T - International Brotherhood Of Electrical Workers

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$40 Fo/h iii the series oil the telephone NE trouh...solle characteristic of riat e tmonopolies .... like' the A .... nal Teephloe and 'ITe'leraphl (]oalmny is their breeding. Not, in the Of d II....breeding. Rather in the sense that all o£ theil activities acquire the defotrmed characteristics of /o1irl°[Ily and in the sense that profit .n.op..Ilolis begeo hi nl .eno pr I.Is. This tendency to breed is snle..hat in proportion to their success in the acquisi tion of profits. Stlange as it iay seelm, the pressure of SlCe.s.. occasionally is so gnmat as to resui in the producotio of ilprofitable mono po les. Smetio hos such a nlalady results simply beeaus there is nething else to do with the pofifts, At other times the sarifite of profits is eonsidered fail exchange Iot a s.u. ting gain in poweI, Then, too, there is IaI,. Multiple, constant, peisistenl. /let fless fea. ear that public authority may succeed it putting an effective limit on excess!ve profits, Fear that som eone, anyone, may litrude upon the . .onoplyl's exchlsive dom in ions [Though tile oxistin streams of profit are bore han adequate to be shared with others, mnonopoly lrks eonfideee in itself against efficielt corn peti tilom r against "yardslicks" of mnopqolies operated in the true public interest. Acutely cnosious of the importanoe If its economic privileges in relation to its suavival, monopoly must contimally fortify itself and its privileges. Such a multiplicity of fear is an awful thing. flaying lived with its fears for nore than half a century, the Bell System has devised many interesting and bIportant methods to defend itself f]'on known and unk.nown. assaults. The Bell System has been also spectaUhlarly successful ini the ]>rodlethin of subordinate iinlpOlies to occupy new routld and of "'tel'" lno0- hopnoles to keep competitive forces at a iaximum distane, and at the saie time enlarge its revennes and profits. THE ENTRAPPING NET The strategic position of Wester Eleetril is a hastion of ni.o......Itay ( xIrIOt is obvious. Western Electric was given the exclusive authority to manufactulre telephn.e equ. IilpmenIt and apparatus under the 11 e 11 patents, The patent cen iompany of the Hell System retained title to the tPee phon .. strUnents, nelely rentbifg them to its operating comn panlos. The operating conpanies paid the Bell System rents and royalties for the use of these hislstuernts, as well as surrendering substantial prtions of their capital stock to the parent complany for the franchise privilge. Thus monopoly control, made possible by control of the patents., was fortified by control of the companies operating under the patent licenses. This arangement tended to strengthen the Bell System monopoly in geonietic proportiono. Possession of titles to the instruments assured not only contiuous control, but also ,ontious re.v.en.e. And there wler many by-products. The lienase agree neats included a provision giving the POOR A. T. & The Journal of ELECTRICAL WORKERS and Operalors T.! 91 2iei i e~aa& qe" Monopolies sit under sword of Damocles. Smaller buffer monopolies created to ward off control 11ell Syst.n. Ian option to purebase such poi'prty of the optrating eolnlpalieS as was not alreadly owned by the Hell Sys- Ie... This in turn made it difficult, if not i possible, for the operatigm coipanies to sectiri capital except from tile parent ,onpr..oly. This mo...nopoly con l of the petIr... img coiml.anhs. credit also proved irofitahle, with tbe result that when perpeteal licenses eI .. er granted the Bell Systen imposed a stipulation whereby the lice nses were pohlbtoed f'ot . Ir'rowing o money without 1he flteesor's eonsent. THE BANKERS JOIN THE PARTY Credit control is one of the most strategic instr ... e..ts for the Itention of monopoly and the enhancement of ecoarom power. Some conception of the eeoriUrnic power which accompanies tho control of vast aggregatoms of cupitetl may be derived from the followinrg panssage froml the essay "Other Peple's Mfoucy,' written by Louis D. lrandeis years beforee e was appointed to thi Supren.e C.urt of the United Stats: "'The Equitable Life Assu am'e Society ia stock cnimal } ' and is controlled by $100,000 of stock. The dividend on this st..k is limited by law to 7 her r.ent; but in 191) Mr. Morgan laid about $3,000,000 for $51,000, Ill value of this stock, or $5,88s2,:5 a shari. The dijvidend . turn on tlhe stock investn.en.t is less than oneeighth of I per e/nt, but the assets eontrolled amounted to over $500,000,000, A rid certaiM f those assets had an especial value for investment bankers namely the la'rg houlings of stock in hauks and tLust compeanies. petitive bidding prior to 1898. [I, 1899 anl ssue, of $3,000,000 in bonds was sod. An additonma $2,000,000 worth of bonds were ,olI six months later. All these bonds were sold to bankers above fiar under co ipetitiv V co dithfs. In the ieantimie, the needs of financing h,,,lersd to meet the alarmdoig threats .,competition stimulated by the expiation of the basic Boll patents. The last tIf the competitive offers of American Telephone & Telegraph Company bonds was in 1905, Thereafter the A. T. & T. debt was finaIced without competitive bidding. This thange in policy is explainable, in part at Ieast, by tlie inereasi rng ilfluen.ce of the financial interests representing J. P. Morgan & Co., Kuhn, Lohb & to., and Kdder, Peabody & Co. Between 1907 and 1936, a total of $900,000,- 000 of non-convertible bonds, debentures aml notes was sold to Morgan firms and their associates. Of this total, infomi.- tion was available as to the underwriters fees i relation t) $835,000,000. The fees on this $835,000,000 amounted to $23,250,000. The preceding paragraph relates to the financing of the parent company only. Since the accession of J. P. Morgan & Co. as the dominant banking interest in the affairs of the Bell System, not only the A. T. & T. bond issues, but also bond issues of the subsidiary operating compan.es have been sold to syndicats ofganized by this firm.. Detailed information on all the Iinanc..ig operations of the A. T. & T. subsidiaries is not available for the whole period, but from 1922 to 1936 bonds in the principal amount of $411,000,000 were sold. Of this total, 401,000,000 princi[pal amouit of oands were soIl to J. P. Morgan & Co. or to Morgan, Stanley & Cn,, Inc. The ,oulmnisson on the purchase and al, of these $4{H,000,000 amounted to $10,859,000. I NJUST TO THE PUBLIC There is no way to m [h leasire very eaIl hut intangible economic. p ower a- Quite asid, from the fact that other ruing to the A. T. & T. form its maonoe [sistie credit colrtl. But the quota- ,/re ability, have been xcluded from as- fin.ancial initerests, fossessed of lhe requtior is appropriate, both because it illus sisting in the debt financing of the worlds tates the price which bankers will pay to ilnrgest .orpol-.tion, and quite aside from outrol capiotal, and bocause the sane Mr. the resnlting undocital concen tration of Morgan has Wxel(ised a very consider.bbe power and wealth in so few hands, the in.luence on A. T. & T. polities. And it is financing polies of the A. T. & T. are possible to .neasu . .e some of the direct sigificant in relatiuon to what tihe public benefits proceeding from the credit monoly to the beneflci ries C i he Bell vibus article it was shown that after the must pay for telephone servicE. In a pe- empire. Massachusetts legislature required tile The dominance of the banking interests B4ll Systems to sell its stoslk at competitive is not difficult to identify. Aceording to In rket prkies, coltrol of the System was ~he report of Federal Cormnurncations traniisf.rre.d to New York. The adverse Comrnlission on the investigation of the eftects on the public are parallel whether telephone industry, some $8,00000S in it is the debt or the equity securities of notes and blods were sold to ckholders a monopoly which are sold to insiders and to investment bankers undier com- wit out the benefits of competitive
NOVEMBER, 1942 m41 bidding and bona fide bargSaining between independent parties, Il the light of this financbd history, Vice President Page, iT his tireless efforts to "weil" the Bell System to th, American puhlic, attempts to justify the profits as reasonable by saying "All businesses, no mnatter how diff.rent they ale iother respects, mus., if they M.a.l capital compete with e.ach other i, the same money ainket f.r thie public's dolta rs." 'Would sch a statemlent be risked if the financial history of the instittiim Were fllore gelnev [ally know. .? Would sUe practices have been tolerated if the (viis had been m nore grrally appreciat!d? Then there are other banking favors and priv ileges t be best.wed. The A. T. & T. mmaintis trelendous banki hat a..es. The average daily bahlae inl I-93, was $60, 00010. Batiks pay .n, interst on demand deposits. Hence su.ch deposits are especially att ractive Tlin banker directrs of A. T'. & T. are in an advant ag(eous position to, see that (eposits are mad, with due consideration for their welfare. Some $40,000.000 was In deposit with 25 mportant Illins oaltd chiefly in New York and Bisin. The remitnng $20,- 000,000, still a sizable piece of political patronage, was disribtLed I among 4,355 sn li e, halkS. This, of course, is good "public relations, for the A. T. & T. has fonnd that ven small hankers are in - fliential in their res..ective e, nunrities. E.en they .an fundii as oltpt, guarding the A. T. & T. n In "THE PUiBLIC BE D-D!" COMMON ' t LGARIn'IES OF DICTATORSHIlPS While the moniptlistic traits originating with the primary Bell paten $were impressing a.i. tonsolidatin g thenmselves on the finanintM poliies of the corpoa,- liont adding profits and power, there was to ebbiug in the appreciaton of the lun que valU of patent control It will b, recalled that Alexander Graham Bell's first patents were in 1879 and 1877, But that the prospect of omniercially ex ploitinag these patents was clouded by the patents of Elisha Gray asld Thomas A. Edison whirl, xere being actively pro meted by the Weser tU/iliont Telegraph Company. In Ihe 17 years following the ipeace-pat with Western Union, whe,,by Western l.nion agreed lo withdraw from the telerphor field in return for the agreepeat of tihe Bell interests to stay u.I of the telegmaph hat ss. anI .. Iay specfied royalties to W stern Unio, thie telephone interests obtained exchuive rights in the telephone filld under 87 Western Union patents. By the time the basic patents expired in 189:1 and 189!4, the Bell System had acquired about 900 patents in ac - cordance with its adficttud policy .f patent acquisition for the purpose of nonopolizing talephony. But the abitions of the Bell System were never confined siply t .n.....nOliZgig the tlphone industry. As has heen emphasized., that is one or the mlost troihlesome features of profit monopoly. The following passage illustrates the point. It is from a letter, dated April 14, 1906, written by one thie A. T. & T. Presidnt Vail ht Ihe then A. T. & T. Presidnt Fish. F...... the very beginning of the idephon' baslniss, so far as I have had to d, with the policy of tIhe company. it was d.i rected toward the ultimate absopt ion (If the 'tlegraph' husiness-I do not realtetuber that I was alone i this, antd as I bueirv cand understand. this policy still exists. I think Mr, Cobhlane will recall iremarlar ]Bade by lv when the Weslevn I[ nitil ag cement was signed to the effeet that, if we were in the position I honed we wouhl be at the teri nation (of the contract, that we should ask the \\estern I ... on for hall of its capital stock for the privilege of continuing in business as one or ourI subordinate conmpanies." This .inr utn..'ation should have been in 51ussolini's scrap-Look or inl whatever container he has lesignated for the filing of Scraps nf paper. Its aischal of pa tentis. howeverI.wa not ,aIlI.n.. to the task of pres..ering the Bell System's do ination,. pmch less the in.posi.ng of its ternis upon Western liTon for tile 'privilege of .... etmg ini busi nes. ," Substantial hope for sp. I....s)af .ompettliohi after 1894 sprang fromn the Berliner patent. This patent. relaing t. hle ndrie'pholte, wxa; appied for in 1877 by . Be.rier and was pu,- chased by the Bell interests the same year. But the patent was not issued until 1891, so that it wuld not expire until 1908, with the possibility that thie tephone mon)topoly colrd be maintained thereby until 1908. The conpay was suspected of deliberate delay il securing iSSla/ee Cf thie patelt. A Boston attorney, dames J. Stor.ow, lonzg o. frien dly terms with the man age meat of thie A merican Bell Telephone Ce., w rote to the comeItay's ..residennt O No- Velibel' 17. 1891 th, same year in which the Btrltiler patent was issued--in part a ollohws "The Il[-I Corni ny has had a monopoly note profitable and eontrolling a .. more generally hated than any ever given by a patnit, The attempt to prolong it IC years moe by the Berliner patent will bring a greet train on that patent and a greatt plarsuri-lrpen the courts," TIE S(I'ENCE OF ENSLAVING SCIENCE While the financial allies of the Bell Syste .. succeeded in saving the mnolpoly in the period of crisis when the latent iContinued e c i m .mge 53)
Page 1 and 2: E-G I I I I a MIRACLE YARD- UNION o
Page 3 and 4: InTERnATIonAI ELECTRICAL WORKERS nn
Page 5 and 6: THE JOURnAL OF ELECTRICRL WORKERS A
Page 7 and 8: NOVEMBER, 1942 533 A VIEW OF SOME W
Page 9 and 10: NOVEMBER, 1942 A. F, 4 LS.am / eta
Page 11 and 12: NOVEMBER, 1942 SOCIAl, SECURITY IN
Page 13: I NOVEMBER, 1942 o474a 4otd Man C"o
Page 17 and 18: NOVEMBER, 1942 S 4 sUnn i Aa4l " 04
Page 19 and 20: NOVEMBER, 1942 GAIN the JOURNALA OF
Page 21 and 22: NOVEMBER, 1942 O(e in th, verics of
Page 23 and 24: NOVEMBER, 1942 fore, the following
Page 25 and 26: NOVEMBER, 1942 651 aWOMEN'S AUXILIA
Page 27 and 28: NOVEMBER, 1{942 Editor: L. U. NO. B
Page 29 and 30: NOVEMBER, 1942 555 Work still plent
Page 31 and 32: I NOVEMBER, 1942 left heIs ld Is >
Page 33 and 34: NOYEMBER, 1942 559 a trip to New Yo
Page 35 and 36: NOVEMBER, 1942 551 that they are go
Page 37 and 38: NOVEMBER, 1942 so nelview, "Why don
Page 39 and 40: NOVEMBER, 1942 With the playinh jIn
Page 41 and 42: NOVEMBER, 1 942 517 I tIsol ],1.O i
Page 43 and 44: NOVEMBER, 1942 569 Ramie A. flyers,
Page 45 and 46: NOVEMBER, 1942 5;n CLINTON METAL MF
Page 47 and 48: NOVEMBER, 1942 573 Catfish Have Nin
Page 49 and 50: NOVEMBER, 1942 "I is rnos pleased d
Page 51 and 52: NOVEMBER, 1942 577 lee trueit i. Fa
Page 53 and 54: NOVEMBER, 1942 579 LOCAL UNION OFFI
Page 55 and 56: N OVEMB ER, 1 942 761141 701200 704
Page 57 and 58: WNDVEMBER, 1 942 6{3 L.UV. 318333 3
Page 59 and 60: Il L 2/hem'cs a Xrauoh o It lo,, ..

T - International Brotherhood Of Electrical Workers

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