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Full text of "Investigation of concentration of economic power. Hearings before the Temporary National Economic Committee, Congress of the United States, Seventy-fifth Congress, third Session [-Seventy-sixth Congress, third Session] pursuant to Public Resolution no. 113 (Seventy-fifth Congress) authorizing and directing a select committee to make a full and complete study and investigation with respect to the concentration of economic power in, and financial control over, production of goods and services .."



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INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



HEARINGS 

BEFORE THE 

TEMPOEARY NATIONAL ECONOMIC COMMITTEE 
CONGRESS OF THE UNITED STATES 

SEVENTY-SIXTH CONGRESS 

THIRD SESSION 
PURSUANT TO 

Public Resolution No. 113 

(Seventy-fifth Congress) 

AUTHORIZING AND DIRECTING A SELECT COMMITTEE TO 
MAKE A FULL AND COMPLETE STUDY AND INVESTIGA- 
TION WITH RESPECT TO THE CONCENTRATION OF 
ECONOMIC POWER IN, AND FINANCIAL CONTROL 
OVER, PRODUCTION AND DISTRIBUTION 
OF GOODS AND SERVICES 



PART 30 No. 1 



TECHNOLOGY AND CONCENTRATION 
OF ECONOMIC POWER 



APRIL 8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 22, 23, 24, 25, AND 26, 1940 



Printed for the. use of the Temporary National Economic Committee 




UNITED STATES 
GOVERNMENT PRINTING OFFICE 
124491 WASHINGTON ! 1940 



lORTHEASTERN UNIVERSITY SCHOOlof LAW tlBR/^RY 



(Created pursuant to Tublic Res. 113, 75th Cong.) 

JOSEPH C. O'MAHONEY, Senator from Wyoming, Chairman 

HATTON W. SUMNEKS, Representative from Texas, Vice Chairman 

WILLIAM H. KING, Senator from Utah 

WALLACE H. WHITE, Jr., Senator from Maine 

CLYDE WILLIAMS, Representative from Missouri 

B. CARROLL REECE, Representative from Tennessee 

THURMAN W. ARNOLD, Assistant Attorney General 

• WENDELL BERGE, Special Assistant to the Attorney General 

Representing the Department of- Justice 
JEROME N. FRANK, Chairman 
LEON HENDERSON,* Commissioner O 

Representing the Securities and Exchange Commission fTl 

GARLAND S. FERGUSON, Commissioner CD 

• EWIN L. DAVIS, Chairman -. 

Representing the Federal Trade Commission 
ISADOR LUBIN, Commissioner of Labor Statistics 
• A. FORD HINKICHS, Chief Economist, Bureau of Labor Statistics ^ 

Representing the Department of Labor qtj 

JOSEPH J. O'CONNELL, JB., Special Assistant to the General Counsel (Oj 

* CHARLEIS L. KADES, Special Assistant to the General General 

Representing the Department of the Treasury 

SUMNER T. PIKE, Business Adviser to the Secretary of Commerce 

Representing the Department of Commerce 

James B. 'Brackett, Executive Secretary 

Thkodobb J. Kreps, Economic Adviser 



* Alternates. 
II 



REPRtNTED 
BY 

WILLIAM S HEIN &. CO INC 

BUFFALO. N. Y 

1968 



CONTENTS 



'estiinony of — ''"K^ 
Barkin, Solomon, economist, Textile Workers Union of America 16831-16877 
Beau, Louis H., economist, Bureau of Agricultural Economics, Depart- 
ment of Agriculture 16940-16963, 16973-16999 

Blunt, I. L., secretary. National Federation of Textiles 16878-16899 

Carey, James B., general president of the Electrical, Radio, and Ma- 
chine Workers of America, national secretary of the Congress of 

Industrial Organizations .'— 16727-16747 

Carr, William G., secretary, Educational Policies Commission— 17169-17186 
Clark, Harold F., professor of education, Teachers College, Columbia 

University ^ 17105-17121 

Conze, G. R., president, Susquenhanna Silk Mills 16878-16899 

Driesen, Daniel, legislative representative, American Communications 

Association (Congress of Industrial Organizations) 16747-16756 

Elliott, William S., vice president. International Harvester Co__ 17078-17080 

Green, William, president, American Federation of Labor 17122-17140 

Gill, Corrington, assistant commissioner. Work Projects Adminis- 
tration 17220-17242 

Griflath, Paul E., president, National Federation of Telephone 

Workers 16697-16726 

Harrison, G&orge, president. Brotherhood of Railway Clerks 16609-16669 

Holcomb, Ernest, Division of Farm Population and Rural Welfare, 

Department of Agriculture 16922-16940 

Johnson, Sherman E., head of Division of Farm Management and Costs, 

Department of Agriculture 16940-16963 

Kennedy, Thomas, secretary-treasurer. United Mine Workers of 

America _— 17186-17203 

Kifer, R. S., Division of Farm Management and Costs, Department of 

Agriculture — 16940-16963 

Lubin, Isador, Commissioner of Labor Statistics, Department of 

Labor-^ 17242-17267 

McCormick, Fowler, vice president. International Harvester Co_ 17001-17040 
Merrill, Lewis, president. United Office and Professional Workers of 

America ,__. 16796-16829 

Murray, Philip, chairman, Steel Workers Organizing Committee. 16453-10516 
Nichol, F. W., vice president. International Business Machines Cor- 
poration 16760-16796 

Norton, John K., professor of education. Teachers College, Columbia 

University 17084-17105 

Parmelee, J. H., director. Bureau of Railway Economics, Association 

of American Railroads 16546-16607 

Pelley, J. J., president. Association of American Railroads 16517-16546 

Polakov, Walter N., director, Engineering Department, United Mine 

Mine Workers of America ^ 17186-17203 

Renton, William, of Coverdale, Pa 17195-17199 

Reynolds, John W.. Commercial Telegraphers' Union 16688-16693 

Rieve, Emil, president. Textile Workers Union of America 16831-16877 

Russell, Michael, of New Castle, Pa 16461-16469 

Ruttenberg, Harold J., Steel Workers Organizing Committee-- 16453-16516 

Sullivan, Rose, American Federation of Labor 16669-16688 

Taylor, Carl, Division of Farm Population and Rural Welfare, Depart- 

n^ent of Agriculture 16922-16940 

Taylor, Paul, professor of economics. University of California.- 17040-17078 
Wall, Norman J., Division of Agricultural Finance, Bureau of Agri- 
cultural Economics, Department of Agriculture 16963-16973 

lir 



IV CONTENTS 

"Testimony of — Continued. Page 

Ware, Caroline F.," associate professor of social history and social 

economy, American University ___'__^ 17204-17219 

Watson, Thomas J., president. International Business Machines Cor- 
poration 16760-16796 

Weintraub, David, Work Projects Administration 17220-17242 

Whitney, Byrl, Brotherhood of Railroad Trainmen 16899-16919 

Winnek, Douglas F 16350-16358 

Wright, J. C, assistant commissioner for vocational education, 

United States Office of Education 17140-17168 

Statement of — 

Davie, Watson, director. Science service 16260-16291 

Ford, Edsel, president. Ford Motor Co 16319-16349 

Hook, Charles R., president. The American Rolling Mill Co 16391-16451 

Kettering, Charles F., vice president. General Motors Corpora- 
tion 1629^^16317 

Kreps, Theodore J., economic adviser. Temporary National Economic 

Committee—— 1620^-16267 

McCarroll, R. H., engineer. Chemical and Metallurgical Division, 

Ford Motor Co : 16319-16349 

Moekle, H. L., auditor. Ford Motor Co 16319-16349 

O'Mahoney, Joseph C , ^ 16207, 16208 

Thomas, R. J., president. United Automobile Workers 16359-16390 

Report on the depression of 1873 : 16210 

Invention of the art of invention 16212 

Why are innovations introduced? , 16213 

Important types of technological change_^ 16214 

Labor-saving devices 16217 

How measure the impact of technology? -c: . 16218 

New industries created by technology 16219 

Distress to laborers caused by machines 16220 

Productivity of labor 16222 

Increased capital per unit of product 16224 

Shortened working hours 16225 

The mining industry ^ 16229 

The national labor force 16231 

Problem of the ages 16233 

The potential working force -- 16234 

The efficiency of capital 16240 

Technology and the business cycle 16243 

Does industry need more capacity? I 16244 

Who benefits from technology? : -- 16246 

How many are now employed? 16249 

Average cost of production- : 16250 

Nonproductive workers 16251 

The general effects of technology , — 16252 

Economic policy . 16255 

Technology and modern business empires 16256 

Technology' and pressure groups 16258 

The world an economic unit 16259- 

Technology and war : 16261 

America unlimited ^ 16262 

Modern industrial research 16270 

Government research expenditures^ 16272 

Fields for further research 16274 

Atomic power 16277 

Suggested use of gold 16278 

Long-range weather forecasting 16282 

Metal alloys 16285 

Chemical therapy 16286 

Genetics 16287 

Spread of technical progress 16290 

Group V. Individual research 16293 

Research in General Motors , 16294 

Patent policy of General Motors 16296 

Government aid to research 16299 

Accelerating rate of invention 16300 



CONTENTS V 

Page 

Mass production and mass purchasing power — 16303 

Photosynthetic energy '. 1 16305 

Goperal Motors research budget _ 16307 

Interorganizational cooperation 16309 

Effect of patents on invention 16311 

Cost of industrial research 16:313 

Low-priced automobiles 16315 

Cost of labor within the Ford plant 16322 

Proportion of skilled to unskilled workers 1032.J 

A $500 automobile - 16330 

New versus replacement car market-- . 16332 

Feasibility of lower-priced car ^^__ 10334 

Effect on society 163:^7 

Technology and migration of industry 16337 

Cost of production as measure of effect of technology 16338 

Increase of decrease of skill 16341 

Supply of labor 16343 

Decentralization in Ford Motor Co 16346 

Trivision for X-ray purposes ■. 16352 

Trivision in aerial photography 16354 

Problems of financing development-- 16356 

Changes in productivity since 1928 16300 

Wages and technology . 16362 

Effect of the "speed-up" 16367 

1. Intensified labor, (speed-up) i 16370 

Speed-up and older worker j!-.^ 16372 

Effect of shortened hours on productivity 16375 

Plant investment and productivity - 16377 

Displacement of men by machines 16378 

Production and employment sipce 1929 . 16381 

Regularity of employment 16384 

Effect of mechanization upon skill 16386 

First continuous sheet mill installed in 1926 " 16393 

Advantages to labor from continuous mills 16394 

Effect of continuous mills on age of workers 16397 

Operation of continuous mills at Middletown 16399 

Displacement of labor 16403 

Production in American Rolling Mill Co 16405 

Employment and earnings : 16407 

Annual earnings of ARMCO workers 16409 

Change in quality of steel 1&413 

Decline in sheet steel prices 16415 

Proposed reduction in hours ., 16417 

Labor costs for steel production 16419 

Causes of increased volume 16424 

ARMCO research in housing 16427 

Displacement of other industries by sheet steel 16428 

Financing of new capacity , 16429 

Production on continuous hot mills 16432 

Lack of investment as cause of unemployment 16436 

r^mployment in manufacturing industries 16438 

National Association of Mnnufacturers' study of older workers 16443 

Provisions for displaced employees 16448 

Technological changes in the steel industry 16456 

Labor displacement in hot strip jpills 16458 

Provision for displaced workers 16460 

Chost towns 16409 

Cost of production in mechanized mills 16474 

New steel technology covers industry 16478 

Mergers and consolidations , 16480 

Greatest change in employment after 1936 16484 

Extent of mechanization cost borne by labor 16491 

Steel employment in 1929 and 1939 16494 

Increase in production from 1929 to 1939 16497 

Interindustry competition 16500 

Problem of new entrants to labor force 16501 



YI • CONTENTS 



! Providing for displaced workers . 16504 

Proposed regulation of mechanization 16508 

Industrial cooperation invited 16513 

Technological change 4n the railroad industry 16518 

Ftit^ure progress 16520 

Total' labor force on the railroad; -_ 16521 

Competition with other forms of transportation 16524 

Railroad labor policies 16530 

Efforts to increase business 16533 

Effect of technology on employment ^ 16534 

Effect of- increased business on employment 16536 

Distribution of railway earnings 16539 

Effect of displacement on avei-age age of workers 16542 

Character of the raili'oaa industry 16547 

Physical plant of the railroads : 16552 

Installation of new equipment 16562 

Investments in railroads 1923-39 16564 

Railroad purchases of supplies: ^ 16568 

Diversion of traflSc from railways 16572 

Trend of employee compensation 16577 

Railroad costs of operation 16585 

Mechanization and wage changes 16590 

Details of labor displacement by mechanization _^ 16595 

Resistance to technological change 16598 

Summary of technological changes 16601 

Prospects for employment — : 16605 

Technological change in railroad operation 16610 

Mechanization in shop service-^ 16611 

Railway expenditures for new lines and extensions 1_- 16614 

Increased efficiency of engines 16616 

Speed of railroad transportation__y ; 16618 

Decline in job opportunities 16621 

Classification of employees 16624 

Distribution of railroad service 16626 

Increase of labor productivity 16629 

Unemployment in various labor groups 16631 

Rate of technological change—: - 16633 

Effect of increased traffic on employment 16635 

Introduction of dial switchboard 16643 

Analysis of labor force 16645 

Displacement after 1930 16647 

Qualifications for employment in American Telephone & Telegraph Co 16650 

Progress of dialization after 1933 - 16653 

Change in character of labor force 16654 

Increase of business in relation to employment 16658 

Opportunity for investment '. 16661 

Construction in relation to general operation 16663 

Division of revenues in A. T. & T— ., 16604 

Possibilities of expansion 16667 

Analysis of effect of displacement 16670 

Displacement in the Boston area 16672 

Dial service versus manual service 16674 

Labor displacement as a purpose of dialization 16680 

Earnings of employees 16681 

Unionization in the A. T. & T 16688 

Employee attitude toward the dial_i. i, 16685 

Technological change in telegraphy . ^- 16689 

Labor displacement in the telegraph industry 16693 

Concentration of ownership in American Telephone & Telegraph Co 16694 

Reduction of employment ^ 16699 

Effect of rate reductions on volume of business 16706 

Effect of mechanization 16709 

Policies of unions in A. T. & T 16711 

Employee policies in the Bell System 16714 

Separation pay . 1 16718 

Union attitude toward mechanization 16721 



CONTENTS VII 

Page 

Suggestions for cushioning displacement 16724 

Introduction of letters relating to insurance hearings 16726 

Effect of technology in the electrical industry 16729 

Remedies for unemployment 16733 

Leveling of skills 16737 

Effect of patent rights on technological change 16740 

Union agreements as to labor displacement 16743- 

Prospects for iil)sorption of unemployed 1 16746 

Mechanization of telegraph industry 16748 

Union agreements of technological change 16749 

Consolidation and labor displacement , 16752 

Technology and economic recovery 16760 

International Business Machine's share of the business machines industry- 16761 

Wages paid and hours worked 16762 

Accounting machines and employment - 16764 

Advantages of business machine 16767 

Direct and indirect I. B. M. employments 16770 

Effect of mechanization upon earnings 16775 

Physical and social effects of mechanization 16781 

Classification of labor force 16783 

Training for reemployment 16785 

Prospect of foreign markets 16787 

Responsibility of industry to displaced workers ^ 16790 

Provision for unemployables 16794 

The growth and composition of white-collar group 16799 

Industrial urban concentration ^_ 16801 

Earnings of white-collar workers 16805 

Changing status of clerical workers ^ ^ 16807 

The introduction of the machine 16808 

Rate of introduction of machines 16809 

Machine displacement 16811 

Effect on skilled workers . 16812 

Promotion policies 16812 

Public policy and business practice , 16815 

Unemployment — secular or technological? 16818 

Futile prospects for employment 16821 

Union contracts and technological change 16823 

Changing status of white collar worker :: 16826 

, Non-mechanical changes in technology 16828 

Technological change in the textitle industry 16832 

Technological advances in cotton textiles 16836 

Technological advances in woolen and worsted industry 16839 

Technological advances in synthetic yarn 16841 

Technological advances in other textile industries 16842 

Economic and social effects of technological change 16843 

Effect on skilled workers , 16850 

The changing character of the textile industrj^ ^ 16852 

Union policy regarding technological change ' 16855 

Improvement in earnings u 16858 

Job tenure . 16859 

Separation allowances and i^t-nsions 16861 

Unions as a factor in mechanization _- 16864 

Migration of textile industry ._ ^1 1 16867 

Division of labor in textile plants : ,--i-l 16870 

Effect of unionization on production costs 16873 

Prospects for increased employment 16878 

Shift from silk to rayon _' 16879 

Introduction of automatic looms 16882 

Shift of production away from silk mills 16887 

Reduction in silk and rayon prices 16890 

Prospects of continued mechanization 16892 

Future of fiber industry : .- 16894 

Labor displacement in silk mills 16896 

Employment and pay rolls ' 16900 

Productivity of railroad labor 16903 



VJII CONTENTS 

Page 

Reemployment program in the railroad industry 16906 

Railroad consolidations . 16910 

Railroad finances 16911 

Six-hour day ___— 16915 

-Displacement as a result of consolidation 16916 

Technology in agriculture 16922 

Labor force on the farm 16926 

Earnings for farm laborers 16033 

"Gainfully employed" in agriculture 16938 

Productivity in agriculture 16941 

Mechanization of farming — 16950 

Increased efficiency in agriculture 16954 

Prospects for increased employment 16958 

Effect of mechanization on investment 16959 

Comparative costs of operation _ — 16961 

Farm indebtedness and farm values 16964 

Farm ownership and operation 16967 

Farm interest rates 16971 

Effect of mechanization on labor costs 16975 

Changes in farm labor force r 16978 

Increase in farm productivity 16981 

Fai^m income : 16982 

Prospect of great technological change 16987 

Future movement of farm population 16991 

Increase of corporate farm ownership 10998 

Effect of increased employment on farm production 16996 

Mechanization in agriculture ^ 17005 

Farmers' demand for mechanization 17011 

Major effects of the use of farm machinery 17012 

Farm machinery as labor saver 17015 

Future trend toward small machines 17017 

Effect of tenant farming on mechanization 17020 

Cost of mechanizing a small farm 17023 

Credit policy of International Harvester 17020 

Effect of mechanization on labor costs 17030 

Prospect of future technological change 17082 

Prospect for increased farm employment 17035 

Employment in farm machinery industry 17038 

Effects of farm mechanization L 17041 

Origin of migrants to the west coast 17044 

Sharecropping on cotton plantations 17046 

Mechanization in the wheat belt 17049 

Corn belt mechanization 17051 

Expansion of holdings after mechanization 17053 

Agricultural concentration by States 17056 

Cash payments to labor , 17060 

Citizens' associaticrns and farm labor 17063 

Future of family-sized farm 17065 

Displacement of farm owners and laborers 17068 

Mechanization as a force for expanding acreage 17070 

Recommendations to eliminate displacement 17073 

Economy of operating large units 17078 

Potential production of the United States 17085 

Increase in occupational training 17088 • 

Possibility of discrimination in vocational training 17091 

Increased emphasis on skills^ : 17093 

Potentialities of domestic consumption _• 17096 

Consumption lags behind production ! 17099 

"Mortality" in high-school education 17101 

In«?reiS6d p7oi1uctivity of labor 17104 

Need for'cataloguing of available jobs 17107 

Mobility of labor 17110 

Productivity of trained labor 17112 

Training to reduce unemployment 17115 

Increased competition for highly paid positions 17119 

Increase in available labor force , 17124 



CONTENTS IX 

Page 

Production and income since 1929 17127 

Increased productivity . ^ . . 17129 

Technology and wages 17131 

Suggestions for dealing with labor displacement 17134 

A. F. of L. attitude toward dismissal wage 17136 

The vestibule school 17141 

Private schools 1 17144 

Public schools 17144 

Retraining for t^e employed and unemployed 17146 

The need for a larger vocational program 17148 

How a larger vocational progranj should be established 17150 

Industrial training 17151 

Occupational training in public schools 17154 

Training of the unemployed 17156 

Adequacy of present training program 17159 

Efficacy of vocational guidance 17165 

Need for economic literacy 17171 

Economic information needed 17172 

Summary _• 17175 

Democracy depends upon economic knowledge 17177 

Use of education for recovery 17180 

Increased emphasis on skills 17182 

Why youth leave school 17184 

Increased productivity , 17187 

Competition of coal and gas 17193 

Dismissal wages ;_ 17198 

Labor displacement by mechanization^ 17200 

Workers' education 17206 

Health program arising out of workers' education 17209 

Workers' education in Sweden 17213 

Workers' education and economic literacy 17217 

Industrial recovery after depression. , 17223 

Advantage of size in mechanic,; lion 17226 

Effects of mechanization on workers 17229 

Effect of mechanization on skills 17232 

Increased unemployment among youth 17234 

Effects of technology on employment 17237 

Income distribution and full employment 17239 

Factors affecting labor productivity 17244 

Work-creating technological change 17247 

Labor and capital saving change 17248 

Changes affecting raw materials 17250 

Social accounting faulty : 17252 

Displacement and the young and old worker 17257 

Displacement costs paid by workers : 17258 

Displacement costs chargeable to society 17261 

Cooperation of employment agencies 17264 

Schedule and sununarv of exhibits xi 

Mondav, April 8, 1940 16207 

Tuesday, April 9, 1^40 16281 

Wednesday. April 10, 1940— 16319 

Thursday, April 11, 1940 16391 

Friday, April 12, IIMO 1645£ 

Monday, April 15, 1940 16517 

Tuesday. April 16, 1940 16609 

W^ednesday, April 17. 1940 16639 

Thursday, April 18, 1^0 16697 

Friday, April 19, 1940 ^ 16759 

-Monday. April 22, 1940 168.31 

Tuesday, April 23, 1940 16921 

Wednesday, April 24, 1^0—, 17001 

Thursday, April 25, 1940 17083 

Friday. April 26, 1940 , 17169 

Appendix 17269 

Supplemental data 17597 

■Index I 



SCHEDULE OF EXHIBITS 



Number and summary of exhibits 



Intro- 
duced 
at page— 



A ppears 
on page— 



2428. 
2429. 

2430. 

2431. 
2432. 

2433. 

2434. 

2435. 

2436. 

2437. 

2438. 
2438-A. 
2438-B. 
2438-C. 
2438-D. 
2438-E. 

2438-F. 

2438-G. 

2438-H. 

2438-1. 

to 

2438-0. 

2439. 

243^A. 

2439-B. 

2439-C. 

2439-D. 

2440. 

2441. 



Memorandum: Innovations of major importance to 
industry 

Table: Proportion of hand and machine workers in 
selected industries; based on sample inspections in 
1925 

Table: Employment created by new manufacturing 
industries 

Chart: Capital invested, horsepower and product 

Chart: Productivity, hourly earnings, and unit wage 
cost in manufacturing, 1919-38 

Chart: Fixed capital investment, output, and em- 
ployment in manufacturing, 1919-38 

Table: Productivity, output, and employment — 
percentage changes between designated years. 1 

Table: Index of productivity and unit wage cost in 
selected groups of industries, 1919-38 ^-- 

Table: Production, employment, and productivity 
in 59 manufacturing industries in 1936 

Table: Occupational distribution of gainful workers, 
1880-1939— -as a percentage of all gainful workers. . 

Memorandum: Population and employment, 1870- 
1940 

Chart: Growth of population of the United Spates 
1850-1980 ^ 

Table: Growth of population in the United States, 
1750-1980 

Table and Chart: Estimated labor force of the future 
in the United States, 1940-1980 

Chart: Gainfully employed in the United States, 
1870-1940 

Chan: Percentage of total population gainfully em- 
ploved, by occupational groups, United States, 
1870-1940 ^.-. 

Chart: Number of workers gainfully employed, by 
occupational groups. United States, 1870-1940 

Chart: Distribution of gainfully employed, by occu- 
pational categories. United States, 1870-1940 

Chart: Increase in population and in gainful employ- 
ment, 1940 over 1870, by occupation. United States. 

Charts: Gainfully employed workers in the United 
States, by occupational groups, 1930 



Memorandum: Capital-savings innovations 

Table: Industrial processes ^ 

Table: Fifty typical installations of material-handling 
equipment ^^ 

Memorandum: The myth o' a profitless prosperity 

Table: Statistics on values, production, revenues 

Chart: Fixed capital investment, output, and employ- 
ment in the automobile industry, 1919-38 ^^- 

Table: Indexes of fixed capital, output and employ- 
ment in selected industries, 1919-38 



16212 

16214 

16219 
16223 

16226 

16223 

16229 

16229 

16230 

16232 

16233 

16233 

16233' 

16233 

16233 

16233 

16233 

16233 

16233 

16233 

16239 
16239 

16239 
16239 
16239 

16239 

16240 



XII 



CONTENTS 
SCHEDULE OF EXHIBITS— Continued 



Number and summary of exhibits 



2442. Memorandum: Effects of the radio telegraph and tele- 

phone and of radio broadcasting 

2443. Chart: Technical progress in travel time 

-^444. Chart: Swedish national income and value added by 

manufacture compared with U. S. from 1860 

2445. Table: Real wages 

2446. Statement: The mechanism of photosynthesis and 

national or world economy 

2447. Statement: Atomic power 

2448. News item: Hundred-million-volt, forty-nine hundre*^ • 

ton atom smasher made possible at University f 
California through gift from Rockefeller Founaa- 
tion 

2449. Statement: Summary of U. S. Weather Bureau work 

in long-range forecasting , 

2450. Statement: A practical application of knowledge de- 

rived from the study of plants 

2451. Letter from Elton Mayo to Watson Davis on human 

relations, executive authority, and unemployment.. 

2452. Statement: Background of conflicts 

2453. Chart: Diagram of a complete rolling-mill plant pro- 

ducing sheets 

2454. Chart: Diagram of a complete old style hand mill 

producing sheets 

2455 to 2459. Photographs of strip mills 

2460. Table: Continuous sheet and wide strip mill installa- 

tions 

2461. Table: Estimate of number of workers employed in 

industry in hand mill processes 

2462. Table: ARMCO production 

2463. Table: Distribution of ARMCO sheet shipments be- 
• tween continuous and hand mills 

2464. Table: ARMCO parent company employment, aver- 

age number of employees' 

2465. Table: Emplovment, wages, hours, and production, 

ARMCO M'iddletown plant 

2466. Table: Expenditures for construction, ARMCO 

Middletown plant 

2467. Table: ARMCO average iron and steel sheet selling 

prices 

2468. Table: Iron and steel industry . . . employment 

wages and production 

2469. Table: Iron and steel industry — increase in sheet and 

tin-plate production 

2470. Table: Distribution of sheet and tin-plate production 

to consuming industries 

2471. Table: Examples of increased use of sheet steel 

2472. Table: Industry expenditures for continuous mill 

construction 

2473. Chart: Index of hot rolled steel production 

2474. Chart: Sheet and tin-plate production and number of 

continuous mills operating 

2475. Chart: U. S. Department of Labor indexes of employ- 

ment in manufacturing industries 

2476. Memorandum: Plan for handling hot mill employees 

in connection with new finishing mills 

2477. Tabic: Continuous hot strip mills in the United States 

and cold reduction strip mills 

2478. Article: War and steel ghost towns 

2479. Table: Displacement of men by automatic strip mills. . 
• On file with the committee. 



Intro- 
duced 
at page— 


Appears 
on page— 


16253 
16259 


17311 
16259 


16262 
16264 


16263 
17313 


16276 
16277 


17313 
17315 


16278 


17316 


16284 


17316 


16287 


17319 


16289 
16289 


17320 
17325 


16399 

16401 
16402 


(0 

/facing 
116401 


16402 


17326 


16402 
16405 


17326 
17327 


16406 


17327 


16407 


17327 


16407 


17328 


16411 


17328 


16413 


17328 


16416 


17328 


16423 


17329 


16425 
16429 


17329 
17329 


16430 
16432 


17330 
16433 


16434 


16434 


16439 


16439 


16448 


17330 


16457 
16469 
16470 


17331 
17332 
17339 



CONTENTS 
SCHEDlhLE OF EXHIBITS— Continued 



XIII 



Number and summary of exhibits 



2480. 
2481. 

2481-A. 

2482. 

2483. 
2484. 

2485. 
2486. 
2487. 
2488. 
2489. 

2490. 

2491. 
2492. 
2493. 

2494. 

2495. 
2496. 
2497. 

2498. 



Chart: 
Chart: 
Chart: 
Table: 



Table 
Chart: 
Table: 
Chart: 
Table: 



Table: Cost of production of tin-plate hand mills 

Book: Employment and productivity in a sheet steel 

mill, by Jennette R. Gruener 

Memorandum: A summary of "Employment and 

productivity in a sheet steel mill" 

Table: Mergers and consolidations by major steel 

producers -- 

Chart: Pay rolls and man-hours per ton of output — 
Memorandum: Explanation of material submitted in 

Exhibits 2485-2488 

Chart: Man-hours per ton of ingots produced 

Wages per ton of ingots produced 

Relation of production to pay rolls 

Relation of production to employment 

Comparison of working force, wages, and 
production in continuous butt-weld pipe mills and 

in han d style butt- weld pipe mills . 

Memorandum: Technology and employment — de- 
scription of terms : 

Table: Mileage of railway tracks operated 

Miles of road constructed or abandoned -.. 

Locomotives — number and tractive power 

Locomotives 

Freight-carrying .cars 

Freight-carrying cars 

Table : I nstallation of new equipment 

Table: Passenger-train cars 

Chart: New rails laid in replacement 

Table: Rails laid in replacement and wooden ties laid 

in previously constructed tracks 

Chart: Gross expenditures for additions and better- 
ments, 1923-39 ---- 

Table: Gross expenditures for additions and better- 
ments 

Chart: Railway purchases, 1923 to 1939 

Purchases of fuel, material, and supplies 

Tons of revenue freight originated 

Revenue ton-miles 

Freight traffic 

Revenue passenger-miles 

Table : Passenger traffic 

Chart: Average revenue per ton-mile 

Table : Average revenue per ton-mile 

Average revenue per passenger-mile 

Average revenue per passenger-mile 

Indexes of distribution and rail shipments 

Indexes of distribution and rail shipments 

Income account, class I railways, United 

States 

Railway freight traffic trends 

Chart: Net income or net deficit after fixed charges. _ 

Table: Condensed income account 

Chart: Total operating revenues, total operating 

expenses and net railway operating income 

Chart : Rate of return 

Table: Property investment, net railway operating 

income and ra* e of return 

Chart: 1939 and 1916 railway dollar compared 

Table : How the railway dollar is spent 

Table: Railway operating expenses 



2499. 

2500. 
2501. 

2502. 

2503. 

2504. 

2505. 

2506. 

2507. 
2508. 

2509. 

^510. 

2511. 

2512. 
' On file with the committee. 



Table 
Table 
Chart 
Table 
Chart 



Chart 
Table 
Chart 
Table 
Table 



Intro- 
duced 
at page— 



16474 
16477 
16477 



16481 
16482 

16484 
16484. 
16484 
16484 
16484 



16506 



Appears 
on page— 



16562 

16564 

16564 

16568 

16568 

16569 

16569 , 

16569 I 

16569 

16569 

16570 

16570 

16572 

10572 

16:;;^ 

16573 



16575 
16575 
16577 
16577 

16577 
16577 

16577 
16577 
16577 
16577 



17341 

(') 
17341 

17342 
16483 

17343 
16485 
16486 
16487 
16488 

17345 



16516 


17346 


16552 


17350 


16553 


17350 


16557 


16557 


16558 


17351 


16559 


16559 


16559 


17351 


16562 


17352 


16562 


17352 


16562 


16563 



17353 

16564 

17353 
16568 
17354 
17354 
16570 
17355 
16571 

i73rr 

i6.|i72 
17355 
16573 
] 7356 
16574 
17356 

17357 

(') 
16577 
17358 

16578 
16579 

17350 
16579 
17359 
17359 



CONTENTS 
SCHEDULE OF EXHIBITS— Continued - 



Number and summary of exhibits. 



2513. Chart: Maintenance ratio 

2514. Chart: Five year averages compared with year 1916_. 
Table : Railway taxes per dollar of earnings 

2515. Chart: Percent of total mileage operated by receivers 

or trustees __ 

Table: Railwav receiverships and trusteeships at close 
of each year," 1921 to 1939 

2516. Chart: Trend in railway supply costs since May 1933_ 
Table: Index of railway material and supply costs. _. 

2517. Chart: Employees and hourly compensation 

Table: Employees, hours, and compensation 

2518. Chart: Unit cost of operation 

Table: Unit cost of operation 

2519. Chart: Freight train speed — miles per hour between 

terminals 

2520. Chart: Freight cars per train 

2521. Chart: Gross ton-miles per freight train-hour 

2521-A. Table: Freight operating averages 

2522. Chart: Fuel conservation 

Table: Fup.l conservation 

2523. Chart: Loss and damage expenses per dollar of freight 

revenue 

Table: Loss and damage expenses 

2524. Chart: Casualties to employees in train, train-service 

and nontrain accidents 

Table: Casualties to employees in train, train-service, 
and nontrain accidents 

2525. Chart: Casualties to passengers on trains in train and 

train-service accidents 

Table: Casualties to passengers on trains in train and 
train-service accidents 

2526. Chart: Total loss and damage and injuries to per- 

sons — expenses per dollar of total operating reve- 
nues 

Table: Loss and damage and injuries to persons, ex- 
pense 

2527. Memorandum: Detailed analysis of technological 

advance in the railroad industry with respect to 
maintenance, of way 

2528. Chart: Example of labor-saving machine 

2529. Chart: Buiro crane 

2529-A. Photograph of burro crane 

2529-B. Table: Burro crane 

2530. Table: A typical main track railroad 

2531. Table: Total railway capital outstanding 

2532. Table: Investment in road and equipment 

2533. Table: Number and tractive effort of steam locomo- 

ti ves 

2534. Table: Average tractive effort of steam locomotives 

in service 

2535. Table: Fuel consumed in freight and passenger scrvice. 

2536. Table: Locomotives, passenger and freight cars in- 

stalled and retired 

2537. Table: Average capacity of freight cars in service 

2538. Table: Ties laid in replacement 

2539. Table: Annual expenditures for small tools and sup- 

plies, and roadway jiiachiireiS 

' On flie'^th tlie committee. 



Intro- 
duced 
at page- 



16577 
16577 
16577 

16577 

16577 
16577 
16577 
16577 
16577 
16585 
16585 

16586 
16586 
16586 
16586 
16591 
16591 

16592 
16592 

16592 

16592 

16592 

.16592 

16592 
16592 



16595 
16597 

16600 

16600 

16600 
16601 
16614 
16614 

16615 

16616 
16616 

16617 
16617 
16619 

16619 



Appears 
on page— 



16580 
16580 
17360 

16581 

17360 
16581 
17361 
16582 
17361 
16586 
17362 

16587 
16587 
16588 
17362 
16592 
17363 

16593 
17363 

16594 

17364 

16594 

17364 

16595 
17365 



(0 

16599 

/Facing 

I 16600 

fFacing 

[ 16600 

17366 

17367 

17367 

17368 

17368 

17369 
17369 

17370 
17370 
17371 

17371 



CONTENTS 
SCHEDULE OF EXHIBITS— Continued 



XV 



Number and summary of exhibits 



Intro- 
duced 
at page- 



Appears 
on page— 



2540. Table: Total number of employees, total number of 

hours worked, and total compensation 

2541. Table: Average number of employees by major sub- 

division 

2542. Table: Average hourly or daily earnings of employees 

by major subdivisions ,_' 

2543. Chart: Average hourly compensation of railroad em- 

ployees in the United States 

2544. Table: Total operating revenues and total employees' 

compensation 

2545. Table: Distribution of railway operating revenues 

2546. Table: Operating revenue per employee, per hour of 

service and per dollar of compensation 

2547. Chart: Revenue and wages per ton-mile 

Table: Freight revenues per revenue ton-mile, etc 

2548. Table: Total mileage of track operated 

2549. Chart: Employees and wages per mile of track oper- 

ated ■. 

2550. Chart: Revenue freight ton-miles per employee 

Table: Revenue freight ton-miles per employee 

2551. Chart: Total revenue freight ton-miles and total 

wages 

Table: Wages paid per 1,000 revenue ton-miles 

2552. Chart: Gross ton-miles per employee 

Table: Gross ton-miles per employee 

2553. Chart: Ton-miles per dollar of wages, etc 

Table: Wages per 1,000 gross ton-miles 

2554. Chart: Operating expenses per 1,000 revenue ton- 

miles , 

Table: Operating expenses per 1,000 revenue ton-miles. 

2555. Chart: Operating expenses per 1,000 gross ton-miles_. 
Table: Operating expenses per 1,000 gross ton-miles.. 

2556. Table: Revenue freight ton-miles and gross ton-miles 

per dollar of operating expense 

2557. Table: Operating expenses per mile of road and per 

mile of all tracks 

2558. Table: Increased efficiency and productivity reflected. 

2559. Table: Cost of clearing wrecks, and damage to 

property 

2560. Tabic: Traffic units 

2561- Tables: Decrease in employment opportunities 

2568. 

2569. Chart : Growth of the Bell System 

2570. Chart: Employees and payroll, Bell System ■ — 

2571. Chart: Force losses. Bell System 

2572. Statement: Technology in the Bell System with par- 

ticular reference to employment - — 

2573. Chart: Production employment and income distribu- 

ted. Bell System, 1919-1938 

Table: Production, employment and income distrib- 
uted, etc 

2574. Article: "The Dial Telephone and Unemployment," 

from Monthly Labor Heview, February 1932 

2575. Article: "Text of P^pochal Telephone Decision," from 

the Journal of Electrical Workers and Operators, 
June 1934 

2576. Article: "Costly Dials Make Subscribers Work," 

from the Journal of P'lectrical Workers and Oper- 
ators, March 1935 



16621 

16624 

16625 

16625 

16626 
16626 

16627 
16628 
16628 
16629 

16629 
16629 
16629 

16629 
16629 
16629 
16629 
16629 
16629 

16629 
16629 
16629 
16629 

16629 

16629 
16629 

16629 
16629 
J6629 

16640 
16642 
16647 

16656 

16664 

16664 

16678 



16678 



16679 I (') 



1 On flle'with the committee. 



XVI 



CONTENTS 
SCHEDULE OF EXHIBITS— Continued 



Number and summary of exhibits 




Appears 
on page— 



2577. 

2578. 

2579- 
2581. 

2582. 

2583. 

2584. 
2585. 

2586. 



2587 
to 

2604. 
2605. 



2606. 
2607. 
2608. 

2609. 

2610. 
2611. 
2612. 

2613. 
2614. 

2615. 

2616. 
2617. 

2618. 

2619. 
2620. 

2621. 

2622. 

2623. 
2624. 



Article: "Gifford's Chickens Come Home to Roost," 
from the Journal of PJlectrical Workers and Oper- 
ators, April 1936 

Article: "More Glimpses into Private Life of A. T. & 
T," from the Journal of Electrical Workers and 
Operators, December, 1939 

Tables: St'ected data showing the development 
through the years 1926 to 1938, inclusive, of Class A 
telephone carriers 

Table: Relative activity of Western Electric Com- 
pany's pJant-r 

Table: Bell System — index of output per employee 
and employee man-hour 

Table: Progress of dialization in Bell System 

Table: Production, employment and productivity 
summarv indexes for the telephone industry ^ — Op- 
erators: "^1919-37 1 

Table: Production, employment and productivity 
summary indexes for the telephone industry — all 
employees: 1919-37 

Appears in Hearings, Part 28, appendix, pp. 15634- 
15641 



Statement of James B. Carey, general president. 
United Electrical, Radio and Machine Workers of 
America 

Memorandum: List of companies in which workers' 
conditions were improved by unionization 

Table: Wages and hours of labor at the IBM Endicott 
Plant, 1926-1939 

Table: Routine clerical workers: Cumulative percent- 
age distribution of annual earnings in large and 
small cities, 1929 . 

Table: White collar workers compared with total gain- 
fully emj )ioyed 

Table: Growth of clerical class 

Table: White collar workers in industry 

Table: Clerical and professional workers employed 
and unemployed 

Table: Distribution of clerical employees in 30 cities-- 

Table: Median annual income of clerical and profes- 
sional employees by age groups 

Table: Weekly hours of office employees in private 
business, 1928 

Table: Overtime compensation table 

Table: Productivitv and labor requirements in manu- 
facture of cotton textiles, 1910 and 1936 

Table: Percent of increase in man-hour output of 
processing departments in 1936 compared with 1910_ 

Table: Man-hour output in textile industries 

Table: Index of output per man-hour in the cotton 
goods industry 

Table: Labor productivity and man-hour require- 
ments in manufacturing woolens and worsteds, 
1910 and 1936 

Table: Changes in man-hour output of woolens and 
worsteds '. 

Table: Annual fiber consumption in the United States. 

Table: Index numbers of wholesale prices of textile 
products 



16679 

16679 

16699 

16705 

16705 
16705 

16705 

16705 
16727 

16728 
16746 
16763 

16775 

16800 
16800 
16801 

16804 
16806 

16806 

16806 
16807 

16838 

16838 
16839 

16839 

16840 

16840 
16844 

16844 



(0 

(') 

17408 

17410 

17411 
17411 

17411 

17412 



17412 

17424 

17425 

17425 
17426 
17426 

17426 
17427 

17427 

17427 

17428 

17428 

17429 
17429 

17429 

17430 

17430 
17431 

17431 



On file with the committee. 



CONTENTS 
SCHEDULE OF EXHIBITS— Continued 



XVII 



Number and summary of exhibits 



Intro- 
duced 
at page- 



Appears 
on page— 



2625. Chart: Indexes of production, employment and man- 

hours in the textile industry 

Table: Outstanding statistical facts in address of Emil 
Rieve 

2626. Table: Indexes of total man-hours and employment 

in the textile industry 

2627. Table: Spindles in place, 1921-39 

2628. Chart: Distribution of silk by trades 

2629. Chart: Pfoduction of silk and rayon goods, etc 

2630. Chart: Production of woven goods 

2631. Chart: Spot silk and rayon prices, yearly averages 

2632. Chart: United States consumption of raw silk and 

rayon yarn in the weaving industry 

2633. Chart: Income reports of silk and rayon weaving 

mills - 

' 2634. Table: Index of employment in manufacturing indus- 
tries and railroad industry 

2635. Book: Main Street, not Wall Street 

2636. Memorandum: Machinery creates jobs — What of it?.. 

2637. Chart: Shifts in occupations, 1870-1930 

2638. Chart: Working population in agriculture, etc 

2639. Chart: Movement to and from farms, 1920-38 

2640. Chart: Estimated rural-farm population 

2641. Chart: Rural farm, population — total entrants to age 

group 15-64, 1930-40 

2642. Chart: Totally unemployed and emergency workers, 

male, living on farms, November 1937 

2643. Chart: Partly employed males living on farms, etc 

2644. Chart: Percentage in each tenure class gainfully em- 

ployed in agriculture, etc . 

2645. Table: Adjusted sharecropper and wage laborer net 

income in specified localities, 1932-37 

2646. Table: Income of hired laborers 

2647. Table: Farm labor income 

2648. Table: Agricultural employment in the United States, 

1909-39 

2649,2650. Charts: Hours peracre 

2651. Chart: Variations by areas in labor used per acre in 

producing corn , 1 909-36 

2652. Chart: Labor used per acre producing cotton in major 

areas i 

2653. Chart: Man-hours per acre 

2654. Chart: Man-hours per 100 bushels 

2655. Chart: Tractors; number on farms, 1915-39 

2656. Chart: Horses and mules on farms, 1915-39 

2657. Chart: Percentage of wheat acreage harvested with 

combine in 1938 

2658. Chart: Percentage of acreage of corn harvested with 

mechanical field picker, 1938 

2659. Chart: Labor on a 320-acre central Kansas farm 

2660. Chart: Relation of employment in agriculture to the 

size of agricultural enterprise - 

2661. Chart: Relation of employment in agriculture to agri- 

cultural production 

2662. Chart: Combined investment in work stock, ma- 

chinery and mechanical power en farms operated 
with horses and tractors 

2663. Table: Comparative costs of operating a 320-acre 

wheat farm with horses or with tractor 



16843 

16845 

16846 
16850 
16879 
16883 
16884 
16885 

16886 

16888 



16845 

17431 

17432 
17433 
16879 
16883 
16884 
16885 

16886 

16889 



16900 
16909 
16909 
16923 
16924 
16925 
16926 


17433 

0) 

17434 
16924 
16924 
16925 
16926 


16927 


16928 


16928 
16930 


16929 
16930 


16931 


16931 


16933 
16933 
16934 


17440 
17441 
17442 


16938 
16941 


17443 
16942 


16944 


16945 


16944 
16946 
16946 
16947 
16949 


16946 
16947 
16948 
16948 
16949 


16950 


16951 


16952 
16952 


'16953 
16954 


16954 


16955 


16956 


16956 


16959 


16959 


16961 


17444 



' On file with the committee. 
124491 — 11— pt. 30- 



XVIII 



CONTENTS 
SCHEDULE OF EXHIBITS— Continued 



Number and summary of exhiDiis 



Intro- 
duced 
at page- 



Appears 
on page— 



2664. Table: Comparative cost of operating a 200-acre farm 

with horses or with tractor 

2665. Table: Expenses of operating plantations with crop- 

pers and mules, etc 

2666. Table: Comparison of net plantation income under 

two systems, etc 

2667. Chart: Total farm mortgage debt and ratio of debt to 

value of farm real estate, United States, 1910-39 

2668. Table: Changes in farm mortgage debt, etc 

2669. Table: Estimated amount of farm-mortgage loans out- 

standing, 1910-39 

2670. Chart: Percentage of the value of farm real estate 

belonging to the farm operator, etc 

Table: Percentage of the value, etc 

2671. Table: Equities in farm real estate, etc 

2672. Table: Total farm-mortgage debt, etc 

2673. Chart: Short-term loans to farmers held by commer- 

cial banks, etc 

2674. Table: Total farm real estate taxes, etc 

2675. Table: Estimated number of farms changing owner- 

ship, etc 

2676. Table: Farm real estate held by leading lending agen- 

cies, 1929-39 

2677. Table: Gross income from farm production, etc 

2678. Table: Cash farm income, etc 

2679. Chart: Per capita farm and nonagricultural income, 

etc 

2680. Table: Distribution of gross farm income, etc 

2681. Chart: Price comparisons, farm machines and other 

products 

2682. Chart: The farm dollar 

2683. Chart: Origins of migrants to California, 1935-1937. . 

2684. Chart: Origins of migrants to Oregon, 1933-1936 

2685. Chart: Origins of migrants to Washington, 1932-36-- 
2685-A. Table: Measures of concentration in California agri- 
culture - 

2586. Chart: Percentage distribution of number of farms, etc. 

2687. Chart: Farms and wage workers, etc 

2688. Chart: Average cash expenditure for labor, etc 

2689. Chart: Farms employing no hired laborers. Pacific 

^region and California - 

2689-A. Expert testimony presented at hearings of the sub- 
committee of the United States Senj.te Committee 
on Education and Labor, etc 

2690. Chart: Residence in 1930 of 19,786 agricultural fami- 

-lies moving to California, 1930-39 

2691. Chart: Residence in 1930 of 1 1,201 agricultural families 

moving to the Pacific Northwest, 1930-39 

2692. Chart: Potential productive capacity, income pro- 

duced, and expenditures for public education, 1929- 
1934 

2693. Chart: Index of educational expenditures and other 

governmental expenditures, 1926-34 

2694. Chart: Estimat-ed causes of increase in school cos+s, 

1914-30 

2695. Chart: Trend in number of youth in the United States, 

1920-52 



16962 

16962 

16962 

16963 
16965 

16966 

16967 
16967 
16967 
16969= 

16969 
16972 

16973 

16973 
16973 
16976 

16982 
16984 

'17004 

17004 
17043 
17045 
17046 

17055 
17056 
17056 
17060 

17081 



17064 
17081 
17081 

17084 
17084 
17084 
17084 



17445 

17445 

17446 

16963 
17446 

17447 

16968 
17448 
17448 
17449 

16970 
17450 

17451 

17451 
17452 
17453 

16982 
17454 
/Facing 
\ 17004 
17005 
17043 
17046 
17047 

17455 
17057 
17058 
17061 

17456 



17456 
17457 
17458 

17459 
17460 
17461 
17462 



CONTENTS 
SCHEDULE OF EXHIBITS— Continued 



XIX 



Number and summary of exhibits 



Intro- 
duced 
at page- 



Appears 
on pat'e — 



2696. Chart: Percentages of state and local taxes and ap- 

propriations for public elementary and secondary 
schools derived from property taxes, etc., 1935-36_ 

2697. Chart: Effort and adequacy, 1934 

2698. Chart: Children under 16 years of age and national 

incomes 

2699. Chart: Proportion of native sons and daughters living 

in other states, 1930 

2700. Chart: Proportion of state residents born outside the 

state, 1930-- . 

2701. Chart: Does education pay? 

2702. Chart: Expenditure per pupil in average dailv at- 

tendance, 1933-34 .■ 

2703. Chart: Current expense per pupil, etc., 1930-38 

2704. Chart: Per capita retail sales, 1933 

2705. Chart: Freedom from farm tenancy, 1935 

2706. Chart: Rate per 100,000 population of deaths from 

homicide, 1934 

2707. Chart: Freedom from infant mortality 

2708. Chart: Percentage of children of high-school age en- 

rolled in public and private schools since 1890 

2709. Chart: ReaUzed private production income, 1799-1937 

2710. Chart: Why do youth leave school? 

271 1 . Chart: Relation of fathers' occupations to the amounts 

of education their children received 

2712. Chart: The jobs youth want and the jobs they get.. 

2713. Chart: To what extent do j«outh receive vocational 

guidance from schools? _. 

2714. Chart : Test scores of high-school seniors 

2715. Chart: Enrollment in vocational schools, 1918-1939.. 

2716. Chart: Enrollment in federally aided agricultural de- 

partments, 1918-1939 

2717. Chart: Enrollment in federally aided trade and in- 

dustrial classes, 1918-1939 

2718. Chart: Enrollment in federally aided home economics 

departments, 1918-1939 

2719. Article: Cooperative part-time diversified occupa- 

tions program . 

2720. Table: Number of pupils enrolled in specified voca- 

tional schools, federally aided, by type of class, 
1318-1939 

2721. Table: Amount expended from federal, state, and 

local money for vocational education, 1918 to 1939- . 

2722,2723. Photographs: Burgard Vocational High School 

2724. Chart : Vocational agriculture 

2725. Chart: Vocational agricultural departments 

2726. Chart: Enrollment in vocational schools or classes 

operated under state plans, 1918-39 

2727. Chart: Enrollment in federally aided trade and in- 

dustrial classes, 1918-39 

2728. Pamphlet: Training for the painting and decorating 

trade 

2729. Chart: Expenditure of funds for trade and industrial 

education 

2730. Article- Cooperative part-time diversified occupa- 

tions . f ogram 

1 On file with the co^nmittee. 



17084 
17084 

17084 

17084 

17084 
17084 

17084 
17084 
17084 
17084 

17084 
17084 

17084 
17084 
17084 

17084 
17084 

17084 
17084 
17084 

17084 

17084 

17084 

17145 

17145 

17145 
17158 
17159 
17159 

17160 
17163 
17167 
17168 
17168 



17463 
17464 

17405 

17466 

17467 
17468 

17469 
17470 
17471 
17472 

17473 
17474 

17475 
17476 
17477 

17478 
17479 

17480 
17481 
17482 

17483 

17484 

17485 

17486 

17489 

17490 
/Facing 
1 17158 

17160 
/Facing 
1 17164 

17161 

17162 

(') 

17493 

17494 



XX 



CONTENTS 
SCHEDULE OP EXHIBITS— Continued 



Number and summary of exhibits. 



Intro- 
duced 
at page- 



Appears 
on page— 



2731. Table: Number of pupils enrolled in specified voca- 

tional schools, etQ., 1918-1939 

273 1-A. Chart: Enrollment in federally aided home economics 

departments, 1918-1939 

2731-B. Chart: Enrollment in federally aided agricultural de- 
partments, 1918-39 

2732. Table: Amount expended from federal, state, and 

local money for vocational education, etc., 1918 to 
1939 

2733. Chart: Number and percentage of persons employed 

in different age groups, as painters, glaziers, and 
varnishers, 1930 

2734. Table: Distributive workers, 1930 

2735. Statement: Examples of study units on economic 

problems from American secondary schools 

2736. Statement: Summary of testimony relating to edu- 

cation 

2737. Statement submitted by Charles O'NeiU, president. 

United Eastern Coal Sales Corporation 

2738. Memorandum: Technological disemployment in the 

coal industry 

2739. Memorandum: Technological changes in bituminous 

coal mining and their social-economic consequences. 

2740. Chart: Displacement of miners by mechanization in 

deep bituminous mines 

2741 to 2743. Chart: Displacement of coal miners, etc 

2744. Chart: Energy consumption per capita provided by 

coal and other fuels related to industrial production _ 

2745. Chart: Indicesof employment and productivity output 

and man-hours worked in bituminous coal industry. 

2746. Chart: Tonnage of bituminous coal mechanically 

loaded in deep mines 

2747. Chart: Petroleum production and revenues in 1937 

2748. Chart: Displacement of mines by mechanization 

2749. Statement: Technological unemployment and decen- 

tralization in the rubber industry 

2750. Chart: Industrial pi'bduction during three depression 

periods— 1872-1882, 1892-1902, 1929-1939 

2751. Chart: Industrial production and the labor supply 

during three depression periods 

2752. Memorandum: Work Projects Administration, Na- 

tional Research Project, reports published as of 

April 1940 

2753 to 2758. Tables: Indexes of production, employment, 
and productivity in various industries 

2759. Table: Investment and operating costs or three sizes 

of petroleum-refining equipment, 1939 

2760. Table: Cost of instrumentation of three sizes of petro- 

leum-refining equipment, 1939 

2761. Table: Industrial-instrument expenditures per $1,000 

worth of machinery and equipment 

2762. Table: Trend toward automatic-control instruments . 

2763. Table: Automatic control of -heat treating of steel 

2764. Table: Concentration of industrial research, 1938 

2765. Table: Concentration of research in various industries, 

1938 

2766. Table: Labor requirements per uiiit of output for 

large and small operations 

' On file with the committee. 



17168 
17168 
17168 

17168 



17497 
17499 
17500 

17501 



17168 
17168 


17503 
17503 


17178 


17504 


17179 


17515 


17186 


17516 


17187 


17536 


17199 


17551 


17200 
17203 


17201 
17558 


17203 


17561 


17203 


17562 


17203 
17203 
17203 


17563 
17564 


17219 


17564 


17222 


17222 


17223 


17224 


17221 


17577 


17221 


17582 


17221 


17584 


17221 


17585 


17221 
17221 
17221 
17221 


17585 
17585 
17585 
17586 


17221 


17586 


17221 


17587 



CONTENTS 
SCHEDULE OF EXHIBITS— Continued 



KXI 



Number and summary of exhibits 



Intro- 
duced 
at page- 



Appears 
on page— 



2767. Memorandum: Productivity and employment in 

agriculture 

2768. Memorandum: EflFects of tractor and motor vehicles 

on farm labor requirements 

2769. Memorandum: EflFects of changes in field implements 

on farm labor requirements 

2770 to 2776. Memoranda: Labor requirements in various 
agricultural productions. _. 

2777. Memorandum: Employment and relief problems and 

migration of the lumber industry 

2778. Memorandum: EflFects of mechanization of bitumi- 

nous-coal mining on labor requirements ^ 

2779. Table: Employment status of textile workers during 

year following mill shut-down in 1935 

2780. Table: Duration of unemployment since last job of 

weavers and loom fixers who were unemployed in 
May 1936 

2781. Table: Volume of unemployment experienced during 

1926-35 by weavers and loom fixers 

2782. Table: Age distribution of cigar-machine operators 

and of hand cigar makers whom they replaced 

2783. Table: Employment status of hand cigar makers dur- 

ing five years following displacement in 1931 

2784. Chart: Employment and pay rolls, cement 

2785. Chart: Employment and pay rolls, structural and 

ornamental metalwork 

2786. Chart: Employment and pay rolls, lumber-sawmills.. 

2787. Chart: Employment and pay rolls, brick, tile, and 

terra cotta ^ 

2788. Chart: Value of building construction as indicated by 

building permits 

SUPPLEMENTAL DATA 

Unnumbered. Letter from William S. Elliott to H. Dewey An- 
derson in connection with his testimony 



17221 
17221 
17221 
17221 
17221 
17221 
17221 

17221 

17221 

17221 

17221 
17252 

17253 
17253 

17253 

17253 



17079 



17587 
17588 
17588 
17589 
17593 
17593 
17594 

17595 

17595 

17596 

17596 
17254 

17254 
17255 

17255 

17256 



17597 



INVESTIGATIOJS OF CONCENTKATION OF ECONOMIC POWER 



MONDAY, APKIL 8, 1940 

United States Senate, 
Temporary National Economio Committee, 

Washingt^nt D. C. 

The committee met at 10:45 a. m., pursuant to adjournment on 
Saturday, March 23, 1940, in the Caucus Room, Senate Office Build- 
ing, Senator Joseph C. O'Mahoney presiding. 

Present: Senators O'Mahoney (chairman), and King; Representa- 
tives Sumners (vice chairman), Williams, and Reece, Messrs, Pike, 
Hinrichs, O'Connell, and Brackett. 

Present also : Representative Richard J. Welch, of California ; 
Frank H. Elmore, Jr., Department of Justice; Dr. Francis Walker, 
Federal Trade Commission; George E. Biggs, Social Security Board; 
and Dr. Dewey Anderson, economic consultant to the committee. 

The Chairman. The committee will please come to order. 

Steady improvement in technology has been the distinguishing mark 
of our time. No generation in history has seen anything to compare 
with the advance of science and invention accomplished during this 
generation. More than that, the 10 years since the crash of 1929 have 
probably seen the establishment of more new industries and greater 
teclinological gains in old industries than any decade since the human 
race first began to measure time. 

It was in the midst of the depression that commercial aviation 
conquered both the Atlantic and the Pacific Oceans. Recovery was 
still only a dim hope when the railroads began to introduce the stream- 
liner. Communication by telegraph, telephone, and radio was stead- 
ily becoming easier and more efficient and more widespread during 
the same period. The steady advance of chemistry was creating new 
commodities for the convenience and enjoyment and service of man. 
Every year saw new and greater improvement in motion pictures, 
including the altogether remarkable development of technicolor. 

The same decade which has been notable for its steady demand upon 
Congi-ess from the States and the cities of the land for ever larger 
appropriations to provide work for the unemployed has seen new 
achievements in every branch of human knowledge and industry. All 
of these are the gifts of technology to mankind. Yet in the face of 
them, unemployment of men, unemployment of money, unemployment 
even of the machine which technology has developed, remains an 
unsolved problem. 

It is clear, therefore, that one of the major tasks to be performed 
by the use of human intelligence is the adjustment of our wonderful 
technological civilization to the immediate and pressing needs of 
human living. So today the Temporary National Economic Com- 

16207 



16208 CONCENTRATION OF FCX)NOMIC POWER 

mittee begins this hearing to develop the thought of leaders in the 
world of industry, science, and economics, on this all-importaufc 
riddle of our time, namely, why it is that in a world of inexhaustible 
natural resources, inhabited by men who know more about the 
physical and chemical secrets of nature than all the generations which 
have preceded them, we still have not learned how to apply the 
^wonders of technology to the abundance of nature in such a fashion 
as to provide decent jobs for the millions of idle who are able and 
willing to work. 

The leaders who have been invited here to testify are under no 
direction or restriction of any kind. The committee is only seeking 
light. We are not trying to prove a case for any remedy or for any 
approach. We are not seeking to solicit evidence to justify more 
government, or to justify increased expenditures. We are not trying 
to prove that men should be regimented by law, limiting their right 
to work, or that the use of machines should be in any way restricted 
or made more difficult. 

I say this because I want to make it quite clear at the outset that 
this hearing must not be regarded as in any sense especially designed 
to implement the bill to reduce unemployment which I recently intro- 
duced and which was by many altogether incorrectly described as a 
tax on machines. 

No member of this committee, no employee, no witness, can speak 
for the committee. In this as in all previous studies, we are pursuing 
an objective search for facts. Conclusions have not been preconceived, 
but will take care of themselves when the facts have been developed. 

In the prej)aration of this hearing, the committee has designated 
Dr. Dewey Anderson, an economic consultant for the committee, who 
has had broad experience in this general field, to act as counsel and 
to question the witnesses. 

Are you ready to proceed, Dr. Anderson ? 

Dr. Anderson. Mr. Chairman and members of the committee, as 
has been outlined by your chairman, tlie hearings that will be con- 
ducted in the next 3 weeks will attempt fo get c.t certain of the major 
problems of technology', unemployment and the concentration of 
industry. In building these hearings, we have sought to get together 
and bring before you witnesses who represent large industries, or 
industries in which technology is a paramount feature and in which 
employment is large. 

We do not propose to offer these witnesses as a whole as repre- 
sentative of all that is occurring in industry, but rather as case 
studies of various aspects of the technological problem. From day 
to day, in introducing successive witnesses, we will outline the reason 
for bringing them before you and the matters they propose to discuss. 

In today's hearing we break open the problem with a basic study 
of technology in relation to the concentration of economic power made 
by Dr. T. J. Kreps, economic adviser of the committee. Following 
his testimony today, Mr. Watson Davis, editor of /Science Service, will 
outline new and impending technology, and lay out some of the fields 
of technology that are still to be explored. 

Dr. Kreps is prepared to discuss the topic at this time as the 
witness of the committee. 



CONCENTRATION OF ECONOMIC POWER 16209 

STATEMENT OF THEODORE J. KEEPS, ECONOMIC ADVISER, 
TEMPORARY NATIONAL ECONOMIC COMMITTEE 

Dr. Kreps. Technology, or the science of technique, includes all in- 
novations in the arts of production and trade brought about by science, 
invention, and scientific management. It has created, and is contin- 
ually transforming, modern industrialism. Its elemental power 
caused and v.ill continue to make necessary continuous changes and 
adjustments in our economic, political, and social order. Harnessed 
to consumer welfare, -it is a most powerful servant, capable of open- 
ing up a vast industrial frontier of unexplored abundance. 

Without technolooy the United States would still be a primitive 
society. There would be few large factories, hardly any concentra- 
tion of production, few large corporations in production, finance, 
and trade, a much smaller world-wide interchange of large volumes 
of goods and services, less controversy over foreign-trade policy, and 
no serious national problem either of idle men, or idle money, or idle 
machines. There would also be little, if any, leisure, little release 
from back-breaking toil, few comforts and fewer luxuries, at least 
for the masses of the people, and certainly no extensive technological 
base upon which to build that great democratic civilization which is 
our goal and dream. 

The problems of technology being numerous and complex, I pro- 
pose to raise only a few of wnat seem to me to be the most important 
questions and divide my task into three parts. 

I. I am going to take a brief glance at the history and background 
of technology and ask : 

(1) What are some of the important innovations which have 
changed modern methods of production and trade? 

(2) AVhy is the invention of the art of invention the most impor- 
tant of all inventions? 

(3) Do technical innovations come along in haphazard fashion or 
can thev be predicted? 

(4) "^Vlio introduces them? Why? 

(5) Will technology transform all branches of human effort, or 
is its scope limited? 

II. In the second portion, I am going to take a look at some of 
the more important economic effects and ask : 

(1) How can one measure the various changes caused by tech- 
nology ? 

(2) What important new industries have been created by tech- 
nology ? 

(3) What happens when labor is actually displaced? Where do 
displaced workers go? How long do" they have to hunt for a new 
job? What sort of job do they get? WTiat happens t« their pay? 

(4) How has technology affected the productivity of the worker? 
(o) What has happened to the occupations of our labor force? 

How ? 

(6) What special problems are raised by capital-saving inventions? 

(7) Who receives the benefits of technology? 

(8) Is technology a basic factor in modern business fluctuations? 



16210 CONCENTRA'tLON OF ECONOMIC POWER 

III. In the third portion, I intend to try to get some notion of 
ihe most important general or social effects, and in particular ask : 

(1) ^Without technology would there be so much large-scale pro- 
duction and such large industrial aggregates as there are today? 

(2) Is fhere any connection between technology and the increase in 
recent decades of the number and power of pressure groups? 

(3) Has technology made the world an economic unit? 

(4) If man does not Jearn to control technology, may its power de- 
stroy him? 

(5) Can it be harnessed to create an "America unlimited"? 

Many of the ^lost important technological innovations occurred be- 
fore the dawn of human history. About 150 years ago that modem 
miracle of scientific advance and invention commonly called the Indus- 
trial Kevolution began to speed through the textile industry of Great 
Bx'itain. Starting slowly at first, it soon spread not only horizontally 
to continental Europe and thence to the rest of the civilized world, but 
also vertically with increasing crescendo through industry after indus- 
try, iron and steel, railroads, steamships, agricultural implements, 
public utilities, automobiles, and the myriad wizardries of chemical 
enterprise. 

Tliroughout its history/technology has required a price for its bless- 
ings, and consequently it has been subject to resistance. Even in 
England 150 years ago there were machine-breaking riots, persecu- 
tion of inventors, and legal restrictions. John Kay, who invented the 
flying shuttle in 1733, had to leave England. Hargreaves, the inventor 
of the spinning jenny, was attacked by a mob in his home and his 
model destroyed. Crompton, after inventing the spinner's mule in 
1779, had to flee into hiding. 

Technology for decades has been vigorously attacked as one of the 
major causes of depression, not only in the United States but through- 
ouu the world. I am going to cite but one example from our own 
history. 

After the severe depression of 1873, numerous congressional commit- 
tees were appointed with special instructions to search for causes. 
Thirteen years later, in 1886, th- search culminated in an interesting 
volume entitled Industrial Depressions^ constituting the first annual 
report of the first Commissioner of Labor, the famous Carroll D. 
Wright. 

This study, full of lugubrious prophecies that have not come true, 
^ives a detailed analysis of labor-saving devices of that day, especially 
the detrimental effects. In short, complaints about technology are as 
old as the hills. But it should be pointed out with emphasis, they 
are no older than certain other complaints that are heard at the 
present time. And, being old, the complaints are not necessarily 
groundless. 

REPORT ON THE DEPRESSION OF 18 73 

Dr. Krefs. Now let me just look at some of these other causes which 
businessmen back in the 1870's asserted made it impossible for business 
to go ahead any further : 

Undue influence of agitators. 
Disturbed value of gold and silver. 
Class legislation. 



CONCENTRATION OF ECONOMIC POWER 16211 

Extravagance in government expenses. 

Depreciation of currency. 

National debt. 

Acts that startle money lenders, causing them to withdraw funds 

and refuse loans. 
Low prices for agricultural products. 
Fear of adverse legislation relative to banks. 
Timidity of capital. 

Unfavorable and reckless legislation in Congress. 
Uncertainty of the future monetary standard. 
Democratic Party in power. 
Want of confidence in Government. 
Overproduction. 
Political distrust. 

Want of adjustment between production and consumption. 
Enormous taxation.^ 

In this same report are also listed various remedies suggested by 
business for that depression, some by no means unheard of today, 
such as — 

Good judgment and hard work. 
Confidence. 

Check legislative derangement of the currency. 
Reduce the salaries of officers of the Government. 
Abolish all unnecessary offices of the Government. 
Rigid economy of the Government. 
Local self-government with no Federal interference. 
Enact laws against communistic schemes. 
Abolish taxation. 

Let Government give attention to the individual needs of its citi- 
zens. 
Elect men of better judgment to Congress. 
And, finally, restrict the powers of the President.^ 

Needless to say, the controversies raised by technology have not 
diminished since 1886, nor are they likely to in the future. 

The term "technology" in its narrowest sense refers to changes in 
technical processes, the machinery, the plant, and equipment used by 
businessmen to manufacture and distribute their product. In the 
typical instance such changes increase the product per man-hour of 
labor or improve the quality. But there have been many increases 
in productivity due to factors other than changes in mechanical ap- 
paratus, notably improvements due to scientific management regu- 
larizing the flow of production, lowering costs, and the like. A change 
in floor plan providing a more even flow of raw materials, standardiza- 
tion of materials, a faster or more even flow of farm, factory, and 
mining products to markets, reducing inventories and lowering the 
cost of warehousing, improved factory lay-out and machine assembly, 
economies in the use of power, better selection of personnel with re- 
duction of labor turn-over, time and motion studies reducing the effort 
required by labor to do specific tasks — all those come under the gen- 
eral heading of technology. 

1 The First Annual Report of the Commissioner of Labor, Industrial Depressions, March 
18S6, pp. 61-n:5. 

2 liiJ., pp. 264-270. 



16212 CONCENTRATION OF ECONOMIC POWER 

Technology is consequently much broader than invention or even 
mechanical developments. Its sweep does not depend on the genius 
of singly individuals. Its advance is like that of a tide, where no 
one wavelet is of more than transitory importance. Technical prog- 
ress, like the building of a coral island, is the accumulation of the 
contribution of multitudes of individuals, capitalists, laborers, engi- 
neers, technicians, and scientists. 

Changes in technical development are not haphazard. They are 
the results of the fundamental onward march of scientific knowledge. 
For innovation is a cumulative process, being usually a rearrangement 
or combination of earlier inventions and scientific discoveries. As the 
number of inventions increases, the number of possible permutations 
and combinations multiplies. This can only mean (barring catastro- 
phes) that we are facing not the end of invention but, on the con- 
trary, an acceleration of the rate of invention. It is entirely prob- 
able that we are today on the threshold of a greater period of techno- 
logical advance than ever before in our history. 

I have prepared an exhibit of innovations that are of major 
importance to industry. It by no means comprises a full list of scien- 
tific discoveries. For instance, none of the medical discoveries is 
listed. Tbls exhibit shows in striking fashion the increase in the 
number of such innovations from before the tenth century on to the 
present day. For instance, there are only 3 items listed in the tenth 
century, four in the eleventh. But by the time we get to the eight- 
eenth and nineteenth centuries the list of these innovations runs into 
pages. 

I would like to offer this exhibit for the record. 

The Chairman. Without "objection, the exhibit may be received. 

(The document referred to was marked "Exhibit No. 2428" and is 
included in the appendix on p. 17269.) 

INVENTION OF THE ART OF INVENTION 

Dr. KjtEPs. By far the most significant invention made in the 
nineteenth century was, as Dr. Alfred North Whitehead, the noted, 
philosopher at Harvard University, has so well stated in his book, 
Science and the Modern World, the invention of the art of invention. 
Laymen who have no knowledge of the way in which inventions are 
made frequently labor under the delusion that inventions are hap- 
pened upon by some lucky break, by some peculiar feat of genius, by 
some peculiar aptitude for contrivance or manipulation. And indeed 
this is the manner in which previous to the nineteenth century most 
inventions were actually made. 

But after 1850 the progress of science, particularly of the physical 
sciences, became so systematized that the invention of a product was 
first blueprinted before realized by processes of deduction and syn- 
thesis in the industrial plant. Just as astronomers, by mathematical 
computations of the most complicated sort, insisted that there must 
be another planet in the heavens and later found Uranus, so chemis- 
try, particularly after the promulgation by Kekule of his famous ring 
theory of the structure of carbon, developed the ability to produce 
almost any desired color and property simply by a knowledge of the 
architecture of matter. Thus the contact process for sulfuric acid 
started with elaborate mathematical computations because that was 



CONCENTRATION OF ECONOMIC POWER. 16213 

the only practical way in which to find the one best set of conditions 
under which the synthesis of sulfuric acid by the contact ' process 
could be achieved. The most highly theoretical in modern times is 
in many cases the most eminently practical. 

It is this technique of scientific blue printing by means of involved 
chemical and mathematical formulas which has made the industrial 
research laboratory the creator of new processes and new products, the 
critic of existing techniques; in short, the industrial and commercial 
intelligence section of a modern business. Industrial research labora- 
tories today aren't places in which so-called contriving geniuses work. 
They are, rather, clusters of workers completely familiar with the most 
advanced scientific techniques of analysis who cooperatively explore 
the terrain which their theoretical compilations have shown to be most 
likely to produce results. Thus, in honoring the inventors of Nylon 
recently, the du Pont Co. asked that a group of 11 of their men share 
the award. Invention, in short, is a cooperative product, whether by 
international collaboration of scientists or by a program of industrial 
research financed by large corporations. 

WHY ARE INNOVATIONS INTRODUCED ? 

Dr. Kreps. The primary purpose of businessmen in introducing 
new machinery or new methods is, of course, to reduce costs of pro- 
duction. That is first. The displacement of labor, while often a 
result, is seldom a motive or cause. 

Labor cost is, of course, a highly important item, particularly so in 
the less-mechanized industries. But employers are interested in any- 
thing that will redurri any other expense on their books. In an article 
entitled Invention Und Discoveries^ Dr. S. C. Gilfillan examined a 
typical sample of inventions and found only a third to be labor- 
saving devices; 8 percent were land-saving, 14 percent were capital- 
saving, and 45 percent created new kinds of consumers' goods. Busi- 
ness welcomes new machines which economize fuel, power, and floor 
space more than those which reduce the expense of labor and of direct 
supervision. New machines may reduce one or more of any number 
of costs — costs of raw material, maintenance, repair, inventory. If so, 
they will in time be adopted. 

But reduction in costs is not the onl^ reason. New machines arouse 
pride and loyalty and efficiency in their workers. New machines pro- 
mote cleanliness and safety in the shop, often make it fireproof. New 
machines may change the design or processing or precision of the 
prodiict, making it more acceptable to the market. Machines are 
tireless, accurate, powerful, obedient, never talk back, and never go 
on strike. 

Numerous as are the advantages offered by machine, they will never 
supplant human effort entirely. Machines may take over back- 
breaking, simple, repetitive work. But there are definite limitations. 
Even at the present time by far the larger proportion of American 
labor is not occupied with machines, nor is it likely to be displaced 
by them. There is a vast range of personal and professional services 
in which the machine assists the laborer but does not supplant him — 
barbering, medicine, and so forth. Even in the industries th^t are 
sometimes thought to be dominated by the machine, a careful survey 
made by Dr. Harry Jerome of the National Bureau of Economic 



16214 CONCENTRATION OF ECONOMIC POWER 

Research established the fact that in a representative group of plants 
embracing a variety of manufacturing industries 44 percent of the 
workers were hand workers even as late as 1925, 52 tDercent being 
machine workers, 3 percent being supervisors, and 1 percent being 
teamsters. The figures for individual industries are given in detail 
in this exhibit, which I submit herewith. 

The Chairman. The exhibit may be received. 

(The table referred to was marked "Exhibit No. 2429" and is 
included in the appendix on p. 17276.) 

Dr. Kreps. Note that at that time, even in bituminous coal mining, 
82 percent of the workers- were hand workers. 

New machines easily arouse popular interest and attention. Hence, 
their importance is often exaggerated. But the process of mechan- 
ization is neither automatic nor inevitable. It depends on size and 
weight of the product, on the uniformity of raw materials, and on 
the degree of standardization possible, and the like. Adaptability 
to use of power and mechanical and chemical engineering processes 
is fundamental. The industry, the firm, the management, the tech- 
nical labor force, and, above all, the customers, all vary in willingness 
to accept and ability profitably to employ technological advance. 

Coming now to the second part of the testimony, the Economic 
Effects of Technology, some of the more important economic effects 
are given in the outline below. This outline, it should be observed, 
is in no way complete or exhaustive. It greatly oversimplifies the 
problem because there are so many currents and crosscurrents inter- 
acting simultaneously. There are short-run effects and long-run 
effects, interindustry and intraindustry repercussions. But the out- 
line does indicate the important types of technological change. Mr. 
Chairman, I would like to put the outline directly into the record 
without reading it in detail. 

The Chairman. You want it to appear as a part of your testimony 
at this point? 

Dr. Kreps. Yes, sir. 

The Chairman. Very well; it may be so ordered. 

(The matter referred to follows:) 

Important Types of Technological Change 

I. Inventions of a new product or service in- Representative Problems 
volving investment in new plant and new Raised, 
enterprise : 
A. If making a product or doing a job that 
would otherewise not exist: 

1. Buoyancy of exploring a new market Credit expansion. 

may enlarge business borrowing Cyclical mal-investment. 
and with a "multiplier" effect in- 
crease the volume of production, 
consumption and employment: 
(a) Rapidity and extent of success 
depends on economic condi- 
tions, on market resistance, 
on industrial controls, etc. 
(6) Often increases inter-industry 
and inter-commodity com- 
petition. 

2. May cause fight for share in con- Mass persuasion. 

sumer dollar. 



CONCENTRATION OF ECONOMIC POWER 



16215 



I — Continued. 

B, If partly displacing an existitig product 

or service: 

1. Gives outlet for spirit of gain with 

new investment, employment and 

production, sometimes in new 

areas. 



Migration of industry. 



Those making old product intensify 
efforts to survive. 



Abandoned plants. 
Ghost towns. 



II. Labor saving devices, especially those sub- 
stituting machinery and mechanical 
power for labor: 
A. Manifold effects will depend on whether, 
and the extent to which, net savings 
are passed on in one or more or aU of 
the following ways : 
1. To consumers in lower prices: a 
positive stimulus to increased con- 
sumption, production and higher 
standards of living: 
(a) Dollar volume of sales as large 
or larger: 
(i). All the workers attached 
to the industry re- 
absorbed, e. g., litho- 
graphing, 
(ii). Consumers get more of 
same product; the econ- 
omy gets stimulus of in- 
creased demand for raw 
materials, expanding out- 
put, etc. 

(aa) Changes in consum- 
er expenditure 
patterns. 
(6) Dollar volume of sales less: 
(i). Consumers have more to 

spend on other things, 
(ii). More volume, higher effi- 
ciency, more workers 
not only in other indus- 
tries but in raw material, 
transport and distribu- 
tive trades. 
2. To labor in: 

(a) Lighter work and better condi- 
tions: 
(i). No change in number 
employed but wages 
may be lower. 
(6), Fewer hours per day or per 
week, 
(i). If output per worker per 
day or per week remains 
the same, prices and 
production remain the 
same. 
(aa) Fewer man-hours per 
unit of product — 
increased leisure. 
(66) Shift of demand to 
some ex ten t — 
home furnishings 
to automobiles 
and moving pic- 
tures. 



Large scale production. 
Heavier fixed charges. 



Occupational obsolescence. 
Frictional unemployment. 
Vocational retraining. 



Price disturbances. 



Women in industry. 
ChUd labor. 



Education for leisure. 



"Caprice" consumption. 
Greater cyclical instability. 



16216 

II — Continued. 



CONCENTRATION OF ECONOMIC POWER 



\ 



(ii). 



If output per worker per 
day rises — lower costs 
may mean lower prices 
with further results, 
same as under (a) above : 
(c) Higher money wages per hour: 
(i) Shift in pattern of income 
distribution, if unem- 
ployed without income 
are included, 
(ii) Larger proportion of pro- 
ductive resources ab-- 
sorbed in making com- 
forts, 
(iii) More vivid contrast be- 
tween scale of living of 
laborers in low-wage, 
non-industrialized areas 
and high-wage areas. 
3. To capital in higher profits on capi- 
tal: Increased funds available for 
further expansion: 
(a) If plowed back may increase: 
(i) Concentration of produc- 
tion in few firms, 
(ii) Temptation to unwise ex- 
pansion, 
(iii) Importance in competition 
of length of purse. 
(6) If not re-invested may increase 
size of stagnant pools of sav- 
ings to point where portion 
of income stream buying 
output of industry is too 
small at current prices. 

(c) Consumption of the "luxury" 

.. type. 

(d) Investment decisions 

hands — problem of 
III. Capital-saving inventions. 

A. Rationalization measures, i. e. 

in organization of production or labor, 
e. g., scientific management, Taylor 
system, Bedaux system, standardiza- 
tion, etc. 

1. Existing firms may produce more 

without any rise in investment or 
employment. 

2. Capital-labor ratio may rise, e. g., 

automatic looms, speeding up of 
spindles, higher speed of transport 
due to better roads and engines. 
B'. Labor- and cost-saving inventions in 
capital goods industries. 

1. Not so much labor absorbed in in- 

dustries producing machines. 

2. Without change in volume of savings, 

problem of finding outlets for idle 
money is made more difficult. 

3. Usually old capital must be revalued 

by large write-downs or increased 
depreciation and obsolescence 
charges. 



in few 
outlets. 

changes 



"Wastes of monopolistic (50in- 

petition. 
Excessive capacity. 

Inefficient financial Goliaths. 



Restricted markets. 



Idle money in banks and other 
lending institutions. 



Men out of work. 
Low interest rates. 



Temptation to resist techno- 
logical change. 



CONCENTRATION OF ECONOMIC POWER 16217 

Dr. Keeps. I intend merely then to call attention to the fact that there 
are three types of innovations here dealt with — I, those innovations 
which result in a new product or service involving investment in new 
plant or new enterprise; II, labor-saving innovations, especially 
those substituting machinery and mechanical power for labor; and 
finally. III, capital-saving innovations. 

The Ch-vikman. As I recall, earlier in your statement you quoted 
some student of technology as endeavoring to classify these various 
inventions as to percentages of each. Perhaps it would be well for 
3'ou to repeat that statement here. 

Dr. Krips. In his sample he found only one-third to be labor- 
saving devices ; that is, coming under II. 

LABOR-SAVING DEVICES 

The Chairman. That is, only one-third of all of the inventions or 
improvements of technology are labor-saving in character. 

Dr. Kreps. In their direct operation. 

The Chairman. And what percentage had the effect of establish- 
ing new industries or new plants, new enterprises or new products? 

Dr. Keeps. Forty-J&ve percent, as he listed them, created new kinds 
of consumer goods, some difference in the product which made it 
more salable, and in some cases entirely new products. 

The Chairman. Was any attempt made to determine to wnat ex- 
tent those new consumer goods were competitive with existing goods ? 

Dr. Kreps. He made no such attempt in his sample. 

The Chairman. There is that phase of the problem; is there not? 

Dr. Keeps. Yes; as I indicate under I, part 2, such innovations 
may cause a fight for a share of the consumer dollar, and therefore 
lead to the use of various devices of mass persuasion. 

The Chairman. In other words, many of these new products are 
substitutes for old products. 

Dr. Kreps. Quite so. 

The Chairman. Rayon is a substitute, at least to some extent, for 
silk. 

Dr. Kreps. Exactly. 

The Chairman. Have you made any catalog of such substitutes? 

Dr. Kreps. I have not. 

The Chairman. Is any such catalog available ? 

Dr. Kreps. I know of none that is available. There have been 
given for individual products all the competitive commodities in 
the field, of course. I have, myself, in a book on sulfuric acid, 
indicated in a chapter the number of substitute commodities, a 
phenomenon that I call intercommodity competition, that tended to 
share the market with sulfuric acid. 

The Chairman. Dr. Anderson, will any of the witnesses go into 
that phase of the subject? 

Dr. Anderson. Yes, sir; it is a very difficult topic, as you know, 
sir, to get the interrelationship, but I "hope that when we move into 
automobiles tomorrow we will , directly concern ourselves with re- 
pkeement and substitution of automobiles for other products, and in 
specific cases- in that way we hope to bring them out in each successive 
day's hearings." 

124491 — 11— pt. 30- 3 



16218 CONCENTRATION OF ECONOMIC POWER 

The Chairman. I was thinking rather of commodities like rayon, 
plastics, and the like. 

Dr. Andebson. We have one hearing on textile fibers which will 
treat of that particular one, rayon, and its effect upon the entire 
textile market. 

The Chairman. I think it might be very illuminating if some 
study was made of substitutes as a general subject. 

HOW MEASURE THE IMPACT OF TEOHNOLOGY ? 

Dr. Kreps. The first problem to which I want to return is the 
difficult one of how to measure the various changes caused by tech- 
nology. 

The impact of technology is not a simple one or a direct one. 
Prof. Frederick C. Mills of Columbia University spent more than 10 
years directing a staff at the National Bureau of Economic Research 
m a study of this problem. He has published 3 large volumes of 
findings which will be heavily relied upon in these hearings. Yet 
he regards the job as by no means complete. In the National Re- 
search Project, Mr, David Weintraub has published more than 60 
volumes, and of course one agency that has been assembling, study- 
ing, and publishing practically all the fundamental data that is 
available on this subject is our own Bureau of Labor Statistics, But 
as Dr. Mills has pointed out : 

Technical change is a many-sided process that affects economic institutions 
in economic activities in numerous ways. The opportunities open to entre- 
preneurs ; the tlow of savings ; tlie kind of capital goods required ; ttie rate of 
obsolescence ; the soundness of existing investments and of the debt structure 
that rests upon them ; the amount of labor needed and the kind of skills 
required in the working force ; costs and prices and the distribution of pur- 
chasing power^— all these are directly affected by changes in productive tech- 
nique. Moreover, the problems raised by technical changes may be quite differ 
ent at different times and in different conjunctural conditions. It is a probleta 
that calls for realistic, first hand study, that is both intensive (in its bearing 
yju the fortunes of single industries and industrial groups) and extensive (in 
its bearing on the production structure as a whole and on tlie working of the 
price and credit systems).^ 

Thus, to attempt to measure the amount or economic enectsy ^of 
technological change merely by taking, say, a given manufacturing 
industry and comparing output with number of men employed or 
man-hours worked at different times, say in 1$T0 or 1900 and 1929 or 
1937, is not even to scratch the surface of the problem. Many more 
measurements are required. In addition to knowing (1) what has 
happened to physical volume of total production of all products 
and (2) what has happened to the production per worker and per 
man-hour of labor in all important branches of business an adequate 
analysis requires measurements of such things as (3) primary power 
utilized both in total volume and in amount per employee; (4) num- 
ber of workers employed; (5) fluctuations in unit prime cost; (G) 
money spent for industrial' research ; (7) number and importance 
of new manufacturing materials or new processes; (8) figures on 
wastage of manufacturing materials; (9) produc ' n of secondary 
materials such as scrap iron, rubber, copper, tin, and the like; (10) 
number of industrial accidents; (11) extent, degree, and quality of 

^Frederick C. Mills, "Industrial Produntivitv and Pricps." in Journal of the American 
Statistical Association, No. 198, Vol. 32, June 1937, pp. 247-248. 



CONCENTRATION OF ECONOMIC POWER 16219 

lighting and other factors necessary to 24 hour a day oppration; 
(12) improvement in working conditions; (13) wholesale and retail 
prices of the articles manufactured; (14) percentage of new enter- 
prises started jx^r year; (15) hourly, weekly, and yearly wages, in 
mone}' and in goods; (16) returns to the proprietorship account in 
dividends, interest, profits, or managerial salaries, and above all, the 
effects on other industries in the shape of interprocess, intercom- 
modity, and interindustry competition. 

It is obviously impossible to attempt to give even a fraction of 
the time and space necessary to an exhaustive analysis. One must 
pick and choose and that is exactly what I propose to do. 

NEW INDUSTRIES CREATED BY TECHNOLOGY 

Dr. Kreps. I am first going to go into the question of what im- 
portant new industries have been recently created by technolog}\ 

The most startling of all accomplishments of technology is that 
of creating entirely new products and doing jobs that otherwise 
would never be done at all. Without technology we would not have 
such marvels of engineering genius as the Hoover Dam, or Grand 
Coulee, or the Triborough Bridge. That work would not be done. 
Nor would we have such products as the radio, the automobile, the 
telephone, the railroad train, alloy steels, plastics, rayon, nylon, 
and the like. These and other new industries employ millions of 
workers. 

A tabulation published by the National Industrial Conference 
Board in its interesting study on Machinery^ Employment^ and 
Purchasing Paioer, provides a good case in point. I should like 
to submit this exhibit for the record. 

The Chairman. The exhibit may be received. 

(The table referred to was marked "Exhibit No. 2430" and is 
included in the appendix on p. 17276.) 

Dr. Kreps. It lists 18 industries that have been started in the 
United States since 1S70 and now employ millions of men. 

These are, of course, by no means all additional jobs. Even the 
automobile industry supplanted a large number of little enterprises 
that used to make wagons, buggies, harnesses, and other such equip- 
ment. Livery stables went out of business, and the farmer's market 
for oats, hay, and the like, in large part, vanished. 

Moreover, all new inventions have to be bought and paid for, 
largely by consumers whose incomes have not been expanded. 

Representative Reece. If you don't mind an interruption, do your 
figures on motor vehicles include the sales force, which would come 
more nearly being the phase of the industry which replaces livery 
stables ? 

Dr. Kreps. This is the manufacturing end of the industry, not the 
automobile vehicle retailing. That is, this does not include garages, 
and so forth. 

For consumers, the purchase of something new means going 
without- something they formerly used to buy, if they haven't had 
an increase in income. It is said, for example, that the propor- 
tion of income spent for home furnishings and for clothing has 
been decreased by the demands upon the budget made by the auto- 
mobile for gasoline, repairs, and the like. 



16220 CONCENTRATION OF ECONOMIC POWER 

Similar comments could be made on all the industries mentioned 
in the exhibit. Rayon has, in part, supplanted cotton and woolen 
fabries, particularly those of high quality. Manufactured ice -or 
mechanical refrigerators have supplanted' the old-fashioned ice plant, 
ana the like. 

Now, in discussing the second type of innovation, the labor-saving 
innovation, one of the most important problems raised is, what 
happens to the laborers actually displaced? 

The easy answer to this question is usually, "They are absorbed 
elsewhere," 'or "They are released for easy jobs in the clerical profes- 
sions or in the service trades." This idea had a good deal of validity 
when work was plentiful as it was before 1890. 

But as Dr. Mills writes in summarizing his studies : ^ 

A facile dismissal of ^he problem on the assumption that an automatic adjust- 
ment to industrial shifts is effected, with re-employment of all displaced produc- 
tive factors, is no longer possible. 

DISTRESS TO LABORERS CAUSED BY MACHINES 

Mr. HiNRiCHS. May I interrupt at that point a moment, Dr. Kreps ? 
You say that reabsorption from the displacement that occurred was 
relatively simple with rapid expansion. Can you cite evidence to that 
effect, and how do you reconcile that statement with the character of 
the machine riots which were possibly commoner in the nineteenth 
century than they are today ? 

Dr. Kreps. The machine riots owe -a good deal of their intensity at 
that time to the fact that the machine was something absolutely new, 
and they had a good deal more public support in resisting it than they 
can get today wnen we are accustomed to technological changes. 

Furthermore, we have made adjustments today which were not made 
at that time; since the machine was relatively new in Great Britain, 
they had not yet developed the various devices for facilitating the 
transfer of labor and its employment in other industries that we have 
developed in modern times. 

My point is simply that when you have, as you did to begin with, an 
innovation, say, merely in the textile industry, and your economy is 
still 90 percent agricultural, as even ours was in 1790, the amount of 
displacement the machine causes is relatively small ; but when you have 
become, as we have in recent years, more than 60 percent industrialized, 
and you get machine technology, innovations going on in range after 
range of enterprise, your problem greatly increases. 

Mr. HiNRiCHS. Your statement in all events isn't based on any studies 
that were made in that earlier period, tracing through what did happen 
to particular groups of displaced workers. For example, one of the 
major displacements was the displacement of the home weaver by 
machine weaving, and when we come down to date, we have actually 
traced through what happens to some of the individuals, as Mr. Wein- 
traub did, for example, with silk weavers displaced, with some knitters 
that had been displaced in Philadelphia. We don't have any ma- 
terials that you know of in the nineteenth centurv that give a contrast- 
ing picture of an easy transition at that time as against the difficult 
transition at this time with the individual worker displaced. 

j.,V^?^o5*^»,^' Productivity and Prices," Journal of the American Statistical Association, 
'one 1937, No. 198, Vol. 32, p. 247. 



CONCENTRATION OF ECONOMIC POWER 16221 

Dr. Kreps. Coming back again to the United States— and I am 
talking primarily about the problem here — I think the picture which 
de Tocqueviiie gives us of the United States in 1820 indicates rather 
clearly whatever displacement took place was readily compensated 
for; there were places, frankly, where laborers could go. It is quite 
true that in Great Britain such studies as Hammond's The Village 
Labourer and The Town Labourer?- Thomas Hood's famous poem, 
The Song of the Shirt, and others, indicate that there was localized 
distress of a very acute sort. Nonetheless, so far as the economy as 
a whole is concerned, I don't believe the problem had nearly the 
magnitude, certainly in the United States, at that time that it has 
now. 

Mr. HiNRiCHS. I don't want to push the point further, but there is a 
difference between the effect on the economy as a whole and the effect 
on particular workers. We may want to develop that somewhat later. 

Dr. Keeps. Quite so. 

The Chairman. That differei^ce is apparent throughout the whole 
history of the development of technology, isn't it, the effect upon the 
economy as a whole and the effect upon particular workers ? 

Mr, HixRiCHS. I think that the problem of the relationship with 
tlie machine in detail to particular individuals and groups of indi- 
viduals is of fundamental and overwhelming importance, and it may 
possibly be somewhat confused in discussions of the effects on the gen- 
eral economy. I know of no evidence to indicate the fact that ths 
problem of individual displacement has not been a very acute one. 
Whenever a major innovation has been introduced the evidence of the 
nineteenth century in general economic literature seems to me to indi- 
cate that effect on the individual was present, was very terrific at that 
time, and was handled at that time with possibly less social con- 
sciousness and awareness of the problem than I should hope would be 
present in our handling of that problem at the present time. 

Dr. Krei'S. Certainlj', beneficial as the machines in the aggregate 
have been in lightening the work of labor and in increasing the 
amount of available product, and even graniing that in the long run 
labor manages to find other employment, the question still remains 
why those who can least bear the burden are required to make the 
sacrifices demanded of them by tlie machine. On this point the In- 
dustrial Commission, composed mostly of McKinley Republicans, 
slated 40 j^ears ago in its report: 

The interest of the man who sees a machine invading nis cratt and thn- n , - 
ins to rob him of the opportunity to sell his skill is little affected by the results 
Which the introduction of the machine may exert 20 years hence upon society, 
upon his trade, or even upon his children. He is concerned with getting bread 
and shelter tuday and tomorrow.^ 

And they go oii to say ; 

From the social standpoint, justice might also seem to require compensation 
for the destruction of the value of special skill. When a man has devoted ye irs 
to the acquirement of an ability, he may be excused for feeling that he has a 
vested right in his income from the use of it. This feeling, indeed, is at the 
bottom of the machine-breaking and the other less violent means by which men 

^John L. Hammond. The Village Labourer, 1760-1832, Longman's, 1917. The Tovn 
Labourer, 1760-1832, Longman's, 1920. 

' FinnJ Report of the Industrial Commission, House Document No. 380, 57th Consress 
1st Session, p. 822. 



16222 CONCENTRATION OF ECONOMIC POWER 

have undertaken to maintain their hold on work which they have felt belonged 
to them.^ 

Of more than usual interest is the recommendation of this Indus- 
trial Commission that — 

* * * the only way in which the workmen in a particular trade can, by 
their own action, avoid the immediate hardship that results from improvement 
of machinery and methods in their own craft seems to be by united action, taken 
through some such organization as a trade union. It is believed to be impos- 
sible to point out any instance in which unorganized workmen have received 
any immediate and visible benefit from the introduction of new machinery in 
their trade.^ 

The problems of isolating such temporary technological unemploy- 
ment from other kinds of unemployment is a difficult one. That 
accounts, of course, Mr. Hinrichs, for the lack of studies until a com- 
paratively recent date. It is mixed up with various other forms of 
unemployment : Workers who have lost their employment on account 
of seasonal influences, cyclical unemployment, unemployment as the 
result of a change in the age composition of the population or over- 
crowding in certain branches of the labor market, for example, the 
middle classes of women workers, and so-called frictional employment 
which represents the reserve supply on the labor market. 

Recently some notable sample studies have appeared, among them 
that of Dr. Isador Lubin, of this committee, entitled The Absorption 
of the Une77iployed by American Industry (published by the Brook- 
ings Institution, pamphlet series vol. I, No. 3). In his sample of dis- 
placed workers less than a third of those who found jobs returned to 
their old industries, the rest beuig unemployed for as much as a year 
before they found work. 

Another study by Dr. E. Wight Bakke followed certain displaced 
Hartford rubber workers.^ During the first year the skilled workers 
lost '4.8 months of work, the unskilled 4.6 months. The annual in- 
comes of the former group fell to 50 percent of what they had earned 
in 1928, the latter to 62 percent. In the third year following the shut- 
down, not only were the relative losses of the skilled greater than 
those of the unskilled, but the absolute average annual incomes were 
lower. As Dr. Bakke says : 

Apparently the qualities which helped men to rise £o skilled jobs and high 
wages while at work are of limited use in helping to readjust satisfactorily 
when the job goes. 

It is not necessary to refer to the excellent and graphic studies of 
the National Research Project, nor to call to mind The Grapes of 
Wrath of John Steinbeck, to emphasize the hardships suffered by 
those who are displaced today, even by those who are "tractored 
out" on a farm. 

PRODUCTIVITY OF LABOR 

Dr. Kreps. The next question I want to raise is: How has tech- 
nology affected labor's ability to produce? The effect of machinery 
upon the average amount produced by the American worker in the 
manufacturing industries is strikingly shown in a chart entitled 

'7!>iU, p. 824. 
" Ihid., p. S25. 

3 E. W. Bakke, Former L. Candee Workers in the Depression, lale University Press, 
N'ew Haven, 10;j4. 



CONCENTRATION OF ECONOMIC TOWER 



16223 



"Caf>ital Invested, Horsepower, and Product," taken from Carl 
Snyder's book, Capitalism the Creator.^ 

i would like to submit this chart as an exhibit. 

The Chairman. The chart may be received. 

(The chart referred to was marked "Exhibit No. 2431" and appears 
below.) 

Exhibit No. 2431 



10 



CAPITAL INVESTED, HORSEPOWER, 
8. PRODUCT 

PER WAGE EARNER IN MANUF. 
U.S. 



RATIO SCALE 




1850 1860 1870 1880 1890 4900 1910 1920 1930 1940 

XXVII. THE CAPITAL INVESTMENT AND THE WAGE OF THE WORKER 

Dr. Kreps. You will note that the physical product per worker 
since 1870 has more than doubled. There has been a striking increase 
in the capital invested per wage earner in dollars and in the horse- 
power per wage earner. Meanwhile the average hours of work per 
week in all industries have dropped from levels of around 60 and 
70 in 1870 to the 40-hour week at the present time. 

The Chairman. Does that appear on this chart? 

Dr. Kreps. You have to read it at the bottom. 

The Chairman. Oh, yes; the lower line shows the trend of the 
a.er-^ge b.oiirs per week in all industry. 

Dr. Kreps. That is riirht. 



iCarl Snyder, CapitaUam the Creator, MacMillan, 19^0. 



16224 CONCENTRATIQN OF ECONOMIC PawBR 

The Chairman. What is the source from which these figures were 
taken? 

Dr. Keeps. Dr. Snyder, who is an economist for the Federal Ee- 
serve Bank of New York, had a vast array of statistical data and 
they have been pieced together from that array. To quote all the 
sources would absorb considerable time, but he is a rather competent 
statistician, and therefore I have taken it from him. 

The Chairman. The heavy black line at the top indicates that there 
has been a tremendous increase in capital investment as related to the 
dollar wages of the worker. Is that correct? 

Dr. Kreps. That is correct. 

The Chairman. And that, of course, reflects, I take it, the in- 
creased cost of plant under modern teclmological tLf„ ,ge. Is that 
correct ? 

Dr. Keeps. There is a dispute on that point. The statistics do not 
speak with one voice. 

The Chairman. What is the explanation, then, of the increased 
investment ? 

Dr. Keeps. First of all, the increased investment is in dollar figures. 

The Chairman. Is in what? 

Dr. Kreps. In dollar figures, and there is no good way of deflating 
dollar figures of capital invested for changes, for example, in the 
general price level. 

Senator King. We know that a great deal of machinery has been 
obsolete, characterized as obsolescent, which has called for very large 
capital investments in order to replace the displaced machinery and 
to keep up witii the d'^mand for the nev^ products and the demand 
of the market for the products. 

increased capital per unit of product 

Dr. Kj?eps. The point that I think the Senator was raising was the 
one whether or not the amount of capital per worker, or rather per 
unit of product per worker, had tended to increase. We have to get 
back to the dollar figures, and as soon as we do th^t we feel that 
certainly the amount of capital kept up with product ; in other words, 
there was what we call an intensive application of capital up to 1910, 
Since 1910, and particularly since 1925, there seem to have been cer- 
tain changes introduced which made it possible to make more product 
with less dollar investment of capital-; in other words, innovations 
have made it possibl*} for a machine costing less money to do as much 
or more work than the old machine; we have. improved the design 
and the effectiveness of our niachinery, and it is on that second point 
that at the present time the statistics do not speak absolutely clearly, 
although they do since 1925. , 

The Chairman. Then what is, in simple words, the significance of 
this first line, this upper line? 

Dr. ICreps. To indicate two facts, and Dr. Snyder, I think, has 
indicated them in his footnote: That the amo'.uit of increase in prod- 
uct per worker is largely due to increased machinery, and increased 
horsepower in that machinery, put at the worker's disposal, and that 
that larger volume of machinery in turn has been due to business- 



CONCENTRATION OF ECONOMIC POWER 16225 

men taking their savings and placing them in capital equipment at 
the disposal of society. That is at least what I take it this chart 
represents, and that is the meaning I wished to convey. 

The Chairman. Doesn't that mean increased investment in plant 
and equipment? 

Dr. Kreps. Oh, quite, an absolute increase, positively. I had inter- 
preted your q lestion as being one in which you wanted to know 
whether the ii crease was more rapid than the increase in physical 
product. 

Senator Kjng. It was onl}^ a few years ago Mr. Ford discarded 
machinei'y and plants that were worth more than 50 to 65 millions of 
dollars, and the larger part of his capital new consists of plants 
which of course deteriorate from day to day and from year to year 
and call for increased investment. 

Dr. Kreps. That is right. 

Mr. HiNRiCHS. Mr. Chairman, in connection with this chart and 
merely to clarif}'^ the record, I would like to comment on that bottom 
line for a moment. This chart is constructed on a ratio scale and 
that means that the base line of the chart is not a zero line; that is, 
obviously hours per week have not gone down to almost zero, but 
effectively that bottom line as far as hours is concerned would rep- 
resent about 38 hours a week at the present time, and back in 1929 
it would have represented some 44 hours. 

SHORTENED WORKING HOURS 

Dr. Kreps. The point that I wanted to make in connection with 
that chart which slightly exaggerates the movement in hours is that 
(here had been a declining trend throughout our earlier history. Our 
tigures in the Bureau of Labor Statistics would indicate that between 
1909 and 1929, let' us say, hours were fairly substantially decreased, 
not as much as they have been decreased from 1929 to 1939, but the 
late at which hours were shortened was not more than twice as great 
in this latter period as in the earlier period, and this chart, merely 
from the point of view of the record and from that single point of 
view, slightly exaggerates the moA'ement that has taken place; it 
has not been quite as extraordinary a movement as it might seem to 
be in this ratio plotting. That was a period of unusually rapid and 
unusually concentrated change in hours worked. Since 1933, since 
J 932 as a matter of fact, there has been relatively little change in 
hours worked. Actually they tend now to be longer than they were 
in 1932. If you contrast the rate of change between 1929 and 1932 
you have an exceptional and extraordinary change in hours worked. 
If you consider the 10-year decade as a whole, the shortening of hours 
is much less exceptional than it might appear to have been on the 
basis of this chart. 

I think -I can explain. Senator, that what Mr. Hinrichs is say- 
ing is perfectly true, namely, that a reduction, say, of 6 hours 
per week when you start from 60, is only 'a 10-percent reduction; 
that same reduction taken from, say, 30 hours a week, is a 20 percent 
reduction. Therefore, a chart of this order visually, particularly in 
that last period, would exaggerate the amount of decline. 



16226 CONCENTRATION OF ECONOMIC POWER 

Mr. Pike. On the other hand, it dampens the upward movements, 
too. 

Dr. Kreps. Yes; '* does that. 

Dr. Walker. ^^^ did you explain exactly what that top line, capital 
invested, means? 

Dr. Keeps. Dr. Snyder has taken this with certain modifications 
of his own from the successive censuses of manufacture plus a series 
that is kept up since 1920, I believe, by the Federal Reserve Bank of 
New York. 

Dr. Walker. Does it mean plant or all assets? 

Dr. Keeps, It does mean all capital invested; it does not mean just 
tixed capital. 

Dr. Walker. It would be different if there were changes in the 
ratio. 

Dr. Kreps. If there had been any substantial change in the ratio 
of inventories to fixed capital. 

Representative Reece. What would be the effect of that top line 
representing capital invested, if it were based upon the wage-earner 
hour rather than upon the wage earned? The difference would be 
much greater, would it not? 

Dr. Keeps. That is true. Of course in modern times plants are 
tending to operate on a more uniform basis, that is they will tend to 
operate, say 2 shifts, 16 hours ; an intensive use of their capital , in 
other, words, is taking place, so that you get a modified effecr. 

While Dr. Snyder's chart exhibits the rate of growth from 1870 
to 1930, the chart which is found in a publication issued this morn- 
ing by the Brookings Institution, written by Dr. Spurgeori Bell, 
entitled Productivity, Wages and National Income, shows the story 
in detail for the last 2^ years for manufacturing enterprise. I sliould 
like to offer this chart or the record. 

The Chairman. Tin exhibit may be received. 

(The chart referrei to w^as marked "Exhibit No. 2432" and appears 
on p. 16227.) 

Dr. Keeps. Notirj there that the volume of production m manu- 
facturing has inci eased more in that period than! the amount of 
fixed capital invested. (This is fixed capital only.) In other words, 
the productivity of capital has increased. In 1936-37, fixed capital 
investment was only 2 percent greater than in '23-24; the volume 
of output was 25 percent greater. 

The steady decline in total man-hours of employment is also strik- 
ing. In general, the productivity of labor seems to have increased 
by something on the order of 40 percent from 1924 to '38. 

The Chairman. Would vou mind making a comment on clie back- 
ground of Dr. Bell? 

Dr. Kreps. Dr. Bell is a statistician who for a long time was at 
Ohio State University and then has been with the Brookings Insti- 
tution for the last year, getting together these figures. 

The Chairman. This chart represents the statistics whi<'h he has 
gathered while a member of the staff of the Brookings Institution? 

Dr. Keeps. Quite so. 

In this same volume. Dr. Bell presents a series of charts, all of 
them showing this same trend. This is the general pattern. 



CONCENTRATION OF ECONOMIC POWER 



16227 



The Chairman. This upper chart would indicate that there has 
been not only a positive gain in the number of wage earners since 
1932 until 1937, when it began to fall off, but that there has been a 
marked gain of wage earners as compared to the amount of fixed 
capital. 

Dr. Kjieps. That is correct. 



Exhibit No. 2432 



Productivity, Hourly Earnings, and Unit Wage Cost in 

Manufacturing, 1919-38^ 

(1923-25 = 100) 



INDEX NUMBERS 
160 



140 



120 



100 



60 



60 



40 



SO 



INDEX NUMBERS 
160 



140 



;^= 120 



















.••*••• 














PRODUCTIVITY, 








A 










.....-•"'' 


'""' 








' \ 






..• 


••■ 




HOUl 


7iK EAR 


/ 

MINGS/ 




A. 


\ J 


— T-r*- 


_ _ — — 


^ — — 


""n 




^*«" 









M- 


.^^^^^ 








\ 
\ 


/ 

/ 
/ 






y 
















^r 




f' 






a 


iV/7" tMCi 


- COST\ 


^ 

































.. 1 . , 








1 




I 





100 



so 



60 



40 



20 



^ 



Source: Spurgeon Bell, Productivity^ Wages and National Income 
(Brookings Institution: 1940) 

The Chairman. That is, while fixed capital was falling off gen- 
erally during that period, the number of wage earners was steadily 
increasing. 

Dr. Kreps. That is correct. That tendency is present as one of the 
m.ost significant tendencies, I think, since after the World War, since 
1920. 

The Chairman. .What is the explanation of that in terms of 
technology ? 

Dr. Kreps. I offer some e'xplanation of it. I am not quite sure ■ 

The Chairman, (interposing). As you go along? 

Dr. Kreps. Yes. 

The Chairman. Very well. 



16228 



CONCENTRATION OF ECONOMIC POWER 



(The chart, referred to was marked "Exhibit No. ^33" and 
appears below.) 

Dr. KJREPS. I may say this same picture holds true for many other 
industries. Fixed capital investment, for instance, has either, fallen 
off in the automobile, textile, iron and steel, and manufacturinoj in- 
dustries, or failed to increase as fast as output. 

Exhibit No. 2433 

Fixed Capital Investment, Output, and Employment in 

Manufacturing, 1919-38* 

(1923-25 = 100) 



INDEX NUMBERS 
1 40 



120 



INDEX NUMBERS 
140 



120 



100 



SO 



€0 



40 



20 












UTPUT/ 








^ 


\ 


•\ 


I 


N^ 'A 


^"'' 






\FIXED 

V. 


CAPITAL 


/A 






=*<;^*' 














\ 






NUh 


1BER OF 


WAGE E^ 


\ 
> 

ARNERS^ 


\ 


• 


/ 

MAN-HOU 


\ - - 
\ 
\ 














^^^ 






























> 


i_ .. 




1 










1 



100 



so 



60 



40 



20 



Source: Spureon Bell, Productivity, Wages, and National Income (Brookings Institution, 

1940) 

Employment and man-hours of labor also fail to keep pace with 
output, in most cases actually declining. Productivity shows a con- 
tinuous increase over the entire period — no break in trend at any 
particular date. These phenomena, while I am showing them in 
this exliibit only for manufacturing, I can say from the book also 
are true for mining, railroads, electric light and power, and indi- 
vidual industries, such as automobiles, iron and steel, paper and 
pulp, cotton textiles, and tobacco. 

A table summarizing some of these results has been compiled from 
his volume and I wish to submit it as "Exhibit No. 2434, Produc- 
tivity, Output, and Employment; Percentage Changes Between 
Designated Years, in Major Groups of Industries and in Selected 
Manufacturing Industries." 

The Chairman. The table may be received. 



CONCENTRATION OF ECONOMIC POWER 16229* 

(The table referred to was marked "Exhibit No. 2434" and is in- 
cluded in the appendix on p. 17277.) 

Mr. HiNRicus. You said that there was no break in this series on 
productivity. 

Dr. Kreps. No break in the trend. 

Mr, HiNRicHS. I am not questioning your generalization, your 
characterizing that wliole period, but there is a minor variation in 
there that I would like to point out and emphasize for just a moment, 
if I may. You will notice that in your chart between 1931 and 1932 
your line stops rising. 

The Chairman. Which chart are you referring to? 

Mr. HiNRicHS. I am referring to the chart entitled "Productivity, 
Hourlj' Earnings, and Unit Wage Costs." ^. That upper line marked 
"Productivity" shows a dip in that period from 1931 to 1932 which 
we think, in the work that we have been doing analyzing produc- 
tivity, is rather significant, not so much in terms of the average for 
all manufacturing as more particularly in the components of man- 
ufacturing that caused the general line to stop rising. There w^ere 
certain lines of manufacturing, notably in the heavy industries, in 
which productivity went down very sharply and will go down very 
sharply every time the volume of physical production declines. One 
of the chapacteristics of a depression is the tendency of the output 
per worker per hour to go down, which in large measure may offset 
the benefits of reduced labor costs that people seek to achieve through 
wage reductions in a period of depression such as we knew between 
1931 and 1932. 

THE. MINING INDUSTRY 

Dr. Kjjeps. I call attention to the fact that in this table, which 
gives the same picture for a variety of enterprise generally, the same 
trends appear. Employment in the mining industry and in rail- 
roads showed an absolute decline in the period of 1923 to 1929. More- 
over, in that period volume of output increased 27 percent in manu- 
facturing, while the number of wage earners increased only 2.8 per- 
cent. 

An indication of the steadiness of the trend both in the twenties 
and in the th.rties — and I am taking the decades and not particular 
years-r-is-indicated in this tabulation, which shows productivity and 
unit wage cost for a variety of industries. I should like to submit 
this tabulation as an exhibit. 

The Chairman. The tabulation may be received. 

(The table referred to was marked "Exhibit No. 2435" and is • 
included in the appendix on p. 17278.) 

Dr. Kreps. By 1938 the productivit}' of labor had increased over 
1923-25 levels by 44 percent in manufacture, 44 percent in railroads, 
99 percent in mineral industries, 116 percent in electric light ond 
power, 40 percent in automobile and parts manufacturing, 51 percent 
in blast furnaces, steel works, and rolling mills, 55 percent in paper 
and pulp manufacture, 38 percent in cotton textile manufactures, . 
and 153 percent in the manufacture of tobacco products. 

1 See "Exhibit No. 2432," supra, p. 16227. 



16230 CONCENTRATION OF ECONOMIC POWEK 

At the same time urit wage costs in 1938, compared with the base 
period of 1923-25, liad declined 17.5 percent in manufacturing 
in general, the same for railroads, 46 percent for the mineral in- 
dustries, 37.5 percent in electric light and power, about 7 percent 
in the automobile industry, 6 percent in the steel industry, 25 per- 
cent in paper and pulp manufacturing, 22 percent in cotton textile 
manufacture, and more than 50 percent in the tobacco industry. 
In all these industries, despite the increases in wage rates per hour, 
actual wage costs declined throughout the period. That is the sort 
of achievement which the machine makes possible. 

Output per man-hour and per wage earner have increased con- 
siderably even since 1929. Various estimates place the amount in 
the vicinity of 25 to 30 percent. The detailed studies made by the 
National Research Project indicate that out of 67 industries 23 
showed appreciable increases in production, 20 exhibited increases 
in employment, but only in 2 of them, the side and upholstery 
leather and the rayon industry, was there an increase in the man- 
hours of work. 

I should like to submit this particular exhibit, taken from the 
National Research Project, showing what has happened to produc- 
tivity, employment, and prpduction in 59 manufacturing industries 
from 1929 to 1936. 

The Chairman, It may be received. 

(The table referred to was marked "Exhibit No. 2436" and is 
included in the appendix on pp. 17279-17281.) 

The Chairman. All this material seems to show in a very definite 
and clear manner that in terms of wage cost the output is increasing 
tremendously. 

Dr. Kreps. That is correct. Wage costs have been going down. 

The Chairman. That trend is apparently a continuous trend. 

Dr. Kreps. It has been in this period, with, as you will notice, 
some modification in individual industries, of course. 

The Chairman. You say that that is a result of the machine. 

Dr. Krbps. a result — I used the machine in an elliptical sense for 
technology, a result of improved methods of manufacture. 

The Chairman. Is there any dispute about that? 

Dr. Kreps. I know of none. 

The Chairman. Do you know of any contrary statement or con- 
clusion reached by any student? 

Dr. Kreps. Not within the range of my information. 

The Chairman. Have you heard of any statistics that indicate a 
contrary result? 

Dr. Kreps. I have not. 

The Chairman. One of these charts refers particularly to manu- 
facturing, railways, mineral industries, and electric light and power. 
That pretty well covers the field of technological production, does it 
not? 

Dr. Kreps. Dr. Bell estimates that 75 percent of the total employ- 
ment is comprised within the sample of industries for which these 
figures are here given. 

The Chairman. And while this technological advance has been 
going on in industry there has also been technological advance in 
agriculture, has there not? 

Dr. Kreps. Quite so. 



CONCENTRATION OF ECONOMIC POWER 16231 

The Chairman. Have you covered that? 

Dr. IvRErs. I do not in my testimony, although we have hearings 
sch'^duled on the problem. 

Dr. Anderson. Mr. Chairman, we have a 2-day hearing scheduled 
for agriculture, in which we will show the results of about a 3-year 
study that has been engaging the attention of the Department of 
Agriculture on mechanization in agriculture, which shows exactly 
the same tendency.^ 

Mr. Hini;tchs. When you used the phrase "three-quarters of in- 
dustry," you were defining it as productive industries? You didn't 
include retail trade and service industries? 

Dr. Krei'S. No. 

Mr. HiNRiCHS. Nor banking and finance and the other sources of 
employment which are rather large? 

Dr. Kreps. That is true. 

As you notice here, output per man-hour increased in all but 13 
industries and declined in only 4 of them. The increase has ranged 
as high as 241 percent for rayon, in 8 industries they were in 
excess of 50 percent, and in 22 others range from 25 percent to 50 
percent. Such is the magnitude of the technological advance in the 
midst of which we now find ourselves. 

This tendency, it sliould be noted, is not peculiar to the United 
States. While I do not want to bring in an embarrassing volume of 
statistics, studies conducted by the International Labour Office and 
other research organizations show similar increases in productivity — 
not of the same magnitude, but increases, nonetlieless — in England, 
France, Germany, and as a matter of fact throughout the modern 
industrial world. There is one computation for Great Britain which 
estimates that the same volume of output could be produced in 1934 
as was produced in 1926, with 1,500,000 fewer workers than they had 
used 8 years previous 

THE NATIONAL LABOR FORCE 

Dr. Kreps. Now I want to take up the question, how has technology 
changed the occuj^ations of our national labor force? 

As. we have already noted, in the last 70 years technology has cre- 
ated hundreds of new kinds of jobs and required many new skills. 
It has also changed completely the number of workers in various 
gioups of occu; ations. 

I should like to submit as an exhibit a table taken from Dr. Bell's 
work showing occupational distribution of gainful workers from 
1880 to 1939. These are in terms of percentages of all gainful work- 
ers. Notice that wage earners, since 1880, have comprised between 
54 percent to 56 percent of all gainful workers, no great rise, and 
even aj\ appreciable fall since 1910. The percentage of clerical and 
sales employees has about ti'i])led, from 6.5 ]iorcent in IS'^O to KS.;5 
jiprcen in 1939. While the percentage of professional employees has 
doubled, it is still only 5.6 percent, and managerial employees 3 
percent. 

The Chairman. It may bc'received. 



See pp 16922-16999. 



16232 CONCENTRATION OF ECONOMIC POWEK 

(The table referred to was marked "Exhibit No. 2437" and is in- 
cluded in the appendix on p. 17281.) 

Dr. Kreps. The percentage of gainful workers in self-employed 
enterprises has steadily declined from 36.9 percent in 1870 to 18.8 
percent in 1939, although the decline is considerably less in the last 
10 years than in any previous decade. The percentage among farmers 
has dropped more than half, from 27.8 in 1880 to 11.8 in 1939, while 
that in nonfarm business enterprises has declined from 8 to 6.6 in 
1930, and '6.1 in 1939. 

I should add that different technicians in this field get somewhat 
different technical results. This is a happy hunting ground of ex- 
perts on vital and occupational statistics. 

In order to provide ^ome technical footing of our own, with the 
usual reservations, I would like to submit a small technical memo- 
randum entitled "Population and Employment, 1870-1940," which has 
data that have been carefully compiled in a volume which will be 
published — it is not yet off tlie press — by Dr. H. Dewey Anderson 
and Percy E. Davidson, Stanford University. The publication is 
called Occupational Trends. All these figures, as all of you know, 
have to start with population statistics, then make some estimates 
about the number of gainful workers, at least intercensal, although 
there are census records at the end of each decade, and from that 
come to certain conclusions about the working force, and what it is 
doing, 

1 would like to call attention to two or three charts in this exhibit. 

The Chairman. You are submitting this in advance of publication? 

Dr. Kreps. With the consent of the authors and publishers. 

The Chairman. May I ask Dr. Anderson the source of the figures? 

Dr. Anderson. Mr. Chairman, the first clinrt is a basic chart built 
from data that have been introduced in this committee before, in the 
economic prologue discussion,^ the ch^rt with respect to population 
and its movement. Its recharting brings out certain facts with respect 
to movement. 

All of the charts carry sources on them, I think, that are descrip- 
tive of them in each instance. 

With respect to the population figures themselves, they are taken 
from the census, and regroupings were made by a technical staff at 
the university. They have been subjected to rigorous criticism by 
other experts in the field. 

The Chairman. That is to say, they were submitted for comment 
to other students before publication? 

Dr. Anderson. That is right. For each chapter of the book from 
Vv'hich this has been taken, we made up a panel of the people consid- 
ered most competent in the field, and submitted the data of the 
chapter, including the figures, to them for comment before they were 
finally revised for publication. 

The Chairman. I notice that there are some statistics taken from 
Enterprise and Social Progress as published by the Ni^tional Indus- 
trial Conference Board. 

Dr. Anderson. That is rieht. 



^ See Hearings, Part I. 



CONCENTRATION OF ECONOMIC POWER 16233 

The Chairman. Did that board have anything to do with the 
preparation of any of the other material? 

Dr. Anderson. No; nothing whatsoever. 

Dr. Kreps. I would like to call attention to two or three points in 
these charts, first "Exhibit No. 2438-A", "Growth of Population of 
the United States." Population, of course, is continuing to grow and 
will do so, particularly in certain age groujis. The rate of growth 
since 1860, as you notice, has become steadily lesp. That ought to 
solve certain controversies about what is meant when people talk 
about declining population. 

I would also like to point out in the next chart that we have on our 
hands in this next decade a greater problem of finding jobs for youth 
than we have had certainly in the past, and that we will have there- 
after. In other words, the percentage of the new^entrants is larger 
for that decade than in any of the previous ones. 

The Chairman. If the percentage of population increase is stead- 
ily growing less, as indicated b}^ "Exhibit No. 2438-A," is it not a 
proper deduction that the problem will rather be one of providing 
for the aged before the youth? 

PROBLEM OF THE AGED 

Dr. Kreps. That was the next comment I was going to make, that 
after this decade of the forties, we are going to have increasing 
problems with the aged. The number of workers from 45 to 64 years 
of age is increasing rapidly percentagewise, and finding jobs for 
men over 40 will in the near future require every scrap of ingenuity 
that leadei's in business and Government can summon. 

I would like to submit this whole exhibit for the record. It will 
be referred to probably many times. 

Tlie Chairman. Without objection, the memorandum will be 
received. 

(The documents referred to were marked "Exhibits Nos. 2438 and 
2438-A to 2438-0'^ and are included m the appendix on pp. 17281 to 
17299.) 

Dr. Anderson. I would like to point out in connection with com- 
ments with respect to age groups, that the table supporting the chart 
shows that a very substantial number of persons are to be found 
among the youth population entering labor, so that would be a con- 
tinuing problem, although to a lesser degree of intensity. 

The Chairihan. Let's refer to "Exhibit No. 2438-C." 

Dr. Anderson. The table 2438-C supports the chart. It is an 
important point to make because we are dealing not only with per- 
centage of decrease and increase but actual numbers. It is an indi- 
vidual's concern that must be faced, and if you will note the figures, 
while they do show a downward trend of the youth population enter- 
ing labor, as a matter of fact, the number of individuals concerned 
is quite large in each decennial period until 1980, there are 6,633,000 
people in that population. 

The Chairman. As I glance now at "Exhibit 2438-C," isn't there 
an apparent error there in the figures for new entrance to labor for 

124491 — 41— pt. 30 4 

/ 



16234 CONCENTRATION OF ECONOMIC POWER 

1950? That is represented as a positive increase of 0.9 percent, 
whereas the figures show a decrease under 1940. 

Dr. Kreps. Tliere is an error in transcription, you are correct, sir. 
It should be a minus 0.9. 

The Chairman. It should be a minus. Let that change appear in 
the record. 

Are there any others ? Perhaps you had better run over that. 

Dr. Anderson. No; there are no others. 

The Chairman. Strange how my eye picked out the only one. 

Dr. Anderson. Thank you so much. 

Mr. HiNRiCHS. This table is headed "Estimated labor force of the 
future in the United States." The next to the last column of the 
table is headed "Totals, 20-64 years of age." You are, therefore, re- 
ferring to the estimated labor force of the United States less than 
64 years of age and not to the total labor force. 

Dr. Anderson. That is right. 

Mr. HiNRicHS. There is a fairly substantial working group 15 to 19 
years of age, many of whom make their entrance at Hiat period, so 
that the definition in the first column, "New entrants to the labor 
force," doesn't mean that that group is necessarily making its first 
appearance, but that you regard them as unstably employed until 
they are 20 years of age, and still you do regard them as workers. 

Dr. Anderson. That is right. The last column shows what propor- 
tion this population is of the estimated entire working population 
10 years of age tind over. So there is a substantial number of persons 
above 64 years of age, and below 20 years of age, wlio normally seek 
gainful employment. The assumption under which the table is made 
was that by one means or another, legislative, educational, old-age 
pension, and other forces, this group at the top and the group at the 
bottom would not enter the labor market. 

The Chairman. I wonder, Dr. Hinrichs, if the Bureau of Labor 
Statistics has made any effort to check these figures of the National 
Industrial Conference Board. 

THE POTENTIAL WORKING FORCE 

Mr. HiNRiCHS. We are very much concerned in studies of the po- 
tential working force ; particularly in connection with our occupa- 
tional outlook service we are working on this question of labor sup- 
ply. At the present moment the problem of estimating the per- 
centages in each group, particularly as it applies to family popula- 
tion is extremely difficult. The last fundamental information thai 
we have relates to the 1930 census. . The 1940 census is going to show 
some very great differences in the percentage of the population who 
are ordinarilj^ working, but this is a vital field in wliich we are 
working, yes. 

The Chairman. Did not t^ unemployment census wliich was 
taken a couple of years ago develop any substnntial statistics on this 
question ? 

Mr. Hinrichs. That, anfortunately, Xvas not fundamentally a cen- 
sus, but a voluntary re^gimiation , a so-callrtl sample enumeration 
was hitched onto that registration and gave OS ^ yainple census, but 
since it was incidental to the registration and was a mere means of 



CONCENTRATION OF ECONOMIC POWER 16235 

checking on the registration, it raiced perhaps as many questions as 
it answered. It did throw some light, on the question, and it indi- 
cates what was at the time an unbelievable increase in the proportion 
of women, particularly above 25 years of age, who continued to re- 
main in the labor market. The 1940 census has been worked out with 
the utmost care in the light of the information that was developed 
in 1937, and I think is going to give us a more reliable estimating 
b;)se than we can derive from the 1937 sample enumeration. 

The Chairman. You refer to an unbelievable increase in the num- 
ber of women above 25 who remain in the labor market. Why do you 
so charact€>rize it? 

Mr. HiNRiCHS, Well, I should say, myself, an increase which many 
people did not, cannot, believe took place. 

The Chairman. In other words, you think the indicated result is 
not actually representative of the facts. 

Mr. HixRicHS. The doubt arises for this reason : It is very difficult 
during a period of extensive unemplojonent to phrase questions with 
reference to the status of the worker clearly enough so that you don't 
do one of tvco things. You may unduly limit your concept of people 
wanting jobs and seeking work. I can illustrate that by saying 
that if you insist that a person has to be actively hunting for a job 
to be counted as unemployed, you don't make sense when you come 
into a community with a single mine or manufacturing enterprise 
that is closed down, where the workers will hunt work as soon as 
the whistle blows, but as long as the plant or the mine is totally 
closed down there is nothing to hunt and everybody in the com- 
miuiity knows it. 

Therefore, if you make your definition extremely rigorous with 
reference to the activity of the individual hunting a job, you tend to 
underestimate the magnitude of your problem. If, on the other 
hand, you define your question very loosely as one of wanting work, 
you may stimulate respondents to say yes, they do want work. The 

best example of that sort of thing 

The Chairman (interposing). Though they don't need it. 
^Ir. HixRiCHS. I regard any person who is actively interested in 
having a job as needing a job. A job is not only a means of main- 
taining income, it is also a means of maintaining an individual's 
self-respect. In most instances there is a very close corollary be- 
tween wanting a job for economic reasons and wanting a job in 
order to be at home in the society in which the man or woman is 
living. 

Need, so far as I am concerned, narrowly defined, isn't a relevant 
criterion to the question, 'Ts a person employed or unemployed?" 
It is relevant if you are asking, "Does this particular unemployed 
person need underwriting by the public because he doesn't have a 
job?'' Some people, some of the unemployed, come in that category; 
others do not. 

To just take the other extreme that I am talking about, an over- 
registration of a desire for work, you have a large number of peq^le 
who are in and out of the labor market. The group in the cities 
that come m for the Christmas retail trade are p<^rhaps the best 
example — a very important source of income to them, but many of 



16236 CONCENTRATION OF ECONOMIC POWER 

these people do not normally count upon working throughout the 
entire year. 

Now, a woman who normally works at Christmas time and not 
during the rest of the year goes through a period of transition be- 
tween the time in, let's say, September, when she is definitely not 
in the labor market, to December, when she is actually employed. 
There comes a period just before her employment when she certainly 
wants work and is counted at that time as unemployed. Actually, 
she becomes unemployed if she doesn't get work in the Christmas 
peak. I am not excluding her at certain tirfies from the group of 
the anemployed. But I do say that there is a period just before her 
annual entry to the labor market when a question whether or not she 
wants work may stimulate her to say, yes. 

That group is not the bulk of the people who respond, "Yes; we 
do (or do not) want work," but it may be large enough by hun- 
dreds of thousands, or possibly by a million or so, to make the 
question of the enumeration of the different categories extremely 
difficult. That, as I say, has been carefully approached in the present 
census. It was not possible to do that job back in 1937. 

The Chairman. In other words, you don't place very much reliance 
in the figures of 1937? 

Mr. HiNRiCHs. I think they are significant guides, but I don't 
think we learned at that time as much as we should have. 

The Chairman. Dr. Kreps, it is quarter after 12. How much more 
time will you need? 

Dr. Keeps. I could finish in about an hour if there weren't questions. 
The Chairman. Well, the committee, then, will stand in recess 

until 

Mr. Hinrichs (interposing). Mr. Chairman, may I have 1 minute 
on tliis table that has been introduced, just to close that? 

Mr. Kreps, in this table that was marked "Exhibit No. 2437," which 
gives the occupational distribution of gainful workers, 1880-1939, 
in percentages, you referred to the relative stability of the per- 
centage that wage earners constituted of the total working force, 
pointing out some decline in that percentage since 1910. By and 
large, those percentages indicate stability. 

You referred to this table as showing some of the basic occupa- 
tional changes that have taken place. 
Dr. Kreps. Groups of occupations; yes. 

Mr. Hinrichs. It refers to very broad groups of occupations within 
which there may have been very substantial occupational displace- 
ments. For example, the relative constancy of the wage-earner pro- 
portion between 1930 and 1939 was completel}^ useless from the point 
of view of indicating stability of employment for cigar makers. It 
doesn't indicate particularly w^hat happened to men that had been 
engaged in the hand-rolling process in strip steel mills, so that inside 
the constancy of some of these percentages there was a tremendous 
churning that was going on in individual occupations, and if we are 
talking about technological displacement and its relationship to occu- 
pation, you are thinking really along two lines, one possibly tlie effect 
that the technological change in general may have in developing a 
requirement for a higher skilled group, is for example more profes- 
sional people per thousand workers, or more clerical workers, if that 
^ere the case ; and then you also need to think the problem through 



CONCENTRATION OF ECONOMIC POWER 16237 

on the level of the occupations inside each of these distributions of 
what happened to ci^ar makers, what happened to steel roll opera- 
tors, what happened to hand transfer knitters, and so forth, and 
so on. 

Is that correct? 

Dr. Kreps. Yes; I agree. 

Dr. Andehson. Mr. Chairman, may I make one addition that is 
pertinent at this point? The table refers to an occupational distri- 
bution of gainful workers as the census uses that term "gainful 
workers." This is not a distribution of employed workers, as would 
be implied from Mr. Hinrichs' remarks. This is a distribution of the 
way in which workers say they are normally employed. In other 
words, it presents an over all, and doesn't refer to employment or 
disemployment or displacement of workers, but it does give you a 
framework picture of the distribution of gainful workers seeking 
employment or employed. 

The Chairman. Thank you. 

The committee will stand in recess until 2:15. 

{Whereupon, at 12:20 p. m., a recess was taken, to reconvene at 
2 : 15 p. m. of the same day.) 

AFTERNOON SESSION 

The hearing was resumed at 2 : 25 p. m. upon the expiration of the 
recess. Senator O'Mahoney, the chairman, presiding. 

The Chairman. The committee will please come to order. Are you 
read}' to proceed ? 

Dr. Kreps. Proceeding next to the question of capital saving inno- 
vations, I think it is not overemphasizing the point to say that prob- 
ably the most astounding feature of the technical progress which 
holds us in its grip at the present time is the extent to which capital 
saving devices are being invented, items such as multiplex telegraphy, 
fire-protection systems, cheap artificial illumination permitting 24- 
hour operation, skyscrapers, geophysical prospecting, and all the 
myriad devices of rationalization. 

I have prepared a small memorandum indicating specifically what 
some of these capital saving devices are, from three sources.^ One 
ii an article in the American E con o^nie Review, entitled "Effects of 
Current and Prospective Technological Developments Upon Capital 
Formation," in which are cited actual tnechanical improvements that 
have all resulted in greatly increasing the amount of product per 
dollar of investment and per unit of machinery. I will cite just 
one to give a notion of the general tenor of the article. In the 
electric-utility industry, for example, a topping technique has been put 
-nto practice in which exhaust steam from high-pressure, high tem- 
perature turbines is utilized by being discharged into the steam 
headers of lower-pressure units. This tends to increase the capacity 
of existing stations from 40 to 90 percent without an increase in fuel 
requirements and without corresponding additions to plant and 
equipment, a fact which is sometimes ignored by those who state the 
so-called capital investment needs of utilities. 

Similarly, I have got together certain excerpts from a study on 
inventions published in the two-volume work by Hoover's Committee 
on Recent Economic Changes and in that they have a section listing 

1 See "Exhibit No. 2439." pp. 17300 



16238 CONCENTRATION OF ECONOMIC POWER 

a variety of industrial processes and the savings in costs brought 
about by these industrial processes. 

The Chairman. Do you state what that committee was and how 
it was constituted ? 

Dr. Kreps. President Hoover, if my memory is correct, had sum- 
moned together a committee consisting of experts in various fields, 
labor, industrial relations, foreign trade, and the like, to trace the 
changes that had taken place in the twenties and they came out I 
think in 1930, or thereabouts, with a report called Recent Econ(ym,ic 
Changes. In that report there was a rather extensive chapter on 
industrial rationalization and industrial innovations. It is from that 
report and from a tab^e in that report that I have taken an excerpt 
which gives a few examples of the type of capital saving innovations 
introduced at that time. 

The Chairman. What do you mean by capital saving innovation? 

Dr. Kreps. One that enables a given firm to produce the same 
volume of business, either in physical amount with the same machine 
or with a machine costing less money ; that is, either the product per 
dollar of invested capital is larger or sales are larger per unit of 
technical equipment, sometimes without supplanting a single laborer. 
It still takes one laborer to operate the new machine. He just has 
a better machine. 

The Chairman. To simplify it, just a cheaper machine to do the 
same or better work in terms of output ? 

Dr. Kreps. That is correct. 

Mr. HiNRiCHS. Capital saving is also labor saving, isn't it? 

Dr. Kreps. Capital-saving devices, as my outline indicates, save 
labor in the production of the machine, if the machine itself is actu- 
ally made cheaper, and in part answers the question whether labor 
is reabsorbed in the machinery-making industries. Capital-saving 
inventions have tended to reduce the amount of labor that can be 
reabsorbed in the capital-making industries. 

To quote certain other examples listed in this memorandum, the 
American Woolen Co. reports for 1939 that it has only about half 
as much plant and equipment today as in 1924, but nevertheless has 
the actual capacity to turn out the same amount of goods. 

Similarly, in the iron and steel industry the average daily output 
of a typical 170-ton furnace increased from 302 tons per day in 1929 
to 395 tons in 1939, a rise of 31 percent. 

The Chairman. May I interrupt to say that we have with us this 
afternoon Mr. George E. Bigge of the Social Security Board, and 
I want to say, ]VIr. Bigge, that we will be very happy to have you 
ask any questions that may occur to you. 

Mr. Bigge. Thank you, very kindly. 

The Chairman, The committee, of course, realizes that this is a 
subject in which you will naturally be interested, and we will be very 
happy to have any contribution you might care to make by way of 
question or statement. 

Dr. Kreps. To show in detail what happens, I have taken an ex- 
cerpt from a study on the textile industry, and cotton spindles spe- 
cifically, which shows that cloth production per active spindle has 
increased from 276 million square yards in 1929 to 410 in 1939. Al- 
though the number of spindles has gone down, the increased effective- 
ness of the use of the spindles has actually raised the capacity beyond 
what we had when we had more spindles'lO years ago 



CONCENTRATION OF ECONOMIC POWER 16239 

I would like to submit this exhibit from which I have quoted 
certain representative passages, for the record. 

The Chairman. It may be received. 

(The documents referred to were marked "Exhibits Nos. 2439 and 
2439-A to 2439-D" and are included in the appendix on pp. 17300 
1^0 17309.) 

Dr. Keeps. To illustrate graphically what this means for our prob- 
lem of idle money, I might say that it is possible to maintain and 
even increase productive capacity in a given industry with an actual 
curtailment of demand for capital. Tliis is strikingly shown since 
1920 in the automobile industry. I have a chart taken from Mr. 
Bell's book on Productivity^ Wages and National Income:^ showing the 
decline in fixed capital investment in the automobile industry since 1926 
to a level that is now less than 80 percent of what it was in 1926. At 
the same time the capacity of the industry has not diminished. 

I would like to submit this chart, together with the table, as an 
exhibit. 

Tlie Chairman. It may be received. 

(The chart referred to was marked "Exhibit No. 2440" and ap- 
pears below. The statistical data on which this chart is based are 
are included in the appendix.) 

Exhibit No. 2440 

Fixed Capital Investment, Output, and Employment in the 
Automobile Industry, 1919-38* 
(1923-25 = 100) 



INDEX NUMBERS 
160 



INDEX NUMBERS 
160 




^ Spurgeon Bell, Productivity, U'aj/es and Xational Income, Brookings iDStltutlon, lUJO. 



16240 



CONCENTRATION OF ECONOMIC POWER 



Rates of Retubn on Invested Capital foe Three Major Automobile Companies. 

1927-1937 



Year 


General 
Motors 


Chrysler 


Ford 


Year 


General 


Chrysler 


Ford 


1927 


48.77 
45.75 
37.02 
20.71 
15.64 
1.34 
12.57 


43.49 
34.91 
19. 37 

.71 

4.35 

-6.86 

15.68 


-3.97 

-10.31 

13.73 

5.79 

-4.93 

-10.46 

-1.20 


1934_ 
1935. 
1936. 
1937- 




15.19 
25.62 
32.82 
28.23 


11.10 
40.61 
61.12 
48.89 


3.75 


1928 




3.25 


1929 




3.98 


1930 




1.45 




Average. 






25.25 


23.59 




1932 . 


.04 


1933 









Source: Federal Trade Commission, Report on the Motor Veh'-"e Industry, Washington, 
1939, pp. 487, 618, 671. 

Dr. Wai/kek. Is that accounted for in any way by the abandon- 
ment of plant ? 

Dr. Ej{eps. I don't know the detail of it, and as a matter of fact 
the detail will be developed in some hearings that we shall have, so 
I would rather have the industry speak because they have accurate 
first-hand knowledge. I do want to call attention to the fact that 
the decline in fixed capital investment can probably not be ascribed 
to a lack "of sufficient profits in the industry to attract new capital. 
Throughout this period, and particularly in 1926, the industry en- 
joyed substantial profits and rates of return that were really above 
that of the average of industry generally. Such profits, however, 
failed to attract new capital investment, for, as this study indicates, 
the total amount of fixed capital investment in the industry began to 
decline in 1926. It is. said that the most extensive investments 
actually made in the period were made by one of the firms that did 
not have nearly as good a profit record as some other firms. It 
changed over from a model T to model A. 

In short, the alert, highly progressive managements of the auto- 
mobile industry put into practice in their plants the most efficient 
new devices, machinery, processes, and tools known, plus all that 
scientific management had taught them. They thus created a capac- 
ity in excess of their 1937 volume of business. Relative to their 
volume of output they put in all the equipment that they needed, but 
so much of it consisted of capital-saving devices that total investment 
in fixed plant went down. 



THE EFFICIENCY OF CAPITAX. 

Dr. Kreps. The efficiency of capital has also increased in other 
industries. This is not a unique case. I should like to submit a table 
of the record of fixed capital compared with output and employment 
in manufacturing, class 1 railroads, electric light and power, auto- 
mobile and parts manufacturing, iron and steel manufacturing, and 
the cotton textile goods industry. 

The Chairman. The table may be received. 

(The table referred to was marked "Exhibit No. 2441" and is in- 
cluded in the appendix on p. 17310.) 

Dr. Kreps. Such increases in the efficiency of capital may result, 
of course, from production control, time and motion study, budget 
control, orderly marketing, intelligent forecasting, improvements in 
shipping methods, salvage and waste reclamation, improvement in 



CONCENTRATION OF ECONOMIC POWER 16241 

service departments and tool control, betterments in inspection and 
office methods, but all tend to ^et more output for the same dollar 
of capital invested. Tht ::i^nificance of such developments for the 
problem of idle money is obvious. 

In the woids of Lewis Mumford in his classic volume, Technics 
and Civilization: 

Whereas the growth and multiplication of machines was a definite character- 
isric of the paleotechuic period, one may already say pretty confidently that the 
refinement, the diminution, and the partial elimination of the machine is a 
characteristic of the emerging neotechnic economy.^ 

In the thirties, as before, there has been no hesitancy to invest cap- 
ital in places where there has been a demonstrated need for it. To 
enumerate merely one or two examples, productive capacity in the 
rayon industry, in electric refrigerators, and in a number of chemical 
industries has more than doubled, even since 1935. Some of the larg- 
est chemical companies are now manufacturing substantial portions 
of their output in producis they did not even produce in 1929. Mon- 
santo Chemical Co. has reported recently that products whose com- 
mercial manufacture they had started since 1929 accounted for 39 
percent of sales in 1938. 

According to Shelby Cullom Davis, treasurer of the Delaware 
Fund, Inc., in a pamphlet entitled The Investment Decisions of In- 
dustry^ many companies have changed completely from one industry 
to another. [Reading:] 

Automobile accessory companies became builders of bathtubs, refrigerators 
and other household utensils. Automobile companies went into air condition- 
ing. * * * Remington Rand went from typewriters to electric shavers, 
American Fork and Hoe from agricultural hand implements to sporting goods 
and railway track implements.^ 

In other words, industry has not been reluctant to make new in- 
vestments when there was a market. Probably m no instance is this 
better shown than by the d^ Pont Co. in their annual report of 1937, 
that products relatively unknown in 1929 accounted for about 40 
percent of their total sal^s that year. 

The Chairman. What year was that? 

Dr. Kreps. '37. 

Tlie Chairman. In 1937 products which were relatively unknown 
in 1929 accounted for 40 percent of the total sales? 

Dr. Kreps. That is correct. 

The Chairman. Was that in units of commodity or in dollars ? 

Dr. Kreps. In dollars. Among these products were some Duco 
finishes, Dulux enamels, Neoprene, synthetic camphor, Ponsol dyes, 
anhydrous ammonia, synthetic methanol, urea, titanium pigments. 
Viscose rayon, cellophane, and cellulose film. 

The Chairman. All of those products, I suppose, would fall into 
the category of which you spoke this morning when you were dis- 
cussing the cooperative nature of modern invention and discovery. 

Dr. JKjieps. That is correct. 

The Chairman. These could be produced only by group activity, 
research, and study of a number of persons in the modern type of 
laboratory. 

^ Lewis Murafrrd, technics and Civilisation, Harcourt, Brace, New York, 1934, p. 258. 
^ Shelby Cullon. Davis, Ttle Investment Decisions of Industry, p. 8. 



16242 CONCENTRATION OF ECONOMIC POWER 

Dr. Kreps. That is right, by being alert. 

The Chairman. Maintained by an institution, or by one of these 
large corporations. 

Dr. Kreps. Exactly. 

In 1927 they had only 10,700 workers making products like this. 
In 1937 they had 18,000. During the same period the company's in- 
vestment in facilities for manufacturing these products increased 
from $65,000,000 to $174,000,000. 

The Chairman. How many of these products are substitutes for 
natural products and how many of- them are completely new products 
that were never used before, and which therefore do not complete, or 
compete only slightly, with previously known commodities ^"^ natural 
resources ? 

Dr. Kreps. That makes a larger demand upon my information con- 
cerning the chemical industry than I possess, but it is quite clear that 
synthetic methanol represents a substitute for a natural product such 
as you spoke of, that some of the finishes represent products new in 
composition, products that resulted in greatly decreasing the expense 
of painting automobiles and gave us a much superior finish. At the 
same time they also displaced some of the inefficient materials and 
inefficient hand methods and other methods. 

Similarly, cellophane has in part developed a new market, as all 
these products tend to do, and in part supplanted an old markets 
When I say "supplant"" I never want to be taken to mean 100 percent- 
For instance, this morning I talked about the electrical refrigerator 
tending to supplant the ice plant, but actually the sales of natural ice 
have not gone down a great deal. The need for refrigeration has 
become evident to people through the advertisement of mechanical 
refrigeration, so you have a larger volume of output, with the older 
industry finding a niche in this larger volume. 

The Chairman. The electrical refrigerator can go into homes which 
could not possibly be served by the ice man. 

Dr. Kreps. It works both ways. That is, you see, the factor of 
interindustry repercussion, which makes each particular commodity 
a study in itself. I have written a book which is devoted to one 
product that probably the members of the committee have rarely 
heard about, sulfuric acid, and yet problems of this sort arise, inter- 
industry competition, intercommodity competition, joint cost, and 
developments of one sort or another, interprocess competition within 
the same industry. 

Mr. Pike. You think possibly among such products ethyl fluid 
might be one of the really new nondisplacing things? 

Dr. Kreps One would think so. . 

Mr. Pike. That is as near as pnything I can think of. 

Dr. Kreps. Yes. 

Incidentally, in these products, since the first time they were put 
.on the market there has been a 40-percent decline in the price quoted 
in 1928. That again is a result of progress in technology. 

At the present time industry needs more market rather th^n more 
capacity. Most of industry is equipped t-o produce a $90,000,000,000 
or $100,000,000,000 national income. In the symposium of opinions 
of business executives in the New York Sun in its annual-review 



CONCENTRATION OF ECONOMIC POWER 16243 

edition on Saturday, January 6, Lincoln Cromwell says for the textile 
industry : 

There is little capital going into new cloth mills. Those we have can over- 
supply the market on two 40-hour shifts. 

The Chairman. That is another way of saying that the problem 
now is one of distribution rather than of production. 

Dr. Kreps. Yes; I think that would follow. 

The CuAiitMAN. Do you find any diflfei'ence of opinion on that? 

Dr. Kkei's. There is some difference of opinion on that topic. 

The Chairman. Wliat is the contrary view? 

Dr. KijEi's. "Well, some feel that you must have an investment in 
capacity irrespective of Avhether that capacity is going to be used or 
not, that that investment in capacity then stimulates consumption and 
gives better distribution. 

Similarly, railroad executives were almost unanimous on the point, 
to quote A. N. Williams of the Lehigh Valley Railroad, that — 

The railroads are ready for more traffic when it comes. * ♦ * Railroads 
are getting more out of their power and equipment than ever before. * * * 
We cannot escape the fact that the railroads now handle more tra^c with 
less cars and locomotives. 

In fact the only industries even at the high level of operations last 
fall, equal to 1929, that felt a strain upon capacity to produce w^ere 
those that make war equipment, notably the airplane industry. This 
means, of course, that calculations tending to show how much obso- 
lescence exists in American enterprise, based on 1929 valuations and 
so-called nonreplacement, lack solid substance. If it takes only a 
$5 machine to produce the same amount of stuff as was produced by 
a $10 machine 10 years ago, obviously there is not $5 of underde- 
preciation or of obsolescence wliich can be represented as measuring 
a demand for capital goods. Such calculations completely ignore the 
most significant technological advance of the last 20 years, that of 
capital-saving innovation. 

TECHNOLOGY AND THE BUSINESS CYCLE 

Dr. Kreps. I turn to the question. Before the advent of technology, 
was there a modern business cycle? The connection between the 
modern cyclical fluctuations of business and the use of large amounts 
of fixed capital and equipment is stressed by all analysts of the busi- 
ness cycle, but especially by Bouniatian in his classic volume Les 
Crises Economiqves} Obviously a great portion of the fluctuation of 
business is due to the fact that errors in plant investment are made. 

(Representative Sumners assumed the chair.) 

Dr. Kreps. The further away from the consumer the original de- 
cision to try to fill his demand, obviously the greater chance for 
things liappening which were not anticipated. No one wljo has 
analyzed the effect of technology on modern life has ever come to any 
conclusion different from that which Dr. Harry Jerome of the Na- 
tional Bureau of Economic Research summarizes in his volume on 
Me-'hanization in Industry^ in the following words: 

Finully, while advancing mechanization probably tends to lessen seasonal 
fluctuations in industry, there is reason to suspect that it may aggravate 

1 Mentor Bouniatian, Les Crises Econon. ques, M. Giard, Paris, 1922. 



16244 CONCENTRATION OP ECONOMIC POWER 

cyclical fluctuations through intensifying competition, enlarging the function 
of capital goods in the economic ' systera,, and * * * increasing the share 
of expenditures in those lines, such as durable consumer goods, the effective 
demand for which is characterized by sharp reductions when a recession sets in. 
In brief, to the extent that medtani-sation contributes to the unpredictability 
and the variability of economic processes, it may likewise contribute to an 
aggravation of the severity of cyclical fluctuations/ 

Or, in the words of Eini] Lederer, in his vohime Technical Prog- 
ress and Unemployment^ written for the International Labour Office, 
"technical progress aggravates the typical phenomena of depression." ^ 
Investment in capital goods starts credit expansion and usually re- 
sults in malinvestment or so-called overcapacity in some line or other. 
When the bubble collapses we have the modern business depression — 
want in the midst of plenty — a new phenomenon completely differ- 
ent from those periods of feast and famine that existed in antiquity. 
Depressions then were periods of scarcity. Today scarcity is ane way 
of making profits. Today it is abundance that characterizes depres- 
sions — a direct result of the miraculous ability to produce goods 
given us by technology. 

DOES INDUSTRY NEED MORE CAPACITT? 

Dr. Kreps. The next question I wanted to deal with has been 
argued about a great deal: Who has received the benefits of tech- 
nology in the last 20 years? And I don't propose to embarrajs the 
committee with a large treatise of statistics on prices and the rest, but 
I shall give you the summary results of two or three such studies. 

Representative Reece. Would an interruption bother you before 
you leave the question which you were discuasmg when 1 came in? 
I don't want you to repeat it for my beiiefit, but having only heard 
part of it I am not quite sure about the conclusions which you reach. 
Wasi this conclusion thf^t we did not need a fu^her expansion of 
plants at this time, but that the problem now was largely one of 
administration ? 

Dr. Kreps. No; I was merely emphasizing that the question of ca- 
pacity is one that isn't bothering American business at the present 
time; that is, the question of inability to give the consumer what he 
can pay for. What they really need is more mari^et, more consumers 
coming on the market with funds ready to buy those goods. In other 
words, there was no problem of underinvestment in the sense that in- 
dustries were beggins: for capital and couldn^t get it. 

Representative Reece. We are no^- yet in a position of the young 
man who comes into a large inheritance, to be under no necessity 
for putting it to work, but only the necessity for administering and 
spending. 

Dr. Keeps. No. 

The Vice Chairman. Doctor, don't you think it is pretty well 
agreed by everybody going around tne country, without regard to 
statistics or data,- that we have plenty of everything to produce 
everything we need if we could just manage to distribute it around? 

1 Harry Jerome, Mechanization in Industry, National Bureau of Economic Research, 
New York, 1934. p. 22-23. 

2 Emil Lederer, Technical Progress and Unemployment, International Labour Office, 
Studies and Reports Series C (Employment and Cuemployment, No. 22). Geneva, 1938, 
p. 248. 



CONCENTRATION OF ECONOMIC POWER 16245 

There is no dearth, there are plenty of people to produce food and 
there are plenty of machines to produce all the things we need, and 
we have plenty of railroads to haul them around. 

Dr. Kreps. I would say that is certainly a strong current of 
thought. 

The Vice Chairman. All the folks who go around the country a 
little bit know that pretty well, don't they? 

Dr. Kreps. I think so; yes, sir. Sometimes this problem of idle 
money is approaclied from the point that somejiow or other there 
is an enormous demand in industry, but for some reason or other, 
it doesn't attract idle money. 

The Vice Chairman. The only reason a person who has some idle 
money keeps it idle is because he doesn't know where he can make 
a safe investment profitably. If you and I had $50, we would be 
governed by the same application, wouldn't we? 

Dr. Kjreps. I think so. 

The Vice Chairman. And the man who has $.50,000,000 is just the 
same sort of a person. 

Dr. Kreps. Yes, I think the problem is more market. There is 
the neck of the bottle. 

The Vice Chairman. Yes, sure. It doesn't take a smart man to 
see that. Every man knows that. 

Representative Williams. Have you any figures, or are there any 
available, that show the percentage of capacity of production that 
is now being utilized in general? 

Dr. Kreps. There has been no survey of potential capacity since 
1929. The Brookings Institution made a good survey,^ and then 
there was another one by Loeb and associates, called the Chart of 
Plenty^ which has been subjected to considerable criticism one way 
or another. We do know, looking at industry after industry and 
judging by the reports of executives in the industry — I have just 
quoted from the statements given by executives to the New York 
Sun in the annual review edition of this year — that in industry 
after industry the executives say, "^Ve can fill the demand for an 
increased volume of business, even over 1929 levels." 

Representative Williams. That being true, of course there would 
be no demand for capital investment further along that line, would 
there? 

Dr. Kreps. There is a school of thought that feels exactly that way, 
among which I would class myself. 

Representative Williams. But upon what basis does the other 
school of thought rest? What is the economic theory back of the 
other idea that it is necessary or proper or useful to invest capital 
funds where there isn't any necessity for it, from the production 
standpoint? I can't see, myself, any basis for that kind of thought. 
There may be one. 

Dr. Kreps. It is prominently argued, at any rate. 

The Vice Chairman. You know, we have a lot of talk here about 
credit, about doing something about credit. Well, as Judge Williams 
indicates, credit doesn't help yon to sell your goods. Somebody might 
borrow some money and buy some of your goods, but when you got 

1 Nonrse and associates, America's Capacitv to Produce^ Brookings Institution, 1934. 
' Loeb and associates, The Chart of Plentii, Viking Press, 1935. 



16246 CONCENTRATION OF ECONOMIC POWER 

ready to collect, he probably wouldn't have any more money than 
when you sold them to him. We seem to be adopting in this country 
the general psychology of the old lady 'who thanked God she had 
been able to borrow enough money to pay all her debts, and it doesn't 
seem to work. v , 

Dr. Kreps. This controversy is just one of the controversies in the 
field of technology, and is no larger than that controversy which I 
am now going to raise, which is. Who has received the benefits of 
technology ? 

WHO BENEFITS FROM TECHNOLOGY? 

Dr. Kreps. The extraordinary increase in production represented 
by the fact that in the United States in 1933, 43 men produced the 
volume of goods that required 100 men in 1899 has been character- 
ized by Dr. Mills in an article entitled "Man and the Machine," 
which he wrote for the magazine Today in its issue of November 28, 
1936, as— 

A new industrial revolution, a revolution that strikes more deeply, falls 
upon a much wider front and a more complicated industrial system, and threat- 
ens more violent disturbances than did its progenitor of 150 years ago. . . . The 
heart of the problem that arises out of such technical and organizational 
advance — 
he goes on to say, is the question whether it will mean — 

on the one hand exceptional prosperity for limited groups, with concurrent unem- 
ployment of men and other productive resources or, oil the other hand, higher 
living standards for the population at large. 

Professor Mills has shown in his studies that prior to 1914 the 
benefits of technology were on the whole passed on to consumers and 
farmers in the form of lower prices. As a result 112 men were hired 
for every 100 men displaced. But after the World War a change 
took place. Even in the period from 1923 to 1929 only 91 new men 
were employed for each 100 displaced. These may not have remained 
unemployed for long at a time. They crowded into such occupations 
as hotel services, restaurant cooks and waiters, taxi drivers, beauty 
shop employees, garage workers, gas station attendants, and the 
like. But they were the first to be throwii out when the bubble broke 
in Wall Street in 1929. 

If I may be permitted to quote Professor Mills here rather ex- 
tensively : 

Under prewar conditions, when higher productivity was promptly renected in 
lower costs and lower selling prices, new contacts were established without 
?reat delay and without persistent hardships. * * * For a number of rea- 
sons, the gains in production since the war have gone largely to the managers 
and owners of industrial plants and to the men who work for industrial 
plants. * * * 

Here is the central fact that emerges from this analysis. A host of economic 
frictions impede the readjustments made necessary by increasing industrial 
efficiency. The machine process itself, with its heavy fixed charges, has placed 
major barriers in the way of prompt adaptation of prices to changing circum- 
stances. Most of the obligations of a modern business are fixed, in terms of 
dollars, and these rigid monetary charges tend to freeze great areas of the price 
system. To these elements we must add monopolistic and serai-monopolistic 
controls, public regulation of rates, the persistence of customary prices and 
scores of other factors that impede price changes and restrict the flow of capital, 
labor and enterprise. It is these frictions, apparently inescapable today, that 
prevent the prompt and full utilization of technical imprbvements.^ 



^ Frederick C. Mills, "Man and the Machine," in Today, Nov. 28, 1936. 



CONCENTRATION OP ECONOMIC POWER 16247 

The Vice Chairman. Doctor, as I understand your statement, it is 
that these technical improvements increase the amount of capital 
investment necessary to develop a unit of production that is economic 
in its operation. 

Dr. Kreps. Right. 

The Vice Chairman. That is pretty significant, isn't it? 

Dr. Kkeps. I think so. I think it is the heart of the problem. 

The Vice C'hairman. Mechanical developments tend to put the man 
of relatively small capital out of the picture insofar as concerns his 
ability to compete with the person vrho has more money and can buy 
modern equipment of sufficient size. 

Dr. Kreps. In many industries that is the result. 

The Vice Chairman. And in addition to that— I don't know 
whether this is beside your point — it requires a pretty big producing 
unit to be able to maintain an agency of distribution that can get to 
the general market. It seems to me that is in the picture. 

Dr. Kkeps. That is correct. 

The Vice Chairman. I don't want to make a speech, but it seems 
to me that regardless of what may be to the advantage of the other 
side, the tendency to uniform wages everywhere it seems would tend 
to eliminate the small machine of probably not the highest productive 
capacity for unit of product. Take a cotton mill, an operator whose 
machinery is not the most modern but still can produce cloth, but 
not as cheaply as the better machines would produce it — it would 
seem that probably the operator of that plant couldn't pay as much 
money as the operator of the most modern plant. That seems to me 
to be'in the picture. There may be something on the other side that 
quite overbalances that» but those things all seem to be tending in the 
direction of the concentration of the opportunity to produce and 
market. 

Dr. Kreps. That is correct. 

Representative AVilliams. Did I understand you to say. Doctor, 
that during the twenties for every 100 employees displaced, 91 w^re 
reemployed? 

Dr. Kkeps. In industries in which displacement occurred, that is 
correct. 

Representative Williams. What has been the record since '29? 

Dr. Kreps. We don't have the figures. I am giving you the results 
here of about 2,000 pages of statistics in 3 volumes by Frederick 
C. Mills, and that study of Mills has not been carried on to date in the 
same form. There have been other studies but they don't permit me 
to answer your question by quoting any number. We know that 
productivity has increased at something like a steady rate right 
through the thirties. 

Representative Williams. And do you know that the displacement 
has been greater or less? 

Dr. Kreps. All I could say in the absence of such definite measure- 
ments as Dr. Mills gives is that the evidence that I see leads me not 
to change what I conceive to be Dr. Mills' contention. In other 
words, tnere hasn't been so far as I can see, any tendency for dis- 
placement to become less in the thirties than it was in the twenties. 

Representative Williams. It seems to me that is rather significant 
for our inquiry here to try to determine if we can whether or not 



16248 C0NCi^JN-j.KAT10N OF ECONOMIC POWER 

that tendency is increasing more and more. Of course, if that study 
hasn't been made, we just haven't got tiiat information. 

Dr. Kreps. It is a very difficult technical matter to make a rela- 
tively simple statement such as the one I have just made. 

The Vice Chairman. And your statement is that from the best 
study you have been able to make, you are convinced that the increase 
of employment has not kept pace with the increase of productivity. 

Dr. Kreps. Yes. 

The Vice Chairman. And that would seem to indicate, as a matter 
of fact, it does not always follow that improvement in machinery 
results in better employment. 

Dr. Kreps. No, not unless other things are adjusted, prices and a 
whole host of other factors, if you are going to get an increase in ' 
employment with an increase in productivity. 

The Vice Chairman. It would seem probable to me that where the 
energy, the intellectual energy, of the people is devoted too much to 
improving the mechanism and not enough to taking care of the people 
who are released by reason of improved machinery, that it would 
be a question just how substantial progress that is when you put a 
machine in the place of a living human being and he walks the 
street and eats the bread of charity. Somebody may brag on the 
man who put the machine up there, but it would seem to be a serious 
question fundamentally as to just how much good he has done to 
society, until society does something about it. 

Dr. Kreps. I would agree that if we don't make the economic 
adjustments, so the hind wheels of the automobile go as fast as the 
front wheels, or our technology — in other words, if we don't synchro- 
nize our changes, we are in for major spells of jerky production and 
distribution. 

The Vice Chairman. The Government is continuing, however, to 
offer a premium, to offer an inducement of 17 years of monopolistic 
use to anybody who can figure out a machine that will put somebody 
else out of a job. 

Representative Williams. While we are on that question of pro- 
ductivity and the relation to what it was 10 years ago, is it already 
in the record wiigther or not there has been an increase or a decrease 
in productivity during the last 10 years, from '29 to '39 ? 

Dr. Kreps. Yes; I placed in the record this morning a series of 
exhibits. 

Representative Williams. Have you that in percentages? I am 
talking as a whole, not as applied to 'duy particular industry, just 
to get that broad picture of it. 

Dr. Kreps. As a whole it is about 30 percent, somewhere in that 
vicinity, varying enormously from industry to industry. 

Representative Williams. But the average productivity has in- 
creased during that decade 30 percent ? 

Dr. Kreps. In the manufacturing industries which were examined 
by the National Research Project. 

Representative Williams. During that same time has consumption 
kept pace with productivity ? 

Dr. Kreps. I don't have the figures on consumption or consumption 
per worker. My recollection is — and I would defer to the Bureau of 
Labor Statistics in this regard — that real wages per worker employed 
are higher today than they were in '29. 



CONCENTRATION OF ECONOMIC POWER 16249 

HOW MANT ABE NOW EMPLOYED? 

Representative Williams, And just one other question now : What 
about the number of actually employed compared with '29? 

Dr. Keeps. I don't have those figures at my finger-tips. I would 
have to go to the Bureau of Labor Statistics and try to secure them. 

Representative Williams. To my mind there are some very funda- 
mental statistics that we certainly ought to agree on in this hearing 
if they are available, and it seems to me they should be, and that is 
one of them, whether or not there has been an increase or decrease 
of employment in the productive industries in the country and to 
what extent the productivity has increased, whether or not consump- 
tion has kept pace with productivity, and to my mind, what has 
been the labor cost to industry in this production. 

Dr. Kreps, I submitted figures this morning showing the decline in 
unit wage cost that is accompanying recent increases in productivity. 
The reason I hesitated about answering your question on the total 
volume of employment is of course that we have had no good record 
of the number employed. All of us have to reason from the small 
sample for which the Bureau of Labor Statistics is collecting monthly 
figures. They are estimates. 

Representative Williams. The reason I am asking that question is 
to try to get some authentic figures, because it ranges from nothing to 
a great many. It has got a very wide range in the discussion that 
is taking place in the newspapers and among some of the supposed 
economists of the country, and it does seem to me that we ought to 
reach some kind of a reasonable, fair, approximate understanding 
as to what is the truth about the matter. 

Mr. HiNRicHS. Mr. Chairman, there doesn't seem to be a very great 
range with reference to the estimate of the number of people employed. 
In the case of manufacturing industries the comparisons can be made 
quite exactly. In 1937 approximately the same number of people 
were employed in manufacturing as in 1929. At the present time the 
number is slightly less than it was in 1937 or 1929. The estimates 
for trade are not as good as the estimates for manufacturing. They 
indicate approximately the same levels of employment now as in 
1929. We have no census information on trade since 1935, The 
census figures of the present year may indicate that there is some 
underestimate currently of the amount of employment. 

In the construction field the figures on employment and all other 
aspects of that fundamentally important industry are woefully inade- 
quate. We do know, however, that construction employment is very 
substantially below the levels of 1929. There is some question with 
reference to the figures on transportation. 

In the railroads we know that the level of employment is substan- 
tially below the levels of 1929, As far as we can get any indica- 
tion for the total field of transportation that would also be some- 
what less than in 1929, The difficulty is there that we measure 
the areas where employment is decreasing more accurately than we 
measure the areas like ipr'otor trucking where the employment is 
increasing, and again I refer, as I have done several times in the 
past, to the census information against which we have to put current 
estimates periodically as they become available. 

12-MOl — il— pt. 30 5 



16250 CONCKNTUATION OKl^OOl^OM 1(J TOWEll 

If you add up all of the figures that we can now put together as a* 
basis of estimating nonagricultural employment, our current esti- 
mates of nonagricultural employment would be 33,800,000 people as 
against an average in 1929 of about 30,000,000 in nonagricultural em- 
ployments. Now if you put together the question marks that people 
place against these estimates (not that the estimate could be better 
made at the present time, but simply that there are fields for which 
informaion is sadly lacking, where there is no basis of making a 
really sound estimate) and add up the probabilities, there is a prob- 
ability that that estimate of 33.8 million is somewhat too low; we 
wouldn't be astonished if in various fields for which we have com- 
paratively little information, casual workers, various types of service 
industry, we found that in the aggregate that figure was as much 
as a million too low. 

At the end of a period of 10 years of the most violent changes in- 
employment that we have ever known, I do not feel that that esti- 
mate IS altogether bad. It means that we are estimating within a 
margin of some 2 or 3 percent, and have been looking forward regu- 
larly to the fact that just exactly today our information is worse 
than it is ever going to be or could ever have been ; that is, we have 
come to the end of a 10-year period, a census is now being taken in 
this week that will give us a more accurate tying point for this whole 
series on the basis of which projections will be made, or estimates 
will be made from month to month, over the next 10 years, and in 
1949 as in 1939 certain parts of that estimating process are going 
to be dangerously inaccurate. But if you say, what is the relation- 
ship between employment now and in 1929, within approximate 
levels at least we can estimate it, in some lines very accurately, in 
other lines less accurately, and the margin of doubt is in the order 
probably of a million people as between the judgment of various 
people. We are quite sure it is not less than our present estimates 
would indicate. 

(Representative Williams assumed the chair.) 

AVERAGE COST OF PRODUCTION 

Acting Chairman Williams. You have already put in the record 
the decreased labor cost to industry ? 

Dr. Kjieps. I have. 

Acting Chairman Williams. Now what has been the actual trend 
with reference to the cost of production ? 

Dr. Kreps. I haven't, of course, the figures on the total cost of 
production, but the unit wage cost 

Acting Chairman Williams (interposing). I understand you have 
that in, but I am asking now what is the trend so far as the total 
cost of production has been during the last 10 years. 

Dr. Kreps. In a particular industry? 

Acting Chairman Williams. No; over the whole field.' 

Dr. Kreps. I am afraid I am not competent to answer that ques- 
tion. I wish I could. 

Acting Chairman Williams. In other words, whether the cost of 
production as a whole has decreased or increased over that period. 

Dr. Kreps. Of course it would vary with the industry. - 

Acting Chairman Williams. Naturally so, but I am trying to get 
a picture of the whole industry. 



CONCENTRATION OF ECONOMIC POWER 16251 

Dr. Kreps. Prices are lower than they were in some years in the 
twenties, and raw material costs are different, and the like. 

Acting Chairman Williams. Then I judge from what you say we 
have not made any study, there aren't -any jfigures available, to give 
us an idea of what the trend has been during the last ten years in 
the £eld of production with reference to its costs. 

Dr. Kreps. No; we would say on gi-ounds of general theory that 
prices and costs tend to be in line. Presumably costs came down in 
about the same way that prices have come down, but you are quite 
right, there has be«n no survey. There have been, of course, studies 
of costs of particular elements in particular industries. There has 
been a summation year by year of what has happened to certain types 
of costs in those industries. 

Acting Chairman Williams. I had the impression that the claim 
had been made by certain industries especially that labor cost of 
production had been very materially increased in the last few years. 

Dr. Kri-:ps. I think that you will find that such claims usually rest 
upon a confused notion of what is labor cost per unit as opposed to 
wage rates. Wage rates have risen, but of course the wage rate is 
not the same as labor cost. The factor of productivity has been 
ignored. The charts that I showed this morning indicate almost 
universally an increase in wage rates per hour, but at the same time 
so much greater increase in productivity that unit wage cost per 
unit of product, which is the important item in quoting price, has 
gone down, broadly, since the twenties. 

Acting Chairman Williams. It would look rather reasonable to 
me that that being true, so far as the labor cost is concerned, it migh 
probably be true as to the general cost. 

Of course I realize that there are a number of elements that go 
into cost outside the labor. 

Dr. Kreps. I was going to remark that probably some elements 
such as taxes may have risen appreciably. 

Acting Chairman Williams. Interest may have gone down. 

Dr. Keeps. That is correct. 

nonproductive workers 

Mr. Pike. While you are off the track a little bit, Doctor, may we 
take this additional trip around. I was looking at your "Exhibit 
2437," which gives me some idea that a great deal of the saving made 
in the primary production, the saving in actual wage earners on a 
machine, has gone to other people a little bit farther from primary 
production, the managers and clerks and the free riders, you might 
say. In 1880, against 52.7 wage earners you had 10.9 distribution, 
managerial, and professional people; in other words, around 5 wage 
earners carried 1 white collar man. In 1^39 as against 54.3 wage 
earners you had 26.93 riders, so that every 2 wage earners had to 
carry a white collar worker. It probably is inevitable, along with 
higher technological efficiency, to have more management and pro- 
fessional help around the factory. I would say the laboratory would 
be part of it — not really a free rider in that sense, but not directly 
engaged in production. There has been more overhead on business 
in the way of people not directly at machines. 

Dr. KJREPs. Yes; they have been classified by accounting systems 
as overhead. 



16252" ONCENTRATrON OF ECONOMIC POWER 

Mr. Pike. A ditferenco of 5 to 1 as against 2 to 1 in 60 years is 
quito marked. 

Dr. Kreps. Of course, a niacliine that does the back-breaking job 
mny involve substitution of-d clerical worker whor^is just as productive 
as were the people doiufj the back-bi*eaking work. 

Ml*. Pike. And also they have to put a lot more people on the road 
"to peddle them. 

Dr. Krkps. The conclusion that something? has happened to prices 
since tlie World War which has prevented the benefits of technology 
from being fully distributed to consumers is one that is arrived at 
by a wide variety of authorities. The Brookings Institution came to 
something of the sanlj^ conclusion in a well-known study on Income 
and Economic Progress} That situation has not changed in recent 
years. 

Dr. Mills, writing in the New York Sun as late as January 6 of this 
year, stated that while ''some correction of 1933 distortions has been 
effected," and he meant by thatihe distortion which his study revealed 
in 1933— 

there still exist price and wage disparities, exemplified by low farm prices, high 
construction costs, high costs of some capital goods and high labor costs iij 
certain industrial processes, that make for unemployment, idle equipment and 
a low ^volume of production. The benefits of technical progress must be widely 
disseminated. Economic bottlenecks are created when the gains resulting from 
industrial improvements -are retained by a few. Price reductions are the surest 
way of effecting the desirable wide distribution of productivity gains. The ad- 
vance of some 30 percent in man-hour output in manufacturing industries since 
1929 is only in part refiected in prices to consumers today. 

The fact of technology, therefore, makes the work being done by 
the Temporary National Economic Committee on concentration of 
economic power of crucial importance. For technology is bound to 
ca'ise aggravating problems to the economy unless the benefits of the 
machine are distributed to the consumer in lower prices. The best 
argument for, if not the proof and substance of, technical progress 
consists of the lower prices that are quoted to consumers. These 
savings from increasing productivity, if passed on to consumers, in- 
crease the purchasing power of millions of people and thereby give 
increased opportunities for employment to millions of businesses 
throughout the country. 

THE GENERAL EFFECTS OF TECHNOLOGY 

Dr. Kreps. Now I turn to the final part of the testimony, part 3, 
in which I try to give some picture of the general effects of tech- 
nology. So far we have been talking exclusively about economic 
effects, effects on labor productivity, prices, and the like. 

Acting Chairman Williams. I would like to ask one question just 
before you leave the subject you were just on : Have you any figures 
available to show to what extent these benefits in cost and prices 
have been passed on to the consumers? 

Dr. Kreps. There are variable measures. Dr. Bell, in the study 
which was referred to this morning, has figures that would indicate 
that while a substantial proportion of the increase in productivity 

^ Harold G. Moulton, Income and Economic Progress, Brookings Institution, Washington, 
1935. 



CONCENTRATION OF ECONOMIC POWER 16253 

was passed on to consumers in the form of lower prices, by no means 
all of it was. 

Acting Chairman Williams. That is not only shown, I assume, in 
the reduced price, but perhaps in the increased efficiency of the serv- 
ice and the better material, also, that has been passed on by reason 
of these technological processes. 

Dr. Kreps. Quite so. 

Acting Chairman Williams. Not only a lower cost, but better ma- 
terials, better goods. 

Dr. Kreps. Probably the dominant form in which tjie benefits of 
technology have been passed on has been in leisure, shorter hours to 
those employed, and, of course, complete absence of employment to 
others, whose exact number w^e don't know, 

Now, so far, only a few of the major economic effects have been 
considered, in fact only those likely to ^ccur at a given moment of 
time. But an innovation rarely shows its full power except after 
years and decades have elapsed. Moreover, it shows itself with dif- 
ferent power in different countries, causing all sorts of changes in 
social life, in government, in education, and in religion. 

The automobile, for example, affects not only the railroads, but the 
family, the size of our cities, the types of crime, the tend<?ncy for 
county seats to grow, as well as our manners, and, according to some, 
our morals. It has undoubtedly stimulated the growth of suburbs, 
changed the nature of much of our hotel business, decreased the em- 
ployment of domestic servants, changed marketing areas, and made 
oil one of the centers of controversy in international politics. It has 
saddled our Stat€ and local governments with a vast burden of debt 
for the building of roads, brought in central school systems, dottec; 
the landscape with tourist camps and roadside restaurants and pine 
board retail huts, in addition to killing and injuring more people 
each year in the United States than the American Army lost in battle 
during the World War. 

A sample of the types of effects which must be studied even to 
trace out the more important changes caused by one relatively simple 
invention is interestingly shown on Exhibit 2442, which I should like 
to submit for the record. I have only taken an excerpt of some of 
the changes that are here listed. Each one of those could in turn be 
developed. For instance, there is one item, "interest in sports in- 
creased, it is generally admitted," and that leads to a nymber of 
other effects. I merely introduce this, to indicate the coi.iplexity of 
the results that occurs when you try to trace the total effects of 
technology, and yet. that- is what statesmen have to do. Fortunately, 
economists d,. n^. 

I would like to submit this for the record. 

(Representative Reece assumed the chair. 

Acting Chairman Reix^e. It may be admitted. 

(The document referred to was maiked ''Exhibit No. 2442" and is 
included in the appendix on p. 17311-17312.) 

Dr. Kreps. Obviously it is impossible to do more than name some 
of the more important results, and a few of these are indicated in 
an outline which shows the different levels of analysis within which 
most discussions take place, and I propose to discuss briefly only the 
topics that are underscored. 1 should like not to read the outlin^ in 



16254 



CONCE^TTRATION OF ECONOMIC POWER 



its entirety, but to have it introduced into the record at this point, hot 
as an exhibit but as part of the testimony. 

Acting Chairman Reece. As part of your remarks? It may be so 
admitted. 

(The niatter referred to follows:) 

Levels of analysis 





Business policy 


Industrial policy 


Economic policy 


Public policy 


Having referenceto 


The business en- 


The industry or 


The economy 


The whole life of the 




terprise 


trade 




nation, economic, 
political, social, ar- 
tistic, educational, 
etc. 

Enlargement of hu- 
man liberties 

Protection of weak 
against the strong 


Primary objectives 


More profits either 


Expanding mar- 


Equal competitive 


Elimination of eco- 




by increasing or 


kets 


opportunity 


nomic duress and 




restricting pro- 


Larger share of 


Maximum con- 


fraud 




duction 


consumer dollar 


sumption 


National security 




Larger size 


Maximum use of 


Capacity produc- 


Conservation of na- 




Increased econo- 


government to 


tion 


tural and human 




mic power 


secure tariffs, 
loans and other 
aid 


Full employment 


resources 


Dominant interest 


The interest of 


The interest of the 


Greatest good of the 


The national inter- 




stockholders or 


■ organized, typi- 


greatest number 


est, i. e., the politi- 




proprietors 


cally the larger 


Consumer sover- 


cal, religious and 




Industrial empire- 


concerns 


eignty 


. culturalmorescom- 




building 






prising the Ameri- 
can way 


Specialist with 


The business 


The industrial 


The economist 


The statesman 


practical knowl- 


manager 


leader 






edge 




The trade asso- 
ciation execu- 
tive 






Types of prices or 


"Good prices" 


Don't chisel (ump 


Prices promoting 


M onopoly the enemy 


price control de- 


Concessions when 


of business fall- 


maximum con- 


of democracy 


sired 


necessary 


acy) 


sumption 


Uneconomically high 






"Stabilized prices 


Prices responsive to 


prices to regulate 






obtained by ad- 


competition 


consumption, e. g.. 






justing produc- 


Prices uncontrolled 


liquor, or insure 






tion to consump- 


by any one per- 


self-suflBciency e. g. 






tion, by implicit 


son or group 


war chemicals 






or agreed on for- 




Subsidized prices to 






mulae,and/orby 




promote consump- 






"fair or unfair" 




tion, e.g. housing 






trade legislation 






Payrolls 


An expense limit- 


A barrier to lower 


Mass purchasing 


A public cost, e. g. in 




ing ability to 


costs and wider 


power vital to 


time of war 




compete 


market 


mass consump- 


The proof and sab- 




A stimulus to la- 




tion 


stance of public 




bor effort 






well-being 


Costs of technology 


Plants, tool* and 


Small businesses 


Consumer illiteracy 


Breakdown of family 




machines dis- 


displaced 


Loss of investment 


unit of production 




placed 


Migration of in- 


in labor skills 


Standardization of 




Increased over- 


dustry 


Vocational retrain- 


work 




head 


Defensive invest- 


ing 


Occupational obso- 




Market research 


ment 


Displacedlaborforce 


lescence 




Cost of developing 


Restrictive na- 


thrown on com- 


Loss of handicraft 




market 


tional planning. 


munity 


artistry 






especiallycartels 


Gigantic economic 
states 

Wastes of monopoly 
and monopolistic 
competition 

Concentration 
of production, em- 
ployment and in- 
vestment dc- 
cisions in a few 
hands 

Recurrent business 
depressions 


Factoiy towns 

Pressure groups 

Increased inter - 
dependence 

Increased centraliza- 
tion of economic 
and political con- 
trols 

Increased destructive- 
ness of war 



CONCENTRATION OF ECONOMIC POWER 
Levels of analysis — Continued. 



16255 





Business policy 


Industrial policy 


Economic policy 


Public policy 


Benefits of technol- 


Lowers account- 


Promotes stand- 


New commodities 


Broader basis for 


ogy 


ing costs by sub- 


ardization 


and services 


higher standard of 




stituting me- 


Provides common 


Inter-industry com- 


living 




chanical for hu- 


basis for associa- 


petition 


Increased leisure 




man power 


tional activity 


Inter-commodity 


Increased opportun- 




Affords surer con- 


Affords weapon 


competition 


ity to create a civil- 




trol of processes 


against outsider 


Lower prices 


ization 




of production 


and chiseler 


Improved quality 






Providosoutletfor 


Softens rigors of 


Higher wages 






surplus earnings 


competition 


Shorter work week 






Implements in- 




Less child labor 






dustrial empire 




Fuller utilization of 






building 




natural resources 





Dr. Kreps. Then I should like to point out that' in the outline I 
have sketched the various horizons of thinking on the whole question 
of technology. You will find you will be able to identify — I was 
going to say pigeonhole — the remarks of most people, and sometimes 
even all the remarks that they not only have made but will ever 
make, in one of these classifications. 

For instance, the first group I list is that of "business policy," 
that which affects the individual business enterprise and its welfare. 
Those might be called, if you like, individual effects. Technology, for 
example, involves as costs such accounting figures as the plants, tools, 
and machinery displaced, the increased overhead, the market re- 
search, the cost of developing the market ; the benefits of technology 
to the individual enterpriser represent substantially lowered account- 
ing costs in addition to affording surer control of production, pro- 
viding outlet for surplus earnings of that firm, and implementing 
their expansion. 

Others will reason from the point of view of an industry. They 
^et beyond the individual firm and its problems, and talk about the 
industry as a whole, generalizing usually for some section of the in- 
dustry. Sometimes the industry is divided into small businesses and 
large businesses, those of one process opposed to businesses of an- 
other process, businesses in one region sometimes opposed to busi- 
nesses in another region, but very often the experience and the eco- 
nomic reasoning of people te'nds to be guided by the fact that on 
the whole, the horizon of their thought is, Wliat is beneficial to that 
industry? 

And referring to the costs of technology, as far as the industry is 
concerned, the small businesses that are displaced represent a cost 
very often causing vigorous protest. 

The migration of industry that takes place is a cost to the industry 
concerned; the defensive investment that is necessary, the restrictive 
national planning that takes place, especially of the cartel type. 

ECONOMIC POLICY 

Dr. Kreps. Then the level that goes beyond an individual industry 
and tries to consider the economy, the wealth-getting, wealth-using 
activities of men, is what I have termed "economic policy," and eco- 
nomic policy, as you notice, has different objectives from business 
policy. A business has to make profits or there will be no business. 



16256 CONCENTRATION OF ECONOMIC POWER 

But SO far as the economy is concerned, profits is a lure or induce- 
ment. " What we really want from our economic structure is some- 
thing like equal competitive opportunity, maximum chance for busi- 
ness to grow, something like maximum consumption, capacity pro- 
duction, and full employment. 

Similarly, so far as technology is concerned, technology involves 
certain definite economic costs that may not be met by the individual 
business, may not have to be met by them, such as the cost of occu- 

Eational obsolescence or the cost of retraining workers whose skill 
as been supplanted, or finding jobs for workers who are no longer 
needed. Even though the business can get rid of them, and even 
though the industry can get rid of them, the economy cannot. You 
have to support these men. They represent social costs involved. 

I should go on to say, so far as economic policy is concerned, that 
the benefits of technology in terms of shorter workweek and less 
child labor, fuller utilization of natural resources, higher wages, im- 
proved quality, lower prices, are benefits which sometimes the indi- 
vidual business may not like, particularly the lower prices. What- 
ever resistance there is to lower prices is rarely found on the part of 
economists. 

Now J finally, the legislators' job is more difficult by far, because 
the legislator has to consider pulDlic policy, the national interest, the 
political, religious, and cultural mores comprising the American way, 
and the legislator often has to disregard what is good business and 
what is good economics because it is bad public policy. 

Mr. Pike. We could get the price of liquor down if it wasn't for 
public policy. 

Dr. Kreps. And there are certain social costs of technology that 
have become important — factory towns, pressure groups, increased 
destructiveness of war; and there are certain social benefits to be 
achieved, to be achieved not by solving economic problems but by 
solving public problems, including that of an increased opportunity 
to create a ciAnlization. 

Now, as I say, when people argue on the question of technology, 
you will usually find them arguing from one or the other of these 
points of view, one or the other of these levels, nnd frequently they 
ne\"er get away from any one of them. 

I propose only to look very briefly at the five points underscored, 
namely, the effect of technology in creating certain large economic 
units, its impact upon the problem of pressure-group politics, its 
impact upon our economic interdependence, its impact upon the in- 
creased destructiveness of war, and finally, its promise of a better 
civilization. 

TECHNOLOGY AND MODERN BUSINESS EMPIRES 

Dr. Kreps. Technology, in the typical instance, means the use of 
power,- of specialized equipment, large factories, large plant, and 
large sums of money. In the railroad industry and puolic utilities, 
steel and automobile manufacture, the aggregates of capital required 
fdr efficient size are much larger than any but the extraordinary indi- 
vidual can suppl,y. Consequently the corporation has been devel- 
ol^ed, which could mass the savings and efforts of hundreds of thou- 
sands of people so that we might have abundance. 



CONCENTRATION OF ECONOMIC POWER 16257 

These a<]:gre^ates of industrial production have in the last century 
<2:roAvn so much in economic i)o\ver that they have become of primary 
si<^nificanct in modern economic life, a significance which Woodrow 
Wilson, in an address in 1910 to the American Bar Association, 
expressed as follows : 

A modem corporation is an economic society, a little economic state — and 
not always little, even as compared with states. Many modern corporations 
wield revenues and command resources which no ancient state possessed, and 
which some modern bodies politic show no approach to in their budgets. * ♦ * 

Society cannot afford to have individuals wield the power of thousands 
without personal responsibility. It cannot afford to let its strongest men be 
the only men who are inaccessible to the law. Modern democratic society, in 
particular, cannot afford to constitute its economic undertaking upon tae mon- 
archical or aristocratic principle and adopt the fiction that the kings and 
great men thus set up can do no wrong which will make them personally 
amenable to the law which restrains smaller uien : that their kingdoms, not 
themselves, must suffer for their blindness, their follies, and their transgres- 
sions of right. 

It does not redeem the situation that these kings and chiefs of industry 
are not chosen upon the hereditary principle (sometimes, alas! they are) but 
are men who have risen by their own capacity, sometimes from utter obscurity, 
with the freedom of self-assertion which should characterize a free society. 
Their power is none the less arbitrary and irresponsible when obtained. That 
a i)easant may become king does not render the kingdom democratic* 

This utterance seems unusually prophetic considering the new gov- 
ernments where peasants and house painters have made their way 
to the top. Large corporate businesses are in no sense private, indi- 
vidual businesses. They are economic governments, created by polit- 
ical governmental units such as the State of Delaware. As Henry 
S. Dennison has stated in an article entitled "Business and Govern- 
ment" in a recent issue of the Michigan Alumnus: 

* * * The basic pre-supposition that business can be considered as an 
entity sepsirate from government is wrong. * * * In the modern world a 
large number, often a considerable majority of the citizens, spend the most 
significant hours of their lives as part of the business structure. In so far, 
therefore.- as business governs the lives of its people when they are working 
for it, business i.s, itself, a government within a government. Its possibilities 
of affecting the well-being and self-respect of its people for better or worse 
cover just exactly the ground which the democratic hypothesis claims as the 
primary and essential field of governraent." 

This position has been seconded by the noted political scientist. 
Prof. Charles E. Merriam, iii a book entitled The Role of Politics 
in Social Change. I want to quote only one or two pas.sages: 

The great company assumes many of the characteristics of what is commonly 
considered a goveniment. It has a legislative body, an executive, an adminis- 
tration, a department of state (public relations), a law department, a trea.sury, 
of cour.se. It takes on many of the characteristics of what is called bureaucracy. 
The heads are invisible and intangible or tend to become so ; they lose contact 
with their men ; personnel divisions spring up ; security of tenure becomes an 
issue, leading the way to pensions and other forms of insurance. * * * 

With reference to their weaker rivals these great ones may lay down rules 
of action to which conformity is as important or perhaps even more so than 
compliance with the law itself. Manner and mode of production, prices, profits, 
areas of marketing — the whole gamut of production — may be swept by the 
benevolent supervision of the stronger. 



■ Reports of the American Bar Assooiation, 1910, vol. XXXV, pp. 428-430. 
''Henry S. Dennison, "Business and Ciovernment," in Michiyan Alumnus; Quarterly 
\umber, June 29, 1935, vol. 41, No. 23. 



16258 CONCENTRATION OF ECONOMIC POWER 

* * * If they do not raise armies, they can organize their own deputies 
into coal and iron or other police and carry on struggles In times of industrial 
strikes — little short of civil war in some instances; and they may also control 
the; local organization of force and justice, or intimidate, if not own. 

They may control tlie working conditions and hours of thousands of men, 
and, private 'y, shall we say, regiment their conduct to an extent not equaled 
by the organization known as the government. * * * 

* * * Curiously enough, a corporation may obtain powers under the laws 
of some States, giving greater powers than the State government itself may 
exercise. 

Furthermore, the relations between these larger units themselves become a 
problem of far-reaching importance to the community of which they are a part. 
Great "companies" may struggle and make war with each other within the 
boundaries of tlie State, as railway groups, or steel groups, or oil groups arise 
and contend for <^'ie mastery. At the same time comes battle with the smaller 
companies, concerns, and individuals, and the pressure of all of them upon the 
consumer and upon the worker and upon the state itself.^ 

TECHNOLOGY AND PRESSTJRE GROUPS 

Dr. Kreps. I propose for just a moment to look at the connection 
of technology and the increased power of pressure groups. There 
have, of course, always been pressure groups, groups with the same 
or similar interests, such as the aged, the veteran, farmer, laborer, 
banker, manufacturer. All have organizations. Being in the- same 
group and hearing over and over again the same sort of experience, 
they easily identify what is to their own advantage with that which 
benefits everybody — and thus press for higher tariffs, consumption 
taxes, higher prices, higher wages. Federal subsidies, lower income 
taxes, aiid the like. These pocketbook interests soon develop into 
full-fledged matters of emotional principle. I think it is this that 
the cynic refers to when he defines politics as a battle of interests 
masquerading as principles. These "principles" then become the 
group mores not to be questioned internally and the basis for a 
friend-enemy classification externally. 

Each such major economic group then brings pressure to bear upon 
legislatures for favorable legislation, and the resultant legislation 
often sets up a department, a bureau, a commission designed to minis- 
ter to the needs and promote the interests of those whos& initial pres- 
sures motivated the legislation. Thus, in housing, several distinct 
agencies exist here and abroad to represent, among others, the separate 
economic interests of the contractors, the building and loan societies, 
the advocates of governmental housing, and the owners who were 
threatened with loss of their homes. As a result there sometimes is 
frozen into the governmental structure the same sort of confusion 
which exists outside. But it is particularly in the m(jdem era of 
specialization and of rapid commtmication brought about by tech- 
nology that pressure groups have multiplied, and it is particularly 
in the modern era of large-scale production and savings that the 
individual interest at stake has become large. 

Consumers are hard to organize because no one consumer will gain 
or lose a great deal either way, but large units may gain much and 
lose much. And large units, as has been shown, tend to have a 
technological foundation. Moreover, no one so easily or so readily 
raises the funds necessary for maintaining an organization as those 

^ Charles E. Merriam, The Role of Politics in Social Change, New York University 
Press, New York, 1936, pp. 49-52. 



CONCENTRATION OF ECONOMIC POWER 



16259 

able to tax consumers directly through price maintenanc ;. Good 
causes often so abegging. Thus technolo; 
number and the power of pressure groups 



causes often go abegging. Thus technology has increased both the 
th( 



THE WORLD AN ECONOMIC UNIT 

Dr. Kreps. Next, has technology made the world an economic unit? 
The extent to which technology' has reduced the economic dimensions 
of the world is indicated in this exhibit. 

The Chairman. The exhibit may be received. 

(The chart referred to was marked "Exhibit No. 2443" and appears 
below. ) 

ExHiRiT No. 2443 




E0TECHNIC5 
(to !830's and 40's) 
Best regular speed on land and sea lOm.ph. 



PALEOTECHNICS 

(late 19th, early 20th centuries) 
Best regular land speed 65m p h best regular sea speed 36nn. p. h 

NEOTECHNIC5 

("present era) 
Best regular speed in am 200 m. p. h. 



TECHNICAL PROGRESS IN TRAVEL TIME 

Size of the world, supposing best travel technology in each epoch were 
applied over the whole surface of the earth 



16260 CONCENTRATION OF ECONOMIC POWER 

Dr. Kreps. This is taken from Eugene Staley's World Eeanomy in 
Traiixition ^ and is based on technical terminology taken from Lewis 
M.unford's book, Technics and Civilization.- Mumford calls the 
period which utilized wood as material and wind and water as sources 
of power, the eotechnic era. The size of the world in the 1830's is 
represented according to the best regular rate of speed on land and 
sea, about 10 miles an hour. The period beginning with 1800, which 
used coal, iron, and limestone, and mechanical devices, he calls the 
paleotechnic era. That, you see, is represented by the small size of 
the world, where the best regular land speed is 65 miles per hour, and 
the oest regular, sea speed is 36 miles per hour. The present age, 
in v'hich chemical interaction, electric power, radio, and biochemistry 
are atilized, he calls the neotechnic era. You see the size of the world 
today, that little diminutive spot. The latter has been well char- 
acterized by a publication of the National Resources Committee en- 
titled Technological Trends and National Policy ^^ in the statement: 

Four characteristic trends of modern manufacturing, (1) toward continuous 
processes, (2) automatic operation, (3) use of registering devices, and (4) of 
controlling devices are conspicuotis. 

(The chairman resumed the Chair.) 

The Chairman. Have you, for ordinary folks, defined the meaning 
of these terms? 

Dr. Kreps. Yes; I have; just before you came in. The eotechnic 
period is one which used wood for material and wind and water 
for power. The paleotechnic period is one using iron and steel for 
material and using mechanical power. The neotechnic period is the 
one we are in at the present time, of chemical interaction, and the 
like. I am describing some of the characteristics of this period 
as given by the Committee on Technological Trends. 

The Chairman. Thank you so much. 

Dr. Kreps. They point out : 

The last two may embody the new electric eye or ear or only the older 
mechanical "senses." Or they may automatically make chemical tests, such as 
Sampling furnace gas every few minutes for its proportion of carbon dioxide, 
to enable efficient and smokeless combustion, or measuring acidity, or chemical 
content by an automatic spectrophotometer/ 

When you talk things like that, you are talking the neotechnic 
era. 

Concerning the impact of technology upon nations, Mumford has 
made this, it seems to me, classic statement: 

Both eotechnic and paleotechnic industry could be carried on within the 
framework of European society : England, Germany, France, the leading coun- 
tries, had a sufficient supply of wind, wood, water, limestone, coal, iron ore; 
so did the United States. Under the neotechnic regime their independence and 
their self-sufficiency are gone. They must either organize and safeguard a^d 
conserve a world-wide basis of supply, or run the risk of goivg destitute ami 
relapse into a lower and cruder technology. The basis of the material elements 
in the new industry is neither national nor continental but planetary : this is 
equally true, of course, of its technological and scientific heritage. * * * 
Under these conditions, no country and no continent can surround itself with 
a wall without wrecking the essential, internatiLual basis of its technology 

* Eugene Staley, World Economy in Transition, Council on Foreign Relations, New York, 
1930, p. 6. 

* Harcourt, Brace, New York. 1084. 

* Technological Trends and National Policy, National Resources Committee, Washing- 
ton, .Tune 1037, p. 24. 

* Ibid., pp. 24-25. 



CONCENTRATION OF ECONOMIC POWER 16261 

* ♦ * Isolation and national hostilities are forms of deliberate technological 
suicide.' 

Thus it is that today measured in travel tiine, the whole world is 
smaller than the eastern seaboard in Washington's day or France 
in the reign of Napoleon. 

Technology has been making for easier and larger movements of 
goods and persons across boundaries precisely at a time when nation- 
alistic and pressure group politics seems bent on erecting walls to 
resist all these tendencies. The conflict of technology and politics is 
at the bottom of the present European mess. 

Needless to say, from the point of view of raising living standards 
in the world, the forces of technology should be accommodated by the 
erection of a system of worldwide economic exchange which, through 
movements of capital and knowledge, or indirectly through trade in 
goods, would make every region more productive than it otherwise 
could be, and raise the income level of every country in the world. 

While today population pressure, access to raw materials, and 
access to markets are fighting slogans in international politics 
[reading] : 

One of the fii^t principles for progress towards political peace a- well as 
towards economic welfare must be: Lessen the economic significance of political 
boundaries.' 

according to Eugene Staley in his book World Economy in Transi- 
tion.^ 

TECHNOLOGY AND WAR 

Dr. Kreps. The way in which wars have been made more destruc- 
tive by the use of machinery need not be emphasized. Despite the 
fact tliat wars are carried on only by governments, probably no 
machines have been so greatly multiplied or so rapidly improved as 
the machinery of death. In the first World War we already had 
repeating rifles, hand grenades, machine guns, heavy artillery, mines, 
submarines, bombing- planes. Then new expedients such as steel 
helmets, tanks, chemical warfare, flame throwers, and antiaircraft 
were introduced. Today we have the additional fact of motorization. 
But, due to the machine age or due to technology the destructiveness 
of war has increased not only on the battle front but (and here is the 
important point) on the home front. As Mr. Frederick Lenz points 
out in an article entitled "Influences of Modern War" in Plan Age: 

The modern battle on land, on sea, and in the air, becomes the true counter- 
part of our peace processes. It exhibits all the characteristics of mechanized 
mass production and tran.'^port. It stretches the efficiency of standardized de- 
struction to the utmost. Despite the human factor involved, it takes on an 
objective, measurable character; the role of the fighting soldier is analogous 
to that of the modern factory worker who acts as an accessory to the ma- 
chinery of which he is in charge. Officers, non-commissioned officers, and 
privates represent the three typical strata of our industrial society.^ 

Modern industr}' and the military machine have in many ways 
the same characteristics. The preponderance of fixed capital invest- 
ments is paralleled by the mechanization of modem annaments. 
Both, when in full action, consume durable goods, steel, coppei, 
chemicals, and the like. Both require concentration and regimentr- 

* Lewis Mumford, Technics and Civilisation, Harcourt, Brace, New York, 1934, pp. 232- 
233 : italics in original. 

^ KiiKene Staley, op. cit., p. 320. 

' Plan Aye, November 19.J9, Vol. V, No. 9, p. 289. 



16262 CONCENTRATION OF ECONOMIC POWER 

tion of large numbers of human beings into compact units. In both 
the tendency toward rationalization is strong, and standardized pat- 
terns promote continuous replenishment of spare parts. Both tend 
to plan on a Nation-wide scale, map out campaigns, and rely heavily 
on propaganda, stressing heavily that they are only protecting their 
ovm. 

The military is in fact the ideal form toward which a purely 
mechanical system of industry tends. It affords large-scale demand 
for absolutely standardized goods. Individual taste, individual judg- 
ment, individual needs other than the dimensions of tlie body, have 
no effect upon the clothing or equipment of the soldier — all are alike. 
Moreover, a nation at war is the ideal consumer. It makes large de- 
mands for steel and iron and machinery — that is, the durable goods 
recovery so much empl -^sized by certain analysts takes place — and 
then in the process of battle these are sunk or shot to pieces. No 
problem of overcapacity or resistance to replacement remains to block 
further sales. 

Technology, in short, not only accounts for a good part of the 
increased physical suffering and loss of life in modem war but it 
shares no small par^ of the responsibility for the terrific economic, 
social, and political readjustments that modern war brings in its wake. 

AMERICA UNUMITED 

Dr. Krpts. One of the inveterate pathological characteristics of 
periods of depression is the hue and cry that opportunities no longer 
exist, that the frontier is gone, that the pace of advance in the 
future is bound to slow down. So also at present. On the one hand, 
there are those who point to the small amount of virgin territory 
remaining to be settled in the United States, to the tapering rate of 
growth of the population — despite the fact that the number of 
families in the 40's is going to increase by a larger absolute amount 
than in any previous decade in our history — and similar factors. 
Not allowing for the fact that the human mind rarely can see as far 
and as distinctly in a forward direction as it can see backward, they 
sometimes argue that employment opportunities in the future are 
bound to be limited. 

Such persons should study the recent industrial history of other 
countries such as Great Britain or Sweden. 

I wish to submit as an exhibit, a chart from Carl Snyder's book 
entitled "The Remarkable Parallel of Sweden and the United 
States." It is the middle chart on the easel. 

Acting Chairman Reece. It may be admitted. 

(The chart referred to was marked "Exhibit No, 2444" and ap- 
pears on p. 16263.) 

Dr. Kreps. This shows a growth paralleling if not exceeding that 
in the United States. Moreover, the rate of increase in value added 
by manufacture in Sweden, precisely in the period from 1880 to 1920, 
is, if anything, faster. 

Now Sweden in 1870 seemed to have no such frontiers ahead of 
it as did the United States. Here most of the area, west of the 
Mississippi River remained to be settled. vVe were to go through 
in succession a rapid development of the iron and steel industry, 
two hectic decades of railroad building, and a new era of automo- 



CONCENTRATION OF ECONOMIC POWER 



16263 



biles, construction, and road building. In SwedeJi the land was 
already occupied. Its population growth in no sense paralleled that 
of the United States. Moreover, from the point of view of the 
writer, Carl Snyder, who published this chart, Sweden was "handi- 
capped" throughout the period by measures which have come into 
effect in the United States only m the past 7 years. To some of 
these measures or "handicaps" I should like to call attention. 



Exhibit No; 2444 



10 



SWEDISH NATIONAL INCOME 
& VALUE ADDED BY MANUF. 

COMPARED WITH U S. FROM 1860 




SWEDISH 
.NATIONAL INCOME 



U.S. 
"NATIONAL INCOME 



^VALU£ ADDED 
BY MANUr. 
IN SWEDEN 

IN KR. 




rVALUE ADDED 

BY MANUF. 

IN U.S. 

IM$»S 



RATIO SCALE 



1660 



1870 



1880 



1690 



1900 



1910 



1920 



1930 



1940 



XXX. THE REMARKABLE PARALLEL OF SWEDEN 
AND THE UNITED STATES 



sonnet' C»P1''«L'SM 'Ht cnEiTOR 



They have had a reserve works system, a W. P. A., if you like, 
since 18G6, based on a national resources survey made in 1852. They 
have about tlie lowest tariff in the world. They initiated a national 
power system under a water power administration in 1909, with 
scores of municipal and cooperative distributing plants (T. V. A.). 
A governmental power network gridirons the whole nation, with 
rural electrification covering 60 percent of the farms (as opposed 
to less than 20 percent here). They have had a managed currency 
since 1920 and frankly ignore the gold standard. The S:ate is a 



16264 CONCENTRATION OF ECONOMIC POWER 

partner in the largest iron mines of the country, those now of such 
importance to Germany. Tobacco profits are used to finance old-age 
pensions, which they have had for decades, together with unemploy- 
ment insurance and other forms of social security. The State owns 
the trunk line railways, the telegraph and telephone systems, and 
most of the forests. They have had the basic elements of the 
A. A. A. since 1928. Their systems of State liquor control compares 
favorably with that of any country in the world. Their govern- 
mental aerotransport company has not had a fatal accident in 12 
years. They have had full collective bargaining for decades and 
since 1909, when Hjalmar Branting came into power (by the way, 
to settle a general strike which the King refused to stamp out by 
violence or bloodshed), Sweden has been governed most of the time 
by its L. O. (Landsorganisationen) with the slogan "The same 
possibilities for living securely within the fatherland for all those 
"who inhabit it." They have had a consumer cooperative movement 
that successfully and aggressively reduced the prices of manufac- 
tured goods. In spite of all these "obstacles" Swedish manufacturing 
grew faster than that in the United States. 

Those who consider Sweden a special case should look at develop- 
ments in Germany, Switzerland, the Netherlands, or any other indus- 
trialized country, including Great Britain. Even in that tight little 
island the increase in real wages from 1840 to 1900 was just as rapid 
as in the United States. 

I should like to submit an exhibit showing real wages in Great 
Britain and in the United States, 1840 to 1900. 

(Senator O'Mahoney resumed the chair.) 

The Chairman. The exhibit may be received. 

(The table referred to was market "Exhibit 2445" and is included 
in the appendix on p. 17313.) 

Dr. Kreps. (ireat Britain, I might say, has "suffered" similarly 
from free trade, full collectible bargaining, and various forms of labor 
legislation. In addition to that, it has experienced a deficit in savings 
such that slightly more than half as much, that is only 7 percent, of 
the national income was saved in 1935 as was saved, 13 percent, before 
the World War. 

What is the frontier that Sweden and England and many other 
countries have developed? It is obviouslv an intensive rather than 
an extensive frontier. It is the frontier represented by the needs and 
the will to progress of their own citizens. And that frontier stpl 
remains to be developed in the United States. As a notable business 
magazine. Fortune^ points out in its issue of February 1940: 

* * * The tools and exten.sions of industrialization do not exist for their 
own sakei Tlioy exist for * * * the cnvsumcr. The entire producers' 
goods industry, for instance, whose purpose is the making of tools, is quite 
secondary to the real purpose of industrialization. That real purpose may be 
defined as an increase in the poiccr to ammme. * * *^ 

* * * The central economic problem is not a revival in the producers' 
industry, although that would help. Nor can it be a revival in "investment" in 
Uie old sense of the word. The central economic problem is simply the con- 
version of a high i)otential power to consume into an actual power to consume: 
a wider distribution of progress. 



1 Fortune, Vol. XXI, No. 2, p. 50. 



CONCIONTllATION OK r<X>f)NOMfC I'OVVKIl 16205 

'I'hf- (trout <IllTororitiiil thnt links yxitonllnl and ;i<'lii;il consunilnt; piwor is 
price; und wlial llio n«'vv era cricH tor is a dniHllc (Icclinc in niany iiai-K «»f 
IndUHtrinl prices.* 

* * * Emi)haHi.s has boon jait on I Ik; ne<Ml for confidciKc in rnakinj; new 
Investment; but • • » this emphaslM is both unrealistic atid academic. The; 
realistic requirement is, rather, that the businessman should liavf; crmfldcv/;*; 
in the ronmimcr: he must have confidence that if he decreases his prices and 
his profit nuirKlns ho will jjet a <-orrespi»ndin>? rise in volume.^ 

• * * In the consumer lies th(! frontier. ♦ * • Hy industrialization we 
built a new civilization. And durinj? the last fifteen or twfjnty years, by further 
industrialization, we have created the possibility of an entirely new era for 
mankind. It is time now to get to work to make that era a reality.' 

The ma<;iiitudo of tlie frontier lierc to be explored is evident from 
the familiar i)yraniid showing income levels in the United States 
which was introduced once before at our hearings.* I would like 
to refer to it now. 

Dr. Kreps. It shows 8,000,000 families with incomes of hiSS than 
$750 a year, and an additional 11,000,0(X) families with incomes be- 
tween $750 and $1,500 a year. These families, representing over GO 
percent of our population, constitute a vast unexplored economic on^ 
body open for the kind of pioneering effort which the Swedish and 
British have used throughout the past 50 years. Economic i)iofieeis 
with vision are needed, able to get outside the shells of their prejudice 
and their self-interest. Here are some truly gigantic bridges to Vje 
built, economic bridges connecting the needs of these families with 
the goods which our superb machines can produce. 

There are, in short, two frontiers — the industrial frontier and the 
frontier of economic adjustment. Changes in one must be synchro- 
nized with changes in the other, just like the front and back wheels 
of an automobile. If we vigorously push advances in technology 
and refuse to make the requisite economic adjustment, we will set up 
grave tensions in our society. Obviously to call a moratorium on 
research or on progress of the machine. is both unwise and impossible. 
But the shortsightedness of those who argue that the industrial 
frontier is gone is only exceeded by the stupid defeatism of those who 
wish to call a halt to economic adjustment. 

What is necessary is economic balance. Our capacity to produce 
goods must not change faster than our capacity to purchase them. 

The Chairman. You should state that the other way, that our 
capacity to purchase goods should be kept in line with our capacity 
to produce them. 

Dr. Kreps. Yes; I would agree to that. 

The Chairman. Wouldn't you agree that that is a much better 
way of j)utting it? 

Dr. Ke s. There has to be give and take. 

The Chairman. No; the one as you stated it involves the idea of 
limitation of production, and the amended statement which I have 
suggested does not involve limitation at all, it involves solely build- 
ing up of the consuming capacity of these 19,000,000 families at the 
bottom of this curious diagram that you have presented. 

Dr. Kreps. I agree. 

' Ibiil., p. 160 (italics in original) 

Mbid., p. 163. 

3 Ibid., pp. 14."j, 164. 

* See He.irings, Part II, pp. 5424, S-jB-j 

124491 — 41— pt. 30 6 



16266 CONCENTRATION OF ECONOMIC POWER 

The Chairman. In other words, here is a potential market of 19,- 
000,000 families which is unable to take full advantage of what 
advances technology offers, because they are living in the individual 
era, depending upon themselves, whereas all of the great triumphs of 
modern technology, or most of them at least, are the product of 
some form of organized effort, either in the development of the 
technology or in the use of it. Most of these great new inventions 
are capable of use only by some sort of collective effort. A railroad, 
for example, can be made to serve the people only by the collective 
a-ssets, the capital of thousands of people, and the huge industrial 
army who operate the railroads. The same is true of every com- 
munication system. The same is true of the airplanes. The same is 
true of the modern system of public roads, and of the automobiles 
which travel those public roads. 

These families at the bottom of the scale have not been permitted 
to emerge into the area of using what organized technology and or- 
ganized industry makes available to them. 

Dr. Kreps. That is correct. 

It is interesting to note that even before 1932, a committet. of 
President Hoover's, writing a two-volume work on social trends, 
should summarize their findings by saying : 

If, then, the report reveals, as it must, confusion and complexity in American 
life during recent ye&rs, striking inequality in the rates of change, uneven 
advances in inventions, institutions, attitudes and ideals, dangerous tensions 
and torsions in our social arrangements, we may hold steadily to the importance 
of viewing social situations as a whole in terms of the interrelation and inter- 
dependence of our national life, of analyzing and appraising our problems as 
those of a single society based upon the assumption of the common welfare as 
the go!al of common effort. 

Effective coordination of the factors of our evolving society mean, where 
possible and desirable, slowing up the changes which occur too rapidly and 
speeding up the changes which lag. The Committee does not believe in a 
moratorium upon research in physical science and invention, such as has some- 
t' les been proposed. On the contrary, it holds that social invention has to be 
stimulated to keep pace with mechanical invention.^ 

Some of these social inventions have alrearly been applied in Amer- 
ican life. Our genius in inventing and exploiting the idea that all 
the children of all the people should be educated has led to an in- 
vestment in plant in every corner of the United States and created 
jobs for millions. If we should catch the vision of building an 
American civilization, we could create employment for millions, as 
did Sweden, in providing, to use their national slogan, "more beauti- 
ful things for everyday life." In every city an art center, an opera 
house, with native schools of painting, sculpture, woodwork, handi- 
craft, music, and literature; m every home and school and public 
building examples of native American artistry; but abcve all in 
American economic life a realization of that type of economic and 
social adjustment which may lead some future observer to call the 
United States, as Marquis W. Childs describes Sweden in his Sweden^ 
the Middle Way, a — 

country where laissez-faire has continued to exist; where the so-called "laws" 
of supply and demand have not been wholly invalidated by the spread of 
monopoly.^ 

1 Recent Social Trends in the United States. McGraw-Hill, New York, 1933, p. XV. 
s Marquis W. Childs, Sweden, the Middle Way, Yale University Press, New Haven, 
1936, p. 161. 



CONCENTRATION OF ECONOMIC POWER 16267 

Monopoly in its various forms in the United States is tJie enemy 
of deniocnicy. If we fail to have sufficient American pioneer red 
blood in our veins to insist that there shall be no concentration and 
exercise of economic power without the consent of the governed, 
technology will never be able to create for us an America Unlimited. 

I am sorry to have taken such a long time, Mr. Chairman, for this 
testimony. 

The Chairman. It was very interesting. 

Do any members of the committee desire to ask Dr. Kreps any ques- 
tion i 

Mr. HiNRiCHS. Mr. Chairman, may I have just a moment? There 
were one or two questions that I should like to have asked, but the 
hour is somewhat late and it has been somewhat difficult at points 
to follow this very interesting discussion. Merely as a matter of 
safeguard, therefore, I might want to question the witness at some 
later time. 

I would like, however, to indicate what you already indicated at 
the beginning, that Dr. Kreps spoke in his personal capacity, and 
certainly was not representing, more particularly, the point of view 
of the Department of Labor in presenting what seems to me to be 
in part at least a bridge between the work which the committee has 
been doing and the present hearings, presenting it very interestingly 
and significantly. That is, in the discussion, for example, of con- 
centration of economic power, of prices, with which the committee 
has heretofore concerned itself, I think in showing the relationship 
between those subjects and the broader problems of technology. Dr. 
Kreps has done a very real service. 

I should like, however, if I may, to address myself for a moment 
to Mr. Anderson with reference to the type of interest which we 
feel in the Department very keenly, in the problems of technology 
or the machine as such. We recognize these other problems; our 
interest in America Unlimited is as unlimited as Dr. Kreps'. As a 
matter of fact, I think the phrase might conceivably have originated 
within our Department. 

The Chairman. It is a good phrase, if more than one wants to 
claim it. 

Mr. HiNRicHS. It is an excellent phrase, and the more widely used, 
the better, and the more widely it is realized that America Unlim- 
ited means a very broad attack on the problem, and not a specific 
attack by restrictive measures, either with reference to production 
or with reference to machinery, presumably the better. 

I have gathered from Dr. Kreps' testimony that an attack on the 
problem through a mere limitation on the use of machines as such 
would be regarded by many as analogous to the machine riot ap- 
proach to machinery in the nineteenth century. Merely in passing, 
I would put in a footnote that I wouldn't want to make the statement 
before we closed an examination of the problem. There has been 
some interesting thinking by David Cushman Coyle and others, for 
example, as to the poverty a society may find itself in through an 
undue rate of obsolescence of machinery, where an undue proportion 
of its efforts goes into the creation of plants which are then scrapped 
and don't result in consumer goods. 

But turning to the particular problems that are involved, Mr. 
Anderson, I hope that this is a bridge and not a forerunner of the 



16268 CONCENTRATION OF ECONOMIC POWER 

attack which is going to be made by all witnesses. This is funda- 
mentally important, but there is the problem of the machine itself, 
of the group of workers that are thrown out by a specific machine, 
or the individual worker that is thrown out in the process of tech- 
nological change, with reference to which we in the Department of 
Labor have a vital and continuing concern. 

The things that we are hunting for are the constructive efforts 
which are being made by industrial leaders, by trade union lead- 
ers, by thoughtful people in the Government, as to the means by 
which that dislocation can be made less in those instances in which 
it occurs. It has meant, for example, in the recent past, a fairly 
substantial extension of the field of collective bargaining in which, 
for example, collective bargaining has concerned itself not merely 
with the question of wages and of hours, but has also concerned 
itself with such questions as the rate at which machinery is going to 
be introduced, and the way in which machinery is going to be 
introduced. 

To take examples from countries that Dr. Kreps has been talking 
about, there has also been a very great interest in such things as 
dismissal wages, with which we in the United States have relatively 
litth familiarity. Now there is a developing experience in the United 
Stales, and a developing awareness of the problem of the dislocation 
for the individual groups, on which we need to focus our attention, 
and to which hearings on technology and machines as such can very 
pro3erly be directed, and should be extensively directed, to find out 
the extent to which there is an awareness, the extent to which that 
proDlem is being handled in one industry after another, and the 
methods that can be applied. And it is along that line that our De- 
partment has a very vital interest, that operates in a sense on a nar- 
rower level, or operates at least on an un-underlined level of interest, 
in that chart that was submitted, and I hope that we can look for- 
ward to that material and point of view being developed. 

Dr. Anderson. May I express the attitude of the staff in building 
up these particular hearings, Mr. Chairman? We had in mind two 
approaches. The first one has been reflected in Mr. Kreps' fine docu- 
ment, and will be included in the next witness's statement of new and 
impending technology. On this first day we planned to orient our- 
selves in the problem, to get a glimpse of its size and its ramifica- 
tions, to form this bridge between the larger social policy problems 
of the economic situation that you have been discussing through the 
year, and this more specific topic of technology as it applies in par- 
ticular industries. Not only have we had in mind these specific 
points, but also as I pointed out this morning successive witnesses will 
be in the nature of case studies for the committee. Mr. Ford, for 
example, will be here on Wednesday morning, and he will discuss 
the whole retooling story of the Ford plant, the thing which every 
economist and labor man has been wanting to know about for a long 
time. Specifically in detail he will talk about displacement in par- 
ticular units of the plant, and the effect of displacement upon workers, 
particular workers, in definite lines of production. 

We have had in mind, therefore, a .twofold purpose all the way 
through. The first task today was to lay a groundwork, as it were, 
upon which to build the rest of the structure. Ultimately we hope 
that out of this will come some sense of the social obligations, of the 



CONCENTRATION OF ECONOMIC TOWER 16269 

policies of a social character, that must be fomiulatedi and I liavo 
cautioned every ^vitness with whom I have discussed the hearinn:s that 
we do not propose to prejud<i:e the outcome of the lioarin^s in any 
way, nor do we have anv formuhi or panacea. We intend to look 
upon them precisely as Mr. Hinrichs 1ms outlined, a succession of 
case studies in which specific data will bo assembled and presented 
to the committee for its review. 

We are reatly for our next witness, Mf.. Chairman, if the com- 
mittee is. 

The Chaikman. Did you want to make any comment? 

Dr. Krets. Just one statement, that I want to second what Mr. 
Hinrichs lias said. As a witness, counsel had instructed me to say 
that I was speakin<x for myself, ii\ no way connnittin*!; anyone, and 
particularly in no way committinoj the committee as such, or any 
part of tiie committee. I am sorry if I failed adequately to carry 
out that instruction. 

The Chairman. That is clearly understood, I think. 

Dr. Andkrson. Mr. Chairman, we are ready with our second wit- 
ness for the day, and I mijrht say we have scheduled the hearings 
on such a basis that you will have two strong witnesses a day to 
contend with. 

Mr. Chairman, Mr. Watson Davis is the director of Science Serv- 
ice. He is the author of the book. The Advarhcemsnt of Science. 
He has written many nrticles in this field, and, when looking over all 
possible witnesses to bring to you, on the subject of "New and Im- 
pending Technology," your executive secretary and I concluded that 
Mr. Davis was the best qualified person we could find. We present 
him to you with the subject of "New and Impending Technology." 

The CiiATRMAN. Your testimony of course is all a matter of opinion, 
isn't it, and the result of your own studies? 

Mr. Davis. Not only my studies, but those with whom I have con- 
sulted. 

The Chairman. If there is no objection, we won't bother adminis- 
tering the oath to witnesses who are just contributing expressions 
of their opinion and of their own researches. 

STATEMENT OF WATSON DAVIS, DIRECTOR, SCIENCE SERVICE, 

NEW YORK 

The Chairman. Will you be. good enough to state for the record 
your background, please? 

Mr. Da\7s. My name is Watson Davis. I am director of Science 
Service. Science Service is a nonprofit institution for the populariza- 
tion of science, with trustees nominated by five bodies: The National 
Academy of Science, the National Research Council, the American 
Association for the Advancement of Science, the newspaper profes- 
sion generally, and E, W. Scripps estate. It has been in exist- 
ence about 20 years, and it is operating in the field of keeping the 
public informed as to the advances of science. We operate in part 
as a press association or a newspaper syndicate and we publish the 
weekly magazine. Science News Letter. 

The Chairman. How long have you been engaged in this work? 

Air. Davis. Approximately 20 years. 

The Chahiman. You may proceed. 



16270 CONCENTRATION OE ECONOMIC POWER 

Mr. D-A^vis, The pace of research, invention, and engineering de- 
velopment shows no sign of lagging. On the contrary, science and 
the organized knowledge of the world seem to be proceeding at an 
accelerating rate. 

It does not seem possible to predict with, great definiteness exactly 
what new things the world will have in the years to come. But we 
may all be very sure that there will be new things, that we live in a 
world which will never be finished and is Jiot static today, that most 
of the things that we wish to have can be obtained if we put our 
minds and our hands to the task. It is one of the important facts 
about our world today that we know enough and we have techniques 
suflSicient to give us an extraordinarily good chance to develop 
through scientific research an answer to a need. We can usually 
make an invention if it is deemed sufficiently necessary and if brains 
and labor and money are turned to the task. As Dr. Kreps has 
noted in his earlier testimony, the art of invention has been invented. 

The purpose of my testimony is to give some inkling of the things 
that men, looking into the future, believe we should be able to 
accomplish, things that once the people know might be achieved 
they will desire. Calling upon representative scientific research 
workers in various fields, my presentation will skim high points of 
what is being done to achieve these ends. Based on the record of 
successful research to date, we may be sure that what we set out to 
do in the field of research and invention we shall be able to accom- 
plish in large measure sooner or later. With a broad and compre- 
hensive look at great problems of the future, we should be able better 
to comprehend the topic the committee is now considering. It would 
appear rather definitely that these great problems will, in the imme- 
diate future, become more, not less, urgent. 

First of all, just what is science and invention? I want to quote 
Sir William Bragg's advice to England at war because it is pertinent 
here in America at peace: 

Science — 

Sir William says — 

which is knowledge of nature, is of fundamental importance to the successful 
prosecution of any enterprise. 

Science is of general application. There is not one science of chemistry, 
another of electricity, another of medicine, etc. There are not even distinct 
sciences of ijeace and w^r. There is only one natural world, and there is only 
one knowledge of it. 

Fruitful inventions are always due to a combination of knowledge and of 
experience on the spot. 

MODERN INDUSTRIAL RESEARCH 

Mr. Davis. The investigators engaged in scientific research are the 
remakers of civilization and the true molders of history. They may 
be called the catalysts of civilization. Now who are they, and where 
do they work? They are in our universities, in our Government 
laboratories, and in our industrial research laboratories. A few are 
on their own, working on their problems when the rest of us play 
bridge or go to the movies. 

The Chairman. How many of them are on their own ? 



CONCENTRATION OF ECONOMIC POWER 16271 

Mr. Dav78. That is a very difficult question to answer. Perhaps 
your best index would be found in the patent record. I don't think 
there are any good reliable figures on that at all. 

The Chairman. The general picture that has been presented to 
this committee in the patent study ^ and elsewhere is that which was 
mentioned by the previous witness, that an increasingly large pro- 
portion of research and invention is t^e product of group activity 
rather than of the activity of the single individual. 

Mr. Davis. I think that is very true. 

The Chairman. Fifty years ago it was common to have an in- 
ventor work altogether by himself. He may have been a student of 
chemistry alone, seeking to develop new chemical properties. But 
today would you. say, from your experience, that the reverse is 
largely true? 

Mr. Davis. Yes; the reverse is true, and even if the person is of 
such a nature that he actually is seeming to work alone, he very 
often, through literature or through contacts in other ways, is a part 
of a group, even if he brings about that group through consultation 
or consulting the literature and so forth. 

The Chairman. It emphasizes the organizational aspects of modem 
society. 

Mr. Davis. Oh, very much so; yes. Numerically, they are few, 
although their works bulk large in the fundamental reckoning of 
progress. Exact figures are lacking but perhaps not over 100,000 
individuals are engaged in scientific research in this country. Per- 
haps a tenth of these, that is, 10,000, less than a hundredth of 1 percent 
of the ITnited States population, strike with the flint of genius from the 
steel of learning the sparks that continually kindle anew the forward- 
moving torches of science and industry. Throughout the world per- 
haps 200,000 scientific investigators in the aggregate are engaged in 
the extremely important task of creating new knowledge and new 
technologic developments. 

On industrial research in the United States, approximately $215,- 
000,000 was spent during the past year by 2,000 individual com- 
panies, according to a survey by Dr. William A. Hamor, Mellon In- 
stitute of Industrial Research's associate director. The survey 
showed that 32,000 scientists and engineers are engaged in industrial 
research, half of them in chemical, petroleum, and electrical labora- 
tories. Some 16,000 more persons backed up these scientists and 
engineers as assistants or clerical workers. Leading investors in re- 
search during 1939 were du Pont, with a research budget of $7,000,000, 
and Dow Chemical Co., spending $1,400,000 on research. About 110 
individual companies in the field of chemical industry and 40 trade 
associations make research grants to educational institutions. Ap- 
proximately 200 college laboratories are used incidentally* for indus- 
trial research and commercial testing. About 250 manufacturing cor- 
porations are sustaining long-range investigations in research founda- 
tions. Many companies with no laboratories of their own turn to the 
250 commercial laboratories in the country, 

I might say that these figures are rather round and there are in- 
quiries under way which will come to fruition in a couple of months 

' See Hearings, Parts 2 and 3. 



16272 CONCENTRATION OF ECONOMIC POWER 

which will probably refine them, but in general I think they are of 
the right order of magnitude. 

In the universities and research institutions a considerable amount 
of fundamental research is done, much of which will eventually be 
of industrial and community value in a practical way. In the Fed- 
eral Government laboratories much fundamental research is under- 
taken with the money available amounting to approximately 
$35,000,000 a year. 

Again, you can compute that figure differently if you define re- 
search differently. 

Progressive, forward-looking industries are in the habit of making 
it a rule to spend from 1 to 3 percent of their gross income on re- 
search. Some large organizations in older industries spend almost 
nothing, while a few industrial concerns, born largely of research 
and development in recent years, are reported to spend up to 5 and 
even 8 percent of gross income in this way. The amount of money 
spent by the Government for research on a percentage basis is far 
less than that of the average industrial concern. 

The Chairman. Do you mean on a percentage basis? 

GOVERNMENT RESEARCH EXPENDITURES 

Mr. Davis. The Government, on all its scientific educational activi- 
ties, spends approximately, or did a few years ago, 1 percent. 

The Chairman. One percent of what? 

Mr. Davis. One percent of the total expenditures of the Govern- 
ment; therefore, the amount spent on research, using the same defi- 
nition of research of an industrial laboratory, would be closer to 1 
percent. 

The Chairman. You wouldn't expect the Government expenditure 
for research on a percentage basis to be anything like that spent 
by ordinary industry, would you ? 

Mr. Davis. I would like to see it larger. The biggest job the 
Government has is taking care of the country as such, and that cer- 
tainly is as important to the Government as the operation of indus- 
try. 

The Chairman. Of course a good lot of that activity of Govern- 
ment is the constitutional duty of enforcing the laws which have 
been enacted from time to time. 

Mr. Davis. That is true. Personally, I would like to see the Gov- 
ernment spend more. 

The Chairman. Surely ; I can understand that. 

Mr, Davis. I think it would be a very good investment from a 
practical standpoint. 

Dr. Anderson. Mr. Davis, isn't it true that Government research 
enters a field that is not otherwise properly taken care of or ade- 
quately handled, and therefore is vital to fundamental research? 

Mr. Daus. Yes; very much. The Government can do certain things 
in resear^ih that no commercial concern would be justified in doing. 
I think one example of that is the very extraordinary record of the 
N. A. C. A., the National Advisory Committee for Aeronautics, in 
aviation research, undertaking a job of development which industiy 
certainly was in no position to do, and which has revolutionized the 
whole aeronautical industry to a remarkable extent. 



CONCENTRATION OF ECONOMIC POWER 16273 

The Chairman.. Well, the ordinary commercial industry cannot 
undertake research except as an incident to its own ent^srprise. It 
must be upon a profit basis. The Government, on the other hand, can 
undertake research without respect to the profitable phase of it at all. 

Mr. Da\t[s. Well, it seems to me, Mr. Chairman, that the Govern- 
ment can look at research in very much the same way as an industry 
does. As a matter qf fact, one of the most profitable methods of 
conducting research is to allow competent scientists to do the sort of 
things that they want to do, make the inquiries that they want to 
make, with the confidence that as they explore new fields of knowledge 
which may in some cases be very remote to the commercial aspira- 
tions of that particular concern, there will be enough new knowledge 
plowed up, and the results from a commercial standpoint will be 
sufficiently large, to allow that. 

The Chairman. I assume that you would feel that the product of 
Government research should be contributed to the public. 

Mr. Davis. Well, it will be of necessity; yes. 

The Chairman. In other words, it would not be made the basis of 
a profit-making enterprise on the part of Government, but would 
be contributed to the public to be used by the public in whatever 
form seemed advantageous. 

Mr. DA^^s. Some Government research might very well form the 
basis of a very profitable activity by commercial concerns. 

The Chairman. Yes; but I mean you wouldn't want the Gov- 
ernment itself to make profit out of the research. 

Mr. Da'vts. The profit to the Government would be its service to 
the people. I don't see that it is the function of Government to make 
a profit in the industrial sense. 

The Chairman. I wanted it to be clear that that was your point of 
view. 

Mr. Davis. Research, in a very real sense, is international in scope. 
I think that is very important. It can be said that it is cosmic in 
scope, rather than merely confined to this earth. For what happens 
to a distant star or galaxy, when viewed by a giant telescope, may 
very well give an essential hint of how atoms act on earth, enlight- 
ening and explaining the way to some new industrial process. 

As Dr. Raymond B. Fosdick, president of the Rockefeller Founda- 
tion, said in his annual report a few days ago : 

Scientific growth is almost invariably the result of cross-fertilization between 
laboratories and groups in widely separated parts of the world. Only rarely 
does one man or one group of men recite with clear loud tones a whole im- 
portant chapter, or even a whole important paragraph, in the epic of science. 
Much more often the start comes from some isolated and perhaps timid voice, 
making an inspired suggestion, raising a stimulating question, the first whisper 
echoes about the world of science, the reverberation from each laboratory 
purifying and strengthening the message, until presently the voice of science 
is decisive and authoritative. 

Achievement in science, more often than not, is the result of the sustained 
thinking of many minds in many countries driving toward a common goal. 
The creative spirit of man can not successfully be localized or nationalized. 
Ideas are starved when they are fenced in behind frontiers. The fundamental 
unity of modern civilization is the unity of its intellectual life, and that life 
cannot without disaster be broken up into separate parts. 

What is it that science and technology can do for us in the future? 
What developments can be brought about through research ? It seems 
worth while to attempt to look at the future possibilities, in terms 



16274 CONCENTRATION OF ECONOMIC POWER 

of what representative scigJitific authorities believe can be done or 
what JSelds of research may prove to be fruitful to our industrial, 
personal, and national life. 

Being a prophet is always dangerous. Yet those who in the past 
have made predictions of things to come have in general, curiously 
enough, been too conservative. I am referring to well-considered 
predictions by those who are competent to look ahead rather than 
the romancing of fiction writers. 

FIELDS FOR FURTHER RESEARCH 

Mr. Davis. In an attempt to obtain for this committee a well- 
documented and expert survey of fruitful fields for future research 
and invention, I have consulted with a number of representative 
scientists and engineers in this- country. Since the National Associa- 
tion of IManufacturers at its recent Modern Pioneers Celebration 
selected a group of nationally recognized modern pioneers, men who 
are judged to have made major contributions to American industry 
from a research and engineering standpoint, this provided an eminent 
jury ta which this problem might be put. Many of these men are 
very busy. Some of them are absorbed in a particular line of work 
to which they have made great contributions. Nevertheless, from this 
jury have been obtained valuable suggestions which I am incorporat- 
ing in the material to be presented to you. There have also been con- 
sulted numerous authorities in various fields of research and their 
comments are being made available to the committee. 

Eight broad or highly significant fields in which scientific and 
engineering developments should be particularly fruitful have been 
selected for exploration. These are, of course, just eight fields, and 
there are other important fields which, because of the limitations of 
time, can not be included. These fields are photosynthesis, atomic 
power, long-range weather forecasting, synthetic materials, chemical 
cures of diseases, genetics, human relations, and mobilization of 
scientific knowledge. 

From the experts that I have consulted bv wire I have gotten some 
comments, a few of which I want to include. Every one of these 
items represents extremely important fields of investigation and ones 
which will have very important consequences even in the very near 
future, in the opinion of Dr. V. K. Zworykin, director of the K. C. A. 
Manufacturing Co.'s electronic research laboratory. 

This morning I have a wire from Dr. J. V. Dorr which states : 

Your wire shows great vision. It probably understates possibilities and 
probabilities of the next twenty-five years. 

In the opinion of Dr. William D. Coolidge, director of the research 
laboratory of the General Electric Co., Schenectady, N. Y. [reading] : 

The experience of the past teaches us that for the future we have much more 
to hope from the things that we cannot even dream of today. Prior to the 
work of Faraday no one could have envisioned a dynamo, or before Roentgen 
an X-ray tube, or before Maxwell and Hertz a radio. These things became 
possible only after the fundamental facts and principles had been discovered. 
The most successful research organizations are those stressing the ipiportance 
of fundamental research looking to the discovery of new facts and principles, 
which may not lead merely to improvements in old things but which may lead 
to entirely new ones. This of course constitutes an unlimited field for research. 



CONCENTRATION OF ECONOMIC POWER 16275 

A general comment on the relation of research to industry and 
general living has been made by Dr. Charles F. Kettering, who, by 
the way, is vice president of General Motors and general manager of 
the General Motors research division. In the record I had him presi- 
dent of the General Motors Research Corporation, an organization 
which has been dead as a corporation for 15 years, but very much 
alive from the standpoint of research. 

On the question put to him he says : 

It is impossible to predict specifically the effect research will have in shaping 
developments in existing industries, in creating new ones, and on general living. 
It is no more possible for us to tell what the next new industries will be than 
it was for Columbus to know that he would reach a new continent when he 
set sail to the "West from Spain on a proposed journey to India. Even more 
important than his actual arrival in the West Indies was the fact that after 
he returned to Spain he still did not know that he had discovered a new conti- 
nent. It took a hundred years of exploration after his initial voyage to have 
the new continent well defined. 

And so it is with research ; the only predictions that can be made are of the 
most general nature. Benjamin Franklin predicted that in time the doctors 
would know how to cure all diseases. His prediction is just as good today as 
when it was originally made. The doctors have made remarkable progress, but 
there are still enough diseases that they don't know how to cure to give them 
plenty of work over a long period of time before they succeed in fulfilling 
Franklin's prediction. 

The CH.\iR>r.\x, And to give the patients plenty of trouble. 
Mr. Davis. Exactly. 

This idea — 

Dr. Kettering says — 

of our inability to look ahead as to specific accomplishments is something that 
must be recognized and its recognition is as important as the actual research 
work itself. 

Now, to take up these 8 fields: first, the field of photosynthesis. 

The utilization of energy from the sun is a primary problem of 
mankind. The sun is fundamentally our chief source of available 
pcvN er or energy. Heat and electric power are derived from the sun 
whether it is generated hydroelectrically or by use of coal and oil. 
AH food is manufactured by green plants through the use of sun- 
shine. For ages men have fought for, literally, their places in the sun. 
The war in Europe is largely a struggle for the fossi^ sunshine of 
pas* ages, the oil and coal necessary to modern industry and living. 

The problem of solar energy is a very large one. According to 
Dr. O. L. Inman, director of the C. F. Kettering Foundation for the 
Study of Chlorophyl and Photosynthesis at Antioch College, the best 
estimates are that the energy reaching the earth from solar radiation 
each year is equivalent to that received from burning 400 septillion 
tons of anthracite coal (4X10" tons, or 4 followed by 23 ciphers). 
From this source mankind could draw plenty of available energy for 
all its needs. 

The green plant is the principal converter of solar energy into 
useful material for mankind. The process by which it does this is 
called photosynthesis, jilthough just how the plant does this is still 
unknown. Obviously, this is one of the major problems of our civil- 
ization. Yet a rough estimate by Dr. Inman of the amount of money 
budgeted in 1940 for this work in the United States is only about 
$250,000 to $300,000. 



16276 CONCENTRATION OF ECONOMIC POWER 

Dr. Inman sees two ways of approaching this probleni so important 
to the long-time provision of power to our civilization: First, we 
could learn more about plant growth and grow several hundred times 
the amount of vegetation we now grow, transforming much of this 
into more condensed charcoal from which gas, oil, and so forth, may 
be made. Second, through fundamental research we could solve the 
mechanism of how to fix with the tools we now have available the 
carbon of carbon dioxide and the hydrogen of water into chemical 
compounds similar to methane or marsh gas and gasoline; or, by 
the addition of oxygen, to get sugar, woods, or fats; and, by the 
further addition of nitrogen, to get proteins and so on to thousands 
of possible compoimds or molecules with energy stores ready for our 
use. 

The Chairman. In other words, we may confidently look forward 
to the synthetic production of coal and oil and similar carbon prod- 
ucts before the natural products have been exhausted. 

Mr. Davis. If we get at the job soon enough and hard enough, 
because it is a big problem. 

The Chairman. Progress is already being made, is it not? 

Mr. Davis. Not too much progress is being made. It is relatively 
discouraging. But after all, there is only a handful of people who 
are really at work on this job at the present time. 

Dr. Anderson. Mr. Davis, the point to be made is that it is realiz- 
able. In the opinion of this expert, this sort of a future is before us. 

Mr. Davis. Yes. 

Dr. Anderson. And the period of time involved depends upon the 
amount of money and the attention devoted to it. 

Mr. Davis. It is a good bet that we will be able to do this in 
the future. How soon we are going to do it, no one knows, but 
certainly it is a very real problem for the future, and one that is 
worth working on, and if and when our supplies of coal and oil 
are exhausted, this may be one of the ways that we can take care 
of the energy resources of the world. 

When man solves this problem of photosynthesis and sets up his 
own method of storing radiant energy from the sun, it may very well 
not be an exact duplicate of the method used by the green plant. And 
it is rather important that it may be even more efficient than the 
green plant is. 

Dr. Inman says that man has been taking for granted that he can 
in some way keep on depending on capital stores of coal, oil, and gas 
for energy. He feels that the solution of the problem of photo- 
synthesis in a practical way is a long-time research program, which 
is the point that you brought up, Mr. Chairman. If it is not started 
sufficiently early on a large scale, mankind may find that it was too 
late beginning the research, and serious shortage of power and 
energy supplies may be visited upon the earth by our failure to begin 
research even though we knew the job had to be done. 

Mr. Chairman, I have here an expanded statement by Dr. Inman 
that I would like to submit as an exhibit. 

Dr. Anderson. Mr. Chairman, the number for the record is 2446, 
and I submit this as part of Mr. Davis' testimony. 

The Chairman. The exhibit may be received. 

(The document referred to was marked "Exhibit No. 2446" and is 
included in the appendix on pp. 17313-17315.) 



'^CONCENTRATION OF ECX)NOMIC POWER 
ATOMIC POWER 

MiK Dams. Turning to atomic power, within the atom there are as 
yei untapped stores of energy which if released would furnish almost 
unliniited amounts of power, enough to take care of all the energy 
-needs of mankind. A mere 2 years ago the probability of the release 
KJi atomic power of any kind seemed fantastic. Early in 1939, the 
splitting of the heavy chemical element, uranium, with the release of 
an enormous amount of interatomic energy was demonstrated. Labo- 
ratories throughout the world that had "atom smashing" apparatus 
have been exploring as rapidly as possible with relatively limited 
resources this very exciting possibility. 

The best opinion at the present time seems to be that which it may 
be possible to obtain energy from uranium on a scale of comm.ercial 
importance for special uses, this type of reaction if made practical 
will at best tap only an infinitesimal fraction of the total atomic 
energy around us. The hope of tapping large amounts of atomic 
energy seems to lie in the possibility of discovering in the future a 
mechanism for atomic annihilation, in the opinon of Dr. M. A. Tuve 
of the Carnegie Institution of Washington's Department of Terrestrial 
Magnetism, one of the leading investigators in this field. Dr. Tuve, 
Mr. Chairman, has prepared at my request a statement on atomic 
power which I would like to offer as an exhibit. 

The Chairman. It may be received. 

(The document referred to was marked "Exhibit No. 2447" and is 
included in the appendix on p. 17315.) 

Mr Davis. Dr, William D. Coolidge, director of research labora- 
tories of the General Electric Co., states : 

II has been shown that in the case of the element uranium an enormous amount 
of , interatomic energy may be set free, so much, in fact, that if further research 
sbows how the process once started may be made self-propagating, we may be 
^le to get as much energy from a pound of uranium as from millions of pounds 
of coal. This might prove to be a cheai)er source of power than any other. Even 
if it were more expensive it might be revolutionary in those applications where 
weight and bulk are all important. It also seems possible that further nuclear 
research may show how the interatomic energy of some of the more common 
elements may be economically set free. 

Dr. Lee de Forest, famous engineer, now resident at Hollywood, 
Calif., whose inventions have been so important in radio and motion 
pictures, states : 

The cyclotron as developed by Prof. E. O. Lawrence, of the University of Cali- 
fornia, has already justified man's hope that eventually he will be able to derive 
by elemental fission cheap, universally obtainable energy in unlimited quantities. 
Our oil and coal resources must otherwise be exhausted vpithin a few centuries. 
These must be conserved for more essential services than mere i)ower supply. 

Mr. Chairman, it happens that this morning there was announced 
from the University of California a gift from the Rockefeller Founda- 
tion which makes it possible to construct a new and larger cyclotron 
or atom smasher, and I have a statement of that which is being dis- 
tributed today by Science Service, which I would like to make avail- 
able to the committee. 

The Chairman. Do you wish to incorporate it at this point? 

Mr. Davis. I think it would be suitable, perhaps somewhat edited 
to conserve space in the record. 



16278 C0NC5ENTRATI0N OF ECONOMIC POWER 

The Chairman. Very well, if you will cut it down and edit it, it may 
be received. 

(The document referred to was marked "Exhibit No. 2448" and 
is included in the appendix on p. 17316.) 

Mr. Davis. As in the case of the photosynthesis, the amount of 
research being conducted upon the problem of atomic power is extraor- 
dinarily small compared with the large winnings to mankind if success 
should be achieved. Most of the research is being undertaken in 
university and scientific institutional laboratories without any com- 
mercial objectives. On account of the extreme importance of adequate 
power to national economy and military defense, as well as to indus- 
try, adequate support of investigations of atomic power would seem 
to be a highly justifiable gamble. 

SUGGESTED USE OF GOLD 

Mr. Davis. In connection with the possible obtaining of practical 
power from uranium, the use of a few tons of the gold stored at 
Fort Knox, serving no useful industrial or scientific purpose, would 
be helpful. Such use of the gold would not involve its loss. The 
most practical methods that have been suggested of concentrating 
uranium is through thermal diffusion or through centrifuging. 
The uranium would be in the form of a complex gaseous fluoride 
which is highly corrosive to ordinary material but which is resisted 
by gold. If sufficient gold to construct the necessary apparatus could 
be loaned by the Government to research laboratories, this particu- 
lar investigation would be very much speeded. The gold after the 
experiment could be returned to storage and even while in practical 
use would not lose its value as an asset in the United States Treasury. 
Perhaps some of the same gold that was prized by the Egyptian 
pharaohs could be used in this experiment since gold is one of the 
most imperishable materials on earth. 

The Chairman. How much p-old would be needed for an experi- 
ment of this kind ? 

Mr. Davis. Oh, a ton or two. It wouldn't be very much. It 
would be really just a loan of that gold, and you might have to loan 
a Treasury guard or a few soldiers to orotect it, but even that wouldn't 
cost very much money. 

The Chairman. There ought to be a headline in that : The witness 
proposes the Government loan two tons of gold. [Laughter.] 

Mr. HiNRiCHS. Incidentally, it was an economist about 300 years 
ago who first suggested that gold might reach the point where it was 
going to have to be used as a commodity, and this seems to me to 
be an interesting demonstration of the cultural lag that it takes 
to make an inventive suggestion free. 

The Chairman. I haven't looked at the Treasury statement this 
morning, but I am conscious of the fact that the gold at Fort Knox 
is measured in ounces, not in tons. 

Mr. Davis. It might do a good deal more good in a scientific lab- 
oratory than at Fort Knox. 

The Chairman. I wouldn't be at all surprised. 

Mr. Davis. It still could be used to back up currency, of course. 



CONCENTRATION OP ECONOMIC POWER 16279 

The work on atomic power shows the internationalism of scientific 
lesearch, and again I quote from Dr. Fosdick, that: 

In the case of the breakdown of uranium during the past year, the early 
tentaitve questionings came from Rome; they were caught up at Berlin, were 
eargerly heard at Paris and Copenhagen, and then spanned the Atlantic and 
were seized upon here so enthusiastically that literally within hours, rather 
than within days, the critical experiments had been checked and extended at 
Columbia University, at the Carnegie Institution of Washington and in Law- 
rence's laboratory at the University of California. 

There has been some fear that the sudden production of a new 
energy source of large magnitude would be economically disturbing. 
The experience has been that any development of this sort from a 
practical standpoint can be introduced only over a period of years 
even when it is once perfected. The benefits to the community at 
large from cheaper power would be so large that if and when atomic 
power or other power of low cost is achieved it would well be worth 
while to make the necessary economic adjustments. 

Dr. Anderson. I wanted to ask a practical question bearing upon 
the subject of this hearing with respect to the time element of such a 
new, cheap power. When you say it would come in gradually, do you 
mean gradually enough for us to make the economic and social 
adjustments necessary to its use without a great loss? 

Mr. Davis. I think that is a very difficult question to answer, I 
should think that if we had atomic power in such a way that you 
could apply it, probably it might take a decade to get it into such 
form that you could actually use it in a torpedo or automobile or 
some device of that sort. 

From the experience that the world has had in making itself at 
home with innovations of a technologic sort, perhaps 100 years isn't 
too long. There might be a certain amount of difficulty. 

Dr. Anderson. In other words, a 10-year span would be so short 
in terms of its far-reaching effectsi that some serious dislocation 
might occur from such a wide-sweeping thing. 

Mr. DA^^8. Yes; it might in the same sense that dislocations have 
occurred through the use of radio, perhaps. 

Mr. HiNRioHS. May I ask a question in that connection. Dr. Davis. 
Does the practical application of a basic scientific principle, such as is 
applied here in the development of atomic energy, ordinarily make 
itself immediately available as a substitute in a whole series of fieldsi, 
or does it become available in parts, as it were. Potentially we may 
need to think of readjusting our whole source of power sup* 
ply with all of our mines, all of the people engaged in the produc- 
tion and distribution of electric power, all of the people engaged in 
the production and distribution of petroleum. A decade, two dec- 
ades, for that sort of transition would be a terribly short period. 
I am interested to know whether in fact the practical applica- 
tion of the basic scientific principles does manifest itself over the 
whole field at once, or whetner it tends rather to be a matter of a 
decade or so of development of one use, another decade in the devel- 
opment of another use, and so on. 

Mr. Da\7s. I think it is on the order of a decade-for-a-use type of 
development. That is certainly true in radio. Radio came relatively 
slowly. That is, we had radio approximately at the turn of the 



16280 CONCENTRATION OF ECONOMIC POWER 

century, and we didn't have broadcasting until approximately 2, 
perhaps 3, decades later. 

I should think, particularly if you began to use uranium, that is 
if you used the energy from uranium efficiently, that would be the 
first practical development. Nobody knows what will be the first 
practical development or whether there will be any, but if there is, 
that would probably be a very limited use. And if annihilation of 
the atom were achieved, that might bring about much more general use. 

Dr. Anderson. Just to follow that for one moment, because it 
has some important bearing on the whole problem of technology, 
is it true that the state of our knowledge has come to a point where 
we are able to make the application much faster than we ever did 
before, and that there is some prospect of wide-sweeping changes 
occurring more rapidly than has been true in the past? 

Mr. Davis. I think that is true. We are certainly getting certain 
applications such as sulfanilamide, which I want to talk about later, 
that have come in a good deal shorter time than such developments 
would have taken place a decade or two decades ago. 

Mr. Pike. You would see nations like Italy and Japan, which have no 
fuels of their own, who wouldn't wait two decades to put that into use. 

Mr. Davis. No. They would put it in use once it was achieved. 
One of the amazing things is that the crucial experiment was done 
in Germany. Instead of being bottled up as a military secret, prob- 
ably partly because they didn't know what they had, it was allowed 
to get out into scientific literature. 

The Chairman. Mr. Davis, it is now 5 o'clock, 

Mr. Davis. I will speed it up, Mr. Chairman. 

The Chairman. I think that some of the members of the com- 
mittee feel that this might be a good time to suspend for the evening. 

Dr. Anderson. The schedule for tomorrow begins with Mr. C. F. 
Kettering in the morning, Mr. William Green in the afternoon. Mr. 
Kettering has promised to be here by 10 o'clock if the committee 
chooses to meet that early. But we can delay his presence a half 
hour or longer if Mr. Davis is to finish, because we should have 
Mr. Davis' testimony. I think the testimony ought to be in this order. 

The Chairman. Yes; I think it ought to be in this order. Sup- 
pose we recess until 10 o'clock in the morning and have this witness 
proceed at that time, and he will then probably be in position to 
finish in half an hour or so, do you think ? 

Mr. Davis. I should think so ; yes. 

The Chairman. Unless there is objection, that will be the program. 
The committee will stand in recess until 10 o'clock tomorrow morning. 

(Whereupon, at 5 o'clock, -a recess was taken until Tuesday, April 
9, 1940, at 10 o'clock.) 



INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER 



TUESDAY, APRIL 9, 1940 

United States Senate, 
Temporary National Economic Committee, 

Washington^ D. C. 

Tlie committee met at 10:15 a. m., pursuant to adjournment on 
Monday, April 8, 1940, in the CauciN Room, Senate Office Building, 
Senator Joseph C. O'Mahoney, Wyomrtig, presiding. 

Present: Senators O'Mahoney (chairman), and King; Representa- 
tives Williams and Reece; Messrs. Hinrichs, Pike, O'Connell, and 
Brackett. Present also : Frank H. Elmore, Jr., Department of Justice, 
and Dewey Anderson, economic consultant to the committee. 

Tlie Chairman. The committee will please come to order. 

Are you ready to proceed ? 

Dr. Anderson. Mr. Chairman, we are proceeding with the "svitness 
who was on the stand yesterday afternoon, Mr. Watson DaA^is, who 
will continue his testimony on new and impending technology. 

STATEMENT OF WATSON DAVIS, DIRECTOR, SCIENCE SERVICE, 
NEW YORK— Resumed 

Mr. Da\is. Mr. Chairman, we had gotten to the point in my testi- 
money where we were considering atomic power. During the night 
an event has happened which might have some significance in that 
connection. The German occupation of Copenhagen brings perhaps 
into jeopardy one of the great centers of research upon atomic 
physics, the laboratory of Prof. Niels Bohr, and it is quite possible 
from a long perspective of history that it may be more important than 
some of the military consec^uences of the events that have occurred 
in the last few hours. 

. I had gotten to the point in the testimony yesterday where we were 
discussing the possible economic consequences of the production of 
new energy from a source of large magnitude like photosynthesis or 
the energy within the atom. 

Because the problem of atomic power is in essence bound up with 
radiation of all sorts and atomic particles, attention is called to the 
future fruitfulness of more knowledge about electromagnetic radia- 
tions and atomic particles, especially the electron. The electron, the 
unit of negative electricity, is of course fundamental to the whole elec- 
trical industry with its wide ramfications, including radio, felephony, 
television, and so forth. There are many undeveloped possibilities, 
in ultra-high frequency electromagnetic waves as a means of com- 

16281 

1244^11— 41— pt. 30 7 



16282 CONCENTRATION OF ECONOMIC POWER 

munication, including television, frequency niodulation broadcasting, 
and so forth. 

A new field of great practical importance, in which the electron 
I)lays a major role, involves the use of streams of electrons as though 
they were beams of light. Dr. V. K. Zworykin of RCA, a pioneer in 
this field, foresees many important applications of electron optics to 
industrial and scientific problems. By means of a microscope that 
uses electrons instead of light radiation, the scientist is developing 
a means of delving further into the depths of tkings about us than is 
possible by means of visible or even ultraviolet light. The electron 
microscope promises to have important applications to biological, 
medical, and industrial research. 

Atoms that are made to explode, artificially radioactive elements, a 
relatively new achievement in physics (the textbooks of a few years 
ago will state that radioactivity is found only in naturally occurring 
substances, in such elements as radium) are proving to be useful tools 
for research. Whether they vrill have practical industrial use is a 
matter for the future to tell. 

Not only to explore the universe but to determine the fundamental 
properties of matter, the astronomer turns large telescopes to the 
heavens, where in the stars are found temperatures and conditions 
of matter which cannot be attained here on earth. From these ex- 
plorations of the universe, much of our fundamental knowledge 
about the nature of matter has come, and in the future it can be 
expected that additional information of technological importance 
will be snatched from the heavens in this way. 

It is conceivable,, in the opinion of Dr. Lee de Forest, that we 
may be able to tap subterranean sources of heat in many localities 
for power and heating purposes. A long-term heat-storage discov- 
ery or invention might permit us, in his opinion, to store and use 
solar energy in enormous quantities, but today he sees no promise 
of such. Adequate fuel crops are conceivable but Dr. de Forest 
believes that climatic vagaries would seem to make this uneco- 
nomical. 

The direct conversion by combustion, of co^l into electricity is a 
possibility upon which some research is being done. If this were 
accomplished efficiently the present round-about method of power 
production, burning coal to make steam for use in engines or turbines 
which in turn drive dynamos to generate electric power, would be 
replaced by a direct one-step process. 

LONG-RANGE WEATHER FORECASTING 

Mr. Davis. Turning to the problem of long-range weather fore- 
castings, the weather is so important to the conduct of everyday 
affairs, industrial activities, and human activities in general, that 
knowledge of what the weather is to be in the future is of immense 
practical importance. At present the weather forecasts issued every 
8 hours covering up to 2 days in the future are so much a part of 
our daily life that we take them for granted. The providing of 
these forecasts by the U. S. Weather Bureau is one of the most 
important of goYernmental functions. 

The prediction of what the weather will be weeks, months, and 
years in the future is one of the important jproblems still to be 



CONCENTRATION OF ECONOMIC POWER 16283 

solved. If it were possible to know what the weather was co be next 
year, or several years from now, whether the growing season in 
various regions was to be satisfactory or unsatisfactory, whether the 
winter was to be abnormally cold, whether there was to be too little 
or too much rain, the savings to agriculture, industry, and the natiou 
would be very large. Such information would be of great use in 
planning pei-sonal activities in the future. Botli supply and demand 
of commodities are greatly affected by weather conditions, and long- 
range predictions that would reduce the hazard due to weather would 
be of great benefit. On a national or international basis reliable 
knowledge of the weather to come would allow the Government and 
business to make plans for meeting changing conditions, wliich with- 
out long-range weather forecasting, assume the shape of emergen- 
cies. Disastrous famines might be averted. Unmanageable agri- 
cultural surpluses might be reduced. 

Research and progress on this problem holds out the hope that with 
enough work, adequately supported, there is a good chfince that 
weather forecasts considerably further in advance of what is now 
possible will be developed. Prediction of the seasonal trends may be 
possible for years in advance. 

Prediction of the weather as a general pubKc service has been a 
function of the government in practically sll parts of the world. 
Long range weather forecasting could hardly be considered the 
foundation of an extensive industry itself, but business and industry 
will benefit to a large extent when and ii the long-range forecasts 
are possible, 

Trends iij long range forecasting research are shown by the follow- 
ing developments, made known in statements obtained from repre- 
sentative investigators : 

"Short" long-range forecasts for 5 days in advance, on an experi- 
mental basis, have been made by the United States Weather Bureau 
during the past 2 years, based on a combiuLtion of statistical studies, 
synoptic tecliniques, and physical theory of the general circulation of 
the atmosphere. These forecasts have been subjected to rigid verifi- 
cation tests and have lately become sufficiently successful to warrant 
a broader try-out. 

The extension of present forecasts from 2 days to 2 weeks, and the 
making of forecasts of temperature and precipitation for seasons and 
even years in advance, on the basis of solar radiation, are considered 
possible by Dr. C. G.. Abbot, Secretary of the Smithsonian Institu- 
tion, as the result of extensive research. 

Long-range forecasts for the United States are considered possible 
for the future by Dr. Charles F. Brooks, director of Harvard Uni- 
versity's Blue Hill Meteorological Observatory, but he feels that the 
problem is no easy one and would take much woik at groat expense 
to solve to a generally useful point. The value of such forecasts, 
however, would far exceed the cost. In one study of world weather 
it has been found that conditions in the Southern Hemisphere indi- 
cate subsequent abnormalities in the Northern Hemisphere more 
often than do antecedent conditions in the Northern Hemisphere 
itself. 

I have here, Mr. Chairman, statements on behalf of the U. S. 
Weather Bureau, Dr. C. G. Abbot, and Dr. C. F. Brooks, which I 
should like to submit as exhibits. 



16284 CONCENTRATION OF ECONOMIC POWER 

The Chairman. Th,ey may be received. 

(The document referred to was marked "Exhibit No. 2449" and 
is included in the appendix on p. 17316-17319.) 

Mr. Davis. In the opinion of Dr. Lee de Forest, universal strato- 
sphere flying and better interpretation of information obtained from 
radio transmission phenomena, cosmic rays, sun cycles, and earth- 
wide meteorological data will enable twenty-first century man to re- 
liably forecast long-range weather conditions for agricultural and 
other planning. 

Turning to synthetic materials, bountiful as Nature has been in 
supplying the earth with materials useful to man, research and in- 
vention have created important synthetic materials, many of them 
unknown in nature, which play extremely important parts in our daily 
economy. Many of these are familiar to us in our daily life : drugs, 
dyes, and chemicals from coal tar, a multiplicity of plastics or synthetic 
resins, alloys of iron and other metals, rayon, and so forth. In the field 
of textiles or fabrics alone in the last few years, chemistry has given 
us nylon, a silklike synthetic fiber made basically from coal, air, and 
water; vinyon, another synthetic fiber; synthetic wool, made from 
casein of milk or other protein ; and even fibers of glass. Clay has 
been transformed into a synthetic mica which potentially makes us 
free from overseas export of this essential mineral needed by industry. 

I'or the future, particularly if power is obtained by discovering the 
secret of photosynthesis or from within the atom, it may "he considered 
a crime against society to burn coal or oil for power or heat, because 
their chemical constituents are so much more valuable than their 
energy content. 

On behalf of the General Motors Research Laboratory, in a com- 
ment on the possibility of extended chemical utilization of oil and 
coal, prepared by T. O. Richards, head of the laboratory control de- 
partment, it is declared : 

Oil and coal have long been considered as finished products that only needed 
a certain amount of refining to put into commercial form. Within the last few 
years petroleum particularly has come to be considered as simply a source of 
chemical compounds which can be torn down and built up and rearranged into 
particular compounds of specific commercial value. The utilization of coal as 
a raw chemical material to be used as a building block for chemical compounds 
has- barely begun, but it will become an important chemical industry. Just what 
products will be made, we don't know. 

Du Pont comments as follows in a statement on this possibility pre- 
pared by Theodore G. Joslin, director of public relations department: 

In our judgment, coal and oil will serve as valuable sources of raw materials 
for the synthetic organic chemical industry. It is our belief that there will be 
great developments in the future, but we do not see the future clearly enough 
to want to speculate for publication on what these possibilities will be. Beyond 
any doubt, many millions of dollars will be spent on research in connection with 
these problems, but it is impossible for anyone to make an accurate estimate. 

The artificial production of diamonds is a possibility foreseen by 
Dr. William D. Coolidge, director of the research laboratory. General 
Electric Co. Such an accomplishment would be of great industrial 
importance and the production within the last few months of high 
pressures in the order of 3,000,000 pounds per square inch is a step 
in this direction. Dr. Coolidge states : 

Diamond, the hardest known substance, would have much more extensive use 
as an abrasive material for grinding operations and for rock drilling if it were 



CONCENTRATION OF ECONOMIC POWER 16285 

less expensive. Through research on the effect on graphite of high pressure 
combined with high temperature it might be possible to learn how to make 
diamond artificially and relatively inexpensively. 

The production of refractories which would .withstand higher 
temperatures than the furnace linings now available would be of 
great industrial importance. Failure of the flirnace linings is now 
the controlling factor in the production of high temperature in- 
dustrially. With respect to this problem Dr. Coolidge says: 

Power from coal or other fuels could be produced more economically through 
the use of steam or other vapor if higher temperatures and pressures could 
be employed. We are now limited by the high temperature strengtii of present 
metals. Current metallurgical research indicates possibilities in this direction 
and the importance of the problem warrants much further research effort. 

Common building materials are susceptible to considerable im- 
provement, as these two observations by Dr. Coolidge will indicate: 

Present reseai'ch on road materials is showing how the life of a pavement may 
be economically increased. Further research in this direction should lead 
to improved highways with all that this means in better living conditions and 
in the strengthening of our national defense. 

Further research on plastics and other materials is certain to contribute 
greatly to the solution of our important housing problem. 

MEl'AL ALLOYS 

Mr. Davis. The science of metallurgy has only begun to tap the vast 
domain of metal alloys. There are millions of combinations pt 
metals possible that are not yet investigated. Only about a thousand 
alloying combinations of metals have been studied and most of these 
are inadequately investigated. Millions of binary, tertiarj^ and 
quaternary alloy systems still need investigation. Among them .there 
undoubtedly many hundreds of combinations which would be strik- 
ing improvements over alloys now in use. 

Some of the unusual metals being used in alloys will give indica- 
tion of the possibilities for improvements in metals in the future. 
'According to information supplied by Dr. Oscar E. Harder, assist- 
ant director of the Battelle Memorial Institute, Columbus, Ohio, the 
unusual new elements being used in steel include silver, titanium, 
tantalum, columbium, and vanadium. These elements are being used 
in stainless steel. A columbium-containing heat-resisting alloy has 
been patented recently. Silver is used in bearing metals, as is cad- 
mium. Tantalum and columbium are being used as pure metals and 
as the carbide for making bonded carbide tools. During the past few 
years high-speed tool steels in which molybdenum has replaced tungs- 
ten in whole or in part have been developed to where they are ac- 
cepted by industry. Metallic manganese is being made by an elec- 
trolytic process. 

The old dream of the alchemists, transmutation, has been achievevd in 
the scientific laboratory. Although relatively small amounts of ore 
element have been changed into another, almost every element has 
been transmuted into some other element. This holds out the possi- 
bility that in the future when large amounts of power are available, 
and when more is known about the constitution of the elements, it 
will be possible to manufacture the rare elements from the common 
elements. 



16286 CONCENTRATION OF ECONOMIC POWER 

As Dr. Lee de Forest puts it [reading] : 

Today's astonishing, althougli as yet meager, atomic transmutations abund- 
antly justify ttie hope that eventually we may be able to manufacture all rare 
metals from those more nearly inexhaustible and located within our reach. 

He adds that — 

many other elements will soon be in the rare category if present rates of con- 
sumption continue. 

CHEMICAL THERAPY 

Mr. Davis. Turning to the chemical cures of disease, the remark- 
able success in the use of sulfanilamide and its related chemical com- 
pounds in treating a large variety of diseases, some 40 different sorts, 
focuses attention upon the possibility of further chemical cures of 
disease in the future. While the results obtained with the sulfanil- 
amide chemicals are truly remarkable — they have changed the 
routine method of treatment of many diseases — there are still many 
diseases of economic importance that are not successfully treated. 
There is hope that chemotherapeutic agents can be developed for the 
control of infectious and other diseases not now successfully treated. 

The economic loss due to illness is appalling. The manufacture 
and distribution of drugs to be used by physicians is in itself a large 
industry. It is evident that there are many economic implications 
in the treatment of disease and the problem of human health. 

A healthier population which will result from the application of 
medical advances should be an economically more secure and effec- 
tive population, capable of greater consumption and production. A 
slowing population growth, undesirable from the standpoint of con- 
sumption of industrial goods, may be counteracted to some extent 
by the lengthening life span and the ability of individuals to en- 
gage in active work during a longer period of their life. 

Despite the advances in medical treatment, there are non-infec- 
tious ills such as cancer and heart disease that are unsolved problems. 

In the opinion of Dr. Perrin H. Long, of the Johns Hopkins 
Hospii-il in Baltimore, who brought sulfanilamide to America, there 
aJB still chemotherapeutic advances to be made. He states: 

While great advances have been made in the chemical treatment of bacterial 
and parasitic diseases, there is every reason to believe, if research is prosecuted 
vigortjusly in the laboratories of the chemical and pharmaceutical companies 
of this country, that more effective chemical compounds can be elriborated for 
the control of infectious diseases, for t xar^ule : We still do not have as effective 
drugs as we need for the control of in^^:!tions caused by the typhoid-colon 
group of bacilli, the staphylococci, and we have nothing that affects such 
diseases as the common cold, influenza, infantile paralysis, or the other virus 
diseases. All of these piublenis ought to be attacked. 1 can not estimate how 
much money is being spent on chemotherapeutic research in this country at 
the present time, but my rough guess would be in the neighborhood of 2'/^ to 
3 million dollars, that is, if one leaves out or does not consider the experi- 
mental work that is being done on syphilis. 

About 20,000 substances related to sulfanilamide have already been 
made, according to Prof. Paul D. Lamson of the Vanderbilt Uni- 
versity School of Medicine. The task of trying all these on diseases 
in which they may be helpful is a gigantic one. In Professor Lara- 
son's opinion, we are for the first time faced with a public which has 
come to see that cures can be produced with 'chemical substances. 
1 he public is beginning to see that something can be done about the 



CONCENTRATION OF ECONOMIC POWER 16287 

problem of disease and that the time has come to do it. In Professor 
Lamson s opinion, investigation should be conducted to find out how 
the animal body works, by using chemical substances as exploratory 
probes, thus giving the knowledge needed for the development of 
better treatments of disease. 

In recent years the chemical nature of vitamins and hormones has 
been discovered and many of them have been synthesized. Striking 
cures of diseases have resulted from th& use of vitamines and hor- 
mones therapeutically. One of the latest disease conquests has been 
the abolishment almost overnight of the bleeding tendency in jaun- 
dice patients who have to be operated upon, by injections of the new 
synthetic vitamin K. 

According to Dr. Walter Simpson, of the Miami Valley Hospital, 
Dayton, Ohio, in a communication transmitted by Dr. Charles F. 
Kettering, experiments now under way indicate that by combining 
relatively large doses of arsenic compounds with artificial fever it 
may be possible to reduce the minimum time for the treatment of 
syphilis from 18 months to a few days. When the treatment for 
syphilis becomes simpler and cheaper, we shall be well on our way 
toward the eradication of this great destroyer of mankind. 

Statements by Dr. Simpson on vitamin K, pneumonia, syphilis, 
and malaria are made available to the committee, and I would like 
to offer these as exhibits. 

(Senator King assumed the chair.) 

Acting Chairman King. They may be received. 

(The document referred to was marked "Exhibit No. 2450" and is 
included in the appendix on pp. 17319-17320.) 

Mr. Da\7s. To an even greater extent than in many other fields, 
the development of medical research is an international undertaking. 
This is shown vividly in the case of the sulfanilamide compounds. 
The first hint of this amazing development came in conneclion with 
the dye industry in Gennany, and the drug actually was shoveled 
around an industrial plant for years before its medical usefulness 
was discovered. German, French, British, and American institutions 
all played important parts in the development of this drug, which 
has brought such brilliant results in the treatment of disease. 

GENETICS 

Mr. DA^■IS. The living plantr and animnlc Lhat populate the earth 
constitute one of our most important natural resour<;es. Primitive 
man, by selecting the best plants and animals for his purpose and 
allowing them to perpetuate themselves, made remarkable advances 
in quality and usefulness of his crops and his livestock. 

Since the turn of the century, when the scientific fundamentals of 
genetics began to be known, this process of scientific breeding of both 
plants an:l animals has been greatly speeded. The superior grain, 
fruits, and ve<^etables, the more efficient animals, from the standpoint 
of milk, the improved meat and wool production that the farmer 
now has, are indications of what can be done through Ihis Improvecl 
process of invention applied to living things. 

In recent years the role of man's part in invention of new plants 
has been recognized tlii'ough the inauguration of plant patents 



16288 CONCENTRATION OF ECONOMIC POWER 

Industry has always used to a large extent the products of the 
farm and forest, but tliere is an awakening realization that agricul- 
ture can furnish more of the raw materials of industry than it now 
does. Improved crops and animals will play an important part in 
this promising movement. 

Promising possibilities for further advancement are seen by scien- 
tific investigators working in the field of genetics. 

Dr. A. F. Blakeslee, director of the department of genetics, Car- 
negie Institution of Washington, Cold Spring Harbor, Long Island, 
N. Y., states : 

Scientific plant breeding, known as genetics, is responsible for the conscious 
development of superior types of plants and their preservation against the 
ravages of disease and other unfavorable conditions/ The economic value 
could be cited of crossbred seeds in corn which gives increased yield from 
hybrid vigor, hybrid vigor in forest trees, the development of rust-proof grains 
and other disease-proof crops through hybridization and selection. Genetics 
is at the basis of improvement in the present wide range of agricultural and 
horticultural forms. In the future, genetics will play a greater role than in 
the past, with ability to control increase of chromosome number by such stimuli 
as colchicine and by other methods, new species and variety will be made up 
in order to meet special needs. In ways and to an extent impossible to imagine 
at the present time, I believe geneticists will exercise conscious control of 
evolution to the betterment of mankind. Important sources of raw material, 
such as cellulose from cottons, paper pulp, and cornstalk waste, as well as 
plants as sources of food, are all controllable by genetics methods. 

Dr. E. D. Merrill, administrator of the botanical collections of 
Harvard University, Arnold Arboretum, Jamaica Plain, Mass., 
states : 

It is very diflBcult for one to indicate the tangibles in genetics in reference 
to plants and plant breeding. I personally doubt if any new major industries 
can be developetl on the basis of research in this field ; but, manifestly, many 
existing industries could be increased in importance by the utilization of exist- 
ing and potential knowledge within the general field of genetics and plant 
breeding. New significant social developments could hardly be expected, but 
the increased utilization of knowledge in industry would have a very favorable 
refiex action on our whole social set-up. I would be inclined to forget genetics 
as gf>netics, and emphasize plant breeding. Too many individuals are working 
on abstruse phases of the general subject of genetics, and too few well- 
trained men are devoting their efforts to the actual problems of breeding plants 
for resistance, adaptability, yield, and other similar factors. 

Prof. M. F. Guyer, professor of zoology of the University of Wis- 
consin, states : 

The application of genetics to domestic animals is very important from the 
standpoint of resistance to disease. The genetic constitution of the host is 
no less importarit than the nature of the invading germ. Many investigations 
indicate this. The work .should be greatly extended. 

Dr. W. C, Curtis, professor of zoology of the University of Mis- 
souri, states: 

Considerin« th»/t all our most important knowledge in genetics has been 
acquired since IdOO. it is not surprising that practical applications are just 
beginning. With the theoretical foundation now established and being rapidly 
extended, it v/ill be surprising if important applications are not forthcoming 
in the next few decades. Such has been history in all branches of natural 
sciei^ce once the liasis has been laid in fundamental kuerwiodge. Such applica- 
tions' have already been made in many instances in dometicated plants. Appli- 
oations to animals are more difficrlt but are on the way. The possibilities of 
human appHcaticns with advancing knowledge are very great within the limits 
that such knowledge can be applied to human beings. 



CONCENTRATION OF ECONOMIC POWER 16289 

It is possible that in the years to come the greatest contribution of 
genetics to our society will be the conscious evolutionary improve- 
ment of our human population that it will make possible. 

The way in which human beings get along with each other, at work 
and in general living, is perhaps the paramount problem of industry 
and the world at large. Human relations in the factory, in the com- 
munity, and in the home, might not seem to be at first consideration a 
problem for research and technology. As a matter of fact, it seems 
probable that the metliods of scientific research applied to this great 
problem in which the reagents are human beings w^ill be capable of 
producing useful and fruitful results with as much assurance as they 
do in less animate fields. Admittedly, the difficulties in this field are 
larger because we are dealing with ourselves and we always feel 
that we know all there is to know about ourselves. 

Man, as an individual and in the group, is the subject of investiga- 
tion by psychologists, psychiatrists, teachers, administrators, and 
others who deal with various human problems. It would seem logical 
that some of the findings in these fields might be applied profitably to 
the difficult relations in the fields of business, politics, and interna- 
tional aflfairs. Any scientific developments or researches that would 
minimize the conflict between labor and management in industry 
would be likely to pay large dividends. Any scientific inquiries that 
would be likely to minimize the chances of economic and military con- 
flict between nations would likewise be very profitable. 

I have turned for an analysis of the situation with relation to the 
problem to Dr. Elton Mayo, professor of industrial research of Har- 
vard University's Graduate School of Business Administration. He 
sees thre« outstanding present and future problems in industry and 
general living. They are : better human relations, executive authority, 
and unemployment. He finds the amount of research being done on 
these problems so small as to be negligible. It is only the obvious 
aspects of the difficulties ^hat are being studied, and the various in- 
quiries deal only with palliative measures for the symptoms instead 
of diagnosis of malady. 

I have a statement from Dr. Mayo I should like to submit as an 
exhibit. 

Acting Chairman Kixg. It may be received. 

(The document referred to was marked "Exhibit No. 2451" and is 
included in the appendix on pp. 17320-17324.) 

Mr. DA^^s. This material from Dr. Mayo is particularly pertinent 
to the subject under discussion by the committee because of the fact 
that it does go into the human basis of conflict between employers 
and employees, and I think it is worthy of rather detailed considera- 
tion. However, I am not going to take the time of the committee to 
read these quotations. 

I have an excerpt from a document by Lawrence K. Frank that I 
should like to offer as an exhibit that discusses the background of 
conflict. 

Acting Chairman King. It may be received. 

(The document referred to was marked "Exhibit No. 2452" and is 
included in the appendix on p. 17325.) 

Mr. Davis. I should like to call to the attention of the committee 
the very difficult problem of the mobilization of knowledge. 



16290 CONCENTRATION OF ECONOMIC POWER 

SPREAD OF TECHNICAL PROGRESS 

Mr. Davis. With the acceleiating pace of scientific research, inven- 
tion, and development, the distribution, interpretation, and utilization 
of the knowledge already obtg^ined become increasingly important 
problems. 

The normal way of announcing a scientific discovery is to publish 
a paper in a scientific journal or the report of a scientific institution. 
An invention is made public^ through the issuance of a^patent; in 
effect, the inventor tells the world what he has done in exchange for 
a monopoly of his invention for a limited time. Scientific meetings 
and conferences are an effective way of exchanging scientific informa- 
tion and results. 

There has been built up through the years a vast and complex 
scientific literature containing the results of past researches. These 
journals, books, reports, etc.j are accumulated in libraries. The chan- 
nels of publication are relatively adequate. It is usually possible for 
any important scientific contribution to be published in at least 
abbreviated form in a scientific journal. The facilities for keeping 
on file in libraries the scientific literature are also relatively adequate. 

The great failure of our organization of our written knowledge 
lies in the inability of anyone to put his finger upon all the literature 
on a given subject with relative completeness and at a reasonable cost. 
Our organized knowledge as contained in the printed literature is 
extraordinarily poorly indexed from the standpoint of its efficient 
utilization. 

In a few fields, such as chemistry, there are abstract journals which 
do an invaluable job. But in many fields bibliographic resources are 
quite inadequate, resulting in investigators not being able to discover 
what researches have been made in a particular line of inquiry in the 
past. 

New mechanisms recently developed, or in the process of develop- 
ment, which may be called new tools for intelligence, are likely to 
prove useful in this needed mobilization of knowledge. 

The card index was a major invention in connection with scientific 
information services. Of similar usefulness is 'microfilm, reduced-size 
images on photographic film, which can produce with facility and 
low cost single copy editions of anything that a camera lens can see. 
Microfilm is in practical use, making available to scientific workers 
copies of articles in libraries which they need in their researches. 
It i^ also being used to publish upon demand extensive research 
reports which it is not practical economically to print in extenso and 
distribute widely. 

With mechanical and photographic devices already existing, under 
development, or capable of being developed in the future, the mar- 
shaling of the scientific and technical knowledge of the world so that 
it may be used to the fullest extent would seem to be a project that 
could be contemplated if the need were realized, attention were given 
to the problem, and means were available. It would be of immense 
benefit to the world to create what H. G. Wells has called engagingly 
a "world brain." 



CONCENTRATION OF ECONOMIC ^OWER 16291 

Most of the scientific literature has been listed by title or abstract 
bibliography somewhere in abstract journals or in special bibliogra- 
phies or large card compilations. Microfilm would make it possible to 
multiply the cards under various subject classifications and to copy 
them for distribution to the scientists and inventors that need them. 
A great many fields of development would come to fruition in such 
a project. This is a large project that will require cooperation be- 
tween different kinds of research workers and even between different 
nations to make it effective. It is of such magnitude that it is prob- 
ably a matter for public rather than industrial support. The cost 
would be considerable but the returns to industry and the community 
at large through the speeding up of research and invention would 
make the project a very profitable undertaking to the community at 
large. 

Better coordination of research and the exchange of information 
about research in progress between investigators will also help in our 
mobilization of human knowledge. 

It is very important that the public be informed about the progress 
of science and invention and the possibilities of further advances. 
Cooperation of the press and other media of distribution of news and 
information is essential in this connection. 

Acting Chairman King. Thank you very much. Are there any 
questions? 

Who is your next witness? 

Dr. Anderson. In calling the next witness, I might refer to the 
closing remarks of Mr. Hinrichs yesterday and outline once more 
the issue of these hearings. We have had in mind not only the oral 
hearings conducted with your questioning, but the published record. 
In doing so, we have devoted the first day, yesterday, and half of 
today, to the general topic under review. We have called, in the 
first place, an economist to give a detailed statement of what tech- 
nology looks like in terms of economics. You have now had Mr. 
Watson Davis, who is a scientific writer, who has outlined the scope 
of impending technology, and we wish to call now a man whom we 
selected with great care, Mr. C. F. Kettering, vice president of Gen- 
eral Motors Corporation, and general manager of the Research 
Laboratories Division of General Motors. We bring him before 
you as the third member of this general review section, to speak 
as an industrial engineer on the topic that he knows best — technology 
and the social economic horizon. 

Mr. Kettering has prepared a statement which is submitted to the 
committee at this time, and I understand his secretary will read 
that statement to the committee as the opening of his remarks. Mr. 
Kettering has been before the committee before and you know him 
so well that he doesn't need an introduction. I know^ his lively 
treatment of the topic will call forth a great deal of questioning from 
many. We begin with his statement, and then, as Dr. Kettering 
says, it is up to you, and he is at your disposal for any questions. 

Acting Chairman King. The committee is well aware that Dr. 
Kettering has been before the committee, as you have indicate*!- 
It isn't necessary that he be sworn again. 



16292 CONCENTRATION OF ECONOMIC POWER 

STATEMENT OF CHARLES F. KETTERING, VICE PRESIDENT, GEN- 
ERAL MOTORS CORPORATION, IN CHARGE OF RESEARCH, 
DETROIT, MICH. 

Mr. Paul Garrett, secretary to Mr. Kettering (reading) : 

We have been accused of producing unemployment by too many inventions, 
yet the facts are that we haven't enough new things to provide suflBcient jobs 
for all of the people who want to work. Someone said years ago that neces- 
sity is the mother of invention. Necessity for invention then was to produce 
machines and devices which would save human labor because there were so 
many more things to do than there were hands to do them. Today, necessity 
is again calling on the inventors to produce new things, because we have 
more hands than we have jobs to do. 

We know that this call for new products from the inventors and industries 
will not go unheeded. Many of these products will come directly from, a 
system called industrial research, a process which is American through and 
through. This is a process of cooperative invention and it will surely bring 
into our industrial machinery many new products and improvements. 

In the field of automotive transportation, with which I am most familiar, 
we are not even predicting when you hear that the next ten years will show 
a rate of improvement greater than that of the past ten years." TTiis fact is 
established as clearly as anything in the future can be established. Scores 
of research projects are now under way in the industries which make auto- 
mobiles, trucks, buses, tractors, airplanes, and Diesel locomotives. This is also 
true in every one of the Industries which make and supply the materials for 
our industry, such as petroleum, rubber, steel, fabrics, chemicals, etc. Success 
in only a small percentage of the projects now in mind will give American 
workmen thousands of new jobs and will increase the value of the trans- 
portation dollar more than can now be realized. Statistics show that of the 
millions of people who earn a living in the automotive transportation business 
only about 10 percent are employed in making the vehicle. 

In research laboratories all over the country we now have men who are 
learning to think. In the management of the automotive and associated in- 
dustries, we have enlightened executives who have learned how to spend money 
to give research man the opportunity to think. They are providing the tools 
to make ideas come alive. 

I like to think of this mass production of ideas as a team play in an immense 
effort to readjust our economic system so as to put to work our excesses of men, 
money, and materials. Our team includes many men, many companies, many 
industries. 

Speaking from my own experience, I think particularly of the automobiles of 
tomorrow, the airplanes of tomorrow. They are being built right now in 
secluded laboratories by specialists in fuels, metals, ceramics, rubber, plastics— 
by designers of engines — by petroleum technologists — by others who are devoting 
their lives to improving such humble but indispensable engine parts as valves 
and fuel pumps, lubricants and gasoline, for these oil products are now as 
much a part of the engine design as the crankshaft and pistons. 

Progress encounters new and more diflScult problems. Each year the road 
ahead is steeper. When Orville and Wilbur Wright made their historic flight 
of 120 feet in 12 seconds, they had to think only of the process of flying, but 
now, just 36 years later, when you buy a ticket to Europe the company which 
operates the airplanes has a thousand additional problems and it has to take 
the question of successful flight for granted. But we in America take progress 
on this road for granted, as we also take for granted blessings unknown any- 
where else on the face of the globe. This has happened partly because we are, 
in a healthy sense, an unsatisfied people. We who make automobiles are not 
satisfied "with the fine new model that rolled off the production line today. It 
may be the best car that has been built up to now. But tomorrow, so help us, 
we'll build a better one. The chemi.sts who spin a silken thread from a magic 
brew of air and water turn back to their laboratories bent on new discoveries. 
The petroleum engineer makes a better gasoline. Now, he says, well make it 
cost less. And he does. 

Thinking men are driven by a God-given dissatisfaction with present achieve- 
ments. Through such men, industries are revolutionized. And even if research 
workers and their companies were content to rest on their laurels, you and a 



CONCENTRATION OF ECONOMIC POWER 16293 

hundred million others would not let us. Somehow, because you are Americans, 
you demand and think you have a right to expect more value, more usefulness 
from everything you buy, and I think you have. 

That's why our tempo of progress is Speeding up. American industry is 
cultivating ideas as its richest investment in the future. We are looking for 
young Marconis, young Bells, young Edisons. We have many of them in our 
laboratories now. We encourage them. They are taught to look upon progress 
as a road that has no end. 

If we give them the opportunity of free enterprise, they will contribute 
freely. In every industry — those existing and those to come-^— their improve- 
ments will demonstrate clearly that what we have today is not enough or good 
enough. That is why, with all conviction, I say that the future is boundlesSv 
It holds a treasure of great and good things for all of us to share and of jobs 
enough for all of. us to do. 

Acting Chairman Kjng. Do you desire to supplement the state- 
ment that has just been read? 

Mr. KETrERiNG. If you care to ask any questions, I will be very 
glad to answer them. 

Acting Chairman King. Do any of the members of the committee 
desire to ask Mr. Kettering any questions? 

Mr. Pike. On one point, Mr. Kettering. You say that the process 
of industrial research is American through and through. How does 
that differ, say, from the German process of research, which for very 
many decades was regarded as tops in the world ? 

GROUP V. INDIVIDUAL RESEARCH 

Mr. Kettfring. I think .the main difference is the fact that you 
get a group of men to cooperate. I think the particular thing is, our 
concept of industrial research is not so much an individual working 
on a problem as a group of men working on a problem. In the Ger- 
man industi'ial research they usually segregated the individuals on a 
specific problem, and here we 

Mr. Pike (interposing). Under competent direction you work the 
problem out. 

Mr. Kettering. You see, if you can pick a problem, it may be a 
many-sided problem, and therefore you have to correlate the activi- 
ties of a group of them. I think that particular thing is original 
in this country. 

Representative Williams. In that work, do you confine that coop- 
eration to the ones in a particular industry, or do you work in coop- 
eration with research laboratories from other industries? 

Mr. Kettering. The thing I was particularly speaking about was 
a particular research in any industry in which is required the serv- 
ices of metallurgists, physicists, chemists, and so forth. You see, the 
average inventor is pretty much of a personalized thing. He likes to 
work alone. The great difficulty is the transition period from the 
individual as an inventor to the group as an inventor; that is what 
I was trying to develop — group invention rather than individual 
invention. 

Representative Williams. In other words, you have a separate 
and independent research department 

Mr. Kettering (interposing). Oh, yes. 

Representative Williams. In your company taat works not in 
cooperation with other companies, but within their own group. 



16294 CONCENTRATION OF ECONOMIC POWER 

Mr. Kettering. Yes. We work with other organizations in the 
problems developed. If it is necessary to work with a chemical 
company or oil company, we will work with them, understand. But 
we originate the problems that pertain specifically to our industry. 

Representative Williams. How many men have you in your 
research division? 

Mr. Kettering. About 400 or 500. 

Kepresentative Williams. And what is your annual expenditure 
on that branch of the industry ? 

Mr. Kettering. I will have to guess. I would say it is in the 
neighborhood of $1,500,000 to $2,000,000. That has nothing to do 
with the engineering of the General Motors products, you understand. 
We have nothing whatever to do with the products General Motors 
makes. We have only to do with broadening the base. You see, we 
work only on new industries, trying to develop new industries to 
take up the slack in employment. 

Dr. Anderson. Will you describe the set-up of industrial research 
within General Motors and then within the organization of which 
you are also the head ? 

research in general motors 

Mr, Kettering. I will be delighted to do that. Our particular 
set-up is something like this. There is no very definite way in which 
you can draw departmental lines of research because they shift 
almost with every product, but for the sake of generalizing the situ- 
ation we have our laboratory set-up divided up like this : We have a 
department of chemistry, and in that department of chemistry we 
have allocated all of the specific problems that have to do with the 
chemistry of our industi^y, which will be paints, varnishes, fuels, 
and all of the others — metallurgy, and so forth — in that chemical 
department, and we are departmentalized to the extent of having a 
fuel-research department, a rubber-research department, plating, 
and so on; then in the material division, which comes under the 
general head of chemistry, we have our metallurgical department; 
then material tests, and so on. 

(Senator O'Mahoney resumed the chair.) 

Mr. Kettering. Then we have a department of physics, and in that 
department we have all the ordinary apparatus that goes with a 
department of physics. We have our X-ray department, we have our 
high-voltage department, our ignition departments, and spectroscope 
and all of the other facilities that would be in a high-^rade physical 
laboratory. And those are all equipped with technicians, and it is 
the correlation of the technician, say, in the physics department 
with the technician in the chemical department that I was talking 
about particularly w^hen you asked the question. 

Then we have a department of design, because all of these ideas 
have to be formulated finally into a concrete thing, and if it were 
a Diesel engine, "we would design a Diesel engine for a service, but 
not as a product, because you have to design something that you can 
put in and prove the principle. So we have a design department. 
In that design department we design apparatus, build it, and subiect 



CONCENTRATION OF ECONOMIC POWER 16295 

it to test, without any idea whatever as to how it is going to be 
manufactured. 

After we have had demonstrated the fundamental principal of that, 
then some manufacturing division takes that, and we act only as 
consultants, and have nothing to do with the final application. 

Dr. Anderson. At that point, how do you determine upon the 
projects to be investigated by the scientific section of your organi- 
zation ? 

Mr. Kettering. We have a committee of about three or four men, 
consisting of myself and three or four of my assistants, who try to 
select the general subject of investigation. Of course, from Mr. 
Watson- 'Da Vis' discussion, you could see there are a million things to 
investigate, but research men are quite hard to get, and therefore 
you have to select what you might call the control problems that 
control an industry, and we are the ones who select those problems, 
and 

Dr. Anderson (interposing). On what basis do you make the 
selection ? 

Mr. KJETTERiNG. We make our selection very largely on this basis: 
looking down the road, what are the most impc.tant problems that 
our industry has? The most in>portant single problem the industry 
has is the question of fuels, so fuels have been one of our researches 
ever since the laboratories were started. In fact, long before our 
laboratories were started, when I was running my own laboratory 
in Dayton, I had been working on this fuel thing since about 1913, 
and some of the same boys that started in 1913 are still on the job, 
and every^ year we think we know a little something about it and 
the next year we slip back a little bit, but I think we have gained. 

But the reason that is an important problem is because with our 
best automobile engine that we have today we are utilizing lesss than 
5 percent of the total efficiency of the fuel. That isn't because we 
don't want to utilize any more. That is the best we have been able to 
do. That is, there are theoretically about 450 miles, if you could 
use all the energy in a gallon ol gasoline,, in a gallon, A mall car, 
Chevrolet, Ford, or Plymouth, would go about 450 miles on a gallon 
of fuel. I don't think anybody claims we are getting that, but I think 
we are getting 5 percent of it. As long as there is a 95 percent waste 
factor in that thing, you can see right away you can t let that go 
rteglected. The fuel and the engine are so tied together that you can't 
treat one without treating the other, ycu see. They are integral parts 
of each other, so engines and fuels have been and will continue to be, 
as long as tlie industry last.--, I think, a major problem, and it was out 
of that work on the study of engines and fuels that we developed 
this new Diesel engine which we use on these high-speed trains, sub- 
marines, and so forth, because we were simply trying to see if the 
thinking that we were doing was applicable in these other lines, and 
that has worked out very well. 

Dr. Anderson. When you mate a discovery within fuels, such as 
ethyl or some other discovery, is that discovery then patented by the 
company, in the company's name? What is your policy with respect 
to control of the discovery? 



16296 CONOBNTRATrON OF ECONOMIC POWER 

PATENT POLICY OF GENERAL MOTORS ^ 

Mr. KiTiTERiNG. That varies with every one of them. There is no 
rule. We have no rule on that thing at alL We take out patents, 
and they are usually turned over to the division that is going to 
market the thing. They become the property of the commercial 
organization. 

Dr. Anderson. So that research beyond the actual discovery and 
perfecting of an invention does not move over into its application. 

Mr. E^ETTERiNG. No; you can't do that, and I am glad you mentioned 
that point because that is one of the places we have to watch. Any 
new device, it doesn't make any difference what it is, is two things. 
It is a principle and it is a product. Now, when you put the product 
on the market first, it is bought by a few people who think they want 
it. They immediately begin to reflect back on the modifications of 
that, and it is purely the function of engineering from then on. If 
you take your research men to do that you don't do another research job 
for 10 or 12 years, so what you have to do is to set it pretty clearly, 
and when we set up our researcli laboratories we set this very clear and 
distiiict line, tha^t we were to have neither authority nor responsibility. 

Mr. Pike. That is where the individual inventor is in a pretty 
bad fix. He hasn't any separate sales and engineering organization. 

Mr. Kettering. I went through that several times myself. 

Mr. Pike. You did a very good sales job on one of yours. 

Mr. Kettering. That is still going on. The weakest thing — when 
I say the weakest thing that the technical man per se has, it is that 
he only knows three dimensions; length, breadth, and thickness. He 
deals with the material relationships completely, while there is a 
fourth dimension that we say goes into that, and that is the eco- 
nomics — how much it is going to cost. The thing doesn't become a 
product until its cost is brought down to the place where people can 
buy it. You have to get a man cost-consicious, and of course you can't 
be cost-conscious when you haven't anytliing to work on. 

Dr. Anderson.- With that divorcement between research of a pri- 
mary and secondary character and its application, the scientific men 
are not in any sense responsible for the economic aspects of the prod- 
uct. They are not concerned with whether or not it is put on the 
market immediately, whether it is held off the market, whether it 
goes on in partially completed form for trial and error in purchasers' 
hands, or anything of that sort. They have nothing to do with that. 

Mr. Kettering. No, no. You couldn't have anything to do with it, 
you see. 

Senator King. My recollection is that we have many examples of 
brilliant investigators and researchers and inventors who have, at the 
same time, had considerable business ability, and associated them- 
selves with others in putting their product upon the market to their 
great advantage. 

Mr. Kettering. Oh, that is all right ; yes. 

Senator King. There is no assumption that the inventor lacks skill 
as a businessman. 

Mr. Kettering. Oh, no. 

Senator King. And as •omoter of the product which he has 
invented. 



1 In this connection see also Hearings, Part 2, pp. 328-372. 



CONCENTRATION OB\FOONOMIC POWER 16297 

Mr. Kettering. No; but merely to facilitate the organization, 
here is what we have. We have 1,000 people who can make and 
narket a product to one who can originate it. The system that we 
liave set up is a conservation of our originating talent. 

^fr. HiNRicHS. It does, however, distinctly separate the two 
functions,' so that the inventor, the developer, the research man, has 
no interest in the question of whether the product is marketed or is 
pushed into competition with existing processes. 

Mr. Kettering. He has. You have to draw some line where his 
responsibility stops, see. For instance, we will take our srtlall truck 
and bus engine. The men who developed that in the research lab- 
oratory as a principle elected to go into th« factory. There were 
about 100 or 125 of the boys who had been in that development end 
who elected to go into the commercial phases of it, so they moved 
bodily out and went with the thing. They always have that oppor- 
tunity to do it if they want to do it. 

Mr. HiNRicHS. It does involve a clear-cut separation of the in- 
ventive scientific function and the subsequent decision to commer- 
cialize the product. 

Mr. Kettering. Yes. 

Mr. HiNRiCHS. And you now haVe a situation in which fundamen- 
tal scientific research on a very large scale is bein^ conducted in 
enterprises which have an extremely heavy stake in existing processes 
as well as in the prospective process, whereas in the individualized 
inventive function the inventor's stake in . the past is orditiarily 
comparatively slight, has been frequently very slight, and his stake 
in the future may be very large. There is some change in that 
respect in terms of the commercial application of the product, isn't 
there? 

Mr. Kettering. I don't quite grasp the point you are making 
there. 

Mr. HiNRicHs. The decision now to apply scientific investigation 
has to be made by a commercial organization with a very heavy 
investment in the methods of production which have characterized 
the past, and an investment which might be jeopardized by the 
I)rompt application of scientific discovery, and you introduce a com- 
mercial consideration into the question of whether it is worth while 
to apply. 

Mr. Kettering. Well, are you asking whether or not we hold back 
things because they might interfere with something that is already 
on the market? 

Mr. Hinrichs. I was asking in the first place whether it is correct to 
assume there is a change in the general situation. My second ques- 
tion was going to be, does that mean that at any point the application 
of invention is held back, and how is that conflict reconciled by the 
company between its interest in its existing investment and its inter- 
est in the application of a new principle which might result in sub- 
stantial economies in the future to users of the products, but might 
also involve jeopardizing, for the time being, a rather large invest- 
ment that has not yet been fully amortized. 

Mr. Kettering. I can only speak for my own industry. We are 
always behind. Our people say we are slow. We are not getting 

124491— 41— pt. 30 8 



16298 CONCENTRATION OF ECONOMIC POWER 

stuff out fast enough. Almost all of our things are new things, and 
don't interfere with anything that we have already got. 

Representative Wiixiams. May I just interrupt for a moment. 
There is a call of the House, and I ask to be excused. 

Dr. Anderson. If a research worker discovered a means of utiliz- 
ing not 5 percent but, say 50 percent of the full content, and it 
resulted in a drastic alteration in your automobile, what would be 
the procedure? You have startling inventions. What happens? 

Mr. Kettering. Of course, I couldn't draw a conclusion from a 
fictitious thing. 

Dr. Anderson. Let's take an example that you have had in the 
recent past, of a great change. Has it in any way been held back? 

Mr. Kettering. Never, never; we have never had that condition 
in our industry at all. 

Senator King. Even in your large group of investigators, there 
may be some person who prefers to pursue a very narrow field, and 
he achieves success in that, and of course coordinates that. 

Mr. Kettering. For instance, here is a particular fellow that may 
be a specialist along that ]tne. Let him work his specialty in co- 
ordination with some other fellow's, of which that is a component 
part. 

The Chairman. I gather from what yoa say, Mr. Kettering, that 
it has been your experience that the researcher and the inventor are 
constantly endeavoring to produce a commodity, a new invention, a 
new product, at a cost which will make it commercially profitable 
to the producer. 

Mr. Kettering. Not necessarily. You can never make them profit- 
able in the beginning. 

The Chairman. But your constant effort is to bring it out so you 
can put it on the market and dispose of it at a profit; isn't that it? 

Mr. Kettering. Ultimately. Of course, we never have anything 
to do with it except at the beginning. 

The Chairman. You are head of the research laboratory and you 
have to do with this long preliminary study which is intended to 
bring forth the new invention or the new commodity or whatever the 
discovery or invention may be. 

Mr. Kettering. That is right. 

The Chairman. The problem of marketing is not 'your problem. 

Mr. Kettering. Not in the least. 

The Chairman. But it is true, I take it, that the research expert is 
constantly faced with the problem as to whether or not the particular 
study on which he is working will result in a product which can 
be marketed successfully. 

Mr. Kjittering. That is right. 

The Chairman. For example, my attention has been called over a 
long period of years to the effort to find new industrial uses for agri- 
cultural products. It is a very desirable end to be achieved, because 
obviously, when we find new industrial uses for agricultural prod- 
ucts, we will be successful in benefiting the producer of agricultural 
products. 

Mr. Kettering. That is right. 

The Chairman. One of these studies has been designed to make 
alcohol at such a cost that it can be used in automobiles as a fueL, 



CONCENTRATION OF ECONOMIC POWER 16299 

but to date, it is my information, science has been unable to produce 
the alcohol at a cost low enough to make it commercially available, 
isn't that correct? 

Mr. Kettering. Yes. 

The Chairman. That is to be found throughout the line of scien- 
tific research, is it not? 

Mr. KETrERiNG. Yes. As I say, the great difference between the 
fundamental principle and the product is one of economics. That is, 
you may have a fundamental principle that is all right but it. isn't 
a product yet because it hasn't beeii whipped into shape from the 
pomt of view of its over-all economics. 

GOVERNMENT AID TO RESEARCH 

The Chairman, Have you any thought about what may be done, 
by society, or by Congress, or by the State legislatures, to enable 
science to pursue its studies more rapidly by making better markets 
for the products which you are working with? 

Mr. Kettering. Of course, the big problem in that, Senator, is the 
fact that the process of getting the new industry is almost diametri- 
cally opposite from the process of operation. For instance, you take 
any industry that is a manufacturing operation ; they are set up on a 
schedule of production depending upon the reports from the field, 
from the sales department, and the current markets of raw materials, 
and everything. In other words, you have got to budget a modern 
industry very carefully or the sheriff will get you. You can't go 
on just making a lot of things ad lib. 

The 'Chairman. That is true. 

Mr. Kettering. Now, remember that is 99.9 percent of that in- 
dustry's business. Wlien you come over to the research and develop- 
ment thing, you can't answer any of the questions on the forecast. 
You don't know when you are going to get the thing done, whether 
it is going to work or not, and whether it is going to have any value 
whatever, because it is an intangible thing. 

It is the lack of understanding between the operating ends of in- 
dustry and the development phases — they are almost diametrically 
opposite in their whole content. 

The Chairman. In what way are they diametrically opposite? We 
are coming to a very interesting point and I would like to develop it. 

Mr. Kettering. They are diametrically opposite because you can't 
forecast what a thing is going to be worth before it is developed. 
I can only work on a very small detailed thing. "When are you 
going to get that thing done?" I don't know. We have been 
working on problems — as I say some of the men who started with 
me in 1913 are still working on this fuel problem. 

The Chairman. The inability of the rssearcher to predict when he 
wijl finish his studies or exactly what he will produce, and the in- 
ability of the operator to predict what the result will be, does not 
in itself indicate there is any opposition between the two. 
i. Kettering. No. 

The Chairman. The operator will be most anxious to put on the 
market the product of the research laboratory as soon as it can be 
disposed of at a profit. 



16300 CONCENTRATION OF ECONOMIC POWER 

Mr. Kettering. There is no opposition. There is just impatience. 
That is, therp is a terrific impatience between operations and 
researches. 

Th^ Chairman. The operator then is very anxious to have you get 
through with the job so he will ha^ea new product to dispose of. 

Mr. Ketfering. That is right. 

The Chairman. That is what you meant? 

Mr. Kettering. That is right. Now then, it is a lack of under- 
standing. For instance, there is another kind of accounting. You 
take the detailed cost accounting that is absolutely essential in an in- 
dustry, it is quite different from the actuarial accounting used in in- 
surance. You have to apply the actuarial type of accounting to re- 
search; not what a specific problem is going to cost, but what rea- 
sonable percentage of the problem you undertake will come through. 

Mr. Pike. What is your mortality? 

Mr. Kettering. Oh, I would say 99 percent. 

Mr. Pike. Naturally, a lot of these things do efid up in thorough 
and bitter disappointment. 

Mr. Kettering. When I said 99 percent, I wouldn't say 99 percent 
of the long-range things but 99 percent of the workaday things you 
are working on today will be a failure. In other words, that is* the 
biggest problem we have in keeping the morale of our personnel up. 
If you were to walk through a research laboratory with me, the 
thing that would perhaps discourage you is that almost every one of 
the projects is in a jam, the thing "busted" up yesterday, you see. 

accelerating rate of invention 

The Chairman. I hav een reading over the prepared statement 
which you presented at tbo i cutset — unfortunately, I wasn't here when 
you went on the stand — rand it suggested several questions which I 
should like to direct to you. In the first place, beginning toward the 
end, I note this statement : "Progress encounters new and more diffi- 
cult problems. Each year the road ahead is steeper." 

Do you mean by that that the progress of science and invention is 
getting more difficult ? 

Mr. Kettering. If you read the rest of that, it is explained there as 
to what I meant. You have to take more things into consideration. 

The Chairman. But as a matter of fact, standing alone, that state- 
ment doesn't convey a correct=.idea. 

Mr. KETrERi>fG. No; not if you pull it out, because that was a 
preliminary statement to another paragraph which came after that. 

The Chairman. The impression I have had has been that the pace 
of progress is constantly accelerating. 

Mr. Kettering. That is right. 

The Chairman. And because of the accumulated wisdom and in- 
vention and development of the past, we can expect larger and larger 
gains in the future; isn't that correct? 

Mr. Kettering. Well, I don't know, because there are many things 
that we take for granted. If a young man who comes to work for us 
can survive two shocks he usually makes a pretty good man. I am 
talking of the young man who is a graduate of one of our technical 
institutions. The first shock he gets is that we are working on such 



CONCENTRATION OF ECONOMIC POWER 16301 

terribly elementary things, because we don't know much. If we don't 
know a thing, we usually give it a Latin or Greek name. 

The Chairman. I have noticed, during the process of these studies, 
that lack of knowledge is frequently covered up by a mass of words 
and statistics. 

Mr. Kettering. And so we say if the boy can survive the fact that 
we are working on terribly elementary things, that we don't know 
very much about anything 

The Chairman (interposing). Of course, elementary things are 
frequently, I think, the most important, and that leads me to this 
thought. I think the most elementary of all problems is the problem 
of jobs. 

Mr. Kettering. That is right. 

The Chairman. And work for people. 

Mr. Kettering. That is right. 

The Chairman. And that leads me to this quotation from your 
statement : 

I like to think of this mass production of ideas — 

And I like your phrase "mass production of ideas" because I think 
that correctly describes our modern condition — 

as a team play in an immense effort to readjust our economic system so as to 
put to work our excesses of men, money, a:nd materials. Our team includes 
many men, many companies, many industries. 

Now, it is implicit in that stateinent that there is an excess of men, 
that there is an excess of money, that there is an excess of materials, 
which is not being used, and that there is something in the economic 
system which needs readjustment 

Mr. Kettering (interposing). They haven't got. the projects. 

The Chairman (continuing). In order to enable society to put to 
use these several excesses. Have you any contribution to make on 
that? 

IMr. Kettering. That is why I say we are behind technologically 
rather tlian ahead. We are 'way behind. And I was going to explain 
why we are behind, because we have taken for granted i great 
many things. Going back, speaking of the young man, I say he must 
survive two shocks, one that we are working on such ter.-ibiy ele- 
mentary things, and the next that nothing he can find in the 
books will help him out very much on it. We have used this ^ery 
simple illustration. You rub your hands together and they get 
warm, and why is that, and the fellow says, "That is quite simple, 
that is friction," and yet if you pursue that, you say, "What is fric- 
tion?" and you end up by saying, "The thing that makes your hands 
warm when you rub them together." You don't know a single thing 
about the mechanism of why your hands get warm when you rub 
them together. 

It is hard to get men back to those things and that is the reason 
I think we are behind. We haven't been willing to go back and take 
those very tedious jobs. 

The Chairman. Those tedious jobs, I take it, can be pursued suc- 
cessfully only by large, comparatively large, cooperative effort such 
as that which is illustrated in your research laboratories. 



16302 C(^NCENTRATION OF ECONOMIC POWER 

Mr. Kettering. Well, I don't know. I think that individuals can 
work on that kind of thing. In fact, there have been some very good 
individual contributions made, both in this country and abroad, on 
this mechanism of friction. 
_ The Chairman. All right, suppose you can get suflScient investiga- 
tion of these elementary things to satisfy you, what would be the 
result? 

Mr. Kettering. You immediately begin to broaden out, for instance, 
you take on some of the things that are available now but not per- 
fected, we will say. We have heard a lot of talk, we will say, about 
air conditioning. Air conditioning has done a very, very good job, 
but yet the economics of air conditioning perhaps haven't reached 
the point at which it can be of general usefulness. 

We are trying to find out what we can do to make this thing more 
flexiblcj easier to handle, more easily installed, and things like that. 
In other words, that is an economic problem. We know in our climate 
up North that one of the factors that is involved, especially in air 
conditioning in the wintertime, is very low humidity. That requires 
a new type of window. 

The Chairman. To what extent do economic conditions prevent, if 
at all, the use and development of inventions and discoveries which 
have already come into the scientific consciousness ? 

Mr. Kettering, I think they have a lot of retardation in the be- 
ginning because you don't know quite what the problem is, you see. 
For instance, I was going to mention on this window business — in 
trying to hold the humidity up in our section of the country where 
it gets rather cold in the wintertime, we have to have double windows. 
There are a number of people that have been working on that, and 
if we ever get at satisfactory double window, then you immediately 
would see quite a change in the method of building structures, in 
houses, and everything else. But we haven't had it yet. We are 
getting closer to it all the time. 

Take television as a new industry. It will have to struggle along 
quite a long while before it strikes its pace, because you can hit 
tne middle of the road but very rarely, and then it is an accident. 

The Chairman. What is in the back of my mind in asking these 
questions may probably best be illustrated by reports which have 
come to us in Congress with respect to housing, for example. 

The statement is frequently made that so-called slum-clearance 
housing in some communities has progressed physically to a very 
advantageous point. That is to say, very fine apartment houses have 
been constructed, but it has been found that these new apartment 
houses are not being occupied by the low-income groups for whom 
they were originally intended. • In some instances it is said the 
destruction of the slum to make way for the new and improved 
modem housing project has. resulted only, in some instances, in the 
moving of such families into worse slums, because the group at the 
bottom of the scale were not economically so situated as to make 
use of the new product. 

Now, isn't it true all through the field that markets are essential 
to the development of research, and science, and invention? 

Mr. Kettering. The only time we get those research problems 
which you mention there is when they are reflected back from the 



CONCENTRATION OF ECONOMIC POWER 16303 

field. For instance, suppose we develop the best thing we know how 
to do in a research, and it is turned over to the manufacturing divi- 
sion to make and sell, and suppose they try to put that on the 
market, and after a couple of years they come back and say, "This 
is pretty good, but it doesn't fit the market. Now, you fellows will 
have to take another cut at this, make another study of this." Very 
seldom do they do that, because that organization immediately sets 
up its own development and research department for that particular 
product, you see. 

The Chairman. If it were possible to increase the market, either 
by opening, up new fields in other countries, or by increasing the 
purchasing power of the masses of the people in America, would not 
that in itself be of tremendous assistance to the scientist in his efforts 
to develop new products? 

Mr. Kettering. Sure. Of course, the average scientist doesn't get 
that far in the picture. 

The Chairman. Of course, that is one of the phases of this matter 
we are studying. 

Mr. Kettering. We can help the scientist best by taking his 
thought or his idea and developing it into a tangible shape. 

The Chairman. You started your statement with this sentence, 
which was of great interest to me: "We have been accused of pro- 
ducing unemployment by too many inventions." By whom have you 
been accused? 

Mr. Kettering. Well, the newspapers and others. It has leaked 
in through various sources. I don't know where it comes from. 

The Chairman. I often wonder if that isn't a misunderstanding. 
For example, there was distributed to the members of the commit- 
tee today a pamphlet, apparently issued by Iron Age, entitled "The 
Threat to the Machine," and on the second page of this I find a 
statement attributed to me. It reads as follows — my name, in the 
first place, and then quoting: "Science and invention are to blame 
for the present unemployment in America." 

Now, I am not conscious of ever having made any such statement. 

Mr. Kettering. I never saw that. 

The Chairman. I know you didn't. I am taking advantage of 
your presence here, you see, to make a statement with respect to 
that. 

Mr. Kettering. That is all right. 

MASS production AND MASS PURCHASING POWER 

The Chairman. That statement, of course, doesn't begin to repre- 
sent my attitude toward the machine. Never in my conscious mo- 
ments have I ever intended to intimate that science and invention 
are responsible for unemployment. 

I ithink there can be no dispute about the fact that science and 
invention have immeasurably increased the standard of living in 
the world, and particularly in America. But while the standard of 
living has unquestionably been increased, it seems to me it has also 
become less stable than it used to be. Our grandfathers lived at a 
very much lower scale; they didn't have electric lio;hts, they didn't 
have automobiles, they were content to get along with kerosene lamps 



16304 CONCENTRATION OF ECONOMIC POWER 

or candles; they didn't have any of the luxuries or comforts which 
we have, but they could support themselves because they vere living 
upon the land. 

Mr. Kettering. That is right. 

The Chairman. Their economy was on a lower plane, but it was 
stable. Now, our problem is to make certain that the undoubted 
advance of technology will redound to the benefit on a stable basis 
of the masses of the people, and that their purchasing power will 
be so increased that the scientist may make constantly increasing 
gains. Do you agree with that statement? 

Mr. Kettering. Yes. You have to broaden your industrial base. 
That is the reason why we have the excesses of men, money, and 
materials. We simply haven't got the projects. We are behind 
on the project-getting end of this thing. That is what I am getting 
at. 

The Chairman. I think there is a good deal of misunderstanding 
of what is meant and intended by persons who are studying this 
problem, and I wanted to make clear here in questioning you, that 
at least speaking for myself, I want to do everything in the world 
to aid technology and to aid the machine, to make wider and wider 
use of it. 

I recognize the fact that labor-saving devices are desirable and 
excellent and beneficial in every possible way, but I also recognize 
the fact — at least it seems to me to be a fact — that the market for 
all technological advance depends absolutely upon the ability of 
the masses of the people to use what the scientists are producing. 

Mr. Kettering. That is right. 

Hr. HiNRicHs. Along that same line, I have one or two questions. 
Your part, I judge, in this team play that you refer to is to make 
fundamental scientific advances which may be of either of two sorts. 
It may result in a totally new product ; it may result in a very much 
better use of an existing product, or a product which is substituted 
for an inferior product now in use. An increase of fuel efficiency 
from 5 to 7I/2? perhaps 10 percent, would result in substantial econ- 
omy in the use of fuel and probably to an extension of the use of 
automobiles. 

Now you implied in your discussion that the business organization, 
the operating and sales end, has the job in this team play of making 
the products of scientific research widely available. 

Going back to your first page, you say that there is a necessity 
for producing new things because we have more hands than we have 
jobs ^o do. There is no question that people at present are unem- 
ployed, but you would hardly sry that in a physical sense the peo- 
ple in the United States were at the present time well supplied with 
the goods that we know how to make and know how to use, would 
youf That is, we have, roughly, two-thirds of our population with 
family incomes of less than $1,500 a year. As far as I can calculate, 
it would take an addition of about $50,000,000,000 to the national in- 
come to raise the group that is below $1,750 to $1,750. We don't 
have the technical capacity nor the hands to produce an additional 
$50,000,000,000 worth of goods at the present moment. 

So that there really are two approaches that are conceivable in 
team play. One is the stimulation and the easy flow into the econ- 



CONCENTRATION OF ECONOMIC POWER 16305 

omy of new products. The other part of the team play of your sales 
or<ranization, your producin<i: or<ranization, is to make existing things 
available at the lowest conceivable costs in order to get tne widest 
possible distribution within the existing distribution of income. 
Would you agree Avith that general statement? 

Mr. Kettj:ring. Yes. 

Dr. Anderson, Mr. Kettering, getting back for a moment to this 
divorcement between invention as your industrial researchers con- 
duct it, and the application of invention that is carried on by the 
business end of your plant, I wonder if you would hazard a state- 
ment as to how general that situation is in industry? 

Mr. Kettering. No, I wouldn't. I, think that every industry is 
set up. depending upon its operating conditions. You see, we oper- 
ate on a decentralized basis. Tliat is, our automobile factories, Cadil- 
lac, Buick, Chevrolet, Oldsmobile, and so forth, are all operated as 
individual units. 

That makes it rather easy for us, then, to have a centralized 
detached laboratory. Now, in an organization in which you have 
your engineering and your research and your design and everything 
tied up together, it will work differently. There is hardly any general 
rule that I can say on how to put that up. We just happen to be 
fortunate in our set-up to be able to get that sort of thing. 

Mr. Pike. And still there are some things you say you are inter- 
ested in that are not close enough to the automobile business to put 
them in youi- laboratories; for instance, your chlorophyl research, 
where you go out to Antioch. 

Mr. Kettering. That is a personal thing. The reason for that 
is that you couldn't ask any industry to take that on. I have been 
interested in that one for a great many years, and we are interested 
in that. You know, the word "chlorophyl" is just the Greek word for 
''green leaf," and we don't know any more about it in Greek than 
we do in English. 

PHOTO- synthetic ENERGY 

The only reason we are here is because of the ability of a plant to 
trap the sun's energy. I felt that was important enough to set a 
group of scientific fellows to see if we could find out how it is done. 
Out of that has come a lot of very, very interesting things already, 
aJthough that is absolutely set up as a purely scientific research. It 
has nothing whatever to do with. business or anything else, and we 
liave been on it about 10 years now and we have been able to clarify 
a lot of things. Some practical things have come out of it. For 
instance, this question of why certain pastures are poisonous to white 
stock but not to black stock. 

There are certain pastures in which only black sheep can be pas- 
tured, or black cattle. The reason for it is that there is some weed or 
something that the cattle eat that sensitizes them to light. Now, if 
they are white, that lets some of the undestroyed radiations go into 
the blood stream and tiiey get quite sick. Well, some practical things 
Jike that have come out of tliis already. 

We know a ton of hay dried in the dark is worth about four tons 
drieU in the light. 



16306 CONCENTRATION OF ECONOMIC POWER 

The Chairman. That is pretty far afield from the motor industry, 
isn't it? 

Mr. Ketteking. This is my scientific golf game. 

Dr. Anderson. Mr. Kettering, why is it with such a practical pros- 
pect as you have indicated, that industry does not undertake such 
basic research as your study of chlorophyl ? 

Mr. Kettering. I think the reason for it is that there is no way in 
the beginning of drawing a line between the question of whether it is 
fundamental or whether it is some fellow's hobby, because if you try 
to follow all those hobbies you would just go out of business in a 
hurry. 

Dr. Anderson. That leads to the next question: How does your 
corporation determine on the fund, the size of the fund, the amount 
to be placed at your disposal for research? 

Mr. Kettering. They leave that entirely to us. We ask for an 
appropriation to cover what we believe is an honest interpretation of 
what we are able to do. 

Dr. Anderson. Is that fairly general in industrial research? 

Mr. Kettering. I couldn't answer that. 

The Chairman. In presenting your request for an appropriation 
you have to make some justification of it, I assume. 

Mr. Kettering. Not very much, Senatpr. We are pretty well 
known in our organization. 

The Chairman. Of course, you are pretty well known outside of 
your organization, too. 

Mr. Kettering. I mean by that, we have been working along cer- 
tain definite lines. We set up our projects just about as I outlined. 
For our physics department we would like to have so much money 
for that, and here are the problems that are in there, and here is the 
probable new thing we would like to put in if things work out dur- 
ing the year. Then we put a cushion in there of X number of thou- 
sands of dollars that this thing can be automatically pulled out or 
shoved in. 

'The Chairman. The output of your laboratory over the years has 
paid for itself, has it not? 

Mr. Kettering. They still give us money. 

The Chairman. They wouldn't do it if you weren't paying; isn't 
that right? 

Mr. Kettering. They never tell us. The only way we know whether 
we are going along right is when we see the corporation building a 
building to make new things they, never made before. 

The Chairman. Industrial research, I suppose, is keyed to its 
utilitarian phases. 

Mr. Kettering. Not nearly so much as you would think. 

The Chairman. Then to what extent are you permitted to go out- 
side of utilitarian objectives? 

Mr. Kettering. I am going to assume that you mean by utilitarian 
that thing which is obviously applicable to our industry. 

The Chairman. Oh, no. I think that in your case, or in the case 
of any similar or comparable research laboratory, the corporation 
would be very glad to accept your judgment that the eventual result 
of a particular line of inquiry is likely to produce something of value 
to die corporation. 

Mr. Kettering. I can tell you how that is e\aluat'ed. 



CONCENTRATION OF ECONOMIC POWER 16307 

GENERAL MOTORS RESEARCH BUDGET 

The Chairman. That is what I would like to know. 

Mr. Kettering. In dividing our appropriation, we say that it has 
worked out about this way : about 40 percent of our appropriation 
goes to consulting services to our divisions. We are a free consulting 
engineering operation to all of our divisions, and they come there and 
talk to us about this, that, and the other thing. 

The Chairman. In other words, they bring to you their immediate 
problems. 

Mr. Kettering. They don't bring the problems there so much as 
they come and ask us to come out to their place and help them work 
on a thing there. 

The Chairman. But it is an immediate problem that they want 
worked out. 

Mr. K-ETTERiNG. That is fine, for two or three reasons, because that 
keeps us very definitely in touch with our industry. Then there is 
about 30 percent of our budget that is applied to more or less ad- 
vanced engineering and where we have to design the apparatus to 
demonstrate the principle; and then there is 30 percent that is very 
long-range material. 

The Chairman. It is conceivable that the 40 percent represented by 
your assistance to the various divisions, and the 30 percent which is 
represented by the development of problems which you yourself see 
for the improvement of the industry will produce sufficient results 
to carry the other 30 percent without profit. 

Mr. Ketiering. Because you see the 30 percent, we will say, of 
design and engineering, 4 or 5 years ago was the top 30 percent. It 
is working this back down into that thing, because it is surprising 
how long it takes, sometimes, to get a thing clarified enough in your 
mind to put it down on a drawing board and make a piece to repre- 
sent it. 

For instance, you take the simple thing of a spectroscope, which 
is this method of splitting light out as an analysis factor in a foundry. 
Well, we have been playing on that for a great many years, but it is 
only recently that we have been able to get a spectroscope which is a 
highly scientific piece of apparatus, that you could put out in a 
foundry. Yet, if you had come to the practical board 20 years ago, 
they would have said, "We don't see how you can do that." But all 
the fellows all along the line have been making improvements — the 
optical men, the glass men, and so on — and finally you have an object 
of scientific accuracy in a light-proof case and you can put it in your 
foundry and a fellow can make his analysis and control his steel very 
much better than he did before. So that intangible 30 percent is 
going to come of age some of these days, so you have to have that 
put in." 

It is just like a calendar. You have a calendar here of 365 days 
and you keep tearing one off each day, and it gets iliimier. That 
is the way it is with products. Ever} ihae you take one off you 
have to put a new intangihle one on the bottom, c>tlierwise you run 
out. 

Dr. Anderson. Mr. Kettering, how much money did you budget 
last year for resean'h in General JSIotors? 

Mr. Ketthring I think it was between $1.. 500,000 and $2,000,000. 



16308 CO"NCENTRATION OF ECONOMIC POWER 

Dr. Anderson. What percentage would that be of total General 
Motors expenditures for the .year? 

Mr. KE'm:RiNG. I haven't the slightest idea. Do you mean from 
an engineering standpoint? 

Dr. Anderson. Yes. 

Mr. Kettering. I couldn't tell that, I think we could get those 
figures for you. You take an organization like the Buick ; they have 
their engineering expense divided into two classes. They have what 
they call research, a group which has to do particularly with their 
product, but this would only be a very, very rough guess ; I imagine 
the total engineering and research budgets for the divisions would be 
around ten or twelve million dollars, so that I should say our specific 
research thing was maybe about 10 percent. Those figures are purely 
guesses, and we can get them for you if you would like them. 

Dr. Anderson. You made a point a moment ago that you didn't 
know precisely wdiat is going on in other plants with respect to 
research, but I would like to question how independent of each other 
large business units, supposedly competitive units in the same busi- 
ness field, are in the research field. 

• Mr. Kettering. Well, they are independent in one waj and in an- 
other way they are not. They bring all of this stuff together through 
their engineering societies. For instance, we have a very fine society 
know^n as the Society of Automotive Engineers, the S. A. E, We 
have a research committee in that, and through the papers and so 
on I think everybody knows w4iat the general problems of the in- 
dustry are. As to what is being specifically attacked by each organ- 
ization, I don't think we attempt to find out. Chrysler is working 
on problems that we are on. We don't make any attempt to find out. 
I am; perfectly sure if we asked they would tell us, but we don't 
abuse the courtesy. 

Dr. Anderson. How near standardized has the product become as 
a result of this general knowledge of research in the full field? 

Mr. Kettering. Not very much standardized, because there are 
always many approaches to the thing. You take in our own corpoja- 
tion we have two schools of engineering so far as engines are con- 
cerned, the so-called L-head and the valve-in-head engine, and you 
can't standardize those two. Each of those groups sticks to its own 
view-point. 

Dr. Anderson. Why is that? 

Mr, Kettering. Because a man's experience and his work have been 
along one line, and the two things aren't alike. There are a lot of 
things different in them. When the valve-in-head fellow tries to 
step across he tries to carry the valve-in-head practice and vice versa. 

Dr. Anderson. In other words, you would say that there is little 
hope from the research side to come to the standardization in which 
there would be a common product, 

Mr. Kettering. I think that would be very dangerous. You might 
agree on a standard today, and say that this thing is the only thing 
we ought to make, and tomorrow, if you went ahead, you would find 
out something else. We have seen that happen in materials like 
steel, in which they w'anted to standardize a kind of steel; and a few 
months afterward we found out that if they had, they would have 
taken the wrong one. ISo; I think you wftot to keep the front of 



CONCENTRATION OF ECONOMIC POWER 16309 

industry fairly broad, and specific standardization can be very 
dangerous. 

INTERORGANIZATIONAL COOPERATION 

Dr. Anderson. Undoubtedly basic research is carried on both in 
industrial research laboratories and in universities and Government 
laboratories. 

Mr. Kettering. Yes. 

Dr. Anderson. Do you have any estimate of the dependence of 
industrial research laboratories upon the universities and Government 
research? 

^Ir. IvETrERiNG. They work together in a great many cases ; in other 
lases they can't. But there are good working arrangements — you 
ake between the Bureau of Standards and industry, and between the 
iiniiversit}' laboratories and industry — but there are certain of those 
problems. For instance, let's take a very specific case.- Take the 
injector that we use in our Diesel engines. That was a very difficult 
problem, because it parted from what you call conventionalism. We 
arrived at a conclusion from other work we had done that we had 
to raise the injection pressure from, say, 4,000 pounds to 25,000 
pounds. When you begin to try to pump oil at 25,000 pounds it 
introduces quite a problem. The argument was that if you made this 
thing accurate enough so that you had to fit a piston into a little 
barrel so accurately that oil at 25,000 pounds wouldn't leak by, logic 
said if that is the case, you only need to move that a couple of times 
until that accuracy will be worn away. 

It didn't work out' that way at all. It doesn't wear at all. We 
have injectors back from locomotives that have been run a million 
miles, and they are still absolutely accurate. But if you make a little 
more clearance it wears very rapidly. 

There was a thing on which it took us years to get over the hurdle. 
The limits that we use, the tightness of the fits, can best be illus- 
trated by saying that if you take a human hair, that is three- 
thousanJths of an inch in diameter, and you cut that up into 120 
equal pieces, the size of one of those pieces is the limit we have. 

To make that commercial was regarded as an impractical thing, 
and they said, "It is impractical because if you make it that close 
it will wear." If j^ou make it that close it doesn't wear. Why, we 
don't know. We have all the time to be investigating such terribly 
elementary things. 

Out of that, of course, came quite a step in the so-called Diesel 
engine development. 

Now, answering your point, the university laboratory can do cer- 
tain types of work that have to do with fundamental principles. 
You take one piece of research work that is being done in a univer- 
sity that is tremendously important is by Dr. Lawrence out on the 
cjTlotron. That certainly could be done only in a university, and 
that depends on Dr. Lawrence. Then Dr. Urey's work on heavy 
nitrogen. Many of these universities are doing splendid work. 
What you have to do is gather them up and write them up, and 
see how iiuich of it you can use in today's product. 

Dr. Anderson. There is no thought in your own mind that indus- 
trial research is actually supplanting basic 



16310 CONCENTRATION OF ECONOMIC POWER 

Mr. Kettering (interposing). Oh, no, no. We are still shy. We, 
need much more of it all the way through. 

Dr. Anderson. Do you think there is any danger of basic research 
to lag for lack of funds due to the fact that industrialists are apply- 
ing more and more of their funds to their own research? 

Mr. Kettering. No; I haven't seen that to be the case at all. I 
have two or three of these researches which I co,uldn't and wouldn't 
ask industry to do. Chlorophyl is one, some of the medical work 
we are doing at Dayton, and one or two other things, and you just 
couldn't ask industry to do that to start with. That is the reason 
why I have underwritten those, to get them started. After a while 
they may go on their own. 

Dr. Anderson. Is there a lack of capable people for research work? 

Mr. Kettering. No; there is not a lack of specific technicians. 
Ydu can get somebody to do anything you want done. The lack that 
we ha^Ye is the keeping of those people on a definite track. In other 
words, tke one great temptation you have when you are working on 
a research problem is, you are uncovering something new. That 
something new may be just a way station on this thing you are 
working on. The great temptation is to run off sideways. It is a 
grapevine; you want to run off there, but to keep the fellows on 
through to destination first is your problem. Then you can always 
come back and do this afterwards — the problem is to keep men's 
minds definitely on a problem until you get that solved, and that 
furnishes your survey line from which you can do all your other 
work. 

Dr. Anderson. What are the incentives that inventors in your 
industrial plant have, the monetary incentives? Do they gain by 
the invention made? 

Mr. Kettering. They gain in this way. We don't give specific 
bonuses to the inventor. We give the bonus to the laboratory, and 
the reason we do that is because we want to keep these fellows from 
becoming individuals. If we gave the bonus for a new invention to 
the specific man under whose care it was done, then these fellows 
would just begin to make little cliques, but if the laboratory gets the 
thing 

The Chairman (interposing). That is your team play. 

Mr. Kettering. That is the team play, and it works out very well 
because everybody is assured something every year. 

Dr. Anderson. What would a bonus look like, say, for last year? 

Mr. Kettering. I can't tell you. 

Dr. Anderson. It doesn't apply to a particular project that has 
been consummated. 

Mr. Kettering. No; what they do, they give the laboratory a 
bonus depending upon what they think we have done. 

The ChairivI^n. I like that phrase of yours, Mr. Kettering, about 
team play. It suggests to my mind the desirability of putting a lot 
more people who are at the bottom of the social scale on the team 
so that they will benefit equally, or at least to some extent, from the 
wonderful progress of technology. I think it will wtork both ways. 

Mr. Kettering. Most of us came from there anyhow. 



I 



CONCENTRATION OF ECONOMIC POWER 16311 

EFFECT OF PATENTS ON INVENTION ^ 

Mr. O'CoNNELL. Mr. Kettering, I would like to ask you a question 
or two relative to the patent system which has, as I understand it, 
the general purpose of promoting progress in science and the useful 
arts. I wondered if you had any view as to the importance of exist- 
ir.g patent laws as regards the type of invention you have been 
describing, so-called group activities. 

Mr. Kettering. I think if there is any modification in the patent 
laws, it ought to be made by the patent department and, say, the 
patent solicitors, and that sort of thing. 

Mr. O'CoNNELL. I understand they would do it. I thought you 
might have some views on that. 

Mr. Kettering. We are celebrating tomorrow the one hundred and 
fiftieth anniversary of the first patent law that Washington signed 
150 years ago. You never get anything perfect, but I think our 
patent laws are pretty good. 

Mr. O'CoNNELL. It is a fact, if I understood the testimony, that 
the type of invention that you have been describing is more or less 
on the increase, the cooperative activity by large organizations. 

Mr. Kettering. I think it would have to be. For instance, on a 
complicated thing like that injector, we had to have the expert 
metallurgist, expert physicist, and all that. There wasn't any one 
of those fellows that could have done that job. 

Mr. O'CoNNELL. Wouldn't it be the fact that organizations such 
as yours would function and continue to operate even if there were 
no such thing as a patent system? 

Mr. KmTERiNG. So far as patents concern an organization like 
ours, I think they are only important from one standpoint, and that 
is 01 preventing other people from coming in and saying they did 
the thing, so you have to patent a lot of things as a protective thhig. 
I think patents still have an enormous value from the standpoint 
■of the inspirational effect they have on people, and certainly for the 
small concern they are vital, very vital. 

Mr. O'CoNNELL. Addressing ourselves solely to the type of organ- 
ization you have been describing, it occurred to me that even in the 
absence of any patent laws at all, the mere force of competition in 
the industry would probably require the type of organization you 
have been describing. 

Mr. Kettering. I imagine so, yes; but I am a terribly optimistic 
person on what can be done if we get coordinated right, if w^e get 
the thing understood as to what our problems are. Only 10 years 
ago we didn't have enough people to supply the job and I think we 
can do this job. I say, if we have brains enough to get out of the 
cave, I think we can keep from going back in. 

The Chaiioian. That is a very hopeful statement. 

Mr. O'CoNNELL. I don't want to press the point, Doctor, but ap- 
parently organizations such as yours would undoubtedly continue 
to function and would be forced by competition to function even 
were there no patent laws. 

Mr. Kettering. We don't run our organization for the purpose 
of taking out patents. We think only of the general problems. And 

*Por general discussion of this subject see lleaiings, Part 2. 



16312 CONCENTRATION OF ECONOMIC POWER 

I would like to say, if any of you are out in Detroit any time, we 
would be glad to have you spend a day or an hour, whatever time 
you have, to take a look around and see how it is done. 

The Chairman. I shall take advantage of that. 

Mr. Kettering. It is quite different when you see it from how you 
talk about it, when you see what foolish little things we have to 
work on to get a link cleaned up. 

The Chairman. Doctor, have you given any thought to this ])rob- 
lem of coordination which you have just mentioned? 

Mr. Kj^ttering. We have thought about it a lot. 

The Chairman. Do you want to testify about it? 

Mr. Kettering. No, no. It hasn't crystallized in any specific thing. 

The Chairman. Don't you think vre ought to try to crystallize it ? 

Mr. Kettering. Well, I am doing that. I think within our own 
industry we have it pretty well worked out. 

The Chairman. That is true. There can be no question about that. 
The record of General Motors demonstrates that. 

Mr. Kettering. But we are working very closely with educational 
institutions and everything else, and we are trying out a few experi- 
ments this, that, and the other way, and I think some of these days 
we will have something that we can give you, at least a program, at 
least something to prove wrong, and I haven't it crystallized enough 
to lay that on the table for you today. 

Mr. Pike. Of course the production department is here again a 
little bit impatient for results. 

Mr. KErTTERiNG. I think that is a good stimulating thing. I have 
no objection to the impatience of the production department. 

Mr. Pike. There is one thought I had in mind. As a small part 
of this coordination you spoke of interindustry cooperation-:— and 
it occurred to me the development and commercializing of ethyl 
fluid, perhaps, was a fairly good example of cooperation between 
yourselves, du Pont, Standard of Jersey, and Dow Chemical — there 
must have been research by all of those organizations in one way or 
another to make that thing go. 

Mr. Kettering. Well, for instance, you take the one particular thing 
in that; when we started to make that material the total production 
of bromine in the world was only 600,000 pounds, and Ave couldn't 
think of starting anything unless we had at least 2.000,000 pounds a 
year. I had to go and bargain my shirt almost to get the Dow 
Chemical Co, to drill the necessary salt wells to produce the bromine. 
We knew we couldn't continue that, but there is 1 pound of bromine 
for every 10 tons of sea water; that is 1 part to every 20,000. We 
have a plant at Wilmington, N. C, taking 43,000,000 pounds of bro- 
mine out of the sea this year. That couldn't have been done by any 
individual. We just had to have it, because that was the only supply 
of bromine that was available in that quantity, and you see that is a 
very small percentage, 1 part in 10 tons. 

Mr. HiNRiCHS. Mr. Chairman, I would like to come back to your 
question for just a moment on the bonus at the bottom of the heap. 
That sometimes shows up in the form of larger wage incomes, but I 
am thinking of the situation in which the bonus on invention is often 
the specific displacement of a particular group of workers, or of a 
particiilirT individual as the process changes. Your phrase is that 
through these men, without giving dissatisfaction, industries are rev- 



CONCENTRATION OF ECONOMIC POWER 16313 

olutionizod. A revolution of any sort may be a very necessarj thing, 
but it is inevitably a very disturbing thing in the area in wliich it 
occurs. 

In the Bureau of Labor Statistics, Congress set up what it called 
an occupational outlook service, and I am interested in the problem 
of the point at which it is jiossible to visualize the changes which are 
coming so that they lend themselves to planning by business execu- 
tives, by trade-unions, by those who are concerned with the operation 
of an industry in an effort not to stop progress but to minimize the 
dislocations which are inherent in this revolutionary process. 

Now, is it possible at the stage when one of these machines leaves 
your laboratory as demonstrating the practicability of the principle 
or the fact that a principle will work — is it possible at that stage to 
forecast even api)roximatelyj not in detail, but what in general the 
area of the impact of that upon the technological structure will be? 

Mr. Ketteking. No. Take the Diesel engine. We made the Diesel 
engine without any regard to where it would go. It went in the 
railroad industry first, and yet nobody would have anticipated that, 
and nobody even predicted it. As Mr. Harriman said, they tried it 
out purely as a means to see if they couldn't do something to have 
people look at a raiiroad train again, and the fact it was a success 
was as much a surprise to them as to anybody else. 

The Chairman. Sort of a matter of general research in the begin- 
ning? 

Mr. Kettering. Yes. 

Mr. HiNRicHS. At what stage did it become possible to see where 
this was going, what its impact was going to Be? 

Mr. Kettering. It isn't even evident yet what it is, and 5 years 
ago — to show you how you can't tell — we didn't have a plant to 
make the Diesel engine, and we bought a piece of ground outside of 
Chicago, out at La Grange, 111, We built a little plant. there for 
three hundred people and broke ground just 5 j^ears ago now\ We 
have between 3,000 and 4,000 people working directly in that plant, 
and perhaps 5 times as many working indirectly in it, and nobody 
could predict from year to year what was going to happen, and we 
can't do it today. We haven't the slightest idea what that business 
is going to be.. 

Mr. HiNRicns. Do any of jour principles and does any of your 
work affect the production practices of your own establishment? 

Mr. Kettering. We have nothing whatever to do with any pro- 
duction problems. 

Mr. HiNRiCHS. That work is all in the engineering, designing, and 
research division of the operating companies? 

Mr. KETrEKiNG. That is right. 

Mr. HiNRiCHS. And it is at that level you would have to work if 
you were trying to anticipate change in the going occupational 
structure? 

Mr. Kettering. Yes. 

CX>ST OF industrial. RESEARCH 

Dr. Anderson. Getting back for a moment, Mr. Kettering, to this 
cost of research, you indicated in your own division you sy)end 
approximately $1. 500,000, and the total General Motors expenditure 

124491 — 41— pt. 30 



16314 CONCENTRATION OF ECONOMIC POWER 

would be approximately ten to twelve millions of dollars. If it 
could be assumed that other large units in this business would spend 
correspondingly, it would appear, would it not, that it cost a great 
deal to carry on the day-by-day research necessary to produce an 
automobile ? 

Mr. Kettering. Yes. 

Dr. Anderson. Would you hazard a guess as to what effect that 
would have on the smaller units within the business? Is it true that 
that is an advantage so large that it would be a hindrance of smaller 
business? 

Mr. Kettering. No; they can buy those units — they can buy prac- 
tically all that stuff on the open market. 

Dr. Anderson. They can buy what you produce in your research 
laboratory? 

Mr, Kettering. Yes ; as soon as it gets into production.- There 
is a great advantage in having a large company put it on the market 
first. For instance, this hydromatic transmission we are putting on 
the Olds this year is quite an expensive thing and is being worked 
out. We have got up to a production of a couple of hundred a day 
now, but the independent transmission manufacturers have an article 
for sale almost exactly like that. 

Dr. Anderson. In other words, you would say it works just in the 
contrary way? 

Mr. Kettering. I would say it doesn't work either one way or the 
other. In other words, the automotive industry has never been very 
.tight on patents. I mean, we have never triecl to hold exclusiveness 
at all. 

Dr. Anderson. Wlio takes out the patents, your division or the 
corporation from the operating side? 

Mr. Kettering. We take out the. patent in the name of some indi- 
vidual, whoever originated the project. 

Dr. Anderson. Your division takes it out? 

Mr. Kettering. Or the company, the General Motors Corporation 
under the name of the particular fellow. 

Dr. Anderson. And what about intercompany use of patent rights? 

Mr. Kettering. That is always done. 

Dr. Anderson. One more question. From 1920 to '30, the econo- 
mists quite generally in the literature regard the automobile as having 
been largely responsible for a generally high level of employment and 
general prosperity, and you have indicated that there is a lack of 
projects, of new areas of performance which need to be explored and 
made practical. Do you anticipate in the decade 1940-50 anything 
comparable to the automobile? 

Mr. Kettering. Xo; I haven't, but we started one in this railroad 
business, the Diesel engine business. That has grown pretty healthily 
and we are feeding in new things all the time. The length of time 
that it takes an industry to become an important factor is around 
10 or 15 years, and you never can tell when you start them out how 
far they are going to go. 

But you take the aviation industry. That is only 36 years old. 
It started when they made the first flight. Its development has come 
in the last few years because we have learned how to make engines, 
and thinjTS like that. 



CUINCKISIKATION OF ECONOMIC POWER 16315 

So I tliink all yon have to do, if wo can n:et everybody to under- 
stand that he on<;ht to po ahead, tluvt the thing should be done — 
but a lot of people are pretty glooriiy today. 

The Chaiuman. The common assertion is that we may not- look 
confidently for a boom through the development of aviation as we 
did through the development of the automobile, because the auto- 
mobile was obviously much more suited to universal use than the 
airplane. 

Mr. KETTEinxG. I think that is true. But yoit take things like 
radio. There were great contributing influences on employment. 

The Chairman, Because the radio can be used by the masses of the 
people. 

Mr. Kettering. The interesting thing about radio is that the de- 
velopment of the parts that go into radio has made possible doing 
a lot of other things that never could have been done abstractly. 
So the interrelation of these things can't be anticipated at all. 

The Chairman. It has been said that the building of the railroads 
contributed to the era of prosperity after the Civil War because that 
construction made a demand for almost unlimited quantities of mate- 
rial, for labor, and for capital ; and then the development of the auto- 
mobile industry and the development of the radio ihdusti-y likewise 
had a very beneficial effect ui)on general prosperity. 

As a research expert, do you see anything to take the place of 
railroad development, motor development, radio development, in 
anything ? 

Mr. Kettering. Yes; I do. 

The Chairman. What do you see? 

Mr. Kettering. I think in these new^ types of locomotives that you 
could perhaps re-do to a large extent the method of railroad trans- 
portation. 

The Chairman. That would be rehabilitation of the existing roads? 

Mr. Kbhtering. And when you go around, you .can go around the 
second ttioe. You take housing — certainly many of the new factors 
being developed in other industries w^hen applied to housing, are 
tremendous. In fact, I think that is one of the big things. When I 
speak of air conditioning, I mean the control of humidity and tem- 
perature the year arouncl, not just the summer time. That is little 
understood, and that is going to have a tremendous effect which we 
haven't broken open yet, you see. 

The Chairman. Are there other questions. Dr. Anderson? 

Dr. Anderson. No. 

Tlie Chairman. Any other members of the committee? 

LOW-PRICED automobiles 

Mr. HiNRiCHS. I have just one. This is a chart which was intro- 
duced yesterday referring to income levels in American life.^ You 
are talking about new industries. I would like to call your attention 
to the fact that the automobile industry itself has on several occa- 
sions become a new industry by digging deeper into the going struc- 
ture. That is, prior to. 1914, you were selling automobiles generally 
in the $5,000 income class and above. That is that very thin, long, 
white line with about 800,000 families in it. Then during the war 

' Sec "Exhibit Xo. OHS, " supra, p. o440. 



16316 CCJNCENl RATION DF ECONOMIC POWER 

you dug down in the next level of 1,500,000 families, in the $3,000 
bracket. At the present time, the automobile industry has, of course, 
done a magnificent job in supplying transportation to the American 
people, but a relatively small percentage of the population in the 
income levels where these -families are concentrated still has auto- 
mobiles. 

Take the* group, for example, from $2,500 down to $500; in that 
group some 50 percent of the families have automobiles — a much 
higher proportion at the higher income levels, something like 10 
percent in very old cars at the lower income levels. 

Now, there is an opportunity for the development of a new indus- 
try, if there is any way to furnish a larger proportion of these people 
at the lower-income levels with cars, either by raising their incomes, 
which puts them into a ditferent class, or by lowering prices and costs 
in such a way that that group can be served in precisely the same way 
that the automobile industry has heretofove reached down and bored 
deeper into this population that becomes denser, the further down 
you go. 

Now, is there any prospect, in terms of the research work, as you 
see it, in the automobile industry, of digging more deeply than we 
now have? 

Mr. Ketfering. That wouldn't be a thing that would contact us. 
That looks to me more a matter of engineering, economics, manufac- 
turing facilities, and so forth. 

Mr. HiNRicHS. That is, you pass the ball to other members of the 
team, quite properly? 

Mr. Kettering. It doesn't belong to us anyhow, you see. That is, 
if we should accidentally discover a new way of developing power, 
something like that, that would make the automobile cheaper, then 
that would immediately pass over to us, but as the thing stands today 
we haven't anything — that is, we have gone around this circle many, 
many times; in other words, the automobile consists of an engine, 
transmission, axle, and so "forth. Every one of those we have been 
around dozens and dozens of times to see if it is possible to break 
what we might call the conventional points of view in it, and, of 
course, we go far afield in that, but none of them have been fruitful 
of anything, because you remember there have been 60 or 65 million 
motorcars made, aiid there has been an awful lot of engineering done 
on that particular thing. That is, your chance of changing specifi- 
cally to any great amount the present type of motorcar isn't very 
great, only by such radical changes as fuels, metallurgy, and things 
like that, and, of course, thoy are being followed right up to the last 
minute. 

Of course, there are 2% used cars sold in the market for every 
new car that is put out, so you have quite a large production of rea- 
sonably low-priced cars. 

Mr. HiNRicHS. The chances, then, of a very much greater extension 
of automobile production for complete servicing of the people with 
cars, so far as scientific possibilities are concerned, seems to depend 
upon the distribution of income rather than on the cost of the car? 

Mr. Kettering. That is as our knowledge stands today. I wouldn't 
say our knowledge we get tomorrow or day after tomorrow wouldn't 
help', but we know what our limiting factors are today, and we 



CONCENTRATION OF ECONOMIC IX)WER 16317 

haven't been able to push any of them over. We are working at 
them all the time. 

Dr. Andkkson. Automobile trade publications make much of the 
fact that after the periixl of sharp reduction in delivered price of 
automobiles that came, say in the early '30's, when it began to flat- 
ten out, we had a period in which you engineers built more quality 
into the car. 

Now, will this quality improvement ever suffice to do what Mr. Hin- 
richs has suggested? Will it not continue to keep that big buying 
group in the lower part of the pyramid using old cars? 

Mr. Kettering. I don't know. Of course, the adding of radios 
and heaters, and that kind of stuff, which is apparently what the 
public demands, we don't try to follow at all over in our place. 

Mr. Pike. Of course, if you ever got anywhere with your fuel 
problem, you would have some sort of an answer to this. I think it 
is a fair statement to say it costs as much to run a $50 car, of tvhich 
there are a great many 

Mr. Kettering (interj)osing). I agree with you. 

Mr. Pike. xVs it does to run a new $600 or $700 Chevrolet or Ford 
or Plymouth, and I believe it would be a fair guess that it is the cost 
of operation rather than the first cost that keeps a great many families 
in the lower bracket from owning car^. 

Mr. IvETTERiNG. I told you fuels and motors are the two ^o. 1 
problems, and have been ever since (he research laboratories were 
organized. 

Mr. Pike. You get us 200 miles. on a gallon and there will be a 
whole lot more peoj^le able to own and oi)erate a caiL 

Mr. Kettering 1 can't promise that today. 

The Chairman. Are there any other questions? 

Dr. Kettering, we are again very much indebted to you for an in- 
teresting and stimulating discussion. 

(The witness, Mr. Kettering, was excused.) 

The Chairman. Is theie to be a session this afternoon? 

Dr. Anderson. Mr. Chairman, unfortunately, William Green, who 
was to have been here this afternoon, was unable to be here so there 
will be no session so far as we are concerned. 

Tomorrow morning we will have Mr. Edsel Ford, and in the after- 
noon, Mr. Thomas, U. A. W. A. They both definitely said they will 
Ije here, and unless we get a later annoniu'ement we know they will be. 

The Chairman. The connnittee will stand in recess until 10:30 
tomorrow morning. 

(Whereupon, at 12:30 ]). ni.. a recess was taken unlil Wednesday, 
April 10, 1940, at 10:30 a. m.) 



INVESTIGATION OF CONCENTKATION OF ECONOMIC POWER 



WEDNESDAY, APRIL 10, 1940 

United States Senate, 
Temporary National Economic Committee, 

WdsJi'mgton, D. C. 

The, committee met at 10:40 a. m., pursuant to adjournment on 
Tuesday, April 9, l^^O, in the Caucus Ilooip oenate Office Build^iiiy;-, 
Senator Joseph C. O'Mahoney, of Wyominji:, presiding. 

Present: Senators O'Mahoney (chairman), and King; Representa- 
tives Sumners (vice cliairman), Reece and Williams; Messrs. Davis, 
O'Connell, Hinrichs, Pike, Kreps, and Brackett. 

Present also : Frank H. Elmore, Jr., Department of Justice ; Com- 
missioner Charles H. Marsh, Federal Trade Commission; George E. 
Bigge, Social Security Board; and Dewey Anderson, economic con- 
sultant to the committee. 

Tlie Chairman, The committee will please come to order. 

Dr. Anderson. Mr. Chairman and members of the committee, on 
tliis third day of hearings we are* fortunate in having Mr. Edsel 
Ford, president of the Ford Motor Co., Mr. R. H. McCarroll, who 
is seated in the middle of the trio, engineer of the chemical and 
metallurgicjil divisions of the Ford Motor Co., and Mr. H. L. Moekle, 
auditor for the Ford Motor Co. These three gentlemen have kindly 
consented to come and share with us their knowledge of the techno- 
logical processes in the Ford Motor Corporation. Mr. Ford has sub- 
mitted a statement to the committee which Mr. McCarroll, I think, 
will read. It was in answer to questions directed to him concerning 
technology and his answers are contained in the statement which he 
is prepared to enlarge upon at the committee's pleasure. 

Bx'^vond that, however, he is also here to tell that very important 
story of the change-over from one model of Ford production to 
another, which involved the building of the Rouge plant, so that 
we have two aspects of the Ford Motor Co.'s testimony, one their 
response to questions directed to them on the problem of technology, 
and then following that Mr. Ford's contribution concerning the re- 
tooling story and its implications. 

Mr. McCarroll will i)roceed with the statement of the Ford Motor 
Co. with respect to these particular questions. 

STATEMENTS OF EDSEL FORD, PRESIDENT; R. H. McCARROLL, 
ENGINEER, CHEMICAL AND METALLURGICAL DIVISIONS; AND 
H. L. MOEKLE, AUDITOR, FORD MOTOR CO., DETROIT, MICH. 

Mr. McCarroll. The information set forth hereunder is compiled 
for the use of the Temporary \ational Economic Committee of the 

16319 



16320 CONCENl'IlATION OF ECONOMIC POWER 

Congress of the United States, created pursuant to Public Resolution 
113 of the Seventy-fifth Congress, and is intended to be submitted 
in this form and to be made a part of its records of the hearings 
•during the period of April 8 through April 19, 1940, on the subject 
of Technology and Its Relationships to Economic Recovery. The 
information is compiled in accordance with an outline suggestive 
of the scope and character of the hearings attached to letter dated 
January 24, 1940, from the Temporary National Economic Commit- 
tee addressed to Mr. Edsel B. Ford and -signed by Mr. H. Dewey 
Anderson. Examples are given from plant operations in some cases 
better to illustrate the statements made. 

The Ford Motor Co. has pioneered m the contimuil development 
of labor-serving and labor-saving machinery. With such machinery 
and technological improvements it not only has been able to lower 
costs and make more desirable products but it has helped to increase 
employment. 
'Question 1, on the effect of investment : 

What is the effect of technological change on the use of new cap- 
ital? 

Answer, In the operations of the Ford Motor Co. technological 
change in the way of improvements calls for the continual investment 
of new capital. A recent and good illustration of this is the develop- 
ment and use of a new type of cylinder liner which is now being 
introduced and made a part of the product. At present (March 1, 
1940) this is taking 12 men off the former type cylinder work, but 
is adding 386 men to the work in the manufacture and installation 
of the new part. In 60 days the added employment from this new 
development, which improves motor operation, lessens the amount 
of oil used, and decreases maintenance cost to the owner, will be 
about 500 men. The capital expenditure to equip the factory for 
this job so far has been about $880,000. The total expenditure by 
the Ford IMotor Co., for new and improved machinery, together with 
the necessary buildings, during the year 1939 was about $36,000,000. 

Question 2. To what extent has technological change become related 
to the size of an industry and its control of substantial capital ? Is 
it true that the complexity and cost of modern techniques place them 
beyond the use of small independent business, thus giving an advan- 
tage to multiple-unit industries and monopolies? 

Answer. It is true that some technological changes in the line of 
improvements and new developments require much time and money 
and therefore, it is believed, can be done more readily by large indus- 
tries. Many improvements probably would not be put to use except 
for the facilities of large industries, especially where their effective- 
ness depends upon large production. It is necessary at times to 
spend hundreds of dollars a day over a period of years before a new 
method or article can be put in production. The improved Ford 
crankshaft and method of making it is a good example of develop- 
ment of this type. 

It is not believed technological advances are beyond the use of 
small independent businesses, as this company always has taken ad- 
vantage of such advances. Many ideas for new developments can 
be worked out by individuals o^- small businesses. As an illustra- 
tion, mention may be made of new mechai ical devices or new plastic 
materials and parts. Work of the kind ihat the Ford Motor Co. 



CONCENTRATION OF ECONOiMIC POWER 16321 

is doings on the industrial use of farm products would be in this 
class. Reference is directed to pao:e -1, chapter 5, Background 1940 
Census by Department of Commerce, Bureau of the Census, on "Cash 
Crops For Use In Industry," where it is stated : 

The 1940 Census will carry an important message to the farmer ip the 
measure of the increased industrial use of his i)roducts. An example: Soybeans 
were first imported in 1804 but it was not until 1910 that there were enough of 
them to show in the census report. Since then the acreage has jumped to morf 
than 6,000,000 acres, mostly as a result of expanded commercial use. They are 
utilized for everything from oil and paint to automobile accessories; to bread 
for humans, and food for livestock. 

Question 3. "WTiat are the effects of patent rights on technological 
development ? 

Answer. Patent rights can be used or misused. When used as 
they are by this company, they help to advance development. Every 
attempt is made to develop their widest use at the lowest possible 
cost. 

When patent rights are held by those who make no effort to put 
them to good use, they may retard development. However, when 
considering modification of patent rights, there must not be over- 
looked the incentive given to thought and work and development by 
the possible compensating returns from proper use of patent rights. 

Question 4. What would happen if technology were freely devel- 
oped^ Wliat retards use of available technological devices? Are 
we slower or faster than we should be? 

Answer. It is assumed that "freely developed" in this case means 
"without patent rights." If this is so it is believed this question is 
answered by the reply to question No. 3. 

It is believed the use of some devices is retarded by the fear of 
capital to make the necessary investment under the present limiting 
conditions, whereby it shares in all the losses but in little of the 
profit. The chances against success are too great. Too, the theory 
of scarcity (to which this company does not subscribe) rather than 
that of plenty is another retarding factor. 

Usually, full use is slower than desired. Some advances come as a 
series of intermittent or gradual and continual steps to the final total 
improvement desired. It is estimated that the time in general be- 
tween the conception of an idea and its use in practice is from 1 to 5 
years. 

Effect on labor: 

Question 1. What is the effect of technological change on the vol- 
ume of production, the number of workers employed in that pro- 
duction, and the vohnne of wages paid? 

Answer. It is believed that the effect of technological change (im- 
provement) has been and will be to increase the volume of produc- 
tion, to increase the number of workmen, and to increase the volume 
of wages paid. 

The amount of pay roll and purchases per Ford, Model T, with its 
about 5,000 parts, in 1926 was $454.42. 

The amount of pay roll and i)urchases per Model A (the 4-cylinder 
car which succeeded the Model T in 1927) with its about 6,000 parts 
in 1929 was $526.84. 



16322 CONCENTRATION OF ECONOMIC POWER 

COST OF LAROR WITHIN THE FORD PLANT 

Mr. McCarroll. The amount of pay roll and purchases per Model 
V-8 (which was placed in production in 1932), with its about 16,000 
parts, in 1939 was $683.23. 

The Chairman. I notice that you combine pay roll and purchases. 
Have you any figures on segregating those two items? 

Mr."McCARROix. Not in this particular report. We combine them 
for a very definite^^-eason, because the purchases total up to hours 
of work, and if you don't include both of them you don't get the full 
story. 

The Chairman. What do you mean by purchases ? 

Mr. McCarroll. All material purchased outside and going into 
the car. 

The Chairman. Is there any way of segregating the two? 

Mr. McCarroll. They are segregated in our records, but we haven't 
segregated them here because we believed they would be much more 
informative if we gave them together. 

Tlie Chairman. You do know what the difference is? 

Mr. McCarroll. Yes ; it is in the company records. 

The Chairman. Could you tell me approximately what proportion 
this figure, in each of the two instances, was for labor alone? 

Mr. McCarroll. I haven't that figure here. Mr. Moekle says that 
Tv^e don't have that figura here. It is in the records. 

The Chairman. I understood that 'you didn't have it. I won- 
dered if you could give an approximate figure. 

Mr. Ford. We would be glad to furnish it. Senator. 

The Chairman. You don't care to make an approximate figure ? 

Mr. MoEKLE. The reason we haven't got the figure, and it may be 
a little difficult to get, is the fact that at different tim?s the volume 
or the work done inside our factory changes. It goes from inside the 
factory to outside and from outside to inside. 

The Chairman. I can understand that, but T thought for example 
you could say whether or not of this sum in 1926, of $454.42, for 
example, 50 percent was labor, or 60 percent, or 70 percent. You 
are probably familiar enough with your figiires and 3^our accounting 
to give us some notion. 

Mr. McCarroll. You will find a figure coming a little later which 
will give you amount of purchases per unit during two different 
8-year periods, and I think we can get the figure you are after by 
comparing that figure'with the figure we have just given you, which 
amounts to about the figure that Mr, Moekle is talking about now, 
about 25 percent inside and about 75 percent outside. 

The Chairman. Of labor ? Of course it is obvious that when you 
purchase any material to be used in a motor there must be labor 
costs combined in that purchase price, because it took labor to pro- 
duce the commodity or the article somewhere else. 

Mr. MoEKLE. Roughly about 25 percent of these figures represents 
labor in our own plants and about 75 percent represents the price 
paid for materials, services, and so on from the outside. 

The Chairman. Would you say that that proportion held true in 
1929 and also in 1939? 

Mr. MoEKLE. Roughly. 



CONCENTRATION OF ECONOMIC POWER 16323 

The Chaikman. In other words, the proportion of labor in the 
factory apparently remains about the same. 

Mr. MoEKLE. Yes. 

The Chairman. Thank you. 

Senator King. And there m a gi-eat deal of labor, however, is there 
not, in the })roduction of what might be called raw material? For 
instance, as I understand, the corporation owns coal mines and min- 
eral depoits and oj^erates those, and the costs of labor in obtaining 
the^e raw materials would be pa^-t of the cost, or the entire cost, of 
the product. 

Mr. McCarroll. You can really figure every cent paid out goes for 
labor in one form or another.. Figure it all the way back in any 
material— transportation 

The Chairman (interposing). Actually, cost of labor is a very large 
factor in every step of the industrial process, isn't it? 

Mr. McCarroll. You can reduce practically all of it to labor if you 
want to go back far enough. 

Dr. Anderson. Just to retouch the question that Senator O'Ma- 
honey has asked, does the modern Ford plant, say the Dearborn 
plant, do more of its production than the old Ford plant? 

Mr. Ford. Do you mean by that that many more parts of the unit 
are manufactured by ourselves? 

Dr. Anderson. Proportionately, what would it look like? You 
say you have about the same labor cost, your purchases and produc- 
tion within your own units are about the same now as they were 
formerly ; but isn't it true that in this intervening period you have 
integrated your plant tremendously, so that appreciably more of your 
product is made under your own roof ? 

Mr. Ford. That is true. We have taken on a great many inore 
parts. 

Dr. Anderson. Does that mean that you have bought more and 
more on the outside? Your total is greater now than it was? 

Mr. MoEKLE. Yes ; but the proportion in the total is approximately 
the same, 

Mr. Ford. There is one factor in that that may be illuminating, 
and that is the fact that there are about 16,000 parts in fhe car we 
make today as compared with 5,000 parts in the car we made in 1915. 

Dr. Anderson. So you continue to buy on the outside about the 
same quantity of equipment and materials. 

Mr. Ford. I coulcln't answer that offhand as to quantity but we buy 
a great amount of material on the outside. We have between 5,000 
and 6,000 suppliers. 

The Chairman. "What would the answer be in terms of parts them- 
selves ; for example, of the 5,000 partes of the Model T Ford in 1926, 
what proportion were manufactured by the plant itself, and what 
proportion were purchased from outside? 

Mr. Ford. I don't think I can .answer that in accurate figures, 
Senator, but in general there were many more parts purchased on 
the outside at that time compared with today; we purchased many 
more things on the outside which we did not make any part of 
ourselves. 

The Chairman. You purchase more outside today, more of the 
16,000 than of the 5,000. Did I understand you correctly? 



16324 



CONCENTRATION OF ECONOMIC POWEK 



Mr. Ford. I don't believe so. Wluit I meant to say was that we 
purchased a great many more parts on the outside in the earlier days 
than we do now. 

The Chairman. A larger proportion of the 5,000 parts of 1926 

Mr. Ford. Were purchased on the outside. . 

The Chairman. Than of the 16,000 today ? 

Mr. Ford, That is right.' 

Mr. McCarroll. Records show that during the past 6 years, both 
the labor and the purchases per automotive unit produced by Ford 
Motor Co. have steadily and substantially increased. For example, 
during the two 3-year periods ending February 29, 1936, and Novem- 
ber 30, .1939, the average daily production was almost identical, but 
average labor-hours performed in the factories increased consider- 
ably. The details are as follows : 



Period 



3 > ^ars ended — 
Feb. 29, 1936- . 
Nov. 30, 1939. 



Average daily 
production 



3,276 
3,267 



Total hours 



448, 947, 000 
507, 294, 000 



Average hours 
per unit 



179. 13 
201.95 



Mr. Hinrichs. In that connection these are total hours in all of 
your plants for that volume of assembly, I take it? 

Mr. McCarroll. Total hours in the Ford Motor Co. only for that 
number of units, and then averaged over the number of units pro- 
duced during those two periods wliicli were selected because they 
were alike in the volume of production, so you could get a good 
comparison. 

Mr. Hinrichs. During part of that latter 3 years there was a tire 
plant that was producing part of your tire requirements? 

Mr. McCarroll. That is true. 

Mr. Hinrichs. That extension of your activities would be included 
in that' larger number of hours? 

Mr. McCarroll. That undoubtedly accounts for part of that dif- 
ference there, but when you consider the figures we mentioned before 
when we include both purchases and hours within the plant, and 
dollars for this plant, you will see why we used that combined figure 
as being the more important and the more imformative one, because 
it takes out of all consideration just points such as you just raised 
then. 

Mr. Hinrichs. I judge from your earlier answers that on balance 
you feel you are doing about the same proportion of outside pur- 
chasing in these two periods. Would that be correct? 

Mr. McCarroll. I believe that is true. Furthermore, the follow- 
ing figui*es also taken from the company's records, for 6 calendar 
years, clearly show that accompanying the increase in the average 
h8urs of labor per unit there has been a gradual increase from year 
to year in the labor cost per unit produced. These figures are the 
more significant in view of the fact that even in 1934 the minimum 
daily wage paid by Ford Motor Co. was $5, the minimum being 
raised to $6 the following year : 



CONCENTRATION OF ECONOMIC POWER 16325 

Labor cost 
Calendar year : per unit 

1934 $119.41 

1935 130.01 

1936 — ^ 145.24 

1937 160. 99 

1938 190.39 

1939 197.84 

Dr. Anderson. Mr. McCarroll, just at that point, may we go back 
to the previous question. Your labor cost per unit is per unit, such 
as the vehicle. I understand you have gone into extensive tire produc- 
tion. You have developed a foundry; you are doing more of your 
own rolling of steel. If you took out all those things for all years 
in the trend would you still hold that the cost per vehicle for labor 
is greater now in the Ford plant than formerly ? 

Mr. McCakrolx,. Yes, sir. 

Dr. Anderson. Could you give an approximation of the amount? 

Mr. McCarroll. No; I can't; without the figures. 

Dr. Anderson. Could you supply us with such a figure? It is a 
very important one, if we can get it. 

Mr. McCarroll. Mr. Ford says he would be glad to. The figure 
is here. 

Representative Reece. But the amount of labor required to produce 
the unit would be the same, whether it was done in your company or 
done in another company from which you purchased. 

Mr. McCarroll. Approximately. The thing that influences that 
increase is, of course, the thing Mr. Ford mentioned a minute ago, that 
every year there are added parts, not only a few but a great many, 
and that is the thing more than anything else that is affecting the in- 
crease in labor-hours going into the car and in money cost of the car. 

Representative Reece. But based upon your experience the amount 
of labor required to produce the parts is approximately the same 
whether the parts are produced in your plant or some outside plant 
from wliich you purchase the parts? 

Mr. McCarroll. As a general rule that would be true. Of course it 
would be affected by the efficiency of the equipment that two people 
ndght have. 

Repr-^-sentative Reese. What I have in mind, and what I am driv- 
ing, at is in a general way the amount of labor that is required to 
produce a unit. 

Mr. McCarroll. That would probably be on an average quite true ; 
yes. 

proportion of skilled to unskilled workers 

Mr. HiNRiCHS. These figures I understand represent the total num- 
ber of man hours of labor required by an increasing number of parts 
and the average hourly earnings of the workers engaged in that process, 
and your wage rates have obviously increased in this period. I am 
interested also in the change in the internal composition of the labor 
force, irrespective of its relationsliip to wage rate. For example, lias 
there been a tendency not only within this period but over a longer 
period of t-ime, to decrease the proportion of skilled workers and in- 
crease the proportion of semiskilled and unskilled? 

Mr McCarroll. I think you will find there are some questions di- 
rected toward that answer later on, and suppose we cover it by ou»" 



16326 



CONCENTRATION OF ECONOMIC POWER 



answers there and if that is not sufficient, why then we will be glad to 
try to answer further. 

Mr. HiNRiCHS. I am sorry to have anticipated you. 

Mr. Ford. I think there is one jDoint that might be added on that 
subject which might clarify that in a very simple wording, and that is 
the fact that the average or lower minimum rate has remained more or 
less static. Our average wage has gone up consistently, indicating 
more skilled pay. 

The Chairman. I didn't hear that statement, Mr. Ford. 

Mr. Ford. The question was asked as to whether the labor cost of the 
car was paid out to more highly skilled workmen, or whether, due to 
the improvement of processes, we were employing more unskilled 
labor. 

The Chairman. And what was your answer ? 

Mr. Ford. My answer to that was that our average wage is on the 
increase continuously. That would indicate these men are becoming 
more skilled and are receiving higher rates. 

The Chairman. Then the answer would be that skill is increasing ? 

Mr. Ford. More skilled men are involved at the present time than 
in the past. 

Dr. Anderson. Mr. Ford, would your consistent average increase in 
wage rates indicate a change in the composition of skills used or 
would it mean simply in the over-all increase in wage rates, regardless 
of skill ? How do you make the direct connection between the wage- 
i-ate increase average and the increase in skill of workers employed? 

Mr. Ford. The lowest rate, our minimum rate, applies to only the 
most unskilled labor, sweepers, cleaners, and common labor. Every 
ether classification of rate is based on skill. These men are classified, 
based on the skill of the job. Now, of course, the trend has been 
upward for the last several years; the general scale is on the upward 
turn. 

Dr. Anderson. You would say two things are at work ; the average 
wage rate in your opinion is moving up and also the composition of 
3^our labor force is altering with more skilled workers employed, 
relatively 2 

Mr. Ford, yks; I would think so. There is less hand labor and less 
unskilled labor involved and more semiskilled. 

Senator King. With these improvements upon your car, of course, 
it calls for a larger proportion of skilled labor, I assume, and that 

Mr. Ford (interposing). Yes; the fit and technique is becoming 
more complicated and involved all the time. We are putting things 
into our product which will make for a great deal longer life. All 
those things are highly technical and highly developed, which calls 
for more skill. 

Mr. MoCarroll. The foundry department is noted for the vast 
amount of technological improvement and installation of so-called 
labor-saving machinery. Therefore, it seems of interest to present 
below, figures on the number of men employed in this department in 
the years listed, showing also amount of production at those times. 



Tinner 


ProductiOl 


Number 
of men 


Men per 
car 


Year 


Production 


Number 
of men 


Men per 
car 


1933 


414, 953 
1, 193, 121 


2,345 
6,311 


0. 0057 
.0053 


1937 

1930 .- 


1,117,241 
803, 751 


7, 330 
6, 310 


0066 


1935 


.0079 



CONCENTRATION OF ECONOMIC IX)WER 16327 

The Chairman. Wliat is the unit of production? 

Mr. MoCarroll. The unit of production is in the foundry where 
there is a number of motors produced during that period. 

The Chairman. This, then, refers to the production of motors? 

Mr. McCarroll. This refers to the production of motors.* 

The Chairman. Thank you. 

Would it be a proper inference that the increase of men per car in 
1939 is due rather to the decreased production than to *:he difficulty of 
production? 

Mr. McCarroll. It undoubtedly has something to do with it, but 
the thing we luive mentioned before comes into it there; for instance, 
in the foundry we cast a great many of the motor parts. In that 
year we started putting, these valve-seat inserts into intakes as well as 
the exhaust. Well, now, that iust doubles the number of those parts 
that we make every day and there are a good many other parts that 
come under that same kind of heading. 

The Chairman. So both factors would operate? 

Mr. McCarroll. Both factors would operate. 

Dr. Anderson. There must be a third factor. Supposing you put 
in a column on hours worked so as to get at the actual technological 
etfect of change; the hours must have been changing during this 
period of time? 

Mr. McCarroll. Yes. 

Dr. Anderson. It is true that your over-all number of men in- 
creased there, but the difference in working time would have an 
unusual effect, a decided effect upon that last column of men per car ? 

Mr. McCarroll. That would go back to the figure which we have> 
used in the case of the whole plant, of the number of man-hours per 
unit. We stated this in a slightly different way here, and we stated 
it in the other way in the case of whole units because this would be 
interesting information. 

Dr. Anderson. And could you supply us with the man-hours for 
this particular division? 

Mr. McCarroll. We could. 

Dr. Anderson. That would fit into a column there. Also, is there 
any way of measuring under this tabulation, not on the basis of 
motor production but on the basis of the product of this particular 
division of the plant, so as to get at the measure of technological 
increase? 

Mr. McCarroll. Yes, sir; it would be possible to get that. 

Representative Reece. And, Mr. Anderson, if he supplies that 
information, might it not also be helpful if he would supply .the 
lalx)r cost: ? 

Mr. HiNRiCHS. Would the figures for the assembly line for the 
assembling of the motors show the same story that your foundry 
story has; that is, this, like any other partial piece of work, repre- 
sents a changing situation with respect to your materials purchased. 
As those are increased and decreased, obviously your own hours show 
a similar change? 

Mr. McCarroll. Yes. 



' In a Iptter dated April 20. 1940, from the Ford Motor Company, Mr. Moekle says, 
reeardini; this table, "The iinit of production is cars produced rather than motors, as 
Mr. McCarroll stated. Ilowevpr, the theory under which we we.e working called for 
the production of car*,' and we believe our use of cars rather than motors is better." 



16328 CONCENTRATION OF ECONOMIC POWER 

Mr. HiNRicns. Your assembly of the engine has always been clone 
within your own establishment. Does the assembly line for engines 
show the same results, or could you supply similar figures for the 
assembling of engines? 

Mr. McCarroll. Usually it would show the same result. 

INIr. Ford. 'I don't quite get the drift of the question. As I under- 
stand it, the question is whether in the assembly of motors there is 
more stability to the cost per man, or the man cost per motor as 
compared with the complete car, as these figures show. 

Mr. HiNRicHS. Well, I wasn't thinking of it in relationship to 
the complete car, but rather as possibly a more clean-cut illustration, 
less subject to variations in terms of what you were purchasing on 
the outside. Obviously every time you shift your practice with 
reference to the foundry department, as you manufacture internally, 
3'our hours or man-days go up. As you purchase on the outside, they 
go down. Your assembly on the other hand has throughout this 
period been done completely within the confines of your own com- 
pany, and I was wondering if the assembly of engines would show 
this same kind of relationship you have here. 

Mr. Ford. There are more parts being added to the engine all the 
time, which would tend to increase the labor cost per engine, I sup- 
pose, due to refinements. As Mr. McCarroll mentioned, the bush- 
ings that go into the seats of the valves, these cylinder liners that we 
are putting in now, wdiich are very hard steel liners, and go in all the 
cylinder barrels, and various things like that weren't in an engine 
10 years ago. That keeps adding to the cost of that assembly for 
additional parts. 

Mr. HiNRiCHS. And similar things have added to the costs of the 
manufacturing operations in the foundry? 

Mr. Ford. Oh, yes. 

Mr. HiNRiCHS. You have been processing more parts in the 
foundry. None of these exhibits are intended to indicate that a 
given part i-equires moje man-hours on higher labor cost today? 

Mr. Ford. Probably they require less man-hours, but the product 
becomes more and more complicated all the time and there are more 
parts being added. 

Mr. HiNRiCHS. I understand that. 

Mr. Ford. And the refinement is becoming greater. 

Senator King. As I understand, many of the parts which are 
involved in the construction of an automobile you purchase from 
other manufacturers of parts, if not entire plants. I assume you 
can't control the costs of those commodities that you purchase from 
other people? 

Mr. Ford. Those costs are controlled by competition. We have 
several sources for practically every part we buy. 

Senator King. But some of the parts which from time to time you 
purchase from other persons you have to pay higher prices for by 
reason of the competitive demands, and that necessarily increases 
your aggregate cost? 

Mr. Ford. Naturally. 

Senator King. For the car ? 

Mr. Ford. But if those prices on the outside increase there is some 
basic reason for it which would perhaps apply to other things we 
buy. and also to our owii. 



CONCENTRATION OF ECONOMIC POWER 16329 

I'he Chairman. What has been the trend of prices of the outside 
parts ? 

Mr. Ford. That varies with the design. If we were buying today 
the part that we bought 10 years ago we would be buying it at a 
very much lower price probably than we bought it at that time ; but 
the fact is that we are buying an entirely different type of part, 
which goes into a different vehicle. 

The Chairman. Then the price tends upward because of the im- 
provement, does it? 

Mr. Ford. The price per unit is upward, yes; and the price per 
part. If the same type of part were being bought today that we 
bought 10 years ago, the tendency would be that we are buying it 
probably at a less price than we did then because of refinements in 
manufacture. 

Senator King. But you are making better cars and with better 
parts? 

Afr. Ford. Spending more time on parts; better raw materials 
going in, which cost more, and much better finish ^ much more inspec- 
tion. 

Senator King. And the finished product calls for more technologi- 
cal improvement and higher costs with respect to some of the parts 
that go into the car? 

Mr. Ford. A great deal. 

Senator King. And what is the effect upon the final price to the 
consumer ? 

Mr. Ford. Well, the price trend has been somewhat up as compared 
with the old model T and model A, which we built, but it is still 
competitive. 

The Chairman. It is a much better car ? 

Mr. Ford. Competitive; the whole trend is that way. No longer 
what you might call a very low-priced motor car. The public ap- 
parently demands lots of room and lots of power. 

The Chairman. Of course, your company was the pioneer in the 
low-price field? 

Mr. Ford. Yes. 

The Chairman. And you are still in the low-price field, of course, 
although the tendency of the price may be upward because of the 
improved character of the car? 

Mr. Ford. The whole field has risen. The whole low-priced field 
has risen; the price of the vehicle. 

The Chairman. But still the level of price is lower than before 
the pioneering effort of your father began; isn't that correct? 

Mr. Ford. The level of the price is higher. You mean when large 
volume started? Oh, yes; surely. 

The Chairman. And the reason why it was possible to produce the 
original Ford car for a low price, in other words, the reason that your 
father was able to pioneer in this field was that he was able to tap 
a much larger market than the high-priced car could tap ? 

Mr. Ford. Oh, quite, and that was only possible with low prices. 

The Chairman. So that after all the basic cause for the expansion 
of the industry has been the lowering of the price to reach a larger 
number of possible purchasers? 

Mr. Ford. That is right. 

124401 — 41— pt. .?0 ^10 



16330 CONCENTRATION OF ECONOMIC POWER 

The Chairman. So that the market is the essential factor in the 
growth of the industry? 

Mr. Ford. That is quite correct. 

Dr. Anderson. If that is true, Mr. Ford, and in the light of your 
statement of a moment ago that there is no low-priced car in the 
sense of the earlier product of your father, what do you -think is the 
prospect of a new car in the low-price field that will fill that gap, 
that will reach that purchasing mass we have been speaking of who 
cannot at the present time buy even the low-priced new cars ? 

Mr. Ford. There have been several factors that have entered into 
that problem since the day that we built a very low-priced car. The 
first one was that those cars were being sold to original owners to a 
great extent, to people who hadn't owned a motorcar before. In the 
meantime they purchased that car and many others, and have created 
a used-car field, used-car market. Now the used car is merchandised 
by a dealer, and his market for that used car is the man who formerly 
bought a new car in that very low-priced field. He is in the' $200 to 
$400 class for a used car. 

Dr. Anderson. You leave the person with low purchasing power the 
used-car field rather than attempting to provide him with a new unit, 
giving him all the efficiency of a new unit? 

Mr. Ford. That is the way it exists today. We have hopes that 
some day we will have a low-priced unit again that will supply the 
purchaser with a new car at a lower price and a more efficient opera- 
tion than in the past. 

Dr. Anderson. Is there any technological reason why that hope 
couldn't be realized shortly? 

Mr. Ford. None whatever, except the question of buying power, 
whether there is a sufficient volume of buying power in that field to 
warrant a low-priced product which can be. produced only in large 
volumes. 

A $500 automobile 

Dr. Anderson. In other words>, if you could see a market for 1,000,- 
000 to 2,000,000 cars a ye^fr, say at $500, you could produce the cai ? 

Mr. Ford. We could produce the car all right; yes. 

The Chairman. Now just to repeat what I understand you to have 
said, an increased market for technological advance depends upon 
an increase of purchasing power; is that correct? 

Mr. Ford. Mass purchasing power. 

The Chairman. Mass purchasing power? 

Mr. Ford. I believe so. 

The Chairman. That is the essential need for further technological 
improvement ? 

Mr. Ford. I believe so. 

Mr. McCarroll. In the Ford Motor Co.'s exhibit at the New York 
World's Fair, there was in operation a display illustrating how 
machinery creates employment. Perhaps this may have been seen 
by members of the committee. There, side by side, a man was pound- 
ing out hub caps by the slow hand method and a mighty progressive 
machine was stamping them out with great rapidity. The man made 
one piece while tlie machine made 2,160 pieces, and at first glance 
it would seem that this machine might eliminate 2,159 jobs, but a 
study of the figures proves otherwise. 



CONCENTRATION OF ECONOMIC POWER 16331 

Representative Reece. Will you. permit a further interruption? I 
am interrupting to refer particularly to the summation which the 
chairman made. He stated that the ability to make a low-priced 
car and sell it would depend upon mass purchasing power, but what 
would the effect be- if our standard of living had been raised so 
that when this mass purchasing power came about the people de- 
manded a better car than was the case when you produced your 
original low-priced car? Would it then result in the production of 
a new low-priced car or an increased volume of cars comparable to 
the present so-called low-priced cars? 

Mr. Ford. We feel there is always a field way down below that 
everybody in the world wants a motor car. It is a question of 
being able to afford it, and we feel the lower the price of a motor car 
adequate for general use, the greater the market will be. If the cost 
of living, the standard of living, had been higher — you. mean if it 
were highe than it is today or had been higher in the past? I 
didn't quite get which you meant. 

Representative Reece. I might state it this way. We have a greater 
mass purchasing power today tlian we did when your father pro- 
duced the original low-priced cars, but with this mass purchasing 
power is going a demand for a better car, for better service, which 
you are supplying in accordance with the demand? 

Mr. Ford. Yes, that is true. We are supplying the demand as it 
exists today among the class of people that can buy new motor cars. 
There are strata underneath buying used cars. We feel that if a 
low-priced new car were produced to fit that price class they would 
buy tliose cars rather than the used cars, because of the increased 
efficiency. Tliere is still a great mass of buying power underneath the 
present standard. 

Representative Reece. I agree with you in that statement. 

Dr. Anderson. Mr. Ford, then I take it that the future of the auto- 
motive, the new car building, industry at the present time, unless you 
can tap a new consuming public, is inseparable from the sale of old 
or used cars? 

Mr. Ford. ,It is inseparable because those old or used cars exist and 
they have to be disposed of. The unfortunate part is that the dealer 
lakes them in as part allowance on his new car. If the dealer could 
make a clean case deal, or clean deal without the itsed car being in- 
volved he would be a lot better off, perhaps, than he is, because he 
takes those i^sed cars in and it is somewhat of a gamble as to the 
salability of them. He either fixes them up, or sells them as is, and 
t iiere is an element of risk involved and the tendency is to over-allow 
sometimes on that used car. 

The Chairman. Tlnit is wholly the risk of the dealer, isn't it? It 
isn't passed on to the manufacturer? 

Mr. Ford. The dealer takes tliat risk, entirely. 

The Chairman. He is the judge of how much he shall allow and 
he takes the gamble as to what disposition he can make of the used 
car? 

Mr. Ford. That is right. Of course, there is a great amount of 
skill involved in that in apprr.ising these cars. 

The Chairman. Oh, naturally. 

Mr. Ford. But the sales factor has a loi to do with it, too. If the 
salesman has a deal about ready to break and there is a question of 



16332 COKCENTRATION OF ECJONOMIG POWER 

$25 or $50 l)etween the appraisal of this used car and what the owner J 
expects from it, well thei*6 is sometimes a compromise and the dealer 1 
therefore makes the sale but he gives up part of his gross profit. 

NEW VERSUS REPIiACEMENT CAR MARKET 

Dr. AjsIderson. Mr. Ford, following up that question I asked a 
moment ago, I notice in the Autom,ohile Foots a/nd Figures recently- 
published the heading of a table that spans a long period of time, ^ 
showing that in the last year, 1938, the replacement market took all 
of the new cars sold in the United States. In other words, new cus- 
tomers in the over-all, people who did not own cars, did not appear 
in the ehops in sufficient numbers to offset the replacement market. 
They balanced. Everybody coming in turned in a car in order to 
buy a new one. Now, if that becomes a trend, does that offer any 
hazard .to the market for new cars in the United States? 

Mr. Ford. It may. 

The Chairman. Do you agree with that premise, Mr. Ford? 1 
thought I saw Mr. McCarroll shaking his head. 

Mr. Ford. I don't know what those figures are. 

The Chairman. The statement as I gather from Dr. Anderson is 
that the original purchaser has apparently disappeared from the 
motor market. Is that true? 

Mr. Ford. Well, I wouldn't think it were true 100 percent; no. 

Senator King. That can't be true in view of the fact that yo^j, 
just a day or 2 ago turned out your twenty-eight milliofith car. 

Mr. Ford. Mr. Moekle said 15 to 20 percent don't turn in cars. 

Mr. MoEKLE. I don't know the exact figures but we do know some 
percentage, 15 or somewhere around there, of what we call clean 
deals, that is purchasers come in and buy cars without trading in 
an old one. 

Mr. Ford. Those people may have disposed of their car before the 
deal, before they came^to the dealer for a new car. 

The Chairman. But the replacement factor is a constantly in- 
creasing one, is it? 

Mr. Ford. Increasing problem. Until a new field is tapped by 
lower prices. 

Mr. HiNRiCHS. At lower prices, the market now is certainly not 
saturated. You wouldn't contend there is a saturated market? 

Mr. Ford. I wouldn't, by any means. As I said before, everybody 
wants a motorcar. It is a question of whether they can afford it. If 
you lower the price, the greater the field. 

Mr. HiNRiCHS. About one-third of the families at $900 to $1,200 
buy a car; about half of those at $1,200 to $2,000 have cars; so that 
at lower prices there is a presumption of a vast untapped market, 
isn't there? 

Mr. Ford. I believe so. 

Mr. HiNRiCHS. Now, development of the Ford Motor Co. in recent 
years has been in the direction of tapping that market through lower 
prices and lower costs?-. Or have they been rather in the direction 
of giving the existing mattet a better product at essentially the same 
price, slightly highipF Slightly lower? 



CONCENl^RATION OF ECONOMIC POWER 16333 

Mr. Ford. The latter is what we have been doinfr of late. We 
haven't attempted, of course — we naturally wish to reduce the cost 
of the car as we can, but we are not taking parts off the car to do 
it. We are adding all the time to tlie ref^iement of the car, because 
we feel that is the car that is in greatest aemand at the present time. 

The Chairman. The table which Dr. Anderson referred to is taken 
from Automobile Facts and Figures^ published by the Automobile 
Manufacturers Association, twenty-first edition, for 1939, and this 
table would indicate that in 1930, '31, '32 — in those 3 years, there 
were no new buyers and multiple car owners and that the replace- 
ment market took up all of the cars sold in the domestic market; 
that in 1934, '35, '36, and '37 new buyers appeared again in increasing 
proportion but disappeared wholly in 1938. 

Mr. Ford. 1938 was a bad year; 1937 was good; and 1939 was much 
better than '38. 

The Chairman. It would appear from this table that the disap- 
pearance of the original purchaser is accounted for by the poor years. 

Mr. Ford. I should think so. 

The Chairman. In every other year there is a substantial original 
purchaser market. 

Mr. Ford. Yes. 

Dr. Anderson. It might be added that the chart show5> and figures 
tend to bear out the fact, that while the trend is not constant 
downward trend of new purchasers, there is a tendency that cor- 
roborates your point that somebody has to find some way of tapping 
new purchasing markets for low-priced cars. 

Representative Reece. If the present car owners, however, were 
unable to trade their old cars in, that is, if the market was not avail- 
able for the used cars, they themselves would use their cars for a 
longer period of time and not buy as many new cars as they do at 
this time ? 

]Mr. Ford, I believe that is true, and then when he did dispose of 
them he would have to dispose of them at a lower price. 

Representative Reece. Dispose of them at a lower price or they 
would go to the junk heap? 

Mr. Ford. Any introduction of a new low-priced car will have a 
very drastic effect- on the used-car market. It will tend to lower 
the whole range of used cars definitely. 

Representative Reece. And from the utility standpoint many of 
the used cars which are taken in by the companies are very useful. 

Mr. Ford. They are useful? 

Representative Reece. Yes. 

Mr. Ford. They are transportation, but they are not sufficient 
transportation, as the new car is perhaps. 

The Chairman. You don't expect to have him say the used car 
is as good as a new car? 

Representative Reece. I included the words "had a high utility 
value." They give us luxury and comfort that our old car didn't 
have, if it is only 1 year old; although our old car is 1 year old, and 
we feel the urge for a new one, it still runs very successfully and gets 
us back and forth without any difficulty, so strictly from utility 
standpoint it serves the purpose. 



16334 CONCENTRATION OF ECONOMIC POWER 

FEASIBILITY OF LOAVER-PRICED CAR 

Mr. HiNRicHS. Mr. Ford, you mentioned the fact that the used- 
car market might be seriously disturbed for a period of, I take it, 
several years during a transition to a really low-priced car. Has 
that factor played an important part in your considerations as to the 
businesslike feasibility of introducing a low-priced car at any time? 

Mr. Ford. It has been one of the factors that we have considered 
right straight along. I don't think it would perhaps stop us from 
producing a job of that kind when the time comes, because w^e feel 
that perhaps a situation of that kind might take care of itself. There 
will be some losses involved, of course, but there will be greater 
profits and greater benefits wdien the thing has stabilized itself and 
w^orked itself out. It isn't an element that prohibits us fronl doing 
it. There have been many other factors besides that one. 

Mr. HiNRiCHS. Technically, you can do the job? 

Mr. Ford. I believe so, 

Mr. HiNRiCHS. What is the chief inhijjiting factor? 

Mr. Ford. We have felt with the vast number of unemployed peo- 
ple and the depressed state of the farmer, and so forth, that there 
perhaps wasn't the buying power for that type of car that there 
might be later on. 

The Chairman. The chairman intervenes now, noting that Mr. 
McCarroll has read only a small portion of the original statement. 
Perhaps we might expedite the presentation if we permit him to 
])roceed and then we will ask the questions later on. 

Mr. MoCarroll. Tliank you. The automatic machine produces this 
part at about $0.12 each, but there was spent $115,000 for the ma- 
chine and dies. 

The first point to consider is that machinery begins to create 
employment before it goes into production. Divide the cost of the 
press by a day's wage, say $7, for every dollar of material cost is 
ultimately reducible to someone's work. At this rate the press and 
dies represent 16,428 days work. 

Next consider making the article by hand. A man can be equipped 
with hand tools for $24. This would seem to be a big saving over 
the $115,000. But the $24 must be multiplied by 2,160 which would 
be $51,840. Then there would have to be a factory to house those 
2,160 men wdiich would cost at least $500,000 for the building and 
land, and about $83,000 per year for maintenance, heat, light, and 
taxes, making- a total of $634,840. Now, as a practicable business mat- 
ter, such a development could never be realized, but imagine that 
this were done and that the hand worker could turn out 2.7 parts 
in an 8-hour day, then the part would cost about $2.50 each, as against 
$0.12 on the machine. If this practice were followed throughout 
all the manufacture of an automobile, it is calculated that the cost 
of making a Foi'd car "yvould exceed $17,000. At sue i a cost, not 
more than about 50 cars a year would be sold. There would not 
be work for more than 1 of the 2,160 men, none for most of the more 
than 125,000 men now in the Ford industry alone. 

Could this be avoided by paying for the hand work just wht't 
it would be worth by comparison? Hardly, for under that arrange- 
ment a man on this job would earn about $0,18 per day. 



CONCENTRATION OF ECONOMIC POWER 16335 

Three million men are normally employed in making, selling, and 
servicing cars, because, with machinery, cars can be* produced at 
prices people can pay. And that, in turn, creates jobs at wages that 
enable people to buy. The cars, the jobs, the wages would not be 
there, were it not for machinery. 

Some who object to machinery still think they have a point. They 
say "We'll grant that we, need the machinery we have now, for 
it has created most of the jobs there are toda}'. But let's not have 
any more. Let's freeze things as they are and keep the jobs we 
have." In the opinion of this company's management, that again 
nhows a lacl of understanding of the w^ay things work. There is 
no point in enying that manufacturing costs are constantly cut by 
taking certa.n men off certain jobs because better machines have 
made those men unnecessavy on those particular jobs. But that doe- 
not mean that the total number of jobs has been permanently de- 
creased. The Ford Motor Co. has been cutting costs for many years, 
but as has been shown, there are many more man-hours of work in 
today's Ford car than in the model T or model A, Cutting costs 
enables the company to put more in the car, and it takes mo're men 
to put it there. 

In the following cual figures comparing 3 separate 12-month 
periods which had l similar average daily production, it will be 
observed that there has been a progressive increase in both the total 
hours of labor and in the average hours per automotive unit pro- 
duced. 



Period 



12 months ended- 
Jan. 31, 1935. 
Apr. 30, 1938 
Nov. 30, 1939 



Average 
daily 
pro- 
duction 



3,074 
3.115 
3,069 



Total hours 



146, 373, 000 
168, 790, 000 
173, 668, 000 



Average 

hours 

per 

unit 



186.74 
211.64 
220.18 



With regard to purchases the following figures from the company's 
records for the same two 3-year periods referred to earlier show that 
during the same time that labor hours and labor cost per unit were 
increasing, the amount of purchases per unit produced also was 
increasing. 



Period 


Average 
daily 

produc- 
tion 


Purchases 


Pur- 
chases 
per 
unit 


3 years ended— 

Feb. 29. 1936 


3,276 
3,267 


$1,198,609,000 
1,259,242,000 


$478.24 
501.30 


Nov. 30, 1939 



The.se purchases were exclusive of those for plant facilities. 
Here, reference is suggested again to the Government publication. 
Background 1940 Census, page 4, chapter 4, but it- is asked that the 



16336 CONCENTRATION OF ECONOMIC POWER 

whole text be read, rather than just the heading "New Products Hurt 
Old Ones" which seems misleading. 

For instance while certain silk fabrics declined from 386,000,000 square yards 
in 1927 to 109,000,000 in 1937, rayon fabrics advanced from 66,000,000 square yards 
to 947,000,000 square yards. 

This shows a net gain of 604,000,000 square yards. 

Electric stoves and ranges more than doubled while gas cooking stoves and 
ranges declined only slightly. Electric clocks rose nearly 50 fold in 10 years while 
other clocks declined by half. 

And on page 5 — 

Probably no figures in the manufactures census tell more as to the changed 
habits of Americans in transportation than those having to do with automobiles, 
carriages, and wagons. Jn 1904 we made only 20,000 passenger motor vehicles but 
then we made 937,000 carriages, buggies, and sulkies. In 1937 we turned out 
3,847,000 passenger motor cars and only 900 buggies. Horse-drawn wagons 
reduced from 644,000 in 1904 to 108,000 in 1937 and motor trucks rose from a 
production of 160 to 602,000. 

Many other figures can be gotten from this Government Publication 
which, it seems, further justify opinions expressed herein on the sub- 
ject under discussion. 

It is also suggested that note be taken of Mr. Justin W. Macklin's 
(First Assistant Commissioner of Patents) article in Nation'' s Business 
for January, 1940, under the title, "Labor Saving Machines Make More 
Jobs." 

Question 2. What does the size of industrial unit, the type of owner- 
ship or management, and the kind of industry have to do with the 
rate and character of technological change? 

Answer. Regarding size of unit, you are referred to the answer to 
"Effect on Investment" — question No. 2. 

Regarding type of ownership, it is believed that results may be 
much more quickly accomplished where efficient compact management 
is demanded and developed and such management is given a free hand 
than where, due to an unduly complicated corporate structure, much 
red tape must be gone through before a development may be started 
or carried through. 

Regarding the "kind of industry," it is preferred to confine re- 
marks herein to experiences in this company for obvious reasons. 

Question 3. What kinds of technological change result in perma- 
nent displacement of workers? 

Answer. This company has no knowledge of any technological 
improvement that has resulted in the permanent displacement of 
workmen, in the sense that generally cooperative willing workmen 
cannot thereafter find employment. If there are isolated individ- 
uals seriously affected, undoubtedly they should be and can be com- 
pensated without impeding for the use of civilization generally the 
great benefits of new developments. 

Question 4. How many and what kinds of workers are displaced 
by technological changes in particular industries, and what becomes 
of them? 

Answer. As far as this company's information goes, there is no 
Icnown permanent displacement of workmen in this industry, as 
under normal conditions they are absorbed in jobs created by one or 
another technological change. 



CONCENTRATION OF ECONOMIC POWER 16337 

Question 5. What is the annual vohune of technologically dis- 
placed workers in particular industries? What is the aggregate 
effect of technological displacement on the labor force employed in 
these industries? 

Answer. In this industry there has been no permanent displace- 
ment. 

Question 6. What is the effect of technological change on occupa- 
tional skills, indiA^dual earnings, and social-economic status of 
workers? 

Answer. The technological change has increased occupational 
skills, increased individual earnings, and improved the social-ecQ- 
nomic status of workers. 

Question 7. What is the effect of technological change upon var- 
ious age groups and sex groups of workers? 

Answer. Teclniological change has made possible the use of men 
older and with less physical strength. This company has use for 
very little female labor. 

EFFECr ON SOOTETY 

Question 1. Wliat are the effects of technological development in 
the "one-industiy town?" 

a. On employment. 

h. On pay rolls. 

c. On community agencies and activities. 

Answer. As some members of the committee may already know, 
the Ford Motor Co. has 14 small plants located within a radius of 
60 miles of Dearborn, in an effort to help rural communities by the 
decentralization of industry where possible. This is its only direct 
contact with "one-industry towns." Wliere technological change has 
affected these plants, it has been found both convenient and desirable 
to make arrangements to maintain or increase the amount of labor 
in those places. 

TECHNOLOGY AND MIGRATION OF INDUSTRY 

Mr. McCarroll. Question 2. With technological change having 
made possible standardization of industrial processes, what is the effect 
on the migration of industries? What causes these migrations ? How 
do they occur? "Wliat do they leave behind them in the way of social, 
economic, and human gains and losses? "WHiat do they accomplish in 
these respects in their new location ? 

Answer. This company has had little direct contact with the migra- 
tion of industry. So that its industry at Iron Mountain, Mich., might 
not '"migrate" from there when the average amount of wood decreased 
from about 850 pounds per car to 34 pounds per car, other jobs, such 
as tlie station wagon assembly, were moved to our Iron Mountain plant, 
stion 3. What is the extent and character of the bidding made 
by States and localities for the transfer of businesses? Is there need 
for economic and social policy to mitigate or eliminate the undesirable 
features focuul in this situation? 

Answer, No experience has been had with the bidding of different 
localities for transfer of business. In a few instances benefits offered 
locally to any new industry have been received, but the decisions to 



16338 CONCENTRATION OF ECONOMIC POWER 

establish this company in such places were dictated by other consid- 
erations. 

Question 4. How successful are public and private agencies in meet- 
ing the problems of vocational training and placement, retraining and 
replacement of workers? 

Answer. At the company's main plant, it maintains its own train- 
ing schools with more than 2,000 students. This has been advantageous 
both for the students and the company. 

Question 5. Is technological development resulting in degrading or 
upgrading of workers ? In either case, what is the effect on purchasing 
power and standards of living ? Is there need for the formulation of 
social policy in this connection ? 

Answer. It is believed technological development is resulting in up- 
grading of workmen. It makes for increased purchasing power and 
increased standards of living. The laws of cause and effect and the 
natural desires of businessmen and employees for improvement from 
every social angle are accomplishing this without a formulated social 
policy. 

Question 6. How successful are the various industrial plans for 
spreading work, annual income payments, wage-and-hour adjustments, 
in-service training, intraplant shifting, etc., in adjusting the labor 
force affected by technological change?' Is there need for legislation 
along these lines? 

Answer. It is believed that this company has been very successful in 
these matters under the conditions, and that it will continue to improve 
its handling of them. The company strives to lead in improvements 
along these lines. It does not believe that new legislation is necessary 
or helpful tothese ends. 

Concerning Ford plant extension and replacement, the records show 
an outlay for the past 6 years of $169,152,000. Plant equipment 
scrapped or otherwise disposed of amounted to $96,682,000. Yet, at 
the end of 1939 after these important improvements in plant were 
made, employment by the company, for a like volume of production, 
slood at a 10-year peak of approximately 125,000 men. During the 
years 1927 to 1929, inclusive, the compajiy's annual gross outlay for 
replacement or expansion purposes ^\ns $36,000,000. 

It is believed that the foregoing comparative figures taken together 
establish definitely that employment by Ford Motor Co. during the 
past 6 years has not been affected adversely by any possible technolog- 
ical reaction. On the contrary, the company, even with improved 
working facilities, has steadily employed more men, paid out more in 
wages, and purchased more materials per automotive unit produced. 

The Chairman, Do you care to ask any questions now. Dr. 
Anderson ? 

COST OF PRODUCTION AS MEASURE OF EFFECT OF TECHNOLOGY 

Dr. Anderson. "Well, Mr. Ford, before moving over into this very 
interesting retooling story, I would like to ask two or three questions 
concerning parts that we covered here and didn't ask questions about. 
In answering the question as to the effect of technological change on 
the volume of production, the number of workers employed in that 
production, and the volume of wages paid, you listed 3 periods of 
time and the number of parts used, and each period showed an 



CONCENTRATrOX OF KCOXOMTP IMWER 16339 

increase in tlie anioun( of pay rolls and purchases of cars. The last 
statement is, ''The amount of ])aY roll and ])urchases per model V-8 
(wliich was placed in production in 1932) with its about 10.000 
parts in 1939 was $G83.23." What is that, the V-8 "60" or the V-8 "85"? 

Mr. FoHD. I couldn't say as to that. There is very little difference. 

Dr. Anderson. So there won't be any significant difference in one 
or the other? 

Mr. MoEKLE. It is a composite. 

Dr. Anderson. Then I take it the $G83 means the total cost in 
terms of pay roll and outside purchases, but not in terms 

Mr. Ford (interposino;). All purchases for ))roduction. 

Mr. MoEKLE. It is not the cost per car. It is the amount of 
purchases and pay roll per unit produced. 

Dr. Anderson. Per car produced. 

Mr. MoEKLE. Which includes, of course, materials that are resold 
or sold-as service parts. It wasn't possible to segregate that. 

Dr. Anderson. What proportion of your total production would 
that be? 

Mr. Ford. Service parts? 

Dr. Anderson. Would it run anything like 15 to 20 percent? 

Mr. Ford. It runs about $10,000,000 a month, but I can't tell you 
what it is in number of parts. 

Mr. MoEKLE. I suppose 10 or 15 percent is somewhere near. 

Dr. Anderson. Then, in other words, to get the production cost of 
that car you would have to deduct parts and accessories sold for 
replacement or sale on the outside. 

Mr. Moekle. Yes. This wasn't made with the intention of sliowing 
the cost |)er unit. Ii was made to show the trend of purchases of 
labor and materials per unit. 

Mr. Ford. More and more going into the unit as years go on. 

Dr. Anderson. It goes beyond that. If there are 10 to 20 percent 
of accessories in here,-the unit basis of production will not be a suitable 
one for determining change over a period of time. You would have to 
take out this element. 

Mr. Ford. Those parts are all manufactured ; they involve labor. 

Dr. Anderson. But they don't involve labor on that particular car. 
The measuring unit is a bad one at that point, isn't it? 

Mr. Moekle. We thought it was all right. 

Dr. Anderson. I want to lead you to a curious point, then, if it is 
all right. Your cost here is $683, and according to the Federal Trade 
Commission's report your V-8 "60" at that time was selling for $666, 
f. o. b. your factory. 

Mr. Moekle. This is not the cost. 

Di'. Anderson. So your costs were above your f. o. b. selling price. 

Mr. Ford. This is not cost. This is a lump sum of all the material 
and labor for a given period, divided by the number of cars, and we 
only did that for comparative reasons. It has nothing to do with the 
actual cost of the car at all. 

Dr. Andfj^son. And to get at the actual cost of production y(ui 
would have to proceed in quite a different way? 

Mr. Moekle. Somewhat different; yes. 

The Chairman. What are the differences which produce the dif- 
ferent fi'nire? If we are not to regai'd this as cost, why not? 



16340 CONCENTRATION OF ECONOMIC POWER 

Mr. MoEKLE. The diflFerence is, altogether, that this includes all 
purchases and all pay rolls, and a certain amount of the purchases and 
pay rolls goes into service parts, parts that are sold, service parts and 
accessories that are sold separately from the car. 

Mr. HiNRicHS. This would also include, I take it, materials put into 
inventory for the time being ; that is, all material purchases during a 
calendar period. 

Mr. M0EKL.E. It would. 

The Chairman. There is no duplication? 

Mr. MoEKLE. There is no duplication. 

Mr. HiNRiCHS. Suppose the proportion of your repair parts or re- 
placement parts, and your invenfory within a calendar year, wotild 
change from one period to another. They are not constant. There 
may have been a higher proportion of repair part production in 1938 
than in 1929, with which you are making a comparison. 

Mr. MoEKLE. If inventories were proportionately different ill one 
period and another, it would make that difference. 

Mr. HiNRicHS. Actually, in 1939 you were somewhat building up 
inventory, weren't you, in anticipation of 1940? 

Mr. MoEKLE. I don't think so. 

Mr. Ford. Not abnormally. 

Mr. MoEKLE. Not abnormally. We don't have accurate figures here, 
however, on that point. 

Dr. Anderson. My point, Mr. Ford, was that the question con- 
cerned the effect of technological change on the volume of produc- 
tion and the number of workers employed in that particular produc- 
tion. To answer that question, we need some measure — some unit — 
which eliminates as many fallacious elements as possible. 

Using the measure you do, it would be possible that in your plant 
you had gone into businesses quite removed from the production of 
automobile units and thereby swollen your number of workers em- 
ployed and the volume of wages paid. In other words, the character 
of the business would have much to do with the figures in the over-all. 
My point, therefore, is that only on the basis of some comparable 
unit, such as actual motor cars produced, could we get at a measure 
of the effect of technological change on volume of production or upon 
the number of workers employed. 

Mr. Ford. You feel that this example isn't quite an accurate one? 

Dr. Anderson. I wonder if you consider it precise enough to get 
at such a question. 

Mr. McCarroll. Don't you think that in some ways it is better, 
because, although sucli parts as the radios and heaters are included 
undei' what we call parts sold separately from the car, they are a 
very definite part of the car and a very definite part of the labor that 
goes into the making of the car, and it is just those extra. things that 
are being put on the car, both as regular production and as service, if 
you like, units, that are helping to cause this increase in the amount 
of labor in the car. 

Dr. Anderson. In other words, you don't have any figures to show 
what the trend with respect to replacement parts and accessories is. 

Mr. MoCarroll. We haven't separated that figure in Here. 

Dr. Anderson. You see it could reasonably be, Mr. McCarroll, as 
there are more old cars on the market, that we have an increase in 
replacement-part business that becomes a vital Dart of vour total 



CONCENTRATION 0T< ECONOMIC POWER 16341 

business. You say it already amounts to some $10,000,000 a mO.^th, 
which would mean an appreciable part of the total. 

Mr. Ford. It doesn't fluctuate very much. 

Mr. BiGGE. Isn't there much more change over a period of time 
due to the change in the model itself rather than the proportion of 
total cost that is spent on the replacement parts, and so on, in con- 
nection with your outstanding cars? It seems to me the major 
change is in the character of the car that you are turning out. 

Mr. Ford. The unit is building up all the time. 

Mr. BiGGE. And you can't cojuparc today's costs of producing a 
model T with the 1924 cost of producing a model T because it isn't 
produced today. 

Mr. Ford. Here is one instance which is rather illuminating. The 
demand for remote-control gear sliift, which is up on the steering 
wheel, has become universal, and we, as well as the rest of the indus- 
try, have installed that method of shifting gears. Well, we used to 
run a lever from the transmission directly up, with a ball on the end 
of it, and you shifted the gears with it. But because of the engineers' 
creation of this change and the popularity with which it was re- 
ceived by the j^ublic, we have had to put this remote control on, 
which requires 40 parts, compared with one or two parts, and yet it 
doesn't function any differently than the old method did, but those 
parts all have to be designed, tooled, and produced, which all adds to 
this involved product which we are building today as compared to 
the early days. 

INCREASE OF DECREASE OF SKILL 

Dr. Anderson. I am interested in more elaboration of the point 
with respect to the upgrading of workers due to technological change. 
Some people have labored under the impression that once a belt-line 
conveyor is installed you get a semiskilled to unskilled level of 
worker doing almost automatic things. I can remember a Charlie 
Chaplin film in that respect. 

Your testimony is quite the reverse; that as technological innova- 
tions increase in a large institution such as youri?, the proportionate 
number of skilled workers in the labor force increases. 

Mr. Ford. I don't think you can quite call them skilled workers, 
but the standards are increased, and of course you have to take into 
consideration the fact that all these devices and machines, the ma- 
chine tools that are built and designed for this so-called technologic^ " 
change for greater efficiency, all require the highest type of skill 
manufacture those machines. 

Dr. Anderson. Those would be the tool and die makers. What 
proportion are they of the total labor force? 

Mr. Ford, They are about 10 percent of our total direct labor. 
We have perhaps 40,000 to 45,000 men on direct labor, and 4,000 to 
5,000 tool makers. 

Dr. Anderson. About 10 percent of the total, then? 

Mr. Ford. Of course, they are not considered direct labor, though. . 
But you are asking the proportion. 

Mr. HiNRiCHS. That .comes back to the same question that I was 
asking earlier. I would expect an increase in the skill in any par- 
ticular occupational level, more skill among your semiskilled work- 



16342 CONCENTRATION OF ECONOMIC POWER 

ers, for example, as you improved your process, but would it be 
possible to indicate what has happened to the proportions of the 
groups of workers that you would regard as skilled workers, as 
opposed to semiskilled, in three quite distinct periods, say 1920, 1929, 
and 1939? Is the proportion of skilled today as high as it was in 
1929, as high as it was in 1920? 

Mr. Ford. I don't believe I could answer that, offliand. I would 
say that because of the refinement that goes into the product as com- 
pared with 1920, for instance, the natural tendency is for those men 
to all require more intelligence, or for us to require more intelligence 
of those men, and they have to improve their skill. 

Mr. HiNRiCHS. I am thinking of this sort of a situation : I am very 
much interested in terms of the work that we are doing in the chang- 
ing levels of occupational demand, and if it would be possible to 
make a reasonable answer, not offhand but at some later time, with- 
out giving you too much work, I would appreciate it. 

Mr. Ford. We w^ould be very glad to make a study of that. 

Mr. HiNRiCHS. Conceivably you might have 10 out of 100 skilled 
workers today, and have had 15 out of 100 in 1920. The 10 might 
be on the average a more highly skilled group than the 15, and yet 
the change in that demand for skilled labor as a proportion of the 
total is rather significant with reference to the changing occupalional 
pattern. If you can throw further light for us 

Mr. Ford (interposing). I would like to askJVlr. McCarroll or Mr. 
Moekle if they can. I don't believe I can, offhand. 

Mr. McCarroll. 'Wlien we were studying some of these questions on 
here, while we didn't get those detailed figures to which you refer, we 
had to keep in mind several things that are different in different de- 
partments, but I think it will be very easily proved by these figures 
that we are going to get lihat increase in skilled and semiskilled, and 
we haven't had them separated in any way. For instance, the boys 
coming out of the trade schools are making every year a much larger 
proportion of the total number of men employed, and they are cer- 
tainly much more skilled than their predecessors were. 

Mr. HiNRiCHS. A second question along the same line : again, if it 
can't be answered at this time, I would appreciate an answer later if 
it is convenient. Are these people who are coming out into the skilled 
jobs coming out with a highly specialized skill, or with an all-around 
skill? Is the. proportion of those who have to have the all-around 
skilled training increasing, or is it becoming a very specialized type of 
skill? 

Mr. Ford. I w^ouldn't think so from our experience. The men that 
we are making in our apprentice schools, our trade schools, are men 
that have a well-rounded-out experience in all types of mechanical 
operations. 

The Chairman. Would you say, then, that the effect is not to make 
an automaton out of a man ? 

Mr. Ford. Not in our business, we feel definitely. 

The Chairman. So that the experience which the man gets in a 
modern plant such as yours is such as to give him a well-rounded 
mechanical knowledge and capacity ? 

Mr. Ford. Yes, sir. 

The Chairman. And could you switch him easily from job to job? 

Mr. Ford. Very easily. 



CONCENTRATION OF ECONOMIC POWER 16343 

The Chairman. What type of skill is required of the individual 
worker in tending these machines? 

Mr. Ford. Average intelligence, not any great technical experience. 
A machine-tool man requires a little training. They go into a de- 
partment in many instances green. 

The Chairman. We were discussing the skilled, and I was wonder- 
ing just what type of skill is required of the worker beyond intelli- 
gence to handle the machines, 

Mr. Ford. Do you mean skill based on past experience, training skill, 
skill from training, or education? 

Dr. Anderson. From machinery. 

Mr. Ford. Not a great deal. 

The Chairman. Then what does the skilled worker do? 

Mr. Ford. He is a different type. He is a toolmaker, a patternmakei-, 
a jig and die-fixture maker. 

The Chairman. And to what extent does the worker merely manipu- 
late a machine and to what extent does he, by his own intelligence, 
shape the product ? 

Mr. Ford. The machine shapes the product. That is practically 
automatic. He has the intelligence to put them on, to operate the 
machine and not get caught in it, and that, I would say, would just 
require average intelligence. 

Dr. Anderson. Let me ask, what is the training period for an 
assembly line worker to make him proficient? 

Mr. Ford. The assembly line worker goes on the line as a green 
man. I am assuming th-at he probably would get as proficient as 
he ever will be inside of 30 days. 

Dr. Antjerson. In 30 days he attains maximum efficiency? 

Mr. Ford. That is on plain assembly. That has nothing to do 
with machining parts. 

Dr. Anderson. On machining parts, what would be the training? 

Mr. Ford. You me^n on an automatic machine? I should think 
a few days. 

Dr. Anderson. And you wouldn't call the person working at pro- 
ficiency in a few days a skilled worker? 

Mr. Ford. Not a technically skilled worker; no. He is skilled at 
the work he is doing. 

Dr. Anderson. But he is not classed. generally as a skilled worker 
in the plant? 

Mr. Ford. No. As we all understand skilled work, that means 
craftsmanship — toolmakers, patternmakers, die makers, and so on, 
the highest class of employee we have. 

SUPPLY OF labor 

Dr. Anderson. Is there any oversupply or undersupply of workers 
in any of the levels in which you demand workers? Can you get 
all the workers you need? 

Mr. Ford. We can get all the common labor we need. It has 
been very difficult the last year or two to get toolmakers; pattern- 
makers of the higher skills are in great demand. 

Dr. Anderson. What is that due to? 

Mr. Ford. It is due to the style change people want in a motorcar. 
Detroit is the center of the motorcar industry and either the sales 



16344 CONCENTRATION OF ECONOMIC POWER 

department or the buying public seem to want a new facial front on 
their automobile every year, and that requires a vast outlay for dies 
and tools and new fixtures every year to comply with that. We 
spend about $5,000,000 a year on just style changes. 

Dr. Anderson. Do you propose, in your trade schools, to train 
those very workers needed most? 

Mr. Ford. Our trade school boys all come out technical workers 
if they are so fitted mentally. Then we have an apprentice school 
for employees who are older and don't go into the technical arts 
quite as much, who come out more of the skilled assembler, garage 
man, service man. He knows the motorcar, he knows the function 
of the internal combustion engine, but he couldn't sit down and read 
a blueprint and make a die or tool or fixture. 

Dr. Anderson. Let me ask, do you see any prospect in the im- 
mediate future, knowing the market as you do, for what would be 
comparable to full employment in the automotive industry? 

Mr. Ford. You mean by that, whether the market will increase to 
the point where there would be full employment? 

Dr. Anderson. You have overcapacity at the present time, do you 
not? 

Mr. Ford. We have ; yes. I think we are running three-quarters of 
our capacity. . 

Dr. Anderson. Do you see any prospect in the immediate future 
of that thing being stepped up ? 

Mr. Ford. I couldn't comment on that. 

Dr. Anderson. You are not projecting? 

Mr. FoRD". I really don't know. 

Dr. Anderson. From a businessman's standpoint you are not mak- 
ing any decisions of your own to occupy the whole plant? 

Mr. Ford. No ; we are trying to build a product that will compete 
and be as successful as we are able to do it, and we hope that they 
will continually increase in volume, but there is no way of estimating 
that. 

Mr. HiNRicHs. Coming back to this question of the capacity of 
your different groups of workers, the assembly worker, you have indi- 
cated, is trained to full production in about 30 days. What general 
requirements have you in hiring such a man? You indicated average 
intelligence, and I suppose actually you aim at something a little 
better than that if you can get it. 

Mr. Ford. Yes ; we do. We naturally want to get the best type of 
employee we can. 

Mr. HiNRiciis. What about physical stamina ? 

Mr. Ford. They are all given a physical examination for their 
insurance and our insurance against occupational disease and that 
sort of thing. 

Mr. HiNRiCHS. The average worker on the assembly line now has 
to work under very considerably higher tension than was true in the 
earlier days of motor production. 

Mr. Ford. Did you say tension ? I wouldn't think so. 

Mr. HiNRiCHS. You would feel there was no greater tension now 
than there was in the days of essentially hand assembly ? 

Mr. Ford. I think parts fit together better than they did 20 years 
ago. My own observation in observing the line is that the men seem 



CONCENTRATION OF ECONOMIC POWER 16345 

to have more leisure time, take it in a more leisurely manner, and 
seem to know, what they are doing. There is no stress that I can see. 

Mr. HiNRiCHs. Would it be your feeling, for example, that an aver- 
age man over 45 would fit on any of your assembly linei, or that a 
younger man would be more satisfactory? 

Mr. Ford. I should think either would be satisfactory. We have 
a great many men that are past the age of 45 who do any work that 
is assigned to them. 

Mr. HiNiiicHS. What has been happening to the average age of 
workers in your plant ? Is your average age higher now than it was 
in 1929, the age of the average worker? 

Mr. Ford. I believe it is. ' We had some figures a while ago on that. 

Mr. McCarroll. Mr. Cameron had some figures on that which he 
used on the air, which showed there had been some increase. 

Mr. Ford. That is my impression. I would have to verify that 
before I would want to make a definite answer. 

Dr. Anderson. I wanted to refer to the question of seasonality and 
its effect upon production and workers. How sharp are model 
changes in your plant? How long a period of time does it take to 
make a model changeover, annually? 

Mr. Ford. We usually consider approximately 2 months are in- 
volved, but that means from the time the assembly line cuts down 
until the new model is rolling off the assembly line. In the meantime, 
the only people that are involved in that shut-down are the assem- 
blers, but they, in turn, are starting to assemble the new product long 
before it appears to the public before it appears in.th,e dealers' show 
rooms, so that there is about a 2-months period until we start to get 
settled, but that doesn't mean every man is unemployed for 2 months. 

Dr. Anderson. What do you think would be the unemployment 
period for the people involved in that changeover who are not perma- 
nently employed? 

Mr. Ford. I should think in a normal year about 30 days. 

Dr. Anderson. Then they spend their 11-month pay over a 12- 
month period of time. Is that about right? 

Mr. Moekle. That would be about right. They would have to. 

Mr. Ford. That is right. 

Dr. Anderson. Wliat do you find them doing in the off months? 

Mr. Ford, We try to brmg that period at a time when they can 
do some gardening and get the benefit of the summer months. That 
is usually from the middle of August to the middle of September, 
or all of August. 

Dr. Anderson. They do stay in the vicinity of the plant ? 

Mr. Ford. Not necessarily. They may go off on a vacation. They 
may take their families off to the woods. They look forward to it. 

Dr. Anderson. Do you find, then, in this condition, labor turnover 
of any substantial size as a result of a shut-down of that character? 

Mr. Ford. No, sir. 

Dr. Anderson. They come back? 

Mr. Ford. Right away. 

Dr. Anderson. Do you see any evidence at all of a halt in the move- 
ment or migration of people? I understand that the population 
studies show you people in the automobile area have pulled approxi- 
mately 200,000 to 300,000 people from the South and Midwest to the 
motor area. Is there any halt in that movement of people? 

124491— 41— pt. 30 11 



16346 CONCENTRATION OF ECONOMIC POWER 

Mr. Ford. I really don't know. I should think so, but I don't know. 

Dr. Anderson. Are there more people at the gates waiting and 
asking lor jobs, or less than we have had during the trough of the 
depression ? 

Mr. Ford. In the past 18 months there have been less, but there 
are still a great many looking for employment. There is still a big 
welfare load in Detroit. 

Dr. Anderson. Do you think, Mr. Ford, that that problem of the 
unemployed is related throughout various industries? If, because 
of the situation of your plant in regard to size of output, efficiency 
of production, and cost, it does not experience an ovef-all technologi- 
cal displacement, do you liink that this situation is general in indus- 
try, or that it has any bearing upon the load of unemployed in the 
Nation ? 

Mr. Ford. I would hate to comment on that, because I am so ig- 
norant of all those facts. I know what our own industry does, but 
I know very little of other industries. 

Dr. Anderson. Is your industry disturbed about the size of the 
unemployment population in the United States? 

Mr. Ford. Yes ; I think our industry is as conscious of that as any 
industry and are trying as hard, if not harder, to create more jobs. 

The Chairman. How do you try to do that? 

Mr. Ford. Create more jobs? By this so-called more highly de- 
veloped product that we are producing, in design, requiring more men 
to produce it. 

The Chairman. What could be done to cooperate with you in that 
effort? How could Congress, for example, help you or industry in 
general to create more jobs in private industry ? 

Mr. Ford. Well, there has been a feeling of uncertainty in, the 
minds of a great many people which I suppose has a tendency to 
arrest development, to arrest purchasing. I really don't know, I 
am sure. It seems to me a thing that has to wear itself out. 

The Chairman. You don't think there is anything that we can 
positively do? 

Mr. Ford. I hadn't thought about it. This is a new thought to 
me. 

decentralization in ford motor CO. 

The Chairman. It occurred tome that perhaps you might have 
been think about it because of the effort which the Ford Co. has 
been making toward decentralization. The paper this morning, on 
page 7, quoted, in response to the question "What are the effects of 
technological development in the one-industry town," your state- 
ment, "As some membei-s of the committee already know, the Ford 
Motor Co. has 14 small plants located within a radius of 60 miles of 
Dearborn, in an effort to help rural communities by the decentaliza- 
tion of industry where possible." 

Mr. Ford. Yes. 

The Chairman. What was the motivation for that? What was 
the purpose of bringing about decentralization if possible? 

Mr. Ford. We wanted originally to show an example of how a 
small stream could be developed hydroelectrically. We took the 
Rouge River and bought dam sites along the Rouge River as far 
as we could, depending on the flow of the river, and we put these 



CONCENTRATION OF ECONOMIC POWER 16347 

small plants in there. Tliey are hydroelectric plants. The source 
of power comes from the^e generators. 

The Chairman. But your purpose was to decentalize industry. 
Why? 

Mr. Ford. That went along with it. We wanted to show how a 
small stream could be utilized for ]X)wer output, and naturally if the 
power was being produced it would have to be consumed. 

The Chairman. Did you think that that would create more jobs? 
Mr, Ford. I don't think it created any more jobs, because we took 
those departments away from the main plant and put them out in 
the small plants. 

The Chairman. How did it help the small community? 
Mr. Ford. That was the best thing about it, the way it affected 
those small communities. 

The Chairman. It struck me that it would be, and I thought you 
might describe it for us. 

Mr. Ford. These plants are created; I know one plant has 6 or 7 
men in it, but that is a very minimum. They range from 40 or 50 
up to 300, and we have 1 plant where we make starters and gener- 
ators, in Ypsilanti, Michigan, which is a larger town, with perhaps 
1,200 people in it. When you take 1,200 people in a new industry 
with a minimum wage of $6 a day, and that money is spent in that 
community, it revives the whole community. 

The Chairman. It doesn't necessarily create more jobs, you say, 
but it does /improve the community and the standard of living for 
the worker. 

]Mr. Ford. We didn't transfer very many of the men when we 
transferred this operation. We tried to employ local labor in and 
around those small communities. We found work for the men who 
had been doing that paritculai* job in the main plant on other things. 
We built this small plant, the hydroelectric plant. We employed 
local labor, farm or semifarm labor, either men who had been w rk- 
ing on farms by the day or farmers or small-town citizens who hacn't 
any great skill. 

The Chairman. Your objective here was rather social improve- 
ment than the self-interest of the industry itself? 

Mr. Ford. That is right. We tried to prove a point on social 
improvement, and to show the possibility of developing a small 
hydroelectric unit taking this one stream, as an example; and inci- 
dentally, in every instance where we have moved these departments- 
out there and the local men have operated them we have found that 
our costs have been less than in the main plant. 

The Chairman. So that social improvement is a desirable thing 
from the point of view of industry? 

Mr. Ford. Decidedly, and decentralization, I think, has a great 
part to play in it. 

The Chairman. But you don't have any suggestions to us as to 
]:)ositive steps that might be taken by othei-s to push forward this 
desirable ideal on which you have been working. 

Mr. Ford. Well, all those suggestions are things that might create 
an urge on the part of other people to do the same thing. I don't 
know — we like to do it. But we aren't representative, necessarily, 
of all industry. They all have their different problems. 



16348 CONCENTRATItDN OF ECONOMIC POWER 

The Chairman. If it is to be done upon a broad scale, it must be 
done by the action of the entire population. 

Mr. Ford. Where the most benefit would occur. 

The Chairman. That is right. 

I gather from your testimony, which has been most interesting, 
two simple facts, and I am going to ask you whether they correctly 
represent the picture that yoii have of this problem. The first is 
this, that without the modern machine and, technological improve- 
ment it would be utterly impossible for an organization like the 
Ford Motor Co. to supply cars on so large a scale to so many 
people. 

Mr. Ford. That is absolutely correct. 

The Chairman. And the second is that it would be impossible for 
the Ford Motor Co. to i^se the machines which have this beneficial 
effect without a kirge-scale purchasing power upon the part of poten- 
tial customers. 

Mr; Ford. Yes, 

The Chairman. And the conclusion to be drawn from that is tliat 
the measure of technological advance is the capacity of the masses to 
buy the products of technology. 

Mr. Ford. Absolutely correct. 

The Chairman. You agree with all those? 

Mr. Ford. I agree with that decidedly. 

Mr. Davis. Mr.' Ford, your company has a nuttiber of assembly 
plants throughout the country, has it not? 

Mr. Ford. Yes, sir. 

Mr. Davis. Were they established solely from a transportation 
standpoint, or for other reasons, or both? 

Mr. Ford. Well, I should say both. Originally from a transpor- 
tation angle, because we have had them a great many yea^rs. 

Mr. Davis. But you have found them beneficial from other stand- 
points as well? 

Mr. Ford, I believe so, just the same as these small manufacturing 
plants have been beneficial. They, of course, are located in larger 
communities, but I think they have their beneficial effect in those 
communities. But it isn't quite the same parallel as these small 
plants in these very small communities, where you see the effect a 
great deal more. / 

Mr, Daves, In other words, your assembly plants are located in 
fair-sized cities, are they not? 

Mr, Ford, In Louisville, Atlanta, Kansas City, Chicago — all the 
big cities where there are distribution centers, trading centers, so 
that that doesn't apply quite as effectively, although I do feel that, 
by giving employment in those communities at the wage scales we 
pay, there must be some benefit. 

Mr. O'CoNNELL. May I ask a question, Mr, Ford? I notice on 
page 7 of your statement a sentence to the effect that technological 
change has made possible the use of men older and with less physical 
strength. Converting that possibility into the realities of the situa- 
tion as regards your company, does that remain merely a possibility, 
or is it a fact that you use more? 

Mr. Ford. That is a fact. These machines are much less difficult 
to operate. We have devices for handling materials that enable a 
man of much less physical 



CONCENTRATION OF ECONOMIC POWER 16349 

Mr. O'CoNNELL (interposing). It would enable them, but in terms 
of your labor force would it be the fact that your labor force now 
is generally composed of older and less physically strong men than 
was the case 20 years ago? 

Mr. Ford. They are older. I wouldn't say about less physical 
capability. 

Mr. O'CoNNELL. It Occurs to me that this possibility to which you 
refer would, generally speaking, continue to be only a possibility. 

Mr. Ford. We don't go out and try to hire older men for those 
particular jobs. The men are naturally getting older day by day, 
but we have no restrictions on age when we do hire them. 

Mr. O'CoNNELL. You have no general rule? 

Mr. Ford. Not at all. We try to take our share of all types — 
crippled, blind, and incapacitated people — and work those into our 
industry in what we think is the proper proportion. 

The Chairman; Are there any other questions? 

Mr. Hinrichs. Along that same line, Mr. Ford, most of your 
changes in your labor force, I presume, occur during the period of 
rehiring after a shut-down? 

Mr. Ford. After a drastic shut-down due to depression of change 
of model. 

Mr. Hinrichs. Change of model, and a rather drastic shut-down 
occurs every year. 

Mr. Ford. I wouldn't call those drastic shut-downs. That month 
is common in the industry. Everybody expects that. I mean where 
we are down for 3 or 4 months due to one cause or another, there is 
a ";reat turn-over. 

Air. Hinrichs. But it is at those times that you make your general 
clianges in the composition of your labor force as regards the 
industry. ' 

Mr. Ford. We send out notifications to these men that have been 
on our pay roll, as we reemploy, and we find many of them have 
drifted back to their original homes, have gone into other businesses. 

Mr. Hinrichs. Have you ever studied your rehiring on the basis 
of the age composition of the people who were laid off prior to one 
of those shut-downs? 

Mr. Ford. No, sir; I don't think so. 

Mr. Hinrichs. Would such a study be sufficiently significant from 
the point of view of your own management interest to w^arrant an 
analysis for the last several years of the age of the groups laid off . 
and rehired at the opening of the new model? If so, I would be 
very much interested in seeing what that is on different 5-year age 
intervals. 

Mr. Ford. We will be glad to see if w^e can get that information 
out. I am not sure; I suppose it would be available. 

The Chairman. If there are no other questions, let me thank 
you again, Mr. Ford, for coming here and cooperating with us so 
efficiently. We appreciated very much your statement. 

(The witnesses, Messrs. Ford, McCarroll, and Moekle, were ex 
cused.) 

The Chairman. The committee will stand in recess until 2 : 15. 

(Whereupon, at 12:35 o'clock, a recess was taken until 2: 15 p. m. 
of the same. day.) 



il6350 CONCENTRATION OF ECONOMIC POWER 

AFTERNOON SESSION 

The liearing was resumed at 2 : 25 p. m., upon the expiration of the 
recess, Senator O'Mahoney presiding. 

The Chlmrman. The committee will come to order. 

Mr. Anderson, Mr. Chairman and members of the committee, our 
first witness this afternoon is Mr. Dou<^las F. Winnek^ who will tes- 
tify about a new technology and offer examples of it so the com- 
mittee can ask questions pertinent to an understanding of the begin- 
ning of a great new technological product. Mr. Brackett and I went 
to some pains to corroborate, the statements that you will hear thisi 
afternoon and to determine the fitness of witnesses that might 
do this sort of thing for us and we hope to bring you at least two 
more JDefore the hearings are over. 

We wanted to give Mr. Winnek a brief time with you in the dis- 
cussion of a very revolutionary new technological change, three- 
dimensional photography. 

TESTIMONY OF DOUGLAS F. WINNEK, NEW YORK CITY 

Mr. Winner, Good afternoon, gentlemen. I am the reputed in- 
ventor of trivision. 

The Chairman. Do you have any doubt about it? 

Mr. Winner. Trivision is not a trade name, trivision being the 
name I have given to what has been heretofore known as stereoscopic 
photography, or threa-dimensional photography; trivision being the 
word which to me simplifies the technical description of the process 
considerably. Three-dimensional photography or trivision has been 
sought after for a good many years, as you may or may not have 
known, and it started as far back as 1861 when Wheatstone and 
Brewster, two British scientists, thought that the supreme excellence 
of photography should lie in its ability to truthfully record objects 
as the two eyes see them, rather than as one eye alone sees them. 
Wheatstone developed the old familiar stereoscope that I am sure we 
are all familiar with, and was possibly responsible to a great extent 
for a very well-known photographic concern here in the country 
making a tremendous fortune out of the old stereograph, I think you 
all remember. 

The Chairman. Do you contend that one eye does not take in the 
three dimensions? 

Mr. Winner. Yes; I do that. 

The Chairman. Is it only habit that makes me think I see the 
three dimensions if I close one eye? 

Mr. Winner. As a result of considerable experimental work and 
research in photography, I am thoroughly convinced that 90 percent, 
approximately, of the perception of depth or space, or the illusion of 
solidity and plasticity, is due to binocular vision. About 10 percent, 
I should say, is the result of all of the tricks that are now being used 
in Hollywood, especially by Walt Disney. 

The Chairman. When I close my eye I am not conscious of any 
loss of depth. 

Mr. Winner. I think primarily because you have had sufficient ex- 
perience with two' eyes to know that there is space there. If a one- 
eyed man were to argue -with me or debate on the subject I am sure 



CONCENTRATION OF ECONOMIC I^OWER 16351 

he would Siiy, "I see depth, too." I think that is priiiuiiily due to 
experience, certainly not binocular depth. The best proof of binocu- 
lar depth is to close one eye and walk dowii a strange stairway. I 
wouldn't re<?ommend it. You will find that you will have consider- 
able difficulty. 

Another interesting thing about binocular depth is that when you 
hold a card, your hand, or anything solid in front of you and look 
at it first with one eye and then with the other you will see two 
distinctly different images. It is the fusion of those images in the 
brain in the optic thalmus that produces the rather amazing but 
natural result of depth or space. 

Photography for generations has been, with few exceptions, com- 
pletely lacking in three-dimensional relief. The stereoscope, the red 
and green glasses that you see once in a while in the motion-picture 
field, the polaroid glasses, the oscillating shutter device that was at 
one time quite popular in New York theaters, were all methods of 
producing two distinctly different retinal images; that is, the right 
eye and left eye were provided with two different pictures. The 
illusion of depth heretofore has required some visible viewing device. 
Trivision or third dimension by my method introduces, I believe, 
for the first time the three-dimensional photograph without the 
necessity of any visible viewing device. 

The interesting thing about trivision, distinct characteristic of tlie 
method, is that we are able to take an ordinary photographic film, 
emboss it by momentarily softening it, putting minute microscopi- 
cally small invisible beads or lenses on one surface of that film. We 
take any film on the market and run it through a machine which 
momentarily softens one side and impresses it with this lenticulated 
surface, as I call it, or minute beaded surface. 

That surface takes the place of the stereoscope, and when you look 
through it, always keeping it between your eyes and the image on 
the emulsion or printed page or on the motion-picture screen, that 
surface, oven though it is invisible and part of the film, performs 
the same function as the old stereoscope, and once again your two 
eyes are allowed to see two distinctly different views, and you get 
the illusion of depth. I could go on for quite a while talking a )out 
it. Let me show the pictures to you and probably they will do 
more than I can to convey the idea. 

May I suggest that you hold them to the light? These are trans- 
parencies; look through them w^ith the folder face toward you. This 
discovery is relatively new. It is the result of a number of years of 
development work starting as a hobby on my part, and since Sep- 
tember last I have devoted my entire time to it. I have a small 
group of engineers helping me in Mount Vernon, N. Y. These pic- 
tures you are now^ view-ing have been made just recently, I believe 
most of them are less than a month old. 

Dr. Andersox. Are these the first evidence of trivision known? 
Are these the first pictures that we have of this character? 

Mr. Winner. I lielieve they are. About a 3'ear ago we produced 
a few black and white experiments, but to my knowledge these are 
the only pictures of this type in existence. The interesting thing 
about trivision is that we are able, by momentarily softening the film, 
to impress it with this surface, then take the film and put it into any 
camera which you may have, the amateur camera or the professional 



16352 CONCENTRATION OF ECONOMIC POWER 

camera. By clojing the lens down to a horizontal openinjr, rather 
than to a small peephole, as you usually do, we produce this illusion 
of depth. The negative with no further apparatus contains this 
effect. 

(The vice chairman assumed the Chair.) 

Dr. Anderson. Mr. Winnek, in your judgment what is the prac- 
tical use of such a thing as this? 

Mr. Winner. The invisible stereoscope, or, if you wish, this lenticu- 
lated or beaded screen, even though it be out of sight on all film used 
for commercial purposes, lends itself to use both in the taking film and 
in the print. Unfortunately, I am unable to show it to you at the 
moment, but certainly within a month we will have a photographic 
print paper. I only wish we could have waited to show you those. 
A photographic print paper that will probably serve every commer- 
cial use that ordinary glossy or semiglossy photographic paper now 
serves is certainly within immediate reach, and due to the character 
of the product will probably be used everywhere that ordinary paper 
is used. 

trivision for x-ray purposes 

Mr. Winner. Similarly, we find in the laboratory as a result of 
(considerable experimentation ifi X-ray, a great possibility of apply- 
ing this film to X-ray work. We are making surgical X-ray pictures 
with them now, although they are quite crude, naturally, due to the 
newness of the machinery ; they are very remarkable, nonetheless. 

Dr. Anderson. What is the advantage of the trivision over X-ray ? 

Mr. Winner. The distinct advantage of the three-dimensional film 
or trivision film in X-ray is that it provides for the first time a 
three-dimensional result without the necessity of the old stereoscope. 

Dr. Anderson. You were speaking about the value of the X-ray. 

Mr. Winner. It is embarrassing, possibly — it certainly is to me — 
for the average inventor to talk about his product and claim it is 
the most wonderful thing in existence in the industry. I sincerely 
believe that trivision is probably a re voluntary product, certainly an 
evolutionary one, one that fulfills the demand for natural appearance 
of photographed objects. In X-ray this contribution probably will 
be more valuable than in any other field we will go into. There the 
physician will be able to make an instantaneous exposure on this film 
of the heart or the lungs. 

I deliberately select a part of the body that naturally respires or 
in which there is normal movement. This instantaneous shot will 
])roduce for the first time on one film a three-dimensional picture of 
the subject, just as he would have seen had he looked into the subject 
with X-ray eyes. 

By-the slightest motion of his head, just as he would normally look 
at something from left to right^he will actually be able to look around 
the bones and beyond them. If you look at those pictures again for 
a moment you will notice that by moving your head to the right or 
left you look around the object in the foreground and see something 
that has been behind it. 

I would like to call your attention to the picture of the lilies. One 
lather amazing thing about that picture is that you can hold it up 
against the light and take a pencil and project the pencil right down 
through the heart of the lily. As a matter of fact you will feel as 



CONCKNTirATTOX (»F KCONOMIC I'OWKII 16353 

though you touched the lily long before you have touched the film, 
Tlie picture uctually projects space, and you think it is Sf)lid, even 
though it isn't. In X-ray that illusion of solidity, with the addi- 
tion of the panoramic quality, is tremendously valuable, I air sure. 

Dr. Anderson. Beyond the scientific use in X-ray, what would be 
its commercial uses? 

Mr. Winner. Recently I gave up what has been a rather poor living 
as a photographic expert in.New York and delved into this hobby, con- 
verting it from a hobby into a business. The first pictures that 
showed possibilities for commercial application, suitable for window 
and counter display purposes, were made last July. A large advertis- 
ing display company in New York became interested in them and 
offered to make a market study for me. 

As a result of that market study they told me that in their opinion 
they could keep a plant C(mtinuously busy producing pictures for 
display ])urposes, both transparent and i)aper, when we got the paper. 
Since then I have held back commercial application for the interim 
period for the purpose of building the production machinery capa- 
ble of producing not only a transparent film but the paper as well. 
My thought now is to purchase film, ordinary photogi-aphic film, from 
every film manufacturer and to convert that film, in a plant here in 
this country, into third-dimension film suitable for use in ordinary 
cameras. 

The Vice Chairman. Have you testified as to the relative cost ? 

Mr. Winner. I haven't as yet, sir. A rough estimate, and I think 
quite a fair estimate, would indicate that the increase in manufacturing 
cost, or the cost of converting that film in our plant, not the manufac- 
turer's plant, would be about 5 percent over the ordinary manufac- 
turing cost of that film. In the manufacturer's plant it would prob- 
ably be less since the necessity of shipping the product from one place 
to another is eliminated. Ultimately I believe that trivision w411 be 
licensed to the manufacturers. 

I think the products is of such a character that the manufacturers 
in the photographic film industry, possibly photographic equipment 
industry, and certainly in the graphic art industry, where we will 
reproduce these pictures by varnishing the page and embossing the 
varnish right on the press, should be licensed. I presume that is the 
simplest way to exploit most efficiently certain machinery, ai)paratus, 
and film materials that have been developed to produce third dimen- 
sion under the patents. 

The Vice Chairman. Can you treat a completed photograph or 
l)aiiiting and give to it that third dimension? 

Mr. Winner. When you take an ordinary photograph it is monoc- 
ular; when you take it it is just a one-eye picture; you can put all 
the ridges you })lease on the surface of it, antl it will not be converted 
into a three-dimensional picture. AVe must photograpl) three-dimen- 
sionally to begin with. 

Mr. PiRE. You Iiave to do it with the raw film, before exposed? 

Mr. Winner. We do; yes. 

Mr. PiRE. Would you have to? 

Mr. Winner. I think it might be possible to take ordinary film 
in (•(imj)lic!>ted equijMiient and make a series of views and combine 
th<'in optically, but it would not be practical. 

Mr. PiRE. Wouldn't be anv sense in it? 



16354 CONCENTRATION OF ECONOMIC POWER 

TRIVISION IN AERIAL PHOTOGRAPHY 

Mr. Winner. One of the most, if I may use the word, dynamic 
possibilities, and items of interest, at the moment to me is the applica- 
tion of trivision, almost immediately, to aerial photograj^hy. With 
the action over Norway, a great many people are war-mmded, as a 
result of the front pages. My men and I have given considerable 
thought to photography from the air on this film, using slightly dif- 
ferent aerial equipment, of objects on the ground, terrain, topog- 
raphy, camouflaged trenches, gun pits, and buildings of that sort. 
The normal camouflage would not be of much value here. 

We would build up on one film the three-dimciisional picture. An 
interesting feature of the trivision film in aerial photography and in 
X-ray is that for the first time we are able to calibrate the film 
itself. 

The Vice Chairman. Able to do what? 
Mr. Winner. Calibrate the film. 

The Vice Chairman. What happens to it when you do that to it ? 
Mr. Winner. We can put a faint ruling on the film with a scale 
at each edge of the film. When the' picture has been made, simply 
by holding it to the light and wiggling it back and forth there is a 
relative displacement of images on that film. The movement of the 
images is in direct proportion to the third dimension and can be read 
directly on the scale. The aerial photographer can go up in the air 
above the gun range and with an infrared filter and telephoto lens 
can photograph objects in safety on the ground. The picture will 
have the same magnification and the same depth as the objects on 
the ground, and all the dimensions can be easily and accurately 
measured on the film. 

Similarly, the X-ray film being calibrated will offer the physician 
a very accurate way of diagnosing exact distances. 

The Vice Chairman. You mean you can measure accurately the 
distance between objects by a picture? 

Mr. Winner. Yes, sir; you do so simply by looking at the film; 
the slightest motion of your head, once you have focused your eye or 
eyes on any one point of focus, will reveal a displacement of images 
on all other planes. That is, the further away an object is from the 
point of focus the greater the motion of the images on that plane. 
The Vice Chairman. What I mean is, Can you measure in feet or 
miles? 

Mr. Winner. Yes. By calibrating the aerial film, we would be able 
to read directly and instantaneously the exact number of meters, miles, 
or feet. The unit of calibration you might want to put on there will 
determine the answer. 

The Vice Chairman. You mean you have something on the film that 
measures the distance between objects? 

Mr. Winner.' Yes, sir ; that is right ; it will be especially valuable 
in X-ray and I am sure very valuable in aerial photography. 
Mr. Pire. Like putting latitude and longitud. "nes on a map? 
Mr. Winner. Somewhat similar. I don't know uhether or not I am 
using the proper technical language — cross-hatch lines with the scale 
at the top and bottom. One feature of trivision is that it will prob- 
ably apply to motion pictures. I have tried to identify myself for a 
number of years now, even though it has been a hobby until recently. 



CONCENTRATION OF ECONOMIC POWER 16355 

as beiiijx the one inventor in the photoj2;raphic industry with a third- 
dimension idea who didn't expect to revolutionize motion pictures 
overnight. 

I pay tribute to all the other inventors; a great many of them, I 
think, sincerely believe they have the answer to the third-dimensional 
motion picture. 

The Vice Chairman. How many patents, have you testified, do you 
have on this thing? 

Mr. Winner. I believe I have as many as 5 patent applications in 
Washington and as many as 200 others on their way in. Commissioner 
Coe and Mr. Braekett invited me down in what certainly are the early 
stages of development. 

The Vice Chairman. Two hundred applications for patents on this 
matter you are talking about? 

Mr. Winner. We havfe- as a result of considerable work in the past 
few years developed over 200 patentable developments suitable for 
application as the finances justify it in this field. I believe that the 
distinct feature, the interesting thing about trivision is that it is the be- 
ginning of a new industry, not a series of gadgets. We have developed 
new X-ray camera equipment, new X-ray tubes, a new aerial camera, 
new rangefinders, all utilizing the principles of trivision. Certainly 
an amateur will be able to buy this film very shortly, I presume between 
now and the fall, and put it in his camera or one of our cameras, which 
we will ])robably sell. These cameras will give additional depth. 

You will be able to take the film back to the drug store, and 48 hours 
later, after we have processed it in our plant, get back third-dimen- 
sional pictures. 

The Vice Chairman. How many patents have you on making the 
picture distinguished from the mechanism through w^hich you dis- 
play it? 

Mr. Winner. Of the material we have been developing, I would 
say tliat probably 200 of tlie disclosures, a little less, are necessarily 
mechanical ideas. I would say that out of the 200 disclosures we 
have extrtacted or are extracting no more than 6 basic or fundamental 
ideas, methods of, and apparatus for — mostly methods of. The 
stronghold, at the moment, from a patent viewpoint lies in our ability 
to do something that men hate tried to do and haven't done before 
successfully, namely, putting these little invisible beads on the plastic 
film or on the plastic resinous coating of the print paper, so that they 
are optically accurate and permanent in character. 

The ridged material is not new as an idea. 

The Vice Chairman. Wliat is not new? 

Mr. Winner. The idea of putting ridges on a film for the purpose 
of producing a stereographic result, third dimension, or color. Dr. 
Herbert Ivez 

The Vice Chairman (interposing). When you say the idea of put- 
ting those ridges on so as to create the third dimension — what other 
word did you use tliere? 

Mr. Winner. T am sorry, I don't know myself. 

The Vice Chairman. The idea of making pictures stand out. 

Mr. Winner. The idea of j^utting a ridged screen or a grating 
between the ej^es of an observer and the photographic plate for the 
purpose of producing color or depth is not entirely new. I think the 



16356 CONCENTRATION OF ECONOMIC POWER 

distinct contribution here is the reduction of that idea to practice in 
almost every field of photography. 

Dr. Anderson. Mr. Winnek, when you speak of creating new in- 
dustry, are you thinking in terms of an absolutely new industry? Is 
there nothing in the field? How much of a displacement of other 
industries will this thing cause? 

Mr. Win:nek. I have given considerable thought to displacement 
of labor and machinery, or possible replacement, if you wish, by the 
process, or due to the process. I think that shortly the public will 
demand third-dimensional pictures because they will see some and 
expect them. I think that tri vision, or the process displayed here, will 
undoubtedly permit the conversion of existing equipment very quickly 
to eliminate flat photography and produce third-dimensional pho- 
tography. I think the market will demand it almost as fast as we can 
produce. I don't foresee a displacement of labor. 

I do feel that the activity of the industry will increase considerably, 
certainly during the novelty period, which can exist for quite some 
time, and in the graphic art industry where textbook illustrations will 
no doubt sooner or later be printed in third-dimension, I think there 
will be new jobs, but to what extent I can't say. 

Dr. Anderson. Once l\aving gotten over the main hump of invent- 
ing a thing of this kind, what confronts you as an inventor, business- 
man, in carrying on to a practical industry ? 

PROBLEMS OF FINANCING DEVELOPMENT 

Mr. Winner. I would like to reduce it to inventor in the first 
place. For the last few years as a result of having been very 
active as a more or less engineer — I have no college degree and con- 
sequently I presume I don't qualify as an engineer — I have specialized 
in photography and for a number of years have been very active ih. 
jobbing out my time and that of my men in developing photographic 
equipment and methods. In September I seriously decided to give 
up that business and go into this as a business, and since then I have 
definitely sought the proper financing, because money is necessary to 
carry on and convert from this laboratory exhibition stage into a 
producing stage. 

Fortunately I met a display company official who immediately 
grasped the opportunities. I have no connections other than moral 
with them or with anybody else, as yet. I have from time to time met 
and discussed with businessmen the thought of their putting money 
into the thing. Long before I decided to go into this thing as a busi- 
ness I did explore the possibility of gettng finance back of it. I 
found that the first thing the businessman thinks of, I presume quite 
justifiably, when you go to him with an idea, is just what merit has 
it, just what patent protection can we get or have you got? As a 
businessman he is naturally subconsciously, or consciously, thinking 
of a trading position, and to justify any finance put into it. Un- 
fortunately it has been my experience that the more revolutionary 
an idea is the more difficult it is to get the original finance. The 
more revolutionary an idea the more patent expense, more patent 
development cost, you are confronted with; the more gamble there 
would be on the part of investors and the more difficult it is to 
interest that investor. 



CONCENTRATION OF ECONOMIC 1X3 WER 16357 

I have met with continuous faihire for a number of years now. 
I, for a while, was considerably ashamed of it; I thought I didn't 
know how to promote it, or the product w sn't any ^ood. Recently 
I gave up seeking money or discussing finance and for almost a 
month and a half now the young men and myself in the laboratory 
have resorted to making gadgets and selling them. We have a photo- 
graphic exposure pencil, for example, and little nonsensical gadgets 
that certainly are not utilitarian in quality, just novelties. We find 
that those seem to sell very quickly and from the revenue derived we 
hope to keep ourselves living comfortably and get this product on 
the market. 

Dr. Anderson. Let us look at this matter of capitalizing a new and 
revolutionary enterprise such as this that you say would likely result 
in a whole new industry. We have heard a great deal of risked capi- 
tal and the venturesomeness of promoting businessmen. You have 
had some experience in that connection, haven't you? 

Mr. WiNNEK. Yes; a little. 

Dr. Anderson. What does it sum up to? You say you haven't 
been able to raise the capital in that way, Have you had people who 
were willing to go in with you on some terms? 

Mr. AViNNEK. r^aturally the first thing that enters into the mind of 
anyone in the photographic industry, looking at this picture or these 
pictures, is, "Well, I should imagine the boys in Rochester or Bing- 
hamton or New Jersey, the film manufacturers, would just love to get 
hold of that" and I sincerely believe as a result of many friendly 
and helpful contacts with them that they are all interested in the 
development, more or less. I think that the attitude of the business- 
man in that industry is, ''Well, when you get something, when you 
have successfully demonstrated there is a market, there will be time 
enough." It is pretty revolutionary; there is an awful gamble 
attached to it, 

Mr. Pike, You will get a much bigger price for it then ? 

Mr. Winner. Possibly, One thought has impressed me tremen- 
dously from time to time, about the advisability of different means of 
marketing, to do justice to the process, looking at it from both a 
selfish and a business viewpoint — I mean my selfish viewpoint, not 
that business is necessarily selfish — I think the greatest revenue 
could be derived by licensing all of the film manufacturei-s, rather 
Than to go imder the wing of one exclusively, or attempting to do 
business with one alone. The contacts with the three manufacturers 
I have mentioned indicate that any oae of them would be more than 
glad to help, provided there was some exclusiveness attached to it. 

I think that by purchasing the film and the product of these m-an- 
ufacturers and converting it ourselves and reselling it we would more 
or less keep their good will and hope, in due time, to build up a posi- 
tion that would merit and justify licensing relations with all. I think 
there is money available for developments of this character. There 
are two ways of getting it: one is to give a stoclj promoter a set of 
pictures to put in his pocket — and I am sure that the enthusiasrt 
displayed to me by a few of my friends who are in that businesi? 
indicates that they would like and Sre ready to go out and raise 
money through the novelty value of the product. 

T think thp other wav would be to offer a nirouifactuicr -the ex- 
clusive sales of the prorluct. My natural deSire is to refrain from 



16358 CONCKNTPiATION OF ECONO:\[ir rOWKU 

granting any exclusive rights. I think that a great deal more can 
be accomplished and developed without that exclusiveness. 

Mr. Pike. That is why you are going to take all of the film first 
and then process it? Establish the attractiveness of it in the mar- 
ket and then you think they will all come running? 

Mr. Winner. Well, not exactly, but very close to it, I believe, once 
we have demonstrated there is a market and are selling their film. 
If the film is all I really believe it is, the public will demand it, and 
the manufacturers will have to have it. 

Mr. Pike. One more question. I would like to ask — I think you 
have covered it, but I am not clear. So far you are using the coat- 
chrome, or something similar, just for transparencies? 

Mr. WiNNEK. We are using an ordinary color film, simply running 
it through tlie machines and taking our pictures. 

Mr. Pike. Now, when you come to putting it on a print, must the 
picture have been taken on that sort of fihn? I mean, when you 
really get so you can make the print with your process on the gela- 
tine, or whatever it is. 

Mr. Winner. The prepared jihotographic paper might be used 
in the camera, but undoubtedly a negative made on pj-epared film 
would be necessary first. 

Mr. Pike. When you finally get so you can make a print of it, must 
(he print be done from this prejiared film in both cast s? 

Mr. Winner. Yes; or from a ])repared film. Referring once more 
very briefly to the technical end of it, the ridged surface on the 
negative resolves the })icture into a depth picture when you look 
at it. The ridged surface on the projection screen, on the X-ray 
film, on the print paper, or on the magazine page (in that case the 
resinous coating is embossed with a warm roller almost simultaneously 
with the print) servos as the viewing device. 

Mr. PiRE. About what is the size of the little cross hatches? 

]\Ir. Winner. On the present film I believe about ?00 to an inch; 
on the commercial film that we propose to release almost innnediately, 
onei way or another, we will have certainly no less than 300. The 
object is to get the ridges so small that you don't see them. 

Mr. Pike. Same as a half-tone or something of that sort? 

Dr. Anderson. Mr. Chairman, we have promised Mr. Thomas, the 
next witness, we would get him out of here this afternoon and if- 
there are no other questions of Mr. Winnek (we wanted to give 
you a glimpse of a new technological develoivment in the making), 
and we will ])roceed with our liext witness. 

Mv. Winner. Thank you. 

The Vice Chairman. Thank you very nuich, sir. 

Dr. Anderson. Mr. C^hairman and members of the committee, Mr. 
R. J. Thomas, the 

Tlie Vice Chairman. We Inven't been swearing tlic witness. We 
used to do it but found it didn't do any good. 

Dr. Anderson. Mr. R. J. Thomas, president of the United Auto- 
mobile Workers. Is such he is in daily contact with the in^'ustry 
which we have been discussing for the last '2 days. He is to piesent 
a statement to the connnittee and is available for (luestioning at this 
time. 



('()N('i:ntkati(>n of ioconomk^ powiok 16359 

STATEMFNT OF R. J. THOMAS, PRESIDENT, UNITED AU.JMOiilLE 
WORKERS, DETROIT, MICH. 

Mr. Thomas. Gentlemen, I would like to say that I think I am 
])retty much qualified to discuss this problem for the automobile 
industr}', due to the fact that I have only been out of the automobile 
shops for the past 3 years. I spent over 15 years working in the 
automobile shops and actually have personal knowledge and know 
what happens in the autf)mobile ])lants. 

More than any other industry the auto industry has lieen credited 
with stimulating and jnomoting the prosperity of the 192()'s. Basing 
its expansion upon the accumulation of %»ealth in the country through 
American primacy in post-war years in the world's economic and 
industrial life, the auto industry set the pace of national prosi)eritv. 

The value of its product increased from $30,000,000 in 1904 to $3,- 
000,000,000 in 1919, and over $5,000,000,000 in 1929. Employing di- 
rectly 12,000 woi-kers in 1904, the auto industry gave jobs to 343,000 in 
1909 and 447,000 in 1929 (Census of Manufactures). By 1929 the auto 
industry, according to claims of the Automobile Chamber of Com- 
merce, provided either directly or indirectly for the employment of 
over 4,000,000 Americans. 

This tremendous expansion in production and employment was 
linked up with an even more striking accumulation of profits. From 
1919 to 1929 profits of major automotive companies had averaged 
year by year 21 percent of their net worth. And net worth had risen 
steadily from $606,000,000 in 1919 to over $1,500,000,000 in 1929. 

At least 100.000 men and women found employment directly in the 
auto industry during these years who would otherwise have found no 
gainful occui)ati()n. For the most part these new workers required 
to turn out a constantly expanding automobile production came from 
the agricultural regions of the South and the Midwest. Distress in 
the farm belt, together with the displacement of farm labor by im- 
proved technology, was providing the auto makers with a generous 
resem-e supply of labor. Between 1920 and 1930 over 200,000 native 
whites of native parentage migrated to the State of Michigan, drawn 
by the magnet of jobs in the auto shops (C. W. Thornwhaite, Infenwl 
Migration in the United States, p. 20). These people had seen the 
advertisements of employment in the papers of Georgia, Alabama, 
Tennessee, or Mississippi. They found economic salvation (for the 
time being at least) by migrating to such cities as Detroit, Flint, and 
Toledo. Their new purchasing power helped prop up our economy 
against the underlying threat of economic crisis. Expanding auto 
production in those years gave the Joads of that time a chance for 
employment and a decent life. 

While ex])ansion of the auto industry was providing jobs for hun- 
dreds of thousands of Americans, another and contrary process was 
going on within the industry itself — the increasing displacement of 
labor by technological progress. 

During the 20's this process was almost always relative, not abso- 
lute, in its effects. While the total demand for labor to produce at a 
given level was being constantly reduced, an equally constant rise in 
the level of production increased the over-all demand for labor. 



I' 



16360 CONCENTRATION OF ECONOMIC POWER 

The cloarest picture of these tendencies is given in a recent study 
by the National Research Project of W. P. A. On the basis of the 
National Research Project figures it can be estimated that man-hour 
n-oductivity in the auto industry rose from 100 in 1919 to 234 in 1929. 
n other words, a group of auto workers able to produce 100 cars in 
1919,' were able to produce with the same labor time in 1929 a total 
of 234 cars. 

But in spite of this increased man-hour productivity the National 
Research Project figures show total employment increasing by 30 per- 
cent from 1919 to 1929. Now this increase in employment was brought 
about despite increasing man-hour productivity, as is made plain by 
the rise in production between 1919 and 1929 — from 100 to 312. 

So long as the buying power of the public was sufficient to allow 
this explosive growth of production, total displacement from the in- 
(kistry was no immediate menace to the auto worker. This mass pro- 
duction was the keyr.»te to the prosperity and efficiency of the auto 
industry. 

Compare the development of the auto industry with that of the 
59 industries studied by the National Research Project. From 1919 
to 1929 auto production rose 212 percent ; in the od industries it rose 
44.9 percent. Employment in the auto industry rose by 30 percent; 
in the 59 industries by 1.6 percent. In productivity the auto industry 
rose 134 percent while the 59 industries could squeeze out an increase 
of only 43.2 percent. 

Since the automobile industry is included among the totals for the 
59 listed above, the 1.6 percent increase in total employment between 
1919 and 1929 may be attributed to this one industry. Only a phe- 
nomenal increase in auto production kept the country from an over- 
all decrease in its employment in this period. 

CHANGES IN PRGDUCTIVITr SINCE 192 8 

Mr. Thomas. As was noted before, the tendency of improved ma- 
chinery to displace labor in the auto industry during the 1920's was 
balanced out b}' a consistent expansion of production. But when the 
purchasing- power, which had allowed this expansion, slumped dis- 
astrously m 1929 and the the years following, the story was a very 
different one. Accumulated relative displacement of lal jr became, 
in those years, absolute. Had something close to the 1919 level of 
productivity been maintained, even the low level of production from 
1930 to 1934 would have insured an employment of nearly twice the 
actual employment. But vrith advanced technology, employment 
sank lower and lower until in 1932 and 1933 only 54 percent of 1929's 
labor force was employed. 

Nor did the coming of the depression check the trend toward ever- 
increasing man-hour productivitv. By 1935 man-hour productivity 
stood at 112 percent of 1929; by 1936, at 116 percent; and, according 
to recent figures worked out by the National Research Project, at 117 
percent in 1938. This is the over-all picture proved by the most 
reliable and accurate studies tlif.t have been made in the industry. 

That the displacement of necessary labor for a given level of pro- 
duction in the auto industry has taken place, is bej^ond question. 
However, the Automobile Manufacturers Association, in a recent 



CONCENTRATION OF ECONOMIC POWER 16361 

study by Andrew T. Court {Men, Methods, and Machines^ 1939), 
expressed a different i)oint of view. Says Mr. Court : 

During 1937 employment in automobile factories averaged 15 percent higher 
than in 1929 although production lagged 10 percent below 1929 levels. 

Mr. Court concludes: 

There has been no aggregate technological displacement of labor in auto- 
mobile factories despite the introduction of countless new and more productive 
machines and processes. 

In making this cheery estimate Mr. Court has neglected to take 
into consideration two or three factors of primary importance: 

First, Mr. Court's figure for employment in 1929 is taken from the 
Census of Manufactures. His figure for 1937 is estimated from the 
indexes of the Bureau of Labor Statistics. Unfortunately for Mr. 
Court's thesis, the Bureau of Labor Statistics figures are not neces- 
sarily comparable with Census of Manufactures statistics. Econo- 
mists generall}' estimate that the Bureau of Labor Statistics partial 
survey of the industry indicates employment figures for the entire 
industry about 15 percent higher than they are in actuality. The Bu- 
reau of Labor Statistics figures are, therefore, constantly revised 
downward to coincide with more complete statistics from the Census 
of Manufactures. For 1937 the Census of Manufactures lists 479,341 
wage earners in the motor vehicle, motor vehicle bodies, and parts 
industries. Mr. Court estimates for the same year, from the Bureau 
of Labor Statistics, an employment of 517,000. Exactly why this 
economist should choose the unrevised Bureau of Labor Statistics 
figure is a question toward which I can offer no solution. At any 
rate, comparing employment between 1929 and 1937, using in both 
cases the Census of Manufactures as the source, it appears that em- 
ployment rose from 447,448 in 1929 to 479,341 in 1937. In other 
words, instead of Mr. Court's 15 percent rise in total employment, we 
have a rise of only 7.1 percent. 

Mr, HiNRiCHS. Mr. Thomas, I don't want to stop you at this point, 
but I would like, for the sake of the record, to comment on that, 
later. Please continue vour testimony now. 

Mr. Thomas. Secondly, Mr. Court neglects to take into considera- 
tion the shortening of hours per week which has taken place through- 
out the automobile industry as a result of collective bargaining. Aver- 
age hours per week in 1929, according to the National Industrial Con- 
ference Board, were 46.8. In 1937, according to Bureau of Labor Sta- 
tistics, average hours in the industry per week were 35.8 hours. 

This single factor, which Mr. Court does not consider worthy of 
reference, is more than enough to explain a 7 percent rise in the total 
number of men employed in the industry. 

What is essential, however, in determining total labor displacement, 
is not the total number of men whose names may be on the pay rolls 
of auto companies, but the actual number of man-hours worked at a 
given level of production. On this basis, according to the National 
Research Project figures in 1937, 92 percent of 1929 production was 
obtained, with 82.1 percent of 1929's man-hours. This figure is clear 
evidence of the actual labor displacement which has occurred. 

To get a fuller realization of what these statistics mean it is neces- 
sary to estimate the total employment at 1929 hours DPJ'-week, wMch 
would have been available in 1937 A^ssuming, then, that t^ie average 



16362 CONCENTRATION OF ECONOMIC POWER 

auto worker had worked 46.8 hours a week in 1937, only 366,0^0 men 
could have been employed in the industry to obtain 92 percent of 1929's 
production. With shorter hours per week, 479,341 were actually em- 
ployed. This means that in 1937, 112,000 jobs, at least, were saved by 
the union's battle against long hours. 

It may be noted also that wages for this increased group of workers 
were larger in 1937 than in 1929. Total wages paid in 1937 were 
$756,000,000 ; in 1929, $733,000,000. These facts suggest very strongly 
that unionism in the auto industry has not only protected the" auto 
worker against the menace of technological unemployment; in addi- 
tion, the stability and general welfare of our economy as a whole have 
been supported. One hundred thousand auto workers can provide the 
life blood for a city of upwards of 1,000,000 inhabitants. That this 
city was not wipeel out by the force of technological change can be 
explained only by the growth of collective bargaining as supported 
by the National Labor Eelations Board and other progressive Govern- 
ment agencies. 

WAGES AND TECHNOLOGY 

Mr. Thomas. It has been claimed by various representatives of auto- 
mobile manufacturers that the relatively high wages paid in the indus- 
try have been made possible by "technological progress." Said Mr. 
Sloan, of General Motors : 

In the automobile industry improved methods resulting in constantly increasing 
efficiency have made possible wage rates well above the level of industry in 
general. 

Our friend, Mr. Court, has similar opinions. He says : 

The gains from technological advances show in many ways. Weekly earnings 
of factory workers in the industry have averaged 24.3 percent above the 
comparable average for all manufacturing industries for the past 10 years. 

It will be granted without question that wage rates in the auto- 
mobile industry are somewhat higher than those paid throughout 
industry in general. To explain this differential on the basis of the 
industry's improved technology is a highly questionable procedure. 
Far more relevant to the issue are t>vo facts : 

First, competition for workers in the industry. From the earliest 
days ot automobile manufacturing up to the mid-twenties, expand- 
ing production required an expanding labor force. This labor force 
could be supplied only if automobile employment were made suf- 
, ticiently attractive to recruit new workers. Workers in the auto- 
mobile industry in the old days, moreover, were of comparatively 
high skill. Carpenters, cabinet makers, sheet-metal workers, black- 
smiths, and others would move into the industry only if the bait of 
liigh wages were offered. As a result of this, during the twenties the 
automobile industry was among the higher-paying industries of the 
country. So anxious were automobile manufacturers to overcome 
this relative shortage of labor that their advertisements continued 
to appear in Southern newspapers and their employment agents 
continued to be active even after a more than adequate labor force in 
Michigan and other automobile centers had been built up. After 
1929, needless to say, competition among auto manufacturers for 
workers languished considerably. With hundreds of anxious annli- 
cants for every job, high wagers were no longer necessary. T"bus the 



CONCENTRATION OF ECONOAIIC POWER 16363 

depressiorij with its millions of unemployed workers, drove wages 
down precipitously after 1929. The average hourly wage rates were 
75 cents in 1928, 62.8 cents in 1932, and 59.9 cents in 1933. 

It should he, noted, of course, that in' the years 1928 to 1933 as 
wage rates were being pushed down technological progress was mov- 
ing forward rapidly. Although man-hour productivity in 1931 and 
1932 apparently fell, this is explained by the decreased efficiency of 
a low production level. Correlation between technological progress 
and hitrher wage rates is to be found in the minds of apologists for 
the indiistry and not in its statistical records. 

Secondly, union influence on wages. It would seem exceedingly 
difficult to prove that the rise in wages from 59.9 in 1933 to 92.2 
in 1938 and 92.8 in 1939 can be accounted for by technological 
progress. Much more relevant to the issue would seem to be the 
union's policy of demanding higher wage rates. Auto workers are 
now organized to bargain collectively for better wages. Employers 
are no longer able to beat down wages by playing one employee 
against another. 

Further evidence toward this conclusion is seen in the fact that a 
considerable differential in hourly wage rates exists between organ- 
ized and unorganized automobile plants. For instance, the Chrysler 
Corporation is paying at the present time an average hourly rate of 
97 cents. The Ford Motor Co., protected from organization by 
various agencies, pays an average hourly rate of about 87 cents. 
Automobile M'orkers doubt very much that Mr. Ford would pay even 
this rate were it not for his desire to forestall organization. 

The experience of 1937 and 1938 is final proof for our thesis that 
high wages are to be credited to union organization rather than 
technological advance. The latter part of 1937 and all of 1938 were 
depression years. Auto production and employment slumped to 1932 
and 1933 levels (1938 production, 51.8; employment, 63.3; man-hours. 
44.2). 

But wage rates did not slumj) accordingly, as in earlier depressior. 
years. Instead they rose from 88.5 cents in 1937 to 92.2 in 1938 and 
92.8 in 1939. Again it was demonstrated that only when union or- 
ganization is strong may workers secure any share of the benefits of 
technological progress. 

General Motors has and continues to earn more money for its owners than 
any manufacturing corporation in the history of the world. Although its total 
assets as of Decemher 31, 1937, totaling .$l,n6(),000,0(X) were slightly exceeded 
hy'a few other corporations, yet its average yearly earnings in the 2,0 years of 
its corpomte existence have exceeded those of all other corporations. 

So reports the Federal Trade Commission in a recent study of 
the automobile industry. 

Even for the 11-year period, 1927-37, the Federal Trade Commis- 
sion finds G. M. profits averaged 35.5 percent of total investment in 
manufacturing. This average was made in spite of dei^ression con- 
ditions. 

For the same years the Chrysler Corporation made an annual aver- 
age return on total investment in the auto industry of 27.27 percent. 

These truly remarkable figures on profits suggest very strongly 
who the principal beneficiaries of increased productivitv in the in- 
dustFv have been. 



16364 CONCENTRATION OF ECONOMIC POWER 

To make any i-eliable estimate of the benefits of technological 
advance to the car owner during recent years is impossible. It is 
clear that the modern automobile is the product of a whole series of 
improvements. Competitive conditions existing in the industry have 
forced manufacturers to improve the quality and the appearance of 
automobiles with a fair degree of consistency. 

Whether the progressive elimination of competition in the indus- 
try would have the effect of checking improvement in the product 
is a question on which we have been unable to obtain any reliable 
information. 

The experience of the Ford Motor Co. since the change over in 
1927-28 has not encouraged other manufacturers to make any basic 
changes in over-all methods of production. In this connection a 
recent statement by one W. J. Cameron, of the Ford Motor Co., is 
interesting. Mr. Cameron said in his Sunday Evening Hour of 
March 3, 1940, in reference to the Federal Trade Commission report : 

The report shows that the cost of making a Ford car is higher' and profit in 
selling it is lower than for others in the low-price field. Why this higher cost 
of making and this lower profit in selling? Is it due to wasteful expensive 
Ford manufacturing methods? On the contrary, everyone adopts them. Or 
does it indicate that more quality is built into Ford cars? Some members of 
our organisation complain that too much quality is built into Ford cars. It 
takes too many years to wear them out. 

I want it understood that I am quoting Mr. Cameron, not myself. 

The Vice CHAiRMAN. What do we get out of this advertising 
anyhow ? 

Mr. Thomas. Those familiar with the auto industry will recog- 
nize, of course, that the low-profit margin on Ford cars is not to be 
explained on the basis of super value created in the car. Rather 
it is to be explained on the basis of high overhead costs per car 
which follow inevitably upon a level of production lower by far 
than capacity. 

(Senator O'Mahoney resumed the chair.) 

Mr. Thomas. The Federal Trade Commission report (p. 672) indi- 
cates that in the years since 1927 Ford's average annual rate of 
return on the total investment during the entire 11-year period 
was 0.04 percent. This means simply that because of low sales high 
overheaci costs per car wiped out the anticipated profit margin. 

In 1929 the Ford Motor Co. ran somew^here close to capacity pro- 
duction, turning out over 1,600,000 vehicles. In 1932 and 1933 the 
Ford Motor Co. turned out a little over 300,000 vehicles. Even in 
1937 the Ford Motor Co. turned out only 900,000 vehicles. Place 
over against this the total productive capacity of the company — in 
the neighborhood of 1,800,000 vehicles — and the high overhead cost 
per unit is evident. 

These figures on Ford production in relation to productive capac- 
ity will serve to explain the $91,000,000 profit made by Ford in 1929 
as well as the $74,000,000 loss marked up by the Ford Motor Co. 
in 1932. Mr. Cameron's effort to explain these losses as evidence of 
his company's generosity is not very happy. This incident serves 
to illustrate as well the fact that heavy investments in new machinery 
sometimes serve to defeat their own purpose; that is, the reduction 
of costs. Without seeking to analyze this subject in detail, it is 
apparent that heavy investments in new machmeiy are profitable 
Wfjen a steady mass market is assured. 



CONCBNTRATION OF ECJONOMIC P/)WER 16365 

When operations proceed at near capacity, then the tremendous 
saving in labor costs is sufficient to wipe cut investment in ma- 
chinery and return kish profits. But when operations are at a low 
level, capital expenses refuse to be laid off, speeded up, or techno- 
logically displaced. They continue exacting their heavy toll in unit 
costs per car. To counteract this tendency the employer naturally 
seeks to reduce labor costs still lower, though in this case primarily 
through the intensification of labor itself. This is one of the keys 
to the tremendous development of raw speed-up in the industry after 
1929. 

Other manufacturers have preferred to keep their plants up-to- 
date by a series of small yearly changes. This appears to be Ford's 
method now. 

Mr. Court claims that these yearly change-overs in automobile 
models have restricted the rate of technological displacement in the 
industry. He says, "Thus the prospect of model change delays or 
eliminates entirely the use of many labor-saving machines." Mr. 
Court apparently had not read the report of the General Motors 
Corporation for 1938. Stating its policy on model change-overs, 
G. M. announced that its purpose is — 

To inject into each new series of products * * * features which promotp 
comfort and convenience and add to greater appeal from the standpoint or 
appearance * * * (go that) the time during which the original purchaser 
operates any one car is reduced and there is a flow of relatively up-to-date 
cars into the used-car market. * * * The rapid evolution of design neces- 
sitates a more rapid turn-over of productive equipment * * * with resulting 
benefit to costs, because advancing technology is always producing more 
efficient instruments of production. 

In other words, the corporation believes the change-over in models 
with its r'^cessary season of slack production is desirable in that it 
gives the company an opportunity to introduce labor-saving improve- 
ments in machinery and technique. 

Most auto workers believe that these labor-saving improvements in 
machinery bulk much larger than do actual improvements in cars 
produced. 

The Vice Chairman. "Would you like to stop for a moment there? 
What is the statement you just concluded? 

Mr. Thomas. ''Most auto workers believe that these labor-saving 
improvements in machinery bulk much larger than do actual im- 
provements in cars produced." 

The Vice Chairman. What do you mean by that? I don't quite 
get that. 

Mr. Thomas. In recent years there hasn't been very much change, 
mechanically, in an automobile. I have met many manufacturers 
who tell me quite frankly that the reason they change models annu- 
ally is not because they are producing a better car but so they will 
have a better sales field, something different. It is like keeping up 
M ith the Joneses. They change the model so the man doesn't want to 
drive last year's model. 

Ihe Vice Chairman. AVliat I didn't get is quite the connection 
betwi^en the proportion of new devices to the new feature of cars. 

Mr. Thomas. What I am trying to sa^ is that the technological 
improvement in the industry, the change in machinery, is very much 
greater than the change in the automooile would warrant. 



16366 CONCENTRATION OF ECONOMIC POWER 

The Vice Chairman. You mean, then, that these technological 
changes are for the purpose of increasing the productivity of the 
individual ? 

Mr. Thomas. That's right. 

The Vice Chairman. That is what you mean? 

The Chairman. But Mr. Ford made the statement this morning 
that there are about 16,000 parts ill the 1939 model as compared 
with about 5,000 parts in the 1926 model. 

Mr. Thomas. I don't doubt that statement at all. That is prob- 
ably true. There are many more parts in the average automobile 
today than there were a number of years ago, but following that 
theory, does that mean that in 10 years from now there are going 
to be 32,000 parts in the automobile? That change from 5,000 to 
16,000 parts was done through a few years there, when the techno- 
logical improvement in the automobile itself was greater. For the 
past several years there hasn't been that improvement. 

The Chairman. His testimony w^as that in 1926 they had 5,000 
parts ; in 1929, 6,000 parts ; in 1939, 16,000 parts, so that in the past 10 
years there has been quite a change in the inherent quality of the car 
and not alone in its style or fashion. 

Mr. Thomas. That is correct. But as I say, in the last 2 or 3 
years that hasn't been the case at all. 

The Chairman. You are telling us that the change in the machin- 
ery in the last 5 or 10 years has not been very great? 

The Vice Chairman. Just the opposite, is what he says. He says 
tlie change in machinery has been great, but the change in machinery 
lias been out of proportion to the change in the automobiles. 

Mr. Thomas. That is right. 

The Chairman. I see. 

The Vice Chairman. And the point seems to be that this change 
in machinery is to increase the production of the individual working 
man. 

Dr. Anderson. Beyond that, isn't it to increase the salability of the 
product ? 

Mr. Thomas. That's right. 

The Vice Chairman. How about that? That seems to me to get 
i\t cross purposes on that. 

Mr. Thomas. No; you might increase the sale of an automobile 
without improving anything mechanical about it at all. If you have 
noticed, they put a bulge in here, leave a running board off there, 
and just by changing the looks of the car they make the car salable. 

The Vice- Chairman. What I am trying to get at is the substance 
of the point you make, that the new devices are increased out of pro- 
portion to the improvement of the car. Do you mean by "improve- 
ment" the improvement in the wearability of the car or the looks of 
the car, or is it the new devices to increase the number of cars which 
a given group of employees can produce ? 

Mr. Thomas. The improvement has come about — well, J have had 
a manufacturer, or several manufacturers, say to me, for instance, on 
some certain skilled trade— of course, I disagree with what Mr.. 
Ford said on that this morning, because I have had manufacturers 
say this to me— that they are developing new technological processes. 
When I go in and ask for a wage raise for a certain skilled trade, they 



CONCENTRATION OF ECONOMIC POWER 16367 

say, "Well, if you ^et that wa^je rate too high we will put a machine 
in to do the job which can do it cheaper." 

The Vice Chairman. There is something to that, too, isn't there. 

Mr. Thomas. Certai)dy; that is what has happened. The auto- 
mobile manufacturer has only put in technological improvement to 
reduce wages. 

The Chairman. To reduce cost. 

Mr. Thomas. That is right. Well, that is wages. 

The Chairman. It is a very important element in the cost, prob- 
ably tlie most important. 

Mr. Thomas. That is right. 

The Vice Chairman. Now, have you ever figured out, with regard 
ro any more improvement for increasing productivity, how much you 
Avoukl have had to reduce wages to keep human beings doing what 
liiese important machines have done? 

Mr. Thomas. I can't answer that question. 

The Vice Chairman. Has anybody ever gone into that at all ? 

Mr. Thomas. I haven't. I heard Mr. Ford ask that question this 
morning. He told about what the car of years ago would cost if it 
were sold today. 

The Chairman. There was testimony, of courge, this morning, that 
wages would have to be reduced to a perfectly ridiculous level, if you 
could hire enough persons to produce the same number of cars at the 
same cost. 

Mr. Thomas. I agree with that. 

The Chairman. That is perfectly obvious. There is no dispute 
about that. 

Mr. Thomas. That is right. 

EFFECT OF THE "SPEED-UP" 

Mr. HiNRiciis. While you have been interrupted, Mr. Thomas, you 
used the phrase "gross speed-up." What do you mean by that? 

Mr. Thomas. Well, for instance, today, or the other day, a man 
walked into my office. This man happened to work for the Ford 
Motor Co. He was a very good friend of mine. He is a younger 
man than I am — considerably. He was a metal finisher in the plant 
and, by the way, is not a union member. He walked in and sat 
down and talked to me about a half hour, and then he stood up. This 
man i- in a i)erfectly healthy condition, but when he stood, because of 
the way he had to work in the plant, he fell dow^n on his knees, be- 
cause he had been used to being in that position so much that he 
couldn't stand up after sitting down like that for a short while. 

The Chairman. Do you mean that that is characteristic? You 
give us a single instance. Do you want us to understand that that is 
characteristic of all workers? 

Mr. Thomas. No; I wouldn't want to do that. I want it under- 
stood that there are a lot of workers in that same condition. 

The Chairman. You are contending that the speed of work wdiich 
is r(Mjuired is too great for many men to stand. 

Mr. Thomas. That is right. I myself, working in the automobile 
industry — of course in the organized plants we try to overcome that 
to a great extent — over a period of years, when I was a much younger 
man than I am now, have worked, well, there was no limit to the 



16368 CONCENTRATION OF ECONOMIC POWER 

hours, and when we worked, I suppose most of the time the average 
was a 9-hour day. I would say that was about the average, and 
when I went home from work I sat dowm and tried to read a news- 
paper but I was so tired I couldn't do it. I would immediately go 
to sleep, or my hands would be so sore, maybe, from working on a job 
that I couldn't open them after I got up out of bed in the morning. 
I would say that 5 years ago in the automobile industry that was 
generally true. 

The Chairman, But it is not true now ? 

Mr. Thomas. Not generally in the industry. It is quite generally 
true in the unorganized part of the industry. 

The Chairman. You attribute that change to organization ? 

Mr. Thomas. Yes ; I do. 

I have a number of cases here of statements that men have made 
to me who work at the P'ord INIotor Co. I ^\•onder if I could read 
them. It will take only a few minutes. 

The Chairman. Surely. 

Mr. Thomas. First, these are each different men whom I have 
spoken to at the Ford Motor Co. The names of these w^orkers I 
don't want to give out,' it should be quite obvious to everybody why 
I don't want their names in the record. I am quoting what the men 
say: 

The foreman says "Step on it." So much has to be out a day. Production 
is raised every day. If behind, I have to work faster. 

A second man says: 

When we start working on these frames our foreman and his two bosses 
threaten us worse than slaves. Not even a chance to blow my nose. 

A third: 

The threat of being fired or laid off; boss and foreman standing behind 
the men's backs. 

A fourth man: 

He (speaking of the foreman) would tell the men "Either get them out or 
go home." Wliy can't they handle the working men like human beings? 

A fifth: 

Whip-cracking, browbeating, bulldozing, a tyrannical and autocratic attitude 
is assumed and maintained at ah times by all officials from foremen up. No 
improvement is too extensive or complicated as long as it tends to speed up 
production, but practically no improvement is ever considered concerning the 
comfort or wellbeing of the workmen. We have no relief to get to the toilet; 
no attention is paid to ventilation and <^oinperatures. Toilets, coat rooms, and 
exits are over-crowded. We sit yn the fioor to eat lunch. The floor is oily 
and full of ruts which are full of water and oil. Hell ! 

That from a worker employed 16 years by the Ford Motor Co. 

Representative Sumners. Do you think that is, from your observa- 
tion and experience, a correct picture of the conditions in the plant? 

Mr. Tnoivf AS. I have talked to hundreds of men from the Ford Mo- 
tor Co., and I can go right down the line, and that is the picture I 
get from them. I have been at the gates of the Ford i)lant. It so 
happens that I was there once and Ford put me in jail, but I have 
been out at the gates of the plant and any reasonable person who 
would ^o and v.^atch the Ford men coming out of work and then go 
to the gates of any other automobile plant, I don't care what com- 



CONCEiNTRATION OF ECONOMIC POWER 16369 

pany it is, could see the difference in the spirit of the men coming 
out from work. 

Dr. Anderson. Let us look at the assembly line of two of these 
different firms. What marks the difference in the speed-up of the 
Ford assembly line over any of the otlier motor groups? 

Mr. Thomas. Well, as I said, 5 years ago there probably was very 
little difference. Of course, originally Ford was the originator of 
the conveyor lines. That was one of the biggest technological im- 
})rovements in the automobile industry, and Ford was the originator 
of that. Up to about 5 years ago men would start to work on those 
lines and as they got broken into the job the foreman at the end of 
the line would turn a crank to make the line go faster; and he would 
just keep turning that crank, making the line go faster and faster 
each day. Finally, the men with the least resistance or the men who 
were a little grayliaired, or maybe physically weaker than the others, 
found it impossiole to stay on the line, so they were replaced by, well, 
better athletes, I would say. 

Mr, HiNRicHS. But daily increase in speed at the beginning of a 
season is a necessary part of the process of getting a new- model 
under way, isn't it ? That is not the thing you are complaining of. 

Mr. Thomas. We are talking about two different things, I agree 
that what you are talking about has to be done. The thing I was 
talking about continued throughout tlie year. 

^Ir. HiNRicHS. And the union. now concerns itself with this ques- 
tion of the amount of effort required? 

Mr. Thomas. The union concedes that a man, or especially a group 
of men working on an assembly line, when they first start on a job, 
are not at their top efficiency to do an honest day's work until after 
about 30 days, I would say ; but after that, after they reach "a certain 
speed, then we claim, in our organization — well, in some companies 
we negotiate joint standards with the companies, but, after that, if 
a man protests the speed at which he has to work, we have the right 
in all our contracts to take that up with the management as a griev- 
ance, and they are pretty generally settled by negotiations through- 
out the industry, 

Mr, HiNRicHS. Which of the companies are negotiating joint 
standards? 

Mr. Thomas. The companies that are negotiating joint standards 
are, most of them, small companies. I believe the Briggs Manufac- 
turing Co., a body company, is one of the biggest companies that is 
doing that. 

Mr. HiNRifHS. From the union point of view, are you finding 
conditions in those plants more satisfactory? 

Mr. Thomas. Oh, yes ; considerably so. I might say that I was in 
with one manufacturer the other day — I hate to state the names of 
manufacturers because it might give some of them a bad reputation, 
and we are getting along well with them now — and he said: 

I am glad we got the union in here. We used to be known all over the city as 
a butcher shop, and today we have good labor relations, and we want to keep 
that. 

Dr. Kreps. Coming back to the subject of technology, maybe I am 
anticipating something you are going to deal with, but I have been 
wondering whether technological change in the industry can be meas- 



16370 CONCENTRATION OF ECONOMIC POWER 

ured in terms of displaced workers. You seemed, as I looked at it, 
not to separate the amount of work that is done, such as the figures 
that you just gave on man-hours, from the amount of employment 
that you think does not exist because of technological displacement 
as such. Now, as I say, maybe you have some measurements further 
down the line in which you allow for sedsonal and cyclical change:: 
and for other types of unemployment besides technological unem- 
ployment. Is that correct? 

Mr. Thomas. Yes. 

Dr. Keeps. Maybe you would like to go on with your statement, 
then. 

Mr. Thomas. I think this has to do with the question you ask right 
here: Speed-up in the automobile industry. 

1. INTENSIFIED LABOR (SPEED-UP) 

Speed-up in th©^ automobile industry is a controversial subject. Cer- 
tain authorities explain that there is no such thing. The unanimous 
testimony of 400,000 auto workers stands definitely and lUiaTiimously 
against that conclusion. They have experienced the terrific speed-up 
of the modern auto shops. 

The N. R. A.'s study of the automobile industry issued early in 1935 
points out : 

The automobile industry throughout its history has always been efficient and 
became more efficient through the decade of the 1920's. At the end of this decade 
it had reached a peak of practical efficiency ; that is, efficiency that takes into 
account human capabilities from an effective and industrial engineering stand- 
point. The industry led the country in effective time study of its operations and 
the time-study men gradually brought its operations to this efficient peak. 

I might say, in speaking of this time study, I have been time studied 
on a job. By the way, because the workers in the automobile plant 
had been speeded up so much, there was a tendency on their part, when 
aTnan came around to time study them, to try to cheat on that time 
study if they possibly could, and I might say I was the same as every 
automobile worker. One clay I w^as being timed on a spot -welding 
job, and I tried to get as good a time as I could on the job, and I was 
given my time on that particular job the next morning. I went to work 
on the job and I tried my best to get out the number of pieces I had 
been timed for the day before, and it was impossible to do, 

A lot of workers at the plants say that to me today, and a lot of 
times I have thought, well, maybe they just don't want to do so much. 
Yet I know what my own experience was, that it was just impossible 
for me to make the time study which they had made upon me. 

The Chairman. You were glad enough to make that record while 
you were being timed. 

Mr. Thomas. But I didn't make that record. 

The Chairman. When you were being timed you made a record, as 
I understood you. 

Mr. Thomas. No the fact of the matter is, I tried to slow down. 

The Chairman. While you were being timed ? 

Mr. Thomas. While I w^as being timed, and the next day I couldn't 
keep up with that time. 

The Chairman. But slow down time 



I 



CONCENTRATION OF ECONOMIC POWER 16371 

Mr. ThomAs (interposing). The poiliL I am trying to make, this 
time study that they talk about doesn't mean a thing because they set 
men witli stop watches to take the employee's time, and it used to be 
the system in the automobile industry that the man in charge of tlie 
time-study department got a cut on added efficiency every time he 
could cut time and get the men to do so much more work. The result 
was, instead of taking honest time, they would look and see what your 
record was last year, and maybe boost a little more for the last model. 

Mr. PiitE. You both were playing tricks, and he won. 

The Vice Chairman. You mean the next day you couldn't go as slow 
as you went the first day ? 

Mr. Thomas. The next day I couldn't go as fast as what the com- 
j)any claimed I had gone the day before, but I actually knew I hadn't 
gone that fast. 

In other words, before the depression even began automobile pro- 
duction was carried on A\ith eveiy scientific method for squeezing 
a maximum quantity of work per hour from the individual worker. 
Jobs were broken down and timed to the fraction of a second. Men 
were offered bonuses to exceed the production on the rates established 
by time study men. When these levels had been surpassed the new' 
attainments were accepted as normal, and intense pressure was ap- 
]>lied for higher and higher records of output. With the coming of 
the depression the univei"sal testimony of the auto workers is that 
sjieed-up increased beyond the powere of human endurance. 

Quoting again from the N. R. A. report of 1935 : 

The only reason that it (speed-up) can exist as at present is because of the 
luige available supply of labor through which as one man falls by the way- 
side, anotlier is there to take his place. 

'Tf you don't like this job there are thousands outside the gate 
who do." That was management's stock reply to every grievance 
and admonition to everyone who fell behind the frantic pace of the 
assembly line. 

Hounded by foremen, supervisors, and time study men, workers 
"turned out production" with no regard to standards of health or 
safety. Miserable as job conditions may have been, they were less 
miserable than the chronic disaster of an auto worker's life — unem- 
ployment. Altliougli the N. R. A. brought a slight upward revision 
of wage rates, those gains according to the testimony of thousands 
of auto workers were nullified by the exactions of this increasing 
speed-up. 

Summing up workers' testimony on this development during 1933 
and 1934, the N. R. A. report states : 

Evorywliere workers indicated that they were being forced to work harder 
and harder to put out more products in the same amount of time, and with 
less WDrkers doing the job. There was a tendency to excuse the automobile 
manufacturers for lack of steady work. "That is caused by market condi- 
tions." P.ut when it comes to increasing their work loads they are vigorous 
in denouncing the management as slave drivers and worse. If there is any 
one cause for a conflagration in the automobile industry, it is this one. 

It would be untrue to say that since the organization of the 
U. A. W. speed-up has be^n absolutely eliminated from the automo- 
bile industry. Auto workers are producing even yet on levels above 
those of most industrial workers in this country. But the more 
vicious features of the speed-up system have been eliminated in the 



16372 CONCENTRATION OF ECONOMIC POWER 

organized plants at least. Workers ai-e no longer subject to dis- 
missal at the whim of a foreman or company spy. Unfair produc- 
tion standards are negotiated with management and in most cases 
eased down. The vicious piece-work system has been eliminated 
from many plants. "Slave driving" has been replaced by collective 
bargaining, and an industrial dictatorship has given away to the 
recognition of human rights. 

Only in the unorganized plants does the speed-up system still 
prevail. 

SPEED-UP AND Oi^DER WORKER 

Before the coming of the union, few men over 40 could be found 
on assembly lines or basic production jobs in automobile plants. 
Most operations had been simplified and specialized until they re- 
quired no experienced skill for satisfactory production. It is alleged 
that in the Ford plant 43 percent of the workers require 1 day to 
learn their jobs, 36 percent up to 8 days, 6 percent up to 2 weeks, 
14 percent from a month to a year, and only 1 percent more than a 
year. 

Mr. Pike. What is thei basis of that? Have you any idea who 
made that statement? 

Mr. Thomas. We have — whether Ford recognizes it or not — a 
local union in the Ford plant, and this is from our people who belong 
to our union in the Ford plant. 

Mr. Pike. That is, workers in the plant believe that is about true. 

Mr. Thomas. Yes. 

The Vice Chairman. Is the difference in the time to learn how to 
do that work, due to the difference in the ability of the individual 
to learn or the difference in the difficulty of the work to be done? 

Mr. Thomas. It mi^ht be both. This means that experience and 
skill are relatively minor assets in a modern auto plant. Instead 
the ability to endure incredible demands upon nerve and muscle are 
wanted — not patient craftsmanship. 

Some of these older workers find places on the few skilled jobs 
remaining in tht aiito plants. Others are relegated to sweeping floors 
or running elevators. But the vast majority are simply laid off 
and allowed to shift for themselves. 

Says the N. K. A. report : 

The most tragic situation in the industry was revealed to us through the 
testimony of the older workers. They had service records of 10, 15, 20, 30, 
years, often in one plant and occasionally in one department of a plant. 
Always their story was the same. After many years' service with less layoff 
than anybody else there came a time (often in the early years of the depres- 
sion) when they began to be laid off early and were taken back only during 
the busiest season of the year. That happened for several years and then 
finally they did not get back at all. Seldom if ever were they told that they 
were too old. They were merely told that when there was something for 
them they would be called back. But they were never called back. 

Protection for the worker over 40 through a seniority program has 
been one of the central objectives of the uiiiion. The U. A. W.- 
C. I. O. is proud that it has saved thousands of older workers from 
unemployment and a hopeless dependence on charity at the prime of 
life. However, an adequate social-security program alone will pro- 
vide salvation for that group of older men who are unable to meet the 
still ^^"-orous demands of automobile production. 



CONCENTRATION OF ECONOMIC POWER 16373 

To deny that this problem of the older worker exists is irre- 
sponsible folly. Mr. Court claims that — 

The automobile industry increased the proportion of men 45 years or over 
between 1920 and 1930 by 9 percent, according to the U.S. Census. The 
normal expectation, considering this rate of growth of the industry during 
this period and using the performance of other industries as a criterion, was 
for a decrease of 7.1 percent in the proportion of these older men. 

The Chairman. Mr. Thomas, have you made any computation of 
the ages of your members? 

Mr. Thomas. No. 

The Chairman. How many membei-s are there in your organiza- 
tion now? 

Mr. Thomas. We have contracts covering some 400,000. There 
is something I would like to explain at this point. In the automobile 
industry as a whole there are peaks and valleys. When a new pro- 
duction season starts usually their employment goes up to the peak. 
There are thousands of automobile workers in the industry who 
only get 2 or 3 months' work out of a year. 

The. Chairman. How many persons? 

Mr. Thomas. I said thousands — I imagine, guessing — I was gomg 
to take a guess. I would say 15 or 20 percent of th automobile 
workers don't get over 3 months' work out of the year, and I don't 
know that those figures are anywhere near correct. I am just guess- 
ing by my own experience. 

Dr. Anderson. Will you explain that, please? Why is that? 

Mr, Thomas. Wlien they bring out a new model, and as the old 
model goes down, salesmen and dealers try to get all their current 
models off the showroom floors as quickly as possible. When they 
start in production on a new model, they. try to have their dealers' 
stocks built up to a great height, have their dealers filled up full of 
cars before they announce a new model, which means that there is a 
tremendous amount of work during those 2 or 3 months. After those 
dealers are supplied, then they usually go below normal for about, I 
would say, 8 or 9 months, and then there are about 3 months in tjie 
industry, as a general rule, in which only the various oldest workers 
in the industry work at all. 

Dr. Anderson. You are coming to such seasonality in a moment, 
I know, but according to the testimony of Mr. Ford this morning 
%\ ith respect to seasonality, there is a lay-off of a month for a small 
proportion of the total force. 

Mr. Thomas. Of course, as I heard Mr. Ford this morning, I think 
what he said there is at least 75 percent wrong. I happen to know 
from experience at the Ford Motor Co. — I have been working around 
or watching that plant for a long time — there are great peaks and 
valleys where thousands of men are called in and thousands, after a 
short time, are laid off who are never brought back to work. 

Dr. Anderson. So the idea of an 11-month working year, even for 
those who are not hardest hit by the yearly model changes, would 
not, according to your observation, be correct? 

Mr. Thomas. That is right. Anyone coming to Detroit wouldn't 
have to look very far to find, even at peak seasons, thousands of 
automobile workers on the streets, on W. P. A., and every place else. 

Dr. Anderson. Do you have any figures in your union respecting 
seasonality in the plants in which your union works? 

Mr. Thomas. We have. 



36374 CONCENTRATION OF ECONOMIC POWER 

Mr. J. H. WiSHART (director of research, U. A. W.-C. I. O., 
Detroit, Mich.). We have a statement on that in 1934. 

Dr. Anderson. Would it be possible, without too much trouble, 
for your able statistical staff to compile figures on seasonality of 
workers as you know them? 

Mr. WiSHART. I think that can be done. 

The Chairman. You have not compiled statistics on the average 
age of your members? 

Mr. Thomas. We have a comparatively young membership. 

The Chairman. That would be a pretty good indication, would it 
not, of the age of automobile workers, the average age of your mem- 
bers? That would just about tell the story, wouldn't it? 

Mr. Thomas. That is right. 

The Chairman. Don't you think it might be a good thing for you 
to do that? You could probably do it without a gi'eat deal of 
difficulty. 

Mr. Thomas. I think so. According to a Brookings Institution 
report, in 1938-39, 7.2 percent are less than 25 years old; from 25 to 
29, 16.6 percent; 30 to 34, 18.8 percent; 35 to 39, 17.6 percent; 40 to 44, 
14.8 percent; 45 to 49, 11.8 percent; 50 to 54, 7.4 percent. 

The Chairman. That is about equal to the first group you men- 
tioned, isn't it ? 

Mr. Thomas. Yes. From 55 to 59, 3.5 percent; 60 and over, 2.3 
percent. 

The Chairman. What is the authority for those figures? 

Mr. Thomas. That is written by William Herndon McPherson, 
Labor Relations in the Automohile Industry. This is compiled for 
the Manufacturers' Association. 

The Chairman. Does he state, on the page from which you read, 
the source of his figures? 

Mr. Thomas (reading) : 

Estimated by the Automobile Manufactures' Association, based on a 10 percent 
sample of employees of member firms. 

The Chairman. Do you have any reason to believe that that is 
inaccurate ? • 

Mr. Thomas. I just don't know. 

The Chairman. You would assume that it is fairly accurate? 

Mr. Thomas. It is fairly accurate, I think. Ford, of course, doesn't 
belong to the Automobile Manufacturers' Association. 

Dr. Anderson. Mr. Thomas, figures of that kind, standing by them- 
selves, haven't very much comparative value. I presume you treated 
of the topic of older and younger workers in your paper. 

Mr. Thomas. Yes; I have ah-eady mentioned as I went through 
here that we are having absolutely no difficulty in the organized 
plants today. In every contract we have, we have seniority provi- 
sions, and w^e are having no difficulty at all with aged workers. 

The Chairman. What are those provisions? 

Mr. Thomas. It is occupational seniority, and a man can't bump 
another man off his job, regardless of how old he is. 

The Chairman. Just on account of age, regardless of how old he 
gets? 

Mr. Thomas. That is right. We protect his job, no matter how^pld 

The Chairman. Suppose hia productivity falls off? 



CONCENTRATION OF ECONOMIC POWER 16375 

Mr. Thomas. In an automobile company there is always a place 
where a man can be used no matter how old he is. For instance, !n 
the Chrysler Corporation they have one department of old men; in 
the Dodge plant in Detroit there are men there who are working 
who are extremely old. I went through there the other day. One 
man was formerly a superintendent of a plant, some 76 years old now, 
who is working on a bench there. It happens that at this time he 
belongs to the union. He had a grievance and we took up the 
grievance for him. Tliey call it the old men's department, and they 
have work there which they are capable of doing. 

EFFECT OF SHORTENED HOURS ON PR0DUCT1\^TY 

The Chairman. In the earlier days of the labor movement it was, 
I think, pretty well demonstrated that shortening the hours of labor 
tended to increase the productivity of the worker. 

Mr. Thomas. That is right. 

The Chairman. \Vlien instead of working 10 or 12 hours a day 
the worker was required to labor only 8 hours a day, he did a better 
job for his employer and he was a better citizen, too, because his 
health was better. That is correct, is it not? 

Mr. Thomas. I wouldn't say that he had done a better job. The 
average automobile manufacturer — when you are working in there, 
it is pretty hard for an employee to do a better or worse job. 

The Chairman. I wasn't talking about the automobile manufac- 
turer in presenting that question. I was talking about the history 
of the labor movement. 

Mr. Thomas. That is true ; yes. 

The Chairman. That was true, was it not? Now then, what is 
your impression of the result upon productivity of these activities of 
the union which you are describing? 

Mr. Thomas. Well, I don't think there is any question that we 
have less productivity, because we have lessened the speed-up. 

The Chairman. But you feel that you compensate for that in the 
condition of the worker, is that' correct ? 

Mr. Thomas. That is right. 

The Chairman. How much have you lessened productivity? 

Mr. Thomas. I would doubt very much that it would be over (in 
the industry as a whole) 5 or 10 percent. Ten percent would be a 
large figure, in my estimation. 

The Chairman. Tliat productivity, thus reduced 5 or 10 percent, 
compares with the productivity of 5 or 7 years ago in what way ? 

Mr. Thomas. I think there is a big fatigue factor. When men 
worked 10 or 12 hours a day there was a big fatigue factor, and 
when they went to 8 hours a day, many manufacturers got out the 
same production — and this i? not taking technological improvements 
into account at all. The Ford Motor Co. especially was able to get 
out the same amount of production in 8 hours that they had formerly 
done in longer hours. In the organized plants, I don't think we have 
cut productivity any, in comparison with the hourly productivity of 
a 12-hour day, for instance. 

The Chairman. In other words, the elimination of the fatigue 
factor does not decrease productivity. 

Mr. Thomas. That is risfht. 



16376 CONCENTRATION OF ECONOMIC POWER 

The Chairman. What is it that has decreased productivity ? 

Mr. Thomas. Well, the organization. 

The Chairman. I mean what requirement of the organization — 
what practice that you now require? 

Mr. Thomas. If a member of ours is working on a job and he 
feels so fatigued that he can't keep up with that job any longer, 
he places a grievance. 

The Chairman. It is the elimination of the speed-up, then. 

Mr. Thomas. That is right. It is the elimination of the extreme 
speed-up. There are still speed-ups, but it is extreme speed-up. 

The Chairman. Speed-up of s ^ch a character that it becomes a 
grievance which can be presented to the proper committee and 
argued out. 

Mr. Thomas. That is right. 

The Chairman. So that the elimination of the fatigue factor of itself 
does not decrease productivity, but the elimination of excessive speed- 
up does. 

Mr. Thomas. That is right; yes. 

Mr. HiNRicHs. As a matter of practice, have most of those griev- 
ances risen in connection with standards that have already been in 
practice, or have they originated when the speed has been further 
increased ? 

Mr. Thomas. We have very few. We have some, but the pro- 
portion is very small on jobs, as you say, that have been standard. 
We pretty much generally go along with that. 

Mr. HiNRiCHS. When you say that productivity has been de- 
creased, do you mean that you had restrained the increase in pro- 
ductivity, held back the increase? 

Mr. Thomas. That is right. 

Mr. Hinrichs. Rather than actually decreased productivity ? 

Mr. Thomas. That is right. Another thing, when I say that, of 
course, there are many times violent disagreements between us and 
the management on where there is a speed-up or a slow-down. We 
go into production on a new model, for instance. The management 
has figures from a previous year of what amount of work they were 
able to produce, but they have made what they consider is a techno- 
logical improvement. Uur workers find that it is not a technological 
improvement in many cases; it is a hindrance, so that actually they 
are able to do less work after the "improvement is made than before. 

I ran across that in several instances in the last year. The man- 
agement put fewer spot welds on the floor board of a car, which is 
all steel now, than they had the year previously ; so .they said, "You 
ought to be able to do more of them," but when we went in to nego- 
tiate on the thing we found that even though they were putting fewer 
welds on, the ones that were left were in more awkward places, 
so it actually took more time. 

Dr. Anderson. Mr. Thomas, has the union ever attempted to re- 
strict introduction of new technological processes? 

Mr. Thomas. No. 

Dr. Anderson. You accept the introduction, and then attempt to 
control . their use? 

Mr. Thomas. That's right. Well, I don't know ; you say "control 
their use." We often get accused of that. When I go out into a 



CONCENTRATION OF ECONOMIC POWER 16377 

]>lant I tell every member of our union that I want him to jrive 
niunan:ement a fair day's work. Now, a fair day's work is a hard 
(hin<i;^o measure, sometimes, I mean. I don't want any of our people 
stanclinjx around, I want them to work steady, but I don't want 
them to be like race horses, either. 

Dr. Anderson. But the union is conscious now, as perhaps it hasn't 
been in the past, that there is a technological- prochictivity increase, 
and are you attemptinj^ to reach any understandino; with the manage- 
ment about it? You say the slow-down is part of that. Are there 
< ther ways that you attempt to control production? 

Mr. Thomas. I still don't admit that there has been any slow-down. 
I say we have gone to normal. There has been no slow-down. We 
have tried to stop the management's speed-up rather than have a slow- 
down. In our opinion we don't try, in an}- way, to hinder technological 
improvements. In fact, we go along with what perhaps Mr. Ford 
would say, in that we agree with technological improvements, but what 
we ask for is that the savings made with those technological improve- 
ments should be shared to a greater extent with the workers. 

Dr. Andeuson. Is that why you referred a few moments ago to the 
large net earnings on capital ? Do you infer that that is an improper 
situation? 

Mr. Thom.vs. Yes: I do. 

Dr. Anderson. What, in your judgment, should be the prevailing 
situation ? 

Mr. Thomas. I don't think Mr. Ford's money should get any bigger 
return than what I get on mine. 

Mr. Pike. It doesn't, by the record. 

Mr. Thomas. We will say General Motors, or Chrysler. 

PLANT INVESTMENT AND PRODUCTIVITY 

Mr. Pike. There is a point there, I think, that perhaps might be 
made that was perhaps missed. You said that Ford's low earnings are 
very largely due to the fact that he has a very large plant not very 
much used. Isn't it true that both General Motors and Chrysler, also, 
have substantial plant capacity not used to its peak? 

Mr. Thomas. Not to such a large extent as Ford, because Chrysler's 
and General Motors' production has increased more rapidly in the last 
few years than Ford's has. 

Mr. Pike. There is also another point, Mr. Thomas, that in the auto- 
motive industry there is a very high speed of production as compared 
with plant investment, where you can say $1,000,000,000 of investment 
can produce $3,000,000,0t)0 of automobile, or so. So the importance of 
plant investment to output isn't anywhere near as great as it would be 
in many other lines where you have, say, only $1 of output per dollar of 
investment, or as in the public utilities, where you have $1 of output for 
5t=6 of investment. The burden of fixed interest charges, whether paid 
by the public or whether paid to the bondholder, as in Mr. Ford's case 
paid to himself as a shareholder, is nowhere near as great on the pro- 
duction. 

Mr. Thomas. That is correct. 

Mr. Pike. So it is pretty difficult for me to see that any great pro- 
portion of the difference in earnings can be due to the differences in the 
plant. 

124491—41 — pt. 30 13 



16378 CONCENTRATION OF ECONOMIC POWER 

Mr. Thomas. There is another factor that enters into Mr. Ford's 
case. I am not sure of the figure, I believe I could say honestly that 
Mr. Ford has thousands of service men on his pay roll who put noth- 
ing into the automobile at all. They are just there; well, in the 
union we call them "good squads." 

Mr. Pike. I have heard the expression. I never knew it meant 
service men. 

Mr. Thomas. When you put thousands of service men on your 
pay roll who have nothing else to do but to go out and w^atch other 
workers to see that tliey don't w^hisper to each other and that they 
don't talk and that they keep away from other departments, you 
are bound to have a high overhead. 

Again I must accuse Mr. Court of not hitting the nail right on the 
head. According to the Census of Occupations, 17.4 percent of auto 
employees were 45 or over in 1920. In 1930, 19.1 w^ere 45 or over. 
This is an increase in proportion of 9.8 percent. In all manufactur- 
ing and machine industries 26.2 percent were 45 or over in 1920 and 
29.5 percent in 1930. This is not a 7.1 percent drop in proportion, as 
claimed, but a 12.2 percent increase. Even by 1930, then, before the 
weeding-out process had become most ruthless, more than II/2 times 
as many (proportionately) workers 45 years of age or older were 
employed in all industries as in the auto industry? 

DISPLACEMENT OF MEN BY MACHINES 

Mr. Thomas. It is impossible at the present time to give any full 
or adequate survey of changes which have been taking place in ma- 
chinery, techniques, and methods of production generally throughout 
the industry. With tens of thousands of operations involved, this 
subject is one which requires a special analysis by a group of trained 
engineers and economists provided with specific facts on production 
costs. We intend, rather, to give certain examples of changes which 
wnll indicate general tendencies and illustrate the techniques in- 
volved. Obviously, the examples will not by themselves prove that 
there has been an over-all displacement of labor in the industry. 
Representatives of the manufacturers may well cite changes in ma- 
chinery and products for the improvement of automobiles which have 
tended to increase the necessary manpower in automobile produc- 
tion. That tl ere has been over-all displacement of labor is proved 
not by these examples but by the general statistics regarding pro- 
duction and man-hours of employment which we have already cited. 

Approaching this question of technological change generally, it 
call be said that the tendencies pointed out in 1935 by the N. E. A. 
report summarize most of the persent developments in the industry. 
Since 1935 there have been few, if any, basic changes in the method 
of manufacture or machinery. Rather there has been a continuation 
of incessant small changes w^hich individually may have had no 
considerable effect, but which in the aggregate have served to in- 
tensify tremendously total labor displacement. 

1. The N. R. A. report, for instance, lists the introduction of a 
photoelectric automatic inspection device used in the inspection of 
wrist pins. This inspection robot was introduced in one of the de- 
partments of the River Rouge Plant of the Ford Motor Co. in 1935. 



CONCENTRATION OF ECONOMIC POWER 16379 

It resulted in the displacement of 8 out of 10 workers previously 
employed on the inspection job. 

The robot proved so satisfactory on wrist-pin inspection that a 
similar machine was designed for application in the camshaft section 
of the same department. On that job now 4 men are doing the work 
formerly done by 18. 

Mr. Pike. Do they do as good a job? 

Mr. Thomas. A becter job. 

With thisbackground of success, another robot was designed along 
similar lines to inspect crankshafts weighing 75 pounds each instead 
of 18 pounds for each camshaft. When this machine is finally 
introduced it is exj)ected that 2 men will be able to do the work 
formerly done by 90 on this job. 

2. The most striking example cited by the N. E. A. report of techno- 
logical advance was the labor saving achieved through the introduc- 
tion of the all-steel automobile body. According to estimates made 
in the report the all-steel body was turned out at a cost of $30 less 
per unit. This was done in spite of heavy costs for steel and new 
equipment. 

Since 1935 no such revolutionary change has taken place in auto- 
mobile body makin^:. Rather, there has been the development of more 
satisfactory and efficient machinery reducing the number of stamp- 
ings necessary for a body and turning out a product requiring much 
less time for finishing and repair. 

The Chairman. I presume that you have no objection to the ma- 
chine, have you? 

Mr. Thomas. No. 

The Chairman. Because the statement is frequently made that any- 
body who presumes to discuss this question of technology and its effect 
upon the human element is necessarily an enemy of the machine. But 
I gather from your testimony here that you and your organization 
recognize that the machine has made a most invaluable contribution 
to society. 

Mr. Thomas. Tliat is right. 

The Chairman. And you are not in any sense, in discussing the 
desirability of better human application, desiring to displace the 
machine? 

Mr. Thomas. No ; we don't want to do that. 

The Chairman. I thought it would be well to bring that out. 

Mr. Thomas. In this phase of the industry the development of 
strip mills in the steel industry has had considerable effect. Sheets 
are now received from the steel mills made exactly to size for the 
stamping out of car bodies. This has eliminated the jobs of scores 
of shearmen who previously were required to trim steel sheets to size. 

In painting bodies, considerable changes have been realized within 
the last few years. In one medium-sized plant the substitution of 
synthetic enamel for Duco paint has reduced the number of coats 
from 2 to 1, eliminating sanding operations altogether and dividing 
the number of paint operations in half. This change resulted in the 
displacement of 250 men in 1 department that I know of. I might 
also add that the manufacturers always say when they make an im- 
provement like this, "It is better for the customer." But you I jok 
at any automobile that was painted 3 vears ago, and it is a perfectly 



16380 CONCENTllATION OF ECONOMIC POWER 

smooth job. Look at any cheaper automobile today (the liigher- 
priced automobiles still use Duco), in any automobile in the cheaper 
price class, you will find what is called by the manufacturer an 
'•orange peel" iiiiish. It is very wavy if you look at it very closely, 
and it is not nearly the smooth glossy finish that the automobile of 
2 or 3 years ago had on it. 

The Chairman. To what do you attribute that ? 

Mr. Thomas. Before Duco they put many coats on, and they did 
a lot of hand polishing on it to bring, out a high luster. With the 
paint they ha"ve today they don't need to do that. The luster comes 
out without any rubbing whatsoever, but any spray-painting job 
leaves that orange-peel effect. It is not perfectly smooth and it 
doesn't have any rubbing done on it at all. 

The Chairman. But it is just as durable. 

Mr. Thomas. It is just as durable. It may be more durable. 

The Chairman. And the appearance is as good ? 

Mr. Thomas. The appearance is not as good. 

The Chairman. Except for this orange-peel appearance. That is 
the only defect? 

Mr. Thomas. That is right. Any automobile manufacturer him- 
self will admit that. 

The Chairman. And it is a cheaper finish, is it ? 

Mr. Thomas. Oh, nmch cheaper, because they do away with over 
half the employees in putting it on. 

The introduction on this same job of an automatic paint sprayer 
in place of the dip method formerly used has eliminated approxi- 
mately 90 men. This is in another department. 

8. Constant changes are taking place in the thousands of machines 
used for turning out the various mechanical parts going into the 
construction of an automobile. The types of changes here might be 
listed under three main items : 

(a) Increase in the operations performed by a single machine. 
For instance, in many plants where previously 4 or 5 stamping 
presses were necessary, a midtiple press has been introduced. Dies 
are now constructed so that the whole series of stamping operations 
may be done on one machine. 

(b) Speed-up of the machine through improved cutting tools. 
The use of diamonds or carbide tips speeded up many drills, cutters, 
milling machines, broaches, lathes, and other machines. 

(c) The simplification in operation of machine has made it pos- 
sible in many cases for a single operator to increase the number of 
machines he can run. 

(d) The introduction of conveyors in handling bodies, parts, en- 
gine blocks, and so forth, has gone on consistently throughout the 
industry. 

In one plant, for instance, a conveyor system was installed for the 
making of car cushions. Wliere before a single worker did the com- 
plete assembly, now on the conveyor line workers are assigned to one 
small part in the whole assembly job. This has resulted in an in- 
crease of 200 percent in producticm. Steadily during the pafet years 
the efficiency of co7iveyors has been increased and their use extended 
over wider and wider sections of the industry. 

The Chair i\rA^.-T4K^fii I would take it as a resiilt of the conditions 
you are now describing] there would necessarily be a displacement of 



CONCENTRATION OF ECONOMIC POWER 16381 

labor unless the market for the increased product which the new 
process is capable of puttinp: cut were increased proportionately. 

Mr. Thomas. That is ri^ijht. 

Dr. Anderson. Just to add one more question to tli-lt, is it your 
contention that the reason why we do not see the absolute technoloji'- 
ical displacement effected in the automotive industry is that very fact 
of still meeting an expandinjr or large market demand? 

Mr. Thomas. No; the automobile industry is not at the moment 
Bixpanding. 

Dr. Anderson. I said "an expanding or large market demand." 
You can take your choice. 

Mr. Thomas. I think Mr. Ford was right in one statement he 
made. It was along this line, i^nt if they only put 5,000 parts into 
a car there probably would bt lUother half of the auto ^^ orkers who 
wouldn't be working today, because of technological improvements. 
But the fact that there are many more parts is the only reason they 
have been able to stabilize the thing as much as they have. 

Mr. HiNRicHS. I think you also mentioned the reduction of hours 
as being a very important factor. 

Mr. Thomas. That is another factor; yes. 

PRODUCTION AND EMPLOYMENT SINQE 192 9 

The Chairman. But the output of the automobile industry is not 
expanding now, is that your statement? 

Mr. Thomas. Yes. I think I read a report in the newspaper last 
night by one expert who claimed that last month there were as many 
automobiles built as in any other time in history with the exception 
of 1929, and it was very close to the figure of 1929, yet there were 
many mope people working in the industry in 192^ than there are 
today. 

The Chairman. Have you definite figures to show that? 

Mr. Thomas. I haven't definite figures, only from what I know 
in my own experience in the industry. 

The Chairman. Is there any statistical basis for that statement ? 

Mr. Thomas. I think there is. What I base my estimate on is 
that practically every plant in the automobile industry isi employing 
fewer peof a today. 

The Chairman. That is a very important statement, if I under- 
stand you correctly. If 10 years ago the prodiiction of automobiles 
was practically the same as it was last month, and the production 
last month was accomplished by fewer workers, that would be a very 
significant statistical fact. 

Mr. Thomas. I think that could be very easily proved. 

Mr. Hin'Richs. You meant, didn't you, Mr. Thomas, that it was 
accomplished with fewer man-hours. Did you also mean a smaller 
total number of people on the pay roll? 

Mr. Tho:mas. Yes. 

The Chairman. Will you look into that and furnish us a statement? 

Dr. Anderson. Mr. Chaii-man, Mr. Thomas has. in his last table of 
his document, a table showing tlie story through 1936. Do vou have it 
built up beyond '36 to '38? 

Mr. Wishart. We have it for '37 and '38 here. 



16382 CONCENTRATION OF ECONOMIC POWER 

Dr. Anderson. It will settle the question immediately. 

Mr. WiSHART. If I may be allowed to read the figures, production 
in 1937 was 92 ; employment, 107.1. 

The Chairman. Now you are talking in terms of indexes. 

Mr. Wishart. That is right, and we are taking 1929 as 100. In other 
words, in 1937 there were 7.1 percent more workers who had employ- 
ment for a part of the year than there were in 1929 ; in 1938 employ- 
ment was 63.3, with production at 51.8. Naturally the figure is higher 
for this year. My guess is that total employment, the total number 
of workers whose names were on pay rolls in 1939 was perhaps a trifle 
under 1929. 

The Chairman. And what about the output? 

Mr. Wishart. The production index for 1939 hasn't been worked out 
yet on this basis, so there is not much that can be said. Production 
will be lower than it was in 1929. 

The Chairman. Well, of course, then there is no comparison. The 
statement as you made it is not borne out by these figures. 

Mr. Thomas. But proportionately I say what I said is true. 

The Chairman. That is still your analysis of the statistics? 

Mr. Thomas. Yes; that is my best estimate. 

The Chairman. All these economists make a lot of estimates, you 
know. 

Dr. Kreps. You certainly agree that the man-hours are much lower. 
Whether or not the number that were reported on pay rolls was lower 
is another question. 

Mr. Thomas. I think the names on pay rolls are less. 

The Chairman. I think it would be a very important fact to develop 
if it is a fact. 

Dr. Anderson. Is it possible for you to get such data ? 

Mr, Thomas. I think it is; yes. 

Dr. Anderson. Will you supply it to the committee? 

Mr. Wishart. We hope to provide that. 

Mr. Thomas. I might say, in talking about these changes, I had 
another experience with technological improvement myself in an 
automobile plant. I happen to be a welder. I have done the plant's 
gas and electric arc welding, I got a job in the Cadillac Motor Car 
Co., and was welding rear-axle housings by hand, and they paid $1 
apiece for welding those rear-axle housings. Their production aver- 
aged about 100 per day, which required, obviously, 10 welders. We 
did 10 housings apiece a day, which we were paid $10 for doing. 
There was an engineer who worked for the company, and I worked 
with him quite a lot — a Mr. Goodspeed was his name — who developed 
the Goodspeed automatic head for welding. That machine would 
turn out more than enough in a day, with one man operating it, for 
the day's production, and the wages were less than the $10 which 
each one of us originally received. 

The Chairman. That machine was capable of turning out more 
than 100 welded housings? 

Mr. Thomas. Which formerly the 10 men had turned out. I was 
quite interested in the analysis Mr. Ford made, arguing that the cost 
of these machines offset the number of people laid off. I can take 
an average mechanic and take this Goodspeed head. Of course, it 
was wortn something to the man who invented the taing, but it is 
such a simple affair, and they use only one in a plant, that if any 



CONCENTRATION OF ECONOMIC POWEIl 16383 

decent mechanic at all couldn't build one in two weeks' time I would 
think he was a pretty poor mechanic. 

Mr. HiNRiciis. What happened to you 10 men? Were you given 
other jobs in the Cadillac plant? 

Mr. Thomas. The 10 of us were given other jobs, yes, but we were 
given less skilled jobs; that is, most of them were. I continued weld- 
nig there for several years, but most of those 10 men were given less 
skilled jobs. Thoir wages were cut. Some of them, of course, left, be- 
cause they thought they had opportunities of finding a job for their 
trade some place else. 

Here are a few more examples of changes along the lines suggested 
above which have taken place recently in the automobile industry. 
In the production of mowings, graining was formerly done by hand. 
Tins operation was replaced by an automatic graining machine which 
has increased output per man by 400 percent. 

On a press used in the manufacture of clutch release bearing 
springs an air valve was installed, operated by foot, thus enabling 
the operator to increase production by 90 percent. 

On the operation of division channel fabrication in an automotive 
hardware plant a drill press was moved closer to the operator, and 
the table lowered. On this job production was increased from 542 
per hour in 1938 to 794 in 1939. 

The introduction of an automatic polishing machine used for the 
finishing of many parts and accessories occurred in one automobile 
parts plant in 1938. Before a man had been polishing stock on indi- 
vidual grinding wheels. With the introduction of the polishing 
machine, production per hour for each man on one typical part 
increased from 100 to 500. 

Automatic machines were installed in 1938 in many plants for the 
milling, reaming, and boring of many cylinder blocks. Previously 
this operation had required six machines; now the whole job is done 
by one operator on one machine. The job of the operator is to feed 
housings to the machine and move on finished housings as they are 
ejected. 

Changed methods introduced in one plant in 1939 in the setting 
of tappets in engines has resulted in an increase in the number of 
tappets set per hour by 1 man from 96 to 201 Before tappets had- 
been set hot: that is, engines were running and m'-W warmed up; 
operators had been setting the old-style cap screw tt. opet and lock- 
ing them in i)]ace. One man did a complete one on one engine and 
then moved on to work on the next. 

Now tappets are s^t in cold engines as they move between the 
operators on a conveyor. Self-locking tappets arc used which are 
supposed to stay set without a lock nut. Tappets set in this manner 
are reported to give less satisfactory operation, but the change has 
been vindicated by the tremendous savings in labor. 

In I nc motor-assembly plant the installation of conveyors for the 
handliuir of car bodies as they are trucked in from body phints lias 
resulted in considerable saving in labor. Before bodies had been 
handled on push buggies — that is wliat the workers call them (they 
are a tint truck) then stored until called for on tlic production line. 
Now with the conveyor picking up the bodies they are produced in 
the proper number of earh style and are run directly onto the assem- 



16384 CONCENTRATION OF ECONOMIC POWER 

bly line. This has meant the loss of jobs to 25 of the 105 men previ- 
ously engaged in this work. 

In one medium-sizod automobile plant a v.diole series of millinc; 
operations on engine blocks are due for elimination within the next 
year. A broaching machine .costing $750,000 is due for installation. 
One operator using an air hoist will lift the engine block onto a rail 
which will force it through this broaching machine. It is expected 
that the installation of this machine will mean doing away with 126 
men in a department now employing 641. 

These examples, as has been suggested before, represent only a 
fraction of the continuous changes going on in the industry. There 
is no reason to believe that this rate of .change will be slowed dov,n 
in the years to come. Every resource and ingenuity of engineering 
skill has been, and is being, applied to this problem of reducing the 
amount of human labor necessary for a given quantity of produc- 
tion. From discussions with men experienced in the engineering side 
of the industry it can be said that few major changes either ir^ the 
production or methods are to be expected within the next few years. 

The onlf/ basic change is likely to come about through the intro- 
duction of plastic bodies. Already we are informed that some pro- 
duction of plastic bodies has been carried on in European automo- 
bile plants. Although there is some evidence that these new bodies 
have not yet been developed from the ]X)int of ])ractical production, 
those familiar with the industry predict their introduction within 10 
years at the outside. The coming of the plastic body would mean a 
tremendous teclmological displacement through the elimination of 
labor necessary in stamping, painting, and finishing automobile 
bodies. 

REGULARITY OF EMPLOYINIENT 

Mr. Thomas. In listing the blessings which the auto i dustry has 
achieved for its workers, Mr. Court, whose figures Ave have had 
occasion to refer to before, mentions stability of employment. He 
says: 

The average record of continuous employment (In the same plant) for men 
employed in the plants of members of the Automobile Manufacturers Associa- 
tion (lurins 1938 was about 6 years. One-fifth of the men had 10 or more 
years in one plant. 

Here again Mr. Court is giving the automobile manufacturers 
credit for what the union has accomplished in the face of their 
opposition. Stability of employment through the seniority system 
has been and continues to be one of the principal objectives of our 
union. However, the U. A. W.-C. I. O. cannot share Mr. Courts 
satisfaction even with present conditions in this phase of the auto 
workers' life 

The average record of continuous employment, as Mr. Court states 
it, does not reflect- necessarily year-round employment. It is well 
knoAvn that a large proportion of workers whose only employment 
over a long period of years may be in one plant will have only partial 
emplo/ment. 

A study made by the United Stales Department of Labor, Bureau 
of Labor Statistics, on stability of employment in 1934 states: 

Ono> third of the motor vehicle employees work throughout the year. Ono- 
nalf of the employees had less than 6 months work. Another quarter worked 
6 to 10 months. 



CONCENTRATION OF ECONOMIC POWER 16385 

With constant fluctuations in production thi-oughout the year there 
are also constant fluctuations of emph)yment, as the Department of. 
Labor statement indicates. 

Mr. HiNiacHS. May I make one connnent at that point. I don't 
have the fi<:;ures. I am sure you are quoting them correctly. As 
you have indicated, those figures relate to employment in an indi- 
vidual plant; in sonie instances — and we weren't able in that study 
to determine finite how many — the worker may have had employ- 
ment opportunity in two plants. The general picture that you give 
of the large volume of short-time employment is quite correct. I 
don't want to minimize your statement, but I would like to make it 
technically quite accurate at that point because those figures have 
been in a good deal of controversy. 

Mr. Thomas. I would like to say this: You say the worker may 
have had employment in more than one plant. In the automobile 
industry that would be unusual, to say the least. The automobile 
industry strives and they compete with each other. They are all 
trying to, beat the other fellow, so the result is they all come out 
practically at the same time, and they have their peaks and valleys 
atj the same time, so it is practically impossible for an automobile 
worker to work in more than one plant for the duration of a year. 

It should be noted that the Bureau of Labor Statistics study here 
includes salaried employees, who usually work a full 12 months, in 
addition to hourly rated employees. 

Now this is the question you asked awhile ago. 

Organized labor has learned through centuries of experience that 
the intent to check or destroy new machinery is plain social folly. We 
do not stand for artificially increased labor requirements in the pro- 
duction of any of America's basic commodities. What we are con- 
cerned about is that such technological advance should not be entirely 
at the expense of American workers, and the stability of Ajnerican 
economic society. 

It is our })elief that in the pa-st the benefits of technological improve- 
ment have been monopolized by the rulers of our financial and indus- 
trial systems. More efficient production has meant a greater and 
greater accumulation of wealth in the hands of the most powerful. 
This has been accomplished by what appears to be an actual decline 
in the total share of wealth produced going to the employees of in- 
dustry. AYe are opposed to this tendency not only because we feel 
that it is unjust. We are opposed to it because we recognize that con- 
tinued technological advance is impossible without an adequate mass 
market to consume the products of our new skills. 

We believe in genuine technological progress, based upon and re- 
sulting in the greater welfare of the mass of our people. We are 
opposed both to the vicious speed-up system, which has nothing to do 
with genuine technological progress, and to the monopolization by 
the favored few of the benefits flowing from new productive power. 

xVs the experience of the automobile industry shows, technological 
displacement is realized primarily through the failure of markets to 
expand in proportion to an expanding productive capacity. This, the 
United Auto Workers feel, is one of the basic causes for the unem- 
ployment, insecurity, and economic hopelessness of our present time. 
We are proud of our contribution to the solution of these problems 



16386 CONCENTRATION OF ECONOMIC POWER 

through the fight for the economic security of our own people. Or- 
ganized hibor does not believe that a solution to present-day economic 
problems will be found in the discovery of new and improved products. 
We believe that new and improved products will appear and bring 
industrial prosperity when the buying power of the American people 
as a whole is sufficient to make their pruduction profitable. The ex- 
perience of the automobile industry would seem to bear this out. 
American prosperity during the 1920's w^as based on automobiles, but 
automobile sales in turn were based upon the high level of income 
enjoyed by the American people during the first quarter of this cen- 
tury. Without that high level of income the automobile industry 
would have no more effect in developing our prosperity than it had 
in such countries as England, France, and Germany, In these coun- 
tries, although technological advance proceeded as rapidly as in 
America, consistently low-mass purchasing power made impossible 
the circulation of new products to the general public. 

The Chairman. Any further questions, Dr. Anderson? 

Dr. Anderson. These figiires on Ford production related to pro- 
ducing capacity will serve to explain the $91,000,000 profit made by 
Ford in 1929 as well as the $74,000,000 loss marked up by the Ford 
Co.in 1932. It serves to illustrate as well the fact that heavy in- 
vestments in new machinery sometimes serve to defeat their own pur- 
pose, that is, the reduction of costs. I wonder if you would accept 
this qualification, although it may not necessarily explain the Fard 
situation. The obsolescence of a model and the loss of a market might 
reasonably explain Ford's difficulty, rather than his investment here 
in heavy production machinery that didn't yield. 

Mr. Thomas. That is another factor that enters into it, I bWieve; 
yes. 

Dr. Anderson. Would you hold that any machinery is installed by 
a motor maker without having first, from an economic standpoint, 
determined that it will reduce cost in a particular unit where it is 
to be placed ? 

Mr. WiSHART. That is on the assumption of a certain mass produc- 
tion ; yes. 

EFFECT OF MECHANIZATION UPON SKILL 

Dr. Anderson. I want to refer to a question of Mr. Ford's we had 
before you started this afternoon, and that is this one of degrading 
of workmen, which seems to be of real importance not only in terms 
of the satisfaction of the workers involved but in terms of purchasing 
power and general social well-being. Beyond what you have stated 
in this document, what do you think is occurring at the present time 
in the automotive industry? Are workers being degraded to the semi- 
skilled and unskilled level, or is there increasing use of skill in the 
fiutomotive industry*? 

Mr. Thomas. In tbe automobile industry the tendency is more 
toward lower skilled occupations all the time? 

Dr. Anderson. Do you see any immediate prospect of full em- 
ployment in the automotive industry? 

Mr. Thomas. I don't. 

Dr. Anderson. What, in your judgment, is the proportion of un- 
employed automotive workers, either registered with unions or non- 



CONCENTRATION OF ECONOMIC POWER 16387 

union workers, available for labor and seeking work, in proportion to 
the total force? 

Mr. Thomas. Well, that is pretty hard to estimate, due to the fact 
that in our industry, as I said in this statement, a lot of men come 
into the industry from southern States and during the depression 
j'ears have gone back there and we have no way tf account for them 
now. If I would give a guess it would certainly be a very, very 
rough guess. 

Dr. Anderson. In other words you have had an influx from states 
other than the automotive states? 

Mr. Thomas. We are in bad shape today. A lot of them have 
left the state. 

Dr. Anderson. Do you know anything about the circumstances of 
those who left to find employment in their home states? 

Mr. Thomas. No, they can't ; as far as I can learn they keep everj' 
once in a while coming back to Detroit, trying to get jobs, and I 
have talked to a number and they say it is impossible for them to 
get jobs any place. 

Dr. Anderson. Who were those people who came from other states ? 
Were thc}^ farmers, or people from the farms? 

Mr Thomas. Yes . 

Dr, Ander5on. And they made 

Mr. Thomas. They were perhaps sharecroppers and small tenant 
farmers. 

Dr. Anderson. This trend toward shorter hours, do you see any 
evidence that that trend is flattening out? Is there any leveling off 
of the hours of employment? 

Mr. Thomas. In organized shops we have got it pretty much leveled 
off now per day, if that is what you mean. It is pretty much an 
8-hour day now in the industry. 

Dr. Anderson. Are you directing any effort toward an annual wage? 

Mr. Thomas. Well, we are trying in alt our negotiations to convince 
management that it would stabilize the industry a lot more if they 
would agree to an annual wage and we also think it would help the 
unemployment situation. We think the automobile manufacturer 
is well able to afford it by establishing a 6-hour day, 30-hour week. 
Of course we haven't been able to sell that to the manufacturer yet. 

Dr. Anderson. Well, what are the annual earnings, average annual 
earnings of wage earners in the automotive industry? Let me put 
it this way, is it possible to get figures from your uniou that will 
indicate, by grade of labor, the rates of pay and earnings of workers? 
Do you have any such data ? 

Mr. Thomas. We could get a large cross section and try to strike 
an average on something, yes, but it would be a very difficult job. 

Mr. Anderson, Wei], in your new labor contracts are you turning 
increasing attention to such matters as lay-offs and dismissal pay 
and retirement and other social benefits? 

Mr. Thomas. Yes, but that is another thing we have made very 
little progress with at all. The automobile workers have been called 
"dead-end kids" in the labor movement-. The automobile industrial- 
ists who so many years ran the industry as open shops, fight violentlv 
against any new innovation in the industry, and it is a hard job 
for us to make any progress at all on what we feel would be of any 



16388 CONCENTRATION OF ECONOMIC POWER 

economic benefit to the country at large. They would resist with 
their last dollar, I guess, if it became necessary. The Automobile 
Manufacturers Association themselves say that in the season of '^iS 
and '39, the average was $1,328; in '37 and '38 it was $906. 

Dr. Anderson. That is average full-time earnings ? 

Mr, Thomas, Yes. No automobile worker — I say no; 95 percent 
of the automobile workers never work a full year. I don't believe 
I ever worked a full year in the 15 years I was in the automobile 
industry, that I recall. 

The Chairman. What was that figure? 

Mr. Thomas. For the season of 1938 and 1939, $1,328. 

The Chairman. The average? 

Mi-. Thomas. Yes. 

The Chairman. And what does that include in the category of 
woiik ? Does it include everybody in the automobile industry 'i 

Mr. Thomas. This is employees. 

The Chairman. Does it include the office employees? 

Mr. Thomas; Only hourly rate employees, and it doesn't include 
the Ford Motor Co. 

The Chairman. Now, do you regard that as accurate? 

Mr. Thomas, I think it would be very close ; yes. 

The Chairman. In other words, the average hourly employee, 
though he doesn't work a full year, earns more than $100 a month 
in the year? 

Mr. Thomas. In a good year. Of course 1938 w^as considerably 
lower than that. 

The Chairman. This figure, then, refers only to a specific year? 

Mr. Thomas. That is right. 

The Chairman. And what would you say w^ould be the average 
for the last 10 years ? Of course that might be an improper question 
because of course you had the depression years. 

Mr. Thomas. In these figures here the season of '33 and '34 was 
$749; '34-'35, $1,014; '35-'36, $1,294; '36-'37; $1,399: '37-'38, $906; 
'38^'39, $1,328, 

The Chairman. By and large that is a much better record for 
labor than would have been possible 15 or 20 years ago, probably, 
isn't it? 

Mr. Thomas. Yes ; but I remember 15 or 20 years ago when living 
costs were considerably lower, too. 

The Chairman. That is true, but I mean it is true, is it not, that 
there has been a general improvement? 

Mr. Thomas. There has been in the last several years, as I stated 
in my brief here; in the last several years in which we have had 
organization we have increased wages considerably. 

The Chairman. In other words you don't deny there has been an 
improved condition? 

Mr. Thomas. Certainly not. 

The Chairman. But contend the improvement isn't sufficient to 
sustain our economic system? 

Mr. Thomas. That is right. 

The Chairman. And it doesn't provide employment for all who 
need jobs? 

Mr. Thomas. That is right. 



CONCENTRATION OF ECONOMIC POWER 1638^ 

The Chairman. You are quoting from this book of the Associa- 
tion of Automobile Manufacturers. Did you also bring this docu- 
ment to the room? 

Dr. Anuki;son. I am responsible for that, Mr. Chairman. I brougiit 
it the first day and handed it to the connnittee, the documents' that 
were available. This particular document, I might say, is' from the 
Automobile Manufacturers Association; the study is considered the 
basic economic study in the field and so far as I know literature of 
this kind it is the most competent job th .t has been done. 

The Chairman. Well, I note it begins with this sentence from Don 
Quixote, to the effect: "No greater knight errants have sought to 
exorcise the imagined devil in labor-saving machinery." I suppose 
you have read this document. Is that the tone of it ? 

Dr. Anderson. After the first paragraph the economists who wrote 
this document apparently moved into some economic analyses and 
foro;ot about the first paragraph. 

Mr. Thomas. These fio-ures I quote here are from a study by the 
Brookings Institution, wdii -h they got from the Manufacturers' As 
sociation. 

The Chairman. Well, I observe that the author of this pamphlet 
distributed by Dr. Anderson is Mr. Andrew T. Court, an economist 
wliom you have quoted, apparently, from time to time. 
Mr. Pike. Not with the highest approval, however. 
The Chairman. That is what I am getting at. 
Mr. Pike. He has quoted a good many of those same figures. 
The Chairman. I am told that Dr. Court is in the room. Would 
it be proper to give him an opportunity to dispute Mr. Thomas? 

Dr. Anderson. I might say. by way of explanation, Mr. Chairman, 
that in these hearings we have made every effort to secure all the 
facts available. 
The Chairman. I hope so. 

Dr. Anderson. In these hearings we have tried to get all attend- 
ing parties into the room for ihe discussion of their particular points 
of view. We early asked the Automobile Manufacturers^ Associa- 
tion to have a representative speak for them here. As a starting point 
we made an analysis of this document, which was their statement of 
the case. Since Mr. Paul Hoffman, of the Studebaker Co., could not 
come to testify, the}' decided not to have a representative at the 
hearings, but it was agreed that if any witness should refer to this 
study, we would give them an opportunity to be heard in refutation. 
If Mr. Court is here and would like to be heard now we would be glad 
to hear him. 
The Chairman. Is Mr. Court present? 

Mr. Court. I am present. The questions raised mainl}' are tech- 
nical questions between the relative usefulness of the figures from 
various -Government departments, and I don't think I am prepared 
to comment on that. 

The Chairman. All I want to say is, Mr. Court, if you do care to 
make any statement, I am sure the committee would be very glad to 
have you do it at your own convenience. 

Mr. Court. Thank you very much. Not at this time. 
The Chairman. Are tliere any other questions to be asked of Mr 
Thomas? 



16390 CONCENTRATION OF ECONOMIC POWER 

Mr. HiNRiCHS. I indicated earlier that I wanted to make some 
observations with reference to the reference to census figures in the 
Bureau of Labor Statistics figures. There is no essential controversy, 
but I think that a clearer statement of the facts might be helpful 
for the record. The increase from 1929 to 1937 which appears to be 
larger in the Bureau of Labor Statistics series than in the census 
figures, is due to the fact that in 1937 and before we had included 
the steel-making and foundry establishments in the automobile in- 
dustry, and the 1937 census excluded them from its count of the 
industry. In 1929 those particular ")arts of the industry were rela- 
tively unimportant. We normally adjust our classifications to corre- 
spond with those of the census so that there won't be any difference 
in the two sets of figures. Our figures, however, are compiled pri- 
marily in order to show month-to-month fluctuations between census 
periods, and the reports come to us voluntarily from the various 
manufacturers. 

The automobile industry was apparently unable to furnish us a 
break-clown of their employment figures on a monthly basis. It was 
indicated by the census figures and in order to get comparable fig- 
ures from month to month we have had to carry our figures forward. 
Now there is no question that there is a discrepancy between the 
two. It doesn't have anything to do with the reliability of one set 
or the other. One merely needs to know the differences in content, 
which in this case affects on the one hand the automobile figures 
aiid on the other hand the iron and steel figUx^es. 

The Chairman. In other words every statistician will defend his 
estimates ? 

Mr. HiNRiCHS. Our figures are perfectly all right, but the point of 
view for which they are published differs. 

Mr. WisHART. TVe were not attacking the Bureau of Labor Statis- 
tics or the Census of Manufactures. W^ were attacking the com- 
parison of tilings fundamentally noncomparable. As you have 
pointed out, the census figures and B. L. S. figures cover different 
sections of the industry; since the B. L. S. has not included the same 
things, of course, there is a discrepancy there which appeared to 
cover up the actual '^echnological displacement which had occurred. 

The Chairman. If there are no other questions, Mr. Thomas, we 
are very much -ndebted to you for your presence here and your testi- 
mony. The committee will stand in recess until 10 : 30 tomorrow 
morning. 

(Whereupon at 5 : 10 p. m. a recess was taken until 10:30 Thurs- 
day morning.) 



INVESTIGATION OF CONCENTKATION OF ECONOMIC POWER 



THURSDAY, APRIL 11, 1940 

United States Senate, 
Temporary National Economic Committee, 

Washington., D. C. 

The committee met at 10:40 a. m., pursuant to adjournment on 
Wednesday, April 10, 11)40, in the Caucus Room, Senate Office Build- 
ing, Senator Joseph C. O'Mahoney, AVyoniing, i)resi(ling. 

Present: Senators O'Mahoney (chairman), and Kin<2:; Representa- 
tive Williams; Messrs. O'Connell, Pike, Hinrichs, and Brackett. 

Present also: George E. Bigge, Social Security Board; Frank H. 
Elmore, Jr., Department of Justice, and Dewey Anderson, economic 
consultant to the connnittee. 

The CHAiR:\rAN. The committee will please come to order. 

Dr. Anderson. We propose today to present two witnesses, both 
familiar with the steel industry, to examine into the problem of 
technology in steel. This morning's witness is Mr. Charles Hook, 
president of the American Rolling Mill Co. ; ^ this afternoon's wit- 
ness, Mr. Philip Murray, chairman of the Steel Workers' Organizing 
Committee. Mr. Hook has prepared a statement and is now ready 
to testify. 

STATEMENT OF CHARLES R. HOOK, PRESIDENT, THE AMERICAN 
ROLLING MILL CO., MIDDLETOWN, OHIO 

Mr. Hook. It is not my intention to attempt any theoretical analy- 
sis of the effects of technological innovations on employment. It 
seems to me, however, that most economists and businessmen are 
agreed that technological improvements tend to stimulate the demand 
for labor, and do not of themselves bring about prolonged periods 
of unemployment. 

I believe it has been tlioroughly established that ever since the in- 
troduction of power machinery, there has been a continuous increase 
in the output per man-hour in industrialized countries. This in- 
crease in man-hour output, as we all know, has been accompanied by 
increased em))loynient, shorter Avorlving hours, improved working 
conditions, and an ever-advancing standard of living. 

It is true that the introduction of a labor-saving device may cause 
some inunediate displacement of individual workers. Likewise, 
workers in some trades ma}' be displaced vviien new products, as was 
true of the automobile, appear upon the market. Such temporary 
dislocations are inevitable in a progressive society, and they need 

' See Hearings, I'arts 19 and 2t>, for prin-ious testimony of Mr. Hook. 

16391 



16392 CONCENTRATION OF ECONOMIC POWER 

cause concern only when the displaced workers are unable to find 
other employment without prolonged delay. 

It is my observation as a businessman that the time which must 
elapse before any displaced woi^kers are reabsorbed into other lines 
of work depends upon general business conditions and the relative 
freedom from causes whirli restrict the free flow of capital. The 
elapsed time is brief when all factors are favorable, as during the 
postwar period of the early 1920's, when employment gained simul- 
taneously with many technological advances. 

The elapsed time may be longer when general conditions are unfa 
vorable as they have been in recent years, but the experience of the 
last century seems to provide no evidence for concluding that tech- 
nological improvements cause permanent unemployment or help to 
bring about prolonged depressions. 

Periods of business depression always give rise to efforts to locate 
the focal point of infection. This is not the first time the finger of 
suspicion has been pointed at so-called technological improvements 
as the chief cause of unemployment. 

The" clamor against improvements in manufacturing techniques 
has been raised many times during the past 150 years. On such occa- 
sions the charges have been show^n by subsequent events to be un- 
founded and fallacious. Notwithstanding these lessons of history, 
the old exploded theory, like Banquo's ghost, has come to life again 
wearing the label of "technological unemployment." 

Actually it is impossible to measure precisely the broad effect of 
the introduction of a machine upon either employment or output per 
man. Many factors enter into the determination of changes in em- 
ployment and man-hour output. 

Technological innovations relating to blast furnaces and open- 
hearth processes, mechanical and electrical equipment, labor-saving 
devices, improvements in supervision, better working conditions, in- 
centive systeias, and so forth, are all factors which may perma- 
nently influence change in output per man-hour. To attribute a 
given increase in output per worker to any one of these many 
factors would seem to me highly theoretical and, from a practical 
point of view, impossible to demonstrate with any acceptable degree 
of accuracy. 

Since I regard it as w^holly unfeasible to attempt any precise 
measurement of the effect of technological change on employment, it 
is my intention, following these preliminary Remarks, to present for 
the consideration of the committee a factual record. This record will 
cover changes in a large unit of the company with which I am asso- 
ciated and in which the continuous sheet mill represents the outstand- 
ing tech.nological improvement. ' 

For that purpose, I have chosen the period covering the years 1926 
down to 1937, because it M^as during that period that all but one of 
the continuous sheet rolling mills were introduced into the steel 
industry. 

Following the presentation of data relating to my own company, 
I shall show comparable data as to employment in the iron and steel 
industry for the same period. All tliese data show conclusively that 
the installation of continuous mills have not reduced employment. 

With the committ^-e's permission I will present this factual record 
in considerable detail with charts and tables. 



CONCENTRATION OP ECHDNOMIC POWER 16393 

nRST CONTINUOUS SHEET MILL INSTALLED IN 1926 

Mr. Hook. Before doing so, I should like to comment briefly on 
some of the striking changes in the steel industry which have taken 
place since the invention of the continuous sheet rolling mill. Since 
the first continuous sheet rolling mill was put into operation, 27 such 
mills had been installed by 1937, representing a total investment by 
the industry of approximately $500,000,000. Building that equip- 
ment has provided work for thousands of workers in the construction 
and equipment industries. 

It has been alleged that 85,000 to 90,000 workers haye been dis- 
placed by the continuous j^ieet-mill process. Such a claim is shown 
by an examination of the facts to be wholly without foundation. 

In 1926 a total of 1,2C4 hand mills for producing hot rolled sheets 
and black plate were in existence. The greatest number of men that 
could have been employed on these mills, on 3-shift operations, would 
have'been approximately 43,000, or only about 10 percent of the total 
number of workers employed in the entire iron and steel industry at 
that time. 

Obviously, if all of the hand mills in existence in 1926 had been 
eliminated by the introduction of continuous sheet mills, the total 
number of job displacements could not possibly have been even one- 
half of 90,000. But actually there are still 750 of those mills in exist- 
ence with approximately half in operation. That is a reduction of 
the number of men employed on hand mills of about 27,000. But for 
the steel industry as a whole we had an actual increase of working 
forces of 117,000 men from 1927 to 1937. Total employment in the 
steel industry increased from 427,000 in 1927 to 544,000 in 1937, ac- 
cording to figures of the United States census, an increase of 27.4 per- 
cent, while in the meantime the population incre9,se has been 11.2 
percent, according to the same source. 

Mr. HiNRicHS. Just one question at that point. You use the phrase 
"27 continuous sheet rolling mills" and then you speak of 1,264 hand 
mills. Are the hand mills separate enterprises? 

Mr. Hook. They are the old method, tHe old sheet mills which I 
will show in a picture in a few minutes. 

Mr. HiNRicHS. I see ; they arc separate enterprises and not a part 
of the factory enterprises, with 3 or 4 mills. 

Mr. Hook. No; they are not separata. We make sheets on the 
old steel mill, just as we make sheets on the continuous rolling mill. 

Mr. HiNRicHs. And the mill that you refer to as a hand mill is the 
machine, not a factory. 

Mr. Hook. Oh, no; it is a machine. In other words, we made sheets 
on these old hand mills prior to 1926, or in our case prior to 1924. 
Now then, we introduced to do that same job the continuous sheet 
rolling mill. Do I make myself clear? 
Mr. HiNRiCHS. Quite. 

Mr. Hook. Of course it is true that when a continuous sheet mill 
replaces hand mills more jobs are atfocted than those" of the immediate 
hand mill crew of some 8 or 10 men. Other jobs on operations back 
in the plant leading up to the hand mill or connected with its main- 
tenance are afiected also. But that does not mean that such jobs are 
eliminated. In most cases they are merely changed. 

124491— 41— pt. 30 14 



16394 CONCENTRATION OF ECONOMIC POWER 

Men who were skin passers, shearmen, handlers, oilers, weighers, 
picklers, and cranemen on the hand mills are doing the same kind 
of work on the continuous mills. I have cited only a few examples. 
There are many more. 

Not only are such jobs held over in the continuous mill operation, 
but in some categories the number of men required is greatly increased. 

Moreover, the continuous mill creates new jobs which do not exist 
in the hand mill. I will name only a few of these, such as bearing 
setters and helpers, welders, recoil operators, and stitcher operators. 

Another factor bearing upon the record of increased employment 
in the steel industy is the significant increase in the production of light 
flat rolled products from 6,327,000 tons in 1926 to 10,793,000 tons in 
1937. Ihat required more workers in the blast furnace, the open 
hearth, and in all finishing, processing, and shipping departments. 
It must also be realized that many new technical, administrative, and 
selling jobs have been created by this increased volume of production. 

I am sure that there is unanimous agreement among consumers 
of sheet steel that the improvement in quality and properties of this 
product, resulting from the continuous mill, has made possible exten- 
sive improvements in many widely used consumer articles. Notable 
among such improvements are those in the automobile, washing ma- 
chine, electric and gas range, kitchen cabinet, and refrigerator indus- 
tries, all of which have resulted in providing for the consumer a 
a constantly improved product at a steadily reduced price. 

Steel users not only have benefited from improved quality, which 
makes for possible lower fabrication costs, but they have also enjoyed 
the advantage of lower prices as well. From 1926 to 1939 the aver^ 
age prices of all iron and steel sheets realized by our company declined 
31.1 percent. 

ADVANTAGES TO Lu\BOR FROM CONTINUOUS MILLS 

Mr. Hook. Advantages from the continuous sheet mill process have 
come to labor in two important ways. 

First, workers have benefited from the lightening of their task and 
from the improvement of working conditions in the rolling mills. As 
a former woi'ker in the mills myself, I speak from personal experience 
when I say that the w^ork on the old style hand mill was one of the 
most arduous and difficult of any in the steel industry. The continu- 
ous mills, wherever they have been installed, have completely elimi- 
nated all of the difficult and taxing manual phases of work in the 
rolling mill. 

Second, worke;'s have benefited from the broadening of markets 
brought about by the continuous sheet mills. Changes in the quality 
and properties of sheets made by the new process are so great as to 
amount practically to the introduction of an entirely new product 
in the steel industry. It is a product which lends itself to uses and 
applications utterly beyond the scope of old style sheets 

Accordingly, workers are employed in the production of large ton- 
nages of sheet steel for uses who'^y nonexistent before the appearance 
of the continuous mill. I could inention, for example, the steel auto 
top, and one-piece auto fenders, each of which is stamped at a single 
operation from a single wide steel sheet. 



CONCEl^TRATrON OF ECONOMIC POWER 16395 

Moreover, since 1926, average earnings, of workers in the steel indus- 
try have increased from 63.6 cents an hour to 84.7 cents an hour, a 
gain of 32 percent. Meanwhile, there has also been a substantial 
shortening of hours of work. 

The hot-rolled production of other than light flat-rolled products 
in the yea^s 1926 to 1937 shows a reduction of 11 percent, or approxi- 
mately'3,')00,000 tons, while at the seme time the light flat-rolled prod- 
ucts increased approximately 4,500,000 tons, requiring about 45,000 
men. This number of men is more than was previously employed in 
all of the sheet mills in 1926. It is evident, therefore, that the intro- 
duction of the continuous rolling mill' has not been accompanied by 
a decrease in employriient, but on the contrary, since its adoption, the- 
number of workers in the steel industry has materially increased. 

Now, Mr. Chairman, with your permission 

The Chairman (interposing). Now to what do you attribute, Mr. 
Hook, this material increase in the number of workmen? 

Mr. HooK.^ I am going to show you in the charts that follow, and 
some of the exhibits, one small exhibit that I have here. 

The Chairman. I see. 

Before you turn to the charts, it just occurs to me to make this 
comment. I think that in the entire discussion of technological im- 
provement arid its relation to unemployment, there is constant danger 
of misunderstanding of the terms in which people are talking. 

Mr. Hook. ,That is possible. 

The Chairman. There is no doubt, I suppose, that there are persons 
who believe and who say that the mxchine as such is responsible for 
unemployment, but I can't recall any person in any responsible posi- 
tion as having said that in my hearing, or of saying it in any docu- 
ment that I have read. 

The question, I think, revolves around the actual fact of labor 
displacement. 

Mr. Hook. That is right. 

The Chairman. Which apparently is recognized by all industrial 
leaders, and is apparently recognized in your statement. 

Mr. Hook. No; I think I said not displacement — pardon me. 
Senator. 

The Chairman. This is what you say on the first page : 

It is my observation as a business man that the time which must elapse before 
any displaced workers are reabsorbed into other lines of work dei)ends upon 
general business conditions and the relative feedom from causes which restrict 
the free flow of capital. 

Mr. Hook. Correct. 

The Chairman. Now that sentence seems to recognize tliat there 
is such a thing as displacement of workers. 

Mr. Hook. Temporary, becaur;e I s ly until they are reabsorbed. 

The Ch/.irman That i= right. And the question therefore, revolves 
around the ability of industry as a whole, business as a whole, not 
merely mechanical industry but the whole economy, to reabsorb per- 
sons who are displaced, because there is apparently such a thing as 
displacement of individuals. 

Mr. Hook. That is possible, but taking it as a whole 

The Chairman (interposing). Is it possible or is it a fact? 



16396 CONCENTRATION OP ECONOMIC POWER 

Mr. Hook. If that individual is displaced, another man is employed, 
maybe 30 miles away. 

The Chairman. That is right. That is exactly the point 

Mr. Hook (interposing). Plus anotlier man, probably. 
The Chairman. That might be very true. That, of course, is the very 
point of impact. The particular person loses a job though another, 
or 2 or 10 jobs may be created somewhere else. And the problem of 
reabsorbing the displaced worker as set forth in this sentence of yours 
is, as I see it, the heart of this problem. Do you agree with that state- 
ment? 

Mr. Hook. Well, it is a problem and industry has been making a 
great many studies. For instance, the National Association of Manu- 
facturers now. Senator, have a committee at work, just as we studied 
the worker over 40 and proved fallacious the general statement, that 
is, often made, that industry was not employing the worker over 40. 
And that report shows that in recent years the proportion of men over 
40 are greater than they were in the twenties. 

The Chairman. And I think it would be proper for me to say here 
that my observation of this whole economic problem throughout this 
study has given me a great deal of encouragement by reason of the 
very obvious effort that is being made by men like yourselves, and by 
organizations like the National Association of Manufacturers, to study 
the very problem that we are studying, and to bring about beneficial 
social results. I think there can be no doubt about that. We are all 
working, as it were, toward the same end. 

There can be^no doubt, either, it seems to me, that the development 
of technology and the introduction of new devices like your continuous 
mill, which have the result of enabling you to produce your sheet at a 
lower price, necessarily results in making that sheet available for com- 
modities and other industries for which it was not available at the 
higher price, and thereby tends to open the door of opportunity to 
those who didn't have the open door before. 

Mr. Hook. Correct. 

The Chairman. J was curious, however, to ask you whether the re- 
employment of workers as indicated in yotir statement, of more work- 
ers than had been in the industry before, tends to keep your cost up, 
and if it doesn't — which apparently is not the case from your conclu- 
sion — how is it that with maintenance-of-labor costs you still can reduce 
the price of the commodity ? 

Mr. Hook. I will show that to you, I think very clearly on the charts. 
Senator. 

Senator King. A temporary displacement doesn't mean a perma- 
nent one. Of course that is a question that answers itself. 

Mr. Hook. No, indeed. Senator. 

Senator King. In other words, when you introduce machinery in 
which you displace A, B, and C, perhaps with the new machine A would 
be employed and X, Y, and Z be employed. 

Mr. Hook. Correct. 

Senator King. So there would be a temporary change or transition 
from one position to another. 

Mr. Hook. And as T go through his explanation using facts, the 
actual factual records, I think many of the questions that may come to 
your mind, Senator, will be cleared uP- 



CONCENTRATION OF ECONOMIC POWER 16397 

The Chairman. Of course, some of us are looking at this problem 
as a whole and not from the point of view of a i)articular industry. 
Unemplciyment is a major fact that stares us all in the face. Now, 
this unemployment is not by any niQans all industrial. Some of it 
is agricultural, some of it is professional, and what not. It is to be 
found in all lines of endeavor. But for years now Congress has been 
trying to make work for persons who apparently are unable to find 
work in normal avenues, and our problem, the problem of the Na- 
tional Association of Manufacturers, and the Association of Automo- 
bile Manufacturers, and the problem of Congress, is how to coordinate 
the efforts of all to lift this burden of making work off the Govern- 
ment which is doing it only by piling up debt. 

Mr. Hook. We agree with you on that, Senator, 100 percent. 

EFFECT OF CONTINUOUS MILLS ON AGE OF WORKERS 

Mr. HiNRicHS. I would like to come back for just a moment to 
your stateinent about the possible displacement of a worker here and 
the emploj^ment of another worker 30 miles away, or even next door. 
Most of these hand mills were in operation in the early twenties, 
"vvere they not? 

Mr. HcoK. Correct. Some of them still are operating today. 

]Mr. HiNRiciis. Some of them still operating. Let's start, for ex- 
ample, in 1923. You had a fully equipped hand-mill staff wnth per- 
sonnel. Minor improvements would possibly reduce the total 
amount of labor that you needed in the mill, possibly some expansion 
of the mill might require j^ou to add a few work 's. 3y and large, 
however, you had, barring large fluctuation in tlie total volume of 
production, relatively steady employment from yea,r to year. 

With that group fully employed in 1923, you would have tended 
to hire the same people in 1924, the same people in 1925, in 1926. 
There were deaihs, retirements, accidents, and that sort of thing, so 
that you did have some new hiring, but it is a tendency in any busi- 
ness enterprise that is fully established, for the average age of the 
^vorkers in that establishment to rise from year to year, isn't it? 

Mr. Hook. Yes; as the individual company gets older, you 
don't 

Mr. HiXRicirs (interposing). Your workers get older with you. 

Mr. Hook. Of course. 

•Mi;. Hinrichs. Now then, you come along to 1933, 1936, and 1937, 
and open a new mill. Insofar as the workers in this old hand mill 
are displaced and not provided for in the new mill or transferred 
to the new mill, the workers who were in that hand mill in 1935 are 
a relatively old group as comj^ared with the .otal working population, 
l)ecause a verv high proportion of them were with you back in 1923, 
1920, 1915. 

Mr. Hook. That's correct. 

Mr. Hinrtchs. When 3^ou come to open up a totally new em- 
ployment opportunity as a business enterprise, you are not normally 
hiring a straight cross section of the working pojiulation. There, 
starting up a new enterprise, you are much more likely to be hiring 
younger workers. Isn't that true? 



16398 CONCENTRATION OF ECONOMIC POWER 

Mr. Hook. No ; that is not necessarily true, Mr. Hinrichs. Let nie 
tell you just what did happen, because we don't need .to theorize 
about it. The continuous rolling-mill process has eliminated the old 
back-breaking jobs so that in the plant now, the continuous mill, the 
fellow can work to an older age than he could under the old process 
because the old process was so hard, and I hope that I can persuade 
you to come out to Middletown and see this in operation ; see the old 
with the new. 

Mr. Hinrichs. I have seen them, but I recognize that fact. I also 
saw a mill in which a very high proportion of a high-school class 
had been hired. I wasn't theorizing when I spoke about the tendency 
of business, of a new enterprise, to hire younger workers. You will 
find, for example, if you take relatively,' new industries, as com- 
pared with relatively oldel- industries, in the census figures, there is 
a very great difference between the average ages in the old industries 
and "in the new industries. It may not be applicable to your particu- 
lar situation, but it is not a theoretical situation; displacement in 
older plants tends to be of an older age group and hiring in new 
plants tends to be of a somewhat younger age group. The equivalents 
that you are setting up in this process of one worker here and one 
worker there is very often a problem of hiring a man of 45, or put 
ting a man of 45 on the labor market again and hiring workers gen- 
erally 25 to 45 years old (the preferential hiring ages) if you are 
looking forward to an establishment that you are going to have oper- 
ating de novo from year to year. 

Mr. Hook. You are talking about two different things. For in- 
stance, you are talking on the one hand about a new enterprise, and 
what we are discussing here is the effect of a new process on those 
who weriB formerly operating and making the same product by an- 
other method. Now, they are two different things, and what I am 
saying to you is that this new process, having eliminated the old 
back-breaking jobs, has made it possible for these old men to work 
tQ a longer number of years in the plant than they could have under 
the old process. 

Mr. Pike. Still in the same enterprise. 

Mr. Hook. And still in the same enterprise. 

The Chairman. Do you show that in your charts? 

Mr. Hook. Yes. 

The Chairman. May I say, then, I must apologize to you, Mr. 
Hook, because last night you requested me to permit you to make 
your statement before the questioning, and I was the first to offend. 

Representative Williams. I would like to ask a question before you 
leave that. 

Mr. Hook. I want to do everything I can to enlighten -you. 

Representative Williams. I see from your statement that the ac- 
tual employmeait in the steel industry during '^»e 10 years under con- 
sideration increased 177,000. 

Mr. Hook. It is 117,000, I think, Mr. Williams. 

Senator King. Was that for the whole steel industry ? 

Representative Williams. That was the whole industry, as I under- 
stand your statement. 

Mr. Hook. Of which we are a part — blast furnaces, steel works, and 
rolling mills. 



CONCENTRATION OF ECONOMIC POWER 16399 

Representative Williams. Of course, that is evidently not true as 
to other industries. 

Mr. Hook. I am only here giving you the facts with reference to the 
steel industry, but we have a chart at* the end — by. the v ay, we are 
using Department of Labor figures — which shows the results in man- 
ufacturing industries as a whole, and I think maybe we v'ill ansVver 
the question that is ii) your mind, Mr. Williams, at that time. 

Representative Williams. I wonder if you have the facts which 
would show the productivity of the industry during those 10 years, 
as compared with the number of increased employment. What is the 
relative improvement in productivity during that same period? 

Mr. Hook. We will show you that very clearly. 

The Chairman. All right, then, Mr. Hook, we will allow you to 
proceed with your charts and we will try not to interrupt until you 
are finished. 

Mr. Hook. It is very difficult, I realize, to get a picture of this thing. 
T only wish I could get the whole committee to come out to Middle- 
town, so you could study it for 2 or 3 days, and then I think we could 
make it very clear to you. 

Senator King. Mr. Hook, I was not quite clear from your state- 
ment, when you stated 117,000 persons were employed in the steel 
industry. Aren't there a lot more than that number employed? 

Mr. Hook. That is the increase, only the increase during that period, 
Senator. 

operation of continuous mills at mIddletown 

Mr. Hook. Now, if you have a copy — I hope we had copies for you — 
of this diagram, because it is difficult eye strain for you to see it from 
here, but you can look at this and glance down at the diagram that 
is in front of you. 

Dr. Anderson, These are to be exhibits in the record, or are these 
appended to the testimony? 

The Chairman. Will you be good enough to see that each is prop- 
erly numbered as Mr. Hook discusses it. 

Mr. Hot^K. I will try to the best of my ability to give you a picture 
of the chart. 

Dr.. Anderson. The exhibit number is 2453. If you can give it a 
name we can identify it as well. 

Mr. Hook. "Diagram of a complete rolling-mill plant producing 
sheets." 

(The chart referred to was marked "Exhibit No. 2453" and is on 
file with the committee.) 

Mr. Hook. The object of this diagram is to show you a complete 
plant. This happens to be a diagram of the American Rolling Mill 
Co.'s Middletown, Ohio, plant showing the various departments of 
the plant, starting with ore and coal, right through to the finished 
product. And we have here a flap, because here is where the con- 
tinuous mill was put in. In other words, the men who worked on the 
old hand mills, which are being displaced by the new continuous mill 
worked in the section outlined on the chart in heavy ink, beginning 
with the third row of drawing. The men that worked in the blast 
furnaces made the pig iron that was taken to the open-hearth fur- 
naces — we show eight open -hearth ste^.l furnaces, where we take the 



16400 CONCENTRATION OF ECONOMIC POWER 

hot metal, mix it with scrap and limestone, and the product is a steel 
ingot. That steel ingot is taken and heated in what we call the 
soaking pits. In other words, the ingots are put in there to soak 
so that both the outside and the inside of the ingot have the same 
temperature. That is very important, because when the ingot comes 
from the open hearth over to the soaking pit, the inside of that 
ingot is probably in a molten state, and you see we have to let it 
soak so that the ingot is the same temperature all the way through. 
Then that ingot is taken out of the soaking pits, and wei will 
describe the old process first, and go through what we call the slab 
mill or the blooming mill. Under the old process w^e made a billet, 
we will say 8 by 8 or 6 by 6, depending on the size of the sheet bar 
we are going to make, and then that billet was taken and rolled 
through what we will call the bar mill, and when we got through 
we had, possibly, a sheet bar approximately 110 feet long, and rang- 
ing from, say, three-fourths or one-half inch thick up to maybe 
11/2 inches thick, depending upon the thickness of the sheet that 
you were going to roll out of it. 

Well, then that long sheet bar — and we will say this is that long 
sheet bar — on emerging from the bar mill, was cut up into pieces. 
We call those the sheet bars for the sheet furnace. In other words, 
f we were going to roll a sheet 24 inches in width, we cut this bar 
J6 inches in length, because you have to allow for the scrap on both 
ends. When the sheet is sheared out you have a perfect pattern 24 
inches in width. 

Then thos^ sheet bars-^and you can remember that when I show 
you a picture here later — were put back and forth by hand through 
these old sheet mills. In this plant of the American Rolling Mill 
Co. at M^ddletow ' there were 22 units with 2 stands each; one is 
a roughing rrjilLan one is the finishing mill. Lifting the pair into 
the pair-heati^:i§ furnace, lifting them out, putting them on the floor 
plate iji front of the roughing mill, swinging those bars over from 
the roughing mill jco the finishing mill, and putting them through 
the mill, taking theifn off, putting them into the furnace, was all done 
by manual work, and some of those packs weighed 150 pounds. If 
you ever worked in a rolling mill you will know what that means. 

The Chairman. This device that you are explaining, the old de- 
vice, is not dissimilar to the mills by which copper wire is rolled, 
is that right? 
Mr. Hook. That is a different mill. 

The Chairman. It is a different type, but I say it is not dis- 
similar. I have been in copper-wire factories out in Montana. 

Mr. Hook. The old rolling mills, where they rolled out copper 
sheets, are not dissimilar, because they had to make the slab and 
work from the slab and roll it through by hand just as we did sheets. 
Then we took these short bars, as I said, and put them through 
these old sheet hand mills, and when we got through we had a 
number of sheets. We call that a steel sheet, the green steel sheet. 
That is finished tc gage, to the thickness that you want, at this 
point. 

Then those sheets were taken and put through what we call two- 
high cold mills, simply to flatten them and give them temper. Then 
they were put into annealing furnaces to anneal them, or to bring 
the structure back to a proper state so that they can be worked, but 



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CONCENTRATION OF ECONOMIC POWER 16401 

before they went in there they went through batch picklers. This 
chart shows the continuous mill area for pickling, but in the old 
process, with these 22 mills, this area took a smaller space. This 
is the space that the new mill takes, and this represents approxi- 
mately the area we needed for annealing under the old process. 
This is the area that we anneal in in the continuous process, 30 
that under the continuous process a large number of men were in- 
creased in this al'ea here, here, and here, to the finished product. 

Now, that is the old process. 

Now, I want to show you that the new process affects directly only 
the men who were employed in the area marked out in the chart 
with a heavy black line. 

Because some people might get an idea that this new continuous 
process affected the workers all over, and it was only in that rolling- 
mill department — — 

The Chairman (interposing). In order that this may be under- 
standable in the record, I think we ought to give this slip sheet 
another exhibit mmiber. 

(The addition to the chart referred to was marked "Exhibit No. 
2454" and faces p. 16401.) 

Mr. Hook. Now, in the continuous process, we use the slabbing 
mill just the same, but, of course, the whole bar mill is cut out. 
There were very few men on that. And we start with a slab which 
comes through the slab-heating furnace and then it goes through 
without stop, right through this series of mills in Exhibit No. 2454, 
say, 12 four-high continuous mills, or 3 or 4 two-high, and the balance 
four-high, and emerges at the end, maybe 1,200 feet: long, rolled up 
like a big roll of paper. And then that is taken, if it is to be further 
reduced for certain purposes, to what we call the cold-strip mill, 
and in some instances we take the 0.109 thickness sheet and reduce 
it cold, without any heating at all, in those 3 stands of mills. 

Of course, that is a continuous process, whereas before j^ou had 
these 22, which meant 44 distinct gi'oups of mills, and here you have 
one continuous plant that does all this work and makes, oh, in that 
particular plant at least 3 times the tonnage that the old plant made 
on those 22 hand mills. 

This was presented simply to give you a picture of the fact that 
this continuous mill only went into part of the plant, and only 
affected men in part of the plant. 

Now, this pictures the old mill. This is what we call a roughing 
mill. The man put the bar into the mill and when he got through, 
he swung around to this mill. It was put in the furnace and heated, 
and here is the roller putting the pack through the old-style mill 
by hand. There is the hot pack on the next mill, lying on the legs 
ready to be taken off by the heater. 

Mr. Hook. This shows the back side of the mill, with the man who 
had to catch the pack when it came through, raise it up, push it 
over to the other side, so the fellow on the other side could catch 
it, as this other ])hoto shows. So you cp;n see the kind of back- 
breaking work that they had. 

Dr. Anderson. That man on the catching, what is he technically 
callexl ? 

Mr. Hook. Catcher, in the old mills. 



16402 CONCENTRATION OF liCONOMIC POWER 

Now, here is a picture showing; you the hot-strip mill. It shows 
1, 2, 3, and 4 stands, but there are 8 others down through the plant that 
you can't see. 

Mr. Hook. This is the cold-strip mill where I told you we would 
take a 12-gao;e sheet in a coil — see how it is rolled up there like a 
big roll of paper — and start it in one side and bring it out the other, 
a highly finished 22-gage sheet. 

(The photographs reiferred to were marked "Exhibits Nos. 2455 
to 2459" and are on file with the committee.) 

Mr. Hook. The table entitled "Continuous Sheet and Wide Strip 
Mill Installations" is simply to show you the 27 . installations and 
when they were put into operation; the American Rolling Mill Co. 
is the first one in 1924, and next is the plant of the American Roll- 
ing Mill Co., at Butler, Pa. The middle column of figures gives 
the size, that is, the length of the rolls. The size of sheet that you 
roll on those mills on those length rolls would be approximately 6 
inches narrower than that length. 

The last column shows the annual capacity figures, the average 
gross tons that those mills w^ould probably produce. 

(The table referred to was marked "Exhibit No. 2460" and is 
included in the appendix on p. 17326.) 

Mr. Hook. The purpose of the table entitled "Estimate of number 
of hand workers employed in industry in hand-mill processes, includ- 
ing preparatory, rolling, and shearing operations" is simply to reit- 
erate what we said in the statement, that in 1926 there were 1,264 
of those old-style mills, and those 1,264 made a production of 6,327,- 
874 tons, with 165 tons per worker on sheets and 125 on black plate, 
black plate being what we use for tin plate and products of that 
kind. The number of workers required to operate the 1,264 mills 
was 42,405. 

(The table referred to was marked "Exhibit No. 2461" and is in- 
cluded in the appendix on p. 17326.) 

The CiT^iRMAN. That is an estimate, you say, Mr. Hook? 

Mr. Ho K. That is pretty accurate, because it is taken from a fig- 
ure from our own records of what the men actually produced per 
man. 

In 1940 there were 750 of these mills still in existence. 

The Chairman. Let me interrupt again. You speak about the es- 
timated nmnber of workers. That also comes from your own rec- 
ords? 

Mr. Hook. Yes, sir; and checked with other plants. Wliere do 
you get that, Mr. Brooks? 

Mr. Earl Brooks (statistician, American Rolling Mill Co). You 
have reference to those in 1926. 

The Chairman. That is right. 

Mr. Brooks. Those in 1926 are derived by dividing our average 
production per worker in those units into the total production for 
(he industry. 

The Chairman. Then the figure is derived by a computation. 

Mr. Brooks. That is right. 

The Chairman. And not by a pay-roll check. 

Mr. Brooks. That is true. Through the integration of producing 
facilities in the ^teel industry, so far ;is I know there is no separation 
of 'employment b}' depar^^ment 



CONCENTRATION OF ECONOMIC POWER 16403 

The Chairman. How do you determine the avera<jje production 
per man ? 

Mr. Hook. That was from our own actual records of what the. men 
in the mill produced at that time per anmim. 

T\w fiiiure could vary very little from that. 

The Chairman. In other words, we can accept that as substan- 
tiallx' accurate. 

Mr. Hof)K. It is substantially accurate, as accurate as it can be 
figured. If j'ou take 2,000 off, it wouldn't amount to much. 

Mr. HiNRicHs. Going back to your first diagram, this 165 gross 
tons, this picks the steel up in the sheet furnaces — is that right — and 
carries it forward. 

Mr. Hock. That is where it is produced, yes. 

Mr. HiNRiCHS. So that you got 

DISPLACEMENT OF LABOR 

Mr. Hook (interposmg). On that first, that is it. On all the mills 
of that type in the country, in that department, 42,405 men were re- 
quired, or were at work at that time in 1926. In 1940, as I say, 
tiiere are 750 still listed. Approximately half of those mills are still 
in operation. For instance, on the diagram which you have in front 
of 3'ou, we show the continuous mill displacing the old-style mills, 
but that actually hasn't happened. We still have in that Middle- 
town plant about 500 men at work on the old-style mills. Part of 
the work is done on the continuous mills and finished on the old-style 
mill, because there are certain products which we have not yet been 
able to make finally on the continuous mill ; that is, on the cold re- 
duction mill, and that is true in another plant of ours at Zanesville. 
Ohio, where the old process, with some improvements in the way of 
tables and automatic catchers at the back of the mill — is operating 
pretty much as it did in 1928. It is hand work. So all together, 
we have over a thousand men in all our plants in the American Roll- 
ing Mill Co. I can give you the exact figure. It is over a thousand 
Mien still working on old hand mills, 1,036, Mr. Brooks says. 

Now, then, assuming, and this is estimating from the number of 
mills that are still actually operating, we estimate that 27,405 — no, 
15,000 are still employed in old-style mills, so that the total displace- 
ment could not have been more than 27,405. You see, if all those 
other men have l:»een displaced 

Mr. HiNRiCHS. (interposing). You speak of those things in opera- 
tion. This last year has been, in the last months, rather exceptionally 
active. Are these roughly half, say, 375 hand mills, operating more 
or less continuously or are these essentially, in large part, stand-by 
equii)ment that comes in at a very busy season? 

Mr. Hook. The half, I think,, are operating regularly, not just 
stand-by. You see, there are a number of companies that have no 
continuous mills at all, tliat are still operating; for in.stance, right 
near us. the Newport Rolling Mill Co. has 22, I think, or 26 old-style 
mills that are still operating. 

Mr. HiNRiCHS. Some of those mills in the beginning of 1939 were 
closed down pretty tight, weren't they? 

Mr. Hook. Not the half that I "am talking about. Half of the 
705, and I should say that of course I havon't the record but I think 



16404 CONCENTRATION OF ECONOMIC POWER 

that a number of the half that we are adi^ittiiig that are closed down 
permanently, were operating in the last half of 1S39. In other words, 
some of the plants who have the continuous mill process weren't 
able to make all the tonnage that they had orders for on their con- 
tinuous mills, and they supplemented them with their old hand mills 
that had been shut down for several years. 

Mr. HiNRiCHS. If you see an assured tonnage of that sort ahead, 
you build the necessary continuous mills and close down the substan- 
tial portion of the balance, don't you? Technically, it is only a lim- 
ited field that these hand mills that are operating would hold in the 
industry. 

Mr. Hook. I am perfectly willing to say to you, Mr. Hinrichs, that 
I think evejitually all of the hand mills will go out of existence, 
because it is not the economical method to use. Wlien we find out 
how to make these certain products which we still have to make, at 
least partially, on the old hand mills, and we are hard at work on 
that, the old hand mill will go out of existence, and it will all be 
made on the continuous mills. As I say, this was simply to show 
the general statement that the number of men that were said to have 
been displaced could not have been. 

The Chairman. I am interested in knowing, Mr. Hook, if you 
have the figures, which perhaps you have later, how many have been 
actually displaced. 

Mr. JHooK. They haven't. We have increased 

The Chairman (interposing). You say 27,000 could have been dis- 
placed. That is the maximum that could have been displaced. 

Mr. Hook. That's right, to date. 

The Chairman. What has been the actual displacement in that par- 
ticular department? 

Mr. Hook. It has been increased. 

The Chairman. In that department that we are talking about? 

Mr. Hook. Well, not , in that department, but I mean for that 
operation, the total number of men that are employed in reducing 
the slab or the billet down to the sheet has been increased. 

The Chair;man. You mean — I ann not sure I understand yet what 
you mean by that. I had in mind that there ivas a displacement so 
far as that particular work is concerned, withii. the sheet that we 
had here, the operations w^^^hin this sheet. 

Mr. Hook. No. 

The Chair.man. The continuous rolling process? 

Mr. Hook. That's night. I don't know just what it is. Have you 
got that figure? I think we have the Middletown plant. We can 
show it to you exactly. The fact of the matter is 

The Chairman (interposing). I got the impression from what has 
been said here that there was a decrease in the number of employees 
wi!hin that particular area. 

Mr. Hook. In that particular department. I think that is true. 
I don't know that we have got the exact figures. 

Mr. Brooks. It is very difficult to work up any figures showing 
the exact amount of displacement which could be applied to any one 
nnill ; in other words, the size of the mill, the lay-out of the mill, and 
certain variations in producing methods might influence that. Also, 
the size of the hot mill unit replaced would influence it. I can give 
you a case exariiple, using this Middletown plant, in rough figures. 



CONCENTRATION OF ECONOMIC POWER 16405 

There were roughly about 1,075 men employed in the area outlined 
there prior to the adoption of the continuous mill. There are roughly 
250 operating men left in that particular area on the mills them- 
selves, doing actual operating work. There are other maintenance 
men, of course, in addition to the 250. 

Mr, Hook. Well, that is just in the old-style hand mill. There are 
500 men in that department still. 

Mr. Brooks. That's right. 

Mr. Hook. In 1929, as I recollect it, the total employment in that 
particular department was 1,191. 

Mr. Brooks. Discounting the fact that part of those mills are still 
operating, those two figures would be the relative forces required. 

Mr. Hook. But some of those men have gone over to the strip 
mill, so that the total number of men in that particular plant in the 
old department, plus the continuous mill, probably, how many are 
in the strip mill? 

Mr. Brooks. That is 250 on the hot and cold strip mill. 

Mr. Hook. Well, on the hot mill. 

Mr. Brooks. I don't believe I can tell you off-hand. 
. Mr. Hook. You haven't got it. We give you all those figures 
broken down, but we are going to give you the plant now as a whole. 
That is what you are interested in, to know whether those men were 
taken care of in other departments. 

Mr. HiNRicHS. Was the capacity of the cold sheet mills the same 
as the capacity of the hot strip mill? 

Mr. HooK. Oh, my, no. Well, I think you didn't catch that. We 
made 20,000 tons a month on the 22 old hand mills, in a pretty good 
month, and we made on the hot strip mill as much as 64,000 tons in 
one month. 

Mr. HiNRiCHs. So that in terms of the relationships of capacity 
and labor, in that limited segment, the relationship is roughly 1,075 
men who could produce 20,000 tons and 250 men who can produce 
64,000 tons. 

(Representative Williams assumed the chair.) 

PRODUCTION IN AMERICAN ROLLING MILL CO. 

Mr. Hook. Pardon me; I think you will see that when we come 
along, because we give you the output per man-hour, the change in 
the output per man-hour, which is the thing you are trying to get at. 

Now, in the table entitled "Armco Production" is shown the total 
production of what ve call the parent company. That is all of our 
plants. In 1926 the total production was 431,347 tons ; in 1937, 1,203,- 
736 tons, or an increase of 179 percent between 1926 and 1937. 

(The table referred to was marked "Exhibit No. 2462" and is 
included in the appendix on p. 17327.) 

Mr. Hook. In sheets alone we produced in 1926, 428,996 tons, wliicli 
represented 99.3 percent of the total production of that ])lant. 

In 1937 we had 1,203,736 tons, of which 1,110,414 were sheets. In 
other words, 92.2 percent of the total production was sheets. The 
reason we present that picture to you is to show you that the Amer- 
ican Rolling Mill Co. is essentially and completely a sheet-producing 
plant. In other words, there are not a lot of other things involved 
in these figures with respect to the American Rolling Mill Co., and 



16406 CONCENTRATION OF ECONOMIC POWER 

this continuous process has to do with the manufacture of sheets and 
strips only. 

Now here we have taken out our Butler, Pa., plant, just to be sure 
that our figures are very conservative and comparable, covering the 
same plants. In 1926 we had 431,347 tons and 99 percent was sheets. 
Now, we took out the Butler plant because it is a continuous mill plant, 
to throw back the picture into the old parent company; this Butler 
plant we bought in 1927, so we have thrown it out, so that our figures 
would be comparable, and even, after throwing it out it stills shows 
that 94,8 percent of our total production was sheets, and the increase 
in tonnage, of course, went from 428,996 to 847,753 in '37, a 97.6 percent 
increase m those plants that we owned before we took over Butler. 

Mr. HiNRiCHS. I was wondering why the base period of comparison 
with 1926 was used throughout here; 1937 was a year of very ex- 
ceptional activity. 

Mr. Hook. Correct. 

Mr. HiNRicHS. 1926 was more nearly average. 

Mr. Hook. Tliere was only one continuous mill operating at that 
time, and that was the American Rolling Mill Co.'s mill at Ashland, 
Ky., and all these other mills have come in since that time. 

Mr. Brooks calls my attention to the fact, and we will show it on 
another chart later on, that the ingot production in these 2 years was 
approximately the same — 70 percent of capacity. 

Mr. Hook. Now the table entitled "Distribution of Armco Sheet 
Shipments Bet°ween Continuous and Hand Mills" is interesting, to 
show distribution of our shipments as between the hand mills and the 
continuous mills. 

(The table referred to was marked "Exhibit No. 2463" and is in- 
cluded in the appendix on p. 17327.) 

Mr. Hook. In 1926, 64.1 percent of the production was rolled on the 
old hand mills, whereas in 1937, only 28.2 percent was rolled on the 
old hand mills. Rolled on the continuous mills, in 1926, 35.9 percent; 
in 1937, 71.8 percent of the production of Armco. 

Mr. Pike. But you still rolled in '37 more actual tonnage on your 
hand mills than you did in '26. 

Mr. Hook. Exactly. 

Now, to show that this displacement is troing on very gradually, in 
any event particularly in our plant, remember that we are entirely a 
sheet plant, but all of that 313,136 tons was partially rolled on the 
continuous mill. The old bar mill is completely eliminated, but even 
with that, you see, we made more tonnage on the old hand mills than 
we did in 1926. 

Mr. HiNRiCHs. Finished more, or made more ? 

Mr. Hook. We produced more of these green sheets that I was tell- 
ing you about. In that year we made 274,835 tons and here we made 
313,i36. That is the finished sheet. 

Mr. HiNRiCHS. What about 1939? Would that show the same sort 
of picture ? 

Mr. HooK. In 1939 I think the figrre would be approximately the 
same. 

Mr. Brooks. It would be slightly lower, because our total tonnage 
was lower. 



CONCENTRATION OF ECONOMIC POWER 16407 

Mr. Hook. We can give you all that, but I hope you will come 
out and spend several days there. 

Mr. HiNRicHs. I shall. 

Mr. Hook. Of course we are talking about employment, and all 
these things have an effect on the employment. This table, "Armco 
Parent Company Employment, Average Number of Employees," 
shows the American Rolling Mill Co. employment. The total em- 
ployment in 1926 was 6,876; in 1937 it was 13,253, or an increase of 
92.7 percent. But again we take out the Butler plant, because you 
may say it is not fair to include it because that is an entirely new 
acquisition, so that we go right back to the old company basis, and 
we have a 51.5 percent increase in the average number of employees 
for '37 over '26. ^ . 

(The table referred to was marked "Exhibit No. 2464," and is 
included in the appendix on p. 17327.) 

Mr. Hook. I think, Mr. Williams, that begins to answer some of 
the questions that were in your mind. 

EMPLOTltfENT AND EARNINGS 

Mr. Hook. Now let's see what happened to employment, wages, 
and hours, in this table '"Employment Wages, Hours, and Produc- 
tion, Armco Middletown Plant." 

(The table referred to was marked "Exhibit No. 2465," and is 
included in the appendix on p. 17328.) 

Mr. Hook. This is a rather interesting story, we think. In 1926, 
the average number of employees at this Middletown plant* that 
produced nothing but sheets, and by the old hand method, was 3,278. 
In 1937 it was 4,327, or an increase of 32 percent. 

.Pay roll (wages only) — that is, those who are paid on an hourly 
basis— in- '26 was $5,125,208; in 1937, $7,234,256, or an increase of 
41.2 percent. 

Shipments, 221,382 net tons in 1926; in '37, 403,805, or an increase 
of 82.4 percent. 

Now the question comes to your mind, and I had better answer it 
before you ask me, "Well now, is that a fair indication of what 
happened in the industry?" I have to make an admission which we 
don't like to, and say we did not keep up with the industry, but as 
compared with that particular plant the increase of the industry w^as 
greater than ours. The increase in industry was 82 percent, sheets 
only. 

The man-hours: in 1926, 32.5; in 1937, 19.1, or a reduction in man- 
hours per net ton of 41.2 percent. Of course we couldn't have got 
the reduction in price if we couldn't have decreased the cost, which 
you will see later. 

Wiige cost per net ton is $23.15; in 1937, $17.92, or a reduction of 
22.6 percent. 

Now let's see what happened to earnings of these men. The mini- 
mum wage rate in 1928 was 37 cents, in '37, 621/2 cents, or a 68.9 
i:)ercent increase. The average earnings per hour was ^9.8 cents in 
'26, and 93.6 cents in 1937, or an increase of 34 percent. 

I was rather interested in the question that was asked Mr. Ford 
yevSterday (it hasn't anything to do with this) whether, as they had 



16408 CONCENTRATION OF ECONOMIC POWER 

increased the parts that ^yent into the car, the average skill required 
was lowered or increased. 

Well, the introduction of the continuous mill has increased sikilled 
labor. In other words, there is a gi-eater need for men of increased 
skill, because we are dealing, for instance, on these continuous strip 
mills, with measurements of split thousandths. When I wag out in 
the mills as a worker, we thought a one-sixty-fourth fit was pretty 
good. 

Mr. HiNRicHS, Your skilled workers in your old mills were your 
rollers, were they not. 

Mr. H(K)K. Yes ; your roller and your l^eater were the two men par- 
tiquarly skilled. The other fellows — well, we. called them skilled, 
but it was largely knack. You got into the swing of things, but the 
roller was really a skilled man. 

Mr. HiNRiCHS. How many rollers would you have had in this 
layout? 

Mr. Hook. Three times 22. 

Mr. HiNRicHS. So you would have 66 rollers. 

Mr. Hook. Yes. 

Mr. HiNRicHS. And at the present time, how many rollers 

Mr. Hook (interposing). We have 27 at Middletown, in the old 
plant. 

Mr. HiNRicHs. But in the new plant, how many men do you have 
to correspond to your own rollers? 

Mr. Hook. Well, you have a very highly technically developed 
general forem.an, and assistants under him, and your maintenance 
men have to be more skilled, and then you have your men all 
along the line, the roll setters and men that do the various jobs. 
You have • an average skill in the continuous mill which is higher 
than the average skill in the old-style mill. 

Mr. HiNRicHS. That is, such skilled men as you have that take the 
place of these 66, have a higher skill now, on the average, than those 
66 rollers? 

Mr. Hook. Well, no; I wouldn't say of those 66 rollers, because 
they were very skilled men. That was a real job. 

Mr. HiNRicHS. How many men do you have in this mill here [ex- 
hibit 2453] who are highly skilled workers? There were 66 rollers 
in the old process who were a highly skilled group. How many 
people correspond to them in the new continuous niill ? 

Mr. Hook. Every man in that continuous mill isi a skilled worker 
now. I would have to have the force report here, and again, if you 
come out, we will show you those fellows at work, and then you can 
see, get this picture. 

Acting Chairman Williams. Is that average earning per hour, 
shown at 34 percent, largely due to the increased number of skilled 
workmen that you have acquired on account of this new process? 

Mr. Hook. That has had an influence. That isn't entirely the 
case; for instance, when we went to the shorter workweek, we in- 
creased the average rate per hour, of course, to take care of that 
change over, but in part, it is due to a higher average skill. 

Mr. Brooks calls my attention to the fact that under the old opera- 
tion we couldn't have sustained, wouldn't have stood for a labor cost 
of that kind. We couldn't have got enough for the sheets. 



.CONCENTRATION OF ECONOMIC POWER 16409 

Mr. HiNRicHS. Part of tluit increase in averaj^e hourly earnings 
lepresents a decrease in the proportion of common laborers in your 
force at the present time, doesn't it? 

Mr. Hook. Oh, the common laborer in the mill today isi almost 
idiminated. It is a very small pro[)()rtion, and when I was in the 
mill, it was a very large proportion. 

Mr. HiNRiciis. A third to two-hfths? 

Mr. Hook. I would hate to make an estimate. I would be guessing 
at it, but we could get that together. 

Mr. HiNRiCHS. But it was very high, and now it is virtually 
limited? 

Mr. Hook. Years ago it was a very large proportion of the men. 

Mr. HiNRicHS. Even in 1926? 

Mr. Hook. Of course, by that time, the number of wliat we call 
conunon laborers had been reduced, but proportionately in '2G, it was 
very nuich higher than, of course, it is in '37 and today. 

We have shown a reduction of 21.8 percent in the average hours 
per week. The average earnings per week have increased from 
$32.32 in 1926 to $33.88 in '37, or an increase of 3.8 percent. xVnd if 
we adjust for the difference in the cost of living to get real earnings, 
the real earnings in 1937 were $38.28 as compared with $30.99, or 
an increase of 231/^ percent. 

Now I think we all agree — and I know you do, of course — that 
what a man is interested in is, "What can I buy with a day's work?" 
That is the figure that really counts with him. It isn't the wage 
rate, necessarily, because it doesn't do a man any good to jump from 
$5 a day to $10 a day if he can't buy more of l^he things that he 
wants to buy and use with the $10 than he could get with the $5. 

ANNUAL EARNINGS OF ARMCO WORKERS 

Mr, HiNRicHS, He is also interested in what he can buy in the 
year." What about the regularity of employment? 

Mr. Hook. I am glad you asked me that ({uestion. In other words, 
what was the annual earning of these men ? We will give you that. 
These are our figures, actual. 

The actual average earning of all the men who worked for wages 
in 1926 was $1,685, and for the industry, $1,627. In 1929, our figure 
was $1,605; in the industry, $1,746. Rather interesting there. We 
had a drop, and the industry went up. 

In 1937, ours was $1,766; the industry, $1,630. In 1938, ours was 
$1,398; the industry, $1,203. In 1939, ours was S1.893, so you can 
see the advance in annual earnings, and we had made no adjustment, 
for instance, for 1939, for the difference in cost of living. That 
would go over $1,900, of course, well over that. 

Dr. Anderson. I would like to have you supply, for the average 
annual earning of $1,983 in 1939, the average immbcD of employees 
that received that wage. 

Mr. Brooks. That is a total company figure. There was an aver- 
age of 9,742. 

Mr. HiNRicHS. That would compare with 4,327 in 1937. 

Mr. Hook. That was a single plant. 

Dr. Anderson. Let's have something that corresponds to the table. 
What was the average for the Middletowji plant at that same time? 
i244»i — 41— pt. no 1.5 



16410 CONCENTRATION OF ECONOMIC POWER 

Mr. Brooks. The average for that rate was 3,335. Now those em- 
ployment figures up above inchide salary as well as hourly labor. 

Dr. Anderson. That is total employment in the plant? 

Mr. Hook. That is total employment, but the figures from there 
on down are all wages. . 

Dr. Anderson. What if you squeezed out the salaried group there? 
What would you have, so as to make it comparable? 

Mr. Brooks. You would have roughly, I would say, about 3,025 in 
1926, and in 1937, roughly 4,000. That may not be exact. 

Dr. Anderson. Would the figure you gave me, 3,335, be correct 
for 1939? 

Mr. Brooks. That is correct. 

Dr. Anderson. In other words, a reduction of approximately 700 
men. This gain was made in average annual earnings from $1,766 
to $1,893. The difference was a gain made at the expense of 700 
workers ? 

Mr. Hook. No; you are dealing with averages. That is not the 
case, Mr. Anderson. For instance, the first three quarters of 1939 — 
it wasn't until the first of September that we got on that high oper- 
ating rate in 1939, and the average number of workers was reduced 
as a result of not having as high employment in those periods when 
we weren't working at the^ same high rate. The 1937 average rate 
was higher. 

Dr. AndJsrson. What you are saying is tha.t you can't compare 
annual earnings here, on any basis such as we have just discussed, 
with the average number of employees for the years indicated. 

Mr. Hook. The fact of the matter is that the number of men who 
worked actually got a certain total pay roll, and if you divide that 
total number of men who worked into your total pay roll, you get 
the dollars that they earned. 

Dr. Anderson. The point I was trying to make was whether there 
was a difference in the number of men who worked and enjoyed this 
better circumstance in terms of an annual wage in 1 year as com- 
pared with another. ' • 

Mr. Hook. Well, we will furnish you with the exact figures. 

Mr. Brooks. At the end of 1939 there were approximately 4,000 
people working in that plant, total employment. 

Dr. Anderson. Of course year-end figures wouldn't suit the pur- 
pose either, would they ? 

Mr. Brooks. Not for the determination of an annual wage, they 
would not. 

Mr. HiNRiCHS. As to the method of computing that annual wage, 
you have divided pay roll by a certain number of employees in 
arriving at it, is that correct? 

Mr. Hook. That is right. 

Mr. HiNRiCHS. And what is the average number of employees that 
you have taken ? 

Mr. Brooks. It is the average of the day-to-day em|^<iyment in 
that plant. 

Mr. Hinrtchs. That means in effect, then, that this average pay- 
roll that you have is the amount which would be earned by a man 
who worked 365 days of the year, minus Saturdays and Sundays. 
Is that correct ? 



CONCENTRATION OF ECONOMIC POWER 16411 

Mr. Brooks. No; that is not correct. It is simply the total wages 
divided by the average number of workers employed in the plant 
throughout the entire year. 

Mr. HiNRiCHS. I think you will find, if you check the arithmetic 
and loo;ic of the thing, that that is eflfectively the amount which 
would t)e earned by a man who worked full time. Just by way of 
illustration, I recQgnize the fact that the figures are not strictly 
comparable and I may have made a mistake in arithmetic, but mul- 
tiplying the figure of $33.88 by 52 weeks, my rough calculation is 
$1,762 as against your figure of $1,766. So that these average earn- 
ings that you are giving are full-time earnings, and irregularity of 
employment- 

Mr. Brooks (interposing). No; the full-time week is 40 hours per 
week. 

Mr. HiNRicHS. Yes. 

Mr. Brooks. And we only average -36.2. In other words, we did 
not average in that plant the full-time hours per week in the 
industry. 

Mr. HiNRiCHS. You corrected me at one point. It is not full-time 
in the sense that it is 52 weeks, of 40 hours each. 

Mr. Brooks. That is correct". 

Mr. Hinrichs. But it is 52 weeks of work times the average num- 
ber of hours per week worked by the people in your plant. 

Mr. Brooks. That is right. 

Mr. Hinrichs. Now, that does not give the annual earnings, say, of 
a group of workers who have an irregular employment opportunity, 
to the extent that there is employment for 2 or 3 months and then no 
employment. That fluctuating employment has not entered into your 
average. 

Mr. Brooks. That has entered in. That may represent the average 
wage of men who worked any place from a week up to the full year. 
It may range from your minimum- wage right up to $2.50 to $3 an 
hour. It is the composite of the entire plant and all the people who 
worked in it. 

Mr. Hinrichs. On an essentially full-time basis. 

Mr. Brooks. Yes ; 36.2 hours per week. 

Mr. Hook. When we are talking about the question of displacement 
of workers, we have got to take into consideration the number of men 
that were employed in the manufacture and the installation, the build- 
ing of the plant, and the installation of the machinery. Now this 
table, entitled "Expenditures for Construction, Armco Middletown 
Plant," is an exact figure at this Middletown plant. Between '27 and 
'37, when we introduced the continuous mill in that plant we spent 
$20,492,778 actually. In other words, we estimate that the man-years 
of employment amounted to 9,000, or we employed during that time 
an average of 819 men at .full time at approximately $7 a day. You 
have got to take that into consideration when you are talking about 
displacement, and, by the way, we did use on that construction a num- 
ber of the men who had formerly worked in the mill wh-en we were 
running the old style full time. 

(The table referred to was marked "Exhibit No. 2466" and is in- 
cluded in the appendix on p. 17328.) 

Mr. Hinrichs. Were those $20,000,000 spent year by year, or did 
the bulk of it come in a limited period ? 



16412 CONCENTKATIOX OF ECONOMIC POWER 

Uv. H(.OK. The bulk of it came from 1928. Just last year we spent 
$;},r)00,()()() of it. No; not of that $20,000,000, but we did spend that 
in improving that plant which doesn't show here — $3,500,000. Be- 
tween '27 and '37— maybe we have got the figures here to give you, 
just how it was spent. 

In the years^27 to '28, inclusive, there were $8,059,950; in '29, 
$1,512,008; and ';'>0; $1,050,000; '31, $280,000; "32, $210,000; '33, $341,- 
000; 1934, $240,000; 1935, $5,427,094; 1930, $171,000; 1937, $1,834,000. 
And, of course, when you order machinery, the machinery manufac- 
turers start back, and they are ordering supplies, and it follows 
through quite a period of time before you pay the bill. 

Mr. HiNRiCHS. That, of course, is an extremely important source of 
employment and we on this committee have been very much inter- 
ested in the role that -construction expenditures and capital expendi- 
tures have played in the maintenance of the level of business activity. 
But essentially those expenditures, as I listened to tliem, were made in 
2, or possibly 3, years. The first figure that I recall is a figure of 
roughly $9,500,000, I believe; then a figure of $5,400,000; and then a 
figure of something over $1,000,000. The employment that was 
created by this activity was a concentrated employment that occurred 
in those years. From our point of view, looking at the economy as a 
whole, it is a very important source of employment if it is continuous, 
if in 1 year it is being done in Armco, and in another year it is being 
done in another company, and so forth. 

It isn't that 819 would not be comparable to the figure of 1,075 men 
in your hand mills. Those 1,075, barring business fluctuations, are • 
employed more or less continuously. Those 9,000 people work roughly 
a year or two, or at the most 3 years, on an extensive basis. At .that 
time' the employment was even greater than 9,000. At other times 
Armco's activities — there is no criticism implied — were not giving 
rise to the employment of these particular individuals. They 
couldn't. 

Mr. Hook. Of course, you are correct to a very large extent, but 
this shows when we paid the bills. Now, as you know, lots of times 
you wait until the installation was complete, you hold back a certain 
amount. It has been going on more gradually than your expendi- 
ture shows. For instance, in 1935, the order was probably given 
for a lot of.it a year before, and the work in those equipment plants 
was going on, and finally concentrated with a lot of bills very sud- 
denly. If you ask our treasurer, he will tell you about it. 

(Senator O'Mahoney resumed the chair.) 

Mr. Hook. This table entitled "Armco Average Iron and Steel 
Sheet Selling Prices," is mteresting only in one respect. Of course, 
I discussed tlie question of price before this committee last November, 
and these siime figures were presented to you, except we didn't have 
ihe 1939 figures at that time, naturally. And it is simply presented 
liere to »how that., starting back when the first continuous mill was 
in opertition, you ^ee the big jump in the average realized price that 
we received for all the sheets — what we received for what we shipped. 
In 1923 it was $100.15, going right on down, of course, in that very 
depressed period of 1933, and before we had that big increase in 
wage costs, it got down to approximately $40; in 1937, $04.50; in 
J-939, $57.31. 



CONCENTRATION OF ECONOMIC POWER 16413 

(The table referred to was niarla>(l ''K.\lii])it No. 2467'' and is in- 
cluded in the appendix on p. 17328.) 

Mr. JrlooK. '1 liat very ^reat reduction in the price of the product, 
of coui'se, encouran^ed (he use, and is responsible to some extent — 
Ave don't claim it all — for the increased prodiiction which we showed 
you before in our Middletown sheet-production })lant; is responsible 
for helping to increase the production which we sold, which meant 
more employment for the men in the mills. 

CHANGE IX QUALITY OF STEE 

Mr. Hook. In addition to the fact that we irave them the sheet 
at a very much lower price, the inteiestin.g thing is, the difference in 
([uality. For instance, I ha^e here, and 1 can pick it up with one 
hand, the old Ford fender. Mr. Chairman, when I started 

The Chairman (interposing). It is interesting how much of this 
testimony revolves around Ford and the Ford car. 

Mr. Hook. It does, doesn't it? 

The Chairman. Of course, Mr. Ford was the pioneer in the mass- 
production field. 

Mr. Hook. Well, in 1911 and 1912, we started to make what we 
called a high-finish sheet, and when we look at our present-day sheet, 
it was a pretty rough piece of worlc I traveled to Detroit a great 
deal during those days trying to help find out what we had to do to 
a sheet to make it useful. We put as high as 16 and 17 coats of 
]iaint on that sheet in those early days. 

This is the model T Ford fender. I don't know how many coats 
that has on there, but if you could look at that sheet you could see 
right tlirough the paint how imperfect the surface was. Then look 
at this big sheet I am going to show you now, which is a modern 
Buick fender sheet. This sheet sold in 1923 for $135 a ton, and for 
that sheet last year the market price, if they got the market price — 
the}' didn't always get it, as you know — was $62 a ton. 

The Chairman. How much larger is that sheet than this? 

Mr. Hook. This fender is made up of two jjieces. 

The Chairman. But the prices that you are quoting are par-ton 
])rices. 

Mr. Hook. That is correct. 

The Chairman. This modern $G2-a-ton sheet is how much better 
than the old sheet? 

Mr. Hook. Well, Senator, tliere wasn't any process that the steel 
industry knew anything about, under tlie old hand-mill process, by 
which we could produce a sheet to make that part. That is stamped 
out of one piece, in one operation. I can ])ick the Ford fender up 
and run all over with it. I can't do it with the new one. 

In other words, if we had attempted to make one like the Buick 
fender in the day of the old one, I don't know wdiether, because I am 
neither a pressman nor an automobile producer, they could have 
clone it, even if they had tried six or seven parts. 

The Chairmax. How many parts are in the old one? 

Mr. Hook. Two in this, and you can see what it is. That is the 
Ford. 



16414 CONCENTRATION OF ECONOMIC POWER 

Now, over here I have an old Dodge fender. I could pick this up 
and run away with it, too. You can see from there, I think, the 
weld. That is probably a repair, but ri<r}^t here is where they were 
joiiied. Even that fender had to be made out of two pieces, and I 
don't know whether you can see this bulge, Senator, but right liere 
there is a kind of bulge which was put into the fender to give it 
strength, and when I was out in the mill trying to develop this bet- 
ter sheet we ran into trouble. We used to call it '•corn meal" struc- 
ture. In other words, we just couldn't get a surface fine enough, 
smooth enough, so that the imperfections wouldn't show through o^i 
three or four operations. We just couldn't have put only two coats of 
Duco on this sheet. You wouldn't have had it. Nobody would have 
run the car. It was a horrible mess. 

The Chairman. This is most interesting testimony, and it is obvi- 
ous that we are not going to be able to finish in any reasonable time 
now, so if there is no objection I think the committee may recess until 
2: 15 o'clock, and if yoa will be good enough to come back this after- 
noon we will proceed. ' 

Mr. Hook. I am delighted. I am at your service. 

The Chairman. If there is no objection, the committee will stand 
in recess until 2 : 15. 

. (Whereupon, at 12: 15 o'clock, a recess was taken until 2 : 15 p. m. 
of the same day.) 

AFTERNOON SESSION 

The hearing was resumed at 2:35 o'clock, upon the expiration of 
the recess, Senator O'Mahoney presiding. 

The Chairman. The committee will please come to order. You 
may proceed, Mr. Hook. 

Just before we recessed, Mr. Hook, you were illustrating the two 
fenders. One was the old Ford fender. What was the price per ton 
of that sheet of steel? I have forgotten what price you gave. 

Mr. Hook. Back in 1923, before the continuous mill came into 
existence, that slieet sold for $135 a ton. 

The Chairman. And the present price for the other sheet is $60^ 
a ton? 

Mr. Hook. $62. 

The Chairman. Do you know how much steel is now used ir 
fenders as com])ared with the amount in 1923? 

Mr. Hook. Well, I can't answer that exactly. Senator. If you look 
at that old fender there, and look at this one, you have to make the 
best estimate you can. I haven't the relative weights. 

The Chairman. The reason I asked the question is, this noon I 
happened to meet Mr. Kettering, and told him of your interesting 
testimony this morning, and he said, as I recall it, that in his opinion 
the automobiles now use at least twice as much steel as they did in 
1923. 

Mr. Hook. I think that is probably true. We figure about 1,400 
pounds. We have a chart showing that for the automobile industry, 
but it does not show the weight for the car. We have that at home; 
I'n sorry. I tried to think of all the things you might ask for. 

The Chairman. Oh, yes; that is impossible. 

Mr. Hook. I will be delighted to send that to you, because we have 
sot it. 



CONCENTRATION OF ECONOMIC POWER 16415 

DECLINE IN SHEET STEEL. PRICES 

Dr. Anderson. Mr. Hook, I wanted to ask you a question while 
we are on this topic of the decline of iron and steel selling prices in 
your plant. Would that be representative of the industry, in your 
mind, or not? 

Mr. Hook. Yes; for tliat product. 

Dr. Anderson. For that particular product? 

Mr. Hook. Yes ; that is, for sheets. 

Dr. Anderson. Let me ask this question, then. Is this to be taken 
as tlie decline in steel sheet selling prices only? 
• Mr. Hook. Tl^at's right. 

Dr. Anderson. In other words, you have isolated, out of all the 
products of your plant, steel sheets, and we are comparing identically 
the same product all the way through. 

Mr. Hook. That's right. 

Dr. Anderson. Tliat is not a decline, then, in prices of your 
products, whatever they might be? 

Mr. Hook. Not the others; but, of course, sheets, as we showed you 
this morning, are ovar 90 percent, the lowest percentage of any one 
plant being about 92 percent sheets. 

Dr. Anderson. But we are only concerned here with sheets. 

Mr. Hook. That's right. In other words, the product that is made 
on the continuous mill. 

Mr. O'CoNNELL. May I ask a question there? Speaking generally, 
Mr. Hook, as I recall the testimony in the other hearing we had on 
steel,^ a picture of the price of steel products generally over a com- 
parable period would be quite different from that, would it not? 

Mr. Hook. You are correct. 

Mr. O'CoNNELL. Tlipre has been a relatively greater decline in the 
price of sheets than in almost any other steel product? 

Mr. Hook. Correct. 

Mr. O'CoNNELL. To what do j^ou attribute that ? 

Mr. Hook. That is the technological deveU-pmont. the introduction 
of the continuous sheet mill. Not only that, as we tried to say in 
our opening remarks; we don't credit that droj) entirely to the in- 
stallation of this innovation, because management efficiency and other 
things that we tried to enumerate did have a part in that. 

Mr. O'CoNNELL. I understood you to indicate tliis morning that, as 
far as this product is concern :d, it was somewlmt more i-esponsive to 
price reductions in terms of the volume than some other steel 
products ? 

Mr. Hook. Decidedly so. 

Mr. O'CoNNFXL. There has been ai)parently quite some controversy 
among people wlio do some thinking on tlie subject, as to how elastic 
the demand for steel is, and from what you say this morning, I 
lake it that it is your belief that for this ])arti('ular steel product 
tlie demand is to a greater extent responsive to pi-ice changes than in 
some of the other steel products. 

Mr. Hook. Yes. You see there was technological development with 
resj)ect to other {products in earlier years, from, say, 1910 to 1920. 
There were develoi>ments of the contiiuious mill for rolling sheet 

' See Healings, Part 19. 



16416 CONCiONTRATION OF ECONOMIC POWER 

l)ars. For instance, when I started to work in our little plant at 
MiddJetowii we made sheet bars, first on an old two-high break-dowti 
mill with three-high finishing mill with a lot of passes and the men 
did a Jot of very hard physical work. That was supplanted by what 
is known as the continuous Morgan sheet bar mill, and that develop- 
ment came in, I forget when. Mr. Eppelsheimer, perhaps you re- 
member. 

Mr. Eppelsheimer. About 1900, 

Mr. Hook. It was about 1900 that the Morgan mill was developed, 
so there was a lot of change in the price of other products, the sheets 
having gone on for many, many years by this old method until we 
found a way of doing it continuously. 

Mr. O'CoNNELL. Speaking generally, are sheets ordinarily sold to 
a few large buyers as distinguished from a lot of smaller buyers? 

Mr. Hook. No; we have a chart showing the distribution of the 
product to the various industries. 

Mr. O'CoNNELL. I will be interested in that. 

Dr. Anderson. May I refer, in this matter of prices, to the state- 
ment that you submitted to the committee, on page 5, the fourth para- 
graph down, we have this statement: 

Steel users not only have benefited from improved quality which makes for 
possible bwer fabrici;tion costs, but they have also enjoyed the advantage of 
lower prices as well. 

Th'en you take from 1926 to 1939, "the average price of all iron and 
steel sheets realized by our company declined 31 percent." 

I l/ake it that is this illustration here, and we are dealing with steel 
sheets only. 

]Vtr. Hook. That is right. 

Ill this table, entitled ''Iron and steel industry (blast furnaces, 
ste^l works, and rolling mills) employment, wages, and produ'^tion," 
we. jump from the pure sheet plant and use the American Rolling 
Mill Co. because we develo])ed this continuous process. We make 
practically nothing but sheets. We will see what the effect on the 
entire iron and steel industry has been, because in this chart and 
othet^ I think that will be obvious, 

(The table referred to was marked "Exhibit No. 2468" and is in- 
cluded in the appendix on p. 17328.) 

Mr. Hook. Noav, we have taken the iron and steel industry, blast 
furnaces, steel works, and rolling mills, and we show employment, 
wages, and productif>n. The reason we use 1925 in this instance and 
'26 before is because here we are using the United States census 
figures. This is a census year. I thought I had better explain that 
right off the bat. 

The average number of wage earners in '25 was 399,914; in '37, 
502,417, or a 25.6-percent increase, during which time the population, 
as I noted in my preliminary statement, increased 11.2 percent. 

The pay roll, which is wages only, not salaried workers, increased 
fiom $660,297,150 to $817,777,929, oi- an inci-ease of 23.8 percent. 

The steel production — lliis is steel in.^ots — increased from 45.- 
119,113 tons in '25 to 51.599,000 in '37, or a 14,4 percent increase. 

The CiiAiR]\iAN. Mr. Hook, do those figures with respect to pay roll 
and waofe earners indicate tliat the rate of wages has not increased? 

Mr. Hook. We will have that down below, Senator. Down here 
we have the average earnings per hour. . 



CONCENTRATION OF ECONOMIC POWER 16417 

The Chaibman. All right, I will wait until then. 

Mr. Hook. We will come to that. 

The man-hours per gross ton of steel — that is all rolled products — 
are 28.12 in 1925 and 19.83 in 1937, or a reduction of man-hours per 
gross ton of product of 16.2 percent. 

The labor cost per gross ton of steel increased from $14.68 to $15.85, 
or an increase of 8 percent. 

You remember we showed you that in the sheet mills operating in 
our own plant, with the continuous process of production, we had a 
decrease in labor cost per gross ton, but taking the industry as a 
whole, there was an increase in the labor cost. 

Now, had we not introduced the continuous mills, and had not 
the sheets and strips i-epresented such an important part of this total 
steel production of 51,000,000 there, then this increase would have 
been considei-ably more. 

The Chairman. This is the curious thing that suggests itself to 
my mind. The percentage increase of wages is less than the per- 
centage increase of the number of wage earners, and yet the labor 
cost })er ton has increased. How do you explain that? 

Mr. Hook. The shorter hours. You see the average workweek 
m 1925 was 50 hours, whereas in 1987 it was 38, so we had a reduc- 
tion in the numbef' of hours that the men worked of 23.6 percent. 
That accounts, too, for a large part, if not all,x)f the increase here of 
the average number of wage earners. 

The Chairman. That is, the reduction in the number of hours re- 
sulted in an increase in the number of wage earners. 

Mr. Hook. Correct. 

The Chairman. And do you think that was the cause of practically 
all of -the increase in the number of wage earners? 

Mr. Hook. We have the exact figures. It covers practically all 
af them — not in our case; now we are talking about the industi*y. 

Dr. Anderson. Might I ask 'a question concerning that labor cost 
per gross ton of steel ? What is the source for such a figure ? How 
do you get at such a figure ? 

Mr. Brooks. That is simply the steel production and the wia,ge 
figure. 

Dr. Anderson. You computed it from the available data there? 
We don't have any source for any such thing as that for the industry. 

Mr. Brooks. You could take it out of the Biennial Census of Manu- 
factures. Those figures are shown. 

PROPOSED REDUCTION IN HOURS 

The Chairman. May I ask, Mr. Hook, how do you look upon the 
suggestion, which is sometimes made, that increased employment could 
be provided by a further reduction of the number of hours which 
each worker would be permitted to work? 

How do you look upon that suggestion? 

Mr. Hook. Well, I don% look on that favorably, because I think 
we have reached a point now where, with an average production — 
well, say you get 70 percent — in order to keep their earnings up per 
week and per annum you would have to have a considerable increase 
in the wages, in the hourly rate, and I don't 



16418 CONCENTRATION OF ECONOMIC POWER 

The Chairman (interposing). What is the average week in the 
iron and steel industry now? Is it 40 hours? 
Mr. Hook. Yes; 40 hours. Over and above 40 hours is time and a 

half. 

The Chairman. So what you are saying to us is that if, for .ex- 
ample, the workweek were reduced to 30 hours, such an increase of 
the hourly rate would be needed to enable the worker to obtain the 
' same income that he receives for a 40-hour week as to be uneconomic 
as far as the industry is concerned. 

Mr. Hook. That is my opinion, Senator ; and T think you would 
reduce the use of the product upon which they are dependent for 
their work. 

The Chairman. In what way? 

Mr. Hook. By increasing the cost to a point where jou would be- 
gin to seriously affect its use. 

The Chairman. Of course, the 40-hour week in itself was resisted 
by industry, looking at it as a whole. Every shortening of the 
workday and the workweek has been resisted as this movement has 
gone along from year to year. That is true, isn't it ? 

Mr. Hook. Well, speaking for the steel industry, that was a vol- 
untary act. 

The Chairman. Yes, in this case ; but I am now going back many 
years. In the steel industry at one time the 12-hour day was rather 
common, was it not ? 

Mr. Hook. Yes, indeed. 

The Chairman. And it was some struggle before that was aban- 
doned. 

Mr. Hook. You are correct. 

The Chairman. Now, what do you think is the minimum workweek 
that would be economic in the industry ? 

Mr. Hook. I think we have reached the very minimum now. Sena- 
tor. I think it would be a very serious matter to attempt to go any 
further. 

The Chairman. Because of the increases in cost that would result 
to the consumer; is that the idea? - 

Mr. Hook. It is bound to do that. 

The Chairman. And, therefore, in cutting down the market for 
the ppoduct. ' . 

Mr. Hook. I think so. I think you would limit the uses in many 
instances. 

The Chairman. Do you see any argument against those conclu- 
sions? Is there another side to it, in other words, as you look at it? 

Mr. Hook. No;T think I see only the side that I am favorable to, 
I am afraid. Senator. 

The Chairman.. I guess that is the way with most of us. 

Mr. Hook. That is quite a study, though. I appeared before the 
National Industrial Recovery Board when Mr. Clay Williams was 
chairman, Senator, and I think my detailed testimony on the 30-hour 
week is a matter of record some place here in the Government files. 
With the break-down, which I haven't here to substantiate my posi- 
tion, I think we presented pretty conclusive evidence that it would 
be a very serious mistake to attempt to go to a 30-hour week.^ 

' See Employment Provisions in Codes of Fair Competition, National Recovery Admin- 
istration. January 31, lO.SS, Volume 2, Part I, pp. 7G7-804. 



CONCENTRATION OP ECONOMIC POWER 16419 

LABOR CX)STS FOR STEEL PRODUCTION 

Mr. HiNRicHS. Mr. Hook, this morning you indicated tha^ in the 
Armco plant the labor cost for sheets in 1926 was about $23.15. I 
presume that the cost in 1925 would have been about the same? 

Mr. Hook. Yes. 

Mr. HiNRicHS. Now, the labor cost per gross ton of steel that you 
show on this chart is an average for the entire industry, $1*4.67. 

Mr. Hook. That's right. 

Mr. HiNRiCHS. Sheets had a very much higher labor cost? 

Mr. Hook. Pardon? 

Mr. HiNRiCHs. Sheets had a substantially higher labor cost? 

Mr. Hook. Yes. 

Mr. HiNRiCHS. It follows, therefore, with other products which 
had a substantially lower labor cost per ton, which I suppose would 
have been the heavier steel roll products ? 

Mr. Hook. For instance, if you look at your diagram that you have 
in front of you which I used this morning, "Exhibit No. 2453," to show 
a steel plant manufacturing sheets, sheet bars stopped before you 
started in the old-style hand mills. 

Mr. HiNRiCHS. I am not criticizing the higher price of sheets. I 
am criticizing this lower figure here, in terms of the significance of 
-the change from $14.67 to $15.85; during this period between 1925 
and 1937, the composition of the steel products going to make up 
those 45,000,000 and 51,000,000 tons has changed quite drastically. 
Sheets, you indicated this morning, had increased from some 6,000,- 

000 to some 10,000,000 tons. Structural steel shapes, on the other 
hand, are less. Steel rails, I believe, would be less. 

Mr. Hook. Yes. 

Mr. HiNRiCHS. So that the high-cost items, or let me put it the 
other way, the items with a high labor content and high labor costs 
in the steel industry, have been increasing between 1925 and 1937. 

Mr. Hook. Can I interrupt? 

Mr. HiNRiCHS. And the low-labor costs and the low-labor-content 
items have been decreasing? 

Mr. Hook. May I interrupt you just a second? 

Mr.*^HiNRicHS. Yes. 

Mr. Hook. This figure is on steel ingots, which is the beginning 
of. the operation before you begin to roll. These rails and every- 
thing else are made from that, and this labor cost is based on the 
first beginning of rolling; that is, before you start to roll the steel 
ingots. 

Mr. HiNRicHS. Your pay-roll figure is the census pay-roll figure, 

1 believe? 

Mr. Hook. That's right. 

Mr. HiNRiCHS. The census pay-roll figure covers 

Mr. Hook (interposing). Everything. 

Mr. HiNRicHS. The pay rolls in blast furnaces, steel works, and 
rolling mills? 

Mr. Hook. Correct. 

Mr. HixRiCHS. And would include the pay rolls of the final rolling 
process, sheec pay rolls, for example? Your ingot figures are com- 
parable figures, I presume. I don't remember the figures, but I am 
sure they are. 



16420 CONCENTRATION OF ECONOMIC POWER 

Mr. Brooks. No, they are not, Mr. Hinrichs. Our labor costs per 
ton were based on finished sheets. If we had used ingot production, 
it would have come out lower on both ends. In other words, the 
1926 figure would have been lower, and the 1937 figure would-have 
been lower, but the relationship would have been somewhat the same. 

Mr. Hinrichs. You mean to say that these labor-cost figures are 
specially weighted by the different rolled products? Let me ask my 
question in another way. If you had had this same proportion of 
heavy-rolled products in 1937, with reference to the 51,000,000, as in 
1925, and the same proportion of light-rolled products, that figure of 
$15.85 would have been smaller than the one that you have there. 
I don't know how much. 

Mr. Brooks. Yes ; it might have been. 

Mr. Hinrichs. It would have been? 

Mr. Brooks. Yes; I believe it is true that it would have been. - 

Mr. Hinrichs. Now that same criticism, then, applies to this 23.12 
and 18.38 man-hours. 

Mr. Brooks. Correct. 

Mr. Hinrichs. Those are the number of man-hours required to 
produce a gi-oss ton of steel, but the steel that you are talking about 
is of a changing composition. It i^ a finer product, so that if you 
are trying to report the technological development as it has affected 
man-hours of labor, the figure that you gave this morning of a de- 
crease from 321/^ to 19.1 is a very accurate picture for sheets. 

Mr. Brooks. Sheets alone. 

Mr. Hinrichs. And we don't have the same figure before us now 
for the steel industry as a whole, or for any other steel product., 

Mr. Hook. That is correct. You have an indicator. 

Mr. Hinrichs. Rather crude ! [Laughter.] 

Dr. Anderson. The question that follows naturally from Mr. Hin- 
richs' question to you is whether you propose to use this to make a 
comparison of unlike things, this compared with your previous state- 
ment in the morning, with respect to steel sheets ? 

Mr. Hook. Well, it is the best comparison that you can make with 
the available information that you have. 

Dr. Anderson. In other words, at the outset, you'd say it would 
be a very crude comparison. 

Mr. Hook. Well,. maybe we ought to admit that, that it is a crude 
comparison, but it is a comparison, ^nd there has been an increase, and 
of course, if the relationship of the finished products in 1937 is the 
same as the relationship between the various finished products in 
1925, then that is an accurate statement. Now just what the change 
in relationship has been 

Mr. Pike (interposing). It is not inaccurate to say that the pay 
rolls have gone up ? It is not inaccurate insofar as the wages are 
concerned. Some of the deductions from it may be quite inaccurate 
as to the gross ton of steel, if the composition has changed a great 
deal, but from the point of view of w^age warnings, pay roll, those 
figures are accurate, aren't they, in the steel business? 

Mr. Hook. My attention is called to the fadt that the Brookings 
Institution have used the same basis of figures. 

Dr. Anderson. That is true of the Brookings Institution. I have the 
form in that book, but it is definitely dealing with the problem only 
of blast furnaces, steel works, and rolling mills. They make it that 



C50NCENTRATION OF ECONOMIC POWER 16421 

sort of a tabular display, but they are not trying to make any com- 
parison between it and over-all, and any part of the industry that 
might be included in it. 

]VIi". Hook. I'm not trjring 

Dr. Anderson (interposing). In other words, you are just submit- 
ting this as an evidence of what is occurring in these things in the 
over-all. 

Mr. Hook. Yes. Tlie best figures that we could ^et from Brook- 
ings Institution, but it shows what has happened m the iron and 
steel industry in 1025 to '37 inclusive. 

Dr. Anderson. Let me just make one comment, and ask a question 
that arises from if, if that is what this is supposed to show. You are 
taking 2 years, 1925 and 1937, and making a comparison between 
them, and saying that that is a trend of what has occurred between 
1925 and 1937. Is that right? 

Mr. Hook. That is. correct. 
. . Dr. Andeirson. Might I point out that I don't believe any statistical 
procedure would permit you to draw such a conclusion, because you 
have two end points only and you don't establish a trend thereby. 
All you have done is compare one year, 1925, and another year, 1937. 

What has occurred between might be quite contrary to anything 
that is displayed in the last column of percentage of change; in the 
table from which you quoted, that is precisely drawn out. If you 
had taken 1938 as your end year, you'd have shown a quite different 
picture, or if you had selected any other base year than 1925, you'd 
have shown a different picture. 

' Mr. Hook. Well, you know why we took this period of 1926 to 
1937, in this case, 1935. It is because, between those periods, the 
continuous mill came into operation and it has had its effect. 

Dr. Anderson. I tried to make the point earlier, Mr. Hook, that 
what we were dealing with was a single display here, and it wasn't 
purporting to show what did occur in the continuous sheet-mill 
process. In other words, to use this as an evidence of what might 
have occurred in your part of the industry wouldn't be reasonable 
because this course includes it and many other factors. It is an 
inclusive set of data and not one that is detailed enough to permit 
such comparisons. 

Mr. Hook. Well, it does show- the trend within those periods, un- 
questionably. 

Dr. "Anderson. As a matter of fact^ my point is, Mr. Hook, that 
you can't establish a trend by comparing 2 years. I w^ll give you a 
good example of it. I just happen to have it, because of a piece of 
work that I have done recently. If you Lake agricultural gainful 
workers in the United States from 1870 to 1930, you establish the 
fact that their number has increased 77 percent. 

But if you spot the intervening censal periods you find that by 
1910 the peak lias been reached, and that by 1930 there was an actual 
decline in numbers from 1900. In other words, you had a broken 
trend line. The fiirure for 1870 was lower than 1930, but it rose from 
1870 to 1910, and then dropped off to 1930. That is a trend; you 
don't compare 1870 and 1930 and think you have a trend, just as you 
don't compare 1925 and 1937 and establish thereby a trend. You 
have to put in every intervening year. Isn't that correct? 



16422 CONCENTRATION OF ECONOMIC POWER 

Mr. Hook. Let's take this. Let's be really practical. There is no 
question but that is what happened so far as pay roll is concerned, 
so if everything? else is out the window the industry did increase its 
pay roll from 1925 to 1937 by 23.8 percent. 

Dr. Anderson. Mi^ht I just question something at that point. 
Now we will put in different years and see what happened. Based 
on an index, 1923-25 equals 100, 1925 stood at 99, according to the 
Brookings figures. This is total wages paid. In 1937 the figure 
stood at 122.5. Put the next year in, and you have 1938 Standing at 
68, or decidedly -below 1925. * You would thereby have a decided drop 
in total, wages paid if you used 1938. 

Mr. Eppelsheimer. What page is that ? 

Dr. Anderson. Page 299. 

Mr. Hook. They weren't comparable in operating rate. Let's put 
in .1939. Maybe we should have . put in 1939. We will prepare- a 
chart for you and send it back. 

Dr. Anderson. That is rjght; I think any trends would require 
just such a procedure. 

Mr. Hook. All right; we will be glad to present and get some 
facts in for 1939. 

The Chairman. What is the general trend as you kiiow it? Is it 
up or down? 

Mr. Hook. Wages have been' up. We can see that. 

Mr. HiNRiCHS. I am sorry; I have just one more question on that 
chart. As I put those figures together, there is another figure which 
you could have used here, which was the total number of man-hours 
worked in the industry. You show an increase of roughly 400,000 
to 500,000 workers. Then you show average hours per week on the 
second line of the second half of your chart. 

Mr. Hook, I think maybe we have those figures; we will see. 

Mr. HiNRiCHS. Multiplying those two, you get figures of rougtily 
2,000,000^000 man-hours per week in 1925, and 1,917,000,000 man- 
hours — I have my decimal point wrong — in 1937. 

Mr. Brooks. I have the calculated figilres. 

Mr. HiNRiCHS. Would you include them, please? 

Mr. Brooks. The man-hours were 1,043,000,000 in 1925, and have 
been reduced to 99,728,000 in '37. 

Mr. HiNRicHS. So that the maintenance of the employment figure 
between 1925 and 1937 depended in very large part upon that de- 
crease in hours per week that you show on the bottom of the chart. 

Mr. Brooks. Yes. But the sheet-producing unit, the American 
Rolling Mill Co., was up in man-hours. That is the point. We are 
talking about technological development, and where that technologi- 
cal development affected a plant making that product, the man- 
hours went up, and later on you will see some figures here that will, 
I think, enlighten you and you won't worry so much about that 
chart. 

Mr. Hook. The table entitled "Iron and steel industry, increase in 
sheet and tin-plate production" shows th.e increase in sheet and tin- 
plate production in the iron and steel industry. In 1926 the total 
hot-rolled products, 35,495,892; hot-rolled products and sheet and tiu 
plate, 29,168,018 ; or in 1926 there were 6,327,874 tons of sheet and tin 
plate. In 1937 the total hot-rolled products amounted to 36,766,38^" 



CONCENTRATION OF ECONOMIC POWER 1642b 

a 3.6 percent increase in this period. The hot-rolled products 'other 
than sheet and tin plate went down to 25,972,079, or a decrease of 11 
percent in the products other than sheets. 

(The table referred to was marked "Exhibit No. 2469" and is 
included in the appendix on p. 17329.) 

Mr. Hook. The sheet and tinplate alone went up to 10,793,592, or 
an increase of 70.6 percent in the particular end of the industry 
where this technological development was introduced. Or there was 
an increase in sheet and tinplate between those periods of 4,465,718 
gross tons, and we figure that that is equal to giving employment to 
45,000 men. 

Now, I think that is very enlightening and gives you 

Dr. Anderson (interposing). Mr. Hook, might I ask you now, if 
you did splice on the successive years, has that been a continuous 
trend? Increase in sheet and tinplate has been moving up since '37 
as well? 

]Mr. Hook. I don't ^now whether we have the figures, so I couldn't 
say definitely that that is true. I do'n't think that progression has 
kept up. 

Dr. Anderson. That 10,000,000 tons is not a peak that represents 
that artificially high year of '37? 

Mr. Hook. No ; '39 would show about the same as '37. 

Dr. Anderson. It has held after that? 

Mr. Hook. For instance, in our own case I will give yon the exact 
figures and I think we ran right along with the industry. I don't 
think we are any smarter than the rest of %hem, and in 1937 our 
shipments were '1,131,000; in '39, 1,033,000, so it kept up pretty 
much the same. 

Dr. ANDt:RsoN. I*f that is true then you would say that your part 
of the entire steel industry is even more important today than in 
1937, because the indices- for total output have dropped in '38, and 
I suppose they are still down in '39. In other ^Yords, this would 
be accentuated by later figures. 

Mr. Brooks. I can answer your original question. In 1938, which 
is the 'atest break-down of figures we have, sheets were 35.8 percent 
of the lotal. hot-rolled production, which is a greater percentage, I 
believe, than is shown in '37, when it was 29.4 percent of the total. 

Dr. Anderson. So that is really true ; it is increasing. 

Mr. Hook. It is increasing. 

Dr. Ant>erson. And you would say now that sheets have become a 
predominant factor in the industry, making for whatever pros- 
perity the industry shows? 

Mr. Hook. It is a very important factor in it, that is so, almost 
the domitiant factor. 

Mr. HiNRicHS. Mr. Hook, you spoke, I think, of an increase of em- 
ployment of 45,000. Did I hear you correctly? 

Mr. Hook. This 4,465,718 we just estimated is equal to an increase 
of 

Mr. Hlnrichs (interposing). Forty-five thousand people? 

Mr. Hook. Forty-five thousand men all the way through. 

Mr. HiNRiCHS. Turning to Exhibit 2461 presented this morning, 
an estimate of the number of workers employed in the industry in 
the hand-mill processes, there is a line on it, "Estimated number of 



16424 CONCENTRATION OF ECONOMIC POWEIl 

workers (sheets), 4,237,847," approximately the same figure that you 
have there — slightly smaller, and an estimated employment of 25,682. 

Mr. Hook. In that department alone. We have taken credit here 
for the employment all the way. through in all the departments, not 
just ... 

Mr. HiNRiCHS (interposing). This is only in the mill', and stops 
at the strip pickler, which didn't exist, I take it? 

Mr. Hook. It is right in that group where the continuous mill 
was installed to take place of the old hand mill. 

Mr. HiNRicHs. And this thing includes the process all the way 
through to the railroad car? 

Mr. Hook. That is, of, course, an estimate. 

Senator King. Mr. Hook, I would like to ask one question. I 
know that many of the witnesses who come here don't expect all the 
members of the committee to be here all the time, because we have 
other committees. I have been in other committees all day, and I 
am sorry when we don't have the opportunity to be here all the 
time to listen to you, but we will read all that is said by the witnesses 
who appear. 

I want to ask you whether or not you are familiar with the testi- 
mony that has been given by Mr. Fairless and other respecting the 
development, and production, and changes in the steel industry.^ 

Mr. Hook. Fairly so. Senator, 

.Senator King. Would you say that your testimony with respect to 
the figures which they gave as to production arid employment, and 
so on, are substantially in harmony with those, or materially dif- 
ferent? 

Mr. Hook. I should think they ought to coincide. 

Senator King. I wondered if you made an examination to see 
whether there were any coincidences or any divergences. 

Mr. Hook. I think we went through those figures fairly well, the 
Steel Corporation figures, and so far as 'I know there were no in- 
consistencies with respect to our figures. 

Senator King. I might add that I was present during the testi- 
mony of many of the witnesses concerning the steel production, and 
I am reasonably familiar with their .testimony,- and I am not familiar 
with yours because of being compelled to be in. other committees 
today. 

Mr. Hook. That was my bad luck. 

CAUSES or INCREASED VOLUME 

Mr. HiNRicHS. You do very definitely connect this increase of 
$4,465,000 with the decrease in your selling price from $100 to $57 ? 

Mr. Hook. Oh, yes. 
' Mr. HiNRiCHS. And we can assume that the earlier witnesses would 
probably indicate that .there was an important relation between price 
and volume. 

] Mr. Hook. Remember, Mr. Hinriclis, we didn't take credit for the 
increased volume entirely due to the price change, but to the in- 
crea'sed quality of the product which made possible a thing of that 
kind that cduldn't be made before. 



1 See Hearings, Parts 18, 19, 20, 26, and 27. 



OONCENTUATION OF ECONOMIC POWER 16425 

Mr. HiNRicHS. That is, if you didn't have a better product, it 
couldn't have been used, but it was hipjiily desirable in your opinion 
to have lower prices in Qrder to ^et volume use. 

Mr. Hook. We are perfectlj^ willing to admit that competition as 
other mills came in had something to do with lowering the price, 
because tlie return on the investment- hasn't been w^hat I think it 
should have been. 

Dr. Anderson. But is it not the lower price that makes it possible 
to use the larger thing instead of the little thing that used to be 
used? (Referring to the fenders on exhibit before the committee.) 

Mr, Hook. Undoubtedly. 

Dr. Anderson. In other words, when steel approaches the con- 
sumer's market, steel has to be concerned about lower prices, or as 
low prices as possible. 

Mr. Hook. Yes ; that is what we are working for, to find ways and 
means of decreasing the cost of the product to make it available for 
larger use. 

There was a question asked this morning and I think this fable, 
''Distribution of sheet and tin plate production to consuming indus- 
tries,'^ will show it. Iron Age is the source of our information. Mr. 
Brooks reminds me that these totals down here don't agree with the 
totals which we have used, probably because they are obtained in 
a different way and they are distributed, but it is approximately the 
same. The distribution is probably fairly accurate, and this table is 
only presented to show the increased use of sheet and tin plate in 
these industries. 

(Tlie table referred to was marked "Exhibit No. 2470" and is in- 
cluded in the appendix on p* 17329.) 

Mr. Hook. In the automotive industry it increased 142.9 percent 
in that period; agriculture, 95.7. This is very enlightening — there 
was a redtiction of 27.2 percent in the construction field — and in the 
export field, an increase of 68.1. 

Jobbers and warehouses, an increase of 170. To those of us in 
the industry that is a very interesting and significant figure, because 
jobbers sell to the very small manufacturer and to the tinner and 
to the man who is rnaking repairs, and that is a very encouraging 
increase to us. 

The Chairman: You interpret that to mean that there has been a 
v^ery remarkable increase in the consuming power for this product 
of small independent products of one kind or another?* 

Mr. Hook. Apparently. That is what is indicated to us. 

T!.e Chairman. Is that the fact from your experience? 

Mr. Hook. Yes ; it is. 

The Chairman. To what do you attribute that increase? 

Mr. Hook. Well, I say the question of price and quality both come 
in there. 

"^he Chairman. No; I mean how does it happen that there are 
more users, more small users of sheet and tin-plate? What dp they 
use it for? 

Mr. Hook. Oh, there are innumerable purposes. Senator. For 
instance, there are little gadgets that are now made out of sheet steel, 
and this little manufacturer who onl})- uses a few tons, can't buy by 
tne carload, goes to the jobber and buys. 

124491— 41— pt. 30 16 



16426 CONCENTRATION OF ECONOMIC POWER 

The Chairman. What does this little manufacturer do with the 
steel plate? And there any new industries, new products?. 

Mr. Hook. He will stamp it out into articles of various kinds, 
maybe an ash tray. This one is made out of glass, of course, bui 
we are trying to get him to make it out of steel. 

Senator King. The .ingenuity of man manifests itself in different 
uses to which steel products may be put, as well as in the plastics 
and glass, and the other products. 

Mr. Hook. That is right. 

The Chairman. These new uses are being developed by small man- 
ufacturers, independent enterprises? 

Mr. Hook. Yes.. 

The Chairman. And not by the large enterprises? 

Mr. Hook. Yes. For instance. Senator, I think I called your at- 
tention in November to a very unique product which we have devel- 
oped and put on the market in the last 2 years, known as zinc grip, 
and the continuous mill made that possible in part, only, but it is a 
method of galvanizing sheets, that is putting a spelter coat on them, 
so that that coated sheet can be put in a press and stamped out with- 
out that spelter breaking off. 

Now formerly, you would have to take a black sheet and stamp 
it, because the spelter or the zinc wouldn't stick on it, and then you 
would pickle that sheet and then put it in a hand-dipped operation, 
which was very expensive. It took a great deal of spelter. 

So now the man with a sheet which only costs $2 a ton at the 
present time above the price of ordinary common galvanized sheets, 
can stamp these articles out at very much less cost to him. There- 
fore, it is increasing the use of the material and makes it possible 
for him to sell his product at a lower price and create a wider 
market. 

This is simply a break-down. 

Dr. Anderson. Mr. Hook, I am curious to know because of the 
great importance of the construction industry and its prosperity to 
the prosperity of the Nation and the reduction of unemployment, 
why you have the construction industry there in the red with a de- 
cline in use of steel and tinplate, 

Mr. Hook. Of course, there are two reasons for that, in my opin- 
ion. The prime and important reason has been that the flow of 
private and corporate savings into the capital goods industry has 
been retarded, and I think that is one of the very important things. 

Then I think that the construction industry, certain parts of the 
construction industry — and when we are talking about construction 
we must differentiate between the big construction items, big build- 
ings, and so forth, and the home-building field — in the home-building 
field Avhere there are great needs now, we believe, for additional 
homes, we haven't liad the advance in mass production, I think we 
have been held back, I think unwisely, by some of our labor freinds 
where the rate has been kept too high, and the use of that labor in 
the construction of homes has actually been held back. In other 
words, T think more homes would be built, and I think they would 
have had more hours of labor and w6rk, and more earnings over the 
year, if that hadn't been true. 

Dr. Anderson. In the new developments in steel, these unusual 
things that have occurred in the last 10 or 15 years, do you see what 



CONCENTRATION OF ECONOMIC POWER 16427 

would amount to an entrance of steel into the construction industry 
in an increasing way so as to reduce the cost of home building? 
What is the future in your mind of that thing? 

ARMt:0 RESEARCH IN HOUSING 

Mr, Hook. We think so. We have been spending a good deal of 
money in research in that field in the last several years. We have 
just, for instance, finished building a little unit — not so little, 27 
houses is not such a small unit — of steel houses, and dollar for dollar 
we think that the buyer is getting a very much better product and 
more value for has money; well insulated, thoroughly insulated in 
fact, termiteproof and stormproof, tornadoproof — very many things 
that we think make it advantageous to the buyer. 

Dr. ANDf:BSON. Is the widespread use of steel for housing or do- 
mestic homes in tlie immediate offing, in your opinion, or not? 

]Mr. Hook. I wish I could answer you in the affirmative. Dr. Ander- 
son, but I don't know. We are trying very hard to reduce costs in 
tliat field and get a home which can be built at very low costs. We 
have made a lot of progress and we are building very good houses 
at very reasonable figures at the present time. 

Mr.' O'CoNNELL. Mr. Hook, looking at "Exhibit No. 2470" and 
relating it to the question I asked a little while ago about the price 
behavior in the sheet portion of the steel industry, I notice that 
two classes of buyers, the automotive and the metal container, con- 
situte a little over 50 percent of the steel sheet buyers, and those 
industries, I take it, are characterized by a few in the industry, but 
large units. 

Mr. Hook. Very large units. For instance, the metal container,- 
that is' largely tinplate as you know. 

Mr. O'CoNXELLu Would you say. that that fact, the fact that there 
are large buyers on that side, was a factor which helped to produce 
the reductions, the 5ubstant^ il reductions in sheet prices ? 

Mr. Hook. I don't think tJ lere is any question about it. 

Mr. O'CoNNELL. You see, that price behavior is not characteristic of 
the steel industry generally as I would understand it. 

Mr. Hook. The other branches of the industry haven't had the tech- 
nological improvements that made it possible for the price to be 
reduced. 

Mr. O'CoNNELL. They haven't had the large buyers, either. 

Mr. Hook. Oh, some branches have. You take in the railroads, for 
instance, they are very large buyers. 

Mr. O'CoNNELL. Lately ? Not lately. 

Mr. Hook. Not what we would like to see, of course. 

Mr. O'CoNNELL. When we heard the story about the way the price 
of tinplate was arrived at in the prior hearing,^ it apparently was a sit- 
uation in which the Carnegie-Illinois representatives sit down with 
the representatives of the American Can Co. and thrash out a price, 
which apparently from your figures has tended to be a rather low price, 
relatively low over the years. In other uses of steel, take structural 
shapes or something like that, where you have a multitude of small 
buyers, the price has apparently remained relatively high as compared 
to the price of tinplate ; isn't that true? 



16428 CONCENTRATION OF ECONOMIC POWER 

Mr. Hook. I am not competent to express an opinion on tinplate be- 
cause we don't make tinplate and I would rather not discuss a subject 
that I am really not competent to discuss. 

Mr. O'CoNNELL. It seemed to me that the fact that" there are two 
groups of buyers representing about 50 percent of the market for sheets 
might have been a yery important factor in bringing about the price 
reductions that there is evidence of. 

Mr! Hook. Of course, they can order in large volume, and if you can 
get a large tonnage of one size to put through your mill, that is quite a 
differei.t operating problem than if you have to take that same tonnage 
and divide it up into innumerable sizes. 

Mr. O'CoNNEix. Yes ; but purely on the bargaining side I take it that 
a large buyer is in a better bargaining position than a multitude of 
small buyers. 

Mr. Hook. I don't think there is any question about that. 

Mr. O'CoNNELL. And that would have some effect on the price struc- 
ture, wouldn't it ? 

Mr. Hook. It would have some effect on that, of course. But here 
you see are jobbers, they are small buyers, and yet there were 1,092,000 
toils to jobbers and warehouses, and that has greatly increased, Mr. 
O'ConnelL in the last few years. 

Mr. O'ConNell. Yes: J. can see that. 

DISPtACElvniNT OF OTHER.INDUSTRIES BT SHEET STEEL 

Mr. HiNRicT' s. Just iojie more question on "Exhibit No. 2470" in 
terms of increases of eniployment. You have been emphasizing the 
contribution which the <sheet industry has been making to total em- 
ployment and pointing out, quite properly, that capital construction 
itself is important, and feo forth. There are some deductions that need 
to be made, too. That isi not your business, but in terms of the furniture 
item down here, it is a i^elatively small item, or in terms of the automo- 
tive item on the top, th/e introduction of plate represents in part simply 
business that would n/ot otherwise have been done, but there has been 
at the same time some displacement of other products, hasn't there? 
There is less wood usfed in automobiles for example, less wood used in 
furniture which has been displaced by plate. 

Mr. Hook. Of course I am not competent to answer that question 
accurately, but you take the great increase in the number of auto- 
mobiles that are produced since the introduction of steel into the 
automobile; I question whether there has been such a tremendous 
reduction in the amount of wood taken as a whole, i don't know. 

Mr. HiNRiCHS. The number of automobiles isn't 

Mr. Hook (interposing). Maybe Mr. Ford could have answered that 
question for you. 

Mr. HiNRiCHS. I thought he testified the number of automobiles in 
1j37 was not larger than the number of 1929, for example ; about the 
same number or a slightly smaller number. 

Mr. Hook. Yes ; but we began to use sheet steel in the automobile in 
large quantities before the twenties. Of course, here in recent years 
the metal top has come in, when we were able to produce a sheet that we 
could make it out of. That undoubtedly reduced the amount of wood 
in those tops very considerably. 



CONCENTRATION OF ECONOMIC POWER 16429 

Mr. HiNKiciis. To some extent, textiles. I think I remember there 
used to,be n textile finish on the top. 

Dr. Anderson. Mr. Hook, just to put a cap on that point, you 
wouldn't want to say that this represents new industry. You would 
say, wouldn't you. rather, that in all of the points listed here there is a 
certain amount or replacement that is a substitution of your product 
for something that has been used formerly? 

Mr. Hook. Oh, to some extent. Dr. Anderson, but I don't think that 
has been a serious thing. I think the increased use — for instance, just 
see how much the automobile is using that fender; you can see with 
your own eyes, this old fender and the one today, multiply that by four. 
We have increased the actual amount of the steel because the public 
wanted it, Mr. Ford said yesterday, if^you remember, that they* spent, 
I think I am correct in remembering he said, about $5,000,000 to change 
the face of it. This w-as one of the things we have done to help them 
change the face, when you look at the nose of that fender. . 

This table, "Examples of Increased Use of Sheet Steel," is pre- 
sented to shotv you there are other industries in addition to the 
automobile. In electric refrigerators, we have contributed of course 
to some extent in the reduction of the cost, due to the cheaper, as 
well as better grade of steel that they are able to use in these enam- 
•eled parts; and the same way in the electric washing machine. A 
few years ago, this tub, which is made by some of the manufacturers 
out of enameled material — that iS, you stamp the tub and enamel 
it — just couldn't be made from the old sheet.. We have improved it 
and that has made it possible for them to make a better product, 

. (The table referred to was marked "Exhibit No. 2471" and is in- 
cluded in the appendix on p. 17329.) 

Mr. Hook. They have decreased the average unit price of their 
product 58 percent in electric refrigerators, and increased the number 
of units 1,027 percent during this same period, and the electric yaw- 
ing machine has decreased in price 51 percent and increased in use 
75 percent. 

Dr. Anderson. Mr. Hook, how much do you think the matter of 
increased volume has had a bearing in reduction in price as over 
against the diflference in use of materials? 

Mr. Hook. They couldn't get the increased volume until they were 
able to bring their price dowm so that they could get the increased 
volume. In 'other words, it wasn't only the technological develop- 
ment — we contributed, but all along the line the other manufacturers 
(hat were furnished them with parts had contributed, and they, 
themselves, have introduced more efficient methods. 

FINANCING OF NEW CAPACITY 

Mr. Hook. We sliowed you what we spent at Middletown for the 
construction of this mill, and here in this chart, "Industry Expendi- 
tures for Continuous Mill Construction," is the total for the industry. 
We won't argue over that distribution, Mr. " Hinrichs, of whether it 
wa.s in 2 years or not, but the total amount of money is fairly accu- 
rate, because that is from the Institute, and then rechecked with the 
manufacturers who furnished mills and equipment, and so forth. 



16430 CONCENTRATION OF ECONOMIC POWER 

(The table referred to was marked "Exhibit No. 2472" and is 
included in the appendix on p. 17330.) 

The Chairman. Does that represent new capital i 

Mr. Hook. Yes, sir.- 

The Chairman. I mean in the sense of a new contribution and not 
a plowing in of earnings. 

Mr. Hook. Oh, well, that depends upon the particular company. 
We had to borrow all ours. Now, some of the companies were more 
fortunate, sir, and had cash surpluses that they could use and go 
into their working capital, but most of the companies did. financing 
that introduced these continuous mills. 

The Chairman. Would it be fair to say that most of this was new 
financing either by way of borrowing or stock sales or such ? 

Mr. Hook. Of course, I would be guessing at that, Senator, and 
maybe I oughtn't to make a statement. 

The Chairman. But in your own case it was a case of borrowing. 

Mr. Hook. That was borrowing, I know that. 

Mr. Hinrichs. I am not going to take exception to your statement, 
but I wasn't trying to be unfair to you this morning and I would 
like to go the other way now. Actually the chart that you intro- 
duced this morning showing mills built in '26, '27, '28, '29, '30, in 
fact in every year down to 1937, indicates that the industry as a 
whole (irregularly it is true, because the volume wasn't the same in 
every year) was making a net' contribution . during that period 
through the construction industry. 

Mr. Hook. That is true. 

Mr. Hinrichs. This particular branch of the steel industry is 
pretty nearly through on this thing and it is going to be something 
else. My criticism now would not be on a year-to-year basis but on 
a decade to decade basis if I were making it, and I wouldn't want to 
quarrel with you on that score. You have a very legitimate point 
on this one that you could have made. 

Mr. Hook. You have helped me out. You see, I didn't see it quite 
as quickly as you did. 

Mr. Hinrichs. There is one question on this though, that I would 
be interested in. It is along a slightly different line, having to do 
with the concentration of sheet mill operations'. 

If I figure at all correctly, the minimum ante to get into this game 
is in the neighborhood of $8,000,000. The smallest mill that you 
listed was a little over 200,000-ton capacity, and the cost per ton of 
capacity seems to be in the order of $40. 

M3,ny of those mids that you spoke of, the 1,264 mills, were in 
rather. small establishments a number of years ago, weren't they, in 
the sheet business ? 

Mr. Hook. No. 

Mr. Hinrichs. It has always been in large 

Mr. Hook (interposing). The relationship of tonnage hasn't 
changed so materially. Take the Steel Corporation, I think todav 
(we will have to examine the records very carefully because I am 
guessing now which I ought not do, but, I know you are not going 
to hold me to it) the proportion of the sheet steel production of the 



CONCENTRATION OF ECONOMIC POWER 16431 

country, for instance, indicates that the Steel Corporation produces 
today approximately the proportion it did back in '26. 

Mr. HiNRicHS. I wasn't speaking of it in connection with the 
United States Steel Corporation or the idea of concentration in 
some one or two companies, but rather the concentration of business 
in essentially large producing units, so that some 8, 9, or 10 com- 
panies come to have virtually complete control of this particular 
field. I am not implying an improper control, but the operations 
in this field have come to be concentrated in a relatively small num- 
ber of operating companies, whereas fonnerly there was a fringe of 
small companies operating with hand mills. Isn't that true? 

Mr. Hook. You are correct, that it ig possibly more concentrated. 
That is, the proportion of the total capacity of the country today is 
larger with respect to, say, those 10 companies, than it was in 192G. 
Remember, there are still a lot of the old hand-mill companies that 
are working profitably, because they are making special products to 
some extent that it is difficult to make on the continuous strip mills. 

Dr. Anderson. Is that the explanation for their operating on a 
profit basis, the small hand mills? I have got the impression from 
this testimony that this is so distinctly an advantage from a produc- 
tion standpoint that I can hardly imagine small hand mills operating 
successfully profitably against your competition. 

Mr. Hook. They do, but some of these hand mills are still operating 
on the specialties which I told you we ourselves must still produce 
on our hand mills, and when we find out how to make all the products 
on the continuous mill, I am perfectly frank to admit that they will 
either have to go to a continuous mill process or I think they will be 
eliminated, just as my father was eliminated from the carriage 
business. 

Dr. Anexerson. Is it true that there has been a process of elimina- 
tion of the hand mills going on, say, since strip mills came in ? 

Mr. Hook. Oh, yes; there has been. For instance, take our old 
Twenty -third Street mill, which was a part of the Ashland plant 
when we bought it back in 1921. I forget how long we ran it — 
2 or 3 years, maybe 3 years. It has gone completely, and many of 
the old hand mills of the Steel Corporation have gone completely, 
and that tonnage is now made on the continuous mills. 

Dr. Anderson. Do you have any idea as to the number of concerns 
that have been closed as a result of the continuous mill ? 

Mr. Hook. No ; I couldn't answer that question. 

Dr. Anderson. Do you know of any such figures ? 

Mr. Hook. There doesn't come to my mind any particular plant 
that I can think of that has actually been eliminated and put out of 
business entirely by the continuous mill. 

Dr. Anderson. What really happens? What occurs if they are 
not actually eliminated ? 

Mr. Hook. Their operations to some extent have been reduced, 
and, as I say, they go into the manufacture of f»roducts in small 
quantities. It isn't profitable to make small quantities on these big 
mills. That is one of the things you have got to do. The little mill 
can make the over-the-counter stuif, and do that more profitably 
than we can. 



16432 CONCENTRATION OF ECONOMIC POWER 

Just think of it. I told you this morning, we make a coil running, 
anywhere from 12,000 to as high as 17,000 pounds out of one slab, 
just rolled up in a great big roll like a big roll of- paper, and it con- 
tains from 12,000 to 17,000 pounds, from 6 to 8 tons. 

Mr. HiNRicHS, I am confused at one point, probably because I 
haven't come to Middletown yet. This morning I understood you 
to say that you were operating your hand mills on material which 
had already been through the continuous strip. 

Mr. Hook. Through the hot continuous strip, partly rolled down 
on the hot continuous strip, and finished on the old hand mills, 

Mr. HiNRicHs. So the survival of the hand mill in part depends 
now upon having a hoi continuous. strip operation in conjunction with 
the hand mill. Is that correct ? 

Mr. Hook. Not necessarily. For instance, just 30 miles from us; 
Mr. Hinrichs, at Newport, Ky., is the Newport Rolling Mill Co., 
operating what we call improved old hand mills. -In other words, 
we have tables running from the furnace down to the rolls so that the 
man needn't by main strength and awkwardness pick that pack up 
and throw it on the floor plate. Then in back they have mechanical 
catchers, and the screw is operated by the roller, who stands and 
operates it just as he did on the old hand mill. I think they have 26 
mills. . 

This chart really sums up all we have been talking about, if you 
stop and analyze it, because this dotted line is the United States Bu- 
reau of Employment Index, blast furnaces, steel works, and rolling 
mills, and you can see where that has gone,.using the 1923-25 average 
as 100. , 

(The chart referred to was marked "Exhibit No. 2473" and appears 
on p. 16433.) 

Mr. Hook. This line is the sheet and black plate production that 
we have been talking about that is made on the continuous mills, and 
this production has been very largely influenced, of course, as we 
have tried to present to you, by this continuous rolling-mill process. 

PRODUCTION ON CONTINUOUS HOT MILLS 

Mr. Hook. This black line here is the total hot rolled production, 
and the production of sheet and.black plate is a part of that, so when 
you eliminate that, then you find that you have this line of hot 
rolled products other than sheets. So you can see what the increase in 
the sheet and black plate production has done to the curve for the total, 
and where it would have been without that. 

Dr. Anderson. Mr. Hook, would it be possible to insert two more 
lines, breaking up the Bureau of Labor statistics, employment indixes, 
so that we could compare labor and production in one part of the 
'industry with labor and production in another? If you had the two 
more lines there, we might have an excellent summary of your argu- 
ment that this process does not, even within its own part of the 
industry, adversely affect employment. 

Mr. Hook. Well, maybe we can get the Census Bureau to get that. 
There are no available figures now. 

Dr. Anderson, I don't think they are available. I was just won- 
dering. 



OONCENTRATION OF ECONOMIC POWER 



16433 



Mr. Hook. I wish we could have done that for you, Doctor, but 
we feel that this is very significant, and really sums up the story prettv 
well. 

The CiiAiKMAN. May I ask whether that trend exhibited upon 
"Exhibit No. 2473" is still apparent, or has there been any change? 

Exhibit No. 2473 

(Submitted by the American Rolling Mill Co.] 



IHPEK OF HOT SOUfD STHL mOKim 

Uvi. 1923-1925-100) 




Mr. Hook. Yes; you remember the question wa3 asked a little 
while ago, and we looked at our figures, and we found that it had 
continued during this period. 

The Chairman. This ends in 1937, but it is still going on. 



16434 



CONCENTRATION OF ECONOMIC POWER 



Mr. Hook. Yes. In other words, this has affected favorably the 
trend of the total production. It is continuing, in other words, to be 
a larger portion of the total production of rolled products. The chart 
"Sheet and Tin Plate Production and Number of Continuous Mills 
Operating" 3hows that these continuous mills didn't come in all at 
once. 

(The chart referred to was marked "Exhibit No. 2474" and appears 

below. ) 

Exhibit No. 2474 









[Submitted by the American Rolling Mill Co.] 








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Mr. Hook. Here is our first mill. It started in 1924, but we start 
with li)2G. Then the next mill in '26, that was the Butler, and then 
the Weirton mill came in here;. and if we went back to "Exhibit No. 
2473," you could see how these mills came in during this period, and 



CX)NCENTRATION OF ECONOMIC POWER 16435 

it showed that the index of sheet and bhick-plate production came 
right along after this bad period in '32. It came right along with 
the introduction of these mills. 

The Chairman. It is observable that tliis upward trend began ap- 
parently in 1933, didn't it ? 

Mr. Hook. Yes; yes, it did. We got the first boost, you see, before 
1929 was over. We got a couple of these mills installed, our mill, and 
the Butler mill and the Weirton mill were going before 1929, and I 
think the small mill at Gary, at the steel corporation, and we did 
get a jump in there, you see, in production during those periods, but 
that might have been a natural rise. In other words, I don't know 
that I can credit this to the continuous mill. [Laughter.] 

The Chairman. On the previous chart, "Index of Hot Kolled Steel 
Production,'' "Exhibit No. 2473," there is a perfectly amazing increase 
beginning in 1934, of your steel and black-plate production. That 
line, '35, 36, and '37, is practicall}- vertical-, it runs up so rapidly. 

Mr. Hook. That is when you got the real effect of all these mills, 
because the majority of them came in from '33 on, where they really, 
begsin to jump. 

The Chairman. And the next chart, "Exhibit No. 2474," shows that 
the index of sheet and black-plate production has almost kept pace 
with the number of continuous mills operating. ' Now, you have been 
disposing and marketing the products without difficulty all this time? 
[Laughter.] , 
Mr. Hook. I wish we could say that was true, Senator. 
The Chairman. Well, let me put it this way. Has it been going 
into inventory or the channels of trade? 

Mr. Hook. Oh, no; it has been going into the channels of trade; 
absolutely. 

The Chairman. So that it is an active industry and it still remains 
active. 
Mr. Hook. Very. 

The Chairman. Expanding industry. 
Mr. Hook. Yes. 

The Chairman. I hope your profits are expanding, too. 
Mr. Hook. Unfortunately, they have not. I am not particularly 
pVoud of the financial record. [Laughter.] 

The Chairman. Njjw, to what do you attribute this increased de- 
mand for your product ? 

Mr. Hook. Well, particularly to two things — the very great im- 
provement in the quality, making it possible for the man who used it 
to reduce ills cost because of lower fabricating cost, and the lower price 
at whicli he was able to buy. 

The Chairman. Now you have told us that you were employing 

more persons 

Mr. Hook (interposing). Correct. 

The Chairman (continuing). During this period. Now, if all 
industries were showing the same results, we probably would have a 
much less difficult unemployment problem than we have, wouldn't 
we? 

Mr. Hook. Definitely. 

The Chairman. AVell, have you, from your observation and ex- 
perience, any opinion to express as to whether or nov the conditions 
in your industry are indicative of conditions in other industries? 



16436 CONCENTRATION OF ECONOMIC POWER 

LACK OF INVESTMENT AS CAUSE OF UNEMPLOYMENT 

Mr. Hook. No, they are not, because I tliink that the hirge pool of 
unemployment today is the result of the lack of capital financing; in 
other words, the deficit in capital financing which I discussed the 
last time I appeared before this committee,^ and of course, as you 
know, I think that I have very definite views on that, and if we go 
back. Senator, to the report of the Durable Goods Industries Com- 
mittee, which was submitted to the President on the 14th of May 1934, 
and you follow through what has happened, those of us who were 
members of that committee and who have studied the matter since, 
believe that the things that we pointed out are still pertinent, and 
other things have happened, of course, since that time, that we think 
have affected the flow of corpohite and private savings into production 
and trade. I am encouragecl by one part of the joint resolution, which 
created your committee ; in section 2 it says : 

It shall be the duty of the committee, (a) to make a full and complete study 
and investigation with respect to the matters referred to in the President's 
message of ApriJ 29, 1938, on monopoly, and the concentration of economic power 
and financial control over production and distribution of goods and services, 
and to hear and receive evidence thereon with a view to determining, but withooit 
limitation, (1) the causes of such concentration and control and their effect 
upon competition, (2) the effect of the existing price system and the price policies 
of industry upon the general" level of trade, upon employment, upon longrterm 
profits, and upon consumption, and (3) — 

And this is the point I want to bring up — 

the effect of existing tax, patent, and other Government policies upon competition, 
price levels, unemployment, profits, and consumption — 

And then (b) says — 

to make recommendation to Congress with respect to legislation — 

and so forth, on the foregoing subject. 

I say it is encouraging to me because you haven't started on No. 3 
yet. [Laughter.] 

The Chairman. You'd be surprised. [Laughter.] 

Mr. Hook. When you give business an opportunity to come down 
here under clause 3, and we haven't yet appeared on that subject, I 
think we will have quite a number of things to suggest that have 
militated against the flow of corporate and private savings into pro- 
duction and trade, particularly into the durable-goods industries, 
where I think your large pool of unemployment still exists. 

In other words, there has been a using up of tlie capital assets of 
the country, and we haven't kept up with replacement, ordinary re- 
placement. 

Here — and I will be glad to leave this — the Machinery and Allied 
Products Institute have made a very exhaustive study and they said 
here : 

The need for constant replacement of capital goods is seen when we note the 
decline in value of such prc-perty in daily use. A study by the National Bureau 
of Economic Research revealed that business capital is consumed at the rate of 
more than eight billion dollars per year. This amount of durable wealth in 
business, that is, capital goods, must be replacvHl each year if we are to maintein 
the nation's stock of durablj weaith, to say nothing of expanding it for growth. 



1 See Hearings, Tart 20, pp. 10805i-10830. 



CX^NCENTRATION OF ECONOMIC POWER 16437 

.And I believe that therein lies largely the answer to this (question of 
unemployment. I am firmly convinced that with the proper study of 
the things which have militated against the flow o+' corporate and 
private savings into production and trade, the Congress can encourage 
business in such a way that confidence will be established and we will 
reinstate that flow, we will encourage that flow of capital, and that, 
in my opinion, is what is' going to change this unemployment picture. 

The Chairmax. Of course, I might 

2Jr. Hook (interposing). In other words, we want to get them off 
the Government relief rolls and onto the pay rolls of private enter- 
prise. 

The CiiAiRJMAN. I might say, and it may not be beyond the bounds 
of propriety, that my personal views 'have for a long time been that 
Congress might, with great success, endeavor to encourage so-called 
private industry to take up the slack in unemployment by some form 
of encouraging private investment. 

One thought that I had in mind was to give employers of labor some 
form of a credit to be measured by the number of persons employed, 
but it is always difficult to suggest a formula without at the same time 
awakening fears. Not ever^'body w^ho comes before this committee 
comes with the same objective attitude that you bring here, Mr. Hook. 

Mr. Hook. Thank you, sir. 

The Chairman. And not everyone realizes that the committee is 
endeavoring to discover something and not trying to make a goat out 
of the witnesses who come here. 

Mr. Hook. I don't feel like that. » 

The Chairman. I know you don't and that is why I can say it tf» 

Mr. Hook. I am, of course, quite frankly of the opinion that when 
we really get into a serious investigation under (3) of section 2, a lot 
of information can be brought here that has a very decided bearing on 
it, but M e would have to spend a couple of days. 

Mr. HiNRicHS. May I ask a question at this point, please? Mr. 
Hook, what was the year that you were quoting there from the Na- 
tional Bureau of Economic Researfch? 

Mr. Hook. 1938. 

Mr. HixRicHs. That was a year of depression. I wonder if you 
wouldn't like to introduce in the record later, not now, a comparison 
of the net additions to business capital as shown by the National 
Bureau for 1929 and 1937? 

Mr. Hook. Yes ; I will. 

Mr. HiNRiCHS. Just to give a. year of active business. 

Mr. Hook. We will prepare those figures over a period of time, 
and be very glad to have that opportunity. 

Mr. HiNRicHS. May I ask, has the sheet industry been unusually 
venturesome, and are you restrained at the present time so much by 
fear as by the 13,500,000 tons of continuous strip capacity shown 
in "Exhibit No. 2460"? 

Mr. Hook. I fully expected that question to.be asked some time — 
"V\'^re we more venturesome than anybody else?" Well, it was a 
case of necessity. When a fellow comes along with a method of 
doing a thing 'that you have got to adopt to keep up with the pace, 
you go out and break your back to find the money to do that job. 



16438 CONCENTRATION OF ECONOMIC POWER 

to keep from going out of business, and that is just exactly what 
happenec;!. We have proved by the introduction of this process that 
a quahty of material could be produced that could not be produced 
by any other method,^and if they wanted to keep in competition with 
the game, it was necessary to go out and put in one of these plants. 

Mr. HiNRiCHS. Do I read your figures in "Exhibit No. 2460" incor- 
rectly? By the end of 1929 there were 3,000,000 tons of continuous 
strip capacity. Between 1929 and 1932 there was some further build- 
ing of strip capacity. I would assume that the capacity finished in 
1930, and very likely that finished in 1931 was projected in 1929, 
but even including that capacity, there was only a comparatively 
small increase during the period when business was sliding off and 
you had no idea what your future volume would be. By the end 
of 1932 you had 5,400,000 tons. 

Mr. Hook. That is right. 

Mr. HiNRicHS. Of continuous capacity. 

Then, in this later period, when you saw a rising volume of busi- 
ness and saw some security in the future, there was' a very rapid 
introductidn of continuous strip mills, so that by the end of 1937 
you had 13,347,000 tons of capacity, a little more than 4 times as 
much as you had back in 1929. 

Now, is that an incorrect reading of those figures ? 

Mr. Hook. Those dates are correct. I haven't in mind, you caii 
tell me what it is — but will yon refer there to when the sheet and 
tube plant w^ent into operation? 

Mr. HiNRicHs. Youngstown? 

Mr. Hook. Yes. 

Mr. HiNRicHS. In 1934, and a second one in 1935; the Indiana 
Harbor in 1934. 

Mr. Hook. That is when- it actually was turned over. Of course 
they were some months breaking it in. But what actually took 
place, the sheet and tube technical men and operating men visited 
our plant many times during the period say, from 1928 particularly 
and 1929, up to the time when they made their decision to go ahead — 
and they were considering it all the time, making their estimates 
and finding out how they were going to raise their capital and so 
forth and so on, until finally they saw that it was inevitable. 

EMPLOYMENT IN MANUFACTURING INDUSTRIES 

Mr. HiNRicHS. Didn't they also have in mind the line "All manu- 
facturing" on this chart headed "Indexes of Employment," Exhibit 
2475, or on the earlier chart, the total production, Exhibit 2473 that 
black line that goes sloping off from 1929, when it stood at 104.6, to 
1932, when it stood at 65 ? That must have been also in their minds 
during that period when they were on the brink of considering build- 
ing. Had they been maintaining employment, they would probably 
have been in the game very much earlier than they were; don't you 
think so? 

Mr. Hook. I don't think there feany question about it. 

Mr. HiNRTCHs. And when they saw that line turn up in 1932 and 
1933 about that time it began to look as though there were some sense 
in a businesslike investment. 



CONCENTRATION OF ECONOMIC POWER 



16439 



Mr. Hook. They knew by that time that if they were goin^ to stay 
in the sheet game in a big way and hold their proportion of the indus- 
try they had to do it. ■ 

Tlie Chairman. Now, what does the chart, "United States Depart- 
ment of Labor Indexes of Employment in Manufacturing Industries" 
show ? You produced that chart for a purpose. 

(The cliart referred to was marked "Exhibit No. 2475" and appears 
below..) 

Exhibit No. 2475 









[Submitted by the American Rolling 


Mill Co.] 








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Mr. Hook. It is just comparative, that is all. 

The Chairman. Isn't that the answer to the question that I asked 
you a little while ago? 

Mr. Hook. Yes ; I think it is. 



16440 CONCENTRATION OF ECONOMIC POWER 

The Chairman. You feel that this chart correctly represents the 
condition ? 

Mr. Hook. Yes. 

The Chairma.n. Then, reading it, we find that thfe blast furnaces, 
steel plants, and rolling mills have shown the same striking increase 
which was. shown on your other chart from 1932 to 1937, an increase 
which you. tell us by your figures for 1938 and '39 is continuing. 

Mr. Hook. Yes. 

The Chairman. I asked you a little while ago if that increase in 
your business of capacity and of output Avas comparable- with condi- 
tions in other industries, and you said you weren't able to speak for the 
other industries. 

Mr. Hook. No ; this is the steel industry only. This is all manu- 
facturing 

The Chairman. What does that line show with, respect to all manu- 
facturing? 

Mr. HopK. Here is your nondurable goods. 

The Chairman. First let's deal with "all manufacturing." What 
does it show with respect to all manufacturing? 

Mr. Hook. Here it is. Here is your curve of all manufacturing. It 
lags way behind. 

The Chairman. But it shotvs an increase, does it not ? 

Mr. Hook. It hadn't reached, in 1937, the 1923-25 base. 

The Chairman. What increase does it show from 1932 ? 

Mr. Hook. All manufacturing ? Well, it starts at, say , about 65 and 
goes up to less than the base. 

The Chairman. It has gone up from 65 to almost 100 in the 5 years 
from 1932 to 1937. 

Mr. Hook. That is right. 

The Chairman. Now, Vhat has been the effect on durable goods, 
according to the chart which you have produced? 

Mr. Hook. Durable goods has not kept pace with all manufac- 
turing. 

The Chairman. But what has been the actual effect? It increases 
from what — from 65 in 1932 to what, to about 95 ? 

Mr. Hook. To about 95. 

The Chairman. So that in all three of these items which you have . 
produced here there has been a steady and very striking increase of 
production, has there not? 

Mr. Hook. Yes ; there has been that. 

The Chairman. The nondurable goods apparently showed a strik- 
ing increase from 1932 to 1934, and then tended to level off until 
1936, and then began running up slightly again. Is that not correct? 

Mr. Hook. But they didn't get the drop that all manufacturing 
goods, and especially durable goods, had. 

The Chairman. That is right, because the nondurable goods are 
the ccmsumer goods. 

Mr. Hook. Yes. 

The Chairman. In other words, this chart which you have pro- 
duced here shows that these substantial lines of industrial activity 
have had an obvious increase since 1932. , 

Mr. Hook. That is correct. I don't know where we would have 
been if it hadn't. 



CJONCENTRATION OF ECONOMIC POWER 1644 A 

The Chairman. Well, with respect to your industry, you are wa 
above the point which you occupied in 1929. 

Mr. Hook. Correct, and that is why I showed by that other chart, 
Senator, ^'Exhibit No. 2474," that the sheet tin and black plate pro- 
duced on these continuous mills affected that very largely. 

The Chairman. I ask you these questions because recently I read a 
report by Standard Statistics which sliowed that in 1939 the 669 
leading corporations — utilities, railroads, and manufacturing corpora- 
tions — had a net income in 1939 of more than 80- percent greater than 
in 1937,- and yet we still have the unemployment problem. 

Mr. Hook. Well, in the meantime. Senator, over this period of 
time, 1932 to the present time, we have had an increase in the em- 
ployable men. If we had kept up the normal increase, -this figure 
shou^' oe way beyond where it is. If we had kept the normal trend 
going, we had an increase between 1926 and 1937, I think we showed, 
of 11.2 percent in population, therefore, we should have had an in- 
crease over that same period from 1926 to 1937 to keep up with that 
trend. 

Now, in 1926, you see, the all manufacturing and. durable goods 
lines started at practically base. We oyght to have had somewhere 
around 111, or something of that kind. 

The Chairman. Well, this is the question that frames itself in my 
mind. If we had an increase in durable goods from an index of 55 
to 95 in a period of 5 years, as shown by your chart, and an increase 
in all manufacturing from 59 to 99 in the same 5 years, an increase 
of production in nondurable goods from an index of 80 to 102, an 
increase in all manufacturing from an index of 65 in 1932 to 99 in 
1937, and an increase in blast furnaces, steel plants, and rolling mills 
from 60 to 115. can it be said that any of these industries were suffer- 
ing any lack of confidence during those 5 years ? 

Mr. Hook. Well, yes ; I think so, because it should have gone way 
beyond where it is in the natural course. 

The Chairman. Of course, we never are satisfied with the expan- 
sion which we have. 

Dr. Anderson. But, Mr. Hook, looking at the chart again and its 
title, you have a chart that does not depict increases in durable 
goods or nondurable goods, or manufactured articles, but the labor 
employed in such activities. You would have to put an entirely .dif- 
ferent chart on there to determine what had happened to production 
during the^e years. 

Mr. Hook. Yes. 

Dr. Anderson. Speaking in terms of our topic, namely, technology, 
if you laid alortcrside that chart, which indicates the use of labor in 
a very rou^. way, as you will agree, because these are labor 
indices 

Mr. Hook (interposing). That is right. 

Dr. Anderson. And not actually full-time employment, a series 
that would depict the thing the Senator and you have been talking 
about, what is your guess? Would it show total technological dis- 
placement of labor as this product moved upward from the trough 
of the depression or not? 

Mr. Hook. No; I don't think so. 

124491 — 41— pt. 30 17 



16442 CONCENTRATION OF ECONOMIC POWER 

Dr. Andeeson. In other words, you would hold that productivity 
per unit produced on this rising market out of the slump of the 
depression had not increased in the over-all? 

Mr, Hook. The labor per unit probably has gone down. If it 
hadn't, we wouldn't have got the increase in production. The in- 
crease of production has kept up the employment to where it is. 

Dr. Anderson. So you recognize the item of labor per unit as a 
factor ? 

Mr. Hook. We do. 

Dr. Anderson. And you linked with it, in order to have an over-all 
incre-ase, increasing production of such proportions as to take care 
of individual displacement as it occurs. That is your thesis? 

Mr. Hook. That has been the case. 

Dr. Anderson. Mr. Chairman, might I have the witness refer back 
to the testimony statement for a moment or two to ask several ques- 
tions that we want in the record ? 

Mr. HiNRiCHS. May I talk to "Exhibit No. 2475" for a moment? 
Mr. Hook, I would like to give you a chance at this point in the record 
to introduce a table showing the annual averages of these several lines 
of employment in each year from 1926 to 1937. I don't know when 
your chart was drawn, and I don't recognize the terminal figure. 
Actually, the increases of employment appear to' have been greater 
than those that are indicated on your chart, and it may be that your 
chart is not adjusted to the final census figures. 

Manufacturing employment in 1937 was very slightly higher than 
it had been in 1929, and all of the indexes for 1937 are somewhat 
higher than they appear to be on your chart. I am sure that there 
was simply some slip in possibly the old and not revised figures, and 
I would like to have you have a chance, at your leisure, to correct the 
final record on that thing. 

Mr. Hook. They were taken from the Survey of Current Business, 
as issued by the Department of Commerce. This happens to be the 
1938 supplement that those figures were taken from. 

Mr. HiNRicHs. There are two factors that haven't been taken into 
account, then, I think. One is the fact that the census changed its 
definition of what was manufacturing. Back in 1929 they included 
railroad repair shops and several other industries as manufacturing 
that don't appear in 1937, and there are always small adjustments 
that the Bureau makes in its figures, which were released in Septem- 
ber of the past year. I will be glad to supply you with those. 

I was going to suggest that ihe chart be withdrawn, but so much 
discussion centered on tha thing that I think I would leave the chart, 
unless they prefer to withdraw it and insert the table in its place 
later. 

The Chairman. I think the chart can remain, 

Mr. Hook. I will let Mr. Brooks confer with you, and we will work 

it out. 

Dr. Anderson. I know we have imposed upon you greatly today. 

Mr. Hook. You haven't imposed upon me at all. 

Dr. Anderson. From our standpoint it is only because of the serious- 
ness of the problem we are discussing, and your wide knowledge and 
comprehension of it, and this remarkable paper and presentation that 
you have made, that I want to probe a little bit further in order to 



C?ONCENTRATION OF tiOONOMIC POWEH 16443 

have certain things in the record that seem to me to be extremely 
important. 

NATIONAL ASSOCIATION OF MANUFACTURERS' STUDY OF OLDER WORKERS 

Dr. Anderson. One of the problems of technology that cor jerns 
everybody of late is this matter of the elimination from employment 
of the older worker. This morning you referred to the National 
Association of Manufacturers' study of workers over 40. I take it 
it was this document, Men Over 40, that you had reference to. From 
your reading of the document, you came to the conclusion that there 
was no evidence to support the charges of various groups that are 
mentioned here — the American Legion and veterans' organizations — 
that older workers are being eliminated from industry. 

Mr. Hook. They, cooperated with us. 

Dr. Anderson. Might I point out that from my own standpoint as 
a student of the problem, and I think this is agreed in by others who 
have studied it, this pamphlet in no sense, in any comprehensive way, 
permits that conclusion. I draw your attention to the final chapter, 
the final supplement. No. 3, from which most of the data are derived, 
and I hope later you will add something for our record on this topic 
if you differ with me. The table was based on group insurance sta- 
tistics of life insurance companies covering the years '23, '28, and '37. 
The age distribution of industrial employees had altered as follows: 
those over 40 years of age who were covered by group policies, indus- 
trial workers, were 31.7 percent of the total^in '23, 33.7 percent in 
'28, and 32.3 percent in '37. 

In other words, from '28 to '37 there was a decline in the proportion 
of people aged 40 and over covered by this insurance. 

That would lead me to believe that these data show nothing con- 
clusive with respect to retaining older workers in industry generally. 

Mr. Pike. Do you happen to know, Dr. Anderson, whether the 
insurance companies themselves may have changed their policy regard- 
ing insuring employees in the groups over 40? 

Dr. Anderson. Nothing is indicated in the pamphlet, which, by the 
way, is important becanise it has had wide distribution. 

IVfr. Pike. During the hearings on insurance ^ we had some indica- 
tions that in some instances they changed the views about the desir- 
ability of certain forms of insurance, and I don't know whether group 
insurance was involved. 

Dr. Anderson. The National Association of Manufacturers did one 
other thing. It sent out a questionnaire to its members and got back 
returns for the year '37 and the year '38. I point out again that you 
cannot tell anything decisively from 2 successive years by way of a 
trend of conditions, but I simply want to add that the number of 
reports returned for 1937 was 2,089, those for 1938 were 1,582. I 
haven't read the pamphlet recently, but I remember in the rea^lmg 
I made of it, and I trust my memory is correct, that it does not i^.clude 
detailed analysis of the study, so that we do not know the exact iden- 
tity of the respondents in the 2 successive yeai >. We do not have what 
scientific students of the problem consider a safeguarded study. 

* See Hearings, Part 10. 



16444 CONCENTRATION OF ECONOMIC POWER 

There was a difference there of 6 percentage points in the 2 succes- 
fiive years; on tHe down-sweep over the peak employment year of 
1937 to '38 there seemed to be a retention of older workers in the indus- 
tries. So far as I know, however, there is no substantial body of 
evidence in this or any other document that proves that industry as 
a whole is retaining its older workers, and I wanted to ask Mr. Hook 
if, in his analysis of the problem, he had discovered such data, and 
if he did have them, would he supply them to the committee for its 
use, 

Mr. Hook. I referred to that. Dr. Anderson, because it was conducted 
by a subcommittee under the employment relations committee of the 
National Association of Manufacturers, and it was conducted in con- 
junction with the service men and several other organizations. I hap- 
pened to be chairman of the resolutions committee in 1937, when rep- 
resentatives of those various organizations appeared before our com- 
mittee and argued that men over 40 were being eliminated and were 
not being given an opportunity. We said, "Well, c'ome along and join 
with us and let's find out what the facts are. We will furnish the 
money and you cooperate," and if you will read what they said about 
the study on the very first page you will find that they were very 
complimentary and very appreciative^ of the work which we did. 

I would have to go through it and study it carefully 

Dr. Anderson (interposing). It was not my thought, Mr. Hook, to 
criticize the study so much as to raise the question which it seems to 
me industry should be more concerned about — and I was pleased to 
see your own concern about it'— namely, the elimination of the older 
worker. I was wondering whether you have data from your own 
plant to indicate what has occurred there. 

Mr. Hook. We have. I hope Mr, Brooks has them here. 

Mr. Brooks. I have it only back to 1929, and the percentage in 1929' 
and 1939 of workers over 40 is practically the same — 30 percent in 
both years. 

Dr. Anderson. In '29 and '39? 

Mr. Brooks. Yes, sir. 

Mr, O'Connell. Do you have it for any intervening y^ars, or just 
for those two ? 

Dr. AndersoS". Let me just ask this one point, then. That is a 10-year 
period of time, and you know that during that period of time the 
proportion of older people in the population has been increasing. If 
that is true, and we don't have the information for those years avail- 
able, it would show that there was no tendency on the part of your 
firm to employ older workers in preference to other workers. 

Mr. Brooks. Well, your total employment has increased in this pe- 
riod, I believe. 

Dr. Anderson, Might I ask this, Mr, Hook. If we were to frame 
you the headings of a table that would bring out this point, could you 
supply us with the information from your company records? 

Mr, Hook. I think we can. We will be delighted to give you any 
information, Doctor, that you want and we can furnish, 

Mr, Pike, May I ask one more question along that line ? It is normal, 
I think, for the growing business to pick its employees out of the pool 
which is normally becoming employable, whereas in the declining 
business it is also normal, isn't it, for the concern to keep on with the 



CONCENTRATION OF ECONOMIC POWER 16445 

men that it has, or if it has to drop people, to drop the youngest people 
that it has? I wonder if, in the concern that is growing, the average 
age of the employees would probably not increase, and might even 
tend to decrease it. A concern that is standing still, or contracting, 
such as the railroads, might find its average age of employees increas- 
ing. I would think that generally — I wouldn't say invariably — the 
human manager dealing with the human machine would tend to keep 
his old people and discharge the younger ones without family obliga- 
tion. So that, since your own business has grown substantially durmg 
that 10 years, it might be that your percentage of old men hasn't in- 
creased because you have been picking them out of what is normally 
the large pool of those employables, that is, those coming of age. 

Mr. Hook. Correct. Unless you were making a real effort to hold 
your older-than-40 men in the period, the percentage would have 
markedly decreased, because the number that you would employ as 
you increased your production, of course, greatly increased the total. 
In other words, your older men represent a smaller percentage of the 
total in 1937. 

Now, if your percentage remains the same, that shows that you really 
have employed a larger percentage of the older men. You haven't let 
them off, you have kept them on. 

Dr. AxDERSoN. That is right, you haven't let them off. 

Mr. HiNRicHS. What age groups have you ? 

Mr. Brooks. They are in 5-year groups. 

Mr. HiNRiCHS. What was the percentage of 30-35 in 192'9 ? 

Mr. Brooks. It was 15 percent. 

Mr. Ht-strichs. And 40-45 in 1939, 10 j^ears later ? 

Mr. Brooks. It was 13.78 percent. May I explain that the distribu- 
tion is changing. These are taken from group insurance records, and 
I might point out in 1929, that distribution covered 8,858 employees, 
"whereas in 1939 the distribution covered 11,210 employees. Now, this 
is not to be confused with total employment because not all employees 
are included. 

Mr. HiNRiCHS. Mr. Anderson, I wonder if instead of asking for a 
special tabulation, it wouldn't be helpful, at least in the first instance, 
to have that distribution inserted in the record, if that is a proper 
request. There is the information. 

Mr. Hook. This chart ? Yes. 

Mr. HiNRiCHS. If that meets our needs, nothing further may be 
needed in the way of a special tabulation. 

Mr. Hook.' We would be glad to give you any records we hr.ve. 

Dr. Anderson. You don't have the story of the data on new 
entrants? 

Mr. Brooks. I don't have it with me. 

The CHATRiTAN. You do have it, then ? 

Mr. Brooks. It could be gotten by going back through all oi our 
employment records over a period of years. 

The Chairman. I didn't mean to suggest that. 

Mr. Brooks. It is not tabulated. 

Dr. Anderson. In the hiring of new employees, you make no dis- 
tinction on the basis of age? 

Mr. Hook. No. 

Dr. Anderson. That doesn't come in at all ? 



16446 CONCENTRATION OF ECONOMIC POWER 

Mr. Hook. Oh, naturally, for instance, yoti wouldn't take a man 60 
years of age and put him up on a crane handling 60 tons of hot metal. 

Dr. Anderson, But you do not have any form or anything ? 

Mr. Hook. No, indeed. 

Dr. Anderson. I want, then, to read from your statement, and, 
without belaboring the point that I raised earlier in the day, ask you 
something concerning the whole statement on this basis. You say: 

For that purpose, I have chosen — 

in order to determine what has happened here — 

the period covering the years 1926 down to 1937, because it was during that 
period that all but one of the continuous sheet rolling mills vpere introduced 
into the steel industry. 

Following that, your testimony has been based in display after 
display on these 2 years, 1926 — — 

Mr. Hook (interposing). Period. 

Dr. Anderson. 1926 period; 1937 period. I wonder if it would 
be possible in order to get the true picture — and I think you agree 
that would be necessary — to get the intervening years on the same 
basis? Could you extend your table and just give us the table that 
you have here, just supply the inter^^ening years? 

Mr. Hook. You mean give you 'he information for each year? 

Dr. Anderson. Just as you have it in the tables, but each year 
separately. 

Mr. Brooks. Would you want that on the single plant, we used as 
the case example or the total company? I think the single-plant 
illustration, since it is the only plant where the old hot-plate process 
was actually replaced by the continuous -mill, would probably be 
more illuminating for your purposes. 

Mr. Hook. Otherwise you confuse other products. 

Dr. Anderson. For example in "Exhibit No. 2461," "Estimate of 
Number of Workers Employed m Industry in Hand Mill Processes In- 
cluding Preparatory, Eolling, and Shearing Operations," 3-0U show 
2 years, and on that basis you come to this conclusion which is so 
extremely interesting to me, and I know to the committer, that there 
was a net increase of 42,000 workers. 

Mr. Brooks. What was that statement? 

Dr. Anderson. You say the estimated number of workers is an 
increase in 1926 

Mr. Brooks (interposing). No; that is not an increase. The 42,000 
workers are those who were in employment on those mills in 192^. 

Dr. Anderson. Right; but now you get a net 

Mr. Pike (interposing). Of 27,000 decrease. 

Mr. Brooks. A possible decrease in that number ; yes. 

Dr. Anderson. The possible decrease is on the basis -of the 2 years 
compared is what I am trying to say. 

Mr. Brooks. That is right; it is on the basis of the total tonnage 
manufactured in 1926, which I believe was the greatest sheet and 
tijnplate tonnage year up to that point. 

Dr. Anderson. My point is this: I am led to believe by reading 
and study of the problem, and conversation with people engaged 
in the industry, that the displf>.c^ment effects of the continuous sheet- 
rolling process are most noticeable following 1937. In other words. 



CONCENTRATION OF ECONOMIC POWER 16447 

I understand that these mills were introduced gradually, as you 
pointed out today; they finally began to have the increasing pro- 
portion of all production; and in the last 2 or 3 years noticeable 
changes have occurred. 

Now I refer to your comment that some 90,000 people are sup- 
posed to have lost employment as the result of tnis continuous sheet- 
rolling process. 

Mr. Hook. That was the statement that has been made. 

Dr. Anderson. And that statement has been made, as I remember, 
within the last year or so, and I understand it refers to things that 
have happened within the past 2 years. Would it be possible to 
carry your figures forward through '38 and '39 ? 

Mr. Hook, I think we can. 

Mr. Brooks. Well, it is rather difficult to carry them forward on 
the basis we have used, because in the year 1926 there was very little 
continuous-mill tonnage. There was only one continuous mill actu- 
allv in operation throughout the year. Therefore, we could take the 
unit of production per man and divide into it and arrive at a reason- 
ably correct figure of the total correct employment. 

That is not true in 1939. Th6 only way you could ever carry 
those figures through would be by a check-up with every manufac- 
turer of sheet steel to see how many people he has employed on those 
mills. 

Dr. Anderson. In other words, you have to go into estimating 
for such a year as '39. 

Mr. Brooks. We did make a checTi-up on which we based our esti- 
mate of 15,000, contacting a number of producers as to what mills 
they were operating. 

Dr. Anderson. I wonder if you would be willing to go through 
the tables at your leisure and give us the sources, where they are not 
indicated, and the bases of computation where such things were 
computed ? 

Mr. Brooks. Yes ; I would be very glad to do that. 

Dr. Anderson. Such data are lacking in certain instances and 
when we read these at our leisure we want to know what they are 
based on. 

Mr. Hook. When you come to Middletown, Doctor, and we go into 
this more thoroughly, we can get a lot of those figures, a lot of 
information. 

Mr. Brooks. Dr. Arderson, could you give me a list of those in- 
stances where you want the references? 

Dr. Anderson. Yes; we will do that, if you will permit us to raise 
the questions we have been talking about here and hand them to you 
so you can fill them in. 

Mr. Brooks. All right, sir. 

The Chairman. Yen testified a little while ago that reduction of 
price was an important factor in increasing the distribution of your 
product and all steel products? 

Mr. Hook. That is correct. 

The Chairman. So, I take it you agree with the testimony of Mr. 
Ford yesterday, and of other witnesses, in response to my questions, 
that increasing the capacity of the masses to purchase commodities 
is one of the most important factors in providing for increasing 
prosperity, technological advance, and general welfare. 



16448 CONCENTRATION OF ECONOMIC POWER 

Mr. Hook. You are right, Senator. I referred to that a little while 
ago when I commented on the things that I thought could be done to 
bring that about, in order to get the men off the relief rolls and onto 
the pay rolls of private enterprise. 

The Chairman. Where they ought to be, of course. 

Mr. Hook. Where they ought to he. 

The Chairman. Are there any other questions to be asked of Mr 
Hook? 

PROVISIONS FOR DISPLACED EMPLOYEES 

Mr. HiNRiCHS. Mr. Hook, I wonder if you care to comment briefly 
on what you did with reference to specific workers in terms of pre- 
venting a dislocation and a displacement. Jobs were changed by this 
process, changed quite extensively. You commented that the over-all 
employment was perhaps even greater than it had been in your 
company. 

Mr, Hook. Well, in our particular case, I can give you exactly 
what we had, because I have here a copy of the notice. We called all 
the men together who worked on the old-style mills, in our auditorium, 
oh, I think it was the 4th of January 1929, and we explained to 
them what was going to happen, that we thought that eventually the 
1,191 men (I think I remember correctly the number employed at that 
time in the old-style sheet mill department) would all be dismissed 
and we would have to find jobs for them in other departments. If 
we couldn't find jobs for them, we worked out a separation allowance, 
and I will read it to you, and theA I will give it to you for the record. 
We posted this afterward after explaining it to them. The subject 
was, "P. an for handling hot-mill employees in connection with new 
finishing mills." [Reading:] 

1. We do not expect to be able to find jobs for employees who have been 
with the company for less than one year. 

2. Jobs will be found on new finishing mills for as many men as are necessary 
for their operation and every effort will be made to place as many as possible 
in other positions in our various plants. 

The employment department will have charge of placing men. 

3. Men who are not placed will be given half pay for as many months as 
fhey have years of service but not more than 6 months and with a minimum 
of $50.00 per month. 

4. No special payment as outlined in Paragraph Three will be given to men 
who are placed in any of our plants. 

5. Any man who accepts a position in our plants, but decides within a period 
of 30 days that for some reason he is not able to go on, will receive the pay- 
ments as outlined above. 

In other words, he had 30 days in which to decide whether he'd 
take, his separation allowance or keep the job which we put him on. 
[Continuing.] 

6. Continuous service with full insurance will be carried for the period men- 
tioned in Paragraph Three on all men who are not placed in our plants. 

7. If an employee gives up a job and receives payment as above and then 
smarts with the company later his special payments wiL cease and he will not 
receive them again if he rhould leave the company's emplc v a second time 

8. If requested, the company vill be glad to assist in pl&''ing men with other 
companies if positions cannot be found in our plants. 

(The document referred to was marked "Exhibit No. 2476" and is 
included in the appendix on p. 17530. ) 



CONCEINTRATION OF ECONOMIC POWER 16449 

Mr. Hook. Now, as a matter of record, because I think vou will ask 
me the question, "Well, how many men were employed f" Well, at 
Middletown, in that plant, 393 received their separation allowance. 
The rest of them were taken care of, and we paid those 393 $208,233, 
or $530 per man. At Ashland, Ivy., and I mentioned that we shut 
that old hand mill down after the new continuous mill had been in 
operation 2 or 3 years, there were 199 -men. They received $76,660 
or $385 per man. So there was a total of 592 men. The total amount 
we paid was $284,893, or an average of $481 per man. 

Now some of those men got as high as, oh, $1,900, for instance, a 
roller. 

The Chairman. Five hundred a id ninety-two men out of how 
many ? 

Mr. Hook. Well, at Middletown, there were 393 out of 1,191, as I 
recollect. Now, of those 393 who got their separation allowance, most 
of them are back again in the plant. They bought gasoline stations 
and several of them thought they'd start a little grocery store with 
the money that they got. They had the experience that many people 
have had who go into business. They failed, and so they came back 
and worked in the mill, so there are not .very many of those men out. 
Some of them are now on what we call our idle-time pay roll. We 
do not have within our company what we call a definite pension plan. 
We take each case, and I forget how many men are on the idle-time 
pay roll now. Do you know? 
Mr. Brooks. I don't know exactly, but I'd say offhand about 110. 
Mr. Hook. Who are on the idle-time pay roll. In other words, we 
use that term. The men like to feel that they are still in our employ. 
They are doing something. We may call on them for a little service, 
so they are not pensioned. They are just on the idle-time pay roll. 
Each case is judged on its own merits. In other words, one man may 
need more assistance than another, depending upon whether he is 
married and has a family that are still dependent upon them. 

Mr. HixRicHs. They are not compensated for the amount of time 
that they do work for you ? 
Mr. Hook. Oh, no. That is just a monthly allowance. 
Mr. HiNRicHS. Now, these 199 men in the Ashland plant were all 
of the employees in Ashland. Is that correct ? 

Mr. Hook. Well, no. We took some of those men. There were 
more men than that employed in that plant. I forget just how many 
were employed there, but we took men from what we called the 
Twenty-third Street plant, which was the old plant, now dismantled, 
and we took them down into the new plant as we increased the pro- 
duction down there. We took them out of the old plant and put 
them into the new, and many of those men are now working down 
in the new plant who were formerly employed in the old plant. 
Mr. HiNRicHS. They were given the same options as the people in 

the old plant. They had the option of staying or of taking a 

Mr. Hook (interposing). Yes. Yes; we found jobs for them in 
the new plant, or they could take their separation allowance, and in 
tnat case many of those men are back. 

Mr. HiNRiCHS. Some of those separation allowances were volun- 
tary, I judge. With otliers, there was a clause in there that you 



16450 CONCENTRATION OF ECONOMIC POWER 

would keep them if you could. Otherwise they'd get a separation 

allowance. 

Mr. Hook. Correct. ,, . x i; i.u coo 

Mr HiNRicHS. Now, is it fair to assume that most of these 592 
men were men for whom you couldn't find ]obs at the time^ _ 

Mr Hook No. Quite a nmnber of those men were ottered ]obs, 
and thev preferred to take their separation allowance. A good many 
of them have told me since, "I wish I hadn't taken it and stayed 
in the mill because I'd be further ahead now," because they have 
had to come back into the mill and take positions that are lower-paid 
jobs than they had before. i • ^i v, 

Mr HiNRiGHS. So that at the time you were making the change- 
over you also had to go out into the labor market and hire new peo- 
ple for' these jobs that were available to the old people, but which 

Mr. HooK (interposing). To some extent, that is true. 

Dr. Anderson. How widespread is this separation pay-roll allow- 
ance method in the industry as a whole ? rr.! XT .• 1 

Mr Hook. I can't answer that question, Doctor. Ihe National 
Association of Manufacturers' Committee on Employment Relations 
has a subcommittee working on this plan, and we have been urging 
manufacturers throughout the country to plan ahead when they 
know that the technological development is going to displace tem- 
porarily a certain number of men, and try to plan ahead and tram 
them for jobs. 

Mr. HiNRiCHS. This took place within your own establishment and 
your business was expanding over this period in total employment? 

Mr. Hook. Correct. 

Mr. HiNRiCHs. There has been some displacement in hand mills 
that have failed, closed down completely, I presume. Hasn't there? 

Mr. Hock. Oh, I must presume, also. 

Mr. Hinrichs. Has the industry made any industry-wide effort to 
deal with that problem ? Those are men who are not your individual 
responsibility, as the executive of a single company, but they are the 
outside casualties for the industry as a whole. 

Mr. Hook. Industry-wide, no. Each company has carried out its 
own program, whatever it may be. 

Mr. Hinrichs. Have there ever been any discussions as to what 
approach of that sort is even feasible? 

Mr. Hook. Oh, there have been discussions amongst executives, nat- 
urally, as we discuss all sorts of problems amongst ourselves, but not 
as an organized discussion. But there has been organized discussion 
in the National Association of Manufacturers' Employment Commit- 
tee. For instance — this hasn't anything to do with this, but I only 
use it as an illustration — at the present time, we have a very able 
committee studying the problem of' regularization, and I don't, know 
whether you have seen our latest report on that or not.. I think it 
would be very interesting to you, particularly. If you haven't it, I 
hope you will get it. 

Mr. Hinrichs. Casualties of that sort, the small plant that has 100 
or 200 employees that closes up, would have to Ipe handled, if at all, 
on the basis of an industry approach to the problem. There isn't 
any surviving respotisibility by a responsible employer to deal with 
the problem, is there? 



CONCENTRATION OF ECONOMIC POWER 16451 

Mr. Hook. Well, if a company actually goes out of business, 
why 

Mr. HiNRiCHS (interposing). That, however, has been a part of the 
process, as a reflection of tliis large extension of these very large 
units, hasn't it? 

The Chairman. Mr. Hook, were you going to make another com- 
ment ? 

Mr. Hook. No; Mr. Brooks was just calling my attention to the 
fact that there are a good many companies that are folding up for 
other reasons than tecnnological development. 

The Chairman. AVe are very much indebted to you for a very 
interesting day. It has been very nice to have you here. 

Mr. Hook. Thank you. 

The Chairman. Tomorrow morning, Mr. Philip Murray, who was 
to have been called today, will be the first witness. The committee 
will stand in recess until 10 : 30. 

(Whereupon, at 4 : 50 p. m., a recess was taken until Friday, April 
12, 1940, at 10:30 a. m.) 



INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER 



FRIDAY, APRIL 12, 1940 

United States Senate, 
Temporary National Eoonomio CoMivnTTEE, 

Washington, D. C. 

The committee met at 10:40 a. m., pursuant to adjournment on 
Thursday, April 11, 1940, in the Caucus Uoom, Senate Office Building, 
Semitor Joseph C. O'Mahoney, Wyoming, presiding. 

Piesent: Senators O'^Mahoney (chairman) and King; Represent- 
atives Williams and Reece; Messrs. Henderson, Pike, Hinrichs. 
O'Connell, Kreps, and Brackett. 

Present also: Boris Stern, Department of Labor; Frank H. El- 
more, Jr., Department of Justice^ William T. Chantland, Federal 
Trade Commission; and Dewey Anderson, economic consultant to 
the committee. 

The Chairman. The committee will please come to order. Dr. 
Anderson, are you ready to proceed? 

Dr. Anderson. Mr. Chairman and members of the committee, we 
devoted the day yesterday to management's story in the steel indus- 
try as told so ably by Mr. Hook. Today we propose to present to 
the committee a witness able to discuss the problem from the side 
of the workers. Mr. Philip Murray, chairman of the Steel Workers 
Organizing Committee of the C. I. O. is the witness to be presented 
at this time. He has with him his technical assistant. I presume 
you will swear them. 

The Chairman. Do you both solemnly swear that the testimony 
you shall give in this proceeding shall be the truth, the whole truth, 
and nothing but the truth, so help you God? 

Mr. Murray. L do. 

Mr. RuiTENBEEG. I do. 

The Chairman. You ma}' be seated. Dr. Anderson, it would ap- 
pear that Mr. Murray has a rather substantial statement to make, 
and in the interests of expedition, if it is agreeable to you, I will ask 
members of the committee, so far as possible, to refrain from inter- 
rupting the witness until he has completed his statement. If we can 
make our notes as we go along, then we can ask the questions after 
Mr. Murray has concluded, and I think probably we will get better 
results. 

TESTIMONY OF PHILIP MURRAY, CHAIRMAN. STEEL WORKERS 
ORGANIZINvl COMMITTEE; ALSO HAROLD J. RUTTENBERG, 
ASSISTANT 

Mr. Murray. Mr. Chairman and members of your committee, I 
welcome thi^; occasion to present testimony to the Temporary Na- 

16453 



16454 C(5?fCENTRATI0N OF ECX)NOMIC POWER 

tional Economic Committee on tlie social and economic effects of 
technology, and want to express my appreciation to the members of 
the committee for this opportunity. 

Although the purport of my testimony is national in character, the 
bulk of 'my observations are confined to the basic iron, steel, and 
tin producing industry, which I shall hereafter refer to as the steel 
industry. The spirit in which I present this testimony is a cooper- 
ative one, as it is my understanding that the committee's function 
is to arrive at the essential basic facts about our economy for the pur- 
pose of devising solutions to the chronic economic ills with which it is 
afflicted. 

Tlie most vital of these chronic economic ills is unemployment. The 
crux of the unemployment problem, particularly in relation to the 
displacement of men by machinery and other technological improve- 
ments, seems to lie in the unwillingness of industrialists and certai"' 
of our statesmen to recognize the facts. Before discussing technolog- 
ical unemployment in the steel industry, I want to make a few general 
observations. 

The upswing in business and industrial activity, which reached a 
peak in the last quarter of 1939 has demonstrated irrefutably that 
the American economy has not kept pace with the advance in tech- 
nology during the past decade ; and that industry is not expanding to 
absorb the workers displaced by technology. Last November and De- 
cember industrial production in the Nation as a whole surpassed the 
all-time peak in 1929, with fewer workers.^ In the great industrial 
district of Pittsburgh production rose 6 percent from August 1929 
to November 1939, but during this period man-hours worked declined 
19 percent." It is plainly observable, therefore, that the most crucial 
problem confronting our economy is the failure of employment to 
keep pace with production. The seriousness of unemployment is 
demonstrated in Pennsylvania, where 24 percent of the working popu- 
lation was unemployed last December, the month when national in- 
dustrial production was higher than in 1929.^ At the same time unem- 
ployment in the Nation as a whole was a discredit to our industrial 
civilization, the estimates ranging from 9,000,000 to 11,000,000 unem- 
ployed workers, men and women idle through no fault of their own, 
men and women no longer wanted or needed by private industry. 

Occasional pronouncements from men in high places seem to be 
focused upon the elimination of unemployment when our national 
annual income rises several billion dollars above the peak year of' 
national income. The goal of a $90,000,000,000 to $100,000,000,000 an- 
nual income is i:npossible of attainment as long as industry in Amer- 
ica continues its present practices. To eliminate unemployment by 
raising the national income is getting the cart before the horse. The 
national annual income cannot be raised until the unemployed are 
])ut back to work. And as long as industry continues its present prac- 
tices of eliminating workers to maintain profits, our national income 
cannot be raised above the level of recent years. 

^Federal Reserve Bulletin, February 1940, p. 81. (Mr. Murray's footnote.) 
2 PittsburRh Business Review, December 29, 1939, Burfc.iu of 'Business Research, Uni- 
versity of Pittsburgh, Pittsburgh. Pennsylvania, pp. 17-18, (Mr. Murray's footnote.) 

» Pennsylvania Public A.ssistance Statistics, October 1939, Department of Public Assist- 
ance, Commonwealth of Pennsylvania, Harrisburs, Pennsylvania ; and correspondence 
between the Research Department of the Steel Workers Organizing Committee and the 
Department of Public Assi.stance. (Mr. Murray's footnote.) 



CONCENTRATION OF ECONOMIC POWER 16455 

The apologetic attitude of political and industrial statesmen con- 
cerning a solution of this problem of unemployment might very well 
be likened to the attitude of leading industralist^ and Republican 
statesmen during the period 1930 through 1932, when they said that a 
policy of waiting would result in a return of prosperity. The attitude 
of industrialists and certain statesmen of today concerning the solu- 
tion of the present unemployment problem is the same. We are told : 
"Let's wait and things will eventually straighten themselves out." 
The Nation and its people have been going through this period of 
waiting for more than a decade, and here we are with 11,000,000 
people still idle, whilst the heavy hand of taxation, directly attrib- 
utable to Nation-wide unemployment, engulfs the country and jeop- 
ardizes the perpetuity of our democratic form of government. In 
recent years this "Wait-and-things-will-work-out-all-right" attitude 
has been altered slightly by saying no one shall starve. But even this 
slight alteration is being abandoned, and less than a quarter of the un- 
employed are being given meager W. P. A. jobs. 

On every hand we hear the cry of industry, and also we hear the 
cry from Government: "Give us greater productivity, increase our 
efficiency, lower the production costs of our commodities, and thereby 
create greater buying power, and this will afford the cure for all the 
unemployment evils confronting the Nation." This has been the 
battle cry of America for a period of almost 8 years. Labor has 
responded to it. Efficiency ha^ been increased. Workers have co- 
operated, applied more energy, put forth greater effort, and in- 
creased productivity. What has been the reward? It has been a 
lower annual income for labor, a greater number of men thrown out 
in the streets, and a shorter work year for the- workers still em- 
ployed. The greater efficiency ^is not being passed on to consumers, 
but is going into corporate profits, which surpassed 1929 profits in the 
last quarter of 1939. All this while millions of workers are idle. Here 
is another case of working men and women responding to a national 
emergency, giving their all in reply to the battle cry of industrialists, 
politicians, and economists. And what has been labor's reward? In • 
return for their cooperation, the workers of this Nation have unem- 
ployment, poverty, and all the misery that trails in the wake of both. 
Monopolistic controls have grabbed up the fruits of greater efficiency 
and turned them into the highest corporate profits in the history of 
America. 

Almost every corporation and company in America today main- 
tains an army of industrial engineers and efficiency experts, whose 
duty it is, through the process of time evaluating of jobs, to increase 
the productivity of the individual, and thereby lower the costs of 
prod\iction. The science and ingenuity of man in developing processes 
and methods to increase production and increase efficiency has run 
amuck in the United States during the past 10 years. There has been 
no planning, and so far as I am aware there have been no checks or 
restraints. As a matter of fact, every agency of government, every 
leader and owner of industry, and almost every economist of national 
repute, has loaned every effort toward the attainment of this goal of 
ever-increasing efficiency in American industry. Indications point ^^o 
continuing improvements in efficiency and production during the ye .rs 
to come. Out of this situation there may develop the greatest pros- 



16456 CONCENTRATION OF ECONOMIC POWJER 

perity or the craziest national economy ever recorded in the history 
of any civilized nation. 

In this machine age, is this age of technological improvement going 
to spell the. downfall of our democracy? Or are these improvements 
in the production facilities of modern industry going to be utilized 
to promote the social well-being of our national population, and 
thereby maintain for America the best form of democratic government 
we believe to be anywhere in the universe? Factual investigations 
conducted by responsible economists and statistical organizations re- 
veal the very alarming fact that the trend in American industry to- 
day, due to the introduction of machines and other improvements in 
efficiency, is toward greater monopolistic control in all kinds of in- 
dustrial and manufacturing enterprises. Technology, for example, is 
building a new^ monopoly in the steel industry. 

In substance, the present program of industry, insofar as I am 
able to observe with relation to the introduction of new mechanical 
devices and other technological improvements follows this pattern : 
Introduce a machine or a new method; increase productive efficiency 
15, 25, or 50 percent; increase hourly wage rates a fraction of this 
percentage; lower the number of man-hours per year considerably; 
lay off such other men as may not be required where the new ma- 
chine or the new method for increasing productivity has been intro- 
duced; and gobble up most of the benefits of greater productivity into 
profits. There is the situation in American industry today. It seems, 
therefore, to be the bounden duty of the leaders of industry, govern- 
ment, banking, farming, and labor to get together under the auspices 
of the Federal Government and do something of a constructive nature 
to put more people to work, to absorb in industry the people who are 
now unemployed, and to give the youth of the country a chance in 
life, thereby increasing the national income, and alleviating the pr*^s- 
ent high taxation imposed upon our people for the purpose of main- 
taining an impossible economy, an economy made impossible of 
maintenance through taxation because of the failure of private in- 
dustry to employ the unemployed workers of America. I shall have 
more to say about this proposed national conference on unemploy- 
ment in the concluding part of my statement. 

The Chairman. Perhaps I may interrupt you here, Mr. Murray, 
because I note that you have come to the conclusion of your general 
observations. If any member of the committee wishes to ask any 
questions on the general observations, this might be an appropriate 
time to do it without actually obviating the rule laid down at the 
outset. 

Dr. Anderson. Mr. Chairman, the general observation depends upon 
certain other parts of the general statement, and I have some questions 
that I wanted to reserve until a later time. 

The Chairman. Very well, I just wanted to give everybody a chance. 

TECHNOLOGICAL CHANGES IN THE STEEL INDUSTRY 

Mr. Murray. Xo industry has been harder hit by technology during 
the 1930's than the steel industry. I^efore discussing the new steel 
technology, its social and economic consequences, I w^ant to make the 
position of *^^he Steel Workers Organizing Committee on technological 
changes pe. rectly clear. The Steel Workers Or -anizing Committee 



CK)NCENTRATION OF ECONOMIC POWER 16457 

does not oppose technological advances; in fact, the Steel Workers 
Organizing Committee approves them and condncts a continuous edu- 
cation campaign amongst its members in favor of technological 
improvements. The attitude of the Steel Workers Organizing Com- 
mittee, unlike that of the run-of-mine employers, does not stop there. 
In approving technological changes, the Steel Workers Organizing 
Committee's objective is to secure the participation of labor and con- 
sumers in the economic benefits of such changes and to eliminate the 
devastating social consequences of such changes on workers, their 
families, and entire communities. 

Those who choose to charge the Steel Workers Organizing Com- 
mittee with opposing technological advances misrepresent the Steel 
Workers Organizing Committee's position for the purpose of erecting 
a smoke screen behind which they try to deprive workers, as well as 
consumers, of the benefits of technology. These parties would likewise 
have us believe that there is no such thing as technological unemploy- 
ment, and in their attempt to prove tliis they try to create the im- 
pression that workers are participating in the benefits of technology 
when, as a matter of fact, sucli is not the case. 'My purpose in this 
discussion is to present the facts of the new steel technology, as briefly 
as possible^ in their logical sequence. 

The story of the new steel technology during the past decade is one 
of technological unemployment, the permanent displacement of work- 
ers, the elimination of skilled workers no longer young in years, the 
ruination of complete communities, the abrupt closing of entire plants, 
tlie cancelation of labor's contribution to national purchasing power, a 
constantly rising labor efficienc}', the failure to reabsorb the displaced 
workers to create a corresponding number of jobs elsewhere, the 
inadequate participation of labor and consumer, and the intensification 
of control of steel-producing facilities in fewer and larger hands. 

The largest single technological improvement of the 1930's has been 
the continuous automatic steel strip mill. Twenty-seven of these 
mills, commonly called hot strip mills, have been built to date with 
a combined annual capacity of 15,000,000 tons.^ The first mill was 
operated in 1924, and the twenty-seventh mill was put into operation 
in 1938. I am submitting a list of these mills with full particular's, 
and the members of the committee have a copy of that exhibit. 

(The table referred to was marked "Exhibit No. 2477" and is 
included in the appendix on p. 17331.) 

Mr. Murray. The cojnmon contention that increased wage rates are 
responsible for technological improvenients has no validity in con- 
nection with the automatic strip mills. The facts in this case show 
the opposite. All of the automatic strip mills were completed, under 
construction, or authorized to be constructed by the resi:ective- steel 
companies before steel wages were raised in 1936 and 1937. The intro- 
duction of the hot strip mills preceded the current level of hourly 
wage rates, and not vice versa. The introduction of these mills, 
' herefore, cannot be attributed to higher wage rates. Mr. Charles R. 
Hook, president of the American Rolling Mill Co., estimates the total 
cost of the 27 mills at one-third of a billion dollars.^ The respective 

1 steel Facts, June 1939, American Iron and Stcci Institute, New York City, p. 2. 
(Mr. Murray's footnote.) 

2 Pittsburgh Press, December 13, 1937. (Mr. Murray's footnote.) 

1:^4491— 41— pt. 30 18 



1 6458 CONCEINTF ATION OF ECONOMIC POWER 

companies have announced the aost of individual hot strip mills at 
figures ranging from $2 "5,000,000 to $45,000,000. 

The hot-strip mills produce only flat-rolled steel products. Their 
capacity of 15,000,000 tons almost duplicates the old-style hand-mill 
capacity for flat-rolled pro^Jucts. In 1929 the capacity of the old- 
style mills was 15,600,000 tons of flat-rolled products (plates, sheets, 
black plate, and tin platp).i The peak annual production of flat- 
rolled products on strip and hand-style mills was 16,900,000 tons in 
1937. Thus the modefc automatic hot-strip mills, with a capacity of 
15,000,000 tons, can haudle most of the demand for flat-rolled products 
made on the steel industry. 

For technical reasons certain flat-rolled products can be rolled only 
on the old-style mills. But since 1929 an increasing percentage of 
the industry's flat-rolled production has been on the automatic hot- 
strip mills. Automatic strip-mill production of tin plate, for example, 
far exceeds the hand-mill production of tin plate at present. In 1936 
only 23 percent of the tin plate was produced by the strip mills. In 
1937 the percentage rose to 35 percent, in 1938 to 61 percent, and in 
the first 9 months of 1939 to 76 percent. In the meanwhile, the tin- 
plate hand mills have been abandoned with lightning speed, as I shall 
discuss later. It is plainly observable that before long virtually all 
of the tin-plate hand mills will be permanently abandoned. And 
within a few years only a handful of the old-style plate and sheet mills 
will still be operating. The automatic hot-strip mills are fully able 
to handle virtually all of the demands for flat-rolled products. If, 
at. any time in the future, demand should exceed present automatic 
strip-mill capacities, additional strip capacity will be built instead of 
operating the old-style high-cost mills ; this, in fact, is what has been 
taking place recently in the tin-plate division of the steel industry. 

LABOR DISPLACEMENT IN HOT STRIP MILLS 

Mr. IVIuRRAY. The extent to which the strip mills eliminate workers 
is incredible. Mr. John D. Knox, a practical mill man and associate 
editor of Steel Magazine, recorded the following conversation with an 
official operating a strip mill with whom he discussed how much labor 
(the strip mills) displace technologically : ^ 

"At the rate of 2500 tons a day and working 24 days a month," I said, "you'd 
deliver to the shipping end of your mill OO.OCio tons monthly or exactly what a 
plant with eight conventional sheet mills would produce a year. In other words, 
on the basis of gage for gage your mill will pi^oduce 12 times the output of a con- 
ventional eight-mill sheet plant." 

"Sure thing, and with a lot less men Take your eight hand mills," he con- 
tinued turning the leaves of his notebook until he came to a blank i)age. 

"You have a crew of 112 men per turn," he said writing these figures at the 
top of the page. "Now add a cranesman, a sheet bar stocker and a couple of 
helpers, a yard clerk, and four shearmen and their helpers and you have a total 
of 125 men or 375 required to man the mills per 24-hour day. 

"Now let's see. On the back of the heating furnaces of this continuous mill we 
have a heater and a couple of helpers, a furnace charger, a furnace stocker and a 
couple of helpers, a clerk in the slab yard and a couple of cranemen. That's a total 



1 Directory of the Iron and Steel Works, Twentv-second Edition, 1935, American Iron 
and steel Institute ; Twenty-third Edition, in38 : .Annual Statistical Report of the Ameri- 
can Iron and Steel Institute, 1939; and Steel, November 6, 1939. (Sources of data In 
this and succeeding paragraph.) (Mr. Murray's footnote.) 

"Steel, October 22, 1934, "Continuous Mills Voracious in Cost, Rut How they Produce]", 
by John D. Knox, pp. 19-23. (Mr. Murray's footnote.) 



C?ONCENTRATION OF ECONOMIC POWER 16459 

of 10 men," he said adding up the figures lie had set down after each of the 
occupations. 

"On the mill proper we have a he^d roller and one assistant, a gager, a rougher 
and his operator and helper, a couple of rolls hands, a speed regulator and his 
helper, a finisher and his assistant, a looper operator, an operator for the runout 
table and his helper, an inspector, a recorder, a roller leveler operator, a hot bed 
recorder, a shear foreman and his crew of eight men, one torchman for burning 
cobbles and three cranemen. 

"That is a total of — let's see," and adding up the column he arrived at a total of 
32 men to operate his mill or 42 men per turn including the furnace attendants. 
"This is 126 men to andle the mill per 24 hours." 

"In other words," I chimed in, "with 126 men in the slab yard, on the furnace 
and overseeing the mill you can turn out 2500 tons a day whereas it would take 
96 sheet mills of the conventional tys with a combined crew of 4512 men to pro- 
duce an equivalent tonnage." 

"Yes sir, that's about the set up '' 

This tremendous increase in production for each worker employed — 
that is, that 126 men in the automatic steel mills can produce the same 
tonnage as 4,512 men in hand mills — represents a 97 percent reduction 
in man-hours, according to Mr. Knox's figures. Human labor is prac- 
tically eliminated on the hot-strip mills. Electrical power is substi- 
tuted. Steel is rolled on the hot-strip mills at speeds approximating 
a half mile a minute. The large numbers of men formerly required to 
roll steel are no longer needed. 

Such wholesale elimination of workers has been devastating. The 
strip mills are displacing 84,770 workers, 38,470 of whom have already 
been disconnected from the steel industry.^ Just 10 days ago in Mas- 
sillon 500 workers in Republic's sheet mill there were given this notice: 

We regret to advise you that on account of the permanent discontinuance of 
operations of the Massillon sheet mills your services are hereby terminated. 

Please find enclosed your copy of the "Termination Notice to Employment 
Office." This form should be presented to the paymaster to secure any earnings 
which may be due you. 

Also find enclosed "Workers Copy" of Form UC 406, "Separation Report for 
Total t^nemployment" as provided under Unemployment Compensation. 
Yours very truly 

(signed) REyuBuo Steul Corporation 

(The chairman. Senator O'Mahoney, resumed the chair.) 

Mr. MuBRAY. And 500 men walked out and 500 men are walking the 
streets of Massillon today ; they have nowhere to go. That happened 
only 10 days ago. 

This notice was given to these 500 workers on March 29, 1940, and 
within tlie next few weeks between 500 and 600 more will receive the 
same notice. 

In the Niles, Ohio, plant of the same company 450 more workers are 
also out of employment, as Republic Steel has discontinued its sheet 
mill there also. A public announcement of the discontinuance of the 
mill in Niles was published in the newspapers on March 28. 

These workers have not been disconnected from the industry one by 
one. They have been cast out a thousand at a time. Fifteen hundred. 
And in one case 3,000 workers were told to go home and never to come 
back, as their mill would not work again. Aside from the inhuman 
effect this wholesale abandoning of mills has on the individual worker, 
look at what happens to entire communities. Property becomes next 
to worthless, business drops to a fraction of previous levels, families 
are kept in existence by W. P. A. and relief, the social fabric of the 

' See 'Exliibit Xo. 2479." 



16460 CONCENTRATION OF ECONOMIC POWER 

town is torn in shreds, and the only means of making a livelihood is 
taken away from workers, many of whom have never known any other 
way of earning a living. All this happens because technology has 
found a new method of production, in this case the automatic strip 
mill. The financial cost of a strip mill is $15,000,000, $20,000,000, or 
$40,000,000. But the social cost of this automatic mill is far greater 
in terms of human misery, personal tragedy, and wrecked mankind. 
Look at the worker immediately displaced. 

A large percentage of these technologically displaced workers are. 
skilled men. They have -spent yeare acquiring their skills, and now 
private industry has no use for them. These men are no longer young 
in years, though they are not too old to work. But they are unem- 
ployed, discarded by the steel industry because profits cannot be made 
from their skills any more. These men are capable of many more 
years of good work, but private industry is no longer interested in 
them because most of them have reached the ripe old age of 40 years. 

Rather than relate the tragic circumstances of these men who are 
victims of the strip mills, I have brought one of these skilled hand- 
mill workers with me to tell this committee his own story in his own 
way. 

Michael Russell has not been employed on one of the United States 
Steel Corporation's strip mills for a very definite reason. The vice 
president in charge of operations of a large steel firm told me that he 
had hired a completely new force of men for his strip mill, mostly 
very young men. He explained : "A hand-mill worker is used to pro- 
ducing from 5 to 10 tons in 8 hours, and he can't get used to seeing a 
thousand or more tons produced on a strip mill in the same time. We 
have to break in new men on the strip mills who have never seen a 
hand mill operate." The comparatively few hand-mill workers who 
have been employed in automatic strip mills — and remember 37,000 
of them are out completely — are working as laborers or semiskilled 
workers, and are receiving wages one-half to one-third of their former 
daily earnings. The social effects of the strip mills are doubly 
devastating. 

Now, Mr. Chairman, with your permission I would like to present 
to your committee, Mr. Russell. He typifies one of those 37,000 men 
who have been cast out on the streets. Mr. Hook produc?ed for the 
benefit of the committee yesterday some of the new technological 
improvements that have been brought about in industry in the form 
of examples of mud guards and fenders. I want to submit for the 
benefit of the committee a .piece of our human wreckage here, Mr. 
Russell. 

The Chairman. Mr. Russell, do you solemnly swear that the testi- 
mony you shall give in this proceedmg shall be the truth, the whole 
truth, and nothing but the truth, so help you God ? 

Mr. Russell. I do. 

The Chairman. Do you care to make a statement here? 

Mr. Russell. Yes, sir. 

The Chairman. Did you want to question him. Dr. Anderson, or 
Mr. Murray? 

Mr. Murray. I should like to, if you don't mind . Mr. Chairman. 

Dr. Anderson. Will you question the witness? He'is your example. 



CONCENTRATION Ot ECONOMIC POWER 16461 

TESTIMONY OF MICHAEL RUSSELL, NEW CASTLE, PA. 

Mr. Murray. Mr. Russell, how old are you? 

Mr. Russell. I am 48. 

Mr. Murray. Forty-eight years of age. How long were you an 
employee of the Steel Corporation before }*ou were summarily dis- 
charged or dismissed in 1937? 

Mr. Russell. About 32 years. 

Mr. Murr.\y. What was your occupation with the Steel Corpora- 
tion prior to your dismissal in 1937? 

Mr. Russell. A roller. 

The Chairman. A what? 

Mr. Russell. Roller. 

Mr. Murray. A roller is one of the highest type of skilled crafts- 
men in the industry, is he not? 

Mr. Russell. That is right; yes, sir. 

Mr. Murray. And therefore one of the highest paid? 

Mr. Russell. That is right. 

Mr. Murray. You are a married man, are you not? 

Mr. Russell. I am. 

The Chairman. ^Miat were you paid? 

Mr. Russell. Well, in the neighborhood of from $12 to $16 daily, 
depending on how much tonnage we produced, but as an average it 
runs anywhere from $12 to $14 or $16 a day. 

The Chairman. What was your average? 

Mr. Russell. Daily or pay period? 

The Chairman. Well, let us say your average annual earning. 

Mr. Russell. Well, for the year of 1937 I can give you a brief 
statement here; I have it on a card which was given to me at the 
time; $2,842.99. 

The Chairman. That was your annual compensation for the year 
19371 

Mr. Russell. Yes; minus 19 days of November, also of December, 
not working. In fact it would have been more than $3,000 if I had 
worked the balance of the year. 

The Chairman. You worked all but 19 days that year? 

Mr. Russell. In November when they terminated my work. That 
is when we were shut down, in 1937, November 11. 

The Chairman. Ho»- did that working year compare with the 
ordinary working year in your experience in the industry? 

Mr. RussKLL. Well, this in fact was one of the be^ years we had 
because there was a great boom on at the time. 

The Chairman. What was the poorest year you had during your 
experience? 

Mr. Russell. I) don't have the definite figure but it ran in the 
neighborhood of $2,000 or $2,400 yearly anyhow. 

The Chairman. Then would it be proper to say that your earning 
in this highly skilled employment was never less than $2,000 a year? 
'Mr. Russell. That is right. 

The Chairman. Over how many years? 

Mr. Russell. In the neighborhood of 20 years that I have rolled. 

Senator King. Do you have any persons working under you? 



16462 CONCENTRATION OF ECONOMIC POWER 

Mr. Russell. Yes, sir; a roller in a hot mill is responsible for 
ei^ht men besides himself. 

Senator Kino. Did they receive as large wages as you received { 

Mr. Russell. They did not. 

Senator King. What were their average wages per day? 

Mr. Russell. As a rougher he would average in the neighborhood 
of $9 or $10 daily ; that is a roller's assistant. 

Senator King. Each of those men under you received approxi- 
mately $8 a day? , , <. 

Mr. Russell. Well, they would average better than that, some of 
them $10 or $11, heaters and so on. 

Senator King. Did you work for the same company all these 
years ? 

Mr. Russell. I did ; yes, sir. 

Senator King. What company was it ? 

Mr. Russell. Carnegie-Illinois Steel Corporation, better known 
as U. S. Steel. 

Senator King, In the same mill, were you, all those years? 

Mr. Russell. In different mills; the Shenango and New Castle 
plant. 

The Chairman. And was this the scale of wages throughout your 
experience of 20 years ? 

Mr. RusseiJj. They vary up and down there with different scales 
from time to time, you know, and some were larger in some years and 
some years they were lower. 

The Chairman. Wasn't there a substantial improvement in wages 
during those 20 years? 

Mr. Russell. Well, yes, there were, there were some. 

The Chairman. What did you get when you started? 

Mr. Russell. When I started first they didn't have what is known 
as the four-part system ; there was a three-part system at that time. 
When I first started in the mill a roller made $10 a day on a level, 
very large wages, but it gradually came up as wages came up in the 
industry at the time. 

The Chairman. How about the number of working hovirs in the 
day? 

Mr. Russell. We had to put in 8 hours daily. 

The Chairman. When? 

Mr. Russell. Every day we worked. 

The Chairman. But when did the 8-hour day begin? 

Mr. BusSELL. Well, I began working 8 hours in the hot mill ; they 
started in at midnight at 12 o'clock. 

The Chairman. You misunderstood my question. In what year 
was the 8-hour schedule instituted \ 

Mr, llussELL. Eight hours always in the hot mill. 

The Chairman. Always? 

Mr. Russell. Yes, sir. 

The Chairman. During the 20 years, then, the 8-hour day was the 
rule? 

Mr. Russell. That is right. 

Mr. Murray. The weekly hours, of course, prior to 1937 were 48 and 
55. wasn't it, 6 day3 a week ? 

Mr, RussEi.L. That is right. 



CONCENTRATION OF ECONOMIC IX)W^.rv 16463 

Mr. Murray. There is a distinction in the classifications of labor 
there, and the labor rates at the mill that Mr. Russell worked at No- 
vember of 1937, ranging from a minimum of 621/2 cents an hour for 
common labor, with the maximum of the rollers based upon entirely 
the production. They were piece workers, and those rates may have 
ranged anywhere from $8 to $15 a day, depending upon their produc- 
tion and their efficiency to produce in the old conventional hand-mill 
type of furnaces. 

Dr. Anderson. Mr. Russell, you were on piece rates? 

ISIr. Russell. Yes ; tonnage rates ; that is right. 

Dr. Anderson. And were you at the peak of the tonnage rates of 
employed workers? 

Mr. Russell. That is right. 

Dr. Anderson. Anybody get any more than you did per tonnage 
rate? 

Mr. Russell. Based on 

Dr. Anderson (interposing). In other words, you are the highest 
skill known in the industry in the old hand-mill process? 

Mr. Russeix. The roller ; yes, sir. 

Dr. Anderson. And this top wage that you have just indicated, an 
annual earning of $2,800, is a good year? — '37 is your peak earning? 
Did you ever earn any more than that ? 

Mr. Russell. Not thalt I know of becausp I always worked on a 
femall mill. The other mills, larger mills — in fact, they make around 
$4,000 in the bigger mill, see, $3,000 and $4,000. 

Dr. Anderson. A man in your class of work? 

Mr. RussELi- Yes, sir; bigger force on the same type of mill. 

Dr. Anderson. What do you suppose the average worker in the 
plant in which you have been employed wa^ earning when you were 
earning $2,800? 

Mr. Russell. Well, I don't understand that; you mean the average 
worker, lowest-paid man in the hot-mill department? 

Dr. Anderson. You perhaps wouldn't have the figure. You got 
$2,800 that good year, and I was wondering what the average worker 
might be earning in the same mill that year. 

Mr. Russell. Well now, in the tonnage part of it, some of them 
would average around $7 and $8 a day ; $7 at least. 

Mr. Murray. We have a collection of all the statistical matter with 
reference to the average wages of men employed in Mr. Russell's 
mill, and all other mills that I know of throughout the country, and 
for Mr. Russell's particular mill in the year 1937 the gross average 
earnings of all employees approximated $1,658. 

The Chairman. We interrupted you, Mr. Murray, in the questions 
you were going to ask Mr. Russell. You may proceed. 

Mr. Murray. You are a married man, Mr. Russell ? 

Mr. Russell. Yes; I am. 

Mr. Mur.RAY. How many in your family? 

Mr. Russell. Four. 

Mr. Murray. Four children, and your wife. 

Mr. Russell. Four children ; six in the family. 

Mr. Murray. Were any of your family working in the Shenango 
and New Castle Works when you were laid off? 



16464 CONCENTRATION OF ECONOMIC POWER 

Mr. Russell. When I was laid off there was a son-in-law of mine 
at work, but there aren't any at work at this time at all. 

Mr. Murray. All off? 

Mr. Russell. All off. 

Mr. Murray. How many men were laid off in your mill in No- 
vember 1938? 

Mr. Russell. Sixteen hundred. 

Mr. Murray. Sixteen hundred automatically displaced? 

Mr. Russell. That is right. 

Mr. Murray. That is, thrown out by an order of the Steel Corpora- 
( ion that there was no more work for them. 

Mr. Russell. That is right. 

Mr. Murray, And your two sons were thrown out into the streets 
with them ? 

Mr. Russell. That is right. 

Mr. Murray. Have you been able to get any employment since^ you 

ere laid off in November 1937, any employment of any description 
in private industry? 

Mr. Russell. We tried ill 1938. I had a brother-in-law living up at 
Erie and he wrote me a card and asked me to come up, because he 
thought we could get some work on the docks up along Lake Erie, the 
shipping docks, labor work and all that; so I took my son and 
another friend of mine and we drove up to Erie to investigate. There 
wasn't any work on the docks, so coming back home, on Twelfth 
Street, I noticed a plan with a sign, "Acetylene welder wanted." 
That is a trade I did follow for a few years, acetylene welding and 
cutting, so I stopped and applied for the job, went in the employment 
office and asked if they were looking for welders and he said, "Yes; 
we are," so I told him what I wanted. 

He sent for the general foreman and the foreman came out and he 
told him what I wanted and told him to put me to the test to see 
whether I did know what acetylene work was about. It was all right, 
he took me back to the employment office and said, "The man is all 
right, he came out very favorably on the test." 

The employment agent asked me, "What is your name?" and I told 
him. He said, "Where are you from?" 

I said, "New Castle." 

He said, "How old are you?" 

I said, "47." 

He said, "Hell, man, you're too damn old to start with this com- 
pany now." 

That is what I was confronted with right there. There was no 
way out, T was too old to start w4th. 

Mr. Murray. What are you doing at the present time ? 

Mr. Russell. Working on W. P. A. 

Mr. Murray. What are you getting? 

Mr. Russell. $48 a month. 

Mr. Murray. $48 a month ? 

Mr. Russell. Yes, sir, 

Mr. Murray. And you are the only one in a family of six that h 
working, are you ? 

Mr. Russell. The boys are working on W. P. A., but they art. 
married and living by themselves as individuals. 



CONCENTRATION OF ECONOMIC POWER 16465 

Mr. Murray. So that the $48 is all that you get to provide the needs 
of your wife, and how many dependents? 

Mr. Russell. One son. 

Mr. MuKRAT. One son and yourself. You pay your rent 

Mr. Russell (interposing). That is right. 

Mr. Murray. And your food and medical and other obligations, 
and maintain your home on $48 a month. 

Mr. RusspXL. Well, with $48 a month we maintain paying the 
rent and some of the food, but as far as medical attention and cloth- 
ing and so on, those are neglected. We can't afford to get it because 
the money won't reach that far. We have to skimp along, and as far 
as rent is concerned, we couldn't get a home like I had when I was 
working in the mill, paying $25 or $30 a month rental, so I had to 
get one of the boys and we rented a big house of 8 rooms and a 3-room 
finished attic, so there we split the house up together and split the 
rent, and all utilities so we could get by. 

Mr. Murray. So that your married sons are now living with you? 

Mr. Russell. One of them is living there, and my daughter and her 
liusband are living there. They have their own apartments but it is 
all in the same household, and that is how we manage to get by. 

Senator King. Did you acquire a house cf your own during those 
yeai"S when you were working? 

Mr. RusSEix,. Yes; I did. 

Senator King. You owned your own home? 

Mr. Russell. I owned two homes at one time, during the World 
War, but I disposed of them when the World War was«on, and I 
never owned any since. 

Representative Williams. At the time you were let out of employ- 
ment, what reason was given for it? 

Mr. Russell. They didn't give us any reason at all, to be honest 
about it. They just told us the mill was down, and that was all there 
was to it. 

Representative Wiljliams. Did they shut the mill entirely down? 

Mr. Russell. Absolutely down. 

Representative Williams. Permanently? 

Mr. Russell. They told us that was the end of the mill. 

Tlie Chairman. Has it ever been reopened? 

Mr. Russell. Never reopened; no, sir. 

Representative Williams. And these 1,600 that were let out with 
you represented the entire force in the mill? 

Mr. Russell. Yes, sir. 

Representative Williams. What became of them, if you know? 
Did they make any effort to secure employment for them in some of 
their other mills? 

Mr. Russell. Probably some of them did go about, but hundreds 
and hundreds in New Castle are doing- the same thing as I am doing 
at the present time. 

Representative Williams. Do you know why the mill was shut 
down ? 

Mr. Russell. The only reason for it was the strip mill that is in 
operation that put us put of work. 

Representative Williams. The old process had become obsolete, 
and they had by this new process of continuous rolling supplanted 



16466 CONCENTRATION OF ECONOMIC POWER 

the work that was being done by some other plant by that new 
process. 

Mr. Russell. That is right. 

Mr. Pike. Has the mill been dismantled? 

Mr. Russell. No, sir ; it is still there. 

Mr. Pike. It has never been used since ? 

Mr. Russell. No, sir ; it has not. 

PROVISION FOR displaced WORKERS 

Dr. Anderson. Mr. Russell, we were told yesterday in Mr. Hook's 
testimony, and showed evidence that when he made the change-over 
to the hot-strip continuous mill, he announced to the workers the 
condition, what was going to take place, and offered them the alter- 
native of a dismissal wage amounting in some instances to a sub- 
stantial sum, which many of them took as they were dismissed 
because of the change-over to the continuous-strip process. 

In your experience, did anything like that happen ? 

Mr. Russell. No, sir ; it did not. 

Dr. Anderson. When were you notified that the mill was going to 
close down, the day you were dismissed ? 

Mr. Russell. No ; I can give you an answer to that. It was in 1937. 
That year was a veiy good year. Mr. Sturdy, who was superintendent 
of the New Castle works at that time, when we first got word of that, 
and Mr. Hall, they took all us rollers in the office for a meeting and 
they explained and told us at that time that they insisted on us rollers 
making these men, our crews — that we see that these men got to work, 
because they had so many orders ahead, and thev held us responsible. 
They said, "We have been working on it since the previous year." 
That was in about the latter part of September. Then in November, I 
think just about the first part of November, we got word the mill was 
going to shut down, and it did shut down on November 11, and it hasn't 
moved since. 

Dr. Anderson. But you didn't get any dismissal wage benefit? 

Mr. Russell. No, sir ; nothing at all. 

Dr. Anderson. And you had, according to your testimony, 1 or 2 
weeks' notice. Was word given to you by the plant superintendent? 

Mr, Russell. No; it was just word out through the plant. 

Dr. Anderson. Just a rumor? 

Mr. Russell. Just a rumor was what it was; yes, sir; but it did 
come. 

Senator King. Was a new plant constructed to take the place of the 
old, only changing the process ? 

Mr. Russell. As far as I know, it was the strip mill down around 
Pittsburgh. 

Mr. Murray. The Iroquois works, a new stripping mill erected at 
Clairton. 

I think, Mike, you might have gone astray in stating you had no 
work in private industry following your dismissal in the New Castle 
work in private industry following your dismissal in the New Castle 
job at the Shenango works of the United States Steel Corporation? 

Mr. Russell. You are right ; that did slip my memory. I was called 
back in the Shenango mill in the latter part of December in '37. We 



CONCENTRATION OF ECONOMIC POWER 16467 

went there, in fact all of us rollers, and they rehired us as catcher 
helpers on the job that I had started at 32 years ago as a boy. 

The Chairman. How many of you were rehired? 

Mr. Russell. I should say about 200 anyhow, about that. They 
put me on the job where I started 32 years ago as a catcher helper. 
I didn't like it, in fact, to be lowered away down like that, but I had 
to take it or I couldn't draw compensation or get on relief to get a 
W. P. A. job, so I had to take that and do as I was told, and I was let 
out July 8, 1938. 

Mr. Murray. You were let out July 8, 1938, in the Shenango 
works ? 

Mr. RussELi.. That is right. 

Mr. JSIuRRAY. What happened in the Shenango works? 

Mr. Russell. The orders got so slack, it was a 40-mill plant and 
they were only operating 20 mills, so they doubled the staff up. 

The Chairman, How far from New Castle is Shenango? 

Mr. Russell. Tliey are all in one town, probably half a mile apart. 

The Chairman. Is the Shenango mill still working? 

Mr, Russell. No, sir; it is not. 

The Chairman. Is that closed down? 

Mr. Russell, It is. 

Mr. Murray. How many men did the Shenango works employ 
before it was permanently abandoned by the Steel Corporation? 

Mr, Russell, In the neighborhood of 3,600. 

Mr. Murray. And they were automatically displaced by the same 
order ? 

Mr. Russell. That is right. 

The Chairman. As I get your story, you spent 20 years acquiring 
a skill as a rolling mill operator. 

Mr. Russell. That is right. 

The Chairman. The hand-mill operation. 

Mr. Russell. That is right. 

The Chairman. And when you had reached this peak of skill as 
a result of 20 years of work, a new process was invented which did 
work that you had been doing, more efficiently and at greater speed 
than the hand-mill that you and your associates had been operating, 
could operate, is that right ?' 

Mr. Russell. That is right. 

The Chairman. Therefore, the new mill which was constructed in 
another town took the work away from your mill and from the 
workers in the mill ? 

Mr. Russell. That is right. 

The Chairman. The mill at New Castle has never again been 
opened ? 

Mr. RussEiu. That is right. 

Tlie Chairman. And the workers at New Castle who were dis- 
placed have never since obtained work at anything like the com- 
pensation they were getting when the new continuous mill came 
into operation and displaced them ? 

Mr. Russell. Tliat is right. 

The Chairman. And you and many others have been compelled 
for the most part since that time to support yourselves upon inade- 
quate W. P. A. wages? 

Mr. Russell. Yes; that is right. 



16468 CONCENTRATION OF ECONOMIC POWER 

The Chairman. And without the W. P. A. you would have had 
no opportunity to work at all ? 

Mr. Russell. That is right. 

Dr. Anderson. Mr. Russell, I wanted to ask a question. If you 
had been employed in one of the new strip mills after being laid 
off when the hand process was done away with, what would you 
have done? Your skill is not called on in the strip mill now, is it? 

Mr. Russell. Now you are asking something I can't answer, be- 
cause I don't know anything about a strip mill. I never saw the 
inside of one, never got the opportunity to see inside one. 

Dr. Anderson. Did you go and apply as a roller in a strip mill? 

Mr. Russell. I didn't think I could because it is a different system 
altogether from the hand packing. 

Dr. Anderson. Then the only place you could dispose of the skill 
you have taken 20 years to perfect is another h^nd-process mill. 

Mr. Russell. That is about all. 

Dr. Anderson. What is happening to the hand mills? Have you 
tried to locate wopk in hand mills ? 

Mr. Russell. In fact there isn't any. They are all down. They 
are doing away with all the hand-packed mills. 

Dr. Anderson. Is that the general impression among workers such 
as yourself? 

Mr. Russell. It must be, because we are always looking around and 
can't find any, we don't know where to go. 

Dr. Anderson. Was there any attempt made by the mill for whom 
you worked to retrain you, to fit you into some other part of the mill? 

Mr. Russell. No, sir; none whatever. 

Representative Williams. Your statement that there are none seems 
to be entirely in contradiction to what Mr. Hook said yesterday when 
he said there are practically half of them still maintained, as I re- 
member his testimony. 

Mr. Russell. I don't know what Mr. Hook's intentions are. In 
fact I don't know; I have never seen the inside of the strip mill, I 
don't know anything about the strip mill. 

The Chairman. Perhaps it might be worth commenting that Mr. 
Hook was testifying with respect to the firm of which he is the head. 

Representative Williams. No, not as I understood him; I under- 
stood him with reference to the whole industry that there were prac- 
tically half of them left in operation, the hand mills he was talking 
about. 

Mr. Pike. I think he said there were about 750 still standing and 
about half of the 750 or 375 were still in operation, not necessarily 
full operation but still used a good part of the time, and some of them 
as I think you said, Mr. Murray, were still necessary for certain finish- 
ing operations. 

But probably not in your area, not anywhere near you. 

Mr. Russell. Well, yes ; there was a plant there in Farrell, a hand 
type mill that operated part-time, but it has been down for the last 
6 weeks, too. We don't know whether that will reopen or not. 

Mr. Pike. There wouldn't usually be many jobs left in the few 
left. The people who have got the mare going to hold onto them 
pretty strongly, I should think. 

Dr. Anderson. Mr. Hook's statement was, "But actually there are 
still 750 of those mill? in existence with approximately half in opera- 



CONCENTRATION OF ECONOMIC POWER 16469 

iion." That is three hundred-some-odd mills that require your skill 
are still in operation. Have you applied to any of those 300 mills to 
see if you can get a job? 

Mr. Russell,. I don't know where they are at to get a job. I know 
in aur district there aren't any in operation, so I wouldn't know where 
to go. They would probably be away off from our town, and I 
wouldn't haA e any means to get there to applj' for work anyhow. 

Mr. Murray. I think it might be well to make a distinction here, 
lest a wrong impression is created, a distinction between a plant and a 
mill. Mr. Hook said that there were some 375 mills still in operation. 
I think Mr. Hook might support me in saying that only affects some 
40 plants, the 375 mills. And the distinction ought to be made there 
lest the impression be created that there are 375 huge hand-mill plants 
still in operation. 

Dr. Anderson. Mr. Murray, where would those 40 plants be located? 

Mr. Murray. I will endeavor to set that out for the benefit of the 
committee here during the course of my testimony. If the committee 
has no further questions to ask I am through with Mr. Russell. 

(Mr. Russell was excused.) 

GHOST TOWNS 

Mr. Murray. The strip mills have reduced entire communities to 
ruin. Thriving steel towns have been converted into ghost towns over- 
night. New Castle, Pa., and that is the town Mr. Russell comes from, 
a steel town of 50,000 people, is a typical example. In the last 3 years 
4,500 hand-mill workers have been permanently displaced in this 
town. A few years earlier 1,200 Bessemer steel workers were dis- 
placed in New Castle, a total of 5,700 victims of technology during the 
1930's in a single steel town. As a consequence, private job opportuni- 
ties have dried up. High-school graduates cannot find work, and are 
lucky to get an opportunity to go to a C. C. C. camp. Sixty-four 
percent of New Castle's population — 7,000 families — have been receiv- 
ing some form of State or Federal assistance, or have been trying to 
get such aid. The State and Federal Governments have been spend- 
ing approximately $3,G50,000 a year in New Castle. But even as the 
plight of the town got worse, the Seventy-sixth Congress reduced 
W. P. A. wages $5 a month and cut the number of W. P. A. jobs by 
more than 50 percent. I am submitting here a thorough study of New 
Castle made by the research department of the Steel Workers' Organ- 
izing Committee. 

(The document referred to was marked "Exhibit No. 2478" and is 
included in the appendix on pp. 17332-17339.) 

Mr. Murray. Other steel towns have likewise been reduced to ruin, 
while still others are on the verge of it. These towns are the victims 
.of corporate irresponsibility. Boards of directors sitting in the finan- 
f/ial centers of the Nation pass economic legislation, based exclusively 
on their profit-and-loss statements. In one decision they wipe out a 
complete mill and ruin an entire town, and they do it apparently 
without any thought of responsibility for the social consequences of 
their decision. 

The record of the steel industry during the past decade in abandon- 
ing entire plants, or large departments of plants, in one knockout 
bloAv reveals an ijmorance and disconcern of social conditions that 



16470 CONCENTRATION -OF ECONOMIC POWER 

defy description. From 1929 to 1939, 53 old-style hand plate, sheet, 
and tin-plate plants have been permanently abandoned. Some of these 
plants were departments of large integrated steel works, but a large 
majority were separate plants. There were 38,470 workers displaced 
in these abandoned plants. I am submitting a list of these plants, 
indicating the parent firms, the location, products produced, and num- 
ber of workers- displaced in each plant by years. More than 50 percent 
of the workers were displaced in 1937 and 1938 with the result, as I 
shall point out later, that the effects of the strip mills on the volume 
of wages and employment in the steel industry have not been substan- 
tial until recently. 

(The table referred to was marked "Exhibit No. 2479" and is in- 
cluded in the appendix on pp. 17339-17341.) 

Mr. Murray. The strip mills are not through with their killing. 
Fourteen plants or departments of integrated steel producers arc on 
the industry's death list. These old-style hand mills are scheduled 
to be abandoned permanently. Some of them have worked irregularly 
in recent years, and some are completely idle at present. Twenty-two 
thousand nine hundred and fifty workers are employed in these plants, 
soon to be thrown into the streets, to be made idle through no fault 
of their own, and no longer wanted by the steel industry or by private 
industry generally. I have a list of these plants. I feel it incum- 
bent upon myself to refrain from adding any additional handicaps 
to the respective communities in which they are located, and to 
refrain from hastening the day of their final abandonment. There- 
fore I am not submitting the list of these plants to the committee, 
but if the committee would like to see the list I shall be glad to submit 
it in confidence. About the eventual abandonment of these plants, 
there is no doubt. Several steel employees have already discussed 
the abandonment of these plants with the Steel Workers' Organizing 
Committee. And with abandonment of these plants the number of 
prosperous steel towns will decline, while the number of ghost 
steel towns will increase. But the effects of the strip mills do not 
st^p here. 

The largest single step toward monopoly in the steel industry dur- 
ing the past decade has been the automatic strip mills. These expen- 
sive mills,* which small companies operating the obsolete hand-mills 
cannot afford to install, are further concentrating the control of 
steel-producing facilities in the hands of fewer and larger companies. 
In the steel industry at present there are 18 small independent com- 
panies with obsolete hand mills, whose future is definitely limited. 
These companies employ a total of 23,350. Their combined capacity 
for flat-rolled products is 2,350,000 tons, or 15 percent of the indus- 
try's hand-mill capacity in 1929 for plates, sheets, black plate, or tin- 
plate.^ Daily they are losing business to the strip-mill producers, 
and before long their entire business will have been gobbled up by 
the huge strip producers, and these small independent companies will 
have closed their doors for all times. 

Thirteen of these 18 companies are under contract with the Steel 
Workers' Organizing Committee or another C. I. O. affiliate. The 
executives of these firms have told me and my associate officers, in the 

» Directory of the Iron and Steel Works, Twenty-third Edition, 1938, American Iron 
and Steel Institute. (Mr. Murray's footnote.) 



CONCENTRATION OF ECONOMIC POWER 16471 

course of negotiations, that they do not expect to be able to stay in 
business mudi longer. I personally know that several of these com- 
panies would have closed their doors by now if it had not been for 
the revival in business of last fall. I, of course, have a list of these 
18 small companies and shall gladly submit it to the committee in 
confidence, if the committee desires it, but I do not want to add to 
the credit, financial, and other difficulties of these companies by 
advertising their dire condition publicly. 

With the strip mills firmly in the saddle, these small independent 
companies are doomed to extinction. The changes in the basing 
point system of pricing that were made in June 1938 have added' to 
the diflficulties of these companies, because their plants are located in 
one producing district. But even if these changes had not been made, 
the days of the small companies would still be numbered. The Steel 
Workers' Organizing Committee has not made any statement on these 
changes in the basing-point system of pricing, and it is not my pur- 
pose to 'comment on them as such, I merely refer to the observable 
effects of these changes in connection with the small steel firms I am 
discussing. The president of one of the small companies told me 
that the June 1938 changes merely cut a few months or years off the 
life of his company, that neither his company nor his competitors 
could hold out indefinitely against the automatic strip mills. An- 
other president of a small company told me the only kind of business 
his plant has been able to get in the last several months is what the. 
strip-mill producers will not handle. Since 1929, he told me, his 
company's share of the sheet business of the industry has declined 
more than 70 percent. 

These companies are doomed, because their obsolete mills depend, 
in the main, upon manual power; while the automatic strip mills 
derive their power primarily from electricity. The difference in the 
cost of production is fatal to the smaller companies. Men cannot 
compete against electricity. This is plaifiiy demonstrated by a com- 
parison of the cost of producing a gross ton of tinplate, for example, 
on the hand mills with the automatic strip mills. 

The Chaieman. Mr. Murray, I must interrupt you, because that 
sentence, "Men cannot compete against electricity," by many would 
be interpreted as a statement on your part that you wanted to do away 
with electricity. I know you don't want to do it and I want to give 
you the opportunity to say so at this time. 

Mr. MuKRAT. Of course, I have already said, Mr. Chairman, that 
our committee and our organization and our whole C. I. O. movement, 
is in" complete accord with technological advancement and progress, 
and the increasing of efficiency and productivity, and there is nothing 
here which I have made in this statement, I hope, that will create the 
impression in the public mind that there is any opposition being mani- 
fested by me against the introduction of electrical devices in industry 
today. 

The Chairman. Your whole theory is that technological advance, 
the use of improved devices, the use of electricity, the use of all forms 
of power for industrial production, should be accompanied by some 
sort of social care for the workers and the businesses and the towns and 
communities which are affected by the change. 

Mr, Murray. That is quite right. That is the basis of this presen- 
tation, as a matter of fact. 



16472 CONCENTRATION OF ECONOMIC POWER 

Representative Williams. Of course, what you are stating now is 
simply the effect that the introduction of these various modern appli- 
ances has had upon the working man in displacing him. 

Mr. Murray. Quite true. I am trying to explain to the committee 
not only the devastating effect it is having upon the working man and 
his family, but the misery and poverty that is trailing in the wake of 
these things because of the manifestations of social irresponsibility 
indicated by these large corporations in meeting with Government and 
labor, and these other interested groups. 

The Chairman. May I ask at this point, in your experience how 
many of the companies which employ the improved devices also en- 
deavor by the payment of displacement wages or other separation 
allowances of any kind, to take care of the human factor ? 

Mr. Murray. There are no companies that I know of in the steel 
industry that are doing it. Perhaps Mr. Hook's company did that 
some 20 years ago; his company may be doing it today, I don't know 

The Chairman. He testified yesterday that he is doing it. 

Mr. Murray. I understood he said he was doing so,- but insofar as 
I am aware, I know of no single company or corporation manufac- 
turing steel in this country today that is making provision to take 
care of these disappointed Americans that are being thrown out of 
American industry, in Jiny way, shape, or f oriji. 

The Chairman. And with how many companies are you personally 
acquainted ? 

Mr. Murray. Well, I have collective bargaining agreements in 70 
percent of the industry, with some 638 companies. 

The Chairman. And your testimony is of 638 companies with which 
you have collective bargair;ing agreements, you know of no company 
which has adopted any separation allowance to take care of the 
displaced worker. 

Mr. Murray. I know of none ; none whatever. 

Dr. Anderson. In the companies with which you do not have bar- 
gaining agreements do you know of any such arrangements ? 

Mr. Murray. No, I know of no such arrangements anywhere in 
the steel industry, none whatever. 

Representative Williams, I take it you haven't any agreement 
with Mr. Hook's company, the American Rolling Mill Co. ? 

Mr. Murray. No, Mr. Hook is an affable gentleman when he ap- 
pears before the committee but a different type of gentleman when he 
appears back in Middletown. 

The Chairman. Now, Mr. Murray! 

Representative Williams. I didn't mean that, but he said he had 
such an arrangement and you wouldn't know about that. That 
is why I said, you evidently haven't an agreement because he said 
he had the arrangement and you said there were ijo arrangements. 

Mr. Murray. No, as far as I know, Mr. Hook has no desire to 
talk to me. I am quite willing to talk any time he wants to. 

Representative Reece. If I may revert to page 3 which was read 
before I came in, I notice on line 3 in speaking of the industrial con- 
ditions existing at that time you say : 

Unemployment might very well be likened to the attitude of leading indus- 
trialists and Republican statesmen during the period 1930 through 1932, when 
they said that a policy of waiting would result in a return of prosperity. 



CONCENTRATION OF ECONOMIC POWER 16473 

Then you go on and say : 

The attitude of industrialists and certain statesmen of today concerning the 
solution of the present unemployment problem is the same. 

Do you have any particular reason for designating "Republican" 
statesmen in one caseand "certain statesmen" in the other? 

Mr. Murray. Nothing other than the fact we had a Republican 
administration way back there and I was making an indirect refer- 
ence to the chickens in pots and cars in garages back there, and that 
was about the only suggestion that was offered in those days, so far 
as I know, to cure the unemployment conditions of some -5,000,000 
citizens who were idle then. 

Representative Reece. But you say the same suggestions have been 
offered at this time by industrialists and certain statesmen. Now. 
we don't have a Republican administration today and I was wonder- 
ing why you used party reference in one instance and not in another, 
since we are dealing with purely an economic situation here in which, 
of course, party consideration has no relationship. 

Mr. Murray. Well, I am sorry if the implications have created 
the impression in your mind that this dart was directed at the Repub- 
lican Party, because I certainly did not mean it that way. I sim- 
ply meant we had a Republican administration back there, and that 
the only cure they suggested then was to wait. Now I don't see 
anybody waving their arms in the Federal Congress today about 
this unemployment situation — just nobody at all. 

The Chairman. Oh, well,- look at the chairman, will you please, 
and say, "Yes, there is somebody." 

Mr. Murray. Well, perhaps they are not making public the things 
you are saying. Chairman O'Mahoney, but I would be delighted if 
this Congress would get exercised about this situation and do some- 
thing about it. That is how I feel about it. 

The Chairman. Of course it may be appropriate to say that the or- 
ganization of this committee was in itself a very definite attempt to 
bring about a solution of this question. I may say that as long ago as 
1935 I introduced a bill in Congress which in its terms called for 
just such an industrial conference on unemployment and economic 
conditions as you mentioned a little bit earlier, and I am glad to be 
able to say that there are a number of Members of Congress, both 
Democrats and Republicans, and others also, who are not affiliated 
with either party, who are seriously concerned with this question of 
unemployment. 

Mr. MuRit\Y. I think it might be well to say there, Senator 
O'Mahoney 

Senatr^r King (interposing). Let me supplement what was said by 
the chairman, if you will pardon me. I agree with what the chairman 
has stated, and I understand this committee is charged with the re- 
sponsibility, at least I so interpret our mandate, to inquire into our 
economic and industrial situations and to make such recommendations 
for the alleviation of the situation as the evidence justifies. And I am 
waiting anxiously to hear what you have to suggest as an antidote 
for these evils, and what you have to suggest as a means to alleviate 
the conditions. 

Mr. Murray. I think it might be well, Mr. Chairman, for me to say 
to the committee that there is nothing in this statement that can be 

124491 — 41- -pt. 30 19 



16474 OONCE .TRATION C^F ECONOMIC POWER 

construed as disparaging insofar as the committee here is concerned, 
because I have the greatest admiration for the work which the chair- 
man of the committee has been doing in promoting a better under- 
standing of thousands of industries and endeavoring to ascertain 
through the means of these hearings what it is that groups of citizens 
are doing about it. 

The Chairman. I didn't mean to imply vou were disparaging the 
work of the committee, or indeed of anybody. I was merely bearing 
out what I understood to be your attitude, that in this reference you 
didn't mean to make any invidious comparison. 

Mr. Murray. That is right. 

The Chairman. We have a problem. It wasn't solved in 1932 and 
prior thereto, and it hasn't particularly been solved yet. As a matter 
of fact, we only have W. P. A. to provide a little bulwark against com- 
plete disaster for men like the human exhibit that you brought here 
this morning in the person of Michael Russell. 

COST OF PRODUCTION IN MECHANIZED MIIXS 

Mr. Murray. I stopped at that place, Mr. Chairman, that men can- 
not compete against electricity. This is plainly demonstrated by a 
comparison of the cost of producing a gross ton of tin plate, for 
example, on the hand mills with the automatic strip mills. The fol- 
lowing cost of production figures were given to me in confidence, and 
I cannot divulge the companies involved. The standard measurement 
of tin plate is a base box amounting to approximately 100 pounds. 
The total cost of production of a base box of tin plate on hand mills 
is $4.72, Of this cost, labor amounts to $1.52. I am submitting a 
table, "Cost of Production of Tin Plate on Hand Mills," giving the 
full details of these costs. 

(The table referred to was marked "Exhibit No. 2480," and is in- 
cluded in the appendix on p. 17341.) 

Mr. Murray. The total cost of production of a base box of tin plate 
on an automatic strip mill is $3.91. Of this cost, labor amounts to 
$0,643 per base box, a reduction of 57 percent from the labor cost on 
the hand mills. Other strip-mill items of the cost of production 
amount to $0,067 per base box mor^ than on the hand mills, par- 
ticularly because of higher depreciation charges. Thus the strip mills 
can produce tin plate $0,808 a base box cheaper than can the hand 
mills. This amounts to a savings on the strip mills of $17.77 per 
gross ton. This difference is so great that the integrated steel com- 
panies have almost completely abandoned their hand mills, and thus 
four small tin plate companies with only hand-mill facilities freely 
admit that they will be compelled to go out of existence in the near 
future. 

The Chairman. Do you happen to know what the employment is 
of white-collar workers in these mills of which you speak that are 
about to go out of existence ? 

Mr. Murray. The percentage of thf^ whole? 

The Chairman. Yes. 

Mr. RuTTENBERG. The ratio is about 10 percent salaried and white- 
collar workers, one salaried or white-collar worker for nine laborers. 

The Chairman. The picture you are drawing is not only of the 
displacement of the day worker or the hourly rate worker but also of 



CONCENTRATION OF ECONOMIC POWER 16475 

the displacement of white-collar workers and the injury of independ- 
ent producing companies and also the injury of the communities in 
which they operate, so I want to know how many of these white-collar 
workers might be involved in this movement that you are describing. 

Mr. Murray. That is quite true ; there is, and might I follow through 
at that point and explain to the committee another situation that de- 
velops in connection with the maintenance of these dying hand mills 
or obsolete or antiquated mills. The hand mill desires, of CQurse, to 
live, it wants to live, it fights to live ; it knows that life to it is a ques- 
tion of the surv'ival of the fittest in the great competitive field. It 
cannot compete and pay the same wage that is paid at the low-cost, 
high-producing, more efficiently managed big mill, with better machine 
facilities. The employer who owns the small hand mill comes in a 
state of desperation to the organization and says, "Give me a chance 
to live, won't you ? Help me along. Won't you agi-ee to a cut in our 
wage rates here so that we can live for another 2 or 3 months?" 

Now, there is an economic repercussion that runs through this dis- 
torted competitive picture in the steel industry today that constantly 
confronts the workers employed in the industry, reducing their social 
standards, to meet these newer conditions created by the production of 
these large continuous mills. 

Mr. Chantland. Mr. Murray, if your figures are right, the hand- 
mill cost on a base box of tin was $4.72 and the strip mill was $3.91. 

Mr. Murray. That is right. 

Mr. Chantland. Representing a savings between the two processes 
of 81 cents a box, while the savings on labor or the reduction in labor 
was $1.52 and $0.64, or 88 cents, so that the reduction of labor was 
7 cents more a box than the total savings ? 

Mr. Murray. Perhaps my expert can explain that to you, but it is 
my understanding that in arriving at that figure he was trying to 
determine the difference in the actual labor cost, and the figures showed 
a difference in labor cost amounting to a^'^roximately 88 cents, al- 
though the over-all cost may have been only bu . 

Mr. Chantxand. That is right. Reduction in labor is greater than 
total saving. 

Mr. Murray. No ; I think that the reduction in labor is a distinct 
situation from the one to which you make reference, and I believe that 
Mr. Ruttenberg can answer that. 

Mr. Ruttenberg. The total difference is between $3.91 on the strip 
mill and $4.72 on the hand mill ; it is a reduction of a total of approxi- 
mately 88 cents, of which 80 cents is reduction in labor costs. 

Mr. Murray. Does that explain it? 

Mr. Chantland. Then your total cost of the strip mill is $3.91. 

Mr. HiNRiGHS. You don't give the detail in that exhibit for the 
costs of the strip mill, but I think that the steel cost would be the 
same in the two types of mill and the tin cost would be the same 
in the two types of mill, and the materials and supplies essentially 
the same. 

Mr. Ruttenberg. The reduction is almost exclusively in the labor 
costs. 

Mr. HiNRicHS. And the increase of 6 cents tha*: you mention is 
almost entirely the depreciation item. 

Mr. Ruttenberg. That is right. 



16473 CONCENTRATION OF ECONOMIC POWER 

Mr. HiNRicHS. That would mean, then, that if these hand mills 
were to stay in business in competition with the automatic strip mill, 
if the hand mills disregarded that whole depreciation item of 12 
cents, which is the only capital charge in the thing, if they regarded 
their equipment as worth absolutely nothing and didn't charge any 
depreciationj but just mined it out and cut their wages more than in 
half, they still would not be effectively competing with the automatic 
process. Is that correct? 

Mr. KuTTENBERG. That is so true that virtually every hand mill 
that produces tin plate for the integrated companies that have strip 
mills is down, and they are producing ojj the strip mills. 

M^. HiNRiCHS. And that process could be kept alive only up to the 
point where the machinery itself couldn't be used any longer if you 
didn't maintain any depreciation. 

Mr. KtJTTENBERG. They would live as long as they had any fat to 
live on and when they didn't have that they wouid have to close their 
dcors. 

The strip mills' advantage in producing sheets is even more fatal to 
the hand-mills. An official of a small hand-mill sheet producer told 
me his direct labor cost to convert a ton of billets into sheets for 13- 
gage sheets, which is his average, amounted to $6.50 a ton, plus $1.30 
a ton for indirect labor costs, or a total labor cost of $7.80 per ton of 
sheets. The strip mills have reduced the over-all cost of production 
of sheets and strip, according to Mr. Eugene Grace, president of the 
Bethlehem Steel Corporation, by $6 to $8 a ton.^ Thus, if the entire 
labor cost on the sheet hand mills were eliminated, the cost of- pro- 
duction would still exceed that of the automatic strip mills. In other 
words, even if the hand-mill workers donated their labor to the small 
hand-mill companies, they still could not successfully compete with 
the automatic strip mills. Certainly with such a wide difference in 
the cost of producing sheets, wage sacrifices on the part of the hand- 
mill workers will not save either their jobs or the companies that 
employ them. As a matter of fact, all of the 14 small, hand-mill 
sheet companies pay wages at present that are below the prevailing 
wages in the steel industry, and they cannot be reduced further. 

Efforts of these small companies to reduce their costs and remain 
competitive have been exhausted. Several of these companies have 
installed three-high semiautomatic mills for the production of sheets. 
These mills eliminate around 1 out of everj^^ 5 workers required to 
produce an equivalent tonnage on the hand mills, and reduce the 
over- all cost of production $4 per ton of sheets, on the average. The 
effect of the '^emiautomctic mills is to prolong the life of the com- 
panies that install them, but the savings of these mills are not enough 
to enable the companies that have them to compete indefinitely 
against the strip mills. The president of the small sheet company, 
which first installed semiautomatic mills, told me more than a year 
ago that if he could keep his company alive for another 4 years he 
would be satisfied. 

Prior to the installation of semiautomatic mills, the small sheet 
mill companies, particularly during the twenties, pared their costs 
to a bone. As an example, I am submitting a noteworthy study of 
employment and productivity in a sheet-steel mill, by a thoroughly 

1 Wall Street Journal, July 28, 1939. 



CONCENTRATION OP ECONOMIC POWER 16477 

competent student, Dr. J. R. Gruener. This is the only copy we 
have of the book, but there is a summary in the paper. 

The Chairman. We will be glad to have it for tlje files. 

(The book referred to was marked "Exhibit No. 2481" and is on 
file with the committee. The document summarizing this book was 
marked "Exhibit No. 2481-A" and is included in the appendix on 
pp. 17341-17342.) 

Mr. Murray. This is a printed volume of some. 80 pages. This 
study, based on the company's own records, briefly summarized 
shows, as a result of technological improvements made from 1925 to 
1929, the company eliminated 312 workers and reduced man-hours 
by 47 percent, but its monthly pay roll by 34 percent, or $34,816, and 
still increased its production by 13 percent. In other words, the 
hand-mill companies had reached their peak of efficiency when the 
strip mills were developed, and they. are helpless before the onslaught 
of the low-cost automatic strip producers, as hand-mill costs cannot 
be slashed any more. 

The economic effects of the strip mills, therefore, are the elimina- 
tion of the smaller companies, a>id the further concentration of 
steel-prod' icing facilities in the hands of the few large steel com- 
panies. Tlie new steel technology is accentuating monopoly in the 
steel industry. 

The Chairman. It is now 12:15 and you still have some time to 
go, so we will postpone the rest of your statement, if you have no 
objection, until the afternoon session. I was going to ask, however, 
whether in the matter that is still to be presented you intend to deal 
with the statement which has been made that though there has been 
this big advantage in technology through the introduction of the 
continuous mill and workers have been as a result necessarily dis- 
placed, they have by and large been absorbed in new industry or in 
avenues that liave been created as a result of the improvement. Do 
you deal with thf«t subject later? 

Mr. Murray. We deal with the failure of industry to reabsorb or 
new enterprise to absorb. 

The Chairman. The committee will stand in recess until 2 : 15. 

(Whereupon at 12: 15 the committee recessed until 2: 15 p. m.) 

AFTERNOON SESSION 

(The hearing resumed at 2 : 20 at the expiration of the recess, Chair- 
man O'Mahoney presiding. ) 

The Chairman. The committee will please come to order. You 
ended just before you got to New Steel Technology Covers Industry 
of your prepared statement. 

TESTIMONY OF PHILIP MURRAY— Resumed 

Mr. Murray. With your permission, Mr. Chairman and members o^ 
your committee, I would like to expedite the reading of this paper by 
asking that with the beginning of our subject dealing with New Steel 
Technology Covers Industry on page 18, running over to the last para- 
graph on page 21, all of this matter which I won't read unless you 
insist upon my reading, be included in the record. 



16478 CONCENTRATION OF ECONOMIC POWER 

The Chaikman. That is a very customary request in the House of 
Kepresentatives. All you are asking is for leave to print. We will 
grant it. 

Mr. Murray. Then the matter which I refrain from reading deals 
largely with the individual displacements of perhaps one, two, or 
three men on jobs, and it will be interesting, I suppose, for the guid- 
ance of the committee in their final determination of the facts to be 
presented. 

The Chairman. That material will be printed in the record as part 
of your statement in the order in which it appears in the statement 
itself. 

(The omitted portion of Mr. Murray's printed statement appears 
below:)" 

NEW STEEL TECHNOLOGY COVERS INDUSTRY 

The new steel technology has been displacing labor in all branches of the steel 
industry, and has not been confined to the production of flat-rolled products. The 
cumulative effect of all the technical improvements made in the steel industry 
during the past decade, some small, others large, has been v" severe on employ- 
ment as the huge, dramatic technical improvement of the automatic strip mill. I 
shall not impose upon the time of the committee by relating all of these smaller 
technical improvements, but I do feel it is important to recite a few tj-pical ones 
briefly. I have chosen the following cases of relatively smtll technical improve- 
ments from our files at random, as illustrative of what is happening in every one 
of the branches of the steel-producing industry. 

Case No. 1 : A large steel company, firmly established in the trade, invested 
$750,000 o improvements in its open-hearth department. Sixty-two employees 
were eliminated in the department a" a result of the . improvements, which 
amounted to an annual pay-roll saving of $118,000. In addition, the company 
effected savings in coal consumption and other savings, which amounted to 
$257,000 a year. Thus the company's annual savings in cost totaled $375,000, or 
enough to write off its $750,000 investment and interest in less than 2V2 years. 
The technical improvements enabled the men remaining on the pay roll— =and 
recall that 62 were eliminated — to produce in 133 days the same amount t< steel 
that formerly required 200 days. The result was tliat even though the men ^ade 
more money per hour, their over-all annual earnings remained the same, as che 
tuimber of hours of work a year was reduced correspondingly with the increased 
tonnage per hour. Incidentally, the company sought a reduction in tonnage rate, 
but the S. W. O. C rejected the company's request for the reason stated above. 

This case illustrates how the employment year of steel workers in being reduced. 
Increased mechanical efficiency r.aeans steel workers no longer can look forward 
to 5 days' work a week for 50 steady weeks a year ; in fact, a steel wo'"ker is lucky 
if he is employed 75 percent of the year. 

Case No. 2: One of the industx-y's largest wire companies, through technical 
improvements, increased ihe speed of its cold wire drawing machines from 
115 revolutions per minute to 150. As a consequence production rose from 
2,185 pounds per 8-hour turn to 3,000 pounds per turn, or an increase of 37 
percent. Here again the company sought to reduce tonnage rates from 14 to 22 
percent. Production had been increased to such an extent, it was argued, that 
the employees involved would be able to increase their daily earnings by 7.2 
percent, despite the 14 to 22 percent proposed cuts in their tonnage .ates. 
The S. W. O. C. maintained in this case, as in the open-hearth case I h.ive just 
discussed, tliat daily earnings are not a fair measurement, because the annual 
earaings uf the men were reduced in direct proportion to the increase in their 
output per hour. Toimage wage rates were adjusted to the mutual satisfaction 
of the company and S. W. O. C, recognizing the principle that workers should 
participate equally with the company, directly and immediately, in the benefits 
of technology. In another case, a wire company in its fine-wire department 
Increased the revolutions per minute of i*"s machines from 350 to 450, or 28 
percent. Production rose from 1,200 to 1,800 pounds per 8-hour tu-'n, or 50 
percent. Here again the 12-month employment year was cut at least by one- 
fourth. 

Case No. 3 : Large numbers of men have been eliminated in the primary 
operations of the steel industry by the introduction of the scarfer. Scarfers. 



CONCENTRATION OF ECONOMIC POWER 16479 

with their acetylene torches, can bum the bad seams out of billets 3 to 5 
times as fast as chippers can chisel them out with their air-pressure chisels. 
In the steel foundry of the Bethlehem Steel Co., Bethlehem, Pa., five to six 
chippers formerly worked 8 hours each to clean the scale from a certain 
product, at a total labor 'cost for this one operation of $31.20. Now one man 
with an acetylene torch and one helper does this same job, at a total labor 
cost of $10.08, or a reduction in the total labor cost of 70 percent. At least 2,500 
workers have been eliminated in the steel industry during the past decade In 
the shift from the chipping to scarfing method tor taking bad seams out of 
slabs, billets, etc. 

Case No. 4 : There are technical improvements that eliminate as few as 1 
wrker, or 3 on 3 shifts. In the blooming mill department of a large steel 
works 1 man was employed as a stamper on each operating shift. . His duties 
were Jo place small metal numbers in the slot of a stamp hammer, and to strike 
the billet with the hammer to imprint the heat number for identification pur- 
poses. This job, affecting 3 men, 1 on each shift, has been eliminated. Now 
a small air-controlled cylinder directly above the hot billet has been installed. 
It is controlled by a switch placed near the shearman who operates it along 
with his other duties with no extra corapensaton. The heat numbers t re 
changed by the production recorder, vrho likewise does not receive any extra 
compensation for his increased duties. Countless cases of this description can 
be related. I can cite numerous other cases, and the story is the same: 1 man 
here, 3 men there, 12 men here, etc., are being displaced by technical 
improvements. The effects of these improvements have been that fewer and 
fewer workers and less and less man-hours are required to produce more and 
more steel products. 

Mr. Murray. Might I summarize this by beginning on the last 
paragraph of page 21 : All this means irregular work for the steel 
workers who are considered regularly employed. They might work 
5 days a week for a month, or for 2 months. Then they will be cm- 
ployed 4 days a week, or 3 days a week for a month or more. As 
the year goes on they might get 5 days' work a week for a few more 
months. Then they might be laid off for a week, sometimes for a 
month or more. A pick-up in business comes. They are called back, 
and are employed 5 days a week for a while. They might get 6 days 
a week for a couple of peak weeks of production. Then they go down 
to 3 and 4 days a week work. All this adds up to partial employment 
for the entire year. Steel worker? who are considered regularly em- 
ployed suffer periodic unemployment or slack employment evei^ 
year. The number of steel workers who are employ-^d a full ^/ days 
a week for 50 weeks a year is insignificant. The vast majority of 
workers attached to the steel industry are affected adversely by the 
increased technical efficiency of the industry. Instead of being em- 
ployed a fiiU year, the f^verage steel worker is idle from one-fifth to 
two-fifths of the year, and only employed from 60 to 80 percent of th9 
time. Because in this time all the steel consumed for the entire year 
can be produced. 

The Chairman. The conditions which you have just described as 
existing in the steel industry are v^ery similar to those which exist in 
the coal-mining industry, are they not? 

Mr. Murray. In the coal industry, of course, that industry is keyed 
with men enough, invested capital enough, and coal mines enough, to 
produce approximately 85C,000 000 of coal annually, where the con- 
sumptive requirements of the Nation are reduced to something ap- 
proximating 400,000,000 tons now. The coal industry on the basis of 
its present industry set-up only affords about half iime to all of the 
worlkers emploved in that industry. In the steel industry, according to 
our analysis of the whole thing throughout the past 10 or 11 years, we 
find that, due to the introduction of new machines, improvements in 



16480 CONCENTRATION OF ECONOMIC POWER 

efficiency, and other technological improvements, the steel industry is 
equippeii today with men and money and plant-equipment facilities 
to produce approximately all of the Na.tion's ordinary normal 1929 
requirements on about 7y2 months' work each year. 

The Chairman. I was about to say 

Mr. Murray (interposing). And that situation, of course, is be- 
coming worse from the standpoint of the introduction of new ma- 
chines constantly in the industry ^ providing only part-time employ- 
ment for those who are kept in industry, and, of course, as I have 
already stated, displacing some 88,000 people from the industry within 
the next 2 years. 

Representative Williams. That would mean an average employ- 
ment of men about 7 or 8 months a year ? 

Mr. Murray. That is right, on the ba^is of 5 days per week and 40 
hours. 

The Chairman. Well, in terms of unemployment during the week 
ind during the year I could have imagined that you were describing 
conditions in the coal-mining areas of my own home State. 

Mr. Murray. Quite true. What is true in Wyoming is true in 
Pennsylvania, true in Illinois. 

The Chairman. And when the worker who constitutes the bulk of 
the population, of the coal-mining population, or a steel-producing 
community, is unable to work but a portion of the time, his lack of 
purchasing power is felt not only by the businessmen of the par- 
ticular community but also by your whole economy; isn't that right? 

Mr. Murray. Quite true, and. Senator, I want you to know that the 
interest that we are manifesting in endeavoring to eflfect a cure for 
these bad economic conditions is prompted wholly and very unsel- 
fishly to help not only industry but the community and the State and 
the Nation as well. We believe what we are offering here in the intro- 
duction of factual matter dealing with unemployment in steel is not 
something that is promoted by my union to immediately help my 
union, but rather to help the industry, to stabilize the functioning 
end of the industry, and to help the community and the Nation as well. 

The Chairman. It is all keyed into the purchasing power of the 
masses, as was testified here by Mr. Ford and Mr. Kettering a few days 
ago, and when we build up that purchasing power by stable employ- 
ment at real wages we increase the market for every businessman in 
the land, do we not ? 

Mr. Murray. That is right. 

Now with your permission, Mr. Chairman, on page 22 I should like 
to eliminate from the reading of the paper that portion of the paper 
that deals with mergers and consolidations and merely again to sum- 
marize by referring to the last paragraph of that article on page 23. 

(The omitted portion of Mr. Murray's printed statement appears 
below :) 

ME3SOEES AND CONSOLIDATIONS 

Included in the new steel technology are savings resultir^ from mergers of 
steel companies and consolidations of subsidiaries of the larger steel producers. 
During the thirties United States Steel consqlidated the Illinois Steel Co., Car- 
negie Steel Co., Lnriiin Steel Co., and the American Sheet & Tin Plate Co., all 
subsidiaries, in the Camegie-IUinois Steel Corporation. The West Leechburg 
Steel Co. meiged into tlio Allegheny Steel Co. in 1936, and 2 years later the Ludlum 
Steel Co. merged with the Allegheny Steel Co, into the AUegheny-Ludiim Steel 
Corporation, The Hepublic Steel Corporation ahsorb^d the Corrigan-i.lcKinney 



CONCENTRATION OF ECONOMIC POWER 16481 

Steel Co. and the Canton Tm Plate Corporation ; and the Truscon Steel Co. merged 
with Republic. The Seneca Iron & Steel Co. waS merged into the Bethlehem 
.Steel Co. and later consolidated along with the Pacific Coast Steel Co., Southern 
California Iron & Steel Co., and the McClintic-Marshall Construction Co. The 
number of steel companies going out of existence during the thirties as a result 
of mergers and consolidations by the major steel producers was 18, while 8 others 
were merged but have kept their separate identities. Only 2 new companies 
were formed as a result of these mergers and consolidations, all of which are 
listed in exhibit No. 2482, which I am submitting. 

In addition, there have been other managerial improvements, like systems of 
budgetary control, etc., that have been introduced in the steel industry in recent 
years, the net effect of which has been to contribute to a shrinking labor force. 
This has also been the effect of the mergers and consolidations that took place in 
the steel industry during the past decade. 

Dr. Anderson. Mr. Murray, do you want to introduce the exhibit? 

Mr. MuBR.\Y. I want to introduce the exhibit and I want to intro- 
duce all of the other material in the record for the guidance of the 
committee. 

Dr. Anderson. The exhibit then will be "Exhibit No. 2482." 

The Chairman. Jt may be received. 

(The table referred was marked "Exhibit No. 2482" and is included 
in the appendix on pp. 17342-17343.) 

Mr. Murray. I endeavor at this point to impress upon the committee 
the fact that these mergers and consolidations that have taken place 
in the steel industry within comparatively recent years are in some 
measure, or do in some measure contribute toward the unemployment 
situation in the steel industry through the promotion of greater effi- 
ciencies and the centralization of the operating efficiencies of the 
management. I continue by stating : 

The net effect of the automatic strip mills, of other technical improvements, of 
mergers, consolidations, and the like — in brief, of the new steel technology — has 
been an increasing volimae of technological unemployment in the steel industry 
during the 1930's. 

I come now to the statistical measurement of technological unem- 
ployment in the steel industry. There are two ways to measure 
employment. One is in total employment, or the number of wage earn- 
ers. The other is in man-hours, or the number of hours worked. The 
latter (man-hours) is the more accurate measurement of employment, 
from the point of view of both the employer and labor. The number 
of wage earners at any given time is not an accurate measurement of 
employment. From labor's point of view the imber of wage earners 
may be too high for the given production because of part-time work, 
as no consideration is given to the effect of sharing the work on actual 
working time. From the employer's point of view the number of wage 
earners may be too low for the given production because of overtime 
^vork, as no consideration is given to the extra days actually worked. 
On the other hand, man-hours, the actual number of hours worked to 
produce a given output, gives consideration to part-time work and 
overtime work. Finally, the changes in the number of hours worked 
per week, as these changes affect employment, can be seen only by 
man-hour comparisons. 

Thus in measuring employment, it is obvious man-hours is a far 
more accurate picture of the volume of employment than is the number 
of wage earners. In other words, the volume of employment in man- 
hours in relation to production is the real way to get at the heart 
of the problem of technological unemployment. 



16482 CONCENTRATION OF ECONOMIC POWER 

I am submitting here ^ chart, "Pay Rolls and Man-Hours per Ton 
of Output." 

The Chairman. It may be received. 

(The chart referred to was marked "Exhibit 2483" and appears 
on p. 16483.) 

Mr. MuKRAT. This is a chart showing the trend of pay rolls and 
man-hours per ton of output of hot-rolled iron and steel products in 
the steel industry from 1923 through 1939. This chart is based on 
figures from the National Industrial Conference Board, a private sta- 
tistical agency whose board of directors is composed of leaders of 
industry.^ 

This chart shows that since 1923 the number of man-hours per ton 
of steel output has declined 36 percent. In other words a little more 
than 6 steel workers can turn out as much steel now as 10 could in 
1923. The decline has been most severe since 1936, when the huge 
labor displacement by the automatic strip mills began. Almost half of 
the decline has taken place since 1936. 

The impact of the hew steel technology on pay rolls demonstrates 
why our economy is in a rut. Pay rolls per ton of steel produced have 
declined 10 percent since 1923. In other words, the labor cost per 
ton of steel produced now is 10 percent less than in 1923. This 10- 
percent reduction was made from 1924 to 1929, during which time 
hourly wage rates remained unchanged. The labor cost per ton of 
steel now is approximately the same as in 1929 ; that is, the index of 
pay rolls per ton of output on this chart stands at 89.4 in 1929 and 
90 in 1939. During the same period, however, from 1929 through 
1939, average hourly earnings increased 29 percent, or from 65.4 to 
84.2 cents per hour.^ Thus during this 10-year period total pay rolls 
for a comparable output remained the same despite an increase of 
29 percent in hourly earnings. Technological improvements are re- 
sponsible for this condition. It is plainly observable, therefore, that 
labor is not participating in the benefits of the new steel technology. 

A full-view effect of this technology, however, on pay rolls and 
employment can best be had by looking at the last 4 years in the steel 
industry. 

The Chairman. Is that statement disputed by any observer of the 
steel industry? 

Mr. Murray. Might I say for your information, Mr. Chairman, 
that this statement which I now read is largely derived from figures 
produced by the American Iron and Steel Institute, the National 
Industrial Conference Board, and from other private and statistical 
agencies with whom we have no connection, and in addition to that 
based upon factual studies of all those matters by my own department 
of research in the city of Pittsburgh, which has made a current review 
lasting now for a period of approximately 5 months, into all of the 
factors having to do with this question that I now present to the 
committee. 

Mr. Pike. I think, Mr. Murray, that your statement is almost 
exactly true in dollars and cents, and I think Mr, Hook's figures 
yesterday bore it out pretty well, but they at least have gained in 



^Iron and Steel, January 1940, National Industrial Conference Board, page 6. (Mr. 
urray's footnote.^ 
a Steel Facts, F( 
Murray's footnote.) 



Murray's footnote.^ , „^ , ^ ^.^ ^ o /»» 

'Steel Facts, February 1940, American Iron and Steel Institute, page 3. (Mr, 



CONCENTRATION OF ECONOMIC POWEIt 



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16484 CONCENTRATION OF ECONOMIC POWER 

several hours a week of leisure which they didn't have before. If 
there is any gain, it is in more off time a week rather than in dollars 
and cents. 

Mr. Murray. Of course, my complaint here is predicated upon 
the assumption that there is too damned much leisure in the steel 
industry. I don't think that they are giving them enough work. If 
your mind is meeting my mind, and I doubt that it is, of course we are 
both right. 

Mr. Pike. We would agree that 70 hours a week was much too 
much for a man to work over a long period, and that there was a 
real desirability for social reasons to pull those hours down first, 
saj', to 60 and then to 54 and to 48 and possibly to 40, but somewhere 
in there comes the question of when you have got too much time on 
your hands and I am interested to get your point of view. Would you 
only ask, then, for 30 hours in order to spread the work more, and 
not because 30 hours would be better for the men ? 

Mr. Murray. Well, I intended of course to cover that phase of 
it in the later discussion of this problem. 

Mr. Pike. All ri^ht. 

Mr. Murray. Is it all right if I shoot it in a little later ? 

Mr. Pike. Yes. 

GREATEST CHANGE IN EMPLOYMENT AFTER 1936 

Mr. Murray. The most vital period during the thirties has been 
from 1936 through 1939. It is during this period that hourly wage 
rates rose more than 26 percent; that is, of the 29-percent increase 
since 1929, most of it took place since 1936. The new steel technology 
of the thirties did not begin to reduce pay rolls and employment, in 
substantial amounts, until 1936. It is since then that the productive 
efficiency of the industry increased by 21 percent. During this period 
wages per ton of ingots produced rose as a result of the increase in 
hourly wage rates, but by the end of the period, in September 1939, 
wages per ton of ingots produced had returned to the level prevail- 
ing before the increase in hourly earnings. From August 1936 to 
September 1939 technology reduced the number of man-hours per ton 
of ingots produced from 18.7 to 14.7, or more than 21 percent. 

These facts were arrived at through careful and extensive analysis 
of the basic facts compiled by the American Iron and Steel Institute 
on monthly ingot production, total monthly hours worked by hourly, 
piece work, and tonnage workers, and total monthly wages (in whole 
dollars) received by this group of steel workers. I am submitting 
an explanation in "Exhibit No. 2484" of the nature of these basic 
facts and the method of their analysis. 

The Chairman. It may be received. 

(The document referred to was marked "Exhibit No. 2484" and is 
included in the appendix on p. 17343.) 

Mr. Murray. I am also submitting four charts that illustrate these 
facts. I then make reference to the charts which are "Exhibits Nos. 
2485, 2486, 2487, and 2488." 

The Chairman. They may be received. 

(The charts referred to were marked "Exhibits Nos. 2485 to 2488" 
and appear on pp. 16485-16488.) 



CONCENTRATION OP ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 




CONCENTRATION OF ECONOMIC POWER 16489 

Mr. MuRKAY. I am submitting this explanation and illustration of 
the facts as exhibits to avoid consuming the committee's time on 
technical matters, and if after looking these facts over any committee 
members want to discuss them with me or the S. W. O. C. research 
staff, we shall gladly oblige. 

In connection witli this body of information I want to discuss, 
briefly, three important questions. One is the relation of hourly 
earnings of steel workers to steel prices. The second is the relation 
of the new steel technology to national purchasing power. And the 
third is emploj'ment. 

Might I just take the time of the committee while I present one of 
those charts? 

(Senator King assumed the Chair.) 

Acting Chairman King. Which exhibit is that? 

Dr. Anderson. "Exhibit No.' 2488." 

Mr. Murray. I wanted to make a comparison here because I think 
this is graphic and describes in vivid fashion just about what our 
situation is todav in the industr3\ You will note at the left side 
of the chart there the August output of 1936, 4,184,287 tons. Sep- 
tember 1937 there was an increase of 2 percent over the August 1936 
production, or 4,289.507 tons. In September 1939 there was a drop 
of 1 percent below the i937 production to 4,231,310 tons. Those are 
three fairly comparable months. 

You will note here in the middle of the ehart reference is made 
to the number of employees in those particular periods. 

In August 1936, 444,953 employees produced the 4,184,287 tons. 
I want to explain this figure here. In March of 1937 the Steel 
Workers Organizing Committee negotiated the agreement with the 
steel industry reducing the workweek from ¥ to 40 hours. That 
condition necessitated the employment of an additional 58,000 work- 
ers, bringing the total number of employees in the steel industry in 
March of 1937 up to 503,643. 

.'-cting Chairman King. That is the entire United States? 

Mr. Murray. In the United States. In September of 1939, 2 
years later, when the full impact of technological improvement was 
beginning to be felt, this force of 503,643 workers employed in Sep- 
tember of 1937 producing a comparable tonnage to that of Septem- 
ber 1939, we find the industry in September 1939 giving employment 
to 415,171 workers, or, as you will note, a reduction in the working 
force approximating 88,000 below the September 1937 figure. 

In the last column we find 3 months in 3 separate years, August 
1936, September 1937, September 1939, 3 comparable months, 3 com- 
parable tonnage figures. How do we explain this reduction from 
•37 to '39? It is explained by the number of man-hours given the 
employees of the industry in those 3 years. In August of 1936 the 
employees in the industry worked 78,208,172 hours to produce 4,134,- 
287 tons. In September of 1937, the employees in the industry 
worked 79.230,977 man-hours to produce 4.289,507 tons. Here again 
we come to the impact of the new technology. In September of 1939, 
the same tonnage was produced tliat was produced in September of 
1937 and yet this tonnage was produced by 62,171.423 man-hoursr 
or a reduction in man-hours n the iiidustrv' below the 1937 fi?^ui*e 
of approximately 17,000,000. 

124491— 41— pt. 30 ^0 



16490 CONCENTRATrON OF ECONOMIC POWER 

Acting Chairman King. What would be the difference in wages 
in the aggregate ? 

Mr. Murray. Well, the hourly rates 

Acting Chairman King (interposing). I mean the entire amount 
which was paid. 

Mr. Murray. In "Exhibit No. 2487," Senator, I offer an explana- 
tion of that, to show you that despite the fact that our wages 
have increased approximately 27 to 28 percent since 1936, the ton- 
nage is about the same, monthly pay rolls are here recorded, showing 
that the pay roll for August 1936 — and I again deal with the same 
3 months and the same comparable tonnage — the monthly pay rolls 
show August 1936 $52,278,846, in August of 1936, distributed 
amongst 444,953 workers. 

In September of 1937, when production had gone about 2 percent 
above the 1936 figure, the pay roll for that montli was $66,800,712. 

In September of 1939, when we had the full impact of our 27- or 
28-percent wage increase, the pay roll was approximately the same as 
the pay roll in August of 1936, $52,921,352. 
Does that answer your question? 
Acting Chairman King. Yes, sir. 

Dr. Anderson. Mr. Murray, referring to your "Exhibit No. 2488" 
for just a moment for an explanation, your three bar charts on pro- 
duction are what? Ingot tons? What is the production measure 
there ? 

Mr. RuTTENBERG. Open hearth and Bessemer ingots. 
Dr. Anderson. The second set of figures then on employment of 
wage earners is wage earners in those particular things, in the open 
hearth and Bessemer? 
Mr. RuTTENBERG. Wage earners in all operations in the industry. 
Dr. Anderson. Isn't that an incomparable comparison? Aren't 
you making a comparison here of production, which is total tonnage 
ingot production? 

Mr. RuTTENBERG. If we followed through and had all finished pro- 
duction to compare with the wages it would be the same. The stand- 
ard accepted measurement of production in the industry is ingot pro- 
duction, and the relation of that to total employees in all parts of the 
industry and ta the total wages paid in all parts of the industry is 
comparable. 

Dr. Anderson. In other w^ords, though these are not precisely the 
same and you are not making a comparison between people employed 
in that particular production only, you would find no difference if 
you did make such a comparison. 

Mr. RuTTENBERG. The comparison of ingot production in each 3 
months is the same as the comparison of all other types of production 
throughout the industry. 

Mr. Murray. And as a matter of fact, we are using here the same 
yardstick to measure these things that the American Iron and Steel 
Institute and the National Industrial Conference Board and other 
statistical organizations use to arrive at conclusions. 

Acting Chairman King. Such a relation as you have stated here 

Mr. Murray (interposing). It is an established relationship that 
has iDeen used in terms of results down through the history of the 
industry and we have merely followed the procedures adopted by the 
industry itself. 



CONCENTRATION OF ECONOMIC POWER l^ 

Acting Chairman King. So they would be based upon a common 
denominator when you are trying to relate one to the other. 

Mr. EuTTENBERG. Yes ; the common denominator in the steel indus- 
try is open hearth and Bessemer ingot production. It is used 
throughout the hearings on the steel industry ^ that Mr. Hook 
referred to yesterday. 

Mr. MuRiLVY. It has been contended before this committee and else- 
where that "substantial reduction in prices could not be effected with- 
out great reductions in wage rates." ^ This contention, no doubt, is 
based on the face that from August 1936 to September 1939 (produc- 
tion being comparable in both months), average hourly wage rates in 
the steel industry rose more than 27 percent, or from 66.8 to 85.1 cents 
per hour. This increase in hourly wage rates, however, has not re- 
sulted in any increase in total wages per ton of ingots produced. The 
amount of wages per ton of ingots produced in August 1936, and 
September 1939, was the same, $12.50 a ton.^ Thus despite a 27-percent 
increase in average hourly wage rates, total wages per ton of ingots 
produced, within a 3-year period, were not increased. This was ac- 
complished, of course, by the reduction of 21 percent in the number of 
man-hours per ton of ingots produced during the same perioij. 
Through technological improvements the steel industry has elimi- 
nated the effect of increased average hourly wage rates on the labor cost 
of steel production. In view of these facts, derived from the figures 
of the industry's own American Iron and Steel Institute, the conten- 
tion that price reductions can only be made with "great reductions in 
wage rates" is unsound and unfounded in fact. 

EXTENT OF MECHANIZATION COST BORNE BY LABOR 

Mr. Murray. The only basis for this contention is that if the money 
required to install the labor-saving machinery that made possible the 
increase in productive eflSciency cannot be charged to the consumer, 
then labor should pay for the machinery through lower hourly wage 
rates. Labor in the steel industry, through the Steel Workers' Organ- 
izing Committee, will not take wage cuts to pay for machinery that 
displaces thousands of steel workers. And no responsible person in 
industry or Government should ask labor to pay for technological im- 
provements out of its pay envelope. Without wage cuts, labor in the 
steel industry has paid dearly for technological improvements in the 
last 4 years. Thirty thousand steel workers have helped pay for these 
improvements with their jobs.* The organized steel workers have 
the power, and have exercised it, to stop wage cuts, but lacking the 
cooperation of the industry they are unable by themselves to stop this 
wholesale displacement of workers. That is why, on behalf of the 
Nation's steel workers, I am bringing this matter to the attention of 
this important congressional and governmental committee. 

Now, let us look at what has happened to the purchasing power of 
workers in the steel industry during the last 4 years. In 1936 and 
1937 the Steel Workers' Organizing Committee raised average hourly 
earnings for hourly, piece work, and tonnage workers 26 percent, 

1 See Hearinps, Parts 18, 19, 20, 20, 27. 

* Verbatim Record of the Proceedings; of the Temporary National Ecoiioniic Comir 
Volume XI, No. 6, January 2."', 11)40. pa^es 240-241. (Mr. Murray's footnote.) 

' See '•ExhiMt No. 24S6," .supra, p. 16486. 

* See "Exhibit No. 2488," supra, p. 16488. 



16492 CONCENTRATION OF ECONOMIC POWER 

or from 66.8 cents per hour in August 1936, to 84.3 cents per hour in 
September 1937 (both months being comparable in production). 
During this same period total monthly pay rolls rose in proportion to 
average hourly earnings — a monthly pay roll rise of a little more than 
$14,500,000, or from $52,200,000 to $66,800,000. 

This was a substantial contribution to national purchasmg j^ower 
of which the Steel Workers Organizing Committee has been justly 
proud. Having won an increase of $14,500,000 in total monthly pay 
rolls, however, the Steel Workers Organizing Committee has been 
helpless to prevent the steel industry from taking it away through 
technological improvements. And that is just what has happened. 
By September 1939, 2 years later, when production returned to the 
same level of September 1937, total monthly pay rolls failed to like- 
wise return to the level of September 1937. In fact, total monthly 
pay rolls in September 1939, were virtually what they had been before 
the 26-percent increase in average hourly earnings, or $52,900,000. 
Thus from August 1936, before the increase in hourly earnings, to 
September 1939, total monthly pay rolls merely increased by 1.2 per- 
cent, or to the same extent as production. In other words, despite 
the increase in hourly earnings, the benefits of technology are not 
being passed on to steel workers in higher total monthly pay rolls. 
The new steel technology has not added to national purchasing power 
through increasing the industry's monthly wage bill ; but, on the con- 
trary, has ctit down the national purchasing power of consumers to 
the extent of a 9-percent increase in finished steel prices from 1936 
to 1939.1 

At first glance, it would seem impossible to maintain the same 
monthly pay roll for comparable pi eduction after hourly earnings 
had been raised by more than one-fourth. A close look at the em- 
l^loyment situation August 1936, September 1937, and September 19.39 
(all 3 months being comparable in production), however, shows how 
increased hourly earnings have failed to raise total pay rolls. 
Greater productive efficiency, resulting from technological improve- 
ments, reduced the number of man-hours worked in the steel indus- 
tr}' and the number of steel workers employed. Consequently the 
higher hourly earnings are being paid to fewer steel workers, with 
the result that total pay rolls have remained stationary. 

I The Steel Workers Organizing Committee reduced the maximum 
workweek in the steel industry in 1937 from 48 to 40 hours. As a 
consequence, 58,690 more workers were required to produce an equiva- 
lent tonange in September 1937 than in August 1936. This repre- 
sented a substantial contribution to reducing unemployment. But it 
did not stick because of technological advances. The number of 
wage earners in the 2-year period from September 1937 to September 
1939 dropped from 503,000 to 415,000 — an elimination of more than 
88,000 workers — or a decline of 17^/^ percent in the number of steel 
workers needed to produce an equivalent tonnage. Compared to 
August 1936, when maximum hours were 8 per week higher, the 
number of steel- workers in September 1939 was ^0,000 less. 
(Senator O'Mahoney assumed the chair.) \ 
The Chairman. Is tliere any dispute about those figures? 

ii-on ana Stoel. January 1940, National luuustrial Conference Board, p. 6. (Mr. 
Murray's footnote.) 



CONCENTRATION OF ECONOMIC POWER 16493 

Mr. Murray. There may be, I don't know. I suppose there might 
be. Mr. Hook evidently yesterday said something that would run 
quite contrary to what I am saying here today. 

The Chairman, What is the source of your figures? 

Mr. Murray. The source of our figures is the facts, the records of 
the industry, the American Iron and Steel Institute, the National In- 
dustrial Conference Board, and a complete record of the employment 
figures taken from almost every plant in the United States. 

Representative Williams. As I remember, Mr. Hook said the in- 
crease during perhaps a period of 10 years for the entire industry had 
been 117,000. 

Mr. Murray. Number of employees. 

Mr. Pike. That was '26 to '37. 

Mr. Murray. Well, unfortunately Mr. Hook stopped with your com- 
mittee in the year 1937, when, as I have already stated to this com- 
mittee, the impact of these technological improvements was beginning 
to drive right into the heart of the industry and force people onto the 
streets. 

Dr. Andersox. Let me read from Mr. Hook's statement and ask your 
clarification or criticism for the record: 

But for the steel industry as a whole we had an actual increase of working 
forces of 117,000 men from 1927 to 1937. Total employment in the steel industry 
increased from 427,000 men in 1927 to 544.000 in 1937, according to the figures of 
the United States Census, an increase of 27 percent, while in the meantime the 
population increase had been but 11.2 percent. 

Now you are discussing here what ? Are you discussing the working 
force available for labor in steel or the actually employed labor forcel 

Mr. ISIuRRAY. I am discussing the actual number of people employed 
in the industry in those years. 

Dr. Anderson. But Mr. Hook was discussing the available labor 
force employed and unemployed. 

Mr. Murray. Well, of course, I assume it is taken for granted there 
are 10 or 11 million people who are available for work in the country 
who are idle today and can't get jobs. 

Mr. Pike. There is not much difference in the figures. You had 
503.000 in 1937 as against 530,000-odd. 

Dr. Anderson. The other difference to be noted, if the first is not a 
difference, is that you carry your figures on through 1939. He stops 
at 1937, as you indicated. 

Mr. Murray. That is right. 

Dr. Anderson. If you had stopped at '37 do you presume you would 
have shown the increase of 27 percent in figures? 

Mr. Murray. I don't know. I haven't prepared a statistical survey 
of the situation from '27 through. 

Mr. Ruttenberg. There isn't any basic controversy about the in- 
crease in total employment from 1927 to 1937. Mr. Murray did not have 
an opportunit}' to hear the information presented yesterday by Mr. 
Hook and he was not here when that part was presented. It brought 
us up to 1937. Our information substantially is the same, showing 
a tremendous rise in employment from '36 to '37. It is since 1937 
that the high cost obsolete hand mills have been abandoned in large 
numbers in the industry. From 1937 through 1939 employment has 
dropped and the impact of these 27 continuous strip mills is observable 



16494 CONCENTRATION OF .p:conomic power 

now in the drop, and there is no controversy or conflict in the figures; 
merely, these figures bring us up to date through 1939, whereas Mr. 
Hook left off in 1937 when employment was exceptionally high and 
before the total impact of automatic strip mills had been felt in the 
industry. 

Senator King. I take it it is your contention that if Mr. Hook had 
brought it down to date, to 1939 or the beginning of 1940, his figures 
would have been comparable to yours. 

Mr. RurrENBERG. Yes. These fimires are from the American Iron 
and Steel Institute, sheets 1 and 2, and are supplied to all members of 
the institute, and they cover more than 90 percent of the industry. 

The Chairman. Sheets 1 and 2, you said ? 

Mr. RuTTENBERG. Ycs.; that is in "Exhibit No. 2484" where we 
submit a complete explonation of the source and method of analysis. 

The Chairman. Sheet. " and 2 of what ? 

Mr. RuTTENBERG. The American Iron and Steel Institute. 

The Chairman, Of what document? Name the document. 

Mr. RuTTENBERG. It is described in "Exhibit No. 2484." It is 
known as the American Iron and Steel Institute, New York City, 
statistical sheets 1 and 2, which are distributed to companies in the 
steel industry which supply data to the American Iron and Steel 
Institute. 

The Chairman. Those sheets were issued as of what date ? 

Mr. RuTFENBERG. They are issued monthly. 

The Chairman. The particular ones you quoted from were issued 
when? 

Mr. RuTTENBERG. Periodically each month. 

The Chairman. So this is a composite figure from sheets 1 and 2 
issued monthly over the period included in this survey. 

Mr. RuTTENBERG. YcS. 

STEEL EMPLOYMENT IN 192 9 AND 1939 

Representative Williams. According to your survey now let's have 
the plain statement, if you can make it, as to whether or not there are 
more men employed in the steel industry now, say in 1939, than there 
were in 1927. 

Mr. RuTTENBERG. The actual figures we have further on in Mr. 
Murray's statement; he goes into the year 1929 as compared to 1939, 
and during that period of time total employment was virtually the 
same. The American Iron and Steel Institute reports total employ- 
ment for 1929, the average for the year, as 419,500 employees. They 
report the average annual employment for 1939 at 423,000 employees. 
In other words a total employment in '39 was substantially the same 
as in '29, despite a drop of 36 percent in the average hours worked per 
week in the respective years. 

Repiesentative Williams. Right in that same connection have you 
the unit output of the steel industry ? 

Mr. RuTTENBERG. Yes. 

Representative Williams. What is it, '29 and '39 ? 

Mr, RuTTENBERG. The per-unit output, the figures of the American 
Iron and Steel Institute in "Exhibit No, 2485" only go I ick to 1933, 
and we have that here, showing how many man-hours are worked to 
produce each ton of ingots. As Mr. Murray observed in his state- 



CONCENTRATION OF ECONOMIC POWER 16495 

ment, the drop from 1936 to 1939 was 21.4 percent, or froni 18.7 to 
14.7 man-hours per ton of ingots produced. 

Kepresentative Williams. What I am trying to get at is what the 
total output was. 

Mr. RuTTENBERG. The total actual output in the month? 

Representative Wilijams. The total actual output of '29 compared 
with '39. 

Mr. RuTTENBERG, The output of 1929 was in excess of 1939. 

Representative Williams. Now, let's have the figures, if you have 
them. 

Mr. RuTiENBERG. I don't have them immediately at hand, but we 
have comparable production jBgures for these months that Mr. Mur- 
ray has explained on these charts. 

Representative WyxiAMS. That chart doesn't go back to '29, does it? 

Mr. RuTTENBERG. No ; it goes to '36. 

Representative Williams, \\niat I am trying to get at in my own 
mind is the number of men that were employed in '29 compared with 
'39, and also the output of the industry for the same period of time. 

Mr. RuTTENBERG. The output — I have just given the employment 
for those 2 years; the output for 1929 wa3 greater. I can recall, I 
think, there were 54,000,000 tons produced in '29 ; '39 was several mil- 
lion tons below that, less than 50,000,000 tons. 

The Chairman. So that the output has been decreased? 

Mr. RuTTENBERG. Yes. 

The Chairman. And the figures on total employment that you gave 
were practically tlie same, I understood you to say ? 

Mr. RuTIENBERG. YcS. 

The Chairman. That is in terms of men, but that figure does not 
reflect the actual condition because of the change in the number of 
hours worked per man ? 

Mr. RjTTENBERG. Precisely. 

The Chairman. Is that right? 

Mr. RuTTENBERG. Precisely so. 

The Chairman. Now, could you prepare a statement for a table 
which will give these figures which Congressman Williams has asked, 
so they would appear in the record? 

Mr. Murray. We would be delighted to furni3h you with those 
figures. 

Dr. Anderson. Mr. Chairman, I have them here, handed to me in 
Monthly Labor Information Bulletin of the B. L. S. Production in 
1929 was 54^00,000 tons ingots; 1939, 45,800,000 tons ingots; emplov- 
ment in the 2 years, 419,000' workers in '29; 415,000 workers in '39. '^I 
think that answers the Congressman's question. 

The Chairman. Proceed, then, Mr. Murray. 

Mr. Murray. Measured in man-hours the drop in employment is 
more pronounced. From August 1936 to September 1937, man-hours 
rose 1 percent. But from September 1937 to September 1939 man- 
hours declined 2I1/2 percent, from 79.000,000 to 62,000.000 man-hours— 
a drop of 17,000,000 man-hours in the short space of 2 years. 

Briefly summarized, the period from August 1936 to September 
1939 shows that the steel industry, through the installation of techno- 
logical improvements had done the following: 

1. Maintained the same labor cost of production despite an in- 
crease of more than one-fourth in hourly wage rates. 



16496 CONCENTRATION OF ECONOMIC POWER 

2. Eliminated $14,000,000 from the total monthly pay envelopes 
of the steel workers from 1937 to 1939. 

The Chairman. I will have to interrupt you because I am now 
examining the chart from the B. L. S. to which Dr. Anderson called 
attention. This shows, with 1929 as a basis, a production of 54,300,- 
000 tons ingots, which is designated 100 percent. A total employ- 
ment of 419,000 workers designated 100 percent, and weekly pay rolls 
amounting to $14,060,000, which is also designated as 100 percent. 
So the figures for 1929 represent a 100-percent base of production, 
employment, and pay roll. In 1937 the production was 91 percent 
of 1929, but employment was 120 percent, a very great increase ; and 
weekly pay rolls amounted to 112 percent, an increase of 12 percent. 
In 1938 production had fallen off to 51 percent of 1929, employment 
to 88 percent of 1929, and pay rolls to 83 percent of 1929. Now as 
to 1939, production amounted to 45,800,000 tons ingots, which was 
84 percent of 1929. The workers numbered 415,000, or 99 percent, 
and the pay roll $12,410,000, or 88 percent, so we have this conclu- 
sion, that in 1939 in the steel industry, though the production had 
fallen off by 16 percent, the employment had fallen off only 1 percent 
and wages had fallen off 12 percent. 

Mr. Murray. That is a very good analysis and in substance sup- 
ports the contention of the organization, my own organization, with 
relation to 

The Chairman (interposing). But it indicates, you see, that it 
required more persons proportionately to produce the output in 1939 
than it did in 1929. 

Mr. RuTTENBERG. I think there is a footnote. Senator, that ex- 
plains that chart, at the bottom of the chart in connection with the 
comparison of j'our drawing. 

The Chairman (reading) : 

These data presented for all manufacturing industries combined and for a 
few selected industries are not suitable for use in measuring changes in labor 
productivity in these industries. 

Well, of course, that is one of the difficulties I am constantly find- 
ing about statistics. The experts come in here with statistics and 
after you have read them, then there is a footnote in small type which 
savs, "Pay no attention to them." 

IVTr. Stern. Would. you mind reading the next sentence? It ex- 
plains why. 

The Chairman (reading) : 

Labor productivity is generally measured in terms of output per man per hour. 
The figures of employment given here cannot be used as an indication of actual 
man hours worked because they include total as well as part-time employ- 
ment and the ratio between the two varies greatly from industry to industry, 
and from month to month in the same industi-y- Pay rolls are a better criterion 
of man hours worked, but they are greatly affected by changes in the hourly 
earnings. Until more precise information is available on actual man hours 
worked in the separate industries land a better method is devised to measure 
changes in industrial output, studies of changes in labor productivity from 
such data as are presented here are bound to be inconclusive and at times 
even misleading. 

Dr. Anderson. Mr. Chairman, to protect my profession, I would 
like to comment that I didn't read the last section of that chart in 
presenting the data to you for the very reason that you have now 
discovered, and furthermore 



CONCENTRATION OF ECONOMIC POWER 16497 

The Chairman (interposing). You have been holding out on me? 

Dr. Anderson. I was holding out for that very reason, because it 
is very plain we do not have the adequate body of data to do the thing 
attempted in the last part. 

The Chairman. Of course, one of the purposes of this hearing is, if 
possible, to develop statistics upon which all can agree. 

Dr. Anderson. And I am only sorry that Mr. Hinrichs and Mr. 
Lubin are not here because they are responsible for this document, 
and I know they would be the first to tell you that one of the great 
needs in the United States is an adequate body of data, of factual 
material upon which we can actually build national policies; and that 
depends upon many developments, including an adequate budget for 
the Bureau of Labor Statistics. 

The Chairman. I have heard that story on the Appropriations 
Committee many times and the next .time I hear it I am going to have 
some of these charts with me and find out why we can't get accurate 
information. 

Mr. Murray, You see, Mr. Chairman, the best answer — and it 
doesn't require the effort of any statistical expert to get the answer — ^is 
to be found in the men that are walking the streets. 

The Chairman. I think you are quite right about that. 

Mr. Murray. That is the answer. 

The Chairman. No matter what increase of production we show. 

Mr. Murray. I just don't care how much, industrialists or any 
others care to indulge in the magic of figures about these things. I 
am living among steel workers. I visit their homes. I talk to them. 
I meet with them. I really live with them. I know the conditions. 
Mike Russell appeared before the committee today as just one of 
5,000 idle people in one community in the city of New Castle. I 
coould take this committee to Martins Ferry, Ohio, to Mingo Junc- 
tion, Ohio, to Elwood, Ind., to Monessen in Pennsylvania, to Brad- 
dock, to Duquesne, to Homestead, and there are the figures, but they 
are the figures of human beings walking the streets out of jobs. 

Now there just simply isn't any statistical set-up that can deny 
that sort of a situation. It is there. 

The Chairman. Well, there were statistical set-ups in some of the 
columns just a few weeks ago which undertook to prove that there 
were only about 2,000,000 persons unemployed now, in the entire 
Lountry. 

Mr. Murray. Of course, Dorothj'' [Thompson] doesn't work in a 
steel mill. Now with your permission, Mr. Chairman, I would like 
to continue here. 

increase in production from 1929 TO 1939 

Mr. Pike. Mr. Murray, I think that question of Congressman Wil- 
liams was wpII answered in your chart, "Exhibit No. 2483," which 
you really didn't call much attention to. 

It happened at the end of 1929 and end of 1939 the pay rolls are 
almost exactly the same per ton, but they certainly wandered all over 
the place in the 10 years intervening. The man-hours you show most 
graphically in the last 2 or 3 years. 

Mr. Ruttenberg. This measurement by the National Industrial 
Conference Board was made in conjunction with the American Iron 



16498 CONCENTRATION OF ECONOMIC POWER 

and Steel Institute and it shows a progressive decline in man-hours 
per ton of output for 1929 on down through 1939, or a drop from 
approximately 82 in 1929 down to 64 in 1939, and this is the statistical 
chart that shows the story that Mr. Murray has been telling in human 
terms, existing in these various towns he has mentioned. It is the 
only one on a national basis that exists anywhere, so far as we are 
able to determine. 

The Chairman. Now, according to this chart, the average was the 
condition that existed in 1932 ; that is your base. 

Mr. RUTTENBERG. Right. 

The Chairman. That is 100 percent, and it shows that in 1932 the 
peak of man-hours was reached at 110; that it has fallen off pre- 
cipitously since then until in 1934 it was below 85. 

Mr. Pike. Below 65. 

The Chairman. In 1934 it was below 85. In 1935 it was about 82 ; 
in 1936 it was just below 80; in 1937 it was at 75 ; showed a slight in- 
crease in 1936 ; and in 1939 had dropped to below 65. In other words, 
in 1939 in terms of man-hours the record was less than 65 percent of 
what it had been in 1932 and that, I take it, can be regarded as a more 
accurate representation of the facts than the actual number of persons 
employed. 

Mr. RuTTENBERG. Precisely. 

The Chairman. Because the persons employed may not be working 
as many hours as they were in previous years. Is that your point of 
view? 

Mr. Murray. That is right. 

The Chairman. And this chart from which I have been reading 
was prepared by the National Industrial Conference Board on the 
statistics gathered by the American Steel Institute; is that correct? 

Mr. RuTTENBERG. On statistics gathered jointly by the Conference 
Board and the American Iron and Steel Institute. 

The Chairman. Now neither of these institutions is a C. I. O. 
affiliate? 

Mr. RtriTENBERG. Not so far as we are aware. 

Mr. Stern. For the sake of the record, ihe chart refers to man- 
hours per ton, not to the man-hours worked. It is the time the labor 
time consumed to produce a ton of product. It isn't total man-hours 
worked. 

The Chairman. That doesn't tell the story of employment, either, 
then. That doesn't tell our employment story at all. 

Mr. RuTTENBERG. This tells the employment story precisely, I 
think. It shows the man-hours per ton. "When you referred to 
man-hours per ton going away up in 1932 that was a reflection of a 
low operation, and as operations become on a comparable basis in 
'39 you have your precise number of hours of men you had to work 
to produce a given ton of output, a'^id that measures progressively 
the fewer hours of work required to produce the same output. 

The Chairman. That is right, but when you get to that statistical 
and expert formula you are getting away from the human problem 
in which I am particularly interested anrl trying to develop the fact. 
I am sorry, Mr. Murray ; if you will proceed. 

Mr. Murray. I am glad that you clarify those things. 

3. Raised product'v^ efficiency by one-fifth. 

4. Displaced 30,000 stee^ workers. 



CONCENTRATION OF SOONOMIC POWER 16499 

5. Increased finished steel prices 9 percent. In other words, the 
steel industry is able to produce the same amount of steel with 
30,000 fewer workers. The steel workers who are currently em- 
ployed are receiving more than 26 percent higher wages per hour, 
but at the expense of 30,000 steel workers who have been displaced 
and are receiving no wages from the steel industry. And the steel 
workers still attached to the industry are idle one-fifth to two- 
fifths of the year, because the increased productive efficiency enables 
them to produce all the steel consumed each year in three-fifths to 
four-fifths of the year. 

Now with your permission again, Mr. Chairman, I would like to 
dispense witli reading the next 4 pages, and have them placed in 
the record. 

The Chairman. All right, it will be included in its regular order 
in your printed statement. 

(The material referred to appears below:) 

Needle.ss to add, if the Steel Workers Organizing Committee had not raised 
wage rates and lowered weekly hours during this 4-year period, 1936 through 
1939, the. situation would be much worse, than it is today. As I have previously 
noted, the automatic strip mills were introduced into the steel industry before 
the birth of the S. W. O. C. The increase in output per man-hour, the 
reductions in pay rolls and employment, and the displacement of workers was 
virtually an accomplished fact before the steel workers were successful in 
organizing their union. Therefore, if the steel workers had not organized, 
as they did, in 1936 and 1937, wage rates would not have been increased to 
the extent that they were, nor would the maximum hours per week have 
been correspondingly reduced. Consequently, the net contribution, after 3 
years, of the S. W. O. C. has been to prevent — 

1. The reduction of the total monthly pay rolls of the steel industry by 
more than V^ the amount of the increase in hourly earnings. 

2. The permanent elimination of 58,000 steel workers from their jobs, or the 
difference in the number of workers required to produce an equivalent tonnage 
on a 40-hour week as compared to a 48-hour week. 

In other words, the S. W. O. C. has been the only cushion to the devastating 
effects of the new steel technology. S. W. O. C. raised monthly pay rolls by 
more than $14,500,000 a month for a period of a couple years. Technology 
eliminated almost all of this increase. But S. W. O. C. stopped technology 
from reducing total monthly pay rolls by one-fourth. S. W. O. C. saved the 
jobs of over sr* ( steel workers. If S. W. O. C.'s contribution had not been 
made, there Nvould be today 88,u00 displaced -steel workers instead of 30,000, 
and instead of the steel industry's contribution to consumers' purchasing 
power remaining virtually the same, it would have been lowered by more than 
25 percent 

The 10-year employment record of the steel industry, from 1929 through 
1939, shows the extent to which technology has eliminated workers. The 
American Iron & Steel Institute reports an average of 419,500 wage earners 
in 1929, as compaied to 425,000 10 years later in 1939.' As I have noted, in 
1937 considerably more workers were employed as a result of the shorter 
workweek instituted then, but they mostly have been eliminated by ttvhnology. 
Thus in 1939 the number of wage earners was only 5,500 more than in 1929, 
or a rise of l%o percent in 10 years. But during this 10-year period average 
weekly hours declined from 55 to 35 a week, or 36 percent. Thus, instead of 
more men being employed to get out the same tonnage in ^'he shorter week, the 
number of wage earners has remained virtually stationary. In presenting in- 
formation to this committee the United States Steel Corporation, for its own 
operations, computed the number of wage earners that would be required 
Curing the thirties on the basis of prevailing weekly hours in the year 1929." 

1 steel Facts. February 1940, American IroD and Steel Institute, pages 2, 3, and 4 
(Mr. Murray's footnote). 

^TNEC 'Exhibit 140"J," Actual Number of Employees And Number That Would Have 
Reen Re(iuirod on Basis of li»i;9 Hours Per Week, United State^■ Steel roriwratlon ,ind 
Subslaiaribs {WIt Murray's footnote). 



16500 CONCENTRATION OF ECONOMIC POWER 

The corporation did this by multiplying the actual number of employees 
in each year or month by the number of hours worked per week during the 
period and dividing by the number of hours worked per week during the year 
1929. 

By this method we find that on the basis of weekly hours in the year 1929, 
steel industry in 1939, the year just past, would ha^e employed only 270,000 
wage earners. This represents the elimination of» 150,000 wage earners, or 
a decline in employment of 35 percent. In other words, if reductions in the 
maximum hours of work per week had not been effectuated from 1929 to 
1939, 150,000 steel workers conceivably would have been displaced in the past 
10 years. In addition, nothing has been done to expand steel employment, 
which is today at virtually the same levels as 1929. It is plainly observable, 
therefore, that technology has been at .the root of unemployment since 1929, 
and since that time the steel industry has failed to give employment to young 
workers becoming of employable age without displacing older workers. On a 
net b^sis, the steel industry, the wealthiest in the country, has failed to 
absorb in its working force any of the increase in employable workers resulting 
from our rising population in the last decade. As a matter of fact, as I noted 
earlier in my statement, more than 40,000 steel workers now attached to the 
steel industry are scheduled to be displaced by the automatic strip mills. You 
will recall I showed by actual figures that 38,470 of the 84,770 workers 
scheduled to be eliminated by the strip mills have already been laid off per- 
manently in the past 10 years. Therefore, the steel industry has failed in both 
respects; it has not absorbed any new workers, and secondly, it will soon be 
employing fewer workers than in 1929. 

Dr. Anderson. There were no exhibits? 

Mr. Murray. None that I know of in thr-t whole thing. 

INTERINDUSTRY COMPETITION 

Mr. Murray. The new steel technology is not creating new jobs 
elsewhere to compensate for the jobs directly eliminated in the steel 
industry. The automatic strip mill, for example, instead of adding 
to total employment by creating new industries or expanding old 
industries to offset its devastating effects in the steel industry, is 
robbing jobs from old-established industries. The new jobs created 
through the development of new industries utilizing the automatic 
strip mill output, or through the expansion of old industries using 
the automatic strip mill output, are virtually canceled out. A major 
strip mill product, for instance, is tin plate. A new use developed for 
tin plate in recent years has been to pack beer in tin cans. But beer 
cans, in turn, mean fewer glass bottles and other containers, and 
correspondingly less employment in these lines. 

Sheet steel is another major strip-mill product, and a new outlet 
is being developed for sheet steel in the plumbing-fixture industry.. 
But this inevitably means the displacement of workers now employed 
in foundries producing cast iron enameled plumbing fixtures. An- 
other outlet for sheet steel, still in a very early stage, is prefabricated 
steel housing. 

The Chairman. But yesterday Mr. Hook presented a chart which 
showed various commodities which he said are now being manu- 
factured which were not manufactured previously, with the product 
of the old hand rolling mill. That may not have been true of each 
one of the items which he mentioned, "but among those industries 
which have come into existence and which are using tin plate, for 
example, was the electric refrigerator. Now the electric refrigerator 
obviously can be used in places where the old-style refrigetator, filled 
every morning by the iceman on his rounds, could not be used; 



CONOENTRATION OF ECONOMIC POWER 16501 

electric refrigerators are used in farms and ranch homes where it 
would have been impossible to get ice, where the cooling device was to 
stack things in a cellar. The development of the Delco system and 
of rural electrification has made possible the use of electric refrigera- 
tors where they never were before, and where they are not displacing 
any other commodity but are adding a new convenience to the home 
and for the benefit of the housewife. 

I think that we must acknowledge that there are new commodities 
coming into existence, don't you think, which do not displace ? 

Mr. Murray. Of. course, that is undeniably so. However, I am not 
prepared to say that I am in perfect accord with the idea that the 
mere introduction of an electric ice box has given more men jobs 
because ice boxes were substantially used in the larger centers of 
population in years gone by and did comprehend the employment 
of workers, particularly lumber workers, and the icemen that we 
hear talked about quite frequently are not in the picture any more. 
Of course in the rural districts where rural electrification ha% en- 
enhanced work opportunities and has perhaps put an occasional ice 
box in a farmer's home that was able to buy one, it has added some- 
thing to the comfort of that particular farmer and perhaps given 
another fellow a job. 

The Chairman. I may say the impression that has been made upon 
me in my study has been that undoubtedly advancing technology 
creates many new jobs. At the same time it undoubtedly displaces 
many workers, and the problem is the human problem, the absorption 
of the particular person who is displaced. 

Now you brought your human exhibit here this morning- in the 
person of Mike Russell. He was displaced. Some new ]ob may 
have been created in some other and distant town, but it isn't a job 
for him. He must then depend upon the contribution of the Federal 
Government through W. P. A. appropriations to provide a most 
meager income for his family, and it is how we are to take care of 
the particular person who is displaced that to my mind is the most 
pressing question in this whole problem. Do you agree with that 
statement ? 

PROBLEM OF NEW ENTRANTS TO LABOR FORCE 

Mr. Murray. Oh, in substance I do. I think that it is all right, 
Senator; yes. Of course, it isn't merely a question of absorbing peo- 
ple who are actually displaced by new technological changes. That 
isn't the sole factor that disturbs this Nation or upsets our economy. 
It is the very definite inability of American enterprise and American 
industry to give employment to the newer generation that is coming 
along. When I talk of 30,000 ste<el workers being definitely thrown 
out in the streets during the past 3 years I am merely talking about 
people who had jobs in this industry in 1936, but necessity compels 
me to think about these younger people who have been pouring out 
rf our schools and growing up and who are physically fit, wondering 
what the great captains of industry are going to do about them. 

I know the steel industry isn't going to do anything about them, 
unless there comes into their hearts and their souls and their minds 
the consciousness that there are some definite social responsibilities 
tv^ot run beyond the payment of ordinary dividp^ds to stockholders. 



16502 CONCENTRATION OF ECONOMIC POWER 

The Chairman. Well, could the steel industry, or any industry by 
itself, meet this problem ? 

Mr. Murray. No ; I don't say so. I think that in all fairness to 
any industry ; I don't say it is a one-industry problem. 

The Chairman. It is a national problem? 

Mr. Murray. It is a national problem. I merely use the industry 
as one of many industries where ownership, management, have not 
indicated to me, and so far as I am aware, have not indicat<^d to gov- 
ernment any desire to do anything about it, excepting that the new 
technology produces new enterprises and perhaps m the days to come 
will give work to the coming generations, but that kind of an attitude 
has not been fruitful of any results during the past 11 years. Eleven 
years ago we heard that, 10 years ago, 9 years ago, 8 years ago, and 
today one of America's most distinguished leaders in the field of busi- 
ness, represejiting a great body of organized wealth and business in 
this country, appears before this committee and says there is nothing 
to be worried about, th-at the newer technology creates new enterprise. 

My God ! Ten years ago we were told that — 11 years ago. I 
believe in the introduction of new enterprise — I hope some day it 
will come. Mr. Hook perhaps could lecture this committee about 
high taxes, free enterprise. I am here not to lecture but rather to 
persuade and plead with and talk to this Nation through the medium 
of this committee about our Government and our industries in this 
country and labor getting their heads together and doing something 
to save this Nation of ours; to save these institutions of ours in this 
country; to save this form of government by providing this much- 
needed employment to these idle people. It has just simply gone 
beyond the stage of guessing any more about it. I would like, Senator, 
and this isn't said disparagingly about you, either, because I have a 
great fondness for you and you have been doing a great work over 
here, given ^eat study to it; I haven't been able to find any indus- 
trialist in this country that is willing to offer any solution, and I can't 
find the politicians that will do it because the proposition doesn't seem 
to have, in the language of the streets, any political sex appeal; it 
doesn't seem to be a very good vote getter ; at least that is what they 
think. . And as one layman — and I am a very ordinary layman, hum- 
ble in spirit, who wants to do the right thing — I think our Federal 
Congress should lead the way. 

I think the President of the United States should be asked, ir 
the form of a congressional resolution, to draft into public servict 
some of the important men in this country and tell them to get tc 
work for 6 months, a year, yes — ^however long it may be — to settle 
this problem of unemployment in this country, because I get over my 
desk — I represent half a million steel workers — every morning pleas, 
prayei-s, from a lot of people in this country, and there isn't a single 
solitary thing that I can do to help them; I can't do anything. I 
represent a great big union. Well, I am utterly helpless because there 
is evidence of a lack of desire on the part of government, on the part 
of business, to be cooperative in providing the proper kind of solution 
for this situation. 

The Chairman. I am glad you have made that statement, Mr. 
Murray. I feel, from my own experience, that much of what you 
have said is true, but I can tell you this: since the study of this 



CONCENTRATION OF ECONOMIC POWER 16503 

committee begjan, and that is considerably over a year ago, I have had 
occasion to talk with many business groups as well as with leaders of 
all other groups, and I have come to the very definite conclusion, and 
I take the liberty of conveying it to you, that a great majority of all 
the people in this country in every classifiication, whether they are 
industrial leaders or workers or farmers, want to see this problem 
settled and they are willing to settle it, and most of these, by far the 
most of them, express exactly the same thought that you have ex- 
pressed here, namely, that they want to save our form of government, 
our democratic institutions. I am sorry to say that there are a small 
percentage of persons on the two extremes who spend so much time 
calling one another names that the 95 percent of the people in between 
don't have very much opportunity to get their thought over. 

One of the hopes of this committee has been that it might prove the 
microphone, as it were, through which there could be conveyed to the 
country a sensibility of the necessity for cooperative and immediate 
action to put people to work in private industry so that the Govern- 
ment would not be under the necessity of continuing to expand and 
to grow and to apparently control things. I think we have both been 
a little bit off the direct subject. 

Mr. Murray. We are both getting a little bit sentimental. Now, 
with your permission, Mr. Chairman, and, of course, again reminding 
you of my request to include in the record, I should like to cooperate 
with the committee and expedite the reading of this paper and not 
read "Jobs Not Created Elsewhere," and continue -over to p. 41 
from 33. 

(The material referred to appears below:) 

It is estimated that a prefabricated steel house can be produced and erected 
with one-fourth of the labor required to build a house by conventional methods. 
But any such development on a large scale would cost the jobs not only of a 
great body of building-trades workers, but also of brick and clay, lumber, 
cement, and other workers now employed to produce building materials. 

The facts about our national economy attest that this vicious circle of tech- 
nological unemployment, as illustrated by the strip mill, is typical of technologi- 
cal developments in industry generally during the past decade. In the last year 
of the thirties production reached the levels of 1929 and exceeded them, but total 
employment was below that of 1929 by 1,000,000 to 2,500,000 workers. In discuss- 
ing this question the Federal Reserve Board states : * 

"The larger total volume of output currently (January 1940) than in 1929 re- 
flects continued technical progress during the decade: the number of persons 
.employed, excluding those working on relief projects, is slightly smaller than 10 
years ago and those with jobs are working much shorter hours." 

Also in this period, the Board noted, ix)pulation has increased about 8 percent. 

The impact of technology on our economy during the 1930's has been one of the 
major factors retarding a sound recovery and sustained prosperity. The problem 
of this technology is twofold. 

First, ways and means must be found to provide for the men and women, 
their families, and their communities, who are the victims of technological change. 
Industry must assume social responsibility for the human beings who are dis- 
carded by new industrial techniques that industry owns, controls, and installs. 

Secondly, ways and means must be found to distribute the benefits of tech- 
nology to everyone in the country, to arrest the trend toward a declining working 
force, and to provide employment — the means of life, liberty, and the pursuit of 
happiness — to the large mass of men and women, one-third of whom are young 
men and women, who are today idle through no fault of their own, who are idle 
because of the failure of private industry to provide them with jobs. 



1 Federal Reserve Bulletin, February 1940, p. 81. 



16504 CONCENTRATION OF ECONOMIC POWER 

PEOVIDING FOB DISPLACED WOEKEBS 

Let us consider the first of these problems, the men and women who are dis- 
employed by technology. 

The cost of technology has always been enormous socially. With every tech- 
nical improvement since the beginning of the Industrial Revolution has comt. 
the displacement of labor, the upheaval of human beings, the dislocation of 
towns and entire regions. The history of technology in industry is a story of 
continual change in productive techniques and processes and the continual dis- 
regard of the human suffering caused by these changes. This disregard for the 
victims of technology has to be changed to solicitation for their welfare. 

A half -century ago puddlers produced the bulk of iron in the United States. 
Today iron puddling is almost a vanished art. Huge blast furnaces, costing 
from $4,000,000 to $6,000,000 each, produce the bulk of iron at present. Tech- 
nology has played a major role here. The number of blast furnaces^ since the 
World War has declined 49 percent, while the average annual capacity of each 
furnace has increased 131 percent. The National Industrial Conference Board ' 
reports : 

"The installation of labor-saving devices, such as contrivances for mechani- 
cal charging of raw material — ore, coke, and limestone — and machine casting 
of molten pig iron has increased the efficiency of blast furnaces. The effect of 
these changes and the increased size of the blast furnace units have had com- 
paratively little effect on the size of the labor force attending individual fur- 
naces because a substantial increase in the daily output per furnace has not 
required a proportionate increase in the amount of labor." 

Just as radically, open-hearth steel production has supplanted the bessemer 
steel process, which produced a majority of the steel at the turn of the century, 
but now accounts for less than 10 percent of the current steel output. In their 
wake the seamless-tube mills likewise have left many lap-weld and butt-weld 
tube mills obsolete and abandoned. 

The social costs of each of these major technological changes in the steel 
industry in the past half century have been incalculable in terms of human 
suffering and misery. The detailed sto y of each one is merely a repetition 
of the story of the automatic strip mill. My purpose in citing the history 
of steel technology during this period is to show that it is a continuous process, 
as regular as the flow of the Ohio River. It is always taking place. At this 
very moment several steel companies are installing continuous butt-weld pipe 
mills, whose impact on employment and wages is to reduce them further. 

A brief look at the continuous butt-weld mills gives an indication .of how 
severe the new steel technology is on employment and pay rolls. The 8-hbur 
crew on a hand butt-weld mill consists of 34 workers. On the continuous butt- 
weld mill an 8-hour crew consists of only 9 workers. The output per 8-hour 
period on the continuous mill is increased from 12 percent, for 1/2 -inch pipe, 
to 60 percent, for 3-inch pipe, or from 65 tons of ^-inch pipe to 73 tons, and 
from 84 tons of 3-ineh pipe to 135 tons. 

The labor cost per ton of 14-inch pipe is reduced 78 percent, or from $3.85 a 
ton on the hand mill to $0.86 per ton on the continuous mill. For 3-inch pipe 
the reduction is 84 percent, or from $2.98 a ton to $0.47 a ton. These figures 
are from the records of one of the companies operatiiig a continuous butt-weld 
pipe mill. I am submitting "Exhibit No. 2489," a comparison of the hand-mill 
and contmuous-mill crews, showing the wages of each member of the crew per 
hour and per day, and the 8-hour wage bill for the entire crew on each type 
of mill The labor cost per ton of pipe was computed on the basis of the 
production figures I have just cited, which were given to me by company 
oflScials as typical 8-hour performances. 

A continuous butt-weld pipe mill displages exactly 100 workers. A full force 
consists of 4 crews, or 136 workers on a hand mill. For the continuous mill the 
lull force consists of 36 workers, or a redaction of 75 percent. Continuous butt- 
weld pipe mills are a recent innovation. Republic Steel Corporation just put 1 
of these mills in operation last fall in Toungstown and is building another 1. 
Jiethlehem Steel Co. started operations on 1 in Sparrows Point a few months ago, 
and IS constructing another one. Another was announced to be built in Indiana 
Harbor last J uly, and Wheeling Steel Corporation announced construction of a 

fo^tn'^t''e.r'* ^*^^'' "^'^^ ^^""' ^''*'*'"^' Industrial Conference Board, p. 7. (Mr. Mn ray's 



CX)NC5ENTRATrON OF ECONOMIC POWER 16505 

continuous pipe mill for Benwood last November. The National Supply Oo. is 
building anpther continuous miU, having put 1 in operation a few years ago. 
In other words, a total of 8 continuous butt-weld pipe mills have been installed 
in the last. couple years or will have been installed by the end of this year. 

The combined net displacement of these 8 mills amounts to 800 pipe mill 
workers. Like the sheet and tin plate workers displaced on the hand-type mills 
by the automatic strip mills, these pipe mill men, in the main, are skilled workers. 
Thy have spent years acquiring their skills, which are no longer neededr and 
many of them are beyond the most favored age for hiring in the steel industry. 

This continuous displacement of workers by technology is an old story. It is 
going on in the steel Industry right this moment, and it will continue to. take 
place as long as leaders of industry are permitted to evade responsibility for the 
social consequences of the technology which they control. 

• I want to publicly inform the steel companies that are this minute installing 
continuous butt-weld pipe mills that the Steel Workers Organizing Committee will 
not stand for one single steel worker being thrown out in the street, without 
adequate compensation, as a result of the installation of these automatic pipe 
mills. I invite these companies to sit down at the conference table with the 
S. W. O. C. and work out, through the normal processes of collective bargaining, 
ways and means for taking care of the workers being displaced by the continuous 
pipe mills. This invitation Is also being publicly extended to all steel companies 
in connection with the installation of technological improvements in the future. 

I know of nothing more contemptible in public life than for industrial leaders 
to issue pronouncements that the workers they are throwing on the streets — 
workers they are displacing with new machinery — will some day be reabsorbed 
by private industry somewhere. This callous attitude toward human suffering 
is the cause of social upheavals, of the destruction of democracy that may trail 
In .the wake of technology unless the people vested with the control of t'KJhnology 
are made to assume adequate social responsibility for its consequences. 

Classical economic pronouncements about the automatic reabsorptlon of dis- 
placed workers by private industry, whether true in the long run or not, are just 
so much dribble to the men and women who are deprived of their accustomed 
way of making a livelihood. These pronouncements can be classified with the 
myths of the 1920's that no intelligent person can have faith in today, in view of 
the striking failure of our economy in the last 10 years to reabsorb the victims 
of technology. Something more than pronouncements of economic theory — in this 
instance, demonstrated fallacious — is needed. 

I join with Mr. Edward R. Stettinius, chairman of the board of the United 
States Steel Corporation,' in the idea he expressed In his lecture. Human Factors 
in Economic Progress: 

"When a whole community can stumble into despair with the stoppage of a 
single pay roll, it is seLf-evIdent that industry has fp^-reaching social implica- 
tions which should be matched by an equal sense of Social reponsibility. It is 
no exaggeration to say that one of the most Important functions of business 
administration, on the large scale, is the social function. Having helped. to 
create the modem society, the businessman will not be excused from the duty 
of coping with its problems." 

One of these problems of modern society is the displacement of workers by 
technology. I Invite the leaders of industry to cope with it, to put the idea 
expressed by Mr. Stettinius about Industry's social responsibilities into practice.. 

I wiU not be sidetracked in my efforts to prevent technology from casting 
workers out of our economic* machinery, by engaging In any debate on whether 
these workers will or will not find other jobs 5, 10, or 20 years hence. As a 
famous economist once said. In the long run we are all dead. The problem of 
the victims of technology is an immediate one. I say to the leaders of Industry 
keep your economic theories in textbooks. So far as the workers of this great 
Nation are concerned, they want to know only one thing — when do-they get 
jobs? When are they going to be protected from losing their jobs every time a 
new contraption or a new invention Is discovered? When are their children, 
the youth of this Nation, who are roaming the streets today, going to get jobs? 
This Is the question. This is the big problem of today. And I agree heartily 
with Mr. Stettinius when he says, "Having helped to create the modern society, 
the businessman will not be excused from the duty of coping with its 
problems." 



^ "Human Factors In Economic Progress," by Edward R. Stettinius, Jr., Alexander 
Hamilton Institute, New lork, pp. 5-6. (Mr. Murray's footnote.) 

124491 — 41 — pt. 30 21 



16506 CONCEN'J'UATION OF ECONOMIC POWER 

Here is the twofold problem of technological displacement and unemployment. 
Businessmen, leaders of industry, have to cope with it. The code of social 
responsibility for industry must be enlarged. Two decades ago industry as- 
sumed social rtsi)onsibility through workmen's compensation for the workers 
injured in mines, mills, and factories, and for the families of workers killed 
on the job. In the past decade industry has assumed some measure of social 
rt^ponsibility for workers who are too old to work, and for workers who are 
seasonally unemployed through old-age pensions and unemployment compensa- 
tion. In this decade another social responsibility must be assumed by industry. 
This responsibility is to workers who are technologically unemployed, thrown 
out of work by new machinery. 

By what right does industry assume the prerogative to say : "Here is a new 
machine. It will bring benefits to society. Therefore, it is installed." By 
what right does industrj displace workers, ruin communities, reduce consumers' 
purchasing power with technology before that technology can possibly bring any 
benefits to society as a whole? Only by the right made by power does industry 
bring ^bout such social liabilities before bringing about any social gains. Why 
should workers and their families be thrown to the wolves today, just because 
industry says it has found a new machine that will benefit society tomorrow? 
What if it fails "to benefit society? What if it does benefit society tomorrow? 
Today there are human beings that must be provided for. This is the crucial 
problem of technology. Technological unemployment is unnecessary. It must 
be eliminated. 

No longer can we afford, as a Nation, to set our eyes on that future when 
specific technological improvements will bring social improvements, while at the 
same time we fail to see the human misery wrought in our midst by these 
very technological improvements. The social cost of technology, as clearly 
demonstrated by the automatic strip mill in the steel industry, is greater than 
we can bear. Unless the social cost of technology is eliminated, it will drag 
us Into economic, social, and political ruin. 

The social cost of technology must be eliminated. No longer can we afford to 
wait for the economic benefits of technology to offset the tremendous social cost 
at its inception, because the social cost of technology for more than a decade has 
been far greater than technology's economic benefits. This social cost must be 
eliminated, or else technology will cease to be a boon to mankind. Industry must 
assume social responsibility for technological improvements, by seeing that they 
are introduced under conditions that stimulate instead of retard employment, to 
see that workers are not displaced, to see that towns are not reduced to ruin, to 
see that I^here is no immediate social cost in terms of displaced workers, impover- 
ished fairilies, devastated communities, and bankrupt regions. 

Dr. Anderson. There is an exhibit on page 36 to be included. 

Mr. Murray. Yes; if you please. 

The Chairman. That will be received. 

(The table referred to is marked "Exhibit No. 2489" and is included 
in the appendix on p. 17345.) 

Mr. Murray. I will conclude with the introduction of my recom- 
mendations. 

The Chairman. Very well. 

Mr. Murray. I want to discuss, briefly, practical ways in which in- 
dustry can assume social . responsibility for technological improve- 
ments. In many instances this can be done through the normal proc- 
esses of collective bargaining. Technological improvements should be 
introduced without workers having to pay for them through the loss 
of their jobs. This can be done through collective bargaining, in 
many instances, along the following lines : 

1. The workers to be displaced by technical improvements should 
be reabso^oed in the regular labor turn-over of the companies install- 
ing them. 

2. The workers to be displaced should be notified at least 6 months 
in advance. From then until they are^ finally displaced, they should 



CX)NOENTRATION OF ECONOMIC POWER 16507 

be given opportunities to learn how to do other jobs where openings 
develop periodically. Where necessary, expert vocational guidance 
and training should be provided for those workers who cannot easily 
adjust themselves to other jobs, 

3. Those workers for whom there are no openings when they are 
finally displaced should be employed in some capacity until regular 
.jobs open up for them. The wages paid those workers until they are 
placed on regular jobs should be charged to the original cost of the 
technological improvement. 

4. Displaced workers who suffer a reduction of 10 or more percent 
in their average daily earnings as a result of being absorbed on lower- 
paying jobs than their original ones should be paid a job compensa- 
tion of 3 percent of their earnings while in the service of the company. 

Mr. Pike. That would be total earnings. 

Mr. Murray. Up to the time they were demoted or given a job where 
a lower rate is being paid. 

The job compensation payments should be charged t6 the cost of the 
teclmological improvement. 

, 5. The displaced workers who, for various reasons, cannot be reab- 
sorbed in other jobs should be paid a dismissal wage of XO percent of 
their earnings for a 10-year period, but not less than $500 to those 
workers with less than 10 years of service. The dismissal wages shall 
be charged to the cost of the technological improvement. 

This plan will help eliminate the social cost of the technological im- 
provements. Jobs will be found for most of the displaced workers, 
and those who are not reabsorbed will be compensated, in part, for 
the loss of their jobs ; while tliose who suffer reductions in their earn- 
ings by being reabsorbed on a lower-paying job will, in part, be com- 
pensated for this. 

This practical plan is not offered as the final solution for all the 
problems incident to the installation of technological improvements. 
Instt;ad, I am offering these concrete suggestions for .practical con-~ 
sideration by the parties to collective-bargaining agreements in in- 
dustry; the objective being to eliminate the heavy social cost of 
technology. 

There is no reason why this plan cannot be adopted by management 
generally where collective bargaining is practiced. Collective bar- 
gaining in the basic industries, however, is practiced on a company- 
wide basis, and therefore cannot cope with large technological im- 
provements, like the automatic strip mill, that are industry-wide and 
national in character. Consequently, in the absence of universal col- 
lective bargaining, congressional regulation of the introduction of 
large technological changes is necessary. It is not my purpose to out- 
line in final detail such regulations. At this time I want merely to 
indicate broad general outlines. 

The objective of these regulations should be to eliminate the social 
cost of technology. This means that technological improvements 
should be installed at such times and under such conditions as not 
to displace workers, bankrupt communities, close up complete mills, 
and otherwise disrupt the social fabric of industrial districts. 



16508 CONCENTRATION OF ECONOMIC POWER 

PROPOSED REGULATION OF MECHANIZATION 

Mr. Murray. These regulations might take the following form : 

1. It should be compulsory for industry to pay adequate dismissal 
wages to all workers Avho are displaced as the result of technological 
changes. 

2. The Federal Government should conduct a large-scale vocational- 
training program for displaced workers w^ho are paid dismissal wages, 
so that they will be better adapted for other jobs in industry that thev 
might be able to secure, when their dismissal wages are exhausted. 
It is essential that labor should participate in the administration of 
such a vocational-training program. 

3. In addition to compulsory dismissal wages, other measures de- 
signed to have industry immediately reabsorb workers displaced by 
technological changes should be adopted. 

In connection with the proposal that congressional measures might 
be enacted to provide industry with incentives to keep workers affected 
by technological changes on the pay roll until they can be reabsorbed 
in the normal labor turn-over, I want to make a few general observa- 
tions. At the present time, for instance, when a technological im- 
provement is installed that displaces, say, 100 w^orkers, they are thrown 
on the streets. State^ relief has to be provided for them. They draw 
unemployment compensation benefits for a period of time. W. P. A. 
jobs have to be found for them. N. Y. A. and C. C. C. assistance 
has to be provided for their children. All this assistance industry 
has to pay for in the form of taxes. Here is an opportunity for 
industry to do something about* reducing its tax bill, about which 
it has been complaining. Instead of throwing these displaced workers 
on the streets every time a technological change is made, industry 
should plan technological changes in such a way that the w^orkers im- 
mediately affected are kept on the pay roll and eventually placed in 
regular positions in the normal labor turn-over. Thus the money 
that would otherwise have been paid to these displaced workers in 
relief grants, work-relief wages, and so forth, would be saved, and 
industry's overall tax bill would be accordingly reduced. 

It should therefore be the policy of the Federal Government to see 
that technological improvements are carefully planned and properly 
introduced by industry so that they do not displace regularly em- 
ployed workers. In this way the. men and women, their families, and 
communities who have been the victims of technological changes in 
the pa^t, would be provided for, and industry wotild asslime social 
responsibility for the workers, their families, and communities who 
otherwise would be discarded by new production methods and 
processes. 

These proposals are designed to prevent regularly employed work- 
ers from being added to the ranks of the unemployed, and thu3 only 
deal with part of the problem of technological unemployment. The 
other part of this problem — the major part of the problem of techno- 
Ibgical unemployment— is to find ways and means to distribute the 
benefits of technology to everyone in the country, to arrest the trend 
loward a declining working force, and to provide employment for 
the large mass of men and women who are today idle through no fault 
of their own, who are idle because of the failure of industry to provide 
them with jobs. 



CONCENTRATION OF ECONOMIC POWER 16509 

By making provisions to absorb displaced workers in the normal 
labor turn-over, idle workers and young workers becoming of em- 
ployable age, who would be absorbed in the normal labor turn-over 
if there were no displaced workers, remain unemployed. It is neces- 
sary, therefore, that proposals be adopted dealing with the major 
problem, which is that of finding jobs for workers who are presently 
unemployed and are not being absorbed by private industry because 
of the rapid strides of technological improvements. In connection 
with this larger problem, congressional measures might be enacted 
which are designed to — 

1. Pass on to consumers generally the economic benefits of tech- 
nological improvements whicn are not being passed on in large enough 
amount^ at the present time, or are being passed on too late to pre- 
vent our economic machinery from becoming jammed. 

2. The maximum workweek in basic mass-producing industries 
which are highly developed from a technological point of view should 
be reduced. The performance of the steel industry in the past 10 
years, as I have shown, illustrates the vital necessity for a further re- 
duction in the maximum workweek. At the same time the population 
of the country a^ a whole has increased approximately 8 percent. 
Thus, despite a decrease of more than one-third in the average work- 
week, the steel industry, the wealthiest in the Nation, has failed to 
absorb any of the net increase in employables resulting from our ris- 
ing population. With the present rate of technological change in the 
steel industry, in the course of a short period of time thousands fewer 
workers will be employed than at present, unless the maximum work- 
week is further reduced to the level of approximately 30 hours a week 
at prevailing earnings or more. 

In conclusion I want to refer to the proposal which I mentioned at 
the beginning of my statement for a national unemployment confer- 
ence, to be called by the President of the United States, of leaders 
of .Government, industry, labor, and farm groups. A conference of 
this description would obviously necessitate a broader discussion of 
our whole national economy, and encompass an exchange of ideas 
that might develop constructive proposals to which each of the groups 
represented in. such a meeting might subscribe. It necessarily would 
entail lengthy discussion that presupposes a healthy development of 
long-range economic planning. It seems to me that the suggestions 
which I have offered your committee could very well be made effective 
by the Federal Government, pending the outcome of the joint deliber- 
ations of the participants in the conference which I have suggested. 

That concludes my statement to you, Mr. Giairman, and added to 
the statement, as you will note, are a number of exhibits and a great 
deal of material which I would like to have in the record. 

The Chairman. The exhibits have been admitted as we went along. 

Dr. Anderson. The hearings for Monday begin with railroads, two 
successive days of railroad hearings Monday and Tuesday. The first 
witness is Mr. Pelley. 

The Chairman. Of the Association of American Railroads. 

Dr. Anderson. Mr. J. J. Pell^, president of the Association of 
American Railroads; Dr. J. H. Parmelee, Association of American 
Railroads; and presumably Mr. Norris, president of the Southern 
Railway, will present the data for railroads on Monday. On Tuesday 



16510 CONCENTRATION OF ECONOMIC POWER 

we will have Mr. George Harrison, president of the Brotherhood of 
Kailway Clerks, Mr. A. F. Whitney, president of the Brotherhood of 
Railroad Trainmen. 

The Chairman. When the committee recesses it will recess until 
Monday morning at 10:30. 

Before I go for a vote in the Senate, Mr. Murray, may I express my 
personal gratification at your presentation here today and the appre- 
ciation which is felt I know by all members of the committee. We 
were very glad to have you here and we feel that you made a distinct 
contribution to this study. It may be that some members of the com- 
mittee may desire to question you a little bit further, and I will ask 
Mr. O'Connell to preside. 

(Mr. O'Connell assumed the chair.) 

Dr. Anderson. I have a few questions that I think are of impor- 
tance, even though the hour is growing late. Mr. Murray, in your 
exhibits, you have a very important document concerning ghost towns, 
Exhibit 2478, which refers, as I take it, to New Castle, Pa., only. I 
wonder if you could describe for us what is occurring in this unusual^ 
phenomenon in industrial cities and towns of ghost towns caused by 
technological changes in steel manufacture. 

Mr. MuERAY. If I may be permitted, Mr. Chairman, to offer New 
Castle as a typical situation of a number of towns that are commonly 
referred to now in the steel industry as ghost towns, the city of New 
Castle has a population of approximately 50,000 souls. The commu- 
nity is one which was almost wholly dependent upon the steel indus- 
try, some 5,000 steel workers being employed. in recent years there at 
the Shenango and New Castle works of the United States Steel Cor- 
poration. A few years ago, approximately 6,000 were employed in the 
steel industry in those two works at New Castle. 

The employment of those 6,000 people, pay roll, earnings, cooper- 
ated toward the upbuilding of a very flourishing community — street 
railways, mercantile establishments, other small business enterprises 
which leaned rather heavily upon the local basic industry. Large 
municipal buildings, churches of all denominations, reflected the pride 
of these 50,000 people who had been living in this community down 
through the years. The decision of the United States Steel Corpora- 
tion, for business reasons, permanently to abandon the Shenango 
and New Castle works, immediately threw the entire working popula- 
tion of the city of New Castle out m the streets. That originally took 
place in November 1937 at New Castle, and later, in 1938, took place 
at the Shenango works of the same corporation. Since 1938 when 
the Shenango works closed down, 72 percent of New Castle's 50,000 
people are living on relief in one form or another. 

The investments of the people in that community that have grown 
up throughout the years have disappeared. The values of real estate 
have been completely dissipated and are gone. Civic bodies, political 
organizations, businessmen, leaders of its .various churches in that 
community, have had committees come ove'r to see me in Pittsburgh 
about what it was that we might be able to do to help them. I have 
conveyed them over to the offices of the Steel Corporation, with prayer 
on their lips that the Corporation might do something about reopen- 
ing those plants and producing work. 



CONCENTRATION OF ECONOMIC POWER 16511 

Mr, Pike. They might as well have put one of those strip mills back 
in that same town, mightn't they? Did you ever find out why they 
didn't? 

Mr. Murray. I don't know. 

Acting Chairman O'Conneix. But the strip mills which resulted in 
the closing of these mills were built in some place other than New 
Castle. 

Mr. Murray. I can describe that, of course. Only last week the 
leaders of business and the leaders of religion, the leaders of labor, the 
leaders in the field of politics, had a meeting in New Castle to see 
what they might be able to do through local incentive to promote local 
enterprise and at least give some of their people work. 

Now that is one town, the city of New Castle, 50,000 people. One 
fell swoop on the part of the Steel Corporation has created for that 
community the most despairing condition that I know of anywhere 
in America for such an extraordinarily lar^e number of people. 

The Steel Corporation has closed its Mmgo Junction plant down 
there close to Steubenville, Ohio. Mingo Junction is a. community of 
some 9,000 or 10,000 people. Business houses, churches, homes — tneir 
values have all been completely dissipated as the result of the decision 
of the Steel Corporation to close its Mingo Junction plant now. 

Martin's Ferry, the same ; the Monessen plant of the Steel Corpora- 
tion, the same ; the Elwood plant of the Steel Corporation in Indiana, 
the same. 

These ghost towns which have been created as the result of this 
mass laying off of people, mass discharge, thousantis of people, con- 
stitute a very, very serious problem, I have had their committees 
representing the city council, the local business organizations, come 
over here to Washington, journey down to the Department of Lf»bor, 
come over here to see their Congressmen; they have gone do^\li to 
New York to meet with the executives of this corporation to see 
what could be done about it. The reply of the corporation has always 
been that competition, new skills, new efficiencies, new tochnic^ues in 
production, have forced them to do the things which they are doing, 
Mr, Pike, That doesn't explain why they moved away, though. 
Isn't there a good supply of labor? What is wrong with the locality 
as the place to put a .-trip mill? Did they ever tell you that? 

Mr. Murray. Perhaps Mr. Ruttenberg can tell you what is wr?ng 
with the locality there. 

Mr. RuTTENREr.o. This question is partly tied up with the con- 
solidations. All these plants Mr. Murray has been mentioning were 
formerly part of the American Sheet & Tinplate Co., which was 
concentrated with the Carnegie-Illinois in 1936. 
Mr. Pike. That was all corporate fiction, 

Mr, Ruttenberg. With the abandonment of the American Tinplate 
plants, the products they produced, sheet and tin plate, are being 
coordinated with Carnegie-Illinois with its other organizations. . Con- 
sequently the Irvin strip mill, the most recent and largest in the 
industry, opened in 1938 by the United States Steel Corporation, is 
adjacent to the large byproduct coke ovens of the corporation that 
supply the gas that is used in some operations in Irvin. It is close 
to the plant that produces the slabs that are rolled into semifinished 
steel products at Irvin, and it is likewise located on the river, the 
Monongahela, and river transportation is available. 



16512 CONCBriTRATION OF EC50N0MIC POWER 

It is estimated that the cost of production in a strip mill at Irvin 
is approximately . $5 a ton cheaper than it could have been in New 
Castle because of the transportation to and fro of semifinished and 
finished products. 

Mr. Pike. They didn't make the ingots at New Castle ? 

Mr. RUTTENBERG. No. 

Acting Chairman O'Conneli.. It was the same reason that resulted 
in their determination to build the plant at Irvin rather than at, New 
Castle; in other words, it was purely a matter of business policy 
on the part of the company, and had to do with how efficiently they 
could do it. 

Mr. RuTTENBERG. It had to do with bringing their plants together. 
New Castle is an inland town and Mingo Junction and M^irtin's 
Ferry are along the river. 

Mr. Pike. They would save a heap by this move. 

Dr. Anderson. I would like to ask one or two questions more about 
the ghost town situation which you have so graphically portrayed. 
Is this ian inevitable accompaniment of mergers due to the tech- 
nological advance of the steel industry, as manifested in the con- 
tinuous strip-mill process? 

Mr. Murray. Well, it is a manifestation of what occurs when large 
consolidations are effected, and savings in producing costs, and so 
forth, result. I assume that the reason for the Steel Corporation's 
building of a tremendous continuous stripping mill at Irvin, near 
Clairton, was that it was good business on tlie part of the Steel 
Corporation from the standpoint of economics. The Irvin works 
gives employment to some 4,200, three shifts. These 4,200 men, plus 
the machinery which is provided for them there, are capable of pro- 
ducing a quantity of goods sufficient in size to meet the combined 
productive efficiencies of some 18,000 or 19,000 workers who were 
employed in those old hand-mills before the Irvin works was 
produced. 

Mr. Pike. That is almost entirely a new works, isn't it? 

Mr. Murray. -It is a new works. It went into operation in full last 
year. However, it isn't confined to the United States Steel Corpora- 
tion. 

Mr. Pike. Of course, not. 

Ml*. Murra^ I read into the record today where Republic has been 
doing it, Bethlehem has been doing it, and they have all been doing 
it from the standpoint that they contend it is good business practice. 

Mr. Pike. In Bethlehem, we might say Lebanon is practically dis- 
carded, or are you familiat with that? 

Mr. Murray. I know there have been continuous changes taking 
place in the closing up of certain mills in given plants, and the cen- 
tralization of their production facilities at certam other points, but 
the transportation that has taken place in steel ia extraordinary, and 
the impact of it has been felt very hard dijring the past 3 years. 

Mr. Pike. Yes ; it shows very clearly hdre. 

Dr. Anderson, fhat leads me to the point tl\at I wanted to get some 
informatipn on, namely, with this increasing tempo of mergers, some- 
how linkeJ with a different type of manufacture based on the new 
technology, is it your feeling that iiu)re or fewer ghost towns, can be 
anticipated in the immediate future f 



CONCENTRATION OF ECONOMIC POWER 16513 

Mr. Murray. I think we are safe to assume that there will be more 
^host towns. I didn't disclose the names of these 18 companies that 
T talked about here today, but I am prepared to give them to the com- 
mittee in confidence, and at least 10 of those companies are the only 
establishments in their communities. 

Dr. Anderson. And that means 10 ghost towns. 

Mr. Murray.' It means that there are 10 small communities that 
will be confronted with a state of distress akin to that prevailing 
in New Castle and elsewhere. 

Dr. Anderson. That leads me to the question as to whether you 
have a suggestion to add to your list of suggested things to be done 
with respect to social policy affecting gliQst towns. 

Mr. Murray. I have suggested that the matter of final detail with 
reference to the introduction of new machines in industry, and par- 
ticularly as those things relate to the regulation in a legislative way, 
is one that might very well be a subject of conference. I have sug- 
gested here that none of these things should take place in this 
country of ours without ample notice in the first instance, and then 
means of compensation provided for the directly affected communities 
and individuals. 

INDUSTRIAL COOPERATION IN^^TED 

Mr. Murray. I do think that unless industry moves to do some- 
thing about it cooperatively with labor, the only answer to the 
situation lies in providing proper legislative enactment here, the 
details of which I of course will be prepared to discuss with any 
congressional committee at the proper time. 

I might say here that our research forces at the offices of the Con- 
gress of Industrial Organizations are preparing a considerable amount 
of material to be presented to your committee at a later date upon 
the whole national economic situation, national industrial situation, 
and Mr. Lewis has asked me to come over here and present it for 
the C. I. O. at that time. No doubt that will encompass some other 
suggestions with relation to these legislative enactments about which 
I am talking here today. 

Dr. Anderson. In your contacts and deliberations and negotia- 
tions with management and industry, would you care to say whether 
there is a spirit comparable to the one that the Senator manifested 
today, and you, with respect to the need for an immediate attack- 
upon this problem? 

Mr. Murray. Well, in my confidential discussions with the mag- 
nates of industry — and I have many of them, dealing in a business 
way with our collective bargaining arrangements— there has been 
no disagreement with me that something will have to be done. They 
don't offer any particular remedy, but confidentially they are willing 
to indicate to me a desire to be cooperative at the proper time. But 
their fear lies evidently in the inability of any one industry to solve 
this problem by itself. 

I have talked to leaders of the National Manufacturers Associa- 
tion. Mr. Howard Coonley addressed a meeting with me at Des 
Moines, Iowa, a few weeks agQ, the Farm Institute meeting. I posed 
to the farmer's a sugge. n of a national congress to bring the lead- 
ers of business and the aders of labor and the leaders of finance 



16514 CONCENTRATION OF ECONOMIC POWER 

and government and agriculture together, and while Mr. Coonley 
didn't suggest publicly a willingness to do those things, after the 
meeting was over he came around and said, "I think that is a good 
idea. I think we ought to get together. I think something ought 
to be done about it." 

Now Mr. Coonley, I suppose, is an estimable fellow. It may be 
that he is willing to try and do what he can about it, I don't know, 
but he at least indicated a willingness to participate in a meeting. 

I presented to the President of the United States 3 years ago a 
desire on the part of labor to bring all of these forces together under 
one roof, around one table, and talk it out, not in a spirit of selfish- 
ness or one trying to take advantage of the other, but the group to 
l3e brought together for the purjwse of rendering a service to this 
country, doing something about it. I find no indication from the 
administration of any desire on their part to do anything about it, 
insofar as holding a meeting is concerned. Perhaps they are going 
to find a panacea here. They might find it here. I hope they do. 

But I am constrained to believe that unless the Federal Congress 
moves to arouse the interest of the people of this country in the 
need of bringing these special groups together, working out an 
agreement, our situation is going to get much worse than it really 
is today. It simply has to be stopped, and we can't fool or tempo- 
rize much longer with it, and the only way to stop it is for the service 
of these important men in this country to be drafted, commandeered. 
Tell them, "You are citizens of the United States, you have a task to 
perform to help reconstruct the economy of the greatest democracy 
in the world. You have got a job to do to save human beings," and 
labor should help to do that job just as unselfishly as business must. 
But it has got to be tackled on that basis. 

Acting Chairman O'Connell. I would like to ask you one question 
which related to one of your recommendati(/ns in your statement. 
You referred in your statement ^ to the possibility that congressional 
measures might be enacted which would be designed to pass on to con- 
sumers generally the economic benefits of technological improvements 
which apparently you assume or believe are not being passed on at 
this point, or at least not being passed on rapidly enough. 

What do you consider to be some of the factors which prevent the 
benefits of those technological improvements from being passed on at 
the present time ? 

Mr. MuEEAY. I don't know. I don't charge business here with vio- 
lating any law. 

Acting Chairman O'Connell. No. 

Mr. Murray. Or fixing any prices. 

Acting Chairman O'Connell. I have heard that they have been 
known to. 

•Mr. Murray. But evidences are at hand which very well indicate 
that although the cost of producing steel has gone down, at least dur- 
ing the past 18 months, the price of steel has gone up. 

Mr. Pike. I believe we call it stabilizing, Mr. Murray* 

Mr. Murray. There might be something akin to the word "stabiliz- 
ing" being used there. 

1 See p. 16509. 



CONCENTRATION OF ECONOMIC POWER 16515 

Acting Chairman O'Connell. You were thinking in partj I take it, 
of monopolistic practices or the power of very large, highly mtegrated 
industrial organizations to control their prices and products, and that 
sort of thing, were you not, to some extent? 

Mr. Murray. Oh, yes. I am speaking as a citizen, a taxpayer, and 
I am very much opposed to monopolistic tendencies or practices 
wherever they may aevelop. 

Mr. Pike. This is one of those instances, going back to the strip mill, 
where they have passed on quite a bit to the consumer. Really their 
price per ton to the customer has dropped quite substantially. I don't 
think there is any argument about that. At least I haven't heard any. 
But so many other things have happened where the saving has been 
much more reluctant to get on to the final consumer? In this case it 
looks as if there had been a good part of the saving passed on. 

Mr. Murray. I have no argument to make here about any monopolis- 
tic practices in the steel industry with reference to the fixing of prices, 
or anything like that. 

Acting Chairman O'Connell. But in part you had in mind the gen- 
eral desirability of either under existing law or more effective laws 
making competition work, I take it. 

Mr. Murray. We believe technological advancement lends itself to 
increased productivity and the lowering of cost and the passing of 
savings on to the consumer. 

Acting Chairman O'Connell. I think we would all agree it is very 
desirable and very essential that such benefits do be passed on in order 
to bring about the necessary increased ability to purchase on the part 
of the masses of people, but this statement implied that to some extent 
at least the benefits of technological change were not 'being passed on, 
either at all, or at a sufficiently rapid rate, and it occurred to me you 
had in mind the general desirability of effective legislation or enforce- 
ment of legislation involving such statutes as the Sherman Act. 

Mr. Murray. I think the implication there might very well also be 
one of not expanding employment to reduce •the cost, pass it along to 
the consumer — that there is a complete sense of social irresponsibility, 
I mean, in these procedures that have to do with the introduction of 
machines. The corporation or management under present competi- 
tive practices merely resorts to the expedient thing, the thing that 
will effect an immediate saving to meet the price of a competitor, 
somebody somewhere else that has the same kind of a machine. 

Acting Chairman O'Connell. Isn't that almost essential, assuming . 
a competitive- situation ? 

Mr. Murray. I am not going to dwell in the realm of these myste- 
rious things with you here today, Mr. Chairman, about what all these 
competitive practices might lead us into. I read a lot about them, 
but the more I read them, the more confused I become. My interest 
here today runs mostly toward this one thing of unemployment, and 
I unfortunately have created an impression in this implication here 
of something that I didn't really intend. 

Acting Chairman O'Connell. Have you any other questions, Dr. 
Anderson ? 

Dr. Anderson. No. 

Acting Chairman O'Connell. As the Chairman said, we are very 
grateful to you. 



16516 CONCENTRATION OF ECONOMIC POWEK 

(The witness, Mr. Murray, was excused.) 

Dr. Anderson, Before the committee adjourns I would like to 
introduce as an exhibit a description of the terms which we have 
been dealing with, which we have worked out, to be printed in the 
record for your use in the discussion of the data as it develops. 

Acting Chairman O'Connell. It will be printed in the record. 

(The document referred to was marked "Exhibit No. 2490" and is 
included in the appendix on pp. 17346-17349.) 

Acting Chairman O'Connell. The committee will stand in recess 
until Monday morning at 10 : 30. 

(Whereupon, at 4:30 p. m., an adjournment was taken until Mon- 
day, April 15, 1940, at 10:30 a. m.) 



INVESTIGATION OF CONCENTRATION OF ECONOMIC.POWER 



MONDAY, APBIL 15, 1940 

United States Senate, 
Temporary National Economic Committee, 

Washington^ D. G. 

The committee met at 10:40 a. m., pursuant to adjournment on 
Friay, April 12, 1940, in the Caucus Room, Senate Office Building, 
Senator Joseph C. O'Mahoney, of Wyoming, presiding. 

Present: Senators O'Mahoney (chairman); King, and White; 
Representatives Williams and Reece; Messrs. O'Connell, Hinrichs, 
Pike, Kreps, and Brackett. 

Present also: William T. Chantland, Federal Trade Commission; 
Frank H. Elmore, Jr., Department of Justice; and Dewey Anderson, 
Economic Consultant to the committee. 

The Chairman. The cionmiittee will please come to order. 

Dr. Anderson. Mr. Chairman, we oj^en tliis morning with evidence 
on the railway systems of America, the effect upon them of tech- 
nological improvements, and the two witnesses for today represent 
railway management. Mr. J. J. Pelley is the first witness, president 
of the Association of American Railroads, located in Washington, 
D. C. Following him will be J. H, Parmelee, with the Association 
of Americiui Railroads, who will present a detailed analysis of the 
railway structure and its development. 

The Chairman. Mr. Pelley, you haven't appeared before us before, 
have you ? 

Mr. Pelley. No. 

The Chairman. Will you be sworn, as is our custom ? 

Do you solemnly swear tlie testimony you are about to give in this 
proceeding shall be the truth, the whole truth, and nothing but the 
truth, so help you God? 

Mr. Pelley. I do. 

The Chairman, You may proceed. 

TESTIMONY OF J. J. PELLEY, PRESIDENT, ASSOCIATION OF AMERI- 
CAN RAILROADS, TRANSPORTATION BUILDING, WASHINGTON, 
D. C. 

Mr. Pelley. At the outset let nie emphasize that our railroads 
constitute a progressive, dynamic industry, seeking at all times new 
means of producing more efficient, more economical, more adequate 
transportation service. This has been true in tlie past, it is true 
today, and it will be true of the future. 

16517 



16518 CONCENTRATION OF ECONOMIC POWER 

Ten years of economic depression and an even longer period of 
subsidized and growing competition have forced the railroad industry 
greatly to curtail annual capital improvement work, purchases of 
fuel, material and supplies, and normal employment. The handicaps 
with which the industry is now faced are great, but they are not 
insuperable. They can be surmounted, and the industry will again 
be in the market on a large scale for new equipment, new rail and 
cross ties, ballast, fuel, and many other items of materials and sup- 
plies. Improvement work requires employment of additional labor, 
both in the railroad industry and the industries from wiiich it buys 
supplies. An increase in traffic to more nearly normal levels will 
also mean additional employment for railroad maintenance and 
operating forces. 

I need point only to the year 1937 as an illustration of what I 
have ii- mind. That year represented the culmination of 4 successive 
years of improvement in traffic and earnings from the depths reached 
in 1932 and 19C3. Even in that year, 1937, earnings were far from 
adequate for the real needs of the industry, yet capital expenditures 
for the year exceeded $500,000,000, purchases of fuel, materials, and 
supplies'^ approached $1,000,000,000, while railroad employment ex- 
ceeded 1,100,000 persons. 

Then came the recession of 1938, and retrenchment again became 
necessary in order to keep expenditures within the limits of revenues. 
Capital expenditures fell 55 percent under 1937, railroad purchases 
were reduced 40 percent, while railroad employment declined 16 per- 
cent. 

TECHNOLOGICAL CHANGE IN THE RAILROAD INDUSTRY 

Mr. Pellet. Technological progress has always been a factor in 
American 'railway history ; it has not developed overnight. The ap- 
plication of steam as a source of energy to means of locomotion was 
one of the outstanding technical advances in the history of civilization. 
From the early days of the railroad down to the present time, pro- 
gressive improvement has taken place in equipment, in track, in sig- 
naling, in the development of automatic devices, and in the use of 
coal, fuel oil, electricity, and other modern forms of power. Hand 
in hand with these physical betterments have gone improved organi- 
zation and operation. 

These factors have always been at work in the railroad as well as 
other industries ; otherwise we would have a stationary economy. The 
record of railroad expansion in this country to Nation-wide propor- 
tions is one of the vital chapters in American history. It was accom- 
plished by continuous and consistent progress in the technical field. 

More recently, in the absence of technological advance, the industry 
would have been unable to render the efficient services required of 
modern transportation agencies. As it is, railrop,ds are giving the 
public the fastest, most efficient, and most satisfactory service in their 
history. 

Mr. HiNRicHS. Mr. Pelley, may I interrupt at that point? I mis- 
read that thing so badly that from the point of view of- the record 
you may want to emphasize the fact that there have been technologi- 
cal advances and not an absence of them, that if you had not these 
teclmological advances you "VYOUld not have had the efficient service 
that you have been getting. 

Mr. Pellet. That is right. 



CONCENTRATION OF ECONOMIC POWER 16519 

The Chairman. What you meant was that more recently, without 
the technoloo;ical advances which have been developed, the industry 
would have been unable to render such efficient service. 

Mr. Pelley. That is right. 

Technological factors are closely intertwined with what I may call 
economic factors. The latter include traffic, rates, earnings, relations 
to the Government, and finally the extent of competition. 

While there has always been a relationship between economic and 
technological factors, the economic factors of the past were of a dif- 
ferent type from those of more recent years. During the earlier years 
of railway development the country was expanding, its population 
was spreading over the whole country, and competition existed to only 
a limited degree. The problem then confronting the railways was to 
keep ahead of the growing transportation demands of the country. 
This called for large investments and large-scale expansion of facili- 
ties, as well as purely technical improvements in plant and equipment. 
The principal stimulus to technological progress in those days was the 
urgent need for more mileage, more equipniBnt, and more men to oper- 
ate the plant. This stimulus was added to the incentive that is always 
present in a business enterprise, namely, so to conduct the enterprise 
that it will produce a return on investment. 

In more recent years the problem has changed from one of rapid 
physical expansion to one of an intensive struggle against depres- 
sion, and against growing competition. With the advance of high- 
way and waterway construction, the latter completely and the former 
to a large extent subsidized by government, a great decrease in rail- 
way revenues has occurred, aggravated by reductions in rates made 
necessary by subsidized competition with the railroads. 

In the past, today, and in the future, the railways have applied, 
and will continue to apply, the principle of mass production that has 
been so effective in building up manufacturing and producing indus- 
tries. In the railway field this principle takes the form of mass 
transportation. In no other transportation industry, except perhaps 
on the Great Lakes and the high seas, is it possible to handle lar^e 
aggregates of freight more efficiently and at lesser cost per unit. This 
principle has been sound in the past and will continue to be effective 
in meeting future competition. 

The railroad industry has been struggling against serious handi- 
caps in recent years. One handicap has been economic depression, 
which has seriously influenced the trend of railroad traffic and earn- 
ings. This situation is complicated by such economic changes as de- 
centralization of industry, development of hydroelectric power, and 
substitution of fuels and other materials, all of which tend to reduce 
the total volume of goods transported. 

Secondly, there has been increased competition from other agencies 
of transport. To meet tliese difficulties, railroad managements have 
adopted every possible means of operating efficiently and econom- 
ically. They have reduced operating expenses in approximately the 
same ratio as revenues have declined. They have reduced the cost of 
handling the average ton of freight 1 mile and the average passen- 
ger-train cars 1 mile. This they have done by introducing specific 
measures of economy, by installing every possible means of im- 
proving their plant, their rollintr stock, and their methods of opera- 
tion, all of which constitute^ technological progress. 



16520 CONCENTRATION OF ECONOMIC POWER 

What the industry needs in order to meet its competitive handi- 
caps is equality of treatment by the Government as between the rail- 
roads and other agencies of transport. We believe that each transport 
agency should be required to pay its own way. None should occupy a 
position in which it receives special favors from the Government, and 
each should be under the same general type of regulation as other 
agencies. 

I believe the adoption of this principle as a national policy is on the 
way, although its development is a slow process. But to the extent 
that it is adopted and put into effect, railroads will be enabled to meet 
Iheir present handicaps. With these handicaps removed, the industry 
will go forward in its field. I, for one, do not hold the view that we 
have reached the ultimate in railroad development. 

The railroad industry must continue to progress. The pressure of 
competition will exert a strong influence. We do not fear that com- 
petition if it is fair competition, for it can be met by further ad- 
vances in technology. The industry will adopt and adapt itself to 
all kinds of improvements growing out of chemical, physical, tech- 
mcal, and other discoveries and inventions. To do otherwise would 
be to fall back in the race for its rightful place in the economic or- 
ganization of the country. . 

To keep abreast of progress, new money will be required. New 
investment will be needed for further modernization, replacements, 
and improvements to plant. The margin of profit on which the rail- 
ways have been and are now operating is so small that they must look 
to the money market for large sums of new. capital in the future if 
they are to hold their own in the field of technological progress. They 
can secure those funds if the competitive handicaps I have referred 
to are removed. 

Specifically, it has been estimated that the railroad industry would 
be justified in spending $500,000,000 or m.ore annually for new and 
improved equipment, rail, ties, ballast, machinery for shop and track 
work, and other capital improvements. The' average capital program 
of the railroads over the period from 1923 to 1930 was $843,000,000 
per year; since 1931, the average has been only $259,000,000. per year. 

FUTURE PROGRESS 

Mr. Pellet. The effect of future technological progress on railroad 
performance and employment will be a definite one, although it is not 
easy to outline it in specific terms. If and when the railroad industry 
is relieved of the handicaps against which it is now struggling, it will 
be able to regain much of the traffic it has lost and should, in addition, 
obtain a larger proportion of the future increase in freight and 
passengers than it now has. 

. The future volume of employment in the railroad industry will 
depend largely on the trend of traffic- and earnings. With a "return 
to better economic conditions, and removal; of the competitive handi- 
caps now confronting the industry, railroad traffic may show so great 
a future- increase that even with increased efficiency in handling it 
a greater number of em])loyees will be required. Railway manage- 
mcaite will be more than glad to increase their forces under such 
conditions. 



CONCENTRATION OF ECONOMIC POWER 16521 

It should not be overlooked that technological pro<rress in the rail- 
road field stimulates employment in other industries. Purchases of 
equipment, rails, ties, machinery, and other products from other indus- 
tries tend to increase employment in tlie shops and factories of those 
companies from which railroads buy, and which prosper only when 
the volume of railroad purchases is on a high level. 

I close, as I began, by emphasieing that the railroad industry is a 
dynamic industry, that it will continue in full force and vigor for 
many years to come, and that it will progress in the field of technology 
in the future as in the past. 

That is all of my direct statement, Mr. Chairman. 

Dr. Anderson. Mr. Pelley, before the questions Avhich I know will 
come readily from the committee members, the railroad industry is a 
highly regulated industry, is it not? 

Mr. Pelley. Yes, sir. 

Dr. Anderson. That is, if you propose to do anything which in any 
drastic way affects the number of people employed or the wage rates 
paid, what must you do about it? 

Mr. Pelley. Which one do you want me to answer ? 

Dr. Anderson. Let's take both. 

Mr. Pelley. We have to get 'the approval of the Interstate Com- 
merce Commission for most of the things that we do. 

Dr. Anderson. So that the railroad industry would represent some- 
thing different than we have had heretofore in these hearings in that 
we are now looking at a highly regulated, monopolistic industry. 

Mr. Pelley. That is correct, and it is an industry that has been 
regulated for a lon^ time. 

Dr. Anderson. You have been a practical railroad man for many 
years, Mr. Pelley? 

Mr. Pelley. Yes, sir. 

Dr. Anderson. And you have seen the effects of the up and down 
swing of the business cycle, employment and unemployment through 
the years. 

Mr. Pelley. Yes, sir. 

TOTAL LABOR FORCE ON THE RAILROAD 

Dr. Andei?son. What is the total of persons normally regarded as 
laiJroad men in the country, have you any idea? 

Mr. Pelley. At one time there were 2,000,000; probably there are 
now 1,200,000 or 1,300,000. 

. Di". Anderson. With the present volume of employment in the 
railroads, then how many persons customarily employed are not now 
engaged in railroad^ work? 

Mr. Pelley. Well, it is a little difficult to give an accurate estimate 
of that. We now employ about 1,000,000 men. Just how many of 
them have wnited around for employment, or gone elsewhere, it is 
pretty difficult to say, because many of them have had to wait a 
long time ; some of them couldn't wait, they had to seek employment 
elsewhere. I think it is a safe figure to say that probably 1,100,000 
men are now looking to employment in the railroads. 

Representative Williams. Right in that connection, when was it 
at its peak of emph^yment? 

121491 — il— pt. 30 22 



16522 CONCENTRATION OF ECONOMIC POWER 

Mr. Pellet. In 1930. We had about 2,022,000 men employed in 
1930, and that was the peak, Mr. Williams. 

Dr. Anderson. Since that peak time, these workers who were nor- 
mally in the regular force of railway men have gotten older, some 
of them have dropped by the wayside, couldn't wait, as you say. 
You would fix the number that is not now employed at about 100,000 
to 150,000? 

Mr. Pellet. Well, I repeat, it is rather difficult. If I am correct 
in saying that there are 1,100,000 men looking to the railroads for 
employment, and are either employed regularly or waiting for their 
turn with an upswing in business to be called back, then there would 
probably be 100,000 waiting, because there are about a million work- 
ing now. 

Senator King. But from the peak of 1930, 900,000 have lost their 
jobs? 

Mr. Pellet. That is right, Senator King. Many of them have 
died or retired, and many of them have gone elsewhere, and prob- 
ably many of them have given up hope of ever getting bac: to the 
railroads and have taken up work in other lines of business. 

Dr. Anderson. What is the average of railroad workers ? 

Mr. Pellet. Probably Dr. Parmelee could give you a little better 
answer on that than I could. 

Dr. Anderson. You recognize, gentlemen of the committee, that 
Dr. Parmelee is following with a very detailed analysis of the rail- 
road plant equipment and railroad force and I don't want to move 
into an area that he is going to explore. 

Mr. Pellet. I think he will be able to give you a very good answer 
to that figure. 

Dr. Anderson. Except that I want to raise this point as a conclusion 
on the previous question about the number of people available for labor 
and not now employed. 

If by some circumstance, almost a miracle, I suppose, the railroad 
business should go back to its height of prosperity in the immediate 
future, would there be a need for recruiting new labor other than 
those now waiting for work? 

Mr. Pellet. There would. I think, Mr. Anderson, it might help 
you in your question if I were to tell you that in 1937 we had pretty 
good business and then the railroads were employing some men who 
had never before worked on a railroad; they were looking for new 
men. They probably gave some of their old men the call and they were 
employed somewhere- else and did not want to give up their chances 
where they were to come back to what might be temporary employment 
on the railroad, so they had to seek the menj they even hired new 
brakemen. I kn^w of some cases where they hired new men in trans- 
portation service in 1937. 

Senator King. So in 1937 you took on new men, and doubtless you 
would give preference to the old men, that is, to those who had been in 
the employ in the past. 

Mr. Pellet. That is right. We always give preference to the old 
men, and by agreement, for that matter, which we are very glad to do. 
They have the first call. 

Senator King. That situation would indicate, would it not, that be- 
tween 1937 a considerable number of that 900,000 had found positions 
in other fields of employment? 



CONCENTRATION OF ECONOMIC POWER 16523 

Mr. Pelxet. Yes, sir; and some of them were so well located that 
they did not want to come back, consequently some of the railroads had 
to hire some new men who had never before worked on railroads. 

Representative Williams. About how many new men were taken 
on in 1937? Covering the period, «vve will say, from the lowest de- 
pression, to what extent was the railroad employment increased, say, 
from '32 or '33, whenever it was at its lowest ebb, to '37, when it reached 
its highest point ? 

Mr. Pellet. Probably 150,000 men, Mr. Williams, I should say, as a 
quick estimate, from the depths of the depression in '32 and '33 to the 
peak of '37, probably 150,000 men. 

Representative Williams. And what proportion would you say of 
those were new men ? Have you any idea about that ? 

Mr. Pellet. Very few. 

Representative Williams. Since that time what has happened with 
regard to employment? 

Senator King. Since '37 ? 

Representative Williams. Since '37. 

Mr. Pellet. We are down about 100,000 men. 

Representative Williams. Since '37 you say there is 100,000 off. 
What has become of those men ? Where are they and what are they 
doing? 

Mr. Pellet. Some of them are waiting to be