Part 2 — Chapter V SECRET HISTORY OF A CARTEL

The story begins in the 1840’s with the formation of the great modern news agencies in obedience to the click of the telegraph key. At that time, Great Britain dominated the world. France, a powerful state, was nevertheless a link in the British system. Germany had not yet fully emerged as a modern industrial power. Russia, ruling a sprawling empire, was herself, in a sense, something of a political and economic “colony” of the more advanced European states. The Far East was one huge, thinly-disguised sphere for European exploitation, too, with Britain hogging the lion’s share. The United States, in addition to exercising little influence in world affairs, lacked the immediate facilities for world news competition: Great Britain controlled almost all cable and other communications.

Under these conditions, there arose what Kent Cooper justly terms “the greatest and most powerful international monopoly of the 19th Century,” the world news cartel. Considering that A.P. voluntarily participated in it, Cooper’s highly moral tone is strange. It is true, nevertheless, that the agencies “brought under their control the power to decide what the people of each nation would be allowed to know of the people of other nations and in what shade of meaning the news was to be presented.”

* * * * *

Summarizing the situation, the A.P. boss continues:

For long years Reuters, acceptably to Havas and Wolff, had divided the globe among the three according to Reuters’ idea of proper spheres of influence for each.... Reuters received English-speaking North America, in which since 1893 the A.P. had bought exclusive territorial rights.

For long years Reuters, acceptably to Havas and Wolff, was granted a free hand in Canada. Later this free hand was extended to include Mexico, Central America and the West Indies where Reuters and Havas held the sovereign rights. The two, however, admitted no control whatever to Wolff, the German Agency, in the Western Hemisphere. Reuters had Great Britain, including all the colonies and dominions, Egypt, Turkey, Japan, China and what might be called the suzerain states, or those in which England had exerted a sphere of influence.

Havas [since succeeded by France-Presse] controlled the French Empire, Switzerland and all the Latin countries, including Italy, Spain, Portugal and those in South America. [Also the Balkans.]

To Wolff [later D.N.B. or the Deutsches Nachtrichten Buro] fell the Scandinavian states, with Russia and all the Slav nations. Austria also came under the jurisdiction of the German agency.

A Conflict Is Born

Reuters used its control frankly in the interest of the British Empire and of British business interests. Havas and Reuters combined to carry stories that would tend to ridicule American manufactures and America, but they refrained from such handling of Britain and France respectively. All over the world, news from America was top-heavy with Indians on the warpath, lynchings in the South, bizarre crimes in the North. Havas headed off American business competition with France in South America—a Havas exclusive territory—by stories belittling U.S. automobiles and other products. (Very reminiscent, one may note, of the American news industry’s deliberate belittling of Soviet industrial products and skills and planning, propaganda that misled even our highest authorities prior to Stalingrad.)

Anglo-French ridicule was gall and wormwood to American Big Business as it moved more and more into competition for world markets, world influence and world power. It was more immediately vexing to Associated Press but A.P. never went outside the gentlemanly bounds of the conspiracy. It used the cartel as a club to beat back United Press and other would-be rivals at home.

Nevertheless, an ultimate conflict between A.P. and Reuters was inevitable. The United States was building up industrial might and developing resources to overtake and pass Great Britain in the race for world power. This was somewhat obscured, for the general observer, by the rather more aggressive challenge of Germany. Germany, too, had built up a modern industrial productive apparatus far greater than that of Britain. It found the world already divided. Markets, raw materials, the slave labor of colonies and their investment opportunities, had been “parcelled out” among Britain, France and their satellites: Holland, Belgium, Portugal. British and French guns were levelled against any suggestion of sharing the plunder with the newcomers. So German imperialism levelled its guns, too, and World War I was on.

Peak of Reuter’s Power

With Britain and France and Germany engaged in worldwide warfare while the United States (until 1917) stood on the sidelines, Reuters, Havas and Wolff were severely handicapped. Even under peacetime conditions they could not compete with the American agencies on a commodity-news basis. Their official or semi-official character restricted their freedom of action and of judgment. The moment something really important happened in Europe, they would hesitate, under official pressure. For example, when the Nazis murdered Austrian Premier Dollfuss, Havas sent nothing for hours while the Quai d’Orsay debated how French-controlled areas should be informed of this event, how it should be interpreted. The “officialese” in which such events were reported sometimes achieved peaks of silliness. A dispatch to New York from Havas bureau in Beirut, Syria, in 1934, said:

French governor visited hinterland first time since elections. On every hand he was greeted with enthusiasm by populace which thanked him for all France had done to relieve food crisis. Extremists threw a few bombs but vigorous police measures reassured people.

Reuters was no less one-sided in its devotion to British interests, and the national agencies of the smaller States were doubly handicapped. On the one hand they were mere creatures of Reuters-Havas; on the other, they were bound out to the service of their own State. The mere listing of the national agencies dancing to the Reuters-Havas tune establishes the political significance of the cartel. They were: Amtliche Nachrichtenstelle, Austria; Agence Telegraphique Belge, Belgium; Agence Telegraphique Bulgars, Bulgaria; Bureau de Presse, Czechoslovakia; Ritzaus Bureau, Denmark; Agence Telegraphique Esthonienne, Esthonia; Finska Notisbyran, Finland; Athena, Greece; Nederlandsch Telegraaf Agentschap, Holland; Agence Telegraphique Lettone, Latvia; Agence Telegraphique Hongroise, Hungary; Stefani, Italy; Kokusai, Japan; Avola, Yugoslavia; Agence Telegraphique Lithuanienne, Lithuania; Norsk Telegram-Bureau, Norway; Agence Telegraphique Polonaise, Poland; Rador, Rumania; Rosta, Russia; Fabra, Spain; Tidningarnas Telegrambyra, Sweden; Agence Telegraphique Suisse, Switzerland; Anatolie, Turkey.

These agencies were financially controlled by Reuters-Havas-Wolff, but they could not have been independent even if there were no financial control. In the first place, the cables were British and aside from direct restrictions imposed by Great Britain on users of the cable, manipulation of rates could determine the profit or bankruptcy of a stubborn agency. On top of that, Havas and the smaller agencies were not only news but also advertising agencies, monopolistic ones. Newspapers, in Europe and Asia alike, got Reuters-Havas news service free—in effect, and they had to use it if they wanted the advertising by which they lived.

This dominating position gave the European agencies a haughty and clumsy attitude toward transmission of news. They could delay or garble the most important events. It also gave them no incentive to technical advance. Havas was still using the stylus instead of the typewriter in the 1920’s. So long as and wherever Britain and France remained the ruling powers, the agencies could get away with it. But wherever and whenever some other power could challenge Anglo-French rule, a challenge to the news agencies would follow. South America was the “where” and World War I was the “when.”

Conquest of South America

Havas was boss of South America according to the cartel contract. As soon as World War I started, therefore, Havas decided exactly what South Americans could be permitted to learn about the war. It goes without saying that only the Allied side was to be reported. But such was the inflexibility of the official agencies, that Havas was unwilling to transmit even the German war communique when asked to do so by leading South American papers. It could not unbend that much to head off the obvious danger of losing South America to some American rival agency.

This was A.P.’s great opportunity, but the agency was fearful of losing the advantages of cartel membership if it made a bid for South America. Manager Melville Stone considered that the cartel might oust A.P. and admit the newer United Press to membership. Accordingly, he left unanswered a request by La Nacion of Buenos Aires, one of the world’s leading newspapers, for A.P. service.

New pressures, however, were at work. Within A.P., Kent Cooper, then only Traffic Manager, learned for the first time of the cartel and of A.P.’s humiliatingly inferior position in it. He began what he likes to call his “great crusade,” by which he means a thirty-year fight to substitute American for British news domination of the world. From outside the agency came insistent demands by the government for aid in advancing national policy. The State Department made a crude subsidy offer with the aim of bribing the South American press. Stone later wrote:

The State Department asked me to employ the editors of almost every leading paper in South America on handsome salaries as correspondents of A.P. ... whether they sent us news or not ... and the government would recoup us for anything we paid.... They want something more than a mere news report.... They want some sort of illuminating service from the United States to indicate that this country is not money-grabbing or territory-grabbing.

Incidentally, a similar proposal was made for the Far East. A.P. rejected the proposals. Moreover, “government propaganda” was one important reason. Moreover, “government propaganda” organizations were regarded as inadequate and unstable instruments for conquering news control. A.P. felt the government interest, for one thing, was not likely to survive the war. Even more important was the fact that the American news industry has always heavily exploited its alleged “independence of direct government ties” as proof of its non-partisan character.

But far from refusing all forms of subsidy, the news industry fought for and obtained aid in the form of “practical rates for news transmission; rates attractive enough to encourage the export of news from the U.S.” The government had for some years encouraged the laying of new American-owned cables. Now, at the “behest of the State Department,” the American-owned cable company gave lower rates to American clients than to Havas, for news to South America. American news went to South America after all, therefore, on behalf of the State Department.

A.P.’s conservatism might well have cost it the chance to seize South America. But United Press, unhampered by cartel obligations, started operations there. That shook A.P.’s complacency. Cooper insisted that the cartel give A.P. full freedom to operate in South America. Stone said: “Go ahead and advocate as much liberty as possible, but don’t do anything to bring a break between the A.P. and our European news agency allies.” There was, however, no serious resistance. Reuters told Havas to agree or else. Havas yielded.

Redividing the World

World War I was fought for the redivision of the world among the existing imperialist powers. Germany lost her colonies and the German Republic was reduced to the role of a vassal state serving the American-Anglo-French victors. This situation was duly reflected within the news cartel where Wolff lost territory and was permitted to serve only Germany itself.

A.P. scrambled clumsily for a share in the spoils. Cooper hurried to Versailles to ask the U.S. treaty delegation to fight for A.P. parity with Reuters and Havas. This was to be expressed in the form of a “free press” clause in the peace treaty. President Wilson’s right-hand man, Colonel House, very sympathetic to the American news monopoly’s desires, agreed to sound out the possibilities. He reported, in a few days, that the question had been “taken care of privately” and he could do nothing.

How it was “taken care of,” Cooper reports with great indignation. His account, coming as it does from a member of the gang—a disgruntled member but still one of the boys—is of great authority. It is necessary only to warn that, writing in 1942, he showed no great anti-Nazi fervor and discreetly dodged the ticklish problem of the Soviet Union. He does not mention the great cordon sanitaire—the strangling “safety belt”—set up around the new Socialist State after World War I, but is full of pity for Germany.

Cooper says he learned that a cartel meeting had been held in which the heads of Havas and Reuters had conferred alone while Dr. Heinrich Mantler, head of the Wolff Agency, was left to smoulder in an anteroom. When Reuters-Havas had decided the redivision of the globe, Mantler was called in and told the bad news.

Reuters and Havas, matching the political terms of the Versailles Treaty, built their own news agency cordon sanitaire around Germany. All the political states bordering on Germany were allowed to have only news agencies owned or controlled by either Reuters or Havas or both. In other words, the position of the news agencies in those border countries was harmonious with the determination of England and France to keep Germany hemmed in by little nations mostly pro-Ally, such as Finland, Sweden, Norway, Denmark, Holland, Belgium, Switzerland, Austria, Czechoslovakia and Poland.

A borderline area was the Saar Valley, the Palatinate and Rhenish Prussia. The French Government wanted that for Havas. Reuters was neither wholly unwilling nor enthusiastic, because Britain wanted a moderately strong Germany to act as a check on France. Finally, and subject to the Saar Plebiscite 15 years later, “they made a compromise by which Wolff Agency might serve there, but a copy of Wolff service should go to the Havas Agency, and if it was not satisfactory Wolff could be removed from there.”

The victors were not averse to tearing slices of territory from one another, either, so within the winning combination some changes were made. Havas retained the bulk of the Balkans, but Greece and Turkey passed “into Reuters’ [Britain’s] sphere of influence.”

Battle for Asia

A.P. remained a stepchild during all this time. It obtained a free hand in South America, as already related. But in general, just as Great Britain was slow to recognize and acknowledge the unmistakably superior position of the rival American imperialism, so Reuters took a haughty tone toward A.P. requests for adjustments in their relations. Outside the cartel, accordingly, A.P. built up positions and alliances for an ultimate showdown. Inside A.P., Kent Cooper gathered allies for his more aggressive program against the still dominant go-slow policy of Melville Stone.

While Britain was deeply involved in World War I, the U.S. greatly extended the American communications network. Monopoly in communications was deliberately fostered to “advance the national interests.” This process, begun during World War I and continued through World War II, is described in the previously-cited Report on Freedom of the Press.B As this study is financed by a Time magazine grant and has semi-governmental, semi-official news industry standing, it is not critical of imperialist expansion. All the more weight must be attached to its admission that State and industry are one in communications and news-export.

These new government-fostered monopolies now played an important part in the forward march of American news. Though A.P. had refused to do a propaganda-job under government control, it was not at all reluctant to let the government pay for A.P.’s expansion. This is what happened:

The Far East was the scene of the first open clash with Reuters. Reuters’ absolute domination of world news produced some peculiar effects on American-Oriental information exchange. West Coast publishers, led by Hearst, were frantic about the situation. Cooper’s first ally within A.P. was V. J. McClatchy, California publisher who reflected the violent anti-British, anti-Japanese policies of Hearst. McClatchy, in turn, won the support of Adolph Ochs, publisher of the most powerful newspaper in America—the New York Times. A.P. was now consciously but cautiously working toward an ultimate showdown with Reuters.

McClatchy went to Washington in 1919 to seek Congressional aid. When he told Congress about the news aspects of American imperialism’s secret struggle in the Orient, the legislators were indignant. Reuters, it was demonstrated, mangled all American news printed in Japan, China and the Far East as a whole. Even news between the U.S. and the Philippine Islands had to go by way of London for British profit and British editorial slant.

Japan was the key news country in the Far East. Until 1914, the country had no news agency of its own. Reuters not only controlled the import and export of news but had the direct internal monopoly as well. Japan had to pay Reuters what amounted to an annual subsidy, after 1914, to get out of Japan and let the Japanese form a news agency, Kokusai, which got all its non-Japanese news from Reuters. The American news report for Far East distribution was now circulated by Kokusai; Reuters-Havas Far East news to the U. S. was transmitted via Kokusai. It amounted to an Anglo-Japanese alliance against the U. S. The garbling of news that resulted was beyond imagination; British bias strained through Japanese culture and policy!

Congress ordered the U. S. Navy to put its radio circuits at the disposal of the agencies. The order specified rates that were, in effect, a subsidy to permit the agencies to compete with Reuters. Again, it was U.P. that moved first. A new Japanese agency, Nippon Dempo, was set up and it used the U.P. “report.” Later, Nippon Shimbun Rengo was formed to replace Kokusai. Rengo constantly sought A.P. service, but the cartel would not consent. On the whole, British control of Far Eastern news remained unimpaired.

This was the situation in 1925 when Kent Cooper became General Manager of A.P. In 1927, Cooper went to Europe to negotiate a new “treaty” with Reuters, Havas and Wolff. He wanted A.P.’s gains since 1893—the rights acquired in South America, for instance—put in writing. He especially wanted the cartel to admit A.P. to Japan on the plea that other American agencies were there and were serving the home market with non-cartel news.

As Cooper put it, he wanted a new contract primarily in the interest of plain-speaking. He said: “It seemed to me that if the A.P. wanted to be in on a division of the world as between the other three agencies the contract should specify what territories were allotted to each.” The new contract did exactly that. Without the shadow of double-talk, it stated: “Reuters shall have the exclusive exploitation of the following territories....” The British and Dutch Empires and most of the Far East were included in these territories. Havas had “exclusive exploitation” of Italy, Spain, Portugal and the Balkans as well as the French Empire. Associated Press had “exclusive exploitation” of North America and shared South America with Havas.

Now that is plain enough even for me, a disillusioned newspaperman weary of piffle about “freedom of the press.” That is straight business talk as among “legitimate” monopolists. It is, in short, a cartel agreement for the division of the world market in news. But there is a sequel to the story. When Cooper returned from Europe with his new contract, A.P. Board members were horrified by the word “exploitation.” Cooper explains their squeamishness by saying that “the word has taken on a stigma in the United States which it does not have in Europe.” An evasive word was substituted and the contract was approved. “Exploitation” disappeared but the cartel reality remained.C

With respect to Japan, the head of Reuters, Sir Roderick Jones, made a verbal agreement to permit A.P. dealings with Rengo. He could not put it in writing, he said, because it would be a loss of face to Reuters (that is, to the British Empire). Neither side had any intention of yielding to the other, in practice. Power would tell, they knew, and force would decide the issue.

The Showdown

They differed in their estimates of power distribution. The relationship of forces had vastly changed since 1893. The United States had been slow to enter world competition because it was busy with internal development. But the delay actually improved its chances, for when it finally laid down a claim for world position, it did so on the basis of an incomparable home market. In the commodity-news industry this was strikingly clear. At a meeting of the A.P. Board of Directors, Chicago Tribune publisher McCormick once offered some estimates in this connection. The estimates were so impressive that Cooper got him to repeat his statement for the benefit of any directors who had missed the import. Said McCormick:

We are pretty much the most important country in the world and much the richest country in the world, and in comparing America with other foreign countries the press stands probably higher in America than any other institution. I think it is a pretty good guess that American newspapers print and supply two-thirds of all the world’s news, and I think that the revenue of all the American newspapers is probably three-fourths of all the revenue of the newspapers of the world.

It was on the strength of this tremendously favorable competitive position that A.P. laid down the gauntlet to Reuters in 1932. It demanded “free competition.” Meaning that Japan, for instance, must be free to switch from Reuters to A.P. service. All American monopolies tend to demand “free competition” because they are now in a position to strangle their isolated competitors. Nourished by a huge home market built up with plenty of government aid, they no longer need direct subsidy and want to establish a no-subsidy rule for younger and weaker national news industries. The newspaper industry is in an even stronger position than chemicals, steel and other monopolies. In no other country has news-publishing grown into a business of comparable size and power. In no other country does the newspaper business stand so near the top in the list of Big Businesses.

A.P. understood this very well. Reuters misunderstood it badly. For years it held out stoutly against A.P.’s right—verbally admitted but never put in writing—to operate in Japan. Jones was confident that A.P. would never risk a break with Reuters; he counted on the threat that Reuters would take U.P. into the cartel if A.P. walked out. Cooper deliberately led Jones into a trap, pretending eagerness to maintain the alliance but needling him at all points.

“While I wondered how long it would be before this bubble of Reuters world domination would burst, I was willing for Sir Roderick to blow his own bubble so big that it would burst through his own exertion but I would not puncture it myself,” Cooper gloats.

It burst in 1934. Carrying his pretense of humility and loyalty to the uttermost limits, Cooper travelled from Japan to London to explain to Sir Roderick that A.P.’s activities in Japan were within the meaning of the contract. Pretending to mollify Jones, he encouraged him to think that his own actions were due to weakness either of A.P. or of his position within A.P. Accordingly, Jones refused to sanction the A.P.-Rengo deal. He announced that the cartel agreement must be renewed on the old terms or Reuters would allow it to lapse.

Reuters had fallen into a trap. Not only A.P., but the American news monopoly as a whole was determined to humble the British. United Press joined A.P. in an agreement establishing between themselves the principle of “non-exclusive access to foreign news at its source.” This meant that U.P. would not agree to replace A.P. in the European cartel. So A.P. blandly notified Reuters that it “agreed” to let the “alliance” lapse.

This announcement exploded with bomb-force in London. Sir Roderick’s house of cards collapsed. Reuters was through as the news dictator of the world and A.P. was king. Within a few hours Reuters, recognizing what it had long failed to see, offered to capitulate. Jones hurried to New York, begging for an audience. He was forced to humiliate himself enough to satisfy Cooper who had been waiting years for that triumph. Then the “alliance” was renewed—on A.P.’s terms.

World Conquest

American news domination of the world was now assured. The “non-exclusive” principle did not in the least destroy the cartel; it merely made the cartel an instrument of American policy. The old system of recognizing political controls remained to some extent, in that Reuters, for instance, retained the dominions and protectorates as partially privileged territory. But a new system became the dominant one. The new system opened territories once dominated by Britain, France and Germany, to American news penetration, just as the basic industrial-military potential of the United States was beating the way for American political-economic penetration into those sacred preserves. The “non-exclusive” principle governed the new contract. The term sounds very lofty and moral. It seems to mean that A.P. and Reuters would compete everywhere on equal terms and let the better man win. Not only that, but A.P.’s American rivals would have the same chance.

Alas, it meant nothing of the sort. The principle merely established a new kind of monopoly in which political intervention of the State on behalf of the monopoly no longer was so blatant. Competition was still sharply restricted—not by cartel agreement but by economic pressure. A.P. informed Reuters for instance, that the British agency was absolutely free to deal with U.P. The new contract guaranteed that and so did A.P.’s agreement with U.P. But, said A.P., if Reuters chose to exercise that freedom, A.P. would choose to deal with Reuters’ British rival, Exchange Telegraph, and so destroy Reuters! A.P. also informed Reuters it would have to deal with Canadian Press through A.P.: thus, Canada passed from the British to the American Empire!

That wasn’t really the end. World War II put the period on the new contract. Havas crumbled all-at-once-and-nothing-first like the wonderful one-hoss shay. Reuters’ internal crisis matured and in 1941 the agency was liquidated as a private profit-seeking body. It was reorganized as the British equivalent of A.P. Within the Empire it is struggling for survival against terrific American pressures, just as the Empire itself is creaking under American expansionist strains and the impact of the rising liberation forces released by the anti-Axis war. Sideswiped as a British government propaganda agency in a semi-official State Department document recently, Reuters indignantly denied the charge. In doing so, it acknowledged the British surrender to the American commercial-sensational news pattern which it resisted for so many years. Said Reuters chief Christopher Chancellor: “We are not purveyors of British news; news cannot be British or American—it is an international commodity.”

The German D.N.B. has, of course, been liquidated. So has Japan’s Domei. An American-sponsored German Agency, D.A.N.A., has been set up in U.S.-occupied Germany with favorable competitive advantages as against the British and French agencies. U. S. Treasury funds have been used openly in the battle for news control of Austria and other countries. In Japan, under exclusive American occupation, American news dictatorship is assured. With Britain restricted to Southeast Asia, the whole Far East is rapidly becoming an American private preserve. And not even the limits of the thinly-concealed modern American empire provide boundaries for the American news empire.

Only the Soviet Union and the new Eastern European democracies, together with the anti-imperialist forces within the dominated territories, stand in the way of complete global sway by the new empire-aspirant and its news monopoly. Against them, the “free press” monopolists are mobilizing the blackmail batteries of atomic diplomacy. “It is unthinkable,” declares Kent Cooper, “that the peace will not be dictated by America and Britain and that there should not be included in its terms the principles affecting the press as I have outlined them.”