Evening star., 1938-08-28
Berle's Memorandum on
Business Structure.
By OVEN L. SCOTT.

ness men suddenly find themselves in
the strange position OF cheering the
original brain truster OF all brain trust
ers and the architect OF much of the
New Deal itself.
A uniform shout of enthusiasm has
gone up for Adolph A. Berle, jr., Assist
ant Secretary of State, an authority on
the American business structure, close
back-stage White House adviser on eco
nomic matters and now author OF an
analytical memorandum entitled: "Inves-
tigation of Business Organization and
Practices"
This memorandum was written for use
by the temporary National Economic
Committee. which is about to begin q
$5OOOOO study Of this country,s business
set-up and its controls. The cheering Is
for portions OF the Berle memorandum,
which strike the fancy Of New Deal op-
ponents
For example: Mr.. Berle has a critical
word to say for the idea strongly held in
Congress that 1t might be a good thing
Unfortunately to pulverize big corpora
tions into little corporations He is ex-
tremely unkind to the believers in unre-
strained competition as q cure for ali
business Ills. His views concerning the
tax on the part OF corporation income not
paid out in dividends, as that tax was
imposed by Congress, coincide with those
Of businessmen. The idea of regulating
business by requiring corporations to OBJ
tain q Federal license, to which condi-
tions would be attached for doing busi-
ness does not get his support
But Mr.. Berle is far from compliment
tary or even hopeful in his analysis of
the organization OF American business
and In his recommendations for doing
something to correct defects in that or
ganization. his New Dealism goes consid-
erably beyond the New Deal in many par
ticulars. Cheering among businessmen,
consequently, may be a bit premature.
To start with. in II 2000-word memo
randum constituting . bare outline OF
his ideas. Mr.. Berle finds that the exist
ing industrial system Of this Nation has
failed more often than it has succeeded
in providing either an adequate supply
of goods to fill needs or an opportunity
for a maximum number of people to
make living that will enable them to
end their lives outside the poorhouse or
relief line
But before searching for corrections
the New Deal adviser explodes q series OF
assumptions.
The assumption that small business Is
necessarily competitive business and that
small business is more humane" with its
workers than large business simply fails
to hold water. in the light OF Mr. Berle's
diagnosis. Neither, Mr.. Berle finds, is
there anything to show that mere size
rf h,yct @v 70 n<An Ins-
that the old-fashioned farm-considered
highly inefficient by most people-actu-
ally is about the most effective organiza-
ton for filling human wants. Efficiency
in industry, the author decides. seems to
depend on the degree to which q plant
can unload a maximum of obligations on
the community to be carried by Govern
ment revenue. thereby leaving the plant
itself to reap profits.
That type of dirty dig" at business for
not meeting the unemployment problem
Is followed by another even more telling
Bow delivered by a mere outline OF the
subsidies that Government provides for
businessmen.
The general claim Of businessmen Is
that they support the Government. Mr..
Berle finds that there definitely is an
other side to the picture. This side is
that Government supports much of busi-
ness through privileges and subsidies OF
many kinds. The author OF this memo
randum. which business Is cheering,
wants to know where the automobile in
dustry would be if Government did not
provide roads for the industry's cars to
run on. The author also calls attention
to the privilege that Government gives
business through the right of incorpora-
ton. through patent rights and trade
mark rights. He refers to direct mail
subsidies. to shipping subsidies. to tariffs
which permit industries to escape compe-
tition and to tax the public through
higher prices, and to vast Government
expenditures for materials OF various
kinds. Then he adds:
1T will come as shock to the public
to learn that unemployment relief is
essentially a subsidy ito industry but
I see no escape from the underlying
economics OF it,
In other words. when the automobile
industry or the steel industry or other
industries fire great numbers of workers
in order to protect profits and reserves,
thereby forcing the Government to as
sumo responsibility for caring for the
displaced workers, the result, according
to Mr.. Berle. Is . subsidy to the indus
tries affected.
All of this hardly comedies with the
philosophy of American business today.
There are a number of other jolts in
long section dealing with the advan-
tages that the existing organization of
industry and finance in this country give
to big business as contrasted with smaller
business. A whole field of new reform
could be opened in this area by Mr..
Berle's analysis. but most attention CEN
tiers on the definite program of reform
that he considers.
Author Berle wants reforms that will
result in industrial controls assuring
more goods, better goods and cheaper
goods: more jobs, better paying jobs and
steadier Jobs. and continuous, ready ac-
cess to capital financing needed to create
and maintain additional industrial
plant"
In that connection, he discusses Fed
eral incorporation or licensing of indus
try and decides that, before any action is
taken. the reason for setting up this type
Of control and the result to be achieved
must be determined, or otherwise: THE
individual licensing corporations would
be merely an economic dictator" Then
Mr.. Berle, as one leading creator Of the
New Deal, adds: "A fair criticism of the
technique of the New Deal has been that
1t INDUCED shotgun imposition of regu-
lation without adequate definition OF
standard"