35
THE THIRD FORM OF GOVERNMENT
THE THIRD FORM OF GOVERNMENT
MONOPOLY: PRIVATE COLLECTIVISM
Bitterly tragic is the fact that many businesmen often denounce the real friends of democracy and of honest capitalism as "communists," when they themselves are being destroyed by concentrated finance, big business and monopoly—a concentration of wealth that is itself private collectivism.
Every Marxist has been taught that this ruthless concentration of wealth and centralization of economic power will be the destruction of private capitalism. When monopoly and the concentration of wealth becomes intolerable, they say, socialization of wealth—of the concentrated means of production, that is—becomes the only solution.
In any event, monopoly is at the heart of every American problem. Historically, monopolies were exclusive privileges granted outright by the King. Throughout history the people have regarded them as curses because they excluded the people from much of the richest land and its fruits. Many tried to have monopolies forbidden in our written Constitution.
Business and industry have assumed radically new proportions and characteristics. I have fished around among the economists for a definition of these new developments, but I find them getting all tangled up because monopolies no longer extend to a single commodity only. Individual firms now have monopolies of several commodities and dominate one or more markets. So economists are inventing new words like "duopoly," "triopoly" and "oligopoly." And now Leon Henderson, formerly Executive Secretary of the 1938-1939 Monopoly Committee in Washington and now a member of the Securities and Exchange Commission, says that if you don't watch out the oligopoly will get you just like a monopoly.
As for me, economists can call them gollywopolies if they want to. All I am interested in is preserving and extending true democracy, which I have defined as being able to talk, pray and think as you please, and to "eat regular." But for the sake of getting started, I should like to define a monopoly as a corporation which has such a degree of control over men, money, land and its products, that it can deny democratic rights to individual citizens. The control is not merely of a certain business field, but of many apparently unrelated activities in our organized society. Or, to put it another way, a monopoly is any big and powerful business combine which holds such a dominant position that it not only ceases to be more or less subject to the ordinary controls of society, but actually begins to take over those controls.
It is now abundantly evident that these organizations are becoming fewer in number and more gigantic in size. This argues against the theory that man is always getting a greater share of land and wealth as time goes on. And the story of the wide distribution of their stocks in any substantial amounts among the American people is just not so. More and more stock is getting into the hands of fewer and fewer people. In 1935, forty-three stockholders of the American Telephone and Telegraph Company owned over 250,000 shares more than the combined holdings of a quarter of a million people classified as small stockholders. Only 3.28 per cent of the American people filed income taxes in 1929. And that 3.28 per cent received 83 per cent of all dividends paid to individuals by corporations. Nearly all of that went to individuals with incomes of $10,000 or more per year.
Hold on just a moment—these figures are important and I have about a quarter-page more of them. Internal Revenue Department figures show that of corporations reporting in 1932, 5 per cent of the stockholders owned 85 per cent of their wealth, while by 1935, the same 5 per cent owned 87 per cent of the wealth. In the hearings before the Monopoly Committee (1938-1939), Dr. Willard Thorp showed from official figures that 780 firms, or .2 per cent (not 2 percent, but two-tenths of 1 per cent), each had assets of over $50,000,000, and that this proportionally small number of American corporations holds 52 per cent of the total assets of all corporations.
Because decisions of the Supreme Court under the "due process of law" clauses have exempted corporations from various controls of government, both state and federal, some of these monopolies have become in effect a third form of government, or a series of third forms of government independent of the United States government and individual state governments.
The trouble with this third form of government is that the people have no control whatever over it; it becomes in effect independent of the constitution of the people. A few of the big fellows get together and tell us, as consumers, how much we shall pay for meat, steel, aluminum, liquor, and numerous other commodities. This is certainly exercising the powers of government and without any responsibility for the welfare of the governed. Even a fascist government takes into some consideration the effect of the price upon the citizen or consumer. If it does not feed its people, it eventually falls.
It is taxation without representation, which our forefathers regarded as unconstitutional enough to warrant a revolt against the British Government. Some industries call this third form of government "self-government in industry." Actually it is anarchy—separate government without reference to the sovereign government of the people. Although there are occasional examples of intelligent "self-government," they are nevertheless independent of the public or consumer, the employee, and quite often the stockholder.
Of history-making importance, therefore, was the President's message of April 29, 1938, in which he bluntly called attention to the gigantic concentration of economic power. He emphasized the fact that this concentration was breaking down private enterprise as a method of providing capital and employment. It was a studious and scholarly message on which he had spent many months. He suggested a joint committee—to be made up of members of both houses of Congress, together with prominent government officials—to investigate and propose legislation.
Congress created the committee, and it is now functioning. On the committee is a representative group of men, most of them conservatives. They have the ablest group of advisers I have ever known to serve on a congressional committee.
The Executive Secretary was Leon Henderson, distinguished economist, whom I have already mentioned. In an opening statement, he outlined the proposed scope of the committee's work. He said that the American system had emphasized the dignity of the individual and his resourcefulness. He pointed out the serious problems of modern civilization, and said the "overall question seems to be, 'Why have we not had full employment and full utilization of our natural resources?" The Committee, he continued, was faced with one extremely important question: the problem of excess savings over new investment and capacity to produce.
He asked numerous questions that Americans must answer. Among them: "Can the country rely on unregulated competition alone? How can competition be made effective? Is the choice between full competition and full planning?" Then he submitted the following: "Can economic effort be divided into monopoly and competition?" and "What part has concentration [of economic power and wealth] played in the decline of competition?"
This beginning seems to be sound; it must be followed up and encouraged by the American public at large. For the situation today has become critical. Of course in the beginning of our history people didn't have to worry much about monopoly. If you went broke or needed food, you could move west and take up some free lands. In that way you could get out of the way of monopolies. But now monopolies are all over us, under us, and in between us. Therefore, we have the problem of whether the people are going to let the great corporations, but businesses and monopolies control them, or whether the people are going to do the controlling.
In fact, we must understand that monopoly has a wider social significance than anyone realizes. We must also realize that it is anti-democratic—against the grain of the individualism which is supposed to be so predominant in this country. Our entire American system is built on the dignity and the importance of the individual; monopoly drives men toward slavery once more. As I have said throughout this book, the constitution of groceries has, and ought to have, a first call on men's affections. That's the answer to Monopoly.
Monopoly has some of the attributes of a toll bridge. It tells you how cheap the toll is and the miles you save by taking the bridge route. But when the cost of the monopolist's bridge is paid off, he keeps charging the toll. A monopoly does not have to pass on the savings to its consumers. Certainly, if monopoly is "left alone" it is not going to reduce its prices to consumers.
Therefore, it is apparent to me that if a unit or units of monopoly can determine prices and direct the daily lives of millions, the people through their government at the very least should see that the public's interest is protected. I have often heard business referred to as a "game." If so, there ought to be some rules, and an umpire.
It is useless to say that government should not regulate or control. The government has always done so to some extent, especially whenever a business has been "affected with a public interest." Neither private business nor government bureaucracy should be free to do as it pleases. The people should always have something to say about how things are going to be done. That is the reason we have laws—to express the will of the community.
In this modern world we might as well admit we have monopolies that control prices, businesses so large that it is difficult for the human mind to grasp their complexity. Monopoly is, among other things, organized, centralized efficiency in machine procuction. It saves labor. But it must be made to save the labor of all men—not throw millions of them out of work.
It is silly to talk of destroying big business and monopoly. We need monopolies such as the Post Office and other government monopolies; we need big business concerns in glass, power, aluminum, steel, transportation, automobiles, and other general industries. But these big concerns should be conducted in harmony with the national economy, the rights of consumers, workers, and competing interests.
The hearing on the glass industry in December of 1938 before the Monopoly Committee made pretty clear the inner workings of a monopoly. Amazing testimony out of the mouths and papers of the glass monopolists led by Senator O'Mahoney and other members of the Committee to remark that "this looks like a private NRA. . . . Why! you have a private tariff system of your own. . . . What you are doing is issuing private certificates of convenience and necessity." The glass patents' private monopoly, without any government regulation whatever, has the power today to say whether you can go into the glass business or not, what kinds of ware you can make, how much you can make, what territory you can sell in, and the power to cut you off if you cut prices trying to increase your business.
But, I repeat, it is ridiculous to speak of breaking up big business and monopolies. To talk of trust-busting sprees and a return to village arts and crafts is pure moonshine and foolish hope. In this question as well as others, it is up to the people, through their government, to cope intelligently with their serious national problems.
I frequently hear people criticize the government for limiting agricultural production. At the same time, the big businesses of America drastically limit production, laying men off their jobs by the millions. We cannot expect the government to permit great business combines and more or less monopolistic concerns to cut production and employment, and keep up their prices, and then expect farmers to produce unlimited crops below the cost of production.
What I am trying to emphasize is that the great monopolies and combinations have an effect on the entire economy of the nation, and that all monopolies, private or governmental, must be subjected to some kind of regulation that will keep them running at full speed.
Then we can abandon the scarcity economy and produce enough for everyone to eat and wear—and what is more, enough to put everybody to work. When the day comes, there will be more combinations instead of fewer, but there will not be as many combinations in restraint of trade. It all gets back to the thing I have repeated several times and that is: there is nothing wrong with big business or monopoly as such, but the people must use their government to make sure that monopolies are producing and distributing wealth and not gypping the people.
Our job in America is to foster certain types of big business and monopoly, but to do so with a people's government, having control over their operations. Our job in America is not simply to foster the use of machinery, great assembly lines, modern industrial techniques, great discoveries and labor-saving devices, but to make all these modern things the slaves of man instead of making man the slave of them. We need not fool ourselves about going back to the "good old days" when each person had a cow and could hunt rabbits in his own back yard. We have modern times upon us, fast machines and great discoveries. If we can comprehend this, we can make life more beautiful, less painful, and fairer than it has ever been before.
Every Marxist has been taught that this ruthless concentration of wealth and centralization of economic power will be the destruction of private capitalism. When monopoly and the concentration of wealth becomes intolerable, they say, socialization of wealth—of the concentrated means of production, that is—becomes the only solution.
In any event, monopoly is at the heart of every American problem. Historically, monopolies were exclusive privileges granted outright by the King. Throughout history the people have regarded them as curses because they excluded the people from much of the richest land and its fruits. Many tried to have monopolies forbidden in our written Constitution.
Business and industry have assumed radically new proportions and characteristics. I have fished around among the economists for a definition of these new developments, but I find them getting all tangled up because monopolies no longer extend to a single commodity only. Individual firms now have monopolies of several commodities and dominate one or more markets. So economists are inventing new words like "duopoly," "triopoly" and "oligopoly." And now Leon Henderson, formerly Executive Secretary of the 1938-1939 Monopoly Committee in Washington and now a member of the Securities and Exchange Commission, says that if you don't watch out the oligopoly will get you just like a monopoly.
As for me, economists can call them gollywopolies if they want to. All I am interested in is preserving and extending true democracy, which I have defined as being able to talk, pray and think as you please, and to "eat regular." But for the sake of getting started, I should like to define a monopoly as a corporation which has such a degree of control over men, money, land and its products, that it can deny democratic rights to individual citizens. The control is not merely of a certain business field, but of many apparently unrelated activities in our organized society. Or, to put it another way, a monopoly is any big and powerful business combine which holds such a dominant position that it not only ceases to be more or less subject to the ordinary controls of society, but actually begins to take over those controls.
It is now abundantly evident that these organizations are becoming fewer in number and more gigantic in size. This argues against the theory that man is always getting a greater share of land and wealth as time goes on. And the story of the wide distribution of their stocks in any substantial amounts among the American people is just not so. More and more stock is getting into the hands of fewer and fewer people. In 1935, forty-three stockholders of the American Telephone and Telegraph Company owned over 250,000 shares more than the combined holdings of a quarter of a million people classified as small stockholders. Only 3.28 per cent of the American people filed income taxes in 1929. And that 3.28 per cent received 83 per cent of all dividends paid to individuals by corporations. Nearly all of that went to individuals with incomes of $10,000 or more per year.
Hold on just a moment—these figures are important and I have about a quarter-page more of them. Internal Revenue Department figures show that of corporations reporting in 1932, 5 per cent of the stockholders owned 85 per cent of their wealth, while by 1935, the same 5 per cent owned 87 per cent of the wealth. In the hearings before the Monopoly Committee (1938-1939), Dr. Willard Thorp showed from official figures that 780 firms, or .2 per cent (not 2 percent, but two-tenths of 1 per cent), each had assets of over $50,000,000, and that this proportionally small number of American corporations holds 52 per cent of the total assets of all corporations.
Because decisions of the Supreme Court under the "due process of law" clauses have exempted corporations from various controls of government, both state and federal, some of these monopolies have become in effect a third form of government, or a series of third forms of government independent of the United States government and individual state governments.
The trouble with this third form of government is that the people have no control whatever over it; it becomes in effect independent of the constitution of the people. A few of the big fellows get together and tell us, as consumers, how much we shall pay for meat, steel, aluminum, liquor, and numerous other commodities. This is certainly exercising the powers of government and without any responsibility for the welfare of the governed. Even a fascist government takes into some consideration the effect of the price upon the citizen or consumer. If it does not feed its people, it eventually falls.
The price which a monopolist charges the consumer is, after you subtract his costs plus a reasonable profit, nothing more or less than a tax.
It is taxation without representation, which our forefathers regarded as unconstitutional enough to warrant a revolt against the British Government. Some industries call this third form of government "self-government in industry." Actually it is anarchy—separate government without reference to the sovereign government of the people. Although there are occasional examples of intelligent "self-government," they are nevertheless independent of the public or consumer, the employee, and quite often the stockholder.
Of history-making importance, therefore, was the President's message of April 29, 1938, in which he bluntly called attention to the gigantic concentration of economic power. He emphasized the fact that this concentration was breaking down private enterprise as a method of providing capital and employment. It was a studious and scholarly message on which he had spent many months. He suggested a joint committee—to be made up of members of both houses of Congress, together with prominent government officials—to investigate and propose legislation.
Congress created the committee, and it is now functioning. On the committee is a representative group of men, most of them conservatives. They have the ablest group of advisers I have ever known to serve on a congressional committee.
The Executive Secretary was Leon Henderson, distinguished economist, whom I have already mentioned. In an opening statement, he outlined the proposed scope of the committee's work. He said that the American system had emphasized the dignity of the individual and his resourcefulness. He pointed out the serious problems of modern civilization, and said the "overall question seems to be, 'Why have we not had full employment and full utilization of our natural resources?" The Committee, he continued, was faced with one extremely important question: the problem of excess savings over new investment and capacity to produce.
He asked numerous questions that Americans must answer. Among them: "Can the country rely on unregulated competition alone? How can competition be made effective? Is the choice between full competition and full planning?" Then he submitted the following: "Can economic effort be divided into monopoly and competition?" and "What part has concentration [of economic power and wealth] played in the decline of competition?"
This beginning seems to be sound; it must be followed up and encouraged by the American public at large. For the situation today has become critical. Of course in the beginning of our history people didn't have to worry much about monopoly. If you went broke or needed food, you could move west and take up some free lands. In that way you could get out of the way of monopolies. But now monopolies are all over us, under us, and in between us. Therefore, we have the problem of whether the people are going to let the great corporations, but businesses and monopolies control them, or whether the people are going to do the controlling.
In fact, we must understand that monopoly has a wider social significance than anyone realizes. We must also realize that it is anti-democratic—against the grain of the individualism which is supposed to be so predominant in this country. Our entire American system is built on the dignity and the importance of the individual; monopoly drives men toward slavery once more. As I have said throughout this book, the constitution of groceries has, and ought to have, a first call on men's affections. That's the answer to Monopoly.
Monopoly has some of the attributes of a toll bridge. It tells you how cheap the toll is and the miles you save by taking the bridge route. But when the cost of the monopolist's bridge is paid off, he keeps charging the toll. A monopoly does not have to pass on the savings to its consumers. Certainly, if monopoly is "left alone" it is not going to reduce its prices to consumers.
Therefore, it is apparent to me that if a unit or units of monopoly can determine prices and direct the daily lives of millions, the people through their government at the very least should see that the public's interest is protected. I have often heard business referred to as a "game." If so, there ought to be some rules, and an umpire.
It is useless to say that government should not regulate or control. The government has always done so to some extent, especially whenever a business has been "affected with a public interest." Neither private business nor government bureaucracy should be free to do as it pleases. The people should always have something to say about how things are going to be done. That is the reason we have laws—to express the will of the community.
In this modern world we might as well admit we have monopolies that control prices, businesses so large that it is difficult for the human mind to grasp their complexity. Monopoly is, among other things, organized, centralized efficiency in machine procuction. It saves labor. But it must be made to save the labor of all men—not throw millions of them out of work.
It is silly to talk of destroying big business and monopoly. We need monopolies such as the Post Office and other government monopolies; we need big business concerns in glass, power, aluminum, steel, transportation, automobiles, and other general industries. But these big concerns should be conducted in harmony with the national economy, the rights of consumers, workers, and competing interests.
All real monopolies should be owned, controlled, or effectively regulated by the people through their government.
The hearing on the glass industry in December of 1938 before the Monopoly Committee made pretty clear the inner workings of a monopoly. Amazing testimony out of the mouths and papers of the glass monopolists led by Senator O'Mahoney and other members of the Committee to remark that "this looks like a private NRA. . . . Why! you have a private tariff system of your own. . . . What you are doing is issuing private certificates of convenience and necessity." The glass patents' private monopoly, without any government regulation whatever, has the power today to say whether you can go into the glass business or not, what kinds of ware you can make, how much you can make, what territory you can sell in, and the power to cut you off if you cut prices trying to increase your business.
Glass is only one of the many industries that have set up such private dictatorships.
But, I repeat, it is ridiculous to speak of breaking up big business and monopolies. To talk of trust-busting sprees and a return to village arts and crafts is pure moonshine and foolish hope. In this question as well as others, it is up to the people, through their government, to cope intelligently with their serious national problems.
I frequently hear people criticize the government for limiting agricultural production. At the same time, the big businesses of America drastically limit production, laying men off their jobs by the millions. We cannot expect the government to permit great business combines and more or less monopolistic concerns to cut production and employment, and keep up their prices, and then expect farmers to produce unlimited crops below the cost of production.
What I am trying to emphasize is that the great monopolies and combinations have an effect on the entire economy of the nation, and that all monopolies, private or governmental, must be subjected to some kind of regulation that will keep them running at full speed.
Then we can abandon the scarcity economy and produce enough for everyone to eat and wear—and what is more, enough to put everybody to work. When the day comes, there will be more combinations instead of fewer, but there will not be as many combinations in restraint of trade. It all gets back to the thing I have repeated several times and that is: there is nothing wrong with big business or monopoly as such, but the people must use their government to make sure that monopolies are producing and distributing wealth and not gypping the people.
Our job in America is to foster certain types of big business and monopoly, but to do so with a people's government, having control over their operations. Our job in America is not simply to foster the use of machinery, great assembly lines, modern industrial techniques, great discoveries and labor-saving devices, but to make all these modern things the slaves of man instead of making man the slave of them. We need not fool ourselves about going back to the "good old days" when each person had a cow and could hunt rabbits in his own back yard. We have modern times upon us, fast machines and great discoveries. If we can comprehend this, we can make life more beautiful, less painful, and fairer than it has ever been before.
