GOVERNMENT: Thurman’s Kampf

Thurman’s Kamp

The Sherman Anti-Trust Act, which Chief Justice Hughes called “a charter of economic freedom,” is 50 years old this year. And 1940 is the first of those 50 years in which Congress permitted the Department of Justice to spend more than $1,000,000 on its enforcement. It is the first year since the trustbusting days of Roosevelt I and Taft (Standard Oil, American Tobacco, Northern Securities, etc.) in which the Government has put on a real Sherman Act show. It is also a year of war, whose outbreak, in the words of Assistant Attorney General Thurman Wesley Arnold, “was immediately followed . . . by an outbreak of funeral orations over anti-trust enforcement.” But last week No. 1 Trustbuster Arnold gave the Sherman Act the liveliest week of its liveliest year. As the funeral orations grew louder and more insistent, he danced the aging law away from its grave, through the tombstones, almost out the cemetery gate.

Among the impatient mourners were not only businessmen, 23 of whom (and 15 corporations) were indicted for Sherman Act violations last week. There were also farmers, labor leaders, even New Dealers —especially those inner circlers who are trying to help (or steer) the Defense Advisory Commission in rearming the U. S. A maverick New Dealer, Thurman Arnold necessarily regards the Defense Commission as his natural enemy. It stands for more cooperation among businessmen than he trusts, reminds him unpleasantly of NRA; besides, it may do him out of a job. This week, as Washington’s defense parade threatened to march right over him, Thurman Arnold struggled into a uniform of his own design, tried to align himself with the procession. He published a book, The Bottlenecks of Business (Reynal & Hitchcock; $2.50), whose theme was that the enforcement of the Sherman Act is the U. S.’s best defense against Hitler. He also went right on prosecuting.

The Giggling Professor. When the New Deal rediscovered “monopolies” in 1937-38 and picked Thurman Arnold to go after them, the appointment was regarded by old-fashioned trustbusters of the Borah school as a rather bad joke. Arnold was a cynic, a word-juggler, a clown. With a background of Wyoming sheepherding, Princeton (’11) and Harvard Law (’14), he had returned from the war to help General Smedley Butler drive the prostitutes from New Orleans. Said he: “I didn’t even make a dent in the town.” His cynicism and love of low comedy were augmented back in Wyoming, where he became the sole Democrat in the Legis lature, and was elected mayor of Laramie by nine votes. Later he taught law at Yale, did a few jobs for AAA and SEC on the side. He also wrote two books — Symbols of Government (1935), Folklore of Caitalism (1937) — which combined a rigorous political iconoclasm with a good deal of intellectual clowning. One of their chief targets was the Sherman Act, which he called a “preaching device.” Trusts, said he, are a social necessity, like houses of prostitution ; the Sherman Act was merely intended to express society’s disapproval.

On futile anti-trust crusades “men like Senator Borah founded political careers.” When Arnold confronted the Senate sub committee that was to approve his Department of Justice appointment, his chief questioner was Borah. Arnold said he believed in the anti-trust laws. Said Borah, closing The Folklore of Capitalism: “I’ve been sadly misled by your book.” In office, Arnold continued to mislead.

Paunchy, sloppy, nervous and absentminded, he sits in an enormous office, his pince-nez suspended on a black ribbon, ashes all over his vest. Before he has finished his cigar, he starts sucking a cold pipe, then returns to the cigar. He speaks into an intercommunicator, gets no answer, shouts at it, then finds he forgot to turn it on. Chuckling and giggling, he delights in whimsies, fables and gags of the sort that baffle most businessmen, some of whom think he is insane.

Legal Blackmail. But as an enforcing agent the laughing professor is not funny at all. He launched and is prosecuting the most comprehensive anti-trust drive in U. S. history. A tiresome complainer about lack of funds, he has more than tripled his division’s budget since 1938. Favorite Arnold statistic: in Roosevelt I’s regime, the division had five lawyers, four stenographers. Arnold has 190 lawyers and wants 100 more. For wheedling money from Congress ($1,325,000 for 1941) he has a cogent argument: in the first six months of this year, his division secured judgments returning $2,421,000 in fines to the U. S. Treasury, expects to return some $4,000,000 more. As for consumers, Arnold estimates that his major prosecutions have saved them (in lower prices) some $270,000,000 so far.

Taking advantage of the Sherman Act’s “vagueness” (favorite corporation lawyer’s complaint), Arnold installed his own definition of trade restraints, his own prosecuting technique. Instead of busting merely big corporations, he went after all industrial situations where he smelt a fishy price. Usually he brings criminal rather than civil actions. If his victims reform their ways thoroughly enough, Arnold then sometimes signs with them a consent decree, nol-pros the criminal action. High-minded businessmen like General Motors’ Alfred Sloan (who fought a criminal suit in court rather than sign away G. M.’s profitable sales-financing subsidiary) regard this technique as a form of legal blackmail. Arnold regards it as an efficient way to bring prices down.

First big objective in Arnold’s drive was the building trades, which he attacked on all fronts at once: contractors, suppliers, union leaders. In Pittsburgh, after he got an indictment of twelve contractors and a trade association, the low bid on a municipal hospital dropped from $152,000 to $117,000. The investigation leading to the indictment cost $10,753, less than one-third the saving. In his Chicago milk case, involving dairies, the drivers’ union and the Board of Health, Arnold figures prosecution cut Chicago milk prices by $10,000,000 a year. His next big target: food distribution, now under investigation. Such attacks, argues Arnold, by increasing U. S. consumer purchasing power, help solve the farm problem.

Soon after war began, Arnold began to look into patents as a trade-restraining device. Last December he brought suit against Corning Glass Works, Hartford Empire Co. (whose tight hold on glassmaking machinery was publicized by TNEC) and most of the glass industry, will try the case next month. In March he jumped Masonite Corp. (which is fighting) and Bausch & Lomb (which paid a $40,000 fine) for contracts he did not like. Next came the spectacle industry and Johns-Manville. Meanwhile France fell.

So far from being interested in spectacles and rock wool, the country (and its newspapers) became interested in nothing but defense. Arnold and his men therefore took stock of themselves. Overnight their patent quest, without changing its quarry, gave it a new name: Bottlenecks.

As a publicity device, the Bottlenecks investigation got off to a bad start. Talking carelessly to reporters, Arnold produced huge headlines, vague stories about defense-hindering control of U. S. patent users by the German firm of Krupp. He had designs on a number of industries in which foreign patent tie-ups were said to be restricting U. S. production, among them magnesium, whose chief producer, Dow Chemical Co., has built an independent U. S. magnesium industry (using sea water as ore) from its own smart research. Arnold also got off a phrase about “economic fifth columnists” which he later tried to define, finally retracted. The vagueness of his charges, coupled with the fact that no indictments were announced, got him a bad press. The Wall Street Journal editorialized about “Folklore of Magnesium.” But last week Arnold’s Grand Jury, hard at work since mid-July, began churning out “bottleneck” indictments—four in four days.

>-Wellington Sears Co., three other makers or distributors of airplane fabrics (for wings, fuselages, ailerons, etc.) and their officers were indicted for hiking and maintaining identical prices.

>Five small companies and their officers were indicted for conspiring to control the supply of bentonite, a clay used in making molds for casting engine blocks, other foundry products.

>Corning Glass and General Electric were indicted for conspiring to monopolize the manufacture of glass bulbs, by paying royalties to a Dutch firm to keep the Dutch bulbs out of the U. S. It was not a case to arouse much defense interest. Said G. E.’s young chairman Philip Reed: “If we have made any mistake we want to know about it.”

>G. E. was also indicted (along with its subsidiary Carboloy Co.) for a 1928 patent deal with Krupp on tungsten car bide alloys. President L. Gerald Firth of Firth-Sterling Steel Co., one of Carboloy Co.’s three licensees, applauded.

Like G. E., like Pullman, Inc. (indicted in July), like Aluminum Co. (entering its third consecutive year in the courts), many of Arnold’s corporate victims are vital cogs in defense. Arnold himself confesses that an anti-trust indictment, even if successfully defended, is itself a punishment, “a financial hazard which should not carelessly be imposed on business.” It is also demoralizing to the executives indicted and takes their valuable time. Hence, with the Defense Commission seeking all the businessmen’s cooperation they can get, the heat is on Arnold to go slow.

Time to Stop? Test case of Defense v. Anti-trust is Arnold’s suit against 22 major oil companies, whose pipelines he wants them to divorce. When the oil companies complained to the Defense Commission (which wants to increase U. S. pipeline capacity) a procedure was set up. with Commissioner Leon Henderson as liaison. The Commission is now studying the pipeline case, and Thurman has suspended prosecution until he hears from Leon. If the Commission decides the suit is a menace to defense, Arnold will give weight to the opinion. Beyond that, he has promised nothing. As Arnold showed no signs of relaxing his anti-trust drive this week, many an observer predicted it was time for a showdown. Since the Commission has no power whatever except from the President (whereas Arnold is backed by a 50-year-old law), only the President, who can fire Arnold, can decide.

Philosopher. That Arnold will not otherwise be tamed was clear from his book this week. Unlike earlier Arnoldiana, The Bottlenecks of Business is a sober, almost a passionate book. It has occasional flashes of his old clowning vein (he quotes limericks, etc.). But capitalism, which he once kidded as “the true faith,” is now “the only type of economic structure in which government is free and in which the human spirit is free.” Arnold regards an effective Sherman Act as vital to this freedom. In the course of describing his methods, explaining the Sherman Act, and taking bows toward the U. S. consumer, he reveals a newly serious belief in budget balancing, in the dangers of planning, in “the conservative Utopia of laissez faire.” This sets Arnold apart from what is left of the New Deal.

Said Adam Smith, father of laissez-faire economics: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” To plan-minded New Dealers like Jerome Frank, the lesson of Adam Smith’s observation is that anti-trust laws can never be really enforced. To Trustbuster Arnold the words are simply a challenge, and a reason for larger anti-trust appropriations: “You cannot police a country of 130,000,000 people with a corporal’s guard.”

In arguing that the Sherman Act should not be adjourned for the sake of rearmament, Arnold is concerned not merely with catching “profiteers.” He believes his prosecutions lower food prices, let Americans eat better, make healthier recruits. He winds up in an eloquent chapter which attributes the fall of the Weimar Republic, the collapse of France and the failures of Chamberlain all to the same source: a frozen price system, in which “vested interests” (whether industries, labor unions or lobbyists) put a “money value on restraints of trade and called them national wealth.” If he has his way, the U. S. economy will at least emerge from the defense program as little changed as possible from the ways of life it is arming to preserve.