FINAL REPORT AND RECOMMENDATIONS OF THE TEMPORARY NATIONAL ECONOMIC COMMITTEE CONCENTRATION OF ECONOMIC POWER-THE CHALLENGE TO DEMOCRACY In submitting its recommendations, the Temporary National Economic Committee is conscious that with democracy engaged in a worldwide struggle for its very life, public attention has been diverted momentarily from the study of the problems of economic concentration for which the committee was brought into existence. Far from detracting from the importance of economic reconstruction, however, the events of the past year have served only to emphasize the need for readjustments after the present crisis is over. It is quite conceivable that the democracies might attain a military victory over the aggressors only to find themselves under the domination of economic authority far more concentrated and influential than that which existed prior to the war. CONCENTRATION FOR DEFENSE To marshal the resources of America in defense of democracy there has been set up in Washington in the Office for Emergency Management and under the Council of National Defense an instrumentality of economic concentration the like of which the world has never seen. Not even Mr. Hitler commands industrial power and resources comparable to those directed by one central authority in the massive effort of America to protect the free peoples of the world against totalitarian aggression. In this organization and its work is to be found the epitome of the problem this committee was directed to study. The large defense contracts awarded by the War and Navy Departments in the period from June 1, 1940, to March 1, 1941, amounted, in round figures, to $12,695,000,000, a sum which is more than half of all the value added by manufacture in all the industrial plants of America for all industrial commodities during the year 1939. It is a sum which exceeds the total assessed valuation of all the real and personal property within the boundaries of 21 States. Its distribution among the States and industrial organizations of America reveals most dramatically the degree to which the concentration of economic power and wealth has proceeded in America. Two States-Montana and North Dakota-had not received a single primary defense contract of more than $10,000 by the end of February 1941. Three States had each received only one-hundredth of 1 percent in value of these contracts. Three had each received only two-hundredths of 1 percent. Five had each received less than seven-hundredths of 1 percent. Twenty others, including the District of Columbia, had received less than 1 percent each and 35 States, including the District, had received in the aggregate only 12.84 percent of the total.1 1 See appendix A, p. 53 infra. At the other end of the scale, four States-California, Pennsylvania, New Jersey, and New York-had received 39.32 percent. These four States, with two additional States, had received 53.75 percent. In fact, 82.25 percent of the total went to only 15 States.2 A similar story is told in the distribution of industrial facilities financed by the Federal Government. Most of these defense plants have been constructed in a few States. Less than 12 percent of the total value of defense plants have gone to 33 States whereas, on the other end of the scale, 10 States have received 69.09 percent.* 3 Of course, this means only that the defense contracts have necessarily gone to the States in which the American industrial plant had already been concentrated because the first objective of the defense organization was to produce essential war materials. The geographical concentration, however, is the least significant aspect of the defense picture. An analysis of the contracts shows an even more amazing economic concentration, for approximately 45 percent of all contracts, amounting to about $13,000,000,000, were awarded to 6 closely interrelated corporate groups. Moreover, according to the statement of Chester C. Davis, a member of the National Defense Advisory Commission, to the Conference of Southern Governors in New Orleans on March 15, 1941, 62 companies or interrelated groups received 80 percent of the total. Realizing that the burden of national defense must be shared equally by all of our people and that all must have an opportunity to participate in the effort, realizing that the concentration must be broken down, the Office of Production Management and the War and Navy Departments are endeavoring to bring about at least a better geographical distribution. There will probably also be a larger participation by independent contractors and subcontractors in future contracts. The country may safely rely upon those who are directing the defense effort to effect this purpose of decentralization so far as possible while securing the delivery of the goods now needed for immediate purposes. THE SUBSTANCE FOR ECONOMIC RECONSTRUCTION This committee recites the facts only for the purpose of demonstrating that concentration does exist and that America must find the way to bring about a permanent decentralization if the ideals of a democratic social and economic structure for all our people are to be achieved. If this is to be accomplished there must first be a thorough understanding of the causes and effects of the concentrations of economic and political power which have marked this era. The facts which this committee has gathered constitute the material through which this understanding may be reached. The members of the committee are not rash enough to believe that they can lay down a program which will solve the great problems that beset the world, but they are convinced that the information which this committee has assembled, when eventually properly analyzed and disseminated, will enable the people of America to know what must be done if human freedom is to be preserved. 2 See appendix B, p. 54 infra. 3 See appendix C, p. 55 infra. See appendix D, p. 56 infra. See appendix E, p. 57 infra. The form of political and social organization which we call democracy is at bay throughout the world. Powerful forces have arisen on every continent which reject the principles upon which our system of free government and free enterprise has been established. Americans are committed to an enthusiastic defense of the ideals of democracy, but if that defense is to be successfully waged and its institutions made secure for the future, it is clear that our people must re-examine the elementary factors of our faith in democracy. The first and most important of these is the simple tenet of our political and economic creed that all power originates in all of the people and not in any part of them, however numerous, however powerful or able, any given part may be. In the life of a community the whole is greater than any of its parts and whatever power may be exercised for a time by any part of a community is a power delegated from the whole community for the good of the whole community. Governments are instituted among men to serve men; men were not created to serve government. It is not the function of government nor of those to whom the duties and responsibilities of government are temporarily entrusted to direct and command the activities and the lives of men. It is the sole function of government to produce and preserve that order which will permit men to enjoy to the utmost that free will with which they were endowed by an all-wise Creator. If, however, the political organization which we call government is called into existence by men for the benefit of the entire community, a principle which as Americans we must all acknowledge, it is equally true that the economic organizations, called into existence by men to meet their material needs, are likewise justified only to the degree in which they serve the entire community. If the political structure is designed to preserve the freedom of the individual, the economic structure must not be permitted to destroy it. Business organization, like government organization, is a creature of man, a tool by which mankind endeavors to advance its material prospects. Like government organization, business organization has no right or function to control the activities and the lives of men. BUSINESS AND GOVERNMENT SHOULD SERVE MEN In the modern world these two organizations, in principle designed only to serve men, have instead undertaken to order the lives of all for their own selfish interests. It is this basic fact which is the primary cause of the terrible disorder that now threatens to wreck the world. No person who with an open mind reviews the materials gathered by this committee can fail to conclude that the rise of political centralism is largely the product of economic centralism. People have not wanted to surrender local self-government, but the very basis of local government has been undermined because economic life in the modern world has broken down all geographical boundaries. Concentration of government has appeared because local communities and States are no longer economically self-sufficient, but are dependent for their commercial and industrial life upon the acts and decisions of persons and organizations beyond their juris dictions. Chambers of commerce, mayors of great cities, and governors of great States have beaten a path to Washington begging the Federal Government to undertake Federal enterprises in the local communities to solve local problems of unemployment and failing business because, before they turned to Washington, the control of even local economic activity had been removed from within the borders of their respective communities. Local communities and local sovereignties first found themselves dependent upon centralized economic organization before they became dependent upon centralized political organization. No clear understanding of the modern economic problem is possible by any one who does not first understand that the commercial and industrial life of the modern world is carried on, not by men in their individual capacities, but by men in their group or collective capacities. Most of the goods, commodities, and services which the people of this generation want cannot be produced or offered by individuals, but must be produced and offered by groups of individuals, that is to say, by industrial and commercial organizations. No individual could build or operate a railroad, no individual could build an airplane or operate an air line, no individual could build or operate any of the great electrical systems of transportation, communication, of light and power which modern people demand. All of these services and most of the manufactured goods which have raised the standard of living of our people far above that of any previous generation are possible only through collective activity. But these organizations are not responsive to the political subdivisions of government created when most of the commercial and industrial activities of men were individual. In that era each State was, for all general purposes, self-sufficient. It had within the control of its own people not only all the instrumentalities of material and social existence, but all the instrumentalities of political existence as well. All through the history of the development of our system of free government and free enterprise is found an unswerving determination to preserve the economic freedom as well as the political freedom of the individual. Every State in the Federal Union has tried by law to protect economic freedom by exempting from execution or attachment the tools and implements of trade, thus making effective for individuals a principle, not always followed to be sure, eloquently enunciated by Coke, one of the great masters of the common law, in these words: Thou shalt not take the nether nor the upper millstone to pledge, for he taketh a man's life to pledge; whereby it appeareth that a man's trade is accounted his life, because it maintaineth his life; and thereby the monopolist that taketh away a man's trade taketh away his life. It is the fundamental duty of every society which is devoted to the principles of popular government to leave nothing undone to preserve and guarantee the opportunity to work to every capable and willing man. But the tools of trade which are protected by the unanimous voice of the lawmakers of America are not the tools by which modern workers maintain their lives. The modern worker must find his place in the collective or group enterprises of modern industry which utilize tools that no individual mechanic can carry in his kit. He must be fitted into the vast technological structure which characterizes our economy. He must be given a certain and stable place and a compensa tion which will create and sustain the ever-expanding market for goods, services, and luxuries upon the production and distribution of which the modern economic world depends in constantly increasing degree. The problem of concentration of economic power and wealth, therefore, is the problem of adjusting the lives and opportunities of individual men to the national and international organizations which to so large an extent carry on the commerce and industry on which they are dependent. This committee well knows that the solution for our problems is not to be found in any panacea. It is clear from the facts which have been developed that large-scale collective enterprise is here to stay and that the decision which must be made is to fix the social and economic responsibilities of such enterprise in order to eliminate all danger of arbitrary power. If democracy is really to survive, then all the organizations through which man operates-industrial, social, and political-must also be democratic. Political freedom cannot survive if economic freedom is lost. FAITH IN FREE ENTERPRISE The Temporary National Economic Committee, therefore, avows its faith in free enterprise. Every recommendation which it makes is intended to keep enterprise free. It condemns the regimentation of men by government because that is the antithesis of individual liberty. It also condemns the regimentation of men by concentrated economic power because that likewise is the antithesis of liberty. Economic power which becomes so great that it can regiment men enjoys but a temporary triumph, for eventually, by its restrictive policies, it invites and makes inevitable its own subordination to arbitrary political power. We The records of this Committee prove beyond possibility of successful contradiction that restrictive practices are used by some business organizations not only to destroy competition but to regiment men. know that the patent system, for example, created by Congress for the purpose of fostering trade and industry, has been used to suppress trade and industry and to exact tribute from those who were permitted by the holders of patents to stay in business. We know that large collective enterprise in this country has entered into league with large enterprises in other nations to commit those abuses which, throughout our growth as a nation, have been universally condemned as contrary to the public interest. Great commercial organizations operating on a world-wide scale enter into combinations and agreements to divide territory, to suppress competition, and to exploit the public by the restriction of production and the maintenance of price. Patents have been used by international cartels against the public interest and the beneficiaries of subsidies paid out of the Treasury of the United States have, in some instances, even used the advantages bestowed on them by the public to suppress or restrain the activity of other American citizens and American organizations. The framers of the Constitution, desiring to protect the powers of the National Government to serve all citizens of the United States, provided (sec. 10, art. I): No State shall, without the consent of Congress ment or compact with another State, or foreign power. 304946-41- -2 enter into any agree |