S. MenshikoV
__TITLE__ MILLIONAIRESPROGRESS PUBLISHERS
Moscow
[1]Translated from the Russian by Leo Lcmpcrt
Designed by V. Dober
C. MEHbHIHKOB
MH/IJ1HOHEPH II
__COPYRIGHT__ First printing 1969This hook, written in 1962--63, is a result of a special investigation of control in large American corporations. I decided not to confine myself to a study of the sources available at the time, but also personally to verily the correctness of the managerial revolution theory first advanced by A. Bcrlc and G. Means in the early 1930s. For this purpose I collected all the material published in the United States and accessible to foreign researchers on the distribution of share ownership of the big corporations and banks and other financial institutions, the position of the top managers in these institutions and corporations, the fate of the old large fortunes and of the new multimillionaires who appeared in recent decades despite tax legislation and other state regulatory measures. The results were compared with data on the situation which existed in the United States in the 1920s and 1930s, and the respective conclusions were drawn, which the reader will find in the book.
In the course of the work it became clear that it was necessary to examine in detail the diverse ties between the big corporations in industry and trade, on the one hand, and large banks and other financial institutions, on the other. For the problem of control in corporations cannot be understood without considering the tendency of corporations and banks to form large financial groups. The nature of these groups and also the centrifugal and centripetal forces operating within them were examined.
In the autumn of 1962, I had the opportunity of spending four months in the United States under the programme for the exchange of scientists between the Soviet Union and the U.S.A. Thanks to the kind assistance of the Institute of International Education in New York which took care of all organisational matters, these were very fruitful months: they made it possible to supplement the materials gleaned from books, magazine and newspaper articles, handbooks and other literature with data obtained in the course of personal contact with leading men in the U.S. business world and scientists of American universities.
5During the stay in the United States I visited New York and Washington, Boston and Cleveland, Chicago, Detroit, San Francisco and Los Angeles. I met chairmen of the board, presidents and vice-presidents of dozens of corporations and of 13 out of the 25 commercial banks which at that time had assets of over $1,000 million each, partners of some of the principal investment banks and law firms, insurance companies and investment trusts. Among them were Henry Ford II and Henry S. Morgan, David Rockefeller and Cyrus Eaton, George Gund and Charles Percy, Frank King of Western Bancorporation and Frederick Eaton of Shearman and Sterling. Many days were spent at the library of the New York Stock Exchange going over proxy statements and other reports of the leading corporations. The results of these meetings and studies were extensively utilised in preparing this monograph.
More than five years have passed since then. In preparing the English edition of the book I have fully reviewed it, giving, whenever possible, the latest statistical data and abridging some places not of prime interest to the foreign reader. I was faced with the question, has not the book become out of date? The world of Big Business is very dynamic and changes take place in it every month, every day. But on turning to the latest literature, I learned that, as the French say, "Plus ca change, plus c'est la memc chose''. Hence the decision not to concentrate on altering all details since the main thing, the structure of the U.S. financial oligarchy, has hardly changed during this time.
The reader will find in the book, alongside an analysis of the facts and data, an effort to explain the sum total of the examined phenomena and processes from the positions of Marxism-Leninism. That is the reason why the exposition of the problem begins with a theoretical analysis of the process of separating functioning capital from capital as property. To roam the empirical labyrinth without Ariadne's thread of theory is a hazardous venture. I am convinced that only with the help of Marxist-Leninist political economy is it possible to find one's way in this maze of facts, opinions and theories.
Such an approach necessarily makes the book polemical. But it is in keen disputes that the truth is born.
December 1968
S. Menshikov
[6] __NUMERIC_LVL1__ Chapter I __ALPHA_LVL1__ EVOLUTION OF CAPITALAs capitalism developed the nature of capital as a definite form of exploitation of man by man remained unchanged but the mechanism of exploitation became more involved. The progressing social division of labour extended to the ruling class itself and this led to the emergence of special groups differing for the role they perform in exploiting wage labour. The rudiments of these changes were contained already in the simplest elementary forms of capitalist production and circulation. They attained their greatest development in the epoch of monopoly domination and the rise of finance capital.^^*^^
We refer to changes connected with the historically inevitable and economically determined separation of functioning capital from capital as property. This separation is chiefly a result of the objective changes in the capitalist mode of production---in the productive forces and in the relations of production.
Under capitalism, the main tendency in the development
of the productive forces is the socialisation of production.
This is expressed, first, in the enlargement of the enterprises
themselves, in the conversion of small production units into
large and super-large ones. The initial point of this process
is simple capitalist co-operation which develops into a
manufacture, then into a factory and, lastly, turns into a modern
mammoth integrated works. The progressing division of
labour inside the factory makes the production process
_-_-_
^^*^^ The term "finance capital" is explained in detail in Chapter V.---
'I raitslator.
Second, under capitalism the socialisation of production is expressed in the ever greater division of labour in society, in the constant branching out and birth of new industries united by a single market. While at the initial stages of capitalism this universal connection and interdependence was displayed solely through the spontaneous mechanism of the market, at the highest stage of its development objective conditions arise for centralised social accounting of production and marketing. "Concentration,'' Lenin pointed out, "has reached a point at which it is possible to make an approximate estimate of all sources of raw materials ... of a country and even, as we shall see, of several countries, or of the whole world. Not only are such estimates made, but these sources are captured by gigantic monopolist associations. An approximate estimate of the capacity of markets is also made, and the associations `divide' them amongst themselves.''^^3^^
At the highest stage of capitalism, owing to the colossal development of the banks, a form of social book-keeping emerges for the first time. Even in his day Marx pointed out that "the banking system possesses .. . the form of universal book-keeping and distribution of means of production on a social scale, but solely the form.''^^4^^ Developing this idea _-_-_
~^^1^^ In 1965, General Motors had 735,000 employees; General Electric, 300,000 and United States Steel, 209,000. There were 17 corporations employing more than 100,000 people each, 25 corporations employing from 50,000 to 100,000 and 67 corporations from 25,000 to 50,000 ( Fortune, July 15, 1966, pp. 232--49).
~^^2^^ V. I. Lenin, Collected Works, Vol. 22, Moscow, p. 205.
~^^3^^ Ibid.
~^^4^^ K. Marx, Capital, Vol. Ill, Moscow, 1966, p. 606.
8 Lenin wrote: "The figures we have quoted on the growth of bank capital, on the increase in the number of the branches and offices of the bigger banks, the increase in the number of their accounts, etc., present a concrete picture of this ' universal book-keeping' of the whole capitalist class; and not only of the capitalists, for the banks collect, even though temporarily, all kinds of money revenues---of small businessmen, office clerks and of a tiny upper stratum of the working class. 'Universal distribution of means of production'---that, from the formal aspect, is what grows out of the modern banks.... In substance, however, the distribution of means of production is not at all `universal', but private, i.e., it conforms to the interests of big capital, and primarily of huge, monopoly capital....''^^1^^With the enlargement of factories and the appearance of capitalist ``accounting'' and "social book-keeping" the functions of managing production, marketing and banking steadily become more complicated. The further this process develops, the greater the objective need for the emergence of a special category of employees who take over from the capitalist the function of supervision and management and perform it instead of him.
Even at the stage of simple capitalist co-operation, the function of supervision becomes so complicated that it is beyond the strength of the capitalist and is separated from him. The capitalist, relieved even earlier of manual labour, hands over "the work of direct and constant supervision of the individual workmen, and groups of workmen, to a special kind of wage labourers. An industrial army of workmen, under the command of a capitalist, requires, like a real army, officers (managers), and sergeants (foremen, overlookers), who, while the work is being done, command in the name of the capitalist. The work of supervision becomes their established and exclusive function.''^^2^^
The further separation of these functions from the capitalist was linked with the development of the manufacture and large-scale machine production creating "a barrack discipline, which is elaborated into a complete system in the factory, and which fully develops the beforementioned labour _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 22, Moscow, pp. 216--17.
~^^2^^ K. Marx, Capital, Vol. I, Moscow, 1965, p. 332.
9 of overlooking, thereby dividing the workpeople into operatives and overlookers, into private soldiers and sergeants of an industrial army.''^^1^^With the transition from the factory to large industrial complexes the participation of the capitalist in managing production is reduced to an infinitesimal or fully disappears. First, the management of modern technology demands special knowledge, which the capitalists and their closest aides do not have, as a rule. Second, an industrial complex consists not of one but of many territorially separated factories, the management of which requires a large number of people possessing special know-how. However large a family a capitalist may have, he cannot staff all managerial positions with his own relatives, nor does he set himself such an aim.^^2^^ Management of industrial complexes is handed over to a special category of employees who could be called industrial generals as distinct from industrial officers, who take charge of separate links of these complexes, and from the industrial sergeants who directly supervise the labour of the workers.
The minimal number of this ``generals' " and ``officers' corps" is determined by the actual needs of production. Their number directly depends (although not in direct proportion) on the size of the given industrial complex and its enterprises; on the scale and nature of the production ties of the given complex with other complexes, with industries and the consumers; on the scale of technological novelties and improvements; on the level of saturation with machinery specific for the given branch.
The same applies to the non-productive sphere, specifically to the "social book-keeping" system. The largest banking institutions employ tens of thousands of people. The universalisation of the banks, their employment of the latest electronic devices, the need to maintain numerous branches and offices, an army of insurance agents and so on---all this has led to the appearance and growth of a specialised group _-_-_
~^^1^^ K. Marx, Capital, Vol. I, Moscow, 1965, pp. 423--24.
~^^2^^ "One thing the top men have to realise is that business has become so big and complicated that no single person can run a large company nowadays any more than the President of the United States' can do the job by himself" ((Osborn Elliott, Men at tlic 'Ioh. New York, 1959 p. 37).
10 of bank managers, to the separation of the function of managing the affairs of a bank from its ownership.The enlargement and socialisation of production under capitalism are effected within the bounds of production relations based on private ownership of the means of production. "Production becomes social,'' Lenin wrote, "but appropriation remains private. The social means of production remain the private property of a few.''^^1^^
Let us examine the evolution in the forms of capitalist property and how this evolution helped to separate functioning capital from capital as property, giving it specific forms in every case.
Originally, private capitalist property assumed almost exclusively the individual form. An enterprise was the property of one capitalist who did not share it with anyone else. Historically this form corresponded to the development of capitalist production from simple co-operation to the factory. Up to the last third of the 19th century, it predominated in all industrially developed countries. But the growth in the size of enterprises, the concentration and centralisation of capital led to the appearance and then to the prevalence of the collective-capitalist form of property. The latter, known as the joint-stock or corporate form, grew up as a means which gigantically accelerated the accumulation of capital.
The corporate form of capitalist property in no way effects the qualitative side of the relations which exist in production, it does not abolish the exploitation of wage labour. It merely signifies a certain realignment within the class of capitalist owners. The place of the individual exploiter is taken by a group, a collective of exploiters. "Scattered capitalists are transformed into a single collective capitalist,"^^2^^ Lenin remarked discussing the banks, but this statement is fully applicable to the corporate form in general.
The corporate form, born in the era of free competition, is also ideally adapted to the conditions of monopoly capitalism. It opens up wide scope for the unprecedented concentration of industry and banking, provides a very convenient, and flexible form for organising the largest monopolies, trusts and concerns; it is the basic instrument for the _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 22, Moscow, p. 205.
~^^2^^ Ibid., p. 214.
11 domination by separate groups of the financial oligarchy over a number of formally independent enterprises and for their enrichment on manipulations with fictitious capital.^^1^^ Lastly, the corporate form makes it easier to export capital, to divide the world economically among alliances of capitalists and to merge the financial oligarchy with the state machine.State-monopoly ownership is the third form. It became particularly widespread in conditions of the general crisis of capitalism, which was ushered in by the October Socialist Revolution in 1917. Marx described joint-stock companies as "the abolition of capital as private property within the framework of capitalist production itself.''^^2^^ This applies to an even greater extent to the state-monopoly form. Here private property is formally abolished. The owner is not even a ``collective'' of capitalists but the state, that is, "the whole people''. In reality, however, the relations of exploitation remain untouched, merely the form of appropriating surplus value is changed. State-monopoly enterprises actually represent the collective property of the top group of monopoly capital which gets the lion's share of the surplus value created by the workers at these enterprises.
With the evolution of private property from the individual to the corporate and then to the state-monopoly form, the position of the capitalist in managing social production essentially changes. As the individual owner of an enterprise, the capitalist preserves the function of management and acts as a functioning capitalist. As owner of the capital invested in production he obtains the entire profit on this capital, including both interest and income as entrepreneur. As the man who disposes of the capital of others (loan capital) he stands in opposition to the money-capitalist and obtains the lion's share of profit on the loan capital---the entrepreneur's income.
In a corporation the position of the capitalist owner is changed substantially. First, the stockholders, including the _-_-_
~^^1^^ By "fictitious capital" we mean capital invested in securities (stocks or bonds) as distinct from "real capital" which is invested in material wealth: structures, equipment, raw materials, etc., or used for employment of labour. The movement of fictitious capital, which has no intrinsic value is eventually determined by the movement of real capital, and reflects it. At the same time fictitious capital leads a life of its own and strongly affects real capital and the capitalist economy as a whole.
~^^2^^ K. Marx, Capital, Vol. Ill, Moscow, 1966, p. 436.
12 holder of the controlling block, become money-capitalists who give their capital to collective owner, the corporation. The latter is in the same position vis-a-vis the stockholders as the functioning individual capitalist is in relation to the money-capitalist.Second, the capitalist who controls a corporation because he owns a big block of shares or in some other way, administers other people's (collective) capital. He disposes of this capital not in the way an individually functioning capitalist handles the money capital he borrows, but as the manager of the corporation which acts as a collectively functioning capitalist. As such a corporation attracts other people's money and applies it in production, and the capitalist who controls this corporation handles this money not on his own behalf but on behalf of the corporation.
``Transformation of the actually functioning capitalist into a mere manager, administrator of other people's capital,"^^1^^ such, in the opinion of Marx, is one of the main distinctive features of the corporate form of private property. This transformation is an antagonistic process fraught with conflicts within the capitalist class.
Third, and lastly, a fundamentally new relationship between the capitalist owner and the managerial personnel arises in a corporation. The function of management is performed here by hired people. Formally, the staff of managers is appointed by the corporation and is accountable only to it. Even a capitalist who controls such a corporation, if he takes part in management, is formally regarded as an employee of the corporation and gets a definite salary for his ``work''.
Without examining in detail the state-monopoly form of property, let us merely note that all these three tendencies are further developed in it. In a state-monopoly enterprise the state itself (or a state institution) acts as the functioning capitalist. The members and representatives of the financial oligarchy who actually control such an enterprise by holding appropriate government posts, administer the joint property of the monopoly bourgeoisie. And, lastly, the function of management is fully separated from property in capital. "... The transformation of the great establishments for _-_-_
~^^1^^ K. Marx, Capital, Vol. Ill, Moscow, 1966, p. 436.
13 production and distribution into joint-stock companies . . . and state property,'' Engels wrote, "show how unnecessary the bourgeoisie are for that purpose. All the social functions of the capitalist are now performed by salaried employees.''^^1^^Inasmuch as in the United States the corporate form of property plays the decisive part, let us make a more detailed analysis of how it changes the capitalist and his environment. We have already noted that the capitalist who controls a corporation at first becomes a "salaried employee" of the latter. This, naturally, is only a change of form, because the decisive part is played by the main means of obtaining the income. Inasmuch as he is an employee only in part and his main income is derived from money capital which he owns, his salary as an employee is merely an addition, moreover, a relatively small one, to his main income as a rentier. That is why American millionaires look upon their salaries as a subsidiary income which at times can be even ignored.^^2^^ The reason why the capitalist preserves the post of manager in a corporation is not the salary, but the colossal opportunities for enrichment by utilising other people's capital which this position opens up. This, second side of his activity as manager, for which he does not get a salary, soon becomes the main side, moreover, in a degree that is all the greater the smaller the share of his own money capital invested in the given corporation and the bigger the share of other people's capital he can administer.
Notwithstanding the big salary and prestige associated with an executive post in a corporation, the controlling capitalist gradually begins to regard this function as a burden. That is why as time goes on the function of top management of corporations is also handed over to hired employees. The capitalist preserves actual control which enables him, as before, to "skim the cream" from other people's capital, without troubling himself to manage it.
But the ``emancipation''' of the capitalist does not end at this point. Before long he discovers that he does not have to "skim the cream" himself. This can be done by trusted agents. _-_-_
~^^1^^ F. Engels, Anti-Diihring, Moscow, 1962, p. 381.
~^^2^^ This applies not only to service in private corporations, hut also in government institutions where salaries in most cases do not exceed $30,000--35,000 annually. (Rich people who enter government service are often satisfied with the symbolic annual salary of one dollar.)
14 This ``work'' can be assigned to the executive of a corporation, as is frequently the case. This, however, entails certain inconveniences, because the executive has enough of other duties, and, moreover, it is not entirely safe to extend his powers beyond a definite limit. That is why irequently the "cream is skimmed" by specialists: bankers, top bank officials, lawyers, financial advisers, etc. But they also have to be supervised and, as the fortune of the capitalist grows, even this function becomes burdensome. It is handed over to the most select, to the closest aides, while the capitalist leaves himself only one ``function''---to do what he likes.Now the historical evolution of the capitalist is complete. From an entrepreneur he has turned into a finance capitalist in pure form. He is a parasite, a tycoon-rentier who "clips coupons" not simply because he owns securities, but chiefly because he controls colossal industrial-banking empires.
The inevitability of the parasitic degeneration of the capitalist follows from the objective laws governing the development of the capitalist mode of production. The general possibility of such degeneration arises owing to the extensive development of credit, the stock market and fictitious capital. This possibility, lastly, follows from the hereditary nature of private property as such; owing to this, the second, third and, at most, the fourth generation of the founder of a bigfortune tends to degenerate, becoming a parasitic growth on the body of society.
But if everything boiled down to this, the class of moneycapitalists would long ago have turned into a sort of "House of Lords" shorn of real power. In reality this is not the case because the finance-capitalist is not merely a rentier but the head of gigantic industrial-banking complexes. He is interested not only in the price of the securities he owns, but also in the proper functioning of the companies which bring him a profit. He is also interested in perpetuating the system in which his empire can thrive. Hence the lively interest the finance-capitalist takes in the activity of the government and its home and foreign policy. In a word, the parasitic degeneration has its objective limits, determined by the objective laws of reproduction of the capitalist production relations.
15But let us get back to the top executive, the ``marshal'' of the industrial army, whom the finance-capitalist places at the head of his corporations and banks. This executive is now separated from his real master, for whom he ultimately works and of whose existence he may not even suspect.^^1^^ A fuller characteristic of this executive will be given subsequently. Here we will merely trace in brief his evolution.
Originally the corporation he heads is relatively small and possibly unites only two or three large factories. In this case the function of top management is merely to coordinate the activity of these factories. But gradually a corporation grows, absorbing tens of new, formerly independent production units. Their management becomes more involved. The job formerly handled by the top manager now requires dozens and even hundreds of other managers whose activity has to be co-ordinated. As a corporation grows from a large enterprise into a gigantic complex, so does the machine of management. A part of it no longer has a direct bearing on the production process because it exercises the function of monopoly domination of the market. This machine acquires independent existence as a special corporate mechanism subordinate to its own specific, objective laws. This machine is headed by ``marshals'' of the industrial army who are far removed not only from their real master but also from the working class; these are top managers who for their position and real power differ little from the monopoly bourgeoisie.
In contemporary capitalist society the gigantic monopolies are merely a superstructure over a large number of "freely competing" small and medium-size enterprises. Large and super-large firms exist side by side with small ones and even need the latter as an object for exploitation. The corporate (and in a number of countries also the state-monopoly) form of property prevails, but it coexists with individual capitalist, non-monopolised enterprises.
Although in the United States the number of individual firms (represented by sole proprietorships and partnerships) is large, their share in total receipts of all capitalist firms _-_-_
~^^1^^ In the United States only a small circle of people are aware of the real scale of the financial manipulations engineered by the biggest tycoons. Little information about them is reported in the press.
16 is about 20 per cent and in industry, only 4 per cent (see table on p. 18). Most of the individual firms are in smallscale industry. The average annual receipts of sole proprietorships are only $26,100 and in industry $33,600; their net profit averages $3,600 annually and in industry $3,000. The average receipts of partnerships are $84,500 (in industry $132,000) and their net profit is $10,200 (in industry $10,000).The corporate form also conceals colossal differences in the size of establishments; 99.7 per cent of the companies in industry have average receipts of $950,000 annually and a net profit (prior to the payment of dividends) of only $77,000. Even if the main owner gets most of the profits of such a company he can lead the life only of a small, at most a middle, businessman.
At the other pole is a limited number (500) of really large and mammoth industrial corporations. But even here there are gradations: 400 corporations have average annual receipts of $214 million and a net profit of $10 million, while 100 of the super-large ones have average annual receipts of $1,596 million and a profit of $108 million.
Data grouping companies by the number of persons they employ show that in 1964 of the 3.5 million companies which employed hired labour only 8,800 had more than 500 employees each. The overwhelming majority, 98 per cent of the total had no more than 100 employees each.^^1^^
These data show that the laws we examined earlier pertaining to the separation of functioning capital from capital as property, the parasitic degeneration of the functioning capitalists and the rise of a bureaucratic managerial machine hold good only for a small group of the biggest enterprises which concentrate the lion's share of production, labour force and profit. It is clear that both the finance-capitalist who is isolated from production and the bureaucratic top group of managers he created are merely a monopoly superstructure over capitalist society, over the mass of small and middle businessmen, over the functioning capitalists who, far from being able to live by "clipping coupons'', cannot _-_-_
~^^1^^ Statistical Abstract of the United States, 1966, p. 490. More detailed data on companies employing over 500 people relate to 1956. At that time only 200 corporations had more than 10,000 employees each and 2,800, from 1,000 to 10,000 (Statistical Abstract of the United States, 1961, p. 483).
__PRINTERS_P_17_COMMENT__ 2-1286 17 Firms in the United States in 1963 (All industries, excluding agriculture) Forms of property Total Manufacturing and Mining Number Receipts Net profit Number Receipts Net profit i« Ss c a 8| OJ u--- a. o Million dollars ``is 0 o I* Mi llion dollars +-» £3 °5 OJ IM C.'' H el ``E"S CJ ^_> 0 0 V*. O, 0 Million dollars s« u^ ,_+j (U _ D. 0 Million dollars £3 ~0 0 l_ "^ a; ^_ C. 0 Sole proprietorships . . Partnerships 5,798 794 1,300 73 10 17 151,501 67,072 941,297 13 6 81 20,723 8,101 54,051 25 10 65 221 53 197 0.5 0.1 47 11 42 0.1 0.02 7,418 7,001 431,772 245,091 159,636 2 2 96 55 36 668 534 29,986 14,839 10,829 2 2 96 48 35 Companies ....... of which 500 of the biggest industrial corporations ..... of which 100 of the biggest industrial corporations .... Total . . 7,892 1,159,870 82,875 471 446,191 31,188 Source: Statistical Abstract of the United States, 1956, pp. 486, 492. [18] even allow themselves the luxury of maintaining highsalaried ``generals'' and ``marshals'' of industry.American statistics does not furnish data making it possible to delimit the various strata of the capitalist class in the United States. An approximate idea can be gleaned from the figures on the size of taxable incomes. The initial data for such an analysis are presented in the following table (see p. 20).
Of course, by far not all taxpayers listed in the table are capitalists in the strict sense of the word. It includes highly paid engineers in the service of corporations, doctors and lawyers with a big clientele who do not resort to hired labour, film actors and so on. But in the main we find here the middle and big bourgeoisie, top corporation officials and members of the financial oligarchy.
The table shows how sharply the ratio of different sources of income changes as we proceed from the lower to the higher group. In the lower group (income from $15,000 to $50,000) two categories of income absolutely prevail---salary (59.6 per cent) and income from individual enterprise, including partnerships (23.2 per cent). These are mostly highsalaried corporation officials and the owners of individual firms. This is the middle bourgeoisie and those who are near it for their living standard. In the group with incomes from $50,000 to $500,000, the share of salaries (30.5 per cent) sharply declines, but it still makes up a considerable part of the total, while the share of the entrepreneur's income remains at the same level (24.5 per cent). This is the main part of the top managers of corporations and the most successful of the individual businessmen. But the share of income from securities (37.3 per cent) rises notably. This category includes the big bourgeoisie which in large measure already lives by clipping coupons and by speculating on the stock market. In the group of incomes from $500,000 to $1,000,000 rentier and speculation type incomes prevail (89.1 per cent). This is the main source of the enrichment of the monopoly bourgeoisie. The salary of industrial `` marshals'' (6.9 per cent) and income from monopoly enterprise (3.4 per cent) becomes almost intangible. Lastly, in the highest group---with incomes of more than $1,000,000---- rentier and speculation incomes account for almost 96 per cent of the total and the other incomes are negligible. __PARAGRAPH_PAUSE__ __PRINTERS_P_19_COMMENT__ 2* 19 Size and Source of Annual Personal Income above $15,000 (1964) Groups of taxpayers by size of gross annual personal income 815,000-- $50,000 Per cent of total $50,000-- $500,000 Per cent of total $500,000-- 95! ,000, 000 Per cent of total Over $1,000,000 Per cent of total Number of taxpayers, thousands ....... 2 643 191 1 less than 0.5 Gross income, million dollars ....... 58 625 100 15 703 100 568 100 790 100 including following sources: salaries .......... 34,920 59.6 4 791 30.5 39 6.9 18 2.3 dividends ......... 3 827 6.5 3 438 21.9 208 36.6 292 37.0 sale of capital assets . . . business or profession . . . partnerships ........ 2,311 8,904 4 711 3.9 15.2 8 0 2,416 1,814 2 026 15.4 11.6 12 9 298 10 9 52.5 1.8 1.6 464 Q Q 58.7 1.1 1.1 Source: Statistical Abstract of the United States, I960, pp. 400, 401. [20] __PARAGRAPH_CONT__ This is the sphere of almost exclusive predominance of the finance-capitalists---the upper crust of the monopoly bourgeoisie.
The size of an income does not tell the whole story about the size of the personal fortune. First, the income reported for taxation is deliberately underestimated; second, if a salary is the main source, personal wealth can be much smaller than the capitalised income; third, it is difficult to ascertain the exact degree of capitalisation. Judging by the criteria various authors use to estimate large fortunes and considering the fact that reported incomes are greatly minimised, a declared income usually amounts to about 2 per cent of a large fortune. This means that the number of persons who own more than $50 million approximately corresponds to the category with an annual income of more than $1,000,000. The number of millionaires with smaller fortunes is about the same as in the respective categories with incomes from securities and also, in part, from business activity.
A more detailed characteristic of the composition of the U.S. financial oligarchy is given in subsequent chapters. Here we shall confine ourselves to a few additional remarks about the general laws governing the formation of the financial oligarchy.
The tendency of separating functioning capital from capital as property operates in all capitalist countries. It is most developed in industrial imperialist states where the upper crust of the bourgeoisie has long ago turned into the monopoly bourgeoisie. The degree of this separation directly depends on the level of the productive forces, the concentration of industry and banking and the share of the corporate and state-monopoly forms of property.
This general law operates not in a vacuum but in the real conditions of particular countries which can differ considerably owing to the specific features of historical development. Of great importance are such circumstances as the existence or absence of a landed aristocracy, a state machine with monarchic, feudal and militarist traditions, a colonial empire, etc. Where these additional factors are present the financial oligarchy merges, coalesces with the upper crust of the landowner class, with the "blue-blooded aristocracy'', the governmental and military bureaucracy and the colonial administrative machine. Hence the specific features of the 21 stratum of finance capitalists and the caste of top managers servicing it.
In the United States state-monopoly capitalism has reached a high level. The Federal Government, the states and municipalities own about 30 per cent of all the fixed capital ( productive and non-productive). State purchases of goods and services are equal to about 20 per cent of the gross national product and state investments make up almost one-third of all new investments. Up to 60 per cent of the annual expenditure on research and development is financed by the government. All this signifies that in the United States (just as in other developed capitalist countries) the reproduction process today dictates the coalescence of the monopolies and the state machine. What is important is not only that the financial oligarchy is devoting more and more of its time and energies to controlling the economic and political activity of the state. Of great significance is also the fact that the bureaucratic machine of managing the largest corporations and banks is organically intertwined with the inflated bureaucratic governmental machine. As applied to the questions we are studying this means that the division of the financial oligarchy into finance-capitalists as such and top executives serving them is becoming characteristic both of the monopolies and of the state.
In Britain which took the imperialist path before other countries, the separation of functioning capital from capital as property is perhaps developed most of all. Powerful banking houses, the wealthiest financial families, the landed and colonial aristocracy and the royal family are represented on the boards of most of the biggest monopoly companies. But the actual function of managing these monopolies is in the hands of a special group of professional managers who differ both from the individual entrepreneurs and from the monopolists. Such managers belong to the wealthy bourgeoisie and make up an exclusive well-knit caste, access to which is governed by strict unwritten laws which have been in force for decades. Loyalty of the managers to the financial tycoons is boundless and the atmosphere of secrecy enables the owners of the biggest fortunes to escape the limelight of the press.^^1^^
_-_-_~^^1^^ "The role ol flic manager in Britain has been differentiated Iroin that ol the classical entrepreneur, the owner-manager, and the family __NOTE__ Footnote cont. on page 23. 22
A somewhat different system prevails in the Federal Republic of Germany. A considerable number of the wealthiest capitalists, who maintain a close alliance with the banks, still keep in their hands the top management of their empires.^^1^^ There is quite a deep abyss between these supreme rulers (Unlernehmer) and the professional managers who operate at much lower levels of the monopoly hierarchy. It should also be borne in mind that in West Germany until recently the joint-stock form served merely as a screen for a large and even super-large family enterprise; the controlling blocks as a rule exceeded half of the shares and the number of other stockholders was small. But the requirements of accelerated accumulation here, too, are sundering the narrow bounds of individual property. ``Democratisation'' of capital has become the official slogan of the Bonn regime. The practices of the big state-monopoly trusts (for example, Volkswagenwerke before it was returned into private hands) demonstrated the loyalty of the professional managers to the interests of the monopoly top group. In post-war years, an increasing number of leading posts in trusts has been handed over to " industrial generals" not only from among bankers but also from among hired managers of industrial firms. The West German monopolists are clearly drawing on the experience of their American colleagues in cartel agreements. And although it is too early to speak about the emergence of a fully shaped caste of corporate bureaucrats, the structure of the West German financial oligarchy is increasingly drawing near to the pattern of the main capitalist country.
In France and Italy, owing to the distinctions of their development, the process of separating functioning capital from capital as property is by far not completed. This is explained by the lower level of socialisation of production and the relatively less developed corporate ownership. The family establishment in which the main owner is the chief _-_-_ __NOTE__ Footnote cont. from page 22. businessman. His function today is to conduct the enterprise with capital provided by others, or from the revenues of the enterprise itself, or both, and often subject to little or no direct control from these or other third parties" (Frederick Harbison, Charles A. Myers, Management in the Industrial World. An International Analysis, New York-Toronto, London, 1959, p. 306).
~^^1^^ "In fact, a few leading West German bankers still play a large role in German industry, almost in the way that J. P. Morgan once did in the U.S.'' (liusiness Week, August 13, I960, p. 100).
23 manager remains the prevailing form of industrial enterprise in both countries. In private companies the transfer of this function to hired employees proceeds very slowly. As a result, the category of professional managers has developed chiefly at state enterprises and in numerous branches of foreign trusts.In Japan the corporate bourgeoisie has developed to a greater extent than in West European countries. But it still bears the imprint of medieval clans and essentially differs from American standards.
Separation of functioning capital from capital as property has gone beyond national bounds and has become a manifestation of capitalist parasitism on an international scale. "The world,'' Lenin wrote, "has become divided into a handful of usurer states and a vast majority of debtor states.. .. The export of capital, one of the most essential economic bases of imperialism, still more completely isolates the rentiers from production and sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies.''^^1^^ The activities of managers of foreign branches of U.S., British and other monopolies who ensure the profits of their overseas masters graphically reveal the parasitic nature of the international financial oligarchy.
_-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 22, p. 277.
[24] __NUMERIC_LVL1__ Chapter II __ALPHA_LVL1__ THE VERY RICH __ALPHA_LVL2__ [introduction.]The American plutocracy exists today, just as it did a quarter or a half a century ago. The old multimillionaire families who made their fortune at the dawn of monopoly capitalism have been preserved in the main and many of them have greatly increased both their wealth and their influence. Relatively few of these families have declined, but their place has been taken by the numerous energetic group of nouvcaux riches. The share of the national wealth owned by the plutocracy, far from declining, has even increased. The growth of finance capital and the greater domination of the financial oligarchy in political affairs and the ideological sphere have been accompanied by more thorough and carefully devised camouflage on the part of the millionaires and multimillionaires.
__ALPHA_LVL2__ 1. American Plutocracy in the 1960sIt is no easy task to detect a millionaire and ascertain his wealth. It is even more difficult to determine the exact number of people who could be put in the category of "top wealth-holders" in America. Official U.S. statistics is silent on this score, limiting itself to information about the number of persons who pay taxes on incomes of different size.^^1^^ So far no attempt has been made in official statistics to divide the country's population into categories depending on the amount of capital personally owned by various families.
The results of a survey made by the Federal Reserve System and published in the spring of 1964 enable us to _-_-_
^^1^^ Sec Chapter I.
25 establish the number of millionaires indirectly. According to these data (end of 1962), among families with an annual income from $25,000 to $50,000 only 3 per cent had a fortune exceeding $1,000,000; among families with an income from $50,000 to $100,000, 20 per cent; and with an income above $100,000, 35 per cent.^^1^^ If this ratio is correct, by applying it to the figures on the number of taxpayers with the indicated incomes (for 1960) we estimate: Millionaires with an income of $25,000--50,000......13,227 $ 50,000--100,000.....20,216 `` " " over I 100,000.........8,527 Total.........41,970These figures are close to the estimates made on the basis of data in Lampman's book.^^2^^ Lampman estimated that in 1953 there were 27,500 millionaires. The substantial rise in stock quotations over the next 10 years greatly increased their number. This is indirectly proved by the bigger number of persons who paid a tax on an income of over $1,000,000. In 1953, there were 145; in 1960, 295, and in 1961, 398.
In 1964, as compared with 1960, the number of families with an annual income from $50,000 to $100,000 rose from 101,000 to 158,000, and with an income of over $100,000, from 24,000 to 34,000. At the same time the number of families with an income of from $15,000 to $50,000 increased from 1,549,000 to 2,643,000, i.e., by 70.6 per cent. Applying this proportion to the group with incomes from $25,000 to $50,000 we estimate their number at 752,000 in 1964 and also the number of millionaires in 1964^^3^^:
Millionaires with an income of I 25,000--50,000......22,600 I 50,000--100,000.....31,600 $ 100,000 ....... 11,900 over Total.........66,100All these figures, however, are undoubtedly minimised because the richest families in all cases are inclined to report _-_-_
~^^1^^ Federal Reserve Biillaliii, March 19(>4, p. 291.
~^^2^^ R. ]. Lampman, 'flic Share of To/; Wealth-Holders In National Wealth,'1922--1956, Princeton, 1962.
~^^3^^ Statistical Abstract of the United Stales, 1903, p. 400; 1966, p. 400.
26 smaller wealth and incomes than is actually the case. C. Wright Mills, following Lundberg, remarked that minimising incomes and fortunes of the rich families at least by two-thirds is quite a feasible thing in the United States. Therefore, the actual number of millionaires is not less than 100,000. The reality of this estimate is confirmed by the latest calculations made in the United States on the basis of studies by economists of the Federal Reserve System and the National Bureau of Economic Research. According to these estimates, there are now from 90,000 to 95,000 millionaires in the United States.^^1^^Information regularly published in the American press and some personal observations have convinced me that the ``smaller'' millionaires (with capital of one to three million dollars) make up quite a large category of the American bourgeoisie today.^^2^^
As for the upper crust (with fortunes above $10,000,000) our estimates (based on capitalisation of income) yield a figure of about 3,800.
Let us compare the results of our studies with the conclusions at which Fortune arrived at the end of 1957.^^3^^ The magazine did not resort to statistical calculations and based its estimates on a poll of income tax experts and the millionaires themselves, on materials of government archives and information about the wealth of millionaires which appear in the press from time to time. According to various estimates, to which Fortune refers, the number of persons owning more than $50,000,000 ranged from 150 to 500. Studying for several months the biggest fortunes, the magazine succeeded in definitely establishing the names of 155 persons who owned capital of that size. The magazine remarked that most likely there is another 100. Fortune thus estimated that there were approximately 250 persons each owning more ( than $50,000,000. This conforms to our estimates made on the basis of income tax data (230--300).^^4^^
_-_-_~^^1^^ Finance, January 1967, p. 19.
~^^2^^ "To have a net worth of $1 million today is to be, much of the time, indistinguishable from members of the omnipresent middle class" (Fortune, May 1968, p. 152).
~^^3^^ Fortune, November 19.r)7, p. 17'i.
~^^4^^ C. Wright Mills in his book `I'lla Power Elite cited data about 90 richest families with a fortune of more than $30,000,000. He admitted __NOTE__ Footnote cont. on page 28. 27
While in 1957 Fortune estimated that 45 individuals were worth $100 million or more, in 1968, i.e., only a decade later, the same source easily identified 153 men and women as i belonging to this category. This means a more than threefold increase in the number of the super-rich, unprecedentedly high in the history of the United States.
Economic conditions in the U.S.A. after the war were exceedingly favourable for the growth of the biggest fortunes and the replenishment of the ranks of the plutocracy , by new multimillionaires. One of the main reasons is the swift . development of state-monopoly capitalism. The latter, in combination with other objective tendencies, brought about definite changes in the mechanism of the capitalist cycle. Post-war overproduction crises in the American economy have been less deep and prolonged than in the past. A considerable part of the losses caused by the chronic instability , of the economy (slowing down of growth rates in the 1950s, j underemployment of productive capacity, etc.) were covered * from the federal budget. The monopolies have gained the opportunity to work for the relatively large, stable and defi! nite government market, to make huge new investments on i account of direct and indirect government subsidies and to wax fat on the swift advance of certain industries which enjoy especially privileged conditions owing to government support.
In 1940, American sociologist James Burnham, father of the theory of the "managerial revolution'', asserted that the economic conditions of contemporary capitalism could no longer give rise to new multimillionaires and could not swell the old biggest fortunes. Bourgeois authors have constantly reiterated this assertion in their post-war writings, laying stress on the supposedly unfavourable conditions created by the state, particularly through the taxation system. All these claims are predicated on a distortion of the actual relationship between the state and the monopolies.
The swift increase in the number of multimillionaires in the United States and the high growth rates of their wealth are explained by the broad possibilities for enrichment _-_-_ __NOTE__ Footnote cont. from page 27. that these data were underestimated because, as he put it, "out resources did not permit us to handle a larger list" of millionaires (see C. Wright Mills, The Power Elite, New York, 1956, p. 375).
28 opened up by the system of American monopoly capitalism both in its private and public sectors.When a personal fortune reaches a definite size its further increase becomes practically automatic. In the opinion of a number of American authors, the minimal boundary in the middle of the 50s was the sum of $50,000,000. Towards the end of the 1960s this minimum---also considered the lower boundary for a life of "spectacular luxury"---has risen to $100,000,000. Explaining the difference between owners of $5,000,000 and $50,000,000, Fortune writes: "Unlike the petit millionaire, or the newcomer with five or ten million who considers he's still got his way to make, the fifty-- millionaire has attained a kind of equilibrium in the shifting world of money.. .. He has an immense potential of power and leadership, setting the style in these for wealth generally.''^^1^^
An income which automatically stems from the possession of tens and hundreds of millions of dollars is so great that, even after satisfying all luxury ``needs'', a very large sum remains which again can be turned into capital. A finance- '; capitalist who has $100,000,000 invested exclusively in secu- ' rities, is assured, if he fully turns into a coupon clipper, an i annual income of $3,500,000-5,000,000. (According to official figures, the annual income on various forms of fictitious capital in 1965 ranged from 3 to 4.9 per cent of the market value of the securities.^^2^^) Abstracting ourselves from taxation, the influence of which will be discussed later on, we may conclude that such a fortune will increase from 2 to 3 per cent annually and it will double within 25--35 years.
But instances when finance-caoitalists confine themselves solely to coupon clipping are extremely rare. As a rule their capital is invested in the most diverse spheres which bring a big profit. A considerable part of their property, however, consists of securities. Lampman cites the following figures (see p. 30) on the approximate distribution of gross estates by type of property of the top-wealth holders (per cent of the total).^^3^^
The share of fictitious capital in the property of the multimillionaires increases with the growth in the size of their __PARAGRAPH_PAUSE__ _-_-_
^^1^^ Fortune, November 1957, p. 176.
~^^2^^ Statistical Abstract of the United States, 1966, p. 471.
~^^3^^ R. J. Lampman, op. cit, p. 170.
29 Type o( property Gross estate size (million dollars) 1-2 2-3 3-5 5-10 over 10 Real estate .... 10.1 9.8 1.0 58.9 6.9 2.2 1.3 9.8 12.5 15.5 0.6 43.9 12.9 1.4 1.0 12.2 4.4 17.3 1.5 56.3 7.7 0.7 0.7 11.4 2.3 5.8 0.7 82.2 5.9 0.4 0.4 2.3 0.9 38.3 0.2 51.7 3.7 3.6 0.2 1.4 State and local bonds ...... Other bonds .... . . . Corporate stock Cash ....... Mortgages and notes ..... Life insurance .......... Miscellaneous property . . __PARAGRAPH_CONT__ wealth: from 60 to 70 per cent for persons who own from 1 to 3 million dollars, to 90 per cent and more for persons who own more than 10 million dollars.So far we proceeded from the assumption that the capital of the multimillionaires increases by itself even if the prices of the securities they own remain unchanged. In reality, however, for the top group of finance-capitalists, whose wealth consists of fictitious capital to the extent of 90 per cent, the market value of this capital is of prime importance. If the price of securities rises more or less systematically a millionaire can spend his entire current income, knowing that his fortune is growing because of the laws operating on the stock market. According to Lampman's estimates, stock quotations rose by 450 per cent from 1922 to 1956, increasing by 150 per cent in the first ten post-war years (1946-- 1956). In 34 years quotations of bonds of private companies increased by 30 per cent but in post-war years declined by 13 per cent; quotations of municipal bonds respectively rose 40 per cent and declined 16 per cent.^^1^^ According to data of Standard and Poors, the quotations of private and municipal bonds in 1965 were lower than in 1940, but the market quotations of common stock during this period rose 8 times.
Thus, stocks are among the most profitable forms of investment for the multimillionaires. A fortune of $100,000,000 fully invested in stocks of a wide range of American corporations 20 years ago would have automatically increased to $500,000,000 without the least exertion on _-_-_
~^^1^^ R. J. Lampman, op. cit, p. 223.
30 the part of the tycoon. The rate of this self-growth would be the bigger the larger the share of capital invested in corporate stock. And since this share, in its turn, is all the larger the greater the wealth, it is clear that bigger fortunes must I increase faster than relatively smaller fortunes.^^1^^One certainly has to take into account the wide fluctuations in the market value of stocks, which can bring about sizable increases or decreases in the personal fortune of multimillionaires. Thus, for example, Mr. Edwin H. Land, whose net worth was estimated at about $500 million in the late 1960s, saw the value of his holdings decline by $200 million between December 1967 and March 1968. Such fluctuations do not, as a rule, mean bankruptcy, and when overvalued stocks settle down at more normal levels, their multimillionaire owners usually remain in the super-rich category to which they have come to belong. And most of \ them manage to insure themselves against fluctuations by diversifying their holdings.
The tendency towards a more or less stable increase in stock quotations in the last 20 years is explained by many factors. One of them, usually the least mentioned, is the effectfl of state-monopoly capitalism. Accumulation in capitalist^ corporations is accelerated by the system of government 1 subsidies, orders, tax privileges, etc. The accumulated sur-' plus value is expressed in bigger assets which belong to corporations but not to individual millionaires. But ultimately the latter appropriate the surplus value because the increase in real capital causes a corresponding growth in the value of fictitious capital. In this case surplus value is appropriated not directly but indirectly, but the nature of the enrichment is not altered.
With the general rise in the value of fictitious capital, stock quotations of certain corporations increase faster than the -average growth rate of stock market prices. Even when a boom is slowed down a considerable part of the securities continues to rise in value. From this follows the constant process ol flow of the capital of millionaires from some _-_-_
^^1^^ It follows from Lampman's data that an average property of P 000 had to increase by 53.5 per cent between 1922 and 1956; property of $65,000, by 73.9 per cent; $250,000, by 130.3 per cent and a property of $1.5 million by 209.8 per cent (R.~J. Lampman, op. cit., pp. 222--23).
31 industries and enterprises into others; in some cases there is also well-calculated speculation on a drop in quotations. This ``heads-I-win-tails-you-lose'' game is largely based on comprehensive information which now can be obtained only from a ramified network of agents, not only in corporations and banks but also in the government machine. State-- monopoly capitalism, in addition to everything else, is thus a system for the steady enrichment of the millionaires via the stock market.American millionaires as a rule do not invest all their capital in stocks, although their market value grows faster than that of other securities. A considerable part of their wealth is placed in federal and municipal bonds. This is explained not by the refusal of the tycoons to get rich, as claimed by some bourgeois authors, but by the specific features of tax legislation, which in many cases exempts the income on government securities from taxation.
Two main methods of taxing the wealthiest families are applied in the United States: the income tax and the estate tax. The income tax, first introduced on the eve of World War I, is now quite an important factor influencing the size and composition of the biggest fortunes.
Bourgeois literature now extols the income tax as an ``outstanding'' example of progressively taxing the Very Rich, now roundly criticises it as ``confiscatory'', which supposedly deprives the big capitalists of any stimulus for engaging in economic activity. These versions are designed both for home and foreign consumption. While the aim of the first version is to picture contemporary America as a "people`s'' and ``anti-monopoly'' state, the second version pursues a very practical purpose: either to bring about a reduction of the tax rates or at least condition the public to look favourably upon the numerous loopholes utilised for evading the tax laws.
At first glance the income tax rate might really seem `` confiscatory'' (see p. 33).
If these rates were really applied to all the incomes of the millionaires, the top-wealth owners would have had to pay to the treasury on each million dollars of personal income from $850,000 to $910,000 prior to the 1964 reform. For a coupon-clipper with a capital of $100,000,000 this would have meant a reduction of his annual income from __PARAGRAPH_PAUSE__ 32 Income Tax Rate (per cent of the income to be paid as the tax)^^1^^ Single person Married couple Taxable income, thousand dol lars up to 1964 1964 1965 up to 1964 1964 1965 Up to 2 ... 2-12 . 20 22--38 16--18 20--34 14--17 19--32 20 20--26 16--16.5 17.5-23.5 14--15 16--22 12--20 43--53 37 5-47.5 36--45 30--34 27--30 5 25--28 20--44 ..... 56--69 50.5-61 48--58 38--56 34--50.5 32--48 44--100 .... 72--87 63.5-75 60--69 59--72 53.5-63.5 50--60 100--200 .... 89--90 76.5 70 75--87 66--75 62--69 More than 200 . 91 77 70 89--91 76.5-77 70 __PARAGRAPH_CONT__ $3,500,000-5,000,000 to $370,000--500,000 or nearly by nine-tenths. This sum would be sufficient for a life of luxury but it could hardly satisfy the members of the financial oligarchy. The tax reform proposed by John F. Kennedy in 1963 and adopted by Congress at the beginning of 1964 cut the rates especially for persons with the biggest incomes. This measure undoubtedly met the interests of the Very Rich. The 6 per cent increase of the income tax in 1967 did not fundamentally alter this picture.
The taxes actually paid by the millionaires are much lower, which is admitted even by official statistics. The U.S. Department of the Treasury reported, for example, the following data for 1960.^^2^^
Size of income, thousand dollars Gross income of group, million Taxable income, million dollars Taxes paid, million dollars Tax rate, per cent of taxable income Tax rate, per cent of gross income dollars 100--200 2,438 1,939 1,001 51.6 41.1 200--500 1,370 1,056 607 57.5 44.3 500-1,000 486 383 226 59.0 46.5 Over 1,000 584 456 281 61.6 48.1 _-_-_~^^1^^ U.S. News and World Report, February 3, 1964, p. 41.
~^^2^^ Statistical Abstract of the United States, 1963, p. 400.
__PRINTERS_P_33_COMMENT__ 3-1286 33It turns out that the actual income tax paid by the wealthiest families, even before the tax reform, was about half of the official rates and in no case even reached 50 per cent of the total income. The tax reform reduced the tax payments of the financial oligarchy even more.
The bourgeois state sees to it that taxation should not be burdensome for the rich. The participation of the wealthiest families in replenishing the treasury is relatively insignificant. In 1964, persons with incomes exceeding $100,000 paid an income tax $2,700 million, that is, about 6 per cent of the total. At the same time Americans in lower bracket incomes (less than $5,000) contributed 10 per cent of the total and the group with incomes of $5,000--10,000 paid 34 per cent of the total.^^1^^ In other words, the working people and the petty bourgeoisie paid more than half of the income tax and the millionaires, one-sixteenth. Such is the real value of bourgeois ``progressive'' tax legislation.
It should be borne in mind that we do not refer to unlawful methods of evading the payment of taxes. The American millionaires have the broadest opportunities for concealing from treasury officials the real size of their incomes. Lundberg who studied data of the 1920s arrived at the conclusion that the wealthiest families paid only one-third of the taxes they ought to pay according to the law.^^2^^
Mills who studied the same problem in the 1950s points out that Lundberg's statement fully remains in force in our days.^^3^^ The financial oligarchy is systematically violating the tax laws, but the real reasons for its prosperity are different. The wealthiest families are able to wax fat because even strict adherence to the letter of the tax laws promotes the growth of their capital to no lesser degree than their violation.
Legal methods of evading payment of the highest income tax rates are extremely diverse. To begin with, not every type of income is taxable. A considerable part of the securities issued by the government is tax free on the ground that it is ``absurd'' to take away with one hand from private persons what is paid to them by the other. Hence almost 40 per cent of the capitals exceeding $10,000,000 is invested in _-_-_
~^^1^^ Statistical Abstract of the United States, 1966, p. 400.
~^^2^^ F. Lundberg, America's 60 Families, New York, 1937, p. 26.
~^^3^^ See C. Wright Mills, op. cit., p. 378.
34 government securities, of which from 50 to 75 per cent bring in a tax-exempt income.^^1^^By keeping big blocks ol stocks a millionaire expects to get dividends, but this is not his chief interest. These blocks give him the right to control a definite group of companies (or to participate in their control) and to enjoy colossal opportunities for enrichment and power associated with this control. As long as stock market quotations show a tendency to rise, his fortune automatically grows. Lastly, and what is especially important, possession of shares opens the possibility of systematically playing on the stock market. By selling his stock at a price exceeding the one he paid, the millionaire gets the difference which if there are many shares is quite considerable. U.S. tax legislation provides a maximum tax rate of only 25 per cent for such incomes (known as a capital gain), a circumstance fortunate for the millionaires but by no means accidental. The share of stock market profits and subsequent capital gains in the general incomes of the wealthiest families is quite high. Here are the respective figures of the Treasury Department for 1964.^^2^^
Size of income, thousand dollars Net profit on capital gains, million dollars Gross income of the given group, million dollars Capital gains, per cent of gross income 50--500 .... 2,416 15,703 15.4 500-1,000 . . . 298 568 52.5 Over 1,000 . . 464 790 58.7More than 50 per cent of the income of the Very Rich comes from stock market speculation. It is profitable for the financial tycoons to sell even part of the stock of the companies they control if they are confident that their control is not challenged by rivals.^^3^^ At any rate, they are always _-_-_
~^^1^^ "But the Very Rich typically carry 25 to 30 per cent of their forlune in tax-exempt securities and some go as high as 75 per cent (Mrs. Horace Dodge Sr. sank her entire $56-million legacy in tax-exempts); lately these have been earning a pleasurable 3 per cent, equivalent to a taxable return of 30 per cent" (Fortune, November 1957, p. 238).
~^^2^^ Statistical Abstract of the United States, 1966, p. 401.
~^^3^^ According to data of the Stock Exchange and Securities Commission, millionaires systematically engage in stock market operations with the shares of their companies.
35 able to repurchase their shares in order to make another coup on the stock market.Stock market manipulations of the millionaires at times involve losses. This is especially true of periods of crises when the prices of the shares of many corporations drop. During the periods of revival and boom some stocks also become unsuitable as a means of automatic growth of capital. But the laws help to reduce these losses to a minimum.
: They allow millionaires to deduct stock market losses from their current income, which means that the government covers 70 per cent and more of these losses.
' U.S. tax legislation also encourages stock market and other speculation by allowing the deduction of interest paid on loans from current income.
The right to deduct any, and not only stock market, losses encourages the millionaires to resort to the most risky speculations. Investment in oil-bearing lands has again become a favourite haunting ground of the financial oligarchy in postwar years. The main advantage of such investment is that the law exempts from taxation 27.5 per cent of the gross profit on operating oil and gas wells on the pretext of covering the "depletion of resources''. But that is not the only point. This is how Fortune magazine describes the benefits of this speculation: "The tax advantages are greatest when an investor gets into a venture before the well is drilled. If the hole is dry, he can then write off his entire cost against income. If the well proves productive, the investor can still write off the `intangible' part of the development cost, i.e., everything except the cost of physical equipment; ordinarily, this means he can write off at least 70 per cent of the total. When the well is actually producing, up to 27.5 per cent of gross income from it is tax-free because of the oil-depletion allowance, and in addition the investor can now begin depreciating the physical equipment too; in sum, as much as 50 per cent of this profit from the well could be tax-free."^^1^^
Both the multimillionaire and his heirs are interested in that the transfer of rights to the ``sacred'' private property after his death should be done as swiftly as possible and with the least obstacles. The bourgeois state, except certain anomalies, has nowhere and never challenged the right to _-_-_
~^^1^^ Fortune, September 1961, p. 212.
36 inheritance. The law sets no ceiling to the property that can be inherited. But for the same reasons that the government is formally obliged to set high income tax rates for the rich, an inheritance tax has been in force in the U.S.A.In the United States an inheritance tax was first introduced in 1916 and substantially increased in 1932--35 and then also during World War II. While originally the maximum tax rate was 20 per cent on the part of an estate above $10,000,000, in the mid-1930s it was raised up to 70 per cent on everything above $50,000,000. Since World War II, the rate has been 77 per cent. Thus, outwardly the inheritance tax is also of a ``confiscatory'' nature.
But the inheritance tax, as the record shows, is not particularly burdensome and the rates are not as high as might seem at first glance. The rate rises as the fortune grows. But it is much smaller than the maximum rates set by law. Even if we add to the inheritance tax all the other related expenses (payment for the services of executors of the will or trustees appointed by court in the absence of a will, payment of debts, and so on) they make up a small part of the inheritance. Specialists have calculated that the total is 23 per cent on an estate of $100,000; 31 per cent on an estate of $250,000; 37 per cent of $500,000; 40 per cent of $750,000 and 42 per cent on an estate of $1,000,000.^^1^^
These rates are true only if the size of the inheritance is indicated correctly and if the entire property of the millionaire is handed over to the heirs after his death. The actual situation is different because the law affords various legal means for evading the tax.
Millionaires as a rule underestimate the size of their fortune with the help of various book-keeping devices. One way the millionaire avoids paying the inheritance tax is to hand over to the family a considerable part of his fortune during his lifetime.^^2^^ The law allows placing personal capital in trust, provided after the death of the owner the property passes on to the heirs, while during his lifetime the heirs may receive only the current income on the capital. Two _-_-_
~^^1^^ R. Mehr and R. Osier, Modern Life Insurance, New York, 1956, p. 385.
~^^2^^ "In estate-tax matters, they also pursue the common goal of trying to pass on as much money as possible this side of heaven" (Fortune, November 1957, p. 238).
37 birds are killed with one stone. First, the property placed in a trust fund is deductible from the current income of the millionaire who thus sharply reduces his income tax; second, inasmuch as the capital is removed forever from the personal property of the millionaire, it is not subject to the estate tax in case of his death.The 1948 law stipulates a special way of handing over property to a wife. Under the law, a person may bequeath up to half of his property to his wife and this sum is not subject to the estate tax during her lifetime.
The same law greatly extends the right to make gifts, which is also utilised as a means for preserving and passing on fortunes of many millions. Moreover, up to 30 per cent of the current taxable income can be written off as gifts. This largely compensates the millionaires for the need to pay an additional tax on gifts.
The accompanying table shows that the main item of gifts are stocks---proof that this is a way of reducing the estate and handing it over in part during the lifetime of the owner. Earlier data (1959) indicate that the share of stocks rises with the size of the gifts. In gifts up to $50,000 it is less than half (which is also quite a lot), while in gifts over $1,000,000 it reaches up to three-fourths.^^1^^
Gifts in 1962^^2^^ . 85,689 Number of gifts....... of which taxable............20,598 tax-exempt...........65,091 Total sum of gifts, million dollars..............2,455 of which tax-exempt...........1,362The tax on big gifts is quite high, up to 40 per cent. But it brings a tremendous double saving---on the income tax and on the inheritance tax. When a millionaire makes his son a gift of $1,000,000 he has to pay a gift tax of $390,000. But he no longer has to pay the income tax on the $1,000,000, which is tax deductible (over a number of years). This saves _-_-_
~^^1^^ Statistical Abstract of the United States, 1961, p. 386.
~^^2^^ Statistical Abstract of the United States, 1965, p. 405.
38 more than $750,000. Moreover the one-million-dollar gift is free of the inheritance tax of $450,000. Should the money be passed over to philanthropy the saving for all practical purposes is tantamount to a net income. Hence it is not surprising that of the biggest gifts almost one-fifth goes to philanthropic funds.The American plutocracy is discovering ever new profitable ways of making gifts. For example, under the operating law, it is possible to present a large sum for educational establishments, retaining the right to receive the current income from this sum for life and, moreover, to pass on this right to a wife, children and even grandchildren. In this case, naturally, the saving includes the money which otherwise would have to go for the payment of the income tax and estate tax. Making a gift of big sums is particularly advantageous when this is combined with other forms of tax privileges.
Millionaire Marriner Eccles, one of the leaders of the financial group of the Rocky States, remarked at one time: "No one should assume that philanthropy is necessarily good for the economy. Philanthropy today is merely a tax dodge with no other motivation.'' Citing this statement, Fortune adds that "many Very Rich men, of course, rely heavily on foundations to do their spending for them.''^^1^^
One of the booklets issued for American millionaires, advising them how to utilise to full advantage the tax laws, is aptly called Taxes and Art.^^2^^ It deals with the problem of making gifts of art objects.
An analysis of U.S. tax legislation shows that it, far from preventing the swift growth of the big fortunes, in many cases helps to enrich the millionaires. Of course, for a man who is not well versed in fine points, tax laws may seem exceedingly harsh. But the American plutocracy is well familiar with its hidden springs and one who is unable or unwilling to learn all these intricacies, can have at his beck and call an army of specialists who grew up on the soil of state-monopoly capitalism.
In the 1960s, the American plutocracy remains the exclusive caste it was half a century ago. This particularly applies _-_-_
~^^1^^ Fortune, November 1957, p. 22S.
^^2^^ Taxes and Art, Englewood Cliffs, 1901.
39 to those who inherited the wealth from the former "robber barons''. But the nouveaux riches, too, despite their ostentatious democracy, increasingly merge with the ``mass'' of the financial oligarchy. The colossal wealth of the plutocracy places it in an exclusive position, isolates it from society and raises an invisible gold barrier.^^1^^But the point, of course, is not only the worship of the dollar and the aura that surrounds "fabulous wealth''. The financial oligarchy deliberately isolates itself from society. It does this not only through watchmen and personal bodyguards but also through an army of managers and hired ideologists. The millionaires have their own, class reasons for doing it.
They are afraid of the people and they want them to know i as little as possible about their way of life so that the man in the street should not even suspect the real importance of j their wealth and their power. This fear rose immensely I after the 1930s with their colossal economic upheaval and growth of the class struggle. Mills writes: "They have also adopted every conceivable type of protective coloration for the essentially irresponsible nature of their power, creating the image of the small-town boy who made good, the ' industrial statesman', the great inventor who 'provides jobs', but who, `withal', remains just an average guy. What has happened is that the very rich are not so visible as they once seemed.''^^2^^ This phenomenon is not disputed by some American authors, although they explain it differently. J. K. Galbraith asserts, for example, that the millionaires have become less visible, because, first, there are more of them and, second, the American people as a whole have become more prosperous.
But it is perfectly clear that it was the financial oligarchy itself and its agents that have exerted no little effort to become less visible. Galbraith himself is forced to admit this, although with certain reservations. "The American well-to-- _-_-_
~^^1^^ "People who meet Nelson Rockefeller are always aware of the dollar sign that floats conspicuously if invisible above his head. It is there but one must not mention it. Having that invisible dollar sign hovering over his head tends to hedge a Very Rich man off from his fellows, as divinity doth hedge a king" (S. Alsop, Nixon and Rockefeller, A Double Portrait, New York, 1960, p. 41).
~^^2^^ C. Wright Mills, op. cit., p. 117.
40 do.'' he writes, "have long been curiously sensitive to fear of expropriation---a fear which may be related to the tendency for even the mildest reformist measures to be viewed, in the conservative conventional wisdom, as the portents of revolution. The depression and especially the New Deal gave the American rich a serious fright. One consequence was to usher in a period of marked discretion in personal expenditure. Purely ostentatious outlays, especially on dwellings, yachts, and females, were believed likely to incite the masses to violence.. . . With the decline of ostentation, or its vulgarisation, wealth and hence inequality were no longer flagrantly advertised. Being less advertised they were less noticed and less resented. The rich had helped to make inequality an issue. Now they were no longer impelled to do so.''^^1^^Galbraith, to put it mildly, is exaggerating the ``modesty'' of the plutocracy in spending money for luxuries. Here are some examples of this "asceticism.'' Alfred Gwynne Vanderbilt has a stable of pure-bred race horses on which he spends more than $500,000 annually. Paul Mellon arranged a ball for the debut of his stepdaughter Elisa at a cost of one million dollars. To celebrate his latest successful business venture Laurance Rockefeller in December 1959 rented for a week a whole new supermodern fashionable hotel in Puerto Rico where he made merry together with his some hundred guests. It goes without saying that all the expenses and the cost of travel there and back were covered by Laurance. Even a relatively ``small'' millionaire Birrell, who subsequently turned out to be a swindler, had a mansion with stables, swimming pools and a service staff of 40. He rented a 100-- foot yacht for pleasure trips. Douglas Dillon is an owner of a huge estate and vineyard in Chateau Brion, France, which at one time belonged to Talleyrand. Joseph Kennedy, father of the late president, is known for his luxurious villas on Azur Cote and Palm Beach. Jean Paul Getty several years ago "was forced" to buy a ducal estate in Britain because it ' was cheaper than to rent a whole floor in a London hotel. The interests of the plutocracy are truly diverse.
<---
Fear of social upheavals has not killed in the plutocracy its intrinsic craving for power or the thirst for riches and luxury.
_-_-_~^^1^^ J. K. Galbraith, The Affluent Society, Boston, 1958, pp. 78--79, 80.
41 __ALPHA_LVL2__ 2. The Old FortunesF. Lundberg published a list of America's 60 wealthiest families with a personal fortune of $30,000,000 and more. This list was compiled on the basis of tax statistics of the mid-1920s.
Lundberg himself did not consider his list complete and used the term "60 families" in a relative sense. For various reasons he did not include in his list more than 30 multimillionaires whom he named, but could not give even an approximate estimate of their wealth.
Our aim is to trace the fate of these fortunes step by step, as much as possible, and to ascertain what happened to them in the 1960s.
The Rockefellers. In the mid-1920s Lundberg estimated their personal fortune at $1,080 million. At that time it was represented chiefly by the personal capital of John D. Rockefeller, Sr. (he died in 1937 at the age of 97). He owned approximately $900 million and other members of the family $180 million. These estimates were made by an author who was rather critical of the financial oligarchy but most likely they were below the actual figure. J. A. Morris who wrote a book extolling the Rockefellers cites a different figure--- about $2,000 million.^^1^^ Possibly this figure is closer to the truth. At the beginning of the 20th century, John D. Rockefeller, Sr., himself calculated his fortune with a precision of up to one cent and set it at $815,600,000. A. Nevins, a biographer of Rockefeller, holds that by 1910 his personal capital had exceeded $900 million.^^2^^ From 1910 to 1925, the wealth of the Rockefellers undoubtedly grew substantially and certainly exceeded $1,500 million.
In the mid-1950s, Fortune assessed the wealth of the Rockefellers at a minimum of $1,000 million and a maximum of $2,000 million. In addition, philanthropic foundations, set up on their money and fully controlled by them, owned another $1,000 million. Thus, their total capital, according to Fortune, amounted from $2,000 million to $3,000 million. At the end of 1957, Fortune again published an estimate, _-_-_
~^^1^^ J. A. Morris, Those Rockefeller Brothers, New York, 1953, p. VII.
~^^2^^ A. Nevins, Study in Power: John D. Rockefeller, Industrialist mid Philanthropist, Vol. I, New York, 1953, p. 333.
42 this time indicating the capital owned by members of the Rockefeller family. Here are these figures (million dollars).^^1^^ Minimum Maximum .John U. Rockefeller, Jr. 400 700 Mrs.Jean Mau/.e (Abby Rockefeller) ............ 100 200 David Rockefeller....... 100 200 John D. Rockefeller III .... 100 200 Laurance Rockefeller..... 100 200 Nelson Rockefeller...... 100 200 Winthrop Rockefeller..... 100 200 Total.....1,000 1,900These figures are incomplete because they do not include the capital of the 22 grandchildren of John D. Rockefeller, Jr., to whom he turned over, just as to his children, part of his fortune prior to his death; the heirs of his sister Edith Rockefeller who married Harold McCormick and the brother of his first wife, Winthrop Aldrich, who for a long time was in charge of the Rockefeller family affairs. Together with these additions, the wealth of this family, on the basis of Fortune's estimate, reaches $2,000-$3,000 million.
The will of John D. Rockefeller, Jr., the main provisions of which were made public after his death in May 1960, seem to confirm this estimate. The will shows that during his lifetime he handed over $473 million to various philanthropies, about $600 million-$ 1,200 million to his children and a large sum to his grandchildren. Lastly, his estate included securities, real property and works of art for a sum of $150 million, also in the main exempt from taxes. Approximately half of this sum was given to his second wife, exempt from taxes up to her death, on the basis of the 1948 law. The other half was bequeathed to the Rockefeller Brothers Fund, i.e., formally also comes into the category of charity. In addition John D. Rockefeller, Jr. presented $5 million to the Lincoln Center of the Performing Arts in New York and bequeathed a number of other gifts.
_-_-_~^^1^^ Fortune, November 1959, p. 177.
43Thus, one of the biggest fortunes in America was handed over to the heirs actually without paying taxes. The lawyers and advisers of the Rockefellers displayed truly demoniacal virtuosity in circumventing the tax laws.^^1^^
In our opinion, both the estimate of the wealth of John D. Rockefeller, Jr. made in his will and the figures cited by Fortune are greatly understated. Victor Perlo, who calcu) lated the value of the stocks belonging to the Rockefellers (as of April 1956), names a figure of $3,500 million.^^2^^ Since stock prices in the United States approximately doubled from 1956 to 1965 this estimate should now be increased at least to $6,000-7,000 million. S. Alsop mentioning the estimate of Fortune writes: "Nelson Rockefeller, and all the other Rockefellers, are a great deal richer than they are generally supposed to be. ... I have never been made privy to the secret financial archives of the Rockefellers. But I should be prepared to eat my boots in bearnaise if those figures are not low.'' Alsop points out that the increase in the wealth of the Rockefellers from $900 million in 1910 only to $2,000 million at the beginning of 1960 could occur only if it were managed very badly. But actually it was administered by first-class experts. "It is reasonable to suppose,'' Alsop concludes, "that the total Rockefeller fortune may well amount to several times the accepted figures of between one and two billion dollars. It would not be at all surprising... if all , the Rockefeller family assets---all the Rockefeller-controlled ' money as well as the Rockefeller-owned money---came to something like ten billion dollars.''^^3^^
Today, the Rockefeller fortune consists, as it were, of three parts. The first part is the assets inherited by the wife, children and grandchildren of John D. Rockefeller, Jr.; these are mostly the stocks of oil companies and the Chase Manhattan Bank. Under the term of the will, this capital is secured to each member of the family in trust for life. They can use the income but not the capital itself. After their death this _-_-_
~^^1^^ Here are some other details of this will: a huge estate in New Jersey was handed over to the five brothers, a mansion on Mount Desert Island to Nelson and David, a ranch in Wyoming to Laurance and a mansion in Maine, to the widow of the deceased (see The New York Times, May 20, 1960).
~^^2^^ Victor Perlo, The Empire of High Finance, New York, 1957, p. 318.
^^3^^ S. Alsop, Nixon and Rockefeller, New York, 1960, pp. 34, 35--36.
44 part will be inherited by their children, and as American authors consider, will be broken up between them. But even if this prediction comes true, it is clear that the size of the Rockefeller assets will increase because of the mechanism for the self-growth of fictitious capital. At least in the next ten years this wealth will be managed jointly as the combined capital of the quite large financial clan. As for the rates of the self-growth of this part of their capital, it can be judged from the fact that between 1946 and 1958 it increased by 140 per cent owing to the stock market boom.The second part consists of several philanthropic foundations fully controlled by the Rockefeller brothers. Since this family continues to allot large sums to philanthropy there is every ground for assuming that this part of their capital will continue to increase swiftly.
The third, perhaps most interesting, part of the Rockefeller assets is the capital fully owned by the sons of John D. Rockefeller, Jr. Having no right to spend the inherited capital they utilise for enrichment the income they get from it and also the extensive credit they can receive. In the 1960s, the independent new personal fortune of the children of John D. Rockefeller, Jr., not counting the inherited capital, amounted to not less than $200 million and continued to mount swiftly. In 1968, Fortune estimated the total of the capital belonging to the six Rockefeller brothers and one sister at from $1,200 million to $1,800 million. This is a 1.5-2-fold increase as compared to the 1957 estimate.
The Morgans. Lundberg estimated that the combined personal fortune of the Morgan family, their partners and leading members of their companies reached $828 million in the mid-1920s. But the capital of the Morgans themselves was relatively small. After the death of his father in 1913 J. P. Morgan, Jr., inherited about $78 million^^1^^ which were increased to $90 million at the beginning of 1924. After that the fate of this capital is shrouded in mystery. In contrast to the Rockefellers and some other wealthiest families, about whom the American press writes quite readily, information about the Morgans is extremely meagre. _-_-_
~^^1^^ According to other data, $68 million (J. Tebbel, The Inheritors. A Study of America's Great Fortunes and What Happened to Them, New York, 1962, p. 274).
45 J. P. Morgan, Jr., like his father, set up no large philanthropic loundations. When he died in J943 his will was not made public. Unofficially his estate was estimated at the lime only at $60 million, while in 1947 J. P. Morgan and Company assessed his net estate altogether at $4.6 million.^^1^^It is beyond doubt that even the figure of $60 million is greatly minimised. J. P. Morgan, Jr., up to his death remained the reigning monarch of his empire which was not beset by any special financial troubles. It is impossible to imagine how his wealth could have declined in 20 years. It is more probable that he passed on most of his capital to his two sons during his lifetime. Even if we assume that his fortune increased little, for example, up to $120--130 million, in that case too, Junius S. Morgan and Henry S. Morgan owned each about $60--65 million in the 1940s.
The stock exchange boom in the 1950s at least doubled their wealth, bringing up the personal fortune of the Morgans to about $250--300 million. In full conformity with the "tax strategy" of the millionaires, the two third-generation Morgans should have taken care to hand over their capital to their children in good time.
The "tax strategy" of the Morgans explains why no member of this family is mentioned in Fortune as the owners of more than $75 million. It also explains the full silence about the estate left by Junius S. Morgan who died in October 1960, as though it was something ``unimportant''.
Our estimate gives the minimal possible size of the wealth of the Morgans.
The Fords. In the mid-1920s their fortune was estimated at $660 million and consisted almost exclusively of the personal capital of Henry Ford invested in the Ford Motor Company. In the 1930s, its stock was divided into two categories: class A, without voting rights, and class B, the voting stock. There were nine times as many A shares as B shares. At that time Henry Ford handed over to his son Edsel 41.5 per cent of the stock of both classes, i.e., more than twofifths of his wealth. Under the will of Edsel, who suddenly died in 1943, class B stock was distributed in equal shares to his wife and four children and class A stock was bequeathed _-_-_
~^^1^^ The New York Times, October 21, I960.
46 to the Ford Foundation. The will of Henry Ford himself who died in 1947 had similar terms.At the beginning of the 1960s the assets of the Fords were distributed as follows: they owned 6.3 million class B shares and the Ford Foundation, 29.2 million class A shares. Since class A stock is quoted on the stock exchange, it is not difficult to ascertain the market value of the part held in the Ford Foundation and fully controlled by this family: it was about $2,600 million. It is more difficult to estimate the capital of the Fords themselves because class B stock is not traded on the exchange. In 1957 Fortune estimated their personal capital at $325--500 million, and in 1968 at $450--600 million. This would be true only if, first, the stocks of both classes were of equal value, and, second, if the Fords had no other property except the stock of their company. Both of these assumptions are wrong, however. At present each class A share quoted on the exchange gives a right to one vote, while one class B share is entitled to 1,744 votes. Therefore it is beyond doubt that their market value, if they were sold, would be much greater than of class A. The personal fortune of the Fords can be estimated at $1,200-1,500 million and together with the assets of the Ford Foundation, at $3,800-- 4,000 million.
Some details of the "tax strategy" of the Fords are of interest. Since the estates of Henry and Edsel Ford were passed on to the heirs in 1943--48, when the Ford Motor Company was fully in the hands of this family, the value of the company's stock was obviously underestimated. The entire capital bequeathed by them, including the money turned over to the Ford Foundation, was evaluated altogether at $450 million, while the real market value of the company's assets could not be less than $1,500 million at that time. Were the heirs directly to inherit it all, they would have had to pay the Treasury about $320 million even on the greatly undervalued estimate of the company assets ($450 million), to which by the way the Treasury officials did not object. By handing over the bigger part of the estate to the Ford Foundation, the estate tax was reduced to $42 million. But even this money was not paid from the personal capital of the Fords. An American author tells us that the "Ford family's lawyers, finally, saw to it that their clients did not have to pay the inheritance tax on the shares they did inherit. 47 Henry's and Edsel's wills provided that the bequests to the members of the family be tax free, thereby, in effect, imposing the entire tax burden on what was left to the Ford Foundation. The tax bill came to $42,063,725 which was about equal to the total spent by the Foundation on all its benevolences through 1950. Sweet are the uses of philanthropy.''^^1^^
It might be interesting to add that Mr. Henry Ford II gave most of his fortune in the 1960s to his newly-wed second wife Josephine (Mrs. W. Buhl Ford II).
The Mellons. In the mid-1920s, the Mellons owned about $450 millions.^^2^^ This fortune was managed very skilfully because now, judging by all signs, it greatly exceeds that sum. Fortune gave the following estimates, as of 1957 (in million dollars):
Minimum Maximum Richard King Mellon . . . . Paul Mellon....... Ailsa Mellon (Mrs. Bruce) Sarah Mellon (Mrs. Allen Scaife)......... 400 400 400 400 700 700 700 700 Total.....1,600 2,800Personal and other changes may be traced by comparing the above figures with another table derived from the Fortune 1968 figures, which, however, seem to be rather on the low side:
Minimum Maximum Richard King Mellon 500 1,000 Paul Mellon . . 500 1,000 Ailsa Mellon Bruce .... Cordelia Scaife May . . 500 200 1,000 300 Richard Mellon Scaife . . . . . 200 300 Total.....1,900 3,600The earlier Fortune estimate is smaller than the figures cited by Perlo in 1956---$3,755 million. Taking into account _-_-_
~^^1^^ D. MacDonald, The Ford Foundation, New York, 1956, p. 133.
~^^2^^ H. O'Connor, Mellons Millions, New York, 1933.
48 the rise in stock quotations from 1956 to 1965, we get a figure of $7,500 million. Since the wealth of the Mellons is invested mainly in aluminium and oil, there is nothing extraordinary in such a growth of their wealth in 40 years.Although they are not included in Lundberg's list, we should mention here the two main partners of the Mellons in the Aluminum Company of America (ALCOA) which already in the 1920s were millionaires---Arthur V. Davis and Roy A. Hunt. Davis, who headed this company from 1914 to 1948, had 18 per cent of its stock at the end of the 1920s and remained its biggest stockholder up to 1956. In 1948, at the age of 81, Davis moved from Pittsburgh to Florida where he began to buy up real estate. Towards the end of his life his personal capital reached the $500-million mark.^^1^^ The lesser known Roy Hunt firmly settled down in ALCOA and made a fortune of $100--200 million only on the stocks of this company.
The Du Ponts. Lundberg stated that 20 members of this family owned altogether $238.5 million in 1924, in other words, the personal capital per member of the family was relatively ``modest''. The Du Fonts sooner than other millionaires realised that the formal break-up of their wealth yields a huge saving on taxes. This in no way prevented them from multiplying their wealth manyfold.^^2^^
In 1957, Fortune listed at least five members of this family who had personal wealth of more than $75 million. Here are the wealthiest Du Fonts (million dollars):
Minimum Maximum M. 200 400 William Du Pont 200 400 Lammot Du Pont Copeland . . Mrs. Alfred Irenee Du Pont . . 100 100 75 200 200 100 Total 675 1,300The 1968 list compiled by the same magazine, includes only owners of $100 million or more. Since a number of _-_-_
~^^1^^ Fortune, September 1956, p. 149; September 1957, p. 76; November 1957, p. 177; July 1959, p. 54. Davis died in 1962.
~^^2^^ M. Dorian, 'The Du Fonts, Boston-Toronto, 1962.
__PRINTERS_P_49_COMMENT__ 4-1286 49 deaths occurred during the decade under observation, and since fortunes were passed on to a number of heirs, only three Du Fonts qualified this time (Mrs. Alfred I. Du Pont, Lammot Du Pont Copeland and Henry B. Du Pont) with a total personal worth of $500--700 million.Both estimates, however, represent only part of the wealth of this family which now consists of more than 70 members. The personal capital of all these millionaires cannot be estimated. In 1960, the assets of Christiana Securities and Delaware Realty and Investment, holding companies which were almost entirely owned by the Du Ponts, were estimated at $3,000 million.^^1^^ But many members of this family had business interests not connected with the family holdings or with Du Pont de Nemours and Company. For example, Alexis F. Du Pont, Jr. has his own investment company and is a stockholder of Vertol Aircraft Corporation. Alfred R. Du Pont and Edmond Du Pont are co-owners of a stock exchange company, Eugene Du Pont III and his brother Nicholas have bought up oil lands in Texas and Wyoming. Their personal capital invested in this business now amounts to about $10--15 million.^^2^^
Moreover, the data given by Fortune have to be corrected. For example, the wealth of Mrs. Alfred I. Du Pont was estimated by the magazine at $100--200 million. Business Week cited other figures and also interesting facts showing how swiftly the inherited fortunes grow. Alfred I. Du Pont who died in 1935 left his widow a capital of $27 million. The capital was managed by her brother, a skilful businessman named Edward Ball. Systematically investing money in real estate, local railways, pulp and paper mills, telegraph companies and banks, he increased his sister's fortune to $300 million by I960.^^3^^
This estimate is 50 per cent higher than the maximum figure given by Fortune. If we make a similar adjustment for _-_-_
~^^1^^ Our estimate is based on data of Moody s Bank ami Finance Manual, I960; Wall Street Journal, October 18, 1960, pp. I, 30, and current stock exchange quotations. The double count arising because Delaware Realty owned one-third of the stock of Christiana Securities was eliminated. Subsequently, the two companies merged.
~^^2^^ Fortune, February 1959, p. 69. An adjustment has been made for the rise in the value of these lands.
^^3^^ Business Week, August 27, 1960, p. 65.
50 the other data given by the magazine and also add the assets of family holding companies and independent capital of other members of the Du Pont family, their total wealth may be estimated at a minimum of $5,000 million. V. Perlo who calculated the value of the stock which belonged to the Du Ponts in 1956 arrived at a similar figure ($4,660 million). An adjustment for the rise in stock prices from 1956 to 1965 sends up the total to $9,000 million.The Reynolds. In the mid-1920s, Lundberg assessed their capital at $117 million, pointing out that it was invested chiefly in the Reynolds Tobacco Company. After the death of R. J. Reynolds a considerable part of this capital was handed over to two philanthropic foundations; they are controlled by his heirs, three of whom are directors of the tobacco company. The concentration of the interests of this family in an industry which is not marked by swift growth rates did not appreciably increase their capital which hardly exceeds $200 million.
Considerably bigger financial success was registered by another branch of Reynolds family which took an interest in the aluminium industry. These are the descendants of R. S. Reynolds, Sr., a nephew of the founder of the tobacco company who set out on his own immediately after the end of World War I. However, not one of his four sons (Richard, Louis, David and William) have been included in the list of Fortune. At present this family controls 75 per cent of the stock of the U.S. Foil, which in turn owns 50.7 per cent of the stock of the Reynolds Metals Company. Thus, their personal capital is not less than $300--400 million and, together with the other branch of the same family, it adds up to $500--600 million.
We have traced the fate of a number of fortunes mentioned by Lundberg. In all cases the personal capital of these families has either substantially grown in the last 40 years, or in any case has remained at the old level. The absence of data about the other families does not imply that they have fully lost their significance as top wealth-owners in the United States. Some of them were ruined during the 1929-- 33 crisis or in subsequent years. The inclusion of others in the list of the wealthiest families was unjustified because data on tax statistics for only one year were taken. What is more important is that many of the old big fortunes which for one __PARAGRAPH_PAUSE__ 51 The Old Core of the American Plutocracy Personal wealth, million dollars In the mid-1920s In the 1960s Rockefellers .......... 1,000-1,500 100--240 100--450 100--660 89--600 80--450 117 100 260 90 75--322 129 30--114 50--200 50--194 190 100 50--102 66 34--400 6,000--10,000 4,000-9,000 3,000-7,500 500--700 1,200-4,000 100-1,000 500--750 450--600 500--600 400--500 350--450 250--400 400--600 350--500 300--400 250--350 250--350 300--350 150--300 210--300 200--300 200--300 280--300 230--250 150--200 150--200 150--200 100--190 100--150 250--350 150--200 75--100 75--100 75--100 75--100 75--100 Du Ponts Mellons ...... ...... Mellon's partners---A. V. Davis and R. A. Hunt ... Fords ............ Dorrances Phippses ...... Harknesses Reynoldses . . . Milbanks ........... McCormicks-Deerings Morgans .... Whitneys ..... ...... Houghtons Waggoners ........... Lehmans . Dukes ...... ... Kirby Astors . . . . ... Bakers . . Fishers . ... . . Guggenheims-Strausses ...... Firestones Pitcairns ...... ... Pricks Harrimans Weyerheusers ............ Pews .............. Stillmans-Rockefel lers Posts-Huttons ........ Woodruffs Schiifs .......... Dodges .............. Chaprnans . . . . .... George R. Brown . . ...... Goulds .............. 52 __PARAGRAPH_CONT__ or another reason were not included in Lundberg's list, grew very swiftly in the next 40 years.
John T. Dorrance who died in 1930 left an estate of $120 million, of which $80 million were invested in stocks of Campbell Soup. Today the personal fortune of John T. Dorrance, Jr., amounts to $200--300 million. But that is not all. Under his father's will, 8.7 million shares of the company were placed in trust and the son appointed as trustee. The market value of this block of stock ranges now within $1,000 million. Here is a splendid illustration of how the real wealth of the American multimillionaires exceeds their so-called personal capital.^^1^^
In May 1959, Fortune had to apologise for ``overlooking'' in the compilation of its list the little-known but very la;rge fortune of the Milbanks. As far back as 1884, Jeremiah Milbank left an estate of $32 million and by the mid-1920s it could not be less than $100 million. At present the stocks of only three companies owned by the family---Commercial Solvents, Borden and Southern Railway---have a value of at least $220 million. Together with other property, the Milbanks own now a capital of not less than $400--500 million.^^2^^
Let us sum up certain results. First, in the last 40 years most of the old inherited fortunes of the American plutocracy showed a general tendency to grow swiftly. Notwithstanding the deep crisis in 1929--33 and ``stringent'' tax legislation, it was in this period that ``billionaire'' families appeared in the United States, and the number of the inherited fortunes exceeding $100 million rose several-fold.
Second, the natural tendency towards a break-up of the biggest fortunes is resisted by another, undoubtedly stronger tendency to improve the forms and methods of administering the capital of the Very Rich. It has become a general rule to concentrate formally independent personal fortunes into complexes on a family basis through the setting up of special holding companies and the widespread system of trust management of family capital, and so on.
Third, a considerable part of the old large fortunes is consolidated in ``philanthropic'' foundations. Formally removed _-_-_
~^^1^^ Fortune, November 1957, p. 177; May 1968, p. 156; Barrens Weekly, January 8, 1962, p. 30.
~^^2^^ Our estimates arc based on data given in Fortune, May 1959, p. 137,
53 from the personal ownership of the multimillionaires, this part of the capital actually remains in their possession and at their disposal and promotes their personal enrichment. i All this means that the old core of the U.S. financial ' j oligarchy has preserved its wealth and, moreover, has dci vised many new ways for accelerating its growth. __ALPHA_LVL2__ 3. Replenishment of the PlutocracyThe United States has now at least 90 families which own a personal capital of more than $75 million.^^1^^ Of them 36 families make up the "old core" of the financial oligarchy in the sense that their fortune, true greatly increased, was inherited from wealth amassed even prior to World War I, or in any case prior to the 1929--33 crisis. But more than half of the wealthiest families, 54 to be precise, makes up a new generation of the American plutocracy: their fortunes were amassed almost exclusively between the 1930s and the 1950s.
Although the new multimillionaires exceed the old ones numerically, they still greatly lag behind them in size of wealth. This is explained by the fact that almost half of these families have a fortune ranging from $80 million to $200 million (maximum estimate) whereas almost threefourths of the families making up the "old core" own capital of more than $200 million each.
Never in the history of the United States have new multimillion fortunes grown as rapidly as in the last 25 years.
In conditions of the scientific and technological revolution, those who were the first to get into new industries and utilise the monopoly of patent rights made their fortune faster than others. While the old wealth was accumulated at a time when the role of the bourgeois state in the U.S. economy was small, the new fortunes are a natural product of state-monopoly capitalism.
After 1939, economic crises were short-lived and relatively not big. When in the mid-1950s production growth rates were sharply slowed down, the enrichment of new __PARAGRAPH_PAUSE__ _-_-_
~^^1^^ Tliis is a minimal estimate which includes only families definitely known to have a capital of over $7.r> million. In our opinion actually the number of such families may be twice as high, but in no case less than the given figure.
54 New Multimillionaires Families or individuals Personal fortune, milion dollars in the 1960s Main sphere of enrichment Qt'ttv ,000-1,500 Oil H Hughes .... ,000-1,500 Oil equipment, military con-- Cullcns 800-1,000 tracts, aircraft Oil H Hunt . ... 800-1,500 Oil Murchisons . . 600--700 Oil, investment companies, S Richardson ..... 200--600 speculation in securities Oil Kennedy . . 200--600 Real estate Moody ..... 400--500 Banks, real estate, etc. Upjohns 400--500 Medicines Kaisers . ... 350--500 Steel, aluminium and others W Keck ...... 200--400 Oil D Ludwig 500-1,000 Shipping A P Sloan .... 200--400 Automobile industry Watsons ....... 150--200 Electronics, military contracts J. S. Abercroiubie . . . .1. Blaustein ...... J. Mecorn ....... 150--200 150--200 100--200 Oil R E Smith ..... 300--500 Q. and H. Brown .... W. L. McKnight .... J. S. McDonnell .... J. D. MacArthur .... Ch. Allen, Jr ...... Ch. Engelhard, Jr. . . . S. Newhouse ...... S Bechtel 150--200 300--500 150--200 300--500 200--300 200--300 200--300 100--200 Electrical equipment industry, speculation in securities Engineering Aircraft industry Insurance Investment banking Mining and metal fabricating Newspapers Industrial construction Dillons ..... 150--200 Banking Blakley ....... 100--200 Real estate Land 500--600 Polaroid cameras L. Corrigan ...... H Crown 100--500 180--200 Real estate Building materials, real estate, military contracts 55 Families or individuals Personal fortune, million dollars in the 1960s Main sphere of enrichment letterings 150--200 Pratt ......... 100--200 I Automobile industry C. Mott 300--500 Meadows ........ C. Eaton . 100--200 100--150 Oil Iron ore, coal steel, railways Cabots 100--150 Chemical industry Bakalars . . . . 70--150 Electronics Eccles ......... 100--150 Industrial construction, bank-- S Fairchild 200--300 ing Patent operations speculation Olins ......... 100--120 in securities Chemical industry L. Wolfson ..... 100--120 Engineering shipbuilding H. Ahmanson ..... 200--300 Savings associations real H. Morrison 75--100 estate Construction P. and L. Tisch .... 70--100 Real estate Note: In addition to the multimillionaires indicated in the table the following persons had in the 1960s an annual income of over $1,000,000 and probably a fortune greater than $50--75 million (the names of the companies they head are given in parentheses): Leon Lewinstein (Lewinstein and Sons---chemicals, textiles); Lewis Rosenstiel (Shenley Industries---alcoholic beverages); Chester Roth ( KayserRoth Corporation---textiles); Samuel Bronfman (Distillers Corporation---Seagrams Ltd.---alcoholic beverages); N. Milliken (Deering, Milliken and Co.---wholesale trade); Norman Harris (Harris Trust and Savings Bank---commercial bank); Henry Heinz II (H. J. Heinz Co.---food industry); Peter Grace (W. R. Grace and Co.---chemicals); J. F. Cullman III (Philip Morris---tobacco industry); J. E. Jonsson (Texas Instruments---electronics). The following people are frequently mentioned as newcomers to the more than $150-million personal worth category: Leon Hess (Hess Oil and Chemical), William R. Hewlett and David Packard (Hewlett-Packard---machinery), Forrest Mars (Mars candy), Eli Lilly (Eli Lilly and Co.---Pharmaceuticals), De Witt Wallace (Reader's Digest), Peter Kiewit (construction), S. Mark Taper (finance), and E. C. Robins (drugs). __PARAGRAPH_CONT__ millionaires continued owing to the stock market boom and the preservation of quite high growth rates in some new industries. The high level of military contracts and also government orders in general made possible the enrichment of capitalists who staked mainly on the government market.Almost one-third of the new multimillionaires grew up in the oil and gas industry. In the course of the oil rush, which differs little from stock market speculations, hundreds of thousands of small entrepreneurs and speculators who 56 invested their meagre capital into lands that proved to be barren, were ruined. On the other hand, hundreds were ``lucky'', and a few individuals even succeeded in turning their small speculative business ventures into huge multimillion enterprises (see table on pp. 55--56).
Jean Paul Getty, who opens the list of millionaires given by For Lime, was born in 1892 and during World War I, together with his father, engaged in wildcat drilling in California. At the beginning of the 1930s, he was a wealthy man and some 10 years later owned tens of millions of dollars. The Tidewater Oil Company he founded had assets of $1,000 million in 1965 and was among the 100 biggest industrial corporations in the United States (45th place for size of capital and 98th place for sales).
At the beginning of 1961, the stock of this company owned by the Getty family was worth more than $200 million. But Getty's total wealth was estimated at much higher figures. Today the estimates range from $1,000 million to $1,500 million. He handed over management to one of his sons and lives now the life of a typical multimillionaire rentier.^^1^^
The combined fortune of Harrison Lafayette Hunt and his son, N. Bunker Hunt, is estimated at $600 million, although some claim it is as high as $2,000 million. It was reported that his weekly income exceeds $1,000,000. Yet in 1921 he was the owner of a small cotton plantation in Arkansas and bought his first oil well. By 1937, he had enough wealth to buy an old estate. Now he controls an entire empire of oil lands in the United States and beyond its bounds.
Sid Richardson of Texas, who died in 1959, left an estate of $600 million, of which $400 million was turned over to a foundation bearing his name and the rest is managed by Texas bankers and lawyers. He began as an oil operator in the 1920s and became a multimillionaire during the oil boom in the 1940s and 1950s.^^2^^
Jacob Blaustein of Baltimore, together with his father, organised the American Oil Company in 1910 and in time _-_-_
~^^1^^ He spends most of his time in estates in Britain and France and lias amassed a large collection of paintings. Getty was married five times (See G. Recs, 'flic Multimillionaires. Six Studies in Wealth New York, 1961, pp. 1-17).
^^2^^ Who's Who in America, 19~>S-19,>9; Fortune, November 1957, p. 180; Newsweek, January 9, 1961.
57 became a rich man. In the mid-1980s, he gave up his independent enterprises merging his company with a bigger one. At present Blaustein is the leading stockholder in several large corporations and banks. His personal fortune is estimated at $150--200 million.John Mecom began wildcat drilling in 1936 with a capital of $700. Two years later his property was worth $100,000. He became a millionaire after 1945 when he organised the large-scale resale of oil lots and concessions abroad.^^1^^ In 1957, his capital was estimated at $100--200 million.
Clint Murchison of Dallas is one of the better known oil millionaires who became a big financier. Fortune credits him with a personal capital of $100--200 million. But as early as 1953 the same magazine presented data showing that his wealth exceeded $300 million.^^2^^ Since then, merely through self-growth, it should have risen to $600 million, but he has energetically extended his empire. The Alleghany Corporation stock which Murchison held in 1960 had a market value of $16--20 million.^^3^^ It is possible that Clint Murchison handed over part of his wealth to his sons. In any case, the total capital of this family can be estimated at $700 million.
The methods of enrichment used by Murchison are typical of the new oil millionaires in general. In 1919, he and Richardson, having no money for wildcat drilling, speculated in lease rights to oil lots. Circulating false rumours about the "colossal prospects" of certain lots, they made at times up to $150,000 in one day. By 1927, Murchison had some 5-6 million dollars. He invested this money into his own exploratory drilling. Usually Murchison sold his companies after they began to earn a profit, getting the highest possible price from the buyers. Frequently big companies which spared no money were the buyers. When selling a company, Murchison stipulated that after the company recoups the invested capital and gets a certain profit he was to receive free of charge 50 per cent of the business. Since he sold highly productive lands, the property was ``returned'' within six to ten years. Murchison then resold his share at a much higher price, once more on the old terms.
_-_-_~^^1^^ Fortune, July 1957, p. Hi!).
~^^2^^ fortune, January 1953, pp. 117, 119.
~^^3^^ Business Week, October 1, 1960, p. 131.
58After World War II, Murchison extended his speculative transactions far beyond the oil industry, reorganising and selling companies in different industries. By concentrating on these operations, which earned him capital gains taxed at a maximum rate of 25 per cent, he was able to reduce his payments to the Treasury to a minimum.^^1^^
Another Dallas oil tycoon is Algur Meadows. In 1929, he left the job of a low-paid clerk in an oil company and swiftly became rich in the 1930s thanks to a clever method ol speculation of his own invention: he resold neither oil companies nor oil-bearing lots but "oil payments'', i.e., the expected price of the future oil production on the given lot. An American author writes that he struck a new way of getting rich in the oil business, not prospecting for oil himself but exploiting what others had already found. At the beginning of the 1960s he had a fortune estimated at $100-- 200 million.^^2^^
The oil industry laid the foundation of the fortune of another multimillionaire, Howard Hughes. In 1924 Hughes inherited from his father, an oil speculator, the Hughes Tool Company which held the monopoly of producing drill bits for hard ground. Until recent years this company manufactured more than 75 per cent of the bits used for oil drilling in the capitalist countries. The net profit of the company rose from $1 million in 1924 to $3 million in 1939 and $29 million in 1956. Getting a big tribute from the oil operators Hughes already in the 1920s engaged in other fields: the cinema, aircraft manufacture and in the 1950s in the production of guided missiles and other military equipment.
Forced to sell his controlling stock in Trans-World Airways (in the 1960s) he netted $436 million. This brought his fortune from $500--600 million in the 1950s to around $1,400 million in 1968. Hughes is said to receive as a personal income only $50,000 (his salary as president of Hughes Tool). But any of his bills are immediately paid by his companies; he has at his disposal airplanes and so on. Hughes founded on ``philanthropic'' lines a medical institute bearing his name, to which he turned over $200 million worth of his stock and leased the equipment of one of his _-_-_
~^^1^^ Fortune, January 1953, p. 117; January I960, pp. 146, 148
^^2^^ O. Kllii.lt, op. cit, p. 55.
59 companies. Hughes appointed himself the sole trustee and manager of the institute. He fully utilises in his own interests the tax-exempt $1.5 million of dividends received annually by the institute.^^1^^Recently Hughes has concentrated on buying up hotels and casinos in Las Vegas and has chosen the gambling capital as the seat of his empire.
About 20 of the new multimillion fortunes have been amassed in various sectors of the manufacturing, construction and mining industries (not counting the oil and gas industries). These fortunes have been made in different ways. In some cases they are a result of the concentration of relatively small capital in swiftly growing industries and the full use of the mechanism of self-growth based on technical innovations. In other cases the personal fortune reflects the more energetic activity of the new millionaires in building up industrial empires.
The Olin brothers (John and Spencer) own now more than $100 million. The main part of their capital (about $80 million) is invested in stock of the Olin Mathieson Chemical Corporation, which grew from a small firm into one of the leading war chemical monopolies of the United States, chiefly as a result of World War II and the post-war arms race. Franklin Olin founded it at the end of last century. He died in 1951, leaving an estate of $50 million to which millions made by his sons were added. The subsequent stock-market boom doubled this sum.
Thomas J. Watson, Sr. founded a small office equipment company in 1914. Today it is a leading war electronic monopoly of the United States and a producer of automatic equipment. The Watsons became multimillionaires in the 1940s-50s. Two sons (Thomas John, Jr., and Arthur) owned $150 million worth of stock of International Business Machines at the beginning of 1962.
The enrichment of Sherman Fairchildis also partly associated with International Business Machines; his father, together with Thomas Watson, Sr., was one of its founders and big stockholders. The company stock he inherited is now worth more than $90 million. But now his main interests are in a different field. Fairchild has organised several small _-_-_
^^1^^ Fortune, January 1959, p. 80.
60 firms (optics, electronics, aircraft making) which exploit valuable inventions. The market value of the block of stock he holds in one of these companies (Fairchild Camera and Instruments) rose more than tenfold between 1957 and 1960 (from $2.8 million to $34.5 million); in another company (Fairchild Semi-Conductor Corporation) it grew by $20--30 mi