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

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Northeastern University 




School of Law 
Library 



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?6 3d Sessfon 88 } SENATE COMMITTEE PRINT 



INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



TEMPORARY NATIONAL ECONOMIC 
COMMITTEE 

A STUDY MADE UNDER THE AUSPICES OF THE DEPART- 
MENT OF COMMERCE 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. 27 
THE STRUCTURE OF INDUSTRY 



Printed for the use of the 
Temporary National Economic Committee 




UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1941 



uiwTHFASTERN UNIVERSITY SCHOOL of LAW LIBRARY 



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 

THTJRMAN W. ARNOLD, Assistant Attorney General 

•WENDELL BERGE, Special Assistant to the Attorney General, 

Representing the Department of Justice 

JEROME N. FRANK, Chairman 

•SUMNER 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 the Treasury 

< 

Representing the Department of Commerce I 

• • • i 

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



•Alternates. 



Monograph No. 27 

THE STRUCTURE OF INDUSTRY 

BY 

WILLARD L, THORP, WALTER F. CROWDER, AND ASSOCIATES 

n 

REPRINTED 
BY 

WILLIAM S. HEIN & CO, INC 

BUFFALO, N. Y. 
1968 



ACKNOWLEDGMENT 

This monograph was prepared under the direction of 
WILLARD L. THORP 

Adviser on Economic Studies, Department of Commerce 

AND 

WALTER F. CROWDER 

Chief, Special Research and Analysis Section, Bureau of Foreign and 
Domestic Commerce, Department of Commerce 

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

The status of the materials in this volume is precisely the same as 
that of other carefully prepared testimony when given by individual 
witnesses: 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 Com- 
mittee 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 
Committee, individually or collectively. Sole and undivided respon- 
sibility 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. 

in 



THE STRUCTURE OF INDUSTRY 



TABLE OF CONTENTS 



Foreword. 



Pagg 
vn 



PART I 
TRENDS IN THE SCALE OF MANUFACTURING OPERATIONS 

by 

WILLARD L. THORP 
DON D. HUMPHREY 
MARTHA H. PORTER 

Chapter I. General trends in the size of manufacturing establishments.. 1 

Chapter II. Trends in the scale of operations in selected industries 19 

Chapter III. General trends in concentration of operations among manu- 
facturing establishments 54 

Chapter IV. Extreme changes in establishment concentration by indus- 
tries 58 

Chapter V. Establishment concentration patterns of selected industries. _ 67 

PART II 
THE INTEGRATION OF MANUFACTURING OPERATIONS 

by 

WALTER F. CROWDER 

Assisted by K. Celeste Stokes 

Chapter I. The scope of the study 105 

Chapter II. Extent and significance of central-office operations 111 

Chapter III. The structure of central-office groups 144 

Chapter IV. Simple and complex central-office combinations 151 

Chapter V. Uniform functions 163 

Chapter VI. Divergent functions 167 

Chapter VII. Convergent functions 179 

Chapter VIII. Successive functions 192 

Chapter IX. Unrelated functions 206 

Chapter X. Summary and conclusions _ 208 

PART III 
THE MERGER MOVEMENT 

by 

WILLARD L. THORP 

Text... 227 

v 



VI CONTENTS 

PART IV 
THE HISTORY OF CONCENTRATION IN SEVEN INDUSTRIES 

by 

WILLARD L. THORP 

GRACE W. KNOTT 

Page 

Text _ 235 

PART V 
THE CONCENTRATION OF PRODUCTION IN MANUFACTURING 

by 

WALTER P. CROWDER 

Assisted by Genevieve Beckwith Wimsatt 

Chapter I. Extent and areas of concentration 273 

Chapter II. Leading producers: Number, type, and frequency of appear- 
ance 298 

Chapter III. Relation of concentration to various product characteristics. 303 
Chapter IV. Changes in concentration, in quantity produced, and in 

average realized price from 1935 to 1937 331 

Chapter V. Behavior characteristics of products in periods of recession 

and recovery 346 

Chapter VI. Summary and conclusions 407 

PART VI 
THE PRODUCT STRUCTURES OF LARGE CORPORATIONS 

by 

WALTER F. CROWDER 

ADOLPH G. ABRAMSON 

ESTHER W. STATJDT 

Chapter I. The importance of the largest 50 manufacturing companies. _ 581 
Chapter II. The product structures of the largest 50 manufacturing com- 
panies 592 

Chapter III. The role of the largest 50 manufacturing companies as 

leading producers 632 

Chapter IV. The causes of product diversification. 645 

Chapter V. The economic significance of multi-product production 660 



FOREWORD 

Any attempt to blueprint our national industrial processes would 
take the form of a maze of lines, sideways, forwards, backwards — 
starting at innumerable points and ending everywhere. Hundreds 
of different raw materials are exposed to wide varieties of machines 
and labor skills at many places, and they may be combined or sub- 
divided in numberless ways to yield the final volume and variety of 
products turned out by our economic system. Many of the products 
in turn feed back into the process, facilitating or maintaining the 
flow at some earlier stage. Furthermore, as one follows any single 
line, from raw material to finished product, it takes the form of a 
series of steps or stages, which may be separated in time and place 
or may be integrated into a single smooth operation; in fact, both 
conditions may exist simultaneously for different sets of producers. 

This complicated productive system may be examined in terms of 
its organization; that is, its structural units — its factories, companies, 
and industries, as well as in terms of its products. From the operating 
point of view, the lowest common denominator in the manufacturing 
sector is the establishment or factory. Here in a single spot, and under 
a single ownership, materials undergo certain processes and new 
commodities appear on the shipping platform. 

One is inclined to think of manufacturing enterprise in the United 
States as operating on a large scale. The usual mental image is in 
terms of a cluster of enormous, sky-lighted buildings, hundreds of 
workers, and numerous foremen and higher officials. Such enor- 
mously complex productive units are the flower of the industrial 
revolution, the economic result of modern technology. 

Only to a limited extent is such a picture true. This country has 
always had, and still has, thousands of tiny establishments with only 
one or two workers. Part I of this report concerns itself with the 
over-all trends in the size of establishments since the turn of the 
century, as well as the trends in many individual industries. The 
materials for such measurement are exceedingly inadequate, yet the 
answer is important, for the manufacturing establishment is the 
minimum imit of our business structure. Separate establishments 
are frequently grouped to make larger enterprises but are seldom 
subdivided. The measure used in this study is primarily that of wage 
earners, and it is apparent that a strong tendency is present in the 
direction of increased size on such a basis. Had it been possible to 
measure establishments in terms of capital (in the economic rather 
than its finaucial sense), there might have been clear evidence that 
plant-size was also on the increase in such terms. 

Two new measures of establishment concentration are introduced 
in part I, intended to indicate the extent to which the operations 
within individual industries are concentrated in a few establishments 
The new measures distinguish the problem of concentration from that 
of size. A plant may be fairly small when compared with all plants, 
yet may be large in its own industry. 

vn 



VIII FOREWORD 

From any examination of the establishment picture in manufactur- 
ing, it quickly becomes apparent that in many instances establish- 
ments operate in groups, commonly owned and directed in varying 
degrees from a central office. As technology and mass production 
have developed, it has become increasingly possible to make a living 
through some form of minute specialization, such as a factory making 
nothing but dolls' voices. This subdividing process in turn has led 
to the counter tendency to group establishments into operating units. 
The extent, nature, and functional relationships within such central- 
office companies is the subject of part II of the study. 

The only possible comparisons with the past for central-office 
companies relate to 1919 and to 1929. It is evident that over the 
period since 1919 their importance has increased markedly. In fact, 
the trend toward the operation of establishments in groups is much 
more pronounced than for further expansion in the size of individual 
plants.' Well over one-half of all manufacturing activity at the present 
time is carried on in such central-office groups. 

Parts III and IV of this report discuss other aspects of the trend 
toward concentration in company terms. 1 The data presented in 
part III trace the history of the merger movement in manufacturing 
and mining. Twice in recent times have there been periods when 
concentration increased with unusual rapidity. Both were periods 
when mergers and consolidations were momentarily regarded as pro- 
viding a sure path to lower costs, higher profits, and securities for an 
eager market. The last 10 years, however, have shown very little 
activity of this type. 

The history of concentration in seven selected industries is traced 
in part IV. There is no evidence of any uniform dominating trend. 
Positions of dominance once achieved were not always maintained. 

In the last two parts of this report, new territory is explored. The 
analysis shifts from an investigation in terms of organization units to 
an examination of concentration in strictly product terms. In the 
past, special studies of individual industries have sometimes provided 
useful specific product data in such fields as agricultural implements 
and petroleum. But the problem of monopoly, as distinguished from 
that of size, must be studied in product terms. A large enterprise 
may manufacture many products and dominate in none. A small 
company may be the only producer of its specialty. 

Part V describes the degree of concentration in the production of 
1,807 manufactured products. It appears at once that concentration 
in product terms is much greater than had been indicated in other 
studies using industries as the basis. Additional analyses relate the 
degree of concentration to the price-quantity behavior of the products 
in periods of recession and recovery. These analyses suggest that 
concentration is not an important factor in determining cyclical price 
policy. 

The concentration of control in the hands of large corporations has 
been measured in earlier studies in terms of assets and total sales. 
In part VI of the report, concentration for the largest 50 manufac- 
turing corporations is measured in terms of specific products. Each 
company manufactured a number of different products, and the data 

1 A study of the association of companies themselves irto joint operating units is covered in the mono- 
graph on "Trade Associations," also prepared by the Department of Commerce. 



FOREWORD IX 

permitted the study of how important each product was to the com- 
pany and how much each company produced of the total output of 
each product. Some interesting material was also developed as to 
why companies develop on a multi-product basis. 

The rough conclusion of parts V and VI seems to be that size is 
by no means synonymous with monopoly. Many products, small in 
importance, are produced under conditions approaching monopoly. 
Many large companies manufacture a wide variety of products in 
most of which, if not all, they do not reach a position of dominance. 

At least two broad qualifications need to be kept in mind as we 
examine the evidence presented in the last two parts of this report. 
The first is that these studies have been based primarily on census 
data, and no allowances have been made for the possibility that col- 
lusion may exist among companies, so that monopoly power in fact 
may exceed that shown by the record. The measures of concentra- 
tion presented in this report may, in many cases, be an understate- 
ment. In other words, there is at least this much concentration, and 
the extent to which there may be more falls in the incalculable field 
of "restraints of trade." 

On the other hand, when problems of competition are being con- 
sidered, products may be so closely available for substitution that 
some sort of use-class ought to be established, rather than to limit 
the analysis to individual commodities. Certainly, the freedom of a 
monopolistic company or group of companies is limited by the possi- 
bility of competition from producers of substitute products. For 
this reason, concentration figures for individual products may present 
a greater picture of monopoly power than actually exists. 

Willard L. Thorp. 



PART I 

TRENDS IN THE SCALE OF MANUFACTURING 
OPERATIONS 



BY 

WILLARD L. THORP 
DON D. HUMPHREY 
MARTHA H. PORTER 



XI 



TRENDS IN THE SCALE OF MANUFACTURING OPERATIONS 

TABLE OF CONTENTS 

CHAPTER I 

Page 

General trends in the size of manufacturing establishments __ 1 

Average size of establishments, 1914-37 2 

Average size of establishments, 1899-1919 compared with 1914-37 6 

Establishments by size-groups 7 

Size of establishments in individual industries 13 

CHAPTER II 

Trends in the scale of operations in selected industries 19 

Changes in selected large-scale industries 24 

Iron and steel industries 24 

Automotive industries 27 

Rubber industries 27 

Other selected industries 29 

Selected industries showing increases in scale of operations. _ 31 

Bakery products and canned goods industries 35 

Cigar and cigarette industries 35 

Glass industry 37 

Petroleum refining industry 37 

Woolen goods industry r . 37 

Leather and flour industries 37 

Selected industries showing irregular or no pronounced change in scale 

of operations »_ 38 

Irregular changes in scale of operations 44 

No pronounced change over the period 48 

Selected industries showing decreases in scale of operations 49 

Steam and electric railroad car industry 52 

Ice industry 52 

Screw-machine products and wood-screws industry 53 

Other selected industries 53 

CHAPTER III 

General trends in concentration of operations among manufacturing es- 
tablishments 54 

Measures of concentration 54 

Changes in concentration of operations for all industries 55 

CHAPTER IV 

Extreme changes in establishment concentration by industries 58 

Declining concentration 58 

Increasing concentration ... 61 

Extremes in degree of concentration 63 

Industries with a low degree of concentration 63 

Industries with a high degree of concentration 64 

XIII 



XIV CONTENTS 

CHAPTER V 

Page 

Establishment concentration patterns for selected industries 67 

Nineteen industries employing over 100,000 each 67 

Selected industries from among the industries employing 25,000- 

100,000 wage earners . 72 

Industries characterized by a decline in total number of establish- 
ments 75 

Industries characterized by an increase in the number of establish- 
ments 76 

Eighty industries employing 5,000-25,000 wage earners 77 

Seventy-eight industries employing less than 5,000 workers 80 

Seventeen small industries employing fewer than 1,000 wage earners. - 81 

APPENDIX A 

Basic data for 204 selected industries, 1914-37 82-87 

APPENDIX B 

The absolute index and the proportionate index for each industry analyzed, 

1914-37 - 88-93 

APPENDIX C 

Distribution of industries by average number of wage earners employed, 

1914-37 - 94-97 



SCHEDULE OF TABLES AND CHARTS 

TABLES 



Page 



1. Summary of selected data for all manufacturing industries, 1914 to 

1937 3 

2. Growth in the average size of establishments in all manufacturing indus- 

tries, 1914 to 1937 4 

3. Distribution of number of establishments and number of wage earners 

by size of establishment (measured by the number of wage earners). 8 

4. Percentage distributions of establishments and wage earners by size of 

establishment (measured by the number of wage earners) 10 

5. Percent change in the number of establishments and wage earners by 

size-groups, 1914-37 12 

6. Change in average number of wage earners per establishment for 204 

industries, 1914-37 16 

7. Distributions of establishments and wage earners for 11 large-scale 

industries in which more than half of the employees were in estab- 
lishments employing more than 1,000 wage earners, 1914-37 20 

8. Blast furnaces in active esta blishments 25 

9. Distributions of establishments and wage earners by size of establish- 

ments for nine selected industries showing increases in the scale of 
operations, 1914-37 32 

10. Distributions of establishments and wage earners for 13 selected indus- 

tries showing irregular or no pronounced change in scale of operations, 
1914-37 --. 39 

11. Distributions of establishments and wage earners by size of establish- 

ment for seven selected industries showing decreases in the scale of 
operations, 1914-37 50 

12. Industries with unusual declines in concentration as measured by the 

absolute index 59 

13. Industries with unusual increases in concentration as measured by the 

absolute index 61 

14. Array of industries showing increases in concentration as measured by 

the proportionate inder 62 

15. Industries with low degree of concentration . 64 

CHARTS 

1. Wage earners and establishments, 1899-1937 6 

2. Percentage distribution of industries according to average number of 

wage earners per establishment 14 

3. Absolute index and proportionate index of concentration for all indus- 

tries, 1914-37 56 

xv 



TRENDS IN THE SCALE OF MANUFACTURING 
OPERATIONS 1 

CHAPTER I 

GENERAL TRENDS IN SIZE OF MANUFACTURING ESTAB- 
LISHMENTS 

Ttie basic structural unit in manufacturing is the plant or factory. 
Enterprises or concerns may include a number of such units. From 
the point of view of monopolistic problems and the effectiveness of 
competition, the size of plant is important chiefly as it is indicative 
of the ease or difficulty of entrance into the industry, since a single 
plant is presumably a minimum requirement. Financial and, to a 
lesser extent, management problems are dealt with more often in 
terms of companies than of plants, though the nature and extent of 
such problems bear a close relationship to factory size. Nevertheless, 
the size of plant is itself a significant social and economic fact. It 
reflects the requirements of technology for efficient production. It 
measures the social unit within which employer and employee rela- 
tions must be adjusted. It indicates the degree to which productive 
machinery itself has affected small-scale business enterprise, for enter- 
prises are seldom smaller than plants, though they may be larger. 
This study, therefore, concerns itself with the size and concentration 
of manufacturing establishments, a concept which approximates the 
idea of plant or factory. 

Two measures of the average size of establishment are readily 
available from census material, though neither is free from serious 
defects. These measures are wage earners and output (either value 
or volume of production) per establishment. Both of these are in- 
direct measures of the scale of manufacturing operations and the 
relation they bear to the size of the plant is influenced by a variety 
of factors which differ from year to year. For most purposes, proper 
interpretation of the measures of the size of establishments presented 
in this report requires an awareness of the limitations of the data as 
indicators of the changes in establishment size. 

Both measures are affected by business conditions, a plant appearing 
to be smaller when its output and its pay roll are reduced. For many 
purposes, such a statement is true; yet, if one thinks of establishments 
in terms of square feet of floor space, machinery, or capacity, its size 
is unchanged, whether idle or active. If one considers the size of 
establishments in terms of capital value, cost of construction or cost 
of replacement, the measures are also subject to qualification as the 

1 The basic material relative to establishment size was prepared by Martha H. Porter who was completely 
responsible for ch. II. The concentration indexes were prepared by Don D. Humphrey, who was also 
completely responsible for chs. IV and V. Credit is due John Lindeman for valuable assistance. 



2 CONCENTRATION OF ECONOMIC POWER 

impact of changing business conditions would exercise a somewhat 
different effect on the wage-earner and output figures than on the 
value figures mentioned. The wage-earner measure does not reflect 
changes in productive capacity brought about through increased use 
of machinery and through technical and administrative improve- 
ments increasing the output per worker. On the other hand, the 
marked reduction in working hours in recent years makes the employ- 
ment figures overstate the increases' in productive capacity. The 
value-of-products figures reflect changes in price as well as in the physi- 
cal values of production, and the extreme price changes of the period 
make any such measures of little value for some purposes. The 
volume figures presented are more relevant, but they are subject to 
technical difficulties present in any such index numbers. These limi- 
tations and qualifications must be kept in mind in analyzing the data 
presented. 

AVERAGE SIZE OF ESTABLISHMENTS, 1914-37 

In table 1 is presented a summary of principal items of census 
statistics pertinent to the size of industrial units and table 2 gives 
the averages based on these statistics. Since 1921 the Census of 
Manufactures has been limited to establishments which report prod- 
ucts valued at $5,000 or more and data for previous years have been 
adjusted to a similar scope. 2 These figures are given in the first 
section of the table. 

.^-second set of figures excluding establishments employing less 
than six wage earners is also shown. The latter data may well give a 
truer picture of general size trends than the more inclusive figures for 
all establishments covered by the census. Concerns with less than 
six wage earners account for a large proportion of the total number of 
manufacturing units with products valued at $5,000 or more (40-45 
percent), but only a small proportion of the wage earners and products 
(2-3 percent). The $5,000 minimum results in a variation from census 
to census in the number of these small concerns that are included 



'"As a rule, the term 'establishment' signifies a single plant or factory. In 1937 one report might be 
counted as one, two. or more establishments, depending on the answer given by the respondent to the ques- 
tion 'How many plants does this report cover?' The respondent's answer to this question was taken as 
the number of establishments. The number of establishments for the United States was increased approxi- 
mately 2,000 by this change in definition of establishments. The change does not materially affect the 
number of establishments in any particular industry. 

"As at previous censuses, separate reports were occasionally obtained for different lines of manufacturing 
activity carried on in the same plant, and in some cases a single report was obtained covering two or more 
plants operated under a common ownership and located in the same city, or in the same county but in dif- 
ferent municipalities or unincorporated places having fewer than 10,000 inhabitants. 

"The censuses are confined, in general, to manufacturing industries proper. Data are collected for a few 
industries, however, whose activities are not manufacturing in the sense in which the term is generally 
understood, the most important example being printing and publishing. The following classes of establish- 
ments were not covered by the 1937 Census of Manufactures (the coverage of the Census in other years is 
described in the Census volumes for those years) : 

(1) Establishments which were idle throughout the year or reported products valued at less than $5,000. 

(2) Establishments engaged principally in the performance of work for individual customers, such as 
custom tailor shops, dressmaking and millinery shops, and repair shops. (This does not apply to large 
establishments manufacturing to fill special orders.) 

(3) Establishments operated in the building industries, other than those manufacturing building materials 
for the general trade. " 

(4) Establishments engaged in the so-called neighborhood industries and hand trades, in which little or 
no power machinery is used, such as carpentry, blacksmithing, tinsmithing, etc. 

(5) Cotton ginneries. 

(6) Small grain mills (gristmills) engaged exclusively in custom grinding. 

(7) Wholesale and retail stores which, incidentally were also engaged in manufacturing on a small scale, 
particularly where it is impossible to obtain separate data for the manufacturing and for the mercantile 
operations. 

(8) Educational, eleemosynary, and penal institutions engaged in manufacturing. (Data for the produc- 
tion of binder twine in penal institutions and of brooms in institutions for the blind were, however, 
collected.) 

(9) , Manufactured gas was excluded from the 1937 figures because data covering only the manufacturing of 
gas -could not be satisfactorily obtained. 

(Iff) Rajlroad repair shops (both electric and steam) were excluded in 1937 as not being manufacturing. 
(Census of Manufactures, 1937, pp. 4 and 5.) 



CONCENTRATION OF ECONOMIC POWER 



since in some years higher prices bring a much larger proportion within 
the scope of the census. Moreover, in a census year when a large 
field force is used, as in 1914 and in the decennial census years 1919 
and 1929, the canvass is undoubtedly more complete with reference to 
moderately sized concerns than in a year when only a small field force 
is available and the canvass must be largely conducted by mail, as, 
for example, in 1933 and 1937. By omitting data for establishments 
with less than six wage earners from the totals, inconsistencies in the 
proportion of the smaller establishments included are largely elimi- 
nated. Only establishments and wage earners can be presented on 
this basis. 3 



Table 1. 



-Summary of selected data for all manufacturing industries, 1914-37 * 



Year 



1914 
1919 
1921 
1923 
1925 
1927 
1929 
1931 
1933 
1935. 
1937. 



Establishments with products valued at $5,000 
or more 



Number 
of estab- 
lishments * 



173, 656 
210, 426 
192, 148 
192, 196 
183, 976 
187,659 
206, 669 
171,450 
139, 325 
167,916 
166, 794 



Wage earn- 
ers (aver- 
age for 
the year) 



6, 478, 713 
8, 431, 157 
6, 478, 188 
8, 196, 371 
7, 873, 935 
7, 848, 600 
8, 369, 752 
6, 163, 144 
5,787,611 

7, 203, 794 

8, 569, 231 



Value of products 
(thousands of dollars) 



In current 
dollars 



In 1914 
dollars * 



23, 065, 565 
60, 053, 895 
41,671,288 
58, 201, 863 
60, 831, 938 
60, 337, 372 
67, 994, 238 
39, 829, 888 
30, 557, 328 
44, 993, 699 
60, 710, 073 



23, 065, 565 
29, 510, 000 
29, 080, 000 

39, 405, 000 

40, 021, 000 
43, 067, 000 
48, 602, 000 
37, 155, 000 
31,567,000 
38, 292, 000 
47,916,000 



Establishments em- 
ploying 6 or more" 
wage earners ' 



Number 
of estab- 
lishments 



98,890 
105, 346 

99,004 
105, 652 



78, 040 
90, 987 
97, 745 



Wage earn- 
ers (aver- 
age for 
the year) 



6, 297, 147 
8, 189, 426 
6,261,417 

7, 986, 336 



8, 092, 944 



5, 631, 084 
7, 013, 605 
8, 399, 057 



Index 
of vol- 
ume of 
■manu- 
factur- 
ing 
produc- 
tion 3 



100 
126 
99 
155 
162 
161 
183 
121 
113 
137 
178 



i Data for establishments reporting products valued at less than $5,000 were deducted from the original 
census figures for 1914 and 1919 since such data were not included in statistics for later years. In addition, 
data for several industries which were not canvassed or which were not treated as a manufacturing industry 
in recent years were eliminated as follows: "Automobile repairing" for 1914 and 1919; "Coffee and spices, 
roasting and grinding" for 1914 to 1931; "Peanuts, walnuts, and other nuts, processed or shelled" for 1927 
to 1931 (no comparable data for earlier years); "Motion pictures" for 1923 to 1931 (no comparable data for 
earlier years); "Railroad repair shops" and "Gas, manufactured" for 1914 to 1935. 

a The distribution of establishments according to wage earners employed was not made for 1925, 1927, 
and 1931. 

3 Data from Biennial Census of Manufactures, 1937 (table 2, pp. 18-19). 

' See text, p. 2, for definition of "establishment." 

5 Current values expressed in dollars were adjusted for price changes by use of the index of wholesale prices 
of all commodities compiled by the Department of Labor. 

Source: Reports of the Bureau of the Census, except as noted. 

The value of products in table 1 is given in both current dollars, and, 
in order -to eliminate the effects of price changes, in dollars of 1914 
purchasing power. 4 The latter figures were used in computing value 
of products per establishment. The result yields figures comparable 
to the volume of production index. 

Whether size is measured in terms of employment or output per 
establishment, the averages in table 2 show an increase from 1914 to 
1937. In terms of wage earners the average establishment was one- 
third larger in 1937 than in 1914; in terms of value of product (in 

3 The point is made clear by the record. For example, the total number of establishments declined from 
207,000 in 1929 to 139,000 in 1933, while the drop in those with 6 or more wage earners was from 105,000 to 
78,000. The difference is believed to reflect, in part, the different methods of census-taking. 

4 Values were expressed in 1914 dollars by applying the Department of Labor index of wholesale prices of 
all commodities. This is the most satisfactory index available for the purpose although it includes raw 
materials as well as manufactured products. In addition to differences in coverage, the price index possesses 
limitations owing to the changing composition of manufacturing production particularly during the war 
period. 



4 CONCENTRATION OF ECONOMIC POWER 

dollars of equal purchasing power), more than twice as large; in terms 
of quantity of product, over four-fifths larger. While comparison of 
the 1914 and 1937 figures for average wage earners per establishment 
shows a sizable increase, this increase took place largely from 1935 
to 1937. Except for the decline between 1919 and 1921 and that 
between 1929 and 1931, the wage-earner figures show considerable 
stability from 1919 to 1935. As measured by value or volume of out- 
put, the greater part of the growth in size occurred between 1919 
and 1929. 

Table 2. — Growth in the average size of establishments in all manufacturing- 
industries, 1914-37 





Establishments with products valued at 
$5,000 or more 


Establishments reporting 6 or more 
wage earners l 


Year 


Average wage 
earners per es- 
tablishment 


Value of 
products per 
establishment 
(1914 dollars) 


Index of 
volume of 
produc- 
tion per 
establish- 
ment 


Average wage 
earners per es- 
tablishment 


Index of 
volume of 
produc- 
tion per 
establish- 
ment 


Index of 
volume of 
produc- 
tion per 




Number 


Index 


Actual 


Index 


Number 


Index 


earner 


1914... 


37.3 
40.1 
33.7 
42.6 
42.8 
41.8 
40.5 
35.9 
41.5 
42.9 
51.4 


100 
108 

90 
114 
115 
112 
109 

96 
111 
115 
138 


132, 823 
140, 242 
151,340 
205, 027 
217, 534 
229, 498 
235, 16S 
216, 709 
226, 574 
228, 046 
287, 279 


100 
106 
114 
154 
164 
173 
177 
163 
171 
172 
216 


100 
104 
90 
140 
153 
149 
154 
123 
141 
142 
185 


63.7 
77.7 
63.2 
75.6 


100 
122 
99 
119 


100 
118 
100 
145 


100 


1919.... 


97 


1921 


100 


1923 .... 


122 


1925 




1927 










1929 


77.4 


122 


173 


142 


193r 




1933 


72.2 
77.1 
85.9 


113 

121 
135 


143 
149 
180 


126 


1935 


123 


1937 


133 







i Not available for 1925, 1927, and 1931 as data for these years were not distributed according to the number 
of wage earners employed per establishment. 

Source: Calculated from data in table 1. 



The measure for all establishments with products valued at $5,000 
or more and for those with six or more wage earners are very much 
alike in the 23-year comparison. According to the figures for estab- 
lishments with six or more wage earners, there was a marked increase 
in the size of establishments from 1914 to 1919 as measured by wage 
earners and another pronounced increase from 1935 to 1937. It is im- 
portant to note that between these two periods there was little change 
except for sharp declines in the depression years 1921 and 1933 which 
were practically recovered in each case by the time of the following 
census. 

Although the 1914-37 percentages are quite similar, somewhat 
different trends within the 1914 to 1937 period are apparent from 
averages for all establishments reporting products valued at $5,000 or 
more, and for only those establishments within the group with six 
or more wage earners. The latter averages appear to be the more 
acceptable measure of changes for the reasons set forth above and in 
view of the fact that the 22 percent increase in average wage earners 
per establishment from 1914 to 1919 shown by these data is approx- 
imately the same as the increase (23.2 percent) indicated by the fig- 
ures for all establishments that reported to the Bureau of the Census 
in those years, including data for establishments with products 
valued at less than $5,000 but over $500. 



CONCENTRATION OF ECONOMIC POWER 5 

Both wage earners per establishment and volume of production per 
establishment declined sharply in 1921 and 1933 and subsequently 
resumed the previous upward trend. It is to be expected that the 
general reduction in employment and production in these years of 
acute depression would be reflected in the averages. The severity of 
the declines illustrates the extent to which abnormal business condi- 
tions may influence the averages and raises a question as to the effect 
of different levels of business activity on comparisons for other years. 
The year 1914 was also a depression year, but to a smaller extent than 
1921, while 1919 was a year of expanding business activity in many 
industries. Presumably, therefore, the 1914 averages are somewhat 
depressed by conditions prevailing in that year while the 1919 averages 
reflect to some extent a temporary increase in output and employment 
and a more complete utilization of existing capacity. The figures for 
1919 are influenced by the expansion and more complete utilization of 
certain industries in connection with the war effort — notably the iron 
and steel, chemicals and allied products, electric apparatus, tire, and 
steel shipbuilding industries. The increase from 1935 to 1937 is to be 
accounted for, in large measure, by a more complete utilization of 
plants in the latter year. Before the averages for 1937 can be taken 
as establishing a new and higher level in the average size of plants 
rather than a temporary increase due to the general situation in 
manufacturing industries in that year, it will be necessary to have 
them confirmed by succeeding censuses. 

It is not possible to weigh the various factors that account for 
differences in the increases shown by the wage-earner and production 
figures as measures of size. The factor which perhaps is most capable 
of statistical measurement is the change in working hours. From 
1914 to 1937 there was a large reduction in working hours as indicated 
by the available data on average weekly hours per worker in factories. 
These figures show that there has been a decline from an average 51.5 
hours in the work-week in 1914 to 38.7 in 1937. 5 There was little 
change in the average working hours from 1920 to 1929, but from 
1929 to 1933 hours were sharply reduced and, though slightly higher 
in 1935 and 1937 than in 1933, remained about 20 percent below 1929 
in those years. Any radical reduction in working hours might be 
expected to be reflected in. a disproportionate increase in average wage 
earners as compared with the output per establishment. That there 
was only a small difference in the percentage increase registered by 
these two measurements of size from 1914 to 1919 and that production 
per establishment continued to register large gains from 1919 to 1929 
while the average number of wage earners per establishment showed 
no material change, may be largely attributed to the introduction of 
labor-saving machinery £ind other factors tending to increase output 
per worker. The increased use of mechanical power during this period 
is roughly indicated by a gain of approximately 90 percent in installed 
horsepower. 

On the basis of these somewhat inadequate data, it does appear that 
there probably has been some increase over the period since 1914 in the 
average size of establishments. In the 1914-19 period and again in 
the 1935-37 period the increase in the scale of operations was quite 
rapid but, as was pointed out in the preceding paragraphs, this change 

•Data from the National Industrial Conference Board. See Survey of Current Business, 1940 Supple- 
ment, p. 39. The 1914 figure is for July 1914 and is not a monthly average as art the other figures . 



6 CONCENTRATION OF ECONOMIC POWER 

may be accounted for in the main by the more nearly complete 
utilization of capacity in 1919 and in 1937 than in 1914 and 1935, 
respectively. However, when the size of establishments is measured 
in terms of the value of products, an increase in the average size of 
establishments did take place during the decade from 1919 through 
1929. 

AVERAGE SIZE OF ESTABLISHMENTS, 1899-1919 COMPARED WITH 1914-37 

Chart 1 shows a comparison of the growth in average size of plants 
for two overlapping periods, 1899-1919 and 1914-37. Figures for the 
earlier period were taken from a Census Monograph ("The Integra- 
tion of Industrial Operation" by Willard L. Thorp) and are slightly 
different from those of the later period in that the lower limit on 





15-" 






























s •: 


















































































3 e. - 








x"** - "^ ^»> 




















* S- 






"*" WAGE EARNERS 


















































300 

5 

5 200 

I 

too' 




























| 






*- ESTABLISH 


MENTS -^ 














































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60 
SO 
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+ 
















"— """^HMG 




WES 


TABU 












— 










































1699 1904 1909 1914 1919 1921 1923 1925 1927 1929 »3I 1933 1935 1937 

DO *0- SIS 



CHART 1.— WAGE EARNERS AND ESTABLISHMENTS, 1899-1937. 



establishments was a value of product of $500 instead of $5,000. 
Consequently, although movements of the two series can be fairly 
well compared, the actual figures cannot. 

During the period from 1899 to 1919 there was a steady increase 
both in the total number of wage earners and in the number of estab- 
lishments. The average number of wage earners per establishment, 
however, did not vary greatly except for the rise from 1914 to 1919 
which has already been discussed. It is interesting to note that the 
movements of the indicators of the average size of establishments — 
wage earners and value of product — were quite similar during the 
period from 1899 to 1919 G in contrast to a marked increase from 1919 
to 1929 in the value of product per establishment and virtually no 
change in the average number of wage earners per establishment. 

It happens that the earlier quinquennial censuses did not fall in 
peak and trough years, so that patterns like the dips in 1919-21 and 

* Willard L. Thorp. "The Integration of Industrial Operation," Census Monograph III, Government 
Printing Office, Washington, D. C, 1924, pp. 40 and 43. 



CONCENTRATION OF ECONOMIC POWER 7 

1929-33 do not appear in the record though they may have existed. 
Over the whole period from 1899 the average size of establishment, as 
measured by the annual average number of wage earners per establish- 
ment, displayed considerable stability with evidence of some upward 
trend. There were increases from 1914 to 1919 aud from 1935 to 
1937 which were traceable, in part, to a more complete utilization of 
plants. 

ESTABLISHMENTS BY SIZE-GROUPS 

The record of the national averages is merely the first step in con- 
sidering the problem of establishment size. These summary figures 
represent manufacturing establishments of widely varying size. 
Fortunately, frequency distributions are available for the various 
census years, except 1925, 1927, and 1931, and these data sh«d con- 
siderable light on the size of establishments and also on the meaDing 
and significance of the statistics presented thus far. The actual 
figures are given in table 3, and percentage distributions in table 4, 



8 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



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12 



CONCENTRATION OF ECONOMIC POWER 



The average size of establishment in 1937 was 51.4 wage earners. 
The outstanding fact is that only about one-sixth of the establish- 
ments were actually as large as the average, although they accounted 
for nearly five-sixths of the wage earners. In other words, the great 
number of manufacturing establishments were small, but the rela- 
tively large establishments accounted for a large part of the employ- 
ment. In 1937, the census recorded 166,794 establishments with 
8,569,231 wage earners. The 69,049 establishments (41.4 percent) 
with less than 6 employees accounted for only 170,174 wage earners, 
or 2 percent. At the other extreme in terms of size, were 978 estab- 
lishments (0.6 percent) with over 1,000 wage earners, accounting for 
2,262,282 wage earners, or 26.4 percent of the total. 

It is evident from the detailed "data in the tables that there has 
been some trend in the direction of the larger establishment. Table 
5 gives a simple comparison of the years 1914 and 1937. The pattern 
of change is quite clear but it is exaggerated due to the difference in 
business conditions in the 2 years. 

Table 5. — Percent change in the number of establishments and wage earners by 

size-groups, 1914S7 



Size groups (wage earners 
per establishment) 



Total 

Less than 6 

6 to 23 

21 to 50 



Percent change, 
1914-37 



Estab- 
lishments 



Wage 
earners 



-4.0 



-7.7 
-12.5 
+3.4 



+32.3 



-6.3 
-13.1 
+3.6 



Size groups (wage earners 
per establishment) 



51 to 100-. 
101 to 250. . 
251 to 500. . 
501 to 1.000 
Over 1,000. 



Percent change, 
1914-37 



Estab- 
lishments 



+11.0 
+20.5 
+35.7 
+38.3 
+69. 5 



Wage 
earners 



+11.2 
+20.8 
+36.6 
+37.4 
+100.0 



Source: Table 3. 

If one divides the record by periods, three different patterns emerge. 
From 1914 to 1919, the greatest increases were in the smallest and 
in the very large enterprises. The increases in the large establish- 
ments were nearly as great as shown in the preceding comparison of 
1914 and 1937. From 1919 to 1929, there was surprisingly little change, 
some small increases in number being recorded in the upper-middle 
brackets and some decrease in the number of small establishments. 
Comparing 1937 with 1929, there was a marked reduction in the 
smaller groups and moderate increases in the larger groups. In 1937 
there were 39,875 less establishments than in 1929 with most of this 
decline being accounted for by the group with less than 6 wage earners. 
There were 32,572 fewer establishments employing from 1 to 5 wage 
earners in 1937 than in 1929. While a small part of this difference 
may be due to differences in the method of census-taking noted at 
an earlier point, a substantial decline in the number of small estab- 
lishments appears to have taken place since 1929. In 1937, each 
group above 100 wage earners set a new high level for the number 
of establishments reported. The wage- earner figure for the largest 
group increased more than the number of establishments, indicating 
that within that group there are still further elements of growth, 
since new units entering the group would undoubtedly tend to be 
near the lower limit. Recently records have been available for 
establishments with 2,500 wage earners and over. In 1937, the 241 



CONCENTRATION OF ECONOMIC POWER J 3 

establishments in this group accounted for about 14 percent of all 
wage earners engaged in manufacturing. The outstanding points in 
this record are the increase in the number of large plants, during both 
the war period and recent years, and the marked reduction in the 
number of small establishments since 1929. 

SIZE OF ESTABLISHMENTS IN INDIVIDUAL INDUSTRIES 

Much of the variation in size of manufacturing establishments is 
due to the fact that the broad category includes industries of widely 
differing characteristics and requirements. The analysis therefore 
turns at this point to individual industries. 7 

In order to study the trends in the average size of units in individual 
industries, data were tabulated for 204 industries or combinations of 
industries for which essentially comparable figures for the years 1914 
to 1937 could be compiled from published data. The development 
of new industries or of new lines of manufacture within older industries 
and declines of other industries during the period under study resulted 
in numerous changes in the census classifications. These changes 
necessitated the making of many combinations of present industries 
in order to obtain figures covering approximately the same classes of 
establishments throughout the period. In a majority of cases, two 
or more lines of manufacture were combined because they were not 
classified separately at either early or recent censuses. In a number 
of instances, however, a combination of industries was necessary 
because of a shift between two classifications of some large group of 
establishments. The combinations in some cases include industries 
in which establishments differed widely in size or showed trends in 
opposite directions. In other cases expanding and declining industries 
were brought together. Averages based on these data, therefore, do 
not always give a reliable indication of changes in the size of estab- 
lishments. 

These 204 industries or industry combinations include 265 of the 
350 industry classifications distinguished by the Bureau of the Census 
in 1937. For the remaining industries, changes in the classifications 
were of such a nature that no comparable figures could be compiled. 
These 204 industries represent all broad types of industrial activity, 
although the representation for some groups, notably machinery and 
paper, is much less complete than for others, and include industries 
representing extremes in the scale of production. The industries also 

7 "Although there are thousands of more or less distinct lines of manufacturing activity, manufacturing 
establishments were classified for census purposes in [separate] industries. * • * 

"The production of each specific class of finished commodities, however small, might be looked upon as 
a separate industry; and in some cases certain of the distinct processes in the manufacture of a single com- 
modity might be treated as separate industries, as, indeed, is sometimes actually done in the census reports. 
Manifestly, however, there must be some grouping of commodities and processes, not only in order to bring 
the number of industries within reasonable compass, but also in order to avoid the extensive overlapping 
which would result from an attempt to distinguish so large a number of industries. Each establishment 
must, as a rule, be treated as a unit, and the data reported by it must be assigned in toto to some industry. 
In many cases an establishment manufactures several related articles or commodities, or performs several 
related operations. It is desirable, therefore, that the classification be broad enough to cover all the activi- 
ties—or, at least, the principal activities— of such establishments. 

"An effort has been made to distinguish, so far as practicable, each well-defined or well-recognized in- 
dustry. The classification has been based on prevailing conditions as to the actual organization of industry 
and the distribution of the various branches of production among individual establishments. It has been 
necessary, however, in some cases to combine the data for two or more industries which are usually con- 
sidered fairly distinct from one another, because of the consid'-rable amount of overlapping among them. 
Such cases arise where, although the majority of the establishments concerned confine their business to 
one or another of the industries, a few important establishments combine the activities of two or more 
industries to such an extent as to render it impracticable to obtain separate data for the different lines of 
activity." (Census of Manufactures, 1OT7, pp. 5 and 6.) 



14 



CONCENTRATION OF ECONOMIC POWER 






vary greatly in importance. The detailed material is given in ap- 
pendix A. 

Heading the list in average size of establishments in 1914, as measured 
by wage earners, was the locomotive industry with an average of 915 
wage earners per establishment, and in 1937, the rubber boots and 
shoes industry with an average of 1,530 wage earners per establish- 
ment. The motor-vehicles industry was second in 1937, with an 
average of 1,485. At the bottom of the list in both years was the 
cheese industry with an average of only 1.0 wage earner in 1914, and 
1.7 in 1937. 

The distribution of all industries according to average size of estab- 
lishments in 1937 is shown in chart 2. This chart clearly shows both 
the great range of size and the skewness of the distribution toward 
the small end. Although there seems to be a fairly normal distribu- 
tion, the uneven classes conceal a concentration in the lower end. 



PERCENT OF TOTAL INDUSTRIES 
2 4 6 8 10 12 14 16 18 20 22 24 26 


9 AND UNDER 


+f+ 




















^ 10 TO 20 

I 

^ 21 TO 50 

<o 

q. 51 TO 100 


m^nena^Ks 


* 


" 


" 
























































| 101 TO 250 

5 










































| 251 TO 500 1 




















§ .1 ' 
5 501 TO 1,000 | ■ 
























" r 


























OVER 1,000 






























O 0. 40- S/6 



CHART 2.— PERCENTAGE DISTRIBUTION OF INDUSTRIES ACCORDING TO AVERAGE 
NUMBER OF WAGE EARNERS PER ESTABLISHMENT. 

Nearly half of the industries have "typical" plants employing 50 or 
fewer wage earners. The modal class is 21 to 50 workers per estab- 
lishment, over 25 percent of the industries falling in this class. 

In 8 industries, plants averaged over 500 wage earners in 1937. 
These industries, and the number of wage earners per establishment 
were — 

Boots and shoes, rubber 1, 530 

Motor vehicles, not including motorcycles 1, 485 

Steel-works' and rolling-mill products 1, 169 

Locomotives, railroad, mining, and industrial, not made in railroad repair 

shops 692 

Smelting and refining, copper 631 

Sugar refining, cane 610 

Carpets and rugs, wool (other than rag') 560 

Asphalted-felt-base floor covering; linoleum 507 



CONCENTRATION OF ECONOMIC POWER \ 5 

At the other end of the scale are 15 industries in which plants had 
an average of 9 or fewer employees in 1937. These are: 

Cheese 2 

Lapidary work 4 

Bluing 5 

Butter 5 

Ice, manufactured 5 

Theatrical scenery and stage equipment 8 

Vinegar and cider 8 

Cleaning and polishing preparations 9 

Concrete products : 9 

Feathers, plumes, and manufactures thereof 9 

Foundry supplies 9 

Hand stamps and stencils and brands 9 

Liquors, vinous 9 

Models and patterns not including paper patterns 9 

Statuary and art goods (except concrete), factory production 9 

It is interesting to note the contrast in importance of the large-scale 
and small-scale industries. The first type includes some of our most 
important economic activities;, the latter type does not include any 
industry with as many as 25,000 wage earners. 

The range of variation in size of establishments in the group 
of 19 large industries, having an average employment of at least 
100,000 wage earners for the period 1914-37 (see appendix C), is 
almost as great as the range for all industries. The average number 
of wage earners per establishment in 2 of the 19 industries, steel 
works and motor vehicles, was 1,169 and 1,485, respectively. At the 
lower extreme, 3 industries, book printing and publishing, bread and 
bakery products, and newspaper printing and publishing, had plants 
averaging 13, 14, and 15 employees. Obviously a large industry is 
not necessarily characterized by large establishments. 

A full list of .these industries, together with the average number of 
wage earners per establishment in 1937 follows: 

Printing and publishing — book, music, and job 13 

Bread and other bakery products 14 

Printing and publishing, newspaper and periodical 15 

Clothing — women's, misses', and children's, not elsewhere classified 38 

Lumber and timber products not elsewhere classified 42 

Furniture, including store and office fixtures 55 

Clothing — men's, youths', and boys', etc 71 

Meat packing, wholesale 110 

Cigarettes ; cigars 113 

Ship and boat building, steel and wooden, including repair work 115 

Knit goods: Hosiery, knitted cloth, knitted underwear, knitted outerwear, 

knitted gloves and mittens 127 

Electrical machinery, apparatus, and supplies; radios, radio tubes, and 

phonographs 192 

Boots and shoes, other than rubber 200 

Rubber tires and inner tubes; other rubber goods, except boots and shoes. _ 239 

Motor- vehicle bodies and motor- vehicle parts 304 

Wool combing ; worsted woven goods ; and worsted yarn 352 

Cotton woven goods (over 12 inches in width); cotton yarn and thread 394 

Steel-works and rolling-mill products , 1, 169 

Motor vehicles, not including motorcycles 1, 485 

An examination of the changes in the average number of wage earners 
per establishment for the entire list of 204 industries reveals the pres- 
ence of quite dissimilar trends. Individual industry records may be 
inaccurate due to shifts in census classification, although every effort 
has been made to obtain consistency, and the possible errors should 



16 



CONCENTRATION OP ECONOMIC POWER 



not destroy the total picture. It should be kept in mind, however, 
that the coverage of small concerns was undoubtedly more complete 
in 1929 than in 1937. A summary tabulation of individual industry 
changes is given in table 6. It may be helpful to keep in mind that 
the over-all average for all establishments increased 7.5 percent for 
1914-19, 1.0 percent for 1919-29, and 26.9 percent for 1929-37. 
The over-all increase from 1914 to 1937 was 37.8 percent. 

Table 6. — Change in average number of wage earners per establishment for 204 

industries, 1914-37 



Percent change 


Number of industries 


Percent change 


Number of industries 


1914-37 


1914-19 


1919-29 


1929-37 


1914-37 


1914-19. 


1919-29 


1929-37 


+101 and over... 
+51 to +100 
+41 to +50 
+31 to +40 

+21 to +30 

+11 to +20 

+1 to +10. 


31 
32 
11 
15 
19 
16 
17 


6 
18 
11 
10 

9 
23 
27 

4 


3 
12 

8 
7 

16 
25 
31 
3 


5 
22 
17 
21 
27 
38 
25 

3 


-1 to-10 

-11 to -20 

-21 to -30 

-31 to -40 

-41 to -50 

—51 and over 

Total 


7 
19 
15 
11 
4 
7 


43 
29 
13 
9 

1 
1 


34 
20 
18 

8 
12 

7 


22 
16 
4 
4 


204 


204 


204 


204 









Approximately one-third of the industries, 63 in number, were 
operating on a smaller scale in 1937 than in 1914. On the other hand, 
31 industries had more than doubled their average size of establish- 
ment. The increase in the median industry from 1914-37 falls con- 
siderably below the average increase. This is an interesting illustra- 
tion of the importance of shifting weights. The large-scale industries 
were becoming of increasing importance during this period. Thus, the 
50 industries with largest establishment averages in 1914 reported an 
increase in total wage earners empk^ed by 1937 of 37 percent, al- 
though the increase for all manufacturing was 32.3 percent. Another 
way of demonstrating the point is to observe that 5 large-scale 
industries — steel mills, motor vehicles, motor-vehicle bodies and parts, 
electrical machinery, and chemicals — were responsible for one-third of 
the entire increase in plant size during the 23-year period. They not 
only increased their own size, but nearly trebled their employment. 
Without them, the average would have increased only 25 percent 
instead of 37. 

Looking again at table 6, it is interesting to note that the median 
industry for the 1914-19 period increased only 1 percent and for 
1919-29 was at percent. In other words, the actual increases during 
this period did not come about through any general movement through 
most industries. Rather, it resulted from the fact that the large-scale 
industries were growing more rapidly and that. some few industries 
were increasing their scale in major proportions, influencing arith- 
metic averages but not medians. However, the period from 1929 to 
1937 shows a different picture, for the median increase here was 18 
percent. Of the 204 industries, only 46 showed a decrease during 
that period. 

There were 63 industries which showed a decrease in the average 
scale of operation (as measured by wage earners per establishment) 
in 1937 compared with 1914. The 11 cases where the decline exceeded 
40 percent are listed below: 



CONCENTRATION OF ECONOMIC POWER \*J 

Lapidary work 67 

Feathers, plumes, and manufactures thereof 60 

Ice, manufactured _ 55 

Galvanizing and other coating, done in plants not operated in connection 

with rolling mills 53 

Condensed and evaporated milk 53 

Corsets and allied garments , 53 

Window shades (textile and paper) and fixtures 51 

Cars, electric and steam railroad, not built in railroad repair shops 47 

Fish nets and seines 42 

Screw-machine products and wood screws 41 

Sewing machines and attachments 40 

It should not necessarily be assumed that a decline in the scale of 
operation indicates a declining industry. The scale of operation 
depends upon the ratio between the number oif establishments and 
the number of wage earners. Of the 63 cases of smaller establishments, 
22 reported increases in both establishments and wage earners, the 
first having exceeded the second. Another 22 reported decreases in 
both establishments and wage earners, the second having exceeded 
the first. In the remaining 19 cases, establishments increased in 
number while employment declined. 

At the other extreme of the distribution were 31 industries which 
more than doubled their scale of operations between 1914 and 1937. 
They are as follows: 

Aircraft and parts 1, 833 

Washing machines, wringers, driers, and ironing machines, for household 

use 60 1 

Motor vehicles, not including motorcycles , 441 

Motor- vehicle bodies and parts 389 

Corn sirup, corn sugar, corn oil, and starch 384 

Asbestos products other than steam packing and pipe and boiler covering 333 

Card cutting and designing 262 

Pens, fountain and stylographic; pen points, gold, steel, and brass 226 

Cigarettes; cigars 219 

Engraving (other than steel, copperplate, or wood), chasing, etching, and 

diesinking 207 

Agricultural implements (including tractors) ; engines, turbines, water 

wheels and windmills 186 

Chewing gum 176 

Flour and other grain-mill products 174 

Oils, essential 173 

Wood distillation and charcoal manufacture 171 

Sugar, cane, not including products of refineries 166 

Fire extinguishers, chemical 158 

Bone black, carbon black, and lamp black 156 

Furs, dressed and dyed 145 

Gold, silvpr, and platinum, refining and alloying ,___ 142 

Roofing, built-up and roll; asphalt shingles; roof coatings other than paint. _ 134 

Coke-oven products 133 

Perfumes, cosmetics, and other toilet preparations 111 

Steel-works and rolling-mill products 110 

Bread and other bakery products 108 

A sphalted-felt-base floor covering; linoelum 106 

Saddlery, harness, and whips 105 

Baking powder, yeast, and other leavening compounds 103 

Baskets and rattan and willow ware, not including furniture 103 

Musical instruments and parts and materials, not elsewhere classified 103 

Wool pulling 101 

In four instances — cigars and cigarettes, flour, coke-oven products, 
and saddlery — both the number of establishments and employment 
declined, the first so much more rapidly than the second as to leave 

273238— 41— pt. 27 3 



lg CONCENTRATION OF ECONOMIC POWER 

survivors who averaged more than twice the size of the original group, 
m nine instances both factors expanded. In the bulk of the cases, 18 in 
number, the number of establishments decreased while employment 
increased. 

What is .the total picture? It is one of a slow but definite increase 
in the size of establishment since the turn of the century. This in- 
crease should be considered, however, against the background of a 
general increase in population and wealth, as well as a trebling in the 
aggregate volume of production. To a considerable degree, the 
increase has been the result not of a universal trend toward size, but 
rather the increasing importance of certain of the large-scale industries. 
The point has been reached where less than 2 percent of the plants 
employ 40 percent of the workers. Until the 1929-33 depression, 
there was no evidence that small-scale operators were being affected, 
but since then there has been a noticeable decline in small plants. 



CHAPTER II 

TRENDS IN THE SCALE OF OPERATIONS IN SELECTED 

INDUSTRIES 

It is already evident that within the general trends of manufac- 
turing are widely differing patterns for individual industries. In this 
chapter, this fact is conclusively demonstrated by looking at a num- 
ber of specific cases in somewhat more detail. In addition, it is pos- 
sible to suggest some of the controlling factors whe the inquiry is 
limited to specific industries. 

Data for 40 selected industries are given in special text tables. In 
making the selection of industries, an attempt was made to include 
cases that would illustrate the different trends already suggested and 
to include industries operating on various scales of production. In 
general, industries with less than 100 establishments were excluded 
because in such cases the number in the various size-groups was too 
small to indicate definite trends and might be materially affected by 
the omission of data for even a few establishments temporarily idle 
during some census year or by the loss or addition of a few establish- 
ments which might have shifted their major produot between two cen- 
sus years. 1 Several industries with a comparatively small number of 
establishments which showed pronounced tendencies were, however, 
included in the selection. Many industries were excluded because 
the changes in the size distributions appeared indefinite or erratic or 
because the figures were markedly affected by abnormal conditions in 
the industry during part of the period. 

Since the figures for 1921 and 1933 for nearly all industries and for 
1935 for many industries appear to have been markedly affected by 
depressed economic conditions, changes in these years have usually 
been ignored. In the absence of data on size of establishments for 
1925 and 1927, changes which may have occurred in this period could 
only be determined from the average number of wage earners per 
establishment. 

The grouping of the industries in separate tables, with exception of 
the selected industries in table 7, is based on trends in the scale of pro- 
duction between 1914 and 1937. Tables are presented showing trends 
in the scale of operations for industries in which the scale of operations 
(1) increased, (2) moved irregularly or showed no pronounced changes, 
and (3) decreased. For the most part size changes of establishments 
are indicated by the wage-earner data. 

1 The Bureau of the Census classifies establishments manufacturing two or more classes of products 
according to the product of chief value. 

19 



20 



CONCENTRATION OF ECONOMIC POWER 






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CONCENTRATION OF ECONOMIC POWER 



21 



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CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



23 



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GO .^ 

AJ3 



24 CONCENTRATION OF ECONOMIC POWER 

CHANGES IN SELECTED LARGE-SCALE INDUSTRIES 

The group of industries in table 7 includes the three large-scale 
industries — steel, the two motor vehicle industries, and rubber 
tires — which showed the highest degree of concentration of wage 
earners in establishments employing more than 1,000 wage earners in 
1937 and in which there was a notable development of large establish- 
ments during the 1914 to 1937 period and a severe decline in the 
number of smaller or medium-size plants. The blast-furnace industry 
showed no increase in the number of large units as measured by wage 
earners as did the other four industries, but is considered here because 
of its close relationship to the steel industry. The rubber goods 
(other than boots and shoes and tires and tubes) industry is included 
because it was combined with the tire industry in the earlier years. 

Iron and Steel Industries. 

A tendency toward concentration of production in large estab- 
lishments and toward integrated operations has long been charac- 
teristic of the iron and steel industry. A majority of the blast 
furnaces are now operated in conjunction with steel mills, but for 
census purposes they are classified as separate establishments. 

Trends in the blast-furnace products industry may be measured 
by changes in establishments and wage earners or in the number and 
capacity of furnaces. By either measure, there was an increase in 
the number and average size of units from 1914 to 1919 and a move- 
ment toward concentration in fewer as well as in larger units from 
1919 to 1937. Part of the large increase in establishments and wage 
earners in the earlier period may be attributed to the depressed condi- 
tion of the iron and steel industry in 1914 when many furnaces were 
idle. During the entire period from 1914 to 1937, the average wage 
earners per establishment increased 45 percent, while the average 
capacity of furnaces in active plants more than doubled, a large 
part of the increase in capacity of furnaces occurring between 1923 
and 1929. The increase in average productive capacity of establish- 
ments was even greater than that of furnaces since there was a sub- 
stantial increase in furnaces per establishment between 1919 and 1929. 
This smaller increase in average wage earners per establishment than 
in average capacity reflects the large reduction in the total number of 
wage earners from 1919 to 1929 made possible by greatly increased 
output per worker. It is significant that this notable reduction in 
employment occurred during the period in which there was the 
greatest increase in average capacity of furnaces. A special tabula- 
tion 2 of blast-furnace statistics for 1933 indicates that the direct 
labor per ton of pig iron in furnaces with a daily capacity of more than 
500 tons was only one-half or one-third as great as in the lower capacity 
furnaces, although all of the difference cannot be attributed to differ- 
ences in size of units. There was also a large reduction from 1919 to 
1929 in the number of establishments using sandveasting machines 
which require more labor per unit of product than establishments 
which use machine casting or deliver the metal in a molten state. 

The distribution of establishments by size-groups according to 
wage earners employed shows a marked decrease in the relative 
importance of smaller establishments throughout the 1914 to 1937 

' "Economics of the Iron and Steel Industry." C R. Daugherty, M. O. Chazpeu, and S. S. Stratton. 
Special tabuletion^prepared by Bureau of the Census. 



CONCENTRATION OF ECONOMIC POWER 



25 



period, establishments employing fewer than 101 wage earners declin- 
ing from 41.3 percent of the total to 23.0 percent in 1937. Establish- 
ments in the highest groups showed marked actual and relative gains 
from 1914 to 1919, and also increased in proportion of the total 
from 1929 to 1937. In the 1919 to 1929 period, when the number of 
establishments in all size-groups was greatly reduced, establishments 
in the medium groups employing 101 to 250 and 251 to 500 wage 
earners declined least and, therefore, increased in relative importance. 
The latter group also recorded an actual and proportional gain from 
1929 to 1937, while the number employing over 500 wage earners was 
the same in the two years. The increasing importance of establishments 
with 250 to 500 wage earners is also indicated by the fact that they 
accounted for 38 percent of the total wage earners in 1937 compared 
with 21 percent in 1914, while establishments employing over 500 
workers accounted for approximately one-third in both years, the 
proportion being only slightly higher in 1937. 

The distribution of blast furnaces in active establishments according 
to daily capacity (table 8) presents a somewhat different picture of 
size changes in that it shows a much more severe decline in the number 
and proportion of small furnaces and an actual as well as proportional 
increase in furnaces in the highest size-groups. Moreover, these 
data indicate that the highest size-groups recorded the greatest 
gains throughout the entire period from 1914 to 1937, in contrast 
with a greater relative increase in importance of establishments in 
the medium than in the largest size-groups from 1919 to 1929, as 
measured by wage earners. 

Table 8. — Blast furnaces in active establishments 



Year 


Number 
of estab- 
lish- 
ments 


Number 

of 
furnaces ' 


Average 
daily 

capacity 
(tons) 


Number of furnaces with daily 
capacity of — l 


Under 
400 tons 


400-499 
tons 


500-799 800 tons 
tons and over 


1914 


160 

195 
105 
87 


352 
411 
273 
225 


311 
337 
543 
631 


208 

219 

50 

25 


78 
78 
39 
21 


65 


1919' 


114 


1929 


163 1 21 


1937 


133 46 







1 Includes all furnaces both active and idle in plants in which any furnaces were operated during any 
part of the year. 

* Excludes data for 14 establishments engaged in the manufacture of blast furnace ferro-alloys. 

The total number of furnaces in active establishments followed the 
same general trend as establishments but declined less severely from 
1919 to 1929. Furnaces with less than 500 tons daily capacity, 
which represented over three-fourths of the total in 1914, increased 
only slightly from 1914 to 1919 and declined thereafter from 297 
to only 46, or 20 percent of the total, in 1937. On the other hand, 
the number of furnaces with over 500 tons capacity almost doubled 
from 1914 to 1929 and the number with over 800 tons daily capacicy, 
distinguished in the more detailed distribution for 1929 and 1937, 
more than doubled between these years. 

The concentration of production of blast-furnace products in fewer 
and larger units reflects the abandonment or dismantling of small, 
isolated furnaces and the erection of larger and more efficient furnaces 
operated in connection with steel mills. As an example of the differ- 



26 CONCENTRATION OF ECONOMIC POWER 

ence in size of new and abandoned furnaces, the 29 new or rebuilt 
furnaces completed in 1917 and 1918, when the greatest number was 
built, had an average annual capacity of 145,000 tons, while the 
average capacity of 18 furnaces dismantled or abandoned was less 
than 40,000 tons. 3 Since 1922 the number of furnaces dismantled has 
greatly exceeded the number of new furnaces. 

The number of establishments in the steel-works and rolling-mill 
products industry apparently reached a peak in 1919 and declined 
more than '20 percent between that year and 1937, while the total 
number of wage earners not only increased more rapidly than estab- 
lishments from 1914 to 1919 but was further expanded and in 1937 
was higher than in any other year. As a result of these changes, 
the average wage earners per establishment more than doubled from 
1914 to 1937. 

The most significant feature indicated in the distribution of estab- 
lishments by size according to wage earners was the increasing 
tendency toward concentration in very large units which was in 
evidence throughout the 1914-37 period though less pronounced from 
1919 to 1929 than in earlier or later years. Large establishments 
employing over 1,000 wage earners not only accounted for the greater 
part of the total increase of 65 establishments in the industry from 
1914 to 1929 but increased further from 1929 to 1937, while the num- 
ber employing less than 1,000 wage earners declined substantially 
from 1919 to 1929 and severely after 1929. Moreover, all of the 
increase noted for the large establishments from 1929 to 1937 was 
accounted for by those employing over 2,500 wage earners, which 
increased from 35 to 53. The increasing importance of very large 
units and the extent of concentration in such establishments is more 
evident from the fact that in 1937 the 53 establishments with over 
2,500 workers accounted for 58 percent of the wage earners in the 
industry, while establishments employing 1,000 to 2,500 wage earners 
accounted for 23 percent in comparison with 53 percent in 1914 for 
the two groups combined. 

Although wage-earner data indicate a slackening in the movement 
toward concentration in large establishments in the 1919-29 period, 
a size distribution of establishments according to productivity, or 
productive capacity, would probably show a considerable increase in 
large establishments in this period as in the case of blast furnaces. 
Production in the steel industry, according to an index computed by 
the Works Progress Administration, increased 65 percent from 1919 
to 1929. 4 This would indicate an increase of 78 percent in production 
per establishment compared with an increase of only 12 percent in 
average wage earners. 

The integration of iron and steel operations, which influenced the 
increase in importance of large plants in both branches of the iron 
and steel industry, has been a contributing factor to the greater 
increase in productivity than in wage earners per establishment, since 
in integrated plants the labor of casting and subsequent remelting is 
eliminated. The introduction in 1927 of the process of continuous 
strip-sheet rolling is another important factor which has contributed 
to a greater increase in output than wage earners in steel mills. 

* Data from Annual Report of American Iron and Steel Institute. 

* See study, "Production, Employment, and Productivity in 59 Manufacturing Industries," National 
Research Project, pt. II, p. 92. 



CONCENTRATION OF ECONOMIC POWER 97 

Automotive Industries. 

The motor vehicles industries are conspicuous examples of industries 
in which the average size of units has increased and large establish- 
ments have grown in importance. In average wage earners per 
establishment the motor vehicles branch recorded an increase of 441 
percent from 1914 to 1937 and rose from sixteenth place to second 
place among the 204 industries included in the study, while the average 
for the bodies and parts branch increased 389 percent (see appendix 
A). These gains in average size of units reflect an increase in the 
number of large plants and also a severe decline in the total number of 
establishments that began between 1919 and 1929. From 1923 to 
1937 the total establishments in these industries declined more than 
60 percent. 

The motor vehicles industry was highly concentrated in a few large 
establishments in 1914 when 64 percent of the wage earners were 
found in 14 establishments employing over 1,000 wage earners (estab- 
lishments of this size represented less than 5 percent of all establish- 
ments). In 1937 there were 46 establishments in this class and they 
included 91 percent of the industry's wage earners, while there were 
only 85 establishments employing less than 1,000 workers as against 
275 in this class in 1914 and 1919. Moreover, 70 percent of the wage 
earners in 1937 were employed in 19 establishments with over 2,500 
workers. This tendency to increase the concentration in very large 
establishments was markedly in evidence throughout most of the 23- 
year period but, as in many other industries, the change was not 
uninterrupted. This tendency was reflected in a proportional decline 
for the largest establishments employing over 1,000 wage earners in 
1923, which on the basis of the slight change in average wage earners 
per establishment from 1923 to 1927 may have continued through 
the latter year. The proportional increase for the larger establish- 
ments from 1929 to 1937 resulted entirely from a drastic decline in 
the number in all lower size-groups, since the larger establishments 
declined slightly for the period. 

The bodies and parts branch showed no concentration in very large 
units in 1914. Three-fourths of the wage earners were distributed 
among establishments employing over 100 wage earners and only 21 
percent of the total were employed in the six establishments with 
over 1,000 workers. By 1937, there were 57 establishments, 6 
percent of the total number, in the latter class and they accounted for 
74 percent of all the wage earners. The increase in large units was 
marked throughout the 23-year period. There was a large increase in 
the number of small establishments from 1914 to 1919, which accounts 
for the fact that the average number of wage earners per establishment 
did not change from 1914 to 1919, but establishments in other lower 
size-groups increased less rapidly than the number in the highest 
groups in this period, and both smaller and medium-size establish- 
ments declined severely after 1923. 

Rubber Industries. 

Since 1921 the Bureau of the Census has classified in separate 
industries establishments engaged in the manufacture of rubber tires 
and inner tubes and those producing other rubber goods except boots 
and shoes, but for earlier years only combined figures for the two 
industries are available. 



28 CONCENTRATION OF ECONOMIC POWER 

The combined figures indicate an increase of approximately 50 
percent in the number of establishments in the two industries and in 
the average size of units in terms of wage earners from 1914 to 1919, 
followed by a further substantial increase in establishments to 1921 
but a severe decline in average wage earners per establishment to 
below the 1914 average. During the earlier period, when establish- 
ments in practically all size-groups increased in number, those em- 
ploying over 1,000 wage earners recorded the greatest gain, while 
from 1919 to 1921 establishments in the medium groups recorded 
actual and relative gains, the larger units employing over 250 wage 
earners declining in number and in proportion of the total. For the 
1914 to 1921 period as a whole, both establishments in the medium 
groups, employing 51 to 250 wage earners, and those employing over 
1,000 wage earners, increased in number and relative importance. 
Changes between 1919 and 1921, no doubt, reflect in part the general 
reduction in employment in the depression of 1920-21 but the same 
trends are observable if data for the active business year 1923 are 
compared with 1919, although the average wage earners per establish- 
ment in 1923 was substantially higher than in 1914. It may be 
pointed out that in the 1914 to 1919 period the rubber industries 
employed a large number of inexperienced and inefficient workmen to 
meet the rapid increase in production demands and, in the severe con- 
traction that followed in late 1920 and early 1921, employment was 
drastically cut and the industry put on a more efficient basis. Although 
production was much higher in 1923 than in 1919, the increased output 
was accomplished with a considerably reduced wage force. The 45 
percent increase in installed horse-power during this period is also 
significant. Aside from these factors which affected the wage earner 
figures and limited their usefulness as a standard of measure, size 
trends indicated by the data for 1919 to 1921, or 1923, probably in a 
large measure reflect the changing relative importance in the totals 
and in the various siz.e-groups of establishments in the tire industry, 
in which large-scale operation predominates, and in the other rubber 
goods except boots and shoes industry, which largely comprises small- 
6r medium-size units. 

The marked tendency of the rubber tires and inner tubes industry 
toward concentration in fewer and larger establishments since 1921 is 
indicated by the decline in the total number of establishments from 178 
in that year to 46 in 1937, the practical disappearance of establish- 
ments employing less than 51 wage earners, which numbered 56 in 
1921, and the increase in the number employing over 1,000 wage 
earners from 11 to 19. The proportion of the total establishments 
represented by the latter group increased from 6.2 percent in 1921, or 
7 5 percent in 1923, to 41.3 percent in 1937. The proportion of 
wage earners employed in establishments classified in this group rose 
during this period from 60.5 percent to 83.8 percent of the total. 

With the rapid development of the automobile and the abnormal 
demands on the tire industry created by the World War, a large number 
of companies which were unable to survive entered the field in early 
years. Many companies went out of business before 1921. Failures 
appear to have accounted for a large proportion of the decline in the 
number of establishments since that year, although consolidation of 
units was a contributing factor (according to estimates by J)un & 
Bradstreet, Inc., there were 52 insolvencies among firms in this line 



CONCENTRATION OF ECONOMIC POWER 29 

from 1927 to 1934). Although there has been a movement during the 
last decade by large manufacturers in Akron to decentralize their 
production and to establish branch factories in a number of States,, 
this movement was not reflected in a decline in the size of establish- 
ments. 

Unlike the tire industry, the trend in the rubber goods other 
than tires, tubes, and boots and shoes industry has been toward 
the development of medium size establishments. The number of 
establishments expanded considerably from 1921 to 1929 and slightly 
from 1929 to 1937, notwithstanding a large number of failures, while 
the number of wage earners recorded a considerable increase in each 
period. Although from 1921 to 1923 the higher size-groups showed 
the greatest gains, the apparent trend toward larger units in this 
period may largely result from comparing data for a year when em- 
ployment was generally low with data for an active business year. 
The increasing importance of establishments in the "51 to 500 wage 
earners" class is emphasized by the fact that this group accounted 
for 40.5 percent of the establishments and 58.0 percent of the wage 
earners in the industry in 1937 as against 28.4 percent of the estab- 
lishments and 46.1 percent of the wage earners in 1923, while both 
the smaller and larger establishments suffered declines in proportion 
of the totals. 

The manufacture of rubber boots and shoes has been highly con- 
centrated since early years. In average wage earners per estab- 
lishment, this industry ranked second in 1914 and first in 1937. 
The most notable change in the industry was the reduction in the 
number of establishments from 22 to 12 between 1929 and 1937, as 
the result of a movement by one large company to concentrate pro- 
duction, which was reflected in a large increase in the average size of 
units. The increase in size of establislimcnts from 1914 to 1919 
apparently resulted largely from expansion of employment in existing 
establishments. Declining demand for rubber footwear, especially 
for rubber boots and shoes, which require more labor than other 
products of the industry, was an important factor in the large reduc- 
tion in employment which was reflected in a decline in the number 
and relative importance of the largest establishments employing over 
1,000 wage earners from 19 L9 to 1937 and also in the average wage 
earners per establishment from 1919 to 1929. 

Other Selected Industries. 

Agricultural implements and engines, turbines, water wheels, and 
windmills. — This group is one of the outstanding examples of indus- 
tries in which large establishments greatly increased in importance. 
Although the intensity of the trend toward concentration in large 
units may have differed for the two separate industries which have been 
combined because of a shift in the classification of an important 
group of establishments between 1929 and 1937, the trend toward con- 
centration appears to have been pronounced in both industries. The 
outstanding changes indicated by the combined figures were the in- 
crease from 29 to 62 in the number of establishments employing more 
than 500 wage earners from 1914 to 1919 in comparison with only 
small increases or declines in the lower size-groups and the large 
reduction in the number in all size-groups employing less than 1,000 
wage earners from 1919 to 1937. A notable feature of the reduction 



30 CONCENTRATION OF ECONOMIC POWER 

is that establishments in all size-groups employing less than 250 wage 
earners, which suffered most, showed approximately the same relative 
declines. There was no increase in the total number of establishments 
employing over 1,000 wage earners from 1919 to 1937, but the wage 
earners employed indicate a small increase in the average size of such 
establishments from 1919 to 1929 and a pronounced increase from 
1929 to 1937. 

The growing importance of these large establishments, which rep- 
resented only 1.3 percent of the total number in 1914 and 6.5 percent 
in 1937, is evident from the increase in the proportion of the total 
wage earners employed by this class from 28 percent in 1914 to 66 
percent in 1937. 

Aircraft and parts. — Since this industry was only in the experi- 
mental stage in the earlier years, comparisons between 1914 and 1937 
have little significance but changes since 1929 appear noteworthy. 
After 1929 the number of small and medium-size establishments was 
greatly reduced while the number in the highest size-groups increased 
slightly in number and accounted for an increasing proportion of the 
wage earners. The average size of establishment (in terms of wage 
earners) more than doubled between 1929 and 1937. In the latter 
year 59 percent of the total number of wage earners were in estab- 
lishments employing more than 1,000 workers; the corresponding 
proportion in 1929 was only 24 percent. 

Carpets and rugs, wool. — The small decline in the average number of 
wage earners per establishment in the carpet and rug industry from 
1914 to 1919 and the decline shown for establishments in the higher 
size-groups in this period reflected the depressed condition of the 
industry in the latter year when production as well as employment 
was reduced. For the 1914-37 period as a whole, establishments 
employing over 1.000 wage earners declined in number but increased 
in proportion of the total establishments and recorded a slight gain 
in proportion of total wage earners. The 501 to 1,000 wage-earner 
group, however, showed an actual as well as a proportional gain. 

Electrical machinery, apparatus, and supplies; radio apparatus and 
phonographs. — The outstanding change in this group of industries 
was the large decline from 1929 to 1937 in the total number of wage 
earners employed in establishments with over 2,500 wage earners. 
This was a feature of the substantial reduction in the total wage earn- 
ers in the industry, and the decline in the average size of these large 
establishments. Although establishments in the higher size-groups 
increased in proportion of the total establishments from 1929 to 
1937 as well as in earlier years, the group employing over 2,500 wage 
earners accounted for a smaller proportion of the wage earners in 
1937 than in 1929, while the next lower groups recorded gains. There 
was a substantial gain over the whole period 1914 to 1937 in the pro- 
portion of total wage earners employed in establishments with 251 
to 1,000 wage earners and practically no change in the proportion 
employed in the larger establishments. 



CONCENTRATION OF ECONOMIC POWER 3 J 

SELECTED INDUSTRIES SHOWING INCREASES IN SCALE OF OPERATIONS 

Data for a group of selected industries in which the scale of opera- 
tions increased are included in table 9. In each of these industries 
the total number of establishments in 1937 was less than that in 1914 
or in later years (1919 or 1929), but the number of large-size estab- 
lishments increased. The group includes industries which differ 
widely both in number and size of units. For example, in 1937 
there were 17,193 establishments in the bakery products industry, but 
these plants averaged only 14 wage earners. In the washing machine 
industry, on the other hand, employment in the 40 establishments 
averaged 233 workers per plant. 



32 



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CONCENTRATION OF ECONOMIC POWER 35 

Bakery Products and Canned Goods Industries. 

In the bread and other bakery products and canned vegetables, 
fruits, etc., industries, which include a large number of small concerns, 
the number of establishments in the lowest size-groups, and hence the 
total number in the industries, was affected to a marked degree by the 
application of the $5,000 value of products limit and possibly by 
differences in the completeness of the canvass of small concerns. 
Data for all establishments, including those with products under 
$5,000 in value, covered in the 1914 and 1919 censuses indicated a 
small decline in the number of establishments employing less than six 
wage earners and a large increase in the average size of establishments 
from 1914 to 1919, in contrast with the changes indicated in the tabu- 
lated data in table 9. Excluding from consideration figures for the 
group employing less than six wage earners, there was a decline through- 
out the period in the relative importance of the smaller concerns. 
There was no apparent tendency in either of these industries to 
develop very large establishments. The larger establishments in the 
canning industry recorded gains but establishments in the medium 
size-groups remained the most important in terms of employment. 
In the bread and other bakery products industry, establishments in 
the medium groups increased more rapidly 'than the larger ones after 
1919 and recorded gains in the proportion of total establishments and 
total wage earners. 

Cigar and Cigarette Industries. 

Combined figures for the cigar and cigarette industries (table 9) 
which were not shown separately in census distributions of establish- 
ments by size-groups prior to 1933, do not afford a satisfactory basis 
for studying changes in the scale of production in these industries be- 
cause they differ materially in type and size of establishments and 
have shown opposite trends in production and employment since 1914. 
The figures indicate, however, the strong tendency toward concentra- 
tion in fewer and larger establishments which was characteristic of 
both cigar and cigarette manufacturing. The reduction in the num- 
ber of small establishments was striking throughout the entire period, 5 
but no definite tendency to increase the number of larger units is evi- 
dent from these data until after 1919. The number of establishments 
employing less than 51 wage earners, which suffered the greatest loss, 
declined from 3,637 in 1914 to 547 in 1937. Only the middle groups 
employing 51 to 250 wage earners recorded actual gains from 1914 to 
1919, although it is noted than the 10 establishments in the "over 
1,000 wage earners v group in 1919 was larger in terms of wage earners 
than the 16 establishments in this class in 1914. There was a marked 
increase in the number of establishments employing over 500 wage 
earners from 1919 to 1929 and an increase in the number employing 
over 1,000 wage earners from 1929 to 1937, the number in all lower 
groups declining in each period. While there were only 22 establish- 
ments in the group employing over 1,000 wage earners in 1937 out of 
a total of 727, these large establishments accounted for almost half of 
the total wage earners as against 15 percent of the total for establish- 
ments in this class in 1914. 

J Although the tabulated figures indicate a large increase in the number of establishments in the smallest 
size-group from 1914 to 1919, a decline in establishments employing less than six wage earners is indicated by 
figures for establishments included in the 1914 and 1919 canvasses if establishments with products under 
$5,000 in value are included. See text, p. 2, in regard to the effect of the minimum value-of-products limit 
on the number included in the "less than 6 wage earners" group. 



gg CONCENTRATION OF ECONOMIC POWER 

The high degree of concentration in the cigarette industry is indi- 
cated by the fact that 14 of the 34 cigarette establishments included 
in the statistics for 1937 employed over 1,000 wage earners and ac- 
counted for 92 percent of the 26,149 wage earners reported for this 
industry. In the cigar industry, on the other hand, less than one- 
fourth of the total wage force was reported by establishments with 
over 1,000 wage earners, while nearly 50 percent of the total was ac- 
counted for by establishments employing 251 to 1,000 wage earners. 

In 1914, cigars were largely produced by skilled hand labor and 
small-scale operation predominated. The 13,300 establishments (in- 
cluding those with products valued at $500 to $5,000) reporting to the 
Bureau of the Census in 1914 averaged only 11 wage earners per estab- 
lishment. With the perfection in 1917 of a cigar-making machine and 
its gradual introduction into the industry, the number and size of cigar 
establishments changed radically. This machine was not suited to 
small-scale operation and because of its high cost was unavailable to 
operators with little capital. Declining demand for cigars after 1920 
was also a factor which influenced the decline in the number of estab- 
lishments and concentration of production in the larger units. No 
figures by size-groups are available for cigar establishments prior to 
1921, but since the total number of establishments declined more 
severely than the total number of wage earners from 1914 to 1919 
there was a substantial increase in the average number of wage earners 
per establishment during this period. 

The greatest increase in size of units appears to have occurred after 
1921. The number of cigar establishments with products over $5,000 
in value declined from 4,078 in 1921 to 693 in 1937, while wage earners 
were reduced from 111,855 to 55,879. The average size of establish- 
ment in terms of wage earners, therefore, approximately trebled. A 
frequency distribution of cigar factories according to annual output, 
available since 1921 from reports of the Commissioner of Internal 
Revenue, shows that of the 14,578 cigar factories 6 in operation in that 
year, 13,149 each produced less than 500,000 cigars annually and to- 
gether accounted for 14 percent of the total output. The bulk of the 
production, 61 percent, was accounted for by factories with an annual 
output of 500,000 to 20,000,000 cigars, while 11 factories, each produc- 
ing over 40,000,000, contributed 16 percent. By 1937 the total num- 
ber of factories had been reduced to 4,853, while the number of factories 
producing over 40,000,000 cigars had increased from 11 to 27 and their 
share of the total production to 60 percent. 

Unlike the cigar industry, cigarette factories were highly mechanized 
in 1914 but there have been many technical improvements since that 
year. According to statistics compiled by the Bureau of Internal 
Revenue, the number of cigarette factories in operation declined from 
381 on December 31, 1914, to 81 at the close of 1937, while total pro- 
duction of cigarettes increased tenfold. Census statistics of cigarette 
establishments and wage earners for 1914 and 1937 are not on a com- 
parable basis, but available figures showing the trend from 1921 to 
1937 indicate a reduction of 50 percent in the number of establish- 

. r 

« The number of factories reported by the Bureau of Internal Revenue exceeds the census figures fo- 
number of establishments principally because the former data include many small establishments report 
ing products valued at less than $5,000 and represent individual plants or factories, whereas census returns 
may treat as a single establishment two or more factories operated under the same ownership in the same 
town orcity. AJso the. Bureau of Internal Revenue includes in the count of both cigar factories and cijarette 
factories a plant manufacturing both cigars and cigarettes whereas the . Census Bureau classifies such 
establishments according to their product of chief value. 



CONCENTRATION OF ECONOMIC POWER 37 

merits and an increase of 143 percent in the average number of wage 
earners per establishment. 

Glass Industry. 

In the glass industry the larger establishments increased in number 
and importance throughout the 1914-37 period, but it is notable that 
the smaller establishments employing less than 51 wage earners showed 
a substantial gain from 1914 to 1919 and increased slightly in propor- 
tion to the total from 1919 to 1937, while establishments in the medium 
groups declined in number and importance. After 1919 the number 
of establishments in the groups employing 51 to 250 workers declined 
severely. The number of establishments in the largest size-groups 
increased moderately during this period. 

Petroleum Refining Industry. 

The petroleum refining industry recorded a notable gain from 1914 
to 1919 in the number of establishments employing over 1,000 wage 
earners. Furthermore, the proportion of total wage earners em- 
ployed by these large plants increased from 39 to 54 percent over the 
5-year period, but declined thereafter to 48 percent of the total in 
1937. After 1919, the principal gains shifted to the medium-size 
establishments. For example, plants employing 51 to 500 wage 
earners represented 30 percent of the total number in 1919 compared 
with 45 percent in 1937, and the proportion of the total number of 
wage earners advanced from 26 percent in 1919, to 31 percent in 1929, 
and to 34 percent in 1937. Changes in the proportion of the small 
and large establishments in the petroleum refining industry are likely 
to vary with the opening of new flush pools. 

Woolen Goods Industry. 

The woolen goods industry showed a trend toward larger units from 
1919 to 1937. In the earlier period there was a slight tendency toward 
greater concentration in medium-size establishments. Establishments 
in all size-groups employing over 250 wage earners increased in number 
and in proportion of the total from 1919 to 1937, while the number in 
the lower size-groups declined, but there was only slight concentration 
in establishments in the highest size-groups. In 1937, 52 percent of 
the establishments and 69 percent of the wage earners were accounted 
for by establishments employing 101 to 500 Workers, as against 38 
percent of the establishments and 65 percent of the wagg earners for 
establishments in this class in 1914, while 19 percent bf the wage 
earners in 1937 were in establishments with over 500 Workers compared 
with 9 percent in 1914 and 1919. 

Leather and Flour Industries. 

As in the cigar industry, there was a decline in the number of wage 
earners in the leather tanning and finishing industry and in the flour 
milling industry accompanied by an even more than proportionate 
decrease in the number of establishments; thus, these industries were 
characterized by an increasing scale of operations. Counter to the 
general trend in these industries, there was an increase in the number 
of establishments tanning and finishing leather in the larger size-groups 
(251 to 1,000 wage earners) and the number of flour milling estab- 
lishments in the medium size-groups (51 to 250 wage earners) also 
increased. 



38 CONCENTRATION OF ECONOMIC POWER 

SELECTED INDUSTRIES SHOWING IRREGULAR OR NO PRONOUNCED 
CHANGE IN SCALE OF OPERATIONS 

In the industries thus far considered the trend toward larger units 
was more or less in evidence during practically the entire 23-year 
period. There were, however, a number of industries which showed 
irregular or no significant change in the scale of operations between 
1914 and 1937. Data for a selected group of such industries are pre- 
sented in table 10. In some cases there were minor increases in opera- 
tions but, by and large, the changes were not particularly outstanding. 
In general, these selected industries are old, well-established industries 
and are active in the production of consumers' goods. 






CONCENTRATION OF ECONOMIC POWER 



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43 



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►*^15a«^j^gSKEB 



44 CONCENTRATION OF ECONOMIC POWER 

Three of these industries — silk and rayon goods, knit goods, and 
women's clothing — showed a pronounced trend toward smaller units 
in the earlier part of the period under review and a tendency toward 
larger units in later years. In two industries — butter and meat 
packing — there was a considerable development of larger units in the 
1914-19 period which was followed by a decided tendency to increase 
the number of establishments m the medium size-groups. 

Irregular Changes in Scale of Operations. 

Meat packing and butter industries. — The meat packing industry is 
one of the few industries that showed little change in the total num- 
ber of establishments from 1914 to 1937, but shifts in the relative 
importance of very large and small or medium-size establishments 
were striking. This industry includes a very large number of small 
units, but approximately half of the wage earners in 1914 were found 
in establishments employing over 1,000 workers. These large estab- 
lishments increased greatly in number and relative importance from 
1914 to 1919 but declined in number and importance from 1919 to 
1937 when establishments in all siz£-groups employing less than 1,000 
but over 20 wage earners recordecf large gains. Most of the change 
in the latter period occurred from 1919 to 1929. The number of very 
small establishments declined in each census year. 

The increasing importance of large establishments in the earlier 
years and of establishments in the medium groups from 1919 to 1937 
is apparent from changes in the proportion of the total wage earners 
employed in such establishments. The proportion of the total wage 
earners in establishments employing over 1,000 wage earners increased 
from 49 percent in 1914 to 64 percent in 1919 at the expense of all 
lower size-groups, and then declined to 38 percent in 1937, while the 
proportion for establishments employing less than 1,000 wage earners 
increased throughout this latter period. The decline in the propor- 
tion of total wage earners employed in establishments with over 1,000 
wage earners in 1937 as compared with 1914, despite an increase in 
number for the entire period, reflects a decline in the average size of 
such establishments in terms of wage earners. 

The butter industry, which is composed almost entirely of small 
establishments and offers a sharp contrast in scale of production to 
the meat packing industry, showed trends similar to that industry 
from 1914 to 1929 in that the larger establishments recorded the 
greatest gains from 1914 to 1919 and declined severely in later years, 
while the medium groups recorded the only gains in establishments 
from 1919 to 1929. Apparently, there was a slight trend toward 
smaller units from 1929 to 1937, although medium groups registered 
further small gains in that period. There was little change in the 
total number of establishments in this industry from 1919 to 1937, or 
in the proportion of wage earners accounted for by the predominant 
group employing less than six wage earners. In connection with the 
large number in this group it should be noted that since the wage- 
earner data represent an average of monthly figures, in a highly 
seasonal industry, establishments appear to be smaller in terms of 
wage earners than is actually the case in periods of activity. 

Silk and rayon industries. — Census statistics for manufacturers of 
silk and rayon goods, which were assigned to a single industry classi- 
fication prior to 1935, indicate that in number and size of establish- 
ments this group has passed through three stages of development 



CONCENTRATION OF ECONOMIC POWER 45 

since 1914. The first period from 1914 to 1921 was marked by a 
rapid increase in the number of establishments to almost double the 
original figure, largely through, a multiplication of small units and a 
pronounced decline in their average size. In the second period from 
1921 to around 1927, there was little change in the number or average 
size of units, available data indicating a possible increase in medium- 
size establishments, while from 1929, and probably from 1927, the 
number of small- and medium-size establishments declined sharply 
and the number of large establishments increased. This pronounced 
reversal of the earlier trend reduced the total number of establish- 
ments to approximately the 1914 figure and establishments employing 
less than 51 wage earners, which had increased from 402 (47 percent of 
the total) in 1914 to 1,029 (65.8 percent of the total) in 1921, to approxi- 
mately the same number and also the same proportion of the total 
as in the earlier year. Medium-size establishments also declined from 
1929 to 1937, but somewhat less severely than the smaller ones, and 
were fewer in number in 1937 than in 1914. In contrast, large estab- 
lishments employing over 500 wage earners, which had numbered 34 
in 1914 and 28 in 1921 and 1929, increased to 52 in 1937 and from 4 
percent of the total in 1914 and less than 2 percent in 1921 and 1929 
to 6.1 percent in 1937. These large establishments employed around 
two-fifths of the wage earners in 1937 compared with less than one- 
third in 1914. 

An important factor in the rapid rise in the number of small estab- 
lishments from J914 to 1921 was the increase in commission weavers 
operating small establishments with comparatively few looms (usually 
second-hand) and the increase in many "family shops" with only four 
or five workers. The growth of this type of business was particularly 
marked immediately following the war when the heavy demand for 
silk products induced concerns unable to fill their orders to contract 
work to small operators. While the commission system w T as extended 
in later years, particularly in the depression following 1929, a study 
of the broad-silk industry in Paterson, where the system is most 
prevalent, indicates that the average size of such shops, in terms of 
looms at least, increased. 7 

A second factor affecting the size of units was the change in the 
relative importance in the national totals of the New Jersey output 
which throughout the period under study included a greater propor- 
tion of small establisments than that of any other important State. 
Establishments in this State accounted for 40 percent of the total 
establishments and 26 percent of the total wage earners in 1914 and 
50 percent of the establishments from 1919 to 1927, declining there- 
after to only 26 percent of the total in 1937. 

Separate statistics for the rayon and silk industries, available only 
for 1935 and 1937, show that rayon factories are much larger on the 
average than factories in the older silk branch of the industry and 
that the number of large rayon establishments increased during the 
2-year period. The growth of the rayon industry, which first became 
important in the early twenties, undoubtedly has influenced the trend 
toward larger establishments so evident in the figures since 1927. 
Ten of the thirteen establishments with over 1,000 wage earners and 
34 of the 39 with 501 to 1,000 wage earners reported for 1937 in the 
combined totals for the silk and rayon goods industries w T ere rayon 

: Paterson Broad-Silk Works, Works Progress Administration, National Research Project, p. 113. 



46 CONCENTRATION OF ECONOMIC POWER 

establishments, while the total number of establishments was about 
equally divided between the silk and rayon branches. Between 1935 
and 1937 the number of establishments in the silk group declined 
from 658 to 425, the large- and medium-size establishments declining 
less severely than the smaller units. 

Knit goods and women's and children's clothing industries. — The knit 
goods industry is composed largely of small units although there were 
establishments reported which employed over 2,500 wage earners in 
1937. Despite rather pronounced increases in the number and rela- 
tive importance of the larger establishments as compared with 1914, 
those employing 101 to 250 and 251 to 500 wage earners remained the 
most important groups in terms of employment throughout the 
1914-37 period and together accounted for approximately 45 percent 
of all wage earners. The proportion for the larger establishments 
ranged from a low of 26 percent in 1923 to a high of nearly 40 percent 
in 1937. 

The number of establishments in all size-groups increased from 
1914 to 1929 but those employing less than 50 wage earners recorded 
the largest actual gains. The increase from 1919 to 1929 in the num- 
ber of establishments employing over 1,000 wage earners, however, 
was notable. While there were fewer establishments in this class in 
1937 than in 1929, they were larger on the average, and together 
employed slightly more wage earners than the larger number of estab- 
lishments in 1929. They showed little change, however, between 
these years in the proportion of the total wage earners employed. 

There has been no apparent tendency to develop extremely large 
units in the women's and children's clothing industry. Although 
there was an- increase in the number and relative importance of the 
larger establishments in the industry from 1919 o 1937, there was 
also a large gain in the number of establishments employing 21 to 100 
workers. In the earlier years from 1914 to 1919, the number of small 
units increased considerably while the number in higher size-groups 
declined. Small establishments showed little change from 1919 to 
1929 and declined "after 1929 while the number employing over 20 
wage earners, taken together, increased in both periods. 

Lumber and timber products. — In terms of total wage earners em- 
ployed, the lumber and timber products industry (embracing logging 
camps, merchant sawmills, and combined sawmills and planing mills) 
ranked third among all industries in 1937. Because of the fact that 
the majority of the mills are small, however, the average size of units 
in this industry is comparatively small in spite of the existence of a 
number of very large establishments. Excluding consideration of the 
group reporting less than six wage earners for which statistics are de- 
finitely not comparable, 8 there was a sharp decline from 1914 to 1929 
and a pronounced increase from 1929 to 1937 in the number of smaller 
establishments, while the larger establishments employing over 500 
wage earners recorded a gain in the early period and declined Irom 
1929 to 1937. It should be noted in connection with the increase in 
the latter group from 1914 to 1929 that, although the number in 1929 
exceeded the 1919 figure, the number of such establishments appar- 
ently reached a peak around 1923 to 1925, when lumber production 
was higher than in any other year since 1916. These establishments 
employing over 500 wage earners, however, formed a smaller propor- 

* See footnote, table 10, and text, p. 2. 



CONCENTRATION OF ECONOMIC POWER 47 

tion of the total in the 1923-25 period than in 1929. As a net result 
of the opposite changes in the proportion of larger and smaller units 
in the 1914 to 1929 period and in subsequent years, the largest estab- 
lishments showed a gam for the entire period both in proportion of 
total establishments and total wage earners, while the smaller estab- 
lishments recorded a large actual and relative loss. In point of 
employment, the medium groups reporting 101 to 500 wage earners 
remamed the most important throughout the period, accounting for 
over two-fifths of the total wage earners. 

A frequency distribution of merchant sawmills producing over 
50,000 board feet of lumber, by quantity of lumber produced, indicates 
the same general size trend as the distribution according to wa^e 
earners. It was noted from these data that, while the number of 
mills producing over 10,000,000 board feet of lumber reached a peak 
around 1924, the number producing over 50,000,000 board feet 
which was not distinguished in statistics prior to that year was high- 
est m 1929. There were 120 of these large mills in the latter year 
compared with 110 in 1924 and 63 in 1936, the latest year for which 
data are available. 

The increase in the number and relative importance of large mills 
in the 1914-29 period may be attributed largely to the shift in 
the geographical center of the lumber industry from the southern 
region, where small mills predominate, to the Pacific Coast States 
where the density of the timber areas and the necessitv of having 
establishments capable of handling logs of great size have influenced 
the erection of a greater proportion of large units than in other regions 
At the beginning of the period in 1914, the southern and North Caro- 
lina pine States accounted for nearly half of the total lumber produc- 
tion in comparison with approximately one-fifth of the total for the 
-Pacific Coast States. Production in the latter area rose rapidly after 
1915, resulting in an increase in the number of large mills, while pro- 
duction in the southern regions reached a peak around 1916. By 1928 
production in the two areas was approximated equal, together 
accounting for four-fifths of the total, while after 1929 the Pacific 
states supplanted the southern as the principal lumber region, although 
production in the Pacific States, as in other areas, declined severely 
alter 1929 The effect of the increasing importance of the industry 
m the Pacific Coast States on the proportion of large establishments 
is apparent from a comparison ol the two areas. In 1919 and 1929 
less than 5 percent of the 6,800 mills in the southern and North Caro- 
lina pine States, produced over 10,000,000 board feet of lumber, while 
in the Pacific Coast States 20 percent of the 1,200 mills in 1919 and 
22 percent of the 1,300 mills in 1929 were in this class. Moreover, 
a no j 1 ^ 1111118 cutting over 50,000,000 board feet reported in 1924 
and 92 ol the 120 such mills reported in 1929 were located in the 
racihc Coast States compared with 23 and 10, respectively, in the 
southern and North Carolina pine States. 

Size changes in the past decade reflect the severe decline in the 
dem and for lumber, which has resulted in greatly reduced production 
and m the liquidation of many large mills, and the gradual depletion 
+ la /*p, sou thern tim ber areas with the resultant reversion to smaller 
estabhshments. These utilize small or second growth timber which 
is not available or not accessible in sufficient quantity to supply the 



48 CONCENTRATION OF ECONOMIC POWER 

larger mills. Many of the small mills are of the portable type, and 
are engaged in what has been described as a "mopping up" process. 
Cottonseed oil, cake, and meal industry. — The total number of estab- 
lishments in the cottonseed, oil, cake, and meal industry declined 
nearly 50 percent from 1914 to 1937. The distribution of establish- 
ments according to wage earners indicates that the smaller establish- 
ments declined severely from 1914 to 1919 and from 1929 to 1937, 
while the larger establishments increased over the period as a whole; 
from 1919 to 1929, however, the number of larger establishments was 
greatly reduced, while the number in the medium groups recorded 
relative gains. The increase in the number of larger establishments 
in the 1914-19 period and the decline from 1919 to 1929 was note- 
worthy. In sharp contrast with the changes indicated by the wage- 
earner data in the latter period, a distribution of mills iiccording to 
quantity of seed crushed indicates that in terms of productivity there 
was not only an increase in the number and relative importance of 
large mills and a decline in the number of small mills from 1919 to 
1929 as well as in later years but that the movement was more pro- 
nounced in the 1919-29 period than from 1914 to 1919. The largest 
mills, crushing over 20,000 tons of seed, accounted for approximately 
3 percent of the total number in the cotton marketing year 1913-14 
and in 1918-19 but increased to 8 percent of the total in 1928-29 
and to 12 percent in 1936-37. 

No Pronounced Change Over the Period. 

The discussion in the preceding section was concerned with specific 
industries in which the scale of operations experienced rather wide, 
irregular movements during the period from 1914 to 1937. For six 
industries included in table 10 there is no strong evidence in the wage- 
earner data of a definite tendency toward either larger- or smaller-scale 
operations during all or the greater part of this time. 

In three industries — boots and shoes, cotton goods, and worsted 
goods — there was a large reduction in the total number of establish- 
ments from 1919 to 1937, following an increase from 1914 to 1919 for 
the former two industries. There was, however, no clear-cut tendency 
for the smaller establishments to decline in importance until after 
1929, when all the reduction in the total was accounted for by a severe 
decline in the number in the lower size-groups which include estab- 
lishments employing less than 100 wage earners in the boot and shoe 
industry and less than 250 in the larger-scale textile goods industries. 
In the boots and shoes and worsted goods industries the largest 
establishments employing over 1,000 wage earners decreased in num- 
ber and relative importance between 1914 and 1937. In the latter 
industry the decline occurred between 1919 and 1929, whereas in the 
boot and shoe industry a still further decline in 1937 was noted. 

The same tendency to decrease the number of establishments em- 
ploying over 1,000 workers and to increase the number in the next 
lower size-groups was in evidence in the cotton goods industry be- 
tween 1919 and 1929 but the larger establishments increased in 
number after 1929. For the 1914 to 1937 period as a whole, estab- 
lishments in all size-groups employing over 250 wage earners recorded 
gains in number and in proportion of total establishments as well as 
small increases in the proportion of the total wage earners employed. 



CONCENTRATION OF ECONOMIC POWER aq 

Some tendency toward larger units was apparent in the paints 
pigments, and varnish industry from 1914 to 1919, but there was no 
development of larger establishments in later years. There was a 
considerable expansion in the number of establishments from 1919 to 
1937; throughout the period, however, the industry consisted almost 
entirely of small and medium-size establishments. 

In the furniture industry and the combined group— confectionery 
ice cream, and chewing gum— changes in the proportional distribu- 
tion of establishments and wage earners were not sufficiently pro- 
nounced or regular to indicate any definite trend. 

SELECTED INDUSTRIES SHOWING DECREASES IN SCALE OF OPERATIONS 

Table 11 presents data for a number of industries which were 
operating on a smaller scale in 1937 than in 1914. With the excep- 
tion of the electric and steam railroad car industry, small and medium- 
size establishments predominated in these industries in the earlier as 
well as later years. For a few of the industries the trend toward 
smaller units appears to have been more or less in evidence during the 
entire period since 1914, but in most cases this trend began only after 
1919. A comparatively small number of the 204 industries studied 
however, showed a trend toward manufacturing on a smaller scale 
throughout the entire period. Moreover, as previously noted, in- 
dustries that showed an appreciable decline in the average size of 
units for the 1914-37 period as a whole were far less numerous than 
those that showed appreciable gains. Examination of the data for 
the industries in table 10 reveals considerable irregularity in the 
changes. This appears characteristic of industries in which the size 
ol units declmed. About the only similarity in the changes for the 
group m table 11 was a decline in the relative importance of estab- 
lishments in the largest size-groups between 1919 or 1923 and 1929 



273238 — 41— pt. 27- 



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£2 CONCENTRATION OF ECONOMIC POWER 

Steam and Electric Railroad Car Industry. 

Few industries, and no other large-scale industry, showed as great 
a decline in average size of units from 1914 to 1937 as the electric 
■and steam railroad car industry. Practically all of the decline 
occurred between 1923 and 1929 following a substantial increase in the 
average size of units in the earlier period. The figures in table 11 
and data for 1923, which show a continuation of the 1914-19 trend, 
indicate that there was little change from 1914 to 1923 or from 1929 
to 1937 in the relative importance of large establishments with over 
1,000 wage earners, which account for a large proportion of the wage- 
earners in the industry, but that the next lower group employing 500 to 
1,000 wage earners increased substantially ' in number and relative 
importance. In the intervening years from 1923 to 1929, however, 
establishments in both of these size-groups declined severely in number 
and proportion of the total, while the number in all lower size-groups 
increased. The smaller establishments with less than 51 wage earners 
also increased from 1929 to 1937 which accounts for the slight decrease 
in average wage earners per establishment in this period despite the 
increase for the large establishments noted above. Trends in the 
scale of production in this industry appear to have reflected rather 
closely changes in production which increased considerably from 1914 
to 1923 and declined severely from 1923 to 1929 but did not show any 
marked change in 1937 as compared with 1929. 

Ice Industry. 

The ice industry, which shows a somewhat greater decline in aver- 
age wage earners per establishment than the other industries included 
in table 11, consists largely of small units, the advantages of proximity 
to markets favoring small-scale operations. The wage-earner data 
indicate that there was a marked trend toward larger units from 1914 
to 1919 but that from 1919 to 1937 the smaller establishments in- 
creased rapidly while the number of larger establishments was greatly 
reduced. In 1937, establishments with less than six wage earners 
accounted for 40 percent of the total wage earners in the industry 
compared with 13 percent in 1919. 

The decline in the average wage earners per establishment between 
1919 and 1929, as well as the apparent shift of establishments to 
lower size-groups indicated by the data, may result largely from the 
improper inclusion of some employees engaged in delivery service in 
the figures for the earlier years and the consequent inflation of the size 
of establishments in 1914 and 1919. A comparison of ice production 
Xwhich reached a peak in 1929 and declined severely from 1929 to 
1937) with changes in the number of establishments indicates that 
the average size of establishments in terms of volume of production 
increased from 1919 to around 1925-27, but whether measured by 
production or wage earners there was a large decline in the average 
size of establishments after 1927. 

This trend in the ice industry toward smaller units apparently 
reflects the effects of the development of mechanical refrigeration and 
the tendency to set up plants in small communities, or in large com- 
munities close to the place of consumption, and to develop ice manu- 
facturing as an auxiliary operation in connection with other lines 
of business, such as cold-storage plants, creameries, etc. 



CONCENTRATION OP ECONOMIC POWER 53 

Screw-machine Products and Wood Screws Industry. 

In the screw-machine products and wood screws industry both 
the number of establishments and wage earners recorded large increases 
from 1914 to 1937, but establishments increased more rapidly than 
wage earners as the result of a large increase in the number of smaller 
units. The most notable changes in the size distributions were the 
decline in the relative importance of establishments employing over 
500 wage earners which, though embracing only 3 of the 70 establish- 
ments in 1914, included more than half of the wage earners in the 
industry in that year, and the increasing importance of establishments 
employing 100 or fewer wage earners. Most of the change occurred 
after 1919. The proportion of the total wage earners employed in 
establishments in the "over 500 wage earners" class fell from 53 
percent in 1914 to 48 percent in 1919 and 31 percent in 1937, while 
the proportion for those employing 100 or fewer wage earners increased 
from 14 percent of the total in 1914 to 31 percent in 1937. Similarly, 
the proportion of the total establishments represented by the former 
group declined despite an increase in number from 1914 to 1929, 
while the proportion represented by the smaller size-groups increased. 

Other Selected Industries. 

The cement and structural and ornamental metal work industriea 
showed no definite trends from 1914 to 1919 but a tendency toward 
larger units from 1919 to 1923, probably reflecting the increase in 
building activity that began in the latter period. From 1923 to 1937 
the average size of units (in terms of wage earners) in both industries- 
declined. The decline in the structural and ornamental metal work 
industry reflected a pronounced trend toward smaller units but the 
decline for the cement industry resulted from a movement toward 
greater concentration m medium-size establishments. Similar trends 
were slightly in evidence in the 191-419 period. Concentration in 
medium-size establishments appears to characterize the cement in- 
dustry. In 1914, establishments with 101 to 250 wage earners ac- 
counted for 44 percent of all establishments and 36 percent of the wage 
earners, the remaining establishments being equally divided between 
higher and lower size-groups, while in 1937 this group accounted for 
56 percent of the establishments and 52 percent of the wage earners. 

Of the industries studied, the condensed and evaporated milk 
industry, which is composed of small and a few medium-size establish- 
ments in terms of average employment, showed one' of the most pro- 
nounced declines in average wage earners per establishment. All of 
this decline occurred between 1919 and 1929 and reflected a large in- 
crease in the number of small units and a drastic decline in the number 
of establishments in the higher size-groups. In both earlier and later 
years, from 1914 to 1919 and from 1929 to 1937, the larger establish- 
ments increased more rapidly than the smaller, but for the 1914-37 
period as a whole there was a striking increase in the number and 
relative importance of small units. 

As a consequence of the sharp drop in number of establishments in 
the fertilizer industry and the pronounced rise in total employment, 
the average number of wage earners per establishment was consider- 
ably higher in 1919 than in 1914 but declined sharply between 1919 
and 1929 and again in 1937. The decline in number of establishments; 
in the earlier period occurred among plants employing 100 or less 
wage earners. The larger establishments recorded actual and relative 
gains from 1914 to 1919 but declined in importance in later years. 



CHAPTER III 

GENERAL TRENDS IN CONCENTRATION OF OPERATIONS 
AMONG MANUFACTURING ESTABLISHMENTS 

In discussing the scale of production in the previous chapters, the 
analysis was in terms of the size of establishments. The approach 
now shifts to the problem of concentration, a concept which refers to 
the distribution of employment among the various establishments in 
an industry. For the purposes of this study, the number of estab- 
lishments employing one-half of the wage earners in an industry is 
taken as the measure of the concentration of operations in big estab- 
lishments. Concentration of operations in terms of establishment 
units, then, is really a measure of the extent to which the business of 
an industry is done in a small number of its larger plants, or con- 
versely, how evenly it is spread over the various establishments in 
the industry. Growth of concentration refers to expansion of some 
units at the expense of others. Concentration increases when the 
growth in size of establishments, as measured by the number of wage 
earners employed, is among the larger establishments and decreases 
when the growth in size is among the smaller establishments. There 
are, of course, various other combinations of circumstances which 
would account for increases or decreases in concentration. 

MEASURES OF CONCENTRATION 

In order that changes in the concentration of operations in the 
various industries may be appraised, two measures of concentration 
have been developed. The first measure, which is called the absolute 
index, is based on the actual number of establishments required to 
account for half the wage earners in each industry. The second 
measure, which is called the proportionate index, is based on the pro- 
portion of the total number of establishments which is required to 
account for half the wage earners in each industry. Thus, the first 
index is concerned solely with the number in the concentrated group, 
while the second index reflects changes in the total number of all 
establishments in the industry. 

The establishments in each industry were arrayed in order of the 
number of wage earners employed by each and the number of the 
largest establishments required to account for half the total wage 
earners was thus determined. 1 This figu*e was calculated for 7 
different years throughout the period from 1914 to 1937, inclusive, 
and for 195 industries (or combinations of industries) for which com- 
parable data were available (see appendix B). For ease in comparison 

1 Actually, frequency distributions were prepared from published census data of the number of establish- 
ments and the number of wage earners per establishment expressed in given intervals. By means of inter- 
polation the nearest whole number of large establishments employing half the wage earners was determined. 
Interpolations were considered unreliable in the case of nine of the industries analyzed in the earlier chapter 
so that these industries were excluded from the present analysis. 

54 



CONCENTRATION OF ECONOMIC POWER 55 

the figures were converted to an index with 1914 as the. base. In 
this form an increase in the absolute index from one period to another 
means that more establishments are necessary to account for half the 
workers, and thus concentration has decreased. The same general 
reasoning applies to the proportionate index. A final step was thus 
necessary in the calculation of the indexes in order that they would 
reflect directly the changes in concentration. This involved the 
calculation of the reciprocals of the indexes for each year. The 
absolute index of concentration used in this study, then, is the recip- 
rocal of the index representing the actual number of establishments 
employing half the workers. The proportionate index of concentra- 
tion of operations in the larger establishments was calculated in the 
same maimer. 

The difference between the two indexes is revealed in the following 
example. There were 84 establishments in 1914 and 27 establish- 
ments in 1937 in the corn sirup and other products industry and the 
number of wage earners in these 2 years was 4,500 and 7,000 respec- 
tively. The number of establishments employing half the workers 
was 4 in 1914 and 3 in 1937; this represented 4.8 and 11 percent of 
the establishments, respectively. The absolute index of concentra- 
tion, therefore, increased from 100 in 1914 to 133 in 1937, while the 
proportionate index decreased from 100 in 1914 to 44 in 1937. 

If an industry is static or if all the establishments have the same 
proportionate increase or decrease in the number of wage earners 
employed, the two indexes will be the same. 

In measuring the growth or decline of concentration over a period 
of time, it is important to remember that a good deal depends upon 
the degree of concentration in the base year. If, for example, the 
proportion of establishments employing half the workers decreased 
from 50 to 25 percent, the proportionate index of concentration would 
increase from 100 to 200. The index would also rise from 100 to 
200 if the percentage of establishments employing half the workers 
declined from 4 to 2 percent. The significance of the two changes 
may be quite different. If the degree of concentration is exceedingly 
high to begin with (as in the latter example), the same relative growth 
or decline in concentration may not be as significant as if the degree 
of concentration were low at the outset. 

In the sewing machine industry, for example, 1 establishment, out 
of 30 to 40, employed half the workers in 1914, 1919, 1921, and 1929. 
In 1935 and 1937, 2 establishments employed half the workers. 
The percent of establishments employing half the workers rose from 
2.9 in 1914 to 5.6 in 1937. During this period, moreover, there was a 
substantial decline in total employment in the industry. The 
increase in the number of establishments required to account for half 
the workers, therefore, means that the largest establishment "suf- 
fered" relatively more than the industry as a whole. Both indexes of 
concentration declined by almost 50 percent. Concentration of 
operations, however, remained sufficiently high in 1937 so that the 
decline in concentration would seem to be of minor significance. 

CHANGES IN CONCENTRATION OF OPERATIONS FOR ALL INDUSTRIES 

When one applies this sort of analysis to the general manufacturing 
data, the most surprising fact is the high degree of establishment con- 
centration in 1914; half of the workers were employed in 3.4 percent 



56 



CONCENTRATION OF ECONOMIC POWER 



of the establishments and, further, 25 percent of the workers were 
employed in 0.69 percent of the establishments. 

On an absolute basis, the changes in concentration since 1914 have 
been small against the background of this exceptionally high degree 
of concentration. The absolute number of establishments employ- 
ing half the workers declined from 5,950 in 1914 to 4,885 in 1937. 
This change is reflected by the absolute index which increased from 
100 in 1914 to 122 in 1937. (See chart 3.) 



INDEX 


1914' 100 


150 
145 
140 
135 
130 
125 

ieo 

115 
110 
105 
100 

95 
90 






















i 


\ 
















1 
/ 


\^^ proportionate index 

Y*^ Or CONCENTRATION 












/ 
/ 
/ 


\ — ' 

\ 

% 




,-■ 


V / 










/ 

/ 


\ 
| 




^ 


\ / 


i 


k/Nk 






/ 
/ 


1 

1 


y 


^' 


\ / 


i 








' A 
1 / 

1 s 


\ \ 


/ 
• 




/ \ 


i 
i 


\ 
> 






1 / 


\ s 


/ 


ABSOLUTE INDEX _ 
OF CONCENTRATION ^ 


/ \ 


t 
i 








1 s 

1 jr 








\ 


i 

t 








tf 




















































1914 1919 1921 1923 1929 1933 1935 1937 

D.O. 40- S?0 



CHART 3.— ABSOLUTE INDEX ANET PROPORTIONATE INDEX OF CONCENTRATION 
FOR ALL INDUSTRIES, 1914-37. 



Similarly, the absolute number of establishments employing 25 
percent of the workers declined from 1.194 in 1914 to 866 in 1937 so 
that the absolute index (computed on a 25 percent basis) stood at 138 
in the latter year. Thus, the growth in the scale of operations was 
concentrated in the largest establishments in the upper half. 

The virtue of the absolute index is that it is unaffected by shifts in 
the large number of small establishments in many industries that may 
change without significantly affecting the concentration problem. 
If, for example, 4 out of 100 establishments employ half the workers 
in an industry, it may be much more significant in the concentration 
picture if the number of larger establishments employing half the 
workers increases from 4 to 8, than if 100 small establishments are 
added and 4 large establishments continued to account for half the 
workers. 

Between 1914 and 1937 the percentage of establishments employing 
half the workers declined from 3.4 to 2.9 percent. This change is 
reflected by the proportionate index which stood at 117 in 1937. 
The percentage of establishments employing 25 percent of the workers 
declined from 0.69 to 0.52 percent during this period so that, on a 
25 percent basis, the proportionate index stood at 133 in 1937. 



CONCENTRATION OF ECONOMIC POWER 57 

The greatest increase in concentration measured by the propor- 
tionate index occurred during the war period. In 1919, it reached an 
all-time high of 142 when 2.4 percent, or 5,016 of 210,400 establish- 
ments, employed half the workers. Similarly, for the percentage of 
establishments employing 25 percent of the workers, the propor- 
tionate index reached an all-time high of 177 in 1919. 

The absolute index also increased during the war period. The 
absolute number of establishments employing half the workers declined 
from 5,950 to 5,016, despite the increase in total employment from 
6,479,000 to 8,431,000. Thus, from a base of 100 in 1914, the absolute 
index of concentration rose to 119 in 1919, which compares with 102 
)d. 1921, 109 in 1923 and 1929, 134 in 1933, 129 in 1935, and 122 in 
1937. In other words, when measured absolutely, concentration in 
1919 was markedly above that of the 1920's, well below that of the 
depression years, and not far from the 1937 figure. 

In the post-war depression, concentration, as measured by both 
indexes, dropped precipitately though the 1921 low was still above the 
base level of 1914. The absolute index stood at 102 in 1921 and the 
proportionate index at 113. The period of prosperity in the 1920's 
brought no striking change in concentration. Concentration, meas- 
ured absolutely, was constant between 1923 and 1929, while the pro- 
portionate index rose slightly. 

During the great depression the absolute index increased from 109 
in 1929 to 134 in 1933, and the proportionate index fell from 131 to 
106. This means that there was a reduction in the absolute number of 
establishments employing half the workers. However, since the 
number of establishments employing half the workers fell less than the 
total number of establishments, the percentage of establishments 
employing half the workers rose from 2.6 to 3.2. 

From. the 1933 level of 134, the absolute index declined slightly in 
1935 to" 129 and again in 1937 to 122. The proportionate index 
advanced sharply in 1935 to 126, and was at 117 in 1937. The point 
seems to be that the depression reduced the number of enterprises 
necessary to employ one-half the workers, but did not reduce it as 
rapidly as the reduction in all establishments. The recovery on the 
other hand, increased the number necessary to include one-half the 
workers, but less rapidly than the increase in other establishments. 

These measures support the conclusion suggested in the earlier 
chapter on quite different evidence, that the tendency toward domi- 
nance by a small number of establishments is increasing. 



CHAPTER IV 

EXTREME CHANGES IN ESTABLISHMENT CONCENTRATION 

BY INDUSTRIES 

In the previous chapter an analysis for all manufacturing was 

{^resented. It concerned itself with concentration in the large estab- 
ishments of the country. But in many small-scale industries, there 
may be a high degree of concentration and yet no plant would be 
included among the great. Its size is relative to the others in its 
own industry. For many purposes, the most significant measure of 
concentration is that which considers each industry as a separate 
basis for analysis. On the basis of such studies, this chapter presents 
cases of extreme change in concentration between 1914 and 1937. 

DECLINING CONCENTRATION 

Absolute Index. 

Thirty-seven industries showed a decline in concentration to 50 or 
lower from 1914 to 1937 according to the absolute index; this means 
that more than twice as many establishments were required to cover 
one-half the workers in 1937 than in 1914 (see table 12). Outstanding 
features of these industries were: 

(a) The relatively small size of the industries l . — Only 2 of the 37 
industries in this group employed over 100,000 wage earners and two 
employed between 25,000 and 100,000. Of the remaining 33 indus- 
tries, 18 employed between 5,000 and 25,000 while 15 employed 
fewer than 5,000 wage earners. 

(b) The expansion of the industries. — For the group as a whole, 
employment increased 93.8 percent and establishments 80.2 percent. 

In each of the two large industries, meat packing and electrical 
machinery, the degree of concentration was exceptionally high at the 
outset. In 1914, 1.9 and 1.8 percent of the establishments employed 
half the workers in the electrical machinery and meat-packing in- 
dustries, respectively. The radio and phonograph industries were 
included in the electrical machinery industry and this fact doubtless 
helps explain its growth and establishment decentralization. 

• In 28 of the 37 industries, there was an expansion in total employ- 
ment, and in 33 there was a substantial expansion in total establish- 
ments. It is to be remembered that the measure here used represents 
the absolute number of establishments employing half the workers 
and is not directly affected by changes in total number of establish- 
ments as is the proportionate index. The proportionate index, how- 
ever, also declined (though usually more moderately) in 28 out of the 
37 industries. The exceptions were (with proportionate index indi- 
cated in parentheses) : Aluminum products (100) ; stamped and pressed 

1 Unless otherwise stated, the size of an industry is calculated on the basis of the average employment 
throughout the period 1914-37. See appendix C. 

58 



CONCENTRATION OF ECONOMIC POWER 



59 



metal products (100); fuel briquettes (105); asbestos products (106); 
condensed and evaporated milk (107); ink, printing (110); wood 
preserving (117); doors, shutters, etc. (119); and aircraft and parts 
(315). F 

Table 12. — Industries with unusual declines in concentration as measured by the 

absolute index 



Industry 



Jute goods 

Screw-machine products and wood screws """"" 

Aluminum products '.'.'.'.'.'.'.'.'. 

Galvanizing and other coating, done in plants not operated in connection "with roliing mills 

Bone black, carbon black, and lampblack 

Signs and advertising novelties. ._ ""11"""1 

Sporting and athletic goods, not including firearms and ammunition 

Doors, shutters, and window sash and frames, molding and trim, metal 

Ammunition and related products; fireworks and allied products... 

Electrical machinery, apparatus and supplies; radios, radio tubes and phonographs 

Asbestos products other than steam packing and pipe and boiler covering 

Smelting and refining, nonferrous metals other than gold, silver, and platinum not from "the ore 

Candles 



1937 index 
(1914=100) 



Liquors, vinous '.'.'.'.'. '.'.'.'.'. 

Condensed and evaporated milk ™."™"I" 

Corsets and allied garments 

Ink, printing 

Wood preserving.. '..'.'.".'.'.'.". 

Aircraft and parts ""."."."."."....."." 

Wire drawn from purchased rods I-""""-™"~""I" 

Stamped and pressed metal products; enameling, japanning, and lacquering 

Hat and cap materials, men's.. 

Ice, manufactured " 

Furs, dressed and dyed '..Y.'.'.'.Y.Y. 

Lapidary work Y..Y.Y.Y.Y. 

Petroleum refining .......". 

Foundry supplies ..""""" 

Sugar, beet 

Bags, paper, exclusive of those made in paper milTs 

Fuel briquettes 

Saws _ "."""""" 

Surgical and orthopedic appliances and related products. '.'.'. '. 

Artists' materials; pencils, lead (including mechanical), and crayons 

Meat packing, wholesale ., 

Fire extinguishers, chemical II"""I" 

Matches " 

Sewing machines and [attachments. YYYYYYYYYYYYYYY 



13 
16 
20 
22 
23 
26 
29 
31 
33 
33 
33 
33 
33 
34 
35 
36 
37 
39 
40 
40 
40 
40 
41 
42 
43 
43 
43 
47 
48 
50 
50 
50 
50 
60 
50 
50 
50 



It might be supposed that the growing industries, petroleum, 
aluminum, aircraft, etc., were also industries of growing concentration. 
The opposite is more generally the case. Employment in petroleum 
refining between 1914 and 1937 increased from 25,400 to 83,200. 
Total establishments doubled so that average wage earners per estab- 
lishment increased from 144 to 228. The growth, however, was 
concentrated in the smaller establishments. The number of estab- 
lishments employing half the workers increased from 9 to 21 so that 
the percentage increased from 5.1 to 5.8; This is an outstanding 
example of an industry in which size of establishment increased and 
concentration declined. 

In the electrical machinery and radio industry, employment and 
establishments almost doubled between 1914 and 1937. The growth 
was concentrated in the smaller establishments, while the average 
number of wage earners per establishment declined from 3,743 to 
2,942 for the larger segment. At the same time both the absolute 
number and the percentage of establishments employing half the 
workers declined greatly, the two indexes reaching 33 and 58, respec- 
tively, in 1937. 



£0 CONCENTRATION OF ECONOMIC POWER 

Proportionate Index. 

On the basis of the proportionate index, 14 industries showed a 
decline in concentration to 50 or lower from 1914 to 1937. This 
means that the percentage of all establishments required to cover 
one-half the wage earners more than doubled. Half of these industries 
were growing industries. With two exceptions, the absolute index 
also declined in each industry. 

The industries showing an increase in the absolute index were the 
saddlery industry and the corn sirup industry. In the saddlery 
industry the number of establishments employing half the workers 
fell from 66 to 15 so that the absolute index rose to 440, while the 
percentage of establishments employing half the workers increased 
from 5.4 to 11 percent. The reason is that the total number of 
establishments declined from 1,220 to 139 and total employment 
declined from 13,000 to 3,000. In the corn sirup industry the number 
of establishments employing half the workers declined from 4 to 3, 
while the percentage increased from 4.8 to 11. This is because the 
total number of establishments declined from 84 to 27 while employ- 
ment increased from 4,500 to 7,000. 

In spite of the extreme decline in the proportionate index of the 
14 industries cited above, concentration in these industries remained 
very high. The decline of concentration should be interpreted in 
the light of the exceptionally high degree of concentration in the 
base year. In half of these industries there was a growth in employ- 
ment and a marked growth in the average number of wage earners 
per establishment. This again indicates the fact that the growth of 
size and the growth in concentration are not at all the same thing 
and, in fact, as often as not move in opposite directions. 

In the motor vehicle industry, for example, total employment in- 
creased from 79,300 to 194,500. At the same time the total number 
of establishments declined from 289 to 131 so that the average number 
of wage earners per establishment increased from 274 to 1,485. 
Furthermore, the growth occurred in both the larger and smaller 
establishments. In the larger segment the average number of wage 
earners increased from 5,700 to 10,800; in the smaller segment, the 
increase in average number of wage earners per establishment was 
even greater, from 141 to 797. Despite the growth of size, the 
absolute index declined, the number of establishments employing half 
the workers increasing from 7 to 9. The proportionate index also 
declined to 35 because, owing to the decline in total establishments, 
the percentage of establishments employing half the workers increased 
from 2.4 to 6.9. 

The bulk of the decline in concentration occurred in the war period 
for the smelting industry (nonferrous metals) and between 1914 and 
1921 in the lapidary industry, between 1921 and 1929 in the gal- 
vanizing and corn sirup industries, and by 1923 the tobacco and 
foundry industries had reached their lows. In the remaining in- 
dustries the decline in concentration was rather generally distributed 
throughout the period 1914 to 1937 or the period 1919 to 1937. In 
several instances there was an increase in concentration during the 
war period. 



CONCENTRATION OF ECONOMIC POWER 



61 



INCREASING CONCENTRATION 

Absolute Index. 

Among the 28 industries for which concentration increased to 
200 or more according to the absolute index (see table 13), the cigar 
and cigarette industry is the~only one in the group of 19 large industries 
employing over 100,000. 

The patterns in this group of industries with unusual growth in 
concentration are less well established than in those with declining, 
concentration. 

Perhaps the outstanding characteristic of these industries was the 
comparatively low degree of concentration in 1914. In 21 of the indus- 
tries, the percentage of establishments employing half the workers 
was 10 percent or more, the mean figure 2 being 13.96 percent. The 
mean figure for those below 10 percent was 5.24 percent. 

Those industries with a relatively high degree of concentration at 
the outset and, contrary to the above, showing exceptional growth of 
concentration are: Cigars and cigarettes, 3.2 percent; saddlery, 5.4 
percent; flour and other grain mill products, 6 percent; agricultural 
implements, 4.9 percent; cooperage, 7 percent; organs, 8.3 percent; 
and writing ink, 7 percent. 

In 23 of the 28 industries, the proportionate index also indicated 
growing concentration. 

Of those 28 industries showing unusual growth in concentration, 
5 had only 2 establishments and 3 had only 4 establishments employing: 
half the workers at the beginning of the period in 1914. The 5 
were the oilcloth, fish nets, linen goods, locomotives, and writing ink; 
the 3 were the rubber boots and shoes, china firing, and firearms in- 
dustries. 



Table 13.- 



-Industries with unusual increases in concentration as measured by the 
absolute index 



Industry 



1937 index 
(1914=100) 



Engraving (other than steel, copperplate, or wood), chasing, etching, and diesinking 

Musical instruments: Pianos-. . 

Cigarettes; cigars-. . 

Saddlery, harness, and whips. 

Hair work ____ 

Four and other grain-mill products 

Mirrors and other glass products made of purchased glass 

Musical instrument parts and materials: Piano and organ... 

Gold leaf and foil 

Agricultural implements (including tractors); engines, turbines, water wheels, and windmills 

Boxes, cigar, wooden and part wooden - 

Sheet-metal work, not specifically classified 

Cooperage ,■ 

Wood distillation and charcoal manufacture 

Feathers, plumes, and manufactures thereof 

Jewelers' findings and materials; jewelry .' 

Oil, cake, and meal, cottonseed 

Sand-lime brick 

Glass 

China firing and decorating, not done in potteries.. 

Musical instruments: Organs 

Oilcloth 

Fish nets and seines 

Ink, writing _, 

Linen goods 

Boots and shoes, rubber... _ 

Locomotives, railroad, mining, and industrial, not made in railroad repair shops 

Firearms ....... 



2,300 
750 
520 
440 
420 

40a 

354 
350 
350 
293 
260 
259 
257 
250 
245 
234 
226 
220 
207 
200 
200 
200 
200 
200 
200 
200 
200 
200 



1 Average weighted by number of establishments. 



62 CONCENTRATION OF ECONOMIC POWER 

In only three of these industries was the growth more or less gradual 
throughout the period: Gold leaf and foil, agricultural implements, 
and cottonseed oil, cake, and meal. In only two of these industries 
was the growth chiefly during the war period. 

In the remaining 23 industries the exceptional growth in concen- 
tration was in either or both of the periods 1921 to 1929 and 1929 to 
1937. In only one case, the feather industry, was the growth exclu- 
sively in the 1920's. 

In 11 of these 23 industries the growth in concentration extended 
through both periods, 1921-29 and 1929-37. It appears, then, that 
in almost half the cases the depression neither stopped nor started the 
growth of concentration. These industries are as follows: Pianos 
(also in the 1920's), cigars and cigarettes, saddlery, flour, wooden cigar 
boxes, sheet-metal work, cooperage, wood distillation, jewelry, glass, 
and writing ink. 

In 11 of the 23 industries, however, the growth in concentration 
was highly concentrated in the depression following 1929. These 
industries are as follows: Hair work, mirrors, musical instrument 
parts, sand-lime brick, china firing, organs, oilcloth, fish nets, linen 
goods, rubber boots and shoes, and firearms. 

Proportionate Index. 

Only 5 industries showed an increase in concentration to more than 
200 in the proportionate index; 15 additional industries showed an 
increase to more than 150 (see table 14). Sixteen of these industries 
showed an unusual growth in total employment. 

Table 14. — Array of industries showing increases in concentration as measured 

by the proportionate index 



Industry 



1937 index 
(1914=100) 



Engraving (other than steel, copperplate, or wood), chasing, etching, and diesinking_ 

Aircraft and parts - 

Mirrors and other glass products made of purchased glass 

Perfumes, cosmetics, and other toilet preparations .. 

Cleaning and polishing preparations .__ 

Motor-vehicle bodies and motor-vehicle parts -- 

Printing and publishing, newspaper and periodical 

Jewelers' findings and materials: jewelry 

Electroplating -- 

Firearms 

Chemicals not elsewhere classified -- 

Chocolate and cocoa products, not including confectionery -- 

Bookbinding- and blank-book making 

Fish nets and seines 

Wirework not elsewhere classified 

Needles, pins, hooks and eyes, and slide and snap fasteners 

Stereotyping and electrotyping. not done in printing establishments... 

Artificial and preserved flowers and plants 

Silverware and plated ware 

Printing and publishing, book, music, and job 



1,308 
315 
306 
250 
218 
195 
191 
190 
183 
179 
176 
176 
172 
164 
160 
160 
157 
156 
155 
152 



There are industries of all sizes in this group. Three industries 
empk^ed more than 100,000 wage earners, and 2 between 25,000 arid 
100,000. Of the remaining 15 industries, 9 employed between 5,000 
and 25,000 wage earners while the other 6 industries fell in the lowest 
size-group. 

Sixteen of the industries also showed increases in the absolute index; 
9 of these had increases to 150 or more. Just 4 industries showed a 
decline, and in only 1 case was the decline substantial. These were 



Chaet 1 



EXPENDITURES OF THE UNITED STATES GOVERNMENT 

BY FUNCTION, 1931-1939 



LEGISLATIVE 
JUDICIAL 6 CIVIL 



VETERANS PENSIONS 
6 BENEFITS 



INTEREST ON THE 
PUdLIC DEBT 



PUBLIC WORKS 



UNEMPLOYMENT RELIEF 



l 

2. OHM 



1931 '32 '33 ^4 '35 '36 V SB 1939 




DOLLARS DOLLARS 

(BILLIONS) (BILLIONS) 

12 2 8 



2.6 



1931 '32'33 34'35'36 37'38 1939 




AGRICULTURAL 
ADJUSTMENT PROGRAM 

OOLLAR5 DOLLARS DOLLARS 

(BILLIONS) IBILLIONS) (BILLIONS) 

2.B I 2 



1931 32 33 34 35 36 37 38 1939 



;i| 




931 '32 33 34 35 36 37 38 1939 



NATIONAL DEFENSE 



— 


-p r—r~r. i 2 






o e— *~ . — -s 


• > j -c e 


«v • ' 
















.' 


. . . .- 



1931 '32'33'34'35 36 '37 38 1939 




LOANS, SUBSCRIPTIONS 
TO STOCK 



BiLl 



mil 

ill 1 1 

■ If 



SOCIAL 


SECURITY 


a 


RAILROAD 


RETIREMENT 


DOLLARS 
(BILLIONS) 




OOLLARS 
(BILLIONS) 



• 6 6 




931 32 '33 34 '35 '36 '3/ '38 1939 



1931 '32 JJ '34'35'36'37'38I939 



1931 '32 '33 '34 '35 '36 '37 '38 1939 1931 '32 S3 '34 '35'36 '37 '38 I93i 



Stjrt, CompuUd Irom sola In SUMMARY BUDGET STATEMENT. 1941, p. 1037. 



2610S5 — 40 — N'.o. 20 (Face p. 62) 



CONCENTRATION OF ECONOMIC POWER Q3 

aircraft and parts, in which the number of establishments employing 
half the workers increased from 2 to 5 while the percentage declined 
from 17 to 5.4 between 1914 and 1937; the electroplating industry, 
in which the absolute number of establishments increased from 56 
to 68 while the percentage declined from 22 to 12; the chemicals 
industry, in which the absolute number increased from 19 to 39 while 
the percentage declined from 5.1 to 2.9 percent; and the book printing 
and publishing industry, in which the absolute number increased 
very slightly while the percentage declined from 6.4 to 4.2 percent. 
Except for the last one, all 4 of these are industries in which there 
was an exceptional growth in total employment. In such instances, 
it is to be expected that the number of establishments employing half 
the workers would increase owing to the great expansion. 

All 5 of the industries showing increases in the proportionate index 
to 200 or more were characterized by relatively low concentration in 
the base period. The upper 2 began at 17 percent, the next at 15, 11, 
and 8.5 percent. 

Of the 15 industries showing increased proportionate concentration, 
above 150 but less than 200 according to the proportionate index, all 
are growing industries as measured by volume of employment with 
4 exceptions: The jewelry, firearms, fish nets, and silverware in- 
dustries. 

Ten of these industries had relatively low concentration in 1914. 
The motor vehicles, newspaper printing and publishing, book printing 
and publishing, and chemicals industries had relatively high concen- 
tration in 1914. The percentage of establishments employing half the 
workers in these industries in 1914 was 3.9, 4.0, 6.4, and 5.1, respec- 
tively. 

Despite the high degree of concentration and the enormous growth 
in the motor-vehicle parts industry, both indexes of concentration 
increased, the absolute index to 158 and the proportionate index to 
195, by 1937. Both of these figures, however, are far below the highs 
of 1935. 

Among the 20 industries showing an unusual growth in proportionate 
concentration the growth was mainly a depression phenomenon only 
in t}ie single case of the needles and pins industry. In the majority 
of cases it was distributed over the whole period. In the case of 
perfumes, electroplating, chemicals, fish nets, and wirework, concen- 
tration reached its peak by 1929 with no further growth duriDg the 
later years. In the case of motor vehicles, the peak was reached in 
1923. 

EXTREMES IN DEGREE OF CONCENTRATION 

Industries with a Low Degree of Concentration. 

There were 25 industries in which 15 percent or more of the estab- 
lishments were required to account for one-half the wage earners in 
6 of the 7 years for which we have data. These industries and the 
percent of establishments employing half the wage earners in 1937 
are shown in table 15. There were 21 additional industries with per- 
centages of 15 or more in 1937, but these industries were not charac- 
terized by such a low degree of establishment concentration in previous 
years. 

Most of the industries were comparatively small in terms of total 
employment. Three had an average employment between 25,000 and 



64 



CONCENTRATION OF ECONOMIC POWER 



100,000 wage earners, 13 employed from 5,000 to 25,000 wage earners, 
and 9 employed less than 5,000 wage earners. 

Despite the fact that these are industries with the lowest degree of 
concentration throughout the period, there were 9 industries in 
which the absolute number of establishments employing half the 
workers was five or less. Three of these were very small industries 
and 6 were industries with few establishments but all of the estab- 
lishments were large. 

Among the 25 industries listed, there were 15 in which 20 percent 
or more of the establishments were required to account for half the 
wage earners in 1937. Two of these employed between 25,000 and 
100,000 wage earners, 8 employed between 5,000 and 25,000 wage 
earners, and 5 employed less than 5,000 wage earners throughout 
the period under study. 



Table 15. — Industries with low degree of concentration (15 percent or more of 
establishments employing half the workers in 6 out of 7 census years) 

[Arrayed on the basis of total employment] 



Industry 



Percent of 
establish- 
ments em- 
ploying half 
the wage 
earners, 
1937 



Woolen woven goods, including woven felts; woolen yarns 

Cement 

Blast-furnace products 

Condensed and evaporated milk 

Bags, paper, exclusive of those made in paper mills 

Lime 

Cast-iron pipe and fittings 

Oil, cake, and meal, cottonseed 

Sugar, beet 

Sugar refining, cane.. .. 

Wood preserving 

Smelting and refining, copper 

Boots and shoes, rubber 

Smelting and refining, zinc 

Smelting and refining, lead 

Salt — 

Wallpaper 

Sugar, cane, not including products of refineries — 

Rice cleaning and polishing 

Lasts and related products 

Oilcloth 

Oil, cake, and meal, linseed 

Fuel briquettes 

Wool pulling.. 

Sand-lime brick 



IS 
25 
22 
14 
16 
17 
20 
21 
34 
26 
IS 
22 
17 
20 
28 
22 
19 
24 
2(1 
31 
13 
17 
19 
21 
22 



Industries With High Degree of Concentration. 

There were 19 industries in which 5.0 percent or less of the estab- 
lishments accounted for half the wage earners 'in 6 of the 7 census 
years. The most outstanding feature of this group, as compared with 
the industries with the lowest degree of concentration, is the difference 
in size. Eight of the 19 industries with a high degree of concentration 
throughout the period employed an average of more than 100,000 
wage earners during the same period. These industries were, as 
follows: 



CONCENTRATION OF ECONOMIC POWER gc 

Motor-vehicle bodies and motor- vehicle parts. 

Ship and boat building, steel and wooden, including repair work. 

Printing and publishing, newspaper and periodical. 

Electrical machinery, apparatus, and supplies; radios, radio tubes, and 

phonographs. 
Cigarettes; cigars. 
Bread and other bakery products. 

Rubber tires and inner tubes; other rubber goods, except boots and shoes 
Meat packing, wholesale. 

Five of the 19 industries employed from 25,000 to 100,000 wa<^e 
earners : 

Nonferrous-metal alloys; nonferrous-metal products, except aluminum 

not elsewhere classified. 
Drugs and medicines; insecticides, and fungicides, and industrial and 

household chemical compounds, not elsewhere classified. 
Agricultural implements (including tractors); engines, turbines, water 

wheels, and windmills. 
Chewing gum; confectionery; and ice eream. 
Hardware, not elsewhere classified. 

Four of the 19 industries employed from 5,000 to 25,000 wage earners: 

Surgical and orthopedic appliances and related products. 

Aluminum products. 

Soap. 

Ammunition and related products; fireworks and allied products. 

Two of the 19 industries employed less than 5,000 wage earners: 
Saws. 
Window shades (textile and paper) and fixtures. 

Operations in an additional 20 industries were such that 6.0 percent 
or less of the establishments accounted for half the wage earners in 6 
of the 7 census years. While these industries were, on the whole 
somewhat smaller than those with a higher degree of concentration' 
they were larger than those with the lowest degree of concentration' 
Two of the 20 mdustries employed an average of 100,000 wage earn- 
ers throughout the period. They were: 

Printing and publishing, book, music, and job. 
Lumber and timber products not elsewhere classified. 

Four of the 20 industries employed from 25,000 to 100 000 wage 
earners : & 

Chemicals not elsewhere classified. 
Carpets and rugs, wool (other than rag). 
Petroleum refining. 
Flour and other grain-mill products. 

Eight of the 20 industries employed from 5,000 to 25,000 wage 
earners : b 

Perfumes, cosmetics, and other toilet preparations. 

Artists' materials; pencils, lead (including mechanical), and crayons 

Lighting equipment. 

Tobacco (chewing and smoking) and snuff. 

Sewing machines and attachments. 

Hats, fur-felt. 

Screw-machine products and wood screws. 

Signs and advertising novelties. 



272238— 41— pt. 27- 



6(3 CONCENTRATION OF ECONOMIC POWER 

Six of the 20 industries employed less than 5,000 wage earners: 

Belting and packing, leather. 

Gold, silver, and platinum, refining and alloying. 

Blacking, stains, and dressings. 

Soda fountains and related products. 

Ink, writing. 

Pens, fountain and stylographic ; pen points, gold, steel, and brass. 

There were an additional 12 industries in which less than 6.0 percent 
of the establishments accounted for half the wage earners in 1937, 
but they were not characterized by such a high degree of concentra- 
tion in 6 of the 7 census years from 1914 to 1937. These industries 
were engraving (other than steel, copperplate, or wood), chasing, 
etching, and diesinking; cleaning and polishing preparations; silver- 
ware and plated ware; bookbinding and blank-book making; mirrors 
and other glass products made of purchased glass; wire work not else- 
where classified; aircraft and parts; engraving, steel, copperplate, and 
wood, and plate printing; cooperage; jewelers' findings and materials, 
and jewelry; needles, pins, etc.; structural and ornamental metal 
work, made in plants not operated in connection with rolling mills. 



CHAPTER V 

ESTABLISHMENT CONCENTRATION PATTERNS OF 
SELECTED INDUSTRIES 

NINETEEN INDUSTRIES EMPLOYING OVER 100,000 EACH 

^J^ 19 lar £ e industries employed almost 3,000,000 workers in 
1914 and grew more rapidly than the smaller manufacturing industries 
?n,T g j ^ Em P lo y m ent in this group exceeded 4,000,000 in 
1919 and varied somewhat under that figure, except for the depression 
years, until 1937 when the 1919 high was exceeded by a slight margin 
Inese large industries were especially vulnerable to depressions' 
Total employment declined from 4 to 3.1 million between 1919 and 

th! i° employment was 3.5 million in 1935 ! 

The change in concentration during the period 1914-37 was com- 
paratively small. Of 68,700 establishments, 4,200 employed half 
the workers m 1914; f the corresponding figure in 1937 was 4,000 out of 
57 500. Expressing the absolute number of establishments hiring half 
of the workers as an index (1914 = 100), we find a decline in concen- 
tration in 1919 to 94 with the index remaining below 100 during the 
1920 s. If concentration is expressed as the percentage of establish- 
m ^*mployws half the workers (1914 = 100) the results are some- 
what different, for 1919 equals 120 and the index remains above 100 
during the 1920s Furthermore, this proportionate index declined 
from 1929 through 1935 and 1937 while the absolute index increased. 
1 his means that while the absolute number of establishments employ- 
ing half the workers declined during this period, from 4,500 to 4,000 
the total number of establishments declined still more from 87,000 to 
08,000 so that the percentage of establishments employing half the 
workers mcreased. 

Steel Works and Boiling Mills. 

Employment in this industry increased from 254,000 in 1914 to a 
high of 479,000 in 1937 During the same period the total number of 
establishments declined from 456 to 410, the high being 521 in 1919 
*ilty-tnree establishments employed half the workers in 1914- the 
number declined to 39 in 1937, the absolute index standing at 136 in 
that year. Over the same period, the percentage of firms employing 
half the workers declined from 12 to 9.5 percent, and the proportion- 
ate index stood at 126 m 1937. 

There was growth in the size of both large and small establish- 
ments; the average number of wage earners for the large establish- 
ment 8 rose from 2,400 to 6,100 and for small establishments from 
olo to 646. 

J 1933 data are available only (or "all industries " 
w!^ other S P es Stto'tS^St? "" ^^ thUS ° btain6d - Th * meaSUres m not ""P-able 

67 



(}g CONCENTRATION OF ECONOMIC POWER 

During the war period the absolute index dropped 10 percent while 
the proportionate index rose by about the same amount. That is, 
while the absolute number of establishments hiring half the workers 
increased from 53 in 1914 to 59 in 1919, the percentage of establish- 
ments employing half the workers declined from 12 to 11 percent 
since the total number of establishments rose from 456 to 521, an 
all-time high in the industry. 

Cigars and Cigarettes. 

Employment in the cigar and cigarette industries declined from 
1914 continuously, except for a slight increase between 1935 and 1937. 
The total number of establishments, however, declined very much 
faster than employment so that the absolute index rose from 100 in 
1914 to 520 in 1937. The actual number of establishments employing 
half the workers declined from 130 in 1914 to 25 in 1937. On a per- 
centage basis, however, there was but a slight change from 1914 to 
1937 since the total number of establishments declined about the same 
extent as the number employing half the wage earners. Thus, 3.2 
percent of all establishments employed half the workers in 1914 and 
3.4 percent in 1937. 

For the large establishment, the average wage earners per establish- 
ment rose from 560 to 1,640 during the period and similarly, for the 
smaller establishments, the average number of wage earners per estab- 
lishment increased from 18 to 58. This industry is one of the 
notable cases of great technological change during this period; while 
employment declined almost one-half and the number of establish- 
ments declined by four-fifths, the value of product increased from 
approximately $300,000,000 in 1914 to $1,138,000,000 in 1937. 

Boots and Shoes, Other Than Rubber, 

Employment in the boot and shoe industry increased somewhat 
during the period though not nearly as much as the increase in value 
of product or value added by manufacture. The increase in average 
number of wage earners per establishment from 157 to 200 was 
influenced by a decline in the total number of establishments of 
approximately 10 percent. Both indexes of concentration went 
down. The absolute number of establishments employing half the 
workers increased from 130 in 1914 to a high of 174 in 1937, while the 
percentage of establishments employing half the workers rose from 
11 in 1914 to 16 percent in 1937. 

The growth was in the smaller segment of the establishments 
where the average number of wage earners per establishment increased 
from 88 to 119 between 1914 and 1937. In the larger establishments, 
the average number of wage earners per establishment declined from 
736 to 619 during this period. 

Electrical Machinery, Apparatus, and Supplies; Radios, Radio Tubes, 
and Phonographs. 
Employment in this industry more than doubled between 1914 and 
1937, while the number of establishments increased from 900 to 1,600. 
As a result, the average number of wage earners per establishment 
increased markedly, from 143 to 192. However, this growth was 
entirely in the smaller establishments, for the average number of 
wage earners per establishment in the larger segment declined from 
3,700 to 2,900. As a result of the great increase in the total number 



CONCENTRATION OF ECONOMIC POWER Q9 

of establishments, the percentage of establishments employing half 
the workers increased from 1.9 to 3.3. 

Noteworthy is the fact that the industry was highly concentrated 
to begin with when 17 out of 892 establishments employed half the 
workers. Furthermore, the change was probably due to the inclusion 
of radio apparatus. The growth of this new field has meant a struc- 
tural change in the industry. 

Meat Packing, Wholesale. 

The absolute index declined from 100 to 50 between 1914 and 1937, 
the only increase during the period being to 110 in 1919. This is 
because the number of establishments employing half the workers 
increased from 23 to 46. 

The average number of wage earners per establishment for the 
larger establishments declined from 2,100 to 1,400. In the smaller 
segment the average number of wage earners per establishment 
increased from 40 to 57. 

This is a notable case of an industry in which the total number of 
establishments declined, but the number of establishments employing 
half the workers increased on both an absolute and percentage basis. 
This decline in concentration, however, should be interpreted in light 
of the exceptionally high concentration in 1914 when 1.8 percent of 
the establishments employed half the workers. 

Motor Vehicles, not Including Motorcycles. 

Motor vehicles is an industry where employment almost trebled 
between 1914 and 1929 but where the indexes of concentration de- 
clined owing to the decline in the total number of establishments. 
The average number of wage earners per establishment increased 
greatly from 274 in 1914 to a high of 1,485 in 1937. For the larger 
segment the corresponding figure was 5,662 to 10,807 and for the 
smaller segment from 141 to 797 during this period. Here, clearly, 
there was phenomenal growth in the size of establishments. The 
concentration, however, among the number of establishments was 
becoming more equal rather than less equal. The fact that the 
total number of establishments declined more than 50 percent (from 
289 to 131), while the number of establishments employing half the 
workers changed but slightly (from 7 to 9) means that the percentage 
of establishments hiring half the workers increased from 2.4 to 6.9 
percent. 

Motor-vehicle Bodies and Motor-vehicle Parts. 

Since employment was rising very rapidly in this industry while 
the number of establishments was increasing much less rapidly, the 
average number of wage earners per establishment increased from 
62 to 304. The growth of concentration was quite marked; 30 out of 
764 establishments employed half the workers in 1914, while 19 out of 
936 establishments employed half the workers in 1937. Thus the 
absolute index rose from 100 to 158, the high being 300 in 1935 when 
10 out of 825 establishments employed half the 241,000 workers. On 
a percentage basis, concentration also increased; the percentage of 
establishments employing half the workers dropped from 3.9 in 1914 
to 1.8 in 1919, increased in the twenties to 2.7, dropped to 1.2 in 1935, 
and stood at 2 percent in 1937. Apparently the great expansion 
during the war period was altogether in the larger establishments in 
which the average number of workers per establishment increased 



70 CONCENTRATION OF ECONOMIC POWER 

from 792 to 1,696, while the average wage earners per establishment 
in the smaller establishment remained at 32. 

Ship and Boat Building, Steel and Wooden, Including Repair Work. 

Employment in this industry in 1937 was well above both the 1929 
and 1914 levels. The peak, of course, was 387,000 in 1919 as com- 
pared with 62,000 in 1937. Concentration was exceedingly high with 2 
percent of the establishments employing half the workers in 1937. Ab- 
solute concentration, however, declined, especially during the twenties; 
9 establishments employed half of the 44,000 workers in 1914 and 
19 establishments employed half of the 387,000 workers in 1919. 
Twenty-one establishments employed half of the 55,000 workers in 
1929. The depression greatly increased the degree of concentration 
so that 9 establishments employed half of the 45,000 workers in 1935. 

Printing and Publishing, Newspaper and Periodical. 

Employment in this industry expanded gradually from 101,000 in 
1914 to 135,000 in 1937. Concentration greatly increased. The 
number of establishments employing half the workers declined from 
327 to 190 between 1914 and 1937, while the total number of establish- 
ments increased from 8,175 to 9,244. Thus the absolute index rose 
from 100 to 172, while the proportionate index rose from 100 to 190. 

Printing and Publishing, Book, Music, and Job. 

The employment pattern was similar to that in newspaper and 
periodical publishing. However, the absolute index stood at 98 in 
1937 and the proportionate index at 152, the percentage of establish- 
ments employing half the workers having declined from 6.4 in 1914 
to 4.2 in 1937. 

Lumber and Timber Products, not Elsewhere Classified. 

Employment declined slightly between 1914 and 1929 and had not 
recovered in 1937 from the drop following 1929. Between 1929 and 
1935 there was a large decline in the number of establishments (from 
13,000 to 6,000) as well as a large decline in employment from 419,000 
to 255,000). The absolute index increased to 188 in 935 and fell 
to 147 in 1937. The growth of concentration was apparently in part 
a consequence of the depression state of the industry. On the other 
hand, the proportionate index declined from 150 in 1929 to 96 in 
1935, the percentage of establishments employing half the workers 
having increased from 3.6 to 5.6 percent. 

Furniture, Including Store and Office Fixtures. 

Employment in the furniture industry in 1937 was well above the 
1914 level but below the 1929 high of 193,000. There was no great 
change in concentration except an absolute increase between 1929 and 
1935 and a proportic iate increase between 1923 and 1929. 

Rubber Tires and Inner Tubes; Other Rubber Goods, Except Boots and 
Shoes. 
Employment more than doubled in this industry between 1914 
and 1919. The 1929 level of 123,000 was still somewhat below the 
all-time high in 1919. In 1937, the industry had still not fully re- 
gained the 1929 level of employment. The increase in the value of 
products and value added by manufacture was much greater than the 
increase in employment. For the larger establishments, the average 
number of wage earners per establishment in 1929 was about the same 



CONCENTRATION OF ECONOMIC POWER 71 

as in 1919; for the smaller establishments, there was an increase. 
The absolute index stood at 127 in 1919, 1929, and 1935." It fell to 
78 in 1937 when the number of establishments employing half the 
workers increased from 11 to 18. The industry is, however, highly 
concentrated. Two percent of the establishments employed half the 
workers in 1929, a change from 4.8 percent in 1914, most of which 
had already occurred, however, by 1919. 

Bread and Other Bakery Products. 

Employment in this industry has doubled since 1914, reaching an 
all-time high of 239,000 in 1937. The total number of establishments 
changed comparatively little— from 17,500 in 1914 to 20,800 in 1929 
to 17,200 in 1937. The average number of wage earners per estab- 
lishment increased markedly for both the larger and smaller segments. 
There was considerable growth in concentration, which reached a high 
in the early twenties, the absolute index declining from 154 in 1923 
to 138 in 1937. 

Knit Goods: Hosiery; Knitted Cloth; Knitted Underwear; Knitted 
Outerwear; Knitted Gloves and Mittens. 
Employment in 1937 exceeded the 1929 level by a substantial 
margin. Absolute concentration declined during the period but was 
remarkably constant on a proportionate basis. Between 8 and 9 
percent of the establishments employed half the workers during the 
entire period. The absolute number of establishments employing 
half the workers increased from 123 in 1914 to approximately 150 in 
1935 and 1937. 

Clothing, Leather and Sheep-Lined; Clothing, Men's, Youths', and Boys', 

not Elsewhere Classified; Clothing, Work, and Sports Garments, 

Except Leather; Trousers, Wash Suits, and Washable Service 

Apparel. 

The men's clothing industry also employed more workers in 1937 

than in 1929. While tuere was an increase in the average number of 

wage earners per establishment from 43 to 71 between 1914 and 1937, 

there was a decline in concentration. The number of establishments 

employing half the workers increased from 243 to 274, while the total 

number of establishments declined from 4,000 to 3,200. 

Clothing, Women's, Misses', and Children's, not Elsewhere Classified. 

The pattern of employment in the women's apparel industry was 
similar to that in the men's clothing industry except that the latter 
was more concentrated. The percentage of establishments employ- 
ing half the workers in the men's clothing industry rose from 6.1 to 
8.6 percent between 1914 and 1937. The corresponding figures for the 
women's apparel industry were 14 and 15 percent. The number of 
establishments employing half the workers increased faster than did 
the total number of establishments. 

Cotton Woven Goods (Over 12 Inches in Width); Cotton Yarn and Thread. 
Employment in this industry in 1937 approximated the 1929 level. 
The number of establishments employing half the workers increased 
during the period. Like the women's apparel industry, the degree 
of concentration was lower than in most manufacturing industries, 
with 15 percent of the establishments employing half the workers in 
1937. 



72 CONCENTRATION OF ECONOMIC POWER 

Wool Combing; Worsted Woven Goods; and Worsted Yarn. 

Employment in the worsted goods industry in 1937 as well as in 
1929 was somewhat below the 1914 level. On both the absolute and 
the percentage bases the number of establishments employing half the 
workers was remarkably constant during the entire period. 

SELECTED INDUSTRIES FROM AMONG THE INDUSTRIES EMPLOYING 
25.000 TO 100,000 WAGE EARNERS 

Glass. 

While employment in 1939 was only slightly above the 1929 and 
1914 levels in the glass industry, the value added by manufacture 
rose from $77,000,000 in 1914 to $200,000,000 in 1929 to almost 
$250,000,000 in 1937. 

The total number of establishments declined markedly from 345 in 
1914 t© 232 in 1937 so that the average number of wage earners per 
establishment increased from 216 to 341. At the same time the 
absolute number of establishments employing half the workers 
declined from 62 to 30, while the percentage of establishments employ- 
ing half the workers declined from 18 to 13. Thus the absolute mdex 
stood at 207 in 1935 and 1937 and the proportionate index stood at 
138 in 1937. The average number of wage earners per establishment 
more than doubled for the larger segment and increased, but not as 
much, for the smaller segment. 

Chemicals, not Elsewhere Classified. 

Employment in this industry in 1937 exceeded the 1929 level by 
more than one- third. The number of establishments employing half 
the workers changed from 24 out of 934 to 29 out of 990 between the 
two dates. There was less absolute concentration during later years 
than in 1914 but more than in 1919. The total number of establish- 
ments more than doubled between 1914 and 1919. The number of 
establishments employing half the workers also more than doubled 
from 19 in 1914 to 46 in 1919. 

On a percentage basis, however, the opposite trend is indicated. 
Between 5 and 6 percent of the establishments employed half the 
workers in both 1914 and 1919. During the subsequent period, this 
declined so that the proportionate index stood at 196 in 1929 and 
176 in 1937. The average number of wage earners per establishment 
increased much more for the larger than for the smaller establishments. 

Sheet-metal Work, not Specifically Classified. 

With some decline in employment from 27,000 to 23,000, total 
number of . establishments declined 50 percent (from 2,800 to 1,400) 
between 1914 and 1937. The number of establishments employing 
half the workers declined more than 50 percent, from 313 to 121. 
At the same time, the percentage of establishments employing half 
the workers declined much less than the absolute number; in 1937 
the proportionate index stood at 126 compared with a level of 259 
for the absolute index. The number of small establishments employ- 
ing half the workers declined from 2,463 to 1,271 in this period. 

Agricultural Implements (Including Tractors); Engines, Turbines, Water 
Wheels, and Wind-mills. 
Employment in this industry in 1937 exceeded the 1929 level. 
The total number of establishments, however, declined by one-fifth 



CONCENTRATION OF ECONOMIC POWER 73 

between 1929 and 1937 and by more than one-half from 1914 to 1937. 
The number of establishments employing half the workers declined 
from 41 in 1914 to 20 in 1929 and to 14 in 1937, while the percentage 
of establishments employing half the workers declined from 4.9 to 
3.5 percent. 

Flour and Other Grain-mill Products. 

There is evidence of a secular decline in this industry. Employment 
was 39,000 in 1914; 45,000 in 1919; 35,000 in 1921 and 1923; 27,000 in 
1929; and 26,000 in 1935 and 1937. The total number of establish- 
ments has declined drastically from 8,900 to 2,200 between 1914 and 
1937. There was a slightly greater decline in the number of establish- 
ments employing half the workers which declined from 531 t»o 130. 
Thus the index of absolute concentration was above 400 in 1935 and 
1937. The change in the percentage of establishments employing half 
the workers did not follow the same pattern. The proportionate index 
reached -a high of 187 in 1919 and declined in the early twenties, stood 
at 175 in 1929, and was back almost to the 1914 level in 1937. 

Marble, Granite, Slate, and Other Stone, Cut and Shaped. 

The secular decline in this industry reduced employment by more 
than one-half during the period under consideration. The number of 
establishments declined at about the same rate. There was no increase 
in concentration, however, on a percentage basis. In fact, the per- 
centage of establishments employing half the workers rose from 5.8 to 8 
percent. This is an illustration of the limitation of the absolute index. 
It shows an increase to 169 in 1937 because the absolute number of 
establishments employing half the workers declined from 193 to 114. 
But the small establishments employing half the workers declined 
much faster from 3,200 to 1,300. 

Planing-mill Products and Other Wooden Products, not Elsewhere Classi- 
fied, Made in Planing Mills not Connected With Sawmills. 
Kecovery in this industry in 1937 had not regained the 1929 level in 
employment. Likewise, the number of establishments was 2,858 in 
1937 compared with 4,849 in 1929. The number of establishments 
employing half the workers declined along with the total number of 
establishments so that 8.7 percent of the establishments employed 
half the workers in both 1929 and 1937, a decline from 11 percent 
in 1914. 

Wooden Boxes, Except Cigar Boxes. 

In the wooden box industry 12 percent of the establishments 
employed half the workers in 6 out of 7 census years. Together with 
a decline in the total number of establishments, the absolute number 
of establishments employing half the workers declined one-fifth. 

Woolen Woven Goods, Including Woven' Felts; Woolen Yarns. 

Employment in 1937 exceeded the 1929 level. There was some 
increase in absolute concentration, the index rising gradually from a 
low of 84 in 1919 to a high of 127 in 1937. 

Blast-furnace Products. 

Employment in this industry has been very unstable; beginning 
with 29,000 in 1914, it increased sharply to 43,000 in 1919, dropped 
even more sharply to 19,000 in 1921, returned to 37,000 in 1923, 
dropped off to 25,000 in 1929, reached a low of 15,000 in 1935, and 



74 CONCENTRATION OF ECONOMIC POWER 

increased to 23,000 in 1937. The indexes show a growth of absolute 
concentration while there was a decline in proportionate concentra- 
tion. The reason for this is that the absolute number of establish- 
ments employing half the workers declined from 29 to 19 between 
1914 and 1937. But since the total number of establishments de- 
clined from 160 to 87, the percentage of establishments employing 
half the workers actually increased from 18 to 22 percent. 

There was an increase in the average number of wage earners per 
establishment in both the smaller and larger establishments. 

The most outstanding thing about the industry is the decline in 
the total number of establishments which was not concentrated in 
either the larger or the smaller establishments. 

Paper Boxes, not Elsewhere Classified. 

Employment in the paper box industry increased from forty-five to 
sixty-five thousand between 1914 and 1937. Total number of estab- 
lishments rose from 968 to 1 ,257. While the number of establishments 
employing half the workers increased from 132 to 171, the percentage 
of establishments employing half the workers was 14 percent in 1914, 
1929, and 1937. The average number of workers per establishment 
increased similarly in both the large and small establishments. 

Electric and Steam Railroad Cars, not Built in Railroad Repair Shops. 

While employment declined somewhat in the railroad car industry, 
the total number of establishments increased as did the number of 
establishments employing half the workers. The percentage of 
establishments employing half the workers was around 8.5 percent 
in 1914, 1929, 1935, and 1937 and was somewhat higher in 1919, 
1921, and 1923. 

Cement. 

Employment was roughly at the same level in 1937 as in 1914 in 
the cement industry, but the number of establishments employing 
half the workers had increased from 28 to 41. Since this represents 
a much greater increase than that in the total number of establish- 
ments, there was a decline in concentration on both an absolute and 
a proportionate basis. 

Nonferrous-metal Alloys; Nonferrous-metal Products, Except Aluminum. 
Employment doubled in the nonferrous-metal alloys industry, the 
1937 level surpassing the 1929. The number of establishments em- 
ploying half the workers increased from 24 to 27. There was great 
concentration in this industry, around 2.5 percent of the establish- 
ments employing half the workers throughout the period. 

Petroleum Refining. 

In this industry employment more than trebled during the period. 
The total number of establishments doubled. The number of estab- 
lishments employing half the workers increased from 9 to 21 but the 
percentage of establishments employing half the workers rose only 
slightly. Concentration reached a peak in 1023 when 3.4 percent of 
the establishments employed half the workers. 



CONCENTRATION OF ECONOMIC POWER 75 

Stamped and Pressed Metal Products; Enameling, Japanninq and 
Lacquering. ' 

Employment doubled. Total number of establishments increased 
from 300 to 743 during the period and the number of establishments 
employing half the workers rose from 23 to 57. The percentage of 
establishments employing half the workers remained close to 8 
percent throughout the period. 

Jewelers' Findings and Materials; Jewelry. 

The jewelry industry illustrates a case in which there was growing 
concentration that is unmistakably indicated by a rise in both indexes 
with about the same level of employment and a slight increase in 
the number of establishments between 1914 and 1929. The number 
of establishments employing half the workers declined by almost 
one-third ; the percentage of establishments employing half the workers 
declined even more. 

Vanned and Dried Fruits and Vegetables; Canned and Bottled Juices; 

Preserves, Jellies, Fruit Butters, Pickles, and Sauces. 

Employment in the canned and dried fruits industry doubled. 

lhe number of establishments employing half the workers increased 

still more than total establishments, however, so that both indexes 

declined somewhat. This is a notable illustration of an industry in 

which both indexes declined but in which the size of establishments 

increased— the average number of wage earners per establishment 

almost doubled. That is, the absolute number of establishments 

employing half the workers increased more than the total number of 

establishments even though the average size of establishment almost 

doubled. 

Tin Cans and Other Tinware not Elsewhere Classified. 

Employment in 1937 exceeded that of 1929; both indexes were 
fairly steady except between 1914 and 1919 when they fell markedly. 
Pottery, Including Porcelain Ware. 

Employment in the pottery industry showed some growth in con- 
centration. The percentage of establishments employing half the 
workers declined from 14 and 15 percent during the early years to 11 
and 12 percent m 1935 and 1937. 

Chewing Gum; Confectionery; Ice Cream. 

In the confectionery industry there is evidence of slightly increased 
concentration; the number of establishments employing half the work- 
ers declined from 217 in 1921 to 146 in 1937 and the percentage of 
establishments employing half the workers declined from 4 5 to 3 5 
percent. 

INDUSTRIES CHARACTERIZED BY A DECLINE IN TOTAL NUMBER OF 

ESTABLISHMENTS 

It appears to be a fairly typical pattern that an increase in absolute 
concentration (that is, when half the workers are employed by a 
declining number of establishments) is a product of a decline in the 
total number of establishments. This may mean (a) that the very 



76 CONCENTRATION OF ECONOMIC POWER 

large establishments are growing larger or (6) that the small estab- 
lishments are being ehminated. This pattern of a declining number 
of establishments is more often than not associated with a rise in 
proportionate concentration, that is, with a decline in the percentage 
of establishments employing half the workers. 

Among the industries characterized by this pattern are the following: 

Agricultural implements (including tractors); engines, turbines, 

water, wheels, and windmills. 
Boxes, wooden, except cigar boxes. 
Carpets and rugs, wool (other than rag). 
Clay products, other than pottery; nonclay refractories. 
Flour and other grain-mill products. 
Hardware not elsewhere classified. 
Leather: tanned, curried, and finished. 
Marble, granite slate, and other stone, cut and shaped. 
Planing-mill products and other wooden products not elsewhere 

classified, made in planing mills not connected with sawmills. 
Sheet-metal work, not specifically classified. 
Woolen woven goods, including woven felts; woolen yarn. 

INDUSTRIES CHARACTERIZED BY AN INCREASE IN THE TOTAL NUMBER 

OF ESTABLISHMENTS 

Whereas industries in which there was a decline in the total number 
of establishments are likely to show an increase in concentration if 
measured on an absolute basis and a smaller increase in proportionate 
concentration, industries in which there is an increase in the total 
number of establishments are likely to show an absolute decline and 
usually no great change proportionately. Industries in this group 
are — 

Boxes, paper, not elsewhere classified. 

Cars, electric and steam railroad, not built in railroad repair 

shops. 
Cement. 

Jewelry; jeweler's findings and materials. 
Nonferrous-metal alloys; nonferrous-metal products, except 

aluminum, not elsewhere classified. 
Petroleum refining. 
Stamped and pressed metal products; enameling, japanning, and 

lacquering. 

The following industries include those in which the change in 
concentration was mixed and not of great magnitude: 

Canned and dried fruits and vegetables; canned and bottled 
juices; preserves, jellies, fruit butters, pickles, and sauces. 

Chewing gum; confectionery; ice cream. 

Drugs and medicines; insecticides and fungicides, and industrial 
and household chemical compounds not elsewhere classified. 

Heating and cooking apparatus, except electric. 

Pottery, including porcelain ware. 

Structural and ornamental metal work, made in plants not 
operated in connection with rolling mills. 

Tin cans and other tinware not elsewhere classified. 



CONCENTRATION OF ECONOMIC POWEP 77 

80 INDUSTRIES EMPLOYING 5,000 TO, 25,000 WAGE EARNERS 

Total employment in these 80 industries was slightly more than 
1,000,000 in 1919, 1929, and 1937. The total number of establish- 
ments increased from 23,800 in 1914 to 27,000 in 1919 to 32,200 in 
1929 and declined to 28,800 in 1937. ' 

The impression that concentration is high only in large industries is 
certainly disproved by these data. Approximately 10 percent of the 
establishments employed half the workers throughout the period. 3 
The year in which concentration was highest was 1919, when 9.2 
percent of the establishments employed half the workers; it was 
lowest in 1937, when 11.4 percent of the establishments. employed half 
the workers. 

Furthermore, this measure, as noted above, was not obtained by 
taking the largest establishments out of the total number of estab- 
lishments in all industries together but by taking the largest estab- 
lishments in each industry separately, so that the 3,300 establish- 
ments out of 28,800 which employed half the workers in 1937 does 
not represent the largest establishments in the total, but the sum of 
the largest establishments in each industry. A fewer number of 
establishments and a smaller percentage of the total would employ 
half the workers if only the totals were used, but this would have the 
effect of giving the highly concentrated and the large industries 
greater weight than the less concentrated and small ones. 

The average -number of wage earners per establishment for these 
80 industries was 37 in both 1914 and 1937. There was a decline in 
both indexes of concentration. The number of establishments em- 
ploying half the workers increased from 2,546 to 3,278 and the per- 
centage increased from 10.7 to 11.4 between 1914 and 1937. 

The most general pattern of increasing concentration, measured 
absolutely and usually proportionally as well, is found in those indus- 
tries in which the total number of establishments has declined. Con- 
versely, the most general pattern of declining concentration, as 
measured absolutely though less often followed by a similar decline 
in the proportionate index, is in those industries in which the total 
number of establishments has increased. 

Examples of the pattern of increasing concentration are the 13 
following industries: 

Cooperage. 

Total establishments declined between 1914 and 1937 from 838 to 
less than half that number. Total employment declined by one- 
third. The number of establishments employing half the workers 
declined in even greater proportion. The percentage of establish- 
ments employing half the workers declined from 7 to 5.8 percent. 

Mirrors and Other Glass Products Made From Purchased Glass. 

A decline in the total number of establishments in the mirror and 
glass products industry was accompanied by a very marked drop 
from 92 to 26 in the number of establishments employing half the 
workers between 1914 and 1937. The percentage of establishments 
employing half the workers similarly declined by two-thirds so that 
both indexes of concentration stood above 300 in 1937 on a 1914 base. 

1 3.6 percent if based on the largest establishment regardless of the industry. 



7g CONCENTRATION OF ECONOMIC POWER 

Pianos. 

Employment in the piano industry declined from 24,000 to 6,000 
between 1914 and 1937. During the same period the number of 
establishments employing half the workers dropped from 30 to 4, 
and the percentage of establishments employing half the workers 
declined very little. 

Rubber Boots and Shoes. 

In the rubber boot and shoe industry the total number of estab- 
lishments declined about 50 percent, from 23 to 12. Similarly, the 
small establishments declined from 19 to 10. On a percentage basis, 
concentration remained unchanged. This is an interesting example 
of an industry which shows relatively low concentration, 17 percent 
of the establishments employing half the workers both at the beginning 
and at the end of the period, but the average number of wage earners 
per establishment doubled in both large and small establishments. 

Trunks and Other Luggage. 

The total number of establishments declined by one-third in the 
trunk and other luggage industry. The number of establishments 
employing half the workers also declined, though not quite as much. 
The percentage of establishments employing half the workers actually 
increased. 

Explosives. 

Fairly typical is explosives, an industry in which, with relatively 
stable employment, total establishments declined by one-fourth, the 
number of establishments employing half the workers by almost one- 
half, and the percentage of establishments employing half the workers 
by one-fourth, so that both indexes of concentration increased during 
the period between 1914 and 1937. 

Musical Instrument Parts and Materials, Piano and Organ. 

In the case of musical instruments, the decline in the number of 
establishments employing half the workers from 14 to 4 did not result 
in any substantial change in the percentage of establishments employ- 
ing half the workers because total establishments declined from 117 
to 32 and total wage earners dropped enormously, from 10,600 to 1,800. 

Exceptions to this pattern wherein a decline in the total number of 
establishments resulted in a rise in the absolute index of concentration 
are the following industries: Motorcycles, grease and tallow, chewing 
and smoking tobacco, and needles, etc. 

In the motorcycle industry, for example, with little change in total 
employment between 1914 and 1937, the total number of establish- 
ments dropped 50 percent. At the same time the number of estab- 
lishments employing half the workers increased "from 3 to 5, and the 
percentage of establishments employing half the workers increased 
from 5.4 to 17. In the chewing and smoking tobacco industry the 
number of wage earners fell from 25,900 to 10,000 while the total 
number of establishments declined from 212 to 125. The number of 
establishments employing half the workers rose from 5 to 6 and the 
percentage of establishments employing half the workers rose from 
2.4 to 4.8 percent. We have in this case an example of a declining 
industry if measured by volume of employment (though not by value 
of products) in which the average number of wage earners per estab- 
lishment declined, as did both indexes of concentration. 



CONCENTRATION OP ECONOMIC POWER 79 

A second pattern is found in the following industries in which the 
total number of establishments increased. However, the absolute 
number of establishments employing half the workers also increased, 
so the percentage of establishments employing half the workers 
usually showed no great change in either direction. 

Corsets and Allied Garments. 

The number of establishments in the corset industry increased from 
126 to 215 between 1914 and 1937. The number employing half the 
workers increased in greater proportion from 8 to 22. The percent- 
age employing half the workers also rose from 6.3 to 10 percent. 

Caskets, Coffins, etc. 

In the casket industry the number of establishments more than 
doubled, which is a proportionally greater increase than that in em- 
ployment, but the percentage of establishments employing half the 
workers varied only slightly. 

Cane and Beet Sugar Refining. 

Both the cane and sugar beet refining industries showed a decline 
in concentration. The total number of establishments increased; 
the percentage of establishments employing half the workers increased 
in the case of beet sugar and declined only slightly in cane sugar. 
In both cases concentration was exceptionally low, from one-fourth 
to one- third of the establishments employing half the workers. 

Surgical and Orthopedic Appliances. 

At the other extreme in this group is the surgical appliance indus- 
try in which concentration was relatively high, from 2 to 2.5 percent 
of the establishments employing half the workers. The total number 
of establishments, however, increased, though not quite as fast as 
total employment. 

Exceptions to this pattern in which total establishments increased 
but concentration did not decline are the following industries: Per- 
fumes and cosmetics, book binding, and cutlery. 

In the perfume industry the total number of establishments almost 

. doubled, total employment increased in still greater proportion, but 

the number of establishments employing half the workers declined 

from 29 to 21 and the percentage of establishments employing half 

the workers declined from 11 to 4.4 percent. 

In the case of the cutlery industry, with about the same level of 
employment in both 1914 and 1937, the number of establishments 
increased materially, while the percentage of establishments employ- 
ing half the workers declined. 

A third pattern is found in those industries in which changes in 
the number of establishments were comparatively small between 
1914 and 1937 and in which changes in concentration were also rela- 
tively limited. These industries include the following: Canned and 
cured fish, ammunition, and firearms. 

In the case of the canned fish industry, the total number of estab- 
lishments was 335 in 1914 and 325 in 1937. Thirty-eight establish- 
ments employed half the workers in each of these years and the per- 
centage of establishments employing half the workers changed only 
from 11 to 12 percent. Some of the industries in this group showed 
exceptionally high concentration at the beginning so that relatively 
great percentage changes are misleading. 



gO CONCENTRATION OF ECONOMIC POWER 

For example, in the ammunition industry, with practically no 
change in the 'number of establishments, the number of establish- 
ments employing half the workers increased from one to three between 
1914 and 1937. 

Firearms is similar except that the number of establishments 
employing half the workers declined from four to two and the per- 
centage declined from 17 to 9.5 between 1914 and 1937. 

SEVENTY-EIGHT INDUSTRIES EMPLOYING LESS THAN 5,000 WORKERS 

Total employment in this group of industries increased 'from 
163,000 in 1914 to an all-time high of 189,000 in 1919. There was 
evidence of a secular decline - ' from there on, 1929 being below 1923. 
The decline from 189,000 to 148,000 between 1919 and 1921, and from 
174,000 to 148,000 between 1929 and 1933 shows a relatively smaller 
decline than that in the larger industries. In 1937 employment had 
regained the 1929 levels. 

The increase in the number of establishments was roughly propor- 
tional to the increase in employment from 1914 to 1929, but the 
number of establishments continued to decline from 1933 to 1937 in 
sharp contrast to the recovery in employment. Thus, for this group 
of small industries the recovery in employment did not mean a reversal 
of the decline in the total number ot establishments. 

In 1929, 711 out of the 7,650 establishments employed half the 
workers. In 1937 the figure was 659 out of 6,350. The percentage 
employing half the workers increased from 9.3 to 10.4 between the 2 
years. Again it may be remarked that this percentage is obtained 
by adding the number of establishments employing half the workers 
in each industry rather than by taking the largest establishments in 
all industries together. The percentage of establishments employing 
half the workers would, of course, be smaller if the industries were 
not treated separately. 

It is more difficult to find well established and significant patterns 
among these small industries than among large industries. There 
are numerous cases in which concentration apparently declined when 
employment was increasing as well as when employment was declining. 
Thus, in the bone black and carbon black industry employment rose 
more than six-fold but the number of establishments employing half 
the workers increased from 3 to 13 and the percentage of establish- 
ments employing half the workers increased from 13 to 21 percent 
between 1914 and 1937. 

In the feather industry employment dropped from 4,400 to 550 and 
the number of establishments declined similarly. The number of 
establishments employing half the workers declined from 27 to 11 but 
the percentage of establishments employing half the workers increased 
from 14 to 18 percent. 

Industries showing a decline in the concentration indexes were, 
among others, flags, rice polishing, vinegar, essential oils, drug grind- 
ing, bluing, and oleomargarine. Industries showing a marked increase 
in the indexes of concentration include fish nets, engraving other than 
steel, gold leaf and foil, wool scouring, wood distillation, and many 
others. 

In the wood distillation industry, employment increased from 3,000 
to 4,500 while the number of establishments declined from 106 to 60 



CONCENTRATION OF ECONOMIC POWER 



81 



between 1914 and 1937. At the same time the number of establish- 
ments employing half the workers declined from 20 to 8 and the 
percentage declined from 19 to 13. 

In the fish nets industry, employment declined 50 percent from 
1,000 in 1914. Total establishments declined slightly. The per- 
centage of establishments employing half the workers declined one- 
third to 11 percent in 1937 and the absolute number of establishments 
employing half the workers declined from two to one. 

An enormous growth in concentration occurred in the engraving 
industry in which employment almost doubled to more than 2,000 
between 1914 and 1937. The number of establishments employing 
half the workers dropped from 23 to 1 and the percentage dropped 
from 17 to 1.3. A large part of this decline occurred during the war 
period. In 1919, 6 out of 215 establishments employed half the 
workers. 

In the baking powder industry where employment has been rela- 
tively stable, the percentage of establishments employing half the 
workers has declined enormously from 17.9 to 1.3 percent owing to 
the sharp drop in total number of establishments from 76 to 40. 
Since the number of establishments employing half the workers 
changed only from 6 to 5, this means that the major change was in 
the smaller establishments which grew during the period 1914 to 1937. 

SEVENTEEN SMALL INDUSTRIES EMPLOYING FEWER THAN 1,000 4 

Total employment in these small industries has not recovered to 
the pre-depression levels though there is some evidence of a secular 
decline. In these 17 small industries 844 establishments employed 
12,400 workers in 1914, 893 establishments employed 11,600 workers 
m 1929, and 570 establishments employed 9,000 workers in 1937. 
The number of establishments employing half the workers declined in 
this period from 113 to 90 but the percentage of establishments 
employing half the workers increased from 13.4 to 15.8. 

• These were included in the 78 industries employing less than 5,000 workers. 



273238— 41— pt. 27 7 



APPENDIX A 
BASIC DATA FOR 204 SELECTED INDUSTRIES, 1914-37 



Industries 



Establishments 



(1) 



1937 



(2) 



Wage earners 



1014 



(3) 



1937 



(4) 



Average 

number 

1914 

(5) 



Wage earners per estab- 
lishment 



Index, 1914=100 



1919 
(6) 



1929 
(7) 



1937 
(8) 



Locomotives, railroad, mining, and in- 
dustrial, not made in railroad repair 
shops : 7 

Boots and shoes, rubber 

Sugar refining, cane 

Steel-works and rolling-mill products 

Cars, electric and steam railroad, not 
built in railroad repair shops 

Smelting and refining, copper 

Sewing machines and attachments 

Wool combing; worsted woven goods; 
and worsted yarn 

Smelting and refining, lead j 

Smelting and refining, zinc 

Wire drawn from purchased rods ' 

Cotton woven goods (over 12 inches in 
width) ; cotton yarn and thread 2 

Clocks, watches, time-recording devices, 
and materials and parts except watch- 
cases 

Carpets and rugs, wool (other than rag) •_ 

Firearms 

Motor vehicles, not including motor- 
cycles* 

Wrought pipe, welded and heavy riveted, 
made in plants not operated in con- 
nection with rolling mills 

Asphalted-felt-base floor covering; lino- 
leum 

Jute goods 

Cast-iron pipe and fittings ... 

Cement 

Glass.. 

Ammunition and related products; and 
fireworks and allied products 

Matches 

Lace goods 

Rubber tires and inner tubes; other rub- 
ber goods, except boots and shoes 

Blast-furnace products 

Linen goods 

Corsets and allied garments 

Cordage and twine... , 

Boots and shoes, other than rubber 

Aluminum products. 

Petroleum refining. 

Electrical machinery, apparatus, and 
supplies; radios, radio tubes, and 
phonographs. 



19 

23 

18 

456 

117 
37 

34 

311 
21 

28 
64 

1,168 



61 
97 
24 

289 



18 
33 
68 
129 
345 

64 
19 
39 

293 
160 

20 
126 

98 
1,217 

30 
175 



892 



13 

12 

23 

410 

154 
23 
36 

268 
14 
26 
93 

1,072 



75 
66 

21 

131 



16 
32 
75 
158 
232 

65 
25 
57 

466 
87 
12 
216 
118 
,080 
153 
366 



1/597 



17, 391 

18,687 

11,253 

263,964 

68,128 
17, 731 
14,297 

110,112 
7,384 
9,617 
17,600 

379, 348 



19,783 

3i,309 

7,058 

79,266 



8,841 

4,428 
7,987 
12, 557 
27,907 
74,493 

12,806 
3,795 
7,440 

66,303 
29,356 

3,667 
20,426 
15, 761 
191, 305 

4,601 
26,366 



127,256 



9,000 

18,366 

14,024 

479,342 

40,466 
14, 614 
9,019 

90,782 
4,036 
11,266 
24,580 

422, 310 



23,223 

30,779 

6,847 

194,527 



14,126 

8,107 

6,622 

17, 613 

26,426 

79, 051 

8,356 
5,261 
8,109 

111,462 

23,075 

1,862 

16,385 

14,043 

216,438 
23,695 
83,182 



306,003 



915.3 
812.5 
625.2 
556.9 

496.8 
479.2 
420.5 

354.1 
351.7 
343.5 
325.9 

324.8 



324.3 
322.8 
294.1 

274.3 



260.1 

246.0 
242.0 
216.6 
216.3 
215.9 

200.1 
199.7 
190.8 

188.7 
183.5 
178.4 
162.1 
160.8 
157.2 
153.4 
144.1 



171.7 
161.8 
145.6 
130.3 

104.9 
106.4 
108.6 

95.6 
73.2 
103.0 
93.2 

103.8 



Q9. 
97.3 
174.3 

249.2 



81.8 

104.8 
118.0 
98.8 
97.5 
97.0 

144.7 
93.3 
81.0 

152.4 
112.9 
106.9 
67.6 
96.3 
96.4 
92.9 
129.4 



114.9 



75.4 
143.5 
106.0 
145.8 

54.8 
116.7 
63.8 

90.7 
72.1 
112.8 
85.1 

102.1 



81.7 
150.8 
110.7 

337.8 



87.8 

162.7 
101.9 
126.7 
88.7 
118.9 

63.6 
89.6 
85.5 

130.1 
129.6 
76.9 
39.6 
73.3 
97.5 
92.2 
143.4 



129.2 



75.6 
188.3 

97.5 
209.9 

62.9 
131.7 
59.6 

99.4 
82.0 
131.2 
81.1 

121.4 



100.9 
173.4 
110.8 

641.3 



102.5 

206.0 
84.2 

108.5 
77.3 

157.8 

64.3 
105.4 
74.6 

126.8 
144.5 
87.0 
47.0 
74.0 
127.0 
101.0 
158.2 



134.3 



> Figures for 1914 and 1919 are not strictly comparable with those for 1929 to 1937 because of the fact that 
at the census of 1929 certain large establishments engaged primarily in rolling nonferrous metals and manu- 
facturing nonferrous wire, formerly assigned to the wire industry, were transferred to the nonferrous metals 
industry. The classified wire industry proper does not include the extensive operations of the wire-drawing 
departments of the steel works and rolling mills Industry, as well as Of the nonferrous rolling mills. 

» Figures for 1937 exclude data for the dyeing and finishing departments of cotton mills, which were treated 
as integral parts of the mills prior to 1937 and Include data for manufacturers of certain mixed fabrics (those 
having a cotton warp in which the material of chief value is silk or rayon) which were assigned to the "Silk 
and rayon goods" industry prior to 1937. 

• Figures for 1937 are not strictly comparable with those for earlier years. 

* At the censuses of 1914 to 1929, establishments engaged primarily in the manufacture of trailers wera 
assigned to the motor vehicle industry, while for 1937 such establishments were classified in the motor* 
vehicle bodies and parts industry . 

82 



CONCENTRATION OF ECONOMIC POWER oo 

Basic data for 204 selected industries, 1914-87 — Continued 



Industries 



Watchcases 

Sugar, beet 

Files 

Rayon an(J silk manufactures: rayon 
broad woven goods; rayon narrow fab- 
rics; rayon throwing and spinning; 
rayon yarn and thread; silk broad 
woven goods; silk narrow fabrics; silk 
throwing and spinning; and silk yarn 

and thread ' 

Needles, pins, hooks and eyes, and slide 

and snap fasteners 

Chocolate and cocoa products, not in- 
cluding confectionery 6 

Tobacco (chewing and smoking) and 

snufl___ 

Motorcycles, bicycles, and parts.."""' 
Screw-machine products and wood 

screws.. 

Hats, fur-felt " 

Woolen woven goods, including woven 

felts; and woolen yarns '.. 

Artists' materials; pencils, lead (includ- 
ing mechanical), and crayons 

Pottery, including porcelain ware 

Bolts, nuts, washers, and rivets, made in 
plants not operated in connection with 

rolling mills 

Knit goods: Hosiery; knitted" cloth; 
knitted underwear; knitted outerwear; 
knitted gloves and mittens 8 . . 

Wallpaper 

Stamped and pressed metal products;" 
enameling, japanning, and lacquering • 

Musical instruments: Pianos 

Silverware and plated ware ".""" 

Fish nets and seines 

Agricultural implements (including trac- 
tors); engines, turbines, water wheels, 

and windmills 

Chemicals not elsewhere classified '•""! 
Coke-oven products 

Oilcloth """"" 

Hardware not elsewhere classified"""^ 
Tin cans and other tinware not elsewhere 

classified 8 

Musical-instrument parts and materials: 

Piano and organ 

Cutlery (not including silver and plated 

cutlery) and edge tools 

Cork products 

Leather: Tanned, curried, and finished 
Heating and cooking apparatus, except 

electric :. 

Envelopes !.""" 

Carriages and sleds, children's" " " 

Bags, other than paper 



Establishments 



1914 



(1) 



856 



212 
56 



70 
IS* 



444 



45 
244 



N 



1,428 
47 

300 
242 
161 
11 



830 

374 

224 

13 

477 



182 
39 
672 

769 
85 
73 

117 



1937 
(2) 



848 



125 
29 



311 
140 



373 



86 
251 



188 



1,821 
42 

743 
38 
136 



401 

990 

94 

8 

428 

224 



261 

35 

402 

830 
162 
54 
186 



Wage earners 



1914 
(3) 



3,508 
7,997 
4,312 



108, 003 
5,320 



4,160 



25,857 
6,664 



8,071 
21, 266 



49, 069 



4,925 
26, 538 



10, 657 



150, 125 
4,738 

30, 147 

23,861 

15, 763 

1,058 



79, 799 
35, 306 
21, 087 
1,223 
43, 681 

22,529 

10, 694 

16, 457 

3,442 

55, 858 

63, 596 
6,596 
5,876 
9,339 



1937 
(4) 



2,461 
9,366 
3,715 



116,839 

9,580 

7,402 

10, 130 
6,938 

21,287 
15, 926 

64,680 

6,148 
33,060 



16,840 



231,064 
4,543 

61.092 

5,698 

11,361 

502 



110,367 
138, 704 

20,603 
1,269 

53,000 

33, 145 

1,778 

16, 830 

3,599 

60,681 

89,287 
9.511 
5,218 

12, 075 



Wage earners per estab- 
lishment 



Average 

number 

1914 

(5) 



140.3 
133.3 
126.8 



126.2 
123.7 



122.4 



122.0 
121.2 



115.3 
115.0 



110.6 



109.4 
108.8 



107.6 



105.1 
100.8 



100.5 



97.9 
96.2 



Index, 1914-100 



1919 
(6) 



96.1 
94.4 
94.1 
94.1 
91.4 

90.6 

90.5 

90.4 
88.3 
83.1 

82.7 
81.8 
80.5 
79.8 



.7 
104.0 



76.2 



154.6 



64.7 
199.5 



89.3 
103.1 



108.2 



116.5 
96.7 



120.9 



1 

88.1 

89.4 
123.8 
100.5 

52.5 



1929 
(7) 



60.7 
68.6 
95.0 



9.3 
117.4 



86.6 



58.3 
172.5 



63.1 
90.4 



115.0 



59.2 
104.0 



128.4 



105.0 
83.3 



.4 

124.8 



49.4 



174.3 
104.1 
114.6 
109.1 
100.8 

138.6 

115.8 

82.4 
72.9 
134.8 

120.2 
94.6 
96.5 
65.0 



214.2 
118.8 
142.7 
166.7 
117.9 

150.1 

50.9 

69.4 
124.3 
127.6 

122.9 
74.1 

111.7 
73.4 



1937 
(8) 



60.2 
80.8 
139.5 



109.2 
148. C 



161.2 



66.4 
197.4 



50.3 
99.0 



156.9 



65.4 
121.0 



113.4 



120.9 
107.8 

81.8 
162.0 
85.3 
68.0 



286.4 
148.4 
232.9 
168.6 
135.4 

163.5 



74.2 
116.4 
161.7 

130.1 
71.8 

120.0 
81.3 



,J-o \}~% °^ nsu ^ e l of W™ an d earlier years, the dyeing and finishing departments of silk and ravon mill* 
were treated as integral parts of the mills; for 1937 such dyeing and I finishing departments ilexclvt S 
engaged in dyeing and finishing yarns for use in the same plant!) wer Sided 1 fromThe ^ta for the s!uf 
^od^nv lZ d t ] t ndustr y- Fi &™* 'or 1937 also exclude data for establishments Reducing eeV air mixed 

CoMffl; »pS yon:and ^? t Vl. n %° d . S h8 ^ ing a cotton war P in which the material of chief^ue 

^mJSfnr o™ i^T e / e assi S ned to the "Silk and rayon goods" industry prior to 1937. 
engaged primal?! v & n th^™? '^lude data for chocolate manufacturing departments of establishments 
mntentinnJr^oLJ t manufacture of confectionery. The chocolate-manufacturing departments of 
confectionery manufacturers apparently were of minor importance in the earlier years. *"«'<""'""> <" 

' figures for 1937 are not strictly comparable with those for earlier years. 
h„ ffff f °r.l937 include data for establishments engaged primarily in dyeing and finishing hosiery knitted 
S earlier'ylars WWe f ° rmerly ClaSSifled elsewhere - and are th ^fore not strictly compatible with fi^urel 
' Figures are not strictly comparable. 

iJrVof^hA^rSSin !^ f U \ ed Pfodu^s" and "Compressed and liquefied gases"; these were treated as a 
part of the Chemicals, not elsewhere classified" industry for 1914 and 1919. 



84 



CONCENTRATION OF ECONOMIC POWER 
Basic Data for 204 Selected Industries, 1914-37 — Continued 



Industries 



Artificial leather 

Meatpacking, wholesale-. 

Pipes (tobacco) 

Ship and boat building, steel and wood- 
en, including repair work 

Salt - 



Saws --- 

Scales and balances.. 

Glue and gelatin 

Bags, paper, exclusive of those made in 
paper mills 

Cardb oard, not made in paper mills 

Motor" vehicle bodies and motor-vehicle 

parts 4 

Oil, cake, and meal, linseed 

Forgings, iron and steel, made in plants 
not operated in connection with steel 

works or rolling mills 

E xplosi ves 

Sporting and athletic goods, not includ- 
ing firearms or ammunition 

Oleomargarine (margarine) , not made in 

meat-packing establishments 

Corn sirup, corn sugar, corn oil, and 

starch-. 

Lithographing 

Doors, shutters, and window sash and 

frames, molding, and trim, metal 

Furniture, including store and office 

fixtures 

Soap 

Boxes, paper, not elsewhere classified... 
Nonferrous-metal alloys; nonferrous met- 
al products, except aluminum, not 

elsewhere classified ' 

Wool scouring 

Nails, spikes, etc., not made in wire 
mills or in plants operated in connec- 
tion with rolling mills 

Structural and ornamental metal work, 
made in plants not operated in con- 
nection with rolling mills 

Boxes, wooden, except cigar boxes 

'Clothing, leather and sheep-lined; cloth- 
ing, men's, youths', and boys' not 
elsewhere classified; clothing, work, 
and sports garments, except leather; 
trousers, wash suits, and washable 

service apparel " 

Musical instruments: Organs 

Wood preserving 

Clay products, other than pottery; non- 
clay refractories. 

Asbestos products other than steam 
packing and pipe and boiler covering I2 _ 

Buttons , 

Drug grinding . 

Soda fountains and related products 

Lime 

Caskets, coffins, burial cases, and other 

morticians' goods. 

Lumber and timber products not else- 
where classified 13 



Establishments 



(l) 



10 

1,254 
30 

598 
76 
69 
68 

48 

54 
18 

764 
24 



187 
105 



102 
17 



84 
285 



39 



2,710 
289 



911 
23 



1,042 

872 



3,975 
72 
67 

2,348 

23 
348 
26 
58 
313 

249 



1937 



(2) 



25 

1,160 

25 

544 
46 
80 

57 
75 

107 
16 

936 
23 



194 

77 

204 

16 

27 
552 

154 

3,097 

232 

1,257 



1,103 
20 



42 



1,132 
634! 



3,202 
34 
197 

1,238 

73 
291 
21 
51 
203 

521 



11,684 I 7,647 



Wage earners 



1914 



(8) 



795 

98, 807 

2,333 

43, 931 
5,045 
4,517 
4,447 
3,125 

3,499 
1,159 

47, 541 
1,487 



11, 239 
6,298 

5,522 

917 

4,505 
15, 141 

1,981 

133, 344 
14, 112 

45, 108 

42, 166 
1,059 

2, 635 

46,887 
38, 089 



171, 174 
3,047 
2,830 

97, 843 



14,217 
1,056 
2,221 

11,997 

9,426 



1937 
(4) 



Average 

number 

1914 

(5) 



2,541 

127, 477 

2,382 

62, 274 
4,616 
4,384 
3,299 
3,547 

10, 360 
877 

284,814 
2,628 



18, 255 
5,406 



11,392 
1,214 



7,010 
24, 079 



170, 072 
14, 008 
65, 158 



83, 016 
1,252 



2,432 



38, 814 
25, 981 



227, 708 
1,086 
12, 401 

65, 226 

13,023 

12, 026 

699 

1,655 

9,751 

13, 678 

323, 928 



Wage earners per estab- 
lishment 



79.5 
78.8 
77.8 

73.5 
66.4 
65.5 
65.4 
65.1 

64.8 
64.4 

62.2 
62.0 



60.1 
60.0 

54.1 

53.9 

53.6 
53.1 

50.8 

49.2 
48.8 
46.6 



46.3 
46.0 



45.0 
43.7 



43.1 
42.3 
42.2 

41.7 

41.2 
40.9 
40.6 
38.3' 
38.3 

37.9 

37.9 



Index, 1914=100 



1919 
(6) 



148.8 
159.3 
75.4 

668.7 
132.1 
.4 
118.3 
116.9 

91.7 
138.4 

100.2 
134.8 



197.8 
131.8 

87.1 

126.0 

279.7 
101.3 

75.6 

101.6 
149.8 
104.1 



147.5 
147.8 



117.4 
94.2 



83.1 
75.2 
131.0 

86.8 

206.1 
86.8 
114.3 
111.2 



97.1 
77.3 



1929 
(7) 



191.7 
121.7 
90.0 

120.1 
141.7 

78.0 
106.7 

62.1 

113.3 
72.7 

308.4 
151.0 



159.4 
98.5 

82.4 

69.4 

358.8 
95.1 

127.2 

104.1 
104.3 
95.7 



139.5 
134.8 



81.3 



82.4 
88.3 



123.5 
91.0 
155.7 

127.6 

293.2 
91.2 
64.0 

133.7 
94.3 

83.1 

85.5 



t Figures for 1914 and 1919 are not strictly comparable with those for 1929 to 1937 because of the fact that 
at the census of 1929 certain large establishments engaged primarily in rolling nonferrous metals and manu- 
facturing nonferrous wire, f ormenly assigned to the wire industry, were transferred to the nonferrous metals 
industry. The classified wire industry proper does not include the extensive operations of the wire-drawing 
departments of the steel works and rolling mills industry, as well as of the nonferrous rolling mills. 

" Covers manufacturers of men's, youths', and boys' suits, overcoats, topcoats, separate coats and trousers 
and sport, work, and service. clothing, except that work shirts are not included prior to 1937. 

> 2 Data for 1914 and 1919 are not strictly comparable with those for later years. It appears that estab- 
lishments manufacturing asbestos roofing were assigned to the roofing materials industry for 1914 and 1919 
and to the asbestos products industry beginning 1921. 

: J For all years except 1929, data for all establishments reporting products under $5,000 in value are ex- 
cluded. At the census of 1929, a mill was treated as an establishment with products valued at $5,000 if it 
produced 200,000 feet of lumber (or its equivalent). 



CONCENTRATION OF ECONOMIC POWER 
Basic Data for 204 Selected Industries, 1914-37 — Continued 



85 



Industries 



Establishments 



1914 



(l) 



(2) 



Wage earners 



1914 
(3) 



1937 
(4) 



Wage earners per estab- 
lishment 



Average 

number 

1914 

(5) 



Index, 1914=100 



1919 
(6) 



1929 
(7) 



Galvanizing and other coating, done in 
plants not operated in connection with 
rolling mills 

Gloves and mittens, leather 14 

Toys (not including children's wheel 
goods or sleds), games, and play- 
ground equipment I6 

Lasts and related products 

Cigarettes, cigars 

Lighting equipment 

Chewing gum 

Smelting and refining, nonferrous metals 
other than gold, silver, and platinum, 
not from the ore 

Clothing, women's, misses', and chil- 
dren's, not elsewhere classified 19 _ 

Washing machines, wringers, driers, and 
ironing machines, for household use-.. 

Canned and cured fish, crabs, shrimps, 
oysters, and clams 

Wirework not elsewhere classified 

Boxes, cigar, wooden and part wooden.. 

Condensed and evaporated milk 

Pens, fountain and stylographic; pen 
points, gold, steel, and brass 

Turpentine and rosin 

Fert ilizers _. 

Baking powder, yeast, and other leaven- 
ing compounds 

Artificial and preserved flowers and 
plants 

Boot and shoe cut stock and findings 

Bookbinding and blank-book making 

Hoofing, built-up and roll; asphalt shin- 
gles; roof coatings other than paint ia .. 

Candles 

Wood distillation and charcoal manu- 
facture 

Brushes, other than rubber. 

Tanning materials, natural dyestufls, 
mordants and assistants, and sizes 

Wood turned and shaped and other 
wooden goods, not elsewhere classi- 
fied ».... 

Canned and dried fruits and vegetables; 
canned and bottled juices; preserves, 
jellies, fruit butters, pickles, and sauces. 

Oil, cake, and meal, cottonseed 

Engraving, steel, copperplate, and wood, 
and plate engraving 

Handbags and purses, women's; small 
leather articles; leather goods not else- 
where classified 

Trunks, suitcases, briefcases, bags, and 
other luggage 

Umbrellas, parasols, and canes 

Baskets and rattan and willow ware, not 
including furniture 

Flags, banners, regalia, vestments, robes, 
and related products 

Surgical and orthopedic appliances and 
related products 

Feathers, plumes, and manufactures 
thereof 



42 

285 



210 

58 

4,110 

511 
58 



75 

4,931 

68 

335 

366 
179 
189 



64 
221 



344 

48 

727 

466 

25 



103 

6,337 

40 

325 

563 
69 
601 



62 

1,037 

734 


42 

993 
743 


76 


40 


162 
495 
725 


189 
470 
997 


141 
14 


111 
22 


106 
264 


60 
243 


106 


158 


656 


755 


2,259 
879 


2,772 
447 


284 


435 


344 


593 


408 
198 


277 
81 


182 


194 


145 


121 


200 


323 


191 


61 



1,570 
10,596 



7,721 
2,088 
145, 660 
17,929 
2,020 



2,579 

166, 729 

2,257 

10, 927 
11,885 
5,716 
6,002 

1,966 
32,447 
22,742 

2,230 

4,721 
14, 379 
20,950 

4,038 
387 

2,916 
7,097 

2,836 



17, 418 

59, 839 
21,807 

6,597 

8,390 

9,754 
4,729 

4,319 

3,386 

4,617 

4,399 



1,119 
11,637 



17,547 

1,444 

82, 028 

21,743 

2,401 



4,973 

242, 879 

9,302 

18,229 
33, 471 
3,296 
8,967 

4,343 
32, 386 
20,893 

2,380 

5,657 
18, 755 
25,333 

7,418 
725 

4,467 
7,915 

2,812 

23,087 

137, 064 
16,583 

7,831 

20,852 

8,708 
3,088 

9,308 

2,146 

8,423 

559 



37.4 
37.2 



36.8 
36.0 
35.4 
35.1 
34.8 



34.4 

33.8 

33.2 

32.8 
32.5 
31.9 
31.8 

31.7 
31.3 
31.0 

29.3 

29.1 
29.0 
28.9 

28.6 
27.6 



26.6 

26.5 
24.8 

24.5 

24.4 

23.9 
23.9 

23.7 

23.4 

23.1 

23.0 



90.6 
87.9 



90.5 
136.7 

89.0 
110.3 
160.3 



79.7 

67.8 

192.5 

88.4 
108.6 
LI 
107.5 

202.2 
81.8 
145.2 

185.7 

73.9 
104.8 
80.6 

199.7 
121.7 

137.5 
95.2 



98.5 
152.0 

82. 4 

86.5 

97.1 

90.4 

97.5 
91.9 
99.1 



46.3 
93.5 



95.1 
84.2 
181.9 
109.4 
175.-9/ 

113.4 

68.6 

379.5 

119.2 
125.8 
116.3 
41.5 

190.9 
108.3 
105.8 



57.7 
115.9 
77.2 

206.6 
141.7 

185.8 
89.2 

71.6 



78.6 



124.5 
115.3 



86.9 



101.7 
84.5 

144.7 

88.0 

94.4 



77.4 I 28.7 



lt The figures for 1914 and 1919 are not strictly comparable with those for 1929 to 1937 because of the inclu- 
sion in the figures for the earlier years and the exclusion from the figures for 1929 to 1937 of data for certain 
establishments manufacturing gloves and mittens of cloth and leather combined. 

15 Figures for 1914 and 1919 include data for establishments engaged primarily in the production of toy 
balloons and other rubber toys which were classified elsewhere for 1929 to 1937. 

18 The 8 industries here combined for 1937 were treated as a single industry prior to 1935. They cover 
establishments whose principal products are women's, misses', and children's clothing (except that made in 
knitting mills) such as coats, suits, skirts, blouses, dresses, aprons, nightwear, and underwear and infants' 
and children's outerwear. , 

17 Data for 1937 include establishments engaged primarily in the manufacture of felloes, spokes, and hubs, 
and are not strictly comparable with figures for earlier years which do not include such establishments. 



gg CONCENTRATION OF ECONOMIC POWER 

Basic Data for 204 Selected Industries, 1914-87 — Continued 



Industries 



Window and door screens and weather 
strip 

Hat and cap materials, men's 

Paints, pigments, and varnishes 

Sugar, cane, not including products of 
refineries 

Rice cleaning and polishing 

Furs, dressed and dyed 

Ink, printing... 

Window shades (textile and paper) and 
fixtures:.. j 

Signs and advertising novelties 

Belting and packing, leather 

Wool pulling 

Planing-mill products and other wooden 
products not elsewhere classified, made 
m planing mills not connected with 
sawmills 

Jewelers' findings and materials: jewelry. 

Musical instruments and parts and ma- 
terials, not elsewhere classified 

Cooperage. 

Stereotyping and electrotyping, not done 
in printing establishments 

Photoengraving, not done in printing 
establishments 

Confectionery: Ice cream 

Gold leaf and foil... 

Mirrors and other glass products made of 
purchased glass 

Ink, writing 

Grease and tallow, not including lubri- 
cating greases 

Mirror and picture frames 

Fire extinguishers, chemical 

Printing and publishing, book, music, 
and job 

Statuary and art goods (except concrete) 
factory production 

Marble, granite, slate, and other stone, 
cut and shaped. 

Bone black, carbon black, and lamp- 
black 

Sand-lime brick 

Aircraft and parts l8 

Blacking, stains, and dressings. 

Fuel briquettes 

Lapidary work 

Drugs and medicines: Insecticides, and 
fungicides, and industrial and house- 
hold chemical compounds not else- 
where classified 

Theatrical scenery and stage equipment. 

Foundry supplies 

Printing and publishing, newspaper and 
periodical 

Brooms 

China firing, and decorating, not done 
in potteries. 

Card cutting and designing 

Ice, manufactured " 

Saddlery, harness and whips 

Liquors, vinous 

Perfume^ cosmetics, and other toilet 
preparations 20 



Establishments 



(1) 



135 

77 

715 

164 
58 
70 
65 

189 

442 

141 

34 



4,555 
1,348 



838 



321 

3,271 

61 

618 
28 

282 

272 

15 

6.834 

120 

3,355 

24 
40 
12 
127 
10 
43 



1937 



(2) 



144 

69 

1,124 

72 
61 

121 
184 

304 

1,001 

182 

19 



2.858 
1,045 

83 

397 

218 

641 

4,111 

26 

534 

17 

266 
163 
25 

10, 587 

99 

1,403 

62 
23 
92 
147 
21 
51 



Wage earners 



1914 



(3) 



1,688 


1,586 


7 


50 


41 


51 


8,175 


9,244 


431 


289 


21 


16 


41 


77 


2,055 


3,847 


1,220 


139 


209 


337 


276 


478 



3,111 

1,747 

16,029 

3,604 
1,253 
1,497 
1,387 

4,013 

9,227 

2,940 

708 



94,537 
27,667 

1, 743 

16, 671 

3,429 

6,129 

60,802 

1,123 

10, 984 
496 

4.989 

4,658 

241 

110, 091 

1,917 

53, 459 

332 
546 
162 
1,714 
132 
557 



21, 802 

88 
507 

101, 001 
5,273 

255 
489 

22, 269 
13, 081 

2,202 

2,781 



1937 
(4) 



2,833 

2,444 

31,664 

4.221 
2,218 
6,343 
2,793 

3,166 

16,042 

2,829 

794 



66, 814 
22,838 

3,409 
9,588 

4,766 

12,364 

72, 386 

625 

12, 652 
366 

5,200 
3,382 
1,041 

141,368 

858 

20,816 

2,190 

414 

24, 003 

1, 636 
457 
217 



28,417 
397 
466 

135, 215 
4,067 

306 
3,315 
18, 705 
3,049 
3,005 

10, 158 



Average 

number 

1914 

(5) 



Wage earners per estab- 
lishment 



23.0 
22.7 
22.4 

22.0 
21.6 
21.4 
21.3 

21.2 
20.9 
20.9 
20.8 



20.8 
20.5 

20.3 
19.9 

19.6 

19.1 

18.6 
18.4 

17.8 
17.7 

17.7 
17.1 
16.1 

16.1 

16.0 

15.9 

13.8 
13.7 
13.5 
13.5 
13.2 
13.0 



12.9 
12.6 
12.4 

12.4 
12.2 

12.1 
11.9 
10.8 
10.7 
10.5 

10.1 



Index, 1914=100 



1919 
(6) 



60.9 
115.9 
123.2 

164.1 
117.6 
182.2 
108.6 

91.5 
90.4 
80.4 
141.3 



93.3 
89.3 

157.6 
79.4 

113.3 

91.6 
97.3 
67.4 

77.5 
108.5 

94.4 
92.4 
185.7 

84.5 



61.6 

144.2 
119.0 
905.2 
100.0 
117.4 
90.8 



131.8 
73.8 
116.1 

93.5 
85.2 



149.6 
111.1 
94.4 
45.7 

128.7 



1929 
(7) 



62.6 
100.9 
122.8 

150.5 
122.7 
97.2 
78.4 

46.2 
77.0 
60.3 
159.1 



147.8 
91.5 

143.9 

99.0 
89.2 
85.3 

82.6 
80.8 

104.0 
146.2 
164.0 

73.3 

77.5 

126.4 

180.4 
103.6 
825.2 

70.4 
140.2 

39.2 



107.8 
78.6 
116.9 

91.1 

91.8 

96.7 
280.7 

72.2 
118.7 

74.3 

159.4 



» Statistics for 1914 and 1919 are not strictly comparable with those for later years for the reason that 
establishments engaged primarily in the manufacture of aircraft parts, other than engines and tires, were 
classified with the aircraft industry beginning with 1921, while, at earlier censuses, only establishments 
manufacturing complete aircraft were classified in this industry. 

•• Manufacturers were requested to report only wage earners employed in factory operations; but it was 
evident that in some cases employees engaged in delivery service were included in the figures for 1914 and 
1919. 

*^)wing to a change in classification, figures for 1937 are not strictly comparable with those for earlier years. 
Only a few establishments were involved in the change. 



CONCENTRATION OF ECONOMIC POWER 

Baste Data for 204 Selected Industries, 1914-37 — Continued 



87 



Industries 



Sheet-metal work, not specifically classi- 
fied.... 

Models and patterns, not including 
paper patterns 

Engraving (other than steel, copperplate 
or wood), chasing, etching, and die- 
sinking 

Electroplating 

Hair work 

Hand stamps and stencils and brands. . 

Bluing.. 

Concrete products 

Gold, silver, and platinum, refining and 
alloying 

Bread and other bakery products 

Sausage, meat puddings, headcheese, etc. 
not made in meat-packing establish- 
ments 

Cleaning and polishing preparations 

Oils, essential- 

Vinegar and cider 

Flour and other grain-mill products 

Butter... 

Cheese 



Establishments 



1914 
(1) 



2,776 
420 



138 
257 
123 
193 
29 
1,063 



17,549 



404 

188 

34 

191 

8,912 

4,107 

2,785 



1937 
(2) 



1,392 
594 



77 
547 

35 
266 

14 
1,382 

65 
17, 193 



817 

363 

13 

117 

2,238 

3,716 

2,567 



Wage earners 



1914 
(3) 



26,795 
3,876 



1,249 
2,258 
1,086 
1,593 
220 
7,542 

454 
118,246 



2,538 

1,139 
188 

1,004 
38,757 
14,025 

2,776 



1937 
(4) 



22,973 
5,728 



2,152 
8,256 
434 
2,376 
67 
12,840 

1,086 

239,388 



10, 217 
3,341 
195 
974 
26,390 
19, 437 
4,482 



Wage earners per estab- 
lishment 



Average 

number 

1914 

(5) 



9.7 
9.2 



8.3 
7.6 
7.1 

6.9 
6.7 



6.3 
6.1 
5.5 
5.3 
4.3 
3.4 
1.0 



Index, 1914-100 



1919 
(8) 



79.4 
103.3 



91.2 
87.5 
87.5 
102.4 
109.2 
81.7 

123.2 
95.5 



100.0 
106.6 
120.0 
107.5 
114.0 
141.2 
120.0 



1929 
(7) 



136.1 
91.3 



130.8 
126.1 
69.3 
107.2 
69.7 
95.8 

195.7 
144.8 



138.1 
103.3 
218.2 
107.6 
156.8 
158.8 
120.6 



1937 
(8) 



170.1 
104.3 



306.6 
171.6 
140.9 
107.2 
63.2 
131.0 

242.0 
207.6 



198.4 
150.8 
272.7 
156.6 
274.4 
152.9 
170.0 



APPENDIX B 

THE ABSOLUTE INDEX AND THE PROPORTIONATE INDEX 
FOR EACH INDUSTRY ANALYZED, 1914-37 



Industries 



FOOD AND KINDRED PRODUCTS 
GROUP 

Bread and other bakery products... 
Butter 

Canned and cured fish, crabs, 
shrimps, oysters, and clams 

Canned and dried fruits and vege- 
tables; canned and bottled juices; 
preserves, jellies, fruit butters, 
pickles, and sauces _. 

Chewing gum; confectionery; and 
icecream _. 

Chocolate and cocoa products, not 
including confectionery 

Condensed and evaporated milk 

Corn sirup, corn sugar, corn oil, and 
starch '. 

Flour and other grain-mill products. 

Ice, manufactured 

Liquors, vinous 

Meat packing, wholesale 

-Oleomargarine (margarine), not 
made in meat-packing establish- 
ments 

Rice cleaning and polishing.. 

Sausage, meat puddings, head- 
cheese, etc., 'not made in meat- 
packing establishments 

Sugar, beet 

Sugar, cane, not including products 
of refineries 

Sugar refining, cane 

Vinegar and cider 

TEXTILES AND THEIR PRODUCTS 
GROUP 

Asphalted-felt-base floor covering; 
linoleum. 

Bags, other than paper 

Carpets and rugs, wool (other than 
rag).. 

Clothing, leather and sheep-lined; 
clothing, men's, youths', and 
boys' not elsewhere classified; 
clothing, work, and sports gar- 
ments, except leather; trousers, 
wash suits, and washable service 
apparel 

Clothing, women's misses', and 
children's, not elsewhere classified 

Cordage and twine 

Corsets and allied garments 

Cotton woven goods (over 12 inches 
in width) ; cotton yarn and thread 

Fish nets and seines 

Flags, banners, regalia, vestments, 
robes, and related products 

Hat and cap materials, men's 

Hats, fur-felt 

Jute goods 

Knit goods: Hosiery; knitted cloth; 
knitted underwear; knitted outer- 
wear; knitted gloves and mittens 

88 



Absolute index 



1914 1919 1921 1923 1929 1935 1937 



100 



78 



100 79 



155 
154 



97 



109 



43 

133 

201 

82 

1,000 

79 



100 

79 



107 



64 

57 

04 
100 

113 
50 
171 
100 



133 

252 

60 

1,000 

82 



113 
54 

90 
83 
122 



126 



70 
50 
42 

84 
100 

129 
67 

200 
50 



125 



136 



150 



100 



167 



61 74 83 77 100 106 99 



Proportionate index 



1914 1919 1921 1923 1929 1935 1937 



100 



100 



76 



92 



124 



163 



92 



92 



120 



S7 



CONCENTRATION OF ECONOMIC POWER 

The Absolute Index and the Proportionate Index for Each Industry 
Analyzed, I9l\-Sl— Continued 



89 



Industries 



TEXTILES AND THEIR PRODUCTS 

group — continued 

Lace goods 

Linen goods 

Oilcloth.... " 

Woolen woven goods, including 

woven felts; and woolen yarns 

Wool scouring 

Wool combing; worsted woven 
goods; and worsted yarn 



FOREST PRODUCTS GROUP 

Baskets and rattan and willow ware, 
not including furniture 

Boxes, cigar, wooden and part 
wooden 

Boxes, wooden, except cigar boxes".' 

Caskets, coffins, burial cases, and 
other morticians 'goods 

Cooperage 

Cork products 

Furniture, including store and office 
fixtures ._, 

Lasts and related products '.'. 

Lumber and timber products not 
elsewhere classified 

Matches ~[ 

Mirror and' picture frames.""" . 

Planing-mill products and other 
wooden products not elsewhere 
classified, made in planing mills 
not connected with sawmills 

Window and door screens and 
weatherstrip 

Wood preserving ...".""" 

Wood turned and shaped and other 
wooden goods, not elsewhere clas- 
sified 



Absolute index 



1914 1919 1921 1923 1929 1936 



100 150 



PAPER AND ALLIED PRODUCTS GROUP 

Bags, paper, exclusive of those made 
in paper mills 

Boxes, paper, not elsewhere classi- 
fied 

Cardboard, not made in paper mini! 

Card cutting and designing 

Envelopes 

Wallpaper 



PRINTING, PUBLISHING, AND ALLIED 
INDUSTRIES GROUP 

Bookbinding and blank-book mak- 
ing. 

Engraving (other than steel, copper- 
plate, or wood), chasing, etching, 
and die sinking 

Engraving, steel, copperplate, and 
wood, and plate printing' 

Lithographing 3" 

Photoengraving, not done in print" 
mg establishments 

Printing and publishing, book, mu- 
sic, and job 

Printing and publishing, news- 
paper and periodical 

Stereotyping and electrotyping, not 
done in printing establishments... 

CHEMICALS AND ALLIED PRODUCTS 
GROUP 

Ammunition and related products, 

fireworks and allied products 
Blacking, stains, and dressings 
Bluing 



100 



100 



113 

87 

86 
123 
100 

104 
9l| 

95 
67 
124 



126 



90 



100 107 



100 
100 
100 

92 
100 

93 



136 
108 



79 
137 
100 

93 
77 

128 

67 



110 



80 

87 
100 
63 

76 
150 



84 

128 

67 

87 

78 
82 
122 
131 



50 
44 

100 



100 

67 

100 



94 113 
100 



100 
90 



111 
100 



82 
140 
100 



77 



113 



120 137 188 
50 67 33 
131 117 131 



115 



116 



80 

87 
100 
83 
72 
113 



06 



256 460 



Proportionate index 



1937 1914 1919 1921 1923 1929 1935 1937 



191 



107 



53 50 



SO 



119 



50 
80 
133 



113 

1150 

78 
66 

56 

94 

173 

146 



106 



100 

100 

100 

100 
100 

100 

100 
100 



160 



100 83 71 
59 53 



100 106 
100 108 



101 104 



145 



109 100 
121 101 
140 115 



106 



100 132 
100 73 
100 133 



100 



85 



100 



100 
78 61 
107 



126 

88 
95 

98 101 



110 



100 107 

100 117 

100 85 

100 92 

100 107 

100 127 



126 100 



2300 



33 100 
57 100 
133 100 



110 



06 



123 

115 
100 

100 

111 

90 

119 

77 

160 

78 
77 



126 



US 



71 
120 
115 

106 
130 

84 



123 

107 
100 

109 
121 
90 

108 
56 



126 
68 

117 
i 98 



100 127 135 159 



94 

100 
58 
132 
107 
100 



395 



107 



122 



38 35 

107 52 
93 1 70 



172 

1308 

115 
99 

136 

152 

191 

157 



90 



CONCENTRATION OF ECONOMIC POWER 



The Absolute Index and the Proportionate Index for Each Industry Analyzed, 

1 91 4-87— Continued 



Industries 


Absolute index 


Proportionate index 


1914 


1010 


1921 


1923 


1929 


1935 


1937 


1914 


1919 


1921 


1923 


1929 

93 
47 
196 
193 
100 

89 
126 

76 
136 

84 
134 
233 

92 
124 
196 

90 

344 
94 
124 

92 
173 

118 
104 

74 
218 

62 

111 
100 
83 

110 

100 
£8 

121 

97 
.100 

127 

100 
136 
113 
80 


1935 

65 
55 
182 
185 
160 

91 
109 

90 
113 

74 
123 
140 

104 
175 
35 
105 

220 
70 
82 

120 
158 

125 
91 

100 
200 

84 

92 
85 
91 

119 

100 
65 

104 

126 
81 

173 

93 
94 
129 
71 


1937 


CHEMICALS AND ALLIED PRODUCTS 

groups— continued 
Bone black, carbon black, and lamp- 


100 
100 
100 
100 
100 

100 
100 
100 
100 

100 
100 
100 
100 
100 
100 
100 

100 
100 
100 

100 
100 

100 
100 

100 
100 

100 

100 
100 
100 

100 

100 
100 

100 

100 
100 

100 

100 
100 
100 
100 


60 
100 

41 
100 
100 

123 
163 
116 
150 

117 
117 
100 
157 

83 
150 

94 

132 
100 
129 

87 
105 

67 
69 

80 
127 

42 

85 
92 
76 

61 

124 
140 

113 

60 
122 

80 

101 
96 

103 
81 


43 

50 

53 

94 

200 

90 

108 
97 
120 

117 
88 
200 
164 
100 
100 
75 

138 
109 
113 

81 
111 

200 
60 

80 
82 

56 

93 
87 
91 

60 

111 
150 

100 

40 
97 

80 

110 
109 
122 

85 


38 
50 
73 
133 
200 

85 
108 
100 
120 

117 
88 
100 
193 
100 
150 
78 

152 
109 
113 

76 
111 

60 
70 

80 
100 

56 

100 
80 
93 

52 

109 
169 

95 

67 
97 

80 

106 
170 
124 
83 


27 
33 

79 
84 
100 

78 
144 
91 
86 

81 
58 
200 
149 
100 
300 
61 

112 
120 
129 

81 
200 

60 
47 

80 
127 

42 

93 
91 
97 

68 

135 
264 

106 

33 
74 

100 

124 
59 
148 
111 


27 
33 
73 
89 
200 

96 
163 
101 

75 

81 
41 
200 
198 
167 
100 
70 

126 
109 
100 

81 

286 

50 
41 

200 
127 

63 

91 

96 
121 

59 

174 
608 

138 

40 
68 

200 

193 
85 
207 
122 


23 
33 
66 
114 
100 

104 
186 
87 
86 

70 
37 
200 
226 
125 
150 
64 

138 
120 
113 

81 
250 

60 
43 

200 
78 

71 

91 
76 
104 

62 

126 
440 

133 

33 

68 

200 

162 

73 

207 

111 


100 
100 
100 
100 
100 

100 
100 
100 
100 

100 
100 
100 
100 
100 
100 
100 

100 
100 
100 

100 
100 

100 
100 

100 
100 

100 

100 
100 
100 

100 

100 
100. 

100 

100 
100 

100 

100 
100 
100 
100 


87 
113 

86 
155 
110 

141 
176 
90 
183 

164 
167 
117 
126 
91 
205 
101 

204 
100 
124 

109 
136 

74 
124 

85 
192 

49 

105 
110 
83 

91 

122 
123 

135 

94 

116 

106 

93 
115 
113 

80 


81 
71 
104 
139 
214 

97 
109 

76 
113 

109 
134 
233 
114 
•117 
80 
84 

220 
114 
111 

92 
112 

286 
124 

81 
133 

65 

108 
110 
83 

100 

100 
75 

124 

70 

96 

127 

93 
115 
113 

75 


108 
75 
150 
213 
183 

89 
109 

76 
130 

104 
135 
117 
109 
140 
73 
90 

268 
107 
103 

86 
127 

74 
150 

85 
171 

68 

119 
110 
83 

100 

100 
67 

117 

161 
100 

127 

93 

176 
120 
75 


62 


Candles 


51 


Chemicals not elsewhere classified. . 
Cleaning and polishing preparations . 


176 
218 
81 


Drugs and medicines, insecticides, 
and fungicides, and industrial and 
household chemical compounds 


97 




132 


Fertilizers.. . 


90 




140 


Grease and tallow, not including 


67 




110 




117 


Oil, cake, and meal, cottonseed 

Oil, cake, and meal, linseed 


114 
124 




69 


Paints, pigments, and varnishes 

Perfumes, cosmetics, and other 


100 

m 


Salt.. 


73 


Soap 


91 


Tanning materials, natural dye- 
stuffs, mordants and assistants, 


120 


Wood distillation and charcoal 


146 


PRODUCTS OF PETROLEUM AND COAL 
GROUP 

Fuel briquets.. 


105 


Petroleum refining 

RUBBER PRODUl TS GROUP 

Boots and shoes, rubber. 

Rubber tires and inner tubes; other 
rubber goods, except boots and 
shoes 


88 

100 
123 


LEATHER AND ITS MANUFACTURES 
GROUP 

Belting and packing, leather 

Boot and shoe cut sto.ck and find- 
ings.. . 

Boots and shoes, other than rubber. 

Gloves and mittens, leather 

Handbags and purses, women's; 
small leather articles; leather 
goods not elsewhere classified 

Leather: Tanned, curried and fin- 
ished 


95 

86 
68 
77 

103 

79 


Saddlery, harness, and whips 

Trunks, suitcases, brief cases, bags, 
and other luggage 

STONE, CLAY, AND OLASS PRODUCTS 
GROUP 

Asbestos products other than steam 
packing and pipe and boiler cover- 
ing. 


49 
91 

106 


Cement 

China firing and decorating, not 
done in potteries 


88 
146 


Clay products, other than pottery; 


87 




94 


Glass _ 


138 


Lime 


71 



CONCENTRATION OF ECONOMIC POWER 



91 



The Absolute Index and the Proportionate Index for Each Industry Analyzed, 

1 91 4-37— Continued 



Industries 



Absolute index 



Proportionate index 



1914 1919 1921 1923 1929 1935 1937 1914 1919 1921 1923 1929 1935 1937 



STONE, CLAY, AND GLASS PRODUCTS 

group— continued 

Marble, granite, slate, and other 
stone, cut and shaped 

Mirrors and other glass products 
made of purchased glass 

Pottery, including porcelain ware.. 

Sand-lime brick 

Statuary and art goods (except con- 
crete), factory production 

iron and steel and their prod- 
- UCTS, not including macbinert, 
group 

Blast-furnace products 

Bolts, nuts, washers, and rivets, 
made in plants not operated in 
connection with rolling mills 

Cast-iron pipe and fittings ,. 

Cutlery (not including silver and 
plated cutlery) and edge tools 

Doors, shutters, and window sash 
and frames, molding, and trim, 
metaL , 

Files- 

Firearms... 

Forgings, iron and steel, made in 
plants not operated in connection 
with steel works or rolling mills 

Galvanizing and other coating, done 
in pl&nts not operated in connec- 
tion with rolling mills 

Hardware not elsewhere classified. . . 

Heating and cooking apparatus, ex- 
cept electric 

Nails, spikes, etc., not made in wire 
mills or in plants operated in con- 
nection with rolling mills 

Saws 

Screw-machine products and wood 
screws 

Stamped and pressed metal prod- 
ucts; enameling, japanning, and 
lacquering 

Steel-works and rolling-mill prod- 
ucts 

Structural and ornamental metal 
work, made in plants not operated 
in connection r" A polling mills 

Tin cans an ' o< '•' ct mware not else- 
where classified 

Wire drawn from purchased rods . . . 

Wirework not elsewhere classified 

Wrought pipe, welded and heavy 
riveted, made in plants not oper- 
ated in connection with rolling 
mills... 



KONFERROUS METALS AND THEIR 
PRODUCTS GROUP 

Aluminum products 

Electroplating 

Fire extinguishers, chemical 

Gold leaf and foil 

Gold, silver, and platinum, refining 

and alloying 

Jewelers' findings and materials; 

jewelry 

Lighting equipment 

Needles, pins, hooks and eyes, and 

slide and snap fasteners 

Nonferrous-metal alloys; nonferrous- 

metal products, except aluminum 

not elsewhere classified 



100 



100 



100 



100 



85 



108 

101 
83 
157 

85 



153 



91 
100 



100 



80 
100 
133 



25 

140 

116 

120 
50 

60 

74 

108 

90 

81 
67 
115 

100 



25 
73 
33 
117 

100 

97 

110 

67 



100 



111 
72 

138 

55 



100 



100 



80 
100 
100 



141 



97 



85 
DO 

92 

87 
60 
124 

100 



17 
74 
100 
175 

100 

no 

91 



138 



100 



104 



91 



161 



120 



104 



67 



153 



104 



97 



67 



92 89 100 



100 



ioo 



31 100 
150 100 
200 100 



115 



183 



119 



171 



186 



103 



90 



100 123 113 118 118 118 108 



386 

127 
140 

65 



118 



233 



92 



CONCENTRATION OF ECONOMIC POWER 



The Absolute Index and the Proportionate Index for Each Industry Analyzed, 

1914-37— Continued 



Industries 



Absolute index 



Proportionate index 



1914 1919 1921 1923 1929 1935 1937 1914 1919 1921 1923 1929 1935 1937 



NONFERROUS METALS AND THEIR 

products group— continued 

Sheet-metal work, not specifically 
classified 

Silverware and plated ware 

Smelting and refining, copper 

Smelting and refining, lead 

Smelting and refining, nonferrous 
metals other than gold, silver, and 

platinum, not from the ore 

Smelting and refining, zinc_. 

Watchcases - 

MACHINERY, NOT INCLUDING TRANS- 
PORTATION EQUIPMENT, GROUP 

Agricultural implements (including 
tractors) ; engines, turbines, water 
wheels, and windmills 

Electrical machinery, apparatus, 
and supplies; radios, radio tubes, 
and phonographs 

Scales and balances 

Sewing machines and attachments. 

Washing machines, wringers, driers, 
and ironing machines, for house- 
hold use 

TRANSPORTATION EQUIPMENT, AIR, 
LAND, AND WATER, GROUP 



Aircraft and parts 

Cars, electric and steam railroad, 

not built in railroad repair shops. 

Locomotives, railroad, mining, and 

industrial, not made in railroad 

repair shops 

Motorcycles, bicycles, and parts 

Motor-vehicle bodies and motor- 
vehicle parts •-.-- 

Motor vehicles, not including 
motorcycles « 



100 



43 



TRANSPORTATION EQUIPMENT, AIR, 
LAND, AND WATER, GROUP 

Ship and boat building, steel and 
wooden, including repair work 

MISCELLANEOUS INDUSTRIES GROUP 

Artificial and preserved flowers and 

plants 

Artists' materials; pencils, lead (in- 
cluding mechanical), and crayons. 

Brooms 

Brushes, other than rubber 

Buttons 

Carriages and sleds, children's 

Cigarettes; cigars 

> feathers, plumes, and manufac- 
tures thereof 

Foundry supplies 

Furs, dressed and dyed 

Hair work " 

Hand stamps and stencils and 

brands 

Lapidary work 

Models and patterns, not including 

paper patterns 

Musical-instrument parts and ma- 
terials, piano and organ 

Musical instruments and parts and 
materials, not elsewhere classified . 



100 



47 



158 



77 
200 



43 



100 



82 



96 

67 
'JO 
131 
97 
100 
108 

169 
60 
36 

175 

122 
25 

65 

117 

160 



155 

92 
87 
100 



100 
S3 
100 



195 



50 
150 



50 



200 
100 
91 



100 



60 



105 

67 
100 

113 
115 
129 
115 

135 
33 
31 

210 

133 
23 

76 

117 

133 



205 



75 



315 



ion 



100 



293 



82 



100 



100 



100 



114 



126 



92 



133 



63 



136 



120 



1 Due to Census revisions in the composition of the industry after 1929, the index number for 1929 has 
been calculated on two bases, the first comparable with earlier years and the second comparable with later- 
years. The change is so small that the picture is not materially affected by it. 



CONCENTRATION OF ECONOMIC POWER 



93 



The Absolute Index and the Proportionate Index for Each Industry Analyzed, 

19U-S1— Continued 



Industries 



MISCELLANEOUS INDUSTRIES 

geoup— continued 

Musical instruments: 

Organs 

Pianos 

Pens, fountain and stylographic; 
pen points, gold, steel, and brass. 

Pipes (tobacco) 

Roofing, built-up and roll; asphalt 
shingles; roof coatings other than 

paint 

Signs and advertising novelties 

Soda fountains and related products 
Sporting and athletic goods, not in- 
cluding firearms or ammunition. _ 
Surgical and orthopedic appliances 

and related products 

Tobacco (chewing and smoking) 

and snuff 

Toys (not including children's 
wheel goods or sleds), games, and 

playground equipment _ 

Umbrellas, parasols, and canes 

Window shades (textile and paper) 

and fixtures 

Wool pulling 



Absolute index 



Proportionate index 



1914 1919 1921 1923 1929 1935 1937 1914 1919 1921 1923 1929 1935 1937 



12(1 
120 



100 

74 
100 

45 

80 

42 



100 

140 



94 
109 



61 
60 



51* 
SO 
60 



119 
65 



123 
100 



APPENDIX C 

DISTRIBUTION OF INDUSTRIES BY AVERAGE NUMBER OF 
WAGE EARNERS EMPLOYED, 1914-37 

Group I. Industries Employing an Average op More Than 100,000 Wage 

Earners, 1914-37 

Boots and shoes, other than rubber. 

Bread and other bakery products. 

Cigarettes; cigars. 

Clothing, leather and sheep-lined; clothing, men's, youths', and boys', not else- 
where classified; clothing, work and sports garments, except leather; trousers, 

v >wash suits, and washable service apparel. 

Clothing, women's, misses', and children's, not elsewhere classified. 

Cotton woven goods (over 12 inches in width); cotton yarn and thread. 

Electrical machinery, apparatus, and supplies; radios, radio tubes, and phono- 
graphs. 

Furniture, including store and office fixtures. 

Knit goods: hosiery; knitted cloth; knitted underwear; knitted outerwear; 
'knitted gloves and mittens. 

Lumber and timber products not elsewhere classified. 

Motor-vehicle bodies and motor-vehicle parts. 

Meat packing, wholesale. 

Motor vehicles, not including motorcycles. 

Printing and publishing, book, music, and job. 

Printing and publishing, newspaper and periodical. 

Rubber tires and inner tubes; other rubber goods, except boots and shoes. 

Ship and boat building, steel and wooden, including repair work. 

Steel-works and rolling-mill products. 

Wool combing; worsted woven goods; and worsted yarn. 

Group II. Industries Employing an Average of 25,000 to 100,000 Wage 

Earners, 1914-37 

Agricultural implements (including tractors) ; engines, turbines, water wheels, 

and windmills. 
Blast-furnace products. 
Boxes, paper, not elsewhere classified. 
Boxes, wooden, except cigar boxes. 
Canned and dried fruits and vegetables; canned and bottled juices; preserves, 

jellies, fruit butters, pickles, and sauces. 
Carpets and rugs, wool (other than rag). 

Cars, electric and steam railroad, not built in railroad repair shops. 
Cement. 

Chemicals not elsewhere classified. 
Chewing gum; confectionery; and ice cream. 
Clay products, other than pottery; nonclay refractories. 
Drugs and medicines; insecticides, and fungicides, and industrial and household 

chemical compounds not elsewhere classified. 
Flour and other grain-mill products. 
Glass. 

Hardware not elsewhere classified. 
Heating and cooking apparatus, except electric. 
Jewelers' findings and materials; jewelry. 
Leather: Tanned, curried, and finished. 
Marble, granite, slate, and other stone, cut and shaped. 
Nonferrous-metal alloys; nonferrous-metal products, except aluminum, not else 

where classified. 

94 






CONCENTRATION OF ECONOMIC POWER 95 

Petroleum refining. 

Planing-mill products and other wooden products not elsewhere classified, made 

in planing-mills not connected with sawmills. 
Pottery, including porcelain ware. 
Sheet metal work, not specifically classified. 

Stamped and pressed metal products; enameling, japanning, and lacquering. 
Structural and ornamental metal work, made in plants not operated in connection 

with rolling mills. 
Tin cans and other tinware not elsewhere classified. 
Woolen woven goods, including woven felts; and woolen yarns. 

Group III. Industries Employing an Average of 5,000 to 25,000 Wage 

Earners, 1914-37 
Aircraft and parts. 
Aluminum products. 

Ammunition and related products; fireworks and allied products. 
Artists' materials; pencils, lead (including mechanical), and crayons. 
Asbestos products other than steam packing and pipe and boiler covering. 
Asphalted-felt-base floor covering; linoleum. 
Bags, other than paper. 

Bags, paper, exclusive of those made in paper mills. 
Baskets and rattan and willowware, not including furniture. 
Bolts, nuts, washers, and rivets, made in plants not operated in connection with 

rolling mills. 
Bookbinding and blankbook making. 
Boot and shoe cut stock and findings. 
Boots and shoes, other than rubber. 
Brushes, other than rubber. 
Butter. 
Buttons. 

Canned and cured fish, crabs, shrimps, oysters, and clams. 
Carriages and sleds, children's. 

Caskets, coffins, burial cases, and other morticians' goods. 
Cast-iron pipe and fittings. 

Chocolate and cocoa products, not including confectionery. 
Concrete products. 
Condensed and evaporated milk. 
Cooperage. 
Cordage and twine. 

Corn sirup, corn sugar, corn oil, and starch. 
Corsets and allied garments. 

Cutlery (not including silver and plated cutlery) and edge tools. 
Engraving, steel, copperplate, and wood, and plate printing. 
Envelopes. 
Explosives. 
Fertilizers. 
Firearms. 
Forgings, iron and steel, made in plants not operated in connection with steel-works 

or rolling mills. 
Gloves and mittens, leather. 

Grease and tallow, not including lubricating greases. 
Handbags and purses, women's; small leather articles; leather goods not elsewhere 

classified. 
Hats, fur-felt. 
Ice, manufactured. 
Jute goods. 
Lace goods. 
Lighting equipment. 
Lime. 

Lithographing. 

Locomotives, railroad, mining, and industrial, not made in railroad repair shops 
Mirrors and other glass products made from purchased glass. 
Models and patterns, not including paper patterns. 
Motorcycles, bicycles, and parts. 

Musical-instrument parts and materials: Piano and organ. 
Musical instruments: Pianos. 
Needles, pins^ hooks and eyes, and slide and snap fasteners. 



96 CONCENTRATION OF ECONOMIC POWER 

Oil, cake, and meal, cottonseed. 

Paints, pigments and varnishes. 

Perfumes, cosmetics, and other toilet preparations. 

Photoengraving, not done in printing establishments. 

Roofing, built-up and roll; asphalt shingles; roof coatings other than paint. 

Salt. 

Sausage, meat puddings, headcheese, etc., not made in meat-packing establish- 
ments. 

Screw-machine products and wood screws. 

Sewing machines and attachments. 

Signs and advertising novelties. 

Silverware and plated ware. 

Smelting and refining, copper. 

Smelting and refining, lead. 

Smelting and refining, zinc. 

Soap. 

Sporting and athletic goods, not including firearms and ammunition. 

Sugar, beet. 

Sugar refining, cane. 

Surgical and orthopedic appliances and related products. 

Tobacco (chewing and smoking) and snuff. 

Toys (not including children's wheel goods and sleds), games, and playground 
equipment. 

Trunks, suitcases, briefcases, bags, and other luggage. 

Washing machines, wringers, driers, and ironing machines, for household use. 

Wire drawn from purchased rods. 

Wirework not elsewhere classified. 

Wood preserving. 

Wood turned and shaped and other wooden goods, not elsewhere classified. 

Wrought pipe, welded and heavy riveted, made in plants not operated in connec- 
tion with rolling mills. 

Group IV. Industries Employing an Average of Under 5,000 Wage Earners, 

1914-37 

Artificial and preserved flowers and plants. 

Baking powder, yeast, and other leavening compounds. 

Belting and packing, leather. 

Blacking, stains, and dressings. 

Bluing. 

Bone black, carbon black, and lampblack. 

Boxes, cigar, wooden and part wooden. 

Brooms. 

Candles. 

Cardboard, not made in paper mills. 

Card cutting and designing. 

China firing and decorating, not done in potteries. 

Cleaning and polishing preparations. 

Cork products. 

Doors, shutters, and window sash and frames, molding and trim, metal. 

Drug grinding. 

Electroplating. 

Engraving (other than steel, copperplate, or wood), chasing, etching, and die- 

sinking. 
Feathers, plumes, and manufactures thereof. 
Files. 

Fire extinguishers, chemical. 
Fish nets and seines. 

Flags, banners, regalia, vestments, robes, and related products. 
Foundry supplies. 
Fuel briquettes. 
Furs, dressed and dyed. 
Galvanizing and other coating, done in plants not operated in connection with 

rolling mills. 
Glue and gelatin. 
Gold leaf and foil. 

Gold, silver, and platinum, refining and alloying. 
Hair work. 



CONCENTRATION OF ECONOMIC POWER 



97 



Hand stamps and stencils and brands. 

Hat and cap materials, men's. 

Ink, printing. 

Ink, writing. 

Lapidary work. 

Lasts and related products. 

Linen goods. 

Liquors, vinous. 

Matches. 

Mirror and picture frames. 

Musical instruments and parts and materials, not elsewhere classified 

Musical instruments: Organs. 

Nails, spikes, etc., not made in wire mills or in plants operated in connection with 

rolling mills. 
Oil, cake, and meal, linseed. 
Oilcloth. 
Oils, essential. 

Oleomargarine (margarine), not made in meat-packing establishments. 

Pipes (tobacco). 

Pens, fountain and stylographic; pen points, gold, steel, and brass. 

Rice cleaning and polishing. 

Saddlery, harness, and whips. 

Sand-lime brick. 

Saws. 

Scales and balances. 

Smelting and refining, nonferrous metals other than gold, silver, and platinum. 

not from the ore. 
Soda fountains and related products. 

Statuary and art goods (except concrete), factory production. 
Stereotyping and electrotyping, not done in printing establishments, 
bugar, cane, not including products of refineries. 

Tanning materials, natural dyestuffs, mordants and assistants, and sizes. 
Umbrellas, parasols, and canes. 
Vinegar and cider. 
Wallpaper. 
Watchcases. 

Window and door screens and weather strip. 
Window shades (textile and paper) and fixtures. 
Wood distillation and charcoal manufacture. 
Wool pulling. 
Wool scouring. 



273238 — II— pt. 27- 



PART II 

THE INTEGRATION OF MANUFACTURING 
OPERATIONS 

BT 
WALTER F. CROWDER 

Assisted by 
K. Celeste Stokes 



99 



THE INTEGRATION OF MANUFACTURING OPERATIONS 

TABLE OF CONTENTS 

CHAPTER I 

Page 

The scope of the study 105 

CHAPTER II 

Extent and significance of central-office operations 111 

Number of establishments controlled by central offices 111 

Distribution of establishments by industry groups 112 

Extent of control of establishments by central offices, by industry 

groups 116 

Size of central-office groups — average number of establishments 

per central office ----, H7 

Diversity of central-office operations." 121 

Wage earners and wages paid in establishments controlled by central 

offices 126 

Distribution of wage earners among industry groups 126 

Average number of wage earners per central-office establishment. 127 

Wages paid and average wage payment per worker 128 

Cost of materials and value of products of establishments controlled 

by central offices .- 132 

Value of products manufactured in establishments controlled by 

central offices 133 

Average value of products per establishment 134 

Average value of products per wage earner 136 

Value added by manufacture in establishments controlled by central 

offices 138 

Average value added by manufacture per establishment 139 

Average value added by manufacture per wage earner 141 

A summary comparison 142 

CHAPTER III 

The structure of central-office groups 144 

CHAPTER IV 

Simple and complex central-office groups 151 

Number of simple and complex groups. 151 

Establishments in simple and complex groups 154 

Distribution of central offices according to number of establishments 

operated 156 

Measures of the importance of simple and complex structures 161 

CHAPTER V 

Uniform functions " 163 

The extent of horizontal integration within complex central-office 

groups 163 

The formation of horizontal combinations 165 

CHAPTER VI 

Divergent functions .... 167 

Joint products . 170 

Food and kindred products 171 

Iron and steel and their products 172 

Textiles and their products . 172 

Other industry groups 173 

101 



102 CONCENTRATION OF ECONOMIC POWER 

Divergent functions — Continued. Page 

By-products 174 

Dissimilar products of like processes 176 

Printing and publishing 176 

Textiles and their products 177 

Other industry groups . 177 

CHAPTER VII 

Convergent functions 179 

Complementary products 180 

Complementary materials 181 

Complementary parts 182 

Complementary products 183 

Complementary industries 184 

Auxiliary products 185 

Auxiliary services 186 

Auxiliary commodities 187 

Dissimilar products for like markets 187 

CHAPTER VIII 

Successive functions i 192 

Reasons for vertical integration 198 

Integration among industry groups 196 

Forest products 197 

Textiles and their products 199 

Paper and allied products 199 

Iron and steel and their products 201 

Other industry groups 203 

CHAPTER IX 

Unrelated functions , 206 

CHAPTER X 

Summary and conclusions 208 

APPENDIX A 

Measures of significance of central-office operations, bv industrv groups and 
industries, 1937 . 211-225 

A.PPENDIX B 

Industries in which no establishments are controlled by central offices, 
with number of establishments, average number of wage earners, and 

value of products, 1937 226 



SCHEDULE OF TABLES AND CHARTS , 

TABLES 

Page 

1. Number of central offices and controlled establishments, by industry 

groups, 1937 112 

2. Significance of central-office operations as measured by number of 

establishments, 1937 114 

3. Extent to which the operations of central offices are confined to the 

industries in which thev are predominantly active, by industry 
groups, 1937 i 116 

4. Average number of establishments per central office, by industry ' 

groups, 1937 118 

5. Distribution of central-office companies according to number of estab- 

lishments operated, by industry groups, 1937 119 

6. Distribution of central-office companies according to number of man- 

ufacturing industries in which establishments are operated, by in- 
dustry groups, 1937 123-124 

7. Significance of central-office operations as measured by number of 

wage earners employed and wages paid, 1937 127 

8. Average number of wage earners in establishments operated by central 

offices and in independently operated establishments, 1937 128 

9. Wages paid per wage earner in establishments operated by central 

offices and in independently operated establishments, 1937 130 

10. Significance of central-office operations as measured by cost of materials 

used and value of products, 1937 133 

11. Average value of products per establishment in establishments 

operated by central offices and in independently operated estab- 
lishments, 1937 1 34 

12. Average value of products per wage earner in establishments operated 

bv central offices and in independently operated establishments, 

1937 137 

13. Significance of central-office operations as measured by value added by 

manufacture, 1937 1 39 

14. Average value added by manufacture per establishment in establish- 

ments operated by central offices and in independent establish- 
ments, 1 937 . . . . 1 40 

15. Average value added by manufacture per wage earner in establish- 

ments operated bv central offices and in independently operated 
establishments, 1937. _ _ ; 142 

16. Number of simple and complex central offices, by industry groups, 

1937 152 

17. Number of establishments in simple and complex central-office com- 

panies, by industry groups, 1 937 154 

18. Industries with over 20 percent of establishments in simple central- 

office companies, 1937 156 

19. Distribution of simple central offices by number of establishments 

operated, by industry groups, 1937... 158 

20. Distribution of complex central offices by number of establishments 

operated, by industry groups, 1937 159-160 

21. Extent of horizontal integration within central-office companies, 

1937 164 

22. Total number of different types of integration in central-office com- 

panies, by industry groups, 1937 168 

23. Central-office companies having divergent functions, by industry 

groups, 1937 1 70 

24. Central-office companies producing joint products, by industry 

groups, 1937 _„ ... 171 

25. Central-office companies having convergent functions, by- industry 

grouDs. 1927. _* .' 179 

103 



104 CONCENTRATION OF ECONOMIC POWER 

Page 

26. Central offices operating establishments having complementary func- 

tions, by industry groups, 1937 180 

27. Central offices operating establishments having auxiliary functions, by 

industry groups, 1937 185 

28. Central-office companies producing successive products, by industry 

groups, 1937 197 

CHARTS 

1. Percentage of total number of central offices and central-office estab- 

lishments in each industry group, 1937 113 

2. Percentage of total number of establishments operated by central 

offices and by independents, by industry groups, 1937 115 

3. Percentage distribution of central-office companies according to 

number of establishments operated, by industry groups, 1937 120 

4. Percentage distribution of central-office companies according to 

number of manufacturing industries in which establishments are 
operated, by industry groups, 1937 125 

5. Average number of wage earners in establishments operated by central 

offices and in independently operated establishments, by industry 
groups, 1937 129 

6. Average wage paid per wage earner in establishments operated by cen- 

tral offices and in independently operated establishments, by 
industry groups, 1937 131 

7. Average value of products per establishment in establishments 

operated by central offices and in independently operated estab- 
lishments, by industry groups, 1937 135 

8 Average value added by manufacture per establishment in establish- 
ments operated by central offices and in independently operated 
establishments, by industry groups, 1937 141 

9. Diagram of functional relationships within central-office companies 148 

10. Percentage distribution of simple and complex central offices and 

establishments, by industry groups, 1937 153 

11. Number of establishments per simple and complex central office, by 

industry groups, 1937 155 

12. Percentage distribution of simple and complex central offices, by 

number of establishments operated, 1937 157 

13. Percentage distribution of different types of functional relationships 

within central-office companies, by industry groups, 1937 169 

14. Diagram of the stages of manufacture in the iron and steel industry 202 



THE INTEGRATION OF MANUFACTURING OPERATIONS 1 

CHAPTER I 
THE SCOPE OF THE STUDY 

The extremely complex and interrelated nature of the economic 
system makes it imperative in any formulation of wise social policy 
that all pertinent information be brought before those groups en- 
trusted with the final decisions on matters of policy. In no segment 
of our economic and political life is this need more evident than in all 
those social and economic problems which are related to the con- 
centration of control of industrial operations. Such problems might 
run in terms of the control exercised over industrial operations by 
various types of combinations and in terms of the effect of this control 
over the supply of products in the market. It is the purpose of this 
study to present an over-all picture of the structure of manufacturing 
operations and to appraise the significance and extent of operating 
combinations in various industries. In corollary studies the analysis 
is carried a step further and an answer is supplied to the question: 
To what extent is the supply of the various individual manufactured 
commodities controlled by leading producers? 

The problem of measuring the extent and the nature of combinations 
among manufacturing enterprises and of appraising the structure of 
manufacturing operations might be approached from any one of its 
numerous aspects. One might study the financial relations and fines 
of control among manufacturing enterprises, or one might study the 
informal and less tangible forms of effecting control such as com- 
munities of interest, common banking connections, gentlemen's 
agreements, etc., or finally, one might study the more objective oper- 
ating relationships among the establishments. For a complete 
picture of the control of manufacturing operations, it would be neces- 
sary to investigate all these types of control. For the purposes of this 
study, however, the field of inquiry is limited to the more tangible 
and objective lines of control as reflected in the "central-office" 
records of the Bureau of the Census. The structure and control 
within mining (and other extractive industries) and within distributive 
operations do not come within the purview of this study. Neither 
are the interrelations of these lines of activity with manufacturing 
considered in more than a cursory manner. While this study is thus 
limited to an analysis of the operating combinations among manu- 
facturing establishments, it, nevertheless, covers the leading single 
segment of economic activity. 2 

1 Acknowledgment is made of the substantial contribution of Franklin M. Aaronson at one stage of the 
work. 

8 In 1937, the income produced in manufacturing accounted for 23.9 percent of the total national income. 
In this same year wholesale and retail trade accounted for 12.8 percent of the total; agriculture, 9 percent; 
transportation, 7.1 percent; and mining, 2.1 percent. (See article "National Income in 1939" in Survey of 
Current Business, June 1910 issue, Bureau of Foreign and Domestic Commerce.) 

105 



106 CONCENTRATION OF ECONOMIC POWfc'K 

The basic unit of measurement of the Census of Manufactures is 
the establishment or plant which is classified in one industry, operates 
in one locality, and for which a separate set of books or records is 
kept. 3 In taking the Census of Manufactures, schedules are sent by 
mail to all individuals or concerns which are believed to be eligible for 
enumeration. Where the office records for an establishment or plant 
are maintained at an address other than that of the plant or where 
more than one plant is operated from a single office, the schedules for 
all plants operated from such an office are mailed to that office. In 
order to facilitate the sending of inquiries and the collection of data, 
a separate central-office file is maintained by the Bureau of the Census. 

Each schedule that is returned is marked with the identifying 
number of the central-office group to which it belongs and later in 
the process of punching cards for machine tabulations the central- 
office number is punched on the card for each plant. It is thus pos- 
sible to separate by machine methods independently operated plants 
from those that are operated as part of a central-office group and to 
carry out extensive analyses of these central-office groups. The use 
of machine methods of tabulation greatly reduces the arduousness of 
the task and makes a more extended analysis possible. As con- 
trasted with the earlier and somewhat similar study of the integration 
of industrial operations, 4 where the tabulations were made by hand 
methods, it has been possible by the method outlined above to give 
a more complete picture of the structure of these central-office groups. 
Dr. Thorp's study was largely confined to an analysis based on the 
number of central offices by census industry groups and the number 
of establishments operated by these central offices. In the present 
study, which is based on the reports for 1937, it has been possible 
to cover much the same field of inquiry that was covered in the earlier 
study which made use of data from the 1919 schedules. In addition 
it has been possible to extend the analysis to other measures of the 
significance of central-office operations, i. e., number of wage earners 

3 "As a rule, the term 'establishment' signifies a single plant or factory. In 1937 one report might be 
counted as one, two, or more establishments, depending on the answer given by the respondent to the 
question, 'How many plants does this report cover?' The respondent's answer to this question was taken 
as the number of establishments. The number of establishments for the United States was increased 
approximately 2,000 by this change in definition of establishments. The change does not materially affect 
the number of establishments in any particular industry. 

"As at pre. ious censuses, separate reports were occasionally obtained for different lines of manufacturing 
activity carried on ta the same plant, and in some cases a single report was obtained covering two or more 
plants operated under a common ownership and located in the same city, or in the same county but in diff- 
erent municipalities or unincorporated places having fewer than 10,000 inhabitants. 

"The censuses are confined, in general, to manufacturing industries proper. Data are collected for a few 
industries, however, whose activities are not manufacturing in the sense rn which the term is generally 
understood, the most important example being printing and publishing. The following classes of establish- 
ments were not covered by the 1937 Census of Manufactures: 

"(1) Establishments which were idle throughout the year or reported products valued at less than $5,000. 

"(2) Establishments engaged principally in the performance of work for individual customers, such as 
custom tailor shops, dressmaking and millinery shops, and repair shops. (This does not apply to large 
establishments manufacturing to fill special orders.) 

"(3) Establishments operated in the building industries, other than those manufacturing building ma- 
terials for the general trade. 

"(4) Establishments engaged in the so-called neighborhood industries and hand trades, in which little 
or no power machinery is used, such as carpentry, blacksmithing, tinsmithing, etc. 

"(5) Cotton ginneries. 

"(6) Smr 11 grain mills (gristmills) engaged exclusively in custom grinding. 

"(7) WLolesale and retail stores which incidentally were also engaged in manufacturing on a small scale, 
particularly where it is impossible to obtain separate data for the manufacturing and for the mercantile 
operations. 

"(8) Educational, eleemosynary, and penal institutions engaged in manufacturing. (Data for the pro- 
duction of binder twine in penal institutions and of brooms in institutions for the blind were, however, 
collected.) 

"(9) Manufactured gas was excluded from the 1937 figures because data covering only the manufacturing 
oi gas could not be satisfactorily obtained. 

"(10) Railroad repair shops (both electric and steam) were excluded in 1937 as not being manufacturing." 

(Census of Manufactures, 1937, pp. 4 and 5.) 

* See "The Integration of Industrial Operation" by Willard L. Thorp, Bureau of the Census Monograph 
IIT, 1924. 



CONCENTRATION OF ECONOMIC POWER 107 

and wages paid, cost of materials, value of products, and value added 
by manufacture. The material has also been broken down by 
census industries as well as by industry groups. 

A central-office group exists, in the meaning employed by the 
Census, when two or more plants are controlled or operated by one 
ownership interest. 5 The evidence of control arises out of an avowal 
and acknowledgment on the part of the ownership interest. The files 
and records of central-office affiliations are kept up to date in the 
Bureau of the Census by checking them against the submitted reports 
of the central offices themselves. Several months before the schedules 
are mailed to the reporting units a form is sent to all central-office 
groups that reported in the preceding census. In this questionnaire 
the central offices are asked to list (1) all the plants under their owner- 
ship or control, (2) all the plants over which they have acquired owner- 
ship or control since the last census, and the name and address of the 
seller or lessor, (3) all the plants previously under their ownership 
or control which they have disposed of or dismantled and the name 
and address of the purchaser or lessee in case of sale and (4) all the 
plants owned or controlled by them which were idle during the year. 
This information is checked against the records and in case of dis- 
crepancies the reporting units are further questioned. On the sched- 
ules, which must be filled out for each plant, there is a further inquiry 
relating to the ownership or control of the plant. As a result of this 
continuous, careful checking the central-office fil^s of the Bureau of the 
Census present one of the most exhaustive and exact records of avowed 
and acknowledged control or operating relationship among manufac- 
turing establishments. The more subtle forms of control mentioned 
previously are, however, not reflected in the central-office records and 
as a consequence are not covered by this study. 

It frequently happens that, when one corporation obtains control 
over another under the holding company form of organization, the 
units continue to operate on an independent or semi-independent 
basis. In the mailing lists of the Bureau of the Census these operat- 
ing units may continue to report for those plants under their owner- 
ship or control but the total operations of the two are brought together 
under a master number. For example, corporation A buys the stock 
of corporation B, but corporation B continues to operate as an inde- 
pendent unit. The schedules for the plants under the ownership or 
control of corporation B may still be sent to corporation B but the 
central-office number of corporation B is keyed to corporation A so 
that the manufacturing operations of both concerns are listed under 
one central-office group. It would be true, of course, that minority 
interests of corporation A are not reflected in the operations of the 
group. Only acknowledged ownership or control appears in the 
record. 

Since the inquiries in subsequent chapters relate to operating com- 
binations in terms of specific industries or industry groups, it is nec- 
essary to investigate the meaning and nature of an industry. The 
term "industry" is widely used in common parlance but is extremely 
difficult to define precisely. From a purely theoretical standpoint an 
industry may be defined as a group of firms producing the same com- 

5 For administrative purposes in mailing schedules, the Bureau of the Census also employs the central- 
office technique for those situations in which the office of a concern and a single plant operated by it are 
located at different addresses. These one-plant central offices are not included in the tabulations of the 
present study, since the interest here Is in multiple-plant groups. 



108 CONCENTRATION OF ECONOMIC POWER 

modity for the same market. Practically, however, it would be 
almost, if not completely, impossible to find a group of firms which 
view themselves as an industry under existing conditions that would 
qualify as an industry under such a definition. 

In the first place, there is a tendency for ea°h member of a group of 
producers to create the impression that his products are distinct from 
those of his competitors and thus to establish small segregated markets 
for his goods. Each manufacturer tries to "carve out" a separate 
market and a separate demand for his own goods by making them, if 
only in name, slightly different, and by cajoling the public by adver- 
tising into thinking them different. From a theoretical standpoint, 
each differentiated item is a separate economic commodity. To the 
extent the manufacturer is able to distinguish his product in the mind 
of the public he has decreased the elasticity of the demand for the prod- 
uct and can act as a monopolist of this commodity — a monopolist 
within very narrow limits to be sure, since direct and indirect substi- 
tute commodities present an ever effective source of competition. 

In the second place, there have grown up through long custom and 
habit certain feelings of common interest among producers, not based 
on the fact that they produce a like product, which have led to the 
formation of other types of so-called industries. During the life of 
the National Recovery Administration, 776 codes for industries were 
approved and approximately 5,000 were applied for. In many cases, 
the grouping of firms under one code was quite arbitrary. For exam- 
ple, producers of blankets and piece goods up to and inclusive of 25 
percent wool were included under the Cotton Textile Code and over 25 
percent under the Wool Textile Code. In other cases the boundaries 
of the industry covered by the code were determined by the raw 
materials used. The Underwear and Allied Products Code included 
the manufacture of all types of underwear made from purchased knit 
fabrics, whereas ladies' underwear and undergarments made from 
woven fabrics came under the Undergarment and Negligee Code. 
Furthermore, in fixing the limits of an industry for code purposes, 
the members of that industry were forced to decide where the produc- 
tion of a commodity started and stopped. This led to many arbi- 
trary decisions. 

In the third place, it is quite common for a firm or an establish- 
ment to manufacture several and in some cases hundreds of com- 
modities. Since these different products would qualify the firm for 
membership in several industries some arbitrary decision must be 
made. Under the N. R. A. codes, instances of overlapping and of 
multiple-code coverage were among the most troublesome problems 
from an administrative point of view. These same problems of setting 
the limits of an industry arise in the administration of the Fair Labor 
Standards Act and of the Public Contracts Act. 

While the definitions and limits of an industry are quite arbitrary, 
it is necessary in any statistical measurement of such a complex field 
as manufacturing to establish some basic, manageable unit for anal- 
ysis. The only practical solution of this problem for agencies en- 
trusted with the duty of measuring is to formulate limits that are 
reasonable and logical. The industry limits which have b.een used 



CONCENTRATION OF ECONOMIC POWER JQ9 

in this study are those which have been developed over a long period 
of years by the Bureau of the Census. 6 

Although this report presents material somewhat similar to that 
shown in Dr. Thorp's monograph covering the year 1919, it is em- 
phasized that, because of certain changes in coverage by the census, 
precise comparisons of the statistics cannot be made. The data for 
1919 included reports from all manufacturers having establishments 
with an annual value of products of $500 or more, whereas in this 
analysis only those establishments with products valued at $5,000 
and over are represented. Of the 290,105 establishments reporting 
to the Bureau of the Census in 1919, approximately 65,490, or 23 
percent, were plants in the $500 to $5,000 classification. The value 
of products of these 65,490 plants, however, comprised less than 1 
percent of the value of products of all reporting establishments; 
hence, the exclusion of the small plants does not materially affect the 
statistics except for the number of establishments. 

In the analysis for 1919, all the establishments forming a central- 
office company were classified in the industry group in which the 
largest number of establishments were operated. In this study, on 
the other hand, all the establishments operated by a central office are 
assigned to the industry or industry group in which the establishments 
having the greatest value of products are classified. To facilitate 
the analysis in other parts of this report, each establishment of a 
central-office grc,-^ has been classified in the industry in which it 
actually belongs, The basis of classification in either case, however, 
is the value of products and not the number of establishments. 

Other obstacles to direct comparisons of data for 1937 with those 
for 1919' are the revisions and shifts in industry and industry-group 
classifications. For example, in 1919 the group entitled "metals and 
metal products other than iron and steel" included practically all 
machinery except agricultural implements and electrical machinery, 
whereas machinery is now shown as a separate group and includes 
agricultural implements and electrical machinery. Railroad repair 
shops, automobile repair shops, and manufactured gas plants, which 
were included in the data for 1919, are excluded from the census 
statistics for 1937. 

As part of the census of 1900 a special study 7 of industrial com- 
binations was made, but only those combinations consisting of a num- 
ber of formerly independent plants brought together into one company 
under a charter obtained for that purpose .ere considered. All of 

6 "Although there are thousands of more or less disf net lines of manufacturing activity, manufacturing 
establishments were classified for census purposes in 1937 into 351 industries. 

"The production of each specific class of finished commodities, however small, might be looked upon as a 
separate industry; and in some cases certain of the distinct processes in the manufacture of a single com- 
modity might be treated as separate industries, as, indeed, is sometimes actually done in the census reports. 
Manifestly, however, there must be some grouping of commodities and processes, not only in order to bring 
the number of industries within reasonable compass, but also in order to avoid the extensive overlapping 
which would result from an attempt to distinguish so large a number of industries. Each establishment 
must, as a rule, be treated as a unit, and the data reported by it must be assigned in toto to some one indus- 
try. In many cases an establishment manufactures several related articles or commodities, or performs sev- 
eral related operations. It is desirable, therefore, that the classification be broad enough to cover all the 
activities — or, at least, the principal activities — of such establishments. 

"An effort has been made to distinguish, so far as practicable, each well-defined or well-recognized indus- 
try. The classification has been based on prevailing conditions as to the actual organization of industry 
and the distribution of the various branches of production among individual establishments. It has been 
necessary, however, in some cases to combine'the data for two or more industries which are usually considered 
fairly distinct from one another, because of the considerable amount of overlapping among them. Such 
cases arise where, although the majority of the establishments concerned confine their business to one or 
another of the industries, a few important establishments combine the activities of two or more industries to 
such an extent as to render it impracticable to obtain separate data for the different lines of activity." (Cen- 
sus of Manufactures, 1937, pp. 5 and 6.) 

' Twelfth Census of the United States, 1900, vol. VII, p. LXXV. 



HQ CONCENTRATION OF ECONOMIC POWER 

those companies comprising a number of ^establishments which had 
grown up, not by combination with other plants, but the erection of 
new plants or the purchase of old ones, were excluded. This concept 
of industrial combinations, therefore, precludes a comparison with 
data for central-office combinations. Both Dr. Thorp's study and the 
present one are concerned only with the actual composition of the 
central-office groups in 1919 and in 1937 and not with a historical 
description of how the groups developed. 

The emergence of the large-scale multi-unit enterprise is largely a 
phenomenon of the last decade of the nineteenth and of the twentieth 
century. Moreover, the combination movement during this period 
has occurred in waves. The formation of many of these large enter- 
prises must be explained in financial terms, but a complete explana- 
tion must also include consideration of the influences and develop- 
ments of modern technology. Without modern technology large-scale 
production would be impossible. True, many of the developments 
which are commonplace in our industrial life existed in their rudi- 
mentary forms long before they attained the vital role they now 
occupy. Simple devices for the use of steam were known long before 
the improvements of Newcomen and Watt made them an important 
source of power. The uses to which technological developments have 
been put by business enterprises have certainly contributed heavily 
to their improvement and expansion. Furthermore, in the actual 
development, extension, and exploitation of innovations and inven- 
tions, the large research laboratories of many industrial concerns have 
played no small part. 

But the causal forces flow both ways. The large corporation would 
have been impossible without the development of power generation 
on a huge scale. The development of fast and efficient means of com- 
munication and transportation made it possible to coordinate and to 
control the scattered activities of large multi-unit enterprises and to 
distribute their products throughout the world. The standardization 
of parts and the testing of materials which are basic to large-scale 
production are only possible with the development of precision instru- 
ments and laboratory techniques. All these and many other tech- 
nological factors have conditioned the development of the large 
multi-unit enterprises with which this study is concerned. 

The present study is limited to a statistical description of the 
structural aspects of central -office groups and to an analysis of the 
functional relation of the constituent establishments to the entire 
operating unit. The material presented will undoubtedly shed much 
light on the relations of these multi-unit concerns to other aspects of the 
functioning economy, such as price control, extent and effectiveness 
of competition, control of supply, etc,, but a detailed analysis of the 
influence of these relations cannot be followed through in this study. 
The major task here is the less difficult one of picturing in statistical 
terms the manner in which manufacturing activity is organized from 
an operating point of view by this simplest and most obvious type of 
industrial combination— the central-office group. 



CHAPTER II 

EXTENT AND SIGNIFICANCE OF CENTRAL-OFFICE 
OPERATIONS 

There were 5,625 central-office groups active in manufacturing 
during 1937. Of the 166,794 manufacturing establishments operated 
during the year, 25,699 establishments or 15.4 percent of the total 
number were controlled by these central-office groups. Perhaps a 
more revealing indicator of the true significance of central-office 
operation in manufacturing is the fact that in 1937 these 5,625 central 
offices employed '51.1 percent of the total number of wage earners and 
the wages paid by them were 55.3 percent of the total wage bill in 
manufacturing. Furthermore, the value of products of establish- 
ments under central-office control was 61.1 percent of the total value 
of products in manufacturing. 1 In the following sections these 
various measures of the significance of central-office operations will be 
analyzed in terms of the census industry groups in which the central 
offices were active. 

NUMBER OF ESTABLISHMENTS CONTROLLED BY CENTRAL OFFICES 

In tables 1 and 2 the number of central offices active in the various 
census industry groups is shown in detail. For the construction of 
table 1 , all the establishments operated by a central office are classified 
in the industry group in which the central cffice is predominantly 
active as determined by the value of products of the establishments 
under its control. For example, if a central-office group operated 
three establishments in the "ice cream" industry in the food and 
kindred products group, with a total value of products of $150,000, 
one establishment in the "paper box" industry in the paper and allied 
products group with a value of products of $20,000, and one establish- 
ment in the "refrigerators and refrigerating and ice-making apparatus" 
industry in the machinery group with a value of products of $75,000, 
the five establishments controlled by this central office would all be 
arbitrarily assigned to the ice cream industry and, of course, to the 
food and kindred products group. Under this predominant classifica- 
tion, and with the machine methods of calculation used herein, a 
certain distortion in the number of establishments operated by central 
offices in each industry group exists, but an accurate count of the 
number of central offices is afforded. 2 

1 Although data for 1929 and 1937 are not precisely comparable, a comparison of percentages for the two 
census periods affords a measure of the increasing importance of central-office operations. In 1929, about 12 
percent of the total number of manufacturing establishments were operated by central administrative 
offices; these central-office establishments employed 48 percent of all wage earners in manufacturing and 
accounted for 54 percent of the value of all manufactured products. It will be observed that corresponding 
percentages for 1937, shown in the text above, are somewhat higher. (For summary data concerning central- 
office operations in 1929, see "Fifteenth Census of the United States, Manufactures: 1929," vol. I. p. 95) 

2 In the Bureau of the Census each manufacturing establishment as a whole (a single plant was counted as 
two or more establishments in certain cases, as explained in footnote 3, ch. I) was assigned, on the basis of 
its product or group of products of chief value, to some one industry classification. The data for number ot 
establishments, wage earners, wages, cost of material, fuel, etc. , value of products, and value addedjby manu- 
facture for any particular industry cover the total manufacturing activities of establishments classified in 
that industry. This treatment of each establishment as a unit and its assignment to one industry according 
to its product of chief value sometimes result? in overrating the importance of some industries and under- 
rating that of others. 

Ill 



112 



CONCENTRATION OF ECONOMIC POWER 



Distribution of Establishments by Industry Groups} 

An inspection of table 1 and chart 1 reveals the fact that 1,660 or 
29.5 percent of the total number of central-office groups were 
active in the food and kindred products group, and these central 
offices that were classified in this group on the basis of predominant 
activity, as measured by value of products, controlled 9,546 establish- 
ments or 37.1 percent of the total establishments operated by central 
offices. (A comparison of the total number of manufacturing estab- 
lishments in each industry group and the number of central-office 
establishments actually operating in these groups is presented in table 
2.) In the textiles group there were 810 central offices predominantly 
active; they constituted 14.4 percent of the total number of central 
offices and controlled 2,671 establishments or 10 percent of the total 
number of establishments operated by central offices. At the lower 
end of an array, only 30 and 66 central offices were active in the 
rubber products group and in the products of petroleum and coal 
group, respectively, and central offices in these groups operated 115 
and 430 establishments. 



Table 1. — Number of Central Offices and Controlled Establishmeents, by Industry 

Groups, 1937 

[Note.— In this table each central office and all establishments operated by it are classified in the industry 
group in which the central office is predominantly active as measured by its establishments having the 
major value of products] 



Group 
No. 



Industry group 



Central offices 



Num- 
ber 



Per- 
cent 



Establishments 
operated by 
central offices 



Num- 
ber 



Per- 
cent 



Total manufac- 
turing estab- 
lishments 



Num- 
ber 



Per- 
cent 



All industries. 



5. 625 



100.0 



25, 699 



100.0 



166, 794 



100.0 



Food and kindred products 

Textiles and their products 

Forest products 

Paper and allied products 

Printing, publishing, and allied industries ... 

Chemicals and allied products 

Products of petroleum and coal 

Rubber products i 

Leather and its manufactures 

Stone, clay, and glass products 

Iron and steel and their products, not in- 
cluding machinery 

Nonferrous metals and their products 

Machinery, not including transportation 

equipment 

Transportation equipment, air, land, and 

water 

Railroad repair shops ' 

Miscellaneous industries . 



810 
636 
193 
232 
389 
66 
30 
127 
343 

336 
94 

393 

91 

225" 



29.5 

14.4 

11.3 

3.4 

4.1 

6.9 

1.2 

.5 

2.3 

6.1 

6.0 

1.7 

7.0 

1.6 

~~4.~6" 



9,546 

2,671 

2, 305 

886 

817 

2,229 

430 

115 

499 

1,316 

1,620 
394 

1,429 

561 



37.1 
10.4 
9.1 
3.4 
3.2 
8.7 
1.7 
.4 
1.9 
5.1 

6.3 
1.6 

5.6 

2.2 

"~3.T 



48, 727 
20, 616 
18,012 

3,053 
22, 751 

7,419 
675 
478 

3,364 

6,071 

8,345 
5,303 

9,961 

1,942 

16,077" 



29.2 
12.4 
10.8 

1.8 
13.6 

4.4 
.4 
.3 

2.0 

3.6 

5.0 
3.2 

6.0 

1.2 



6.0 



1 This group was abandoned as an industry group in 1937 by the Bureau 6f the Census and will not be car- 
ried in subsequent tables showing industry-group data. 



3 To facilitate the comparison of one broad class of manufacturing industries with another, the industries, 
as constituted for census purposes, were distributed in 1937 into 15 general industry groups. This grouping 
was based in most cases on the character of the principal materials used, but several of the groups were 
constituted on the basis of the purpose or use of the chief products, and two, "printing, publishing, and allied 
industries" and "chemicals and allied products," on the character of the processes employed. It was 
necessary in some cases to include in a particular group certain industries that use considerable quantities of 
materials or manufacture considerable quantities of products ot her than those treated as basic for the group. 
For example: The "furniture, including store and office fixtures" industry, included in the forest products 
group, embraces the manufactu. c of metal as well as of wood furniture. (For a more extended discussion of 
the method of classification used by the Bureau of the Census see "Census of Manufactures, 1937," pp. 5 
and 6.) 



CONCENTRATION OF ECONOMIC POWER 



113 



A complete tabulation of the number of central offices in each in- 
dustry, as contrasted with the industry-group data presented here, 
may be found in appendix A. It must be noted, however, that in 
appendix A a central office is counted in each industry in which it 
operates establishments and that all establishments and data relat- 
ing thereto are shown in the industry in which the establishments are 
actually classified by the Bureau of the Census. Because of the 
duplicate counting, no group totals for the number of central offices 



PERCENT OF TOTAL NUMBER 
10 15 20 25 



FOOD AND KINDRED 
PRODUCTS 



TEXTILES AND 
THEIR PRODUCTS 



FOREST PRODUCTS 



MACHINERY, NOT INCLUDING 
TRANSPORTATION EQUIPMENT 

CHEMICALS AND 
ALLIED PRODUCTS 

STONE, CLAY, AND 
GLASS PRODUCTS' 

IRON AND STEEL AND 
THEIR PRODUCTS, NOT 
INCLUDING MACHINERY 

PRINTING, PUBLISHING, 
AND ALLIED INDUSTRIES 



MISCELLANEOUS INDUSTRIES 



PAPER AND ALLIED 
PRODUCTS 



LEATHER AND ITS 
MANUFACTURES 



NONFERROUS METALS 
AND THEIR PRODUCTS 



TRANSPORTATION EQUIPMENT, 
AIR, LAND, AND WATER 



PRODUCTS OF PETROLEUM 
AND COAL 



RUBBER PRODUCTS 



W////////////////S 



^fy wWMWWA 



myjWjmmt0%r////jm 



^^S^ 






Ha 



v/zm^//////////////////A 



CENTRAL OFFICES 
ESTABLISHMENTS 



CHART 1.— PERCENTAGE OF TOTAL NUMBER OF CENTRAL OFFICES AND CENTRAL- 
OFFICE ESTABLISHMENTS IN EACH INDUSTRY GROUP, 1937. 



are given. From this material, however, it may be seen that in the 
food group more central offices were active in the "manufactured ice," 
the "canned and dried fruits and vegetables," and in the "bread and 
other bakery products" industries than in any of the other industries 
within the group. The establishments controlled by central offices in 
these three industries represented 46 percent of the total number of 
establishments operated by central offices in the food group. 

For purposes of comparison, the number and the percentage dis- 
tribution of all manufacturing establishments among the various in- 
dustry groups are shown in columns 5 and 6 of table 1. Some idea 
may be gained from this table of the relative importance of establish- 

273238— 41— pt. 27 D 



114 



CONCENTRATION OF ECONOMIC POWER 



ments operated by central offices in the various industry groups as 
contrasted with the distribution of all manufacturing establishments. 
For the reasons mentioned above, there is some distortion in this 
table, since all establishments operated by central offices are classi- 
fied in the industry group in which the predominant value of products 
of the central office occurs. 

A more accurate picture of the true significance of central-office 
operations is afforded by the material in table 2 in which the estab- 
lishments operated by central offices are classified in the census in- 
dustry group in which they properly belong. From this table it is 
possible to appraise the extent and distribution of central-office ac- 
tivity throughout the industry groups, but, for the reasons heretofore 
mentioned, the number of central offices in each group is not shown. 
Here, it is apparent that there were 9,267 establishments controlled 
by central offices in the food products group, representing 19 percent 
of the total manufacturing establishments classified in this industry 
group. 

Table 2. — Significance of central-office operations as measured by number of 

establishments, 1987 

Note.— In this table each establishment is classified in the industry in which it is actually classified by the 
Bureau of the Census and not in the industry in which the central office has its major value of products] 



Group 
No. 



Industry group 



Total num- 
ber of man- 
ufacturing 
establish- 
ments 



Establishments 
operated by cen- 
tral offices. 



Number 



Percent 
of total 



All industries ' 

Food and kindred products 

Textiles and their products -_^__- 

Forest products. 

Paper and allied products 

Printing, publishing, and allied industries . 

Chemicals and allied products . 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products 

Iron and steel and their products, not including machinery 

Nonferrous metals and their products 

Machinery, not including transportation equipment 

Transportation equipment, air, land, and water 

Miscellaneous industries 



166, 794 



25, 699 



15.4 



48, 727 

20,616 

18,012 

3,053 

22, 751 

7,419 

675 

478 

3,364 

6,071 

8,345 

5,303 

9,961 

1,942 

10, 077 



9,267 

2,703 

2,516 

960 

905 

2, 348 

326 

110 

503 

1,325 

1,519 

470 

1,435 

459 

853 



19.0 
13.1 
14.0 
31.4 

4.0 
31.6 
48.3 
23.0 
15.0 
21.8 
18.2 

8.9 
14.4 
23.6 

8.5 



The degree to which central-office activity extends across industry 
and industry -group lines is shown in table 3. For example, there were 
1,660 central offices whose predominant activity was in the food group, 
and these central offices controlled 9,546 establishments, although 
only 9,267 establishments were actually operating in the food indus- 
tries. The extent to which establishments were shifted as a result of 
this method of classifying central offices on the basis of predominant 
activity is shown in column 4 of table 3. It may be seen that, by the 
predominant basis of classification, the number of establishments in 
the food group was overstated by 279: On the other hand, there were 
32 more central-office establishments actually operating in the textiles 
group than the predominant method of classifying would indicate. 

As an aside, it may be pointed out here that some light is thrown on 
the extent of interindustry-group integration by this material. It 
would appear from the table that such industry groups as rubber 



CONCENTRATION OF ECONOMIC POWER 



115 



products, leather and its manufactures, stone, clay, and glass products, 
and machinery were more self-contained than the food and textiles 
groups. In the former there were few net additions or subtractions 
to the number of establishments controlled by central offices as 
indicated by the predominant classification. 

The validity of the conclusions which may be drawn from the 
information presented in table 3, however, is subject to limitations. 
The figures in column 4 of this table are net items and represent the 



PRODUCTS OF PETROLEUM 
AND COAL 



CHEMICALS AND 
ALUED PRODUCTS 



PAPER AND /ILL/ED 
PRODUCTS 



TRANSPORTATION EQUIPMENT, 
AIR, LAND, AND WATER 



RUBBER PRODUCTS 

STONE, CLAY, AND 
GLASS PRODUCTS 

FOOD AND KINDRED 
PRODUCTS 

IRON AND STEEL AND 
THEIR PRODUCTS, NOT 
INCLUDING MACHINERY 

ALL INDUSTRIES 

LEATHER AND ITS 
MANUFACTURES 

MACHINERY. NOT INCLUDING 
TRANSPORTATION EQUIPMENT 

FOREST PRODUCTS 

TEXTILES AND 
THEIR PRODUCTS 

NONFERROUS METALS 
AND THEIR PRODUCTS 

MISCELLANEOUS INDUSTRIES 

PRINTING, PUBLISHIHG. 
AND ALLIED INDUSTRIES 



PERCENT 
40 60 



.>-■•■■• ' .- .-..'::.-.,.* 



•■ ik:\T% 



I i , 




OPERATED BY CENTRAL OFFICES 



INDEPENDENT ESTABLISHMENTS 



CHART 2— PERCENTAGE OF TOTAL NUMBER OF ESTABLISHMENTS OPERATED BY 
CENTRAL OFFICES AND BY INDEPENDENTS. BY INDUSTRY GROUPS, 1937. 



differences between the establishments brought to the industry by the 
predominant method of classification and those actually operating in 
the industry that might under the predominant method of classifica- 
tion be counted in an industry in another group. Thus, it might 
happen that while 115 establishments were operated by the 30 central 
offices predominantly active in the rubber products group only 30 of 
the establishments of these central offices would actually be operating 
in the group. It is almost impossible, however, that this extreme 
situation would exist. 



116 



CONCENTRATION OF ECONOMIC POWER 



Table 3. — Extent to which the operations of central offices are confined to the industries 
in which they are predominantly active, by industry groups, 1937 



Group 

JSTo. 



Industry group 



Number of 
central of- 
fices with 
predomi- 
nant activ- 
ity in 
each group 



Number of establishments 



Operated 
by central 

offices 
whose pre- 
dominant 
activity is 
in each 
group 



Whose ac- 
tual oper- 
ations are 
in the 
group 



Net addi- 
tions (+) or 
subtractions 
(— ) in each 

industry 
group arising 
from method 
of classify- 
ing on pre- 
dominant 
basis 



All industries 

Food and kindred products. 

Textiles and their products. 

Forest products 

Paper and allied products 

Printing, publishing, and allied industries. 

Chemicals and allied products 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products 

Iron and steel and their products, not in- 
cluding machinery. 

Nonferrous metals and their products 

Machinery, not including transportation 

equipment 

Transportation equipment, air, land, and 

water -• 

Miscellaneous industries 



,625 



25, 699 



25, 699 



810 
636 
193 
232 
389 
66 
30 
127 
343 

336 
94 

393 

91 
225 



9,546 

2,671 

2,305 

886 

817 

2,229 

430 

115 

499 

1,316 

1,620 
394 

1,429 

561 

881 



9,267 

2,703 

2,516 

960 

905 

2,348 

326 

110 

503 

1,325 

1, 519 

470 

1, 435 

459 

853 



+279 

-32 

-211 

-74 

-88 

-119 

+ 104 

+5 

-4 



+101 
-76 



+ 102 
+28 



A much more accurate and extended analysis of the degree of inter- 
industry integration is presented in the second half of this study. 
It is sufficient at this time to indicate the differences that arise 
from the two methods of classification used in tables 1 and 2. With 
this note of caution, the material presented in table 2 may be analyzed 
in some detail. 

Although considerable variation exists in the extent to winch 
establishments in the different industry groups are controlled by 
central offices, the wide distribution of central offices among the 
various industrial groups is a fair indication of the fact that this form 
of organization is not restricted to any particular industry but is a 
development which extends throughout all manufacturing operations. 

Extent of Control of Establishments by Central Offices, by Industry Groups. 

The greatest control by central offices over the number of active 
establishments was found in the petroleum and coal group. In this 
group 326 establishments or 48.3 percent of the total number of 
establishments were operated by central offices. (See table 2 and chart 
2.) The next highest concentration occurred in the chemical and 
paper groups in which 31.6 and 31.4 percent, respectively, of the 
establishments were operated by central offices. Greater than aver- 
age concentration was present in the transportation group, in the 
rubber products group, in the stone, clay, and glass products group, 
in the food group, and in the iron and steel group. 

The lowest concentration was found in the printing, publishing, and 
allied industries group where only 4 percent of the active establish- 
ments were controlled by central offices. This low percentage may 
be accounted for by the inherent nature of the activities included 
in this industry group. Approximately 80 percent of the establish- 



CONCENTRATION OF ECONOMIC POWER 1X7 

ments were in (1) the job, music, and book printing and publishing 
industry and (2) the newspaper and periodical printing and publish- 
ing industry. In each of these industries the process can hardly be 
considered manufacturing in the ordinary meaning of the word ; thus 
comparisons with other and more strictly manufacturing industries are 
of questionable value. Although there were a few large multi-plant 
units in these industries, the great majority of concerns were under 
local and individual management or were large single-unit enter- 
prises. Low percentage of central-office control was also found in 
the miscellaneous 4 and in the nonferrous metals groups in which 
the ratio of the number of establishments operated by central offices 
to the total number of establishments in the groups was 8.5 and 8.9 
percent, respectively. 

Although central offices were active in all industry groups, there 
were 15 out of the total of 351 industries in which there were no 
establishments controlled by central offices. The names of these 
industries are given in appendix B along with the measures of their 
significance. A mere reading of the names will adequately demon- 
strate the fact that they are of minor importance. It is sufficient at 
this time to point out that these 15 industries accounted for only 0.5 
percent of the total number of establishments, 0.2 percent of the total 
number of wage earners in all manufacturing, and produced only 
0.1 percent of the total value of products. Thus, by all three meas- 
ures, the industries covered by the present study embraced at least 
99.5 percent of all manufacturing activity. Of course, this does not 
mean that all the establishments in these industries were controlled 
by central offices. 

Size of Central-Office Groups — Average Number oj Establishments per 
Central Office. 

The size of central offices may be measured in terms of the number 
of establishments controlled by them. Although size may be meas- 
ured also on the basis of value of products or number of wage earners, 
the number of plants is the best available criterion of the size of 
central-office concerns from the point of view of their structural 
organization. Two central-office companies may differ greatly in 
terms of value of products, or number of wage earners, but if they 
control the same number of establishments, they represent equal 
degrees of combination and, accordingly, may be considered as of 
equal importance in an evaluation of the extent of this form of com- 
bination throughout manufacturing. 5 

In table 4, the average number of establishments controlled by a 
central office in the various industry groups is shown. The most 
extensive control of establishments was in the petroleum and coal 
and in the transportation groups where there was an average of 6.5 
and 6.2 establishments, respectively, per central office. There were 
considerably more than the average number of establishments per 
central office in the food and in the chemical groups. At the other 

* For a list of the industries included in the miscellaneous group, as well as for those industries included in 
other industry groups, see appendix A. 

• Each reporting plant may be viewed as a separate and distinct activity or operation. The fact that 
a plant reports as a distinct operating unit to the Bureau of the Census implies that a separate set of books 
is kept and that different major products are produced. Thus, in the view of the concern itself, these dif- 
ferent operations are distinct units of activity, and the aggregation of these operations under one control is a 
form of combination. In using the term "combination" or "central-office combination" in this study, 
the words should not carry any of the connotations associated with "combinations in restraint of trade". 
These combinations are, in their simplest terms, managerial devices for organizing production. 



118 



CONCENTRATION OF ECONOMIC POWER 



extreme in an array, the central offices in the textile group controlled 
only 3.3 establishments per concern. 

Table 4. — Average number of establishments per central office, by industry groups, 

1937 

[ Note.— In this table each central office and all establishments operated by it are classified in the industry 
group in which the central office is predominantly active as measured by its establishments having the 
major value of products] 



Group 
No. 



Industry group 



All industries ... 

Food and kindred products 

^Textiles and their products 

Forest products 

Paper and allied products. . 

Printing, publishing, and allied industries... 

Chemicals and allied products 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products 

Iron and steel and their products, not including machinery 

i Nonferrous metals and their products 

Machinery, not including transportation equipment 

Transportation equipment, air, land, and water 

Miscellaneous industries 



Central 
offices 



5,625 



1,660 
810 
636 
193 
232 
389 

66 

30 
127 
343 
336 

94 
393 

91 
225 



Establish- 
ments 
operated 
by central 
offices 



25, 699 



9,546 

2,671 

2,305 

886 

817 

2,229 

430 

115 

499 

1,316 

1,620 

394 

1,429 

561 

881 



Average 
number of 
establish- 
ments per 

central 
office 



4.6 



5.8 
3.3 
3.6 
4.6 
3.5 
5.7 
6.5 
3.8 
3.9 
3.8 
4.8 
4.2 
3.6 
6.2 
3.9 



A more adequate and comprehensive analysis of the extent of 
control of establishments by central offices is possible by referring to 
table 5 and chart 3. In this table and chart, the 5,625 central offices 
are distributed according to the number of establishments operated. 
Over half of the central offices operated only 2 establishments while 
about four-fifths of the central offices operated either 2, 3, or 4 estab- 
lishments. At the other extreme in size there were 11 central offices, 
each of which operated 100 or more establishments and 28 central 
offices that operated 50 to 99 establishments. Seven of the central 
offices in the food group, 2 of the central offices in the chemical 
group, and 1 central office in both the forest products and in the iron 
and steel products groups operated more than 100 establishments. 
The distribution appears quite regular with no sudden breaks which 
might indicate a definite point above which central-office operation 
was not feasible. In all industry groups except the petroleum and 
coal group, the heaviest concentration was in the two-establishment 
class. 



CONCENTRATION OF ECONOMIC POWER 



119 



Table 5. — Distribution of central-office companies according to number of establish- 
ments operated, by industry groups, 1987 

[Note.— In this table each central office and all establishments operated by it are classified in the industry 
group in which the central office is predominantly active as measured by its establishments having the 
major value of products] 





Industry group 


Num- 
ber of 
centra] 
offices 


Num- 
ber of 
estab- 
lish- 
ments 
operat- 
ed by 
central 
offices 


Distribution of central offices, by number of 
establishments operated 


6 

a 

3 
O 
t-i 

O 


c* 


•a 

a 

03 
CO 


So 
> 

3 "3 


.2* 

> 

3| 

00 


So 

SI 

CO 


So 

Si 

O 

ri 


3% 
© 

CO 


.So 

2-1 

o 


■a 
a 

O 

► 

o 






Number 




5,625 

1,660 
810 
636 
193 

232 
389 

66 
30 

127 

343 

336 

94 

393 

91 
225 


25,699 

9,546 

2,671 

2,305 

886 

817 
2,229 

430 

115 
499 

1,316 

1,620 

394 

1,429 

561 
881 


2,996 


1,519 


598 


241 


132 


66 


34 


28 


11 




Food and kindred products. .. 
Textiles and their products. .. 




1 

? 


830 

464 

372 

78 

140 
191 

22 
23 

77 

192 

172 

53 

224 

39 
119 


446 
221 
175 
70 

57 
106 

23 

1 

29 

82 

90 
26 
109 

24 

60 


201 
77 
53 
25 

19 
40 

8 
2 
13 

34 

44 

6 

37 

14 

25 


80 
34 
16 
6 

11 
18 

4 
2 
4 

22 

14 

3 

13 

4 
10 


44 
10 
11 
8 

1 
12 

4 
1 
2 

9 

7 

3 

5 

6 
9 


24 
4 
5 
4 

2 
13 

4 

1 

2 

1 

2 

1 

2 
1 


15 


13 


7 


■\ 


2 
2 

2 
3 


1 


1 


4 


Paper and allied products 

Printing, publishing, and al- 




5 






6 
7 


Chemicalsand allied products. 
Products of petroleum and 


4 

1 


2 


8 


Rubber products 




9 
10 


Leather and its manufactures. 
Stone, clay, and glass prod- 


1 
1 

3 

1 

2 

1 
1 


1 

1 

4 




11 


Iron and steel and their prod- 
ucts, not including machin- 


1 


12 


Nonferrous metals and their 




13 
14 


Machinery, not including 

transportation equipment.. 

Transportation equipment, 


2 

1 




If, 


Miscellaneous industries 

All industries 

Food and kindred products. .. 
Textiles and their products... 

Forest products 

Paper and allied products 

Printing, publishing, and al- 
lied industries 












Percentage distribution 




100.0 





53.3 


27.0 


10.6 


4.3 


2.3 


1.2 


0.6 


0.5 


0.2 


1 
2 


100.0 
100.0 
100.0 
100.0 

100.0 

100.0 

100.0 
100.0 
100.0 

100.0 

100.0 

100.0 

100.0 

100.0 
100.0 





50.0 
57.3 
58.5 
40.4 

60.3 

49.1 

33.3 
76.7 
60.6 

56.0 

51.2 

56.4 

57.0 

42.8 
52.9 


26.9 
27.3 
27.5 
36.3 

24.6 

27.3 

34.8 
3.3 

22.8 

23.9 

26.8 

27.6 

27.7 

26.4 
26.7 


12.1 
9.5 
8.3 

13.0 

8.2 

10.3 

12.1 
6.7 

10.2 

9.9 

13.1 

6.4 

9.4 

15.4 
11.1 


4.8 
4.2 
2.5 
3.1 

4.7 

4.6 

6.1 
6.7 
3.2 

6.4 

4.1 

3.2 

3.3 

4.4 
4.5 


2.7 
1.2 
1.7 
4.1 

.4 

3.1 

6.1 
3.3 
1.6 

2.6 

2.1 

3.2 

1.3 

6.6 
4.0 


1.4 
.5 
.8 

2.1 

.9 

3.3 

6.1 
3.3 

.6 

.3' 

2.1 

.3 

2.2 
.4 


.9 


.8 


.4 


3 
4 
5 


• .3 
1.0 

.9 

.8 


.2 


.2 


6 


Chemicals and allied prod- 


1.0 
1.5 


.5 


7 


Products of petroleum and 




s 


Rubber products.- 




9 
10 

11 
12 


Leather and its manufactures. 

Stone, clay, and glass prod- 
ucts . 

Iron and steel and their prod- 
ucts, not including machin- 
ery 

Nonferrous metals and their 


.8 
.3 

.9 
1.1 

.5 

1.1 
.4 


.8 
.3 

1.2 


.3 


13 
14 
16 


Machinery, not including 
transportation equipment.. 

Transportation equipment, 
air, land, and water 

Miscellaneous industries 


.5 
1.1 






120 



CONCENTRATION OF ECONOMIC POWER 



ALL INDUSTRIES 



FOOD AND KINDRED 
PRODUCTS 



TEXTILES AID 
THEIR PRODUCTS 



FOREST PRODUCTS 



PAPER AND ALLIED 
PRODUCTS 



PRINTING, PUBLISHING, 
AND ALLIED INDUSTRIES 



CHEMICALS AND 
ALLIED PRODUCTS 



PRODUCTS Of PETROLEUM 
AND COAL 



RUBBER PRODUCTS 



LEATHER AND ITS 
MANUFACTURES 



STONE, CLAY, AND' 
GLASS PRODUCTS 



IRON AND STEEL AND 
THEIR PRODUCTS, NOT 
INCLUDING MACHINERY 



NONFtRROUS METALS 
AND THEIR PRODUCTS 



MACHINERY, NOT INCLUDING 
TRANSPORTATION EQUIPMENT 



TRANSPORTATION EQUIPMENT, 
AIR, LAND, AND WATER 



MISCELLANEOUS INDUSTRIES 




CHART 3— PERCENTAGE DISTRIBUTION OF CENTRAL-OFFICE COMPANIES ACCORD- 
ING TO NUMBER OF ESTABLISHMENTS OPERATED, BY INDUSTRY GROUPS, 1937. 



CONCENTRATION OF ECONOMIC POWER 121 

The factors conditioning the development of central-office concerns 
with a large number of establishments appear more favorable in 
certain industry groups than in others. There seems to be some 
prima facie evidence that there are potent limiting factors in some of 
the industry groups on the number of establishments which may be 
economically operated under a single central-office control. For 
example, 77 percent of the central offices in the rubber products 
group operated only 2 establishments. The high concentration in 
the 2-establishment classification in the rubber group is accounted 
for by the large number of 2-establishment central offices in the 
"rubber goods, other than tires, tubes, boots and shoes" industry. 
The chief products of this industry are rubber belting and hose, 
rubberized fabrics, druggists' and stationers' sundries, rubber mats, 
hard-rubber goods, rubber heels and soles, etc. Of the 30 central 
offices in the rubber group, 22 were classified in this industry, which 
is one of three industries in the group. 6 Of these 22 there were 19 
central offices which operated only 2 establishments. At the other 
end of the distribution, almost 20 percent of the central offices in the 
petroleum and coal group operated 8 or more establishments, while 
less than 6 percent of the central offices in the forest products and 
the machinery groups operated 8 or more establishments. 

To summarize, central-office groups active in manufacturing 
usually operate a small number of establishments — the average in 
1937 was 4.6 establishments per central office. According to Dr. 
Thorp's study, 7 the average central office in 1919 controlled 3.68 
establishments. About half of the centraroffices in the present study 
operated only two establishments each, but a considerable number of 
central offices operated many establishments. In fact, one oentral 
office operated 497 and another 373 establishments. Organizations 
in which many establishments were brought together were relatively 
most frequent in the petroleum and coal group. In general, the 
factors that are conducive to the aggregation under one control of a 
large number of units appear to be present in some industry groups 
to a much greater extent than in others. 

Diversity of Central-Office Operations. 

The analysis of the size of central offices as measured by the number 
of establishments which they operated raises another question about 
the nature of these central-office organizations: To what extent were 
central-office groups active in more than one industry? Do central- 
office groups tend to become specialized in one line of activity oper- 
ating several establishments in similar lines, or are the establish- 
ments operated by central offices spread over different industries and 
industry groups? An over-all picture of the interindustry activities 
of central offices is presented in the following discussion, while in a 
later chapter the results of a detailed analysis of the structure of each 
central-office group are made available. There, each central office was 
classified on the basis of the structural form taken by the establish- 
ments in each group. The analysis here is limited to a tabulation 
of the distribution of central offices in terms of the number of in- 
dustries in which they operated establishments. 

Of the 5,625 central offices active in manufacturing during 1937, 
there were 3,574 central offices, or 63.5 percent, which operated 

9 The other two industries included in the rubber products group are rubber boots and shoes and rubber 
tires and inner tubes. 
7 See "The Integration Of Industrial Operation." p. 113. 



122 CONCENTRATION OF ECONOMIC POWER 

establishments in only one manufacturing industry, according to 
the data presented in table 6 and chart 4. These 3,574 central 
offices operated 11,321 establishments or 44 percent of all central- 
office-operated establishments. On the average, the one-industry 
combinations operated 3.2 establishments per central office which is 
about two-thirds the size (number of establishments) of the average 
central office in all manufacturing. (See table 4 above.) 

In the stone, clay, and glass products group, in the food group, and 
in the printing and publishing group more than 70 percent of the num- 
ber of centTal offices active were of this one-industry type. As 
contrasted with this situation, the transportation group and the paper 
group were characterized by a relatively low concentration of central 
offices in this one-industry category — 42 and 43 percent, respectively. 
Although there was wide dispersion in the relative proportion of 
central offices in each industry group that were in this one-industry 
classification, it should be noted that this was the typical category. 
In each industry group a larger number of central offices were of the 
one-industry type than of any other. Organizations of this simple 
or one-industry type will be examined in greater detail in a later 
chapter when the structural form of central offices is the subject for 
analysis. It might be pointed out here, however, that these simple 
central offices are classified structurally as horizontally integrated 
companies. 

While the one-industry type of central office was predominant in 
each industry group, the central offices in certain groups tended to 
be active in many industries. There were no central offices in the 
printing and publishing group active in more than 5 industries, while 
central offices in 2 groups, the forest products and the miscellaneous 
industries groups, operated establishments in no more than 9 census 
industries. This situation is undoubtedly conditioned in part by the 
relatively small number of industries included in these industry groups 
as well as by the diverse nature of the activities of the constituent 
industries. In contrast, there was one concern in the food group that 
operated establishments which were classified in 25 census industries. 
This widely spread type of company is, of course, not typical. In all 
manufacturing, there were only 34 central offices that operated in 10 
or more industries. 

It should be noted, however, that these central offices, though few 
in number, accounted for a high proportion of the number of estab- 
lishments. For example, in the transportation group, two concerns, 
or 2.2 percent of the central offices in the group, operated establish- 
ments in 15 or more industries and controlled almost one-fourth of 
the establishments in the group. Or again, in the petroleum and coal 
group, 3 concerns, or 4.5 percent of the central offices in the group, 
operated 123 establishments, or 28.6 percent of the total establish- 
ments classified in the group. Furthermore, the 34 concerns men- 
tioned above that operated in 10 or more industries controlled more 
than 10 percent of the total number of central-office controlled estab- 
lishments. In terms of the value of products, the percent of the total 
controlled by these concerns would very likely have been even larger 
than the control in terms of establishments. That material may not 
be presented here, however, because of its confidential nature. Other 
measures of the significance of large central-office combinations are 
presented in part VI of this stud} T . 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



125 



PERCENT 
40 60 



ALL INDUSTRIES 



FOOD AND XINORED 
PRODUCTS 



TEXTILES AMD 
THEIR PRODUCTS 



FOREST PRODUCTS 



PAPER AMD ALLIED 
PRODUCTS 



PRINTING, PUBLISHING, 
AND ALLIED INDUSTRIES 



CHEMICALS AND 
ALLIED PRODUCTS 



PRODUCTS Of PETROLEUM 
AMD COAL 



ROBBER PRODUCTS 



LEATHER AND ITS 
MANUFACTURES 



STONE, CLAY, AMD 
GLASS PRODUCTS 



IRON AND STEEL AND 
THEIR PRODUCTS, NOT 
INCLUDING MACHINERY 



AONFERROUS METALS 
AND THEIR PRODUCTS 



MACHINERY, NOT INCLUDING 
TRANSPORTATION E0UIPNEK1 



TRANSPORTATION EQUIPMENT, 
AIR, LAND, AND WATER 



MISCELLANEOUS INDUSTRIES 




CHART 4.— PERCENTAGE DISTRIBUTION OF CENTRAL-OFFICE COMPANIES ACCORD- 
ING TO NUMBER OF MANUFACTURING INDUSTRIES IN WHICH ESTABLISHMENTS 
ARE OPERATED, BY INDUSTRY GROUPS, 1937. 



126 CONCENTRATION OF ECONOMIC PO\^ER 

WAGE EARNERS AND WAGES PAID IN ESTABLISHMENTS CONTROLLED BY 

CENTRAL OFFICES 

The material relative to the size of central-office companies and 
the data on the areas within which central-office operations are par- 
ticularly concentrated throw much light on the instances and places 
where central offices are active. Data in this form, however, are not 
especially revealing of the extent or degree of control over employ- 
ment opportunities, or over the supply of. commodities on the market 
which these central-office companies command. For information 
bearing on these latter phases of the problems of combinations, it 
is necessary to turn to other measures of significance of central-office 
operation. 

Manufacturing establishments controlled by central offices em- 
ployed 4,380,123 wage earners 8 in 1937, or 51.1 percent of the total 
number of wage earners employed in all manufacturing establish- 
ments during that year. (See table 7.) Wages paid these workers 
in establishments controlled by central offices amounted to $5,595,- 
087,000 or 55.3 percent of the total wage bill in all manufacturing 
establishments. It should be noted that in table 7 and in the follow- 
ing tables throughout this chapter the operating data are shown in 
the industry group in which the establishments were actually operat- 
ing and not in the group in which the central office was predominantly 
active as determined by the value of products of the establishments 
under its control. 

Distribution of Wage Earners Among Industry Groups. 

The importance of central-office operations as measured by wage 
earners employed and wages paid varied greatly from one industry 
group to another. Establishments controlled by central offices in the 
petroleum and coal group employed 90 percent of the total number 
of wage earners in that group and the wages paid in the establishments 
controlled by these enterprises amounted to 91 percent of the wage 
bill in the group. Considerably more than average concentration 
was also present in the transportation, the chemicals, the rubber 
products, and the iron and steel groups. At the other extreme, only 
21 percent of the wage earners in the printing and publishing group 
were employed in establishments controlled by central offices. Low 
concentration in central-office establishments was also shown in the 
forest products and the miscellaneous industries groups. 

8 Wage earners were defined by the Bureau of the Census as all time and piece workers employed in the 
plant (including the power plant and maintenance, shipping, warehousing, and other departments). 
Working foremen and "gang and straw bosses" were treated as wage earners, but foremen whose duties were 
primarily supervisory were classed as supervisory employees. The questionnaires called for the number 
of wage earners on the pay rolls for the week that ended nearest the 15th day of each month, if that was a 
normal week, or for some normal week in the month. The average for the year exceeds somewhat the num- 
ber that would have been required for the work performed if all had been continuously employed throughout 
the year, because it is impracticable to take into account the extent to which some or all of the wage earners 
may have been on part-time or for some other reason may not actually have worked on a full-time basis 
during the entire week covered by the entry for a given month. Moreover, in cases in which a plant was in 
operation during only a part of a month, the number of wage earners reported for the week selected would 
almost certainly be above the average for the month. 

The "wages paid" item represents the total amount paid to wage earners during the year, including 
amounts deducted for social-security purposes. The quotient obtained by dividing the amount of wages 
(the total amount paid to wage earners during the year) by the average number of wage earners should not, 
therefore, be accepted as representing the average wage received by full-time wage earners. (For a more 
extended discussion of the method of classification used by the Bureau of the Census see "Census of Manu- 
factures, 1937," pp. 7 and 8.) 



CONCENTRATION OF ECONOMIC POWER 



127 



Table 7. — Significance of central-office operations as measured by number of wage 
earners employed and wages paid, 1937 

[Note.— In this table data are shown in the industry group in which the establishments are classified by the 
Bureau of the Census and not in the group in which the central office has its major value of products] 



Group 
No. 



Industry group 



Wage earners (average for 
the year) 



Total 



In establishments 
operated by cen- 
tral offices 



Number Percent 



Wages paid (thousand 
dollars) 



Total 



In establishments 
operated by cen- 
tral offices 



Amount Percent 



All industries - 

Food and kindred products 

Textiles and their products 

Forest products 

Paper and allied products 

Printing, publishing, and allied in- 
dustries 

Chemicals and allied products 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products 

Iron and steel and their products, 

not including machinery 

Nonferrous metals and their prod- 
ucts -.. 

Machinery, not including .trans- 
portation equipment ... 

Transportation equipment, air, 

land, and water , 

Miscellaneous industries 



8, 569, 231 



4, 380, 123 



51.1 



10,112,883 



5, 595, 087 



55.3 



888, 298 

1, 814, 387 

694, 341 

264, 455 

353, 108 
314,520 
106, 473 
129, 818 
331,955 
300, 278 

1,166,287 

270, 327 

955, 975 

623, 845 
355, 164 



425, 187 
745, 883 
231, 879 
145, 560 

74, 290 
224, 802 
95, 774 
88, 531 
144, 559 
163, 108 

745, 873 

132, 862 



497, 238 
144, 145 



47.9 
41.1 
33.4 
55.0 

21.0 

71.5 
90.0 
68.2 
43.5 
54.3 

64.0 

49.1 



79.7 
40.6 



977, 776 

1, 549, 559 

636, 724 

307, 270 

532, 985 
381,405 
176, 904 
171,305 
311,293 
348, 521 

1,661,045 

349, 276 

1,375,506 

967, 231 
366, 083 



491, 540 
621, 179 
226, 118 
178, 597 

127,361 
285, 714 
161, 437 
125, 268 
140, 390 
202, 057 

1,132,501 

182, 557 

779,617 

789, 585 
151,066 



50.3 
40.1 
35.5 
58.1 

23.9 
74.9 
91.3 
73.1 
45.1 
58.0 

68.2 

52.3 

56.7 

81.6 
41.3 



Average Number of Wage Earners Per Central-Office Establishment. 

It is interesting to note at this point that central-office companies 
controlled 15.4 percent of the total number of manufacturing estab- 
lishments (see table 2), while these controlled establishments em- 
ployed 51.1 percent of the total number of wage earners in manufac- 
turing. Thus, it is evident that the establishments operated by central 
offices were considerably larger in size (as measured by wage earners 
employed) than independent establishments. On the average, there 
were 170 wage earners per central-office establishment or almost 6 
times the 30 workers per independent establishment. (See table 8.) 
The average employment in the central-office establishments in the 
transportation group was almost 13 times that in the independent 
establishments in this same group and the number of wage earners in 
the nonferrous metals and the petroleum and coal groups was 10 times 
that in independent establishments in these groups. 

At the other extreme, the number of wage earners per central- 
office establishment in the paper and in the forest products groups 
was only about three times as great as that in independent establish- 
ments. Thus, there appears to be a wide spread in the degree to 
w r hich establishments controlled by central offices are larger than non- 
central-office establishments within any group. Furthermore, there 
is an equally great spread in the size of establishments as measured 
by the number of wage earners when the comparison is between 
establishments in one industry group and those in another. The 
average size of establishments controlled by central offices in the 
transportation group was 13 times as large as the average in the print- 
ing and publishing group, w r hile among non-central-office establishments 



128 



CONCENTRATION OP ECONOMIC POWER 



the average employment in the rubber products group was 9 times 
the average in the food products group. 

Table 8. — Average number of wage earners in establishments operated by central 
offices and in independently operated establishments, 1937 

[Note.— In this table data are shown in the industry group in which the establishments are classified by 
the Bureau of the Census and not in the group in which the central office has its major value of products] 



Group 
No. 



Industry group 



Establishments operated by 
central offices 



Wage 

earners 

(average 

for the 

year) 



Number 
of estab- 
lish- 
ments 



Average 
number 
of wage 
earners 
per estab- 
lishment 



Establishments not operated 
by central offices 



Wage 

earners 

(average 

for the 

year) 



Number 
of estab- 
lish- 
ments 



Average 
number 
of wage 
earners 
per estab- 
lishment 



All industries 

Food and kindred products. . . 

Textiles and their products 

Forest products 

Paper and allied products 

Printing, publishing, and 

allied industries 

Chemicals and allied products 
Products of petroleum and 

coal 

Rubber products 

Leather and its manufactures 
Stone, clay, and glass products 
Iron and steel and their prod- 
ucts, not including machin- 
ery 

Nonferrous metals and their 

products 

Machinery, not including 

transportation equipment- _. 

Transportation equipment, 

air, land, and water 

Miscellaneous industries 



4, 380, 123 



25, 699 



170 



4, 189, 108 



141,095 



425, 187 
745, 883 
231, 879 
145, 560 

74,290 
224, 802 

95, 774 
88, 531 
144, 559 
163, 108 



745, 873 

132, 862 

520, 432 

497, 238 
144, 145 



9,267 

2,703 

2,516 

960 

905 
2,348 

326 

110 

503 

1,325 



1,519 

470 

1,435 

459 

853 



46 
276 

92 
152 

82 
96 

294 
805 
287 
123 



491 

283 

363 

1,083 
169 



463,111 

1, 068, 504 

462, 462 

118,895 

278,818 
89, 718 

10, 699 
41, 287 
187, 396 
137, 170 



420, 414 

137, 465 

435, 543 

126, 607 
211,019 



39, 460 
17,913 
15, 496 
2,093 

21, 846 
5,071 

349 

368 

2,861 

4,746 



6,826 

4,833 

8,526 

1,483 
9,224 



12 
60 
30 

57 

13 

18 

31 
112 
66 
29 



62 

28 

51 

85 
23 



A comparison of the average number of wage earners per central- 
office establishment and per independent establishment is shown 
graphically in chart 5. 

Wages Paid and Average Wage Payment per Worker. 

In table 7 it may be seen that 55.3 percent of the total wages paid 
in all manufacturing was paid in establishments controlled by central 
offices. The proportion which wages paid in central-office establish- 
ments bears to the total wage bill of all establishments in the various 
industry groups is, of course, very closely correlated with the percent- 
age which wage earners in central-office establishments represent of 
the total wage earners in each group. 

This wage material is broken down by industry groups in table 9 
and chart 6 to show the average wage payment per wage earner in 
the central-officf establishments and in the independent establish- 
ments. For interindustry-group comparisons, certain limitations on 
the data should be kept in mind. In industries and industry groups 
where employment is sporadic, intermittent, or of a highly seasonal 
nature, the average will be lower than in industries or industry 
groups where employment is continuous, although the wage rate may 
be similar. The schedules call for the number of wage earners on the 
pay roll in the week ending nearest the middle of each month, and 



CONCENTRATION OF ECONOMIC POWER 



129 



these 12 monthly figures are averaged to give the data used in these 
tables. The material on wages paid represents the actual amount 
paid in wages during the year. A part-time or intermittent worker 
would thus be counted in the average number of wage earners if he 
should happen to be on the pay roll of a reporting concern for a few 
days at any one of the 12 periods near the middle of the month when 
the count is taken, although the wages paid the individual would be 



TRAHSPORTATION EQUIPMENT, 
AIR, LAND. AMD WATER 

RUBBER PRODUCTS 


AVERAGE NUMBER OF WAGE EARNERS 
20O 4O0 600 BOO IOOO 


mmimm 




















^^^i^ 




















zv^^^ 














IRON ANO STEEL AND 
THEHt PRODUCTS, MOT 
INCLUDING MACHIHERY 

MACHINERY, NOT INCLUDING 
TRANSPORTATION EQUIPMENT 




















































AND COAL 
























LEATHER AND ITS 
MANUFACTURES 
























AND THEIR PRODUCTS 














TEXTILES ANO 
THEIR PRODUCTS 














ALL INDUSTRIES 














MISCELLANEOUS INDUSTRIES 














PAPER AND ALLIED 
PRODUCTS 


^r^ 


■a 






^_ ESTABLISHMENTS OPfPATED BY 
^™ CENTRAL OFFICES 




STONE, CLAY, AND 
GLASS PRODUCTS 










mm ESTABLISHMENTS NOT OPERATED 
Kizia BY CFNTRAL OFFICFS 




CHEMICALS AND 
ALLIED PRODUCTS 














FOREST PRODUCTS 


f- 












PRINTING, PUBLISHING, 
ANO ALLIED INDUSTRIES 














FOOD AND KINDRED 
PRODUCTS 


F 






















- - ■ tesbi** 



CHART 5— AVERAGE NUMBER OF WAGE EARNERS IN ESTABLISHMENTS OPERATED 
BY CENTRAL OFFICES AND IN INDEPENDENTLY OPERATED ESTABLISHMENTS, BY 
INDUSTRY GROUPS, 1937. 

for only these few days of work. In industries and industry groups 
where casual labor is common, there is a considerable amount of this 
type of counting that would tend to reduce the average wage paid per 
worker. For this reason the material in table 9 should not be viewed 
as an annual rate. If the data were put on a full-time equivalent 
basis or if wage-hour data were assembled, it would be possible to 
make interindustry comparisons in terms of rates. 



273238— 41— pt. 27 10 



130 



CONCENTRATION OF ECONOMIC POWER 



Table 9. — Wages paid per wage earner in establishments operated by central 
offices and in independently operated establishments, 19S7 

[Note. — In this table data are shown in the industry group in which the establishments are classified 
by the Bureau of the Census and not in the group in which the central office has its major value of 
products] 



Group 

No. 



Industry group 



Establishments operated by 
central offices 



Wages 

paid 

(thousand 

dollars) 



earners 

(average 

for the 

year) 



paid per 
wage 
earner 

(dollars) 



Establishments not operated 
by central offices 



Wages 

paid 

(thousand 

dollars) 



earners 

(average 

for the 

year) 



Wages 

paid per 

wage 

earner 

(dollars) 



All industries 

Food and kindred products _ . 
Textiles and their products. ... 

Forest products 

Paper and allied products 

Printing, publishing, and al- 
lied industries 

Chemicals and allied products 
Products of petroleum and 

coal. 

Rubber products 

Leather and its manufactures 
Stone, clay, and glass products 
Iron and steel and their prod- 
ucts, not including machin- 
ery 

Nonferrous metals and then- 
products 

Machinery, not including 

transportation equipment. . 

Transportation equipment, 

air, land, and water 

Miscellaneous industries 



5,595,087 



4, 380, 123 



1,277 



4, 517, 796 



4, 189, 108 



1,078 



491, 540 
621, 179 
226, 118 
178, 597 

127,361 
285, 714 

161, 437 
125, 268 
140,390 
202, 057 



1,132,501 

182, 557 

779, 617 

789; 685 
151, oe8 



425, 187 
745, 883 
231, 879 
145, 560 

74,290 
224, 802 

95, 774 
88, 531 
144, 559 
163, 108 



745, 873 

132, 862 

520,432 

497, 238 
144, 145 



1,156 
833 
975 

1,227 

1,714 
1,271 

1,686 

1,415 

971 

1,239 



1,518 

1,374 

1,498 

1,588 
1,048 



486, 236 
928, 380 
410, 606 
128, 673 

405, 624 
95, 691 

15, 467 
46, 037 
170, 903 
146, 464 



528,544 

166, 719 

595, 889 

177, 546 
215,017 



463, 111 

1, 068, 504 

462, 462 

118,895 

278, 818 
89, 718 

10, 699 
41,287 
187, 396 
137, 170 



420, 414 

137, 465 

435, 543 

126,607 
211,019 



1,050 
869 
888 

1,082 

1,455 
1,067 

1,446 

1,115 

912 

1,068 



1,257 

1,213 

1,368 

1,402 
1,019 



In addition to the limitations on interindustry-group wage com- 
parisons cited above, there are other possible factors responsible for 
wage differences, several of which deserve special comment. In 
the first place the geographical area in which the concerns operating 
in the industry group are predominantly active, or the localization 
of the industry, may be such that different wage levels prevail. 
Certain industries tend to be centered in well-defined areas in response 
to various location economies. Th^se advantages as well as such 
factors as cost of living, degree of urbanization, availability of workers, 
etc., are quite -significant in the determination of wage rates. In the 
second place, average wage levels vary with the degrees of mechaniza- 
tion of industries. In the more highly mechanized lines the skilled 
workman has been supplanted in considerable measure by modern 
machine techniques. As a consequence of this development, the 
proportion of unskilled workers in the total labor requirements of 
such industries has increased; this situation must, of course, be taken 
into account when making wage comparisons among different indus- 
tries. Finally, wage rates in different industries vary directly with 
the degree to which labor is organized. The drive toward organiza- 
tion has made more rapid progress in certain industries than in 
others. While the existence of strong unions is undoubtedly reflected 
in wage levels, the possibility that organized workers may receive 
higher wages than unorganized workers is contingent upon the general 
degree of prosperity in an industry as well as upon the available 
labor supply. 



CONCENTRATION OF ECONOMIC POWER 



131 



These limitations on interindustry -group comparisons do not apply- 
to so great an extent to comparisons between average wages paid per 
worker in central-office establishments and in independent establish- 
ments when the comparisons are within one industry group. Com- 
parisons of average wages paid* per worker in central-office establish- 
ments and in independent establishments are fairly reliable when 
confined to a single industry group because (1) there is no a priori 
reason to assure that labor turnover is less in central-office establish- 




CHART 6.— AVERAGE WAGE PAID PER WAGE EARNER IN ESTABLISHMENTS OPERATED 
BY CENTRAL OFFICES AND IN INDEPENDENTLY OPERATED ESTABLISHMENTS BY 
INDUSTRY GROUPS, 1937. 

ments than in non-central-office establishments, since the effective 
physical forces that condition each industry and the management 
devices for spreading work over the season or for reducing the casual- 
ness of labor tend to be common to all establishments, and (2) central- 
office establishments are not concentrated in the industries within 
industry groups that have low labor turnover to a degree that would 
impose any serious limitations on the general conclusions that may 
be drawn from the table. On the contrary, central-office establish- 
ments are operated in all industries with the exception of those minor 
cases noted in appendix B. 



132 CONCENTRATION OF ECONOMIC POWER 

With the exception of the textile group, the average of the wages 
paid per wage earner was greater in establishments operated by 
central offices than in independent units. In the rubber products 
group the excess ran as high as 27 percent, while in the miscellaneous 
industries group it was only 3 percent. 

COST OF MATERIALS AND VALUE OF PRODUCTS OF ESTABLISHMENTS 
CONTROLLED BY CENTRAL OFFICES 

The cost of materials 9 used in establishments controlled by central 
offices represented 65.1 percent of the costs of all materials used in 
manufacturing establishments in 1937, while the value of products 10 
manufactured in central-office establishments was 61.1 percent of the 
total value of all manufacturing production. (See table 10.) The 
value added by manufacture " in the establishments controlled by 
central offices was 56 percent of the total value added in all manu- 
facturing. (The value added by central offices is analyzed in more 
detail later.) Owing to the double counting that occurs as goods go 
through successive stages of manufacturing, the "value added by 
manufacture" figure is a more accurate measure of the net contribu- 
tion of manufacturing operations to the national product. If one is 
interested in measuring the significance marketwise of a company 
or group of companies, however, the value of products figure is 
more revealing, since . the control of supply in the market is best 
measured by the value of products. Both a vertically integrated and 
a non-integrated concern may have equal value of products and thus 
may be equally significant in the market, but the value added by the 

' Cost of materials includes materials, supplies, and containers, fuel, purchased electric energy, and con- 
tract work. A separate entry was made for each of these items but they were all added together to arrive 
at a total cost of materials, etc., to be deducted from value of products to obtain value added by manufacture. 
The cost of fuel covers coal, fuel oil, gasoline, etc., used for power purposes, for heating buildings, and for 
smelting and other forms of industrial heating, but does not cover the cost of coal and oil used as materials 
in the manufacture of gas and coke. (For a more extended discussion of the method of classification used 
by the Bureau of the Census, see "Census of Manufactures, 1937," p. 8.) 

10 The amounts included under value of products are the selling values at the factory or plant of all com- 
modities produced (or, for some industries, receipts for work done) during the census year, whether sold- 
transferred to other plants, or in stock, and consequently, under- normal conditions, the total value of prod, 
ucts covers the cost or production (including overhead expenses) and profits. It also covers selling expenses 
except in cases where separate sales departments were operated, in which cases the values at which the 
products were turned over to the sales departments were reported. The value of products manufactured, 
as given in the census reports, is, of course, the total of fhe actual values reported by the manufacturers 
themselves and not the result of computations made by the Bureau of the Census. 

Some establishments make partly finished products, or containers and auxiliary articles, for the use of 
other manufacturing establishments under the same ownership. For example: A blast furnace may pro- 
duce pig iron for use in the production of steel in plants under the same ownership. In such cases, the 
"transfer value" assigned by the manufacturer is accepted as the value of the product in question. This 
transfer value is usually based on market prices or on the cost of manufacture, but sometimes it is purely 
arbitrary. The products made by the establishments in a given industry, on the one hand, usually include 
minor products different from those covered by the industry designation, and, on the other hand, may not 
include the entire output of products normally belonging to the industry, because some of this class of com- 
modities may be made as secondary products by establishments classified in other industries. In the case 
of each industry, the value of the minor or secondary products normally belonging to it is offset to a greater 
or a less extent by that of commodities normally belonging to it but made as secondary products by estab- 
lishments engaged primarily in other lines of manufacture. In most cases, therefore, the total value of the 
products of an industry, as reported, does not differ greatly from the value of the total output, in all indus- 
tries, of the classes of products covered by the industry designation. (For a more extended discussion of 
the method of classification used by the Bureau of the Census, see "Census of Manufactures, 1937," pp. 
8 and 9.) 

ii The value of products is not a satisfactory mea$ure of the importance of a given industry, because only 
a part of this value is actually created within the industry, another part, and often a much larger one, being 
contributed by the value of the materials used. For some purposes, the most satisfactory measure is the 
"value added by manufacture" — that is, the increment in value, as measured by the price of goods produced 
and of materials processed. This measures the net addition to the value of commodities, and is almost 
free from the duplication that is a factor in the total value of products. It is calculated for all industries by 
subtracting the cogt of materials, supplies, containers, fuel, purchased electric energy, and contract work 
from the value of products. In comparing manufacturing industries with one another the relation between 
the value of finished products and the cost of materials should be kept constantly in mind. The products 
of one industry may be valuea at the same amount as those of another, but the one may have added several 
times as much value to the materials as the other, and may therefore have been of correspondingly greater 
economic inportance. (For a more extended discussion of the method of classification used by the Bureau 
of the Census, see "Census of Manufactures, 1937," pp. 10 and 11.) 



CONCENTRATION OF ECONOMIC POWER 



133 



vertically integrated concern will be much larger as more of the stages 
of manufacturing or processing of a commodity toward the final 
finished goods are counted in the total for that concern than for the non- 
integrated one. 

Table 10. — Significance of central-office operations as measured by cost of materials 
used and value of products, 1937 

[Note. — In this table data are shown in the industry group in which the establishments are classified by 
the Bureau of the Census and not in the group in which the central office has its major value of products] 



Group 
No. 



Industry group 



Cost of materials, etc., and 
contract work (thousand 
dollars) 



Total 



In establishments 
operated by 
central offices 



Amount Percent 



Value of products 
(thousand dollars) 



Total 



In establishments 
operated by 
central offices 



Amount "Percent 



All industries 

Food and kindred products 

Textiles and their products 

Forest products . .-. 

Paper and allied products 

Printing, publishing, and allied 

industries 

Chemicals and allied products.. 
Products of petroleum and coal. 

Rubber products 

Leather and its manufactures.. 
Stone, clay, and glass products. 
Iron and steel and their products, 

not including machinery 

Nonferrous metals and their 

products 

Machinery, not including tr? i s- 

portation equipment 

Transportation equipment, air, 

land, and water 

Miscellaneous industries 



35, 539, 333 



23, 131, 821 



65.1 



60, 712, 872 



37, 106, 858 



61.1 



7,911,368 
4, 089, 124 
1, 173, 931 

1, 208, 154 

793, 092 
1,927,948 

2, 366, 802 
514, 260 
899, 469 
523, 112 

4, 047, 687 

1, 926, 526 

2, 424, 495 

4, 099, 756 
1, 633, 610 



4, 636, 009 

1, 629, 750 

454, 851 

748, 417 

182,909 
1, 382, 172 
2, 132, 174 
391, 514 
451, 478 
336, 953 

3, 104, 995 

1, 497, 672 

1,408,592 

3, 699, 693 
1, 074, 642 



58.6 
39.9 
38.7 
61.9 

23.1 
71.7 
90.1 
76.1 
50.2 
64.4 

76.7 

77.7 

58.1 

90.2 

65.8 



11,265,610 
7,061,609 
2, 439, 530 
2, 060, 849 

2, 585, 699 
3, 721, 531 
2, 954, 465 
883,033 
1,491,513 

1, 395, 858 

7, 480, 360 

2, 783, 285 

5, 891, 599 

5, 985, 889 
2,712,042 



6,390,431 

2, 791, 107 

901,829 

1, 258, 838 

609,040 

2, 642, 664 
2,641,392 

653, 555 
721, 195 



5, 431, 569 

1,960,150 

3, 356, 470 

5, 247, 030 
1,612,490 



56.7 
39.5 
37.0 
61.1 

23.6 
71.0 
89.4 
74.0 
48.4 
63.7 

72.6 

70.4 

57.0 

87.7 
59.5 



Value of Products Manufactured in Establishments Controlled by Central 

Offices. 

The proportion of the total value of products manufactured in 
establishments controlled by central offices in the various industry 
groups is shown in table 10. Almost 90 percent of the value of prod- 
ucts in the petroleum and coal group and 88 percent in the transporta- 
tion group were produced in establishments controlled by central 
offices. The proportions of the total value of products accounted for 
by central-office establishments in the nonferrous metals, the iron and 
steel, the chemical, and the rubber products groups were closely 
clustered between 70 and 74 percent. At the other extreme, the con- 
tribution of central-office establishments to the total value of products 
of the printing and publishing group was only 24 percent, while decid- 
edly less than average contributions were also recorded by the central- 
office establishments in the forest products and in the textile groups — ■ 
37 and 40 percent of the totals for the groups, respectively. 

Thus, in terms of value of products, the establishments operated by 
central-office enterprises, controlled approximately nine-tenths of 
the supply of the products of the petroleum and coal and of the 
transportation groups. This fact alone affords no a priori basis for 
assuming any lack of competition. Quite the contrary, intense com- 
petition may be present among the central-office companies active 



134 



CONCENTRATION OF ECONOMIC POWER 



in the groups. Referring to the material in table 1, it may be seen 
that 66 central offices were predominantly active in the petroleum and 
coal group and 91 central offices were predominantly active in the 
transportation group. One is warranted in inferring from these data, 
however, that there were certain adventitious circumstances present 
in these groups that led to the establishment of central-office com- 
panies as the typical form of organization. 

Average Value of Products per Establishment. 

In table 11 and chart 7 the fact is again demonstrated, in terms of 
another measure, that establishments operated by central offices were 
larger than those operated as independent concerns. On the average, 
the value of products per central-office establishment was $1,443,900 
as compared with an average value of products in non-central-office 
establishments of $167,300. In other words, the value of products 
of the average central-office establishment was almost 9 times as 
great as that of the non-centrat-office establishment. The comparison 
is even more striking in certain industry groups. For example, the 
value of products of establishments controlled by central offices 
in the nonferrous metals group and in the transportation group was 24 
and 23 times, respectively, greater than that in the average independ- 
ent establishment in the same groups. The difference in size was 
much less pronounced in the paper and in the forest products groups — 
in these groups the establishments operated by central-office enter- 
prises were only about 3.5 times as large, in terms of value of products, 
as establishments independently operated. 



Table 11. — Average value of products per establishment in establishments operated 
by central offices and in independently operated establishments, 1937 

[Note. — In this table data are shown in the industry group in which the establishments are classified by 
the Bureau of the Census and not in the group in which the central office has its major value of products] 



Group 

No. 



Industry group 



Establishments operated by 
central offices 



Value of 

products 

(thousand 

dollars) 



Numbei 
of estab- 
lish- 
ments 



Value of 
products 
per estab- 
lishment 
(dollars) 



Establishments not operated 
by central offices 



Value of 

products 

(thousand 

dollars) 



Number 
of estab- 
lish- 
ments 



Value of 
products 
per estab- 
lishment 
(dollars) 



All industries 

Food and kindred products.. 
Textiles and their products. .. 

Forest products 

Paper and allied products 

Printing, publishing, and 

allied industries 

Chemicals and allied products 
Products of petroleum and 

coal 

Rubber products _ 

Leather and its manufactures 
Stone, clay, and glass prod- 
ucts 

Iron and steel and their prod- 
ucts, not including machin- 
ery 

Nonferrous metals and their 

products 

Machinery, not including 

transportation equipment. .. 

Transportation equipment, 

air, land, and water.. 

Miscellaneous industries 



37, 106, 858 



25,699 



1, 443, 903 



23, 606, 014 



141, 095 



167, 306 



6, 390, 431 

2, 791, 107 

901,829 

1, 258, 838 

609,040 
2, 642, 664 

2, 641, 392 
653, 555 
721, 195 

889, 098 



5,431,569 

1,960,150 

3, 356, 470 

5, 247, 030 
1,612,490 



9,267 

2,703 

2,516 

960 

905 

2,348 

326 
110 

503 

1,325 



1,519 

470 

1,435 

459 
853 



689,590 
1, 032, 596 

358,438 
1,311,290 

672, 972 
1, 125, 496 

8, 102, 429 
5,941,409 
1,433,787 

671,017 



3, 575, 753 

4, 170, 532 

2, 339, 003 

11,431,438 
1,890,375 



4, 875, 179 

4, 270, 502 

1, 537, 701 

802, 011 

1, 976, 659 
1,078,867 

313. 073 
229, 478 
770, 318 

506, 760 



2,048,791 

823, 135 

2, 535, 129 

738, 859 
L 099, 552 



39,460 
17,913 
15, 496 
2,093 

21, 846 
5,071 

349 

368 
2,861 

4,746 



6,826 

4,833 

8,526 

1,483 
9,224 



123,547 
238, 402 
99. 232 
bo3, 187 

90,482 
212, 752 

897, 057 
623, 582 
269, 247 

106, 776 



300, 145 

170, 316 

297, 341 

498, 219 
119,205 



CONCENTRATION OF ECONOMIC POWER 



135 



The validity of size comparisons among the various industry- 
groups is subject to some rather sweeping limitations. In the first 
place, in some of the industry groups, the raw material coming into 
the manufacturing process has a much higher value, either intrinsic 
or because of extensive pre-manufacturing operations, than in other 
industry groups, and this higher value is carried through in the 
final value-of-products figure. Thus, to cite the extremes, the average 
value of products of central-office establishments in the nonferrous 





MILLIONS OF DOLLARS 


TRANSPORTATION EQUIPMENT, 
AIR, LAND, AND WATER 


2 4 6 8 10 12 






















W!0< 






















PRODUCTS OF PETROLEUM 
AND COAL 

RUBBER PRODUCTS 






























NONFERROUS METALS 
AND THEIR PRODUCTS 


























IRON AND STEEL AND 
THEIR PRODUCTS, NOT 
INCLUDING MACHINERY 


































MACHINERY, NOT INCLUDING 
TRANSPORTATION EQUIPMENT 

MISCELLANEOUS INDUSTRIES 
ALL INDUSTRIES 










































LEATHER AND ITS 
MANUFACTURES 












PAPER AND ALLIED 
PRODUCTS 


^H^ 


■ 








CHEMICALS AND 
ALL/ED PRODUCTS 

TEXTILES AND 
THEIR PRODUCTS 


w 








^_ ESTABLISHMENTS OPEPAT£D 
^" BY CENTRAL. OFF/US 
mm. ESTABLISHMENTS NOT OPERATED 
1—1 BY CENTRAL OFFICES 


FOOD AND KINDRED 
PRODUCTS 


F 










PRINTING, PUBLISHING, 
AND ALLIED INDUSTRIES 


F 










STONE, CLAY. AND 
GLASS PRODUCTS 


F 










FOREST PRODUCTS 


f 








OD-4C-/S/ 



CHART 7— AVERAGE VALUE OF PRODUCTS PER ESTABLISHMENT IN ESTABLISH- 
MENTS OPERATED BY CENTRAL OFFICES AND IN INDEPENDENTLY OPERATED 
ESTABLISHMENTS, BY INDUSTRY GROUPS, 1937. 

metals group (this group includes such industry classifications as 
aluminum products, gold leaf and foil, gold, silver, and platinum 
for refining and alloying, silverware and plated ware, smelting and 
refining of copper, lead, zinc, and other nonferrous metals) was 
almost 12 times as large as the average value of products of central- 
office establishments in the forest products group. Obviously, much 
of this difference may pe accounted for by the differences in the 
prices of timber and of gold, silver, lead, zinc, and aluminum ores. 

In the second place, the validity of comparisons among industry 
groups is subject to limitations because there are wide differences 



136 CONCENTRATION OF ECONOMIC POWER 

among industry groups in the amount of activity of a strictly manu- 
facturing nature that goes into the products on their journey from the 
mine or the farm through manufacturing to the wholesaler and 
retailer. In some lines extensive fabrication is necessary before the 
product goes to the wholesaler or retailer, as in the transportation 
group, while in other lines the manufacturing process is more simple 
in nature and the value added by manufacture thus constitutes a 
smaller proportion of the value of the finished product, as in certain 
industries in the food group. 

There are other limitations that relate to the nature of the data. 
Among some of the industry groups there is a tendency for the whole- 
saling activity to be carried on by the manufacturer and, since the 
data in many cases are not kept separately by the manufacturer, a 
portion of the value of products reported by the manufacturer to the 
Bureau of the Census is not strictly the result of manufacturing opera- 
tions. To the extent that the practice in this regard varies from 
industry to industry, comparisons based on the data dp not give a 
true picture of the variations among industry groups of the average 
value of manufactured products per establishment in the group. 

Average Value of Products per Wage Earner. 

The average value of products per wage earner in establishments 
operated by central offices was $8,470, as contrasted with an average 
value of products of $5,640 in establishments not operated by central 
offices. (See table 12.) With the exception of the textile, the 
chemical, and the petroleum and coal groups, the value of products 
per wage earner was higher in central-office establishments than in 
independent establishments. In the case of the nonferrous metals 
group, the average value of products per wage earner in central-office 
establishments was almost two and one-half times the average value 
of products in independent establishments. 

The exceptions noted in these industry groups may be accounted 
for by the peculiar characteristics of the manufacturing set-up in the 
industries that made up these groups. In the textile group, a very 
sizeable portion of the value of products of the group was produced 
under the contract svstem. Under this system, a manufacturing 
jobber lets out the work to a contract factory and each reports his 
value of products on the same piece of work. In the case of the 
schedules returned to the Bureau of the Census by the manufacturing 
jobbers, there were many instances in which no wage earners were 
reported but a high value of products was shown. Furthermore, 
these manufacturing jobbers were predominantly independent con- 
cerns. The wage earners were reported once by the contract factory, 
but both the contract factory and the manufacturing jobbers reported 
the value of products. 

The larger value of products per wage earner in non-central-office 
establishments in the petroleum and coal and in the chemical groups 
is to be accounted for by several different factors or combinations of 
factors present in varying degrees in different industries within the 
groups. An examination of the schedules submitted for central offices 
and independent establishments indicates that the following factors 
may account for the exceptional situation in these groups. 



CONCENTRATION OF ECONOMIC POWER 



137 



Table 12. — Average value of products per wage earner in establishments operated 
by central offices and in independently operated establishments, 1937 

[Note. — In this table data are shown in the industry group in which the establishments are classified by 
the Bureau of the Census and not in the group in which the central office has its major vajue of products] 



Group 

No. 



Industry group 



Establishments operated by 
central offices 



Value of 

products 

(thousand 

dollars) 



Wage 
earners 
(average 
for the 

year) 



Value of 
products 
per wage 
earner 
(dollars) 



Establishments not operated 
by central offices 



Value of 

products 

(thousand 

dollars) 



Wage 
earners 
(average 
for the 
year) 



Value of 
products 
per wage 
earner 
(dollars) 



All industries 

Food and kindred products... 
Textiles and their products... 

Forest products 

Paper and allied products 

Printing, publishing, and 

allied industries 

Chemicals and allied products 
Products of petroleum and 

coal 

Rubber products 

Leather and its manufactures 
Stone, clay, and glass products 
Iron and steel and their prod- 
ucts, not including ma- 
chinery 

'Nonferrous metals and their 

products 

Machinery, not including 

transportation equipment.. 

Transportation equipment, 

air, land, and water 

Miscellaneous industries 



37, 106, 858 



4, 380, 123 



8,472 



23, 606, 014 



4, 189, 108 



5,635 



6, 390, 431 

2, 791, 107 

901, 829 

1, 258, 838 

609, 040 
2, 642, 664 

2, 641, 392 
653, 555 
721, 195 
889, 098 



5, 431, 569 

1, 960, 150 

3, 356, 470 

5, 247, 030 
1,612,490 



425, 187 
745, 883 
231, 879 
145, 560 

74,290 
224,802 

95, 774 
88,531 
144, 559 
163, 108 



745, 873 

132, 862 

520, 432 

497, 238 
144, 145 



15, 026 
3, 742 
3,889 
8,648 

8,198 
11,756 

27, 579 
7,382 
4,989 
5,451 



7,282 

14, 753 

6,449 

10, 552 
11, 187 



4, 875, 179 

4, 270, 502 

1, 537, 701 

802,011 

1,976,659 
1, 078, 867 

313,073 
229,478 
770, 318 
506,760 



2, 048, 791 

823, 135 

2, 535, 129 

738,859 
1,099,552 



463, 111 

1,068,504 

462, 462 

118,895 

278, 818 
89, 718 

10, 699 
41,287 
187, 396 
137, 170 



420, 414 

137, 465 

435, 543 

126, 607 
211,019 



10,527 
3,997 
3,325 
6,746 

7,089 
12,025 

29,262 
5,558 
4,111 
3,694 



4,873 

5,988 

5,821 

5,836 
5,211 



In the first place, one schedule was used in the collection of data for 
an industry, but inquiries on activity in several different lines were 
included on the same schedule. It so happened that many of the 
independent- establishments were engaged in these "other" operations 
included in the industry, while establishments operated by central 
offices were active in the main line in the industry. Owing to the very 
nature of these "other" lines — the products were produced for the 
custom trade or were special orders requiring specialized operations — 
the establishments therein turned out a higher value of products per 
wage earner. The reports for the independent establishments thus 
tended to cover a different type of manufacturing operation and one 
would not expect the general tendency (namely, that central-office 
establishments have a higher value of products per wage earner than 
non-central-office establishments) to prevail in these industry groups. 
Thus, a valid basis for comparison was lacking when the value of 
products per wage earner in independent establishments was the 
result of one type of operation and that of central-office establish- 
ments was the result of another. 

Although there were 351 separate industries listed by the Bureau 
of the Census, it was not possible within that number to include all 
the different types of manufacturing operations without placing in 
the same industry category some lines that were not exactly com- 
parable. This limitation holds for all industry groups. It was only 
in the industries cited above, however, that the central-office activity 
was largely confined to one line included under an industry classifica- 
tion, while non-central-office establishments were in another line. 



138 CONCENTRATION OF ECONOMIC POWER 

A second cause for the different situation in these industry groups 
is associated with the more or less unusual situation that existed in 
one industry. The schedules for this industry revealed that approxi- 
mately 90 percent of the total value of products of the independent 
establishments in the industry was produced in two establishments 
where the value of products per wage earner was higher than that 
in any central-office establishment. 

An examination of the schedules revealed two other industries in 
which the average work period for the year was longer in independent 
establishments than in central-office establishments. If one may 
assume equal efficiency (equal value of products per man-hour) the 
value of products per wage earner in the independent establishments 
would obviously be larger than that in the central-office establishments. 

A fourth reason for the exceptional situation existing in these two 
industry groups was the presence in two industries within the groups 
of an apparently higher efficiency in independent establishments than 
in central-office establishments, as measured by value of products per 
wage-earner hour. These four possible explanations for the unusual 
situation in these industry groups were not present uniformly in each 
industry within the groups. Rather, one of the factors was operative 
in one industry and another in a second industry, while in a third 
industry a combination of several of the factors was the causal element. 

VALUE ADDED BY MANUFACTURE IN ESTABLISHMENTS CONTROLLED 
BY CENTRAL OFFICES 

Since the value added figure is a residual obtained by subtracting 
cost of materials, etc., from the value of products, the magnitudes 
obtained reflect variations in the basic series — cost of materials and 
value of products — and from these variations the character of the 
value added series may have been anticipated from a study of the 
primary data. For the sake of completeness and in order to show the 
relative portions of the total manufacturing operations accounted 
for by each industry group, tables 13, 14, and 15 were compiled. 

Establishments operated by central offices accounted for 55.5 
percent of the total value added by manufacture. More than four- 
fifths of the total value added by manufacture in the petroleum and 
coal group and in the transportation group was contributed by 
central-office establishments. At the other extreme, only about 
one-fourth of the total value added in the printing and publishing 
group was the result of central-office operations. 

Columns 4, 5, and 6 of table 13 show the relative amounts each 
industry group contributed to the total value added by manufacture. 
This material was broken down to show the distribution among 
industry groups of the contribution of establishments controlled by 
central offices and the contribution of independent establishments. 
Slightly more than 40 percent of the total value added by manu- 
facture was accounted for by the food, the iron and steel, and the 
machinery groups, each of these groups accounting for more than 13 
percent of the total. The rubber products group was least important 
in terms of the proportion contributed by it to the total value added 
by manufacture. In a picture of all manufacturing activity, this 
material is indicative of the relative significance of the manufacturing 
operations in each industry group. 



CONCENTRATION OF ECONOMIC POWER 



139 



Of the total value added in establishments controlled by central- 
office companies (see column 5), value added in the iron and steel 
group accounted for 17 percent and the value added in the machinery 
group and the food group was 14 percent and 13 percent, respectively. 
The central-office establishments in the rubber products group made 
the smallest contribution to the total value added by central-office 
establishments. 

Among the independent establishments (see column 6, table 13), 
the contribution of the textile group was the largest of any single 
group, accounting for over 16 percent of the total value added in 
non-central-office establishments. A sizable part of the total was also 
contributed by establishments in the food group, the machinery 
group, and the printing and publishing group. The independent 
establishments in the petroleum and coal group and in the rubber 
group made the least significant contribution to the total value added 
by independent establishments. The variations in the amounts 
contributed by central-office establishments and non-central-office 
establishments are accounted for by the relative position of the 
industry group in the distribution shown in column 4 and by the 
extent of central-office operations in the various industry groups. 

Table 13. — Significance of central-office operations as measured by value added by 

manufacture, 1937 

[Note.— In this table data are shown in the industry group in which the establishments are classified by the 
Bureau of the Census and not in the group in which the central office has its major value of products] 





Industry group 


Value added by manufacture 


Group 


Total 

(thousand 

dohars) 


In establishments 
operated by cen- 
tral offices 


Percentage distribution 


No. 


Amount 

(thousand 

dollars) 


Percent 


Total 


In estab- 
lishments 
operated 
by cen- 
tral offices 


In estab- 
lishments 
not oper- 
ated by 
central 
offices 




All industries 


25, 173, 539 


13, 975, 037 


55.5 


100.0 


100.0 


100.0 




Food and kindred products 

Textiles and their products 

Forest products . . 




1 

2 
3 


3, 354, 242 

2, 972, 485 

1, 265, 599 

852, 695 

1, 792, 607 
1, 793, 583 
587, 663 
368, 773 
592,044 
872, 746 

3, 432, 673 

856, 759 

3, 467, 104 

1, 886, 133 
1, 078, 432 


1, 754, 422 

1, 161, 357 

446, 978 

510, 421 

426, 131 
1,260,492 
509,218 
262,041 
269, 717 
552, 145 

2, 326, 574 

462, 478 

1, 947, 878 

1, 547, 337 
537, 848 


52.3 
39.1 
35.3 
59.9 

23.8 
70.3 
86.7 
71.1 
45.6 
63.3 

67.8 

54.0 

56.2 

82.0 
49.9 


13.3 
11.8 
5.0 
3.4 

7.1 
7.1 
2.3 
1.5 
2.4 
3.5 

13.6 

3.4 

.13.8 

7.5 
4.3 


12.6 
8.3 
3.2 
3.7 

3.0 
9.0 
3.6 

1.9 
1.9 
4.0 

16.6 

3.3 

13.9 

11.1 
3.8 


14.3 
16.2 
7.3 


4 


Paper and allied products 


3.1 


5 


Printing, publishing, and allied 
industries 


12.2 


6 
7 
8 
9 
10 
11 

12 

13 


Chemicals and allied products 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products 

Iron and steel and their products, 
not including machinery... .. . 

Nonferrous metals and their prod- 
ucts. . .-. _ 

Machinery, not including trans- 
portation eq uipment 


4.8 
.7 
1.0 
2.9 
2.9 

9.9 

3.5 

13.6 


14 


Transportation equipment, air, 
land, and water 


3.0 


16 


Miscellaneous industries 


4.8 









Average Value Added by Manufacture per Establishment. 

The average value added per central-office establishment was seven 
times as large as the value added per non-central-office establishment — 
$543,800 and $79,400 per establishment, respectively. (See table 14 



140 



CONCENTRATION OF ECONOMIC POWER 



and chart 8.) The value added by central-office establishments in 
the transportation group was approximately 15 times the value added 
per independent establishment and the value added by central-office 
establishments in the nonferrous metals group was 12 times that added 
by independent establishments. At the other extreme, central-office 
establishments in the forest products group and in the paper group 
had a value added per establishment a little more than three times as 
high as the value added by independent establishments in these groups. 

Table 14. — Average value added by manufacture per establishment in establishments 
operated by central offices and in independent establishments, 1937 

[Note.— In this table data are shown in the industry group in which the establishments are classified by 
the Bureau of the Census and not in the group in which the central office has its major value of products] 



Group 
No. 



Industry group 



Establishments operated by 
central offices 



Value 

added 

(thousand 

dollars) 



Number 
of estab- 
lishments 



Value 
added 
per estab- 
lishment 
(dollars) 



Establishments not operated 
by central offices 



Value 

added 

(thousand 

dollars) 



Number 
of estab- 
lishments 



Value 
added 
per estab- 
lishment 
(dollars) 



All industries. -. 

Food and kindred products... 

Textiles and their products 

Forest products 

Paper and allied products 

Printing, publishing, and 
allied industries. 

Chemicals and allied products. 

Products of petroleum and 
coal 

Rubber products : . . 

Leather and its manufactures. . 

Stone, clay, and glass products 

Iron and steel and their prod- 
ucts, not including machin- 
ery 

Nonferrous metals and their 
products 

Machinery, not including 
transportation equipment- .. 

Transportation equipment, air, 
land, and water 

Miscellaneous industries 



13, 975, 037 



25, 699 



543, 797 



11, 198, 502 



141, 095 



79, 369 



1, 754, 422 

1,161,357 

446, 978 

510,421 

426, 131 
1, 260, 492 

509, 218 
262, 041 
269, 717 
552, 145 



2, 326, 574 

462, 478 

1, 947, 878 

1, 547, 337 
537, 848 



9,267 

2,703 

2,516 

960 

905 
2,348 

326 

110 

503 

1,325 



1,519 

470 

1,435 

459 
853 



189, 319 
429, 655 
177, 654 
531, 689 

470, 863 
536, 836 

1, 562, 018 

2, 382, 191 

536, 217 

416,713 



1, 531, 648 



1, 357, 406 



3, 371, 105 
630, 537 



1, 599, 820 

1,811,128 

818, 621 

342, 274 

1, 366, 476 
533, 091 

78, 445 
106, 732 
322, 327 
320, 601 



1, 106, 099 

394,281 

1, 519, 226 

338, 796 
540, 584 



39, 460 
17,913 
15, 496 
2,093 

21, 846 
5,071 

349 

368 

2,861 

4,746 



6,826 

4,833 

8,526 

1,483 
9,224 



40, 543 
101, 107 

52,828 
163, 533 

62, 550 
105, 125 

224, 771 

290, 033 

112, 662 

67, 552 



162, 042 
81, 581 

178, 187 

228, 453 
58, 606 



Some variation occurs in the relative ranks of the industry groups 
when they are arrayed on the basis of the value added per establish- 
ment by (1) central-office and (2) independent organizations. Among 
the industry groups and when the comparison was limited to the es- 
tablishments operated by central offices, the highest value added per 
establishment was in the transportation group and the lowest in the 
forest products group, while the highest value added per establish- 
ment in the non-central-office break-down occurred in the rubber 
group and the lowest was in the food group. 



CONCENTRATION OF ECONOMIC POWER 



141 



Average Value Added by Manufacture per -Wage Earner. 

The average value added per wage earner in central-office establish- 
ments was almost 20 percent higher than the average value added per 
wage earner in independent establishments, as may be seen in table 15. 
With the exception of the petroleum and coal, the chemical, and the 
textile groups, the average value added per wage earner in central- 
office establishments was higher in each industry group than the value 
added per wage earner in non-central-office establishments. The 





THOUSANDS OF DOLLARS 




TRANSPORTATION EQUIPMENT, 
AIR, LAND, AND WATER 

RUBBER PRODUCTS 


500 1000 1500 2000 2500 3000 3500 
















wffl^^ 














PRODUCTS OP PETROLEUM 
AND COAL 
















IRON AND STEEL AND 
THEIR PRODUCTS, NOT 
INCLUDING MACHINERY 

MACHINERY, NOT INCLUDING 
TRANSPORTATION EQUIPMENT 


^^^MB 


























NONFERROUS METALS 
AND THEIR PRODUCTS 

MISCELLANEOUS INDUSTRIES 






















ALL INDUSTRIES 










CHEMICALS AND 










ALLIED PRODUCTS 










LEATHER AND ITS 










MANUFACTURES 










PAPER AND ALLIED 
PRODUCTS 


1^^^^ 


i 


^_ ESTABLISHMENTS OPERATED 
^™ BY CENTRAL OFFICES 




PRINTING, PUBLISHING, 
AND ALLIED INDUSTRIES 






777m ESTABL/SMENTS NOT OPERATED 
6£ ^ i) BY CENTRAL OEF/CES 




TEXTILES AND 










THEIR PRODUCTS 










STONE, CLAY, AND 
GLASS PRODUCTS 










FOOD ANO KINDRED 
PRODUCTS 


r 








FOREST PRODUCTS 


F 






D0-4O-/S2 



CHART 8.— AVERAGE VALUE ADDED BY MANUFACTURE PER ESTABLISHMENT IN 
ESTABLISHMENTS OPERATED BY CENTRAL OFFICES AND IN INDEPENDENTLY 
OPERATED ESTABLISHMENTS, BY INDUSTRY GROUPS, 1937. 

average value added per wage earner in central-office-controlled es- 
tablishments in the stone, clay, and glass group and in the miscel- 
laneous industries group was approximately 45 percent higher than 
that in the non-central-office establishments for the same groups. 
The causes for the divergence from the general pattern in the petroleum 
and coal, chemical, and textile groups were set forth in the discussion 
above relative to the average value of products per wage earner. 
This analysis is relevant to the value-added picture as well. 



142 



CONCENTRATION OF ECONOMIC POWER 



Table 15. — Average value added by manufacture per wage earner in establishments 
operated by central offices and in independently operated establishments, 1937 

[Note —In this table data are shown in the industry group in which the establishments are classified by the 
Bureau of the Census and not in the group in which the central office has its major .value of products] 



Group 
No. 



Industry group 



All industries 

Food and kindred products.. 
Textiles and their products. _. 

Forest products 

Paper and allied products 

Printing, publishing, and 

allied industries 

Chemicals and allied products 
Products of petroleum and 

coal 

Rubber products . 

Leather and its manufactures 
Stone, clay, and glass products 
Iron and steel and their prod- 
ucts, not including machin- 
ery 

Nonferrous metals and their 

products 

Machinery, not including 

transportation equipment. . 

Transportation equipment, 

air, land, and Water 

Miscellaneous industries 



Establishments operated by 
central offices 



Value 

added 

(thousand 

dollars) 



13, 975, 037 



1, 754, 422 

1, 161, 357 

446,978 

510, 421 

426, 131 
1, 260, 492 

509,218 
262,041 
269, 717 
552, 145 



2, 326, 574 

462, 478 

1, 947, 878 

1, 547, 337 
537,848 



Wage 
earners 
(average 
for the 
year) 



4, 380, 123 



425, 187 
745, 883 
231, 879 
145, 560 

74,290 
224,802 

95, 774 
88,531 
144, 559 
163, 108 



745, 873 

132, 862 

520, 432 

497,238 
144, 145 



Value 
added 

per wage 
earner 

(dollars) 



3,191 



4,126 
1,557 
1,928 
3,507 

5,736 
5,607 

5,317 
2,960 
1,866 
3,385 



3,119 
3,481 
3,743 

3,112 

3,731 



Establishments not operated by 
•central offices 



Value 

added 

(thousand 

dollars) 



11,198,502 



1, 599, 820 

1,811,128 

818, 621 

342,274 

1, 366, 476 
533, 091 

. 78, 445 
106, 732 
322, 327 
320,601 



1,106,099 

394, 281 

1, 519, 226 

338, 796 
540,584 



Wage 
earners 
(average 
for the 
year) 



4, 189, 108 



463,111 

1, 068, 504 

462, 462 

118,895 

278, 818 
89, 718 

10,699 
41,287 
187, 396 
137, 170 



420, 414 

137, 465 

435, 543 

126, 607 
211,019 



Value 
added 

per wage 
earner 

(dollars) 



2,673 



3,455 
1,695 
1,770 
2,879 

4,901 
5,942 

7,332 
2,585 
1,720 
2,337 



2, 631 

2.868 

3,488 

2.676 
2,562 



A SUMMARY COMPARISON 

In a sense, the data which have been presented showing various 
characteristics of establishments operated by multi-plant concerns 
and those of independently operated units may be viewed as a com- 
parison between "big" and "little" business. Central offices and the 
units they control may correctly be considered "big" since in 1937 
these 5,625 concerns (1) controlled 25,699 out of a total of 166,794 
establishments (2) employed 4,380,123 of the 8,569,231 wage earners 
in manufacturing (3) accounted for 55 percent of the wage bill and 
produced 61 percent of the total value of all manufactured goods. 
Stated in another way, 141,095 independent manufacturers employed 
less than half the wage earners and accounted for less than two-fifths 
of the total value of manufacturing production. It should not be 
overlooked, however, that there are many large single-unit concerns 
as well as many small-scale central offices. 

The variation in the scale of operation between central offices and 
single-unit concerns is even more striking when' the data are reduced 
to an establishment basis. Establishments operated by central 
offices employed, on the average, 170 wage earners while the average 
independent concern employed 30 wage earners. The average value 
of products per central-office establishment was $1,443,900 as con- 
trasted with an average value per independent plant of $167,300. 
The value added by manufacture per central-office establishment was 
$543,800 and that for the independent was $79,370. 






CONCENTRATION OF ECONOMIC POWER 143 

The higher output per wage earner, arising from either superior 
capital equipment or superior organization, or both, is a significant 
characteristic of central-office establishments. In establishments 
controlled by central offices, the average value added by manufacture 
per wage earner was $3,190 as contrasted with $2,670 in independent 
units. The benefits from this greater output per wage earner were 
passed on almost in their entirety in higher average wages. The 
average wage paid per wage earner in central-office establishments 
was $1,280 in 1937, while the average wage paid per wage earner in 
independently operated concerns was $1,080. Thus, while the pro- 
duction per wage earner in central-office establishments was 19.5 
percent higher than in non-central-office establishments, the average 
wage paid per worker was 18.5 percent higher in the establishments 
operated by central offices. While there are limitations on the data 
arising from inconsistencies in methods of classification and reporting, 
the margin of error is small and the basic validity of the relationships 
presented here need not be questioned. 



CHAPTER III 
THE STRUCTURE OF CENTRAL-OFFICE GROUPS 

In the preceding chapter the extent and significance of central- 
office operations were examined. There the analysis was in terms of 
the number of central offices and their operations among the various 
industries and industry groups. In the succeeding chapters, the 
structure or conformation of each central-office company will be the 
subject of analysis. Here the internal structure of these enter- 
prises will be investigated and the interrelation of the various plants 
controlled by central offices to the entire functioning combination 
will be examined. 

Each central-office company controls two or more plants or es- 
tablishments and the relations, in a functional sense, of these plants 
in the productive processes that comprise the activity of the central 
office reflect or indicate the structural form of the enterprise. For 
example, a central-office company might report the operation of a 
blast furnace and of a steel mill. The functioning of such a group 
involves the intake of ore, the combination of ore with lime-stone 
and coke, the blast-furnace operation that results in pig iron, the 
conversion of pig iron in the steel mill into ingots, and the trans- 
formation of ingots into sheets in rolling mills. The whole process in 
which this central-office group engages is the function of the organiza- 
tion. In a structural sense, the company is made up of several 
units that perform certain successive steps in the process of making 
sheets from ore. This type of organization is commonly called a ver- 
tical combination ; that is, the constituent units are related in the sense 
that they perform successive operations on the product as it passes 
from raw material to finished manufacture. At each stage in the 
process a different product or a product in a slightly different form 
is turned out and passed on to the next unit in the group which in 
turn carries the product a step further. In the chapters which follow, 
the structural form of the central-office enterprises will be analyzed 
in terms of the functional relationship of each unit to the manufac- 
turing processes carried on by the group. 

Before discussing the scheme of functional analysis under which the 
structure of each central-office group is to be classified, some expla- 
nation of the nature of the data is necessary. Each establishment, 
the basic unit in the Census of Manufactures, is assigned, on the 
basis of its product or group of products of chief value, to some one 
industry classification. It frequently happens that production of this 
major product is supplemented by various subsidiary products. The 
function of each establishment, however, has been taken to be the 
production of this predominant product. It would have been possible 
to consider these subsidiary products in the present study, but the 
gain in completeness by such an addition would have been quite small 
compared with the great amount of clerical work that would have 

144 



CONCENTRATION OF ECONOMIC POWER J 45 

been required. In any event, these subsidiary products are usually 
so closely related to the major product and of so little importance in 
the total combination that they seldom enter into the relationship 
between the separate establishments, but are of significance chiefly in 
connection with the establishment which produces them. 

Within some industries operations of quite different nature are 
grouped together. Thus establishments classified in the steel-works 
and rolling-mill products industry are engaged in the manufacture of 
steel and in the rolling of iron and steel. The products included in the 
industry are steel ingots and direct steel castings; rolled iron and 
steel, such as rails, splice bars, rail joints, bars and rods, tin-plate 
bars, wire rods, structural shapes, hoops, bands, and cotton ties; 
plates and sheets, including black plates and sheets for tinning; nail 
and tack plates; car axles, rolled and hammered; car wheels; armor 
plate; gun forgings, etc. With such a diversity of products within 
the industry, how much does it mean, for the purposes of this study, 
to use this "establishment basis of classification for an analysis of the 
functional relationship within a central-office group? How may 
the functional relation of a combination be interpreted in which 
a central office operates one establishment in the "blast-furnace 
products" industry and one in the ' 'steel-works and rolling-mill prod- 
ucts" industry? Obviously, from the data which form the basis of 
this study, it is impossible to say which of the products listed in the 
"steel-works and rolling-mill products" industry the establishment 
classified in that industry had actually produced. For some purposes 
this would be a serious limitation. Here, however, the interest is not 
in the study of the production of the particular product but rather in 
the fact that a central office operated establishments in these two 
industries. A functional relation exists regardless of which product 
was produced and it is the extent and nature of this functional rela- 
tionship in the many central-office groups that we wish to measure. 
The form in which the data are available results in some understate- 
ment of the extent of integration. This less-than-complete picture is 
most frequent in those cases where the integration is vertical and 
occurs as a result of the inclusion of the performance of several steps 
in the productive process within an establishment classified in one 
industry. 

It should be pointed out, however, that the census industry classifi- 
cations have been set up in response to the demand of business men 
and others and thus reflect the opinions of those individuals in the 
industry as to the limits of the industry and what the industry should 
include. Constant changes and adjustments in the old classifications 
and the establishment of new ones keep the products included in an 
industry quite closely in line with the accepted view of the men in the 
industry. 

The basic material for this part of the study consists of a list of all 
central-office companies and an enumeration under each central 
office of the industries in which that central office operated or con- 
trolled establishments. The determination of the functional relation 
of these establishments to the operating combination was supplemented 
in many cases by an examination of the file of permanent central-office 
record cards of the Bureau of the Census. 

In this scheme of functional analysis, each central office and all 
establishments operated by it are classified in the industry group in 

273238 — 41— pt. 27 11 



146 CONCENTRATION OF ECONOMIC POWER 

which the central office is predominantly active as measured by the 
establishments controlled by it which have the major value of product 
For the purposes of this analysis, the central-office compani 
have been grouped into five general classifications on the basis of I 
possible functional relationships exhibited by the establishments 
controlled by the central offices. These possible relationships are as 
follows : 

1. Uniform functions: 

(a) Uniform functions within simple central offices. 

(b) Uniform functions within complex central offices. 

2. Divergent functions : 

(a) Joint products. 

(b) By-products. 

(c) Like processes. 

3. Convergent functions: 

(a) Complementary products. 

(b) Auxiliary products. 

(c) Like markets. 

4. Successive functions. 

5. Unrelated functions. 

Of the five major classifications, the first and last are perhaps 
easiest to define. In the first group all instances are listed in which a 
central office operated or controlled more than one establishment in 
ope industry. This grouping under one central-office control of several 
establishments engaged in the same operations is by far the most 
common type of relationship. For a better and more complete picture 
of this type of relationship, the central offices have been classified in 
two subgroups. In the first there is a listing of all central offices 
operating two or more establishments in only one industry, while in 
the second subgroup, the central offices operating two or more estab- 
lishments in one industry but also operating one or more establish- 
ments in other industries are listed. Those companies in the first 
subclassification may be called simple central offices in that they 
operate in only one industry and those in the second, where operations 
are carried on in more than one industry, may be called complex 
central offices. The matter of classification is relatively simple in this 
group. The Bureau of the Census assigns an industry number to each 
establishment and where central offices were found having establish- 
ments with similar industry numbers an instance of this type of 
uniform functional relation was recorded. 

In the last and smallest major group the matter of classification is 
extremely difficult. This group includes all those cases in which 
central offices control establishments having no apparent relationship 
to the other establishments in the organization. The reasons under- 
lying the formation of these heterogeneous or conglomerate com- 
panies is the subject matter of another study (see the chapter on 
"The Causes of Product Diversification" in part VI of this report, 
"The Product Structures of Large Corporations"). Here we shall be 
content with a listing and brief review of the cases in which establish- 
ments engaged in unrelated operations are bought together under the 
control of a central office. 

The functional relationships that occur in the second, third, and 
fourth major classifications are particularly significant. The different 



CONCENTRATION OF ECONOMIC POWER J 47 

types of relationship may be more clearly understood when expressed 
in the graphic form of the accompanying chart. (See chart 9.) One 
may think of the function of an establishment as a line starting at a 
point, the raw materials, and ending at a point or points, the finished 
products. Thus if two establishments under the control of a central 
office start with the same raw material and end with different final 
products, the function lines are divergent. For example, purchased 
milk, the raw material, may be made into cheese in one establishment 
and into butter in another, or purchased leather may be made into 
boots and shoes in one establishment and into trunks and suit cases 
in another establishment. Conversely, a central office, whose main 
activity is the manufacture of automobiles, may operate establish- 
ments engaged in the production of automobile bodies, artificial 
leather, lighting equipment, automobile engines, and plate glass. 
Production in these various establishments begins far apart with 
different raw materials but finishes in the same final product; thus, 
the function lines are convergent. Each of these major categories — 
central offices with divergent and convergent functions — has been 
broken down into subclassifications which may be enlarged upon 
separately. 

In general, divergent functional relationships occur when central 
offices operate establishments whose functions meet at some point in 
the operating process, but subsequently diverge, the result being the 
manufacture of different products. This major classification is di- 
vided into three subgroups: 

Joint products. — Central offices classified in this subgroup oper- 
ate establishments which make different products out of the 
same raw material. The functional relationship is one of differ- 
ent processes being applied to a common material and two 
different products being the result. The manufacture of either 
of these products could be discontinued without affecting the 
manufacture of the other. For example, this type of integration 
occurs when a central office operates establishments manufac- 
turing cotton shirts and cotton house dresses. Starting with the 
same basic material, cotton woven goods, the manufacturer 
applies two different processes to the cotton goods and produces 
two different products. The decision to make the shirts and 
dresses was a voluntary one and the manufacture of either could 
be discontinued without affecting the manufacture of the other. 

By-products. — The central offices included under this classifica- 
tion, like those under joint products, operate establishments 
which make different products out of the same raw materials. 
There is a sharp line of distinction, however, between these 
two classifications — in the manufacture of joint products the 
divergence is optional, the manufacturer decides voluntarily to 
make two different products; in the case of by-products, however, 
the divergence is not the result of a decision on the part of the 
manufacturer but is a result of the manufacturing process itself. 
At some point in the manufacturing process the original raw 
material diverges into two parts, one being used in the major 
product and the other, having no further use in the manufacture 
of the major product, is a by-product. The appearance of this 
by-product is a natural result of the process and must be made 
as long as the process is used ; the only decision the manufacturer 



148 



CONCENTRATION OF ECONOMIC POWER 



UNIFORM FUNCTIONS 

Horizontal Integration 



DIVERGENT FUNCTIONS 

Joint Products 



By Products 




LiVe Processes 





SUCCESSIVE FUNCTIONS 

Vertical Integration 




CONVERGENT FUNCTIONS 

Complementary Products 



Auxiliary Products 

► MATERIALS 





m 



Like Markets 



RADIOS 



tzfl 







CHABT 9.— DIAGRAM OF FUNCTIONAL RELATIONSHIPS WITHIN CENTRAL-OFFICE 

COMPANIES. 



CONCENTRATION OF ECONOMIC POWER 149 

has in the matter is whether or not he will utilize the by-product. 
Many instances of the manufacture of by-products are found in 
the food and chemical industries. The development during 
late years of processes now utilized on cottonseed to extract the 
cottonseed oil affords an example of by-product manufacture. 
The cottonseed is put through a process in which the primary 
purpose is to obtain cottonseed oU. After the oil has been ex- 
tracted, the remaining hulls are by-products of the process. 
These hulls may be used in fertilizers, as fuel, or as feed. The 
manufacturer has no choice in obtaining the by-product; as long 
as he wants to obtain the oil he also obtains the hulls. The situ- 
ation here is quite distinct from that explained above under 
joint products — here the production of two commodities is invol- 
untary, while in the case of joint products it was voluntary. 

Like processes.— The central offices classified in this subgroup 
operate establishments which apply the same process to different 
raw materials, the result being the manufacture of different 
products. Examples of this structural type are found in con- 
siderable number in the textile industry. A central office may 
operate establishments which spin cotton yarn and silk yarn. 
The same process, spinning, is applied to different raw materials, 
the result being the manufacture of cotton and silk yarn. 

The central offices having convergent relationships operate estab- 
lishments whose functions meet at some point in the manufacturing 
process, the products of the different establishments either being com- 
bined into a single product or meeting in a common market. This 
major classification is also divided into three subgroups: 

Complementary products. — The establishments operated by 
the central offices classified in this group manufacture products 
which complement each other — these complementary parts are 
necessary for the major finished product of the central office. 
An example of this type of relationship occurs in the case of a 
central office whose major product is machinery. Here the 
central office operates different establishments producing such 
complementary parts as nuts, bolts, foundry products, wire, 
steel, brass, etc. Another important example of establishments 
which have complementary functional relationships is given by 
those companies making a major product and also the container 
in which the product is made ready for the market. The manu- 
facture of containers is particularly prevalent in the food and 
chemical industries. 

Auxiliary products. — There is a very close connection between 
this classification and that of complementary products discussed 
above, the major difference being that auxiliary products assist 
in the production while complementary products are an integral 
part of the product itself. Such functions as machine shops 
operated for repair of machinery, the manufacture of ice to 
preserve products in the establishments, etc., are examples of 
auxiliary operations. 

Like markets.— This classification covers central offices in 
which the establishments make products which are sold in the 
same markets or converge in use. For example, a central office 
may have two establishments, one making non-alcoholic bever- 



150 CONCENTRATION OF ECONOMIC POWER 

ages and the other ice cream. There is no particular relation 
between these products either in raw materials or in processes 
used, but they do converge in a common market. 

Instances in which the establishments controlled by a central office 
perform necessary operations on a product as it passes from estab- 
lishment to establishment are classified in the fourth major classifica- 
tion. Grouped under this head are those central offices which show 
a successive functional relationship. Here are recorded (within the 
limitations of the data of the study) vertically integrated manu- 
facturing concerns. Examples of this type of relationship occur when 
the central office operates establishments producing lumber and timber 
products, planing-mill products, and furniture, or again the central 
office might operate establishments spinning cotton yarn and thread, 
dyeing and finishing yarn, and weaving cotton goods. In these 
cases each establishment picks up the product of the preceding estab- 
lishment and advances it a step nearer the final form. 

It is difficult in many instances to separate the successive functional 
relationship from the complementary or auxiliary relationship. In 
general, if the identity of the product was maintained through a 
number of distinct steps, the relationship was taken as successive; 
whereas the relationship was said to be either auxiliary or com- 
plementary if the product lost its identity in the process regardless of 
the fact that it might have been indispensable to the productive opera- 
tion, or if it was possible to manufacture simultaneously, and not in a 
sequence of operations, the separate products necessary to complete 
the ultimate product. 

Such then are the five major classifications into which the relation- 
ships among establishments in the various central offices are grouped. 
There are many instances in which two, three, or four of these types 
of relationship were present in a single central-office group. Each 
relationship was counted as a. separate instance; thus, in this sense, 
there was considerable duplication or double counting of central 
offices. At this stage of the analysis, however, we are concerned 
only with a record of the number of relationships of the different 
types; thus the impossibility of deriving an accurate count of central 
offices from these data is no handicap. 



CHAPTER IV 

SIMPLE AND COMPLEX CENTRAL-OFFICE GROUPS 

Iij the foregoing chapter five general classifications (uniform, 
divergent, convergent, successive, and unrelated) were formulated 
to distinguish various types of functional relations of establishments 
within central-office groups. Before discussing these patterns of 
integration it is desirable to consider the forms of organization in 
terms of two general structural types, namely, the simple central 
office and the complex central office. The simple type embraces 
those central offices controlling establishments which operate ex- 
clusively in one industry. Such central offices may be described as 
horizontally integrated, since each enterprise involves a coordination of 
plants engaged in similar activities or in the same general line of 
business. The complex group, on the other hand, comprises those 
central offices whose establishments operate in more than one indus- 
try; for example, such a group might include an establishment making 
leather, another making tanning materials, and a third producing 
boot and shoe cut stock and findings. The several types of integra- 
tion that occur in the complex category are discussed in subsequent 
chapters. They include all those non-horizontal combinations 
commonly known as diagonal, conglomerate, and vertical. 

NUMBER OF SIMPLE AND COMPLEX GROUPS 

The simple organization is the most frequent structural type among 
central-office groups. Of the entire number of multiple-plant central 
offices in 1937, a total of 3,574 central offices, or 63.5 percent, con- 
trolled establishments having parallel or uniform activities and were 
classified, therefore, as simple enterprises. (See table 16 and chart 
10.) A comparison of the aforementioned percentage with the corre- 
sponding ratio for the year 1919 indicates a tendency toward the 
compfex type of organization. In a study of central-office groups 
for 1919, it was revealed that simple central offices comprised 68.8 
percent x of the total number studied. Because of differences in the 
basic data, however, the two ratios are not precisely comparable. If 
the 1919 data are adjusted by deducting mining companies and rail- 
road repair shops, since they are not included in the present study, 
the percentage of simple central offices in 1937 is lower than that for 
the earlier year. That is, there appears to have been at least some 
decline in the proportion of simple structures in favor of the complex 
type. 

Table 16 shows that the industrial groups having the highest 
proportion of simple structures were stone, clay, and glass products; 
food and kindred products ; and printing, publishing, and allied indus- 
tries. In the former group, the clay products (except pottery) and 
the concrete products industries accounted primarily for the higji 
percentage of simple central offices, while in the food group the high 

1 See "The Integration of Industrial Operation," p. 126. 

151 



152 



CONCENTRATION OF ECONOMIC POWER 



percentage representation of simple central offices in the canning 
and the manufactured ice industries was largely responsible for the 
predominance of this type of structure in that group. Obviously, 
the simple nature of the process in these industries renders them less 
conducive to the complex form of organization. In the printing and 
publishing group, most of the simple central offices were engaged in 
printing and publishing newspapers and periodicals. The ratios for 
simple central offices in the various groups ranged from 75.8 percent 
in the stone, clay, and glass products group to 39.9 percent in the 
iron and steel group. 

Table 16. — Number of simple and complex central offices, by industry groups, 1937 

[Note.— In this table and in the following tables each central office and all establishments controlled by it 
are classified in the industry group in which the central office is predominantly active as measured by 
its establishments having the major value of products! 



Group 

No. 



Industry group 



Total 
number 
of central 

offices 



Simple central 
offices 



Number 



Percent 
of total 



Complex central 
offices 



Number 



Percent 
of total 



All industries 

Food and kindred products. 

Textiles and their products. 

Forest products 

Paper and allied products 

Printing, publishing, and allied industries. 

Chemicals and allied products 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products... 

Iron and steel and their products, not in- 
cluding machinery 

Nonferrous metals and their products 

Machinery, not including transportation 
equipment 

Transportation equipment, air, land, and 
water 

Miscellaneous industries 



5,625 



3,574 



63r5 



2,051 



36.5 



1,660 
810 
636 
193 
232 
389 
66 
30 
127 
343 

336 
94 

393 

91 
225 



1,222 
512 
430 
83 
167 
220 
30 
16 
83 
260 

134 

51 

186 

38 
142 



73.6 
63.2 
67.6 
43.0 
72.0 
56.6 
45.5 
53.3 
65.4 
75.8 

39.9 
54.3 

47.3 

41.8 
63.1 



438 
298 
206 
110 
65 
169 
36 
14 
44 
83 

202 
43 

207 

53 

83 



26.4 
36.8 
32.4 
57.0 
28.0 
43.4 
54.6 
46.7 
34.6 
24.2 

60.1 
45.7 

52.7 

58.2 
36.9 



As the manufacturing processes become more involved it is ap- 
parent that the industries are characterized by a higher percentage 
of complex central offices. In the iron and steel group, more than 
60 percent of the central offices were of the complex type. Other 
groups in which the complex structural form predominated were 
transportation equipment, with 58.2 percent of the central offices 
operating plants in more than one industry; paper and allied prod- 
ucts, 57 percent; products of petroleum and coal, 54.5 percent; and 
machinery, 52.7 percent. The high concentration of complex cen- 
tral offices in' the iron and steel group may be accounted for in large 
^art by the predominance of this type of structure in the steel works 
and rolling mills industry. These central-office groups operated 
establishments in other industries; otherwise, they would not be 
regarded as complex organizations. It may be well to emphasize 
again, however, that those central offices having establishments 
operating in more than one industry were classified in the industry 
in which they were predominantly active as measured by the value 
of products. In the transportation equipment group most of the 
complex central offices were classified in the motor vehicle bodies and 
parts industry, while in the paper and allied products group nearly 
jialf of the companies had plants engaged chiefly in producing various 



CONCENTRATION OF ECONOMIC POWER 



153 




154 



CONCENTRATION OF ECONOMIC POWER 



kinds of paper and paperboard. The petroleum refining industry 
accounted for 24 out of a total of 36 complex offices in the petroleum 
and coal group, and the "electrical machinery" and "machinery not 
elsewhere classified" industries for about half of those in the machinery 
group. 

Table 17. — Number of establishments in simple and complex central-office companies, 

by industry groups, 1937 

[Note.— See headnote to table 16] 



Group 

No. 



Industry group 



Total 
number 
of central- 
office es- 
tablish- 
ments 



Simple central- 
office establish- 
ments 



Number 



Percent 
of total 



Complex central- 
office establish- 
ments 



Number 



Percent 
of total 



All industries 

Food and kindred products. 

Textiles and their products - 

Forest products 

Paper and allied products 

Printing, publishing, and allied industries 

Chemicals and allied products.. 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures. 

Stone, clay, and glass products 

Iron and steel and their products, not 

including machinery 

Nonferrous metals and their products 

Machinery, not including transportation 

equipment 

Transportation equipment, air, land, 

and water 

Miscellaneous industries 



25, 699 



11, 321 



44.1 



14, 378 



9,546 

2,671 

2,305 

886 

817 

2,229 

430 

115 

499 

1,316 

1,620 
394 

1,429 

561 

881 



4,851 

1,354 

1,181 

210 

493 

580 

85 

32 

212 

816 

325 
126 

471 

135 

450 



50.8 
50.7 
51.2 
23.7 
60.3 
26.0 
19.8 
27.8 
42.5 
62.0 

20.1 
32.0 

33.0 

241 
51.1 



4,695 

1,317 

1,124 

676 

324 

1,649 

345 

83 

287 

500 

1,295 



958 



426 
431 



55.9 



49.2 
49.3 
48.8 
76.3 
39.7 
74.0 
80.2 
72.2 
57.5 
38.0 

79.9 
68.0 

67.0 

75.9 
48.9 



ESTABLISHMENTS IN SIMPLE AND COMPLEX GROUPS 

Although 63.5 percent of the total number of multiple-plant com- 
panies were classified as simple central offices, the number of estab- 
lishments controlled by these simple central offices represented less 
than one-half of all establishments operated by central offices and 
only 6.8 percent of the total number of manufacturing establishments. 
(See table 17.) In only 6 of the 15 industry groups were the establish- 
ments in complex organizations outnumbered by those in simple struc- 
tures, and the plants in the stone, clay, and glass industries (the simple 
group with the highest proportion of central-office establishments) 
were only slightly more than one-eighth of all manufacturing establish- 
ments in that industry group. It is significant that four-fifths of the 
central-office establishments in the petroleum and coal group were 
under complex management. Many of the central offices operating 
petroleum refineries apparently found it profitable to extend their 
activities into allied fields of endeavor. For example, certain cen- 
tral offices set up separate plants for the manufacture of lubricating 
greases and various types of containers such as steel barrels and drums, 
tin cans, and the like, thereby creating complex structures. 

As measured by the number of plants per central office, the simple 
central offices were, in general, considerably smaller than the complex 
structures. To further emphasize, the average number of estab- 
lishments per central office in the complex group was more than 
double that for the simple central offices. The extent of this variation 
is portrayed graphically in chart 11. 



CONCENTRATION OF ECONOMIC POWER 



155 



It can readily be seen that the food group had the largest number 
of plants per central office for both structural types. This situation 
is in part attributable to the widely scattered sources of raw materials 
and to the perishable character of the products of this industry 
group. In no other group, however, do the establishments per 
central office exhibit the same rank. For the complex organizations, 
the average number of plants was lowest in the textile group, while 
the low for simple central offices occurred in the nonferrous metals 
and their products group. 

Although the establishments controlled by complex central offices 
were outnumbered by those controlled by simple central offices in 
only 6 industry groups, a detailed examination of individual industries 
discloses that of the 351 separate industry classifications in 1937 there 
were 23 industries in which over 20 percent of all manufacturing estab- 



CO/MPLEX CENTRAL OFFICES 

DUMBER OF ESTABLISHMENTS 



SIMPLE CENTRAL OFFICES 

NUMBER OF ESTABLISHMENTS 




FOOO i. KINDRED PRODUCTS 
CHEMICALS £ ALLIED PRODUCTS 
PRODUCTS Of PETROLEUM S COAL 

TRANSPORTATION EQUIPMENT. AID, 
LAND, AND WATER ' 

ALL INDUSTRIES 

LEATHEP & m MANUFACTURES 

IRON AND STEEL AND THEIR PRODUCTS, 

not /NCiuome machinery 

NON FERROUS METALS t THEIR PRODUCTS 

PAPER & ALLIED PRODUCTS 

STONE, CLAV.C 6LASS PRODUCTS 

RUBBER PRODUCTS 

PORE ST PRODUCTS 

MISCELLANEOUS INDUSTRIES 

PRINTINS, PUBLISHING, AND 

ALLIED INDUSTRIES 
MACHINERY, A/OT WCLUOING 
TRANSPORTATION EQUIPMENT 

TEXTILES S THEIR PRODUCTS 




CHART 11.— NUMBER OF ESTABLISHMENTS PER SIMPLE AND COMPLEX CENTRAL 
OFFICE, BY INDUSTRY GROUPS, 1937. 

lishments (including independent plants) were of the one-industry 
type. These industries are listed in table 18. Most of the industries 
shown are those in which fabrication of only a comparatively simple 
nature is required to convert the raw material into the finished product 
and in other instances the simple central-office groups tend to occur 
near the beginning of the process. It is interesting to note that over 
three-fourths of the total number of establishments making beet sugar 
were operated by simple central offices. Of the 87 establishments in 
this industry, only 10 were in complex groups and 11 were independent 
plants. The increasing tendency toward the simple type of organiza- 
tion in the manufacture of sugar beets is demonstrated by a com- 
parison with data for 1919 when only about one-fourth 2 of all plants 
were under simple central-office control. Data are not available, how- 

»-See "The Integration of Industrial Operation," by W. L. Thorp, p. 169. This ratio may be somewhat 
understated, since all central-office establishments were not available for study. 



156 



CONCENTRATION OF ECONOMIC POWER 



ever, to determine how many of the remaining plants were, in complex 
groups and how many were independent plants. Hence, it is not 
definitely known whether the shift in the nature of the organization 
was from the independent company to the simple central-office 
company or from the complex to the simple structural type, but it is 
believed that the former assumption is more probable. 

Table 18. — Industries with over 20 percent of establishments in simple central-office 

companies, 1937 



Industry 



Manufacturing establishments 



Total 
number 



In 3,574 simple cen- 
tral - office com- 
panies 



Number 



Percent 



Sugar, beet 

Cars, electric and steam railroad 

Cement 

Paving materials (not brick or stone) 

Ice, manufactured 

Hat bodies, carded wool-felt 

Underwear, men's, contract factories 

Fireworks and allied products 

Wood distillation and charcoal manufacture 

Wood preserving 

Minerals and earths, ground and treated 

Canned fruits and vegetables 

Oloves and mittens, cloth and cloth and leather 

Fuel briquettes 

Cast iron pipe and fittings 

Carpets and rugs, wool 

Silk throwing and spinning, commission 

Drug grinding 

Sausage casings, not made in meat-packing establishments 

Bluing 

Rice cleaning and polishing 

Clay products, not pottery... 

Buttons 



87 

154 

158 

148 

3,847 

14 

9 

50 

60 

197 

157 

2,772 

107 

21 

75 

55 

96 

21 

31 

14 

61 

1,198 

291 



66 

66 

64 

55 

1,415 

5 

3 

16 

19 

59 

47 

822 

31 

6 

21 

15 

23 

5 

7 

3 

13 

255 

59 



75.9 
42.9 
40.5 
37.2 
36.8 
35.7 
33.3 
32.0 
31.7 
30.0 
29.9 
29.7 
29.0 
28.6 
28.0 
27.3 
24.0 
23.8 
22.6 
21.4 
21.3 
21.3 
20.3 



Among the industries represented in table 18, the largest number 
of establishments was in the manufactured ice industry. More than 
36 percent of all plants in this industry were in simple organizations, 
15 percent were in complex, and over 48 percent were independently 
operated. The largest industry in terms of value of products included 
in this table was the canning industry. In this classification 30 per- 
cent of all establishments were controlled by central offices operating 
in but one industry, while 62 percent were independent establishments. 



DISTRIBUTION OF CENTRAL OFFICES ACCORDING TO NUMBER OF 
ESTABLISHMENTS OPERATED 

Evidence of the extent to which central offices expand their activi- 
ties without entering other fields of manufacture is demonstrated by 
chart 12. It may be observed that as the number of establishments 
operated by a central office increased, the proportion of simple central 
offices to the total number tended to decline. Companies controlling 
5 or more establishments were preponderantly complex in organiza- 
tion. The higher proportion of simple structures operating 30 
to 49 plants than of those controlling 20 to 29 plants was due to 



CONCENTRATION OF ECONOMIC POWER 



157 



the fact that an unusually large number of concerns operating in the 
food group happened to fall in the former class, as well as to the dou- 
bling of the class interval. 

Although 64 percent of all simple central offices operated only 2 es- 
tablishments, the percentages among the industry groups showed con- 
siderable variation. (See table 19.) In the petroleum and coal group, 
half of the single-industry offices had but 2 establishments, while the 
16 central offices engaged in making rubber products controlled only 
2 plants each. These plants were active in the manufacture of mis- 
cellaneous rubber goods, such as rubber belting and hose, rubberized 
fabrics and cloth, druggists' and stationers' sundries, rubber mats 
rubber heels, and soles, etc. 

About one-fourth of the simple central offices had either 3 or 4 
establishments but the concentration in the larger subdivisions was 



NUMBER OF 
ESTABLISHMENTS 

OPERATED BY 
CENTRAL OFFICE 




CHART 12.-PERCENTAGE DISTRIBUTION OF SIMPLE AND COMPLEX CENTRAL 
OFFICES, BY NUMBER OF ESTABLISHMENTS OPERATED, 1937, 

negligible Only one-eighth of the central offices had more than 5 
plants With one exception, all the companies operating 30 or 
more factories were classified in the food group and most of these 
concerns operated ice plants or bakeries, activities in which the ad- 
vantages of expanding into other fields of manufacture are probably 
unimportant. It is significant that the percentage distribution of 
simple central offices in 1937, by number of establishments operated, 
followed very closely the general pattern of the distribution for 1919 
the year covered in Dr. Thorp's study. 

In contrast with the high concentration of simple central offices in 
the two-plant classification, a distribution of complex offices reveals 
that most of these controlled more than two establishments Spe- 
cifically, 34 percent of all complex central offices operated five or more 
plants, 32 percent had three or four plants, and 34 percent had only 
two establishments. (See table 20.) Stated in another way, 66 
percent of all complex central offices operated three or more estab- 
lishments, whereas 64 percent of all simple companies controlled but 
two establishments. 



158 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



161 



Eighty percent of the number of central offices in the paper and 
allied products group, in the petroleum and coal group, and in the 
transportation equipment group operated more than three establish- 
ments each. Other groups having a higher than average concentra- 
tion in the brackets of three dr more establishments were food and 
kindred products, chemicals, and iron and steel and their products. 

A comparison of the distribution of complex central offices in 1919 
with data for 1937 indicates a very definite transition toward larger 
companies, i. e., larger at least in terms of the number of plants 
operated. Complex central offices operating two plants declined 
f~om 43 percent of the total in 1919 to 34 percent in 1937; those 
controlling three or four plants increased from 28 percent to 32 
percent, while for the companies having five or more establishments 
the change was from 29 percent to 34 percent in 1937. 3 



MEASURES OF THE IMPORTANCE OF SIMPLE AND COMPLEX STRUCTURES 

As was shown in chart 12, the average complex central office 
operated more than twice as many establishments as the average 
simple central office. Several other criteria against which the relative 
importance of the two types of central-office structures may be 
measured are presented in the following tabulation: 



Number of establishments per central office 

Wage earners (average for the year) 

Number of wage earners per central office.-. _ 

Wages paid (thousand dollars) 

Wages paid per central office (thousand dollars). 

Value added by manufacture (thousand dollars) 

Value added by manufacture per central office (thousand dollars) 



All central 
offices 



4.6 

4, 380, 123 

779 

5,595,087 

995 

13, 975, 037 

2,484 



Simple 
central 
offices 



3. 2 
1,023,293 

286 
1, 106, 573 

310 
2, 574, 922 

720 



Complex 

central 

offices 



7.0 

3, 356, 830 

1,637 

4, 488, 514 

2,188 

11,400,115 

5,558 



From the above data for 1937, it may be seen that complex central 
offices, i. e., central offices operating establishments in more than one 
industry, employed about 77 percent of all central-office wage earners 
and paid 80 percent of the wage bill. Furthermore, the value added 
by manufacture in complex structures represented 82 percent of 
that for all central-office groups. It is probable that these ratios 
would vary considerably among industries and industry groups if 
the data were distributed on that basis, but such information was not 
available for this study. 

Since -the complex central offices controlled about 56 percent of all 
central-office establishments in 1937, it is to be expected that they 
would account for a higher proportion of such items as wage earners, 
wages paid, value added by manufacture, etc., than the simple 
groups. The typical complex central office employed almost 
six times as many wage earners as the average simple central office, 
while the value added by manufacture in the former structure was 
about eight times that in the latter. A comparison of the size of 
establishment in the two forms of organization reveals that the average 

3 For a discussion of central offices according to the number of industries in which they operate establish- 
ments, see chapter II of this study. These data are presented statistically in table 6 of that chapter. 
Obviously, the column in the table showing central offices operating in but one industry relates to simple 
structures, whereas the distribution of central offices operating in two or more industries pertains to 
complex structures. 



273238— 41— pt. 27 12 



Ig2 CONCENTRATION OF ECONOMIC POWER 

establishment in complex groups (as measured by wage earners, 
wages paid, and the value added by manufacture) was approximately 
three times as large as the average simple central-office plant. 

Thus, central offices which extend their activities into different 
industries are larger, in general, than those which expand along 
parallel lines. These data, however, do not afford a basis for answer- 
ing the questions: Are complex central offices large because they have 
extended their operations into several industries? Or, are they 
integrated because they are large? Or, are the two developments 
concomitant? 






CHAPTER V 

UNIFORM FUNCTIONS 

The inquiry in the preceding chapter was directed toward measuring 
the extent of simple and complex central-office operations in manu- 
facturing Since the simple structures represent groupings of 
industrial units on the same plane of production or of those making 
the same type of products, the discussion of such structures is likewise 
a discussion of a large segment of uniform functional relations among 
establishments controlled by central offices. For this reason the 
present chapter for the most part, is only an extension of the analysis 
of simple central offices to include the uniform functions of establish- 
ments within complex central-office groups and to cite the probable 
economic forces motivating expansion in parallel lines of production. 

THE EXTENT OF HORIZONTAL INTEGRATION WITHIN COMPLEX CENTRAL- 
OFFICE GROUPS 

As has already been stated, establishments operating under one 
management and producing similar or uniform products constitute 
instances of horizontal integration and this is the most prevalent form 
ol integration among manufacturing establishments. Over 63 percent 
ol all central-office organizations in 1937 were simple in structure: 
tnat is, the establishments within these companies were related through 
the performance of uniform functions. If, however, consideration is 
given the instances within complex central offices in which the func- 
tions ol the establishments are uniform in nature, horizontal integra- 
tion in the manufacturing segment of our economy assumes even 
greater significance. For example, if a complex central office controls 
10 establishments in the ice cream industry and one in the cheese 
industry, there is thus within this complex central office an instance 
in which the functions of establishments are related on a uniform 
. S1 ur v Gn th , e co . m P lex central offices which operated at least some 
establishments having uniform functions are added to the com- 
panies which were purely simple in structure, the proportion of central 
omces with horizontally integrated establishments approximates 85 
percent of the total number of central offices. Of the 2,051 complex 
central offices in 1937, there were 1,219 which controlled two or more 
establishments engaged in parallel lines of activity within a single 
industry. Furthermore, 10,696 of the 14,378 establishments under 
complex- management were related in this horizontal fashion. 

lo give further emphasis to the importance of horizontal integration 
within complex structures, it may be said that the 832 central offices in 
wnich there was no horizontal expansion controlled but 1,851 establish- 
ments, or only 7 percent of all central-office establishments. Since 
no z ol these 1,851 establishments under the same central-office 
management were operating in the same industry, most of the 832 
central offices controlled plants in only two industries. In other 
words central offices which were active in more than two industries 
tended also to expand horizontally. 

The total number of central offices and the number of establishments 
nonzontally integrated are shown in table 21. There it may be seen 
mat when the instances of uniform activities in complex structures are 

163 



164 



CONCENTRATION OF ECONOMIC POWER 



taken into account the relative importance of horizontal integration 
wTeatiy increased among the several industry groups, though in 
vamng magnitude. When only simple organizations are considered 
Tt^Tpparent that the uniform functional relation of establishments 
was most common in the stone, clay, and glass products group. The 
mcluSon of uniform functions within complex structures, however 
results in a change in the relative rank of this group and. brings the 
food group to 'first position. 

Table 21.— Extent of horizontal integration within central-office companies, 1937 

[Note.— See headnote to table 16] 



Group 
No. 



Industry group 



Number of central offices 



All industries. 



16 



Food and kindred products --- 

Textiles and their products 

Forest products -- 

Paper and allied products. ■•■••■■■:-.•:■■- 
Printing, publishing, and allied industries.- . 

Chemicals and allied products 

Products of petroleum and coal. 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products ---------- 

Iron and steel and their products, not includ- 
ing machinery -- ---- -;-v 

Nonferrous metals and their products. -- 
Machinery, not including transportation 



Total 



5,625 



equipment 

Transportation equipment, air, land, ana 



water. _ 
Miscellaneous industries- 



1,660 
810 
636 
193 
232 
389 
66 
30 
127 
343 

336 



■?m 



Simple plus com- 
plex with estab- 
lishments having 
uniform func- 
tions 



4,793 



91 
225 



1,508 
692 
543 
163 
200 
329 
57 
22 
106 
310 

253 

72 

277 

74 
187 



Percent 

of total 

85.2 



Simple 



3,574 



Complex 

with 
establish- 
ments 
having 
uniform 
functions 



90.8 
85.4 
85.4 
84.5 
86.2 
84.6 
86.4 
73.3 
83.5 
90.4 

75.3 
76.6 

70.5 

81.3 
83.1 



1,222 

512 

430 

83 

167 

220 

30 

16 

83 

260 

134 
51 

186 

38 
142 



1,219 



286 

180 

113 

80 

33 

109 

27 

6 

23 

50 

119 
21 



Group 
No. 



Industry group 



Number of central-office establishments 



Total 



All industries . 



1 Food and kindred products 

2 Textiles and their products 

3 Forest products 

4 Paper and allied products --------- 

5 Printing, publishing, and allied industries 

6 Chemicals and allied products 

7 | Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products. 

Iron and steel and their products, not includ- 
ing machinery v.": j""_l»" 

Nonferrous metals and their products. ------ 

Machinery, not including transportation 

equipment - — - -— -,- — y - - " j 

Transportation equipment, air, land, and 

water ~ 

16 Miscellaneous industries 



Establishments in 
simple groups 
plus establish- 
ments wich uni- 
form functions in 
complex groups 



25, 699 



14 



9,546 

2,671 

2,305 

886 

817 

2,229 

430 

115 

499 

1,316 

1,620 
394 

1,429 

561 
881 



22,017 



8.810 
2,182 
1,994 

703 

708 
1,893 

353 
77 

413 
1,181 

1,236 
298 

1,012 

422 
735 



Simple 



Percent 
of total 

85.7 

92.3 
81.7 
86.5 
79.3 
86.7 
84.9 
82.1 
67.0 
82.8 
89.7 

76.3 
75.6 



75.2 
83.4 



Estab- 
lishments 
with uni- 
form 
functions 
in complex 

groups 



11,321 


10,696 


4, 851 


3,959 


1,354 


828 


1,181 


813 


210 


493 


493 


215 


580 


1,313 


85 


268 


32 


45 


212 


201 


816 


365 


325 


911 


126 


172 


471 


541 



135 
450 



287 
285 



CONCENTRATION OP ECONOMIC POWER 1(J5 

Furthermore, 91 percent of all central offices in the food group 
operated establishments which were horizontally integrated and 92 
percent of all establishments in this group were related to other 
establishments horizontally. In fact, the 286 central offices in the 
food group which expanded horizontally as well as into different 
industries controlled only 401 establishments which were not hori- 
zontally related to other establishments, while 3,959 establishments 
operated by these central offices were horizontally related to other 
establishments under the same management. In no group did the 
ratio for the number of central offices fall below 70 percent nor that 
for the number of establishments below 67 percent. A comparison 
of the percentages shown in table 21 with those in tables 16 and 17 
gives the incremental effect among the various groups of the inclusion 
of the complex central offices which controlled plants having uniform 
functions. The relative increase in terms of the number of central 
offices was largest in the paper and allied products group, while the 
largest increase in the number of establishments occurred in the petro- 
leum and coal group. 

THE FORMATION OF HORIZONTAL COMBINATIONS 

The combinations of establishments at the same stage of manu- 
facture and operating under one central office may have come into 
being through a merger of previously independent plants operating 
in the same industry, or the combinations may have been the result of 
expansion through the building of additional plants to manufacture 
the same or closely allied products as those produced by the parent 
plant. As was indicated at an earlier point, the present analysis is 
not concerned with a historical study of how the groups were built up. 
Rather, interest here is centered in a description of the groups as they 
existed in 1937. An understanding of this horizontal type of combina- 
tion wherein establishments operating at the same stage of manufac- 
ture are grouped under one management control is facilitated, how- 
ever, by an examination of the possible economic forces which might 
have served to motivate the formation of such a central-office concern. 

The possible economic forces which operate either singly or in com- 
bination may be briefly set forth in general terms. As enumerated 
here, the economic advantages to be secured through the combination 
of manufacturing plants into a horizontally integrated concern do not 
necessarily afford the motivating force for any particular central 
office, though they may be the general causes of combination. If 
these economic advantages are to be thought of as forces in a rational 
decision to expand horizontally, they should be viewed as net econ- 
omies; that is, the economies to be gained by combination should 
outweigh the diseconomies inherent in the costs of cohesion. 

(1) It may have been economically advisable to add a second estab- 
lishment to the productive set-up of a concern when the existing plant 
was operating at its optimum point and the demand warranted it, 
rather than to derive additional output from the original plant under 
rising cost conditions. 

(2) If the product is bulky and freight costs on it are relatively 
high, it may have been advantageous from the point of view of dis- 
tribution costs to establish plants at widely scattered points. This 
force has undoubtedly been operative in the development of large 
automobile concerns. The assembly plants maintained b} 7 " these 
concerns have a functional relation to the entire central-office group 
which has been distinguished herein as uniform. 



IQQ CONCENTRATION OF ECONOMIC POWER 

(3) If the product has relatively high value in relation to freight 
costs and if the optimum size plant is relatively small, it may have 
been advantageous to decentralize production and gain the benefit of 
the lower cost conditions present in small communities. This com- 
bination of factors may have been of influence in the decision of shoe 
manufacturers, for example, to establish plants in many small com- 
munities throughout the country. 

(4) The economies of financing, advertising, buying, etc., may make 
it desirable to bring under one management a number of plants tied 
to local areas by their supplies of resources or by the necessity of pro- 
ducing perishable commodities close to the consumers. This com- 
bination of forces may account for the tendency of concerns producing 
and distributing dairy products, sawmill products, paper products, 
etc., to bring under one operating control several such establishments. 
The economies to-be derived from combinations of this nature, how- 
ever, may be emphasized too strongly, especially when each of the 
plants so brought together is of optimum size. In many such cases 
the factors responsible for the formation of the combination are not 
economic. Rather, the motivation arises from the understandable 
desire on the part of the management to extend its control over a 
wider area. 

(5) It may have happened that a group of independent concerns 
operating at stage "two" in the productive process were confronted by 
tightly organized market control at stage "one" and' possibly at 
stage "three." Thus, it may have been, necessary for these inde- 
pendent concerns to combine for bargaining purposes into a single 
concern with several different plants. Such a combination would 
improve the strategic position of these concerns by reducing the 
"ruinous" price competition that may have existed previously. 

(6) In each of the foregoing cases, a combination of other economic 
factors of a general nature may have been present to supply a favor- 
able environment for expansion. That is, the concerns might have 
been operating in expanding industries or in expanding markets and 
under profitable conditions. Thus, there would be a reason for 
expansion and there would also be available surplus capital for invest- 
ment to finance such a move. The presence of undistributed earnings 
and successful past operations in a particular line would seem to 
afford a favorable background of experience for the operation of a 
second or third plant in that same line. 

As a concern grows, the ordinary procedure is for it to reinvest first 
in its own industry. Thus, the simple central office is a first step in 
the development of a larger combination. The reasons for the 
expansion of a simple central office into more than one industry are 
usually associated with the desire to insure an adequate supply of 
some necessary raw material or to perfect the disposal of its product 
(either the main product or any by-product). But here, also, the 
motivating forces work both ways. It may be necessary to have 
several plants before it becomes profitable, for example, to operate a 
separate plant supplying containers or a by-product plant. No one 
plant would warrant the acquisition of a by-product or container 
plant, but a combination might profitably utilize such plants. In any 
event, the simple , central office tends to enter other industries and 
thus to become a complex enterprise. The various types of interre- 
lationships among plants controlled by these complex or multiple- 
function organizations are discussed in considerable detail in subse- 
quent chapters. 



CHAPTER VI 

DIVERGENT FUNCTIONS 

Up to this point, the analysis has been concerned with those 
central offices which controlled two or more establishments in the 
same industry or those groups in which the establishments were 
related through the performance of uniform activities. In this 
chapter and in the chapters dealing with convergent, successive, and 
unrelated functions, consideration will be given primarily to the 
functional relationships among the establishments of complex central 
offices. 

Before discussing in detail the functional organization of multiple- 
industry central offices, it is desirable to present a general picture of 
the diverse patterns of integration in manufacturing. (See table 22 
and chart 13.) Smce in this table and chart all the different types of 
relationships existmg among establishments within a single central- 
office group were taken into account, the data by no means give an 
accurate count of the actual number of central offices. They are 
merely a summarization of the horizontal types of integration already 
discussed together with those instances of multiple functional rela- 
tions which are to follow, so that the relative importance of each type 
may be evaluated. It may be seen that for the central-office com- 
panies classified m the iron and steel group, the two types of integra- 
tion are about equally significant. In the stone, clay, and glass 
products industries and m the food industries, where the manufactur- 
ing processes are not particularly complicated, the nonhorizontal 
functional relationships are of relatively less importance. Although 
no extended analysis of the data in table 22 and chart 13 will be 
given, their materials afford a helpful over-all picture of the functional 
relations of establishments under central-office management. 

It was pointed out earlier in the discussion that the larger a central- 
office company becomes the more likely it is to engage in diverse 
lines of manufacture, so that the simple central office is the precursor 
oi complex organizations. The analysis in this chapter and in the 
subsequent chapters pertains to the probable functional relationships 
that existed in 1937 among manufacturing establishments under 
complex management. No attempt is made in this study to determine 
precisely all the mdividual products of establishments and their 
interrelationships. The various functions assigned were based pri- 
marily upon industry classifications and the relationships of the 
principal products of one industry to those of other industries in the 
operating combination. 

167 



168 



CONCENTRATION OF ECONOMIC POWER 



Table 22. — Total number of different types of integration in central-office companies, 

by industry groups, 1937 



Industry group 



AU industries . 

Food and kindred products. 

Textiles and their products 

Forest products 

Paper and allied products 

Printing, publishing, and allied industries 

Chemicals and allied products 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products. 

Iron and steel and their products, not including 

machinery 

Nonferrous metals and their products 

Machinery, not including transportation equipment 

Transportation equipment, air, land, and water 

M iscellaneous industries 



All industries. 

Food and kindred products _ 

Textiles and their products 

Forest products 

Paper and allied products 

Printing, publishing, and allied industries 

Chemicals and allied products... „ 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products 

Iron and steel and their products, not including 

mach iner y 

Nonferrous metals and their products.. 

Machinery, not including transportation equipment 

Transportation equipment, air, land, and water 

Miscellaneous industries 



7,292 



2,049 
1,025 
778 
310 
277 
550 
106 
42 
160 
403 

503 
137 

517 
137 
298 



Uniform 
functions 



2>S 



4,793 



1,508 
692 
543 
163 
200 
329 
57 
22 
106 
310 

253 
72 

277 
74 

187 



— - 



3,574 



1,222 

512 

430 

83 

167 

220 

30 

16 

83 

260 

134 
51 

186 
38 

142 



Multiple functions 



2,499 



541 

333 

235 
147 
77 
221 
40 
20 
54 
93 

250 
65 

240 
63 

ill 



781 



217 

123 

23 
43 

44 
63 

18 



IS 

mi 

18 
53 
17 
24 



1,058 



284 
72 
58 
23 
21 

108 
23 
12 
25 
62 

75 

33 
158 

37 

07 



505 



20 

131 

140 

78 

10 

18 

5 



95 



Percentage distribution 



100.0 



100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 

100.0 
100.0 
100.0 
100.0 
100.0 



65.7 



73.6 
67.5 
69.8 
52.6 
72.2 
59.8 
53.8 
52.4 
66.3 
76.9 

50.3 
52.6 
53.6 
54.0 
62.8 



49.0 



59.6 
50.0 
55.3 
26.8 
60.3 
40.0 
28.3 
38.1 
51.9 
64.5 

26.6 
37.2 
36.0 
27.7 
47.7 



34.3 



26.4 
32.5 
30.2 
47.4 
27.8 
40.2 
46.2 
47.6 
33.7 
23.1 

49.7 
47.4 
46.4 
46.0 
37.2 



10.7 



10.6 
12.0 
3.0 
13.9 
15.9 
11.5 
17.0 
19.0 
5.0 
4.5 

20.7 
13.1 
10.3 
12.4 
8.1 



14. 5 7. 7 1. 3 



13.9 

7.0 

7.5 

7.4 

7.6 

19.6 

21.7 

28.6 

15.6 

15.4 

14.9 
24.1 
30.6 
27.0 
22.5 



1.4 
12.8 
18.8 
25.2 
3.6 
3.3 
4.7 



12.5 
1.2 

13.1 

8.8 
3.9 
5.8 
5.7 



.5 
.7 
1.0 
1.0 
.7 
5.8 
2.8 



.6 

2.0 

1.0 
1.5 
1.7 
.7 
1.0 



1 Includes duplications among joint products, by-products, and like processes. 

1 Includes duplications among complementary products, auxiliary products, and like markets; does not 
include duplications among complementary materials, parts, and products comprising the complementary 
products subgroup, nor duplications between auxiliary services and commodities comprisihg the auxiliary 
products subgroup. 

Manifestly, any one or all of the functions designated may occur 
within a single complex central-office group, i. e., uniform, divergent, 
convergent, successive, or unrelated. When two or more manufactur- 
ing processes carried on by establishments within a central-office 
group begin at a certain point and at some place along the line 
of process branch off in diflerent directions so that different final 
products are obtained, the functional relations of the establishments 
in such a group have been classified as divergent. To facilitate the 
analysis, divergent functions have been subdivided according to the 
manufacture of joint products, by-products, and the exploitation of 
like processes. (See table 23.) 



CONCENTRATION OF ECONOMIC POWER 



169 




170 



CONCENTRATION OF ECONOMIC POWER 



Table 23. — Central-office companies having divergent functions, by industry 

groups, 19S7 

[Note.— See headnote to table 16] 



Group 


Industry group 


Number of 
central of- 
fices having 
divergent 
functions 
(undupli- 
cated 
total)i 


Number of 
central of- 
fices having 
divergent 
functions 
(dupli- 
cated 
total) » 


Number of central offices 
operating establishments 
related through- 


No. 


Joint 
prod- 
ucts 


By- 
prod- 
ucts 


Like 
proc- 
esses 




All industries. 


757 


781 


564 


113 


104 








1 


209 
121 
23 
42 

43 

60 

16 

8 

8 
18 

100 

16 

53 

17 
23 


217 
123 
23 
43 

44 
63 
18 
8 
8 
18 

104 
18 

53 

17 
24 


173 
83 
16 
40 


34 
9 
7 
3 

1 

27 
15 


10 


2 




31 


3 






4 






5 


Printing, publishing, and allied indus- 


43 


6 




35 
3 
8 
2 

10 

96 
6 

63 

17 
22 


1 


7 






8 






9 




1 

6 

3 
6 


5 


10 




3 


11 


Iron and steel and their products, not 


5 


12 
13 


Nonferrous metals and their products 

Machinery, not including transportation 


6 


14 


Transportation equipment, air, land, and 






16 




2 











> The duplicated total includes duplications among joint products, by-products, and like processes; in 
the unduplicated total, duplications among the 3 divergent subgroups have been eliminated. 



JOINT PRODUCTS 

The improved methods in machine technique and the advancement 
in chemical processes have contributed largely to the wide diversifica- 
tion of products made from common raw materials. New uses of raw 
materials continue to be found, so that the manufacturing industry is 
characterized by an increasing variety of commodities fabricated from 
the same base. Different products made from the same material are 
designated as joint products, provided the divergence is not essential 
to the manufacture of either product. In other words, one line of 
activity may be discontinued without affecting other operations, ex- 
cept indirectly. Since each establishment is classified by the Bureau 
of the Census in a single industry according to its product of major 
value, it is not only necessary that joint products be made from the 
same raw material, but they also must fall within different census 
categories. In the case of two plants under common central-office 
management, one plant producing butter and the other making ice 
cream, the functional relationship of the two establishments wouldjbe 
based upon the manufacture of joint products, since both commodities 
are made from milk and they are also classified in separate industry 
categories by the Bureau of the Census. Conversely, if one plant 
manufactures corn sirup and another corn starch, they would not be 
distinguished as producing joint products because both commodities 
fall within the same census classification. 

Among the 5,625 multiple-plant central offices in 1937, 564 com- 
panies or approximately 10 percent, controlled separate establish- 
ments engaged in the manufacture of joint products. (See table 24.) 
When the comparison is made within complex organizations alone, 



CONCENTRATION OF ECONOMIC POWER 



171 



27.5 percent of this type of central office operated establishments 
making products from a common raw material. A comparison of the 
aforementioned percentages with corresponding data for the year 1919 
indicates a slight upward tendency in the proportion of central-office 
groups manufacturing joint products. 1 This is one of the most preva- 
lent types of complex organizations, ranking about equal in numerical 
importance to those producing successive products. More than three- 
fifths of all instances of the manufacture of joint products occurred in 
the food and kindred products, iron and steel, and textile groups. 
Food and Kindred Products. 

Although the diversity of food products which can be made from a 
common raw material is comparatively small, central offices manu- 
facturing different products from a single food material totaled 173, 
a greater number than was recorded for any other industrial group. Of 
this total, 125 companies utilized milk or cream as a raw material. 
The large number of central-office companies in the food products 
group is accounted for chiefly by those concerns making creamery 
products. The principal products made were butter, cheese, con- 
densed and evaporated milk, andice cream. There were 97 compa- 
nies producing 2 of these major commodities, 19 producing 3, and 9 
producing 4. Only 20 of the 125 central offices having establishments 
engaged in the output of creamery products controlled plants active in 
other major lmes as well. Furthermore, in most of these cases the 
establishments manufactured products which were sold in the same 
market as creamery products or were engaged in operations of an 
auxiliary nature, such as the manufacture of ice for use in making ice 
cream or in the preservation of the milk products. 

Table 24.— Central-office companies -producing joint products, by industry groups, 

[Notje.— See headnote to table lfi] 



Group 

No. 



Industry group 



All industries. 



Food and kindred products 

Textiles and their products 

Forest products 

Paper and allied products 

Printing, publishing, and allied industries 

Chemicals and allied products 

Products of petroleum and coal 

Rubber products-. '_" 

Leather and its manufactures ...". 

Stone, clay, and glass products __" 

Iron and steel and their products, not including ma- 
chinery. 

Nonferrous metals and their products" " 

Machinery, not including transportation equipment 
1 ransportation equipment, air, land, and water 
Miscellaneous industries 



Total 
number 
of cen- 
tral 
offices 



5,625 



1,660 
810 
636 
193 
232 
389 
66 
30 
127 
343 

336 
94 

393 
91 

225 



Total 
number 
of com- 
plex 

central 
offices 



2,051 



438 
298 
206 
110 
65 
169 
36 
14 
44 
83 

202 
43 

207 
53 
83 



Central-office compa- 
nies producing joint 
products 



Num- 
ber 



564 



173 
83 

16 

40 



Percent of— 



Total 



10.0 



Com- 
plex 



27.5 



10.4 

10.2 

2.5 

20.7 



9.0 
4.5 
26.7 
1.6 
2.9 

28.6 
6.4 
13.5 

18.7 



39.5 

27.9 

7.8 

36.4 



20.7 
8.3 

57.1 
4.5 

12.0 

47.5 
14.0 
25.6 
32.1 
26.5 



1 See "The Integration of Industrial Operation," p. 178. 



172 CONCENTRATION OF ECONOMIC POWER 

The use of grains as a raw material occurred in 37 central-office 
companies classified in the food group. Major commodities such 
as flour, cereal preparations, feeds for fowls, etc., were produced. In 
the remaining 11 concerns, fruit was the principal raw material 
utilized and various liquors, vinegar and cider, canned fruit, and the 
like were the finished products. 

Iron and Steel and Their Products. 

The iron and steel industry is characterized by a number of definite 
steps in the process from raw material to finished product. In the 
early stages of manufacture there is little opportunity for divergence, 
except in the case of by-products, so that most instances of joint 
products come in the more advanced stages. The principal raw ma- 
terials used in the manufacture of iron and steel are iron ore, coke, 
and limestone or dolomite (the former being more commonly used). 
The initial stage in the process is the extraction of iron from its ore 
in the blast furnace. Pig iron thus obtained can be used without 
refining for making iron castings, but for conversion into steel or 
wrought iron most of the impurities must be removed through refining 
operations. 

Following the blast-furnace operations, there are several possible 
lines of divergence. Establishments making such items as foundry 
products, cast iron pipe and fittings, plumbers' supplies, cast iron 
heating boilers, radiators, stoves, ranges, etc., utilize pig iron direct 
from the blast furnace as their raw material. Products of most of 
the industries in the iron and steel group, however, require a further 
refined basic material and the principal divergence of products from 
a common material occurs after the operations of steel works and 
rolling mills. That more than 80 percent of the total pig iron output 
of blast furnaces in 1937 was used as a material by steel mills gives 
further evidence that diversity of products, for the most part, takes 
place after the product has gone through the steel-works and rolling- 
mill stage. 

Among the 202 complex central-office companies classified in the 
iron and steel group, 96 controlled plants which were related through 
the utilization of a common raw material. Steel, as it left the con- 
verters and rolling mills, constituted the raw material for 64 of these 
central offices, while both steel and pig iron were raw material for 25 
central offices. Steel works and rolling mills were operated as sep- 
arate establishments in 21 of the combinations using steel in further 
manufacture and 9 of these central offices also operated their own 
blast furnaces and coke ovens, thus placing them in the vertical cate- 
gory as well as among the manufacturers of joint products. In seven 
instances pig iron alone was employed as a raw material, five of these 
involving groupings of establishments classified in the steel works 
and rolling mills industry and in the foundry products industry. 

Textiles and Their Products. 

In this group 93 separate industries with different major products 
were distinguished by the Bureau of the Census for the year 1937. 
Since there are numerous final products and comparatively few basic 
textile materials, one would expect to find many instances .of joint 
products in the textile group. Like the iron and steel group, the major 
opportunity for divergence is in the more advanced manufacturing 
stages. The spinning of the yarn and thread and the weaving and 



CONCENTRATION OF ECONOMIC POWER 173 

dyeing of cloth usually follow a single line, but after the material has 
left these processes numerous possibilities for diversification of prod- 
ucts are available to the manufacturer. In some instances, however, 
joint products occur immediately after the spooling, twisting, or wind- 
ing of yarn and thread. Certain central offices controlled establish- 
ments engaged in the aforementioned activities and also operated 
plants engaged in weaving cloth from the yarn as well as other plants 
which knitted the yarn into underwear. 

Eighty-three central offices operated establishments which were 
related through the manufacture of joint products. These structures 
represented about 28 percent of the total number of complex com- 
panies classified in the textile group. Many of the items manufac- 
tured were various types of clothing fabricated from a common 
textile material. Specifically, groupings of factories produced various 
types of women's clothing and men's shirts and collars; rayon broad 
woven goods and rayon hosiery; cotton underwear and nightwear 
and shirts and collars; shirts, work clothing, men's underwear, dresses, 
and miscellaneous clothing for women, misses, and children; knitted 
cloth and knitted gloves and mittens; and cotton narrow fabrics and 
trimmings. 

Other Industry Groups. 

Of the 564 central-office companies producing joint products, 212 
were operating primarily in industry groups other than food, iron 
and steel, and textiles. More than half of these 212 central offices 
were classified in the machinery, paper and allied products, and chem- 
ical groups. The 53 central offices classified in the machinery group 
consisted chiefly of those utilizing steel in the fabrication of various 
machinery products. Obviously, these products would include 
the more advanced manufactures of iron and steel, whereas the 
joint products of those central offices classified in the iron and steel 
group represented, for the most part, crude and intermediate com- 
modities. In practically all instances the central offices controlled 
plants operating in but two or three separate industries, indicating 
that only a few major commodities were made from the same raw 
material. Undoubtedly, numerous minor products were manufac- 
tured, but an analysis of the functional relationship of establishments 
on an industry basis does not reveal these items. There were eight 
central offices operating in more than three industries, but some of 
the establishments controlled by them were engaged in industries 
not utilizing a common raw material. 

Joint products derived from paper and pulp were produced by 40 
central-office companies. Pulp was used by plants classified in 
the paper industry for the manufacture of such products as news- 
print, book, writing, wrapping, tissue, building papers, and the like; 
and in the "paper goods not elsewhere classified" industry for making 
crepe paper, surface-coated paper, corrugated paper, toilet paper, 
playing cards, confetti, milk-bottle caps, and various other miscella- 
neous paper products. One central office utilized pulp in separate 
plants to make paper, miscellaneous paper goods, and molded and 
pressed pulp fabricated articles. Paper constituted the basic material 
for the production of paper boxes, paper bags, envelopes, etc. 

Joint products were manufactured by 35 of the 169 central-office 
groups operating primarily in the chemical and allied products indus- 



174 CONCENTRATION OF ECONOMIC POWER 

tries. Establishments producing soap, fertilizers, glue and gelatin, 
grease and tallow, and bone black utilized animal fats and bones in 
the manufacture thereof. Advances in the field of chemistry are 
reflected in the use of a common raw material by plants engaged in 
the output of drugs and medicines and in the production of numerous 
miscellaneous chemicals falling within the "chemicals not elsewhere 
classified" industry. Although the remaining 84 central offices which 
manufactured joint products were distributed among eight separate 
industry groups, 22 of these were included in the miscellaneous indus- 
tries group, 8 of which utilized tobacco in the production of 
cigarettes, chewing and smoking tobacco, and snuff. Separate plants 
producing buttons and condensed and evaporated milk utilized milk 
as a common raw material, the casein from milk being made into 
buttons.. 

BY-PRODUCTS 

In manufacturing it frequently happens that certain subsidiary com- 
modities are produced in addition to the principal product; that is, 
they are merely incidental to the manufacture of the primary product 
and their eventua'tion is entirely beyond the control of the operator. 
Such commodities, if purchased by other establishments within a 
central-office group and subjected to further processing, were treated 
as by-products in this analysis. Both joint products and by-products 
have a common raw material and diverge at some point along the 
line of production. The distinction between the two, however, is 
that in the production of joint products the manufacturer may dis- 
continue the output of one commodity without affecting any other, 
except indirectly ; whereas, in the case of by-products, the discontin- 
uance of the main product automatically suspends the output of the 
by-product. 

Although a by-product may be secondary or subsidiary in that it is 
less important than the main product, the terms are not used synony- 
mously in this discussion. A by-product must result naturally, and 
more or less in the nature of a waste material, from the production of 
some principal commodity. Manifestly, an establishment may utilize 
its waste within the plant itself, but in the present discussion of by- 
products consideration was given only to those cases in which separate 
establishments were maintained for the processing of waste. Hence, 
the separate by-product plants reported by central-office concerns 
are by no means an indication of the extent to which by-products are 
utilized by the companies. Generally speaking, it is only the larger 
concerns that find the amount of material available for by-product 
manufacture of sufficient importance to justify the operation of 
separate plants to take care of it. 

The manufacture of by-products ranked second in importance 
among the divergent functions of central-office groups in 1937, 113 
cases being found in which by-product plants were operated within 
such groups. (See table 23.) Separate by-product plants were devel- 
oped principally in the food, chemical, and petroleum and coal groups. 
In the food group, 34 central offices maintained by-product plants and 
8 of these were predominantly active in the wholesale meat-packing 
industry. By-product plants operated in conjunction with the basic 
industry of meat packing produced such commodities as fertilizer, 
glue and gelatin, grease and tallow, soap, shortenings made of mixed 



CONCENTRATION OF ECONOMIC POWER J 75 

animal and vegetable fats and oils, sausage casings, and various meat 
products made from meat scraps. Three companies engaged in the 
canning and curing of fish, crabs, etc., also maintained separate 
plants to produce either fish oils or fertilizers. 

Central offices active primarily in the manufacture of vegetable 
products also maintained plants for the processing of by-products. 
The refuse from plants utilizing grains and other vegetable products 
as raw materials was converted by other plants under the same control 
into fertilizer and feeds for animals and fowls. In the production of 
cane sugar, the excess material was reclaimed by separate establish- 
ments and made into animal feeds and blended and compounded 
sirups. There were 15 central offices which used some form of vege- 
table product as their principal raw material and maintained by- 
product plants. 

The chemical industry is another field which lends itself readily to 
the manufacture of by-products. Of the 27 central offices which 
operated by-product establishments in this industry group, 9 were 
predominantly active in the output of cottonseed oil, cake, and 
meal and utilized some of the meal, hulls, cake, etc., in the production 
of fertilizer or animal feeds. Other by-products of the chemical 
industry were paving materials made from coal-tar products, pulp 
from the manufacture of cottonseed oil, grease from reclaimed soap 
stock, and household and industrial compounds from the manufacture 
of miscellaneous primary chemical products. Ice may also be in- 
cluded as a by-product of the chemical industry. The relationship, 
however, is based upon the utilization of excess power and the fact 
that ammonia is an important element in the manufacture of ice. 

Although only 36 complex central offices were predominantly 
active in the petroleum and coal group, 15 of these maintained separate 
by-product plants. The oil refining industry is especially conducive 
to by-product manufacture, since the products of petroleum are ob- 
tained by successive refining processes and the output of any one 
commodity is contingent upon the removal of certain other products. 
Obviously, if these by-products were all produced and treated in one 
establishment they were not recognized in this study. It is significant, 
however, that 1 1 petroleum refineries operated separate plants for the 
production of lubricating oils and greases. 

The development of by-product coke ovens has resulted in the 
recovery of numerous by-products formerly wasted, so that at the 
present time practically all coke is produced in by-product ovens. 
The principal by-products obtained from coke-oven operations are tar 
and tar derivatives, sulfate of ammonia, gas, light oil and derivatives, 
and naphthalene. It is apparent that most of the by-product materials 
are recovered and processed within the same establishment, since in 
1937 only six combinations of coke ovens and separate by-product 
plants were noted and in only two of these instances was the coking of 
coal the principal business. 

Certain operators in the textile industries have found it advan- 
tageous to maintain establishments for cleaning or otherwise preparing 
the waste from cotton, wool, and other fiber. Some of the material 
recovered is spinnable stock, while other waste is used in such products 
as batting, wadding, and oakum. Of the nine central offices in the 
textile group designated as having by-product establishments, five 
had separate plants for the processing of waste or the production of 



176 CONCENTRATION OF ECONOMIC POWER 

batting, padding, and wadding and two central-office companies 
utilized excess power in the operation of ice plants. 

The operation of small ice plants in connection with lumber mills 
or box factories occurred in seven instances, shavings and other waste 
being turned into fuel. Most of the remaining examples of separate 
by-product establishments Were combinations of smelters and refineries 
and plants producing paints and pigments from lead and zinc oxides. 
These paint factories have been included in the by-product category 
since, undoubtedly, their existence is dependent upon the operation 
of the smelters. In addition to the miscellaneous by-product plants 
cited above, there were several combinations of blast furnaces and 
cement plants, the latter utilizing furnace slag in the production of 
puzzolan cement. 

DISSIMILAR PRODUCTS OF LIKE PROCESSES 

The divergent functional relationships of central-office establish- 
ments discussed thus far have centered around the processing of a 
common raw material, the progression along different lines resulting 
from the varying uses made of a single basic material. The establish- 
ments producing both joint products and by-products arrived at dif- 
ferent products by the application of dissimilar processes to a common 
material. Conversely, in this section the analysis is extended to in- 
clude the application of like processes to unlike materials. In other 
words, a basic process is exploited rather than a basic material. 
Shown graphically, the picture is that of the letter X instead of a V. 

Examples of the manufacture of dissimilar products by applying 
similar processes to different materials were found in 104 central-office 
groups. They occurred principally among the central offices classi- 
fied in the printing and publishing, textile, and food groups. (See 
table 23.) 

Printing and Publishing. 

Although the problem of determining the functional relationships 
existing among establishments engaged in printing and allied in- 
dustries is somewhat difficult, it has seemed wisest to include 43 
central offices controlling such establishments with this classification 
of groups having similar processes. In the field of printing and 
publishing the Bureau of the Census recognizes two industries, namely, 
(1) newspaper and periodical and (2) book, music, and job. Hence, 
all combinations of plants classified in the aforenamed industries have 
been treated with those employing similar processes. It is pointed 
out that some establishments are engaged solely in the publication 
of material printed by others and perform no printing or other manu- 
facturing processes of any kind. The Bureau of the Census, however, 
has found it necessary to include such establishments within the 
printing industry in order to make a complete statistical presentation 
for that industry. This necessity arises because commercial printers 
are not in a position to report the selling values of publications printed 
for others, this information being obtainable only from the publishers 
for whom the commercial printing is done. 

Nearly half of the 43 central offices operating primarily in the print- 
ing and allied industries group and classified as having similar proc- 
esses were engaged in printing and publishing newspapers and 
periodicals and in book, music, and job printing and publishing. It 



CONCEJNTTRATION OF ECONOMIC POWER 177 

is the manuscript which determines the nature of the final product, 
and since the same process was applied to different types of manu- 
script, whether newspaper, book, music, or job, plants classified in 
the separately defined industries noted above were said to be func- 
tionally related because they employed like processes. 

Also included under the "like process" classification were 18 groups 
of plants active in the printing and publishing industry and in litho- 
graphing. Establishments classified in the latter industry were 
engaged in preparing lithograph plates of stone or of metal and 
in printing from such plates. The actual reproduction on paper, 
whether from stone or metal, is accomplished in a manner very similar 
to printing from type or plates engraved in relief. The greater part 
of the work done in this industry is lithographing on a job or a custom 
basis to individual order, but in some cases calendars, commercial 
forms, maps, illustrated cards, posters, etc., are made for sale. 

Textiles and Their Products. 

There were 298 complex central offices operating primarily in the 
textile industries. Table 23 reveals that 31 of these structures main- 
tained separate plants which were active in the same type of business 
but which utilized different raw materials and, therefore, produced 
different final products. Most of these cases centered around the 
weaving industry. Plants under common management produced 
worsted and cotton woven goods, rayon and silk broad woven goods, 
rayon and cotton woven goods, silk and rayon narrow fabrics, and 
the like. One central office had separate plants manufacturing 
worsted, woolen, cotton, and rayon fabrics, but in the majority of 
instances not more than two basic textile materials were used. 

Separate dyeing and finishing plants were maintained by six central 
offices, each plant specializing in the dyeing of a particular type of 
fabric or yarn. There were five central offices engaged in rayon 
throwing and spinning and in silk throwing and spinning. Cloth 
and leather were utilized in separate lactones under unified manage- 
ment in the output of gloves and mittens, thereby exploiting the 
sewing process. Since the cloth glove business was the larger in 
terms of value of product, this central office was naturally classified 
in the textile group. 

It is interesting to note that about one-third of the 31 central offices 
in the textile industries which operated plants engaged in similar 
processes also had other plants engaged in successive operations, 
either reaching back into the raw material field or carrying on the 
more advanced stages of manufacture. A concrete example is that 
of a central office controlling separate establishments engaged in 
spinning silk yarn and thread, in weaving rayon and silk narrow 
fabrics, and in dyeing and finishing rayon and silk fabrics. Since 
separate plants were maintained for weaving rayon and for weaving 
silk, the interrelationships existing within the central-office group 
Were those of like processes as well as successive operations. 

Other Industry Groups. 

The Bureau of the Census recognizes but two distinct industries 
involving the canning process. This, in part, accounts for the small 
number of central offices in the food group operating plants related 
through similarity of process. The canning and curing of fish, crabs, 
shrimps, oysters, and clams constitute one industry, while the second 

273238— 41— pt. 27 13 



17g CONCENTRATION OF ECONOMIC POWER 

industry includes canned and dried fruits and vegetables, canned and 
bottled juices, preserves, jellies, fruit butters, pickles, and sauces. 
Only eight central offices classified in the food group controlled plants 
which were engaged in both of the above-named industries. 

The tendency of central offices to expand by establishing plants 
having similar processes is indicated by six central offices engaged 
principally in ; the smelting and refining business. Manifestly, there 
are special advantages derived from operating smelters in proximity 
to such raw materials as copper, lead, zinc, etc. One company oper- 
ated separate plants in all four of the smelting and refining industries 
which are distinguished by the Bureau of the Census, i. e., smelting 
and refining copper, lead, and zinc, and smelting and refining scrap 
metals and dross of all kinds, except gold, silver, and platinum, for 
which there is a special classification. 

In three central-office groups some of the plants were engaged in 
the output of baked or burnt clay products, such as brick, building 
and wall tile, and draintile, while other plants produced various types 
of pottery and porcelain ware. The fact that both industries involve 
the molding and hardening of clay materials seems to warrant the 
inclusion of such combinations with those having similar processes, 
although the basic raw materials are not distinctly different. In the 
pottery and porcelain industry, however, a higher degree of refinement 
and a mixture of other products with the clay are necessary before the 
material is ready for molding. Similarity of process was noted in the 
case of five central offices whose establishments manufactured gloves 
and mittens, some from leather and others from cloth; they were 
classified in the leather group, since the making of leather gloves and 
mittens was their principal business. 

By way of summary, it may be pointed out that the building up of 
central-office groups in which the constituent establishments are 
related through the performance of divergent functions is a charac- 
teristic of large-scale production and is dependent on modern tech- 
nology. The research laboratories of concerns primarily interested in 
one raw material may develop many new products from this material. 
To the extent the production of these products becomes important, 
the establishment of a new plant may be justified and, as a separate 
unit, will come within the scope of the study. Furthermore, the 
economical utilization of by-products is dependent on the innovations 
of the research laboratory. In many concerns the difference between 
profit and loss is dependent on the successful use of by-products. 
Thus, there is a continuous search for new ways to reclaim waste 
materials that were previously consigned to the scrap heap. As the 
concern becomes large, separate establishments may be maintained 
for the processing of these by-products. The extent to which joint 
products and by-products are manufactured varies, of course, with 
thejiature of the industry. The output of joint products was most 
frequent among plants operating in the food, iron and steel, and 
textile industries, while by-product manufacture occurred chiefly 
among plants in the food and chemical groups. 



CHAPTER VII 
CONVERGENT FUNCTIONS 



The discussion in this chapter centers in an analysis of those in- 
stances in which the relationships of establishments in complex 
central offices are convergent in nature. Here the function lines 
begin apart but gradually approach each other and meet at a common 
point. The types of convergent functions recognized in this study 
are as follows : 

1 . Complemen tary products : 

(a) Complementary materials. 

(b) Complementary parts. 

(c) Complementary products. 

(d) Complementary industries. 

2. Auxiliary products: 

(a) Auxiliary services. 

(b) Auxiliary commodities. 

3. Dissimilar products for like markets. 

Table 25.— Central-office companies having convergent functions, by industry 

groups, 19S7 

[Note.— See headDote to table 16] 



Group 

No. 



Industry group 



All industries- 

Food and kindred products 

Textiles and their products 

Forest products 

Paper and allied products 

Printing, publishing, and allied industries.. 

Chemicals and allied products 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products.. 

Iron and steel and their products, not includ- 
ing machinery .. 

Nonferrous metals and their products '. 

Machinery, not including transportation 
equipment ^ . 

Transportation equipment, air, land, and 
water 

Miscellaneous industries. 



Number 
of central 
offices 
having 
conver- 
gent 
functions 
(undupli- 
cated 
total) < 



938 



241 
72 
54 
22 
21 
88 
20 
9 
23 
58 



28 
144 



Number 
of central 
offices ' 
having 
conver- 
gent 
functions 
(dupli- 
cated 
total) ' 



1,058 



284 
72 
58 
23 
21 

108 
23 
12 
25 
62 

75 
33 

158 

37 

67 



Number of central offices op- 
erating establishments re- 
lated through — 



Comple- 
mentary 
products ' 



386 



Auxiliary 
products " 



183 



Like 

markets 



489 



143 

38 

85 

11 

9 

47 

3 

3 

8 

46 

32 
16 

65 

5 

28 



1 The duplicated total includes duplications among complementary products, auxiliary products, and like 
markets; in the unduplicated total, duplications among the three convergent subgroups have been 
eliminated. 

s Figures do not include duplications among complementary materials, parts, and products comprising 
the complementary products subgroup nor those between auxiliary services and commodities comprising 
the auxiliary products subgroup. 

Table 25 shows the number of central offices operating establish- 
ments whose functions are convergent. In numerous central-office. 

179 



180 



CONCENTRATION OF ECONOMIC POWER 



groups it was found that the convergent relationships existing among 
the establishments were of more than one type. This can be ascer- 
tained by a comparison of the duplicated and unduplicated totals 
given in the table. In all but four of the industry groups (textiles, 
paper and its products, printing and publishing, and iron and steel) 
convergent functions, as a whole, were more prevalent than divergent 
functions. The large number of establishments functionally related 
because they were producing for the same market accounted chiefly 
for this excess of convergent functions. 



COMPLEMENTARY PRODUCTS 

Mass output, improvements in machine technology, and the 
specialization of labor have split up production into an ever-increasing 
number of separate processes. Few products today are made com- 
pletely from one material and in one part, and the desire on the part of 
management to have control over the supply and quality of these 
materials and parts has been at least one of the factors leading to the 
establishment of multi-unit concerns. The manufacture of an 
automobile, for example, involves the bringing together of many 
separately fabricated parts and the utilization of numerous materials. 
Even some very simple commodities are composed of a considerable 
number of parts. 

Table 26. — Central offices operating establishments having complementary functions, 

by industry groups, 1937 

[Note.— See headnote to table 16] 



Group 
No. 


Industry group 


Number 
of central 

offices 
(undupli- 
cated 

total) ' 


Number 
of central 
offices 
(dupli- 
cated 
total) i 


Number of central offices operating 
establishments related through- 


Comple- 
mentary 
materials 


Comple- 
mentary 
parts 


Comple- 
mentary 
products 


Comple- 
mentary 
industries 






386 


402 


»100 


»1S1 


*78 


73 




Food and kindred products 

Textiles and their products 




1 


70 

26 

16 

5 

1 

44 
12 
5 
12 
10 

32 

7 

85 

31 
30 


74 
26 
16 
5 

1 

49 
12 
6 
13 
11 

32 

7 

.89 

31 
30 


18 
7 
3 
3 

1 

29 




23 
12 
1 
1 


33 


2 
3 


3 

5 

1 


4 

7 


4 


Paper and allied products 

Printing, publishing, and allied 




5 




6 


Chemicals and allied products 

Products of petroleum arid coal... 




16 
7 
1 
4 
2 

2 

1 

2 


4 


7 




5 


8 


5 
5 
6 

2 

1 

9 






9 
10 
11 

12 


Leather and its manufactures 

Stone, clay, and glass products... 
Iron and steel and their products, 

not including machinery 

Nonferrous metals and their prod- 


2 
2 

23 

5 

71 

27 
12 


2 
1 

5 


13 


Machinery, not including trans- 


7 


14 


Transportation equipment, air, 


4 


16 




11 


i 


1 











> The duplicated total includes duplications among complementary materials, parts, and products; in 
the unduplicated total, duplications among the complementary subgroups have been eliminated. 

> 12 duplications with complementary products; 3 duplications with complementary parts. 

» 3 duplications with complementary materials; 1 duplication with complementary products. 
1 12 duplications with complementary materials; 1 duplication with complementary parts. 

When separate establishments under unified management manu- 
facture articles which converge in a final product -within the organiza- 
tion, the central-office group is said to produce complementary prod- 



CONCENTRATION OF ECONOMIC POWER IgJ 

ucts. For the sake of clarity at this stage of the presentation it is 
perhaps advisable to distinguish the uses that have been made in this 
study of complementary functions and successive functions (to be 
discussed later). Generally speaking, in the manufacture of com- 
plementary products, the separate items which compose the final 
product may be produced simultaneously. In the output of successive 
products, however, several operations are performed in sequence, each 
step bringing the product nearer its ultimate form. For convenience 
in presentation, complementary products have been subdivided 
according to complementary materials, complementary parts, comple- 
mentary products, and complementary industries. These subgroups 
are shown in detail in table 26 and a description of them is given uuder 
their respective headings. 

Complementary Materials. 

In contrast with the manufacture of parts which are joined together 
in the final product without undergoing any significant change, 'the 
manufacture of complementary materials involves the output of 
products which are not in their final form but which are to be further 
changed in their combination with other products. Complementary 
materials frequently lose their identity in the ultimate product or 
they cause some change in the product with which they are combined. 
It was found that 100 central offices operated establishments which 
manufactured complementary materials. Twelve of these central 
offices also had plants producing complementary products and three 
controlled plants making complementary parts. 

Twenty-nine central offices producing complementary materials 
were classified in the chemical group, 18 in the food group, 11 in the 
miscellaneous industries group, 9 in the machinery group, and 7 
central offices in the textile group. Since the diversification of 
products in the chemical industries precludes any specific grouping 
of the materials used, only some of the significant combinations in 
which the interrelationship of establishments was based on the output 
of complementary materials will be mentioned. There were seven 
central offices engaged in the output of fertilizers which operated 
separate plants to produce the various constituent materials. A 
list of some of the more important materials consumed in the manu- 
facture of fertilizer would include sulphate of ammonia, nitrate of 
soda, calcium cyanimid, cottonseed meal, tankage, fish scrap and meal, 
guano, ground bones, superphosphates, muriate and sulphate of 
potash, manure salts, kainite, ammonia, urea and calurea, ammonium 
phosphate, and various other inorganic and organic nitrogenous 
materials. Other central-office structures classified in the chemical 
group which produced complementary materials included plants 
making soap and the miscellaneous oils used therein; drugs and 
medicines and miscellaneous chemical products; and paints and 
varnishes and linseed oil. 

Among the central offices classified in the food group, seven com- 
panies were primarily active in the output of malt liquors and oper- 
ated malt houses in connection with breweries. Since malt is of para- 
mount importance among the materials used in making malt liquors, 
the functional relationship in these cases might have been considered 
successive. In this study, however, the functions of establishments 
in the two industries have been treated as convergent only. There 
were three central offices which produced flavoring extracts and sirups 



182 CONCENTRATION OF ECONOMIC POWER 

and nonalcoholic beverages. Although most of the flavoring products 
Were sold outside the central-office group for soda-fountain use and 
to bakers, confectioners, etc., at least some of the flavors were con- 
sumed within the organization in the production of beverages and 
have been treated, therefore, as complementary materials. Although 
a large part of the total output of vinegar and cider is made as a 
by-product of canning companies, four central-office groups operated 
separate plants producing vinegar which was used in pickling and 
allied processes by other plants in the group. 

• Of the 11 central offices classified in miscellaneous industries, 7 such 
organizations included plants manufacturing various types of roof^ 
ing and the paper used therein. One establishment specializing in 
sporting goods was under unified management with another produc- 
ing cordage, rope, twine, etc., for baseballs, fishing and gymnasium 
equipment, and similar goods. Another central office operated plants 
making mattresses and batting, padding, wadding, and upholstery 
filling. 

Chemicals used in battenes, as well as rubber goods, asbestos 
products, and paints, were produced in separate plants by central 
offices also engaged in making products classified in the machinery 
group. In the textile group certain central offices controlled plants 
manufacturing rayon-mixed broad goods and operated additional 
establishments for spinning the cotton or silk yarn to be combined with 
the rayon. In the boot and shoe industry there were five instances in 
which central offices maintained separate establishments producing 
cut stock and findings. 

Complementary Parts. 

Both complementary materials and parts connote something that is 
necessary to complete a whole. In the case of complementary parts, 
however, the separate products in themselves do not undergo any 
significant change when combined with the ultimate product. Bolts, 
nuts, and washers are used in machinery, but they retain their identity 
as such and frequently can be taken out and used again. Electric 
motors are used in various types of machinery, but they are not sub- 
jected to any inherent change when installed. 

Central offices with establishments manufacturing complementary 
parts constituted the largest subgroup among those organizations 
whose functions were complementary. Nearly half of the structures 
producing complementary parts controlled establishments primarily 
active in the machinery industries. Of the 71 structures classi- 
fied in the machinery group, 22 central offices apparently found it 
advantageous to maintain separate shops for the purpose of machining 
castings and making gears and other parts for machines. By this 
means they were assured of an adequate supply of parts as well as 
the desired quality and the proper specifications. Separate foundries 
to produce rough castings were operated by 15 central offices. Other 
instances noted were those of plants manufacturing radios and neces- 
sary miscellaneous electrical apparatus; electrical machinery and 
electrical porcelain; and textile machinery and the various required 
wooden parts. 

Classified in the transportation group were 23 central offices active 
in the manufacture of motor vehicles, some parts for which were 
produced in separate factories. In manufacturing motor vehicle 
bodies, one central office had plants engaged in seven other industries, 






CONCENTRATION OF ECONOMIC POWER 183 

as follows: Bolts, nuts, washers, etc.; springs; wire drawn from pur- 
chased rods; wirework; stamped and pressed metal products and 
enameling, japanning, etc.; foundry products; and machine shop 
products. Several shipbuilding concerns also maintained separate 
shops for the production of parts. 

Of the 23 central offices predominantly active in the iron and steel 
group, approximately one-half were engaged in the production of 
various types of heating and cooking apparatus, and these concerns 
also controlled separate establishments for making rough castings, 
pipe and fittings, and commercial and industrial instruments and 
apparatus, such as gages for measuring pressure, speed, temperature, 
or direction, and automatic control devices. The heating and cooking 
apparatus industry embraces all heating and cooking appliances using 
coal, gas, oil, and other fuel. These include, among other products, 
steam and hot-water heating apparatus, heating and cooking stoves, 
ranges, and furnaces; gas fireplaces, logs, and grates; gas and oil water 
heaters; hot water tanks; domestic oil burners; radiators, valves, 
gages, thermostats, etc. In the manufacture of tools several central 
offices maintained plants producing turned and shaped wooden parts 
such as handles for tools. It is again stressed that because a central 
office operates separate factories to produce parts for the main line 
of business, this does not imply that all parts are sold within the 
central-office structure. In numerous instances, the value of the 
parts sold outside the organization bulks large. 

Complementary Products. 

It was pointed out that a criterion for distinguishing complementary 
materials and parts is that the materials usually undergo some change 
when combined with other products, whereas parts retain their identity 
to a considerable degree. So it is with complementary products; no 
fundamental change is made in them when combined with other 
things. In the case of complementary products, however, their 
combination occurs at the latest possible stage just before they are 
ready for distribution. Practically all examples of complementary 
products shown in table 26 represented the grouping of plants pro- 
ducing the main commodities with other plants engaged solely in the 
manufacture of containers or wrappers for them. 

Undoubtedly there are very definite advantages to be derived from 
the manufacture of containers under the same management as the 
main product. The manufacture of containers within a central-office 
company guarantees to the enterprise the desired supply and the 
proper type to meet its requirements. The extent to which this is 
done in manufacturing is not fully reflected by the data in table 26, 
since in this study the instances in which containers were made in 
separate departments of the plant making the main product could 
not be ascertained. 

Typical complementary products were tin cans, pails, and boxes; 
paper and wooden boxes; glass containers; tanks for liquids and gases; 
paper bags; bags made of various textiles; and miscellaneous paper 
for wrappings. The manufacture of complementary products oc- 
curred most frequently among central offices primarily active in 
the food, chemical, and textile industries. Several instances of the 
manufacture of complementary products were found in which one of 
the manufacturing processes was of a seasonal nature, for example, 
the canning business in combination with a box factory. In this case, 



134 CONCENTRATION OF ECONOMIC POWER 

the value of the products of the box factory was in excess of that' of 
the canned goods, indicating that, while some of the boxes were used 
in connection with the cannery, most of them were sold outside the 
combination. Since the canning business is seasonal in nature, opera- 
tion of the box factory could be carried on during slack periods and 
the labor supply shifted from one industry to the other. 

Complementary Industries. 

In this category are listed, for the most part, those combinations 
of establishments operated by concerns whose main activity does not 
lie in the field of manufacturing. Rather, their main line of endeavor 
may be in the extractive industries or distribution, service, transpor- 
tation, etc. Since the Bureau of the Census canvasses all known 
manufacturing establishments whose production during the year 
covered by the census was valued at $5,000 or more, it necessarily 
includes the manufacturing operations of many companies engaged 
primarily in nonmanufacturing businesses. Such secondary manu- 
facturing enterprises merely form a part of or complete the principal 
functioning line and thus have been considered as constituting in- 
stances of complementary industries. 

. It is a well-established fact that our economic society is characterized 
by numerous business enterprises that extend their operations 
from the extraction of raw materials through manufacturing to distri- 
bution. With the resources available to this study, it was possible 
to recognize at least 62 central offices which were not essentially 
manufacturing concerns but which did operate establishments which 
were properly classified in manufacturing. It is believed, however, 
that this is by no means a complete coverage and that other such 
central offices are included with those whose functions fell outside 
the complementary industries classification. These 62 central offices 
may be classified according to the following types of enterprise: 
Distribution channels (chiefly retail stores), 18; public utilities, 16; 
cooperatives, 14; railroads, 8; mining and fuel companies, 3; religious 
societies, 2; and restaurants, 1. 

In the field of distribution, one company controlled manufacturing 
establishments classified in 19 separately designated industries; 
two companies had establishments in 11 manufacturing industries; 
and two companies had plants in 8 or 9 manufacturing industries. 
For the most part, the public utilities operated factories in no more 
than four separate industries. In one case, however, a utility com- 
pany had extensive petroleum refineries and also had additional 
factories in nine allied manufacturing industries. The cooperative 
agencies were engaged essentially in the manufacture of butter, cheese, 
condensed and evaporated milk, and ice cream. In several instances, 
however, they maintained poultry dressing and packing establish- 
ments and factories producing feeds for animals and fowls. 

A manufacturing activity common to railroad companies was that 
of wood preserving which involves the treating of wood to prevent 
decay and to protect it against insects. Among the products of this 
industry are railway ties, piles, poles, and cross arms. Several 
railroads maintained printing and publishing plants to print tickets, 
time tables, and other required material. One company built its 
own cars and two railroads were also engaged in the ship and boat 
building and repair industry. Since railroad repair shops were not 



CONCENTRATION OF ECONOMIC POWER 



185 



treated as manufacturing industries in the 1937 Census of Manu- 
factures, the numerous instances of the manufacture of cars in 
these shops are not included in this study. 

It would be of interest if this study could be extended beyond the 
manufacturing industries to include all activities under the super- 
vision of a single central office, for example, the extractive industries, 
wholesale and retail trade, construction, etc. Such data, however, 
for the year 1937 were not available. As part of the more complete 
decennial census of 1940, the schedule calls for the name of the 
principal business of each organization, as well as the number of units 
operated in each of the following classifications: Manufacturing plants; 
mines and quarries; wholesale and retail establishments; service 
businesses and places of amusement; hotels; construction offices; 
and central or district administrative offices, chain-store warehouses 
and other auxiliary units. As these data become available, it will be 
possible to present a more comprehensive picture of integration in the 
whole business economy. 

AUXILIARY PRODUCTS 

The converging functions considered up to this point, except those 
instances of complementary industries, have involved the combina- 
tion of different products to form the ultimate product. There are, 
however, additional cases in which several manufacturing operations 
classified in various industries are required to produce a final product. 
Although these activities are essential, they do not add any physical 
material to the finished article. They merely assist in the process, 
serving in an accessory capacity to the main line of production. 



Table 27. — Central offices operating establishments having auxiliary functions, by 

industry groups, 1937 

[Note— See headnote to table 16] 



Group 

No. 



Industry group 



Number of 

central 
offices fun- 
duplicated 
total) i 



Number of 
central 
offices 

(duplicated 
total) i 



Number of central 
offices operating es- 
tablishments related 
through — 



Auxiliary 
services 



Auxiliary 
commodi- 
ties 



All industries 

Food and kindred products 

Textiles and their products 

Forest products 

Paper and allied products 

Printing, publishing, and allied industries 

Chemicals and allied products 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products.. 

Iron and steel and their products, not includ- 
ing machinery. 

Nonferrous metals and their products. 

Machinery, not 'including transportation 

equipment... 

Transportation equipment, air, land, and 

water _ 

Miscellaneous industries 



190 



123 



67 



i The duplicated total includes duplications between auxiliary services and commodities; in the un- 
auplicated total, duplications between the~2 auxiliary subgroups have been eliminated. 



186 CONCENTRATION OF ECONOMIC POWER 

In certain enterprises a large amount of repair work is necessary 
and it has been found economical to maintain separate establishments 
to conduct this activity ; or separate establishments are operated to 
produce some special commodity, such as ice or fuel, which is indis- 
pensable in the performance of other plants in the group. The 
relationships of establishments under these circumstances come 
within the scope of auxiliary functions. The data have been segre- 
gated according to auxiliary services and auxiliary commodities and 
are presented in table 27. It is apparent that, of the 2,051 complex 
central offices, 183 concerns operated establishments having auxiliary 
functions. Seven of these central offices controlled plants per- 
forming an auxiliary service as well as plants producing auxiliary 
commodities. 

Auxiliary Services. 

Data with respect to auxiliary services provide some measure of the 
extent to which manufacturing combinations controlled separate 
plants for the performance of necessary minor activities. The 
auxiliary services of central-office groups may be classified according 
to the following types: Printing, 66 ; maintenance and repair, such as 
the operation of machine shops or foundries, 29; building or repair of 
transportation facilities, 7; and "other" accessory shops, 21. 

Foremost among the auxiliary services noted for central offices in 
1937 was the development of separate printing establishments in con- 
junction with the principal activity. Since it was not possible in this 
study to investigate the purposes for which individual printing plants 
were established, it has been assumed that in all central offices in 
which the printing business was not of primary importance, at least 
some of the printing was in the nature of an auxiliary service. These 
plants were engaged in the necessary printing in connection with 
advertising, as well as in printing catalogs, bulletins, price lists, 
letterheads, and special labels and tags. 

For the most part, separate printing establishments were operated 
by central offices predominantly active in the chemical, food, machin- 
ery, and miscellaneous industries. A comparison of the number 
of central offices operating auxiliary printing plants in 1937 with 
corresponding data for 1919 1 indicates a strong upward tendency in 
the intervening years. Although a precise comparison of the data 
for the two census periods cannot be made, they are sufficiently 
comparable to give evidence of the trend. 

Second in importance among auxiliary services was the operation 
of separate plants for maintenance and repair. Most of these were 
machine shops set up for the purpose of making gears and other parts 
for the machinery equipment of the factories within the central - 
office group. It frequently happens, however, that these machine 
shops perform job work for unrelated concerns, since their full-time 
operation is not always required by the factories within the com- 
bination. Although the 29 maintenance and repair shops were 
operated in conjunction with central offices scattered throughout, 
practically all industrial groups, most of them occurred in central 
offices primarily active in the output of stone and clay products. 

Only seven central offices operated auxiliary establishments for the 
construction or repair of transportation equipment. Four of these 

i See "The Integration of Industrial Operation," p. 219. 



CONCENTRATION OF ECONOMIC POWER jgy 

were interested principally in the meat packing or petroleum refining 
industries and controlled shops for building or repairing cars for use 
m transporting the manufactured products. Three central offices, 
primarily active in the output of petroleum products, structural and 
ornamental metal work, and coke-oven products, also maintained 
plants for boat building and repair work. 

"Other'' accessory shops were operated as part of 21 central-office 
groups. Eight of these were printing and publishing houses with 
auxiliary establishments engaged in photoengraving. Such estab- 
lishments make photoengraved plates for printing illustrations, art 
work, post cards, greetmg cards, magazine covers, half-tone engrav- 
ings, etc. ; they do not, as a rule, print from the plates which they make 
but prepare them for use by others. Other central ofiices which 
maintained separate auxiliary shops were active in the following 
industries: Wirework and galvanizing and other coating; silverware 
and plated ware and engraving or electroplating; boots and shoes 
and signs and advertismg novelties; tin cans and signs and advertising 
novelties. ^ 

Auxiliary Commodities'. 

Plants producing auxiliary commodities actually turned out sepa- 
rable products, whereas plants in the preceding classification were 
engaged m operations more nearly akin to servicing. Central offices 
controlling establishments manufacturing auxiliary commodities were 
slightly more than half as numerous as those with establishments 
performing auxiliary services. Practically all auxiliary commodities 
were produced m organizations whose chief interest was in the food 
industries. Of the 67 central offices with establishments producing 
auxiliary commodities, 50 such organizations had separate plants 
manufacturing ice to be used in the preservation of perishable foods 
or in the production of ice cream. One large meat-packing company 
produced its own salt, while four central offices active in the dairy or 
poultry dressing busmess had separate plants to prepare special 
animal and poultry feeds. 

The various fuels consumed in the manufacturing processes would 
come within the auxiliary products category, but since it was not 
possible m this study to determine those central offices that reached 
back into the mmmg field, no account of the fuels thus utilized is 
available. In one instance, however, the production of coke in 
combmation with smelting and refining was noted. 

DISSIMILAR PRODUCTS FOR LIKE MARKETS 

Thus far in the analysis dealing with convergent functions, consider- 
ation lias been given only to those types in which the separate lines are 
united before leaving the manufacturer. There are, however numer- 
ous products made from different materials and by different processes 
which do not converge within the manufacturing process but which 
nnally me et m the market place. This final convergence in the market 
was m many instances, the only known explanation for the com- 
bination of certain products produced within a central-office group 
irue it is that many apparently unrelated products converge in use, 
such as bread and butter, but since most products that come together 
in use can be obtained from the same market, no separate account of 
this phase of analysis was taken. 



188 CONCENTRATION OF ECONOMIC POWER 

It must be borne in mind that the cases included in this section 
are by no means all those in which similarity of market is a factor in 
explaining why different products are produced by separate estab- 
lishments within the same central office. Knitted outerwear *nd 
knitted underwear made from wool may be sold in the same market, 
but since the same material is used for both, they have been classified 
as joint products rather than products for like markets. In other 
words, if any basis for the association of plants other than the in- 
ducement t6 produce a full line for the same market could be 
ascribed to the functions of central-office establishments, that policy 
was followed in the present analysis. 

There were, of course, many central offices which, in addition to 
controlling establishments related functionally as suggested above in 
the case of knitted goods, also controlled establishments which were 
related only in the sense that they produced for a like market. That 
is, in a central-office structure composed of four establishments, for 
example, two plants might be related through the production of joint 
products and two because the products were for like markets. There 
were 327 combinations in which the sole relationship between the 
constituent establishments was that these establishments produced 
items for a like market but there were also 162 other central offices 
that controlled establishments some of which were related in this 
fashion, and in addition these central offices controlled other establish- 
ments that were related through some other means. 

The functional relationships based on similarity of market may be 
open to some criticism, since it may be said that almost any type of 
commodity is found in a department, mail or,der, or general merchan- 
dise store. The basis for classification in the present study, however, 
was much more restricted than this. It is known that certain combi- 
nations of commodities, for example, miscellaneous food products or 
the various types of electrical apparatus, are sold in a common market, 
and it is only such usual instances as these that have been included 
in the category of like markets. 

Most of the central-office groups producing dissimilar products 
for the same market were predominantly active in the food and 
kindred products group. (See table 25.) The food market is charac- 
terized by a wide diversity of products required to satisfy consumer 
demands and the nature of distribution channels is conducive to the 
production of a number of products. After a manufacturer has estab- 
lished a reputation for one product, he is in a position to expand into 
the production of other related food products. 

This section, however, does not adequately measure the multiplicity 
of food produced for a common market, since it includes only those 
groupings of plants functionally related solely in the sense that 
they produced for the same market. It will be recalled that a large 
number- of central offices', especially those dealing in creamery prod- 
ucts, were classified as producing joint products. There were also 
numerous occurrences of the combination of food materials to produce 
an ultimate product and these were included in the discussion of 
complementary materials. The manufacture of ice in connection with 
the output of perishable foods was treated as an auxiliary commodity, 
while by-product plants were frequently operated by meat-packing 
establishments. 



CONCENTRATION OF ECONOMIC POWER 189 

There were 143 central offices classified in the food group which 
operated plants the relationships of which were based on the output 
of goods for a single market. Of this number, 84 central offices con- 
trolled establishments operating in but 2 of the food industries. Lack 
of homogeneity in these companies precludes a definite grouping 
of all of them. The 2-industry central offices noted most frequently, 
together with the number of central offices involved, were as follows: 
Butter and poultry killing and dressing, 21 ; bakery products and con- 
fectionery, 18; ice cream and nonalcoholic beverages, 9; and ice cream 
and confectionery, 9. At the other extreme, there were several central 
offices with separate plants operating in as many as 10 of the food 
industries, most products of which could be found in the same market. 
Many of these establishments, however, were functionally related 
because of reasons other than that they produced for like markets. 

Next to the food industries, the machinery group had the largest 
number of central offices producing for a common market. Sixty-five 
central offices were listed in this classification. It is adequate here to 
mention some of the products of separate establishments under the 
same management, such as typewriters, cash registers, and carbon 
paper; radios and pianos; water filtration and softening equipment and 
water softening materials; hoisting cranes and lifting machinery and 
pile hammers; electric refrigerators and electric food grinding ma- 
chines ; refrigerators and radios; lift trucks, barrel racks and platforms; 
agricultural implements and carriages and wagons; and radial and 
sensitive drills and dynamite. Obviously, not all of these products 
were classified in the machinery group, but in each case the principal 
business (on the basis of the value of products) was the production of 
machinery. 

One interesting organization was that of a central office producing 
equipment and materials required at soda fountains. The products 
noted were bottle washers, pasteurizers, bottle fillers, crowners, ex- 
tracts and sirups, dry ice, and soda fountains and bars. Another 
central office with establishments classified in nine separate industries 
manufactured typewriters and miscellaneous writing equipment and 
materials. 

A large number of central offices producing for like markets were 
also classified in the stone, clay, and glass group; chemical group; 
textile group; and in the forest products group. In the former 
group, most of the commodities produced were those used in the 
building industries; for example, concrete products, clay products, 
glass, gypsum products, cement, none! ay refractories, asbestos 
products, wallboard and plaster, and marble, granite, slate, etc. 
Here, again, the majority of central offices operated in only 2 indus- 
tries. The largest central office (that is, largest in terms of the 
number of separate industries in which it operated establishments) 
controlled plants in 9 industries, and all principal products of these 
industries found their markets in the building trades. In 40 of the 
46 central offices classified in the stone, clay, and glass products 
group, the incentive to produce for a common market was the sole 
bond of relationship between the establishments that could be de- 
termined. 

The policy of producing a full line for a common market was quite 
common in the field of chemistry. The wide variety of merchandise 
carried by drug stores is undoubtedly an impelling reason for manu- 



190 CONCENTRATION OF ECONOMIC POWER 

facturers of chemicals to expand into different fields. Whereas in 
the food, machinery, and stone, clay, and glass industries, most of the 
-central offices producing for like markets operated establishments in 
only 2 industries, those in the chemical group operated establishments 
in several industries. In fact, 17 of the 47 central offices classified in 
the chemical group operated establishments in 4 or more industries, 
and 3 of these were engaged in 10 or more separate industries. One 
large chemical- company had plants in 17 different industries. The 
primary factor in expansion here, however, was not that of producing 
for the same market and many of the products manufactured were 
outside the chemical field. 

Numbered among the firms manufacturing different commodities 
for like markets were 38 central offices predominantly active in the 
textile industries. Various types of clothing or textile materials were 
the principal products of many of these concerns, whereas the plants 
of secondary importance to the companies manufactured articles such 
as handbags, millinery, fur goods, gloves, miscellaneous housefurnish- 
ings, etc. A firm producing clothing was also engaged in the output 
of trunks, suitcases, and other luggage. Two central offices manu- 
factured cloth gloves and leather gloves in separate plants. Here, it 
could also be said that the organizations grew out of the exploitation 
of like processes, but it is believed that the desire to produce a fuller 
line was the more probable reason for expansion. 

Of the 35 central offices classified in the forest products group that 
manufactured goods for the same market, 25 concerns controlled 
separate establishments in only two industries. Furniture was an 
important commodity produced by many of the companies. There 
were several concerns making furniture under the same management 
with other plants making mattresses and bed springs. Five box 
factories were in central-office groups with other plants manufacturing 
baskets and rattan and willow ware. 

Since an accurate comparison of the data in this study and in 
Dr. Thorp's monograph 2 cannot be made, it is possible only in general 
terms to measure the change from 1919 to 1937 in the number of 
central-office structures whose sole motive for unified control of plants 
was that they produced for like markets. It may be said, however, 
that there is a growing tendency on the part of manufacturers to 
produce more and more of the commodities that can be sold in a 
common market place. 

To summarize, the number of instances of convergent relationships 
among establishments under common control is sufficient to demon- 
strate the importance of this functional type in central-office organiza- 
tions. Approximately half of the 2,051 complex central offices oper- 
ated plants related through the performance of convergent functions. 
It was pointed out earlier in this chapter that many commodities in 
their final form involve the assembly of numerous separate parts or 
products, each- complete and distinct in themselves. Furthermore, 
certain operations of a more or less subsidiary nature are necessary to 
the functioning of the main line of activity. It is the desire to control 
the supply and quality of these separate products or to direct specific 
secondary operations that has led to the formation of numerous 
central-office groups of this structural form. The reasons for and 

1 See "The Integration of Industrial Operation," p. 225. 



CONCENTRATION OF ECONOMIC POWER J9J 

advantages of such organizations correspond quite closely to those 
of concerns engaged in the manufacture of successive products. These 
reasons are discussed in some detail in the following chapter. The 
area of the market for goods has been increased by modern transporta- 
tion and extensive advertising. As" a consequence, numerous multi- 
plant businesses have emerged whose plants are functionally related 
only in the sense that they produce for a common market. Economies 
in marketing have undoubtedly been a prime motive in the develop- 
ment of this type of central office. 



CHAPTER VIII 
SUCCESSIVE FUNCTIONS 

The central-office groups heretofore considered have involved 
the centralized control of establishments related through the per- 
formance of uniform, divergent, or convergent functions. Another 
type of organization, involving a more complex structural pattern 
than the types analyzed in the preceding discussion, occurs when 
establishments under unified management are related through the 
production of goods at various successive manufacturing stages. 
In other words, such vertically integrated enterprises exist when the 
final product of one factory is used as a raw material for another plant 
within a single company. It is with this type of relation among 
central-office establishments that the present chapter is concerned. 

The extent of vertical integration throughout the total economy is 
not reflected in this analysis. The activities of many companies 
extend from the extractive industries, through manufacturing, to the 
distributive stage. In this analysis, however, attention was centered 
on vertical integration in manufacturing. By way of explanation, 
the larger steel companies own and operate iron ore mines, quarry the 
necessary limestone, mine their own coal and convert it into by-product 
coke for use in their blast-furnace operations, roll their own steel and 
convert it into more advanced manufactures, and, finally, maintain 
a selling organization for the distribution of their products. For such 
enterprises, however, the measure of integration here does not reach 
back of the blast-furnace or coking processes, nor does it extend beyond 
the manufacturing operations. The control of wholesale and retail 
outlets has been developed to a considerable degree in many lines of 
manufacturing, but the measurement of the extent of such forward 
expansion lies outside this study. 

"Vertical integration" is employed here in a somewhat restricted 
sense. In its looser meaning the expression sometimes covers those 
instances in which all related branches or all necessary processes are 
brought together to form one unified whole. The vertically inte- 
grated structures presently discussed, however, comprise only those 
central offices in which the final product of one establishment is passed 
on to another plant within the same central office and subjected to a 
still further degree of fabrication. It is pointed out that such instances 
as the manufacture in separate plants of engines and various finished 
parts required in the assembly of an automobile were not included 
here with successive functions, but were treated under convergent 
functions in the section relating to the manufacture of complementary 
parts. Although the coverage of the material presented here is 
restricted to structural types under this narrow meaning, the data 
are in such form that combinations may easily be made. 

Within the manufacturing segment of the economy the extent of 
vertical integration is understated because of the fact that census 

192 



CONCENTRATION OF ECONOMIC POWER J 93 

industry classifications, on which this analysis is based, are widely 
inclusive and several successive steps in manufacturing may thus be 
merged within an industry. For example, in numerous rolling mills 
the manufacturing processes are carried beyond the rolling stage into 
the production of pipes and tubes, bolts and nuts, nails, etc. It was 
only possible to segregate the successive steps, however, when these 
products were made in separate plants. 

REASONS FOR .VERTICAL INTEGRATION 

Although the data contained in this study are not of the nature to 
permit an appraisal of the advantages and disadvantages of vertical 
integration, it is appropriate at this point to consider some of the 
reasons frequently advanced for this type of integration. The various 
factors which will be set forth, however, are not limited in their rele- 
vance to vertical integration as strictly defined here. Rather, they 
relate to all organizations in which establishments operating at various 
levels are brought together under one management. 

It has been said that horizontal combinations seek control of the 
market, whereas vertical combinations aim to achieve independence 
of the market. Market freedom can be accomplished either by for- 
ward or backward integration. Reaching backward into the prior 
stages of the industrial process gives assurance of an adequate and 
dependable source of supplies, while forward expansion provides a 
definite market for a product. 

Generally, it may be said that the formation of integrated enter- 
prises is motivated by the desire to increase profits. That is, the 
organizers expect the aggregate of establishments to be more successful 
financially than the separately operated plants. The emergence of 
integrated concerns may, therefore, be broadly attributed to this 
"financial motive." But it is expedient to direct attention to the 
fact that the formation of combinations, irrespective of type, is not 
altogether related to the profitability of the concerns themselves. 
Rather, during the late twenties, the combination movement became 
quite the fashion in finance, and promoters were quick to supply the 
public demand for the securities of merged concerns. 

As Dr. Thorp has pointed out: 

One important element which stimulates the merger movement in time of pros- 
perity is the condition of the money market. Many mergers, and some acquisi- 
tions, involve the flotation of new securities. In periods like 1928 and early 1929, 
when there is almost an insatiable demand for securities, the merger movement 
will be certain to flourish. Its most active sponsor is the investment banker. 
Reputable business houses mereh T carrying on their business under their existing 
organization bring a very slight volume of new securities for the banker to handle. 
But if they can be brought together into a new organization it may mean a large 
flotation of stock. * . * * The fact that the public will take the securities 
makes possible a sharing of the increased capitalization between the banker and 
the original owners and makes the owners willing to join the merger even when 
they can see little technical advantage to be gained from the new organization. 1 

The general financial motive wliich lies back of the formation of 
vertically integrated concerns resolves itself into specific constituent 
factors which deserve special comment. As frequently cited in the 

'Thorp, Willard L., "The Persistence of the Merger Movement," The American Economic Review 
Supplement, March 1931, pp. 85 and 86. See also "The Merger Movement," part III of this study. 



273238—41 — pt. 27 14 



J94 CONCENTRATION OF ECONOMIC POWER 

literature, economic advantages accrue under this type of integration 
because it is possible to — 

(1) Seize intermediate profits; 

(2) Stabilize operations; 

(3) Operate continuously (technical) ; 

(4) Reduce inventories; and /or 

(5) Spread administrative or managerial Costs. 

Although the belief that these economies will result may serve as a 
motivating force, the actual realization of the gains does not always 
follow. Rather, they may be only acceptable rationalizations for 
which there is no justification in theory or .experience. 

The seizing of intermediate profits has undoubtedly inspired the 
formation of many integrated concerns. In other words, there will 
be a tendency to expand either forward or backward when the profit 
margins of suppliers or distributors appear attractive. It is not to 
be implied, however, as one writer has stated, "that the final real cost 
of the product sold by an integrated industry will, ordinarily, be less 
than the final cost of a nonintegrated product by the cumulative 
amount of these profit margins." 2 On the contrary, the better argu- 
ment appears to be advanced by those who come to quite an opposite 
conclusion. "As the integrated concern must have invested capital 
in all the stages of production, there must, in the long period, be a 
return to that capital at least equal to the return which could be ob- 
tained by investment elsewhere." 3 And again, "Integration does not 
buy its material 'at cost,' if by this is- meant 'prime cost.' When two 
capitals are joined, it still remains necessary to pay the normal interest 
on both." 4 

The gains anticipated through the control of intermediate stages in 
the productive process may not always be realized for other reasons. 
In periods of rising prices it may be profitable to produce a required 
commodity or to control a necessary service. On the other hand, when 
prices are depressed, losses may be incurred through the compulsory 
purchase of materials or services from a given internal source when 
those items could be purchased more cheaply in the open market. 

The gain to the vertically integrated company through stabilized 
operations is a frequently cited source of economy. Failure to main- 
tain a steady flow of the necessary supplies may bring the productive 
faculties of certain plants to a standstill. To avoid this risk, the inte- 
grated concern may attempt to secure direct control over raw materials. 
In addition to the assurance of an adequate supply of raw materials, 
the integrated structure is in a position to produce the exact quality 
and type of product required in each stage of production. It should 
be remembered, however, that the nature of the supply of raw ma- 
terials is an important factor influencing integration. When a manu- 
facturer utilizes a wide range of raw materials which frequently change 
in character, it is unlikely that he will be tempted to control the supply 
of all of them. Other economies of stabilized production are those 
effected through the maintenance of a uniform and specialized labor 
force. In employing specialized labor, it is necessary, of course, that 

» Frank, L. K.. "The Significance of Industrial Integration," Journal of Political Economy, April 1925, 
p. 190. 

• Dennison, S. R., "Vertical Integration and the Iron and Steel Industry," The Economic Journal, June 
1939,p. 247. 

*MacGregor, D. H., "Industrial Combination," pp. 97 and 98. 



CONCENTRATION OF ECONOMIC POWER \ 95 

the firm be sufficiently large to obtain the maximum profitable division 
of labor. 

Economies arising from technical advantages may be realized 
through continuous plant operations. Thus, in the combination of 
blast furnaces and steel mills there may be considerable savings in fuel 
by avoiding the necessity of reheating the metal ; while in a combina- 
tion of pulp and paper mills it is possible to transfer the pulp direct to 
the paper mill without the expense of drying. It is not to be over- 
looked, however, that there are technical disadvantages in integration. 
According to one writer — 

Technical changes often deprive integration of its independence of the market. 
Twenty years ago the amount of scrap iron used in making steel was small and an 
integrated concern could largely supply itself with its own primary raw material 
from its own blast furnaces. Changes in technique have made it possible to use 
scrap iron on a much larger scale; * * * since no concern has enough of its 
own, the vertical firms are forced to go outside for this raw material. 5 

When the output of one plant is passed directly to the next plant, 
inventory accumulations are held to a minimum and less working 
capital is required. Furthermore, it is possible for an integrated 
company to budget its production so that the ouput of one plant will 
exactly meet the requirements of the plant at the succeeding manu- 
facturing stage. To achieve balanced plant operations, however, it 
is frequently necessary to sacrifice the highest technical efficiency of 
certain individual plants within the combinations. It seldom happens 
that the optimum size plant at each stage will utilize the exact out- 
put or supply the requirements Of the optimum size plants at preced- 
ing or succeeding stages. Burns has expressed the conviction that 
"It is possible that no vertically integrated firm operates at the highest 
level of efficiency available in all stages of production in which it is 
engaged." 6 

One might infer that integration per se would free a concern from 
the open market at each stage of production. Such, however, is not 
the case. Almost invariably some products will be sold or purchased 
outside the combination. A cursory examination of manufacturers' 
reports for 1937 reveals little evidence that plant operations within 
integrated concerns were balanced. In numerous instances it was 
found that only a portion of the raw materials or commodities re- 
quired by establishments operating at the succeeding stage was pro- 
duced within the central-office group. On the other hand, in many 
cases a significant part of the output of certain plants was sold 
outside the central-office groups, and not to other plants within the 
organization which might have utilized the products either as raw 
materials or in combination with other commodities. 

Other advantages claimed for the vertically integrated structure are 
those associated with the spread of administrative or managerial costs 
over more productive units. With the unified direction and control of 
production through the several stages of the whole manufacturing 
process, it is possible to effect considerable savings in selling opera- 
tions, advertising, bad debts, etc. Furthermore, it is possible to 
achieve a technical coordination of plant operations necessary for the 
successful and uninterrupted prosecution of work if, through central 
management, the entire machinery is directed toward the output of 

> Jewkes, John, "Factors in Industrial Integration," Quarterly Journal of Economics, August 1930, p. 635. 
« Burns, A. R., "The Decline of Competition," p. 432. 



196 CONCENTRATION OF ECONOMIC POWER 

the ultimate product. Although it is frequently argued that there 
are size limits beyond which companies may not be competently 
managed, the existence of a number of very large complex and yet 
efficient organizations leads one to speculate on the limits within which 
this contention is tenable. 

In this connection it is held that the large integrated concern does 
not easily adjust itself to change. Vertical integration may cause in- 
flexibility within a concern and may make it less capable ol shitting 
to newer and more improved methods of production. 

Vertical integration may diminish the responsiveness of the firm to changes in 
knowledge of methods of production. It assumes, within limits winch vary from 
indStay to industry, the use of certain materials and certain methods of pro- 
duction and when changes occur, the vertically integrated firm is tempted to 
continue using the former raw material in order to secure as great a return as 
poiible from investment in prior processes which have now become partly 
obsolete. 7 

To summarize briefly, vertical integration has both advantages and 
disadvantages. Whether the gains outweigh the losses, or vice versa, 
is dependent upon numerous determining forces. Among them may 
be mentioned such factors as market conditions, efficiency of manage- 
ment, variety and type of raw material required, character ol ultimate 
product, and capriciousness of consumer demand. Moreover, there 
can be no unanimity of opinion with respect to the advantages or dis- 
advantages of the vertical organization of industry as a whole. 
Rather, in such an evaluation it is expedient to give separate con- 
sideration to the varying problems associated with each md ustry 
To cite the possibility that the economies to be realized through 
vertical integration may be overstated is not to gainsay the prevalence 
of this structural type of organization in our economy A measure 
of the extent of vertical integration is the object ol the ensuing 
analysis. 

INTEGRATION AMONG INDUSTRY GROUPS 

Of the total number of multiple-plant central offices in 1937, 565 
central offices, or 10 percent, controlled establishments which oper- 
ated at successive stages or levels an<J may thus be described as ver- 
tically integrated. Among complex central offices, vertically related 
concerns accounted for 27.5 percent of the structures. Groupings 
of plants related through the manufacture of successive products and 
through the manufacture of joint products were the most prevalent 
structural types among complex central-office organizations 

The number of vertically integrated concerns among the various 
industry groups is indicated in table 28. In terms of the total number 
of complex central offices classified in each group 71 percent of the 
central offices in the forest and the paper products groups were 
vertically integrated. Furthermore, a sizable proportion of the con- 
cerns in the leather, the textile, and the iron and steel groups were 
engaged in the output of successive or vertical products inis, ol 
course, does not signify that all plants within these central, offices 
manufactured commodities produced m sequence. 

As it is measured here, there was no evidence of vertical integration 
in the rubber group. The products of the rubber group, to a con- 
siderable degree, are manufactured in large-unit plants; thus the 



' Ibid. 



CONCENTRATION OF ECONOMIC POWER 



197 



separate processes are not reflected in the statistics. Several of the 
larger tire companies maintained separate plants for the production 
of cotton fabric. This pattern of integration, however, was given 
consideration in the section relating to complementary materials. 

Table 28. — Central-office companies producing successive products, by industry 

groups, 1987 

[Note.— See headnote to table 16] 



Group 
No. 



Industry group 



Total 
number 

of 
central 
offices 



Total 
number 

of 
complex 
central 

offices 



Central-office companies 
producing successive products 



Number 



Percent of— 



Total Complex 



All industries 

Food and kindred products 

Textiles and their products 

Forest products 

Paper and allied products 

Printing, publishing, and allied industries 

Chemicals and allied products 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures. . 

Stone, clay, and glass products.. 

Iron and steel and their products, not in- 
cluding machinery 

Nonferrous metals and their products 

Machinery, not including transportation 
equipment 

Transportation equipment, air, land, and 
water 

Miscellaneous industries 



5,625 



2,051 



565 



10.0 



27.6 



1,660 
810 
636 
193 
232 
389 
66 
30 
127 
343 

336 
94 

393 

91 
225 



438 
298 
206 
110 
65 
169 
36 
14 
44 
83 

202 
43 

207 

53 

83 



20 

131 
146 
78 
10 
18 
5 



1.7 
16.2 
23.0 
40.4 
4.3 
4.6 
7.6 



6.6 
44.0 
70.9 
70.9 
15.4 
10.7 
13.9 



20 



15.7 
1.5 



19.6 
12.8 



5.1 



8.8 
7.6 



45.4 
6.0 



32.7 
27.9 



9.7 



15.1 
20.5 



The four industrial groups having the largest number of central- 
office enterprises producing successive products, were, in the order 
named, forest products, textiles, paper and allied products,: and iron 
and steel. An analysis of the structures comprising each of these 
groups follows. 

Forest Products. 

As previously noted, the data on vertical integration are understated 
to the extent that several' successive steps in production are carried 
on in one plant or are included in one industry classification. Suc- 
cessive stages in the manufacture of forest products are reflected in the 
following census industry classifications: (1) The lumber and timber 
products industry, embracing logging camps producing logs, bolts, 
and rough timber products such as hewn crossties, poles, posts, mine 
timbers, etc.; and sawmills producing rough lumber, laths, shingles, 
staves, heading, hoops, veneer stock, veneers, and other products 
from logs and bolts; (2.) planing-mill products and other wooden 
products industry, 8 covering dressed lumber, sash, doors, blinds, 
interior woodwork, and moldings; and (3) industries at the more 
advanced stages of manufacture, producing such products as furni- 
ture, caskets and coffins, billiard and pool tables, mirror and picture 
frames, etc. 

8 It should be borne in mind that, in this study, only the 'independent planing mills can be identified as 
operating at a stage succeeding the sawmill activities, since planing mills operated in conjunction with saw 
mills are included by the Bureau of the Census in the lumber and timber products industry. 



198 CONCENTRATION OF ECONOMIC POWER 

Of the 206 complex central offices classified in the forest products 
group, 146 central offices controlled plants performing successive 
steps in manufacturing. For the most part, however, the individual 
steps were rather simple in nature and 119 of these central offices 
operated establishments in but 2 separately distinguished industries, 
56 of which were combinations of plants active in the lumber and 
timber products industry and in the planing-mill products industry. 
There were 15 additional central offices which controlled separate 
sawmills and planing mills, but each of these operated establishments 
in other industries as well. 

Among the industries comprising the forest products group, the 
manufacture of furniture probably involves the most complex process. 
Only 14 central offices classified in the forest products group operated 
furniture factories in addition to other plants in some of the less com- 
plex industries within the group. There were 32 central offices 
engaged in the lumber and timber products industry and in the 
manufacture of boxes or cooperage, such as barrels, casks, kegs, tubs, 
tanks, and the like. Here, again, the manufacturing process is com- 
paratively simple. In 12 central-office groups certain plants produced 
lumber and timber products, while others treated the wood to 
prevent decay and to protect it against fire, insects, etc. Seven 
central offices controlled establishments in the lumber and timber 
products industry and had separate plants making turned and shaped 
wooden goods. 

To emphasize the fact that central-office companies predomi- 
nantly active in the forest products industries did not expand into 
many different fields of manufacture, it may be said that only eight 
central offices operated establishments in more than three industries 
and only two of these central offices involved more than five industries. 
An indication of the direction of this diversification is suggested by 
the case of a central-office company which operated in the following 
industries: Lumber and timber products; wooden boxes; cooperage; 
paper boxes ; steel barrels, kegs, etc. ; wirework ; and sheet metal work. 

Textiles and Their Products. 

The textile group includes those industries utilizing cotton, wool, 
silk, rayon, flax, hemp, manila, jute, and hair as their basic materials. 
At the census for 1937, there were 93 separately distinguished . in- 
dustries in this group. They were divided into three subgroups, as 
follows: 

(1) Textile-mill products industries: Those whose principal ac- 

tivities are preparing fiber, spinning, weaving, knitting, 
braiding, lace-making, felting, and related operations. 

(2) Cutting-up industries: Those in which clothing and other 

cut-and-sewed products are made from purchased woven 
or knitted fabrics. 

(3) Processing industries: Those in which articles other than 

cut-and-sewed products are made from purchased woven 
or knitted fabrics, such as embroideries, trimmings, artificial 
leather, linoleum, etc. 

The nature of the above-named general lines of activity provides 
some indication of the successive steps in the textile industries. 
Major products manufactured in succession are yarns, gray goods, 
finished goods, clothing, and other fabricated textile products. The 



CONCENTRATION OF ECONOMIC POWDER 199 

intermediate step of dyeing and finishing yarn or fabric comes within 
the scope of the textile-mill products subgroup. This operation is 
frequently conducted in a separate department of the same plant 
which produces the yarn or fabric, and in such cases is not recognized 
here as a successive step. It is only those instances in which central 
offices maintain separate establishments for dyeing and finishing that 
this activity is included among the successive or continuing steps. 
Of the 810 central offices operating predominantly in the textile 
industries in 1937, there were only 298 concerns that controlled 
plants engaged in more than one industry. Very likely, many of the 
central offices in the one-industry category did their own dyeing and 
finishing in the same plant with the major business. 

Successive products were manufactured by 131 central-office enter- 
prises classified in the textile group. (See table 28.) Approxi- 
mately half of these concerns maintained separate dyeing and finishing 
establishments and 85 central offices operated plants in only two 
industries. A distribution of the remaining 46 central offices ac- 
cording to the number of i ndustries in which their controlled establish- 
ments operated is as follows: 26 central offices in 3 industries; 8 in 
4 industries; 9 in 5 industries; 2 in 6 industries; and 1 in 7 industries. 

Thirty-three central offices operating in but 2 industries controlled 
dyeing and finishing plants and other establishments producing either 
yarns and thread or various types of fabric. In many instances the 
yarn is dyed before the weaving or knitting process, although it is 
frequently made up in the gray and subsequently dyed. Among the 
central offices operating establishments related vertically, there were 
13 combinations producing cotton yarn and thread and woven or 
knitted goods; 11, silk yarn and thread and hosiery, silk woven goods, 
or silk underwear; 7, wuolen or worsted yarn and woven goods or 
knitted wear; 7, woven goods of either cotton, silk, wool, or worsted 
and various articles of clothing; and 4, rayon yarn and thread and 
rayon broad woven goods. Three companies manufactured cotton 
or jute goods and made bags of these materials. 

Those /Central offices which operated establishments in 3 vertically 
related textile industries represented, for the most part, a coordination 
of plants engaged in spinning, dyeing, and the fabrication of woven 
materials. Of the 46 central offices which controlled plants in 3 or 
more industries, only 21 groups operated plants at 3 successive indus- 
try levels. In fact, no more than 3 successive steps occurred in any 
central office. The single central office that controlled plants in 7 
different industries operated in only 3 successive textile industries, 
as follows: Cotton woven goods; dyeing and finishing cotton fabric; 
and the cotton bag industry. The other 4 industries were outside 
the textile field, the largest 2 involving the manufacture of paper 
and paper bags. The fact that paper mills were operated in con- 
junction with textile mills may be accounted for by the use of textile 
scrap in the manufacture of paper. 

Paper and Allied Products. 

The activity comprehended within this industry group lends itself 
readily to vertical integration. Successive steps in the manufacture 
of paper or paper products are reflected in the following census 
industry classifications: (1) Lumber and timber products; (2) pulp; 
(3) paper; and (4) industries involving the manufacture of paper 



200 CONCENTRATION OF ECONOMIC POWER 

products. Seventy-eight central offices, or 71 percent of all complex 
central offices predominantly active in the paper group, controlled 
plants operating at successive manufacturing stages. In terms of 
the total number of central-office enterprises in each industry group, 
more than 40 percent of the companies in the paper industries con- 
trolled vertically integrated plants, a higher proportion than in any 
other industry group. 

The central-office groups noted above may be distributed accord- 
ing to successive manufacturing stages as follows: Lumber and 
pulp, 2 central offices; pulp and paper, 23; paper and paper manufac- 
tures, 24; lumber, pulp, and paper, 7; pulp, paper, and paper manu- 
factures, 12; and lumber, pulp, paper, and paper manufactures, 8 
central offices. Two central offices not included in the foregoing 
distribution controlled plants engaged in the manufacture of paper 
products machinery as well as in the output of paper products them- 
selves! 

Over three-fourths of the wood pulp produced in this country is 
converted into paper or paperboard in establishments integrated with 
pulp mills. Specifically, the production of wood pulp in 1937 
amounted to 6,573,000 short tons and of this quantity, 5,276,000 tons 
were consumed in the producing plant or transferred to and consumed 
in other plants operated by the same companies. Pulp-producing 
concerns may own timberland or they may own the right to cut 
timber within a stated time and under given conditions of manage- 
ment and reforestation. Some indication of the extent of this activity 
is provided by the number of central offices engaged in lumbering. 
Of the total number of central offices classified in the paper group, 
there were 17 concerns .operating plants in the lumber industry and 
in the output of pulp. 

The advantages of integration are most pronounced in the produc- 
tion of those types of paper which are made in large runs of uniform 
specifications from one or two kinds and grades of wood pulp — for 
example, newsprint and coarse wrapping paper and kraft board. 
Conversely, the benefits are less marked in the manufacture of paper 
and paperboard produced in smaller quantities, or which are of varied 
pulp composition, or made largely from other materials mixed with 
new wood pulp. Fifty of the 78 vertically integrated companies 
classified in the paper industries produced pulp in connection with 
their paper-making activities. Considerable savings may be effected 
if the paper plants are operated in proximity to the pulp mills, since 
the pulp can then be used without first being dried. Manifestly, 
the drying operation is an added expense. 

Many central-office groups active in paper making also manufac- 
tured miscellaneous paper commodities classified in several different 
census industries, so that the controlled plants were interrelated 
because of the output of joint products as well as of successive 
products. One central-office organization worthy 'of mention was 
primarily active in the manufacture of paper, but also produced its 
own pulp and made paper boxes. In addition to the above-named 
industries, which are successive, this combination included establish- 
ments classified in seven other census industries outside the paper and 



CONCENTRATION OF ECONOMIC POWER 201 

allied products group. The products of most of these establishments 
could be used in the building trades; hence the functional relationship 
of the plants was based upon similarity of market. 

Iron and Steel and Their Products. 

Vertical integration in the iron and steel industry has long been a 
subject of comment and study. The data developed here reflect 
the prevalence of this structural type in this industry. The various 
stages in the manufacture of steel are shown in chart 14. As indi- 
cated in this diagram, iron ore, coke, and limestone are the principal 
raw materials charged in the blast furnace for the manufacture of pig 
iron. Pig iron, which is produced in different grades, according to 
the purpose for which it is to be used, is for the most part to be con- 
sidered an intermediate stage in the making of steel. Some pig iron, 
however, is used in the production of castings and wrought iron. 
The process of making steel involves the elimination of certain non- 
metallic impurities from the iron. Obviously, it is more economical 
to convert molten iron into steel without reheating; for this reason, 
steel. works haye been developed in conjunction with blast furnaces. 
With the production of the ingot the essential processes of steel- 
making end. Later stages involve the shaping of the steel to meet 
the varied requirements of the different industries. Even for these 
semifinished products there are technical and economic reasons for 
operating on a continuous basis. Thus, sheets, strips, bars, rods, etc., 
are produced without the necessity of cooling and reheating. 

The Bureau of the Census divides the iron and steel industries into 
two broad subgroups, namely, (1) industries whose output consists 
of crude iron and steel and of rolled products, e. g., blast furnaces and 
steel works and rolling mills; (2) industries in which are manufactured 
other iron and steel products (except certain advanced manufactures 
of iron and steel which are classified in the machinery, the transporta- 
tion, or the nonferrous metal products group). The industries in 
this second subgroup use as their principal materials the products of 
the industries in the first subgroup. 

As pointed out earlier in this chapter, it was not possible to deter- 
mine the numerous successive steps in the manufacture of iron and 
steel from the broad census industry classifications. In addition to 
changing the character of the raw material, steel is frequently reworked 
several times. Also, the establishments which roll iron and steel and 
operate departments adjacent to the same plants for the conversion 
of rolling-mill products into wrought pipe, bolts and nuts, wire, tin 
plate and terneplate, etc., are assigned in their entirety to the "steel 
works and rolling-mill products" industry; in such cases, therefore, 
the successive stages are not reflected in the statistics. 

This study reveals that 66 central offices, or about one-third of all 
the complex concerns predominantly active in the iron and steel- 
industries, controlled establishments engaged in the manufacture of 
successive products. (See table 28.) In general, the following steps 
have been recognized: (1) coke-oven products; (2) blast-furnace 
products; (3) steel-works and rolling-mill products; and (4) iron and 
steel manufactures not produced in steel works and rolling mills. 



202 



CONCENTRATION OF ECONOMIC POWER 



il 






Iff Is 



?f fey feit! 



Xr> 




si 

QUitt 






Is 

It 



8 § 

O 3 



i 

o 

f 

a. 

i 

£ 
2> 



CONCENTRATION OF ECONOMIC POWER 203 

On the basis of the different combinations of stages at which they 
operate, vertically integrated central-office companies predomi- 
nantly active in the iron and steel industries may be distributed as 
follows : 

Number of 
central office* 

Coke-oven and blast-furnace products 4 

Coke-oven, blast-furnace, and steel-works and rolling-mill products. """I 4 
Coke-oven, blast-furnace, and steel-works and rolling-mill products, and iron 

and steel products not made in steel- works and rolling mills 10 

Blast-furnace and steel-works and rolling-mill products, and iron and steel 

products not made in steel works and rolling mills 2 

Steel-works and rolling-mill products, and iron and steel products not made 

in steel works and rolling mills 29 

Intermediate and advanced manufactures not made in steel works and rolling 

mills 13 

Total number of central offices 62 

Four central-office companies were precluded from the above 
classifications because of their peculiar organization. The output of 
iron and steel products was the principal business of each of these 
enterprises, but their successive operations were outside this field 
and were represented by the manufacture of paper and paper boxes, 
lumber and turned and shaped wooden products, lumber and wooden 
boxes, and lumber and charcoal. The charcoal may have been used 
as fuel for the blast furnace and the paper boxes and lumber for con- 
tainers and packing boxes. 

Coke is the principal source of heat in the blast furnace and the 
means of reducing iron and oxide to metallic iron. In 1937, approxi- 
mately 65 percent of the coke produced in the United States was con- 
sumed in blast furnaces. Eighteen of the sixty r six vertically in- 
tegrated central offices in the iron and steel group produced coke for 
use in their blast-furnace operations. Other instances of the unified 
management of coke ovens and blast furnaces were noted, but the 
enterprises were not predominantly active in the manufacture of iron 
and steel and, for this reason, were not classified in tins industry group. 
Other Industry Groups. 

Approximately three-fourths of the vertically integrated central- 
office enterprises were classified in the four industry groups dis- 
cussed above, i. e., the forest products, the textile, the paper and allied 
products, and the iron and steel groups. Among the remaining 
industry groups, instances of vertical integration were recorded in 29 
central offices active in the food group, 20 each in the leather and 
machinery industries, 18 in the chemical, and 17 in the miscellaneous 
industries. 

The successive operations in the food group occurred, for the most 
part, in the distilling of liquors and the blending and rectifying of these 
liquors in separate plants and in the production of flour and bread. 
Two central offices operated establishments manufacturing cottonseed 
oil and maintained additional plants to produce shortenings and 
cooking and salad oils. It is of interest to recall at this point that the 
horizontal combination was the most prevalent form of organization 
among the food industries. In fact, only about one-fourth of all 
central-office enterprises classified in the food group were complex 
structures and less than 7 percent of these manufactured successive 
products. 



204 CONCENTRATION OF ECONOMIC POWER 

Most of the central offices primarily active in the leather industries 
were likewise horizontally integrated, but nearly half of the complex' 
central offices in the leather group operated establishments producing 
successive products. In general, the initial manufacturing stage of 
the leather companies was the tanning and finishing of leather, 
although 4 of the 20 central offices extended their operations back- 
ward to include the production of tanning extracts and solutions. 
Two of the organizations manufactured only leather in addition to 
the tanning materials, whereas the other two controlled establish- 
ments producing either boot and shoe cut stock and findings 9 or the 
finished boots and shoes, so that in the latter instances three manu- 
facturing stages were involved. 

The remaining 16 central offices classified in the leather group 
controlled but two stages of production which, for the most part, 
included the output of leather and the fabrication of various articles 
from the leather. Those central offices which operated their own 
tanneries utilized the leather in the production of boots and shoes; 
boot and shoe cut stock and findings; gloves and mittens; belting and 
packing; and miscellaneous leather goods, such as belts, handles, 
corners, and straps for luggage, dog furnishings, desk sets, embossed 
leather goods, razor strops, etc. 

The majority of vertically integrated structures classified in the 
machinery industries represented groupings of plants producing iron 
and steel or nonferrous metals and the various types of machinery 
manufactured from these materials. Manifestly, only two successive 
stages could be recognized in these instances, many of the continuing 
steps being obscured by the widely comprehensive nature of the 
industry classifications. One of the most outstanding examples of 
integration through many stages was noted in the case of a company 
whose ultimate products were agricultural implements and whose 
activities reached as far back as the manufacture of coke and extended 
through the operation of blast furnaces and steel works and rolling 
mills. 

Among the central offices classified in the chemical industries, there 
were a number of concerns operating plants related through the pro- 
duction of such successive products as greases or oils and soap, lamp- 
black and printing ink, rayon and rayon cloth, and distilled and rec- 
tified or blended liquors. 

As the name implies, the miscellaneous industry group includes all 
those industries which do not properly fit in any of the other groups. 
Successive operations were apparent among establishments in 17 
central-office structures in the miscellaneous group. Some of the most 
common products manufactured in succession by plants under cen- 
tralized management were: cotton goods and surgical products 
(bandages, dressings, prepared gauze, and belts and other devices 
made largely of cotton goods); silk woven goods and umbrellas; 
lumber and toys, games, and playground equipment; refined graphite 
and lead pencils; and felt goods and musical instrument parts. A 
large tobacco company operated vertically related plants producing 
cotton goods and cotton bags. Since the bags were used as con- 

8 The "boot and shoe cut stock and findings" industry includes such articles as soles, tips, heels, inner 
soles, uppers, shoe pegs, metal tips, and heelplates, boot and shoe laces, counters, shanks, wooden heels, 
shoe trimmings, etc. 



CONCENTRATION OF ECONOMIC POWER 205 

tainers for the tobacco, there also existed a complementary relation- 
ship between the establishment manufacturing bags and the plant 
producing tobacco. 

Summarizing briefly, it may be said that instances of vertical 
integration appeared in almost 28 percent of all complex central-office 
groups. In the majority of cases the integration extended over only 
two industries though, in some instances, as many as four industries 
were covered. A relatively greater proportion of the central-omce 
structures in the paper, forest products, leather, textile, and iron 
and steel groups were vertically integrated, while this form of com- 
bination was least common in the food and the stone, clay, and glass 
groups, and did n6t appear at all in the rubber group. 



CHAPTER IX 

UNRELATED FUNCTIONS 

, The inference to be drawn from the analyses in the foregoing 
chapters is that the great majority of manufacturing establishments 
operating under central-office control were functionally related. It 
may be said, therefore, that a rational basis exists for the grouping 
of a number of plants under unified management. This does not 
imply that all plants within a central office are related in the functional 
manner. It does signify, however, that establishments or groups of 
establishments under the same management are interrelated. For 
example, a central office may control four plants, one making butter, 
another cheese, and the other two manufacturing silk yarn and thread 
and silk hosiery. Obviously, the first two plants are functionally 
related because they utilize a common raw material and the latter two 
because they operate at successive steps to produce an ultimate 
product, but there is no relationship between the butter and the cheese 
factories and the silk and hosiery mills. 

Of the 2,051 complex central offices studied, there were only 95 
concerns for which it was impossible to determine a functional 
relationship among the constituent establishments. It is possible, 
However, that a more intensive analysis of these 95 central offices 
might have revealed certain relationships among the plants which 
could not be ascertained in this study. 1 

About one-third of the central offices which operated apparently 
unrelated establishments were classified in the chemical group, while 
the remainder were scattered throughout all other industry groups, 
with the exception of the rubber products group. Among the central 
offices whose principal business was in the chemical industries, con- 
cerns operating plants in the following industries were noted: toilet 
preparations and sporting goods; fertilizers and nonferrous metal 
alloys; insecticides and fungicides and machine-shop products; drug 
grinding and paper; soap, flavoring extracts, and paints; compressed 
and liquefied gases and machinery; linseed oil and foundry supplies; 
and fertilizers and carpets and rugs. A company manufacturing 
explosives and ammunition controlled other plants producing con- 
densed and evaporated milk, pulp, grease and tallow, and tanning 
materials. 

Several central offices active in the canning industries controlled 
other establishments manufacturing such unrelated products as 
agricultural implements, turned and shaped wooden products, lumber, 
and various types of machinery. The seasonal characteristics of the 

i In chapter IV, "The Causes of Product Diversification," part VI of this study, information was obtained 
on the causes of product diversification through personal interviews with the executives of a number of 
corporations. This chapter throws some light on the reasons that certain concerns manufacture seem- 
ingly unrelated products. 

206 



CONCENTRATION OF ECONOMIC POWER 207 

canning business were undoubtedly responsible for the diverse industry 
patterns in these instances. The advantages to be derived from 
stabilized employment may have induced the firms in these lines 
to take on the production of dissimilar products. An unusual case 
among the central-office structures classified in the food industries 
was that of a grain mill and a plant producing woolen goods. Another 
company which made shortenings and cooking and salad oils also had 
under its management plants producing turpentine and rosin, mis- 
cellaneous chemicals, and a smelter for nonferrous metals. 

No apparent functional relationship existed between establishments 
manufacturing printers' machinery and dyeing and finishing estab- 
lishments. Other peculiar groupings of plants controlled by the 
same central office occurred in the case of concerns manufacturing 
miscellaneous machinery and malt liquors and another manufacturing 
machinery and soap. A combination of establishments in the elec- 
trical machinery and apparatus industry and in the radio apparatus 
industry has a logical basis, but the operation of a cement plant 
by the same company cannot be explained. Another group which 
defied classification was that of a concern manufacturing motor 
vehicle bodies and parts and miscellaneous house-furnishings, such 
as sheets and pillow cases. 

It is believed that the examples cited above will give some indica- 
tion of the unrelated manufacturing activities which sometimes appear 
under the control of a single central office. With the resources avail- 
able to this study, no extended company-by-company investigation 
of these unusual groupings could be undertaken. It is possible 
that such an investigation would have revealed relationships among 
the plants which were obscured by the data in their present form. 
For certain concerns, however, no explanation in functional terms is 
possible. Reasons which lie outside our scheme of functional analysis 
may be equally relevant in accounting for the grouping under unified 
management of unlike lines 'of activity. It is only surprising that 
so many of the central offices control plants which are related in 
this functional sense. The extent of unrelated activities within 
central-office groups is not measured here but a cursory examination 
of the data indicates that it is a rather common practice. For ex- 
ample, there may be a functional relation among the plants within 
any line of activity but the varying lines of activities may be quite 
unrelated, as was the case of the central office mentioned above which 
controlled plants making butter and cheese and, in another line, plants 
making silk yarn and thread and silk hosiery. 

In general, it may be said that investment in totally dissimilar 
lines is frequently identified with the desire to spread risks over more 
than than one branch of activity. Although there is a high degree 
of interaction among all elements of the economy so that any up or 
down impulse in operations has a wide-spread effect, these cycles do 
not touch upon all phases of business at the same time, nor with 
like intensity. There are, therefore, certain benefits to be derived 
from the unified management of dissimilar lines of endeavor. 



CHAPTER X 
SUMMARY AND CONCLUSIONS 

In part I of this study of "The Structure of Industry," attention 
was confined to the changes which have taken place over the last 
two decades in the scale of manufacturing operations. The long-time 
trend among the various industries and the degree of concentration 
in manufacturing were measured in terms of the basic producing unit, 
the establishment. 

In the present report, which is part II of "The Structure ol Industry, 
the investigation of concentration was carried a step further through 
the measurement of the extent and significance of central-office control 
of manufacturing establishments. This analysis of the role of multi- 
plant enterprises was made possible through the use of the central- 
office records of the Bureau of the Census. 

There were 5,625 central-office companies engaged m manufac- 
turing in 1937, and these central offices operated 25,699 establish- 
ments, or 15 percent of all manufacturing plants active in that year. 
-The extent of control of establishments varied widely among the in- 
dustry groups, from 48 percent of the total number in the petroleum 
and coal group to 4 percent of the establishments in the printing 
and publishing group. The average central office had avowed con- 
trol over approximately 5 establishments, although 1 central office 
operated 497 establishments. About two-thirds of the total number 
of central offices were active in only 1 industry. At the other extreme, 
however, a single central office controlled establishments operating in 

Obviously, a mere count of establishments or industries does not 
adequately reflect the relative importance of central-office operations. 
In terms of another measure, 51 percent of all wage earners m manu- 
facturing were employed in establishments under central-office man- 
agement and the wages paid in these establishments amounted to 55 
percent of the total wage bill. By this measure also, there were wide 
variations among the industry groups. To illustrate, 90 percent of 
the wage earners employed in establishments classified in the petro- 
leum and coal group and 80 percent of those in the transportation 
group were in establishments operated by central offices, whereas only 
21 percent of the wage earners in the printing and publishing group 
and 33 percent of those in the forest products group were in central- 
office establishments. 

The size of central-office establishments and independently operated 
establishments varied greatly. For all industries-, the average central- 
office establishment employed 170 wage earners per plant as con- 
trasted with 30 wage earners per plant in. independent units. In the 
transportation equipment group the discrepancy was even wider- 
establishments operated by central offices employed an average ot 
1,083 wage earners per establishment, while independent plants in 
the same industry group averaged 85 workers. 

There was an equally wide range in size among the central-office 
establishments themselves. In the food group, the average central- 
office establishment employed 46 wage earners as compared with the 
208 



CONCENTRATION OF ECONOMIC POWER 209 

aforementioned total of 1,083 wage earners per plant in the transpor- 
tation equipment group. 

Not only did establishments controlled by central offices employ a 
larger number 6f wage earners per plant than the independent estab- 
lishments, but the value of products per central-office establishment 
was much greater than that of the average independent establish- 
ment, $1,443,900 and $167,300, respectively. Thus, the average 
value of products per wage earner in establishments operated by 
central offices was 50 percent higher than the average value of products 
per wage earner in independent establishments. Specifically, the 
average value of products per wage earner in central-office estab- 
lishments was $8,470 as contrasted with $5,640 in independent 
establishments. 

In chapters III through IX of this study, the determination of the 
relationships of establishments within central-office groups was the 
object of the investigation. A scheme of analysis was developed in 
which five general types of functional relationships were distinguished. 
Each central-office group was examined and classified on this basis. 

Of the 5,625 central offices in existence in 1937, approximately 64 
percent operated in only one industry and thus were simple in structure. 
Among the remaining so-called complex central offices, there were a. 
large number of instances in which several plants in a single industry 
were operated under one management. A combination of these two 
types of situations in which plants are related through the performance 
of uniform functions indicates the wide-spread nature of horizontal 
integration. Specifically, 85.7 percent of all establishments under 
central-office control were related in this fashion. The diversity of 
this form of integration was quite wide, however, among the industry 
groups. In the food group, 92 percent of the establishments operated 
by central offices were horizontally related, while the corresponding 
ratio in the rubber group was only 67 percent. 

The greatest number of complex central offices were found to oper- 
ate establishments engaged in the manufacture of successive products 
and joint products. It will be remembered that the successive 
products represent the output of the so-called vertically integrated 
organizations. The number of instances of the various types of 
functional relations within central-office structures may be sum- 
marized as follows: 

Number of 

Type of functional relationship: instances 
Uniform functions, total 4, 793 

In simple central-office groups 3, 574 

In complex central-office groups 1, 219 

Divergent functions, total . 781 

Joint products 564 

Byproducts 113 

Like processes 104 

Convergent functions, total 1, 058 

Complementary products 386 

Auxiliary products ,. 183 

Like markets '. 489 

Successive functions 565 

Unrelated functions : - 95 

273238 — 41 — pt. 27 15 



210 CONCENTRATION OF ECONOMIC POWER 

A cross-section picture of the structural form of a large segment of 
manufacturing has been presented in this study. The extent of 
combinations and their functional organization has been examined 
on the most apparent level of control, i. e., the control effected when a 
number of establishments are linked together under one central-office 
management. Other less tangible methods of control undoubtedly 
tie together many apparently separate plants, but it is only those 
combinations of plants where the control is acknowledged that are 
reflected here. To the extent the measure of concentration developed 
in this study does not include these more subtle types of control, the 
concentration in manufacturing has been understated. The data 
which have been made available, however, should indicate the areas 
within which concentration is high. Furthermore, the analysis as 
developed here affords striking evidence of the extremely complex 
and varied nature of manufacturing operations. 



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3 
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ments operated 
by central 
offices 




Per- 
cent 
of 

total 


41.0 
49.9 

23.9 
70.0 

23.5 


39.8 
66.9 

26 4 

58.5 
26.1 

24.5 

88.5 

32.4 
44.1 




i 



a 


2,923 
43, 119 

17, 180 
35, 134 

154,971 


338, 057 
20,665 

82, 659 

45, 497 
7,564 

3,607 
103, 284 

22, 795 

18, 985 


"3 

o 


7,128 
86, 346 

71, 757 
50, 225 

658, 467 


848. 481 
30, 902 

312, 552 

77, 716 
29,026 

14, 748 
116, 700 

70, 268 
43, 016 


1| 

CD 
co u, 

SOU 

gBco 
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ments operated 
by central 
offices 


Per- 
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of 
total 


•00 ns 


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CO — CM O CO 
CO *o cm t- CM 


oieo 06 r^f~ •o'co 00 
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a 
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a 
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co t- co cp 

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CO-* COCO — '•**" — '—" 
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"3 

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6H 


rt*J CO t- •*}■ 
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co -^ <oui CO 


O •* Ui »o O * * t-t— 

0— ■* t- oco co 
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CM m cocm 00 

■* CO CO 
CO 


345 
20 

174 

32 
22 

7 
84 

32 
22 


a 
1 

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o 

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S3 

a*o 

CO 

35 

cm 

03 


In establish- 
ments operated 
by central 
offices 


Per- 
cent 
of 

total 


39.4 
46.1 

27.4 
68.0 

23.6 


40.fi 
65.8 

23.8 

57.0 
20.9 

24.0 

88.5 

32.1 

39.2 


a 
3 


a 
< 


916 
9,010 

4,145 
6,238 

40, 692 


111,411 
3,548 

16, 093 

11,301 
73 

727 
10, 034 

6,261 
3,970 


"3 
o 


CM CO ON 00 
CM ■* CM t- "O 
C0»O — — Ui 


tPCM Ui NO T(<00 COCM 

coo -* CMu^eoeo ovco 

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by central 
offices 


Per- 
cent 
of 
total 


03 lO CO 00 


CMCM -0< CCt- O-* OOO 


OCO >OtC — 
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CO»Q Ui N(D SOD -HIO 
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t-^eo cd oc 0" t-Tco 


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COCO 1QCM -* 


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69 
634 

521 
397 

3.097 


7,647 
25 

2,858 

160 
993 

144 
197 

755 
298 




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tral- 
office 
com- 
panies 


co ** -co ui 

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Boxes, wooden, except cigar boxes 

Caskets, coffins, burial cases, and 
other morticians' goods 

Furniture, including store and office 


Lumber and timber products not 

elsewhere classified 

Matches. 

Planing-mill products and other 
wooden products not elsewhere 
classified, made in planing mills not 
connected with sawmills 

Synthetic-resin, cellulose-plastic, vul- 
canized-fiber, and molded and 
pressed pulp fabricated articles, not 
elsewhere classified 

Turpentine and rosin -- 

Window and door screens and 
weatherstrip 

Wood preserving 

Wood turned and shaped and other 
wooden goods, not elsewhere class- 
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APPENDIX B 



Industries in which no establishments are controlled by central offices, with number 
of establishments, average number of wage earners, and value of products, 1937 



Industry 



Number 
of estab- 
lishments 



Total, all industries 

Total, industries not controlled by central offices 

Percent industries not controlled by central offices are of all 
industries • 



Billiard and pool tables, bowling alleys, and accessories.., 

Blouses, women's, misses', and children's— contract factories 

Carpets and rugs, rag.. - -.- - 

China firing and decorating, not done m potteries — ----- ------- 

Engraving (other than steel, copperplate, or wood), chasmg, etching, 

and diesinking - 

Feathers, plumes, and manufactures thereof 

Fur goods — contract. factories 

Furnishing goods, men's, n. e. c— contract factories 

Hair work - 

Handkerchiefs— contract factories 

Knitted outerwear— contract factories - - 

Lapidary work 

Millinery — contract factories... - ----- .- * 

Statuary and art goods (except concrete), factory production 

Wool scouring 



166,794 



776 



0.5 



23 
64 
35 
16 

77 
61 
52 
31 
35 
16 
164 
51 
32 
99 
20 



Wage earn- 
ers (aver- 
age for the 
year) 



8, 569, 231 



14,090 



0.2 



530 

2,554 

429 

306 

2,152 
559 
154 
759 
434 
932 

2,715 
217 
239 
858 

1,252 



Value of 

products 

(thousand 

dollars) 



60, 712, 872 



44,651 



0.1 



5,547 
2,435 
1,336 
1,690 

8,881 
2,320 

634 

854 
2,449 

944 
4,592 
4,391 

697 
3,331 
4,550 



226 



PART III 
THE MERGER MOVEMENT 

BT 

WILLARD L. THORP 



227 



THE MERGER MOVEMENT 

TABLE OF CONTENTS 

SCHEDULE OF TABLES AND CHARTS 

TABLES 

1. Merge^and acquisitions in manufacturing and mining, by quarters, 

2. Mergers and acquisition's" for" selected "yearsl ""~-~/-V."ll"ZV_l 233 

CHARTS 

1. The merger movement, 1919-39 



Pat* 



232 

229 



THE MERGER MOVEMENT » 

Twice in recent times were there periods when concentration in- 
creased with unusual rapidity. Both were periods when mergers and 
consolidations occurred with unusual frequency. Apparently, there 
has been a slow and fairly steady development of giant enterprises, 
but upon this persisting tendency have been superimposed these two 
periods of feverish amalgamations. The first was at the turn of the 
century, from about 1897 to 1903. The second was from 1925 to 
1929. 

In both cases, the enthusiasm for bigger business was closely related 
to the activities of financial promoters and the willingness of the invest- 
ment markets to absorb new securities. In both instances, the busi- 
ness community was swept with the belief that size would solve many 
problems automatically, that "in union there is strength." Both were 
periods of relative prosperity, with trends rising so that their pro- 
jection made the future bright indeed. And, finally, both were 
periods in which the shadow of the anti-trust laws fell only dimly on 
the business world. As a result, the slower and more tested processes 
of growth through plowing back earnings gave way to the excited 
hypotheses of new security prospectuses. 

The birth records of the early period include such prominent names 
as International Silver, International Paper, American Linseed, 
United Shoe Machinery, Standard Sanitary, American Snuff, Inter- 
national Salt, American Can, Eastman Kodak, International Har- 
vester, Corn Products, International Nickel, and E. I. du Pont de 
Nemours Powder Co. The early months of 1901 saw the birth of 
the billion-dollar United States Steel Corporation. Of 318 so-called 
trusts, listed in Moody's Truth About The Trusts, only 82 were 
organized before the end of 1897, and the remaining 234 appeared in 
the years 1898-1903. 

The story of this period is beautifully summarized by Seager and 
Gulick as follows: 

The sensational progress of the second (1897-1903) trust movement was possible 
only because a group of shrewd, plausible, and aggressive promoters was at hand 
to make fullest use of the favorable business situation. 2 

It was standard procedure for the promoter to negotiate with a number 
of enterprises in the industry and reach a purchase price for each 
property. The new enterprise would be formed, with extensive capi- 
talization of the alleged benefits of consolidation. The original 
owners would be paid in cash or stock, and the promoter and the 
bankers would obtain the remainder. It was regularly true that the 
whole was greater than the sum of its parts. 

1 The author was assisted by Miss Frances Goldberg and Miss Helen B. Russell. 

* Henry R. Seager and Charles A. Gulick, Jr., Trust and Corporation Problems, New York, 1929, p. 64- 

231 



232 



CONCENTRATION OF ECONOMIC POWER 



It was not for 20 years that the same phenomena appeared agaiD. 
The merger movement once more reached the hysteria stage in the 
late twenties. A consistent record has been made of mergers and 
acquisitions in the manufacturing and mining fields covering the last 
21 years (see table 1 and chart 1). It is based on the daily reports of 
the Standard Statistics Co., a clipping service of corporate news items. 

This record is neither complete nor accurate. Some consolidations 
or acquisitions may never have reached the public press or the trade 
journals, although it is difficult to believe that many important cases 
could have been kept secret. Moreover, there is no reason to believe 




CHART 1.— THE MERGER MOVEMENT, 1919-391 

that journalists were more astute at one time than another, or business- 
men more or less secretive. At any rate the records are probably 
correct as to trend. Mergers of subsidiaries, especially frequent under 
the goading of recent tax laws, were not included since there was no 
real change in ownership. Likewise, the formation of a new subsid- 
iary was regarded as expansion rather than acquisition. No attention 
was paid to the acquisition of foreign enterprises, although in the active 
foreign trade days of the twenties this was a frequent occurrence. 

The record has been compiled on a quarterly basis, although it was 
often difficult to allocate exactly by time. The original reports often 
failed to. distinguish between agreement, ratification, or actual merging. 
The record is limited to the manufacturing and mjining fields. 



CONCENTRATION OF ECONOMIC POWER 



233 



Table 1.— Mergers and acquisitions in manufacturing and mininq, bu quarters, 

1919-39 

NET NUMBER OF CONCERNS DISAPPEARING i 



Year 



1919 
1920 
1921 
1922 
1923 
1924 
1925 
1926 
1927 
1928 
1929. 



Quarter 



57 

209 

3 184 

86 

84 

110 

124 

286 

161 

197 

349 



ii in rv 



82 

186 

99 

53 

67 

71 

104 

236 

247 

315 

395 



147 

188 

80 

82 

44 

87 

127 

171 

220 

242 

312 



125 
166 
122 

76 
105 

85 
175 
146 
213 
274 
160 



Totals 



438 
760 
487 
309 
311 
368 
554 
856 
870 
1,058 
1,245 



Year 



1930 
1931 
1932 
1933 
1934 
1935 
1936 
1937 
1938 
1939 



Quarter 


I 


II 


III 


IV 


204 


237 


156 


189 


163 


142 


87 


71 


7 


102 


46 


40 


19 


43 


33 


12 


19 


25 


34 


23 


36 


27 


38 


24 


39 


25 


27 


32 


32 


27 


29 


31 


32 


20 


22 


33 


24 


22 


16 


25 



Total » 



799 
464 
203 
120 
101 
130 
126 
124 
110 
87 



i Number of concerns merged less number of mergers plus concerns acquired 

> Annual totals are larger than the sum of the quarterly figures, because they include a small number of 
cases where exact dates were not available. 
3 Includes 1 merger of 60 concerns. 

To a considerable extent, the figures tell their own story. The post- 
war boom in 1920 saw a sudden peak in activity, but the following years 
were much less active. However, with 1925, momentum began to 
appear and the merger movement was under way. If the record were 
based on "merger talk," it would already have reached tremendous 
heights by 1926. The peak quarter, the spring of 1929, saw more 
cases of mergers and acquisitions than any of the full years of 1922 to 
1924. The movement gradually collapsed, and since 1932 has been 
at levels far below those even of the early twenties. 

The collapse of the movement has been particularly true with re- 
spect to the merger procedure. The data for certain selected years 
shown in table 2 demonstrate this point. 



Table 2. — Mergers and acquisitions for selected 


years 




Year 


Number of 
mergers 


Number 

of concerns 

merged 


Number 

of concerns 

acquired 




Annual average 


1921-23 . 


74 

189 

6 

8 


270 

654 

15 

22 


173 
456 
111 
93 


1926-28 


1934-36 


1937-39 


— 



Evidently there is an underlying current of acquisition going on all 
the time (19 cases were reported even in that dismal period, the first 
quarter of 1933). The merger movement, on the other hand, seems 
to blossom only under favorable circumstances and to disappear at 
other times. 

There are at least two factors which have considerable influence 
over the manner of corporate expansion. The first is the character 
oi the anti-trust laws* As has been clearly demonstrated by the 
oo e « f r 2 * Trade Commission (T. N. E. C. hearings, vol. 5-A, pp. 
^361 ff.), m cases where there is a tendency "to substantially lessen 
competition," the result of section VII of the Clayton Act is to force 



234 CONCENTRATION OF ECONOMIC POWER 

the action to take the form of a property acquisition. This section 
has been enforced more vigorously in recent years, and may be 
largely responsible for the disappearance of mergers as such. 

Secondly, there is the matter of tax law. The acquisition of secu- 
rities, the liquidation of a company, and the acquisition of physical 
assets may each provide a different tax base. While this may be the 
determining factor in any individual case, no study has ever been 
made to indicate whether it provides a general bias in favor of some 
one method. 

The above data relate to manufacturing and mining, although the 
movement reached into many other fields. The twenties saw the 
rapid growth of giant public utility systems. Beginning in 1922, 
there was a rapid increase in "disappearances." In 1926, the amazing 
number of 1,029 public utility enterprises disappeared through merger 
or acquisition. 3 Thereafter, the movement subsided, largely due to 
the increasing scarcity of enterprises which could be acquired or with 
which one could merge. By 1930, about one-half the industry was in 
the hands of three controlling groups, and an additional 10 control 
groups accounted for an additional 30 percent of the total. 4 It is 
interesting to note that this trend is to be reversed, as a result of 
section 11 of the Public Utility Holding Company Act. 

In still other fields, the same forces were at work. Motion picture 
producers consolidated and chains of theaters were formed. Chains of 
hotels began to become a usual phenomenon. And, in retail trade, 
not only did chains expand but a number of department store groups 
were formed. 

The same basic forces were present in the twenties as in the earlier 
period of merger activity. Promoters were extremely active, new 
issues were frequently floated where the sum exceeded the parts. 
High hopes were entertained that the new enterprises had extra- 
ordinary economic strength. 

If the above analysis is correct, it indicates that these periods of 
merger activity were not solely the result of necessary economic 
evolution, but rather were brought about to a large extent by pro- 
motional activity during periods favorable to new security issues. 
The control therefore lies in considerable degree in control over the 
money markets. The basic problem shifts from the field of business 
structure and corporate entities to the financial world. If the 
Securities and Exchange Commission, by exposing new issues to cold, 
objective scrutiny, can prevent the run-away excitement of these two 
earlier periods, then corporate expansion will have to come by plowing 
back earnings or by making a convincing, positive case. This seems 
like a more promising path for our economic evolution than the ex- 
cited products of speculative enthusiasm. 

• Thorp, Willard L., Recent Economic Changes, New York, 1929, vol. I, p. 187. 

* Tippetts, Charles S., and Shaw Livermore, Business Organization and Control, New York, 1932, p. 509. 



PART IV 

THE HISTORY OF CONCENTRATION 
IN SEVEN INDUSTRIES 

BT 

WILLARD L. THORP 
GRACE W. KNOTT 



235 



THE HISTORY OF CONCENTRATION IN SEVEN INDUSTRIES 

TABLE OF CONTENTS 

The Agricultural Implements Industry ^ah 

The Automobile Industry . £?q 

The Copper Industry _ _ _ %** 

The Cotton Textile Industry ;™ 

The Iron and Steel Industry i%\ 

The Petroleum Industry £?A 

The Rayon Yarn Industry.. --.y//-l'.y//////////_iy_'_"~_'_y_y_ 263 

237 



SCHEDULE OF TABLES 

Pagt 

1 Number of cars produced by leading three automobile companies, 

1909, 1915, and 1920 : — 244 

2 Proportion of new car registrations by three leading companies (percent 

of total) 1925, 1930, 1935, and 1938 244 

3. Leading producers of copper in the United States, 1850-1937 248 

4. Leading four copper producers by decades, 1890-1937 249 

5. Production of copper - - - 250 

6. Relative importance of leading cotton textile producers, 1800-60 252 

7. Four leading companies in cotton manufactures, 1899 253 

8. Four leading companies in cotton manufactures, 1920 254 

9. Four leading companies in cotton manufactures, 1930 , 255 

10. Four leading companies in cotton manufactures, 1937 255 

11. Leading producers in the iron and steel industry, 1880-1938 258 

12. Total assets of oil companies 260 

13. Activity of leading companies, 1926-38 261 

14. Gasoline production of leading companies, 1929, 1932, and 1938 262 

15. Installed capacity of rayon yarn producers, 1933, 1935, and 1938 263 

238 



THE HISTORY OF CONCENTRATION IN SEVEN 

INDUSTRIES 

Industrial evolution never moves in even and steady stages. Fur- 
thermore, industries do not follow any single pattern. The present 
report endeavors to trace the record of concentration in the following 
seven industries: 

Agricultural implements. 

Automobiles. 

Copper. 

Cotton textiles. 

Iron and steel. 

Petroleum. 

Rayon. 

These are sufficiently varied in nature as to suggest various historical 
patterns which have appeared in the past. 

Like any historical study, the reports could be made much more 
voluminous. However, masses of material have been sifted to find 
only that which bears directly on the record of concentration. Much 
of the evidence is fragmentary, and perhaps not perfect statistically, 
but it does indicate the general nature of the history of concentration 
in each instance. 

239 



THE AGRICULTURAL IMPLEMENTS INDUSTRY 

The agricultural implements industry can trace its history in 
America back to colonial days. At that time the crude tillage and 
cultivating tools were made at home largely from imported materials. 
Small hand tools were all imported. The rapid growth in the demand 
for implements as new land was cleared and settled encouraged the 
extension and improvement in American iron manufactures. Most 
of the early patents in the United States were for farm machinery. 
During the first years of the young republic nearly every cross-roads 
country furnace cast plow-irons and made and repaired the neighbor- 
hood farm implements. Some of these furnaces ultimately developed 
into large enterprises, while others disappeared under competitive 
forces. By 1830, Worcester County, Mass., had three establishments 
engaged in producing plows, employing 10 workers and manufacturing 
about 1 ,000 plows annually. 1 With the introduction of uniform parts, 
and other economies of centralized production, the village blacksmith 
and small foundry gradually disappeared as factors in this field. 

The emergence of the industry, as it is known today, was coincident 
with the patent granted in 1834 to Cyrus McCormick on his grain- 
cutting machine. Between that date and 1845, 15 other machines 
were patented in the farm implement category. By 1 860 tins fledgling 
industry had assumed its position among recognized American manu- 
factures. A farm journal, "The Genesee Farmer," published the 
following data 2 on the relative importance of leading manufacturers 
of reaping and mowing machines through the period ending in 1864: 

Number 

McCormick Bros, (original International Co.) 55, 000 

Walter A. Wood 30,000 

R. L. Howard o?' nnn 

Buffalo Agriculture Machine Co f<> «« 

D. M. Osborne & Co. (later acquired by International) 15, UUU 

C. Aultman & Co. (later acquired by International) 9, 100 

Warder and Childes »> 000 

Seymour, Morgan and Allen '> *)™ 

Bamberger, Wight & Co J, 30b 

Adrience, Piatt & Co oi^'nnn 

Total made in period by all manufacturers &*■% uuu 

The leading four producers accounted for over 65 percent of the 
total number of mowing and reaping machines produced up to 1864. 
Aside from the inherent characteristics which induced large-scale 
production, each of the producers of farm machinery was protected 
on his own product by patents which further limited the number of 
competitors. The census of 1860 reports 1,982 establishments in 
the industry, but this included many small enterprises making imple- 
ments other than large harvesting machines. After 1870, few new 
enterprises entered the field. In 1880, there were still 1,943 estab- 

' History of Manufactures in the U. S., 1607-1860, vol. I, Clark, Victor S., p. 476. 
2 Census of Manufactures, 1860, p. ccxii. 

240 



CONCENTRATION OF ECONOMIC POWER 241 

l^ en i S ' ^ by ! 8 ^° the number had dr °PP ed t0 910 and by 1900 
Tn i'Qo e 9 P ^ e T ? d mcr + eases m wa S e earners and value of products! 
rS°? , e ^elwgest competitors in the farm machinery field 
consolidated and formed the International Harvester Co These 
companies represented at that time over 90 percent of the total p 
due ion of grain binders and 80 percent of the mowers built in the 
^^/•^Ir Ac ? ms \ tl ™ of other companies by International 
followed immediately; the D M. Osborne Company, established to 
1856, makers of mowers, the Aultman-Miller Co., established in 184? 
reaper producers and the Minnie Harvester Co., established in the 
80s, were purchased by International. By 1912 International 
Harvester Co. was producing 76 percent of the harvesting mafcry 

thi?Z CGI \ ° f t\ m ° W f TS >- and 72 P ercent of the **y rlkes made m' 
this country It has also increased its line to include plows, harrow? 
seeding machines, hay presses, manure spreaders, drills, haV loaders 

motor fJu2 ^^ COm ™^™ry> ™Z°™> ^soline engines^ractoS,' 
motor trucks, cream separators, and binder twine, establishing itself 
as a ull-hne company. Not only did International enhance ft! om- 
petitive position in the production of all farm implements and machS- 
ery but it owned the distributing outlets for its own products 
At tne time ot the International consolidation (1902) Deere & Co 

a W T3fr Pr ? d T er ° f { *™T chinery > successfully attempted 
iiK ° r f plow and , llla g e J element companies. Later 
(1910) Deere & Co. successfully undertook an expansion program 
S3 f he Properties of several previously controlled compS' 
™™ ° T ^f'.P 1 ^ expansion, and purchase of competing 

companies combined to increase materially Deere & Co.'s share in thf 

^SSS^^T^ ThlS C ° mpany al8 ° °^ ted its «wn 

thp"pL C nf S ^ & Co ' esta bHshed in 1842, steadily developed until by 
the end of the nineteenth century it had become the largest manu- 
facturer of threshing machines. During the next 30 years it acquired 
properties which added to its threshing machine line and extended Hs 
activities into the distribution field 

nf Tn^ lliS f Mm ? rS M^ifacturing Co., long-established as a maker 
of industrial machinery and engines, made its bid for a share of the 
farm machinery business by initiating the production of gasoline 
engines for farm use in 1903 and tractors in 1915. In the past 10 
years it has added to its farm machinery production by acquiring 
companies engaged in the manufacture of threshers, combines and 
clover hu llers. Throughout this development it has continued to be 
prominent in the manufacture of industrial machinery. In 1935 it 
introduced a 5 foot "all crop" combine which sold fo7half the price 
of International's 12 foot combine. International's production of 85 
percent of all combines in 1921 had dropped to 32 in 1935. The new 
corroetition drove it down to 12 percent - 

m ™»f«2 llV ° r ?T!i Equipment Co. was established in 1855 as a 
SSnlinn 7 ^ ¥ plc T' - 1 * g radua %> through acquisition and 

^^^^t^SSSX. ° f threSherS ' ^^^ ^^ - d 

At the present time there are approximately 200 companies engaged 

in the farm implement and machinery industry. The balance of the 



273238— 41— pt. 27 17 



242 



CONCENTRATION OF ECONOMIC POWER 



large farm market for implements and machines is shared by numerous 
so-called short-line companies and two mail order houses each ol which 
retains a small share of the business through production ol special- 
purpose equipment, lower prices, or sale of their products through the 
large-company stores in order to complete the line required by the 
farmers in particular areas. 

The International Harvester Co. started out with almost a complete 
monopoly. In 1902, it had an 85 percent control of the output ol 
harvesting machines, which dropped to 80 percent by 1911, and 64 

r -I qi o 3 

It is possible to put together studies made by the Bureau of Corpora- 
tions in 1913 and the later investigation by the Federal Trade Com- 
mission for certain items. The following represent the percentage of 
the national output produced by International Harvester Co.: 




Of 28 farm implements and machines studied by the Federal Trade 
Commission, the International Harvester was the leading producer 
of 23 in 1936 It is even more significant to note that, while it 
increased its share of the national total in most items from 1921 to 
1929 it lost ground severely from 1929 to 1936. The proportion of the 
national total for each of the products which it produced in 1936 was 

as follows: Number of 

, , , , products 

Percent of national total: j 

60 and over o 

50 to 59 ■- o 

40 to 49 ^ 

30 to 39 o 

20 to 29 4 

10 to 19 o 

0to9 I 

Total 28 

Based on data for over 95 percent of the farm implements made and 
sold in the United States, the Federal Trade Commission calculates 
that International Harvester's share was 41 percent m 1936, exclusive 
of motor trucks and binder twine. Deere & Co., ranked second, 
accounted for an additional 21.5 percent. , ■ . , i 

Looking at the entire record, it is clear that the industry always 
has had a high. degree of concentration. The maximum was un- 
doubtedly reached in 1902 or shortly thereafter, since when there has 
been a considerable decline in the degree of the leadership of the Inter- 
national Harvester Co. 

i Seager, H. R., and Gulick. C. A. Trust and Corporation Problems, New York, 1929, p. 267.. 



THE AUTOMOBILE INDUSTRY 

In 1896 the Duryea Motor Wagon Co. manufactured and sold 13 
automobiles, the first commercial production in this country. Cars 
were built at home and in workshops during the experimental stage 
by Duryea, Olds, Haynes, Winton, Ford, King, Maxwell, Apperson, 
Riker, Clarke, Stanley, White, Franklin, and Seldon, all pioneers in 
the industry. None of the companies which had launched electric- 
driven vehicles during the 90's survived except that making Columbia 
Electric automobiles. For a short time in the early 1900's, steam- 
driven automobiles were favored and the Locomobile Co. and the 
Mobile Co. produced about 95 percent of the steam carriages built 
in America. 

The pioneer in factory production was the Olds Motor Works at 
Detroit. In 1904 this company produced about 4.000 cars. Ford 
ranked second with 1,708 cars; Cadillac produced about 1,200. The 
three companies accounted for approximately 37 percent of the total 
number of gasoline-driven cars made at that time. 

The automobile industry's historv has been marked by shifting 
popularity for different makes of cars. Dean Ralph Epstein has 
made an analysis of firms' entrance and exit into the industry between 
1903 and 1926. 4 This analysis throws considerable light on the chang- 
ing, personnel of the industry. He found that 181 firms Ik d entered 
the field from 1899 to 1928. Of these 181 firms, 48, or 28 percent, 
did not remain in business over 3 years; 40, or 49 percent, lasted 6 years 
or less, and 26 firms had a life of 7 to 9 years. Only 8 companies 
remained in business 22 to 24 years and only 5 for more than that 
length of time. While this mortality is high compared with other 
industries in the same period, the automobile industry during its 
infancy had a product which was subject to great changes in design 
and construction, involving considerable investment. 

By 1909 leadership in the industry had shifted to General Motors. 
This holdmg company was formed in 1908 to acquire substantial 
interest in the following companies: Buick, Cadillac, Cartercar, 
Elmore, Ewmg, McLaughlin, Marquette, Oakland, Olds, Randolph, 
Welch, and the Weston-Mott companies. Other companies engaged 
m the manufacture of parts were also controlled by this new company 
These companies produced 28,550 cars in 1909. By 1915 the rank of 
producers had again altered. Ford now led, General Motors' produc- 
tion was second, and a newcomer, Willvs-Overland, held third place. 
These same companies were leaders again in 1920. The detail for 
these companies follow in table 1, showing the increasing share of total 
production accounted for by the leading three companies. Note partic- 

w^i! hat in 1920 ' Ford had reached nearly one-half the total figure. 

With the exception of the General Motors merger in 1908, no suc- 
cessful consolidation of automobile companies was attempted until 
the Chrysl er Corporation was formed in 1925, acquiring the assets of 

* Clark, Victor, S., History of Manufactures in the U. S., vol. Ill, p 160 

243 



244 



CONCENTRATION OF ECONOMIC POWER 



the Maxwell and Chalmers Corporations. In 1928 this company pur- 
chased the Dodge Brothers assets. From the time of its formation 
until the present, it has been consistently among the first three in the 
industry. 

Table 2 is based on new car registrations. Registration data, broken 
down by name of car, first became available in 1925. The propor- 
tion of new car registrations by the leaders is shown in the table 
for 5-year intervals from 1925, with 1938 added. 



Table 1. — Number of cars produced by leading 3 automobile companies, 1909, 

1915, and 1920 



1909 



1915 



1920 



General Motors 

Studebaker (including E. M. F. cars). 

Ford Motor Co 

Willys-Overland- - 



i 28, 550 
* 14,500 
» 10, 660 



i 120, 161 



i 393. 075 



i 283, 161 
' 58,000 



1 1, 074. 336 
i 105, 025 



Total 3 companies - 

Percent of total 

Total production ' 



53, 710 

42.1 

127, 731 



461, 161 

51.2 

892, 618 



1, 572, 436 

71.3 

2, 205, 197 



i Moody's Manuals. , 

» Automotive Industries, Dec 30, 1909. 

3 Epstein, Ralph C, The Automobile Industry, p. 314. 

Table 2. — Proportion of new car registrations by 3 leading companies {percent of 
total) 1925, 1930, 1935, and 1938 





1925 


1930 


1935 


1938 




Percent 
42.8 
20.0 
9.1 


Percent 
40.3 
34.5 
8.5 


Percent 
30.2 
38.4 
22.9 


Percent 
20.5 




44.8 




25.0 








71.9 


83.3 


91.5 


90.3 







Source: Automotive Industries, annual statistical numbers. 

Throughout its history of more than four decades, the industry 
has shown steadily increasing concentration among the leading pro- 
ducers. In recent years, what changes there have been are in the 
proportions held by each of the Big Three, but not in their total. 
No newcomer seems to be able to break into that 90 percent of the 
market, although the decline of Ford has been of astonishing pro- 
portions. 



THE COPPER INDUSTRY 

During the eighteenth century, small shipments of copper ore were 
made from the Atlantic seaboard to Europe from mines in Con- 
necticut, New Jersey, and Pennsylvania. It was not until 1844, 
however, that copper mining assumed any size in the United States. 

The discovery of new copper mines and the opening of new terri- 
tories have been an important factor in the rise of the leading com- 
panies in the copper refining industry. The Michigan area was the 
first profitable mining area opened up. Some copper was mined 
there before the Civil War. The formation of the Allouez Mining 
Co. in 1859 marked the first successful exploitation of the Michigan 
mines. This company was acquired by the Calumet & Hecla Con- 
solidated Copper Co. in 1923 as a result of a huge consolidation of 
Michigan mining companies including the Ahmeek Mining Co. estab- 
lished in 1880, the Calumet & Hecla Mining Co. formed in 1871, the 
Centennial Copper Mining Co. established in 1896, and the Osceola 
Consolidated Mining Co. established in 1873. The Calumet & Hecla 
owns outright or a substantial interest in the following properties: 
The Cliff Mining Co.; Isle Royale Copper Co.; Eastern Exploration 
Co. ; Goldfield Mining Co. ; Ishpenung Gold Mining Co. ; Lake Milling, 
Smelting & Refining Co.; Mutual Water, Light & Power Co.; and 
the Torch Lake Canal Co. All of these properties are located in 
Michigan. 

Michigan continued to be the leading copper-producing State 
until 1887, when Montana surged ahead. Copper ore has been 
known to exist in the Butte district since 1864 when gold was dis- 
covered. Ores were treated by 1866, but it was not until the eighties 
that any extensive operations began there. In 1879 the Colorado & 
Montana Smelting Co. was formed under the sponsorship of W. A. 
Clark/ owner of the "Original," "Colusa," "Mountain Chief," and 
"Gambetta" mines around Butte, Mont. This mountainous region 
has been called the "richest hill on earth" and millions of dollars 
worth of ore have been taken from the rich copper veins there. 
These ore fields gave rise to one of the leading companies in the 
copper industry, Anaconda Copper Corporation, which was incorpoi 
rated as such in 1895. At the time of formation it purchased the 
properties of the Anaconda Mining Co. In 1910 it acquired the 
Boston & Montana Consolidated Copper & Silver Co.; in 1924, the 
Davis-Daly Copper Co., the International Smelting & Refining Co., 
and the Utah Consolidated Mining Co. 

The history of the niining interests in Montana is colorful and 
dynamic. The domination of the Montana copper fields by Anaconda 
came about steadily under the powerful stimulus of Marcus Daly. 
Daly's entrance into the copper industry was in 1876 when he pur- 
chased- mining properties in Montana. Backed by George Hearst 
and others, he purchased the Anaconda Silver Mine which was the 

245 



246 CONCENTRATION OF ECONOMIC POWER 

start of the great copper-mining operations that were to make Butte 
and the Anaconda famous. His many interests included timberlands, 
railroads, banks, power plants, and irrigation systems. Warfare — 
political, social, legal, and actual armed encounters — characterized 
the struggle for supremacy between Clark, Marcus Daly, and Augustus 
Heinze, the so-called "copper kings" of the nineties and early nineteen 
hundreds. The Amalgamated Copper Corporation, backed by the 
Standard Oil, owner of the controlling interests of the Anaconda, of 
which Marcus Daly was the leader, waged a long war against Heinze, 
owner of the famous Minnie Healy mine, finally forcing him to sell out. 
Heinze immediately formed the United Copper Co., which was finally 
forced to the wall in the panic of 1907, a speculative crash precipitated 
by the Amalgamated's fight against Heinze. 

Another section of the country is represented in the growth of the 
Phelps, Dodge Corporation, concident with the rise of James Douglas, 
called ""the dean of the mining and metallurgical profession." Dr. 
Douglas, one-time preacher and doctor, became interested in a 
struggling copper mine owned by his father and from his experiments 
there went into the metallurgical field. In 1880 he was hired by a 
conservative metal-dealing concern, Phelps, Dodge & Co., to investi- 
gate reports of a rich copper prospect called the Verde in Northern 
Arizona. On his way home he stopped in Bisbee and examined some 
claims which he bought for the Phelps, Dodge & Co. A company 
was formed in 1885, "The Copper Queen Consolidated Mining Co.," 
with Dr. Douglas as its president. It continued to operate under 
that name until 1917, when its reports were included with those of its 
owner, the Phelps, Dodge & Co. The mining properties of this com- 
pany in the United States include the "Burrow Mountain Branch" 
and the "Stag Canon Branch" in New Mexico, Morenci, the New 
Cornelia and the Monteczuma in Arizona. In 1931 it merged with 
Its subsidiary, Calumet and Arizona, having already purchased the 
Arizona Copper Co. in 1921. Its latest United States acquisition 
was the United Verde Copper Co. in 1935. 

The development of the copper resources in the Utah-Nevada 
regions began in the early nineteen hundreds, although ore deposits 
were discovered there in the last quarter of the nineteenth century. 
In Nevada, the first extensive development of the copper industry 
was undertaken by the Nevada Consolidated Copper Co., organized 
in 1909, and in Utah, the Utah Copper Co., established in 1904, 
profitably exploited the low-grade ores of the Bingham district 
under the capable direction of the company's engineer, Jackling. 
These two companies later formed the nucleus of the United States 
activity of the Kennecott Copper Corporation, which owned the well- 
known "Bonanza" and "Jumbo" mines in Alaska. In 1915 the 
Kennecott Corporation reorganized under this name, acquiring the 
properties of the Kennecott Mining Co. and the Bentson Copper Co. 
In 1932 it purchased outright both the Nevada Consolidated Copper 
Co. and the Utah Copper Co. 

A picture of the shifting controls of the copper mining, smelting, and 
refining industry in the United States is furnished by data compiled 
over nearly a century from the records of the Department of the 
Interior. Table 3 presents data from 1850 to 1937, by decades, 
until 1938: 



CONCENTRATION OF ECONOMIC POWER 247 

This table clearly portrays the development of the copper industry 
through the leading companies. The beginning of production prior 
to the Civil War was marked by competition. Only the Michigan 
fields were under development and these were owned by a number of 
individual mine owners. By 1890, the copper kings of Butte, Mont., 
were vying for power. The next decade Arizona with the "Copper 
Queen" development by Phelps Dodge added its share and by 1910 
the Utah and the Nevada Copper Mining Co's. had become leading 
producers in Utah and Nevada. Control of the industries in the 
hands of today's leaders (Anaconda, Calumet & Hecla, Kennecott, 
and Phelps Dodge) was apparent by 1910. The latest figures show 
these four controlling over three-fourths of the output of the industry 
with the oldest of these, Calumet & Hecla, a waning power. In 
order to show more clearly the rise of these companies the data in 
table 3 are recapitulated for the four leading companies from 1890 to 
date (1937) in . table 4. In 1890 the four companies, Anaconda, 
Calumet & Hecla, Phelps Dodge, and the Boston & Montana, pro- 
duced over 75 percent of the total; in 1900, about 65 percent; in 1910 
with Anaconda's acquisition of the Boston & Montana, another 
newcomer, the Utah Copper Mining Co., joined the ranks of the 
leading four producers, the four companies accounting for only 49.1 
percent of the total. This declining degree of concentration was 
reversed in the boom era of the 20's with the entrance of the Kenne- 
cott Corporation in 1915, who had acquired the Utah Co. By 1930 
the four leading companies represented 76.6 percent of the total and 
in 1937 their production represented 82.1 percent of the total. Since 
decades within themselves may show reversal of trends, the annual 
production of these four copper giants is given below for 1933-36- 
37-38. 



248 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



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250 



CONCENTRATION OF ECONOMIC POWER 

Table 5. — Production of copper 
(Thousands of pounds] 



- 


1933 


1936 


1937 


1938 




Amount 


Per- 
cent of 
total 


Per- 
Amount cent of 
total 


Amount 


Per- 
cent of 
total 


Amount 


Per- 
cent of 
total 




92, 722 

42, 818 

2 136, 602 

77, 592 


20.6 
9.5 
30.2 
17.3 


274, 578 
73, 046 
390, 310 
252, 708 


22.4 
6.0 
32.2 
20.8 


382, 168 

74,274 

598, 734 

314, 448 


22.8 
4.5 
35.8 
18.8 


/ 154,222 
64,884 
339, 668 
258, 044 


13.7 




5.8 




30. 2 


Phelps Dodge -- 


22. 9 


Total 


449, 999 


77.6 


1, 222, 819 


81.4 


1, 669, 362 


81.9 


1, 124, 657 


72.6 







» Includes production of "Inspiration" a controlled company. 

J From Minerals Yearbook, 1937. Utah & Nevada Co. combined, p. 64. 

Source: The New International Dictionary. Copper, p. 56. 

Increasing concentration among the leading producers is noted 
throughout the period from 1933 to 1937, but a large decrease is 
shown in the four leaders' proportion in 1938. The Bureau of Mmes 
states that each of the large producers curtailed their operations, 
shutting down s6me of their mines. This situation may have been 
caused by two factors, the decrease in demand in the early part of 
the year and an unsatisfactory price situation. There is no reason 
to believe that 1939 will continue the reversed trend, since demand 
for copper in the markets at home and abroad has been greatly 
accelerated by armament needs and increased demand at home. 

The picture of the copper industry is one of an early stage of scat- 
tered individual operation. Gradually through the process of merger 
and acquisition, certain large companies emerged with three-fourths 
of the output by 1890. They then lost ground until the early twen- 
ties, since which time they (with Kennecott now in the group) have 
reached new high levels exceeding 80 percent in the hands of four 
producers. 



THE COTTON TEXTILE INDUSTRY 

Although several of the colonial legislatures had encouraged textile 
manufacture by proclamation of bounties, importation of textile 
fibers, etc., it was not until the first water frame for spinning was 
erected in Rhode Island in 1790 by Samuel Slater that the industry 
gained a foothold in America. Slater, an English counting house 
clerk, recently arrived in America, persuaded the conservative mer- 
cantile partners, Almy & Brown, to set up a mill using machinery 
closely following the lines of the Arkwright mills in England. Almy 
& Brown's venture was so successful that before the close of the 
century numerous small mills had been built making use of similar 
machinery for water power in Rhode Island, Massachusetts, and 
Connecticut. By 1810 more than 25 such mills had been started, 
many of them having been established by former employees of Almy 
& Brown. Preceding and overlapping the spead of the Arkwright 
system, many mills employing hand jenny spinning frames had been 
built. The first of these was started in Philadelphia in 1787, but 
closed in 1790. In Beverly, Mass., that same year, a mill was opened 
with horse drawn carding machines and spinning jennies. Exempted 
from taxation by the State legislature and even subsidized by that 
body, it still failed to make a profit. Even though larger than 
Almy & Brown's mill (636 spindles compared with 72) it shut down 
operations a few years later. Almy & Brown remained the leader 
in the industry it had launched until after the War of 1812 when a 
new era was ushered in for the industry. 

During the year 1812, 17 new mills were opened, a record number 
in the industry. During the next 3 years 56 additional ones entered 
the field. 6 One of these formed the nucleus of a leader in the industry 
which was to maintain that leadership for many years. This com- 
pany was the Boston Manufacturing Co. established in 1813 by 
Francis C. Lowell, a wealthy Boston merchant. This corporation 
was the first of the modern corporations. It represented the new era 
of cotton manufacture. The installed capacity of this mill was 3,000 
spindles and its paid-in capital $300, 000. 6 This mill, and others fol- 
lowing in its wake, performed both the spinning and weaving opera- 
tions under one roof. Their fabrics were all heavy, plain white cloth, 
products which came to be called "domestics" to distinguish them 
from the more favored imported fine goods. The Boston Co. was also 
the first to employ extensively the distribution system of an agent to 
dispose of its product. The success of the Boston Co. led its pro- 
moters to develop the power on the Merrimac River. This company 
turned its patents and machinery patterns over to the proprietors of 
the Locks and Canals at Lowell, a development company which estab- 
lished itself as the first textile machinery company of note, building 
and financing many mills. 

« Ware, Caroline E., The Early New England Cotton Manufacturer, p. 38. 
• Kennedy, Stephen J., Profits and Losses in Textiles, p. 3. 

251 



252 



CONCENTRATION OF ECONOMIC POWER 



A study of early corporation records reveals some interesting data 
on capitalization of cotton textile firms from which it is possible to 
roughly approximate concentration in the cotton industry for the 
period ending in 1860. As stated before, the industry was then, as 
it is today, made up of the large integrated mills and the small single- 
product mills. In the 1800-60 period, the small mills were, for the 
most part, engaged in yarn manufacture. A capital of approximately 
$1,000 to $2,000 was required to establish such a spinning mill in 1800. 

Table 6. — Relative importance of leading cotton textile producers, 1800-60 



Year 


Number of 
producers 


Capital in- 
vested 


Leading 4 

com- 
panies i 


Percent 
of total 


1800 » 


J 8 

»60 

»236 

«795 

' 1, 240 

» 1, 074 

M.091 


s $200, 000 
2, 361, 000 
• 8, 892, 368 
• 40, 614, 984 
'51,102,000 
' 76, 033, 006 
1 98, 585, 000 


t $180, 000 
610,000 
1, 201, 988 
6, 100, 000 
6, 850, 000 
8, 800, 000 
9, 800, 000 


90.0 


1810' 


25.0 


1320 . . 


13.5 


1830 - 


15.0 


1840 


13.2 


1850 -. - 


11.6 


I860 - 


10.0 







1 1800: Slater Mills in Rhode Island, Beverly Mills in Massachusetts, Almy & Brown, and Warwick 
Mill. 1810: Cambridge, Fitchburg, Norfolk Mills, Slater Mills. 1820: Boston Manufacturing Co., Slater 
Mills, Ipswich Mills, Devines Factories. 1830: Cocheco Mills, Merrimac Co., Hamilton Co., and Apple- 
ton Mills. 1840: Cocheco Mills, Lawrence Mills, Fulton Mills, Massachusetts Mills. 1850: Amoskeag, 
Merrimac, Massachusetts. Lawrence. 1860: Amoskeag, Merrimac, Pacific, Massachusetts. 

2 Clark, Victor S., History of Manufactures in the United States, p. 535. 

' Ware, Caroline F. The Early New England Cotton Manufactures, "A" balance estimated at $1,500 per 
mill. 

* Estimated. 

s Census of 1810— Special Digest of Manufactures. 

• Bishop, J. Leander, History of American Manufactures , 1608-1860, vol. II, p. 367. 
» Census of Manufactures, 1840-18.50-1860. 

The period from 1815 to 1840 represented the "boom era" of- ex- 
pansion in the cotton textile industry. It was then that "the cor- 
porations" arose, giving birth to the corporate form as we know it 
today and also providing a target from that day to this for "anti- 
monopoly" reforms. The formation in the 1820's of the Merrimac, 
Hamilton and the Appleton and Lowell companies was hailed as a 
mark of noteworthy achievement of American industry. They were 
regarded as gigantic in their day with a capital investment ofover 
$1,000,000 each. They successfully demonstrated mass production 
and the mill cities which sprung up around their factories were pointed 
vto with pride by Americans everywhere. Lowell and Lawrence, 
Mass., and Dover, N. EL, represent such towns. The statistics shown 
above confirm the statements of historians of the period that the for- 
mation of these corporations and their share in the industry did not 
monopolize the progress of the industry. The largest four companies' 
capitalization increased more than fivefold between 1820 and 1840 
but the industry's total capitalization increased more than twenty- 
fold. 

The distress to New England manufactures immediately following 
the War of 1812 drove two or three colonies of spinners to the South 
where they established mills in South Carolina. Kentucky fostered a 
few mills utilizing Tennessee and Alabama cotton which the tributa- 
ries of the Ohio River carried to their accessible market. Encour- 
aged by the success of their northern competitors, southern merchants 
financed the southern mills and followed the methods introduced 20 
years earlier in New England. One of these in Granites ville, S. C, 
financed by Charleston merchants, started operation in 1846 with 



CONCENTRATION OF ECONOMIC POWER 253 

9,000 spindles and 300 looms and marks the beginning of modern- 
textile manufacture in the South. Even with this forward movement, 
by 1860 over half the southern cotton manufacture was yarn. 

Table 7. — 4 leading companies in cotton manufactures, 1S99 1 



Name of company 


Total capi- 
talization 


Percent of 
total 


American Thread Co 


$12,000,000 
11,500,000 
8,500,000 
8, 500, 000 


2.6 
2.2 
2.0 
1.9 


New England Cotton Yarn Co 


Mount Vernon-Woodberry Cotton Duck Co 


Knight Mills 2 - . 




Total, 4 companies 


41,500,000 
467, 240, 157 


8.7 


Total industry 







' Moody's Manual, 1900. 

.» The Knight Mills were a family owned group and no data on capitalization were published They 
contained 533,347 spindles which have been estimated at $16 per spindle, the sale price to the Consolidated 
Textile Corporation in 1920. (See Kennedy, S. J. "Profit and Loss in Textiles", p. 48.) 

The war and reconstruction period from 1860 to 1880 was a serious 
deterrent to expansion of the southern textile industry. The Inter- 
national Cotton Exposition in Atlanta in 1881 stimulated active pro- 
motion of this industry. Coupled with the natural advantages of the 
South, this focusing of attention upon the possibilities resulted in the 
increased spindle capacity there from 561,000 in 1880 to 1,570,000 in 
1890. The introduction of the Sawyer ring spindle in 1871 and the 
Rabbett double spinning ring spindle gave decided advantage to the 
new mills constructed after that date, due to the increased productivity 
of mills equipped with this type of machinery. 

However, by the end of the century competition from the South 
had not forced any of the northern leaders from their prominence. 
In 1899, the four leaders in the industry accounted for 7.6 percent of 
the total capitalization of the cotton manufactures industry. The 
detail of this is shown below. 

A comparison of this and the capitalization data for the 1800-1860 
period indicates a continuation of the decline in the proportion of 
total capitalization contributed by the leading producers. 

The cotton manufactures industry did not escape the wave of 
consolidation which swept over the country in the nineties. The 
above table reflects this in the three leading corporations' inclusion. 
The largest, American Thread Co., represented a consolidation in 1898 
of the leading spool, crochet, knitting, mending, and other cotton 
mills of the country. Fourteen mills were included in this consoli- 
dation which was financed largely by British interests. Likewise the 
New England Yarn Co. was a merger of 1 1 yarn mills in Massachusetts 
operating about 580,000 spindles. 

Over 90 percent of the manufacture of cotton duck was represented 
in the formation of the Mount Vernon-Woodberry Cotton Duck Co. 
in 1899. The subsequent failure of these two last named corporations, 
doubtless, discouraged further mergers in the industry for the next 
20 years. 

It was not until the post-war period that another movement toward 
consolidation occurred. The flush condition of the capital markets 
at the close of the war, together with the later precarious earning 
situation of old textile manufacturing companies, necessitated 
reorganization of their financial structure; unsatisfactory conditions 
in the method of obtaining working capital, that of receiving cash 



254 



CONCENTRATION OF ECONOMIC POWER 



advances from the commission merchants, influenced many mills to 
refinance their companies in order to obtain their own working capital. 
Altogether 43 mergers were effected between 1918 and the present. 
Some of these mergers are reflected in table 8 showing the leading 4 
companies' proportion of total capitalization in 1920. 

Table 8. — 4 leading companies in cotton manufactures, 1920 



Name of company 



Spindles 



Total capitali- 
zation 



Percent of 
total 



Pacific Mills i ___ 

Consolidated Textile 2 

Amoskeag Manufacturing Co. 3 . 
Lockwood-Green & Co. J 



Total, 4 companies. 
Total industry 3 



529, 952 
731,021 
660,000 
362,000 



- $46, 520, 734 
43, 855, 044 
40, 163, 531 
23, 243, 400 



2.4 
2.3 
2.1 
1.2 



153, 782, 709 
1, 914, 919, 506 



8.0 
100.0 



i Moody's Manual, 1920, p. 1311. 

2 Kennedy, S. J., Profits and Losses in Textiles, p. 53 (Consolidation of 10 textile companies in summer 
of 1920). 
» Census of Manufactures, 1920, vol. X, p. 158. 

Comparison of the percentage represented by the leading four 
companies in 1900 and 1920 shows a slight decline in their total share 
of the industry, from 8.7 to 8 percent of total capitalization. 
During these two decades, new leaders replaced the old, both in capac- 
ity and capitalization. The leader in 1920, Pacific Mills, had pur- 
chased the Atlantic Cotton Mills in 1913; in 1915 the print business 
of the one-time leader, Merrimac Manufacturing Co., was acquired; 
and in 1916 the four mills of the Hampton Cotton Mills in South 
Carolina were purchased. Subsequent expasion of the latter mills 
aided Pacific's rise to first place in the industry. The Consolidated 
Textile Co. was formed in the fall of 1919 and represented the con- 
solidation of three cotton textile corporations. In 1920 it acquired 
the Lynchburg Cotton Mills Co., the Pelham mills in Georgia, the 
Windsor Print Works, Massachusetts, Bosham Cotton Mills, Texas, 
Henderson Mills, Kentucky, the Union Cotton Mills of Georgia and 
the Knight Mills of New England, one of the largest cotton manu- 
facturing companies in the country. The Lockwood-Green Co. 
was a textile engineering enterprise which had carried on the building 
of most of the new mills in the first decade of the twentieth century. 
In 1913 it took over the management of the International Cotton 
Mills, the successor to the Mount Vernon- Woodberry combination. In 
1916 it acquired the mills of the Parker Cotton Mills Co., the largest 
group of southern mills. After the War this company undertook con- 
siderable expansion of its mills and through several reorganizations 
reached the top group of textile manufactures. 



CONCENTRATION OF ECONOMIC POWER 
Table 9. — 4 leading companies in cotton manufactures, 1930 x 



255 



Name of company 



Pacific Mills 

CannonMills... 

Amoskeag Manufacturing Co -. 

Berkshire Fine Spinning Association 

Total, 4 companies. 

Total industry 2 



Spindles 



548, 060 
433, 960 
800,000 
876, 656 



2, 658, 676 
31, 255, 000 



Percent 
of total 



1.7 
1.4 
2.6 
2.8 



8.5 
100.0 



Total capital- 
ization 



$63, 432, 768 
34, 433, 038 
28, 155, 494 
20, 885, 725 



146, 896, 015 
1,331,000,000 



Percent 
of total 



4.7 
2.6 
2.1 
1.6 



11.0 
100.0 



1 Moody's Manual, 1930. 

* Kennedy, S. J., Profits anchLosses in Textiles, p. 12. 

It will be noted that the total spindles of the four leading companies 
account for a little more than 6 percent of the total installed capacity 
for the industry, a lower ratio than that for their capitalization. Two 
factors account for this difference. One is that those companies are 
all integrated companies, performing the spinning, weaving and 
finishing processes, while many of the smaller textile companies 
perform only one of these functions. The second is that the Pacific 
Mills and Amoskeag engage in worsted manufacture and thus reflect 
that activity in their capitalization data. 

By 1930 the capitalization concentration in the four companies 
had altered again. Table 9 depicts this change. 

These figures reflect the fact that the textile companies took -ad- 
vantage of the l920's to float security issues through financial houses, 
to cover fixed assets as well as provide working capital. The years 
immediately following the war were exceptionally prosperous ones for 
textile manufactures and capital was readily secured. Two large 
mergers optimistically undertaken in this period had been liquidated 
in the latter part of the period when over-expansion took its toll, 
namely Lockwood-Green and the Consolidated Textile Corporations. 
This wave of liquidation which set in about 1925 is reflected in the 
decreased capitalization of the industry between 1920 and 1930 
from nearly two billion dollars to one and one-third billion dollars. 
Aggressive, more conservatively financed corporations either main- 
tained or strengthened their position. Cannon Mills and the Berk- 
shire Fine Spinning Associates appeared as leaders for the first time 
in 1930. 



Table 10. — 4 leading companies in cotton manufactures, 1937 



Name of company 



Spindles 



Percent 
of total 



Total capital- 
ization ' 



Percent 
of total 



Pacific Mills. 

Cannon Mills. 

Pepperell Manufacturing Co 
Bibb Manufacturing 

Total 4 companies 

Total industry 



389, 032 
452, 740 
227,000 
313, 672 



1.4 
1.6 



$44, 274, 000 
40,131,000 
24, 012, 000 
25, 301, 471 



1, 816, 772 
27, 676, 805 



4.9 

2 100. 



127, 387, 000 
' 1, 107, 040/000 



4.0 
3.6 
2.2 
2.3 



12.1 
100.0 



1 Moody's Manual. 1939. 

1 Census of Manufactures, Cotton Manufactures, 1937. 

• Estimated at $40 per spindle (1930, $43). 



256 CONCENTRATION OF ECONOMIC POWER 

The latest available data showing concentration by spindle capacity 
and capitalization among leading companies are presented in table 10. 

Concentration as shown by the above capitalization figures has 
increased since 1930 but has declined when measured by spindle 
capacity (8.5 percent in 1930, 4.9 percent in 1937). These leading 
companies as measured by capitalization are not the same when 
spindle capacity is used to measure concentration. The Berkshire 
Fine Spinning Associates, for example, report 748,000. spindles but 
only $16,970,000 capitalization. 

The cotton textile industry as defined by the Census Bureau 
includes over 90 products representing a great diversity in type, use, 
and fabrication. None of the companies included in the industry 
engage in the production of all of them. In fact, most companies 
specialize in ar few closely related products. Therefore, all of the 
figures on concentration greatly understate concentration in the 
industry when compared with concentration of production by leading 
4 companies for individual products. For example, there are 1,237 
establishments classified in the industry. The product showing the 
greatest value for 1937, as reported in the Census of Manufactures, 
was "plain print cloth, 36 inches and wider." There were 93 com- 
panies with 113 establishments producing this item. Of these, the 
4 leading companies accounted for 22.3 percent of the total value 
produced ($117,955,528). The next product of largest value was 
sheetings produced by 93 companies with 120 establishments of which 
19.1 percent of the total value was produced by the 4 leading com- 
panies. This latter percentage represents the lowest degree of con- 
centration among the leading 4 companies of any of the ninety-odd 
products included in the industry. 

The record of over a century shows no period of considerable con- 
centration. Changes have taken place among the leaders, but the 
leading four have seldom exceeded 10 percent of the industry's totaL 



THE IRON AND STEEL INDUSTRY 

The first iron-works known to exist in America were located along 
the James River in Virginia in the early days of that colony. Indians 
demolished these works in 1622 and iron manufactures were not at- 
tempted there again for many years. A charter for iron-works was 
given by the colonial government of Massachusetts in 1646. This 
company was capitalized at about $5,000 (later increased to about 
$10,000) and granted a monopoly in iron manufacture for a period of 
21 years. The company established works at Lynn and Braintree 
which had a total capacity of 8 tons per week. These works contin- 
ued m operation for over a hundred years. 7 Records of the colony 
indicate the operation of 5 iron-works in 1673. 

In 1731, according to returns made to the Board of Trade, there 
were 19 forges or bloomeries for bar-iron, 1 slitting mill and 1 nail 
factory in New England. In 1750 Parliament prohibited the erection 
of any slitting and rolling mills. All of the colonial governments sub- 
sidized iron manufactures either by bounty or tax exemption. At the 
close of the Revolution iron bloomeries, forges and furnaces existed in 
all the colpmes, supplying the local population with material for tools 
nads, agricultural implements, household utensils, etc. Meanwhile 
factories for the manufacture of munitions, carriages, textile machin- 
ery and other iron manufactures had established various branches of 
iron and steel production in this country. By 1830 there were 202 
iron furnaces in the United States which produced 137,075 tons of pie 
iron and 18,273 tons of castings. 8 

Technical changes in iron manufactures introduced in the 1830's 
and the growth of railroads permitted the iron and steel industry to 
change from a small unit, local industry into a large-scale activity. 
Ihe use of coal as fuel, instead of charcoal and puddling operations 
greatly increased productivitv. The Great Western Iron Co later 
known as Brady's Bend Works tv pined this new type of large-scale 
operation. Its capital was $1,000,000 and it produced annually be 
tween 10,000 and 15,000 tons of rails. The Phoenix Iron Works the 
Cambria Iron Works, the Thomas Iron Works and the Lackawanna 
Iron & Coal Co. all competed on fairly equal terms in the pre-Civil 
War period. In 1860 the production of iron exceeded 1,000,000 tons, 
a twenty fold increase in 50 years compared with a fourfold increase in 
population. Rolling mills which utilized part of the product of the 
bloomeries (now called blast furnaces) numbered 256 in 1860, produc- 
mg 500,000 tons in that year. 

sv]v i t n h ^ i nTn tant , C0l0, . li * 1 ! x? n ^? rk , s were the Pnncipio Co. in Maryland, Baron Steigel's in Penn 
syjvama and Hasenclever's in New York. (Clark, V. S. History of Manufactures in United States, vol. L 

8 Bishop, J. L. History of Manufactures, p. 346. 

273238— 41— pt. 27 18 257 



258 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 259 

in Wes^^w m^* Bess <; m <* process for making steel occurred 
in lSbd. lne next 10 years witnessed the rise of the following com- 

The concentration trend since 1880 in the iron and steel industrv id 
shown by the data in table 11 on capacity of blast furnaces and ro^ 

'^Zl^T fr FdS ° f - the Am ^ Can Iron STlnstitute g 
lhis table shows the jump m concentration; due to the dominant 

of°lts° Lmatiol M Wft*? f Steel . Cor P-ation fronA"e 
oi its iormation m 1901. At that tune it owned orartiVflllv oil tu*. 

sSn 1 ^ °1 ," low ^ companies: Fe™al l^^(iffind2 

C^t^n^m^'^™ Steel . & ^ Co ' NationalS 
^o. American lui Flate Co., American Steel Hoop Co American 

Mkfes Co' stih^ en , C T n ?*&* C °i' . Lake S ™ ContoTdated 
Mines Co Shelby Steel Tube Co. and the Carneeie Co Tn 1Q09 it 

purchased the Union Steel Co. and in 1904 X^lairton %l?} r. 

In 1906 another subsidiary, the Indiana Steel Ca was ^formld to 

construct the large plant at Gary, Ind. The next year the Tennessee 

Coal Iron & Railroad Co. was purchased. Through these hoH^t? 

the' mm f to St ^ S il teel ^ & M] J -tegrateTcU^owSfg 
rtu w , ? furmsh COa and iron > the railroads to transport mate? 
rotb^t'traife^' ^ Stee ' instruction "co^ri 

tne^ST, YhfS^es' S»ffi?«£ aP o« 
present Bethlehem Steel Corporation was founded Its purchase of 

^ffiR2*S^ ° f RePUbUC ' ^ed^eS^ 

neak n in e i 1 908 a wL S n e f 1:S pro P^ rtion ^el ingot capacity reached its 
peak m 1908, when it mcluded more than half the industry's caDacitv 

III H P ^ 6d ^° 1 0>1 i n 1920 > held at that Iev el for the nexTdeS and 
percent m 1920, 26.7 percent m 1930 and 28.5 in 1938. 



THE PETROLEUM INDUSTRY 

In 1857 the first operations were begun to drill for oil at Titusville, 
Pa. The Pennsylvania Rock Oil Co. began to produce oil in 1859 
after having sunk a well 71 feet deep. Its success drew others into 
oil prospecting and by 1860 the census reports 78 establishments 
refining crude petroleum. 9 Nearly one-half billion barrels of oil were 
produced in 1861. The rush of prospectors to the Pennsylvania area 
and the drilling of wells there soon led to chaotic conditions. Barrels 
could not be manufactured fast enough to meet the demand. Many 
small enterprises were forced to cease operations. The "boom" led 
to overproduction and a sharp drop in prices to 15 cents a barrel — 
a price way under the cost of production. With the elimination of 
many small competitors, prices rose fantastically — to $9.59 a barrel 
in 1860. Again a glutted market and in 1862 prices dropped to 49 
cents a barrel. 

The small refining company of Rockefeller, Andrews & Flagler, 
of Cleveland, Ohio, saw that such chaotic conditions could only bring 
losses to all oil enterprises. In 1870 the Standard Oil Co. was formed 
with a capitalization of $1,000,000. This company represented the 
consolidation of numerous small refining companies around Cleveland. 
By 1879 through acquisition of competitor companies, the Standard 
interests were refining 90 percent of the crude oil produced, controlled 
80 percent of the pipe line transportation service and dominated the 
marketing of petroleum products. 10 Its capitalization had been in- 
creased to $3,000,000. Many of the refineries acquired by Standard 
which were poorly located or equipped were dismantled. This reduc- 
tion in number of producing units is reflected in the census figures for 
1870 and 1880. Establishments in the latter year numbered 86 
compared with 170 in 1870. Production of crude petroleum during 
the same period increased from 19,914,146 barrels to 35,163,513 
barrels. 11 Value of products increased from nearly $27,000,000 to 
nearly $44,000,000. 



Table 12. — Total assets of oil companii 
[Millions] 






Name of company 



1919 



1938 



Standard, New Jersey 

Standard, New York (later Socony) . 

Texas Corporation 

Gulf Oil 

Stapdard of Indiana 



Largest 4 companies. 

Percent of total 

Total assets 



$853 
299 
261 
218 



1,631 

31.6 

' $5, 179 



$2, 045 
919 
605 



724 



4.293 

34.2 

» $12, 500 



1 Aggregate of total assets of all oil companies listed in Moody's manual for 1920; largest 4 selected from this. 
1 Temporary National Economic Committee hearings of Sept. 30, 1939, p. 345. 



• Census of Manufactures. 1860. 

io Encyclopedia of Social Sciences— Oil, p. 446. 

" U. S. Geological Survey , Mineral Resources, 1882. 

260 



CONCENTRATION OF ECONOMIC POWER 



261 



In 1882 the Standard Trust was created representing a virtual mo- 
nopoly in the purchase, transportation, refining and marketing of oil 
and its products. This monopoly was maintained principally through 
secret rebates granted on Standard products by the railroads. Com- 
petitors' activities were closedly watched, price-cutting was resorted 
to, and even bogus independent companies were set up. The United 
Pipe Lines, a Standard subsidiary, had been formed in 1877 and con- 
trolled practically all the oil transportation facilities of the United 
States. In 1892 the capitalization of the Standard Oil Co. amounted 
to $10,000,000 and 8 years later had been increased to $110,000,000. 
The Census of Manufactures for the year 1899 reports capital invest- 
ment of $95,327,892 in the petroleum refining industry. Standard's 
holdings represented investment in pipe lines as well as refineries. 

Standard's monopolistic position in the industry was challenged in 
1906 after an exhaustive investigation by the Bureau of Corporations. 
The company was indicted under the anti-trust laws but, because of 
time consumed m appeals through the lower courts, it was not until 
1911 that the Standard company was ordered dissolved by the Supreme 
Court. Each of the constituent companies was to continue operations 
without unified control. This dissolution did not immediately affect 
the competitive situation since there still existed a community of 
interest through stock-ownership in the old Standard companies. An 
analyst of the industry stated "Subsequent to the dissolution, the 
integration (of ownership) was maintained for more than a decade by 
an undisturbed community of interest, the dissolved companies con- 
tinuing to perform their former specialized functions." 12 The court 
order, however, did provide a frame by which competition could de- 
velop, and gradually new capital flowed ^into the independent concerns. 
In the 1896-1906 period the Standard Oil Co. controlled 85 to 90 per- 
cent of the total refined products, but in 1926 eleven of the old Stand- 
are companies and their affiliates marketed 44.8 percent of the total 
production. 13 



Table 13. — Activity of leading companies, 1926-38 



1926. 
1929. 
1931. 
1933. 
1935. 
1936. 
1937. 
1938. 



Crude runs to stills ' 



4 com- 
panies 



37.1 
36.1 
37.1 
36.4 
36.7 
36.2 
35.5 



20 com- 
panies 



71.2 



81.4 



82.3 
82.6 
82.6 



Production of gasoline 1 



4 com- 
panies 



accom- 
panies 



71.3 



82.6 



84.1 
83.4 
83.8 



1 Includes imported crude oil. 

> Includes blended natural gasoline. 

780a Ur 7803 DeriVed fr ° m d8ta iQ Tem P° rar y National Economic Committee Hearings, XIV-A, pp. 7735, 



11 Encyclopedia of Social Sciences, p. 448. 
■ Ibid. 



262 CONCENTRATION OF ECONOMIC POWER 

Table 14. — Gasoline production of leading companies, 1929, 1932, and 1938 





Percent of total 




3 largest 


5 largest 


10 largest 


1929 


26.8 
24.8 
23.7 


40.7 
39.5 
35.8 


59.2 


1932 


68.7 


1938 


55.2 







A comparison of concentration at the beginning of the post-war 
period (1919) and the present (1938) is afforded by data on total 
assets of the four leading companies and the total assets of the industry 
shown in table 12. 

The oil industry is composed of large companies whose activities 
cover the production of crude petroleum, the transportation by pipe 
line of the crude oil to the refinery, the refining of the oil and manu- 
facture into various products, and the marketing of the refined products. 
Smaller non-integrated companies may engage in any one of these 
activities. Thus measurements of concentration are deceiving for the 
"oil industry" which embraces in its scope such a vast scale of opera- 
tions from the crude oil well to the automobile driver's gas-station 
service. 

The situation in recent years is shown by the data concerning crude 
runs to stills and gasoline production. The leading four companies 
have shown a decline in their position presented in tables 13 and 14. 
The major gains have been made by the companies below the leaders. 

The same picture is painted by a leader of the industry, Robert E. 
Wilson, president of the Pan American Petroleum & Transport Co., 
in material presented to the T. N. E. C. (See Hearings XV, p. 8665). 

It will be noted that the five largest have lost position, while the 
second five have gained slightly, and the rest of the industry has gained 
even more. All these measures fall far below the dominance obtained 
by the Standard Oil Co. prior to 1911. 



THE RAYON YARN INDUSTRY 



The rayon yarn industry was introduced in America in 1910 with 
the establishment of the Viscose Co. of America, today's largest rayon 
producer in the world. Production in 1911, which was entirely that 
of the Viscose Co., was 300,000 pounds; by 1937 the annual production 
was 322,000,000 pounds — an increase of a thousand-fold in little more 
than a quarter of a century. The sharpest increase in production came 
in the 1920's when it increased from 8,000,000 pounds in 1920 to 
123,000,000 pounds in 1929. This is the era when seven of today's, 
leaders entered the field of rayon yarn production. 

With such a rapid and profitable growth it is no wonder that aggres- 
sive competitors entered the field each year. With demand outstrip- 
ping production and fast-moving technology, such fertile markets 
would ordinarily encourage new enterprises. In the first years, how- 
ever, the process by which this synthetic fiber was made was zealously 
guarded by the Viscose Co. Until 1918 its supremacy went unchal- 
lenged. At that time the Celanese Corporation entered the arena 
with a competing fiber made by a different process. Meanwhile the 
leader in the chemical industries, the E. I. du Pont de Nemours Cor- 
poration had been investing money in research to produce an artifi- 
cial fiber from cotton linters. In 1920, with demand for one of its 
principal products, munitions, at low ebb, it converted its Hopewell, 
Va., plant into a rayon yarn establishment, since the same raw mate- 
rial and some of its equipment there could be utilized in rayon yarn 
production. The du Pont Rayon Corporation, now a department of 
the parent corporation, was soon producing rayon yarn in such quan- 
tities as to take second place in that production. Also, in 1920, the 
French-owned enterprise Tubize Artificial Silk Co. entered the field. 
In 1930 it merged with the American Chatillon Corporation to- form 
the Tubize Chatillon Corporation. In 1920, also, the Eastman Kodak 
Co. began production of rayon yarns in their Tennessee methyl alcohol 
and acetose plant. 

Table 15. — Installed capacity of rayon yarn producers, 19S3, 1935, and 1938 

[Millions of pounds] 



Name of company 



Amount 



Percent 
of total 



Amount 



Percent 
Of total 



1938 



Amount 



Percent 
of total 



American Viscose 

Dupont Rayon 

Celanese Corporation. 

North American 

Industrial Rayon 

American Enka 

Tubize-Chatells ...:... 
Tennessee-Eastman... 
American Bemberg... 
Balance of industry... 

Total 



77.0 
37.2 
22.0 
17.3 
16.7 
15.0 
16.3 
5.5 
7.9 
18.5 



32.8 
15.9 
9.6 
7.4 
7.2 
6.4 
7.0 
2.4 
3.4 



95.0 
47.4 
35.0 
20.0 
16.7 
12.5 
10.0 
10.0 
7.9 
18.8 



34.8 
17.6 
12.8 
7.3 
6.1 
4.6 
3.7 
3.7 
2.9 



126.7 
'47.4 
37.0 
24.5 
32.0 
29.6 
20.0 
24.0 
10.0 
30.8 



33.8 
12.4 
9.7 
6.4 
8.3 
7.7 
6.2 
6.3 
2.6 
7.6 



233.4 



273.3 



100.0 



382.0 



100.0 

r 



1 Estimated. Trade papers showed no new capacity installed; Celanese now enlarging plants. 
Source: Rayon and Synthetic Yarn Handbook, 1934 to 1938. 



In 1925 two more corporations entered the field, the Industrial 
Rayon Corporation, which took over Industrial Fiber Co. (1920) and 
the American Bemberg Corporation, a German-owned company with 
exclusive right to use the Bemberg process. In 1927 another foreign- 
owned corporation began operations, the American Glantzstoff 

263 



264 CONCENTRATION OF ECONOMIC POWER 

Corporation, since 1934 known as the North American Rayon Cor- 
poration. In 1928 a Dutch company, American Enka Corporation, 
was established near Asheville, N. C. In 1938 those companies em- 
ployed about 78 percent of the tQtal employees of the industry and 
operated 21 of the 33 plants producing yarn, according to trade reports. 
The last year for which concentration can be adequately measured is 
1935, when Dupont still operated the Dupont Rayon Corporation as a 
separate entity. After that it became one of the departments of the 
parent corporation with its operating data merged with the Dupont 
Corporation reports. Table 15 shows installed capacity for 1933, 1935, 
and 1937, for the 9 largest rayon yarn producers. 

These figures, of course, represent what each company could handle 
in the way of production, not the actual production. Rayon yarn 
production in 1938 approximated that of 1935 (1938 was 257.6 million 
pounds and 1935, 257.5 million pounds), while installed capacity 
increased by 1 10 million pounds or 40.2 percent between 1935 and 1938. 
Some of those companies which increased their capacity during this 
period may have failed to utilize their capacity in the same proportion 
as their competitors. According to these figures, the leading four 
companies accounted for 65.6 percent of capacity in 1933, 72.5 percent 
in 1935, and only 59.3 percent in 1938. That capacity and production 
were equally indicative of the relative importance of leading companies 
in 1935, is substantiated by a compilation of the National Resources 
Committee from 1935 Census of Manufactures data showing concen- 
tration in manufacturing industries. The largest four producers 
accounted for $137,520,000 or 74.3 percent of the total value of prod- 
ucts for the rayon yarn industry and the largest eight producers 
accounted for $167,006,000 or 90.2 percent of the total. 14 In value of 
products, the leading four producers accounted for 74.3 percent of the 
total, according to the National Resources Committee study, and 

72.5 percent of installed capacity, according to the Rayon and Syn- 
thetic Yarn Handbook, 1936. The largest 8 producers represented 

90.6 percent of capacity and 90.2 percent of the value of the product, 
according to the same sources. 

If this industry responds in the same fashion as similarly rapid- 
growing industries have done, whose history in America is older than 
this recent one, the leaders will continue to receive a smaller share of 
the market as new competitors are brought into the field by promise 
of profits now being enjoyed by a popular-product industry. 

The data herein presented on concentration fail to measure the 
competitive advantages enjoyed by those manufacturers who have 
integrated their operations into the fabrication field. Tubize 
Chatillon and Industrial Rayon operate their own knitting mills and 
thus extend their operations over two levels of production. Thus, 
they enhance their competitive position in that they supply their own 
raw materials for their weaving mills as well as compete with other 
rayon yarn producers for other mills' business. Both of these compa- 
nies entered the knitting field in order to insure a market for their 
products, demonstrate the best way to utilize them, and detect flaws in 
them with a view to improvement. The Celanese Corporation 
weaves and knits some of its own yarn and makes some finished 
consumer goods such as men's bathing suits and underwear. The two 
leaders in the industry, Viscose and Dupont, have retained their 
position by seniority and a successful brand-promotion campaign 
among their consumers' customers. 

" National Resources Committee, Structure of the American Economy, 1939, pp. 240-241. 



PART V 

THE CONCENTRATION OF PRODUCTION 
IN MANUFACTURING 

BY 

WALTER F. CROWDER 
ASSISTED BY GENEVIEVE BECKWITH WIMSATT 



265 



THE CONCENTRATION OF PRODUCTION IN 
MANUFACTURING 

TABLE OF CONTENTS 

CHAPTER I 

Extent and areas of concentration 273 

Distribution of number and value of products by concentration 

classes 075 

Distribution of number and value of products by industry "groups"-"." ~ 277 

Relation of concentration to number of companies """ 284 

Relation of concentration to value of product '_'_ 288 

Relation of production of leader to the concentration ratio II '. 288 

Distribution by percentage classes of number and value of products 

accounted for by the leading producer _ 293 

Distribution by percentage classes of number and value" of products 

accounted for by the leading producer, by industry groups 293 

Relation between number of companies producing and percentage of 

total value of product accounted for by leading producer by industry 

groups ___ * 296 

Relation between the value" and the percentage of the total value "of 

products accounted for by the leader, by industry groups 297 

CHAPTER II 

Leading producers: number, type, and frequency of appearance. 298 

Frequency of appearance of same company 298 

Types of leading companies 299 

Appearances in first, second, third, and fourth places." V. ZZZZZZZZZZZ 300 

CHAPTER III 

Relation of concentration to various product characteristics . 303 

Type of immediate purchaser "[ 303 

Distribution by concentration ratio classes ZZZZZZZZZZZZZ ZZ 304 

Variations among industry groups 308 

Type of ultimate user ZZZZZZZ 308 

Distribution by concentration ratio classes ZZZZZZ 310 

Variations among industry groups 3 10 

Degree of durability "" 312 

Distribution by concentration ratio classes.. ZZ ZZZZZZZZZ " 312 

Variations among industry groups " 316 

Degree of fabrication 31g 

Distribution by concentration ratio classes ZZZZZZ ZZ 320 

Variations among industry groups 320 

Type of market 32i 

Source of raw material " " 323 

Distribution by concentration ratio classes ZZZZZZZZZZZZ 324 

Variations among industry groups '_'_ 324 

Construction materials and producers' supplies ZZZZZZZZZZZZZ Z Z 324 

Construction materials 327 

Producers' supplies 327 

Summary Z Z ZZ 329 

267 



268 CONCENTRATION OF ECONOMIC POWER 

CHAPTER IV 

Page 
Changes in concentration, in quantity produced, and in average realized 

price from 1935 to 1937 331 

Composition of the 1935-37 sample 331 

Relation of concentration ratios in 1935 and 1937 333 

Relation of type of product to change in concentration 335 

Relation between degree of concentration and changes in quantity 

and in average realized price 338 

Relation of percentage change in concentration ratios and change in 

quantitv produced and in average realized price 340 

Continuity of leadership in 1935 and 1937 342 

CHAPTER V 

Behavior characteristics of products in periods of recession and recovery 346 

Relation between concentration ratios of selected products and changes 

in their total quantity produced 347 

Relation between the concentration ratios of selected products and 

changes in their average realized prices 357 

Relation between changes in quantity output and changes in average 

realized prices 367 

Behavior characteristics of products in various groupings set forth in 

chapter III 372 

Type of immediate purchaser 373 

Type of ultimate user 378 

Degree of durability 379 

Degree of fabrication 389 

Type of market . 394 

Source of raw material ^ 394 

Construction materials and producers' supplies 395 

Summary 1 395 

CHAPTER VI 

Summary and conclusions „ 407 

APPENDIX A 

A statement of definitions and methods , 413 

APPENDIX B 

Basic data for each of the 1,807 products analyzed for 1937 420 

APPENDIX C 

Basic data for the 392 products analyzed for 1935 and 1937— 482 

APPENDIX D 

Classification of the 1,807 products by product characteristics 506 

APPENDIX E 

Basic data for the 407 products analyzed for the 1929-33 and 1933-37 

periods 562 

APPENDIX F 

Basic data for the products of mines analyzed for 1935 : 573 



SCHEDULE OF TABLES AND CHARTS 

TABLES 

Page 

1. Distribution of number and value of products by concentration 

ratio classes, 1937 275 

2. Distribution of number and value of products by concentration ratio 

classes for 14 industry groups, 1937 278 

3. Distribution of number and value of products by percentage of total 

value of product accounted for by leading producer, 1937 292 

4. Distribution of number and value of products by percentage of total 

value of product accounted for by leading producer for 13 industry 
groups, 1 937 294 

5. Frequency of appearance of central-office companies and of inde- 

pendent companies among leading 4 producers, 1937 299 

6. Number of companies in each place of appearance, at selected appear- 

ance levels, 1 937 300 

7. Frequency of appearance of central-office companies and of inde- 

pendent companies as first, second, third, or fourth largest producer 
according to total number of appearances of each company, 1937- _ 302 

8. Percentage distribution of number and value of products according to 

type of immediate purchaser by industry groups, 1937 306 

9. Percentage distribution of number and value of products according to 

type of ultimate user, by industry groups, 1937 309 

10. Percentage distribution of number and value of products according to 

degree of durability, by industry groups, 1937 314 

11. Percentage distribution of number and value of products according to 

degree of fabrication, by industry groups, 1937 318 

12. Percentage distribution of number and value of products according to 

type of market, by industry groups, 1937 323 

13. Percentage distribution of number and value of products according to 

source of raw material, by industry groups, 1937 326 

14. Percentage distribution of number and value of construction materials 

and of producers' supplies, by industry groups, 1937 329 

15. Distribution of the 1,807 products by product characteristics and by 

industry groups, 1937 330 

16. Relation between the distribution of number and value of products for 

the 1937 sample and the 1935-37 sample by concentration ratio 
classes 332 

17. Relation between the distributions of number of products in the 

1937 sample and the 1935-37 sample by industry groups 333 

18. Distribution of products by the percentage change in concentration 

ratios between 1935 and 1937 334 

19. Distribution of products by product characteristics and by changes in 

concentration ratios between 1935 and 1937 335 

20. Products for which the concentration ratios increased or decreased 20 

percent or more between 1935 and 1937 336 

21. Relation between the distributions of number and value of the 1,807 

products and of the 407 products among the concentration ratio 
classes 347 

22. Percentage change in quantity and in average realized price of products 

which experienced contractions in output of 70 percent or more 
between 1929 and 1933 352-353 

23. Distribution of products which experienced contraction in output of 

70 percent or more between 1929 and 1933, by concentration ratio 
classes and by product characteristics 354 

24. Percentage change in quantity and in average realized price of products 

which experienced expansion in output of 200 percent or more 
between 1933 and 1937 355-356 

269 



270 CONCENTRATION OF ECONOMIC POWER 

Pag«- 

25. Distribution of products which experienced expansion in output of 200 

percent or more between 1933 and 1937, by concentration ratio 
classes and by product characteristics 357" 

26. Percentage change in average realized price and in quantity of products 

which experienced price decreases of 50 percent or more between 

1929 and 1933 361-362 

27. Distribution of products which experienced price decreases of 50 per- 

cent or more between 1929 and 1933, by concentration ratio classes 

and by product characteristics 363 

28. Percentage change in average realized price and in quantity of products 

which experienced price increases of 50 percent or more between 

1933 and 1937 . 363-365 

29. Distribution of products which experienced price increases of 50 per- 

cent or more between 1933 and 1937, by concentration ratio classes 

and by product characteristics 366 

APPENDIX A 

1A. Comparison of value of products for Census of Manufactures industry 

groups, computed on an establishment and on a product basis, 1937. 415 

2A. Relation between all manufacturing industries and the industries 
included in the sample of 1,807 products, distributed according to 
the number of establishments per industry, 1937 417 

3A. Relation between all manufacturing industries and the industries 
included in the sample of 1,807 products, distributed according to 
the value of product for each industry, 1937 417 

4A. Comparison of the value of all products and of the 1,807 products, by 

industry groups, 1937 418 

APPENDIX B 

IB. Basic data for each of the 1,807 products analyzed for 1937 420-481 

appendix c 

1C. Basic data for each of the 392 products analyzed for 1935 482-494 

2C. Percentage change in concentration ratio, quantity, and price between 

1935-37 for the sample of 392 products 495-505 

APPENDIX D 

ID. Classification of the 1,807 products by product characteristics, 1937. 513-553 
2D. Distribution of the 1,807 products by product characteristics and. by 

concentration ratio classes, 1937 554 

3D. Distribution of number and value of products according to type of 

immediate purchaser by concentration ratio classes, 1937 555 

4D. Distribution of number and value of products according to type of 

ultimate user by concentration ratio classes, 1937 556 

5D. Distribution of number and value of products according to degree of 

durability by concentration ratio classes, 1937 557 

6D. Distribution of number and value of products according to degree 

of fabrication by concentration ratio classes, 1937 558 

7D. Distribution of number and value of products according to type of 

market by concentration ratio classes, 1937 559 

8D. Distribution of number and value of products according to source of 

raw material by concentration ratio classes, 19371 560 

9D. Distribution of number and value of construction materials and pro- 
ducers' supplies by concentration ratio classes, 1937 561 

APPENDIX E 

IE. Percentage change in quantity and price between 1929-33 and be- 
tween 1933-37 for the sample of 407 products 562-571 

2E. Distribution of the 407 products by concentration ratio classes and 

by product characteristics 572 

APPENDIX F 

IF. Basic data for the products of mines analyzed for 1935.. 573 



CONCENTRATION OF ECONOMIC POWER 271 

CHARTS 

Page 
1. Distribution of number of products and value of products by con- 
centration of ratio classes, all industry groups combined, 1937 276 

2a. Distribution of number of products and value of products by concen- 
tration ratio classes, by industry groups, 1937 280 

2b. Distribution of number of products and value of products by concen- 
tration ratio classes, by industry groups, 1937 281 

3a. Relation between number of producing companies and concentration 

ratio for each product, by industry groups, 1937 282 

3b. Relation between number of producing companies and concentration 

ratio for each product, by industry groups, 1937 283 

4. Relation between the number of producing companies and concentra- 
tion ratio for each product, textile group, 1937 285 

5a. Relation between value and concentration ratio of each product, by 

industry groups, 1937- 286 

5b. Relation between value and concentration ratio of each product, by 

industry groups, 1937 287 

6a. Relation between percentage of total value of product accounted for 
by leading producer and concentration ratio for each product, by 
industry groups, 1937 290 

6b. Relation between percentage of total value of product accounted for 
by leading producer and concentration ratio for each product, by 
industry groups, 1937 291 

7. Distribution of number and value of products by percentage of total 

value of product accounted for by leading producer, all industry 
groups, 1937 293 

8. Relation between the number of producing companies and percentage 

of total value of product accounted for by leading producer of each 
product, textile group, 1937 297 

9. Distribution of number and value of products according to type of 

immediate purchaser by concentration ratio classes, 1937 305 

10. Distribution of number and value of products according to type of 

ultimate user by concentration ratio classes, 1937 311 

11. Distribution of number and value of products according to degree of 

durability by concentration ratio classes, 1937 313 

12. Distribution of number and value of products according to degree of 

fabrication by concentration ratio classes, 1937 317 

13. Distribution of number and value of products according to type of 

market by concentration ratio classes, 1937 322 

14. Distribution of number and value of products according to source of 

raw materials by concentration ratio classes, 1937 325 

15. Distribution of number and value of construction materials and pro- 

ducers' supplies by concentration ratio classes, 1937 328 

16. Relation between concentration ratios in 1935 and 1937 334 

17. Relation between concentration ratio in 1935 and change in quantity 

produced and in average realized price, 1935 to 1937 341 

18. Relation between change in concentration ratio and change in. quan- 

tity produced and in average realized price, 1935 to 1937 342 

19a. Relation between number of companies which were leaders in 1935 

and 1937 and concentration ratio 344 

19b. Relation between number of companies which were leaders in 1935 

and 1937 and change in concentration ratio 345 

20a. Relation between concentration ratio and percentage change in quan- 
tity produced, 1929-33 348 

20b. Relation between concentration ratio and percentage change in quan- 
tity produced, 1933-37 349 

21a. Relation between concentration ratio and percentage change in aver- 
age realized price, 1929-33 358 

21b. Relation between concentration ratio and percentage change in aver- 
age realized price, 1933-37 359 

22a. Relation between percentage change in quantity produced and per- 
centage change in average realized price, 1929-33 370 

22b. Relation between percentage change in quantity produced and per- 

' centage change in average realized price, 1933-37 371 

23a. Relation between concentration ratio and percentage change in quan- 
tity produced and average realized price for products grouped by 
type of immediate purchaser, 1929-33 374 



272 CONCENTRATION OF ECONOMIC POWER 

Pag* 

23b. Relation between concentration ratio and percentage change in quan- 
tity produced and average realized price for products grouped by 
type of immediate purchaser, 1933-37 375 

24a. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped by 
type of immediate purchaser, 1929-33 376 

24b. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped by 
type of immediate purchaser, 1933-37 377 

25a. Relation between concentration ratio and percentage change in 
quantity produced and average realized price for products grouped 
by type of ultimate use*, 1929-33 - 380 

25b. Relation between concentration ratio and percentage change in 
quantity produced and average realized price for products grouped 
by type of ultimate user, 1933-37 381 

26a. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped by 
type of ultimate user, 1929-33 382 

26b. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped by 
type of ultimate user, 1933-37 383 

27a. Relation between concentration ratio and percentage change in 
quantity produced and average realized price for products grouped 
by degree of durability, 1929-33 384 

27b. Relation between concentration ratio and percentage change in 
quantitv produced and average realized price for products grouped 
by degree of durability, 1933-37 385 

28a. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped bv 
degree of durability, 1929-33 386 

28b. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped by 
degree of durability, 1933-37 387 

29a. Relation between concentration ratio and percentage change in 
quantity produced and average realized price for products grouped 
by degree of fabrication, 1929-33 390 

29b. Relation between concentration ratio and percentage change in 
quantity produced and average realized price for products grouped 
by degree of fabrication, 1933-37 391 

30a. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped by 
degree of fabrication, 1929-33 392 

30b. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped by 
degfee of fabrication, 1933-37 393 

31a. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped bv 
type of market, 1929-33 396 

31b. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped by 
type of market, 1933-37 397 

32a. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped by 
source of raw materials, 1929-33 . 398 

32b. Relation between percentage change in qua fcity produced and per- 
centage change in average realized price for products grouped by 
source of raw materials, 1933-37 . 399 

33a. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped 
separately as construction materials and as producers' supplies, 
1 929-33 400 

33b. Relation between percentage change in quantity produced and per- 
centage change in average realized price for products grouped 
separately as construction materials and as producers' supplies, 
1933-37 401 



THE CONCENTRATION OF PRODUCTION IN 
MANUFACTURING » 

CHAPTER I 

EXTENT AND AREAS OF CONCENTRATION 

The investigation of the concentration of economic power may be 
approached from many angles. It is the purpose of the present study 
to supply information bearing on the following questions relative to 
the concentration of economic power in the production of manufac- 
tured commodities, and to point out some of the possible economic 
implications which may be drawn from the material that has been 
brought together. 

To what extent do a few firms control the supply of various manu- 
factured products? How common is the situation in which a single 
concern is a leader in the production of a number of separate products? 
In what lines of activity is the control of output most concentrated? 
What is the effect of high or low concentration on output and prices 
of manufactured products in periods of recession and recovery? 
With what factors in the production and distribution, or with what 
factors in the intrinsic nature of the product itself, may concentra- 
tion be related? What is the effect of concentration in the production 
of manufactured products on various consuming groups and on the 
functioning of the economy? 

The subject materials of this study are "products, as distinguished 
in the Census of Manufactures for 1937. Earlier studies have ana- 
lyzed the concentration of production for census industries, but, in 
an investigation of the workings of a price economy, data on concen- 
tration in terms of products obviously afford a more significant frame- 
work for analysis. The product concept approaches more closely 
that of the economic commodity as employed in the usual type of 
economic analysis. It is important, however, to realize that there 
are certain differences between census products and economic com- 
modities. 

The thousands of physical commodities produced by our industries 
and listed separately in the Census of Manufactures as products 
differ among themselves with respect to physical characteristics, 
although frequently the differences are very slight. Physical differ- 
ences between two census products are in some cases, indeed, so slight 
as to make it doubtful that the products are significantly different iD 
an economic sense, one being so easily substituted for the other as to 
render them functionally homogeneous for all important valuation 
decisions. Just when a gap in substitutability exists sufficient to 

i Acknowledgment is due Mrs. Esther W. Staudt, who supervised "the editing of the appendixes, 
and Miss K. Celeste Stokes, who reviewed the manuscript. Mrs. Martha H. Porter and Mr. Arnold S. 
Skinner classified the products on the basis of their various economic characteristics. At the prelimiLHry 
planning stage of the study, Prof. Paul O'Leary and Grace W. Knott made many helpful suggestioi.s.- 
Acknowledgment is also due the Division of Manufactures, Bureau of the Census, for the cooperation given 
in making the data for this report available. Appreciation is especially due Mr. John F. Daly, Assistant 
Chief of the Division of Manufactures, for many suggestions and for his generous assistance in checking the 
(basic data to avoid disclosures. 

273 

27J238 — 41— pt. 27 19 



274 CONCENTRATION OF ECONOMIC POWER 

warrant saying that two different physical things are economically 
different products it is impossible to say. In general, however, one 
is warranted in assuming that census product differentiations do 
reflect in- varying degrees significant economic functional differences, 
since they represent largely the cumulative result of suggestions and 
requests made through the years by manufacturers and their trade 
associations. (For .further discussion of a census product, see 
appendix A, p. 413.) 

A cross-section sample consisting of 1,807 products was analyzed. 
This sample was selected in such a manner that it presents a compre- 
hensive over-all picture of the situation existing in the entire manu- 
facturing segment of the economy. The products analyzed account 
for slightly less than one-half of the total number of census products 
and cover more than one-half of the total value of all manufactured 
products. Furthermore, the sample covers all the products listed in 
117 census industries (with only minor omissions) and these indus- 
tries were selected from all industry groups, except the printing and 
publishing group. Thus the sample is made up of products repre- 
senting different types of manufacturing processes, different degrees 
of fabrication, different raw materials, different degrees of durability, 
and different types of buyers. The list includes products which are 
sold under different marketing conditions, and products which are 
destined for different uses. It covers consumers' as well as producers' 
goods, and such diverse items as food, clothing, structural steel, 
cigarettes, electric motors, heavy duty lathes, construction materials, 
and writing paper — to list only a few of the products. The products 
are thus so diverse and the sample so comprehensive that the general- 
izations which are made on the basis of these analyzed products may 
logically be assumed to obtain within very narrow limits for all 
manufactured products. 2 

The concentration in the production of each of these products is 
expressed as a proportion (percentage) of the United States total 
value of each product accounted for by the output of the leading four 
producers of that product. This measure of the concentration in the 
production of census products is called herein the concentration ratio 
for the individual product. For some products the actual ratio could 
not be shown as it would disclose confidential census data, but for 
the purpose of this study this limitation on the publication of the 
data is not particularly serious. It is sufficient here to know that 
the production of the commodity was concentrated in so few hands 
that publication of the data would violate the law which prohibits 
the Bureau of the Census from publishing any statistics that might 
disclose data reported by individual establishments or companies. 3 

• A complete description of the nature of the sample and of its coverage and representativeness in terms of 
various measures is given in appendix A. Similar concentration data for products of mines are presented in 
appendix F. 

3 For the purposes of this study, the Bureau of the Census set forth the following rules to prevent disclosures 
in the publication of data taken from confidential sources: 

(1) No data could be shown for less than four companies; 

(2) No aggregate value of product figure could be shown or used if the value of produet of one of the com- 
panies making up the aggregate constituted 75 percent of the total or if the value of product of two of the 
companies taken together made up 90 percent of the aggregate. Since concentration ratios cannot be as- 
signed to products falling in these categories, they are listed throuchout this study under footnote 1 and are 
indicated in charts and tables by a footnote symbol, as "(')"■ This rule also applies to any figure which 
could be obtained by subtraction or addition to any published figure. Disclosure of this second type appears 
under footnote 2, in all tables and charts in the study. 

It should be pointed out that the Bureau of the Census does not publish data for a product when that 
product is produced by only one manufacturer. In such cases, the data which relate to the product are 
combined with those of another product of like nature or included with products in an "other" product 
classification. It is thus obvious that instances of monopoly, duopoly, and many cases of oligopoly cannot 
be ascertained from the data as recorded in this study. The operation and production statistics for these 
concerns, however, are included in the industry totals. 



CONCENTRATION OF ECOifOMICPOWER 



275 



In addition to the value ratios, concentration ratios have also been 
computed showing the proportion of the United States total quantity 
output of the individual product accounted for by the production of 
the largest four producers of that product. In subsequent sections 
of the study, other pertinent material bearing on the concentration 
in the production of the individual products of the sample will be 
presented and analyzed. 

It should be noted that the concentration ratio for each product 
was computed on a company basis. In the meaning employed in this 
study, a company represents a combination of all establishments 
under common control. Thus, all establishments operated from a 
central administrative office were considered as a single producing 
unit or company. A number of companies were multiplant firms; on 
the other hand, many concerns were composed of but a single estab- 
lishment. (For a distribution of the leading companies according to 
central-office companies and independents, see ch. II, table 5.) 

DISTRIBUTION OF NUMBER AND VALUE OF PRODUCTS BY CONCENTRATION 

CLASSES 

In order that some general over-all view of the data assembled 
here may be available, the 1,807 products were grouped on the basis 
of concentration ratios into 5 percent intervals and the frequency of 
appearances of products and the total value of the products falling 
in each concentration class are shown in table 1 and chart 1 . Approxi- 
mately three-fourths of the total number of products had concentra- 
tion ratios above 50 percent, about one-half of all the products 
analyzed had concentration ratios above 75 percent, and nearly 
one-third had concentration ratios above 85 percent. 



Table 1. — Distribidion of number and value of products by concentration ratio 

classes, 1987 





Number of products 


Value of products 


Concentration ratio class 


Number 


Percent 


Cumu- 
lative 
percent 


Amount 
(thousands 
of dollars) 


Percent 


Cumu- 
lative 
percent 


0.1 to 5.0 


1 

7 

10 

28 

44 

46 

54 

69 

91. 

75 

85 

98 

100 

130 

124 

135 

117 

101 

75 

89 

153 

175 


0.1 
.4 
.6 
1.5 
2.4 
2.6 
3.0 
3.8 
5.0 
4.1 
4.7 
5.4 
5.5 
7.2 
6.9 
7.5 
6.5 
5.6 
4.1 
4.9 
8.5 
9.7 


0.1 

.5 

1.1 

2.6 

5.0 

7.6 

10.6 

14.4 

19.4 

23.6 

28.2 

33.6 

39.1 

46.3 

53.2 

60.7 

67.2 

72.8 

76.9 

81.8 

90.3 

100.0 


353. 432 
357, 663 
477, 592 
792, 708 

1, 454, 942 
1, 304, 025 
1,421,494 

2. 892. 890 
1.461,146 
2, 060, 290 

893, 227 
1, 761, 698 
1, 287, 529 
1, 445, 246 

1, 689, 270 

2, 224, 582 
1, 449, 834 

648, 389 
2, 796, 032 

319,819 
1, 827, 858 

586, 027 


1.2 
1.2 

1.6 
2.7 
5.0 
4.4 
4.8 
9.8 
4.9 
7.0 
3.0 
6.0 
4.4 
4.9 
5.7 
7.5 
4.9 
2.2 
9.5 
1.1 
6.2 
2.0 


1.2 


5.1 to 10.0 _ 


2.4 


10.1 to 15.0 


4 


15.1 to 20.0. 


6.7 


20.1 to 25.0..- 


11.7 


25.1 to 30.0 , 


16. 1 


30.1 to 35.0 .. 


20 9 


35.1 to 40.0... 


30 7 


40.1 to 45.0 


35.6 


45.1 to 50.0 . 


42.6 


50.1 to55.0 .. 


45.6 


55.1 to 60.0 ~.. 

60.1 to 65.0 


51.6 
56.0 


65.1 to 70.0 ._ 


60.9 


70.1 to 75.0 _ 


66.6 


75.1 to 80.0 . 


74. 1 


80.1 to 85.0 


79.0 


85.1 to 90.0 


81.2 


90.1 to 95.0.. 


90.7 


95.1 to 100.0 


91.8 


(') 


98.0 


(«) 


100.0 






Total. 


1,807 


100.0 




29, 505, 693 


100.0 











1 Withheld to avoid disclosing the operations of individual companies. See appendix A for rules govern- 
ing disclosures as used in this study. 

1 Withheld to avoid disclosing the operations of remaining companies. There is not necessarily a dis- 
closure among the leading 4 companies. 



276 



CONCENTRATION OF ECONOMIC POWER 



At the lower end of the distribution, there was only one product 
with a concentration ratio less than 5 percent. In other words there 
was only one product for which the production of the leading; four 
producers taken together made up less than 5 percent of the United 
States total. At the other extreme, there were 89 products which had 
concentration ratios falling between 95 and 100 percent of the United 
States value 6f product. Furthermore, there were 328 products in 
which production was concentrated in the hands of so few producers 
that the actual figures could not be published because they would 
reveal the operations of individual companies. An examination of 




CHABT 1.— DISTRIBUTION OF NUMBER OF PRODUCTS AND VALUE OF PRODUCTS BY 
CONCENTRATION OF RATIO CLASSES. ALL INDUSTRY GROUPS COMBINED, 1937. 

the unpublished concentration ratios lor those products listed under 
" O" and "( 2 )" indicates that by far the largest number had concen- 
tration ratios above 90 percent. That is, the production of the leading 
four producers of each of these products made up over 90 percent of 
the United States total value of the product. 

In contrast with the preponderant number of products occurring 
in the upper concentration classes, a much higher percentage of the 
aggregate value of the products was accounted for by products in 
the middle concentration ratio classes. One-fifth of the total value 
of all products analyzed was accounted for by products with concen- 
tration ratios below 35 percent while only one-tenth oi the number of 
products had concentration ratios below 35 percent. Or again, the 
value of products with concentration ratios less than 60 percent made 



CONCENTRATION OF ECONOMIC POWER 277 

up more than one-half the total value of products analyzed, while 
only about one-third of the total number of products had concentra- 
tion ratios less than 60 percent. Viewed from the high-concentration 
end of the distribution, almost 20 percent of the total value of the 
products analyzed may be accounted for by those items which had 
concentration ratios higher than 90 percent. The products in these 
classes accounted for 27 percent by number of all products analyzed. 
The outstanding characteristic of the distribution of number of 
products as contrasted with that of value of products is, thus, the 
larger proportion of the number of products falling in the upper con- 
centration classes and the larger proportion of value of products 
appearing in the middle-concentration groups. 

DISTRIBUTION OF NUMBER AND VALUE OF PRODUCTS BY INDUSTRY 

GROUPS 4 

The over-all picture of the distribution of the number and value of 
products by concentration classes as shown above conceals a wide 
divergence in the behavior of the distributions among the various 
industry groups. As shown in table 2 and charts 2a and 2b, 41.9 
percent of the total number of products in the food group and approxi- 
mately 38 percent of the number of items in the forest products, in 
the paper products, and in the petroleum products groups had con- 
centration ratios below 50 percent. On the other hand, only 5 percent 
of the total number of the products analyzed in the rubber and in the 
machinery groups had concentration ratios below 50 percent. 6 

* The Bureau of the Census has combined the various industries diflerentiated by it into 15 industrial 
groups. These groups are: Food and kindred products; textiles and their products; forest products; paper 
and allied products; printing, publishing, and allied industries; chemicals and allied products; products of 
petroleum and coal; rubber products; leather and its manufactures; stone, clay, and glass products; iron and 
steel and their products, not including machinery; nonferrous metals and their products; machinery, not 
including transportation equipment; transportation equipment, air, land, anrt water; and miscellaneous 
Industries. 

6 The two consolidated products analyzed in the transportation equipment gr< i.p had concentration ratios 
of more than 75 percent and under normal conditions this group would have been included along with the 
groups mentioned above. Particular circumstances which surrounded the data available to us, however, 
made analysis of the products of this group a procedure of questionable value. 

The value of products of the motor vehicles and the motor vehicle bodies and parts industries accounted 
for almost 90 percent of the total value of products of the transportat ion group and thus would be the obvious 
industries to select for our sample. Data, however, for only two consolidated products from one of these 
two industries were released by the Bureau of the Census for the purposes of this study. These two "con- 
solidated" products comprise closed two-and-four-door and open twe-and-four-door passenger cars and 
passeDger-oar chassis; and commercial vehicles, which include motor busses, trucks, hearses, undertakers' 
wagons, ambulances, truck tractors, tax'icabs, fire-department apparatus, street-cleaning apparatus, and 
commercial-car and bus chassis. 



278 



CONCENTRATION OF ECONOMIC POWER 



Miscella- 
neous 
indus- 
tries 


t- 




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CONCENTRATION OF ECONOMIC POWER 



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280 



CONCENTRATION OF ECONOMIC POWER 



joJUi 



FOOD AND KINORED 
PRODUCTS 



IllJi 

i Q Q O O Q ,/ ? / 

; ci wt cs wt ct •£/ ±f 



o^ 7 




CHEMICALS AMD 
ALU£D PRODUCTS 



^3 



Tf?n 







« jj y 



CONCENTRATION RAT/O 

Wt NUMBER Of PRODUCTS 




o O t> O O o O o <« OQO^O O <3 o <a o 7/9/ 



PAPER AND AU/ED 
PROD L/C TS 




Q d <J O q ^ o C» C. Q o ^ O " O O O ^ Q V // •>» 



PRODUCTS Of PETROLEUM 
AND COAL 







CONCENTRA TlOhl PA Tl O 

m VALUE OP PRODUCTS 



0O-4O-67 



CHART 2a.— DISTRIBUTION OF NUMBER OF PRODUCTS AND VALUE OF PRODUCTS 
BY CONCENTRATION RATIO CLASSES, BY INDUSTRY GROUPS, 1937 



CONCENTRATION OF ECONOMIC POWER 



281 















JLLOs i g g 




*a si » 



COMCCMTftATlON RATIO 

mHUM8£fi OF PRODUCTS 



o q o to <s q q a Q o o q o o a <s q q q q 



CONCENTRATION RATIO 
\SZ VALUE OF PRODUCTS 



CHART 2b —DISTRIBUTION OF NUMBER OF PRODUCTS AND VALUE OF PRODUCTS 
BY CONCENTRATION RATIO CLASSES, BY INDUSTRY GROUPS, 1937. 



282 



CONCENTRATION OF ECONOMIC POWER 



FOOD AND KINDRED 
PRODUCTS 



NUMBER Of COMPANIES 



TEXTILES AMD 
THEIR PRODUCTS 



NUMBER Of COMPANIES 



80 - 
70 - 



FOREST* PRODUCTS 



NUMBER OF COMPANIES 



PAPER AND ALLIED 
PRODUCTS 



NUMBER Of COMPANIES 



CHEMICALS AND 
ALLIED PRODUCTS 



J ' ' ' 



NUMBER Of COMPANIES 



PRODUCTS OF &TROLEUM 
AND COAL 



NUMBER Of COMPANIES 



- 70 

- 60 



o O 10-69 



CHART 3a— RELATION BETWEEN NUMBER OF PRODUCING COMPANIES AND CON- 
CENTRATION RATIO FOR EACH PRODUCT, BY INDUSTRY GROUPS, 1937. 



CONCENTRATION OF ECONOMIC POWER 



283 



I.. 

to 



RUBBER PROOUCTS 



NUMBER OF "COMPANIES 



LEATHER AMD ITS 
MANUEACTORES 



SO Q oo o 

^ V coo O 

NUMBER OF COMPANIES 



80 

| 

J 



S SO 



STONE. CLAY, AND 
GLASS PROOUCTS 



i i i i i ii 



NUMBER OF^COMPANIES 



IRON AND STEEL AHO 
THEIR PRODUCTS. MOT 
INCLUDING MACHINERY 



' i I l l i in 



'8 8 % S§1 

NUMBER OF^COMPANIES 



MONEERROUS METALS 
AND THEIR PRODUCTS 



J I I I I llll 



NUMBER OF COMPANIES 



Sb 



MACHINERY, NOT INCLUDING 
TRANSPORTATION EQUIPMENT 



C't .* 



70 * 

60 * 

i 

"I 

"I 

30 ^ 



8 ? 8 8§ | 

NUMBER OF COMPANIES 



O 0*0-70 



CHART 3b.— RELATION BETWEEN NUMBER OF PRODUCING COMPANIES AND CON- 
CENTRATION RATIO FOR EACH PRODUCT, BY INDUSTRY GROUPS, 1937. 



284 CONCENTRATION OF ECONOMIC POWER 

In the upper concentration classes, 40 percent of the total number 
of products analyzed in the machinery group, 38 percent in the rubber 
group, and 36 percent in the chemical group had concentration ratios 
above 90 percent, while only 10 percent of the total number of products 
in the paper industries group and 11 percent in the food products 
group had concentration ratios above 90 percent. 

The distribution patterns of the various industry groups were 
almost as widely divergent in the case of the value of products as in 
that of the 'number of products. Although a careful inspection of the 
table and charts will reveal these variations, as an aid to the interpre- 
tation of the material some of the extremes are worthy of citation. 
Approximately 90 percent of the total value of products analyzed in 
the petroleum and coal group, 77 percent in the textiles group, and 
75 percent in the forest products group represented the value of 
products having concentration ratios below 50 percent, but only 7 
percent of the value of products in the rubber group and 13 percent in 
the machinery group were in these lower concentration classes. 
Conversely, the concentration ratio classes above 90 percent included 
32 percent of the value of products analyzed in the machinery group 
and 27 percent in the chemical group, whereas corresponding per- 
centages in the food, textiles, paper, and rubber groups were as low 
as 3 or 4 percent. 

These differences in the distribution of number and value of products 
among the various industry groups are particularly striking in the 
case of those groups whose products include, for the most part, 
commodities going directly into the hands of consumers, as contrasted 
with the so-called producers' capital goods industries. (.This point will 
be covered more extensively in chapter III.) 

RELATION OF CONCENTRATION TO NUMBER OF COMPANIES 

It might generally be assumed that in cases where products were 
manufactured by a large number of companies the proportion of the 
total contributed by any one company would be smaller than in cases 
where only a few companies produced the product. Thus, one might 
expect commodities which are produced by a large number of com- 
panies to have low concentration ratios and those produced by only a 
few companies to have high concentration ratios. From the material 
presented in the accompanying scatter diagrams (charts 3a-3b), this 
assumption appears to be well founded. The relationship between 
the number of companies manufacturing a product and its concentra- 
tion ratio is generally, though by no means perfectly, inverse in 
character. 

In order that the data may be shown in charts of reasonable size, 
the number of companies producing the products as measured along 
the horizontal axis has been plotted on a logarithmic scale. It 
appears that a generally straight line sloping downward, with a 
tendency to curve slightly as the line progresses through the upper 
company range, expresses the prevailing tendency of the relationship 
as it exists among the various industry groups. If these data had 
been plotted on an arithmetic scale, a curve that drops off sharply in 
the left-hand segment and then slopes off gently to the right would 
reflect the inverse nature of the relationship. The general shape of 
such a curve plotted on an arithmetic scale from the data of the textiles 



CONCENTRATION OF ECONOMIC POWER 285 

group is shown in chart 4. The curve shown on this chart using the 
arithmetic scale is the same as that drawn on a logarithmetic scale 
in the scatter diagram in chart 3a and was fitted by approximate 
methods. A scatter chart combining the data for all industrial 
groups is not shown here as it is believed the data for the industry 
groups are more revealing. 

The closeness of this inverse relationship varies rather widely from 
one industry group to another. In the textiles group; the forest 
products group; the paper group; the leather group; and the stone, 
clay, and glass products group the vertical spread of the items from 
a regression line which might be drawn through the points to reflect 
the central tendency of the relation appears to be much less than that 
in the other groups. In all groups, however, the vertical spread at 
any point on the horizontal axis is rather wide. For example, evert 
in the textile group where the relation is quite obvious, there was one 



CONCENTRATION RATIO 
















100 


















80 
60 
40 






























- 




>. 












- 




20 



i 1 1 1 


1 


1 1 1 1 1 1 1 


1 


1 1 


1 1 


1 




C 


> 20 40 


60 


60 100 120 
NUMBER OF COMPANIES 


140 


160 


ISO 


20 
oo- 




fO-TI 



CHART 4.— RELATION BETWEEN THE NUMBER OF PRODUCING COMPANIES / ND> 
CONCENTRATION RATIO FOR EACH PRODUCT, TEXTILE GROUP, 1937. 

product produced by 23 companies which had a concentration ratio 
of 46 percent while a second product also produced by 23 companies 
had a concentration ratio of 85 percent. Again, in the machinery 
group, there were 12 products with concentration ratios ranging from 
31 to 99 percent and each of these products was produced by 8 
companies. 

Further inspection reveals the apparent lack of relation between 
the number of companies and the concentration ratios for the products 
when the number of companies exceeds 100. This lack of relationship 
beyond the 100-company line is most obvious in the case of the food 
group, the chemicals group, the iron and steel group, and the non- 
ferrous metals group. 

It should be noted that no product points are located on the 5-, 6-, 
and 7-company ordinates in the various charts. This hiatus in the 
diagrams is not due to any peculiar characteristic of the basic data 
but is due to the disclosure rules set forth by the Bureau of the Census. 
All products that are listed under "( 2 )" and some of those listed under 



286 



CONCENTRATION OF ECONOMIC POWER 



5 



$40 



20 



FOOD AND 
H/NDRED 
PRODUCTS 

i i "inn i i iiiiijj i 1 1 1 nil I 1 1 iniii i i nun 



THOUSANDS OF DOLLARS 



£ 60 



$40 



FOREST 
PRODUCTS 



THOUSANDS OF DOLLARS' 



I I 1 1 lllll ' i i mill i i inn 



CHEM/CAIS 

ANDALUED 
PRODUCTS 



i ' ' mi:i mi i ' i mill i in i i i inn 



THOUSANDS OF DOLLARS 



TEXTILES 
AND THE/R 
PRODUCTS 



THOUSANDS OF DOLLARS 



MPER AND 

ALL/ ED PRODUCTS 



80 



60 S. 

1 
40 5 

I 

20 



THOUSANDS OF DOLLARS 



PRODUCTS OF 
PETROLEUM 
AND COAL 



THOUSANDS OF DOLLARS 



nun iiii 



80 



60 S 



40 § 



40$ 



CHART 5a.— RELATION BETWEEN VALUE AND CONCENTRATION RATIO OF EACH 
PRODUCT, BY INDUSTRY GROUPS, 1937. 



CONCENTRATION OP ECONOMIC POWER 



287 



§ 60 



RUBBER 
PRODUCTS 

i i Hum i 1 1 mil i 1 1 1 1 nn i i i iiimi i 1 1 inn 



THOUSANDS OF DOLLARS 



5 40 



STONE, CLAY, 

AND GLASS 
PRODUCTS 



* 3 § 

THOUSANDS OF DOLLARS 



I ■ "'III I I I llll 



3 40 



NONFERROUS 
METALS AND 
TNE/R PRODUCTS 



§ 1 i 

THOUSANDS OF DOLLARS 



"? 


80 


"•■ •••' : 


60 § 
5 


LEATNER 


«1 

1 

20 8 


AND ITS 




MANUFACTURES 









"■ § § s 
THOUSANDS OF DOLLARS S 



IRON AND 
STEEL AND 
THEIR PRODUCTS 

NOT INCLUDING 
MACHINERY 

i i i nun i i nniji i i iiiiui i i iiiiij i nil 



60 £ 



THOUSANDS OF DOLLARS 



MACHINERY, 
NOTINCLUDINC 
TRANSPORTATION 
EQUIPMENT 



60 S 



THOUSANDS OF DOLLARS 



CHART 5b.-RELATION BETWEEN VALUE AND CONCENTRATION RATIO OF EACH 
PRODUCT, BY INDUSTRY GROUPS, 1937. 



288 CONCENTRATION OP ECONOMIC POWER 

"(*)" fall in this area. If the concentration ratios for the products 
were published it would be possible by subtraction to approximate the 
activities of the remaining companies. As was pointed out earlier in 
the discussion, the concentration ratios of those products which have 
been listed under "(')" and "( 2 )" would fall in most cases between 90 
and 100 percent. The hiatus in the diagrams may be bridged by 
visualizing an extension of the tendencies evident in the scatter dia- 
gram on either side of the gap. 

RELATION OF CONCENTRATION TO VALUE OF PRODUCT 

There appears to be only a slight inverse relation between the con- 
centration ratio of a commodity and the total United States value of 
that product. An inspection of the accompanying scatter diagrams 
(charts 5a and 5b) reveals within rather broad limits an inverse relation 
in the textiles; forest products; petroleum; leather; and stone, clay, 
and glass products groups, but even in these groups the scatter is so 
great as to indicate that total value is by no means a dominant factor. 
In the textiles group, for example, the concentration ratios of the 
commodities with value ranging between $5,000,000 and $10,000,000 
extend from 25 to 100 percent and commodities with concentration 
ratios falling between 50 and 60 percent are products whose value 
ranges from $300,000 to almost $80,000,000. 

The discovery that there is no close relation between the total value 
of a product and its concentration, although a negative conclusion, is 
of interest here. In general terms, this means that products with 
high value and with low value may have either a high concentration 
or a low concentration. It should be noted that in several industry 
groups where there are products with total United States values less 
than $100,000, the concentration ratios of these products are 100 
percent. It is to be expected, however, that production of products 
where the total value is low would be concentrated in a few hands. 
The vast majority of products have total values higher than $100,000 
and for these more important products, both as to number and value, 
the scatter of product points opposite any range on either the hori- 
zontal or the vertical axis is so great that only within the broadest 
limits can it be said that products with high values have low concen- 
tration ratios or vice versa. 

RELATION OF PRODUCTION OF LEADER TO THE CONCENTRATION RATIO 

The statement that the concentration ratio of product A is 80 per- 
cent means that the leading four producers of product A accounted 
for 80 percent of the total United States value of that product. There 
is another question that immediately arises: How is the production 
of the four leaders distributed? Does one producer. account for 23 
percent of the total and the other three producers 19 percent each, 
does one account for 50 percent and the other three producers 10 per- 
cent each, or does one account for 77 percent and the other three 
producers 1 percent each? Of course, those products for which the 
value-output of one producer represents 75 percent of the four-com- 
pany total and those products for which two producers account for 
90 percent of the total involve disclosures of the first type, "C 1 )". and 



CONCENTRATION OF ECONOMIC POWER 289 

specific data on these products are withheld to avoid revealing opera- 
tions of individual companies. 

As may be seen in charts 6a and 6b, there is -a tendency for the 
percent which the output of their leader bears to the total United States 
value to increase as the concentration ratio increases. Thus, in the 
cases of those products with high concentration ratios, it usually occurs 
that the leading producer accounts for a high proportion of the total 
value of production of those products. 

A line has been drawn on each chart to show the distribution of 
production at various concentration ratios if each of the four pro- 
ducers contributed equally to the total production, i. e., if each pro- 
ducer, including the leader, accounted for 25 percent of the total for 
the four companies. The plotted product-points fall closer to this 
line, representing a theoretically equal distribution, in the lower range 
of concentration ratios, and tend to diverge from the line in the higher 
ranges. Furthermore, this divergence appears to be more than 
proportional. 

Interindustry-group comparisons do not reveal any particular 
differences in relation between the percentage contribution of the 
leader and the concentration ratio that cannot be accounted for by 
the differences in the distribution of products with high and low, 
concentration ratios. The dominant and general feature throughout 
the industry groups is the tendency for the leader to be more important 
in the total value of products with high concentration and less im- 
portant in the case of products with low concentration ratios. Within 
almost every industry group, an occasional product may be noted in 
the low concentration ranges for which the leader contributes a rela- 
tively high percentage of the total value of that product. . The fact 
that these products fall outside the clusters on the scatter diagrams 
may be accounted for by a number of different circumstances." 

One possible explanation of the sporadic behavior of a few of the 
product-points in the scatter diagrams, other than the tact of domi- 
nance by some one concern in the usual sense, lies in the regional 
nature of the markets for the products coupled with the presence 
among the companies manufacturing the products of a national 
producer. It may happen that the major portion of the product 
was manufactured and distributed regionally. Thus the output Of 
one concern, even though it be the predominant producer in the area, 
was but a small proportion of the total national output, and, .since 
this situation may be duplicated in many regions the concentration 
ratio of . that particular product (which is based On national data) 
will be low. Where this situation is coupled with the presence of a 
national producer selling his product under a nationally advertised 
name and otherwise operating on a national scale, the value of the 
product manufactured by the national producer will stand out much 
above the other three producers of the product who are essentially 
operating on a more restricted scale. This does not necessarily mean 
that the national producer will dominate the local market' whpre the 
regional producer is operating. Quite the contrary, the .value of the 
product manufactured and sold by the regional producer may greatly 
exceed that which the national producer is able to sell in that particular 
locality. 



273238—41 — pt. 27 — — 20 



290 



CONCENTRATION OF ECONOMIC POWER 





1 




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F . PRODUCTS 




t 


i 


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leader's percentage 




TEXTILES A/HO 
THEIR PRODUCTS 



LEADERS PERCENTAGE 





l ' : '-' ••• ' " 





/... ' •' 










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t 


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LEADER'S PERCENTAGE 





/ •"•'*• ■ 








.7. 


C 


/ 


PAPER AMD AUIEO 
PRODUCTS 


1 


D 


—m. 






LEADER'S PERCENTAGE 





/••; 


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/. .**. * * **■ 


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5 


hi*** 






/ 


CHEMICALS AMD 
ALLIED PRODUCTS 





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< 


7 - 




LEADER'S 


PERCENTAGE 














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< 






<* 






$ 






i 




PRODUCTS OF PETROLEUM 


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AMD COAL 











LEADER'S PERCENTAGE go _ 


*)-W 



CHART 6a.— RELATION BETWEEN PERCENTAGE OF TOTAL VALUE OF PRODUCTS 
ACCOUNTED FOR BY LEADING PRODUCER AND CONCENTRATION RATIO FOR EACH 
PRODUCT, BY INDUSTRY GROUPS, 1937. 



CONCENTRATION OF ECONOMIC POWER 



291 






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c- 




LEADER'S PERCENTAGE 





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/ r *. . 


<* 

? 




/ t" ■ 



5 




. •' 


s 




LEATHER AMD ITS 






MANUFACTURES 


1 




— 


— — 




LEADER'S PERCENTAGE 









I • "•!•" * 






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1 


{• 
■ 


STOVE, CLAY, AMD 
GLASS PRODUCTS 





1 












LEADER'S PERCENTAGE 





I . •• . 






/ .' . •• i. 






/ : • * *•• ' 













/ " "* * "* 


£ 






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1 




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IRON AND STEEL ARO 


\ 


j 


THEIR PRODUCTS, MOT 


INCLUDING MACHINERY 




1 













LEADER'S PERCENTAGE 







/-.'.; 


•' • 




/ _ - 







/•;,'■' 




I 

I 



o 
( 


If 
f 


NONEERROUS METALS 
AND TNEIR PRODUCTS 




LEADER'S 


PERCENTAGE 



I 7 ,■:-.'.•" 




/.•••&fc : «£ '•*..•« 




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/ MACHINERY, NOT INCLUDING 


\ u 


/ TRANSPORTATION EQUIPMENT 




1 


1 




— " ' ' 

LEADER'S PERCENTAGE 




oo-* 





CHART 6b— RELATION BETWEEN PERCENTAGE OF TOTAL VALUE OF PRODUCTS 
ACCOUNTED FOR BY LEADING PRODUCER AND CONCENTRATION RATIO FOR EACH 
PRODUCT. BY INDUSTRY GROUPS. 1937. 



292 



CONCENTRATION 0* ECONOMIC POWER 



DISTRIBUTION BY PERCENTAGE CLASSES OF NUMBER AND VALUE OF 
PRODUCTS ACCOUNTED FOR BY THE LEADING PRODUCER 

The control over production exercised by the leading producer of 
each of the 1 ,807 census products analyzed in this study is shown in 
table 3 and chart 7. There were 20 products in which the leading 
producer accounted for no more than 5 percent of the United States 
total value of each of the products and the total value of these 20 
products amounted to $1,146,998,000 in 1937, or 3.9 percent 61 the 
total value of all products analyzed. Forty-eight percent of the total 
number of products were those in which the leading producer ac- 
counted for 30 percent or less of the total value, while 63.5 percent of 

Table 3. — Distribution of number and talue of products by percentage of total 
value of product accounted for by leading producer, 1937 



Percentage classes of leader's 

production to United 

States total 


Product* 


Value of products 


Number 


Percent 


Cumula- 
tive per- 
cent 


Amount 
(thousands 
of dollars) 


Percent 


Cumula- 
tive per- 
cent 


0.1 to 5.0 


20 
90 
159 
213 
188- 
196 
183 
167 
159 
141 
87 
57 
50 
33 
64 


1.1 

5.0 

8.8 

11.8 

10.5 

10.8 

10.1 

9.2 

8.8 

7.8 

4.8 

3.2 

2.8 

1.8 

3.5 


1.1 
6.1 

14.9 
26.7 
37.2 
48.0 
58.1 
67.3 
76.1 
83.9 
88.7 
91.9 
94.7 
96.5 
100.0 


1, 146, 998 

2,104,144 

5, 657, 878 

3, 113, 290 

3, 885, 292 

2, 826, 780 

2, 725, 863 

1,427,612 

3, 401, 081 

1, 253, 537 

627, 741 

371. 504 

286, 361 

220, 547 

457, 065 


3.9 

7.1 

19.2 

10.6 

13.2 

9.6 

9.2 

4.8 

11.5 

4.2 

2.1 

1.3 

1.0 

0.7 

1.6 


3.9 


5.1 to 10.0 '. 


11.0 


10.1 to 15.0 


30.2 


16.1 to 20.0 -. 


40.8 


20.1 to 25.0 


54.0 


25.1to30.0 


63.6 


3ft.lto35.0 .. 


72.8 


35.1 to40.0 .. 


77.6 


40.1 to 45.0 


89.1 


46.1 to 50.0 


93.3 


50.1 to 55.0. 


95.4 


66.1 to 60.0. 


96.7 


60.1 to 65.0 


917 


65.1 to 70.0 


98.4 


70.1 to 75.0 r 


100.0 


Total 


1,807 


100.0 




», 505, 693 


100.0 











the value of all products analyzed was accounted for by products in 
which the output of the leader made up 30 percent or less of the total 
value of each product. At the upper end of the distribution, there 
were 64 products in which the leader accounted for 70 to 75 percent 
of the total value of those products. The 64 products, however, were 
relatively less important, in value terms, than other products analyzed, 
as they accounted for only 1.4 percent of the value of the 1,807 
products. The bunching of products in this 70 to 75 percent class 
Would seem to require some explanation in a distribution which is as 
smooth as the present one. This grouping is not due to any particular 
behavior characteristic of the concentration data themselves but is 
due to the form in which the data were released by the Bureau of the 
Census. 

As was noted in the discussion of table 1, there is a tendency for 
products with low concentration ratios to have high aggregate 
values. This same feature also characterizes the present distribu- 
tion and may be seen in chart 7. Products in which the leader had a 
relatively low percentage of total production were the products which 
had high aggregate values. The largest number of products fell in 



CONCENTRATION OF ECONOMIC POWER 



293 



the 15 to 20 percent class; that is, those products in which the produc- 
tion of the leader was 15 to 20 percent of the total value of the product 
made up the modal group. On the other hand, the greatest value of 
product was contributed by those products which fell in the 10 to 15 
percent class. 

DISTRIBUTION BY PERCENTAGE CLASSES OF NUMBER AND VALUE OF 
PRODUCTS ACCOUNTED FOR BY THE LEADING PRODUCER, BY INDUS- 
TRY GROUPS 

The importance of the role of the leading producer in the manu- 
facture of a particular item varies widely among the products classi- 
fied in the different industrial groups. In table 4 it may be seen, 
for example, that 26,5 percent of the total number of products 




CHART 7— DISTRIBUTION OF NUMBER AND VALUE OF PRODUCTS BY PERCENT- 
AGE OF TOTAL VALUE OF PRODUCT ACCOUNTED FOR BY LEADING PRODUCER, ALL 
INDUSTRY GROUPS, 1937. 

analyzed in the food group are those in which the production of the 
leader amounted to 15 percent or less of the total value of those 
products, while for those products in the machinery group only 2.8 
percent of the total number of products are items in which the output 
of the leader was 15 percent or less of the total value of those products. 
As the cumulative percentage figures indicate, approximately one- 
half or more of the total number of products classified in the food 
group, the textiles group, the paper group, and the petroleum and 
coal group were those products in which the leader accounted for no 
more than 25 percent of the total value of each. For the products in 
the other groups, it is necessary to go to the higher concentration 
ranges before the 50 percent level is reached. 



294 



CONCENTRATION OF ECONOMIC POWER 






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296 CONCENTRATION OF ECONOMIC POWER 

In the lower part of table 4 the cumulative percentage distribution 
of the aggregate values of the products attributable to those products 
in which the leader accounted for varying percentages of the total 
value" of the products is presented. By referring to the table, it is 
apparent that 73.4 percent of the aggregate value of the products 
analyzed in the food group represented the value of products in which 
the leading producer accounted for 25 percent or less of the total value 
of the individual products. At the other extreme only about one- 
quarter of the aggregate value of the products analyzed in the ma- 
chinery group related to products in which the leader accounted for 
25 percent or less of the total value of the individual products. 

To summarize briefly the material presented in table 4, there was a 
.tendency for the majority of the number and the value of products in 
the food group, in the textiles group, in the forest products group, 
in the paper group, and in the petroleum and coal group to be prod- 
ucts in which the leading producer contributed a relatively small 
percent of the United States total value. On the other hand, in the 
machinery group and in the chemicals group there were large numbers 
of products and a relatively high proportion of the total value of 
product bunched in the classes in which the leading producer ac- 
counted for a high percentage of the total value of the individual 
products. For many products in these last two groups, some one 
producer occupied a relatively important place as a manufacturer of 
the products while in the former groups the leader was relatively less 
important in the control of the production of each commodity. 

RELATION BETWEEN NUMBER OF COMPANIES PRODUCING AND PERCENT- 
AGE OF TOTAL VALUE OF PRODUCT ACCOUNTED FOR BY LEADING 
PRODUCER, BY INDUSTRY GROUPS 

In charts 3a and 3b it was possible to show the relation between the 
number of companies producing a product and its concentration ratio 
by industry groups. This same sort of comparison cannot be made to 
show the relation between the number of producers and the production 
of the leader, since it would tend in many cases to disclose the opera- 
tions of individual concerns. It may be said, however, that some 
inverse sort of relation does exist. That is, there is a tendency for the 
leading producer to account for a high percentage of the total output of 
those products for which there are only a few producers. And further, 
in the case of those products made by a large number of concerns the 
leading producer assumes a less important role. The scatter within 
each industry group is somewhat wider than was the case in charts 
3a and 3b. 



CONCENTRATION OF ECONOMIC POWER 297 




relation between number of comthnies 
and concentration ratios (see chart 4 j 



J L 



20 40 60 SO 100 120 MO 160 WO 200 

NUMBER Of" COMPANIES 



CHART 8— RELATION BETWEEN THE NUMBER OF PRODUCING COMPANIES AND 
PERCENTAGE OP TOTAL VALUE OF PRODUCT ACCOUNTED FOB B¥ LEADING PRO- 
DUCER OF EACH PRODUCT, TEXTDLE GROUP, 1937. 

In order that some general graphic comparisons may be made, a 
regression line has been fitted by approximate methods to the material 
showing the relation between the percent of the total value accounted 
for by -the leader and the number of companies producing the indi- 
vidual products of the textiles group. The regression line has been 
reproduced in chart 8. The curve in this chart is drawn on an 
arithmetic scale and is comparable in nature to the curve in chart 4. 
(For facility in comparison the earlier curve has been reproduced in 
chart 8 as a dotted line.) It should be noticed, however, that the 
curve is much more sharply concave downward and is lower on the 
scale. This, of course, is to be expected, since the concentration 
ratios used in the earner chart represented the aggregate product 
output of four compaLit^ and the lower line in the present chart 
relates to the output of only one company — the leader. 

RELATION BETWEEN VALUE AND PERCENTAGE OF TOTAL VALUE OP 
PRODUCTS ACCOUNTED FOR BY THE LEADER, BY INDUSTRY GROUPS 

As was the case in the preceding section, and for the same reason, it 
is not possible to show the relation between the value of a product and 
the percentage of that value accounted for by the leading producer. 
Although the material may not be reproduced, it should be pointed 
out that there is no clear-cut relationship between these variables. 
If the data could be published they would show about the same lack 
of relation that was revealed in charts 5a and 5b, where the value was 
plotted against the concentration ratio of each product. 



CHAPTER II 

LEADING PRODUCERS: NUMBER, TYPE, AND FREQUENCY 

OF APPEARANCE 

The analysis of the extent to which the output of individual manu- 
factured products was concentrated in the hands of four companies 
in 1937, as presented in chapter I, leads to the question: Were these 
leaders different for each product analyzed or did some companies 
appear as leading producers of many commodities? The degree to 
which the same concerns dominated the output of a number of 
different products throws further light on actual concentration in 
production as it existed in 1937. Did a company which was one of 
the leading four manufacturers of a number of products tend to be 
the largest producer of each of these products or was it more likely 
to be first in some, second in others, and possibly the third or fourth 
ranking producer of still other products? Did "central-office com- 
panies," i. e., multi-plant concerns, appear more frequently as leaders 
than "independent establishments," i. e., single-plant concerns? * 

A total of 3,752 individual companies appeared as one of the leading 
4 producers of at least 1 of the 1,807 products included in this study. 
These companies represented only 2.6 percent of the total number of 
concerns reporting in the Census of Manufactures in 1937. About 
three-fifths of 3,752 leading companies were classified by the Bureau 
of the Census as independents or single-plant companies while the 
remaining companies were central-office companies or multi-plant 
concerns. Although central-office companies made up only 3.8 
percent of all concerns reporting in the Census of Manufactures, they 
accounted for 38 percent of the total number of companies appearing 
as leading manufacturers of the products covered in this study. 

These figures, as well as all of the data for the analyses in this 
chapter, were derived on the basis of the sample.. Had all of the 
products covered in the Census of Manufactures been included in this 
study the number of companies, the number of appearances, etc., 
would have been increased, although it is doubtful if the increase 
would have been proportionate. Leaders for many of the products, 
which would be included, would be the same central-office companies 
as those already enumerated in the present study. 2 To the extent 
that the sample is representative of all products in manufacturing, 
the relationships revealed in the following paragraphs may be taken 
as indicative of the situation existing in all manufacturing. 

FREQUENCY OF APPEARANCE OF SAME COMPANY 

Since the number of times a single company appeared as one of the 
largest 4 producers varied from 1 to 99, a distribution of the compa- 
nies according to the number of their appearances affords a better pic- 

1 For an extended discussion of the meaning, extent, and significance of central-office companies, see 
the study of "The Integration of Manufacturing Operations," pt. II, of this study. 

2 For a discussion of the total number of products manufactured by the largest 50 companies, and the 
number of products not covered by the present sample of which they were leaders, see "The Product Struc- 
tures of Large Corporations," pt. VL of this study. 



298 






CONCENTRATION OF ECONOMIC POWER 



299 



rare of concentration in 1937 than that supplied by totals. 3 The dis- 
tribution of the number of companies making 1 appearance, 2 appear- 
ances, etc., is presented in table 5. 

There were 2,656 companies which manufactured a sufficient value 
of an individual product to place them among the leading 4 producers 
of that item. Approximately a fifth of the leading producers made 
2 or 3 appearances, there being 547 companies and 222 companies at 
these levels, respectively. 4 Beyond the 4-appearance level, the num- 
ber of companies which occurred at each level was progressively less 
until there were but 8 companies making 10 appearances and 9 compa- 
nies making 11. At the highest appearance levels, one company 5 was 
among the first 4 producers of 99 products, a second company made 
82 appearances, and a third made 72. 

Tablk 5. — Frequency of appearance of central-office companies and of inde- 
pendent companies among 4 leading producers, 1937 





Number of companies 


Appearance level 


Number of companies 


Appearance level '• 


Total 


Central 
offices 


Inde- 
pendents 


Total 


Central 
offices 


Inde- 
pendents 


\ 


2,656 

547 

222 

98 

70 

37 

22 

16 

13 

8 

9 

4 

6 

3 

4 

5 

3 

5 


755 

260 

138 

74 

56 

32 

20 

14 

12 

7 

8 

4 

6 

3 

4 

5 

3 

5 


1.901 

287 

84 

24 

14 

5 

2 

2 

1 

1 

1 





o- 







19 


8 
2 

1 
2 


8 
2 
1 
2 





2 


21 





3 


22 .. 





4 


25 





5 


26 





6 


28 





7 


30... 





8 


31... 





9 


33 .. 





10 


34.... 





11 


41 . 





12 


52 





13 


72.... 





14 


82 .. 





16 


99.... 





16 


Total 




17. 


3,752 


1,430 


2,322 


18 









1 Total number of appearances of each company. 



TYPES OF LEADING COMPANIES 

As noted above, 38 percent of the 3,752 companies which appeared 
as leaders of the products analyzed were central-office companies. 
In terms of appearances, however, multiplant concerns assumed a 
more important role, accounting for 59 percent of the total possible 
appearances. 6 

' For purposes of this study a company was said to make as many appearances as there were products 
of which it was 1 of the largest 4 producers. If it appeared as 1 of these 4 it was said to be a leader. In 
general, there were 4 appearances for each product. Thus, for the 1,807 products combined it was possible 
to have 7,228 appearances. Actually there were only 7,201 appearances, owing to the presence in the sample 
of 27 products for each of which there were only 3 manufacturers in the United States. 

4 For ease of reference to tables 5, 6, and 7, companies which were making one appearance were said to 
occur at the one-appearance level; those companies making two appearances, at the two-appearance 
level, etc. 

• This company actually manufactured 302 census products, but only 142 of them were included in the 
1,807 items analyzed in this study. 

• The total number of appearances of the 1,430 central-office companies was 4,218, while the 2,322 inde- 
pendents appeared 2,983 times. These numbers of appearances were calculated from table 5 by summing 
the number of central-office companies making 1 appearance multiplied by 1, the number of central-office 
companies making 2 appearances multiplied by 2, and so on through the 1 central-office company making 
99 appearances. The same procedure may be followed for computing the total number of appearances 
made by independents. In this case, the figures are (1,901X1) (287X2) (84X3) • • • (1X11), which 
equals 2,983. 



300 



CONCENTRATION OF ECONOMIC POWER 



Central-office companies outnumbered the independents as leaders, 
except at the 1- and 2-appearance levels; at the 1-appearance level, 
single plant concerns outnumbered central-office concerns more than 
2 to 1. At the 3-appearance level there were about one and one-half 
times as many central-office companies as independents, while at the 
4-appearance level there were three times as many central-office 
companies as independents. No independent concern was a leader in 
more than 11 products. 

APPEARANCE IN FIRST, SECOND, THIRD, AND FOURTH PLACES 

The analysis thus far has been in terms of the leading four compa- 
nies without regard to their position as first, second, third, or fourth 
largest producer. The relation between the distribution of appear- 
ances by position and the total number of appearances may be 
examined for the appearance levels through 11 in table 6. This table 
merely gives the number of companies appearing at least once in each 
place and gives no indication of the relation between a company's 
appearance level and the number of times it appears as first, second, 
third, or fourth largest producer. 

Table 6. — Number of companies in each place of appearance, at selected appear- 
ance levels, 1937 



Appearance level 


Number 
of com- 
panies 
at each 
level 


Number of companies ' appearing at least 
once to — 


First 
place 


Second 
place 


Third 
place 


Fourth 
place 


1 


2.656 

547 

222 

98 

70 

37 

22 

16 

13 

8 

9 


488 

203 

99 

69 

55 

26 

19 

13 

9 

7 

9 


616 

234 

134 

65 

44 

33 

20 

16 

12 

6 

9 


745 

249 

126 

61 

53 

29 

16 

14 

12 

8 

9 


807 


2. 


254 


3 


130 


4 


61 


5 


51 


6 


25 


7 


13 


8 


12 


9 


11 


10 


7 


11. :.... 


9 







1 Above the 1-appearance level the same company usually appears in more than one place; thus, the 
totals for each place at a given appearance level may include the same companies. 

It must also be borne in mind that above the 1-appearance level 
the same company usually appears in several positions. From table 
6, for example, 203 of the 547 companies which made 2 appearances 
made at least 1 of them in first place. Undoubtedly some of these 
companies made both appearances in first place, but others may have 
made 1 appearance in first place and another in either the second, third, 
or fourth place. Thus all the 203 companies in first place may be 
included in the count of 234 companies in second place or they may be 
scattered in the counts for third or fourth place. 

Of the companies which were leaders in the manufacture of but 1 
product, by far the largest number of companies were in third and 
fourth places. Obviously, the greater the number of products in 
which a company appeared as a leader the less likely was the company 
to make those appearances in only 1 place. Thus above the 1-appear- 






CONCENTRATION OF ECONOMIC POWER 301 

ance level the companies were more evenly distributed among all 
4 places. All of the companies at the 11-appearance level made at 
least 1 appearance in each place. 

A tabulation showing the number of company-appearances of both 
central-office companies and independents distributed on the basis of 
appearance place and of appearance level of the companies is presented 
in table 7. The outstanding feature cf this table is the large pro- 
portion of appearances in third or fourth place of companies at the low 
appearance levels and the tendency of companies which made a large 
number of appearances to have a higher proportion of their appear- 
ances in first or second place. A detailed examination of the various 
appearance levels on the table will, however, reveal some exceptions 
to this general tendency. 

Of the 2,656 companies which appeared as one of the leading 
producers of a single product, 488 were in first place and 807 in fourth 
place. At the opposite extreme, the 1 company appearing as a 
leader in the manufacture of 99 products made 65 of its appearances 
in first place, and only 5 in fourth place. Companies which were 
leaders in the production of 2 or 3 products followed the pattern of 
those making but 1 appearance ; that is, they tended to have a higher 
proportion of their appearances in third or fourth place than in first 
or second. Specifically, from table 7 it may be seen that at the 
2-appearance level there were 245 company-appearances in first 
place, 274 in second place, 282 in third place, and 293 in fourth place. 7 
Above the 3-appearance level, there is a marked tendency for the 
number of company-appearances to be the largest in first place and 
to be progressively less in second, third, and fourth place. 

Since central offices tended to be the largest producers, 8 a consider- 
ably larger number of first-place appearances were made by them 
than by independent concerns at each appearance level with the 
exception of the 1 -appearance level. At. the reappearance level, 35 
percent of the total number of company-appearances were made by 
central-office companies an,d 65 percent by independents; at the 11- 
appearance level, however, the comparable ratios were 86 percent and 
14 percent, respectively. 

Examination of the basic data for the 1 ,807 products reveals that 
there was a slight tendency for companies having a larger number of 
appearances to have more of those appearances in products classified 
in a large number of different industries. There are, however, a 
number of exceptions to the general trend. For example, the com- 
pany making 99 appearances made those appearances in products 
classified in 8 different industries, while 1 concern having 6 appear- 
ances was a leader in the manufacture of products belonging in 5 
different industries. 

7 It should be noted that the sum of these company-appearances is 1,094 or twice the number of companies 
(547) listed at the 2-appearance level in table 5. This is due to the fact that each company at this level had 
2 appearances and was tallied in each of the places in which it made an appearance. Hence, the term 
"company-appearance" is used in this table rather than "company"alone. At the 3-appearance level the 
sum of the company-appearances in the 4 places is 3 times the number of companies at the 3-appearance 
level in table 5. and similarly for each apearance level. 

8 While central-office companies represented 3.8 percent of the number of manufacturing concerns in 
1937, they accounted for 61.1 percent' of the value of all manufactured products. For further data on the 
activities of central-office companies see "The Integration of Manufacturine Operations," pt. II of this 
study. 



302 



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CHAPTER III 

RELATION OF CONCENTRATION TO VARIOUS PRODUCT 

CHARACTERISTICS 

In order that the possible relations between the concentration ratios 
and various economic attributes of commodities might be examined, 
the 1,807 products analyzed in this study were classified on the basis 
of (1) type of immediate purchaser, (2) type of ultimate user, (3) de- 
gree of durability, (4) degree of fabrication, (5) type of market, (6) 
source of raw materials, (7) construction materials, and (8) producers' 
supplies. An extended discussion of the nature of these various 
classifications and of the extent to which they are overlapping may be 
found in appendix D. 

Other interesting and significant economic variables bearing on the 
production structure or marketing conditions for the products sug- 
gested themselves but difficulties in measurement precluded their 
development and use in this study. Thus, the relation between the 
concentration ratio of a product and the amount of capital equipment 
employed in its production might have proved quite revealing. It was 
impossible as a practical consideration, however, to segregate or allo- 
cate the portion of a Dlant used in the production of item "A" when 
50 other items were produced in the same establishment. A separate 
study is being conducted for the Temporary National Economic Com- 
mittee in which the relation between the concentration ratios of the 
products as developed here and the tariff barriers relative to each 
product is the subject of extended analysis. 

In this and succeeding chapters an attempt is made to present in 
terms of comprehensive measures an over-all view of the economic 
characteristics of manufactured products. The picture presented re- 
lates to the varying characteristics and behavior patterns of all prod- 
ucts taken together. As such it affords a general background against 
which the marketing, production, and price policies of individual firms 
may be measured. Owing to the paucity of data of a comprehensive 
nature, sweeping inferences and conclusions on matters of price and 
production policy have in the past been drawn largely from the few 
scattered cases for which information was available. The informa- 
tion in a considerable number of these cases was developed in connec- 
tion with actions of the Federal Trade Commission or of the Antitrust 
Division of the Department of Justice and thus relates to particular 
situations where these agencies enter the picture. To overcome this 
deficiency of general information and to throw some light on the 
economic factors with which price and production policies of firms 
producing manufactured goods are associated are the objects o' f *in 
ensuing analysis. 

TYPE OF IMMEDIATE PURCHASER 

On the basis of the type of immediate purchaser, the 1,807 manu- 
factured products analyzed in this study have been classified as (1) 
purchased by immediate consumer and (2) purchased by immediate 

303 



304 CONCENTRATION OF ECONOMIC POWER 

producer, Of the total products, 511, or 28 percent, were included 
in the former group and 1,296 in the latter group. 

Products whose immediate purchasers were consumers included all 
finished consumers' goods (only private household units were recog- 
nized as consumers). Products whose purchasers were producers 
included products purchased by those engaged in income producing 
activities for further processing or fabrication or for materials ana 
equipment to be used in their operations. To be sure, the products 
were seldom purchased directly from the factory. Rather, the 
great bulk of products (more especially consumers' goods, since .large 
producers do purchase from manufacturers) undoubtedly went 
through regular wholesale and retail channels. These distributors, 
however, who are merely intermediaries, were not taken into con- 
sideration in the classification of products. 

We are interested here in ascertaining and possibly in measuring 
the variation in concentration which may have been present in the 
manufacture of products purchased immediately by consumers and 
of those purchased by industrial producers. Is the relatively weak 
bargaining position of consumers in contrast with the stronger posi- 
tion of large producers a conditioning factor in the price and production 
policies of manufacturers? 

Distribution by Concentration Ratio Classes. 

In chart 9 the distributions of number and value of products whose 
immediate purchasers were consumers or producers are shown for 
each concentration ratio class. The median of the number of products 
purchased by consumers fell in the 60 to 70 percent concentration 
class, whereas the median of the number of products purchased by 
producers was in the 70 to 80 percent concentration class. Half of the 
value of products purchased by consumers was accoimted for by those 
products which had concentration ratios below 50 percent, but half 
of the value of items purchased by producers was accounted for by 
products with concentration ratios less than 60 percent. An examina- 
tion of the distributions of the number and value of items purchased 
by consumers indicates that the number of products was bunched 
somewhat more heavily in the higher concentration classes. Among 
products purchased by producers the distribution of number and 
value was more strikingly different. Nineteen percent of the number 
of the items purchased by producers had concentration ratios below 
50 percent, whereas the value of these products accounted for 38 per- 
cent of the total value. The distribution of the number of products 
purchased by producers was skewed to the left, while the value of 
these products was more evenly distributed between the high and 
low concentration ratios. (See table 2D, page 554 for basic data.) 

Generally, then, a larger proportion of the number of products 
purchased by producers was produced under conditions of consider- 
ably higher concentration than goods purchased by consumers. The 
distributions of the value of products purchased by producers and by 
consumers, however, had the same general conformation and in both 
cases the more important products valuewise had relatively lower 
concentration ratios. 

The high value bars in the 30 to 40 and in the 90 to 100 percent 
concentration classes in the upper section of the chart are to be ac- 
counted for by the inclusion in the first class of all gasoline and in the 
second of passenger automobiles. As single products, both of these 



CONCENTRATION OF ECONOMIC POWER 



305 



items had relatively high values and thus tended to break up or give 
a lumpiness to the distribution. The value of truck and bus tires, 
steel bars and plates, and tin cans fell in the 70 to 80 percent class in 




CK..RT 9- DISTRIBUTION OF NUMBER AND VALUE OF PRODUCTS ACCORDING TO 
TYPE OF IMMEDIATE PURCHASER BY CONCENTRATION RATIO CLASSES, 1937. 

the lower half of the chart and were responsible for the height of the 
bar in that class. These products with high relative values appear in 
subsequent charts of similar nature and tend to make the value 
distribution uneven. 

273238 — 41 — pt. 27 21 



306 



CONCENTRATION OF ECONOMIC POWER 













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308 CONCENTRATION OF ECONOMIC POWER 

Variations Among Industry Groups. 

In table 8 products purchased by consumers have been broken 
down by type of use to which the goods was put, i. e., foods, clothing 
and personal items, household operation items, household furnishings, 
recreation, drugs and medicines, and miscellaneous items. Products 
purchased by producers have been subclassified on the basis of whether 
the buyer was an industrial purchaser or an agricultural purchaser. 
These latter subclassifications are further subdivided to segregate 
products purchased for materials and supplies and products that enter 
the capital equipment of the producer. Both the number and value 
of products are distributed in each of these classes and subclasses by 
industry groups. 

Of the 1,807 products analyzed in this study more than two-thirds 
were items normally purchased by industrial buyers and more than 
half of all products were subclassified as industrial materials and 
supplies. Listed in this latter classification are all semimanufactured 
producers' and consumers' goods and construction materials, as well 
as all producers' supplies. 1 

Although a number of the products analyzed in the paper group 
were undoubtedly used immediately by consumers, all of the products 
in this group were classified as industrial materials and supplies 
purchased by producers. This is attributable to the fact that each 
product was classified on the basis of its predominant purchaser. The 
same sort of forced classification probably distorted the distribution of 
products in other industrial groups, but for the purposes of this study, 
does not impose any serious limitation on the data. 

The chief value of the material presented in table 8 lies in the 
measure of the extent and distribution of the sample which it affords. 
A careful scrutiny of variations among industry groups evident from 
the table will prove of more value than the reading of a descriptive 
review of the particular grouping of the material in certain classes. 

TYPE OF ULTIMATE USER 

When the products are classified on the basis of ultimate user, the 
composition of the consumer and producer classes differs considerably 
from the composition of these classes when the products are grouped 
on the basis of immediate purchaser. 

In the first place, the products classified as producers' supplies and 
construction materials were not differentiated according to producers' 
and consumers' goods on the basis of ultimate user. Owing to the 
extreme difficulty of accurately determining the ultimate user (con- 
sumer or producer) of these products, they were grouped in the two 
separate categories listed above. While it could be said with a fair 
degree of precision that the immediate purchaser of a product was a 
consumer or a producer, it could not be said with the same degree of 
accuracy that the ultimate user of the product was a consumer or 
producer. For example, it was possible to say that the great majority 
of containers, such as cotton bags and burlap bags, etc., were items 
whose immediate purchasers were producers, but it was impossible 
to determine with any degree of accuracy the proportions of containers, 
lubricants, fuels, etc., that would be used in connection with goods 
ultimately to be used by consumers or by producers. This same 
difficulty in classification necessitated the omissions of products in 

1 For a discussion of the composition of the various classifications see appendix D. 



CONCENTRATION OF ECONOMIC POWER 



309 



these two groups from classification on the basis of degree of durability, 
while the items listed as producers' supplies were not classified as to 
degree of fabrication. The exclusion here of products fisted as 
producers' supplies and construction materials reduces the number of 
products analyzed in this and the subsequent section from 1,807 to 
1,328. 2 On the basis of ultimate user, 892 of these products were 
consumers' and 436 were producers' goods. (See table 9.) 

Table 9.— Percentage distribution of number and value of products according to 
type of ultimate user, by industry groups, 1937 



Industry group and group number 



All products 



Number 



Percent 



Products whose ultimate 
users are 



Consumers Producers 



Number of products. 



1,328 



436 



Percentage distribution 



All industries 

1. Food and kindred products 

2. Textiles and their products. 

3. Forest products 

4. Paper and allied products. 

6. Chemicals and allied products 

7. Products of petroleum and coal 

8. Rubber products 

9. Leather and its manufactures 

10. Stone, clay, and glass products 

11. Iron and steel and their products, not including 

machinery 

12. Nonferrous metals and their products 

13. Machinery, not including transportation equip- 

ment 

14. Transportation equipment, air, land, and 

water 

16. Miscellaneous industries 



1,328 



100.0 



67.2 



126 
283 

87 

18 

104 

5 

36 
110 

49 



42 

350 



100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100. 
100.0 

100.0 
100.0 

100.0 

100.0 
100.0 



100.0 
94.7 
65.5 

100.0 
98.1 

100.0 
66.7 
90.0 
63.2 

48.7 
16.7 

22.6 

50.0 
97.4 



32.8 



5.3 
34.5 



1.9 



33.3 
10.0 
36.8 

51.3 
83.3 

77.4 

50.0 
2.6 



Industry group and group number 



Value of products (thousands of dollars) : 



All industries. 

1. Food and kindred products 

2. Textiles and their products _. 

3. Forest products - 

4. Paper and allied products.. 

6. Chemicals and allied products 

7. Products of petroleum and coal 

8. Rubber products 

9. Leather and its manufactures _ _ 

10. Stone, clay, and glass products 

11. Iron and steel and their products, not including 

machinery 

12. Nonferrous metals and their products 

13. Machinery, not including transportation 

equipment 

14. Transportation equipment, air, land, and 

water 

16. Miscellaneous industries 



All products 



Value 

(thousands of 

dollars) 



24, 583, 21 1 



24,583,211 



4, 935, 645 

3, 806, 820 
608, 226 
253, 323 
996, 135 

1,807,916 
723, 730 

1, 137,147 
275, 196 

1,893,811 
715,671 

3,057,531 

2, 848, 786 
1, 433, 274 



Percent 



100.0 



100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100 
100.0 

100.0 
100.0 



100.0 
100.0 



Products whose ultimate 
users are 



Consumers 



19, 260, 403 



Producers 



5, 322. 808 



Percentage distribution 



78.3 



100.0 
98.8 
76.3 

100.0 
95.0 

100.0 
65.2 
96.9 
84.7 

17.4 
8.6 

34.9 

81.1 



1.2 

23.7 



34.8 
3.1 
15.3 

82.6 
91.4 

65.1 

18,9 
.1 



' See appendix D for a further explanation of the criteria used in distinguishing consumers' and producers' 
goods in this section, in the next section on the degree of durability, and in the section on the degree of 
fabrication. It should be noted that the products in these three sections were classified with respect to the 
ultimate product. The characteristics of the final end product were imputed to the intermediate. 



310 CONCENTRATION OF ECONOMIC POWER 

In the second place, the composition of the consumer and producer 
classes differs when products are grouped on the basis of ultimate 
user as contrasted with the grouping on the basis of immediate pur- 
chaser owing to the shifting of a considerable number of products 
from the producers' to the consumers' category. For example, 90 per- 
cent of the pack of canned apples was put up in No. 10 cans and this 
product was thus included in the list of products whose immediate 
purchasers were producers. (Bakers, restaurants, hotels, and other 
producers would be the immediate purchasers for further processing of 
apples packed in these large-size cans.) The user of this product in its 
ultimate form, however, would be a consumer and the item was classified 
as such in this section. There were 511 products whose immediate 
purchasers were classified as consumers, while 892 products were 
classified as consumer items on the basis of ultimate user. 

Distribution by Concentration Ratio Classes. 

Products destined ultimately for consumer use were produced 
under conditions of considerably lower concentration than products 
ultimately to be used by producers. The median of the number of 
products ultimately used by consumers fell in the 60 to 70 percent 
concentration class ; the median of the number of products ultimately 
used by producers, however, fell in the 80 to 90 percent concentration 
class (see chart 10). Furthermore, only 35 percent of the value of 
products classified as consumer goods was accounted for by products 
with concentration ratios more than 70 percent, whereas slightly 
more than 66 percent of the value of producers' goods was accounted 
for by products with concentration ratios more than 70 percent. 

The relatively high value bar in the 70 to 80 percent concentration 
class for producers' goods — almost one-third of the value of all 
producers' goods fell in this class — may be accounted for by the pres- 
ence in that group of all motor trucks and truck tires as well as steel 
sheets, bars, sheared plates, castings, and several other important iron 
and steel products. The relatively high value bars in the 30 to 40 and 90 
to 100 percent concentration class of the upper chart are again to be 
accounted for by the presence in those classes of gasoline and of passen- 
gei automobiles, respectively. 

Variations Among Industry Groups. 

All of the analyzed products of the food, paper, and petroleum 
and coal groups were classified as consumers' goods on the basis of 
ultimate user (see table 9). In contrast, the products of the non- 
ferrous metals, machinery, and iron and steel groups were used 
predominantly by producers. Such a distribution of products among 
the industry groups is to be expected, since products made from raw 
materials of the like nature are usually classified in the same industry 
group by the Bureau of the Census. Thus, products classified in the 
iron and steel group had a common raw material which was pre- 
dominantly used in the manufacture of products ultimately to be used 
by producers. The distribution of value of products among the 
industry groups followed the same general pattern as that of the 
number of products. 

Owing to the fact that producers' supplies and construction materials 
were excluded from the classification in this section, the number of 
products analyzed in a few of the industries was greatly reduced. The 
number of products in the petroleum group, for example, dropped 



CONCENTRATION OF ECONOMIC POWER 



311 




CHART 10— DISTRIBUTION OF NUMBER AND VALUE OF PRODUCTS ACCORDING TO 
TYPE OF ULTIMATE USER BY CONCENTRATION RATIO CLASSES, 1937. 



312 CONCENTRATION OF ECONOMIC POWER 

from 18 to 5 (9 of the products were listed as producers' supplies and 
4 as construction materials). 

DEGREE OF DURABILITY 

The concentration patterns of goods whose use extends over a. 
number of years as contrasted with those which are consumed m a 
single use are significantly different. The 1,328 products discussed in 
the preceding section were classified on the basis of their length of 
service into nondurable, semidurable, and durable goods. 3 In chart 11 
the products falling in each category are distributed according to their 
concentration ratios. Of the .1,328 products, 49 percent were classified 
as durable, 37 percent as semidurable, and 14 percent as nondurable 
items. 

Distribution by Concentration Ratio Classes. 

Both in terms of number and value of products the proportion of 
the 650 durable goods tended to increase rather consistently at suc- 
cessively higher concentration levels. In contrast, the proportion of 
the 190 nondurable goods, both as to number and value, was greatest 
at the 30 to 50 percent level and tapered off, in general, at the higher 
levels. Reference to the chart shows that while the distributions in 
the case of both durable and nondurable goods were not smooth, there 
was a tendency for the proportion of number and of value of products' 
to move together from concentration level to concentration level. 

On the other hand, the 488 semidurable products exhibited different 
tendencies with respect to the proportions of the number and value of 
products falling in different concentration classes. The bulk of the 
value of semidurable products fell below the 50 percent concentration 
level, while the majority of the number of semidurable products were 
above the 50 percent concentration level. That is, those products of a 
semidurable nature having the greater importance iD terms of value 
tended to have lower concentration ratios than products of less 
importance. 

Each of the bars in chart 1 1 is divided to indicate the proportion of 
products which may be considered consumers' goods or producers r 
goods on the basis of the ultimate user of the product. In the durable 
goods classification, a larger number of items were listed as producers' 
goods, but the value of these items was slightly less than that for con- 
sumers' durable goods. This latter category included the value of all 
passenger cars. It is the inclusion of the value of passenger cars that 
accounts for the height of the 90 to 100 percent value bar in the durable 
goods section of the chart. Owing to the small number of producers' 
goods in the semidurable goods class and the absence of producers' 
goods in the nondurable class, the patterns for each of these groups 
were essentially the same as those for the consumer goods falling in 
the groups. It should be noted that the consumers'- products in each 
of the three classes, when combined, yield the same group of consum- 
ers' goods as was discussed in the preceding section. This is also true 
of the producers' goods. 



8 TheTeasons for excluding producers' supplies and construction materials from classification on the basis 
of the degree of durability were discussed in the preceding section. For further explanation of the criteria 
of classification, reference is again made to appendix D. 






CONCENTRATION OF ECONOMIC POWER 



313 



30 



BO 



/O 



30 



SO 



NONDURABLE 

190 PRODUCTS 




SEMI DURABLE 

488 PRODUCTS 




aWCfNTMTHW RA77Q CLASSES 



DURABLE 

650 PRODUCTS 




Sj § 5? $ S 

co/YCf/vr/Mr/o/v Mr/o classes 



\NUMBEfi-COHSUMEH tS8SA NUMB£R-Pf)OOUC£n 



VALUE-CONSUMER 



I VALUE-PRODUCER 



CHART ll.-DISTRIBUTION OF NUMBER AND VALUE OF PRODUCTS ACCORDING TO 
DEGREE OF DURABILITY BY CONCENTRATION RATIO CLASSES, 1937. 



314 



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316 CONCENTRATION OF ECONOMIC POWER 

Variations Among Industry Groups. 

The distribution of the products among the three classes of dura- 
bility according to industry groups reveals the nature of the products 
upon which these concentration patterns are based (see table 10). As 
would be expected, the food group is composed almost entirely of non- 
durable products, while sizable portions of the products in the paper, 
the chemical, the petroleum, and the miscellaneous groups were also 
listed as nondurable. The final users of the five petroleum products 
included in this category were ascertainable and hence were classified 
here. The balance of the products of the petroleum group were 
considered producers' supplies or construction materials and as such 
were not included. Since one of the leading criteria used in the estab- 
lishment of the various census industry groups is the nature of the raw 
material which enters into the product, it is to be expected that this 
fact would be reflected in the distribution of products in table 10. 

The petroleum group was the only group which did not contain 
items of a durable nature. Products classified in the forest products; 
the stone, clay, and glass; the iron and steel; the nonferrous metals; 
the machinery; and the transportation equipment groups were prepon- 
derantly durable in nature. Although most of the industry groups 
contained semidurable products, 'here were no products classified as 
semidurable in the forest products, the petroleum, the nonferrous 
metals, and the transportation equipment groups. The largest 
proportions of the products in the textiles, the rubber, and the leather 
groups were classified as semidurable. 

In accordance with usual preconceptions, the bulk of the non- 
durable and semidurable items were as consumers' goods. Among 
the durable goods, approximately three-fifths of the products were 
producers' goods. There were, however, wide differences among 
industry groups in the proportion of products ultimately used by 
producers or consumers. 

DEGREE OF FABRICATION 

A comparison of the distribution of semimanufactured and of finished 
goods by concentration ratio classes, as presented in chart 12, reveals 
little difference between the concentration patterns of the two groups. 
It should be kept in mind in making this comparison that only prod- 
ucts which have undergone one or more manufacturing processes are 
included in this study. If concentration data for raw materials were 
available, striking differences in concentration patterns would undoubt- 
edly appear. 

The sample upon which chart 12 is based includes all types of manu- 
factured products covered in the study with the exception of pro- 
ducers' supplies. These 1,611 products were classified as semimanu- 
factured if the product was not in final form for its ultimate user and 
as a finished good if the product was in the form in which, without 
significant alteration, it was employed in its final use. 



CONCENTRATION OF ECONOMIC POWER 



317 



SEMIMANUFACTURED 

505 PRODUCTS 




; $ S$ ig 8 

' CO#C£NrMT/0# Mr/O CLASSES 




CHART 12.— DISTRIBUTION OF NUMBER AND VALUE OF PRODUCTS ACCORDING TO 
DEGREE OF FABRICATION BY CONCENTRATION RATIO CLASSES, 1937. 



318 



CONCENTRATION OF ECONOMIC POWER 







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CONCENTRATION OF ECONOMIC POWER 



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Food aiid kindrfed products 

Textiles and their products 

Forest products 

Paper and allied products 
Chemicals and allied products. 
Products of petroleum and coal 

Rubber products 

Leather and its manufactures. . 
Stone, clay, and glass products. 
Iron and steel and their produc 
Nonferrous metals and their pr< 
Machinery, not including trans 
Transportation equipment, air, 
Miscellaneous industries.. 




rH«CCfliON00010H(NnTJi!D 



320 CONCENTRATION OF ECONOMIC POWER 

Distribution by Concentration Ratio Classes. 

Thirty-one percent, or 505 products, fell into the semimanufactured 
group and 69 percent, or 1,106 items, in the finished group. Slightly- 
more than half of the number of products in each group had concen- 
tration ratios above 70 percent. Approximately half 'of the value of 
products in each group was accounted for by products having con- 
centration ratios greater than 60 percent. Thus the degree of con- 
centration found in each of the groups, i. e., semimanufactured and 
finished goods, parallels that for the 1,807 products (see ch. I). 

Not only was there a similarity between semimanufactured* and 
finished goods with respect to the concentration class in which the 
median fell, but the proportion of products at successive concentration 
levels followed the same pattern. The proportions of the number of 
semimanufactured and finished goods increased at each concentration 
level, reaching a maximum at the 70 to 80 percent class, and decreased 
unevenly thereafter. The proportion of total value of the respective 
groups increased at each of the concentration levels through the 30 to 
40 percent class then fluctuated irregularly over the remaining levels. 

Variations Among Industry Groups. 

Although over twice as many products were included in the finished 
goods class as in the semimanufactured goods class, it is apparent that 
both classes included products from nearly all of the industry groups, 
(see table 11). Regardless of industry group, there must obviously 
be products in each class at the various stages of manufacture. It 
will be recalled, however, that this study includes only a portion of 
the products in each industry group. For this reason, there were no 
semimanufactured products in the petroleum and coal and in the trans- 
portation groups and no finished products in the paper group. The 
similarity of the concentration patterns of the two types of products 
may be largely explained by the representation of products from nearly 
every industry group in each type. In the preceding section rather 
striking differences in the concentration patterns of nondurable and 
durable goods were noted. There it was also pointed out that non- 
durable products did not come from the same industry groups as 
did durable products. 

The distribution of semimanufactured producers' goods and 
finished producers' goods among concentration ratio classes were 
quite similar, as were those of semimanufactured and finished con- 
struction materials. In the consumer goods subdivisions, however, 
the distribution of the number of semimanufactured products was 
skewed further to the left than the distribution of finished goods. 
Specifically, 22 percent of the semimanufacture and 34 percent of 
the finished consumer goods had concentration, ratios below 50 per- 
cent. Table 11 presents the distribution of products in the sub- 
classes by industry groups. As in the preceding section, consumers'" 
arid producers' goods were classified on the basis of the ultimate 
user of the product. All types of construction materials are dis- 
cussed in a later section of this chapter. 



CONOE1NTRATION OF ECONOMIC POWER 321 

TYPE OF MARKET 

The concentration ratios obtained in this study were computed on 
a Nation-wide basis. That is, the values of specific products manu- 
factured by the largest four producers of such products were expressed 
as ratios of the entire United States values of these products. It is 
important to realize that various factors, such as the perishability 
or the difficulties of transporting cer£ain products, may cause a small 
number of producers to dominate the market in the area in which 
the items are usually sold. Since the number of such areas through- 
out the United States is large, the proportion of the United States 
total accounted for by the leading four producers will be small. 
Thus, as expressed here, the concentration ratios for products such 
as bread or common brick understate the true concentration situation 
within the market area. 4 The concentration pattern for the 1,576 
products in this study with national markets and for the 231 products 
with regional markets is reflected in chart 13. 

In terms of the number of products, the proportions of the total 
distributed nationally increased at each successive concentration level 
through the 70 to 80 percent ratio class. The proportions of those 
with regional markets increased at each level only through the 30 to 
40 percent class and then tended to decline irregularly at each of the 
successively higher concentration classes. Likewise-, the bulk of the 
value of nationally marketed products tended to be at the higher con- 
centration levels, while that of the regionally distributed products 
tended to be at the lower concentration levels. Gasoline, paraffin 
wax, and heavy fuel oils accounted for the high value bar at the 30 
to 40 percent class for "the nationally distributed products ;• while 
complete fertilizers, portland cement, and direct steel castings ac- 
counted in large measure for the high proportion of value of regionally 
distributed products in the 20 to 30 percent concentration class. 
It is interesting to observe that, notwithstanding the understatement- 
of actual market concentration, well over a third of the 231 regional 
products, which represented about the same proportion of the total 
value, had national concentration ratios greater than 60 percent. 

In each of the industry groups except paper, rubber, and transporta- 
tion equipment, there were some products distributed in a regional 
market. From table 12, the outstanding regionally of iron and 
steel products among the industry groups is evident. In the forest 
products; chemicals; stone, clay, and glass; and iron and steel groups 
the more important products in terms of value were distributed in a 
regional market. That is, 9.1 percent of the number of products in 
the forest products group were marketed in a regional area, whereas 
these same products accounted for 33 percent of the total value of 
products in this group. Conversely, 91 percent of the number of 
forest products were distributed in a national market, but the value 
of these items represented only 67 percent of the total value of forest 
products. 

* Experimental work with regional concentration ratios for common brick revealed that for the Los Angeles- 
and the New York Gity industrial areas the number of companies producing in each of those areas was so 
small that publication of the concentration ratios was prohibited under the rules of disclosure prescribed 
by the Bureau- of the Census for this study. For the Philadelphia area the ratio was 63 percent. In con- 
trast, the ratio based on all companies in the United States was 7 percent. 



273238 — 41 — pt. 27 22 



322 



CONCENTRATION OF ECONOMIC POWER 



NATIONAL 

1.576 PRODUCTS 




% si 

QMtttmMTKW MHO CLASSES 




CHAET 13 .— DISTRIBUTION OF NUMBER AND VALUE OF PRODUCTS ACCORDING TO 
TYPE OF MARKET BY CONCENTRATION RATIO CLASSES, 1937. 



CONCENTRATION OF ECONOMIC POWER 



323 



Table 12. — Percentage distribution of number and value of products according to 
type of market, by industry groups, 19S7 



Industry group and group number 



All products 



Number Percent 



National 
market 



Regional 
market 



Number of products. 



1,807 



1,576 



Percentage distribution 



All industries 

1. Food and kindred products 

2. Textiles and their products 

3. Forest products 

4. Paper and allied products 

6. Chemicals and allied products 

7. Products of petroleum and coal 

8. Rubber products 

9. Leather and its manufactures. 

10. Stone, clay, and glass products 

11. Iron and steel and their products, not including 

machinery.. 

12. Nonferrous metals and their products 

13. Machinery, not including transportation 

equipment 

14. Transportation equipment, air, land, and 

water , 

16. Miscellaneous industries.. 



1,807 



100.0 



87.2 



136 
290 
99 
63 
212 
18 
39 
112 
182 

177 
65 

365 

2 
57 



100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 

100.0 
100.0 

100.0 

100.0 
100.0 



79.4 
91.7 
90.9 

100.0 
96.2 
83.3 

100.0 
68.8 
77.6 

58.8 
89.1 

99.6 

100.0 
96.5 



12.8 



20.6 
8.3 
9.1 



3.8 
16.7 



31.2 
22.6 



41.2 
10.9 



3.6 



Industry group and group number 



All products 



Value 
(thousands 
of dollars) 



Percent 



National 
market 



Regional 

market 



Value of products (thousands of dollars) . 



29, 506, 693 



25, 327, 844 



4, 177, 849 



Percentage distribution 



All industries. 

1. Food and kindred products 

2. Textiles and their products 

3. Forest products 

4. Paper and allied products 

6. Chemicals and allied products 

7. Products of petroleum and coal. 

8. Rubber products 

9. Leather and its manufactures. 

10. Stone, clay, and glass products 

11. Iron and steel and their products, not includ- 

ing machinery 

12. Nonferrous metals and their products 

13. Machinery, not including transportation 

equipment 

14. Transportation equipment, air, land, and 

water..' 

16. Miscellaneous industries .., 



29, 505. 693 



100.0 



85.9 



5,119,482 

4, 050, 032 

663, 078 

835, 369 

1, 941, 180 

2, 482, 267 

729,046 

1, 143, 622 

1,075.835 

3, 017, 572 
832, 833 

3, 168, 945 

2, 848, 786 
1, 597, 646 



100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 

100.0 
100.0 

100.0 

100.0 
100.0 



91.0 
91.1 
67.0 

100.0 
91.1 
98.2 

100.0 
70.4 
63.8 

30.8 
92.3 

99.3 

100.0 
99.0 



14.1 

9.0 
8.9 
33.0 



8.9 
1.8 



29.6 
36.2 



69.2 

7.7 



1.0 



SOURCE OF RAW MATERIAL 

The wide variety of raw materials which are used in manufacturing 
the products analyzed in this study suggests another approach to the 
investigation of the relationship between the concentration in the 
output of products and various product characteristics. Is there any 
relationship between the source of basic materials and the concentra- 
tion ratios of the products? 



324 CONCENTRATION OF ECONOMIC POWER 

For the purposes of this study four major sources of the basic 
materials were recognized: (1) agricultural materials, including all 
materials originating on farms, ranches, etc.; (2) mineral products, 
including all materials from mines, quarries, etc.; (3) forest products; 
and (4) miscellaneous materials, including all materials f rom the sea, 
air, and other sources. In those cases where a prod'i^t was composed 
of materials from more than one source it was classified according to 
its principal source. 

Of the 1,807 products analyzed in the study, the basic raw material 
for 31 percent of the items came from agricultural sources and these 
products accounted for 40 percent of the total value of all products 
analyzed ; 56 percent of the products were made from materials which 
came from mines and these items accounted for 51 percent of the total 
value of product; while 13 percent were produced from forest materials 
and these provided 9 percent of the total value of product. (A 
small percentage of the products were made from the materials 
derived from the sea, air, and other miscellaneous sources.) 

Distribution by Concentration Ratio Classes. 

The concentration patterns of the products derived from agricultural 
and mineral sources showed marked differences as may be seen in 
chart 14. Thirty-five percent of the number of products manufac- 
tured from agricultural materials had concentration ratios of less than 
50 percent, while only 16 percent of the products from mineral sources 
fell within these lower concentration classes. On the basis of 
value this difference is equally evident. Fifty-seVen percent of the 
value of products from agricultural sources and only 31 percent of the 
products derived from minerals had concentration ratios of less than 
50 percent. The proportion of the number of products derived from 
forest materials was fairly constant in each concentration class 
while the proportion of value tended to be quite small above the 70 
to 80 percent concentration class. 

These comparisons suggest certain general inferences which may be 
drawn with respect to the relationship between the source of the basic 
material for a product and its concentration ratio. On the basis of 
both number and value of product, products fabricated from agricul- 
tural materials tended to have relatively low concentration ratios 
while products fabricated from minerals tended to have high con- 
centration ratios. In contrast to the tendency of products derived 
from agricultural and mineral sources to bunch more heavily in the 
low and high concentration classes, respectively, those products which 
were predominantly manufactured from forest materials tended to 
be rather evenly distributed among the concentration classes. 

Variations Among Industry. Groups. 

The Bureau of the Census industry groupings are based in most cases 
on similarity in the character of the principal materials used in the 
fabrication of the products within the industries. Thus, it is to be 
expected that in each industry group a predominant portion of the 
basic materials going into the products classified in the group would 
come from one source. In table 13 it can be seen that practically all 
products classified in 9 of the 14 industry groups analyzed in this study 
were made" from a basic material derived from only one specified 
source; products of 1 group were fabricated from raw materials from 



CONCENTRATION OF ECONOMIC POWER 



325 



AGRICULTURAL 

560 PRODUCTS 




3 3 « 3 $ £ 

CO/VCE/VrfiAT/0/V Mr/o classes 



MINERAL 

1,008 PRODUCTS 




<33«98888 

awcE/mmnicw rat/o classes 



FOREST PRODUCTS 

234 PRODUCTS 



9*86 

aWCE/V77M77HW KA770 CLASSES 



!/ & 




CHART 14.— DISTRIBUTION OF NUMBER AND VALUE OF PRODUCTS ACCORDING TO 
SOURCE OF RAW MATERIALS BY CONCENTRATION RATIO CLASSES, 1937. 



326 



CONCENTRATION OF ECONOMIC POWER 



2 of the basic sources; 3 groups used materials from 3 sources; while 
the chemicals group secured its materials from all 4 of the sources. 

Table 13. — Percentage distribution of number and value of products according to 
source of raw material, by industry groups, 1937 



Industry group and group number 


All products 


Agricul- 
tural 


Mineral 


Forest 


Other 




Number 


Percent 






1,807 




560 


1,008 


234 


5 












Percentage distribution 




1,807 


100.0 


31.0 


55.8 


13.0 


0.2 






1. Food And kindred products 


136 

290 

99 

63 

212 

18 

39 

112 

182 

177 

55 

365 

2 

57 


100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 

100.0 

100.0 

100.0 

100.0 
100.0 


100.0 
81.4 
1.0 
11.1 
23.1 








2. Textiles and their products 


3.1 
31.3 

66.5 
100.0 


15.5 

67.7 

88.9 

8.0 




4. Paper and allied products 

6. Chemicals and allied products 

7. Products of petroleum and coal. . . 


2.4 






100.0 




9. Leather and its manufactures 


100.0 






10. Stone, clay, and glass products 


ioo.6 

99.4 

100.0 

99.7 

100.0 
52.6 






11. Iron and steel and their products, 
not including machinery 




.6 




12. Nonferrous metals and their 






13. Machinery, not including trans- 




.3 




14. Transportation equipment, air, 








33.3 


14.1 











All products 


Agricul- 
tural 


Mineral 


Forest 




Industry group and group number 


Value (thou- 
sand of 
dollars) 


Per- 
cent 


Other 


Value of products (thousands of 
dollars) 


29, 505, 693 




11, 828, 881 


15, 063, 494 


2, 556, 294 


57, 024 












Percentage distribution 




29, 505, 693 


100.0 


40.1 


51.0 


8.7 


0.2 








5, 119, 482 

4, 050, 032 

663, 078 

835, 369 

1, 941, 180 

2, 482, 267 

729,046 

1, 143, 622 

1, 075, 835 

3, 017, 572 

832, 833 

3, 168, 945 

2, 848, 786 
1, 597, 646 


100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 

100.0 

100.0 

100.0 

100.0 
100.0 


100.0 
91.4 
.1 
25.5 
15.1 








2. Textiles and their products 

3. Forest products 


1.6 
17.2 


7.0 
82.8 
74.5 
15.3 




4. Paper and allied products 




6. Chemicals and allied products 


66.7 
100.0 


2.9 


8. Rubber products 




ioo.6 






100.0 








100.0 
99.9 

100.0 

99.9 

100.0 
11.2 






11. Iron and steel and their products, 
not including machinery 




.i 




12. Nonferrous metals and their 






13. Machinery, not including trans- 




.i 




14. Transportation equipment, air, 






16. Miscellaneous industries .. 


84.5 


4.3 









Three variations should be noted in connection with the foregoing 
findings. The materials used in the manufacture of one product in 
the machinery group and one in the iron and steel group were obtained 
from a non-mineral source. The portion of the total number and value 



CONCENTRATION OF ECONOMIC POWER 327 

of product accounted for by these products, however, was so small 
that these two industry groups may be said to have obtained all their 
materials from one source. The third and most significant variation 
to be noted is associated with products classified in the forest products 
group where both metal furniture and furniture constructed of wood 
are included. The inclusion of metal and wood furniture in the same 
group may be explained by the fact that the Bureau of the Census 
makes some industry classifications on the basis of similarity of use 
of the product instead of the materials used. Thus it is necessary 
in some cases to include in a particular group certain products which 
are made from materials other than those treated as basic for the 
group. 

CONSTRUCTION MATERIALS AND PRODUCERS' SUPPLIES 

Almost 16 percent of the 1,807 products analyzed in this study were 
classified as construction materials and 11 percent as producers' sup- 
plies. The construction materials represented 7 and the producers' 
supplies 9 percent of the total value of the 1,807 products. 

Construction Materials. 

A comparison of the concentration patterns of construction mate- 
rials in terms of number of product with that in terms of value of 
product reveals that the more important construction items value- 
wise were produced under conditions of lower concentration. (See 
chart 15.) Approximately three-fifths of the 283 construction items 
representing one-third of the value of these items, was accounted for 
by products with concentration ratios greater than 60 percent. The 
proportion of the number of construction materials reached the high- 
est level at the 60 to 70 percent class and then tended to decrease. In 
contrast with this pattern, the percentages of the value in each class 
rose sharply in the 20 to 30 percent class and then showed successive 
decreases, with one exception, at each of the subsequent concentration 
classes. The very high value bar in the 20 to 30 percent concentration 
class was caused largely by the bunching there of products from the 
chemicals; the stone, clay, and glass; and the iron and steel industry 
groups. 

In interpreting these patterns for purposes of price and other types 
of economic analysis it should be kept in mind that many of the prod- 
ucts included as construction materials were distributed largely in 
regional markets. Hence the same limitations mentioned in the pre- 
ceding section with respect to the meaning of the concentration ratios 
for regional products apply. In table 14, it can be seen that the major 
portion of the construction materials were classified by the Bureau of 
the Census in the stone, clay, and glass and in the iron and steel 
groups. With the exception of the chemical group, only a small pro- 
portion of the total number of construction materials was classified 
in any one of the other industry groups. In terms-of the total number 
of products analyzed in each group, the proportion classified as con- 
struction materials was also highest in the stone, clay, and glass and 
in the iron and steel groups. 

Producers' Supplies. 

The products classified as producers' supplies exhibited concentra- 
tion patterns, both in terms of number and of value, somewhat similar 
to those for construction materials. From chart 15 it is evident that 



328 



CONCENTRATION OF ECONOMIC POWEH 



the proportion of the number of producers' supplies tended to be 
greater at each of the concentration levels, with one exception, through 
the 60 to 70 percent class. The highest value bar, however, occurred 



15 






i i 



CONSTRUCTION 
MATERIALS 

283 PRODUCTS 




$ 3 S g 

CO/lfC£//rM770H ftAT/O CLASSES 



PRODUCERS 
SUPPLIES 

196 PRODUCTS 




% § & S & 

CO/VttNTMT/O/V MT/O CLASSES 



CHART ^.-DISTRIBUTION OF NUMBER AND VALUE OF CONSTRUCTION MATERIALS 
AND PRODUCERS* SUPPLIES BY CONCENTRATION RATIO CLASSES, 1937. 

at the 40 to 50 percent class. Twenty percent of the number of pro- 
ducers' supplies had concentration ratios below 50 percent but these 
products accounted for 46 percent of the value 



CONCENTRATION OF ECONOMIC POWER 



329 



As would be expected, the largest proportions of products classified 
as producers' supplies came from the paper and chemicals groups. (See 
table 14.) It is these two groups which include the bulk of the con- 
tainers and auxiliary purpose chemicals for numerous manufacturing 
processes. Products of the petroleum group, such as fuels and lubri- 
cants, represented only 4.6 percent of the total number of producers' 
supplies. This low percentage may be accounted £or by the fact that 
only a small number of products in the petroleum group were included 
in the total number of products analyzed. Half of the total number 
of petroleum products analyzed, however, were classified as producers' 
supplies; the corresponding ratios for the paper and chemicals groups 
were 67 percent and 39 percent, respectively. 

Table 14. — Percentage distribution oj number and value of construction materials 
and of producers' supplies, by industry groups, 1937 



Industry group and group number 



Construction materials 



Number Percent 



Producers' supplies 



Number Percent 



All industries. 



1. Food and kindred products.. 

2. Textiles and their products 

3. Forest products 

4. Paper and allied products 

6. Chemicals and allied products 

7. Products of petroleum and coal 

8. Rubber products 

9. Leather and its manufactures ._ 

10. Stone, clay, and glass products 

11. Iron and steel and their products, not including ma- 

chinery 

12. Nonferrous metals and their products 

13. Machinery, not including transportation equipment 

14. Transportation equipment, air, land, and water 

16. Miscellaneous industries 



283 
1 



100.0 



196 



100.0 



0.4 



2.8 
1.1 



1.4 
.4 



110 

91 
12 
15 



38.8 

32.2 
4.2 
5.3 



4.6 
3.6 
2.1 
21.4 
42.3 
4.6 
1.0 
1.0 
11.7 

4.1 
.5 



3.1 



Industry group and group number 



All industries. 



Food and kindred products 

Textiles and their products 

Forest products 

Paper and allied products 

Chemicals and allied products 

Products of petroleum and coal 

Rubber products 

Leather and its manufactures 

Stone, clay, and glass products 

Iron and steel and their products, not including ma- 
chinery 

Nonferrous metals and their products 

Machinery, not including transportation equipment... 

Transportation equipment, air, land, and water 

Miscellaneous industries 



Construction materials 



Value 
(thousands 
of dollars) 



2, 137, 595 



500 



34, 746 

38,478 

310. 605 

51, 727 

2,665 



631, 720 

777, 781 
88,540 
111,414 



Percent 



100.0 



(') 



1.6 
1.8 
14.5 
2.4 
.1 



29.6 

36.5 
4.1 
5.2 



4.2 



Producers' supplies 



Value 
(thousands 
of dollars) 



2, 784, 887 



183, 337 
153, 212 
20,106 
543, 568 
634, 440 
622, 624 
2, 651 
6,475 
168,919 

345, 980 
28,622 



74, 953 



Percent 



100.0 



6.6 

5.5 

.7 

19.5 

22.8 

22.4 

.1 

.2 

6.1 

12.4 
1.0 



1 Less than one-tenth of 1 percent 



SUMMARY 



By way of a recapitulation, the distribution of products among the 
various major bases of classification and the break-down by type 
within each major group are brought together in table 15. The prod- 
ucts in this table are distributed by industry groups and the same sort 
of distribution by concentration ratio classes is presented in table 2D 
through 9D in appendix D. 



330 



CONCENTRATION OF ECONOMIC POWER 







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CHAPTER IV 

CHANGES IN CONCENTRATION, IN QUANTITY PRODUCED 
AND IN AVERAGE REALIZED PRICE FROM 1935 TO 1937 

In the preceding chapters the extent of concentration, as measured 
by the proportion of the total value of a product accounted for by the 
largest four producers, gives a cross-section picture of the product 
structure in manufacturing for the year 1937. To what extent does 
the concentration picture change from one biennial census to another? 
If shifts in the concentration ratios of products occurred, were the 
increases or decreases in certain types of produces more pronounced 
than in others or, again, were the changes in certain lines of activity 
more pronounced than in others? Were changes in concentration 
paralleled by variations in quantity produced and by changes in 
average realized price? 

A study of the changes in the concentration ratios for 392 products 
which were identical in 1935 and 1937 offers tentative answers to 
these questions. Such a study also throws light on the actual course 
of concentration in the 2-year period. To appraise the reliability of 
the trends indicated by an analysis of these census products, the 
methods of their selection and their relation to the sample of 1,807 
products analyzed for 1937 are set forth in some detail. 

COMPOSITION OF THE 1935-37 SAMPLE 

In order to develop the methods and techniques to be used in this 
study of the "Concentration of Production in Manufacturing," a 
number of products were analyzed using data from the 1935 Census of 
Manufactures. At the time the plans for the study were being made 
the 1937 data had not yet become available. The items to be an- 
alyzed in this preliminary work were chosen not so much for the pur- 
pose of obtaining a representative sample which would reflect the 
situation in all manufacturing as to indicate the various types of prob- 
lems which would be met in the extensive study of the 1937 data. 
Altogether the 1935 data were analyzed for 392 products. These prod- 
ucts were also included among the larger sample of 1,807 commodities. 
For 225 of the 392 products, quantity as well as value data were 
available for analysis and for these products it was possible to compute 
average realized prices. 

Although the method of selection of the 1935-37 sample would not 
necessarily assure a representative sample, the products are, never- 
theless, reasonably typical of all manufactured products. The 
representativeness of the 392 products may be checked against the 
comprehensive sample. Two measures suggest themselves: Are the 
distributions of the 1937 concentration ratios similar for the 392 and 
for the 1807 products? Are the products in these two samples dis- 
tributed in a similar fashion among the industry groups? 

331 



332 



CONCENTRATION OF ECONOMIC POWER 



The distribution in table 16 indicates that the 392 products offer 
a fairly representative cross-section of the concentration picture of 
the larger group. Therefore, the general tendencies noted in the 
following analyses are probably indicative of the situation respecting 
all manufacturing. 

A further indication of the dependableness of the sample of 392 
products is the closeness with which the relative number of products 
classified in each industry group in it follows that of the sample of 
1807 products. In table 17 the distributions of the two samples may 
be examined. The most marked discrepancies occur in the textile and 
machinery groups, there being underrepresentation in the former and 
overrepresentation in the latter. There is no evidence available, 
however, to indicate that the shifts in concentration in these two groups 
were radically different from those in other groups. There were no 
products from the forest products, the rubber products, the leather, 
the nonferrous metals, and the transportation equipment groups 
included in the smaller sample. The number of analyzed products 
in each of these groups, however, constituted a relatively small pro- 
portion of the total 1807 products. 

Table 16. — Relation between the distributions of number and value of products 
for the 1987 sample and the 1985-87 sample, by concentration ratio classes 





1937 sample 


1935-37 sample* 


Concentration ratio class 


Products 


Percent- 
age 


Products 


Percent- 
age 




Number 


Total 


1,807 


100.0 


392 


100.0' 






0.1 to 10.0 


8 
38 
90 
123 
166 
183 
230 
259 
218 
164 
153 
175 


.4 

2.1 

5.0 

6.8 

9.2 

10.1 

12.7 

14.3 

12.1 

9.1 

8.5 

9.7 


1 
2 
18 
25 
48 
53 
64 
56 
39 
38 
36 
12 


.3 


10.1 to 20.0 


.5- 


20.1 to 30.0 


4.6 


30.1 to 40.0 


6.4 


40.1 to 50.0 


12.2 


50.1 to 60.0 . 


13.5 


60.1 to 70.0 


16.3 


70.1 to 80.0... 


14.3 


80.1 to 90.0 


9.9 


90.1 to 100.0 


9.7 


(i) 


9.2 


(!) 


3.1 








Value (thousands of dollars) 


Total 


29, 505, 693 


100.0 


8, 626, 459 


100.0 






0.1 to 10.0 ■-_. 


711,095 

1, 270, 300 

2, 758, 967 
4, 314, 384 

3, 521, 436 
2, 654, 925 
2, 732, 775 
3, 913, 852 
2, 098, 223 
3,115,851 
1, 827, 858 

586, 027 


2.4 
4.3 
9.4 

14.6 

11.9 
9.0 
9.3 

13.2 
7.1 

10.6 
&2 
2.0 


34, 010 

19, 599 

326, 529 

2, 111, 546 

1, 799. 305 

1,451,143 

833, 322 

854, 603 

213, 927 

208,588 

695, 215 

78, 672 


.4 


10.1 to 20.0 


.2 


20.1 to 30.0. 


3.8 


30.1 to 40.0 


24.5 


40.1 to50.0_. 


20.9 


50.1 to 60.0 


16.8 


60.1 to 70.0.. 


9.7 


70.1 to 80.0 


9.9 


80.1 to 90.0 ....... 


2.5 


90.1 to 100.0 


2.4 


0) 


8.0 


(J) 


.9 











•This distribution is based on the 1937 concentration ratios of the products. 

1 Withheld to avoid disclosing the operations of individual companies. See appendix A fo,r rules gov- 
erning disclosures as used in this study. 

2 Withheld to avoid disclosing the operations of remaining companies. There is not necessarily a dis- 
closure among the leading 4 companies. 



CONCENTRATION OF ECONOMIC POWER 



333 



Table 17. — Relation between the distributions of number of products in the 1937 
sample and the 1935-37 sample, by industry groups 



Industry group and group number 



1937 sample 



Number 
of prod- 
ucts 



Percent- 
age 



1935-37 sam, "e 



Number 
of prod- 
ucts 



Percent- 



Total... 

1. Food and kindred products 

2. Textiles and their products 

3. Forest products.. 

4. Paper and allied products 

6. Chemicals and allied products 

7. Products of petroleum and coal. 

8. Rubber products 

9. Leather and its manufactures 

10. Stone, clay, and glass products 

11. Iron and steel and their products, not including machinery 

12. Nonferrous metals and their products 

13. Machinery, not including transportation equipment 

14. Transportation equipment, air, land, and water 

16 Miscellaneous industries 



100.0 



136 

290 

99 

63 

212 

18 

39 

112 

182 

177 

55 

365 

2 

57 



7.5 

16.0 
5.5 
3.5 

11.7 
1.0 
2.2 
6.2 

10.1 
9.8 
3.0 

20.2 
0.1 
3.2 




13 
53 
17 




53 
70 


136 


13 



100.0 



7.2 

2.3 



3.3 
13.5 

4.3 





13.5 
17.9 


34.7 



3.3 



RELATION OF CONCENTRATION RATIOS IN 1935 AND 1937 

The over-all picture of the shifts in concentration experienced by 
the 392 census products between 1935 and 1937 indicates no "whole- 
sale" movement toward an increase or decrease in concentration ratios. 
In chart 16 l the great majority of the product points fall very close 
to the heavy diagonal line which represents "no change" in concen- 
tration ratios at the various levels in the two-year period. It should 
also be noted that there is no tendency for greater percentage changes 
to occur at the higher concentration levels than at the lower levels. 
The few products which exhibited marked changes are scattered along 
the entire concentration ratio range. 

By way of explanation of the material presented in chart 16, it is 
pointed out that if the concentration ratio for a product in 1937 were 
the same as in 1935 the product point would fall on the heavy, solid 
diagonal line. If the concentration in 1937 were more than in 1935 
the point would fall to the right of this diagonal line at a point opposite 
the 1935 concentration ratio and above the 1937 ratio. The distance 
in each case measured horizontally between the diagonal line and the 
actual location of the point gives the change in percentage points. 
For convenience in comparison, the calculated percentage changes are 
shown on the chart by the light dash and light solid lines (the measure- 
ment in this case must also be along a horizontal line). 

The distribution of products in terms of the percentage changes in 
their concentration ratios is presented in table 18. Almost two-thirds 
of the products showed "no change" or an increase or decrease of less 
than 10 percent in their concentration ratios. Approximately 8 
percent of the products underwent more than a 20 percent increase 
and about 7 percent experienced a decrease of more than 20 percent. 

The levels of economic activity in the 2 years under study differed 
greatly. In the field of manufacturing, the quantity of goods pro- 
duced in 1937 was 30 percent more than that in 1935, as measured by 
the Bureau of the Census index. It might be expected that so great 
an increase in manufacturing activity would be accompanied by 

'The points on the chart which are indicated by solid dots represent products for which quantity data 
are available and which serve as a basis for the later analyses in this chapter. See appendix C for the basic 
data for 1935. 



334 



CONCENTRATION OF ECONOMIC POWER 



90 
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CONCENTRATION RAT/O FOR 1937 m-m*m 



CHART 16.— RELATION BETWEEN CONCENTRATION RATIOS IN 1935 AND 1937. 

marked changes in concentration ratios. The changes which actually 
took place, however, were not only relatively small but were sym- 
metrically distributed as to increases and decreases. The balance of 
products tending toward higher concentration against those tending 
toward lower concentration in the entire manufacturing economy 
should not lead one to overlook important movements among in- 
dividual products. 

Table 18. — Distribution of products by the percentage change in concentration ratios 

between 1935 and 1937 



Percentage change in concentration ratios, 1935-37 



Products 



Number ' Percent 



Total- 



Over 20 percent increase 

10.1 to 20.0 percent increase . 
0.1 to 10.0 percent increase. . 

No change,-- -. 

0.1 to 10.0 percent decrease.. 
10.1 to 20.0 percent decrease. 
Over 20 percent decrease 



100.0 



25 
29 
103 
6 
94 
46 
22 



7.7 
8.9 
31.7 
1.8 
28.9 
14.2 



i The number of products included in this distribution is less than 392 owing to the impracticability of 
computing apercentage change for those products with concentration ratios indicated by "(')" or "(*)' 
in either or both years. 



CONCENTRATION OF ECONOMIC POWER 



335 



It is the contention here that the changes in concentration ratios are 
essentially random in nature, not only for the particular interval 
under study but also for longer periods of time. The reasons under- 
lying this position center in the fact that each product appears to have 
its own peculiar set of distinct and separate factors which determine 
its behavior. Many of these factors may be formulated in general 
terms and may be applied to all sections of the manufacturing process. 
Nevertheless, they affect each product at different times in varying de- 
grees, so that for a given period they form a unique set of conditions 
for each product or for a group of closely related products. 



RELATION OF TYPE OF PRODUCT TO CHANGE IN CONCENTRATION 

Products of like nature did not exhibit a similar degree or direction 
of change in their concentration ratios between 1935 and 1937. An 
examination of the products listed in appendix C reveals a wide 
variety of changes among products in the same industry, among com- 
peting products, among products fulfilling the same types of wants, 
among products purchased by the same group of users, etc. Further- 
more, products which increased in concentration did not show ma- 
terially different characteristics from those products which decreased 
in concentratioD. The products listed in appendix C were classified 
according to various criteria and summarized in table 19. In each 
classification about as many products showed increases as decreases 
with the exception of semidurable and durable goods and producers' 
supplies. 



Table 19. 



-Distribution of products by product characteristics and by changes in 
concentration ratios between 1935 and 1937 



Product characteristics ' 


Total num- 
ber of 
products 


Number of products showing — 


Increases 


No change 


Decreases 


All products.. 


325 


157 


6 


162 






Type of immediate purchaser: 

Consumer 


67 
258 

120 

57 

24 
29 
124 

67 
235 

49 
276 

41 
266 

17 

1 

125 

23 


27 

130 

52 
27 

10 
20 

49 

33 
108 

19 
138 

16 
130 
10 
1 
62 
16 


1 
5 

1 
2 



3 


6 

1 
5 


6 


3 



39 


Producer 


123 


Type of ultimate user: 2 

Consumer. 


67 


Producer 


28 


Degree of durability: ! 

Nondurable 


14 


Semidurable 


9 


Durable 


72 


Degree of fabrication: ' 

Semimanufactured 


34 


Finished 


121 


Type of market: 

Regional 

National 


29 
133 


Source of raw material: 

Agricultural . 


25 


Mineral 


130 


Forest... 


7 


Other. _ 





Construction materials. 


60 


Producers' supplies.. 


7 







1 Definitions of the various product characteristics and the methods of classification of products are pre- 
sented in appendix D. 

1 Those products listed as construction materials and as producers' supplies were not classified as to type 
of ultimate user nor as to degree of durability; products listed as producers' supplies were not classified as. 
to degree of fabrication. 



336 



CONCENTRATION OF ECONOMIC POWER 



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338 CONCENTRATION OF ECONOMIC POWER 

A study of the characteristics of products which experienced changes 
in concentration of 20 percent or more between 1935 and 1937 points 
up the material of table 19 and lends support to the contention that 
changes are random in nature. Data on these products, 25 of wliich 
experienced significant increases in concentration and 22 of which 
experienced decreases of 20 percent or more, are presented in table 20. 
Examination of these materials seems to indicate the lack of any gen- 
eral aspect which is common to the products in each group. 

When the products are classified according to various criteria used 
in table 19, the same type appears among both increases and de- 
creases. Thus, it cannot be said, for example, that consumers' goods 
tended to increase in concentration while producers' goods tended to 
decrease or vice versa. Nor did products, which in many cases were 
manufactured by the same companies, show consistent changes in their 
concentration ratios. Products which were important in value terms 
exhibited no greater likelihood to increase than did unimportant 
products. Further, there appeared to be no association between the 
magnitude of change in the concentration ratios of products between 
1935 and 1937 and the highness of their ratios in 1935. It may be 
said, however, that products which had decreases in concentration 
tended more frequently to have higher concentration ratios than did 
products with increases. 

Since there is an inverse relationship between the number of com- 
panies producing a product and the degree of concentration of that 
product, 2 a decrease in the number of companies between 1935 and 
1937 might be expected to result in an increase in concentration 
ratios. It is apparent from table 20, however, that among products 
having increases in concentration about an equal number of products 
showed increases and decreases in the number of producing com- 
panies. Among products having decreases in concentration, there 
were several instances in which the number of companies decreased, 
but by far the greater proportion of the products showed an increase 
in the number of producers. 

Since these and other general factors tend to be equally character- 
istic of products showing either increases or decreases in concentration f 
the key to the explanation of changes in concentration thus appears 
to be associated with the unique conditions which surrounded the 
production of each product during this period. 

RELATION BETWEEN DEGREE OF CONCENTRATION AND CHANGES IN 
QUANTITY PRODUCED AND IN AVERAGE REALIZED PRICE 

Since the average realized price of a census product is used in this 
and subsequent chapters, it is well at this point to investigate the 
nature and limitations of this measure. It was derived by dividing 
the total value of a census product in 1935 and in 1937 by the quantity 
of that product manufactured in those years. Thus "price" and 
quantity data became available for the same product. Although the 
price measure as here employed should be considered a price only in 
a special sense, for the purposes of this study, it is more desirable 
than existing price indexes proper. Its several limitations will be 
discussed in detail later, but certain advantages should also be pointed 
out. 



1 See cb. I, charts 3a and 3b. 






CONCENTRATION OF ECONOMIC POWER 339 

It is a net realized price. It reflects the actual per unit return on 
a manufactured product and avoids the fiction which surrounds 
nominal or quoted prices as used in the typical indexes. Frequently 
a commodity will be quoted at an unchanged price over a number of 
years and thus to the extent that indexes include this type of quota- 
tion they will remain relatively unchanged. Actually, the manu- 
facturers of the product may have shaved or cut the price of the item 
drastically m periods when business was slow and boosted it as 
economic conditions improved without the change being recorded in 
the quoted price. 

^• Th ?-^ er ?l ge re ™ zed price fi 2 ures S° a lon S wa >" toward overcoming 
this difficulty. The manufacturer reports to the Bureau of the 
Census the total dollar volume of his production for the particular 
year and the number of units of products involved; thus the actual 
amount received per unit by the manufacturer is reflected in the 
average realized price. 3 All sorts of rebates, special allowances 
quantity discounts, cash discounts, freight absorption, and extras 
would tend, therefore to be reflected in the realized figures reported 
to the Bureau of the Census by manufacturers. If one is interested 
in studying the relation between changes in price and changes in 
quantity in any particular period, it would seem advisable to use some 
measure of price that reflects these "concealed" price changes rather 
than to use a price quotation that is purely nominal. 4 

The use of average realized prices for census products should be 
accompanied by a full understanding of the nature of prices in this 
lorm. Furthermore the users of these data should be familiar with 
the area within which the figures have meaning. 

In the first place, it should be stressed that a census product is not a 
unique and homogeneous commodity over a period of time nor does 
it always have precise specifications. Rather, a product as defined 
by the Bureau of the Census frequently covers a number of separate 
but closely related, items. Under one census product classification 
there may be included several different and differentiated economic 
commodities For example the census product, "men's dress shoes 
welted including Silhouwelt" covers all men's welted dress shoes 
regardless of price class, brand name, marketing channels, material 
color and other elements of physical make-up. This classification 
includes all dress shoes regardless of whether they are made of calf 
or kid, whether they are for formal or informal wear, whether thev sell 
at retail for $3 or $15, etc. Obviously, under these conditions the 
average realized price is not to be interpreted as the market price 
of a unique commodity. ^ 

In the second place, a further difficulty growing out of the lack of 
homogeneity is encountered when comparisons are made over a period 
01 time du ring which general economic conditions may have experi- 

reflects eha^Pin%Trr^ h r nr0nt the , statis «ciar. in the construction of a price index which accurately 



340 CONCENTRATION OF ECONOMIC POWER 

enced marked change. Individuals who bought $6 shoes in 1935 
may have shifted their purchases to $12 shoes in 1937. Thus, it 
would be possible for average realized prices to show a marked 
increase between 1935 and 1937 without there having been a change in 
either the total number of shoes produced or in the price of a particular 
brand of shoes. Brand A, the $6 shoe in 1935, may still have been 
sold at an unchanged price in 1937 and brand B, the $12 shoe, may 
likewise have experienced no change in price, yet if relatively more of 
brand B were purchased in 1937 than brand A, the average realized 
price would have been higher. In this instance, the usual price index 
would show no change in price. This shift in consumer purchases 
imposes an even more serious limitation over longer periods when 
consumer income is changing rapidly, i.e., over the 1929-33 recession 
period or over the 1933-37 recovery period. 

A third difficulty arises in connection with the custom in some lines 
of changing the quality of a product, rather than its price, with 
changes in economic conditions. Thus in the case above, brand A 
shoe which sold at $6 in 1935 and at $6 in 1937 may have been in- 
ferior in quality in the latter year as compared with the former. 
This change in the quality of a product over a period of time is a par- 
ticularly elusive and almost immeasurable element which it is ex- 
tremely difficult to express in price terms in an index. Although this 
difficulty should constantly be kept in mind, it is not peculiar to the 
average realized price derived from the census data. Rather, this 
limitation is common to all types of price indexes. 

Notwithstanding these restrictions on the use to which the data 
may be applied it is believed that they serve as an appropriate basis 
for an investigation of changes in price and quantity. Their very 
differences from the usual types of price indexes afford another 
approach to the problems of interest here. • 

If the concentration ratios for 1935 were known, could valid approxi- 
mations of the changes in quantity and average realized price of a 
product be estimated? From chart 17 it is apparent that there is 
little, if any, relation between the extent of concentration in 1935 and 
either the change in quantity produced or in the average realized price 
between 1935 and 1937. The scatter of the product points at each 
concentration level makes any statement of general tendency impos- 
sible. This lack of co-variation is not confined to the period 1935-37, 
but is also apparent in the other and longer periods studied in chap- 
ter V. 

RELATION OF PERCENTAGE CHANGE IN CONCENTRATION RATIOS AND 
CHANGE IN QUANTITY PRODUCED AND IN AVERAGE REALIZED PRICE 

The scatter of the products plotted in chart 18 reflects the general 
increases in quantity produced and in average realized price that 
would be expected in the 1935-37 period of rising industrial activity. 

An inspection of the right and left hand segment of each section 
of the chart reveals about an equal division of the product points on 
either side of the line showing "no change" in concentration ratio. 
That is, about an equal number of products showed increases in con- 
centration as showed decreases. This is to be expected, from the 
nature of the distribution given in table 18. It is interesting to note, 



CONCENTRATION OF ECONOMIC POWER 



341 



moreover, that products in which the quantity produced decreased or 
increased were equally likely to have been products in which the 
production of the largest four companies either diminished or increased. 
Likewise the increases and decreases in realized price over the two- 
year period were evenly divided between products with positive and 
with negative changes in concentration. 





CHANGE IN QUANTITY CHANGE IN AVERAGE REALIZED PRICE 


PERCENT 


f ff f & f 




PERCENT 


+180 




1 W I $% i 






•180 


+160 


- 


. 




• 


+160 


+140 


• 


• 






+140 


+120 




. 






+120 


+100 


• 


• 




• 


+100 


+80 




• 




. 


+80 


+60 




. £ '. , " 




. 


+60 


+40 


/ 






'*•••• 


+40 


20 



-20 




• "."'• ), \ l {'.'• „ 




.... . . • | . t 

*"**■" ".• •• ••* 

•* *...r." . .. • 


+20 

-20 








-40 








• 


-40 


-60 


- 


M 




. 


-60 


( 


) 20 40 60 80 * 100 JJ 2/ 
CONCENTRATION RATIO: t935 


< 


20 40 60 80 /OO JJ 2J 
CONCENTRATION RATIO: /93S 


40 40S 



CHART 17— RELATION BETWEEN CONCENTRATION RATIO IN 1935 AND CHANGE IN 
QUANTITY PRODUCED AND IN AVERAGE REALIZED PRICE, 1935 TO 1937. 

The data in chart 1 7 did not support the hypothesis that in a period 
of increasing industrial activity the products having high concentra- 
tion ratios experienced smaller price increases and larger increases 
in quantity produced than was true for products with low concentra- 
tion ratios. The distribution of product points in chart 18 reveals 
further that there is no particular or distinct pattern of change in 
quantity output or in price associated with large or small increases 
in concentration. The randomness of these distributions may be 
due to the shortness of the period under study, but it is more probably 
due to the fact that the degree of concentration is not the dominating 
factor in determining changes in quantity output and in realized price. 



342 CONCENTRATION OF ECONOMIC POWER 

CONTINUITY OF LEADERSHIP IN 1935 AND 1937 

Not only did the period 1935-37 fail to show striking "wholesale" 
shifts of concentration ratios, but further analysis of the data reveals 
that the same companies tended to be leaders in 1937 that were among 
the first four producers in 1935. For 256 5 of the 392 products it was 
possible to enumerate the cases in which the four leaders in 1937 
were also the largest producers in 1935. For 19 percent of these prod- 





CHANGE IN QUANTITY CHANGE IN AVERAGE REALIZED PRICE 


PERCENT 


» | ; r i 




PERCENT 


+IQO 




3 ^ 


ml ' 








+130 


+160 












- 


+160 


+140 




* 


- 








+140 


+120 


- 




f 








+120 


+100 






'; • 






• 


+100 


+eo 


■ 


< 


. 








+30 


+60 




• • •'• 


. ^ 








+60 


+40 


- 


. * # 






-" 


• 


+40 


+20 















+20 



- 


" ' 


'•. . . 


.:*5 


r 5 .- : 


-20 


- 




• 




- 




-20 


-40 


- 


• # 






• 


. • 


-40 


-60 












• 


-60 




-60 


-40 -20 +20 +40 +60 
PERCENT CHANCE CONCENTRATION RATIO 




-60 -40 -20 +20 +40 +60 

PERCENT CHANGE CONCENTRATION RATIO go 


to-in 



CHART 18.-RELATION BETWEEN CHANGE IN CONCENTRATION RATIO AND CHANGE 
IN QUANTITY PRODUCED AND IN AVERAGE REALIZED PRICE, 1935 TO 1937. 

ucts the same four companies appeared as leaders in both years; for 
41 percent of the products three companies were among the first four 
in both years; for 7 percent two companies remained leaders, and for 11 
percent one company was the same for both years. In only 2 percent 
of the cases (four products) were all four of the largest companies in 
1937 different from those in 1935. 

Although there were not sufficient products available for analysis 
to warrant publishing separate percentage figures for each industry, 

» Due to differences in coding by the Bureau of the Census in 1935 and in 1937 it was impossible in the 
case of many industries to determine the identity of the leadership in the two years. Moreover, consolida- 
tion of companies by various methods made comparison impractical for a number of products. It was 
decided to omit all such cases rather than to make comparisons where the data were of questionable validity. 



CONCENTRATION OF ECONOMIC POWER 343 

it may be stated that for over two-thirds of the products in the meat 
packing industry and for about a third of those in the petroleum re- 
fining and gypsum products industries the same four companies were 
leaders in both years. The same three companies were leaders in 
1935 and 1937 for approximately one-fourth to two-thirds of the 
products in the clay products, paint and varnish, gypsum products, 
electrical machinery, and petroleum refining industries. In each of 
these industries there was a tendency for the same three or four com- 
panies to be leaders in the output of several different products. 

In such industries as .those involving the manufacture of plumbing 
fixtures, tin cans, radios, refrigerators, and asphalt roofing there were 
no products for which all four leaders were identical in 1935 and 1937. 
Insofar as the 256 products may be considered representative, it may 
be said that products for which the same four companies were leaders 
from year to year were manufactured in industries which were rela- 
tively well established and which were not subject to "style" or 
"model" changes. 

The location of the product points above each number on the 
horizontal axis in chart 19a is determined by the concentration ratio 
and the extent of the continuity of leadership for each product. 
This means that for the four products distributed among the con- 
centration ratios above the "0", there was no continuity of leader- 
ship;. the leading four producers of these four products in 1937 were 
different from the four leaders in 1935. For each product point 
above "1," it means that only one company that appeared as one of 
the leading four producers of that product in 1935 also appeared in 
1937, etc. 

Evidence afforded by chart 19a indicates that products which had 
a larger number of leaders that were identical in 1935 and 1937 tended 
to have somewhat higher concentration ratios. There is, however, a 
wide range of concentration at each of the company ordinates, so 
that any general statement is subject to considerable limitation. 

The sample of 256 products for which data on the continuity of 
leadership are available parallels the 1935 sample of 392 products in 
having a fairly equal distribution of increases and decreases in con- 
centration ratios between 1935 and 1937 (see chart 19b) 6 . In both 
samples, however, the proportion of products having decreases 
in concentration was somewhat greater than the proportion having 
increases. 

8 The product points in chart 19b are somewhat less than 256 because actual concentration ratios could 
not be computed for some products. To have done so would have violated the rules regarding disclosures 
set forth by the Bureau of the Census for this stu'dy. 



344 



CONCENTRATION OF ECONOMIC POWER 



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'M' INDICATES THE POSITION Of THE MEDIAN 



O t S 3 

NUMBER OF LEADERS /N /93S REPEAT/NO IN 1937 



CHART 19a— RELATION BETWEEN NUMBER OF COMPANIES WHICH WERE LEADERS 
IN 1935 AND 1937 AND CONCENTRATION RATIO. 



CONCENTRATION OF ECONOMIC POWER 



345 




CHART 19b.-RELATION BETWEEN NUMBER OF COMPANIES WHICH WERE LEADERS 
IN 1935 AND 1937 AND CHANGE IN CONCENTRATION RATIO. 



CHAPTER V 

BEHAVIOR CHARACTERISTICS OF PRODUCTS IN PERIODS 
OF RECESSION AND RECOVERY 

The sharp contraction in economic activity between 1929 and 1933 
was featured in the manufacturing field by a drop of almost 40 per- 
cent in the quantity output of manufactured products and by a 25 
to 30 percent decrease in the prices of these products. Did manu- 
factured items with high concentration ratios experience significantly 
different changes in quantity output and in price from those products 
with low concentration ratios? Conversely, in the upswing in busi- 
ness from 1933 to 1937, did manufactured products with high and with 
low concentration ratios exhibit significantly different magnitudes of 
change in quantity output and price? Were variations between high 
and low control of output among manufactured products in these two 
periods directly related to great or small contraction or expansion of 
output? With what product characteristics were specific price and 
production policies associated? 

To answer these questions, each of the products among the 1,807 
for which comparable data were available from the Censuses of Manu- 
factures for 1929, 1933, and 1937 was segregated for further analysis. 
If the analysis was to run in terms of quantity changes and in terms 
of changes in average realized prices, it was necessary that only those 
products for which quantity data were available in the census records 
be included in the list. Furthermore, only those products which were 
identically classified throughout the period could be used. The im- 
position of these two limitations resulted in a reduction of the sample 
from 1,807 to 407 products. The products which were eliminated 
from the sample for these two reasons were proportionately distributed 
throughout the concentration ratio classes. Thus, the percentage 
distribution of number and value of products among the concentra- 
tion ratio classes conforms closely to the distribution of the 1,807 
products (see table 21 and appendix E, table 2E). Since the sample 
of 1,807 products presents a comprehensive cross-section picture of 
the product structure in all manufacturing, this smaller sample (407 
products) drawn from the original list and conforming to the con- 
centration pattern of the larger sample may also be considered ade- 
quate to insure significant results. 

In the subsequent analysis in this chapter the interest centers in 
the relationship between various characteristics of the products. If 
an attempt were made to measure a characteristic of the products in 
the entire population from a sample, the representativeness of the 
sample would be of prime significance. Here, however, the relation- 
ship between various factors characterizing the products is the subject 
of inquiry, and it is only necessary that the attributes of the products 
in the sample cover adequately the range over which each character- 
istic may be distributed. The distribution of products among the 

346 



CONOENTRATICN OF ECONOMIC POWER 347 

concentration ratio classes and among the various industry groups is 
sufficiently wide to insure an adequate picture of the relationships 
between the product characteristics under consideration. 

Table 21. — Relation between the distributions of number and value of the 1,807 
products and of the 407 products among the concentration ratio classes 



Concentration ratio class 



Total products 
analyzed 



Products Percent 



407 products 
analyzed • 



Products Percent 



Number 



Total. 

0.1 to 10.0. . 
10.1 to 20.0. 
20.1 to 30.0. 
30.1 to 40.0. 
4C.1 to 60.0. 
50.1 to 60.0. 
60.1 to 70.0. 
70.1 to 80.0. 
80.1 to 90.0.. 
90.1 to 100.0. 

(') 

(') 

Total. 

0.1 to 10.0... 
10.1 to 20.0. . 
20.1 to 30.0.. 
30.1 to 40.0.. 
40.1 to 60.0.'. 
50.1 to 60.0. . 
60.1 to 70.0.. 
70.1 to 80.0.. 
80.1 to 90.0. . 
90.1 to 100.0. 

(') 

W 



1,807 


100.0 


407 


8 


.4 


4 


38 


2.1 


12 


90 


5.0 


26 


123 


6.8 


32 


166 


9.2 


42 


183 


10.1 


48 


230 


12.7 


56 


259 


14.3 


50 


218 


12.1 


43 


164 


9.1 


36 


153 


8.5 


34 


175 


9.7 


24 



100.0 



1.0 
2.9 
6.4 
7.9 
10.3 
11.8 
13.8 
12.2 
10.6 
8.8 
8.4 
5.9 



Value (thousands of dollars) 



29, 505, 693 


100.0 


14,909,124 


711,095 


2.4 


291,831 


1, 270, 300 


4.3 


589, 078 


2, 758, 967 


9.4 


1, 232, 297 


4, 314, 384 


14.6 


2, 628, 875 


3,521,436 


11.9 


1, 787, 948 


2,654,925 


9.0 


1,715,229 


2, 732, 775 


9.3 


1, 208, 007 


3, 913, 852 


13.2 


1, 676, 750 


2, 098, 223 


7.1 


388,206 


3,115,851 


10.6 


2, 569, 126 


1, 827, 858 


6.2 


692, 646 


586,027 


2.0 


129, 131 



100.0 



2.0 
4.0 

8.3 
17.-6 
12.0 
11.6 

8.1 
11.2 

2.6 
17.2 

4.6 

0.9 



* This distribution is based on concentration ratios in 1937. 

i Withheld to avoid disclosing the operations of individual companies. See appendix A for rules governing 
disclosures as used in this study. 

1 Withheld to avoid disclosing the operations of remaining companies. There is not necessarily a dis- 
closure among the four leading companies. 



RELATION BETWEEN CONCENTRATION RATIOS OF SELECTED PRODUCTS 
AND CHANGES IN THEIR TOTAL QUANTITY PRODUCED 

The percentage change between 1929 and 1933 in the United States 
total quantity output of the 407 individual products was plotted 
against the concentration ratios of the products in chart 20a. For 
the purpose of sharper analysis, the chart was divided into three 
segments, each of which contains approximately one-third of the 
product points. In the ensuing discussion, those products with con- 
centration ratios above 80 percent (including those products listed 
under "(*)" and "( 2 )") are said to be in the "high" concentration 
group, while those products with concentration ratios less than 50 
percent are referred to as the "low" concentration group. 

For the charts used in the analysis that follows, the points on the 
vertical axis are plotted on a logarithmic scale. In those charts in 



348 



CONCENTRATION OF ECONOMIC POWER 



O) /oo 

% 



to 



*LOW* 



*HIGH* 






20 



30 



40 50 60 70 80 90 

CONCENTRATION PATIO 



/OO 



CHART 20a.-RELATION BETWEEN CONCENTRATION RATIO AND PERCENTAGE 
CHANGE IN QUANTITY PRODUCED, I92»-33. 



CONCENTRATION OF ECONOMIC POWER 



349 



r 



//,325 



10,000 



JD IOOO 



/OO 



(0 



*LOW* 



•• *• *.' 



^IGH* 



! I 



10 



20 



30 



40 50 60 70 80 90 
CONCENTRATION PATIO 



100 



2/ 



CHART 20b— RELATION BETWEEN CONCENTRATION RATIO AND PERCENTAGE 
CHANGE IN QUANTITY PRODUCED, 1933-37. 



350 CONCENTRATION OF ECONOMIC POWER 

which changes in average realized price are plotted against changes 
in quantity, the logarithmic scale is used on both the vertical and 
horizontal axes. By way of further explanation of the chart material, 
in certain charts the quantity produced and the average realized 
price in 1933 are expressed as a percent of the quantify and average 
realized price in 1929. 

This means that the output in 1929 may be taken as 100 percent 
and the quantity produced in 1933 as a relative of that. For example, 
if 50,000 units of a particular product were produced in 1929 and only 
10,000 units in 1933 the output in 1933 would be 20 percent of .that 
in 1929 and as such it would be plotted on the chart. Stated in 
another way, this means there was a drop of 80 percent in the quantity 
output of this particular product between 1929 and 1933. By using 
the logarithmic scale, equal distances on the vertical scale represent 
equal ratios. Thus, a drop in quantity of 80 percent would occupy 
a distance on the vertical scale equal to an increase of 400 percent — 
the relatives as plotted on the charts would be 20 and 500 percent, 
respectively. In order that output might attain the earlier leyel in 
the case above, it would be necessary for quantities to increase 400 
percent. 

The concentration radios used throughout this section are based 
on 1937 materials. There is thus an implied assumption that products 
with high concentration ratios in 1937 also had high ratios in 1929 and 
1933. It would have been more satisfactory if the concentration 
ratios for the products analyzed here had been available for these 
earlier census years, but such was not the case. 

In the preceding chapter, the changes in the concentration ratios 
for individual products between 1935 and 1937 were studied, and the 
conclusions from those data, while indicating change, show the 
changes to be confined in most cases within rather narrow limits and 
to be random in nature. On the basis of this observation, there seems 
little reason to suppose that products in general which had concentra- 
tion ratios above 80 percent in 1937 would have been produced under 
such strikingly different conditions in 1929 that their concentration 
ratios would have been below 50 percent, thus placing them in the 
"low" concentration group. Isolated instances of such a change may 
have occurred, but it is believed that the structural pattern in the 
manufacture of individual products did not change enough in this 
8-year period to impose any very serious limitation on the findings 
of this part of the study. 

An inspection of the scatter diagram (chart 20a) reveals very little 
observable difference in the behavior of products with "low" con- 
centration ratios as shown in the left-hand segment of the chart and 
the behavior of those products with "high" concentration ratios shown 
in the right-hand portion of the chart. Throughout the distribution, 
the scatter is of approximately the same nature and in each group the 
output of some products increased but by far the larger number 
showed decreases in quantity, the drop in some instances exceeding 
90 percent. Very broadly, the conformation of product points 
seems to have a somewhat greater spread in the "high" concentration 
range than in the "low" range, but the scatter is so great within each 
group that only the most restricted sort of relationship may be said 
to exist. If the eight or ten products which decreased more than 90 



CONCENTRATION OF ECONOMIC POWER 351 

percent are not given undue weight, the logical inference would seem 
to be that the changes in quantity output of the great mass of manu- 
factured products between 1929 and 1933 were not related to the 
concentration ratios of the products. In other words, restriction in 
output between 1929 and 1933 was almost equally common and 
equally severe for products with "high" and with "low" concentration 
ratios. It should be remembered that one-half of the products had 
concentration ratios between 50 and 90 percent (see chart 1); thus the 
product points in the scatter diagrams also tend to bunch more 
heavily in that range. 

The 407 products were drawn from many different industry groups, 
but there was a tendency for the majority of the number of products 
falling in the "high" group to be from the industry groups character- 
ized by products with high concentration and lor the industry groups 
characterized by products with low concentration ratios to be more 
heavily represented in the "low" concentration group. Thus, in 
general, the products in each group are different in nature. In the 
analysis which follows this aspect of the data should be kept in mind. 
The various industries in which these products were classified by the 
census, together with the basic data for the charts in this chapter, are 
available in appendix E. 

A careful examination of the nature of the products which exper- 
ienced large decreases in quantity output between 1929 and 1933 will 
perhaps throw light on the product characteristics with which this 
type of quantity behavior is associated. In table 22 the names of all 
products showing decreases in quantity of 70 percent 1 or more are 
listed together with their percentage changes in quantity and average 
realized prices. In order that the economic significance of these 
products may be appraised, the value of each product in 1933 is also 
shown. There were 72 products in the sample of 407 which exper- 
ienced decreases in quantity of 70 percent or more and the total value 
of these products was $180,288,012. In other words, these products 
were relatively less important valuewise than other products in the 
407 sample and consequently were not particularly important in the 
whole economy — they accounted for 17.7 percent of the total number 
of products in the sample but for only 2.4 percent of the total value of 
the 407 products in 1933. 

The product characteristics of the 72 products with decreases in 
quantity of over 70 percent are set forth in table 23. From this 
table it may be seen that 67 of the 72 items were products whose 
immediate purchasers were producers and only 5 items were in the 
consumer category. In terms of the ultimate user, 37 of the 43 items 
were producers' goods. The difference between the total number of 
items when classified on the basis of immediate purchaser and ulti- 
mate user is due to the inclusion of 29 products listed as construction 
materials in the former major category and their exclusion from the 
latter. These same construction materials were not classified or 
grouped on the basis of the degree of durability of the products. On 
the basis of the degree of durability, 41 of the 43 products were in the 
durable category. The distribution of the 72 products in the other 

1 No particular significance need be attached to this 70 percent change, it afforded only a convenient break- 
ing point that would provide an adequate number of products for analysis but not so extensive a list as to 
be unwieldy. The same observation is pertinent to the subsequent analysis in which products showing 
extreme changes are listed. 



352 CONCENTRATION OF ECONOMIC POWER 

major classifications is about as one would expect, except in the group 
in which the products are classified on the basis of the source of raw 
material. There, 70 of the 72 products were manufactured from 
materials of mineral origin. 

Table 22. — Percentage change in quantity and in average realized price of products 
which experienced contractions in output of 70 percent or more between 1929 and 
19SS 



Products 



Percent change, 
1929 to 1933 



Quantity 



Average 

realized 

price 



FOOD AND KINDRED PRODUCTS GROUP 

Canned fruits and vegetables; canned and bottled Juices: 

Canned fruits — strawberries 

Canned vegetables— succotash 

STONE, CLAY, GLASS PRODUCTS GROUP 

Clay products, other than pottery: 
Brick: 

Common . 

Face 

Hollow 

Chimney pipe and tops 

Flue lining 

Sewer pipe 

Terracotta 

Tile: 

Ceramic mosaic (vitreous and semivitreous, unglazed) 

. Hollow building tile: 

Conduit tile 

Floor-arch, silo, and corncrib tile; radial chimney blocks; 
fire-proofing tile 

Roofing tile ,.. 

Vitrified brick and plates— for paving 

Wall coping 

Concrete products: 

Brick 

Circular structures 

Cast stone 

Laundry trays 

Paving materials 

Pipe: 

Irrigation 

Pressure 

Sewer 

Poles and posts 

Tile: 

Building block and tile, except roofing 

Drain tile 

Roofing tile .. 

Pottery, including porcelain ware: 

Plumbing fixtures (exclusive of fittings), vitreous china: 

Lavatories 

Reverse traps 

Siphon jets — 

IRON AND STEEL AND THEIR PRODUCTS, NOT INCLUDING MACHINERY, 
GROUP 

Cast-iron pipe and fittings: 
Pipe: 

Bell and spigot 

Culvert 

eteel works and rolling-mill products: 

Finished hot-rolled products and forgings: 

Bars, merchant, etc. — iron... 

Rails.. 

Rail joints and fastenings, tie plates, etc.* 

Rods, bolt and nut, and spike and chain_ 

Structural shapes (not assembled or fabricated): Heavy (leg or 

web 3 inches and over) 1 

Semifinished rolled products: 

Bars, muck and scrap. 

Blooms and billets for forging 

Unrolled steel: 

Direct steel castings 

Ingots 



-77 



-42 
-26 



82 


-19 


87 


-17 


88 


+38 


73 


-31 


81 


+1 


78 


-15 


81 


-31 



-20 
-27 



80 


-32 


72 


-17 


80 


-6 


82 


-13 


74 


+2 


88 


+46 


91 


-29 


73 


-7 


86 


-14 


74 


-12 


90 


+28 


81 


-10 


SI 


-27 


88 


-17 


84 


+17 


91 


+35 


77 


-31 


70 


-6 


S3 


-11 



-13 

-41 



+4 
-10 
-14 
-15 

-16 

-21 
-18 



+22 



CONCENTRATION OF ECONOMIC POWER 



353 



Table 22. — Percentage change in quantity and in average realized price of products 
which experienced contractions in output of 70 percent or more between 1929 and 
193S— Continued 



Products 



Percent change, 
1929 to 1933 



Quantity 



Average 

realized 

price 



Value, 1933 
(in dollars) 



NONPERROUS METALS AND THEIR PRODUCTS GROUP 

Nonferrous-metal alloys; nonferrous-metal products, except aluminum, 
n. e. c: 
Castings, rough- 

Brass and bronze 

Copper 

MACHINERY, NOT INCLUDING TRANSPORTATION EQUIPMENT GROUP 

Agricultural implements: 

Combines (harvester-thresher), all widths of cut 

Cultivators, horse-drawn, 1-row, riding (2-horse) 

Disk harrows, horse- or tractor-drawn, (single or double action) 

Drills, grain, horse- or tractor-drawn 

Manure spreaders, horse- or tractor-drawn 

Mowers (haying machinery) , horse- or tractor-drawn 

Plows, moldboard, horse-drawn, walking, 2-horse and larger 

Cash registers, adding and calculating machines and other business ma- 
chines except typewriters: Calculating machines. 

Electrical machinery, apparatus, and supplies: 

Household apparatus and appliances: Ranges, electric household, 

2\<i kilowatts and over 

Transformers, instrument and meter 

Engines, turbines, water wheels, and windmills: 
Engines, internal-combustion: 
Carburetor engines: 

A ircraf t 

Marine, inboard 

Machine tools: 

Boring machines, vertical (not vertical boring mills) 

Drilling machines, vertical: 

Multiple-spindle, other than sensitive 

Multiple-spindle, sensitive 

Single-spindle, sensitive 

Standard 

Drills, electric, portable. 

Drills, pneumatic, portable 

Grinders, electric, portable 

Grinders, pneumatic, portable 

Hammers (chipping, riveting, calking, etc.): 

Electric, portable 

Pneumatic, portable 

Milling machines: 

Power-feed, universal 

Power-feed .vertical.. 

Presses (except forging) : Forming and stamping 

Radio apparatus and phonographs: Radio-phonograph combinations. . 

MISCELLANEOUS INDUSTRIES GROUP 

Roofing, built-up and roll; asphalt shingles; roof coatings other than 
paint: 

Roof cements (solid) , asphalt. - 

Roof cement, fi brous plastic . - 



-90 
-86 
-91 
-94 
-91 
-70 
-73 



-92 

-95 
-98 
-93 
-93 
-83 
-74 
-83 
-78 

-89 
-79 

-95 
-85 
-80 
-80 



-32 
-12 



-33 
-13 
-40 
-60 
-23 
-14 
-14 



+ 14 



+ 11 
-29 



+ 19 
-44 

-26 

-17 
+9 
-45 
-26 
+1 
-2 
-35 
-20 

-18 

-7 



-13 
-68 



+3 
+7 



16,575,341 
663, 536 



328,000 
524, 980 
459,000 
236, 192 
586,000 
1,803,000 
609,246 



2, 143, 004 



3, 898, 000 
891,000 



8,719,122 
948, 965 

79,000 

164,000 
62,000 
37,000 
105,000 
775,000 
633,000 
260,566 
206,000 

61,000 
568.000 

295,000 

191,000 

1.432,000 

1,407,650 



255, 471 
661, 044 



The distribution of the 72 products among the various concentration 
ratio classes closely approximates the distribution which would be 
expected if the products were drawn at random from the 1,807 
sample — in this distribution the calculated median is 74.5, while in the 
distribution of the sample of 1,807 products the median is 72.6. 
Expressed in other terms, this means that these 72 products were 
produced under only slightly higher conditions of concentration than 
manufactured products of the large sample. The applicability of the 
earlier contention, namely, that there is no apparent relation between 



273238— 41— pt. 27 24 



354 



CONCENTRATION OF ECONOMIC POWER 



the concentration ratios of the products and their quantity behavior, 
is thus extended even to those products which experienced severe 
contractions in the 1929-33 period. 

Table 23.— Distribution of products which experienced contraction in output of 
70 percent or more between 1929 and 1933, by concentration ratio classes and by 
product characteristics 



Concentration ratio 
class 


3 

o 
Eh 


Type of 
imme- 
diate 
pur- 
chaser 


Type of 
ulti- 
mate 
user* 


Degree of 
durability* 


Degree 
of fab- 
rication* 


Type of 
market 


Source of raw 
material 


3 

OJ 

3 

a 

a 
o 

o 
3 
E* 

00 

a 

o 
D 


CO 

.2 
p. 

a 

s 

CO 
*W 

s 
s 

3 

o 
u 


9-4 

5 

a 
o 
O 


§ 

a 
■a 

o 


3 

3 

o 
O 


9 
O 

3 
•O 

o 

1- 
Ph 


3 

OS 

•a 
a 

© 


3 

03 

•a 

9 
cp 
CO 


S 

03 

Q 


2^ 

a cd 

as 
ail 

s 

CO 


•a 
cp 

£3 

1 


"3 

a 
o 

9 
« 


03 

a 
_o 

3 


"3 
3 
■3 

B 

«4 


"3 

*- 

cp 

a 


© 

fa 


hi 

O 


Total 


72 

2 
2 
3 
6 
6 
6 
9 
9 
11 
7 
9 
4 


5 

.... 

1 

1 

.... 

.... 


67 

2 
2 
3 
5 
4 
4 
9 
8 
U 
7 
8 
4 


6 


37 


2 


.0 


41 


11 


61 

2 
2 
1 
6 
4 
4 
7 
9 
10 
7 
6 
4 


23 

2 
2 
2 
5 
1 
2 
4 
.... 

1 
3 


49 


2 


70 

2 
2 
3 
6 
4 
4 
9 
9 
11 
7 
9 
4 








29 

2 
2 


n 


0.1 to 10.0 




10.1 to 20.0 
























20.1 to 30.0 


.... 


3 






3 

1 
1 
1 
6 
7 
6 
6 
7 
4 


2 
.... 

1 

2 

.... 

"4* 


1 
1 
4 
3 
5 
9 
10 
6 
6 
4 


.... 

1 








30.1 to 40.0 










5 
3 
3 
3 
2 
5 
2 
2 




40.1 to 80.0 


1 
1 

5 
6 
6 
6 
6 
4 


1 
1 











60.1 to 60.0 








60.1 to 70.0 








70.1 to 80.0 












80.1 to 90.0 








90.1 to 100.0 












OX i 












(») ::.. 



























•Those products listed as construction materials and as producers' supplies were not classified as to type 
of ultimate user nor as to degree of durability; products listed as producers' supplies were not classified as to 
degree of fabrication. 

1 Withheld to avoid disclosing the operations of individual companies. See appendix A for rules govern- 
ing disclosures as used in this study. 

' Withheld to avoid disclosing the operations of remaining companies. There is not necessarily a dis- 
closure among the leading 4 companies. 

The changes between 1933 and 1937 in the quantities of the prod- 
ucts manufactured in both the "low" and "high" concentration groups 
are shown in chart 20b. Here, again, the percentage changes vary so 
widely within each group and the conformation of the product points 
within each group is so similar, it cannot be said that manufactured 
products in the "low" concentration group exhibit any outstandingly 
different behavior pattern from that of the products in the "high" 
concentration group. In each group there was a marked tendency for 
the output of the products to increase, but, at the same time, there 
were products in both groups which experienced contractions in 
quantity output. 

There were several products in the "high" and "middle" groups in 
which output was stepped up tremendously, while only a very few 
products in the "low" group experienced such outstanding gains. 
This situation is to be explained more in terms of other attributes of 
the products than in terms of their high concentration ratios alone. 
The items which experienced large gains were chiefly agricultural and 
industrial producers' capital goods. In 1933 only 2 or 3 such units 
might have been produced while 50 might have been produced in 
1937; thus the huge percentage gains. 

If these few extreme items are not given undue consideration and 
if attention is centered within the range where the great majority of 



CONCENTRATION OF ECONOMIC POWER 



355 



product points are located, there appears to be no observable relation 
dunng a period of greatly expanding economic activity between the 
changes in output experienced by products and their concentration 
ratios. 

Table 24.— Percentage change in quantity and in average realized price of products 
which experienced expansion in output of 200 percent or more between 1933 and 



Percent change, 1933 to 
1937 



Products 



FOOD AND KINDRED PRODUCTS GROUP 

Canned fruits and vegetables; canned and bottled Juices- 
Canned vegetables: 

Succotash 

Sweetpotatoes "'.'" 

Vegetables, mixed .['/ 



TEXTILES AND THEIR PRODUCTS GROUP 

Cotton woven goods over 12 inches in width: Specialties— rues 
cotton braided except bath mats g ' 

Hosiery: Women's seamless: Pure-thread-silk with lisle or cotton' 
tops, heels, and toes. 



Quantity 



PAPER AND ALLIED PRODUCTS GROUP 

Paper and paperboard: Book paper— lithograph 

CHEMICALS AND ALLIED PRODUCTS GROUP 

Chemicals, n. e. c: Acids, citric 

Fertilizers: Bonemeal 

Paints, pigments, and varnishes: Varnishesi other."."."" 



STONE, CLAY, AND GLASS PRODUCTS GROUP 

A S a7d gas U k C e?s. S SfiK?. ^ ^^ ^ and b ° Uer C0V " 
Clay products, other than pottery: 

Brick, common 

Brick, face ZZZZZZ "'.""' 

Flue lining ZZZZIZZZ 

Tile, enameled tile and glazed ceramic mosaic 
Concrete products: 

.Brick 

Cast stone ~~~ ' 

Paving materials ZZZIZZZ " 



Pipe, pressure . 
Tile: 



Building block and tile, except roofing 
Drain tile 



Roofing tile 

Glass: Lenses, Motor-vehicle " 

P XLS!^KsS? ™ e "^^^-nxtur^(exciusive- 

Lavatories.. 

Reverse traps ZZIZZZZ '."" "" 



IRON AND STEEL AND THEIRr PRODUCTS, NOT INCLUDING 
MACHINERY, GROUP 

St uctra°n r d S fo a gfn|s° lling " miJ1 products: ^shed hot-rolled prod- 
Bars, merchant— steel, electric and crucible 
Kails. 



Structural shapes (not assembled or fabricated): 

Heavy (leg or web 3 inches and over) 
o c . L iS flt (leg or web less than 3 inches) 
Un?Sst e eel:° lled products: Blooms and bi "ets for forging". 

Direct steel castings... 

Ingots 



+312 
+335 
+326 



+369 
+249 



+202 



+218 
+314 
+346 



+415 

+219 
+247 
+221 
+279 

+1,083 

+203 

+1, 966 

+4, 591 

+356 
+469 
+519 
+271 



+235 
+408 



+210 
+258 

+212 
+222 
+427 

+364 
+599 



Average 

realized 

price 



-4 

-19 

+31 



-41 
-23 



+40 



-28 
-3 

-38 



+23 

+21 

+9 
+34 
+9 

+5 
-12 
-62 
-20 

+8 
-19 
-7 
-1 



+23 
+32 



+2 
-1 

+32 
+43 
+46 

+23 

+18 



Value, 1937 
(in dollars) 



680, 621 
1,017,840 
4, 529, 680 



477, 076 
11,475,518 



5, 683, 482 



4,118,513 

1, 919, 503 

13, 711, 567 



11,519,411 

34, 009, 775 
14, 357. 181 
2, 032, 005 
8, 470, 479 

347,900 
2, 260, 744 

672, 936 
4, 323, 603 

14, 862, 739 

639, 477 

1, 948, 727 

1,755,645 



3, 128, 462 
1, 861, 894 



51, 081, 185 
53, 716, 019 

110,873,129 
34, 130, 777 
15, 304, 185 

176, 129, 935 
8, 734, 116 



356 



CONCENTRATION OF ECONOMIC POWER 



Table 24. — Percentage change in quantity and in average realized price of products 
which experienced expansion in output of 200 percent or more between 1933 and 
1937 — Continued 



Products 



Percent change, 1933 to 


1937 




Average 


Quantity 


realized 




price 


+8,206 


-22 


+1,006 


+92 


+1,269 


+118 


+836 


+32 


+236 


+32 


+472 


+ 10 


+568 


-9 


+334 


+35 


+238 


-3 


+298 


-15 


+332 


-19 


+ 1,624 


-10 


+1,291 


+74 


+ 11,325 


-72 


+445 


-2 


+597 


+27 


+304 


+30 


+394 


-2 


+555 


-19 


+813 


+62 


+1,249 


+61 


+365 


+57 


+1, 183 


-32 


+299 


-34 


+921 


+30 



Value, 1937 
(in dollars) 



MACHINERY, NOT INCLUDrNG TRANSPORTATION EQUIPMENT GROUP 

Agricultural implements: 

Combines (harvester-threshers) , all widths of cut 

Disk harrows, horse- or tractor-drawn, (single or double action) . 

Drills, grain, horse- or tractor-drawn 

Manure spreaders, horse- or tractor-drawn 

Mowers (haying machinery) , horse- or tractor-drawn 

Cash registers, adding and calculating machines and other business 

machines except typewriters: Calculating machines. 

Electrical machinery, apparatus, and supplies: 

Household apparatus and appliances: Ranges, electric house- 
hold, 2Yi kilowatts and over.. 

Transformers, instrument and meter 

Engines, turbines, water wheels, and windmills: Engines, internal- 
combustion: Carburetor engines: 

Aircraft 

Marine, inboard 

Marine, outboard 

Machine tools: 

Drilling machines — vertical: 

Multiple-spindle (other than sensitive) 

Multiple-spindle, sensitive — 

Single-spindle, sensitive. 

Drills, electric, portable .. 

Drills, pneumatic, portable 

Grinders, electric, portable.. 

Grinders, pneumatic, portable - 

Hammers (chipping, riveting, calking, etc.), electric, portable 
Milrfttg nre chines: 

Power-feed, universal 

Power- feed , vertical 

Presses (ex'sept forging) : Forming and stamping 

MISCELLANEOUS INDUSTRIES GROUP 

Roofing, built-up and roll; asphalt shingles; roof coatings other 
than paint: 

Roof cements (solid), asphalt.. 

Roof cement, fibrous plastic. 

Roof coating, nonfibrous liquid 



21,283,817 
9, 745, 008 
7, 044, 974 
7, 216, 792 
8. 015, 105 

13, 506, 101 



23, 742, 816 
5, 217, 745 



28, 576, 971 
3, 203, 663 
4, 359, 822 



2, 255, 415 
1, 497, 584 
1, 172, 956 
4, 152, 509 
5, 601, 252 
1, 374, 959 
1,001,585 
324, 585 

4, 376, 275 
4, 141, 625 
10, 468, 167 



2, 237, 140 
1, 728, 092 
2, 200, 695 



A list of the products which experienced increases in quantity 
between 1933 and 1937 of 200 percent or more is presented in table 
24. The product characteristics and? concentration ratios of these 
products are indicated in table 25. An inspection of these tables and 
of the preceding two tables reveals the nature of the products which 
are subject to violent fluctuations in production in periods of reces- 
sion and recovery. It is interesting to note that many of the prod- 
ucts are the same. Of the 56 products showing increases of 200 per- 
cent or more, there were 42 which appeared in the list of products 
with decreases of 70 percent or more in the 1929-33 period. (It 
would actually have been necessary for the products which decreased 
70 percent in the downswing to increase 233 percent in the upswing 
to attain the earlier level of output.) Furthermore, all of the 72 
products which decreased more than 70 percent in the 1929-33 period 
showed increases in quantity in the recovery period. 



CONCENTRATION OF ECONOMIC POWER 



357 



Table 25. — Distribution of products which experienced expansion in output of 200 
percent or more between 1933 and 1937, by concentration ratio classes and by 
product characteristics 







Type of 
imme- 
diate 
pur- 
chaser 


Type of 
ulti- 


Degree of 


Degree 
of fab- 
rication* 


Type of 


Source 


of raw 


v> 








mate 
user* 


durability* 


market 




material 


CD 

3 


8 


Concentration ratio 




















a 




























9 

CO 


class 












a> 


CD 












"3 








a 










ht 






£k 




3 "2 








3 
3 

H 










00 




3 
o 


s 

a 

o 


u 

a> 
3 

3 
■V 
O 


§ 

3 

a 
o 


« 

3 

O 


as 

3 
■a 

a 



3 

I 


CD 

3 
ea 

3 


.So 


t3 
CD 

.a 

CO 

a 


"3 
a 

'5> 

CD 


03 

a 


3 


"3 

M 

CD 

a 


s 




hi 

CD 




3 

a 



CD 

6 

3 

■a 


hi 




H 


u 


Ph 


O 


&H 


'A 


CO 


M 


00 


fe 


« 


!<5 


< 


fe 


O 


U 


CM 


Total 


56 

2 
2 
2 
3 
5 
1 
7 
6 
11 
8 
6 
3 


7 

"2 

~2 
.... 

1 
1 


49 

2 
2 
2 
3 
3 
1 
5 
6 
10 
7 
5 
3 


11 


26 


4 


1 


32 


11 


44 

2 
2 
1 
3 
4 

"T 

6 
8 
7 
4 
3 


14 

2 
2 
1 
2 
1 
1 
2 

"2" 
.... 


42 


7 


47 

2 
2 
1 
3 
2 
1 
5 
6 
9 
7 
6 
3 


2 





18 

2 
2 

1 
3 
2 


1 


0.1 to 10.0. .__ 





10.1 to 20.0 
























20.1 to 30.0 


— - 


1 






1 


1 


1 
1 
4 


"§' 


1 


.... 




30.1 to 40.0 




40.1 to 50.0 


2 

"~3~ 

"3" 
2 
1 


.... 

3 
5 
5 
4 
4 
3 


2 












1 


50.1 to 60.0 . 




1 
4 
5 
8 
5 
5 
3 


1 

3 

"3" 
1 
2 




60.1 to 70.0 . 


1 


1 


5 
6 
9 
8 
5 
3 


2 
.... 

1 






1 
1 
3 
2" 
1 




70.1 to 80.0 . 








80.1 to90.0_._ 






1 


.... 




90.1 to 100.0 


1 


— - 




(i) 








(») 























* Those products listed as construction materials and as producers' supplies were not classified as to type 
of ultimate user nor as to degree of durability; products listed as producers' supplies were not classified as 
to degree of fabrication. 

1 Withheld to avoid disclosing the operations of individual companies. See appendix A for rules govern- 
ing disclosures as used in this study. 

2 Withheld to avoid disclosing the operations of remaining companies. There is not necessarily a dis- 
closure among the leading 4 companies. 



RELATION BETWEEN THE CONCENTRATION RATIOS OF SELECTED PROD- 
UCTS AND CHANGES IN THEIR AVERAGE REALIZED PRICES 

The average realized price which is used in the following analysis 
was derived by dividing the total value of a census product in 1929, 
1933, and 1937 by the quantity of that product manufactured in these 
years. The advantages and disadvantages associated with the use of 
average realized price data to measure price changes were discusssed 
at some length in chapter IV. 

The relation between the changes in average realized prices of the 
407 products from 1929 to 1933 and their concentration ratios is 
shown in chart 21a. The coordinates of each product point are the 
percent which the average realized price in 1933 was of that in 1929 
and the product's concentration ratio. As in the chart in the pre- 
ceding section, the diagrams here have been divided into three sec- 
tions. The distributions of product points in the "low," "middle," 
and the "high" groups arc strikingly similar. The highness or the 
lowness of the concentration ratios of products does not appear to 
have any measurable relation to the decreases in average realized 
price experienced between 1929 and 1933. 

A general feature of charts 21a and 21b as contrasted with charts 
20a and 20b is the much narrower spread of product points in the 
scatter diagrams showing changes in price than in those showing 
changes in quantity. Thus, .for all the manufactured products 
analyzed there appears to be a quite definite tendency for prices to 
decline less than quantity output in a period of general business con- 
traction and, on the upswing, for prices to increase less when quantity 



358 



CONCENTRATION OF ECONOMIC POWER 



/ooo 



/00 



/o 



♦LOW 



* • . 



* • • 8 • 



*HIGH* 



i - 



}* v. • I 
• *. ' i 



to 



20 



30 



4C SO 60 70 SO 90 

CONC£NT/?AT/ON PAT/O 



J/ 2/ 

00-40- 165 



CHART 2U-RELATION BETWEEN CONCENTRATION RATIO AND PERCENTAGE 
CHANGE IN AVERAGE REALIZED PRICE, 192»-33. 



CONCENTRATION OF ECONOMIC POWER 



359 



Kt.ooo 



% 

\ /ooo 

ft 



/oo 



(O 



*LOW 









*HIGH* 






! : 



/O 20 30 



■40 SO CO 70 dO 90 
CONCENTRATION &AT/Q 



/OO 



1/ 



CHART 21b— RELATION^ BETWEEN CONCENTRATION RATIO AND PERCENTAGE 
CHANGE IN AVERAGE REALIZED PRICE, 1933-37. 



360 CONCENTRATION OF ECONOMIC POWER 

output is expanded. This behavior is not associated with any par- 
ticular condition of concentration but is apparently a price and pro- 
duction characteristic of all manufactured products. 

The percentage changes in the average realized prices of products 
between 1933 and 1937 and their concentration ratios are plotted in 
the form of a scatter diagram in chart 21b. During this period 
there were a number of products which experienced decreases in 
average realized price, but by far the larger number showed material 
increases. As in the period of declining economic conditions, the 
behavior pattern of products with "low" concentration ratios in the 
1933-37 period was quite similar to that of the products in the 
"high" group. The central tendency of the points reflecting the per- 
centage changes in the products within each group appears to be of 
about the same positive magnitude. The divergent behavior of the 
prices of the products in these groups is not sufficient to support any 
general" contention that wide or narrow changes in the average realized 
price of products are associated with the highness or lowness of their 
concentration ratios. 

The data presented in charts 21a and 21b seem only to support the 
general observation that in periods of both increasing and decreasing 
business activity the changes in average realized prices experienced 
by products with "high" concentration ratios and by those with "low" 
concentration ratios were quite similar in nature and extent. The 
changes in the average realized prices of products with high concen- 
tration ratios were neither significantly more nor less than the changes 
of products with low concentration. 

If the validity and relevance of the material presented up to this 
point is granted, the obvious conclusion seems to be that the various 
changes in average realized prices experienced by the products in 
each group are to be accounted for by factors or characteristics of the 
products other than the concentration or relative lack of concentration 
in their production. The analysis in chapter III would seem to indi- 
cate that such factors as the durability of the products, the stage of 
their fabrication, the nature of their markets, or the types of buyers 
for the products are perhaps more pertinent in an explanation of the 
price and quantity behavior of the products than the condition or 
degree of concentration under which they are produced. 

In order that the nature and significance of products which varied 
widely in price may be examined, those products which experienced 
decreases of 50 percent or more in average realized price between 1929 
and 1933 have been listed in table 26. Of the 407 products in the 
sample, there were 47 products, or 11.5 percent, which dropped 50 
percent or more in price between 1929 and 1933. In terms of total 
value, these products were of more than average importance in the 
economy, accounting for 18.9 percent of the total value of all products 
in the 407 sample in 1933. This is in sharp contrast with the products 
showing large quantity decreases; products experiencing largequantity 
decreases were of relatively slight importance valuewise, while the 
products which experienced broad decreases in price were relatively 
more important valuewise than the average. 

The economic characteristics of these 47 products and their con- 
centration ratios are shown in table 27. The computed median of 
concentration ratios is 65.1 percent, while the computed median for the 
407 sample is 67.2 percent. The products are distributed somewhat 



CONCENTRATION OF ECONOMIC POWER 



361 



lower on the concentration ratio scale, however, than those of the 
1,807 product sample — the computed median for the entire sample is 
72.6 percent. This situation is to be accounted for by the large pro- 
portion of consumers' goods in the distribution, coupled with the fact 
that consumers' goods were generally produced under conditions of 
relatively low concentration. Thirty-five products were classified on 
the basis of ultimate user (5 products were classified as construction 
materials and 7 as producers' supplies and as such were not classified 
on the basis of ultimate user), and of this total 31 were ultimately 
used by consumers and- only 4 by producers. Of the 35 products 
classified on the basis of durability, there were only 9 in the durable 
category. Further, two-thirds of all the products which experienced 
decreases of 50 percent or more in price were fabricated or processed 
from materials derived from agricultural sources. Generally, then, 
these products were nondurable consumers' goods which were processed 
predominantly from agricultural materials. Here, again, there is a 
strong contrast with products which experienced large quantity 
decreases in the 1929-33 period. 



Table 26. — Percentage change in average realized price and in quantity of products 
which experienced price decreases of 50 percent or more between 1929 and 1933 



Products 



Percent change, 
1929 to 1933 



Average 

realized 

price 



Quan- 
tity 



Value, 1933 
(in dollars) 



FOOD AND KINDRED PRODUCTS GROUP 

Corn sirup, corn sugar, corn oil and starch: 

Corn oil, crude 

Corn-oil cake and meal 

Flour and other grain-mill products: Bran and middlings 

Meat packing, wholesale: 
Hides, skins, and pelts: 

Cattle hides, cured. 

Cattle hides, uncured 

Sheep and lamb pelts, cured.. 

Sheep and lamb pelts, uncured 

Sheepskins and lambskins, pickled 

Lard 

Meat: 
Cured: 

Beef, pickled and other cured 

Pork, dry-salted, not smoked 

Pork, pickled and dry -cured, smoked 

Pork, pickled and dry-cured, not smoked 

Fresh: 

Beef 

Mutton and lamb 

Pork 

Veal., _ 

Oleomargarine (margarine) made in the oleomargarine, in the meat- 
packing, and in other industries: Oleomargarine, all 

Sugar, beet: 

Molasses, sold or transferred for desugarization 

Pulp, molasses 

Sugar, cane, not including products of refineries: Bagasse, for sale as such 
Sugar refining, cane: Refiners' blackstrap and nonedible sirup. 

TEXTILES AND THEIR PRODUCTS GROUP 

Coats, suits, and separate skirts, women's, misses', and juniors'— regular 

and contract factories: Suits 

Corsets and allied garments: Brassieres and bandeaux-brassieres 

Hosiery: 

Boys', misses', and children's— seamless— rayon with cotton tops, 

heels, and toes, and all-rayon 

W omen's: 
Seamless: 

All-pure-thread-silk _ 

Pure-thread-silk with lisle or cotton tops, heels, and toes... 



-55 



-23 
-28 
-15 



+ 14 
-57 
+54 
+ 18 
+ 113 



-15 

-29 

-4 

-22 

+ 1 

+23 

-6 

+5 

-34 

+54 

+71 

+ 103 

-32 



+53 

+47 



-3G 



-26 
-47 



2, 363, 972 

389, 628 

60, 700, 000 



34, 625, 000 
3, 546, 000 
9, 599, 000 
2, 724, 000 
2, 663, 000 
104, 908, 000 



8, 340, 000 
35, 185, 000 
136, 855, 000 
83, 906, 000 

362, 734, 000 
84,903,000 

235, 206, 000 
44, 386, 000 

17, 357, 683 

732, 433 
1,516,432 

453, 306 
1,348,888 



26,101,000 
12, 126,000 



715,000 



1,342,264 
4, 260, 240 



362 



CONCENTRATION OF ECONOMIC POWER 



Table 26. — Percentage change in average realized price and in quantity of products 
which experienced price decreases of 50 percent or more between 1929 and 1933 — 
Continued 



Products 



Percent change, 
1929 to 1933 



Average 

realized 

price 



Quan- 
tity 



Value, 1933 
(in dollars) 



CHEMICALS AND ALLIED PRODUCTS GROUP 

Chemicals, n. e. c: 

Acetates— amyl - 

Sulphates — copper (blue vitriol) . . --. 

Compressed and liquefied gases: Hydrogen... 

Paints, pigments, and varnishes: Shellac, bleached 

PRODUCTS OF PETROLEUM AND COAL GROUP 

Petroleum refining: Lubricating oils, black, cylinder, red, neutral, pale, 
and paraffin.... 

LEATHER AND ITS MANUFACTURES GROUP 

Leather, tanned, curried, and finished: 
Glove and garment leather: 

Horse, colt, ass, and mule: Half and whole fronts (equivalent 

fronts) --- 

Sheep and lamb, except shearlings (skins).. 

Shearlings (skins) 

Sole and belting leather: Oak and union sole (backs, bends, and 
sides) - 

STONE, CLAY, AND GLASS PRODUCTS GROUP 

Clay products, other than pottery: 
Tile: 

Faience tile (including hand-decorated tile) 

Wall tile, including trim ; — 

IRON AND STEEL AND THEIR PRODUCTS, NOT INCLUDING MACHINERY, GROUP 

Heating and cooking apparatus, except electric: Portable ovens 

NONFERROUS METALS AND THEIR PRODUCTS GROUP 

Nonferrous-metal alloys; nonferrous-metal products, except aluminum, 
n. e. c: 
Ingots and pigs: 

Brass and bronze - 

Copper (secondary) 

Rods, copper - 

MACHINERY, NOT INCLUDING TRANSPORTATION EQUIPMENT, GROUP 

Agricultural implements: Drills, grain, horse- or tractor-drawn 

Electrical machinery, apparatus, and supplies: 

Fans (direct motor-driven): Desk fans.. 

Household apparatus and appliances: Waffle irons and griddles 

Radio apparatus and phonographs: Radio-phonograph combinations... 

MISCELLANEOUS INDUSTRIES GROUP 

Roofing, built-up and roll; asphalt shingles; roof coatings other than 
paint: Roof coating, nonfibrous liquid 



-56 



-50 
-53 
-50 

-50 



-71 



-60 

-78 
-50 
-68 



-56 



+236 

-29 

+183 





-31 



-34 

+139 

-25 



-67 



-25 



-94 

+23 
-41 
-80 



-59 



441, 592 
1, 407, 631 

914, 532 
1,878,000 



74,178,000 



2,281,000 
8, 345, 000 
2,062,000 

39,061,000 



325, 980 
1, 551, 734 



616, 333 



8,018,270 
4, 179, 767 
12, 587, 786 



236, 192 

2, 134, 917 
1, 289, 524 
1, 407, 650 



183,729 



Extending the analysis to the 1933-37 upswing, there were 61 prod- 
ucts which experienced price increases of 50 percent or more. (See 
table 28.) An inspection of the products on this list indicates a con- 
siderable amount of overlapping with those products on the list show- 
ing large price decreases between 1929 and 1933. In fact, 28 of the 
47 products appearing on the earlier list also appear on this list. As 
in the earlier list, these products have greater than average value — 
they made up 15 percent of the 407 products but they accounted for 
20 percent of the aggregate value of the products in 1937. 



CONCENTRATION OF ECONOMIC POWER 



363 



Table 27. — Distribution of products which experienced price decreases of 50 percent 
or more between 1929 and 1933, by concentration ratio classes and by product 
characteristics 







Type of 
imme- 
diate 
pur- 
chaser 


Type of 
ulti- 


Degree of 


Degree 
of fab- 
rication* 


Type of 


Source 


of raw 


to 








mate 
user* 


durability* 


market 




material 




"5 


CO 

.SB 

0. 


Concentration ratio 






















d 


































class 












o 


o 












"3 








a 








u 

3 




a 




XI 


05 




3-o 


"3 

J3 






3 










E 






| 


s 

3 


| 


8 

3 


g 


T3 


5 
3 


03 g 

as 


S3 

a 


03 

a 


s 


S3 


« 




3 

u 


3 




S3 

o 


a 
o 


o 


o 


73 

o 


a 

O 


s 


§ 


"p 


'3 




03 


B 


a 


£ 


S3 


a 



■3 
O 




H 


O 


Pi 


U 


Ph 


!4 


GO 


P 


CO 


£ 


« 


'A 


<! 


fe 


O 


u 


Pi 


Total 


47 


19 


28 


31 


4 


13 


13 


9 


16 


24 


9 


38 


31 


13 


2 


1 


5 


7 


0.1 to 10.0... 



1 
3 
1 
6 
9 
7 
7 
3 
4 
4 
2 




































10.1 to 20.0... 


1 
1 

"V 

7 
1 
4 
1 


~~2 

1 
2 
2 
6 
3 
2 
4 
4 
2 


1 
2 
1 
5 
7 
4 
6 
1 
3 
1 






1 
2 






1 
1 


.... 


1 
2 

1 
5 
8 
6 
6 
3 
2 
4 


1 
3 
1 
5 
5 
4 
4 

3" 
3 
2 












20.1 to 30.0 .. 






.... 


1 
1 

1 
1 
3 
2 
1 
3 
3 












30.1 to 40.0 


.... 

.... 

1 
1 


1 
4 
4 
1 
3 












40.1 to 50.0 




"i 

1 
2 
1 
1 
1 


4 
8 
3 
5 
1 
1 


1 
1 
1 
1 

"2 


1 
4 
1 
3 
2 
1 
1 










50.1 to 60.0... 






1 
2 
1 




60.1 to 70.0 


1 


1 




70.1 to 80.0 




80.1 to 90.0... 


1 






90.1 to 100.0 








(i) 






1 




(«) 




2 






?, 





























* Those products listed as construction materials and as producers' supplies were not classified as to typeof 
ultimate user nor as to degree of durability; products listed as producers' supplies were not classified as to 
degree of fabrication. 

• Withheld to avoid disclosing the operations of individual companies. See appendix A for rules govern- 
ing disclosures as used in this study. 

1 Withheld to avoid disclosing the operations of remaining companies. There is not necessarily a dis- 
closure among the leading 4 companies. 

Table 28. — Percentage change in average realized price and in quantity of products 
which experienced price increases of 50 percent or more between 1933 and 1937 



Products 



Percent change, 1933 to 
1937 



Average 

realized 

price 



Quantity 



Value, 1937 
(in dollars) 



FOOD AND KINDRED PRODUCTS GROUP 

Corn sirup, corn sugar, corn oil, and starch: 

Corn oil, crude. ._ 

Corn-oil cake and meal 

Corn sirup, mixed with other sirups. 

Corn sirup, unmixed 

Corn sugar 

Flour and other grain-mill products: 

Bran and middlings 

Corn meal 

Feed, screenings, etc 

Flour, wheat, semolina 

Meat packing, wholesale: 
Hides, skins, and pelts: 

Cattle hides, cured. 

Cattle hides, uncured 

Sheep and lamb pelts, cured 

Sheep and lamb pelts, uncured 

Sheepskins and lambskins, pickled 

Lard 

Meat, cured: 

Beef, pickled and other cured.. 

Pork, dry-salted, smoked 

Pork, dry-salted, not smoked 

Pork, pickled and dry -cured, smoked 

Pork, pickled and dry-cured, not smoked 



+153 
+78 
+52 
+58 
+55 

+82 
+83 
+66 
+57 



+75 
+69 
+109 
+132 
+122 
+122 

+53 

+95 

+157 

+115 

+118 



-27 
+37 
-31 
+18 
-43 

+6 

-22 

+30 





+25 
+5 
+4 
-16 
+11 
-46 

+17 
+3 
-29- 
-20 
-35 



4, 340, 527 
952,680 
10, 392, 615 
26, 605, 776 
15, 692, 490 

116,434,273 
32, 642, 130 
52, 930, 697 
17, 529, 631 



75, 509, 529 
6, 267, 685 

20, 754, 760 

5, 318, 838 

6, 569, 709 

126, 331, 478 

15, 018, 947 
24,268,086 
64,072,256 
235, 530, 519 
118,556,833 



364 



CONCENTRATION OF ECONOMIC POWER 



Table 28. — Percentage change in average realized price and in quantity of products 
which experienced price increases of 50 percent or more between 1933 and 1937 — 
Continued. 



Products 



Percent change, 1933 to 
1937 



Average 

realized 

price 



Quantity 



Value, 1937 
(in dollars) 



food and kindred products groijp — continued 

Meat packing, wholesale — Continued. 
Meat, fresh. 

Beef - 

Pork 

Veal. 

Edible organs, tripe, etc 

Oleomargarine (margarine) made in the oleomargarine, in the meat- 
packing, and in other industries: Oleomargarine, all 

Shortenings (other than lard), vegetable cooking oils, and salad oils: 

Shortenings - — 

Sugar, beet: 

Molasses, sold or transferred for desugarization 

Pulp, dried, exclusive of molasses 

Pulp, moist, exclusive of molasses 

Sugar, cane, not including products of refineries: Bagasse, for sale 
as such — 

CHEMICALS AND ALLIED PRODUCTS GROUP 

Chemicals, n. e. c: 
Glycerine: 

Crude 

Dynamite grade and chemically pure 

Sulphates: 

Copper (blue vitriol) 

Zinc — 

PRODUCTS OF PETROLEUM AND COAL GROUP 

Petroleum refining: 

Acid oil -- -. - 

Lubricating oils, black, cylinder, red, neutral, pale, and paraffin 
Residuum or tar 



LEATHER AND ITS MANUFACTURES GROUP 

Leather, tanned, curried, and finished: 

Glove and garment leather: Shearlings (skins) 



STONE, CLAY, AND GLASS PRODUCTS GROUP 

Clay products, other than pottery: 

Chimney pipe and tops - 

Tile: 

Hollow building tile: Floor-arch, silo, and corncrib tile; 

radial chimney blocks; fire-proofing tile ..- 

Wall tile, including trim 

Concrete products: Circular structures 

IRON AND STEEL AND THEIR PRODUCTS, NOT INCLUDING MACHINERY, 
GROUP 

Steel-works and rolling-mill products: 

Finished hot-rolled products and forgings: 

Armor plate and ordnance „ 

Axles, rolled and forged 

Ties, cotton 

Scrap iron and steel. 



NONFERROUS METALS AND THEIR PRODUCTS GROUP 

Nonferrous-metal alloys; nonferrous-metal products, except alumi 
num, n. e. c: 
Ingots and pigs: 

Brass and bronze - 

Copper (secondary) 

Plates and sheets: Brass and bronze ; 

Tubing (seamless) and pipe: Brass and bronze 



+73 

+136 

+64 

+55 

+80 

+86 

+83 
+84 
+52 

+67 



+178 
+138 



+100 
+76 



+67 
+81 
+100 



+99 



-f96 



+56 

+73 
+58 



+55 

+77 

+65 

+121 



+81 
+67 
+66 
+59 



+13 
-25 

+44 
+25 

+62 

+64 

-13 



+9 
+13 



+41 
+26 



-33 
+49 
-69 



+20 



+122 



+38 

+1 

+150 



+163 

+132 

+36 

+92 



+137 
+36 
+66 

+104 



710,531,368 

415, 525, 668 

105, 086, 001 

57, 989, 923 

50, 876, 734 

184, 505, 604 

1, 161, 272 
1, 085, 746 
1, 226, 100 

499, 895 



3, 592, 537 
21, 282, 521 



3, 883, 409 
1, 143, 284 



1,015,991 

133, 985, 561 

853, 393 



4, 878, 255 



248,796 



625, 049 
2, 689, 227 
1, 519, 563 



8, 460, 893 
11, 424, 076 

3, 329, 293 
29, 591, 859 



34, 347, 841 

9, 499, 139 

72, 389, 569 

34, 869, 555 



CONCENTRATION OF ECONOMIC POWER 



365 



Table 28. — Percentage change in average realized price and in quantity of products 
which experienced price increases of 50 percent or more between 1933 and 1937 — 
Continued. 



Products 



Percent change, 1933 to 
1937 


Average 

realized 

price 


Quantity 


+92 
+118 


+1,006 
+1,269 


+113 


+136 


+76 


+120 


+74 
+253 
+107 


+1,291 
+155 
+167 


+62 
+61 
+57 


+813 

+1, 249 

+365 


+69 


+92 



Value, 1937 
(in dollars) 



MACHINERY, NOT INCLUDING TRANSPORTATION EQUIPMENT, GROUP 

Agricultural implements: 

Disk harrows, horse- or tractor-drawn (single or double action). 

Drills, grain, horse- or tractor-drawn 

Electrical machinery, apparatus and supplies: Fans (direct motor 

driven): Desk fans . 

Machine tools: 

Boring machines— vertical (not vertical boring mills) 

Drilling machines — vertical: 

Multiple spindle, sensitive... 

Standard 

Honing and lapping machines 

Milling machines: 

Power-feed, universal 

Power-feed, vertical 

Presses (except forging) : Forming and stamping 

Radio apparatus and phonographs: Radio-phonograph combina 
tions , 



9, 745, 008 
7, 004, 974 

10, 698, 020 

306, 498 

1, 497, 584 
943, 077 
692,299 

4, 376, 275 
4, 141, 626 
10, 468, 167 

4, 567, 342 



One might assume from the number of duplications in the two lists 
that, on the basis of their economic characteristics, the distribution 
of the products which experienced broad increases in prices in the 
1933-37 recovery period would be more or less similar to those show- 
ing large price decreases in the downswing. The distributions on the 
basis of product characteristics, however, are not particularly close. 
Of the 44 products classified on the basis of ultimate user (6 products 
listed as construction materials and 1 1 as producers' supplies were not 
classified on the basis of ultimate user), 28 products were consumers' 
goods, and 16 producers' goods (see table 29). The products classi- 
fied on the basis of durability were about evenly distributed between 
nondurable and durable goods and, on the basis of the source of raw 
material, the distribution between agricultural and mineral sources 
was fairly even. Generally, the products which experienced large 
increases in prices were consumers' goods, but their distribution, on 
the basis of other economic characteristics, indicates no predominant 
attribute. As was seen in table 25, those products experiencing large 
quantity increases in this same period were predominantly durable 
producers' goods fabricated from mineral materials. 

The distribution of products by concentration ratio classes shows the 
products experiencing large price increases to be clustered considerably 
higher on the range than was the case of products with large price 
decreases on the downswing. The computed median of these 6 1 
products is 74.6 percent, while the computed median of the 47 products 
is 65.1 percent. The central tendency of the distribution, however, 
closely approximates the distribution of the 1807 products for 
which the computed median is 72.6 percent. 



366 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 367 

RELATION BETWEEN CHANGES IN QUANTITY OUTPUT AND CHANGES IN 
AVERAGE REALIZED PRICES 

In chart 22a, the percentage changes between 1929 and 1933 in the 
average realized prices of products with "high" and with "low" 
concentration ratios are plotted against their percentage changes in 
quantity during this same period. To facilitate the comparison, sepa- 
rate charts for each group have been prepared. The scatter diagram 
of the "low" concentration group is shown in the upper half of the 
chart and that of the "high" group in the lower half of the chart. 

In an appraisal of the significance of the data presented in this type 
of chart, the behavior patterns into which the product points fall 
indicate distinct relational forms and each form has a particular sig- 
nificance in price analysis. In the first place and within each scatter 
diagram the product points may be (1) scattered or (2) clustered into 
some particular conformation. When the points are scattered it means 
that both large and small changes in price are associated in random 
fashion with both large and small changes in quantity, or conversely 
both large and small changes in quantity are associated with both large 
and small changes in price. In this situation, the changes in price and 
the changes in quantity concur as if by chance. Thus, products 
A, B, C, D, and E may all have experienced a 50 percent decrease in 
quantity but A experienced no change in price, B a 10 percent decrease, 
C a 20 percent decrease, D a 30 percent decrease, while the price of E 
dropped 40 percent. Likewise, products F, G, H, I, and J may have 
experienced 50 percent decreases in price but F experienced no change 
in quantity, G a 10 percent decrease, H a 20 percent decrease, I a 30 
percent decrease and J a 40 percent decrease. 

In those cases where a definite pattern is evident, it may take the 
form of a cluster of points which string out and slope downward 
toward the right. This type of behavior is evident, within broad 
limits, in both sectibns of chart 22a; it is more pronounced, however, 
in the upper diagram. There, small changes in price are associated 
with relatively large decreases in quantity and appear in the upper 
left-hand area of the range. From this upper range the product 
points string out down to the right through the intermediate behavior 
types to the lower right-hand portion of the scatter. In this latter 
area small changes in quantity are associated with relatively large 
decreases in price. When viewed in one way, the points tend to cluster 
along or around a diagonal line sloping downward to the right. The 
closeness of the relation between changes in price and changes in quan- 
tity is suggested by the closeness with which the product points conform 
to this line. 

This inverse relation between price change and quantity change 
appears to characterize the behavior of certain types of products, 
while for other types of products no relation between price and quantity 
changes is evident. The nature of the divergent behavior patterns 
for the various groups of products is set forth in the latter portion of 
this chapter. The fact that large price changes are associated with 
small quantity changes and vice versa does not mean that the large 
price changes resulted in or caused small quantity changes. Actually 
the causal relationship may have run in the opposite direction, or it 
may be that the relation is to be accounted for by the operation of a 
third or fourth variable on the price and quantity of the particular 



368 CONCENTRATION OF ECONOMIC POWER 

products. The meaning of the relation must be supplied by an under- 
standing of common causes or of other variables affecting the 
association. 

In the second place and in a comparison of the behavior patterns of 
various types of products as reflected in different scatter diagrams, it is 
necessary to observe the location on the horizontal and vertical axes 
of the range and the center of the conformation of product points. 
The center of the product points for one type of commodity may be in 
one area of the scatter diagram, while the center of the cluster for an- 
other type of product may be in another area. Products of one. type 
may be characterized by small price changes associated with large 
quantity changes; thus, the product points will cluster in one area of 
the diagram. Products of another type may be characterized by large 
price changes associated with small quantity changes and will cluster 
in another area. The typical behavior of still other groups of products 
may assume an intermediate relationship. Furthermore, the points 
on the diagram for products of one type may be scattered and thus 
tend to show a more restricted sort of inverse relation between their 
price and output characteristics (lower diagram, chart 22a). 

A few of the product points in both diagrams of chart 22a fall in the 
second and fourth quadrants, but by far the largest number of points 
fall in the third quadrant where decreases in quantity are associated 
with decreases in price. The points falling in the second quadrant 
represent products which experienced an increase in average realized 
price accompanied by a decrease in quantity, while those points in the 
fourth quadrant represent products for which there was an increase in 
quantity accompanied by a decrease in average realized price. 

As already pointed out, in the lower half of chart 22a, where the 
percentage changes between 1929 and 1933 in the average realized 
prices of products with "high" concentration ratios are plotted against 
their changes in quantity, the pattern of inverse relationship is not 
so strongly marked as that for products with "low" concentration. 
In some instances products that had small price decreases also ex- 
perienced sharp curtailment in output but there were an equal number 
of instances in which small price declines were associated with small 
contractions in output (in some cases the production actually in- 
creased). And further, there were a sizable number of products for 
which the contraction in output was accompanied by an equal or pro- 
portionate decrease in price. Undoubtedly, the inclusion in the list of 
commodites with different characteristics was responsible for the lack 
of uniformity in the conformation of the product points. An out- 
standing feature of the lower diagram as contrasted with the upper 
section of the chart is the greater magnitude of change in quantity 
output among products in the "high" group than among those in the 
"low" concentration group, while price changes in both cases were 
approximately equal in magnitude. Thus, if regression lines were 
fitted to the data of the upper and lower sections of the chart, the 
slope would be greater in the former than in the latter. 

It has been argued that concentration in production manifests 
itself in price and output policies which result in distinctly different 
behavior patterns from those which would result in the absence of 
such control. According to this hypothesis, the prices of products 
produced under conditions of high concentration are maintained in a 
period of business recession and the depression adjustment takes the 



CONCENTRATION OF ECONOMIC POWER 369 

form of -a contraction in output. In a period of recovery, on the 
other hand, the immediate effects may be increases in output at the 
old price as demand expands. Although there might be a tightening 
of credit terms, lowering of cash and quantity discounts, etc., actual 
price increases would probably not occur until near capacity opera- 
tions were reached. It has also been contended, and in some cases 
demonstrated, that the prices of some products were not reduced in 
the 1929-33 do