The Charlotte News

Thursday, September 8, 1938

SIX EDITORIALS

Site Ed. Note: The other editorial of this date "More Appeasement" is maintained separately as part of the grouping of editorials by Cash set forth in What America Thinks.

As to the editorial, possibly not by Cash, "Sneaking Into Socialism", questioning TVA's rights and that of similar government projects to exist in order to provide electric power through government bureau rather than by expressly conferred authority by the people, the matter had already been taken up and determined by the Supreme Court in Ashwander v. T.V.A., 297 US 288 (1936). There the Court held, against essentially a claim of unconstitutional impairment of contracts by the Federal government in competition with privately owned utilities, (in the particular instance stockholders of a power company, with which the Federal government had contracted to purchase its transmissions lines by which to transmit power from Wilson Dam, seeking annulment of the contract as beyond government authority), that the Government has the right under the Commerce Clause to assure navigable rivers and streams and to remove obstructions thereto when they exist, and thus had the right to build Wilson Dam; having that right, the Government then also had the right, the Court stated, pursuant to section 3 of Article IV, stating, "The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States; and nothing in this Constitution shall be so construed as to Prejudice any Claims of the United States, or of any particular State," to dispose of and sell the power thus generated by the water flowing through the dam as being property of the United States, regardless of the Ninth and Tenth Amendments which would not act to confer on the people or the states any portion of this or any other power expressly conferred by the Constitution to the Federal government. So, not Socialism, but rather an Administration using its Constitutional powers creatively to insure electrical power at reasonable rates to rural areas in desperate need of development and emergence from generations of abject poverty, in Appalachia, in Texas, in Alabama and in most other rural areas of the South during this desperate, dustbowled, and depressed period of the 1930's.

It was not a perfect system, as pointed out in subsequent editorials, whereby buyouts of private interests, such as that of 1940 Republican Presidential nominee Wendell Willkie, sometimes occurred under questionable terms; but, nevertheless, the South was electrified finally and progress made toward inclusion in a more modern age, away from backwater poverty breeding ignorance and its inevitable concomitant social ills of crime, disease, racism, and the rest, though not fully eradicated until the Great Society of Lyndon Johnson established programs which ultimately finished the work begun in the New Deal years.

We also reproduce the second part of the Berle analysis of monopoly from this date's News, continued from the previous day.

Berle Looks At Monopoly

[Note: This installment completes the pungent observations on monopoly and the business structure, begun with excerpts yesterday from the Memorandum prepared at the request of two Congressional members of the committee investigating monopoly by A. A. Berle Jr., one time Braintruster, more recently Assistant Secretary of State, but often a critic of the New Deal. --Editors, The News.]

THE PRIVILEGES GRANTED TO LABOR UNIONS

It is axiomatic among businessmen that small-business cannot cope with a powerful labor union. A labor union can dictate, not only rules of pay--which presumably should be uniform--but the number of employees, which frequently will put a small concern out of business. A large concern can meet labor demands, either because it can pass the cost on to the buyer, or because it can improve its methods and expand its machinery sufficiently to satisfy progressively demands for higher pay and more jobs through increase of output and increasing productivity per man. It is a familiarly known fact in large-scale business that, whatever pay scale is set, the business can, over a period of years, improve its methods so that the ratio of labor cost to the cost per unit of ultimate output remains the same. Small businesses frequently cannot do this.

NATIONAL CONCENTRATION OF INDUSTRIAL POWER

I presume some attention will be given to the problem of the concentration of power. It ought not to be confused with concentration of property or ownership. These are two different problems. I have not been able to get up any intellectual respect for books like Lundberg's "Sixty Families" (leaving aside the fact that it was extremely inaccurate) because property is one thing and power is another. Concentration of power in New York or Boston has nothing whatever to do with the private fortunes of individuals. The Van Sweringens were no less powerful at the end of their lives, when they were bankrupt, then they were in midstream, when they had between them a fortune worth on paper two or three hundred million.

A study of concentration of property interests and of income would be interesting, but probably would prove nothing except the existence of a property owning class. By the time it was discovered that some hundred or thousand individuals owned a considerable percentage of the national income, it would also be discovered that most of these individuals had very little to say about what actually was being done. There may be strictly social reasons for having no individuals with large incomes, though I rather doubt this; but such reasons have little to do with industrial organization. Powerful individuals and industry may have large incomes: or they may not. There is no particular connection between the two facts.

CONTROL BY COMPULSORY COMPETITION ALWAYS FAILS

Legislating competition (unless all previous experience is worthless) simply does not work out. The unit which has the greatest number of governmental privileges accompanied by the best access to the capital market, and the best access to markets and natural resources will, of necessity, eventually either monopolize or dominate the field.

If really small-scale units are desired, the really effective procedure would be to take away corporate privilege of limited liabilities. Men who are asked to sign their own names to their own notes will usually be limited by the resulting risk.

METHODS OF TAXATION THAT WORKED BACKWARD

The country has been through two or three fights in connection with corporate taxation, one of them having to do with the undistributed surplus tax... What was not realized was the fact that high undistributed surplus tax, though it retarded growth of existing large corporations, gave them a perpetual franchise, not only to stay large, but to be the only large corporations in existence. No small-business could grow up to a point where it could give its larger competitors any real battle. In consequence, every small-business was in danger far more than the large; and knew it: which was the real reason for the revolt and ultimate modification of the tax. Arithmetically, there can be no other result.

NEXT STEP: AREAS OF DIRECT PRODUCTION

I am pretty clear in my own mind that, within ten years, we shall be forced into a vast expansion of direct production of one sort or another: and that this is likely to be on a more or less regional basis, rather than on a strictly industrial basis. The Tennessee Valley Authority may very well prove to be the great example in this regard.

The advantages are obvious. Production without interruption because of annual fluctuations is possible; so is distribution without intervention of the usual wasteful marketing process.

My feeling is that the constructive side of the report will need to develop the areas in which all control forms, namely, competition, regulation and direct production, are used. As stated above, there is no reason for assuming that any of the three is the sole answer for all industries, for any one industry, or for all localities.

Reverse English

The Internal Revenue Bureau estimates that Messrs. Pierre Du Pont and John Raskob, as a result of the finding of the Board of Tax Appeals that private sales of securities between them in 1929 were not bona fide, owe additional income taxes for that year of $888,285 plus interest for Mr. Raskob and $580,369 plus interest for Mr. Du Pont. Altogether, their combined assessment will exceed $2,000,000.

That is quite a lot of money to raise, especially for taxes, but these two ought to be able to manage it, simply by reversing the process which got them in hot water. That is, let Mr. Raskob sell Mr. Du Pont, and Mr. Du Pont sell Mr. Raskob, securities at a profit, and with that profit pay off the Government. That, except for the slight detail of claiming a loss, is what they did in the first place, and it is a poor rule that won't work both ways.

Familiarity Breeds Contempt

The Interstate Commerce Commission has authorized the Yadkin Railroad to discontinue its nine-and-a half-mile line between Albemarle and Norwood. Maintenance was costing more than the branch was worth.

How one goes about discontinuing a railroad line, we don't know. But one condition surely ought to be the removal of its track wherever it crosses the highway. All through North Carolina and South Carolina the motorist encounters rusty railroad tracks straddling across some highway. Some of them are still in use by one train in each direction every day or so, but the motorist feels safe in taking a chance that this isn't one of those days. Others, from the weeds that have overrun their road beds, give every appearance of having been abandoned long ago. Only the Stop, Look & Listen signs and a thank-you-marm in the highway remain.

To cautious motorists, these casual crossings bring a start and perhaps a quick application of the brakes, for they are always popping up suddenly. And for the uncautious kind, it is bad training to leave railroad crossings lying around. These hazards either deserve respect or removal.

Sneaking Into Socialism*

It's a familiar story told by the president of the Texas Power & Light Co: of a Federal power plant, built and operated with public funds and set up in corporate form as the Lower Colorado River Authority: of this authority's efforts to obtain outlets for its power: of PWA loans and grants to cities that may purchase existing distribution systems, or build their own, in order that they may become the authority's customers. This is the New Deal's method of carrying out Mr. Roosevelt's apparent belief, never expressed when he was first a candidate for the Presidency, that the manufacture and wholesale of power should be a Governmental enterprise.

And it is gradually becoming precisely that, as is indicated not only by the crushing competition of such public power plants as the Lower Colorado River Authority and TVA, but actual negotiations for the purchase of private power systems as well. TVA is ready to buy out and take over the Tennessee Electric Power Co. as soon as agreement can be reached on price. The company wants $97,000,000, but TVA will not pay so much.

Ourselves, we do not recall ever having voted for a Federal executive officer who espoused the nationalization of power production, or law to accomplish this purpose directly. But it is being accomplished indirectly by bureaus and agencies of the Government, slowly but nonetheless surely.

Consolation

It is characteristic of this year's Charlotte baseball team that its fate was sealed by one run in the very last game of the schedule. Denied by a rainy day the chance of having it out head to head with Norfolk, its hottest competitor for the pennant, and either losing or winning on the outcome of that series, it managed to cling desperately to its half-game lead. When yesterday afternoon Norfolk won its fourth straight and final game from dispirited Richmond, the two leading clubs were in a dead tie and the pennant hung on the outcome of the Hornets' night game. They lost.

But there is consolation--there is consolation, that is, if the poet knew what he was talking about when he said that it mattered not whether you won or lost, but how you'd played the game. For our Hornets have played their games for everything in them. Many of them they have snatched in the last inning or extra innings, and ahead or behind they were always fighting for all they were worth. As a result, they have the town solidly behind them, not to mention the seven other clubs in the league.

It was characteristic of the Hornets, we said to begin with, that their fate was sealed by one run in the very last game of the schedule, but we'd like to amend that in part to come. It would have been more wholly characteristic if they had won.

Awful Thought

For the reason, apparently valid, that tobacco quotas in North Carolina, Georgia and Virginia were working an actual injustice on many growers, the Department of Agriculture has increased North Carolina's quota by 2,156,000 pounds, Virginia's by 3,406,000 pounds, and Georgia's by 3,449,000 pounds. Georgia's Democratic primary is next week.

And for the reason, apparently valid, that in Ohio social security had become a partisan instrument, the Social Security Board is holding a hearing to determine if Federal contributions should be cut off. Warnings to Ohio were first sounded publicly three days before the Democratic primary in which Governor Davey, a politician of gross insensibility to ethics and no friend of the White House, was to lose handsomely.

The Department of Agriculture and the Social Security Board are to be exonerated, because of their evident devotion to duty and the non-partisan quality of their administration, from the charge, even before it is made, of playing politics in Georgia and Ohio. But boy! If they ever should decide to pitch in and help to elect the right crowd, wouldn't they have a mortal lock on the votes!

 


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