The Wilmington morning star. [volume] (Wilmington, N.C.) 1909-1990, 1945-09-30
Cartels
nv NATHANIEL H. ENGLE

listing for many decades, they have of late
become news, largely because scapegoat
has been sought on which to pin the blame
for the war. The burden of most discussions
of the subject in the newspapers, magazines,
on the radio, and even in Congress, has been
to condemn rather than to explain.
Among other things, cartels have been &C.
cused of being a major if not the chief cause
of World War Two. Consequently they must
be destroyed lest they generate a third World
War. Before deciding so drastic course
let us examine the cartel question. The ques-
ton we pose is whether cartels are more &C.
curately to be rated as beams or notes in
the public eye.
First, what is cartel? It is not a trust,
it is not a merger, it is not combine, it
is not trade association, it is not a CO.
operative, although frequently confused with
all of these Moreover, it is not commodity
control scheme, with which it is more closely
akin and from which it is seldom dis
tinguished The dictionary definition of a
coordination of separate firms to maintain
prices; a pool is inadequate.
cartel is an association of separate firms
which may and usually does restrict produc-
ton, raise prices divide markets. set quotas,
exchange patents, limit exports and endeavor
| by whatever means to stabilize an industry
Cartels usually try to extend their operations
| internationally, although they may not be sue
cessful. They often seek and frequently Sc
cure government sanction and, occasionally
participation by government. Cartels deal
primarily in manufactured goods or in serv-
| ices such as transportation and communica-
ton, rather than in farm products or national
resources.
| Commodity control schemes, In contrast
are agreements between private agricultural
or mining interests, always participated in by
governments of several nations, which may
and usually do restrict production, raise
prices, set quotas, and endeavor by various
means to stabilize an industry or to conserve
national resource Accurately stated, such
ly differentiated from them in the formula
ton of public policy. A subsequent article
will explain this point
A thumbnail sketch of T. G. Farben's his
tory reveals much of the nature of success
full cartel In 1912 there were sixteen indie
pendent companies making coal-tar dyes in
Germany. Five of the sixteen controlled 80
per cent of the output. By the outbreak of
World War One the sixteen had been resolved
into two groups and two years later into one
The avowed purpose was to meet competition
more effectively, to pool purchases. to protect
patents, to exchange products, and to set up
foreign branches. BY 1925 the dye cartel had
expanded vertically into control of raw ma
terials agriculture and mining as well as
horizontally into other chemical mineral, and
petroleum products. Geographically it became
world wide, with affiliations in the United
States.
While !. G. Farben is no doubt prototypal
Of what cartels would like to be- It is far
from typical Very few have achieved such
widespread success. Indeed, there is reason
to challenge, as some very competent observ-
ers have, the implicit compliments paid to
cartels by their critics AS a recent writer
Hl1fc INV ~ {nc Io~so
ing and investment analysis standards and
thus debunk them?"
Whether cartelS are good or bad, whether
we dlstrust them or not, they are entirely
legal in many nations Again, one of the
causes Of cartels has been fear of American
commercial policy.
If we are really sincere in wanting to pre-
vent the spread of powerful world cartels
let us reduce our high-tariff blockades and
open our markets to the products of other
nations; in short, let us pluck one of the
beams from our own eye. The cartel thrives
behind tariff walls One of it's methods has
been to induce governments to raise tariff
barriers. fortnight pursuit of freer world
trade under recently extended and amend
ed Reciprocal Trade Agreement Act is to be
commended.
There are other beams which we may have
to remove. In 1918 the Webb Pomerene Act
was passed, permitting American companies
to combine without penalty of the antitrust
laws for the purpose of forming export corpo-
rations. While these groups have never been
very numerous or outstandinglv successful on
the whole, they have been source of irrita-
ton to nationals of other countries While they
are not cartels, they are called by foreign
competitors. Consideration should be given to
the wisdom and consistency of supporting
such organizations while opposing foreign
cartels Again, our policy of export subsidies
is open to the same criticism.
We are amply justified in opposing cartels
because they are restrictive, monopolistic in
struments of economic warfare and are
dangerous to world peace.
In and of themselves it cannot be said
however, that cartels have been a major
cause of war, but it can be said with much
truth that cartels were seized upon by the
Nazis and integrated into the German war
effort along with every other device and re-
source of the German people. Apart from that
specific misuse, their contribution to the cause
Of war no greater than, if as great as
Americas weapons of restriction.
British, French, Dutch and many other
nationals as we'll as the Germans look with
favor on cartels and permit them to operate
under their laws Having so little to recon-
mend them, why are they widely endorsed
abroad? The answer is. for the same reason
that American livestock growers insist on a
tariff on Argentine beef, American DAIRY IN
terests get laws passed against oleomarga-
rine independent retailers oppose chain
| iyto tight reStrlc-