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Government Corporations; a Focus of Policy and Administration, I*

Published online by Cambridge University Press:  02 September 2013

Marshall E. Dimock
Marshall E. Dimock
Affiliation:
Bethel, Vermont
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Extract

The government corporation has become a familiar device of public administration all over the world; and yet in some countries, and especially in the United States, uncertainty as to its distinctive purpose and underlying principles seems to grow, rather than to diminish, as the public corporation becomes older and more extensively used. Lack of interest and research cannot be blamed, because in recent years the degree of concentration in this area has probably been relatively as great as in any other sphere of political science. The basic explanation is that administrative formulas and management principles are rarely, if ever, capable of immunization against group pressures and public policy controls, which bend administration to their own designs, sometimes in conformity with what the impartial experts consider sound principle and practice, but just as often in knowing disregard of such considerations and in a determined effort to support their own interests and economic viewpoints.

Type
Research Article
Information
American Political Science Review , Volume 43 , Issue 5 , October 1949 , pp. 899 - 921
Copyright
Copyright © American Political Science Association 1949

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References

1 Dimock, Marshall E., “These Government Corporations,” Harper's Mag., Vol. 190 (May, 1945)Google Scholar; Thurston, John, Government Proprietary Corporations in English-Speaking Countries (Cambridge, Mass., 1937)Google Scholar; Hazard, John, “Soviet Government Corporations,” Michigan Law Review, Vol. 41 (Apr., 1943)CrossRefGoogle Scholar; Bland, F. A., “Some Implications of the Statutory Corporation,” Australian Quarterly, Vol. 9 (June, 1937)CrossRefGoogle Scholar; Beneš, Eduard, Nationalization in Czechoslovakia (Prague, 1946),Google Scholar; and Mann, F. K., “The Government Corporation as a Tool of Foreign Policy,” Public Administration Review, Vol. 3 (Aug., 1943)CrossRefGoogle Scholar.

2 Social Science Research Council, “Research in the Use of Government Corporations” (Pamphlet, New York, 1940)Google Scholar; Valley, Tennessee Authority, “Government Corporations; A Selected List of References” (Mimeo., Knoxville, Sept., 1945)Google Scholar; and the bibliographical references in White, Leonard D., Introduction to the Study of Public Administration (3rd ed., New York, 1948)Google Scholar, Chap. IX.

3 This subject arose during the course of the Hoover Commission report. See the majority and minority viewpoints in Commission on Organization of the Executive Branch of the Government, Federal Business Enterprises (Government Printing Office, 1949), especially pp. 92, 104, 106, 108, and 115Google Scholar. The basic underlying problem has been dealt with in Herring, Pendleton, Public Administration and the Public Interest (New York, 1936)Google Scholar; Blaisdell, Donald C., Economic Power and Political Pressures (Temporary National Economic Committee, Monograph No. 26, Washington, D. C., 1941)Google Scholar, and Government Under Pressure (Public Affairs Pamphlets, No. 67, New York, 1942)Google Scholar. For the special aspect of government corporations, see Hodgetts, J. E., “Administration and Politics; The Case of the C.B.C.,” Canadian Journal of Economics and Political Science, Vol. 12 (1946)CrossRefGoogle Scholar.

4 Pritchett, C. Herman, “The Government Corporation Control Act of 1945,” in this Review, Vol. 40 (June, 1946)Google Scholar, and “The Paradox of the Government Corporation,” in Public Administration Review, Vol. 1 (Aug., 1941)Google Scholar; Key, V. O., “Government Corporations,” in Marx, F. M. [ed.], Elements of Public Administration (New York, 1946), pp. 236–263Google Scholar; and Hoover Commission, op. cit., Federal Business Enterprises (Government Printing Office, 1949)Google Scholar.

5 Commission on Organization of the Executive Branch of the Government [hereafter referred to simply as the Hoover Commission], (Government Printing Office, 1949).

6 Hoover Commission, Appendix J (Government Printing Office, Jan., 1949).

7 Hoover Commission, Appendix R (Government Printing Office, Jan., 1949).

8 Hereafter referred to as the “Brownlow Commission,” Report with Special Studies (Government Printing Office, 1937), pp. 299–308Google Scholar.

9 Public Law No. 248, 79th Cong.

10 Encyclopedia of the Social Sciences, “Corporations,” Vol. IV (New York, 1931)Google Scholar, and “Government Corporations,” Vol. VII (New York, 1932)Google Scholar; Dimock, Marshall E., “Principles Underlying Government-Owned Corporations,” Public Administration [London], Vol. 13 (1935)Google Scholar, and “Public Corporations and Business Enterprise,” Public Administration [London], Vol. 14 (1936)Google Scholar; Reed, Stanley and others, “Government-Controlled Corporations; A Symposium,” Tulane Law Review, Vol. 10 (1935–1936)Google Scholar; McIntire, John A., “Government Corporations as Administrative Agencies; An Approach,” George Washington Law Review, Vol. 4 (1935–1936)Google Scholar; Weintraub, Ruth G., Government Corporations and State Law (New York, 1939)Google Scholar; Lilienthal, David E. and Marquis, Robert H., “The Conduct of Business Enterprises by the Federal Government,” Harvard Law Review, Vol. 54 (1941)CrossRefGoogle Scholar; and Fainsod, Merle and Gordon, Lincoln, Government and the American Economy (New York, 1941)Google Scholar, Chaps. XVIII–XIX.

11 Pritchett, C. Herman, “The Paradox of the Government Corporation,” Public Administration Review, Vol. 1 (1941), p. 389CrossRefGoogle Scholar.

12 The principal purposes and provisions of the Government Corporation Control Act of December 6, 1945 (31 U.S.C. 841 et seq.) were these: (1) no corporation shall be created, organized, or acquired by an officer or agency of the Government except by act of Congress or “pursuant to an act of Congress authorizing such action”; (2) federal reincorporation of all state corporations with federal ownership was required prior to June 30, 1948, except for those in process of liquidation; (3) each corporation was obliged to present a “business-like budget” through the Bureau of the Budget to the President and Congress setting forth its plan of operations with due allowance to the need for flexibility; (4) estimates were required of the amount of Government capital which might be returned to the Treasury, or which might be required for restoration of capital impairment; (5) the Corporation Audits Division of the General Accounting Office was commissioned to audit the accounts annually in accordance with the customary commercial corporation auditing practices; (6) the Comptroller-General was required to report on the expenses of each, the origin of its funds, and its financial status, with comments on irregularities; (7) all banking and checking accounts of more than $50,000 were to be kept with the Treasury; (8) purchases or sales of United States obligations in amounts exceeding $100,000 were prohibited unless approved by the Secretary of the Treasury; and (9) to provide a further review of these activities, the Committees on Appropriations of the Senate and the House of Representatives established special subcommittees to consider appropriations for, and to report on, most of the Government corporations. (Hoover Commission, Federal Business Enterprises, pp. 5–7Google Scholar. For comments and explanation, see Key, V. O., “Government Corporations,” in Marx, F. M. [ed.], Elements of Public Administration (New York, 1946), pp. 246–255Google Scholar.

13 “The Government Corporation Control Act of 1945,” in this Review, Vol. 40 (1946), p. 509Google Scholar.

14 V. O. Key, “Government Corporations,” in F. M. Marx [ed.], op. cit., p. 262.

15 President's Committee on Administrative Management, Report with Special Studies, op. cit., pp. 43, 299.

16 Ibid., pp. 299–302.

17 Ibid., p. 302.

18 See summary of provisions, above, note 12.

19 Federal Business Enterprises, op. cit., p. 14.

20 Ibid., p. 5.

21 Op. cit., p. 2.

22 Op. cit., p. 65.

23 President's Committee on Administrative Management, op. cit., p. 303.

24 Federal Business Enterprises, op. cit., pp. 9–10.

25 Ibid., pp. 81–129.

26 See Macmahon, Arthur W., “Congressional Oversight of Administration; The Power of the Purse,” Political Science Quarterly, Vol. 58 (1943)Google Scholar; White, Leonard D., “Legislative Responsibility for the Public Service,” in Martin, Roscoe [ed.], New Horizons in Public Administration (University of Alabama, 1945)Google Scholar, and also the present author's article in the same volume.

27 Books such as Fainsod, Merle and Gordon, Lincoln, Government and the American Economy (New York, rev. ed., 1948)Google Scholar, Dimock, Marshall E., Business and Government (New York, 1949)Google Scholar, and Lyon, Leverett S. and others, Government and Economic Life, 2 vols., (Brookings, 1940)Google Scholar deal with this subject; and even these books are incapable of exploring all the conflicts of private and public interest.

28 See, for example, Davis, Ernest, National Enterprise (London, 1946)Google Scholar, Dewar, Margaret, Industrial Management in the U.S.S.R. (Royal Institute of International Affairs, 1945)Google Scholar, Beneš, Eduard, Nationalization in Czechoslovakia (Prague, 1946)Google Scholar, Greaves, H. R. G., “Post War Machinery of Government: Public Boards and Corporations,” Political Quarterly (London, Jan., 1945)Google Scholar, and Bland, F. A., Government in Australia (2nd. ed., Sydney, 1944)Google Scholar.

29 Report with Special Studies, op. cit., p. 300.

30 Ibid., p. 302.

31 Federal Business Enterprises, op. cit., p. 91 ff.

32 Lending Agencies, op. cit., p. xi. Italics added.

33 Ibid., p. 19. The entire statement of political and economic philosophy is interesting. The report states, for example, that the driving force in a free-enterprise economy arises from “the law of self-preservation which, in a sense, is a selfish one”; that “the habit of excessive reliance upon government is demoralizing”; and concludes with the recommendation that direct lending by government be discontinued.

34 Federal Business Enterprises, op. cit., p. 104.

35 Ibid., p. 106.

36 See, for example, MacIver, R. M., The Web of Government (New York, 1947)Google Scholar; Merriam, Charles E., Political Power; Its Composition and Incidence (New York, 1934)Google Scholar; and Key, V. O., Politics, Parties, and Pressure Groups (New York, 1942)Google Scholar.

37 Report of the President's Committee on Administrative Management, op. cit., and authorities cited above.

38 Federal Business Enterprises, op. cit., p. 13. Other non-corporate agencies included in the list of business enterprises were the Farmers' Home Administration, the Bureau of Reclamation, the United States Maritime Commission, the Post Office, the Federal Housing Administration, the Federal Reserve Banks, the Treasury Department British Loan, the Economic Cooperation Administration, the Bureau of Indian Affairs, the National Capital Park and Planning Commission, the Puerto Rico Reconstruction Administration, and the Public Health Service (Ibid., pp. 20–22).

39 Ibid., p. 108.

40 Ibid., p. 122.

41 Ibid., p. 115.

42 Ibid., p. 93.

43 Ibid., pp. 94–95. Italics added.

44 Ibid., p. 1.

45 Report with Special Studies, op. cit., p. 300.

46 Staff Manual, Corporation Audits Division, General Accounting Office (Mimeo.' Washington, D. C., 1946Google Scholar).

47 Revolving Funds and Business Enterprises of the Government, op. cit., pp. 172–173.

48 Others were the Reconstruction Finance group and the Production and Marketing group, with two each, and single corporations in the case of the Inland Waterways Corporation, Export-Import Bank of Washington, Federal Deposit Insurance Corporation, Federal Prison Industries, Panama Railroad Company, Tennessee Valley Authority, and Virgin Islands Company. The twelve in process of liquidation included the Inter-American Affairs group and the Reconstruction Finance Corporation group, with four each, and the Home Owners' Loan Corporation, Defense Homes Corporation, Tennessee Valley Associated Coöperatives, Inc., and U. S. Housing Corporation.

49 Op. cit., p. 174.

50 The Hoover Commission did not recommend the liquidation of any additional government corporations on the ground that they lack the essential qualification of being a business enterprise. The report did, however, recommend the liquidation of the Inland Waterways Corporation on grounds of general social policy (Federal Business Enterprises, op. cit., p. 65) and the consolidation, restriction, or creation of other agencies. On the most controversial of all issues in this area, electric power, the Commission had to conclude that agreement was impossible: “Individual members of this Commission have different points of view as to organizational and administrative recommendations on the Government's electric power and irrigation enterprises. Individual suggestions are given at the end of this report …” (Ibid., p. 60).

51 Lilienthal, and Marquis, , “The Conduct of Business Enterprises by the Federal Government,” Harvard Law Review, Vol. 54 (Feb., 1941), p. 587CrossRefGoogle Scholar.

52 “Introduction” by Dimock, Marshall E., in McDiarmid, John, Government Corporations and Federal Funds (Chicago, 1938), pp. x, xiGoogle Scholar.

53 Ibid., p. x.

54 McDiarmid, John, Government Corporations and Federal Funds (Chicago, 1938), p. 14Google Scholar.

55 Bland, P. A., Government in Australia (2nd ed., Sydney, 1944), p. 737Google Scholar.

56 Bland, F. A., “Some Implications of the Statutory Corporation,” Australian Quarterly, Vol. 9 (June, 1937), p. 44CrossRefGoogle Scholar.

57 Lilienthal and Marquis, op. cit., p. 565.

58 Ibid., p. 589. On this issue the Hoover Commission said: “We recommend that Congress require these agencies to conduct their business so as to recover their administrative expenses, or, alternatively, to set out such subsidies as a part of their annual request to the Congress for appropriations. Federal Business Enterprises, op. cit., p. 15.

59 On this question, the Hoover Commission stated: “We recommend that, as a general principle, receipts arising outside of normal activities be paid into the Treasury and that the sums necessary for the conduct of these agencies be appropriated by the Congress. This may require provision for some revolving funds.” Ibid., p. 16. What is meant by “receipts arising outside of normal activities” is not clear from the context. A revolving fund was defined as an operation involving the application of receipts from income or realization of assets as repayments to appropriations, thus making it possible to use the same fund over and over again for the authorized purpose.” Hoover Commission, Revolving Funds and Business Enterprises of the Government, op. cit., pp. 3–4.

60 Ibid., p. 588.

61 Ibid., p. 601. The Hoover Commission would limit this last-mentioned freedom by providing that “major expenditures for capital additions be made only with prior congressional approval and appropriation.” (Federal Business Enterprises, op. cit., p. 10).

62 Corpus Juris, Vol. 14, article entitled “Corporations.” For leading articles on the legal aspect of the government corporation, consult Reed, Stanley and others, “Government-Controlled Corporations; A Symposium,” Tulane Law Review, Vol. 10 (1935)Google Scholar; Culp, Maurice S.. “Creation of Government Corporations by the National Government,” Michigan Law Review, Vol. 23 (1934–1935)Google Scholar; Watkins, Lowe, “Federal Ownership of Corporations,” Georgetown Law Journal, Vol. 26 (1937–1938)Google Scholar; Evans, Peyton R., “Federal Corporations; Their Purposes and Functions,” Federal Bar Assn. Journal, Vol. 2 (1936)Google Scholar; and Pinney, Harvey, “The Legal Status of Federal Government Corporations,” California Law Review, Vol. 27 (1939)CrossRefGoogle Scholar.

63 Corpus Juris, op. cit.

64 Ibid. See also “Corporation” in the Encyclopedia of the Social Sciences, Vol. 4 (New York, 1931)Google Scholar.

65 Dimock, Marshall E., “These Government Corporations,” Harper's Mag., Vol. 190 (1945), p. 570Google Scholar.

66 “Introduction” by Dimock, Marshall E. in McDiarmid, John, Government Corporations and Federal Funds (Chicago, 1938), p. xiGoogle Scholar.

67 Ibid., pp. 7–8.

68 This principle was emphasized by both the Brownlow and Hoover studies. President's Committee on Administrative Management, Report with Special Studies, op. cit., p. 303; Hoover Commission, Revolving Funds and Business Enterprises of the Government, op. cit., p. 175.

69 Hoover Commission, Federal Business Enterprises, op. cit., p. 10.

70 Dimock, Marshall E., Government Operated Enterprises in the Panama Canal Zone (Chicago, 1934)Google Scholar.

71 “Report on Audit of Reconstruction Finance Corporation,” Fiscal Year Ended June 30, 1945, House Doc. No. 450, 80th Cong., 2d Sess. (Government Printing Office, 1947), p. 9Google Scholar.

72 Dimock, Marshall E., Developing America's Waterways (Chicago, 1935), pp. 55. 80, 112Google Scholar.

73 In assessing the probable future of corporate autonomy, under the 1945 legislation, V. O. Key arrived at the conclusion: “If the Government Corporation Control Act really results in a ‘commercial’ type of audit, it will not narrow corporate privileges in this regard.” “Government Corporations,” in F. M. Marx [ed.], Elements of Public Administration, op. cit., p. 262. However, there is no question that centralized controls have been increased, resulting inevitably in lessened managerial authority and initiative. The restrictions are felt more in the areas of borrowing and undertaking new capital investments, however, than in the areas of budgeting and auditing, except as these affect the former indirectly.

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