3 Technology

In the days of Adam Smith it was possible to measure the wealth of nations in terms of mineral resources, possession of fertile lands and control of strategic geographical areas. Today we have a new index to the wealth and security of nations. Technology and applied science have become principal instruments in the maintenance of a high standard of living and for the protection of national interests. In fact, when we speak of the balance of power in the modern world, we must take into account the extent and quality of industrial and technological resources as a dominant factor in national welfare. The horizons which have been opened by applied science and research offer to the world, and to our own nation in particular, new industries, greater opportunities for our youth, higher levels of health and comfort, and the attainment of that genuine social security which comes with all great advancements in human knowledge.

Technology—its direction, its applications, and its enjoyment—is today a primary concern of government. In a system based upon freedom of enterprise, access to technology is the fundamental condition of rapid advancement toward the goals for which our nation is striving. The power that goes with the development of modern technology has been perverted in totalitarian countries to provide instruments of aggression. Because totalitarian states have regimented science and have made it subservient to imperial ambitions, it has been used to destroy rather than to create. One of the principal problems which the United Nations will encounter in the peace to come will be the prevention of any abuse of new discoveries for the purpose of establishing war machines which can threaten the peace of the world.

The control of vital areas of research by monopolistic interests is a condition which cannot be tolerated. Monopoly control seeks to protect vested interests and to perpetuate its grip on the advancement of science and technology. It retards the introduction of new goods and services and the maintenance of full employment in time of peace. Our experiences in this war have demonstrated conclusively that monopolistic control of critical sectors of industrial research has a paralyzing effect on mobilization of our national strength. One of the most difficult problems we have encountered in arming this country has been the domination and restriction of technology by small privileged groups. It has required strenuous efforts on the part of government and industry alike to overcome the stifling effects of complacent monopoly.

With rare exceptions industrial research at the present time can only be carried on by large numbers of scientists and technicians combining their ingenuity to resolve the complex problems of both pure and applied science. In the last fifty years technology has moved at such a rapid pace that no longer is the small businessman in a position to maintain laboratories of sufficient size. Today we witness the gigantic research organizations of all major corporations, and no one desires to impair their efficiency.

There is, nevertheless, a gap between the promise of organized research conducted on a huge scale by great corporations and the fulfillment as measured by accomplishments for the public interest. So that there shall be no misunderstanding, I should like to pay tribute to the vast army of scientists and research workers who have done such remarkable work in the years of peace as well as in the years of war in bringing forth a multitude of amazing discoveries. It is not their fault that their contributions have not been fully realized. The trouble is that in many instances the misuse of research by monopolistic and cartelized groups has resulted in the restricting of production, withholding new products, and fencing in and blocking off new developments.

One of the ablest and clearest statements of the effect of restrictive arrangements upon research was made by Dr. F. B. Jewett, vice-president of the American Telephone & Telegraph, and chief of Bell Laboratories. In discussing an agreement between his company and other parties, he stated:

“Broadly speaking, the practical effect of the agreement is to limit the field of possible development of each party to its present major activities....

“Thus, while a casual reading of the agreement by one not thoroughly conversant with all the factors may appear to establish the basis for an enlarged free development in most of the fields, this is not actually the case.

“The far-reaching effect of the proposed agreement on the character and scope of our research and development work is apparent. Viewed both from the standpoint of the research worker in our laboratories and from the standpoint of those responsible for the expenditures incurred by the Laboratories, the inevitable result would be a narrowing of the field of activity and failure to undertake anything which at the outset is not clearly directed to the field of our current business. From the standpoint of the man who has a brilliant idea which in its first nebulous form seems to be applicable outside our business, there will be little or no urge to go ahead in the face of a situation where he knows that the results of his work have been sold in advance outside of the Bell System. From the standpoint of management there will likewise be no incentive, but quite the reverse, to urging him on and appropriating money for his investigations.”

A member of a monopoly or cartel group all too often finds itself in a position where it must choose between the national interest on the one hand and its cartel obligations on the other. This difficulty is accurately stated in a document taken from the Standard Oil Co. (N. J.) files with reference to the development of 100 octane gasoline, one of the most vital materials of modern warfare:

“This possibility is, of course, extremely attractive to the Army Air Corps, but there is one difficulty involved which Mr. Russell quite frankly discussed. The hydrogenation development originated in Germany, and through cooperation all around has now passed into the hands of the oil industry of the entire world, and, to a certain extent, into the hands of the foreign chemical industry as well. There is a full and free exchange of technical information between all of the companies and units involved in the hydrogenation development and this exchange is not only by means of reports but by constant visits of technical men. To cut off these reports and shut our hydrogenation plants against these visitors would be not only a violation of these agreements, which would involve us in many difficulties, but would also be tantamount to a confession that we were engaged in some work of special military value which would mean that the plants would become a focal point for espionage. The costs and difficulties of protecting against leakage of information about large commercial operations under such conditions is hard to estimate. It seems that the only practical way to handle this problem is to avoid carrying out the operation of producing 100 octane number aviation gasoline commercially as long as possible. We would, of course, also have to breach our agreements to render full and complete technical reports to all of the companies associated with us (even to the American companies, for fear of leakage). We should also forfeit the advantage in producing at the least cost the best available gasoline for commercial purposes.

“Any program by which the Army Air Corps can obtain their objective of a one or two year start over the rest of the world on this vital matter bristles with difficulties and sacrifices from our standpoint. We will not have to cross the bridge finally until our present experiments are completed. When and if we are able to demonstrate that the hydrogenation plants are capable of turning out an aviation product which with the usual quantity of lead can be brought up to 100 octane number, we shall be faced with the situation mentioned above. To meet the very proper desires of the Air Corps as expressed to us we shall have to violate our agreements and perhaps forfeit the confidence of our associates, both American and foreign, and beyond this we shall either have to avoid any commercial use of the new method or run the very grave risk of finding that our efforts at secrecy have been abortive.”

In pointing out the inevitable conflicts between national loyalties and business interests which arise when industry is carried on through private international cartel agreements, I do not attack, nor do I intend to cast inferences against, the patriotic motives of any men or companies. I assume that the persons who have taken part in these transactions have not consciously acted against the best interests of their country. But it is the cartel system that is at fault. The individuals caught up in the system are faced with a dilemma because it imposes on them choices which it is almost impossible to make without violation of an obligation to one of two conflicting interests.

One of the most serious limitations upon research has been the division of fields of technology by cartel groups. If a company is barred by agreement from an aspect of technology, there is little if any incentive to do research in that field. One possible consequence of such division of technology is that it permits foreign interests to exercise influence amounting to domination over research in this country.

No one doubts that synthetic rubber is a matter of national interest. The cartel arrangement between Standard Oil Co. (N. J.) and I. G. Farbenindustrie was such that the latter dominated the development of synthetic rubber in this country as well as in Germany.

In the case of the Bausch & Lomb (Rochester)-Carl Zeiss (Jena, Germany) cartel on military optical glass, the heads of the Bausch & Lomb department responsible for military research were to be appointed only with the agreement of the Zeiss firm.

In regard to the cartel involving Plexiglass, probably one of the most important plastics, and one which has innumerable military uses, the Rohm & Haas Company (Philadelphia) stated: “We could think of a price agreement on the finished product, or a division of our interests ... we have not only our own interests at stake, but also the ones of our German house [Rohm & Haas of Darmstadt, Germany] and the I. G.”

In December 1934 a high official of the duPont Company wrote to E. W. Webb, president of the Ethyl Gasoline Corporation (copies were sent to every member of its Board of Directors) as follows:

“I learned through our Organic Chemicals Division today that the Ethyl Gasoline Corporation has in mind forming a German company with the I. G. to manufacture Ethyl lead in that country.

“I have just had two weeks in Washington, no inconsiderable part of which was devoted to criticising the interchanging with foreign companies of chemical knowledge which might have a military value. Such giving of information by an industrial company might have the gravest repercussions on it. The Ethyl Gasoline Corporation would be no exception, in fact, would probably be singled out for special attack because of the ownership of its stock.

“It would seem, on the face of it, that the quantity of Ethyl lead used for commercial purposes in Germany would be too small to go after. It has been claimed that Germany is secretly arming. Ethyl lead would doubtless be a valuable aid to military aeroplanes.

“I am writing you this to say that in my opinion under no conditions should you or the Board of Directors of the Ethyl Gasoline Corporation disclose any secrets or ‘know how’ in connection with the manufacture of tetra-ethyl lead to Germany.”

Yet, in the face of this warning from duPont, on January 12, 1935, Webb wrote the Chief of the Army Air Corps that “There is no technical data of military importance known to us which would be involved in the building of such a plant that has not already received wide publicity, or is of common knowledge in the aviation field.”

This statement strikingly ignores the warning received from duPont only one month earlier that such a disclosure would “doubtless” be prejudicial to our national security. In this connection it should not be overlooked that duPont and Dow were the sole producers of the chemical components of tetraethyl lead and, as such, were the concerns which alone possessed the essential know-how.

Why did Ethyl Gasoline disregard duPont’s warning? Webb himself has supplied the answer in the final paragraph of his letter of January 12, 1935:

“There is, furthermore, an equally, if not more, important business aspect to the German situation. We are owned by Standard Oil and General Motors in equal shares. General Motors has important investments in Germany, producing there in excess of 50 percent of the motor cars. Standard Oil has large investments in all phases of the petroleum business in Germany.... We feel ... for the reasons specifically mentioned here, that it would be extremely unfortunate for all concerned if we do not proceed to carry out the agreement with I. G.... A refusal or undue delay on our part ... might bring on some serious reprisal measures.”

This leaves nothing for surmise. It is not unfair to conclude, in view of these facts, that for the directors of Ethyl Gasoline the preservation of I. G. good-will conflicted with the maintenance of good faith in dealings with their own government. Though duPont, from the beginning, was opposed to the entire deal on grounds of patriotic scruples, nevertheless it eventually deferred. In an inter-office memo of the duPont Company appears the following:

“I think we should tell I.C.I. that the technical and engineering information which we are giving I. G. in connection with Tetraethyl Lead is being given them entirely at the request of the Ethyl Gasoline Corporation. As they no doubt know, Ethyl Gas and I. G. set up some arrangements whereby they are going to participate jointly in the manufacture and sale of Ethyl Lead in Germany and we are turning over our information to Ethyl Gas which they in turn can submit to I. G. as part of the bargain in connection with this joint enterprise.”

The full extent of the dilemma in which cartel members are placed by the conflict of their cartel commitments with national interest is indicated in two statements made by a representative of one of the world’s great industrial combines. In a letter written in 1939, after the outbreak of war, a Standard Oil official stated:

“Pursuant to these arrangements I was able to keep my appointments in Holland, where I had three days of discussion with the representatives of the I. G. They delivered to me assignments of some 2,000 foreign patents and we did our best to work out complete plans for a modus vivendi which would operate through the term of the war, whether or not the U. S. came in. All of the arrangements could not be completed, but it is hoped that enough has been done to permit closing the most important uncompleted points by cable. It is difficult to visualize as yet just how successful we shall be in maintaining our relations through this period without personal contacts.”

It is of significance also that this same representative of a cartel group brilliantly expressed the cartel point of view when he said:

“Upon completion of that agreement, the war intervened because our grouping of interested parties included Americans, British, Dutch, Germans, and the war introduced quite a number of complications. How we are going to make these belligerent parties lie down in the same bed isn’t quite clear as yet. We are now addressing ourselves to that phase of the problem and I hope we will find some solution. Technology has to carry on—war or no war—so we must find some solution to these last problems.”

It is in their very nature that cartels restrict the fullest developments of new products and that they attempt to place rigid handicaps on output. Very often they even adulterate the quality of products in order to exact the greatest possible toll from the public. Several examples may be used to indicate the practices and mental attitude of monopoly groups in relation to the quality of material. The following quotation concerning flashlight bulbs speaks for itself:

“Two or three years ago we proposed a reduction in the life of flashlight lamps from the old basis on which one lamp was supposed to outlast three batteries, to a point where the life of the lamp and the life of the battery under service conditions would be approximately equal. Sometime ago, the battery manufacturers went part way with us on this and accepted lamps of two battery lives instead of three. This has worked out very satisfactorily.

“We have been continuing our studies and efforts to bring about the use of one battery life lamps. I think you will be interested in the attached analysis which Messrs. Prideaux and Egeler have worked up covering the various points involved in going to the one battery life basis. If this were done, we estimate that it would result in increasing our flashlight business approximately 60 per cent. We can see no logical reason either from our standpoint or that of the battery manufacturer why such a change should not be made at this time.

“Messrs. Parker and Johnson now have this matter up with the battery manufacturers and I would urge that every assistance be given them to put it over.”

Methyl methacrylate, the name of one of the best known plastics, is used not only in the industrial field to make airplane windshielding and many other structural materials, but it also has excellent qualities for the making of dental plates or dentures. As a result of the monopoly control of this material by the duPont Company and Rohm & Haas, its uses were divided into two fields: industrial and dental. At the time these firms were indicted a sharp difference in price was maintained. When methyl methacrylate was sold for industrial purposes, it cost 85 cents a pound, while the price to dental users was $45 a pound. The dental profession soon learned that there was no difference in the material, whether it was designed for industrial or dental use. As a result they began to purchase their requirements from industrial users, in order to gain the advantage of the cheaper industrial price which, we could assume, might possibly be passed on to the dental patient.

The monopoly clique considered this a form of bootlegging. On March 15, 1940, the Vernon-Benshoff Company (Pittsburgh), a member of the clique, made various suggestions to the Rohm and Haas Company which, although they were not placed in actual effect, offer valuable insight into the shocking extremes to which monopolists will consider going:

“Our discussion of the Pure Food and Drug Law and pulling the acrylic denture under it leads me to wonder if the manufacturers of the commercial molding powders might not add an ingredient which would not effect the molding properties, but which would disqualify it under the act. Apparently a slight trace would suffice. Naturally it would be omitted from the strictly denture powder.

“Recently I asked Dr. Johnson to suggest an addition which might interfere with distillation of monomer or retard polymerization. He could not think of anything that wouldn’t spoil the molding properties or clarity of the powders. But there the quantity needed to accomplish the result was the handicap.

“Under the very finicky regulations of the above act however, it may be the slightest trace of the right agent, too little to constitute harm to molding (or health either as a matter of fact) would suffice to have bootleg products in bad.

“A millionth of one per cent of arsenic or lead might cause them to confiscate every bootleg unit in the country. There ought to be a trace of something that would make them rear up.”

In its reply the Rohm & Haas Company said that it was in agreement with the general principles presented in the letter quoted above and that it would ask its research department to work on the matter. This was expressed in a letter of March 21, 1940 to the Vernon-Benshoff firm:

“With reference to your letter of March 15th, we shall be glad to investigate whether denture materials come under the Pure Food and Drug Act. We agree with you that if we could put some ingredient in our commercial molding material which would disqualify it under the Pure Food and Drug Act, this would be a very fine method of controlling the bootleg situation. We shall take this matter up with our development department and advise you whether any such material could be used.”

A striking way in which research can be perverted is illustrated by another example. The dyestuffs industry is one which is basically monopolistic and cartelized. A tight grip is maintained over its price structure. This is especially true of dyestuffs for textiles. Recently the duPont Company’s research laboratories developed a pigment which can be utilized either in paints or as a dye for textiles. The duPont research laboratories considered various ways to be sure that the pigment could be limited in use to the paint and finishing field so as not to disturb the price structure of the textile dyestuffs field. The trend of duPont’s research thought on this subject was stated by the director of one of its laboratories:

“Further work may be necessary on adding contaminants to ‘Monastral’ colors to make them unsatisfactory on textiles but satisfactory for paints.”

After working on this problem for some time, duPont’s Jackson Laboratory reported on its progress somewhat dolefully. (DuPont says of Jackson Laboratory that it is “one of the largest organic chemical research laboratories in the world.”) The particular task involved was difficult, according to a report by the Jackson Laboratory dated June 26, 1940:

“Mr. Chantler was of the opinion that pigment mixtures, unsuitable for textile printing would be very difficult to obtain.

“(B) Agents Injurious to Textile Printing.—The suggestion was made that certain compounds that were white under ordinary conditions but that would be oxidized to give colored bodies when the prints are subjected to chlorine bleach, could be used. A few experiments had been made along this line using such compounds as Chlorostain N, dianisidine and DuPont Oxy Black Base. Complete data on this work are not available. Mr. Dahlen expressed the opinion that the addition of such compounds probably would cause as much or more damage to the paint trade as to textile printing.

“Such substances as ground glass and carborundum were suggested for incorporation with the pigment. While these materials would undoubtedly scratch printing rolls, there is considerable doubt as to their effect in paints and lacquers.”

Two days later the problem was again attacked at a meeting between the representatives of General Aniline Works and the duPont Company. Eight possible methods of adulteration were considered. I quote a few from the confidential memorandum of their discussion:

“1. A new type of copper phthalocyanine (CPC) for the paint and lacquer trade which would be unsuitable for application textiles.

“The importance of solving these problems was recognized, and it was agreed that both parties would work on promising ideas which resulted from this discussion. The three problems are closely related, and it is possible that the solution of one or two will automatically solve the third. It was agreed that a powder would be the preferable standard. After detailed discussion of various modes of attack, the following appeared to be outstanding:

“1. (a) Mixtures of CPC with Lakes.—The most promising mode of attack appears to lie in the formulation of a mixture of CPC with a lake, especially a lake of CPC. Such a mixture should have fairly good fastness to light and yet be poor in wash fastness on textiles or incompatible with the usual textile printing lacquers....

“(d) Deteriorate Cotton.—Compounds might be incorporated into CPC which when applied to textiles and followed by bleaching or heating treatment might increase the deterioration of the cloth. Compounds such as chlorates or aliphatic halides which would produce hydrochloric acid were specific examples.

“(g) Irritating Substances.—It is known that certain resins and solvents are irritating to the skin, often causing dermatitis. It might be possible to formulate a CPC composition which will make textile materials irritating to the skin.

“(h) Incorporation of Grit.—It seemed too dangerous to attempt to add gritty material to CPC since, although it would interfere with the use of the material for textiles, it would also offer serious disadvantages in grinding on application of surface coatings.

“It was agreed that the mere dulling of the material would not be a satisfactory solution since dull shades are often used in the textile trade. Most of the above comments are often based on work on blue, and many of the solutions would apply equally well to the green. In fact it is believed that there is a larger market for the sale of green than the blue.”

It seems to me that we cannot afford to place our sole reliance upon monopolistic corporations whose interests have only too often been divided, who have sought restricted production rather than full employment of our resources and labor, and who have sought for monopoly control rather than public welfare. We must learn by the bitter lessons of the early years of this war which found us lacking both materials and the know-how to make them, resulting from the restrictive practices of monopolies which instinctively seek to produce as little as possible for the greatest profit.

In war and peace alike technology is a vital factor in our national life. The present war is being waged with weapons and equipment which represent the last word in scientific development. Careful planning and rigorous adherence to the plans enabled Germany to have, in 1939, the most efficient war machine the world had ever seen. Now, after several years of feverish activity, the United Nations have at last caught up with and passed Germany in the race for armament superiority.

Now that our war effort has finally been put in high gear an entirely different kind of problem seems to be emerging. Under the forced draft of war urgency and unlimited government expenditure, materials and products are being made the like of which we have not heretofore known. The light metals, aluminum and magnesium, the wonder metal beryllium, the miraculously efficient diamond tools and the tungsten carbide tools, the plastics and dozens of other new developments will unquestionably make the postwar world something entirely different from that to which we have been accustomed. Many of the processes which can revolutionize our mode of living are owned by the government. Some are in the custody of the Alien Property Custodian. Others have been developed with federal funds, either by government agencies or by private concerns. No one will seriously dispute the wisdom of retaining control of these government-owned processes and of fostering the fullest possible use of them for the benefit of all.

There can be no denying that the war has resulted in a concentration of productive facilities in the hands of a relatively small number of gigantic corporations. Even before Pearl Harbor some of them were enormous concerns capable of wielding irresistible power in the competitive struggle with other, smaller companies. Today and after the war the smaller competitors which have survived will find the odds against them a great deal more disheartening than before. It is not in the public interest to allow the small competitors to be killed off in the uneven fight. Neither is it in the public interest to place hampering restrictions upon the effects of the large companies to fully utilize their research laboratories and technical experience for the purpose of strengthening their competitive position.

Without doubt the sensible thing for us to do is to make research and technology available to the little fellow as well as to his big competitor. In agriculture this policy has amply demonstrated its soundness. Experiment stations financed by state and federal funds extend the benefits of their research to the small farmer as well as to the large. It is doubtful that one could find a single intelligent farm operator, large or small, who would voice the opinion that governmentally financed agricultural research has not been worth many times the money spent for it. The small industrialist has the same right to expect that a government wishing him to continue to make his contribution to the national welfare shall offer him those benefits of research and expert advice which he cannot afford to provide for himself but which can easily be provided by the government.

There are those who scoff at all mention of cartels and refer to them as bogies conjured up to justify an attack on all big business. Such an attitude is dangerous. Cartels present the greatest challenge to our system of free enterprise.

In every cartel arrangement which has come to the attention of the Antitrust Division of the Department of Justice technology has been a vital factor. It is the responsibility of government to see that technology remains free from artificial control and monopoly perversion.

Every instance of this sort is evidence of the possibility of service to the public which might be expected if the government should see fit to provide itself with an adequately financed and numerically sufficient staff of technologists. It is my belief that the time has arrived for the adoption of legislation which will adequately protect and advance the public interest in technological development.