Memo from Mr. Berle

Because they saw in their assignment an opportunity to study the whole question of business and its relationships to government, two members of the Congressional Monopoly Investigation committee--Assistant Attorney General Thurman Arnold and SECommissioner Jerome Frank--asked Assistant Secretary of State Adolf Augustus Berle Jr. to suggest a program for the investigators. To nervous, cocky Adolf Berle (rhymes with surly), this assignment was what a murder trial is to a cub reporter. Early in July Mr. Berle completed his "Memorandum of Suggestions." It was not quite the sort of thing New Dealers hand out to the press, but last week it finally did get into print.

In his 12,000-word, 23-page memorandum. Economist Berle ranged far and wide, played no favorites, outlined a program that might well keep the committee in session for at least a decade. "The investigation," he said, "should be essentially a search to find an organization of business that actually works. . . ."

Cautioning trustbusters that mere bigness did not mean badness, he argued that small business despite certain "nostalgic reminiscences" was not necessarily competitive or humane. "The village grocery store, the village blacksmith, the village grist mill, were all monopolies. . . . Such competition as there has been, curiously enough, came from large-scale enterprise; mail-order houses, and later the chain stores."

At the same time, perhaps with a professor's love for upsetting convictions, B.A., M.A., and LL.B. Berle challenged the prevailing belief in the efficiency of large-scale production: "It is familiarly insisted that the old-fashioned farm was an inefficient unit. Yet if, besides the assumed cost of production, there were taken into account the continuity of employment, the ability to use energies of adolescents and of old people, the ability to take care of sickness and give some scope for individual creation and the like, it might prove that ... the old-fashioned farm was one of the most effective units known. . . ."

Getting down to specifics, Mr. Berle found the undistributed surplus tax defective because "though it retarded growth of existing large corporations, [it] 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."

Furthermore, since "small industry does not have the same access to the capital market as does large industry" there should be "a real system of capital credit banks ... a system which would have to be backed by a capital reserve bank . . . able to create credit, and to join in contracting it when necessary."

As for the general program: "It is probably more effective to assist competition rather than legislate the large unit out of existence. . . . Where a high degree of competition will accomplish the result [a business system that actually works], that should be the method used. Where a high degree of cartelization under suitable control will accomplish the result, that should be the method. Where quasi-public owner ship produces the result, use that. . . .

"Before the problem of ultimate control is taken up, the purpose and design ought to be definitely worked out, so that the normal methods of enforcement can cover the great bulk of the area, leaving ad ministrative processes to deal with the doubtful, the experimental, and the cloudy areas. . . .

"A fair criticism of ... the New Deal has been that it indulged shotgun imposition of regulation without adequate definition of standard."

This file is automatically generated by a robot program, so reader's discretion is required.