the cognitive dimension of capitalist development
1871 - 1939
1.  Charles Francis Adams

2.  Louis D. Brandeis Letter

Money Trust Investigation: Investigation of Financial and Monetary Conditions in the United States Under House Resolutions Nos. 429 and 504, 191
3
Other People's Money And How the Bankers Use It,  1914, by Louis D. Brandeis

3.   Evidence Taken by the Interstate Commerece Comission in the Matter of Proposed Advances in Freight Rates by Carriers, August to December 1910, Senate Doc. 725, 61 Cong., 3 Sess.

4.  McElwain to Frankfurter, 1919

5.  United Automobile Workers, Report Made to the Executive Board by William E. Dowell, May 11, 1938.  George Addes Collection, Box 9, Personal: Board Reports, 1938.  
Reuther Archives Detroit

6.  Minutes, Murray Body Committee Local 2 at Executive Board Meeting, April 26, 1939, Toledo Ohio, Addes Collection, Box 14, Reuther Archives Detroit

rr
from Prophets of Regulation: Charles Francis Adams, Louis D. Brandeis, James M. Landis, Alfred E. Kahn, By Thomas K. McCraw, pp. 35-36

The commission tried the cocked-gun approach in a circular letter mailed out to all Massachusetts railroads in 1871.  Adams' purpose was to promote rate reductions, by way of both enticements and threat.  The letter . . . outlined the reduced costs brought by technological innovation ("The locomotive which formerly cost $30,000 now costs but $12,000"), the unusual opportunity now at hand ("Massachusetts is at this time susceptible of a very great and sudden industrial development"), and the payoff to the railroads thesmselves ("It is a pefectly well-established fact in railroad economy, that where a community in industrially in an elastic condition . . . a reduction of railroad charges within certain limits does not necessarilly involve any loss of net profits").

The content of the rate recommendations revealed Adams' preoccupation with aggregate economic growth.  He emphasized, for example, a form of what economists later called the multiplier effect:

In making any reduction, whether in freight or fares, we would therefore suggest to you [Massachusetts railroad presidents] the propriety of strongly favoring certain commodities in general use along the line of the road, and, by so doing, strongly stimulate development, rather than neutralize the whole effect of any concessions you may make by dividing it among too many objects.  Take for instance coal . . . a primary raw material in all manufacturing industry.  Cheap coal is cheap power; and cheap power is cheap manufacturing.  A reduction of five per cent. throughout the charges of tariff would scarcely produce an appreciable effect on the consumption of anything; a tariff, unchanged in numerous other respects, which gave a reduction of fifty per cent. on the cost of carrying coal, would at once communicate an impetus to every branch of industry dependent on power.
1.  But see K. Austin Kerr, American railroad politics, 1914-1920; rates, wages, and efficiency (University of Pittsburgh Press, 1968).  Kerr is one of the few authors who sees sectoral conflict as the central reality of the Estern Rate Case, but he does not deal with the Taylorites.

2.  Rate Case, Vol. 4: 2617-2624; Paul Kellogg, Survey Graphic, Dec. 3, 1910


3.  The Eastern Rate Case


Evidence Taken by the Interstate Commerece Comission in the Matter of Proposed Advances in Freight Rates by Carriers, August to December 1910, Senate Doc. 725, 61 Cong., 3 Sess.


Consider the text generated by the Eastern Rate Case.

The more familiar readings of these hearings that consider the role of the Taylorites1 ignore sectoral conflict and focus instead on Brandeis' arguent that in fact the workers could get a raise and the companies could improve their profits without a ratte increase, a feat that would be made possible by the introuctionof modern mangement methods into the opertionof therailroads.  Such methods, Brandeis' witnesses claimed, could save the railroad $1,000,000 per day.

In order to substantiate this claim, Brandeis marshalled before the Commission a group of production engineers, efficiency experts, manufacturers, contractors, and functional foremen.  The described the application of scietific mangement to machine shops, factories, steel works, paper mills, cotton mills, bleacheries, printing, bookbinding, construction and engineering works.  Among them were the men who would become the leaders of the Society for the Promotionof Scientific Mangement (renamed the Taylor Society after the eath of Frederick Taylor) which was formed in the core of the  hearings.  The confined ther arguments, however, to firm-specific mangeent problems, such as acounting procedures, routing, labor relations, and planning.2  It was not the technocrats, therefore, who supplied the broader strategic perspective on regulation at these Hearings.

In fact, there were thre major groups of witnesses that we must consider, and the technocrats were only one of them.

A second group of witnesses ws comprised of seveal major mass-oriented manufacturers; a third, of higher-order service-oriented functional elites.  Both of these groups focused on strategies of accumulation rather than technical-managerial problems (that is, the made sector-specific not firm-specific arguments), although the service elite functioned on a higher-order strategic level than the manufacturers.
3.  Rate Case, Vol. 8, pp. 4814-4822

4.  Rate Case, Vol. 5, p. 2333-37

5.  Rate Case, Vol. 6, pp. 4340-41; Ives testimony, Vol. 5, pp. 3143-44

The manufacturers included Charles H. Jones, President of the Commonealth Shoe and Leather Company of Whitman, Massachusetts (a close associate of Louis D. Brandeis), representing the New Engand Shoe and Leather Association; Guy T. Miller, treasurer of the Bridgeport Brass Company; B.F. Curtis of the Norton Company (a major manufacturer of grinding wheels and abrasives); George H. Benkhart, of Smith, Klein and French Company (drugs and baby foods); Edwin F. Forbes, President of the New England Confectionary Company; A.C. Lorion, rrepresenting the WRight Wire Company of Worcester and Palmer, Massachusetts (wire cloth for poultry netting); the Grayton and Knight Manufacturing Company, and the Metal Trades Assocation  of Worcester (mostly machine tool manufacturers);and E.A. Stuart, of the Mitchell-Woodbury Company, Boston (importers of crockery and china).3

Guy Miller may be taken as representative of the other manufacturers in the arguments he made in response to Brandeis' questioning.  The  advance in rates, he poionted out, would restrict the territory within which th New England brass industry would ship its output. The resulting contraction of business would not only have an obvious efffect on the prospects for achieving economies of scale; the reailroads themselves would lose revenues as a result of reduced traffic; the division of labor throughout the industry would be threatened; and the manufacturer would have to pay the increase twice, first  in the cost of transporttion of raw materials from the est, then i the cost of transporting the fnished prodct from the east.4

The arguents advanced by the higher-order functional representtives of the realization process went a good deal further in their theoretical grasp of the organizatiobnal dynaic of a changing and growing economy.  Thousands of new products were coming onto the market.  Freight rates on those products, so critical in the determinatin of the nature and scope of the markets within which they would be competitive, were being set arbitarily by the railroads, institutions that least understood the changing political economy.  A major grievance of the shippers in this respect was that thepropsed nw rates had not been established through consultation with the shippers.  The impact of these rates on busienss, therefore, was not being taen into account.5  As the following testimony by David O. Ives, manager of the Transporttion Department of the Boston Chamber of Commerce shows, the carriers were still living in the ninetenth century.
6.  Rate Case, Vol. 5, p. 3144

7.  Rate Case, Vol. 5, p.3237

8.  Rate Case, Vol. 5, pp. 3239-40

9.  Rate Case, Vol. 8, pp. 4818-4820.  This is the celebrated "multiplier effect" of Keynesianism.  By the time this concept was used in the 1910 Hearings it was old hat.  In 1872 Charles Francis Adams, a Massachusetts Railroad Commissioner, had already articulated this notion.  See above.
Mr. Brandeis.  Something has been said here about the increae in class rates [rates on commercial products as opposed to commodities such as coal], and particularly the higher class rates, affecting only luxuries.  What is the fact?

Mr. Ives.  I must admit that I received the impression that the traffic officers of the reailroads, or some of those who testified, had the impression that the majority of artiles moving in the classification were either luxuries or very high-priced necessities in which the freight was so small a moment that itcould be ignored.  Such is not the case, as an examintionof the freight received at an medium-sized station on the roads of any of these carriers or an examinationof the billings will show.  It  includes all the commonest necessities of life, boots and shoes--not only meaning shoes that are sold for $3.50, $4.00, and $5.00 a pair, but those that sell for $1.00 and $1.50 a pair.  Als dry gods--it does not mean simply ribbons and laces.  We should be glad to see ribbons and laces bear their proper share of the burden of trnsportation.  But it means the commonest kinds of cheap prints, cheap underclothing, overalls, all clothing, and all those articles of commerc that are among the barest necessities of life.6

John S. Lawrence of Lawrence and Company (commisson merchats--the "selling department of the txtile mills of New England . . . representing five or six of the largest mills"7) argued that rates had to be determined on the basis of the way they affected the overall develoment of commerce and manufacturing.  Setting rates was a difficult task, and invlved more than merely establishing costs based on handling and other expenses.  Lawrence argued tht " . . . railroad reates were similar to taxation.  The problem seems to be how to distributte the cost of operation among the users of a railroad and have prosperity all around."  For example, one should  impose a higher rate on a high-grade stocin than on a low grde stocking.  "It is manfestly unfair that a 50-cent stocking, where the freight is a very small frctionof its value, shold pay practically the same today as a twelve and a half cent stocing, where the freight rate runs to avery high proportion of the value."8

More generally, the shippers argued tht the propsed increse in rates would seriusly increase the cost of living.  Here again, the concern was directed toward " . . . the poorer classes, who not only spend a much larger proprtion of their income on the necessaries of life, but who purchase a coarser, heavier and less valuable article."  Beyond the aggregate increase in the cost of living attributable to the rate increase, the resulting contrction of markets, and the elimintion of competition between the East and the West would tend to further increae the cost of living.  Finally, the increae would aper not as "a single  incrase on the freight of a finished artice, but on the aggregate of increses, including not merely the increse on raw materials and supplies, but the increae on innumerable articls which directly or indirectly enter into the cost of doing business, including ultimately increae in wages demandd by the increased cost of livng."9

In essential respects the Estern Rate Case can stand as a paradigmnatic expression of the strategic thrust of emergent Keynesianism.  Although we confind our discussion to the problem of infrstructure regulation, the discourse within the Hearings dealt explictly with labor relations, and, as we saw with Lawrence's tstimony, there was a strong planning element as well.  This suggests tht, when viewed in the context of secoral conflict, Brandeis and his band of {rogressivse were harely the naive trust-busters sen by many scholars.

And it is only when viewd in th context of sectoral cnflict that the Taylor Society--and thus the Kenesian Elite in the New Deal State--can be understood.

Richard Frankensteen addresses the workers of Murray Body Co. during their 1937 sit-down strike Detroit, Michigan.
murray
Minutes, Murray Body Committee Local 2 at Executive Board Meeting, April 26, 1939, Toledo Ohio, Addes Collection, Box 14, Reuther Archives Detroit

     BROTHER MANINI:  Last week we were confronted by the mangement of the Murray Corporation, which included the president of the organiation.  It ws the firt time that he had ever met with the union, as alprevious negotiations were done with the manufacturing manager, Mr. Earl; and the Industrial Relations Manager, and so forth, but this time the half-owner of the corporation, Mr. Whitman, was there, and Mr. Avery, and presented us with a problem that is the most serious problem that has ever confronted us, even in the time when we first had our strike.

     Now, the probem that he presented to us with is the fact that we have entirely lost all of our business unless a future change in the policy of receiving pay.

     In other words, a suggestion was made that we take a wage cut and and increase in our efficiency or possibly an incentive plan.

     Now, the incentive plant that he propsed to us was to take a base rate of twenty-five per cent less our standard rate t the present time and in the event that e increased our efficiency ahd showed a good incentive we could bring ourelves to our present rate, which would be no wage cut, only that e would keep them from losing teir business on the prices that are quoted elsewhere.
 .  .  .  .

     In the spring and wire industry we have the McErney Plant in Grand Rapids; we have Reynolds in Jackson, and e have Falls Spring and L.A. Young, but their rates are comparable with ours and they are suffering because of the [un]organized competitive shop.

     We are confronted with this situation immeditely because it has got to be done in the next thirty days because that is when prices are going to be quoted on these jobs and we have not got a single job for 1940, and we don't like to accept a wge cut in the first place.

     In other words, we don't now whether the company is serious in their proposal and that is why we hve come up here, becasue we figured tht you felllows are broader t a sitution like that, and have more experience.  we figured that it was too big a job for us to handle.  Wht we would like for you people to do is to st up a committee of one or two to come with us in the negotiations with the management

     They said they would be perfectly willing to meet with any of you people.  That they would be perfectly willing to meet with Mr. Murray, or Mr. Hillman if necessary.  That they would, if need be, la their books open to them and let them decide what they would do about this thing. . . .
                                                     
     I also have a stement of the financial stnding of the corporation and theloss they had last year, but all corporations of any size have lost money last year.  That is, anyway, they did not make any amount of profit, or the amount of profit that they hd in the previous years.  That is not the argument that I want to use tht these felows lost money.  The argument that I want to use is that competition is so keen, not on the bsis of efficency but on the bsis of wage rates, and I think it is unfair competition.

pp. 1-2
     BROTHER MCWILLIAMS:  We have had quite some  argument amongst ourselves after the proposal was made to us in regards to this incentive system of wage cuts, which is really what it means.

     In our Executive Board meeting we were taking it up and we saw that we would probably get involved wth the Internatinal and we are now here today to lay this case before you fellows because we know that we can't take any action ov er there that is not okayed by you people here.

     Furthermore, as Brother Smith stated, you know more about this thing than we do and we are very young in the labor movement and although we we have got hellish god intentions they probably can fool us a hell of a lot easier thann they can you fellows.  Therefore, I would like to make a plea that one or tw or possibiy all of yu can sit in there and listen to the same story that we have heard.

     BROTHER HALL: I would like to say a few words for the spring industry.  The management of the company called my shop committee in one day last week and wanted to know what we thought would be a fair rate of efficiency for the next year.  He showed us what we had run this last month, this current month I should say, and all our departments had run anywhere, one departmnt an eigty-eight per cent for one day but outside of that tey had run from eighty to ninety-eight--98.7 [er cent.  That was up  to last Thursday for the entire month.

     He explained to us that they work an eight[ty] per cent basis as well, if we are making 93 tht is really 100.  He wanted to know if we culd give him a fair idea of wht we would run next year so they could go out and bid on those jobs according to that.  So we got together and we thougtit over and talked it over and we figured that we could give them on the rate of what they had been getting, we could assure them of 95 per cent, which I think was fair, bcause they hd ben running around 95 on an averge for the whole shop.

     But what we are up against is tht McInery in Grand Rapids is paying ladies 31 cents and mn 41 cents.  We pay ladies 70 cents and men anywhere from 85 cents to $1.05.  So, you see that it is quite a difference.  McInery today is working six days a week three shifts and we are having an awful time working on shift and a half and it is going down every day.  Outside from that we have Audry and they are cutting in on us.

     We have Great Lakes  in Chicago, and we have one down in New Jersey.  They can get that stuff made down there and shipped in to Detroit cheaper than we can make it on account of their wage scale.

     What we would like to get at is to get McInery and these places right around the east do not bother because the are quite a[ ]way away.  If we could get these places in Michigan organized so that they can, so that they will have to pay a rate of wages as we do, we figure we could get somewhere with it.  It would be fair competition.  We would like, if possble, to get those organized as soon as we can. pp. 3-4
     BROTHER REUTHER:  In the spring end of your production there, you weren't having any trouble with L.A. Young, Gibson and Muer?

     BROTHER MANINI:  Our rates are comparable.

     BROTHER HALL: McInery in Grand Rapids, and Great Lakes of Chicago.  I understand that L.A. Young and Falls hve smaller factories out in the small outying districts that are paying less than the fellows in Detroit.

     BROTHER REUTHER:  There is something here, I don't know whether you want me to discuss it here now, but I have one spring plant in my local and they don't, that is Precision Springs, die springs and things like that, but your trouble is with cushion springs.

     BROTHER MANINI:  Cushion springs.

     BROTHER REUTHER: We had a conference with the Spring-Fall and Jimson Muer, that was the Spring Council and we have been trying to cordinate that.  We had a conferenced with our Bargaining Committee and the management of Precision Spring.  There is a fellow there by the name of Peterson, one of the big shots of the Spring Manufactureres Association.  He is quite an advanced sort of fellow on these problems and he is willing, next month there is a going to be a Spring Manufacturers Association meeting in New York City, there was one last year, at which time they agreed if the UAW would send an International representative their group of people would fight on the floor and try to force an agreement for the whole industry.  In order to try to take labor out of competition.  Last yer Tucci was instructed to go there and he got there a day late, after the conference ws over.

     Here is what he want us to do.  He wants to do this if we can get the various committes, now if we can get L.A. Young to get their management and Jinson and Fall Spring and Precision Spring, if we get all the spring companies in Detroit who are dealing with the union and have the highest wage rate in Detroit, if we can get these peole to come together and have a joint management meeting and committee meeting and you people send people from your spring plants and other plants in Detroit, we can sit down and map out a program and send an Interntional reprentative to the association's meeting and the fellows will work wth us when we try to break this thing down.

     Peterson tells us our committee was there ttwo weeks ago, that the spring companies in Detroit are technically equipped and strong enough, if they work as an organized group with the support of the union working in a concerted program they could lick the God damn sweat shops up-statte.

     I think that is the sort of approach that is necessary in this industry.  We have got to being[begin?] to work as an organized group with the organized group of manufacturers who are willing to accept the union.  In Precision we have a closed shop, this fellow says, "The Union is here to stay and I am going to live with it and I want to work with the union and lick these others.

     Peterson thinks that L.A. Young and some of the other companies here that are being pushed like Jinks[Jenks] & Muer will cooperate if we do that sort of thing and we can get before the Association of Spring Manufacturers and set up a blanket agrement in the spring industry and we can begin to squeeze these little fellows who are operating little shops and s[l]ave shop wages.  If this can't be done through the Association then we might get Peterson and these fellows in Detroit to lead a movement for setting up a new association in the spring industry the same as they did in the clothing industry.  In the clothing industry they had to help an advanced group of employers.  In the clothing industry they started with the white goods industry and they had to help these fellows set up a whole new association and together they licked the sweat shops in the clothing industry.  These are the possibilities that we have got to explore.  If you fellows can go the management and get them to agree in a joint meeting like that in Detroit so they can work  out a caucus in the Association, I think you might move this thing.

     Jenks and Muer is a big company and I think if they start squeezing in one way and we send organizers to Grand Rapids we can begin to do a job.  I would like to see if you fellows would cooperate.

     BROTHER MANINI:  I am willing to lay my pocktbook on the table.

     BROTHER HALL:  Jenks and Muer, there we have a very fair administration to work with.  They are very fair and willing to work wth us.  I will agree to that.  We can get them to do something about McIneryny(sic) because they have Chrysler work Dodge work and all of that that we used to have and they are working three full shifts and that is what is pinching us and we have a hell of a time working one and half shifts.  Half of the time our day shifts go home anywhere from 9:30 in the morning up to four in the afternoon. pp. 9-11