have to be fixed before the wheels would begin to turn. Profits, taxes, loans, and so forth, appeared more important to business than getting guns, tanks, and airplane motors into production. For months the Government's desire to get the program moving was offset by business' desire to get the terms of cooperation settled to their liking. It developed that business did not want to work for the country on the basis of a 7 or 8 percent profit limitation written into the Vinson-Trammell Naval Expansion Act in 1935, so these provisions were repealed. Thus, the whole cost-plus basis of defense contracts, which industry liked so well during the last war when it had practically a free hand in determining costs, went by the board in 1940 when the allowable items of costs were determined by the Treasury Department. Moreover, when the basis of figuring industry's "living wage" was changed from one of limiting profits to one of taxing excess profits, industry again exploited its key position. In figuring the basis for normal profits above which surtax rates would apply, two alternatives were presented. Applying to all business without regard to defense operations, normal profits could be figured either on the basis of average annual profits over the 4-year period 1935–39, or on the basis of a percentage of a corporation's capitalization. The choice itself is a concession; but when the latter alternative is so clearly open to inflation, it is also playing ball the way business wants it played. Tax rates remain important, but applied to excess profits in this way, they become less burdensome. Furthermore, in many cases industries with defense contracts shied away from the capital markets in seeking to finance plant expansion, preferring to secure loans from the Reconstruction Finance Corporation and its subsidiaries, loans which can be amortized over a 5-year period.82 In these and other ways, steel, aircraft, motor, and chemical companies created the impression in the summer of 1940 that the Nation's rearmament program could wait on the fixing of satisfactory financial terms and that time, far from being of the essence of success, was of secondary importance. In September 1940, Congress was still wrangling with business leaders over these terms. Farm and labor groups accused business of obstructing the program, but business denied the charge. The American Farm Bureau Federation, largest general farm organization, voiced its concern over industry's stalling in a letter from Edward A. O'Neal, federation president, to the Joint Congressional Committee on Taxation, August 8, 1940. John L. Lewis, president of the Congress of Industrial Organizations, on August 15, expressed similar alarm at the "bold sabotage of national defense by representatives of American corporative industry." Industry took cognizance of these charges. The president of the N. A. M., in a letter of August 18 to congressional leaders, stated that such accusations were "deliberate or unwitting misstatements," and denied the charges.33 Despite this denial, the impression remained. Business, it appeared, was running true to form. Speaking bluntly, the Government and the public are "over a barrel" when it comes to dealing with business in time of war or other crisis. Business refuses to work, except on terms which it dictates. 82 Instances are cited in PM, New York daily newspaper, August 9, 1940. 8 New York Times, August 19, 1940. It controls the natural resources, the liquid assets, the strategic position in the country's economic structure, and its technical equipment and knowledge of processes. The experience of the World War, now apparently being repeated, indicates that business will use this control only if it is "paid properly." In effect, this is blackmail, not too fully disguised. The situation which confronted our Government in 1917 when we entered the World War, and which confronts it now, constitute the dilemma of democratic government. Government depends upon capitalist business for the means of defending its existence. Business apparently is not willing to threaten the very foundations of government in fixing the terms on which it will work. It is in such a situation that the question arises: What price patriotism? CHAPTER XI AGRICULTURE AND DISTRIBUTION 1 There are about 7,000,000 individual farm producers 1 in the Nation, and 1,830,717 wholesale and retail distributive outlets. On the other hand, there are 170,000 manufacturing establishments. The concentration of management and control in industry gained by the corporation and the devices associated with it, combined with the economies of large scale production, has meant that a fraction of the industrial producers dominate industry. No comparable degree of concentration exists in agriculture or distribution, hence there is less chance than in business for the development of a consistent unified group philosophy. As a matter of fact, as a result of their atomistic nature and the consequent lack of a unified philosophy, both agriculture and distribution have in many cases followed the lead of business in internal policies as well as political activity. There are many cases where they did not, of course, among them the Granger movement, the fight for parity of farm income, the distributors' insistence on resale price maintenance laws, etc., but there are also many instances, such as the pressure for a high tariff, the opposition to relief appropriations, and hostility to the reciprocal trade agreements, etc., where the lead of the business community was followed without any clear idea of the contradiction. of economic interest involved. American history, of course, is studded with examples of farm and rural disapproval of policy believed to have been made by and in the interests of urban manufacturing groups. Early instances, such as the revolt of farmers and artisans under Jackson's leadership in the early nineteenth century and of agrarian agitation under Populist leadership some decades later, have been paralleled in recent years by considerable farm resentment against "Wall Street." The attitude is typified in an address by Edward A. O'Neal, president of the American Farm Bureau Federation, in which in 1934 he summarized the effects of economic development and public policy upon business, labor, and agriculture. Aided by high tariffs, copyright laws, patent laws, and enjoying the privileges and immunities of charters granted by States, corporations abused States' rights and by means of mergers and holding companies they built up giant monopolies in our Nation controlling vast industries and millions of employees; they fixed prices and wielded vast political power. Thus, our so-called sovereign States created a child more powerful than the State itself and frequently threatened our rights under the Constitution. They could boast like Louis XIV who said, “I am the state." They laughed at the Sherman anti-trust law and the Federal Trade Commission." 1 U. S. Bureau of the Census, Census of Agriculture, 1935. U. S. Bureau of the Census, Census of Distribution, 1935. Annual Report of the Officers of the American Farm Bureau Federation for the Sixteenth Year (1934). FARM POLITICAL POWER PARTIALLY OFFSETS ECONOMIC HANDICAPS The economic handicap of farmers has to some extent been offset by their ability to retain representation in Congress out of proportion to their numbers. It is well known, of course, that the political representation of predominantly agricultural States is disproportionate to their population. Nevada and New York provide the classic illustration, as the two are equally represented in the Senate, although Nevada has only 91,058 inhabitants, while New York has 12,588,066.5 In a less degree this disproportion between representation and population is duplicated in the House of Representatives. The tremendous economic power of one pressure group, business, therefore, while it has not been equaled, has at least to some extent been held in check by the preponderance of farm representatives in Congress. During the Sixty-sixth and Sixty-seventh Congresses in the early 1920's, the so-called "farm bloc," organized under leadership of the newly created American Farm Bureau Federation, held the balance of power. As a result, "More legislation of benefit to agriculture was passed than in all of the sessions of Congress preceding." President Hoover's signing of the Smoot-Hawley Tariff bill in 1930, while it was in line with farm requests at that time, actually worked against farm interests in many cases, because its industrial levies raised the prices of industrial goods, while its farm duties, although high, were generally ineffective in regard to the prices of farm products. The efforts of organized farmers have been much more successful since 1933. In the Agricultural Adjustment Act, with its grant of inflationary monetary powers to the President, the Emergency Farm Mortgage Act, and dollar-devaluation legislation, the farm organizations finally reached their goal of writing the Nation's farm policy. American Farm Bureau Federation. In this success the Farm Bureau Federation played the leading role. Grasping the leadership held in the nineteenth century by the National Grange and later on, in the Northwest, by the Nonpartisan League, the American Farm Bureau Federation in 1921 took the initiative in agitating for farm relief, and has held it ever since." The foundation stone of its philosophy is the idea that American farmers are entitled to a living standard as high as that enjoyed by other groups. This idea is expressed in the slogan "Equality for Agriculture." According to the Farm Bureau attainment of this goal involves several points. First is a commodity dollar, whose purchasing power would remain constant. The Bureau favored the Goldsborough bill to set up a board to regulate the value of money and stabilize purchasing power. Second, parity must be attained between U. S. Bureau of the Census, Census of Population, 1930. The necessity to agriculture of organization in an age of concentrated economic_power in industry is well stated in the following extract from an editorial in the Bureau Farmer (now the Nation's Agriculture), official publication of the American Farm Bureau Federation, April 1935. "The more strongly American agriculture organizes itself in a national way, and along the lines laid down in the platform and policies of the American Farm Bureau Federation, the greater will be the results accruing to American agriculture. In an age such as this, where all ramifications of industry are represented by organization groups, agriculture also must present a unified front, and must focus public attention upon its problems through a representative organization, such as the American Farm Bureau Federation." The American Farm Bureau Federation in 1934, a statement of Bureau policies and achievements in that year. |