European Steel: Monopoly in the Making

by CLARENCE B. RANDALL

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A YEAR has passed since I watched the inception of the Schuman Plan and wrote down my first impressions in the Atlantic. That challenging proposal for the pooling of the steel and coal industries of Western Europe, put forward so dramatically by the Foreign Minister of France, caught the public on both sides of the Atlantic by surprise. I was in Paris when the plan was announced. I studied it eagerly, for I had come to know something of the problems of the steel industry in Europe. And as I studied, I found my head and my heart contending, one with the other, to resolve a basic dilemma which it seemed to me was created by this colorful proposal.

Now as I try to reassess the situation in the light of all that has happened since, my mind stimulated by fresh exchanges of viewpoint with my opposite numbers in the British and French steel industries and off-the-record talks with many who understand the facts far better than I, I sense the same dilemma, its horns sharper than before.

The problem is this: Shall the privately owned steel industry be sacrificed that the cause of political unity and federation in Europe may be advanced? On the one hand, who could fail to applaud the daring concept of wiping clean the slate of bitter history with its record of divisions and barriers among neighbors in what is in nature a single industrial area? Who could fail to sense the urgency of forgetting the awful past and facing the difficult future in a spirit of mutual coöperation and trust? Yet shall the heart rule the mind?

The more noble the ideal the more important it is that the right method of achieving it be chosen. The difficulty about noble ideals is that men pursue them under such deep emotion that they do not evaluate the consequences of their acts. And so it might be with the Schuman Plan. If a magnificent gesture toward political unity should destroy incentive and fetter initiative in the basic steel industry to the point where its further progress was retarded instead of advanced, the Schuman Plan might prove to have been the wrong approach to the ideal.

This much is clear. It is economic strength that General Eisenhower is seeking. And no American businessman can believe that greater productivity will flow from the abandonment of a free competitive market in favor of price-fixing by a cartel, or by the substitution of socialist planning for the creative resourcefulness of private management.

To sense this dilemma one does not need to master the detail of the plan as it finally evolved. In fact, few Americans have tried to understand it. The new jargon of the European Coal and Steel Community with its juridical personality, the High Authority assisted by a Consultative Committee, the Common Assembly, the Special Council composed of Ministers, and the Court of Justice would weary even a Philadelphia lawyer. Small wonder that so little has been written in the United States that is discriminating about the significance of this breath-taking scheme, when the news each day is packed with so many events which the press can describe so easily and with such evident drama.

It was on May 9, 1950, that M. Schuman made the proposal which thrilled peace-loving people everywhere. It was printed on one page. And how typical it is of human affairs that when, eleven months later, a draft treaty was signed by the Foreign Ministers of France, West Germany, Belgium, Holland, Luxembourg, and Italy, eighty-nine printed pages were required for the English text. Each page was a compromise. Every day of negotiations brought a threat of collapse. Only two things kept hard-working teams from the various countries at their task. One was the instinct that the emotional volume of good will which M. Schuman had created was so compelling that no nation dared risk breaking off the talks lest it be charged that its government was anti-peace. And the other was the inspired leadership of Jean Monnet.

Little is known of this remarkable man in America, yet he began his career as an investment banker in New York City before he went back to serve his country. His is the brain, his the force clothed in ascetic modesty, and his the suave finesse that both conceived and carried through this amazing project. No man in Europe today is more likely to influence history than he, and it should be frankly recognized that the Schuman Plan is actually the Monnet Plan. Like President Roosevelt, Monnet inspires fanatical devotion among his friends and cold haired among his enemies. You either worship him blindly or consider him the personal embodiment of all evil.

At no time during the eleven months of day-andnight bargaining among the governments, and in no country, were the steel men admitted to the council table except for a few matters of technical detail. Their advice was not asked and they were given no orderly chance to be heard. Vet theirs was the stake. They and their fathers and grandfathers had built the plants stone by stone and beam by beam, and had borne the destruction of three wars, but they were dealt with merely as statistics in this new international adventure. The whole approach to the plan was that private ownership and interests must at all times be strictly subordinated to the broad political and social aspects of the new Community. It was hoped that the owners would not suffer too much, but there were to be no inhibitions about it.

This being true, the industrialists have passed from initial skepticism into the present state of deep apprehension or vigorous opposition. Steel is still the stronghold of private enterprise on the Continent. Except for the accident of a minority interest in one French plant which is presently owned by the slate, and some recent government aid to the Dutch plant, neither of which reduces the autonomy of direct private management, no industry anywhere has a more vigorous history of development through the investment of private funds and the exercise of private initiative. Under the wartime controls which survived the cessation of hostilities, the steelmasters have been extremely restive. Now, with the treaty signed by the Foreign Ministers, they await the inevitable approval by the several parliaments this fall and early winter as men would await the summons to the guillotine.

What is it that they fear?

They fear a vast new bureaucracy having authority that transcends national boundaries and that is self-executing; that draws its power from general language capable of broad interpretation; and one that possesses sufficient authority and working tools to bring to knee any recalcitrant producer who during the fifty years for which this commitment is to last may dare to challenge a directive. If the President of the High Authority, for example, should be a German, consider how galling could be the application to a French company of the simple clause, “The High Authority may gather such information as may be necessary to the accomplishment of its mission,” particularly when coupled with “The High Authority may impose fines and daily penalty payments upon those enterprises which evade their obligations.”

What more decisive power of life and death could be created for the use of a new bureaucracy than “In order to encourage a coördinated development of investments, the High Authority may require enterprises to submit individual programs in advance”? The penalty for violation of this is the loss of the right to solicit capital funds outside of the company’s own existing resources, plus a fine “not exceeding the sums unduly devoted to realization of the program in question.”This could mean that no company could ever again build a new blast furnace or open hearth, or perhaps even buy a crane or a galvanizing pot, or take any of the decisions that are taken almost daily by a large American steel company, without filling out forms and awaiting endlessly the approval, not of the company’s own government, but actually one controlled by men who are thought of as foreigners by the company’s management, and who can hardly be expected to have knowledge of or be interested in the particular company’s problems.

And then there is the ever present fear of Germany. In our determination to unite and rearm Europe against the threat of Communism, we tend to forget that Germany was our enemy, but no one over there does. Both in England and in France I found men darkly suspicious of the ease with which the Schuman Plan is progressing through the German Parliament. They think Germany has already been handsomely bribed by being relieved of restrictions on her production in return for her adherence to the plan, and they expect the worst with respect to German influence when the High Authority is established and begins to function. They say that Italy and Holland may be counted upon at critical times to support German proposals — Italy because both politically and commercially she has been close to Germany for so long, and Holland because she competes so vigorously with Antwerp for the inbound and outbound Ruhr traffic. Working control over the High Authority might therefore be precisely the device an unrepentant new Germany might seize upon to dominate Europe in another decade.

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As AGAINST this contingency it becomes germane to ask what the present position of Great Britain is with respect to the Schuman Plan. Actually there is no change. Official policy is still to wait and see; unofficial policy in government and in steel circles is to watch with keen interest for the right chance to make a deal. This opportunistic attitude might well be annoying to the men who have borne the heat of the day in working out the compromises embodied in the document, but I suspect they understand the British problem, which, as I sec it, is twofold. There is first the difficulty that a Labor Government which has carried out nationalization of steel might have in dealing with governments which still recognize private ownership. Time might ameliorate this either by a British election that would restore steel plants to private management, or by the movement ol the Community and the High Authority towards dirigisme and supersoemlism, which is so much feared on t he Continent. Secondly, there is the complication, which any British Government would face, of the ties already existing which bind England to the Commonwealth. As a member of the Community, the United Kingdom would become part of the new free-trade area with a tariff against all other countries. This would at once raise delicate questions with respect to the preferences by which the sterling area as a whole is cemented together. No country could very well belong simultaneously to two federations dealing with economic matters, and it would be a very difficult choice indeed if, in order to join the Community, Britain had to leave the Commonwealth. So England waits for a deal.

And what about price-fixing versus the free competitive market under the Schuman Plan? The American influence was thrown strongly behind provisions comparable to the Sherman Act, as it should have been. But against us were all of the traditional forces of European business practices which have always sought price agreements under the complacent eye of government. They really know no other way of life in Europe. Even the familiar words have different meaning. When European business leaders speak of a “free market,” they do not mean, as we would, an area in which every producer may seek business on any basis that satisfies a willing buyer and a willing seller, but rather one in which the price is identical for all. And when a European businessman speaks of “free enterprise” he means not only private initiative and responsibility but the privilege of agreeing with his competitors on prices without government interference. This chasm between their thinking and ours makes all discussion of the cartel aspects of the Schuman Plan between Americans and Europeans extremely difficult. In fact, in both England and France when I asked businessmen privately how they would achieve the ideals of economic unity in Europe without the Schuman Plan, I got the same answer: leave it to the steel men themselves to “rationalize” the steel industry under some form of government supervision to protect the public interest.

It is no wonder, therefore, that an anomaly has resulted. The treaty bans cartels, yet actually there are embodied in it many of the essential features of a cartel. On the one hand, Article 60 in the most direct language forbids agreement among enterprises that would tend to fix or influence prices; to restrict or control production, technical development, or investments; to allocate markets, products, customers, or sources of supply. Someone knowledgeable of American law surely drew that language. Yet in case of a decline in demand, if the High Authority deems that the Community is faced with a period of manifest crisis it may, after consulting with the Consultative Committee and with the concurrence of the Council, establish a system of production quotas and regulate the rate of operation of the various enterprises by making appropriate levies on tonnages exceeding a reference level. There it is! Shades of America’s codes and the unlamented Blue Eagle of 1932. And who can doubt the infinite capacity of politicians in any country to find a crisis if there is power to be exercised?

One phase of the pricing policy, however, is bound to bring a smile of amusement to the face of any American steel producer who reads the treaty. With us, the government planners who know better than we how the industry should be conducted have in recent years dedicated their efforts to the proposition that freight absorption is evil. Although a magazine or a particular brand of toothpaste may be sold in every town at the same price because the producer pays the freight in order to capture that market, they want steel to be different. They insist that steel be sold to all at the same price at the plant, and that the customer pay the freight. The argument that this would reduce competition and tend to create a series of local monopolies around points of production has fallen on deaf ears. But under the Schuman Plan, after hearing all of the evidence, the assembled European bureaucracy rejected the cherished viewpoint of our American bureaucracy, and established a multiple basing point system with freight absorption encouraged. In other words, what it is heresy for us to practice, our European colleagues are urged to adopt.

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NONE of the doubts that I have expressed have the slightest novelty. Certainly none are original with me. Many of them were felt deeply by men of good will in the various countries who tried honestly to preserve the essential freedoms. Hence the extraordinarily complex system of checks and balances that was introduced into the document through the long months of negotiation. But no polyglot group sitting as a drafting committee, even under the adroit leadership of a Jean Monnet, could possibly reach precise agreement on what are the essential freedoms, or devise escape clauses against all contingencies. Now that the text is complete and signed by the Foreign Ministers, doubt about the Schuman Plan still persists everywhere, even at the top echelons in the various governments. Even its best friends have doubts.

The advocates of the plan recognize all this and have an answer that is rather widely accepted. They say that everything will depend upon how the plan is administered; that in an adventure of such daring magnitude, where in their view the whole future of Europe is at stake, it would be beyond human ingenuity to create a document so perfect that all contingencies had been foreseen and dealt with in express language. This is the first long stride toward unity, they say. We learn to walk by walking. The question is, Can men of good will now go forward together and learn to walk?

It could be. An inspired man of high intelligence and selfless devotion to the cause of a unified Europe could accomplish miracles at this critical time by leading instead of compelling. He could respect the freedom of the competitive market, preserve the driving power of free private management, and still advance the wise integration of the great industrial areas that are now so grievously inhibited by national boundaries. But where is such a man to be found? And if found today, is it reasonable to suppose that others as gifted and as selfless will follow him in lineal succession for the full term of fifty years?

Some think that the first President of the High Authority will surely be Jean Monnet himself. Those who admire him hope very much that this may be so. Certainly during the negotiations no other figure stood out who could bear comparison with Monnet’s facile mind, unswerving purpose, and suave skill in negotiation. But those who distrust him would regard that step as the fulfillment of all their fears. They would consider his ascendancy as the doom of free enterprise and the beginning of socialism in steel. They might even prefer nationalization; for after all, that would be limited to their own country, and elections can change governments and systems. But the Schuman Plan is to be cemented for fifty years. No single government could turn back. For myself, and without expressing an opinion on this point of controversy, I doubt whether this will come about. M. Monnet regards himself far too seriously as a man of destiny to wish to be chained to an administrative desk in this particular project. Once the Schuman Plan is functioning he will go on to the next plan, and after that to the next — in my opinion.

So what should an American think about it all? Obviously it isn’t honest just to duck the whole thing and not have an opinion, and yet who in the United States has one? The official party line of our government as expressed by the State Department and by ECA is to be for the Schuman Plan, on the broad, general ground that European unity is desirable. We were firm against the cartel idea, but whether the over-all impact of the plan will be a move toward socialism and away from free enterprise is treated with silence by our officials. There is no volume of informed opinion in this country to which our government may turn for guidance. We debate the Far East and the Middle East and military defense of Western Europe on every forum and in every pullman car, but never a word about the Schuman Plan.

For myself, I have come to the conclusion that the risks are too great. I cannot believe that it is fair that the European steel industry, which has been built by the patience and skill of generations of steelmasters, maiîtres de forges, from its beginnings in the Middle Ages to its present strong position, which is so basic to the prosperity of each country that is involved and so essential to our own plans for European rearmament, should be made the subject of a vast sociological experiment. I would be the first to admit that the European steel enterprises are not perfect: they are not yet fully modernized; they have been too slow to raise wages and improve working conditions; and they shrink from the risks of that honest competition which is so vital to our own free economy. But this remedy is too violent. It destroys more than it corrects.

I therefore share the fears of those who believe that the Schuman Plan will weaken Europe by laying the dead hand of socialism and bureaucracy across its basic industry. I wish fervently that somehow some other way might be found for advancing the political unity of Europe.

Yet in all conscience how could any thoughtful person drop this important subject on that negative note? World problems cry out urgently for solution. Western Europe is their focus, and the Schuman Plan by its boldness and its honesty of purpose evoked an emotional response from the weary nations of Europe upon which peace can and should be based. M. Schuman’s declaration was brilliant and right in its spiritual concept. I applauded it a year ago and l applaud it now. It is the treaty that is wrong. It is the men who have done the compromising who have let M. Schuman down and who have locked into the document doubts like mine.

This came about because the treaty is the work of men who were halfhearted in their convictions about free enterprise. From every country they were government officials, men who by instinct and habit of mind favor the ascendancy of bureaucracy over business. Taboo at the conferences were the men whose lives have been devoted to the concept that the greatest good for the greatest number is brought about by full release of the driving force of private initiative. Taboo for that matter were American steel men in forming the American Policy.

Yet the steel industries of the countries involved are already an important force in the world. Great wars were begun in reliance upon them, and in peace they have contributed mightily to the economic strength of Europe. Governments did not bring this to pass. Steel is not produced in Paris, or Rome, or Brussels, and never will be. Ingots are not rolled by bureaucrats. Why then should not the men who have made the present system work have a chance to be heard? Is it reasonable to suppose that the men who drew this treaty can make more and better steel than they? Is this a time for that sort of revolutionary gamble?

Fortunately, there is still time to do something about it. True the Foreign Ministers have initialed the draft, but in each country, parliamentary ratification will be required. Amendment is not only still possible, but normal. No one doubts the propriety of full public discussion in each country, to be followed by appropriate modification where that seems to be required. The question still to be answered by the nations of Europe is whether they believe that free enterprise should be preserved; and by us whether the United States, where that system has produced the economic strength that is now the salvation of the world, will use its great influence in that direction.

What specifically do I think should be done?

Let them write into the document a declaration against socialization as clear as that against pricefixing. Let there be a free enterprise standard for measuring the conduct of the administrators. Strike out the punitive measures and rely on informed public opinion to govern the social attitudes of the managements. If necessary, reduce the term of the commitment, making it long enough for a fair trial but not the equivalent of forever.

In other words, to resolve the dilemma, let M. Schuman’s ideal find expression in a climate of free enterprise, in language drawn by men who understand free enterprise and believe in its power for good.