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Frank Demby

Aircraft and Finance Capital

(June 1941)

From The New International, Vol. VII No. 5 (Whole No. 54), June 1941, pp. 103–6.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

THE KEY INDUSTRY of the war, fast becoming the leading industry of the country, is aircraft. Moreover, its strategic rôle and importance are not confined to war. Its potentialities for peacetime transportation and commerce may be somewhat obscured at present due to the destructive capacities of aviation as revealed by the blitzkrieg, but aircraft is clearly marked as the industry of the future. By August 1 of this year, more than half a million workers will be employed in the industry. The industry has a backlog of more than $4 billion. Its expansion has been absolutely phenomenal, more so than any other industry in the history of American capitalism.

Much discussion has filled the press about the President’s goal of 50,000 planes a year and why the United States is so far from filling it at present. More pertinent, however, would be the query: Why is it that the United States, whose inventive genius produced this remarkable invention at the turn of the century, should now lag way behind in the production of airplanes? The answer to this important question is to be found in the history of aircraft, an obscure story but one which is replete with scandals, greed, intrigue, financial manipulation, patent pools, fabulous profits, government subsidies, and monopoly control.

How the Industry Began

In spite of the fact that The Hague Peace Conference had unanimously voted to outlaw the airplane as a weapon of warfare, the bourgeoisie was so entranced with the military potentialities of the airplane that all nations engaged in research and experimentation with this end in view. But from 1909–1913, while the United States spent $435,000 on airplanes, with the result that at the outbreak of World War I, the Army had 28 planes on hand; Germany had spent $28,000,000 during the same period and had 4,000 planes on hand. Thus, the birth of the aircraft industry in the United States coincided with the outbreak of World War I, the period when far-reaching monopolistic controls of virtually all American industry were being developed.

The pioneers of the industry were the original inventors and their successors. As soon as the Allies began to place orders for airplanes in the United States, and the prospect of tremendous profits opened up. Wall Sreet speculators and automobile manufacturers began to take an interest in the production of airplanes. A patent pool was formed under the aegis of the Manufacturers Aircraft Association, the first trade association in the aircraft industry. The association collected a blanket royalty fee of $200 per airplane and apportioned the patent fees among the basic patent owners, the Curtiss Aeroplane & Motor Co. and the Wright-Martin Aircraft Co. These two companies collected over $2,000,000 each from patent fee alone. The MAA secured the ear of official Washington through the persons of Howard E. Coffin, vice-president of Hudson Motor Co. (one of the automobile companies directly interested in the manufacture of airplanes), who became chairman of the Aircraft Production Board, and Edward A. Deeds, an individual with an extremely notorious record, who was one of the leading people in the organization of the Dayton Wright Airplane Co. Through their efforts over one billion dollars was appropriated by Congress to supply the U.S. Army with airplanes. At least 29,000 planes were expected as a result of this huge appropriation. However, only 196 actually saw service in Europe!

The Manufacturers Aircraft Association was attacked as a trust and a terrific scandal broke in the newspapers and finally landed in the halls of Congress. President Wilson felt compelled to appoint a committee of investigation headed by Snowden H. Marshall. This committee brought in a verdict of “no truth in the charges.” Instead of subsiding, however, the stench began to rise. Deeds was court-martialled; but, through the intervention of Secretary of War Newton D. Baker, Deeds, was acquitted and the reputation of the industry was saved. Even this did not end the matter, as after the Armistice Wilson felt constrained to appoint another committee to investigate the aircraft industry – this time headed by Justice Hughes. This committee “found nothing to criticize” in the conduct of the aircraft industry.

How the Profits Grew

The end of the war also saw the end of the huge profits reaped by the insiders. The scandals of the war period and the crashes of army fliers resulted in loss of confidence on the part of the public, especially the investing public. The aviation industry remained in a state of doldrums until Lindbergh’s historic flight of May 20, 1927, which fortunately coincided with the beginning of the stock market boom. Public interest awakened; confidence in the future of aviation grew and aviation stocks began to be sold. By the end of 1929 the public had swallowed over a billion dollars in aviation stocks. By 1932 the value of these stocks had sunk to a low of fifty million dollars! Some people undoubtedly lost a lot of money, but again the insiders reaped huge fortunes.

For example, Charles W. Deeds, son of Albert A. Deeds invested $40 in 1926. At the 1929 high this was worth $5,550,000. F. B. Rentschler (now chairman of of the board of United Aircraft), brother of the future president of the National City Bank of New York, probably made the biggest killing of all. His investment of $253 in Pratt & Whitney stock was worth a cool $35,000,000 in 1929. Pratt & Whitney Corp., organized after the war with a capital of $1,000 made, according to the Nye Munitions Investigating Committee, a profit of over 1,300,000 per cent in ten years! During all this time, of course, the actual production of airplanes was infinitesmal; other countries had forged way ahead of the U.S.

By 1929, through a combination of mergers, stock watering, holding company setups, and general financial chicanery, finance capital had achieved complete control of the aircraft industry. The 150 companies manufacturing aircraft were dominated and controlled by the following five companies: Curtiss Aeroplane & Manufacturing, United Aircraft & Transportation, Wright Aeronautical, Western Air Express and Aviation Corporation. During the past decade, more than half the companies have been eliminated. The remainder are dominated by three powerful, well-integrated finance capital units. They are, in order of their size (based on total assets at the end of 1940): Curtiss-Wright, $202,000,000; United Aircraft, $132,000,000; and North American Aviation, $54,000,000.

Interlocking Relations

Monopoly’s baby has come of age. Each of the three leading systems is a top-holding company for an entire system, two of them, Curtiss-Wright and North American, representing General Motors – that is, the Morgan-duPont finance capital interests – and the other, United Aircraft, representing the National City Bank group. Curtiss-Wright, formed as a result of a merger between Curtiss Aeroplane & Manufacturing and Wright Aeronautical in 1929, now claims to be the world’s largest group, with 29 subsidiaries and 18 affiliated companies. Indirectly controlled by General Motors, Curtiss-Wight has a maze of ties with virtually all sections of American industry through the more influential members of its board of directors. The chairman of the board, George Armsby, adorns the directorates of a mere 22 corporations, the more significant of those outside of aircraft being Vickers, Tide Water Associated Oil, Standard Gas & Electric, Petroleum Corporation, American Maracaibo, California Packing, and Loew’s. Edgar S. Bloom is a very important member of its board. His 10 directorships help to establish cordial relations with Manufacturers Trust and Western Electric. In passing, it should be noted that Bloom is the director of purchases of the British Purchasing Commission, making him a rather useful person for an aircraft company to have on its board. Other members establish connections with Sperry Gyroscope, Ford Instrument, Douglas Aircraft, Transcontinental Air Transport, Empire Trust, Fisk Rubber, Hayden, Stone & Co., Girard Trust, Ken-necott Copper, Mack Truck and Adams Express. Manufacturers Trust, one of the Morgan banks, is represented through several men, especially the president of Curtiss-Wright, G.W. Vaughn.

Finance Capital Dominates

United Aircraft acquires most of its importance through its control of Pratt & Whitney and Pan American Airways, although Hamilton Standard Propellers and Vought-Sikorsky are becoming increasingly important. It work is spread out among 650 vendors, scattered over twenty states. Its list of directors is not quite as imposing as Curtiss-Wright, but its key men, Rentschler, Eugene R. Wilson, who is president, Morgan B. Brainard, Byron C. Foy, William B. Mayo, provide links with National City Bank, Dime Savings Bank, Chrysler, some smaller automobile companies, New York, New Haven & Hartford Railroad and other transportation interests, Swift & Co., and the Cleveland-Cliffs Iron Co.

The most significant group, however, is probably the one headed by North American Aviation, for it was organized and is directly controlled by General Motors. Directly under its control are Ford Instrument, Sperry Bendix and Douglas. It controls Western Air Express and has great influence in Curtiss-Wright. Its strategic importance to General Motors can be seen merely from the fact that one of its directors is Henry B. duPont. The chairman of the board is Ernest R. Breech, a member of the board of General Motors and one of its key figures in the aircraft industry. It is also linked with International Nickel.

The other companies which serve to round out the picture of concentration in a few hands are the Aviation Corporation, which controls Vultee and American Airways, and is bossed by Victor Emanuel, one of the leading lights in the Rockefeller group. Bell and Lockheed appear to be independent corporations, but are, in reality, completely controlled by General Motors through one of its smaller holding companies, National Aviation. Consolidated is clearly controlled by Lehman Brothers. Its board of directors is loaded down with Lehman men, including Robert Lehman. The two other important companies, Martin and Boeing, have not escaped the long arm of capital, either. On Martin’s board of directors appear John W. Castles, a partner in Smith-Barney & Co., and John W. Hanes, one of the most influential of Morgan representatives. Boeing apparently does not have any direct links with the better-known sections of finance capital, but is controlled by local Pacific Coast representatives.

American finance capital thus enters World War II with a firm grip on the aircraft industry. In 1938, 95 per cent of the total value of the industry’s product was produced by the 13 leading companies. In 1940, 90 per cent of the greatly increased production was produced by the eight leading companies. With the aircraft industry tied up with virtually every other American industry (technically, this is necessary as aircraft represents the synthesis of all industry), with its dollar-a-year representatives in Washington performing meritorious services comparable to those of Coffin and Deeds in World War I, with the excess profits tax removing the ceiling on profits from the aircraft industry, with an escalator clause on prices in all contracts with the U.S. government, the latter, in effect, paying the cost of plant expansions, and with England and the Allies paying higher prices and cash in advance for, in many cases, inferior planes, it is no wonder that the industry is having a field day. World War II is presenting the industry with even larger profits than in the case of World War I. A scandal is in the making, which may not be concealed even by the secrecy which surrounds the industry today, and which, if it breaks, will dwarf that of the last war.

Phenomenal Profits the Rule

The financial pages of the newspapers daily reveal how the aircraft industry is utilizing the tremendous subsidies and favorable contracts which it is receiving to demonstrate that “patriotism” pays off in hard cash. The following table (taken from the New Republic, Feb. 17, 1941) shows the annual rate of return on net worth of selected aircraft companies (in per cent):













9 Months







Douglas Aircraft






Martin, Glenn






North American






United Aircraft






1940, as is well known, was a banner year for American capitalists. The aircraft industry, however, made the rest of American industry look as if it was in a state of depression. According to a report in the New York Times of April 27, 1941: “Twenty-four makers of aircraft last year earned $69,866,405, more than double the profits shown in 1939, nearly three times 1938 results and more than five times their earnings in 1937. Each of these years set a new high record for the industry and further peaks are likely under the national defense effort.” (Italics mine – FD) Moreover, 14 of these companies made slightly more than $60 million of the total, or more than 85 per cent of the total profit in aircraft went to these 14 companies. And the four largest companies made a total of $47 million, or over 67 per cent of the total profit.

Many companies showed profits considerably above the 100 per cent increase that the industry as a whole shows over 1939. Two of the larger companies and two of the smaller companies in this category are:



1940 Profit


1939 Profit



Bell Aircraft








Douglas Aircraft




Vultee Aircraft




In addition, it should be pointed out that none of the figures on profits give any indication at all of the tremendous bonuses and salaries that the aircraft companies have been paying their executives. Nor, do they take into account the well-known fact that virtually all the aircraft companies have watered their stock to an unprecedented degree.

Perhaps the most important index of how the merchants of death profit at the expense of the workers can be seen if the rate of profit is compared with the rate of surplus value. Figuring the rate of profit on the basis of total assets (which yields the smallest percentage possible) and taking the three dominant companies as the basis for calculating the rate of profit (for the rate of profit for the industry as a whole must be larger than that shown by these three, as these have the largest investments in constant capital) we get the following picture: (From the 1940 financial statements) —



Total Assets


Net Profit


Rate of Profit





North American

$  54,017,638

$  7,090,336


United Aircraft




The rate of profit for the industry as a whole is, therefore, at least 10 per cent. That this is a conservative figure is shown by the fact that the average return on sales for the industry as a whole is about 20 per cent. In other words, if the average airplane (of the important military types) is sold to the government for about $100,000 per plane, the cost per plane to the manufacturer is about $80,000 (this, of course, makes no allowance for the phony bookkeeping of the capitalists) and the net profit per plane will run around $10,000, In view of this situation, it is hardly a surprise that statistics concerning prices and costs of airplanes are considered a “military secret.”

The Rate of Surplus Value

While it is difficult under these circumstances to calculate the rate of surplus value, it is possible to arrive at a fair approximation, which is important in estimating the degree of exploitation of labor in the industry and in understanding how finance capital operates. Maximum estimates of the average wage per employee in th industry are given by Fortune (Mar. 1941) in its over-zealous whitewash issue of the aircraft industry is about $1,800. It is undoubtedly much lower than this as the minimum wage paid by most aircraft companies is 50¢ an hour or an annual wage for the worker and his family of $1,300. Taking the figure of $1,800 as the average wage, and assuming that the value of the constant capital transferred to the value of the finished commodity by the application of labor power is also equal to $1,800 per worker (it is certainly no larger than this), we find that the amount of surplus value produced by each worker is equal to $2,184 on the average for 1940. This is based on an estimate of $5,784 as the value of each workers’ output given by Donald Ross in his An Appraisal of Prospects for the Aircraft Industry. Dividing the amount of surplus value produced by each worker on the average by the average wage, the rate of surplus value in the aircraft industry for 1940 was over 120%, and, it must be emphasised, this is a conservative figure. The same methods show a rate of surplus value for 1939 of about 100%. Consequently, the rate of surplus value increased by, at least, 20% in 1940 as compared with 1939. No wonder profits increased phenomenally during the past year.

The growth in profits has paralleled the increase in employment. “Three years ago the building of aircraft required only 30,500 men – 10,500 less than the knit-underwear business. Today over 200,000 workers are on aircrafts payroll – an increase of 150,000 in two years. Estimates from the Bureau of Labor Statistics indicate that by August 1 (1941) employment will exceed 550,000 – 15 per cent larger than last year’s average employment in steel and nearly 25 per cent more than motor vehicles, the present giants. The acceleration has been tenfold in thirty months, compared to a sevenfold increase in shipbuilding durinng the four years of the last war.” (Fortune) The height of the expansion during the last war required only 175,000 workers in 1918. Today, it is estimated that by the end of 1943 when the industry expects to be producing at the rate of 50,000 planes a year, over 1,000,000 workers will be employed in the aircraft industry.

Aircraft’s Labor Policy

The bosses have reinforced their policy of low wages and bad housing conditions by one of the most vicious company union and anti-Negro and anti-Semitic policies of any section of American industry. When Consolidated’s company union program collapsed in Buffalo during the NRA days, the company dismantled its plant and moved to the more attractive labor climate of California. Douglas broke two strikes through the use of thugs and armed vigilantes. As long as the labor force remained small and fairly stable, the aircraft manufacturers were able to escape the strike waves of recent years. The industry was firmly in the grip of finance capital, with the single exception of Brewster, which signed a union shop contract with the CIO-UAW in 1937. Otherwise, there wasn’t a cloud on the horizon.

However, the expansion of the past two years brought on by the outbreak of World War II disturbed the equanimity of the aircraft manufacturers. Called on to expand production at a terrific rate, they found themselves surrounded by various monopolistic interests, such as Mellon’s aluminum monopoly, that felt they could make more profit by getting every last cent out of present capital investment rather than building new plants. Consequently, the expansion of the entire war economy of American imperialism has been much slower than military necessity dictates. After all, profits come first. Cross-patents with German capitalists, such as in the case of beryllium, also interfered with the necessary expansion. Then, the automobile industry, which is closely linked with aircraft and has somewhat of a stranglehold on it, as I have shown, feared the consequences of rapid expansion. Hence, the rejection of the Reuther plan. To be sure, the aircraft manufacturers themselves were not loathe to follow this general policy of finance capital. All the entreaties of the Government to sub-contract production of airplanes and parts have been met with stubborn resistance on the part of these “patriots.” Not even Knudsen’s plea at the end of 1940 that aircraft production was 30 per cent behind schedule moved them.

What really disturbed the equanimity of the aircraft manufacturers was that with the influx of workers necessitated by the expansion that was being carried on, there also came a concerted drive on the part of organized labor to organize the industry. The heart of this union drive has been the Aircraft Division of the UAW, which began serious attempts to organize about a year ago. The focal point in the UAW’s drive was Vultee. The success at Vultee, in spite of the combined opposition of the bosses and the government and a vicious newspaper campaign against the union, was the key to the 1941 strike wave and has led to several other contracts in the aircraft industry, mostly with small plants. The only dosed shop so far achieved by the CIO is with Brewster, when its original contract was renewed earlier this year. Although, there are many progressive features in this contract, which the CIO is using as a model for the industry, the union prejudiced its chances with the workers by accepting a minimum wage clause of 55 cents an hour, thus compromising one of its basic demands – a minimum wage of 75 cents an hour.

Alarmed by the threat of the CIO, the bosses openly invited the AFL Machinist’s union to come in and organize the workers in those plants where their company union setups proved of no avail against the CIO. With this as an opening wedge, and aided by a few strikes, the Machinists have made great headway in aircraft – already having contracts with Boeing, Lockheed and others. The Machinists probably have more contracts than the UAW, and the terms of their contracts appear to be as good. The jurisdictional situation is loaded with dynamite, but it is doubtful if the aircraft manufacturers will be able to maintain their company union policy, in spite of this serious division in organized labor’s ranks.

Anti-Semitism and Jim Crow

That which reveals the reactionary character of the aircraft manufacturers more than anything else, however, is their openly anti-Negro and anti-semitic policy. As Fortune delicately puts it: “The industry also has its prejudices. You will find an almost universal prejudice against Negroes – and in the West Coast plants against Jews. This statement stands the test of observation; you almost never see Negroes in aircraft factories nor do you see Jews in the West Coast plants except in some engineering departments. There is little concealment about the anti-Negro policy – the National Negro Congress did indeed receive a letter from Gerard Tuttle of Vultee stating that ‘it is not the policy of this company to employ people other than of the Caucasian race,’ a frank statement that undoubtedly bespeaks the industry’s belief that white workers have prejudices (sic). Anti-Jewish sentiment in Los Angeles is scrupulously denied, and if it exists, it is probably because the managers suspect all Jews of being infatuated intellectually with Communism in the between-wars world.” (Italics mine – FD)

The selfish, reactionary and, at times, just plain stupid policy of finance capital in aircraft only partially explains why the U.S. lags behind Germany in the production of military planes. The rest can be explained by the extreme conservatism of the Army General Staff. (For the previous history of how military short-sightedness resulted in the cashiering of General Billy Mitchell, and for a fairly good account of the general aircraft swindle prior to the outbreak of World War II, see The Aviation Business – From Kitty Hawk to Wall Street by Elsbeth E. Freudenthal). The Germans, because of technical and economic deficiencies have, for example, discovered that for the purpose of laying waste cities and gaining military objectives the most effective method – and therefore the most efficient method – is to build cheap, poor quality planes in as huge quantities as possible. The average flying time of the average German military plane is thus based on an expectancy of about 48 hours. Compare this with the rigid requirement of the U.S. Army that American military planes must have a life-expectancy of 1,000 hours flying time, and the difference in approach is clearly revealed. However, this is a disputed military question, which is not a subject of this article.

It is not an exaggeration to say that developments in aircraft will alter the face of the globe. From a military point of view, this has already been amply demonstrated. The future course of the war will only reinforce this view. What should not be lost sight of, however, is that with the expansion of the aircraft industry, the economic and political struggles centering around aircraft will have a profound effect on the future course of American society. The workers, if fascism is to be defeated, must take a leaf from the book of finance capital and embark on a bold, militant policy in the aircraft industry. The central point in the program of the workers must be the nationalization of the aircraft industry, under the control of the aircraft workers, the maintenance of a high level of struggle for unionization, increased wages, lower hours, and a general improvement of working conditions.

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