In peace time, their high-price, restricted-output strategy has impeded the advance of our living standards and general economic well-being. Through the abuse of our patent system, cartel controls have been established over large segments of technology. With this leverage, industrial monopolies of international compass have at times deliberately brought about the deterioration of quality standards. When it might be to their advantage in maintaining or exploiting their monopoly position, they have adulterated their products to an extent and in a manner endangering the health, and even the lives, of consumers. Almost incredible as these assertions may be, they are not subject to contradiction--the incontrovertible facts are clearly set forth in Congressional investigations and in the evidence in antitrust cases of the Department of Justice.

Cartels are in essence private governments which threaten to subvert and even engulf duly constituted authority. In Germany, Kaiserism and later Nazism received enormous impetus, indeed decisive support, from the regimented, cartelized structure of the national economy.

Totalitarianism represents simply the ultimate consummation of cartelism--the final, full expression of the reactionary forces stemming from special privilege. In totalitarian states all industrial enterprise is subservient to the predatory interests and fear-dominated will of a government which openly flouts the democratic principle of consent of the governed. In the economic sphere, the investment of fresh capital, the volume of production, the prices to be charged, the markets to be served, are determined by arbitrary decrees. Risk-taking, managerial discretion, bargaining freedom, the essential elements of the capitalistic system as we have known it, are absent. One can neither start a new industry, launch a new enterprise, or change one’s occupation without first obtaining official consent. It is in the nature of cartels that they should operate in a similar fashion, even if in their application the devices used for consolidating the vested interests of established concerns and throttling the dynamic forces which economic freedom would release may lack something of the rigor they exhibit under totalitarian “leadership.” In order to maintain their control over production and prices cartels must determine who may enter the industry, how they shall operate and where they may sell.

The basic American concept of free enterprise is the antithesis of a cartelized market. Yet, all too frequently, some of our industrialists have had the effrontery to attempt to promote a pro-cartel policy by a specious appeal for free enterprise. The pretension is that freedom to compete in trade must encompass freedom to suppress competition! As though the right to start a fire in order to heat a house must include the right to burn down the house in complete disregard of the peril to the whole community! The common sense of ordinary men has no difficulty in distinguishing between the right to start a fire and the “right” to commit arson.

Unless I am greatly mistaken, the American public will no more tolerate a cartel-sanctioning abrogation of the antitrust laws in the name of “free enterprise” than they would countenance a repeal of the laws against arson in the name of “freedom of self-preservation”--the right to keep warm!

It is significant, and deserves thoughtful reflection that Germany, the “classic land of the cartel,” where regimented economic restrictionism is the accepted “way of life,” has in the course of two generations farrowed Kaiserism and Hitlerism--the natural offspring of militarism and cartelism. Even in times of peace, the militarists and industrial monopolists of Germany found cartel restrictions an excellent means for conducting covert warfare. In this way industrial “colonies” were acquired and prospective victims “softened up.” Back in 1883, Joseph Chamberlain, as a member of the British Cabinet, declared, in sponsoring a bill designed to forefend the sub-rosa “invasion” tactics of imperialistic Germany:

“It has been pointed out especially in an interesting memorial presented on behalf of the chemical industry that under the present law it would have been possible, for instance, for the German inventor of the hot blast furnace, if he had chosen to refuse a license in England, to have destroyed almost the whole iron industry of this country and to carry the business bodily over to Germany. Although that did not happen in the case of the hot blast industry, it had actually happened in the manufacture of artificial colors connected with the coal products, and the whole of that had gone to Germany because the patentees would not grant a license in this country.”

A quarter century later, Lloyd George, introducing a more drastic bill for curbing these insidious depredations on strategically vital British industries, pointed out:

“Big foreign syndicates have one very effective way of destroying British industry. They first of all apply for patents on a very considerable scale. They suggest every possible combination, for instance, in chemicals, which human ingenuity can possibly think of. These combinations the syndicates have not tried themselves. They are not in operation, say, in Germany or elsewhere.... A good many of these patents have been taken out not for the purpose of working the patents in this country, but for the purpose of preventing their being worked.”

The “big foreign syndicates” to which George referred were, of course, the German cartels.

The adroit strategy of stealthily sapping the industrial foundations of the national security of countries capable of resisting the German drang nach all-points-of-the-compass has been relentlessly pursued and resourcefully developed, through thick and thin, decade after decade. If the cartels are thwarted in the use of the patent system as a weapon for disarming potential competitors abroad, they may inveigle the intended victims of German aggression to a ‘simulated’ love-feast at which the latter are gorged with the poisoned food of production quotas, technology restrictions, market-territory limitations, and pricing inhibitions. What these tactics accomplished in the way of immobilizing French industry is now a familiar story. To cite the record of only three of the most strategic industries, through cartel manipulations the Germans succeeded in (a) reducing the relative output of French steel from substantial equality with German output in 1926 to 40 percent thereof in 1938, (b) retarding the growth of French aluminum production to a rate which fell short of doubling the output in the same period, while German production was increasing five-fold, and (c) restricting the French dyestuffs industry in such fashion that its output in 1937 was barely two-thirds of what it had been in 1924, whereas German production, even according to official estimates (none too reliable though they are) had increased five percent in the same period.

Nor were the European countries alone the “potential enemies” whose vital economic defenses were thus impaired by subtly imposed cartel restrictions. In this hemisphere, likewise and not least of all in our own country, the cartel device was sedulously--and effectively--used for the same ulterior purpose. As President Woodrow Wilson declared shortly after the first World War,

“Our complete dependence upon German [dyestuffs] supplies before the war made the interruption of trade a cause of exceptional economic disturbance. The close relation between the manufacture of dyestuffs on the one hand and of explosives and poisonous gases on the other, moreover, has given the industry an exceptional significance.... It will ... be a policy of obvious prudence to make certain of the successful maintenance of many strong and well-equipped chemical plants. German chemical industry, with which we will be brought into competition, was and may well be again a thoroughly knit monopoly, capable of exercising a competition of a peculiarly insidious and dangerous kind.”

Despite this warning in 1919, we were only slightly better off, relatively, in respect of the arts of organic chemicals manufacture twenty years later, when Germany decided the time was ripe for another attempt at world conquest, than we had been in 1917. In the matter of synthetic rubber technique, today the most strategically critical of all these processes, I. G. Farbenindustrie had succeeded, through its cartel arrangements with the leading American firms in the petroleum and chemical fields, in keeping this country in an extremely vulnerable position--as all the world now knows. Partly through persistent stalling tactics, partly through playing one American firm off against another, partly through cajolery, and partly through deliberate deceit, the German cartelists had not only stifled the development of American technology in this field, even by their “partners” on this side of the Atlantic, but had done even better, from their standpoint. They had obtained the German patent rights and the essential know-how for the most signal contributions of American technicians to the art of synthetic rubber manufacture. And, incredible though it may seem, they had obtained these advantages without divulging a single significant detail of their own carefully guarded know-how!