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Alfred de Grazia:

PUBLIC & REPUBLIC : Political Representation in America


Part  C


American business has possessed the power of governing its activities during most of its history.[27] Although the representation of wealth through suffrage limitations lost practically all basis in the first part of the nineteenth century, the tide of populism rarely threatened wealth with positive political controls. On the contrary, the predominance of the influence of large-scale industry and transport so characterized the last half of the century that that period was known as the golden age of American capitalism. The populist protest movements did little to prevent the transformation of American society into the domain of large corporations and great enterprises.

Before the major offensive of the populist movements struck, the corporations were entrenched behind the protection of the Fourteenth Amendment. The process by which this tactic succeeded is interesting in that it reveals how completely independent pluralism may be of the ordinary idea of representative devices. Pluralism is the attainment of the right to pursue social values independent from a competing sovereignty. Whether or not the attainment is defined in terms conventionally used to describe political privileges is not all-important. The Fourteenth Amendment was drawn up in 1866 by a Congressional committee which had closest to its heart the prohibition of the states' interference with the civil and political rights of Negroes. Its first section declared that "no state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty or property without due process of law; nor deny any person within its jurisdiction the equal protection of the laws."

This one section contains the story of the decline of the old pluralism and the beginning of the new pluralism.[28] A great blow was struck at the old federal system; citizenship was national, and due process of law would protect the life, liberty, and property of all persons against the discriminations of the states. The issue of nation against state was decided in favor of the former in peace as it had just been decided in war. But at the same time, an opening was offered to the corporate person to assume all the liberties of the real person. The full meaning of the advantageous opening was perceived when in 1886 the Supreme Court held that the amendment pertained not only to corporate persons as well as real persons, but also that the substantive meaning given to the phrase "due process" was similarly transferred from the real person to the corporate person.[29] The corporation was now in an excellent position to go ahead with organization of American industry, free from all save a minimal regulation by the states. It possessed the right to petition according to a constitutional amendment, all of its civil rights were protected against state aggression and, in respect to contractual power, it had a sovereign immunity greater than the legislatures, [30] and the corporation could now feel that its representation in politics was fairly secure. Like the American individual and unlike the corporations of Europe, it did not need to fight its way out of a mass of past entanglements of government regulations. Its independence assured, it had only to protect itself for the future.

It need not concern itself with new modes of corporate representation; rather, such a course would have been positively dangerous. For the American corporation was considered a person at law, and, as Thurman Arnold has so well pointed out, it came to possess in the minds of a great many people the attributes of the "rugged individualist" which were so highly regarded in America.[31] There would have been little use in its trying for a new status when the old status suited its needs so well; the best move was to organize itself on a federal basis, separate from the state and national governments so far as possible. The processes of business consolidation and remote financial controls, which came about in the early twentieth century, abetted the tendency to create an independent hierarchy within the state hierarchy. The various attempts at legislating against combinations had little effect on the trends, for, as Arnold wrote," the actual result of the anti-trust laws was to promote the growth of great industrial organizations by deflecting the attack on them into purely moral and ceremonial channels."[32]

The new federalism, like the old, was tied together by the courts -federal courts which were neither elective nor immediately responsible. The courts worked out the details of the practical relationships between the government and business as they had between the national government and the states.[33] In the latter case, however, the courts were much more aware of the interests of the decentralized units than they had been in the case of the states. This was a logical sequel to the fact that the corporation was the holder of individual rights, whereas the original federalist struggle had been between two powers undeniably governmental according to a written constitution.[34]

When the nation entered the new century, business enterprise was already beginning to shape itself to the new group politics. The typical forms in which industry had represented itself in the nineteenth century had been the individual enterprise and the cartel. The new forms began with the formation in 1895 of the National Association of Manufactures, which gave formal content to what had previously been, at most, working agreements. A later president of the Association put the significance of the event as follows: "Notice was thus given to the world for the first time that the American manufacturing industry had come of age, and that it could and thereafter would speak with one voice on every occasion of common defense and on all occasions pertaining to its general welfare."[35]

The age was one of organization, proclaimed the N.A.M., and every progressive business ought to realize it. The N.A.M. was to be the representative of the nation's business, helping many other associations to organize and grow, but always maintaining its positions as the oldest and most powerful. Its methods were the direct pressure of the lobby, a far-flung public-relations program, and an energetic effort to organize all business on behalf of the N.A.M.'s political policies. The War Emergency and Reconstruction Conference, held by the United States Chamber of Commerce in 1918, with the N.A.M. actively participating, derived two propositions from the experience of American business during World War I. One was that each industry in the country should be organized in a representative national trade association with all firms as members, down to the dealer and jobber. The other was that industry should possess "self-government," that each functional entity of American society should be autonomous and self-regulating. A series of tradepractice agreements were proposed by which the government was to turn over economic affairs to these "self-sufficient" industrial entities. But these latter were dropped when it became apparent that they might violate the antitrust acts.

Nevertheless, by the time of the National industrial Recovery Administration in the first year of the New Deal, a rough amalgamation of associations, led by the N.A.M., the U.S. Chamber of Commerce, and the National Industrial Council, gave a preponderating pattern of organization to American industry.[36] The leading concerns of the country were tied together in a search for common policies toward government and labor. Overlapping memberships and interlocked controls gave a single-mindedness to the direction of large-scale industry that did not appear on the face of its associational structure, and the increasing trend toward the concentration of economic power also increased the influence which the leaders possessed over the smaller members of each industry.

A brief general statement can be made of the main ideas by which the business and financial leaders of society related themselves to the state in the baronial and the later consolidating period of American business. The methods of representation in the first and, to a considerable extent, in the second period were those of the lobby and constitutionally protected pluralism. Where business must be transacted with the government, the business leaders preferred to complete the transactions through their legally responsible representatives in the state or national capitals. For the rest, they stood on their constitutional rights as privileged persons, seeking only the necessary contacts with the state and finding ample means of prospering with the help of high tariffs in the rapidly expanding American economy.

In the consolidating period, the same methods prevailed. In addition, taking the moralistic content of antitrust legislation at its word, the corporations and their associations spent a great deal of money and effort in public-relations campaigns designed to prove that they were indeed "moral" persons, as idealistic and as patriotic as the ordinary American citizen. But the maturity which came upon the economic system with World War I began to produce two conflicting tendencies in the politics of big business.

An associational pattern sprang up which strikingly paralleled, as Brady has pointed out, similar development among mature economic system elsewhere, in England, in Italy, in Germany, and in Japan. The tradition of American business had been aloofness from government in a constitutional sense. Government gave protection to industry and the Constitution gave it privilege. It could attain monopoly without aid. The associations facilitated the technique of applying direct pressure to the government and if increasing policy co-operation throughout industry, and they helped establish a general program on labor relations and government control.

Within itself, the loose but meaningful hierarchy was, of course, nondemocratic and represented wealth directly. Robert Brady, in his book Business as a system of Power, writes:

As political-pressure bodies, the trade associations and their Spitzenverbande will be found responsible to their membership on the principle of representation, de jure or de facto according to property holding and clique groupings.... Most of them are as closely controlled by a few of the business giants as the bulk of their underlying corporate properties are controlled by a minor fraction of the managerial and directorial personnel.[37]

The basic demand was for industrial "self-government," by which was meant the right of business leaders to set conditions, prices, wages, and practices within the functional component of the total economy without interference by government and with only voluntary relation to the other functional components of the economy.

Now this role of industry was an adolescent one, though its importance hardly diminished. It was the extremity of the initial stage of capitalistic pluralism and was in its psychology still a rugged individualism, acting out the popular myth about the personal nature of corporative enterprise. Typical of its adolescence was its denial of responsibility for anything outside its functional province, be it depression or bad government. Society was no business of business, which was single-minded and wrapped up in its own concerns of production and distribution.

A conflicting tendency began to make its way felt as a result of the unifying sentiments of war, the cyclical disturbances in the economy, the undeniable success of labor organizations, and the pressure of a more active government. Despite the most adamant denials of business leaders and despite the ordinary policies of the associations, a mature pluralism began to manifest itself, casting an uneasy eye at European examples and finding no comfort in the doctrines of "self-government in industry" and "rugged individualism." "Corporatism" was the new concept which might describe the new tendency. Business must choose now between a real selfgovernment and government in business.

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