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Twenty Years of Turmoil: ITT, The State Department, and Spain, 1924–1944

Published online by Cambridge University Press:  11 June 2012

Douglas J. Little
Douglas J. Little
Affiliation:
Assistant Professor of History, Clark University
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Abstract

Among the factors that have assured the success of units of “multinational” firms like the International Telephone and Telegraph Company, according to Professor Little, is the willingness of the parent's home government to use its diplomatic strengths to assure that a host government lives up to its contractual obligations, even after radical changes in its leadership. Using diplomatic correspondence of the United States with ITT and the Spanish Republic of the 1930s, he demonstrates the vital nature of these strengths at a time when the tensions between “communism” and “fascism” were new and vigorous, and reaches a startling conclusion about the sameness under the skin of the two ideologies where the rights of foreign concessionaries are concerned.

Type
Research Article
Information
Business History Review , Volume 53 , Issue 4 , Winter 1979 , pp. 449 - 472
Copyright
Copyright © The President and Fellows of Harvard College 1979

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References

1 Wilkins, Mira, The Maturing of Multinational Enterprise: American Business Abroad from 1914 to 1970 (Cambridge, Mass., 1970), 411–427.Google Scholar

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4 Sampson, Anthony, The Sovereign State of ITT (Yew York, 1973), 21–25Google Scholar; Southard, Frank, American Industry in Europe (New York, 1931), 52Google Scholar; “I. T. & T. Ends a Brilliant Decade,” Fortune (December 1930), 37–40; Report of the Directors of the International Telephone and Telegraph Corporation, 1924, 10–11. (Hereafter cited as ITT Annual Report for the appropriate year). On the ugly rumors surrounding the concession, see the minute by Arthur Wiggin, December 16, 1931, W14261/14261/41, volume 15783, F0371, Public Record Office, London. (Hereafter cited as PRO F0371). Wiggin noted that “responsible people say that General Primo de Rivera, despite his cleansing of the public services, allowed some near relatives to be given highly salaried but almost entirely honorific appointments in the [Telephone] Company.”

5 Assistant Trade Commissioner James Burke (Madrid) to Bureau of Foreign and Domestic Commerce (BFDC), telegram July 17, 1924; Burke to BFDC, July 29, 1924; R. A. Lundquist to Burke, July 31, 1924, File 541 – Spain, Record Group 151, Records of the Bureau of Foreign and Domestic Commerce, National Archives, Washington, D. C.; Moore to Hughes, telegram August 26, 1924; Moore to Hughes, telegram September 3, 1924, the Department of State, The Foreign Relations of the United States, 1924 (3 volumes, Washington, D.C., 1939), II, 692–693.Google Scholar (Hereafter cited as FRUS for the appropriate year).

6 ITT Annual Report, 1924, 5, 10–13.

7 Hughes to Moore, telegram August 29, 1924, FRUS, 1924, II, 693; Moore to Hughes, September 9, 1924, 852.75/13, Record Group 59, Records of the Department of State, Decimal File 1910–1939, National Archives, Washington, D. C (Hereafter cited as NA RG59).

8 Ferrin to Hughes, September 16, 1924, 852.75/15; memorandum by Carter, October 8, 1924, 852.75/18, NA RG59.

9 ITT Annual Report, 1925, 8–10; ITT Annual Report, 1926, 9–10; “I. T. & T. Ends a Brilliant Decade,” 41; Livengood, Charles A., Spain: Resources, Industries, Trade and Public Finance, Department of Commerce, Trade Information Bulletin No. 739 (Washington, D.C., 1930), 25.Google Scholar

10 Sampson, The Sovereign State of ITT, 24; Brenan, Gerald, The Spanish Labyrinth (New York, 1943), 82Google Scholar; “I. T. & T. Ends a Brilliant Decade,” 41, 43.

11 New York Times, April 30, 1930, 10:4; May 1, 1930, 7:2; Irwin Laughlin to Stimson, June 29, 1931, 811.503152 10; Francis B. White, “The Recognition of the New Spanish Regime,” April 21, 1931, 852.01/40, NA RG59.

12 Laughlin to Stimson, June 29, 1931, 811.503152/10, NA RG59; Sir George Grahame (Madrid) to Arthur Henderson, July 7, 1931, W8046/46/41/, PRO F0371, volume 15774; Jackson, Gabriel, The Spanish Republic and the Civil War 1931–1939 (Princeton, 1965), 43–44Google Scholar; Peers, E. Allison, The Spanish Tragedy 1930–1936 (London, 1937), 62.Google Scholar

13 Arrarás, Joaquin, Historia de la segunda república española (4 volumes, Madrid, 1956–1964), I, 142–143Google Scholar; Manuel Azaña, “Memorias politicas y de guerra,” September 1 and September 4, 1931, in Juan Marichal, ed., Obras Completas (4 volumes, Mexico City, 1963–1968), IV, 111–112, 118.

14 New York Times, September 13, 1931, 8:2. The legal status of the CTNE remained a sensitive issue. Although the firm was incorporated in Spain and had a number of Spanish stockholders, effective control was exercised by a pair of Americans, Lewis J. Proctor and Logan N. Rock. Wilkins, Maturing of Multinational Enterprise, 146–151, notes that this type of arrangement was not uncommon during the 1920s when such firms attempted to avoid provoking a nationalistic outcry in the host country.

15 Article 42 of the draft constitution permitted the confiscation of any public utility by the Spanish Government with proper indemnification, unless an absolute majority of the Cortes determined that no compensation was required. See the memorandum by Ellis Briggs, January 13, 1932, 852.75 National Telephone Company/14, NA RG59. (For reasons of space this file will hereafter be cited as 852.75/NTC).

16 “Translation of Appendix Number 89 of the Journal of the Session of the Constituent Cortes of the Spanish Republic, December 10, 1931,” 852.75 NTC/21, NA RG59.

17 Manuel Azaña, “Memorias politicas y de guerra,” September 4 and December 10, 1931, Obras Completas, IV, 118, 266–267.

18 Proctor to Behn, three telegrams December 11, 1931, 852.75 NTC/3, NA RG59. ITT forwarded a number of these internal communications to the State Department, most of which are preserved at the National Archives.

19 Stimson to Crosby telegram December 12, 1931, 852.75 NTC/3; Crosby to Stimson, telegram December 14, 1931, 852.75 NTC/6, NA RG59.

20 Memorandum by Castle, December 14, 1931, 852.75 NTC/7, NA RG59.

21 Stimson to Hoover, December 17, 1931, 852.75 NTC/7, NA RG59.

22 Behn to Castle, December 18, 1931, 852.75 NTC/11; memorandum by Briggs, January 13, 1932, 852.75 NTC/14, NA RG59; Azaña, “Memorias politicas y de guerra,” January 12, 1932, Obras Completas, IV, 305–306.

23 Behn to ITT vice president Frank Page, telegram February 24, 1932, 852.75 NTC/15, NA RG59. Behn instructed Page to “get Mr. Castle to send tomorrow necessary instructions to the Ambassador in Madrid.” Stimson dutifully apprised Ambassador Laughlin of the situation the next morning. Stimson to Laughlin, telegram February 25, 1932, ibid.

24 Jay Pierrepont Moffat, “Diplomatic Journals,” volume 32, October 10, 1932, the Jay Pierrepont Moffat Papers, the Houghton Library, Harvard University, Cambridge, Massachusetts; Laughlin to Stimson, telegram October 15, 1932, FRUS, 1932, II, 557. On the bombings, see Laughlin to Stimson, October 31, 852.75 NTC/32, NA RG59.

25 Laughlin to Stimson, November 2, 1932, 852.75 NTC/34; Laughlin to Stimson, November 8, 1932, 852.75 NTC/45; Laughlin to Stimson, telegram November 18, 1932, 852.75 NTC/35, NA RG59.

26 “The Ambassadors of the United States,” Fortune (July 1931), 47, 96, 105; Grahame to Henderson, January 24, 1931, W1535/1535, 41, PRO F0371, volume 15779; Laughlin to Stimson, telegram April 16, 1931, FRUS, 1931, II, 985–986.

27 Laughlin to Stimson, telegram November 18, 1932, 852.75 NTC/35; Stimson to Laughlin, telegram November 19, 1932, 852.75 NTC/36; Laughlin to Stimson, telegram November 22, 1932, 852.75 NTC/37; Stimson to Laughlin, telegram November 22, 1932, 852.75 NTC/43, NA RG59.

28 Laughlin to Stimson, telegram November 23, 1932, 852.75 NTC/44; Stimson to Laughlin, telegram November 24, 1932, 852.75 NTC/46; memorandum by Briggs, November 25, 1932, 852.75 NTC/51, NA RG59. Briggs noted in a handwritten memorandum that “Captain Rock … was present at the Embassy during the drafting of the note.”

29 Laughlin to Stimson, telegram November 25, 1932, 852.75 NTC/47; memorandum by Wiley, November 25, 1932, 852.75 NTC/114; Laughlin to Stimson, telegram November 26, 1932, 852.75 NTC/50, NA RG59. Wiley, who had earlier been stationed at several eastern European posts including Warsaw and Berlin, carried on an extended personal correspondence with Kelley. See the John C. Wiley Papers, Box 1 (Spain and DivEE), the Franklin D. Roosevelt Library, Hyde Park, New York. (Hereafter cited as Wiley Papers).

30 Memorandum by Briggs, November 25, 1932, 852.75 NTC/51; Stimson to Laughlin, telegram November 28, 1932, 852.75 NTC/55, NA RG 59.

31 Memorandum by Wiley, November 29, 1932, 852.75 NTC/124; Laughlin to Stimson, telegram November 29, 1932, 852, 75 NTC/61; memorandum by Briggs, November 30, 1932, 852.75 NTC/63, NA RG59.

32 Stimson to Laughlin, telegram November 30, 1932, 852.75 NTC/65; memorandum by Briggs, December 1, 1932, 852.75 NTC/67, NA RG59; Moffat, “Diplomatic Journals,” volume 32, December 1, 1932.

33 Laughlin to Stimson, telegram December 1, 1932, 852.75 NTC/67; Laughlin to Stimson, telegram December 3, 1932, 852.75 NTC/70, NA BG59.

34 Zulueta to Laughlin, December 3, 1932, the Irwin B. Laughlin Papers, Box 18 (“Spain – Madrid”), the Herbert Hoover Library, West Branch, Iowa. (Hereafter cited as Laughlin Papers).

35 Laughlin to Stimson, telegram December 3, 1932; Stimson to Laughlin, telegram December 3, 1932, 852.75 NTC/71, NA RG59.

36 The Henry L. Stimson Diaries, microfilm edition, Reel 5 (volume XXIV), December 5, 1932, Sterling Library, Yale University, New Haven, Connecticut; Stimson to Laughlin, telegram December 5, 1932, 852.75 NTC/84; memorandum by Stimson, December 5, 1932, 852.75 NTC/86, NA RG59.

37 “Memorandum of the Special Press Conference: Spain, December 5, 1932,” by M. J. MeDermott, 852.75 NTC/119, XA BG59; Moffat, “Diplomatic Journals,” volume 32, December 5, 1932.

38 Alvaro de Albornoz and Azaña both quoted in Airarás, II, 51, my translation.

39 Laughlin to Stimson, December 7, 1932, 852.75 NTC/129, NA RG59; Arrarás, II, 51–52.

40 Wiley to Briggs, telegram December 6, 1932; Briggs to Wiley, telegram December 7, 1932, File 875 (Madrid — 1932), volume XVII, Record Group 84, Records of the Foreign Service Posts, Part I: records of the Diplomatic Posts 1788–1945, the National Archives, Washington, D. C.; Moffat, “Diplomatic Journals,” volume 32, December 6, 1932; memorandum by Briggs, December 6, 1932, 852.75 NTC/95; Laughlin to Stimson, telegram December 10, 1932, 852.75 NTC/105, N'A RG 59.

41 Laughlin to Stimson, December 10, 1932, 852.73 NTC/131; memorandum by Castle, March 8, 1932, 852.75 NTC/17; Castle to Page, November 19, 1932, 852.75 NTC/40; Page to Castle, November 30, 1932, 852.75 NTC'90, NA RG59. ITT was so grateful for the assistance rendered by John Wiley that the firm offered to pay all the expenses for his upcoming leave in the United States. Wiley rejected the offer. Wiley to Kelley, January 12, 1933, the Wiley Papers, Box 1 (Spain).

42 Page to Stimson, December 28, 1932, 852.75 NTC/140, NA RG59.

43 Laughlin to Moffat, January 3, 193[3], Laughlin Papers, Box 13 (General Correspondence – “Moffat”); Wiley to Briggs, January 31, 1933, Wiley Papers, Box 1 (Spain).

44 Moffat to Frank Page, March 8, 1933, 852.75 NTC/160; Page to Moffat, March 10, 1933, 852.75 NTC/164, NA RG59.

45 Claude G. Bowers, “Journal: November 5, 1923 to July 18, 1939,” April 11, 1933, the Papers of Claude G. Bowers, Lilly Library, Indiana University, Bloomington, Indiana, (Hereafter cited as Bowers, “Journal”).

46 Bowers, “Journal,” April 28 and May 2, 1933.

47 Bowers, Claude, My Life: The Memoirs of Claude Bowers (New York, 1962), 1–26, 249–263Google Scholar; Bowers to Hull, July 25, 1933, 852.75 NTC/182, NA RG59; Bowers to Roosevelt, August 2, 1933; Roosevelt to Bowers, August 22, 1933, President's Personal File, Box 730, the Papers of Franklin D. Roosevelt, the Franklin D. Roosevelt Library, Hyde Park, New York. (Hereafter cited as Roosevelt Papers, PPF); Hull to Bowers, September 6, 1933, 652.113 Auto/77, NA RG59. For Hull's earlier assurances, see Bowers, “Journal,” April 28, 1933.

48 Bowers to Hull, September 27, 1933, 652.113 Auto/79; Bowers to Hull, May 29, 1934, 852.75 NTC/196; Bowers to Hull, June 12, 1934, 852.75 NTC/198, NA RG59. Hernand Behn, who had met Lerroux during an ITT junket to Spain in September, 1930, characterized the Spaniard as ‘a very intelligent man.” Lerroux was also on cordial terms with Captain Rock. See Francis B. White, “Recognition of the New Spanish Regime,” April 21, 1931, 852.01/40; and Cornelius Vanderbilt to Daniel Roper, April 21, 1933, 852.00/1931, NA RG59.

On ITT's minor troubles with Lerroux, see Claude G. Bowers, “Spanish Diary: May 22, 1933 to June 10, 1939,” December 21, 1933 and January 30, 1934, Bowers Papers. (Hereafter cited as Bowers, “Spanish Diary”).

49 Bowers to Roosevelt, January 10, 1934, in Nixon, Edgar B., editor, Franklin D. Roosevelt and Foreign Affairs, three volumes (Cambridge, 1969), I, 586–587Google Scholar; memorandum by Moffat, January 11, 1934, 611.526 Wines/10; Phillips to Bowers, telegram January 13, 1934, 652.116/34; Hull to Spanish Ambassador Luis Calderón, June 25, 1934, 611.5231/801; memorandum by Phillips, July 17, 1934, 852.75 NTC/200; press release by Hull, September 17, 1934, 611.5231/830, NA RG59. Spain granted preferential duties on French exports in 1931 and imposed quotas limiting American automobile sales in 1933.

50 Memorandum by Moffat, January 21, 1935, 852.51/271; George Peek to Francis Sayre, April 12, 1935, 611.5231/956; Hallett Johnson (Madrid) to Hull, June 15, 1935, 852.5151/123; Hull to Bowers, telegram October 9, 1935, 611.5231/1037, NA RG59; the Henry J. Morgenthau Jr. Diaries, Book 11, November 1, 1935, the Franklin D. Roosevelt Library, Hyde Park, New York.

51 Bowers, “Spanish Diary,” December 23, 1935; Bowers to Hull, December 23, 1935, 852.00/2127, NA RG59. Bowers' despatch was stamped: “Noted by the Secretary of State – January 16, 1936.”

52 Bowers, “Spanish Diary,” February 10 and February 14, 1936; Bowers to Hull, February 14, 1936, 852.75 NTC/204, NA RG59.

53 Memorandum by James C. Dunn, March 27, 1936, 852.75 NTC/205; Page to Phillips, May 27, 1936; Phillips to Bowers, telegram May 29, 1936, 852.75 NTC/206; Bowers to Hull, June 1, 1936, 852.75 NTC/208, NA RG59; Bowers, “Spanish Diary,” May 30, 1936.

54 Behn to Rock, telegram for Bowers, no date [probably mid-June, 1936], Bowers Papers, General Correspondence (1936 – June/August); Bowers, “Spanish Diary,” June 20, 1936; New York Times, June 21, 1936, II, 9:3.

55 Sampson, 29–30. Kindelán's comments are from a personal interview granted to Gabriel Jackson in May, 1960, as paraphrased in Jackson, 248.

56 Memorandum by Culbertson, July 22, 1936, 852.00/2301, NA RG59. For Hull's views, see Cordell Hull, Memoirs, two volumes (New York, 1948), I, 475.

57 Memorandum by Culbertson, July 22, 1936, 852.00/2311, NA BG59; Knoblaugh, H. Edward, Correspondent in Spain (London, 1937), 148–151.Google Scholar Bowers noted in November that the CTNE was attempting to remain “neutral” in the struggle by maintaining uninterrupted telephone service in both the rebel and republican zones. Bowers to Hull, telegram November 10, 1936, 852.75 NTC/213, NA RG59.

58 Wendelin to Hull, telegram October 30, 1936, 852.75 NTC/211; Wendelin to Alvarez del Vayo, October 31, 1936, 852.75 NTC/216; Mahlon Perkins (Barcelona) to Hull, November 17, 1936, 852.75 NTC/219, NA RG59. For Wendelin's earlier instructions, see Hull to Wendelin, telegram August 3, 1936, FRUS, 1936, II, 657–658.

59 Perkins to Hull, November 19, 1936, 852.75 NTC/221; Page to R. Walton Moore, telegram November 25, 1936, 852.75 NTC/225; Page to Dunn, December 7, 1936, 852.75 NTC/232, NA RG59; Bowers, “Spanish Diary,” December 1, 1936.

60 Bowers, “Spanish Diary,” December 14, 1936.

61 Ibid., January 3, 1937; Bowers to Hull, January 27, 1937, 852.00/4628, NA RG59; Moffat, “Diplomatic Journals,” volume 39, July 26 and September 21, 1937. The CTNE's relations with the republican regime suffered a serious blow in May, 1937 when the titular president of the company, Gumersindo Rico, announced from Burgos that dividends would henceforth be paid only in “the territory liberated by the glorious Spanish army.” Bowers to Hull, May 31, 1937, Bowers Papers, General Correspondence (1937 – May/July).

62 Bowers, “Spanish Diary,” November 9 and December 4, 1936; Bowers to Hull, September 18, 1937, 852.75 NTC/247, NA RG59; Bowers to Roosevelt, January 7, 1939, Roosevelt Papers, PPF, Box 730; Elston, James M., “Multinational Corporations and American Foreign Policy in the Late 1930's” (Doctoral dissertation, University of Michigan, 1976), 156–158.Google Scholar

63 Matthews to Hull, telegram May 11, 1939, 852.75 NTC/253; Hull to Ambassador Alexander Weddell (Madrid), telegram July 22, 1939, 852.75 NTC/281; Weddell to Hull, telegram November 30, 1939, 852.75 NTC/301, XA RG59; Feis, Herbert, The Spanish Story: Franco and the Nations at War (New York, 1948), 12–15.Google Scholar

64 Ambassador Carleton J. H. Hayes (Madrid) to Spanish Foreign Minister Francisco Gomez Jordana, February 10, 1944; Hayes to Hull, September 30, 1944, FRUS, 1944, IV, 423–424, 434–439; Chargé d'Affaires W. W. Butterworth (Madrid) to Secretary of State Edward R. Stettinius Jr., telegram March 2, 1945, and Butterworth to Stettinius, telegram March 13, 1945, FRUS, 1945, V, 722–724; Foltz, Charles, The Masquerade in Spain (Boston, 1948), 228–230.Google Scholar Under the terms of the agreement, ITT received $33,000,000 in cash and $50,000,000 in Spanish bonds redeemable over a twenty-year period. Interestingly enough, the agreement also contained “a service and technical contract” between ITT and its former subsidiary calling for the American firm to continue to supply the CTNE with up-to-date equipment.

65 Negro, Francisco Molina, Las Telecomunicaciones en España (Madrid, 1970), 18–22.Google Scholar