PROPOSAL TO STUDY THE POSSIBLE APPLICABILITY OF CO-DETERMINATION (MITBESTIMMUNGSRECHT) TO AMERICAN INDUSTRIAL ORGANIZATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-01446R000100060006-5
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 4
• Document Creation Date: November 9, 2016
• Document Release Date: March 18, 1998
• Sequence Number: 6
• Publication Date: October 16, 1959
• Content Type: MF

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16 October 1959
ll=? a (I
OCT 1959
MEMORANDUM FOR: Director of Central Intelligence
THROUGH: Deputy Director/Intelligence
SUBJECT: Proposal to Study the Possible Applicability of Co-Determination
(Mitbestimmungsrecht) to American Industrial Organization
1. The purpose of this memorandum is to suggest that the West
German. system of industrial labor-management relations known as Co-
Determination (Mitbestimmungsrecht) deserves study as of possible
relevance to the American economy. Although this is presented as my
personal suggestion, it grows out of nearly four years consideration by
SRS of its basic charter concern - International Communism and "means 11
of countering it.
2. The steel strike and the Khrushchev visit have sharply chal-
lenged the comfortable assumption that the American pattern of labor
management relations - free bargaining plus Taft-Hartley - is the "best
of all possible" systems. Indeed, Khrushcheves bland exegesis of "we
will bury you, " coupled with his consummate insulting of our labor union
leaders as "lackeys of capitalism, " has perhaps been the chief contribu-
tion of his visit toward focussing our somewhat blurred economic per-
spective. His slightly patronizing treatment of our leading "capitalists"
- recently reinforced by some shrewd twitting from his son-in-law
Adzhubei - may also have helped to lay the groundwork for an overdue
reappraisal of the fundamentals of our system.
3. To one who has formed the professional habit of looking at
Communist positions "through Communist eyes, " a major problem before
us now is how to cope with this modern phase of "class" conflict which
labor-management relations appears to be entering. On the one hand,
as the "affluent society" emerges, labor displays increasing satisfaction
with its "bourgeois" benefits, coupled with vague apprehension over its
future in an age of automation.. On the other hand, management, which
more and more wields "power without property, " is alarmed over the
problems of inflation and of competitive challenges from abroad. It is
seeking to adjust its traditional responsibilities to stockholders with its
newer obligations to insure the security of workers and the interests of
the consumers. In Communist terms, these divergent aspirations and
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responsibilities are tending to assume the proportions of "contradic-
tions. " So far in our society these have not become explicitly
"antagonistic" but there is no assurance that they will not do so if a
"dialectical" resolution is not speedily provided. It is with some such
thought in mind perhaps that Walter Lippman observes:
"We are demonstrating to the world our failure to grasp the
hard realities of a deep evil in our society, and to deal with
these realities lucidly and firmly. "" (15 October 1959).
Lippman goes on to urge upon Congress a "fundamental decision of
national policy" in the "paramount national interest, " which he believes
should take the form, of establishing the "power to require compulsory
arbitration. "
4. Although some such step may be advisable, I venture to
suggest that Co-Determination would be a more attractive alternative.
It is a system which has been tested in action over ten years in a highly
industrialized economy, in many ways similar to our own. It has pre-
served the principle of private ownership and of management responsi-
bility for the essential points of production policy, while admitting labor
on a basis of equality in the handling of those issues in which it is vital-
ly concerned, especially wages and working conditions. It may be
objected that this system would not work in the United States because of
differing conditions and traditions, especially the paternalism of German
employers, the relatively docile nature of German labor, and the close
ties between the unions and the SIP. But the fact is that our own condi-
tions: are changing, and we have not yet found the solution to our prob-
lems within our traditional patterns. Co-Determination, in the light of
the German experience, seems to offer a workable formula to preserve
the virtues and abate some of the strains of "free enterprise, " the
"affluent society" and the "welfare state. "" It is not a form of "social-
ism. '"
5. Any attempt to introduce Co-Determination in the US
would of course require careful study and preparation. Initially, at
least, it would be best to limit it to those industries in which a collapse
of existing bargaining procedures and the inadequacies of the Taft-
Hartley mechanism would expose the economy to a major crisis. In
this connection, it might be noted that Co-Determination in Germany,
which, is imposed by law, applies only to the coal and steel industries.
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6. One of the difficulties I have encountered in studying
Co-Determination is the apparent lack of readily available accounts
of how it actually works, its strong and weak points. It occurs to me
that, with your own background of interest in the German economy,
and with the resources of OCI and DDP/EE, it might be possible to
obtain a thorough evaluation of the system, with a view to considering
its applicability in this country. If the results were at all positive, it
might be possible to explore the matter with Congressional leaders,
with. the Secretary of Labor, and perhaps with Dr. George Taylor and
the members of his board. Another approach might be through Mr. McCloy,
under whose regime as High Commissioner the system was launched.
Finally, it might be possible to discuss it with some of the national labor
leaders here in Washington.
7. It is possible if not probable that the current steel strike
will be settled in the very near future. Nevertheless, as Lippman has
pointed out, critical tensions have arisen which indicate the existence
of a major problem for this nation. These will not disappear with the
immediate settlement. If we are to meet the long range challenge of
Communism, it must be on the basis of fundamental harmony between
all the productive forces of our economy. Any avenue which gives
promise of leading toward such harmony must be pursued until it is
shown to be without issue.
Chief, SRS/DDI
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