Evening star., 1923-05-02
BY HIRAM kELL4 NODERWELI..

ItItth VI -uoDEsR W
Following is the second of Mr.. Moderwens
articles Industrial. financial and general
economic conditions i'll Gerinany.'
Especial Correspondence of The Star and Chi
cago Daily Sews)
BERLIN, Germany, April 16.-The
type of business organization that has
grown up in Germany since the war
cannot be described adequately by any
of the standard German words. So
1he Germans have adapted an Ameri-
can word, concern The German
"konzern" is an assemblage of cor
porations and interests, trust Of
trusts held together by any means
that are handy. Among these are:
|. Personal ownership. This, how
ever. is by no means necessary to con-
troll. SHINES, for example, owns only
a minor fraction of the properties
he controls.
;. Fusion of amalgamation This is
not SO common in Germany as is gen
orally supposed.
). Ownership of a ma jority of stock.
7 ms - an expensive way of acquiring
control and is usually unnecessary.
J. The holding company This is
"ften resorted to i'll order to obtain
r:nitied direction of certain related in
'ustrles, but it is not the characeris-
'tc form OF combination, as III Ameri-
- Exchange of shares. This is
common operation when the combin-
.ns companies are on an equal foot
iAg. 1t is usually accompanied by an
exchange of directors
s. Trade agreements. One firm
agrees to supply and the other to
Fake i fixed agreed price. This does
cot necessarily involve any financial
nperation. 1t is the characteristic
1orm OF the vertical classification"
which is now in process.
= The selling corporation. This is
"rSanlzed Itnt sy a group OF interests to
often force smaller firms into u posi-
tton of complete dependence
.. The pooling of interests or "in-
teressen eemeinschaft." This is an
extension of the trade agreement
principle. ] may be effected by com
mon investment in Il third undertake
ing of mutual value, or it may be
limited to q formal contract regulat
ing all the affairs of the contracting
1'rrnS in their relation to one another.
covering such matters as supply of
raw materials, price regulation, pro-
duction and pooling of profits.
No German Laws 10 Hamper.
There are no antitrust laws in
Germany. but subsidiary companies
IF a "konzern" generally choose to
T@taln juridicial Independence and
e. large degree of administrative au
1onomy, declaring their own divi-
tends and managing their own affairs
within the limits Of their agreements.
There is nothing new in any of
these modes of organization. There
- not even anything new in the yer
Jical' principle OF organizing the
various stages Of production from the
raw material to the finished product
glnGar :. singh. Hiractinn What =
'ieW In the German "honZern" Sys-
tenn is the dizzy compleXity and range
which the process has assumed.
The cartel or trade agreement be
tween competing firms. which ruled
German industry before the war, still
exists along with the vertical con-
Germ. But in the face of the much
stronger vertical organiZa tion it is
no longer a. ruling power, but rather
\ convenience.
Why Konzerns Were Needed.
The motives which produced the
vertical concern with such rapidity
we're:
]. The shortage of raw materials
'aused by Germany's losing 80 per
cent of her iron 10 per cent of her
zinc, .9 per cent Of her coal and 90
l,er cent of her lead as u result of the
treaty of Versailles. Men like SHINES
sought feverishly to assure to them
selves what supplies We're available
y
others.
.. The need to invest speedily the
Niquid capital Which fell into their
hands as Il result Of governmental
compensation for loss of properties III
the ctded territories.
.. Later, the shortage Of ready capi-
al, which Obliged them to organize
'th" purchase of raw material and the
ale Of the finished product with as
little borrowed money as possible.
I. " hen under
'tay it could not stop itself. The
f'rotits of industry needed to be trans
1ormed Immediately from paper marks
INTO real values. The absorption Of
financially embarrassed industrial un-
dertakings, or OF their depreciated'
5hares. offered to the big Industrial
sts the easiest way to invest their
earnings protitably.
The new German "konzerns' have
been built UP from any one of three
points OF departure:
!. The production konzern. whose
ubsidiarv undertakings are acquired