The Industrial Front

VOLUME 159

NUMBER 3

MARCH 1937

BY GEORGE E. SOKOLSKY

IN most discussions of labor problems, two groups are emphasized: the employer and organized labor. It is because of this really lopsided emphasis that industrial relations are so confused in the United States.

The employer! Who is the actual employer in American industry? Who pays wages? Who pays the new social taxes? Who pays the costs of strikes?

Organized labor! What small percentage of the American working population is organized? What are those workers doing who are not organized? And exactly what do we mean when we say ‘organized’?

Are these two the only factors in our industrial life? Are they ever the most important factors? Must we not delve deeper into the problem of the character and organization of industry?

Let us first of all divide the interested parties in industry, not in sequences of importance, but to discover what is the concern of each group. There will be investors, management, supervisory forces, white-collar workers, skilled workers, common labor, and the consumer.

These seven groups must view the problems of industry differently because the interests of each group are different. Yet, since in the United States we live in a classless society, group interests often merge or are sentimentally absorbed by still greater concerns, such as the maintenance of our unique form of government. Were it not for these wider interests, we should, during the past six years, have suffered from the effects of a social, if not a political, revolution.

That we have been able to avert anything more serious than mass picketing during the years of despair is ample evidence that, on the whole, the American people do not want a fundamental change in their economic and social system. The Communist Party polled under 100,000 votes in the last election, and the difference between the votes for the Party’s presidential and gubernatorial candidates in New York State tends to indicate that the Communists’ participation in the balloting for Franklin D. Roosevelt was too slight to be of any importance whatsoever.

By some, the comparatively large vote for Franklin D. Roosevelt is regarded as a Left-Wing mandate. But the President never, in his entire campaign, attacked the American economic and social system. In fact, he made it unmistakably clear that he supported an economy based upon private enterprise. In a campaign in which all candidates competed in ambiguities, this one statement stands firm.

Copyright 1987, by The Atlantic Monthly Company, Boston, Mass. All rights reserved.

It is, then, possible to discuss our problem without assuming that we are immediately faced with a mass demand for fundamental change. In fact, it may with safety be accepted that Mr. Roosevelt’s vote, like that of Mr. Harding and Mr. Coolidge, represents a normal American response to visible and tangible prosperity.

In spite of that, we meet 1937 with more strikes, more labor disturbances, more confusion in industry, more peril of delayed and impeded production, than ever before. Why ?

II

There are approximately 18,000,000 investors in American corporations. Some are very wealthy men and women. Some are poor folks with a few dollars of savings put into industrial stocks. Some are trust funds created to protect widows and children. Some are institutions of learning, charity, and religion. Some are insurance companies and savings banks.

All these investors own American industry: they own the property rights in American industry. They are scattered all over the country. Some hold their stock for investment and live on the earnings of the companies. Some play the market speculatively and care nothing about earnings. Some, in a word, are true investors, and some are speculative gamblers. The United States Steel Corporation, for instance, has roughly as many investors as workers. But to some of these Big Steel is only X on the ticker.

One class of investor is forgotten in almost all discussions, and that is the man who still owns and manages his business. Such men are the so-called small manufacturers and merchants. In numbers and in total production, they are still tremendously important in the United States.

These investors may have partners or they may issue stock, but they differ from the mere stockholder in that they often have created or inherited the enterprise; they are sentimentally attached to it; they are close to its problems and usually absorbed in them; and they know their own workers personally, often intimately. Ed Barcalo of Buffalo, such an investor, recently issued a circular to his men listing the ‘Old-Timers’ in his firm, with himself as the oldest of them.

To such investors the business cannot be a mere abstraction — a distant entity. It is life itself. To destroy the business would be to destroy life. It would be impossible for the owner of such a business to finance a strike against himself. Yet, the other type of investor may do exactly that. He often finances movements and enterprises the activities of which are not necessarily strengthening to business. For instance, the Nation is owned by a Wall Street banker; yet no one would regard the Nation as strengthening or supporting the capitalist system in the United States.

The lack of direct interest in a business on the part of its factual owners is a definite weakness of the industrial system. Apart from the need for checks on management, — which is not our concern in this article, — the system makes for a lack of responsibility either for the solution of industrial problems or for a mass protection of business against the onslaughts of the politician or the predatory labor leader.

A very large measure of industrial ownership is in the hands of women and of estates and foundations. This ownership is only too often utterly irresponsible. Its sole concern is an immediate return, and its attitude toward major industrial problems is usually pacifistic in the sense that nothing should be done to impede immediate dividends. Its view is frighteningly shortsighted. It neglects fundamental considerations of the relationship of a particular enterprise to the whole of American industry.

If nothing else has been learned during the depression, this has become axiomatic: namely, that remote control of the ownership of industry in the United States makes for neither the greatest efficiency nor the most harmonious industrial relations. Direct control by ownership seems to be preferable. Most of the profitable concerns during the depression were managed either by their owners or by their creators. But direct control by ownership is likely to decrease in the United States as the creators of enterprises die off. More and more, therefore, management rather than ownership is the measure of effective control and operation.

III

Where ownership is distant and indirectly interested in the enterprise, management assumes the rôle of intermediary between ownership, the various forms and interests of labor, and the consumer. Management has not only to produce earnings but also to preserve the business; and it is more the problem of preservation than of profits that concerns it to-day.

Erosions in business are plentiful, and in magnitude are sometimes equal to those of nature. Competition is both a preserver and a destroyer of business. It preserves the capitalist system, but it often destroys individual enterprises. And competition is not merely a question of the price in the market. It is as well a question of avoiding obsolescence, of meeting new times and tastes, of taking full advantage of new inventions, of preventing overhead from raising costs, and finally of jealously guarding against false increases in costs and prices due to labor troubles.

But competition is not the only form of business erosion. Bureaucracy in management is an equal peril to the individual enterprise. Where ownership is diverse and disinterested, real control rests with management. Even where there is a banking representation of ownership, it is the day-by-day activities of management which set the policies of a firm. A board of directors may pass resolutions of policy, but it is management that carries them out — and it is precisely here that a firm stands or falls, particularly in industrial relations. It is often necessary for management to stand firm against the opinions of the great men who represent ownership and whose views, if effective, might wreck an enterprise. When management has become so job-conscious that it resorts to mere subservience, the enterprise is often on its way out.

It is inevitable that in the very largest enterprises some type of bureaucracy should develop. Men grow up in the business and are promoted by seniority. They develop a job-holding attitude not unlike that of civil servants of the government. They are afraid to do anything novel because no one ever got into trouble by following routine. Faced by new times and new conditions, they grow bitter and inflexible. Often they precipitate labor troubles by delaying to act on their own responsibility.

It is interesting to note that many enterprises have taken men in from the outside to meet just such situations. For instance, Myron C. Taylor was taken out of textiles and made Chairman of the Board of the United States Steel Corporation; Edward R. Stettinius, Jr. was taken from General Motors and made Chairman of the Finance Committee of the same company. Ben Fairless, who has been placed at the head of the Carnegie-Illinois Steel Company, the largest producing unit of United States Steel, came from Republic Steel. In the same company Arthur Young, in charge of industrial relations, came originally from International Harvester and latterly from Industrial Relations Counselors. Consciousness of the need for new blood in the management of a long-established enterprise is an indication of the necessity for breaking down an existing bureaucracy. It is really a new life for an industrial enterprise.

Management’s task must be more than the mere organization and direction of a successful business enterprise. That is insufficient. For no enterprise can stand altogether alone in our interdependent economy.

During the depression, the mightiest industrial organizations suffered as much as smaller units of production. An automobile plant, where labor relations were satisfactory and at peace, may have had to shut down because of a strike in a glass plant owned by another company and operating in another city. Durable-goods industries were helpless for years because the farmer could get no price for his produce. Perhaps no broader view of management’s function has been stated than in the 1937 Declaration of Principles of the National Association of Manufacturers: —

From an economic standpoint, manufacturing industries exist to produce and distribute goods and services so that the entire people have a living, and so the standard of that living may constantly be raised. . . . Such accomplishment means that the social objectives of individual health, happiness, comfortable homes, education and security will be realized in greater measure.

This places upon management burdens of leadership which many industrialists in the past have left to bankers and politicians. The depression has taught management a lesson which it dare not forget — namely, that it cannot abdicate leadership in American life, that it must not delegate leadership if it is not to be destroyed.

In an address before the National Association of Manufacturers, Mr. E. T. Weir stated management’s rôle with unusual positiveness. He said: —

Its [industry’s] policies and actions directly and immediately affect the great majority of our people. Its leaders, with their responsibility to employes, stockholders and consumers, are already trained to reconcile diverse interests, to act in broad spheres, and to aim for ultimate rather than immediate objectives. It commands the resources and the man power to undertake a vast project. Its plants are the best laboratory for the study of the human and economic problems under discussion. If industry united on any constructive programme, it would inevitably encourage emulation and coöperation in other groups. . . .

Industry should spare no effort to make it clearly understood that the aims of industry and the aims of the great body of people are mutual — not opposed.

At present we have the paradoxical situation of industry going to any lengths to give the public complete information about its products, while it makes little effort to give information concerning the policies and conditions surrounding the making of those products. Thus we have the equally paradoxical situation of the public accepting without question anything that a manufacturer says about his product and doubting many of the things he says about himself or his methods.

In effect, Mr. Weir asks: ‘How does it happen that industry has done so constructive a job during one hundred and sixty years of national existence, and yet is so distrusted?’ For it must be distrust rather than dissatisfaction that stirs this nation. Here is management that pays the highest wages, utilizes the shortest hours, provides the most favorable working conditions, and keeps prices down. Yet, here is distrust. Can it be that too large a share of the proceeds of production and distribution go to management? But any study of division of the industrial dollar will show that profits to ownership and salaries to management have taken, in the total, a small share.

Have we not to seek deeper than a mere split-up of the dollar? Has not management placed greater emphasis on technological improvements, on merchandising, on efficiency, than on human relations? Has it not assumed that he who sweeps the snow off his own doorstep has done enough — that the man who minds his own business is the sound man? But what is the business of management ? Is it not the welfare of the whole American people? Is it not the character of American society?

When management reassumes leadership in American industry, its role must be not only to speak for itself but to protect the interests of ownership, the position of the workers, and the welfare of the consumer. The weakness of our system, as Herbert Hoover and Dr. Harold G. Moulton so often and so conclusively show, is that the advantages of technological improvements have been divided between ownership and labor — but in them the consumer has shared inadequately. It is management’s task to bring about a sound economic readjustment, so that all benefit adequately from the advantages of American industrial methods.

And it is a difficult task, for labor rarely, if ever, thinks of itself as a consumer; it rarely realizes that all the advantages of a high wage disappear if prices rise in proportion. The laborer when he is a consumer — as he is daily — benefits from high wages only when he can buy more and better things as a result of the increase. It is one of management’s tasks to make more and better things available to an increasingly large part of the population. When management attempts to solve all industrial problems by the simple device of raising wages and simultaneously raising prices, it is utilizing the politician’s trick of solving similar problems by the device of inflation, which, like any other narcotic, can only lead to a depression.

IV

Another element in industry usually ignored in our general consideration of industrial problems is the so-called ‘white-collar class’ — men and women who prepare the way to production and distribution, supervise it, create new outlets for the results of labor, and provide the machinery upon which management must depend for successful operation.

Superintendents, engineers, research men, stenographers, secretaries, salesmen, auditors, inspectors — these and others like them constitute a huge body of American workers. They do not labor at machines and in plants, but without them the entire structure of industry falls. They are the principal elements which in time compose management. Psychologically and socially, they are the allies of ownership and management. Yet, except for the few who rise to executive positions, they are the least protected of all groups in industry.

Living on fixed salaries or on commissions, they suffer most from every economic dislocation. Not forming pressure groups themselves, they find that government tends to protect other, larger (in the sense of large voting) groups, to their disadvantage. Taxed highly for the slight advantages they enjoy over the skilled worker, suffering from unjustified rises in prices, they will be forced back from a middle class to a proletarian condition.

Industry not only needs these groups because of their competence in production and distribution; it needs them as allies to withstand attacks upon the American economic system. Often the most cultured group in a community, likely to be college-educated, generally conservative in social outlook, these men and women in the United States, as nearly everywhere else, make for healthy national stability.

Yet, during the depression, they were the first to be sacrificed. When curtailments were made, the whitecollar folks were the first who could be spared. When the work was spread, they were often dispensed with.

Industry must face the fact that there is to-day a bitterness among white-collar people and their associates, clergymen, lawyers, doctors, engineers, and others of the professions, which is justified by their experiences. Many of them regard themselves as worse off than unskilled laborers, and they speak with disappointment of the years of preparation for the particular skill that is required of them. They feel that paths to the comforts of life for themselves and their children are being closed to them. They see, on the one hand, huge benefits going to unproductive speculators, and, on the other hand, common labor gaining advantages through mass pressure.

Industry dare not lose this class as an ally. It might well face the fact that the best minds in all radical movements, including John Lewis’s Committee on Industrial Organization, come from this class. Homer Martin, who leads the automobile strike, is of this class — a clergyman. Disillusioned, they often are only troublesome; hopeless, they can become a menace to the American social system, for here are brains and character and a habit of independence, fighting against what they should support, because it has failed them.

I know of no effort in any quarter to improve the lot of the white-collar groups in the United States. It is one of the problems that industry must face and face quickly. It is industry’s problem to protect them from the leveling process of such a movement as the C. I. O.

V

The skilled worker in the United States is a well-paid worker. Organized or unorganized, he represents a conservative force in American life which, while resenting the depression, distrusts European panaceas such as Communism and Fascism. When organized, he remains in the American Federation of Labor and supports William Green against John Lewis. When not organized, he may belong to a company union. Usually, however, he thinks of his job as his own and seeks no favors or protection. He makes good money when there is work, and even during the depression he turned down aggressive movements toward unionization, particularly in the mass-production industries. In fact, he fears John Lewis, who represents to him a leveling tendency which will take from him the advantages of his skill.

The organized skilled workers fear a breakdown of American political and social habits as much as management and the investor do. They fear dictatorships. They fear mass movements such as a general strike.

Speaking before the National Press Club in Washington, William Green stated the case for skilled labor succinctly : —

The real issue ... is this: Shall the American Federation of Labor, the organized labor movement of America, follow democratic procedure? Shall the movement be governed by majority rule? Shall the will of the majority of the membership of organized labor be the supreme law of the American Federation of Labor? That is the issue.

He quoted Samuel Gompers’s final address just before he died. Gompers said: —

I want to urge devotion to the fundamentals of human liberty — the principles of voluntarism. No lasting gain has ever come from compulsion. If we seek to force, we but tear apart that which, united, is invincible. There is no way whereby our labor movement may be assured sustained progress in determining its policies and its plans other than sincere democratic deliberation until a unanimous decision is reached.

This may seem a cumbrous, slow method to the impatient, but the impatient are more concerned for immediate triumph than for the education of constructive development.

Understanding, patience, high-minded service, the compelling power of voluntarism, have in America made what was but a rope of sand, a united, purposeful, integrated organization, potent for human welfare, material and spiritual. . . .

And therein lies a very important factor in the present labor situation. The American Federation of Labor never enjoyed a large membership in proportion to the number of employed workers in the United States. It never had on its rolls 10 per cent of the employed population of the United States. It never succeeded in organizing the mass-production industries of this country. But it exercised power; it possessed prestige; and it played a specific role in the improvement of the lot of the American worker. It realized that the unionization of the whole of American industry was impossible and, for its purposes, unnecessary.

For, if the wage scale of skilled workers went up, wages generally rose. If hours for skilled workers were reduced, hours were generally reduced. As long as the aims of a trade-union are accomplished, the honest labor leader need not insist upon his particular formula in handling labor relations or upon all workers belonging to his organization. The objective of labor unions should be the improvement of the condition of the worker, not mere membership in a union.

The impatient ones, whom Samuel Gompers so feared, are more interested in union membership than in improving the condition of the workers. John Lewis, for instance, seems to adopt the attitude that if an employer raises wages without his consent the industrialist is intimidating labor.

The organized skilled worker is now faced with a problem which he will have to solve bravely this year. His advantages come from his skill. If he is an electrical worker or a carpenter or a metal worker, he has a specific preparation for his job and a specialized ability for which he expects better pay because he is a better man. He put time and energy into making himself a better man. But the trend of the moment is to level downward. If common labor is to be paid more, and prices are not to rise, skilled labor will have to be paid less. Technological improvements will have to be made to reduce the number of expensive skilled laborers, and to employ in their place less expensive unskilled or semi-skilled workers. In fact, unless there is incentive pay for skill, there is no reason why anyone should bother to possess skill; and the present shortage in skilled workers in many industries may be partly attributed to this trend.

Shall we, then, find a situation like this, that skilled labor will be organized in the American Federation of Labor and unskilled labor in the C. I. O., and that the two groups of workers will fight for their shares of the industrial dollar?

The current struggle in the A. F. of L., the contest for jurisdiction in the longshoremen’s strike, the disagreements among unions in the automobile industry, in a very large measure are manifestations of this conflict. John Lewis, the C. I. O., the La Follette Committee so far as it exhibits a labor policy, the National Labor Relations Board, are directly part of this conflict.

Here it is not management fighting labor, but skilled workers fighting unskilled. So far as management is concerned, the situation holds terrifying difficulties, because the conflict comes at a time when productivity is increasing, when payrolls are filling up, when wages have been raised, and when there is a chance to restore business not only to what in 1920 was called normal, but even to greater heights. Why should men strike at such a time? To whose advantage is it?

In the struggle between the A. F. of L. and the C. I. O., strikes may be effective without a single worker in the plant striking. A steel town can be picketed by mine workers who may intimidate not only the workers but the women and children of the workers. A plant will close down under such circumstances in spite of everything the workers and management can do to keep it open. This is particularly true in states where law enforcement in labor cases is nil.

The ‘ sit-down ’ strike was first developed in the rubber-tire industry. It has now spread to all industry, and is utilized with or without union authority. In the General Motors strike, it took the form of unlawful possession of the premises. Its technique is simple: the worker remains on the job and docs no work. It is a nasty form of sabotage. The fact remains that a handful of workers in a mass-production industry — sometimes as few as fifteen or twenty — can put a plant out of commission during a ‘sit-down,’ in spite of the objections of other workers who want to work.

Management, in the face of the brutality of C. I. O. methods of intimidation, will have to shut down, or else turn the business over to John Lewis.

Neither alternative affords a pleasant prospect. Nor can management always be sure what it ought to do.

It is so easy for the curbstone authorities on all things to suggest that management settle with John Lewis, but what is such a settlement worth in the face of a fundamental fight within the labor world? On exactly what basis can management settle with John Lewis and yet protect the rights of ownership, of management, of the white-collar worker, and of skilled labor?

Here is an anomalous situation. The A. F. of L. has expelled from its membership John Lewis and all unions associated with him and with the C. I. O. The A, F. of L. is engaged in a jurisdictional fight with Lewis’s unions. In the mass-production industries, forms of employee representation have come into existence which work adequately in matters of wages, hours, and working conditions. Yet, the government seems to insist that the mass-production industries recognize Lewis unions. Is the government prepared to guarantee business against all the dangers of such recognition?

The National Labor Relations Board is the agency for strengthening the Lewis union. In the International Harvester decision, it establishes the novel ruling that an agency for collective bargaining which has functioned adequately for management and labor since 1919 is all wrong, in spite of the fact that it has been endorsed by from 51 to 97 per cent of the workers in different plants of the company. Apparently the only specific charges that can be made, even according to the NLRB decision, are that mass meetings are not held, that the workers pay no dues or initiation fees, and that the employer would have done just as much for the workers if the employee representation plan had not been in existence. For these reasons a government agency says that a method of management-worker coöperation that has functioned since 1919 is no good and that a Lewis union should be recognized!

It is almost impossible for management to know how to do the right thing in a case like this, because the government has ordered it to do what is obviously the wrong thing. The workers of the International Harvester Company are not striking for a Lewis union; they are striking because a small number of workers or even outsiders demand that the employee representation plan shall be disbanded — the government so orders it, against all experience.

VI

In the interest of the consumer, who may be a worker or a white-collar person or anyone, management’s principal task at this moment is to bring prices down so that a larger quantity of goods may move. Dr. Moulton’s economics, as they appear in the publications of the Brookings Institution, serve as a guide to an increasing number of manufacturers. He says: —

The gains resulting from increasing technological and operating efficiency are passed on to consumers through the medium of price reductions. If, for example, productive efficiency in general should increase 100 per cent over a period of, say, twenty-five years, costs — other things being equal — would be cut in two and prices would be reduced proportionally. Thus each dollar of monetary income would purchase progressively increasing quantities of goods. The expanding demand required to take the increasing quantities of goods off the markets would be automatically created by the reduction in prices.

This method of expanding purchasing power does not, like wage increases, threaten insolvency to those who follow it. On the contrary, it is conceived to be the road to increasing profits. Instead of running counter to the principles of competition, it is the essence of competition.

But how can prices be brought down if labor costs rise? Or, perhaps more important, if the costs to industry of strike periods increase? A strike costs money, which has to be added to the price. It is the ultimate consumer who pays for strikes and for every other cost of production and distribution.

Yet, at the present moment, management is faced with the possibility of a protracted strike in the mass-production industries, involving perhaps five million men, not for better wages or working conditions, but to test whether John Lewis is to be recognized as the Dictator of American industry. No matter what guiding philosophy of industrial relations industry adopts, no matter how liberal the views of management may be, it cannot be expected to accept a self-imposed, extralegal dictatorship which has been repudiated by organized labor itself at the Tampa Convention of the A. F. of L. As a matter of fact, if management accepts Lewis, it abdicates that leadership in industry which it must assume if the country is again to be prosperous.

Here, then, is the crux of America’s industrial problem: Who is to manage industry — the management of individual plants or John Lewis of the C. I. O.? And, if it is to be John Lewis, how can he carry through a programme of high wages for unskilled labor and at the same time keep prices down? Obviously, to management, the Lewis movement presents a destructive force which is heading industry and the country back into depression conditions.