THE COMING ECONOMIC CONFLICT

...It is afraid of over-production, surpluses, excess plant capacity...

...The nation that had invented the airplane was suppressing its use...

...The end is hatred of government by big business, distrust of big business by little business, hatred of all business by those who are insecure, and finally the use of power policies to gain special privileges by each warring group...

...We can maintain neither a good neighbor policy nor a sound foreign trade with.a country whose industries we are strangling...

...Their investments in obsolete equipment are secure only if they are able to control and slow up the revolutionary techniques of a new industrial age...

...We will have a capacity after the war to produce 15,000 cargo planes a year...

...When the Blue Eagle flew, oun»banks and financial institutions were failing because of falling prices...

...Edwards shows how "the cartel arrangements concerning electric lamps illustrate the impunity with which quality may be degraded...

...In his report Mr...

...New methods of transportation are taking away the geographical advantages on which the dominance of these great corporations has depended...

...When contract cancellation begins the prime contractors, who are large companies, will shake off the smaller firms which are the ones least able to stand the shock...

...7) They form their own protective tariffs and make foreign economic policies for the nation, the purpose of which is to prevent their own countrymen from producing and distributing goods...

...Recently the world-wide arrangements between du Pont and Imperial Chemical Industries were disclosed in a complaint filed by the Department of Justice...

...Dividends on their capital structure depend on their ability to prevent independents from producing at lower prices...

...A campaign is under way to shut down the productive capacity of plants built by the Government, to permit only those now in business to have access to essential materials, to limit export trade to the exporters in business before the war, to block the development of new transportation which would allow industry to grow up in the West and the South...

...On the result of that struggle hangs the fate of industrial democracy...

...These restrictive policies, in turn, create a crisis in agriculture because the farmer gets less and less industrial goods in exchange for his products...

...I'm afraid you and your friends are going to find him a difficult problem...

...We suffered through this sort of confusion for 10 years until the war forced us into full production in spite of ourselves...

...There is even talk that various units in the automobile industry should agree not to use new designs or materials and thus waste their old machinery...

...The design life of the 2330 Lamp has been changed from 300 back to 200 hours, the change to take effect as soon as manufacturing facilities will permit...

...The advocates of today's new international NRA come forward at a time when the danger of deflation is gone, when astronomical sums are being pumped into our economy, when the only safeguard against disastrous inflation is the fullest production of which our industrial capacity is capable...

...Protected from foreign competition, American manufacturers have attempted to increase their business.by reducing the durability of their light bulbs...

...The arrangement was described in one of the Standard Oil documents as follows: "The I. G. (I.G...

...Another example: Bunge & Born, a large Argentine concern, refused to accept a permament restriction of its field of manufacture in its own country...

...Against this background trade treaties are meaningless...

...The motive behind the program is (1) to protect the profits of established enterprise against the lower prices which would come from full use of our productive capacity, and (2) to keep the activity of new enterprise within the narrowest possible bounds...

...But these factors would compel big business to squeeze the water and the obsolescence out of its capital values and depend solely on superior efficiency...

...At this point hopeless confusion of both political and economic policies begins...

...They compel government to pour out subsidies, unemployment relief, and money for public works to maintain a minimum of production at the artificial prices that an unsubsidized market cannot support...

...But, argues our author in the Harvard Business Review, cartels have learned their lesson...

...The scheme was motivated solely by an attempt to stabilize production all over the world...

...I used all the arguments you gave me and a few I thought up myself, but he is simply determined to sell his output...

...Hirsch's demands, we shall have to face a period of unsatisfactory earnings on our acid, refined sulphur and CS2 investments, but in the meantime we shall be making the chemical business most unattractive to Bunge & Born and this, in time, can only have the effect of removing all enthusiasm for their making further investments in our field...

...Blocking Path To Progress The leaders in that movement are not bad men...

...This sounds like the old scarcity philosophy of the NRA...

...Today 26 billion dollars of railroad capital securities are threatened by the coming competition with the airplane...

...Our tight business combinations have been so used to relying on eliminating independent production and maintaining prices through combinations, patent pools, or private agreements that we may expect them to fight to continue that control over industry after the war...

...It is predicted that passengers can be carried from New York to Chicago in four hours at a rate, of $5, that airplanes will be able to transport fruits and vegetables from the Pacific Coast to New York at less than a third of railway express rates...

...Standard Oil of New Jersey agreed not to produce rubber at home...

...Yet in effect it was an international alliance between British and American companies against their own countrymen to build up private protective tariffs not to aid struggling industry but to crush it...

...It is understood that no publicity or other announcement will be made of the change...

...For example, Prof, de Haas in the Harvard Business Review article tells us that the electrical cartels gave us better lamps at lower prices...

...Established industry feels itself unable to compete in an equal race with new industry...

...The public is informed by prominent businessmen of the old school that it does not want a new car, that it does not Hke changes in design...

...The same consequences will follow cartel control after the war when independent production threatens our present inflated price levels...

...The apologists for the regulation of production and distribution by private agreement or patent control sing only one refrain, a typical rendition of which is found in an article in the Winter, 1944, issue of Harvard Business Review ("Economic Peace Through Private Agreements," by J. Anton de Haas...

...Today cold water is being thrown on such improvement predictions...

...And so Standard Oil proceeded to use its patent control to suppress rubber production in 1940, in the face of the emergency of national defense...

...The answer of the railroads to this competitive threat is a plan to cartelize transportation and to control competing services in the interest of the stabilization of obsolete capital...

...20 a resolution was adopted to the effect that air conditioning for 1934 would be restricted to observation, lounge, and dining cars...

...Harley Kilgore's Committee cites the difficulties of a Dutch producer who thought he had the right to do business in Holland...

...Political government splits into irreconcilable pressure groups, each seeking a larger share in the diminishing national income, each destroying purchasing power in order to maintain artificial prices for itself, while the increasing numbers of unorganized and insecure compel the government to provide subsidies and relief out of the same diminishing income...

...in short, they become a sort of independent state within a state, making treaties and alliances, expanding their power by waging industrial wars, dealing on equal terms with the executive and legislative branches of the government, and defying government authority if necessary with the self-righteousness of an independent sovereign...

...4) They stop the introduction of new and more efficient methods in order to maintain obsolete ways of production, in the continuance of which they have a vested interest...

...5) They set up arbitrary and despotic control over production and exploit weaker members of their own group...

...At no time in our history was there less excuse to begin again the tragic undertaking of delegating to private groups the power to strangle production at home and abroad...

...They are only the soft remnants of the industrial bureaucracy that created our depression with their policies of market control, high prices, and low turnover...

...THE only answer to such naive faith in business regimentation lies in the files of cartel management which over the past three years have been increasingly exposed to public scrutiny...

...Their judgment is no longer biased by the advantages of short run profits against long run advantages for humanity...

...When fluorescent lighting threatened to make the Mazda lamp obsolete because it required less current, a letter from an official of the General Electric Company suggested that articles that had to do with fluorescent lighting "minimize, for the present, the application of daylight fluorescent lamps for other than special applications which would mean plus installations and plus business for ourselves, as well as the utility companies...

...A representative of Duperial reported: "From the beginning we have felt that our policy opposite Bunge & Born should be fixed, having regard more to future than our immediate profits...

...they are now obsessed with a benevolent purpose...

...The Most Important Issue This stage of industrial development of a nation may be compared to old age in an individual—a period of caution, fear, and restricted activity...

...Canada, with less than one-tenth our population, was carrying six times our air cargo...

...THE end of the war will be the beginning of a new conflict—a struggle between the opposing economic forces of free enterprise and cartel control...

...The next step in the scheme is an arrangement of some sort between the Germans and the British...

...The ambitious scope of this plan was described by Sir Harry McGowan to the du Ponts: "Sir Harry explained that the formation of I.C.I, is only the first step in a comprehensive scheme which he has in mind to rationalize chemical manufacture in the World...

...The policy of these top-heavy concerns at home and abroad is aimed at maintaining an artificial division of markets by private agreements, mergers, and patent pools...

...We had less than 400 commercial planes when the war broke out and no cargo planes...

...3) They restrict production and raise prices...

...Sometime ago, the battery manufacturers went part way with us on this and accepted lamps of two-battery lives instead of three...

...IT is high time that we abandoned the illusion that industry controlled by private agreement is capable of any other policy than that of restricting industrial progress...

...In 1939 negotiations were undertaken by Duperial, a subsidiary of the du Ponts and Imperial Chemicals, "to call a halt to B. & B.'s further expansion in the chemical field or at least establish limitations to the rapidity of their growth...

...6) They enter into politics using money and economic coercion, making alliances with other powerful groups against the interest of consumers and independent producers...

...But there was an excuse for the ill-fated attempt to restrict production in 1933...

...In fairness to both du Pont and Imperial Chemicals it should be explicitly stated that the record does not show a lack of patriotism or a desire to trade with the enemies of their respective countries...

...This action on the part of that carrier again brought the subject of air conditioning before Western Roads for reconsideration and at the meeting of the Association held on Dec...

...This has worked out very satisfactorily...

...These restrictive practices if uncurbed spread over all production...

...You say that it is unthinkable that wise business leaders will hold back new production ha order to preserve the capital values of obsolete equipment...

...A memorandum written by a General Electric engineer to an executive of the company in 1932 reads as follows: "Two or three years ago we proposed a reduction in the life of flashlight lamps from the old basis on which one lamp was supposed to outlast three batteries, to a point where the life of the lamp and the life of the battery under service conditions would be approximately equal...

...If we do not accept Mr...

...Farbenindustrie) are going to stay out of the oil business proper and we are going to stay out of the chemical business insofar as that has no bearing on the Oil business...

...The details of such a scheme are not worked out, not even in Sir Harry's own mind, but the broad picture includes working arrangements between three groups—the I.G...

...And so its business policies are devoted to destroying real wealth instead of producing it...

...The American Railway Express, a subsidiary of the railroads, had a monopoly on the pick-up-and-delivery service for air cargo...

...Foreign countries must then be prevented from producing so that the cartel can export that surplus...

...Wherever we turn in the jungle of cartel management we see the same policies pursued...

...And let it not be forgotten that the quid pro quo for cartel division of foreign markets is always restriction of production at home...

...And today the most important issue of the postwar world is whether we will be deluded into again establishing an economy of controlled and stabilized production by private combinations, under the delusion that this path leads to security and international stabilization...

...And cheaper transportation is the key to a vast development of industry in the West and South...

...By sticking to this policy, the logical outcome will be a general arrangement with B. & B.—maybe one or two years hence—but under conditions which must be distinctly more favorable to us than if we were to reach agreement today on the terms Mr...

...Hirsch wishes to impose upon us...

...The concentration of control in domestic production has been increased by huge war contracts...

...Corwin Edwards in a report to Sen...

...Let us glance at the record...

...The threat which these improvements made to established investment was obvious...

...And so contract cancellation may cause a concentration of industrial power even greater than at the height of war production...

...in Germany, Imperial Chemical Industries in the British Empire, and du Pont and the Allied Chemical & Dye in America...

...12, 1933, the action previously taken was rescinded and superseded by a resolution providing that no coaches, chair cars, or tourist cars will be air-conditioned during 1934.___" The Old Scarcity Philosophy This policy was pursued during the depression, when the manufacture of new equipment could have produced employment that we desperately needed...

...And so the farmer demands that government assist him in playing the cartel game of restricting production in order to raise farm prices to parity by making agricultural products scarce...

...A representative of du Pont reported as follows: "As you will have seen from my cable, he is very stiff-necked about his position...

...The stake in the struggle, the thing that cartel apologists are trying to perpetuate, is a system of domestic and international alliances between the powerful industries which controlled both our domestic and our foreign markets during the depression...

...THE smokescreen behind which cartel management always hides is its supposed contribution to consumers...

...It should be repeated as an axiom that where-ever private groups are permitted to control the market these results inevitably follow: (1) They seek to consolidate industrial power by destroying existing independent enterprise...

...That sort of control was exercised before the war...

...Subsequent to that time it developed that one of the roads in Western Territory would find it necessary to air-condition combination sleeping-observation cars inasmuch as full observation cars were not operated on certain of its trains...

...It put a floor under air express rates through an illegal agreement with the principal airlines...

...Similar restrictions were put on freight and passenger service, and, of course, lower competitivs rates were vetoed...

...Transportation begets transportation, and the manufacture of equipment for a growing transportation service is a vast source of new employment...

...It is certain that the public will never find out whether this is true or not in any industry where cartel management gains control...

...ONLY a short time ago our magazines were filled with news and advertisements picturing revolutionary improvements in consumers goods...

...One wonders why any realistic observer would expect a different policy from men who are responsible for keeping up inflated capital values against the forces of competition...

...Unemployment grows, and labor, seeking to stabilize jobs, boycotts more efficient methods...

...A letter from the Commissioner of the so-called Western Agreement in which the principal railroads were parties nipped in the bud the threat that any one railroad would try to excel the others in transportation services: "At a meeting of the Western Association of Railway Executives held on Oct...

...As a result, air cargo was practically suppressed...

...That meant that others must be prevented from producing rubber in this country...

...But glance at the efforts of the railroads to inaugurate a mutual savings plan by agreeing that no road would attempt to improve its equipment during the depression...

...These railroad executives were willing to risk criminal indictment under the Anti-trust Laws because they knew that uncurbed competition would force the railroads to modernize and give the public better service at lower rates at a time when it would have been the greatest stimulus to recovery...

...Standard Oil In Action Cartel policy is an endless succession of such incidents...

...2) They prevent, new enterprise from entering the field...

...A new age of light metals and chemicals promises to scatter and decentralize industry and give independent enterprise the greatest opportunity of the century...

...The author warns us that unless we protect the present inflated price structure from the lowered prices that come from independent production the alternative is "cutthroat competition, progressive deterioration of agriculture, disastrous declines in prices, foreclosure of mortgages, and ruin...

...Artificial prices at home restrict the market and create a surplus...

...It will take very little capital to buy and operate cargo planes if the industry is allowed to be free...

...The examples are endless and I have space here for only a few...

...He claims very low costs and is determined to export that portion of his production (which to him apparently means capacity) which he cannot sell in Holland...

...In 1939 a General Electrical official wrote to Tung-Sol Lamp Works: "1...

...The purpose of that policy is to avoid what they call the over-production and surpluses which will be created if independents are permitted to manufacture and sell in a competitive market...

...This will mean that railroads must scrap the obsolete heavy equipment and give us the modern service of which American ingenuity is capable when forced into a competitive race...

...And thus economic imperialism always follows cartel control...