United States. Temporary National Economic Committ.

Investigation of concentration of economic power; monograph no. 1[-43] (Volume no. 26) online

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?6 3d SelSES"*} SENATE COMMITTEE PRINT

INVESTIGATION OF CONCENTRATION
OF ECONOMIC POWER



TEMPORARY NATIONAL ECONOMIC
COMMITTEE

A STUDY MADE FOR THE TEMPORARY NATIONAL

ECONOMIC COMMITTEE, SEVENTY-SIXTH CONGRESS,

THIRD SESSION, PURSUANT TO PUBLIC RESOLUTION

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

AND DIRECTING A SELECT COMMITTEE TO MAKE A

FULL AND COMPLETE STUDY AND INVESTIGATION

WITH RESPECT TO THE CONCENTRATION OF ECONOMIC

POWER IN, AND FINANCIAL CONTROL OVER,

PRODUCTION AND DISTRIBUTION

OF GOODS AND SERVICES



MONOGRAPH No. 26

ECONOMIC POWER AND POLITICAL

PRESSURES



Printed for the use of the
Temporary National Economic Committee




UNITED STATES

GOVERNMENT PRINTING OFFICE

WASHINGTON : 1941



TEMPORARY NATIONAL ECONOMIC COMMITTEE

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

HATTON W. SUMNERS, Representative from Texas, Vice Chairman

WILLIAM H. KING, Senator from Utah

WALLACE H. WHITE, Jr., Senator from Maine

CLYDE WILLIAMS, Representative from Missouri

B. CARROLL REECE, Representative from Tennessee

THURMAN W. ARNOLD, Assistant Attorney General

VENDELL BERGE, Special Assistant to the Attorney General

Representing the Department of Justice

JEROME N. FRANK, Chairman

♦SUMNER T. PIKE, Commissioner

Representing the Securities and Exchange Commission

GARLAND S. FERGUSON, Commissioner

♦EWIN L. DAVIS, Chairman

Representing the Federal Trade Commission

ISADOR LUBIN, Commissioner of Labor Statistics

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

Representing the Department of Labor

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

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

Representing the Department of tbe Treasury



Representing the Department of Commerce

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



♦Alternates.



Monograph No. 26

ECONOMIC POWER AND POLITICAL PRESSURES

DONALD C. BLAISDELL assisted by JANE GREVERUS



n



ACKNOWLEDGMENT

This monograph was written by

DONALD C. BLAISDELL

Economic Expert, Temporary National Economic Committee

assisted by
Jane Greverus

Technical Assistant, Temporary National Economic Committee

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

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

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

hi



TABLE OF CONTENTS



Page

Letter of transmittal ix

CHAPTER I

The dynamics of Government 1

Control versus Power 1

The contestants 1

Methods of controlling power 5

Characteristics of the struggle 6

Invisibility 7

Continuity 7

Intensity _-__ 8

The site of the conflict 8

The need ._ ," 10

CHAPTER II

Pressure groups 11

Contestants in the struggle 11

Characteristics of the contestants 16

Staying power 16

Cohesion , 18

Invisibility 19

Resources 19

Technology a major resource of business 22

CHAPTER III

Business outposts in Washington 25

Chamber of Commerce of the United States 25

Crystallizing business opinion 26

The philosophy of business 28

Economics in the chamber's philosophy 29

Government-business relations 29

Industrial relations . 32

Taxation and expenditures 34

Money, banking, and insurance 35

The chamber on other public problems 35

The American Bar Association 37

Theme of the bar's philosophy 38

Disseminating the philosophy 39

Composition of the bar association 40

CHAPTER IV

Public policy and group aims 41

Public problems - 41

Domestic problems 42

Problems of foreign affairs 44

Public opinion 45

Political pressure groups 47

The lobby and its technique 48

The lobby and the political parties • " 53

CHAPTER v

Contacts with government 57

Congress and the Executive 57

Congress: The focus of group attention 57

General legislation 57

Tax and appropriation bills 58

Policy-making through blocking treaty ratification 59

Blocking Presidential nominations 61

V



VI CONTENTS

Contacts .with government — Continued. Page

The President's role 63

The President as "Administrator 65

The President as Party Chief 66

The President as Chief Executive 68

Administration 70

Complexity of administrative approach 71

Motivation of administrative pressure 72

The courts 73

Constitutionality and judicial review 74

Increasing use of review power 74

"Duty of the citizen" 75

Pressure groups and judicial review 76

CHAPTER VI

Industrial relations 81

Channels of business pressure 81

Organization of the National Association of Manufacturers 82

Policies of the N. A. M : 83

Organized labor 86

The American Federation of Labor 86

The Congress of Industrial Organizations 88

Other labor organizations 91

Labor lobbying 91

Labor relations the area of conflict 92

Labor and industrial management come to gripb 94

National Industrial Recovery Act 96

Labor disputes bill .* 98

National Labor Relations Act 99

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

N. A. M. supports limiting amendments 105

Allies of the N. A. M 106

CHAPTER VII

Tariffs and taxes 109

Early fiscal policy 109

Nation committed to tariff protection 110

Hawley-Smoot Tariff Act - 112

Use of import excises to strengthen tariff 114

Reciprocal trade agreements 115

Taxes - 117

Taxation in the 1920's 118

New Deal tax policies 119

Taxation for defense 120

Government expenditures 121

Defense expenditures 123

Fiscal policy dominated by business 123

CHAPTER VIII

Banking and insurance 125

Commercial banking 125

Banking and the Government 125

Business and the Government 128

Propaganda methods 129

Representation at Washington 131

Investment banking 131

The role of investment banking 132

Regulation and — regulation 133

Propaganda 134

The life insurance lobby 136

Assistance from other groups 137

Business and Government share the banking field 139



CONTENTS VII

CHAPTER IX Page

Utilities and railroads 141

Public regulation 142

The Granger Movement 142

Association of American Railroads 144

Shaping public policy — — 145

Banker control of the railroads 146

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

Other pressure on the I. C. C 149

Relations with labor 150

Public utilities attempt to shape public policy 152

Utility cooperation with the schools 154

The utility lobby 156

Utility pressure on administrative agencies 157

Utility Holding Company Act 158

Activities of Edison Electric Institute 160

The general welfare and utility lobbying 161

chapter x

Shipping and air transport , 163

The Navy League • 163

Business interests and defense 165

Public subsidies for private shipping companies — 166

Public subsidies for commercial air transport 169

What price patriotism? 170

History repeats itself 171

CHAPTER XI

Agriculture and distribution. ; 175

Farm political power partially offsets economic handicaps 176

American Farm Bureau Federation 176

National Grange 177

Other farm groups 178

Business dominance in shaping farm policy 179

Distribution and legislation 180

Distribution and antitrust laws 181

The motion-picture industry 182

Food and drug legislation 183

Unequal bargaining power of agriculture and distribution 186

CHAPTER XII

The need — to relax business control 187

Advisory councils 187

Strengthen planning 190

Improve Government administration 191

Bring lobbies into the open ,. 194

Appendix 197



LETTER OF TRANSMITTAL



Hon. Joseph C. O'Mahoney,

Chairm(m, T emporary National Economic Committee,

Washington, D. G.

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

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

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

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

Respectfully submitted.

Theodore J. Kreps,

Economic Adviser.

November 26, 1940.

IX



CHAPTER I
THE DYNAMICS OF GOVERNMENT

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

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

CONTROL VERSUS POWER

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

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

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

THE CONTESTANTS

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

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

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



2 CONCENTRATION OF ECONOMIC POWER

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

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

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

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

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

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



CONCENTRATION OF ECONOMIC POWER 3

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

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

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

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

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

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

3 Ibid., p. 54.

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



m CONCENTRATION OF ECONOMIC POWER

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

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

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

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

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

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

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

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



CONCENTRATION OF ECONOMIC POWER 5

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

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

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



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