5

6

operated over 90 percent of the railroad mileage of the country. In the same year the electric utilities on the list accounted for approximately 80 percent of the electric power production in the United States as well as more than 90 percent of the telephone service, virtually the whole of the telegraph service and most of a large part of the rapid transit facilities of New York, Chicago, Philadelphia, Boston, and Baltimore. The remaining 107 corporations on the list of nonfinancial corporations include 84 corporations primarily manufacturing in character, 10 merchandising corporations, 9 primarily mining, and 4 providing other services or carrying on miscellaneous activities. The manufacturing companies on the list comprise a much smaller proportion of all manufacturing assets and employment than do the railroads and utilities, though their importance varies greatly from industry to industry. In some industries like steel, petroleum refining, rubber and cigarette manufacturing, the large corporations listed above comprise most of the industry. In other industries, such as cotton textiles and the clothing industries, not a single corporation on the above list is primarily engaged in that industry, though often a large corporation may carry on subordinate activities in such an industry, just as certain of the larger automobile companies make cotton cloth for their own use.

Industries Characterized by Large Corporations

Some impression of the industries in which the larger corporations constitute a significant proportion of the industry can be obtained by listing the 65 most important industries and indicating both the proportion of the industry's product supplied by the four largest companies, and the number of corporations listed among the 200 largest whose primary activity lies in the particular industry. Such a list is given in table III covering all the manufacturing industries employing over 25,000 persons. Except in the case of the large automobile corporations, which are treated as equally engaged in the automobile industry and the automobile body and parts industry, each of the large corporations has been classed for the purpose of the above list according to its primary activity. Of the 65 industries employing 25,000 persons or more, 24 are represented by at least one of the large companies on the list of 200 nonfinancial corporations. These industries include 67 of the 84 manufacturing corporations in the list, while the primary activity of 17 of the large manufacturing corporations fall in one or another of the industries employing less than 25,000 persons.

5 Based on data in Statistics of Railways of the United States, 1985, Interstate Commerce Commission.

Based on Moody's Manuals, "Utilities," 1935.

Such a compilation in no way reflects the secondary activities of the larger companies. The big railroad companies operate railroad repair shops, one of the meat packing companies plays a significant role in the canning of fruits and vegetables, and in a large number of other industries, such as rayon, rugs, refrigerators, and boat building, one or more of the large corporations plays a significant role, though the particular industry is not its primary field of activity. In many of the more important industries such as knit goods and clothing, none of the large corporations appear to play a significant role.

While the figures in table III give a clear indication. of the importance of the big corporation in different industries, they do not give a clearly defined indication of the extent to which manufacturing as a whole is carried on by large enterprise. To obtain a more precise answer to this question, a special tabulation of 1935 census data has been compiled which brings together data on all the manufacuring activity of each of the largest manufacturing companies and their legally controlled subsidiaries." In such a compilation the mining, service, trade, and other nonmanufacturing activities of the larger companies is excluded, so that the figures apply only to the strictly manufacturing activity of the larger companies. The results of this compilation are given below, indicating the role of the 100 largest manufacturing companies on the basis of different measures of size.8

With size measured by employment:

100 companies employed 20.7 percent of all the manpower engaged in manufacturing; With size measured by value added by manufacture:

100 companies contributed 24.7 percent of all the value added in manufacturing activity; With size measured by value of product:

100 companies accounted for 32.4 percent of the value of products reported by all manufacturing plants.

Thus, while a large proportion of the activity in particular manufacturing industries is carried on by very large corporations, the proportion of all manufacturing activity carried on by the very large companies is much smaller than in the railroad and utility fields. The fact that the big manufacturing corporations produce a larger proportion of the total value added by manufacturing than their proportion of the total manpower employed in manufacturing reflects to some extent the larger volume of capital per unit of manpower which they employ compared with the smaller companies. If comparable data were available on the value of the physical plant controlled by the hundred largest companies (size being measured on the basis of the value of physical plant) there is little question that the proportion of such assets held by them would be very much greater than the ratios of 20 percent of manufacturing manpower and 25 percent of value added by manufacture. Very probably, more than a third of the value of the manufacturing plant of the country is operated by the 100 largest manufacturing corporations even though they

Corporations have been classed as subsidiaries where more than 50 percent of the voting power of its stock was held directly on indirectly by another corporation. See appendix 9.

It should be noted that the three different methods of measuring size result in three different lists of the "largest" companies. Most of the companies or any one list are also on the other two, but not all of the smaller "large" companies.

employ only a fifth of the manpower engaged in manufacturing."

When attention is turned to the field of mining, the same diversity of situation is apparent that exists in the field of manufacturing, though much less data are available to indicate the true role of the large administrative units.

Large corporations listed above, or their subsidiaries, account for a large proportion of the iron ore and anthracite mined in the United States. They mine a significant part of the other nonferrous metals and extract much of the petroleum produced. But at the present time no real basis exists for determining the proportions of the nation's mineral resources controlled by the larger corporations or the proportion of the manpower engaged in mining which they employ.

In the field of wholesale and retail trade, the large mail-order houses, department stores, and retail chains play a significant though by no means a dominant role. Ten such companies are included in the list of 200 corporations, though together their sales appear to account for less than 8 percent of the total retail sales in the country.

In the field of services three large motion-picture companies play a significant role in that industry but, for the most part, the unregulated services are provided by medium or small enterprises.

The list of 50 largest financial corporations includes 30 banks, 17 life-insurance companies, and 3 investment trusts, each with assets of over 200 million dollars. The 30 banks together hold 34.3 percent of the banking assets of the country outside of the Federal Reserve banks while the 17 life-insurance companies account for over 81.5 percent of the assets of all life-insurance companies. The 3 investment trusts are important in their field. No general comparison between the size of these financial corporations and that of the nonfinancial corporations can be made because the financial companies act primarily as channels through which funds are invested and as a rule neither use a large volume of industrial assets in their operations nor employ a large number of persons. Most of their assets are loans or securities which only duplicate the assets of other corporations or borrowers. The significance of these large financial companies lies not so much in their productive activity as in the controls which they

• This conclusion is confirmed by results of the analysis of income-tax returns given in table V-A, appendix 11. This analysis indicates that in 1933, 75 corporations whose activity was primarily manufacturing controlled directly or through legally controlled subsidiaries (more than 50 percent voting control) approximately 45.5 percent of the land, buildings, and equipment (after depreciation) which was controlled by all corporations whose activity was primarily manufacturing. This figure requires two adjustments before it can throw light on the concentration of manufacturing assets since (1) all manufacturing is not carried on by corporations, and (2) the Treasury necessarily classifies all assets of a corporation which is primarily a manufacturing company as if all its activities were manufacturing. If the figure of 45.5 percent were adjusted for these two factors it would be reduced somewhat but would be most unlikely to fall below 35 percent.

can exercise over economic policies, a subject to be discussed in a later chapter.

The final field to be considered is that of government. In this field large administrative units also play a significant role. The 20 largest governmental units together employ approximately 46 percent of all the manpower employed in government, including public education but excluding employees on workrelief programs.10 The largest of these, the Federal Government, employs over a million persons in all its diverse activities, including the 284,000 in the post office, and 327,000 in the Army and Navy. It is by far the largest single administrative agency in the country, a single department, the post office, employing nearly as many persons in 1935 as the largest corporate employer. Some of the State and city governments rank high in size compared with corporate units. There are only a few corporations that employ more workers than the New York City government while State governments, New York, Pennsylvania and Ohio, and the city governments of Chicago, Philadelphia, Detroit, and Los Angeles rank along with the larger corporations in the list of 200.

The Fields of Small Enterprise

The analysis of the list of largest administrative units can disclose the types of activities in which large enterprise plays a significant role but can throw little light on the fields in which really small enterprise predominates. Of these, agriculture is by far the most important. In 1935 there were nearly 7 million farm units, less than 42,000 of which involved the gainful activity of more than 5 persons. The 7 million farm units each engaging the activities of only 1 to 5 persons accounted for well over half of the total number of producing units in the country and together they accounted for 97 percent of the persons engaged in agriculture."

The other more important fields of really small enterprise are service, retail trade, and construction. While there are a few lines of service, such as the motionpicture field, in which large or medium enterprises predominate, and education, in which large government units often supply the service, most of the nonutility services are supplied by extremely small enterprises or individuals. In the field of retail trade, in spite of the encroachment of mail-order houses, large department stores, and chain stores, approximately. 30 percent of all retail sales in 1935 were made by independent stores each having annual sales of under $30,000 and for the most part engaging the activities

10 See table I, appendix 15.

11 See appendix 18, section 18.

of only one or two people.12 Similarly, a third of all the construction by private firms in 1935 was carried on by firms which performed less than $50,000 worth of work apiece.13

In other fields of activity there are many separate small units, but the number of persons engaged does not bulk large in relation to the whole national economy. Many small manufacturing or mining enterprises, small utilities, and small government units exist but do not carry on a significant proportion of the total activity in each of these fields, leaving them to be divided mostly between the medium and very large enterprises. Altogether, little more than a third of the nation's economic activity is carried on by producing units engaging the activity of one to five persons. An almost equal proportion was carried on by a few hundred very large administrative units.

The 200 Largest Nonfinancial Corporations

The greater part of the activity carried on by large administrative units is carried on by the large business corporations and their subsidiaries. In order to bring out more clearly the role of these large corporate units, a special tabulation of their balance sheets and of certain items from their income statements was made from income-tax returns. The precise procedure followed and the detailed results are given in appendix 11. In such a tabulation, a major problem was presented by the subsidiaries of the large corporations. The Bureau of Internal Revenue has in recent years published figures in its Statistics of Income on the assets and incomes of corporations classified according to size. But in these compilations the subsidiaries of a corporation are treated as though they were independent companies, except when the parent held stock in the subsidiaries representing 95 percent or more of the total voting power, and even then the data on subsidiaries are included with the parent company only if the latter has chosen to file a consolidated balance sheet with the Bureau. The importance of this treatment of subsidiaries as independent companies can be indicated by a single piece of evidence. The published income-tax statistics indicate that in 1933 there were 375 nonfinancial corporations each reporting assets of over 50 million dollars. Yet, in the case of 102 of these companies, Moody's Manuals indicate that in 1933 they were subsidiaries of other corporations.14 Thus, the 375 corporations each with assets over 50 million dollars turn out to be only 273 independent corporations and 102 of their subsidiaries. In addition to these large subsidiaries, the large corporations have

12 Based on U. S. Department of Commerce, Census of Business, "Retail Distribution," vol. I, 1935.

13 Based on U. S. Department of Commerce, Census of Business, "Construction Industry," vol. III, p. 30. 1935.

14 Source: See appendix 11.

m: ny smaller subsidiaries which they control through majority voting power.

A clear statement of the assets controlled by larger corporations would require that each independent corporation should consolidate into its accounts the assets of all the corporations which it controlled, directly or indirectly through the ownership of stock representing more than 50 percent of the voting power. 15 It is not possible to make such a consolidation fro' the data filed with the Bureau of Internal Revenue, but some account of subsidiaries can be taken. In the compilations given in the appendix and summarized below, the aim was to obtain figures covering the 200 largest nonfinancial corporations and ail of their legally controlled subsidiaries. To this end, each nonfinancial corporation reporting a sets of 10 million dollars or more to the Bureau of Internal Revenue in 1933 was checked against Moody's Manuals to see if it was & subsidiary of one of the 200 largest independent corporations. Altogether 280 subsidiaries of the 200 largest nonfinancial corpo.ations were found with assets over 10 million dollars. Compilation of the balance sheets and certain income statement items of these 280 subsidiaries and their 200 parents were then made. To the figures were added estimates of the assets and corresponding income statement items for the subsidiaries with assets under 10 million dollars to give estimates for the total assets and activity controlled by the 200 largest corporations. These resulting figures for total assets do not represent consolidated figures but involve a significant amount of duplication since they include both the assets of subsidiaries and the stock held by parents in subsidiaries as well as credit extended to them, just as do the asset figures for all corporations compiled and published by the Bureau of Internal Revenue.16 Most of this duplication can be eliminated by deducting the item "taxable securities" from the summated assets of the 200 largest corporations and their subsidiaries thus providing a figure which can be compared with the total assets of all nonfinancial corporations less their taxable securities. Such a procedure not only eliminates the security holdings of parents in subsidiaries but also all the asset duplications due to intercorporate holdings of stocks and bonds. It does not, however, eliminate the duplication due to the intercorporate extension of short-time credit. A more basic figure which involves no duplication can be obtained by restricting the compilations to the value of physical assets recorded under

15 Ownership by a subsidiary of part or all of the stock representing a majority of the voting power over another corporation is presumed to be included in the phrase "through ownership of stock," as well as stock owned directly by the parent corporation.

16 It also includes duplication to the extent that subsidiaries held stock in their parents or extend credit to them, but this item is believed to involve an insignificant proportion of the total assets of the large corporations.