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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 .."

Northeastern University 




School of Law 
Library 



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INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 

HEARINGS 

BEFORE THE 

TEMPOKAKY NATIOJ^AL ECONOMIC COMMITTEE 
CONGEESS 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. 2 



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 OI^FICE 

WASHINGTON : 1940 



KORTHEASTERM lU^^lVERSITY SCHOOLof LAWDBRSRY 



(Created pursiiimt to Public Res. 113, 75th Cong.) 

Joseph: C. O'MAHONKY. senator from Wyoming, Chairman 

HATTON W. SUMNEKK, Representative from Texas, Vice Chairman 

WILLIAM II. 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 

Representing the Securities and Exchange Commission 

GARLAND S. FERGUSON. Commissioner 

* EWIN L. DAVIS, Chairman 

Representing the Federal Trade Commission 

ISADOR LUBIN, Commissioner of Labor Statistics 

* A. FORD HINHICHS, Chief Economist, Bureau of Labor Statistics 

Representing tlie Department of Labor 

JOSEPH J. O'CONNELL, Jr., Special Assistant to the General Counsel 

* CHARLES 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 R. Brackett, Executive Secretary 

Thbodoeb J. Kreps, Economic Admser ' 

Alternates. 

II 



REPRINTED 
BY 

WILLIAM S HEIN & CO INC 

BUFFALO. N. Y. 



C 

r 

c 



1968 



INVESTIGATION OF CONCENTEATION OF ECONOMIC POWER 



FBIDAY, APRIL 19, 1940 

United States Senate, 
Temporary National Economic Committee. 

Washington^ D. C. 

The committee met at 10:45 a. m., pursuant to adjournment on 
Thursday, April 18, 1940, in the Caucus Room, Senate Office Building, 
Representative Clyde Williams, Missouri, presiding. 

Present: Representative Williams (acting chairman) : Senator 
O'Mahoney (chairman) ; Messrs. Lubin, O'Connell, Pike, and 
Brackett. 

Present also: William T. Chantland, Federal Trade Commission; 
S. Abbot Maginnis, Department of Justice; and Dewey Anderson, 
economic consultant to the committee. 

Acting Chairman Williams. The committee will be in order, 
please. 

Dr. Anderson. Mr. Chairman and members of the committee, to- 
day we open hearings on the subject of technology in the fields of 
white-collar employment, the clerical fields of business particularly, 
and this morning we have with us Mr. F. W. Nichol, vice president 
and general manager of the International Business Machines Cor- 
poration, and the president of that corporation, Mr. Thomas J. Wat- 
son. In talking over the nature of the presentation this morning we 
have come to the conclusion that it would be best to proceed as fol- 
lows : That Mr. Nichol, who has prepared a statement for the cor- 
poration discussing this whole problem, will read that statement, 
and we hope with as few interruptions as possible, because it is gt 
continuous statement in which things discussed follow one after the 
other. Following the presentation of the paper and the question 
period, Mr. Watson will be available to the committee for interroga- 
tion on the problems of the paper, or more particularly the general 
problems which have been the concern of this hearing on technology 
and concentration of economic power and unemployment. 

If it is your pleasure, Mr. Chairman, we will proceed with Mr. 
Nichol at this time. 

The Chairman. Will you gentlemen both be sworn? That is our 
custom. 

Do you solemnly swear, each of you, that the testimony you are 
about to give in the mater now pending will be the truth, the whole 
truth, and nothing but the truth, so help you God ? 

Mr. Watson. I do. 

Mr. Nichol. I do. 

(Senator O'Mahoney assumed the chair.) 

16759 



16760 CONCENTRATION OF ECONOMIC POWER 

TESTIMONY OF THOMAS J. WATSON, PRESIDENT, AND F. W. 
NICHOL, VICE PRESIDENT, INTERNATIONAL BUSINESS MA- 
CHINES CORPORATION, NEW YORK, N. Y. 

Mr. Andebson. Proceed 

Mr. NiCHOL. Shall I begin? 

The Chairman. You may proceed. 

TECHNOLOGY AND ECONOMIC RECO\'ERY ^ 

Mr. NiCHOL. The United Stares has 6 percent of the population of 
the world. We started without any industries, and we have built up 
to a point where we manufacture 47 percent of all the goods manu- 
factured in the world based on the present rate of exchange, and 
under our American system we consume about 90 percent of what we 
produce. That is a great tribute to our people, to their ingenuity, 
and to the machines which they have produced. By the use of im- 
proved machines, we have been able to shorten working hours, and 
at the same time increase wages and reduce the ^rice of manufactured 
goods, resulting in the highest standards of living in the world. 

From 1850 to 1930, the number of industrial workers increased 
about twice as fast as population, and the wages paid increased 
nearly 6 times as fast as the increase in the number of workers. 
' We frequently hear that we are living in a "machine age," butT 
feel we are living in the greatest man-age the world has ever laiown. 
Mafc'hines are simply tools that men have devised to enable them to 
do a better job. 

In England, in the early 1700's, planks were made by men's ripping 
logs with a long hand saw. It was verv hard work and made man 
old at 40, giving them what was called "carpenter's heart." Most of 
them were dead at 50. One day an ingenious Englishman decided to 
hitch a water-wheel to a saw, and that became the first engme. 

The introduction of the spinning jenny and looms in England in' 
1764 actually started a great increase in employment in the textile 
industry, though it was thought at first that nearly everyone would 
be thrown out of employment in the whole industry. 

In 1859 there were 191,000 wage earners in textile mills in the 
United States— 6,200 of each million of the total population. In 
1937, there were 1,125,000 wage earners in textile mills— 8,700 of each 
million of the total population. 

From 1859 to 1937 the proportion of the total population working 
in textile mills had increased 40 percent and the annual wage had 
increased 313 percent. 

In 1890, when the typesetting machine was beginning to come into 
use, we had 30,000 compositors in printing plants m the United States, 
or 476 of each million of the total population. In 1930, the number 
engaged in this occupation was 184,000 or, 1,500 of each million of the 
total population. In 1890, compositors worked 54 hours a week at 
the rate of 49 cents an hour. Now they work a 40-hour week and 
receive $1.30 an hour. Since the introduction of the typesetting ma- 
chine, the proportion of the total population having iobs at type- 
setting has increased 215 percent, and the hourly wage has increased 
165 percent. Thus printmg has become cheaper, and weekly news- 

* Prepared statement of Thomas J. Watson. 



CONCENTRATION OF ECONOMIC POWER 16761 

papers have been turned into daily newspapers, increasing the number 
of employees. 

In 1870, before the typewriter, only 2,100 out of every million of 
population were engaged in office work. Then came the typewriter, 
followed by machines for adding, computing, accounting, record keep- 
ing, writing, and other business procedures. Today, there are 33,000 
people per million of population engaged in office work. 

In 1890, before the accounting machine, there were 159,000 book- 
keepers and accountants. In 1930, there were 931,000. During this 
period, population increased 96 percent, but accounting people in- 
creased 486 percent. 

When a new machine is installed, we must not overlook the fact 
that from producing the raw materials to manufacturing the macliine, 
a great amount of labor is necessary before the machine is ready to 
be installed. Through the use of the machine, products can be manu- 
factured more economically, and the market is broadened to serve 
more people, which in turn creates more employment. 

We cannot reduce the cost of goods to the consumer without using 
the latest type of improved machinery. 

I should like to quote here from a short article, "Things We Didn't 
Have Only Ten Years Ago," which appeared recently in Reader's 
Digest : 

Here are some of the things we take for granted today that we didn't have, 
or hadn't begun to use, as short a time ago as 1929 : 

Streamline trains. Television. Transoceanic passenger air service. Synthetic 
rubber. Fluorescent lighting. Colored home movies. New plywoods, stronger 
than steel. Half a dozen new plastics and resins. Polarized glass. Glass build- 
ing blocks. Fibre glass for insulation and textiles. Synthetic hosiery replacing 
silk. Synthetic vitamins and hormones. Sulfanilamide and sulfapyridine, drugs 
that kill the deadly streptococcus germs. 

Don't ever believe the country's future lies behind it. Inventive genius and 
business enterprise never stand still. 

Under the American system, all industries are interdependent. The 
American system is largely predicated upon mass production, which, 
in turn, is based on machine methods. 

Under the American ^ystem, the people enjoy more of the comforts 
and conveniences of life than in any other country in the world. 

INTERNATIONAL BUSINESS MACHINE'S SHARE OF THE BUSINESS MACHINES 

INDUSTRY 

Mr. NiCHOL. According to reports of the Census of Manufactures 
for 1937, the total business machines production in the United States 
amounted to $246,362,914. International Business Machines Corpo- 
ration's share of the value of business machiiies produced was 7.3 per- 
cent. : 

In the typewriter branch of the industry, I. B. M. has about 1/4 
of 1 percent of the total output of machines. 

By far the greater part of the bookkeeping and accounting work 
in the United States is still done by the method of hand entries. We 
made a careful estimate from available Government records of the 
cost of the accounting work in the United States, and found that the 
amount was about $3,788,000,000 annually. Tlie money spent for the 
use of our accounting machines amounts to only % of 1 percent of 
the total accounting cost of the country. 

124401—41 — pt. ?,0 37 



16762 CONCENTRATION OF ECONOMIC POWER 

Our company does the accounting and statistical work of business 
organizations and institutions whose accounting and statistical prob- 
lems are such that the electric accounting and bookkeeping machines 
give satisfactory service. The idea that these machines do a great 
part of the total accounting work of the country is erroneous. 

Those offices using our machines do a great amount of work on other 
machines, in addition to which there is in these same offices a vast 
amount of clerical work not done by machines at all. The documents 
from which cards are punched must be prepared and arranged for the 
punch operator, and the results obtained by the machines must be ar- 
ranged and interpreted by accountants, auditors, and others. 

It has been the policy of our company during the past 26 years to 
carry on an expanding research and development program. Research 
and engineering is the only branch of our business which is not 
budgeted. 

Our engineering staff consists of 300 scientists, engineers, and in- 
ventors. 

During the past 26 years our company has placed emphasis on 
education. What we consider one of the most important buildings 
in our business is our schoolhouse at our main plant at Endicott, N. Y. 
The program at this school comprises courses for I. B. M. execu- 
tives, salesmen, customer servicemen, systems servicemen, and systems 
servicewomen, office and factory employees, and apprentices. 

We also provide administrative training courses for customers' 
employees. 

In addition to training customer department heads at Endicott, we 
conduct schools in various cities of the country in which customers' 
employees are trained in the operation of our machines. These schools 
offer an opportunity for persons out of employment to become op- 
erators of our equipment, thus qualifying them for useful and 
remunerative employment. No charge is made for this training. 

Our educational program also covers our people in all of our offices, 
where regular educational conferences are held. Educational mate- 
rial for these meetings in the form of textbooks on machines and their 
applications and on selling technique, leaflets describing particular 
applications, and other aids are being constantly provided by the 
Educational Department for the benefit of our people and customers. 
In addition to the regular faculty and staff instructors, our schools 
are taught and given lectures by executives, specialists in various 
industries, outstanding salesmen, and noted educators and business 
executives from outside our own business. 

We operate on the basis that there is no saturation point in educa- 
tion, and our educational program is extended over our whole 
organization throughout the world. 

WAGES PAID AND HOURS WORKED 

Mr. JSicHOL. The company's wage-and-hour scale has always been 
liberal. On April 24, 1933, the company established a minimum-wage 
scale which was higher than that later fixed under the N. R. A. 

In January 1935, as an incentive for quality rather than quantity 
production, piecework was abolished and a minimum rate of 55 cents 
per hour established for all qualified workers, which rate has since 



CONCENTRATION OF ECONOMIC POWER 16763 

been raised to 65 cents an hour, without differentiating between maje 
and female labor. 

The 48-hour week was standard up to January 1, 1933, when it was 
reduced to 43 hours and later in the year to 40 hours. 

The following is the record in detail of the I. B. M. plant at Endi- 
cott, N. Y., where the greater part of I. B. M. manufacturing is done. 

Dr. Anderson. This is Exhibit 2607. 

^Representative Williams assumed the chair.) 

Acting Chairman Williams. It may be received. 

(The table referred to was marked "Exhibit No. 2607" and is in- 
cluded in the appendix on p. 17424. ) 

Mr. NiCHOL. I shall read only the years 1926 and 1939. In the 
year 1926 the average number of hourly workers was 806, the aver- 
age annual earnings were $1,420.99, and the average hourly rate was 
58.6 cents, the average hours worked per w^eek 46.6, standard hours 
per work-week 48. In 1939, the last figure, the average number of 
hourly workers was 3,148, the average annual earnings were $1,850.68, 
the average hourly rate was 89.5 cents, the average hours worked 
per week 39.8, and the standard hours per work week were 40. 

It will be seen, therefore, that during this period the number of 
wage earners increased 291 percent, and the average annual wage 
showed an increase of 30 percent. 

At the end of 1926 we had 255 customer servicemen. They are the 
men who maintain our equipment in the field throughout the coun- 
try, who were paid $140 a month on the average. At the end of 
1939 we had 1,098 service men who received $179 a month on the 
average. In the 13-year period the number of these employees has 
increased 350 percent and the average salary is 25 percent higher. 

Beginning in 1937, vacations with pay were granted to all factory 
workers, on the basis of 2 weeks of vacation for those who had worked 
continuously for 1 year or more, and 1 week to those who had worked 
from 6 months to 1 year. 

In addition, hourly employees are paid full time for 6 national 
holidays-— New Year's Day, Memorial Day, July 4th, Labor Day, 
Thanksgiving, and Christmas. 

These vacation and holiday advantages had been extended to sala- 
ried employees prior to 1937, and all employees now have like vaca- 
tion and holiday privileges. 

Since 1924 the company has carried group insurance on its em- 
ployees, without contribution from employees toward premium pay- 
ments. This insurance coverage has been broadened several times. 

The present schedule of group insurance covering all employees, 
the entire premium for which is paid by the company, stands as 
follows : $1,000 to all employees with 1 year of service, $2,000 to all 
employees with 2 years of service, $5,000 to all employees with 3 
years of service, $7,500 to all employees with 5 years of service; 
$10,000 to all employees with 10 years of service. 

The total amount of this insurance now in effect is $42,159,000. 

Our factory employees have long had an organization for the pay- 
ment of sick benefits. The company contributes to this relief associa- 
tion so as to more than double the benefits available from member 
contributions. The present sick-benefit schedule provides for payment 
by the company of the full amount involved for the first 3 days, and 
thereafter the expense is shared equally with the relief association* 



16764 CONCENTRATION OF ECONOMIC POWER 

Recreational facilities for our factory employees have been provided 
in a large country club with 680 acres of land. Thousands of meals are 
served each month at cost in the club dining rooms, which are open 
daily. Libraries with reading rooms, and party rooms, card rooms, 
billiard, ping pong, and shuffieboard rooms are available. Organized 
gi'oups meet regularly for private dinners, educational discussion, and 
social contact. An orchestra, band, glee club, and chorus give regular 
concerts and broadcast from the main auditorium of the club house. 

There are 16 bowling alleys in the main club house, which accommo- 
date 380 teams, and on which were rolled last year 184,730 games. 

A rod and gun club has its own clubhouse and provides a modern 
skeet field, trap, rifle, and pistol ranges. Classes, under competent 
instructors, are conducted to teach the proper handling of firearms. 

In connection w4th the clubhouse is a 27-hole golf course, swimming 
pool, rifle and pistol ranges, 6 doubles tennis courts, 2 softball dia- 
monds, 1 baseball diamond, archery ranges, and quoit and horseshoe 
courts. 

The management of all of these recreational facilities is vested in 
the IBM Club, an organization of employees. 

ACCOUNTING MACHINES AND EMPLOYMENT 

Mr. NicHOL. Based upon observation and experience, w^e believe that 
the use of our accounting machines tends to increase rather than to 
decrease employment, due to tbe fact that our machines are designed 
to obtain more information from original records rather than to make 
the original records by the use of less labor. Once the entries have 
been transferred to punched cards, they can be rearranged any number 
of ways to develop useful information from the basic data. 

I shall here cite an example of a situation which confronts many 
manufacturers in tlie management of their business. This example is 
illustrative of one of the many functions which our machines perform 
in business, and shows that their favorable effect on employment is not 
confined to the office, but extends throughout the factory. 

I have in mind a specific company which had no adequate cost of 
production system, nor control of sales, labor, materials, overhead, and 
inventories. 

A contract was made with us purely on the basis of giving them the 
necessary facts to do a better job of management in their manufac- 
turing plant. 

Prior to the installation of our system, because of a poor produc- 
tion system, they were frequently confronted with the fact that they 
were suddenly out of one or more vital parts of the equipment they 
manufacture. This resulted in the removal of unfinished units from 
the production or assembly line and setting them aside until the neces- 
sary missing parts were produced. This, in turn resulted in laying 
off certain assemblers sometimes for a week or more or finding some- 
thing else for them to do in the ])lant, and it also resulted in in- 
creased costs and delays in production which seriously affected the 
business. 

Our machines corrected this condition. 

Another result of the installation was the elimination of the manu- 
facture of parts which could not be sold in the immediate future, and 
the placing of responsibility for spoiled parts. Thus a bad situation 



CONCENTRATION OF ECONOMIC POWER 16765 

which the management knew existedNbut which up to that time they 
could not locate was corrected. 

With our sj^stem, coordination of sales and production was achieved 
through the comparison of production reports and sales reports. This 
installation also resulted in the addition of a few extra men in the 
plant to trace production orders, and apply corrective measures where 
errors wfere revealed. 

Our machines are used all over the world, including countries in 
which the wage scales are so low that labor-saving as against the cost 
of our machines could not possibly be the cause of preference for our 
machines. Our company is doing business in 79 countries, and the 
manufacture of machines in our American plants for foreign con- 
sumption creates employent in our own country. 

To determine the effect of the use of business machines upon em- 
ployment, consideration must be given, first, to the reasons which 
prompt their use by industry and Government. 

Our records show that the reasons for the installation of our ma- 
chines are : management control, flexibility, speed, economy, and ac- 
curacy, in the order named. 

Business machines may be adopted not solely because of any one 
advantage but because of a combination of two or more of them. 

During the past few decades the need for facts and figures re- 
garding operations has increased greatly due to the increasing com- 
plexities and speed of modern business. As competition increased, 
iiid mass production became general, and as distribution and service 
became increasingly important, business executives came more and 
more to recognize the value of additional information regarding every 
phase of their operations. They also recognized that this informa- 
tion, if secured, must be timely and accurate. Therefore, the execu- 
tive's problem in meeting these changing conditions was not one of 
curtailing information in order to economize, but rather of finding 
a medium that, at a reasonable cost, would provide the information 
needed. 

Regardless of the desirability or the necessity for these additional 
facts, management still had to weigh the cost of their production 
against their value. Wliile it is true that much of the additional in- 
formation now being compiled b}^ modern business might have been 
prepared without business machines, the probabilities are that it 
would not have been prepared if only the slow, cumbersome, and 
costly hand methods had been available. 

Management's problem, therefore, to maintain re\'enue, profits, 
and employment, to say nothing of increasing them, resolved itself 
into the need for a more careful analysis of every operation of -their 
business. Such an analysis was only possible through developing 
more facts and figures than had ever been developed before. Coupled 
with the adniitted need for additional information was the necessity 
for developing it promptly and accurately, as well as providing a 
method which had sufficient flexibility to permit its change at a 
moment's notice. Therefore, in the marketing of business machines, 
and particularly the products of our company, we fine that the prin- 
cipal reason for their use is that they can provide ma lagement with 
vital information — accurate and timely — at a cost that c m be justified. 

Experience has shown that the failure of an enterj rise generally 
does not result from a single great loss but rather fro: i the cumula- 



16766 CONCENTRATION OF ECONOMIC POWER 

tive effect of minor losses which frequently are brought about by 
a lack of prompt and accurate information on which to make intelli- 
gent decisions. The ease with which accounting and auditing rou- 
tines detect losses depends upon the quality and extent of detailed 
information that is introduced into the records and summarized into 
intelligible operating reports. 

B.y management control action taken in time is more likely to have 
a favorable influence on the earnings of a company, on the mainte- 
nance of continued and increasing acceptance of a product or service, 
and on the employment and earnings of personnel. 

Management in recent years has recognized the tremendous wealth 
of figure facts reposing in its basic accounting records. 

Management then is directly confronted with the problem of eval- 
uating the worth of each report contrasted to the cost of its preparation. 

Because of the inherent ability of modem business machines to 
completely analyze at a reasonable cost the figure facts in the basic 
accounting records, management adopted these devices so that all 
information of value to the enterprise would be made available. 

As an example of the need for a flexible method in modern busi- 
ness, let us consider the amount of information available from a 
simple pay roll time ticket. Essential reports derived from it in- 
clude those for pay-roll compilation, income tax, and other reports 
required by audit practice and governmental agencies. 

In it are also contained the data required for the compilation of 
other valuable internal operating statements. Among the latter are 
such statements as direct and indirect labor costs, planning on pro- 
duction schedules, machine-operating costs, and the like. 

It is this flexibility of electric accounting machines to analyze in 
various ways information contained in one original document that 
has been a determining factor in the use of the machines by many 
companies. 

In these days operating information regarding a business is valu- 
able only if available in time to be used effectively. Information ' 
which is furnished too long after the occurrence of events delays the 
institution of corrective measures. Modern business is adopting 
methods which will reveal facts as soon as possible after transac- 
tions occur. 

It must be remembered, also, that not one, but many reports which 
must be compiled from one set of original records are required to 
satisfy the needs of many individuals m positions of responsibility 
and authority. Promptness in supplying reports to responsible 
individuals is one of the most important elements in the achievement 
of sound business operation. 

In many instances the element of time is the predominant factoi' 
in the adoption of the use of electric accounting machines. The im- 
portance of current information regarding accounts payable and 
receivable, Sales, inventory, expenses, and costs is recognized by 
efficient management. Modern business machinery presents the best 
method available for the prompt compilation of vital information 
necessary to the conduct of sound business. 

In the operation of any business or government constant effort 
must be made to bring about economy and.' efficiency in all operations. 

The installation of business machines, in some instances, results 
in the temporary displacement of labor, just €is does the introduc- 



CONCENTRATION OF ECONOMIC POWER 16767 

tion of many other machines and mechanical devices dev^eloped by 
the inventive genius of man. 

On the other hand, business machines as well as others have been 
the benefactor of labor by the creation, either directly or indirectly, 
of many additional places for both skilled and unskilled labor. 

In manufacturing, economy is also expressed in terms of lower unit 
costs of production — always, of course, with no sacrifice of quality 
of product or of safety of employees. 

In determining the value of reports prepared by the accounting 
department, management contrasts their value with the unit costs of 
preparation. 

Executives recognize that under mechanized routines an increased 
number of reports may be compiled at a nominal increase in total 
cost, but at a lower unit cost for each report. 

Economies achieved by the use of machines in the preparation of 
such reports afford to management an opportunity for the com- 
pilation of these vital figure facts which otherwise would remain 
undisclosed. 

The need for accuracy in the maintenance of records for the 
preparation of financial reports such as the balance sheet and profit- 
and-loss statements has long been recognized. 

The expansion of the use of figure facts for management control 
makes it imperative that reports upon which policies are established 
should be accurately prepared. 

Accuracy in the rendering and payment of bills and in the prepara- 
tion of pay rolls is vital to a company's relations with its customers, 
vendors, and employees. 

The checking and correspondence necessary to expose and adjust 
accounting errors, with attendant annoyance to customers and em- 
ployees, places a premium upon accounting accuracy. 

Scientific studies and practical experience have demonstrated that 
mechanized accounting procedures achieve a degree of accuracy not 
to be expected in manual procedures. 

The modern demand for accuracy of both internal and external 
accounting documents is frequently a major reason for the adoption 
of business machines. 

An analyses of our records covering the new contracts entered into 
by us in New York, Brooklyn, and Newark in 1939 reveals that our 
machines were installed for a number of reasons by many of the 
companies, but the principal reasons were, 49 percent because of 
managerial control, 15 percent because of flexibility, 14 percent be- 
cause of speed, 12 percent because of economy, and 10 percent because 
of accuracy. 

Following are five cases selected from sales made last year in the 
area mentioned, each of which illustrates 1 of the 5 reasons why 
businesses install our machines; namely, management control, flexi- 
bility, speed, economy, and accuracy. 

ADVANTAGES OF BUSINESS MACHINE 

Mr. NiCHOL. Our machines were installed at company A, which is 
engaged solely in the manufacture of metal fasteners, for the major 
applications of merchandising control, production statistics, pay roll, 
and labor distribution records. 



16768 CONCENTRATION OF ECONOMIC POWEIl 

The matter of effecting economy in office clerical personnel had 
nothing to do with the adoption of our machines. They were adopted 
after a study revealed that they w^ould provide essential control data. 

To accomplish merchandising control, sales were analyzed by in- 
dustry, customer, sales, and product. For production control, daily 
and periodic production reports were rendered, facilitating plant 
supervision. 

The effect of the finished stock inventory application has been out- 
standing. It has provided accuracy, permitted of the centralization 
of stock records, provided an accurate monthly stock position report — 
which would be exceedingly difficult to prepare by other methods — 
making it possible for the management to see at a glance the pro- 
duction, shipments, and inventory of each of the company's products. 
It provided an important element in the production and planning 
department's activities. As one result, the management's attention 
was directed to the advisability of converting dead stock into cash 
and removing slow-moving items from the line. 

As a result of our installation, four extra people were directly em- 
ployed in the accounting department. Because of better manage- 
ment made possible by accurate and timely figure facts, the business 
of this company was materially improved. At the time of installa- 
tion. May 8, 1939, there were approximately 5 people in the office 
and 300 employees in the plant. Since the installation, operations 
have expanded, and there are now approximately 80 people in the 
office and 400 people in the factory working two shifts, which means 
800 people. 

In August of 1939 the comptroller's office of municipality B con- 
tracted for the use of electric accounting machines for the purpose 
of maintaining the fund ledgers and contract ledgers of the munici- 
pality and for providing supporting records of an accounting and 
statistical nature. The fund ledgers and contract ledgers are. main- 
tained to record expenditures against the individual funds set up to 
take care of items prescribed by the municipal budget. The^ record 
not only shows the appropriations already made against each fund 
or contract within the fund but also shows the amount of the un- 
expended balance at all times. Prior to the introduction of our sys- 
tem to perform this work most of the operation had been done on a 
manual basis, although the contract-ledger portion of the job was 
being handled on bookkeeping machines. 

An investigation of all types of equipment and methods was under- 
taken early in 1938, under the direction of a responsible official, be- 
cause of the dissatisfaction on the part of the officials of the munici- 
pality with the operation and results of the methods and procedures 
then in use. The ultimate objective in changing procedures was to 
achieve the greatest possible flexibility and accuracy so that detailed 
analyses of revenues and expenditures could be obtained and thus 
enable the comptroller's office ito render an improved service to the 
municipality by exercising a closer control over those items. It was 
not possible to forecast all of the analyses which might be required 
due to the numerous changing problems of a modern municipal 
government. Consequentl}'^, a flexible method which could provide 
numerous types of analyses was of paramount importance. 



CONCENTRATION OF ECONOMIC POWER 16769 

Actual practice has demonstrated the wisdom of the decision to 
everyone concerned. Numerous calls have been made for special 
analyses and reports and all have been satisfactorily handled. 

As a result of the installation of our electric accounting machines, 
all objectives have been attained and nine additional positions have 
been created. 

Our accounting machines were installed at agency C. Tliis agency 
was formed in a city under the joint supervision of Federal and State 
governments, to establish new milk-pool prices monthly at the earliest 
possible moment. There are 10 classifications of milk now allowed 
for which new prices must be set. A set price for the milk delivered 
to the distributor by the producer is established. The distributor 
then contributes to, or receives benefits from, the pool, depending upon 
the ultima' ^ use that is made of the milk he receives from tlie farmer. 
The establ hment of the new milk-pool price is determined by a 
formula wi ch takes into consideration such elements as utilization, 
butterfat, ai 1 transportation. The agency produces reports on pro- 
duction for ilie preceding month by the 14th of the lollowing month. 
Producers and handlers must have all the reports Into the agency 
by the 10th of the following month ; hence, only 4 days are available 
for the compilation of the figures. 

Under the manual plan reports were produced by the dead-line date, 
but no immediate statistical information was available. With the 
introduction of electric accounting machines, the reports are pro- 
duced 1 to 2 days earlier than was previously possible, enabling 
producers and distributors to.- plan the ensuing month's operations 
at an earlier date. The new plan makes available valuable statistical 
information which was not heretofore possible, soon after the pool 
prices for the new month are determined. 

It is essential that new pool prices be available as soon as possible, 
and speed in handling the figures submitted by the producers and 
distributors is absolutely essential. The use of electric accounting 
machines has made it possible for the earlier establishment of milk- 
pool prices, together with statistical information on a sufficiently 
timely basis to aid the agency in its proper operation. 

The installation of electric accounting machines did not displace 
clerical help in this agency, nor did it result in the employment of 
additional people. 

Approximately 6 months ago distributor D in the metropolitan New 
York area installed machines to facilitate the handling of essential 
accounting and report work, and to effect certain economies necessary 
to meet competition. 

As a result of this installation, more timely and accurate reports are 
being made for the merchandising department, the traffic department, 
the buying department, and the Government. 

Throu^ the development of further managerial reports this com- 
pany has virtually eliminated a costly "out of stock" condition, and, at 
the same time, has appreciably reduced its inventory investment. Due 
to the machine accuracy of billing, they have established a vastly im- 
proved retail inventory control over merchandise in their stores. 

The preparation of an improved order-filling medium by the ma- 
chines, and the inventory control previously mentioned, have resulted 
in maximum warehouse efficiency, and provided faster and more de- 
pendable delivery to stores. 



16770 CONCENTRATION OF ECONOMIC POWER 

As a result of this installation, the executives of this concern are now 
enabled to maintain constant control, speed up operations, realize 
quicker turn-overs, and improve their services for the Ultimate benefit 
of the consumer. 

The effect on employment in this case has been the elimination of 
11 people. 

Company E is a manufacturer. Its volume of business increased 
rapidly. It became apparent that more accu^^^^e and completer infor- 
mation concerning manufacturing costs was necessary. A complete 
survey of the requirements of the E company was made by our repre- 
sentatives, a proposal submitted, and the contract was signed in 
September 1939, because it was felt that electric accounting machines 
were the answer to their need fop accurate and detailer^ records. Tlie 
application of machines was for their pay roll and associated records, 
cost accounting, stock and production control. 

Under the former method, reconciliation of shop pay roll and dis- 
tribution of labor had been difficult, since the annual methods they em- 
ployed did not lend themselves to a volume operation. Our machines 
and the system we installed facilitated this procedure and provided 
accuracy. 

In connection with stock control^ part numbers sometimes run into 
10 characters with attendant possibility of error in transcription under 
the former method. Under the present method this hazard is elim- 
inated with resulting accuracy of recording stock movements. 

It was found also that more accurate forecasts of requirements in 
connection with booked orders by part numbers and scheduled delivery 
dates were obtained. 

The accuracy, speed, and flexibility of our system, in this company's 
expanding situation, has placed the management in position to make 
its decisions based on reliable information. 

This installation has insulted in the employment of seven additional 
people in the accounting- department. 

DIRECT AND INDIRECT I. B. M. EMPLOYMENT 

Mr. NiCHOL. On December 31, 1914, the International Business 
Machines Corporation had less than 300 employees in the United States. 
On December 31, 1939, the number of employees was 7,610, an increase 
of more than 2,400 percent in 25 years. Incidentally, throughout the 
world we now employ 11,478 people. 

In addition to the 7,610 persons employed directly by our company 
in the United States, other concerns employ 1,041 persons who work 
exclusively and continuously on the requirements of our company, 
making a total of 8,651. 

In addition, because of the sale and the continued use of our ma- 
chines, many other concerns manufacturing accessories and supplies 
are the direct beneficiaries oi' our sales work. Such products include 
wiring, motor generators, noise-reduction equipment, cabinets, files, 
stationery, and so forth. We estimate there is $2,000,000 worth of 
business done by other companies in furnishing the paper used in 
connection with our machines, exclusive of the operating cards. This 
furnishes employment for a large number of people. 

And our company, in turn, gives employment to the producers of 
raw materials and parts which it buys, to the producers of the machines 



CONCENTRATION OF ECONOMIC POWER 16771 

and tools used in our factories, and to transportation companies and 
others which render service to our company. In 1939 we paid $7,- 
346,000 for materials and $1,487,000 to railroads and other transpor- 
tation agencies for services. 

Before we start the manufacture of any part of our machines, we 
create employment. It goes back to the mines where the ores are' 
produced ; to the smelters, refineries, and copper mills ; to the trans- 
portation companies — rail, water, and motortruck. We have created 
employment in these various places. We create employment in our 
designing, in our engineering, manufacturing, shipping, and record- 
ing work. All this work is created before any machine is placed that 
would tend to increase or decrease employment. We not only create 
employment before the machine is made but we also create employ- 
ment after the maciiine is placed by enabling the manufacturer to do 
a better job and sell more goods. 

It is in this way that our country has been able to bring our per 
capita consumption up to a point where it is seven times as great as 
the rest of the world. In countries which do not use machines you 
will find the per capita consumption, the wages, and the condition and 
intelligence of the people are the lowest. 

A study was made from our own records of every individual sale of 
electric accounting machines in the year 1939 in our New York, Brook- 
lyn, and Newark offices with a view to ascertaining the effect of these 
orders on employment both effected and contemplated, and it was 
found that in 80 percent of the installations involved, no gain or loss in 
employment resulted because of adopting our machines and systems. 

In the remaining 20 percent of installations, 70 percent increased 
employment and 30 percent decreased it. This study shows that 153 
employees have been released and 56 more may be released, or a total 
of 209 actual and anticipated releases. Against this, there have been 
289 persons employed, and 8 more are expected to be employed, bring- 
ing the total increase to 297, or a net gain in employment of 88 persons. 

There were 74 employees transferred to other work, and 112 more 
may be transferred, making a total of 186 transfers within these busi- 
nesses. 

The increase in our employment in the same sales territories in 
which these sales were made, during 1939, was 41 persons. The 
sales in this same area provided work for about 600 of our factory 
employees, not to mention the indirect employment to a substantial 
number of people incident to our business. 

This study clearly shows that the expansion of accounting and 
record making which accompanies installation of these machines, and 
the employment in making and selling and servicing them, results in 
a substantial gain in total employment. 

Our company maintains schools for machine operators and place- 
ment bureaus to find employment for those whom it trains. During 
the year 1939, we enrolled in our training classes 3,645 employees of 
customers so that they might transfer from former occupations to 
operate our machines. During 1939, our company enrolled 2,854 
otlier persons, trained them in machine operation, and placed 1,170 
in permanent jobs, and, in addition, 2,783 placements were made in 
temporary jobs. 

Considering tlie business macliinos industry as a whole, it is my well 
considered o))inion tlint tlie growing use of efficient office machines 
has increased rather than decreased employment. 



16772 CONCENTRATION OF ECONOMIC POWER 

This interpretation of available data is based on our own experi- 
ence both with office machines and other machines. In our factories, 
advantage has been taken of every practical technological develop- 
ment. We buy the latest, most efficient tools with which to produce. 
But labor saving and reduced employment are not the same thing. 
Wliile maintaining our plant in this modern manner, over the years 
the record shows that we added people to our pay roll. 

In 1880, before there was any office equipment industry, there were 
25,467 copyists at work. Much of the work of the copyist was in 
duplicating legal papers. At about that time the typewriter began 
to be used commercially. The typist can write much faster, do a 
better job and can produce a large number of duplicate copies. One 
typist could easily do the work of several copyists. But in 1930 there 
were 811,190 typists at work. That is, in 1880, before this machine 
was in commercial use, there was one job of copy-writing by hand 
for each 2,000 population. In 1920, 50 years later, there were 13 
machine- writing jobs for each 2,000 population. 

The same story can be told of other branches of office work. At 
the 1890 census, the office equipment industry reported the production 
of about $4,000,000 worth of office machines for domestic use. Of 
each 1,000 population, 372 were reported as being employed, of whom 
7 had clerical jobs. 

At the 1930 census, production of about $114,000,000 worth of 
office machines for domestic use was reported. Of each 1,000 popula- 
tion, 398 were reported as having jobs, of whom 33 had clerical jobs. 
That is, in 40 years, the total number reported as having jobs per 
1,000 of population gained 7 percent, but clerical employment gained 
370 percent. 

I will go further and say that, in industry as a whole in the United 
States, improvements as the result of science and invention have re- 
sulted in increasing the wages and reducing the hours of labor, and 
that they have not caused unemployment in general, although there 
are undoubtedly specific instances in which they have done so. 

In 1860, the average annual wage of factory hourly workers was 
$288. Data of hours worked are incomplete, but the best figures I 
can get indicate that the average was about 64 hours a week. Due to 
the use of improved machinery and better cooperation between busi- 
ness, labor, and Government, the average annual factory wage in 
1937 had risen to $1,180, and the work week was down to 38% hours. 
In other words, science and invention and better cooperation between 
business, labor, and Government must be credited with having reduced 
the hours of labor by more than 40 percent and with having increased 
the wage by 300 percent. 

Changes in employment are constantly occurring. At times, one 
efficient person will displace two or more inefficient people. Unem- 
ployment maj' be accounted for by several reasons not involving the 
machine. One reason is that our economic system is out of balance 
due to changes in world markets. Our agriculture has been developed 
to meet world needs for certain crops which we produce to advantage, 
and iirder ])resont conditions we have large surpluses. Some ar- 
rangement must be made whereby we can ^hd markets for these sur^ 
plus products. 

Change is the one certainty that we have. We cannot remain as 
we are. We must either go ahead or go backward. Machines are but 



CONCENTRATION OF ECONOMIC POWER 16773 

the tools which civilized man uses and whenever we find any place 
in the world without machines we find a place in which few would 
care to live. We either must improve and develop those tools or we 
must begin to throw them away and go back to the $288 annual wage 
for a 64-hour workweek and then to whatever conditions prevailed 
before 1860. 

As for me, I prefer progress. What we need is more science, in- 
vention, and machines, because with more of these we shall replace 
the inadequate equipment of the past and present with the better, 
safer, and progress-promoting equipment of the future. 

Thank you. 

Acting Chairman Williams. Have you any further statement to 
make, Mr. Watson ? 

Mr. Watson. No, sir. 

Acting Chairman Williams. Dr. Anderson, do you want to ask some 
questions? 

Dr. Anderson. I want to ask some questions with respect to this 
paper, Mr. Nichol, so that the record will be perfectly clear. You 
state : "At the 1930 Census production of about $114,000,000 worth of 
oflSce machines for domestic use was reported," and then: "Of each 
1,000 population, 398 were reported as having jobs, of whom 33 had 
clerical jobs. That is, in 40 years, the total number reported as having 
jobs per 1,000 of population gained 7 percent, but clerical employment 
gained 370 percent." ' 

May I ask for the source of the data ? 

Mr. Nichol. I will have to find that in m}' statement. 

Dr. Anderson. I think I know the source. I just wanted to see 
whether you aren't in agreement that these are figures taken from the 
census, the decennial censuses of the United States. 

Mr. Nichol. They are ; yes, sir. 

Dr. Anderson. Then I would ask this following question. I think 
this is an error that is very frequently made in the use of the census 
of occupations, which records the total population listed as available 
for work, either employed or unemployed. It does not necessarily mean 
people actually employed. Then the statement that in 40 years there 
was a 7-percent gain in the number of employed per 1,000 of population, 
clerical employment gained 370 percent, would have to be seriously 
qualified, would it not ? 

Mr. Nichol. We were guided by the figures in the census of manu- 
facturers. We accepted those as being correct. 

Dr. Anderson. The census of manufacturers didn't give the data 
for 1930. The 1930 data were taken from tlie census of population in 
which the division on census of occupations is recorded. The point I 
am making is that the frequent translation of census of occupations 
data into census of employment data is an incorrect use of material. 

Mr. Nichol. I have never been aware of that. 

I have taken it naturally for granted that those figures were cor- 
rect as stated. 

Dr. Anderson. As a matter of fact, the census itself is so definitely 
aware of it that in this particular census it no longer will have the 
captions that have usually appeared, "Gainfully employed," and cap- 
tions of tl at sort which have been so misleading. It will now have 

1 See p. 16772. 



16774 CONCENTRATION OF ECONOMIC POWER 

strict census of occupations in order to overcome that difficulty. But 
I take it that the same sort of reasoning was used in your statement 
when you made comparisons beween the situations in England at 
various periods of time. • The English figures are also occupational 
figures, occupational census figures rather than actual employment 
census figures. 

Mr. NiCHOL. Yes. 

Mr. Pike. Is that a very substantial error? 

Dr. Anderson. No one knows the size of the error. Let me show 
you the size of the error if you took it at a period of time such as 
this. I have a document here which is a United States Department 
of Labor Wage and Hours Division document, Beport of Proposal 
to Exempt Clerical Employees from the Hours Provision of the 
Fair Labor Standards Act of March 1, 1940. To show you the wide 
margin of error that could take place — I don't say it did, but the fact 
of the matter is that we don't know what the size of the error is — 
in November 1937, the Census of Unemployment found 943,000 cleri- 
cal einployees and kindred workers totally unemployed or on work 
relief in the United States, If the census had been taken in 1937 the 
943,000 would have been included in this group of presumed em- 
ployed workers. 

Mr. Pike., It doesn't necessarily infer that the error increases or 
decreases by censuses, so that if the percentage of error had been 
the same 

Dr. Anderson (interposing). Of course, you know that these cen- 
suses coming once every 10 years we would have to have a very de- 
tailed, analysis of- what was occurring with respect to actual employ- 
ment in each occupational category and subgroup in order to know 
that the unemployment factor was canceled out in successive censuses. 

Mr. Pike. I was looking at an exhibit that Dr. Kreps brought in 
in the first day's statement.^ The figures aren't strikingly compara- 
ble but they are something of the same nature. 

Dr. Anderson. I drew attention at the time, as you remember, to 
this very point. 'The caption reads "Occupational Distribution of 
Gainful Workers," gainful workers being a concept meaning all those 
who offer themselves or are considered to be available for labor. It 
does not treat of employment. In other words, it is a caption de- 
scriptive of the labor force rather than of employment conditions. 

Mr. Pike. So thr.t any conclusion you would draw from such fig- 
ures wouldn't be aggregate. In the case, however, where you get an 
increase of 200 of 300 or 400 percent, you would say there was a 
substantial increase in there somewhere. 

Dr. Anderson. In employment as well as in the number of people 
available, that is likely true. 

Mr. Pike. If the error wouldn't be large enough to throw the 
trend out. All the people unemployed wouldn't have said in 1890 
that they wanted to work in a machine shop and in 1930' they wanted 
to work at a desk. 

Dr. Anderson. That is right; and it is true, as Mr. Nichol has 
indicated, with this correction that I have attempted to bring in, 
that the focus of attention upon clerical service in the United States 
has been out of ail i)roi)<)rtion to the foclis of attention upon any 
other broad group of gainful workers. 

' See "Exhibit No. 24;5T," inda p, 172S1. 



CONCENTRATION OF ECONOMIC POWER 16775 

EFFECT OF MECHANIZATION UPON EARNINGS 

Dr. Anderson. I wanted to ask a further question of considerable 
importance, Mr, Nichol, with respect to the effect of business ma- 
chines and mechanization in the clerical field on clerical wages and 
earnings. Do you have any data that would indicate what has been 
the result? 

Mr. Nichol. No; but my general impression would be that people 
who are trained to operate our machin"es are promoted and receive 
more remuneration than they did in the previous occupation. Is 
that the point you wanted? 

Dr. Anderson. Yes. The United States Civil Service Personnel 
Classification Board made a study in 1929 on this point. They were 
trying to establish certain classifications of employees and they made 
a very sizeable comparison, in large and small cities, of routine 
stenographer-cierks and dictating-machine operators. Then they ran 
out the percentage of workers with annual earnings of less than 
$1,550 and found that 69 percent of the routine stenographer-clerks 
were in that category, as compared with 81 percent of the dictating- 
machine operators. They found that 79 percent of the bookkeeping- 
ma,chine operators were in the low-wage category, as compared with 
48 percent of the routine bookkeepers. Would you care to comment on 
those figures as an indication of the results of mechanization? 

(The table referred to was marked "Exhibit No. 2608" and is in- 
cluded in the appendix on p. 17425.) 

Mr. Nichol. Where did these figures come from ? 

Dr. Anderson. These are from the United States Civil Service 
Personnel Classification Board study, 1929. 

Mr. Nichol. I am not equipped to answer that specifically. As I 
said before, from my general knowledge it has been my impression 
that the people who operate our machines are transferred from other 
occupations and receive more money after their training and become 
qualified and competent. 

Dr. Anderson. So that your conclusion is that mechanization in the 
clerical division actually does not have a detrimental effect upon 
wages ? 

Mr. Nichol. Yes, sir. 

Dr. "LuBiN. Is this a classification of Government employees? 

Dr. Anderson. No. This was a classification made by the civil 
service of outside workers in the large and small cities. 

Mr. O'CoNNELL. Dr. Anderson, if I understood those figures cor- 
rectly, they come to a somewhat different conclusion from the one 
that Mr. Nichol believes to be the situation. 

Dr. Anderson. That is right. I wanted to bring the contrast in to 
get the judgment of Mr. Nichol, who has had such broad experience 
in the field. His conclusion is quite opposed to this one. 

Mr. Michol, So far as that is concerned, the application to our 
particular business could be very readily ascertained, and I will do so 
for my own satisfaction. 

Dr. LuBiN. Will you send us for the record such figures as you do 
find? 

Mr. Nichol. Yes ; I will be glad to. 

Dr. Anderson. Mr. Nichol, I know the seriousness with which you 
went about preparing this paper. I wonder if you would care to 



16776 CONCENTRATION OF ECONOMIC POWER 

make a comment on the availability of material in this broad field 
of clerical occupations and the effect of technology in the field. Was 
it difficult to find data? 

Mr. NicHOL. Yes. 

Dr. Anderson. In other words, you find statistical information on 
this problem is very rare? 

Mr. NicHOL. It requires a great deal of digging in a great many 
sources, and it isn't always up tor date, either. 

Dr. Anderson. Would you be interested in seeing Government 
bodies make available more complete data? 

Mr. NicHOL. I think it would help the present situation, not only 
in our own field but business as a whole. 

Mr. Maginnis. Mr. Nichol, in your sales of machines in other parts 
of the world, are those machines manufactured in this country or do 
you have subsidiary companies in certain foreign countries? 

Mr. NicHOL. Some of them are manufactured here, and we have 
plants in Germany, France, and Italy. 

Mr. Maginnis. Then, most of your machines that are sold in ii>\i- 
rope are sold from those plants you have in Europe? 

Mr. NioHOL. Partially. Those plants are not fully complemented 
in every case. We ship parts of machines and they are assembled 
there in some cases. In one plant they are wholly made. Before 
tariff barriers we made all of the machines here and shipped them 
abroad. 

Mr. Maginnis. Do you manufacture typewriters? 

Mr. Nichol. Yes; in a small way. 

Mr. Maginnis. You don't sell them? 

Mr. NicHOL. We have just gone into the business. 

Dr. LuBiN. What kind of typewriters do you manufacture? 

Mr. NicHOL. Electric typewriters, electromatic typewriters. 

Dr. LuBiN. Can you tell us what it will do? 

Mr. Nichol. Well, its points of advantage are the number of car- 
bon copies which it can make as compared with the manual machine. 

Dr. LuBiN. How many more? 

Mr. NiciiOL. It will make 20 where the average machine cannot 
do better than 6 or 8. Then there is the uniformity of touch, resulting 
in uniform copy. Every letter is alike and it turns out a beautiful 
job. The operator does not have to move her fingers off the keyboard 
for a return of the carriage, turning up of the platen, and all that 
sort of thing, and tabulations. It relieves the operator of fatigue and 
it increases production. 

Dr. LuBiN. How much will it increase production as compared to 
the standard machine? Have you figured that out? 

Mr. NiciioL. That is disputed in a great many ways. We have had 
estimates from 6 to 25 percent. 

Dr. LuBiN. In other words, you can expect the productivity of the 
workei*s, on the average, to increase at least 10 percent by the use of 
this machine? 

Mr. NiciiOL. Yes; although ^ny personal opinion is more than that. 

Mr. Maginnis. Does it have interchangeable type? 

Mr. NiciioL. No, no. 

Mr. Maginnis. Does it have automatic justification? 

Mr. NiCHOL. No ; it does not. I might say that it is used in special 
purposes for stencil cutting. It does a splendid job on stencil cutting 
and duplicating work. 



CONCENTRATION OF ECONOMIC POWER 16777 

Dr. LuBiN. Does that mean that we can expect, with a given rate 
of output for a given firai, to be able to get along with 10 percent 
fewer stenographers? 

Mr. NicHOL. Not necessarily. I think it might mean that more 
letters might be written. 

Dr. LuBiN. But assuming the same volume of output, I mean. 

Mr. NicHOL. Yes, sir. 

Dr. LuBiN. It means that we can look forward to displacement of 
more typists ? 

Mr. NiCHOL. If we ever sell enough of them. 

Mr. Pike. I suppose the price is pretty high, isn't it, Mr, Nichol? 

Mr. NicHOL. The price is $225 as compared with $115 ; that is before 
discount. 

Dr. LuBiN. Mr. Nichol, I notice that you talk about your sales in this 
report. What kind of equipment do you sell other than typewriters ? 

Mr. NicHoiv. Time recorders. 

Dr. Ltjbin. Well, these bookkeeping machines that you have been 
talking about, when you talk about your sales, are they sold? 

Mr. NicHOL. They are rented. 

Dr. LuBiN. So that the word "sale" really should 

Mr. NicHOL (interposing). The word "sales" means billings, really. 

Mr. Pike. I see. 

Mr. Nichol. We both rent and sell our machines, excepting the 
accounting machines; the electric accounting machine is not sold. 
It is rented. Our time recorders and typewriters are sold outright. 

Mr. O'CoNNELL,. In your statement, Mr. Nichol, there are some 
figures about the volume of business machines produced, indicating 
a volume of $246,000,000 in 1937, and a statement to the effect that 
I. B. M.'s share of the value of this business was 7.3 percent. What 
is the basis of the $246,000,000 figure ; is that a cost figure ? 

Mr. Nichol. Yes ; that is the value at the plant. 

Mr. O'CoNNELL. Value at the plant; does that include all the types 
of machines that your company makes ? 

Mr. Nichol. Yes. 

Mr. O'CoNNELL. Well, 7.3 percent of that would be roughly $17,- 
000,000 a year, in that year. Does that mean that that was just about 
the value of the total production of your company in that year? 

Mr. Nichol. Yes. 

Mr. O'CoNNELL. Well, what kind — taking the machines that you 
rent rather than sell 

Mr. Nichol (interposing). I beg your pardon? 

Mr. O^CoNNELL. I say, I take it that a substantial part of your 
production was of machines that you lease and do not sell ? 

Mr. Nichol. That is right. 

Mr. O'CoNNELL. Well, what kind of a figure would you use for 
that type of equipment? There is no selling price for it, is there? 

Mr. Nichol. No. 

Mr. O'CoNNELL. Well, how would you figure that? 

Mr. Nichol. This was the value at the factory. The sales price 
has nothing to do with this figure. 

Mr. O'CoNNELL. Well, what is it, a cost priced 

Mr. Nichol. A cost price at the factory. 

Mr. O'CoNNELL. You mean the cost of all the machines you made? 

Mr. Nichol. The cost of all the accounting machines is $246,- 
000,000 and our cost is 7.3 percent of that. 



16778 CONCENTRATION OF ECONOIvIIC POWER 

Mr. O'CoNNELL. The total cost of all the machines that your com- 
pany made in 1937 was 7.3 percent of the total of $246,000,000? 

Mr. NiCHOL. Of the total. Our total production is about $17,- 
000,000 i-n terms of cost. We got this other figure from the Census 
of Manufacturers. It was 7.3 as our own figure. 

Mr. O'CoNNELL. Of course, but 

Mr. NicHOL (interposing). Our own proportion of that produc- 
tion cost-— — 

Mr. O'CoNNELL (interposing). Do you happen to have in mind 
what the value, what the total amount of vour billings in 1937 was? 

Mr. NicHOL. No; I don't. In the vicinity of $25,000,000 to $30,- 
000,000, I think. 

Mr. O'CoNNELL. Between $25,000,000 and $30,000,000, you say? 

Mr. NicHOL. Yes. That includes a service bureau. We have peo- 
ple who go to business and do their work for them with our machmes. 
There is a human relation involved there. In other words, we take 
a certain amount of money for the human service, and then we pay 
those human beings, plus a certain job cost for statistics which are 
produced. Then there is the sale of cards that go with the machines 
in addition to the rental. The cost of material purchased was about 
$7,000,000 last year. 

Mr. O'CoNNELL. How much, about? 

Mr. NicHOL. $7,000,000. 

Mr. O'CoNNELL. Cost of material purchased? 

Mr. NicHOL, Yes. 

Mr. O'CoNNELL. Well, is this 7.3 percent intended to indicate the 
relative importance of the I. B. M. Co. in the business-machines in- 
dustry ? 

Mr. NicHOL. Yes. 

Mr. O'CoNNELL. Do you happen to have in mind the other sub- 
vStantial companies that make up the other 93 percent? 

Mr. NiCHOL. Well, there is the Remington Rand; Underwood El- 
liott Fisher; National Cash; Burroughs; Ohmer; Fare Register; 
Eastman Kodak (one section of its business) ; Royal; all the type- 
writer companies. 

Mr. O'CoNNELL. At that point, if you were to take particular prod- 
ucts of your company and relate those products to the total pro- 
duction of that product, the picture might very well be different. 
For example, in the typewriter industry you indicate that you repre- 
sent one-half of 1 percent of the total output. 

Mr. NiCHOL. That is ri^ht. 

Mr. 0'CoNNEi.L. Now, if we were to take tabulating machines or 
types of equipment that you lease, the percentage wotild be quite 
different, would it not? 

Mr. NicHOL. You mean leave the typewriters out? 

Mr. 0'CoNNEi>L. Well, that was an example of one thing. That 
would really change the picture substantially, isn't that right? 

Mr. NicHOL. That would change it; yes. We use that figure be- 
cause we are in competition with every known type of business ma- 
chine; we ai'e in competition on every deal with somebody, not one 
but many. We are in coiDpetitiou with the adding machine, the 
compt-oinctiT, tlu^ l)()()kk'('oj)ing macliines, and all ty[)es of bnsiness 
niacliines. 

Mr. O'CoNNELL. U'ell, till' leason J asked (he. (iiicstion was that in 
ffeneral. I was under the imiiression that the 1. B. M. Co., in certain 



CONCENTRATION OF ECONOMIC POWER 16779 

lines at least, was a much more — ^had control of or was blessed with 
a more substantial portion of the market than 7.3 percent 

Mr. NiCHOL. I think that is a general misconception. 

Mr. O'CoNNELL. A general misconception ? I think the 7.3 percent 
might give rise to something of a misconception when applied to 
particular products. I don't think it is at all an accurate picture 
of the control you have of tabulating machines which you lease to 
the Government, for example, and to other people. 

Mr. NiOHOL. Well, we believe it to be accurate because we are in 
daily competition with all of these machines and that is the per- 
centage of, well, of the value of the machines that are produced by 
the people with whom we are in competition. 

Mr. O'CoNNELL. Yes ; that is, taking the over-all picture of every- 
thing, regardless of whether you happen to be just coming into the 
business, as in typewriters, or whether it happens to be something 
that you have been in longer and have a larger control of the market ? 

Mr. NiCHOL. That is right. 

Dr. LuBiN. Mr. Nichol, if you took out the typewriting figures 
for the total output of the industry, what percentage would your 
figure be of the total ? 

Mr. NiCHOL. I am sorry. I don't know that. There wouldn't be 
much difference. We can get that for you if you like. 

Mr. Maginnis. Mr. Nichol, what do you mean by business machines 
in the use of that figure, $246,000,000? 

Mr. NiCHOL. I mean the business machines in the 

Mr. Maginnis (interposing). What does it include? 

Mr. NicHOL. Machines that are used for keeping records, adding 
machines, listing-adding bookkeeping machines, and bookkeeping- 
billing machines, calculating machines, cash registers, fare registers, 
addressing and billing machines, numbering machines, checkwriting 
and perforating machines, and typewriters. 

Mr. Maginnis. You don't make any cash registers? 

Mr. NiCHOL. Any what? 

Mr. Maginnis. Cash registers. 

Mr. NiCHOL. Yes; but the cash register makes an accounting ma- 
chine. We don't make the cash register, but they make an accounting 
machine, and we are in direct competition with them. 

Mr. Maginnis. You are in competition with them as on the account- 
ing machine, but you do not make cash registers ? 

Mr. NicHOL. That is true; we do not. 

Mr. Maginnis. And in the typewriter field, it is only 11/2 to 1 
percent ? 

Mr. NiCHOL. That is right. That one-half of 1 percent would not 
affect the figure very much. 

Mr. O'CoNNELL. It wouldn't affect it? Well, it depends on how 
much of the $246,000,000 are represented by typewriters, does it not? 

Mr. Maginnis. Yes ; I should think so. 

Mr. O'CoNNELL. Do you happen to know that figure? 

Mr. NiGHOL. The typewriter figures we have here, including parts, 
is about $43,000,000. 

Mr. O'CoNNELL. About 20 percent of the total ? 

Mr. NicHOL. And ours is $614,000. 

Mr. Maginnis. Could you say from the figures you have available, 
Mr. Nichol, what percent your company has in the business in the 



16780 CONCENTRATION OF ECONOMIC POWER 

particular field you are in, eliminating typewriters and cash registers 
and any other machines that you do not cover? 

Mr. NiCHOL. Of course, we feel and we always have felt that we are 
in the same line of business that all these other companies are, or with 
any company that does record making of any kind or record keeping 
by a machine. 

Mr. O'CoNNEix. Well, I don't think there is any quarrel about that. 
The only point I think we are trying to make here is that if the com- 
parison were made in lines in which you have a more substantial 
interest, the percentage of 7.3 would be very materially changed. I 
think if you merely eliminated typewriters, you reduce it; if you take 
fifty-odd million from the total figure and deduct the 50,000 figure 
from your cost figure, you would find that 7.3 percent would be very 
substantially changed. 

Mr. NiCHOL. Of course, the typewriter companies sell recording ma- 
chines; I mean their typewriters are made to record, and bill, and 
everything else. 

Mr. O'CoNNELL. I understand, but 1 still want to point out 

Mr. NiOHOL (interposing). It would make a difference, I agree with 
you, if you take out the typewriters. There is uniquestionably a 
difference. 

Mr. O'CoNNELL. Or if you take any other number of things out. If 
we were to make a comparison between the total value of a particular 
product and your percentage of production of that particular product 
in any specific case we take, you would probably find it would vary 
very greatly from 7.3 percent. It would be on the low side, as in type- 
writers, or on the high side of something else. Isn't that true ? 

Mr. NiCHOL. I should like to make the points 

Mr. O'CoNNELL (interposing). Isn't that true, please? 

Mr. NiCHOL, I should like to make the point that we frequently re- 
place other systems, which consist of adding machines, computing ma- 
chines, accounting machines of various makes, and sometimes they re- 
place us, quite frequently, and sometimes in competition they get the 
business and sometimes we get it. So we feel very definitely that we are 
in competition with all of those record-making and record-keeping ma- 
chines. 

Mr. O'CoNNELL. Well, that may very well be true, but that has 
little to do with the question I asked. Isn't it a fact, please? 

Mr. NiCHOL. If you took the typewriters oui, it would be something 
like $43,000,000 that would come out of that total, and if you took those 
out, it would make a difference in that percentage. There is no ques- 
tion about that. I believe that. 

Mr. Maginnis. How much would you take out for the cash-register 
business ? 

Dr. Anderson. Mr. Nichol, might we not achieve the purpose of the 
member of the committee — I think you wanted to get an answer? 

Mr. Maginnis. I would like to get it if it is available. 

Mr. NiCHOL. I don't think it is available right here, but we would be 
very glad to get it for you any way you wanted it. 

Mr. Maginnis. Whatever it is, $50,000,000 or $75,000,000 or whatever 
it might be; it would again come oflf the $246,000,000, roughly, and 
would 

Mr. NicHOL (interposing) . Only part of it. 

Mr. Maginnis. And would again change the percentage. 



CONCENTRATION OF ECONOMIC POWER 16781 

Mr. Nichols. I say only part of it, because the cash-register company 
does a large volume of accounting-machine business. 

Mr. Maginnis. Well, we are speaking — you don't do any cash regis- 
ter machine business ? 

Mr. NiCHOL. No. If we take 

Mr. Maginnis (interposing). Wliere they compete with you on 
your machines, that is a different proposition ? 

Mr. NicHOL. That is right. 

Dr. Anderson. I was going to suggest, Mr. Nichol, that we might 
achieve the purpose the committee member, is driving at, namely, a 
better break-down of the amount of business per products done by your 
company, by asking you to submit to us, if you would, a list or table 
in which you would have a break-down of the type of business, the 
type of machine, and the proportion of the business done by you, as 
compared with all other companies. 

Mr. NicHOL. We shall be glad to do that. 

Dr. Anderson. I think that would solve the problem. 

Mr. Maginnis. We probably had a misconception as to I. B. M. 

Mr. NiCHOL. Possibly. 

Mr. Maginnis. We thought it was a good deal larger than it would 
appear to be ; from the figure of 7.3 percent which you have given r- 

physical and social effects of mechanization 

Dr. Anderson (interposing). Mr. Nichol, I wanted to ask a ques- 
tion that was not touched upon in your paper, which is of importance 
in analysis of technology. What are the physical and social effects 
of mechanization upon workers? Now, I have, for example, before 
me an International Labour Review publication of the International 
Labour Office, in which they treat the problem. By way of introduc- 
ing the topic, I shall read one sentence or so from the subject of 
fatigue, "The increase in fatigue which often results from mechaniza- 
tion," and then they go on and discuss fatigue, monotony, and effects 
of that kind as a result of mechanization as compared to hand opera- 
tions. Have you made any studies, or has your research division made 
any studies to indicate anything about these matters ? 

Mr. NicHOL. No. 

Dr. Anderson. You do not know whether there is increase or de- 
crease in fatigue or mental stability of workers in those physical, 
psychological aspects that affect production and worker well-being 
as the result of production of mechanical devices ? 

Mr. Nichol: I do not know specifically but from my own observa- 
tion and experience, I would say that fatigue is relieved. 

Dr. Anderson. Would you have any figures to indicate whether 
the introduction of machines has anything to do with the ratio of the 
sexes employed in clerical work ? 

Mr. Nichol. No. 

Dr. Anderson. Does it have any effect upon the introduction of 
employment of proportionately more or fewer women? 

Mr. Nichol. I should say more women. 

Mr. Pike. One thing : I don't know how much it has to do with 
technological unemployment, but I think it fits in here somewhere, 
Mr. Nichol. I would like to get your philosophy of the leasing as 



16782 CONCENTRATION OF ECONOMIC POWER 

against the- selling and see if it does not fit into this somewhere. What 
effect would it have ? In other words, why you do it. That is purely 
a business reason, of course, but I would like to see if it doesn't have 
some bearing on this problem of technological unemployment, let's 
say, with the customer. I am not sure whether or not this fits in, and 
it may be off the track, but I would like to a^et your basic background 
to that leasing practice. 

Mr. NicHOL. We believe that the leasing practice is best for our- 
selves and for our users. We have an engineering, development, and 
patent department, which is constantly improving our machines, and 
we have never held back any development. As soon as it is ready, 
we put it on the market, often with great costs to ourselves at the 
time. 

So if you were to buy machines today, and we brought out some- 
thing radically new next year that you should have, you would have 
bought those machines at a tremendous cost and you would probably 
feel that you would have to depreciate or amortize them before you 
traded them in. We trade them in immediately and give you the 
benefit of the latest technological advances. 

We feel that in the long run, we can better serve our customers and 
ourselves in that respect. 

Then there is the question of the service. These machines are 
highly complicated electrical devices, and we have in the neighborhood 
of 1,100 service men who are constantly operating in our customers' 
offices, keeping the machines in maintenance and order. 

Mr. Pike. You accept that responsibility and do it as a part of the 
renting ? 

Mr. NicHOL. Yes, indeed ; besides which we must give business coun- 
sel. We train all of our men as well as we can in our very compre- 
hensive educational system, to know every angle of business, so that 
they are able to discuss with you sales problems, manufacturing prob- 
lems and other kinds of proolems — counsel with you and apply our 
machines and systems to your particular problems. 

Mr. Pike. Now, if you sold a machine and after a couple of months, 
the buyer decided that he had made a mistake and that it wasn't any 
help to him, he has nobody to blame but himself really, but suppose 
he leases the machine from you and after 2 or 3 months, he actually 
finds that it doesn't help him as much as he had hoped, what happens 
then? 

Mr. NicHOL. We try to prevent any such thing from happening be- 
fore we take the order. In other words, we investigate your situation 
very thoroughly. Sometimes before we take your order — and if a 
salesman in overenthusiasm tries to sell us on the fact that you could 
use our machines for certain purposes and we believe you could not — 
we don't take the business. But the fact remains that we do have that 
occasionally occur. We take our machines back in that event. 

Dr. LuBiN. How long do your leases run for ? 

Mr. NicHOL. Our original lease runs for a year with a 3 months' 
cancelation clause, but I might say that we never enforce it. 

Dr. LuBiN. So that^ 

Mr. NiciiOL (interposing). If you wanted to put them back, un- 
fortunately we would have to take them back because we only want 
satisfied customers. Our machines are in the same category as an 



CONCENTRATION OF ECONOMIC POWER 16783 

employee. If you don't like him, if he isn't producing for you, you 
get rid of him. 

Dr. LuBiN. Well, I fully appreciate the fact that your time-keeping 
machines are older machines, they have been in existence for a longer 
period of time, but they are being constantly improved, aren't they ? 

Mr. NiCHOL. Yes. 

Dr. LuBiN. Wherein is the difference between that type of unit and, 
let's say, a tabulating unit? I mean, if the purpose is to make avail- 
able to the consumer, I mean the businessman who uses your equipment, 
the most modern advances, as soon as they are available, why is it that 
you — if that is the fundamental basis of your sales policy— why is it, 
then, that you sell time machines and you don't sell any others ? 

Mr. NiCHOL. To answer the first part of your question, there isn't 
much improvement that you can make on time-recording mechanisms ; 
in other wojds, they are limited to recording time. You may change 
the outside and .you may do it a little faster, but that is about as far 
as you can go. It simply records your incomings and outgoings, the 
time you start a job^ and the time you finish the job. That is about 
what it can accomplish. Those are simple mechanisms, not requiring 
the degree of service, both mechanical and in a business advisory nature, 
that other machines do^ 

Mr. Maginnis. Mr. Nichol, I would just like to ask you this question : 
Are your employees organized ? 

Mr. NiCHOL. No ; open shop. 

Mr. Maginnis. Entirely? 

Mr. Nichol. Yes. 

Mr, Maginnis. From top to bottom ? 

Mr. Nichol. That is right. 

Mr. Chantland. I take it that your 1,100 service men are not 
included in this Endicott plant ? 

Mr. Nichol. That is right. They are throughout the United States,- 
in every city. 

CLASSIFICATION OF LABOR FORCE 

Mr. Chantland. Below the officials of the company, what is the total 
labor and salary number for 1939 ? 

Mr. Nichol. Below the officials? 

Mr. Chantland. Yes; leaving out the officials and iiicluding all 
other salaried people and labor. 

Mr. Nichol. I haven't got that figure. 

Mr. Chantland. Well, approximately. 

Mr. Watson. Is that number ? 

Mr. Chantland. Yes; number. 

Mr. Nichol. I haven't got it that way. But we can get it for you. 

Mr. Chantland. Well, tabulate them by classes and add them up. 

Mr. Nichol. I haven't got it here, I have just the total number 
of employees here. We can get it any way that you would like 
to have it. 

Dr. Anderson, Mr. Nichol, I wonder if you couldn't make a break- 
down of "Exhibit No. 2607" into groups which would indicate to us 
salary and other workers, wage earners, by certain groupings that 
would clearly bring out the proportionate number and earnings in 
particular groups? In other words, the average is confusing be- 



16784 CONCENTRATION OF ECONOMIC TOWER 

cause it may conceal a wide range. If you enlarge the table to 
do that it would give us the data that has been asked for. 

Mr. NjcHOL. We would be glad to do that. The figure I quoted 
from thait table was the hourly workers — that $1,850 — in the plant. 

Mr. Chantland. Is there any objection to having that take in the 
entire company? 

Mr. NiCHOL. We would be very glad to get that for you. 

Mr. Pike. You mean that 7,610 did include officials? 

Mr. NiCHOL. That includes everybod,y in the United States. 

Mr. Pike. And the 11,478 included everybody in the world? 

Mr. NiCHOL The world picture; yes. 

Mr. Pike. Well, by just subtracting the number of officials you 
ought to come to it. You ought to be able to guess those ejvsily. 

Mr. NiCHOL. Well, it is a matter of definition of officials. 

Mr. Watson. In the hourly work, that does not include the foremen. 

Mr. NiGHOL. That is just the hourly workers. 

Mr. Maginnis. What do you mean by hourly workers? 

Mr. NiCHOii. The men who are paid by the hour at the plant. 

The Chairman. Then that does not include your salesmen? 

Mr. NiCHOL. No. 

Mr. Maginnis. Nor the foremen? 

Mr. NiCHOL. Nor the foremen. Just the hourly workers. 

Mr. Chantland. What Dr. Anderson has called for now will show 
this, though? 

Mr. NiCHOL. That is right. 

Dr. Anderson. In other words, you will supply us with captions? 

Mr. NiCHOL. We will be very glad to get that. 

Dr. Anderson. If there are no more questions of Mr. Nichol, I think 
we might turn to questions of Mr. Watson, who has kindly consented 
to come down here and spend the morning with us, and who has not 
only developed this business from its inception to the present stage 
but who is a man who has done a great deal of thinking, some speak- 
ing, and much acting in this whole problem that concerns us and the 
committee. 

I wanted to ask this question first, Mr. Watson : You have placed 
in your own organization, and I understand elsewhere, great em- 
phasis upon educational training, placement work, and retraining and 
replacement work of an occupational character; do I take it that in 
doing so it is your conception that a dynamic technological society, 
such as we have, in which frequent changes occur, requires sorjie rather 
substantial program of training and placement and retraining and 
replacement ? Would you care to comment upon that ? 

Mr. Watson. I think. Dr. Anderson and gentlemen, the only thing 
we have to depend on to solve this and the many other problems 
that confront us is education. 

On that point I should like to bring out this fact in regard to the 
rental of our machines. We cannot figure out any way for our users 
to service those machines. We constantly run a school in our plant, 
teaching men to go out in the field and take care of these machines 
because our users trust entirely to the accuracy of our machines, 
and they must be exactly right, not pretty nearly right. So that is 
the basis of our rental program. I know and I believe that our cus- 
tomers will tell you that they would prefer that, because if they had 
to make their own repairs they would have to train men, and, as we 



CONCENTRATION OF ECONOMIC POWER 16785 

put new devices on the machine, they would' have to retrain those 
men. I should like to make that point clear. 

Dr. LuBiN. Isn't it true, however, that other firms who make com- 
plicated machinery, who sell these machines, also maintain service 
organizations? With such a simple thing as an oil burner, I know if 
my oil burner goes bad I call up the company that represents the 
manufacturer and they have trained service men who are available. 
Isn't that a pretty general practice for all firms, whether they seH- 
or lease, who have a complicated product ? 

Mr. Watson. It is with some, and with others it is not, but in our 
particularly complicated machines I wouldn't want to undertake to 
build a business where I would put the responsibility of servicing the 
machines up to the user. To begin w4th they would have to invest a 
large amount in the equipment, and if they didn't give them proper 
service they would say that our machines were no good. The same 
would be true of all their friends who inquired about it. Then there 
is the regular inspection that we give those machines to see that they 
are working correctly. In fact, I consider our s,ervice department 
the most important department in our business. The fact that our 
customers can return the machines to us at any time they are not 
satisfied, I think, proves that our policy along that line is a fair policy 
to the customers. Does that answer you ? 

Dr. LuBiN. As far as we are concerned, in our own department, we 
find the service excellent when it comes to getting service on the 
machines. 

Mr. Watson. Thank you very nuich. On the matter of education — 
I beg your pardon. 

Acting Chairman Williams. I wanted to ask if in addition to the 
regular service you render when you sell or place one of these machines 
you also train in the office of the customer someone in the use of it. 

Mr. Watson. Yes. 

Acting Chairman Williams. That is part of your sales service? 

Mr. Watson. It is; in addition to training them in the office we 
have a school that I should say runs at least 10 months of the year 
where our customers send their supervisors, the man or woman in 
the business who wdll supervise the work done by our machines. We 
give those people training of 2 weeks in our regular school for that 
kind of work, and then we carry on that training in the various branch 
offices. Our proposition is a service proposition. 

(Senator O'Mahoney assumed the chair.) 

Mr. Maginnis. Pretty nearly all the machines are extremely com- 
plicated and it would seem that it would require a very high degree 
of mechanical skill to keep them in order. 

Mr. Watson. Yes. sir: it does. 

training for reemployment 

Dr. Anderson. Mr. Watson, j^ou feel that in a society where tech- 
nology is advancing constantly, some workers will be, as you put it, 
momentarily displaced. Tliere are some people who feel that the 
adjustments that people can' make cost them a great deal, and that 
the time it takes a man to find a new job after being thrown out is 
lengthening. You made some point that a training and retraining 
program would help. What did you have in mind? 



16786 CONCENTRATION OF ECONOMIC POWER 

Mr. Watson. I am not qualified to lay out the entire curriculum, 
but I would say education in all directions. What you people are 
doing here I include in what I call the educational program because 
you are going to learn a lot of things about us, and we are going to 
learn things that you want us to do. If we cooperate we are going 
to make progress, we are going to be able to do a better job. Now 
it is true that as improved machinery, not only ours but machine 
tools, drill presses, screw machines, etc., will do more work than the 
old machinery, there is a temporary unemployment that hits some 
people. That is one of the things we have got to figure out. 

The Chairman. Why do you call it a temporary unemployment ? 

Mr. Watson. Because the unemployment as a whole in the country 
keeps growing greater as we progress, as these figures show, and an- 
other thing that was brought out 

The Chairman (interposing). What increases? 

Mr. Watson. The general employment. 

The Chairman. You meant employment? I thought you said 
unemployment. 

Mr. Watson. I'm sorry, I meant to say employment, because as 
was brought out by Mr. Nichol, employment starts in the mines and 
smelting mills and so forth, and all along the line, before the ma- 
chine is ready to go into our shop and displace some men there, or if 
it is one of our machines, before it goes into the office. 

The Chairman. Is that a statistical or a theoretical conclusion ? 

Mr. Watson. It is a statistical conclusion which you can verify by 
the Government records, that in these industries where improved ma- 
chinery has been used the percentage of employment in those indus- 
tries has increased faster than the population of the country has in- 
creased. I have always contended that the use of improved machinery 
makes men more valuable and makes the products that they produce 
cheaper for the consumer, and in our country where we manufacture 
47 percent of everything that is manufactured in the world, through 
that process our working people and all of our people have been edu- 
cated to want to use these things that they are manufacturing, so the 
records show that we have been able to consume a little more than 90 
percent — I am speaking of the average, you understand. 

The Chairman. Now your contention is that technological ad- 
vance by increasing efficiency and increasing productivity and creat- 
ing new industries necessarily creates more employment than before ? 

Mr. Watson. Yes, sir; that is not my personal judgment; that is 
based on the actual figures which you can verify. 

The Chairman. Of course, that assumes that the figures which are 
collected with respect to specific industries, including new industries, 
will give a conclusion as to the over-all condition, doesn't it? 

Mr. Watson. That only applies in a progressive country where you 
are increasing the standards of living and trying to do more for your 
people, through increases in wage rates and reducing working hours 
and giving them more opportunity to enjoy life. 

The Chairman. Of course, on the other hand, those of us who sit 
on various committees of Congress are confronted, particularly when 
the W. P. A. appropriation bill comes before us, with^ definite 
statistics of unemployment which do not seem to reflect any substan- 
tial decrease. Now in the original statement that was read here this 
morning you had a very interesting account taken from the Reader's 



CONCENTRATION OF ECONOMIC POWER 16787 

Digest, of several extraordinary new inventions or discoveries which 
have come into existence during the past 10 years; that is to say, 
during the 10 years of the depression, so-called, with the unemploy- 
ment figures reaching an all-time high ; nevertheless, technology has 
created more new industries than were ever created before m any 
comparable period. I think that probably is a correct statement, 
isn't it? 

Mr. Watson. I think so. 

The Chairman. But still we have this unemployment problem. 

Mr. Watson. The things we are speaking of have not gotten under 
way yet to create the employment which they will create in the next 
few years, because it takes a long time — you take a new device, you 
get out a patent, and we figure as a general rule if it is a major ma- 
chine that it will be 10 years before you are going to make any profit 
out of it, it will be 5 years before you are ready to put your trial 
models out for final test with the users. 

The Chairman, Let's take two of the items that are listed in this 
article from the Reader's Digest, streamline trains and transoceanic 
passenger air traffic. I haven't used the transoceanic airplane yet, 
but I do use the streamline trains consistently in traveling home to 
Cheyenne. They have been a development which has completely 
matured, practically, during this 10-year period. They are being used 
daily running out of Chicago. 

Mr. Watson. They are used on that road more than any place 
else, but they are not used generally on the railroads. 

The Chairman. Throughout the United States that might be, but 
of course the West is always a little bit more progressive. 

Mr. Watson. I agree with you on that. Senator. That is why I 
like to go out in that country. 

The Chairman. But with this expansion in the use of streamline 
trains, during this same 100-year period and with the establislmient of 
regular travel across the Atlantic and across the Pacific, and with 
all the new jobs created in the air lines, we still have this backlog of 
unemployment upon which we are apparently unable to make any 
impression. Does that situation hold out hope that we are going to 
solve unemployment and, if so, when? 

PROSPECT OF FOREIGN MARKETS 

Mr. Watson. I think so ; I think we are going to solve it in a very 
satisfactory way to the unemployed, but I don't mean to say that we 
are going to do it through the few streamline trains already put in 
use, but I believe they will be helpful. My honest judgment is that 
we are never going to completiely solve it until we find a market for our 
surplus in other countries, because I don't believe w^e can solve the 
problem for our farmers and our workers until we do increase pro- 
duction. 

The Chairman. Other countries will develop their own surpluses 
with the same technological advance which we are giving them, will 
they not ? 

Mr. Watson, There is going to be an advance, but you understand 
that we are only 6 percent of the world's population, our per capita 
consumption is only seven times as great as the rest of the world's, and 
as those people become enlightened, if the standard of living among 



16788 CONCENTRATION OF ECONOMiC POWER 

these other 94 percent went up just a very, very little it would go a 
long way in solving our problem, because when I say 10 percent, of 
course you know what happened in our cotton industry, we used to 
market 56 i)ercent abroad. 

The Chairman. Are we then to wait for the solution of the unem- 
ployment problem until we are able to market our surplus cotton and 
our surplus wheat and our surplus manufacturing output in other 
countries ? 

Mr. Watson. We have to market a certain percentage of it there, 
and in doing that create more employment here so we cad market more 
here at home. 

The Chairman. Of course, we are trying to do that. Congress has 
made innumerable appropriations for that purpose. It has subsidized 
the exportation of some surplus commodities, and the effect of that is 
not to make any apparent impression upon unemployment nor indeed 
upon the price which the farmer gets for his surplus product. 

Now let me ask you this. In your own institution, or speaking from 
your experience in your own institution, what is the position of the 
worker 40 years of age or over who is displaced by technological ad- 
vance ? What are the chances for his being absorbed or of h^r being 
absorbed ? 

Mr. Watson. I have never displaced anyone in our industry except 
for cause. 

The Chairman. That is an excellent record, but they do find them- 
selves pushed out of employment in other industries. 

Mr. Watson. I don't know, but in our own industry a high per- 
centage of men whose value we appreciate are people over 40 years 
of age. 

The Chairman. Do you hire anybody over 40 ? 

Mr. Watson. Oh, yes. 

The Chairman. That age is no bar to employment in I. B. M. ? 

Mr. Watson. If a man has had experience, for example, in tool 
making, a very important thing in our business and it takes a long time 
to make a first-class tool maker, we have never made any discrimina- 
tion. We have tried in our own w^ay to take care of people as they 
grow old. We have never put people on relief; we maintained our 
minimum wage during the depression of $18 for married men and $15 
for single men. 

The Chairman. We had a human exhibit, it was called, here a few- 
days ago in the person of a steel worker who was quite evidently a 
man of physical vigor. He was about 50 years of age, as I recall, 
and* he told us that though he was a skilled operator of a rolling mill 
and skilled in the practice of acetylene welding, nevertheless he had 
been refused employment because he was over 40, so that was what 
suggested this question to my mind. May I now ask you how many 
persons over 40 have been hired by L B. M. during the last year ? 

Mr. Watson. I couldn't give you that figure, but I can say to you 
without any reservation that we have no rules against employing 
them, and I want to say further that I believe those men should be 
given consideration, and everything possible should be done to get 
the man around 40 or 45 into a permanent position so that he will 
have' something to grow old with. 

The Chairman. How would you do that? 



CONCENTRATION OF ECONOMIC POWER 16789 

Mr. Watson. Through education. If a man cannot get a job in 
one thing, to find some other place. 

The Chairman. But who would do the training? 

Mr. Watson, We do it in our business, and the majority of people 
who employ skilled labor are giving consideration to- the same thing 
and are trying to do the same things we are trying to do. I think 
that we owe to the workers of this country a certain security. I am 
speaking now of the men who are willing to work and who are dis- 
placed or lose their jobs through no fault of their own. I have 
always stood on that ground, that these men are entitled to be taken 
care of until they can get new positions. I think it is the duty of 
Government and industry to cooperate and study and work along 
educational lines until they find the proper answer that will be fair • 
to business. Government, and the worker. They have all three got to 
work together on the job. I am a firm believer that when we do that 
these people who are out of employment will be consumers because 
they will have enough to spend to meet their requirements of food and 
heat and light, and so forth, and continue their children in school. 

The Chairman. It is important, then, that these persons shall be 
preserved as effective consuming units? 

Mr. Watson. Absolutely; and as operating units when we need 
them, because we are not always going to be in the position we are 
in now. 

The Chairman. A person on W. P. A. who receives $40 or $50 
a month whereas in a skilled occupation from which he has been dis- 
placed he was able to earn $150 to $200 a month is no longer an 
effective consuming unit in the economy, is he ? So that the W. P. A. 
wage of itself does not create the market which industry needs to 
dispose of and distribute its increasing product, so you feel that 
industry and Government should cooperate. 

Mr. Watson. I do. 

The Chairman. To make certain that all displaced workers are 
absorbed at the earliest possible moment. 

Mr. Watson. Absolutely ; absolutely. I don't think it can be done 
in any other way. 

The Chairman. Do you have any specific suggestion, with the 
exception that there should be cooperation to study the problem? 

Mr. Watson. That is the only suggestion I could make, what Dr. 
Anderson brought up here, education on the part of all of us. 

Dr. Anderson. Mr. Watson, when Philip Murray was here the 
other day he made a very strong statement to the effect that the un- 
solved problem of this decade is the unemployment problem, that it 
is so great that it becomes the dominant problem. He said further 
that it was necessary that Government get management and labor 
into the same room, so that the three could sit down and work out 
this problem, regardless of how long and involved and tortuous the 
route might be. Would you care to comment on such' a proposal ? 

Mr. Watson. I think I did make that statement, that it has got to 
be worked out through the cooperation of Government and labor and 
business. 

Dr. Anderson. So you would be in accord with Mr. Murray's 
suggestion ? 

Mr. Watson. Yes. 



16790 CONCIENTRATION OF ECONOMIC POWER 

Dr. Anderson. Is that kind of thinking fairly general among the 
management of industry at the present time? 

Mr. Watson. It is. I would say that I am quite sure that is the feel- 
ing among all the people with whom I come in contact in the industries 
I am in touch with. 

Dr. Anderson. In other words, if a proposal came seriously from the 
proper source to bring the leadership of this Nation together to wrestle 
with this involved problem, the management of industry would look 
favorably upon it and participate. 

Mr. Watson. Yes. I would like to add one further word. I believe 
that we ought to give very serious consideration to reciprocal trade 
treaties. We know to start out with that we can't have them perfect, 
but I think we ought — I am not a free trader — to have a fair adjust- 
ment of trade barriers, because it is so important for us to import 
things. I am not thinking now of the exporting, but take a nation as 
highly industrialized as we are, manufacturing 47 percent of every- 
thing that is manufactured in the world. We know, for example, that 
the American automobile companies would have to go out of business 
if we didn't import something over 50 different ingredients. If our 
imports were shut off today, it would create a situation in this country 
that I wouldn't know how to make a suggestion to meet except turn 
our standards of living back so far that our people would not be 
satisfied in any way. 

The Chairman. I suppose you wouldn't import commodities from 
other countries if they were m competition with commodities being 
produced here and would have the result of driving down the prices 
of those commodities, would you ? 

Mr. Watson. I am not prepared to speak in detail on that subject 
because that is a subject that requires a lot of careful thought. ' While 
I am interested in international affairs, I think everybody agrees the 
first thing for ' j to do is to consider the effect on our own country as 
a whole. 

The Chairman. As for example, if peace should one day be restored 
to Europe and Nazi Germany should develop business machines of 
similar character to your own, would you think it a good thing to have 
them imported into the United States in order that the wheat farmers 
out in that country could have a better market abroad? 

Mr. Watson. I would take my chances on meeting that kind of com- 
petition if the Government decided that they wanted to handle it in 
that way. 

The Chairman. Of course, that reciprocal trade business was just 
settled in the Senate a week or so ago. 

RESPONSIBILITY OF INDUSTRY TO DISPLACED WORKERS 

Dr. LuBiN. Mr. Watson, I wonder whether you would be willing 
to express an opinion on just where you feel responsibility of indus- 
try ends relative to these people wlio are no longer needed, as you 
say, temporarily, but I think there is evidence to show that that 
period of readjustment is lengthening. For example, Mr. Nichol 
mentioned instances where machines manufactured by you have been 
installed, and although the net number of people in tliose particular 
instances employed showed an increase, there were people, as he said, 
who were displaced. What is the responsibility of the employer, in 



CONCENTRATION OF ECONOMIC POWER 16791 

your opinion, in a case of that sort, say seven people are displaced 
by a given machine in a given office, for those seven ? 

Mr. Watson. First, I think that we should consider what other 
positions in the business we could train them to fill, and if we have 
other positions, it is our responsibility to teach those people how to 
fill them. 

Dr. LuBiN, Where they don't do it, assuming apparently in these 
instances that Mr. Nichol mentioned, that it was impossible, do you 
feel that the employer should share some of the savings in cost that 
resulted from this displacement with these workers who are displaced ? 

Mr. Watson. I wouldn't want to make a specific statement as to 
what all the people in industry should do, but I think I am very safe 
in saying that industrially the country would be very glad to cooperate 
in working out a solution of that problem because it should be worked 
out. I agree with you absolutely. 

Dr. LuBiN. Of course we have made an approach in the form of 
unemployment compensation, but apparently that doesn't last for a 
long enough period. 

Mr. Watson. That is the point. It should last longer, because, 
as I stated before, if a man is put out of a position through no fault 
of his own, and is perfectly willing to work and prefers to work, he 
is in a helpless position if some plan is not figured out to take. care of 
him. 

The Chairman. Referring again to my question a moment ago with 
respect to the creation of more jobs, the over-all creation of more 
jobs, and your statement that the Government statistics demonstrated 
that that was the case I have been checking through the written paper 
and I wonder if this is the statement to which you refer ; 

At the 1890 census, the oflBce equipment industry reported the production 
of about $4,000,000 worth of office machines for domestic use. Of each 1,000 
population, 372 were reported as being employed, of whom 7 had clerical jobs. 
At the 1930 census, production of about $114,000,000 worth of office machines 
for domestic use was reported. Of each 1,000 population, 398 were reported 
as having jobs, of whom 33 had clerical jobs. That is, in 40 years, the total 
number reported as having jobs per 1,000 of population gained 7 percent, but 
clerical employment gained 370 percent.^ 

In other words, in 1890, 372 out of 1,000 were employed, and in 1930, 
398, or 26 more, whereas clerical jobs increased in the same period 
from 7 to 33. May I ask whether these figures as to the total number 
of employed did not refer to the total number who were employed 
in industry ? 

Mr. Watson. No. I might say this 

The Chairman (interposing). That is the gainfully employed 
person? 

Mr. Watson. The great increase in those clerical jobs was brought 
about by the new things that came into use. 

The Chairman. There can be no doubt about that. 

Mr. Watson. Take, for example, the automobile industry alone, the 
clerical increase there, and the great increase in selling household 
articles, and so forth, on the installment plan, has created a lot of 
office and clerical work. 

The Chairman. What I am getting at is this : whether it has not 
been characteristic of this so-called machine age that a good deal of 

1 See p. 16772. 



16792 CONCENTRATION OF ECONOMIC POWER 

the work has been merely transferred from the home to the factory, 
that work which was formerly done in the home or on the farm or 
on the ranch and which was not therefore reportable to the census 
as within the category of gainful employment is now performed in 
the factory and doe&come within the category of gainful employment. 
For example we wouldn't contend, would we, that in 1890, 628 persons 

out of every 1,000 were idle 

Mr. Watson. Did you say idle? 

The 'Chairman. I am just reversing the figures on this. We 
wouldn't say that in 1890, 628 persons out of every 1,000 were idle, 
or had no occupation, and that in 1930, 602 persons were unemployed 
or idle, would we? 

Mr. Watson. That figure is the total population, taking in the chil- 
dren and everyone. 

The Chairman. That is right, but even so, that wouldn't directly 
describe the condition of the country with respect to employment, do 
you think ? 

Mr. Watson. I think it would not. 
Mr. Pike. Were housewives supposed to be idle? 
The Chairman. They were supposed to be idle. 
Mr. Watson. I would like to follow what you have said about the 
work we have done in the home. If our Government should decide that 
we should go back to having work done in the home, then we could 
get along without reciprocal trade treaties with other countries, but 
we would have to knock out standard of living down. We want our. 
standards of living to go up. 
The Chairman. That is true. 

Mr. Watson. I am looking forward, gentlemen, to higher wage 
rates. 

The Chairman. Nobody makes any suggestion whatever that we 
should go back to the old lower standard economy, not at all. I am 
just trymg to develop a correct picture of what these statistics mean, 
and as has been pointed out, women who did so much of the work of 
the world before the machine age were not counted in our census as 
gainfully employed, so that that consideration alone makes a tre- 
mendous difference in the interpretation of figures of this kind. 

Mr. Watson. I tell you, I have never taken any statistical figures 
that I get up myself or get from the Government as necessarily cor- 
rect. What I mean by that, gentlemen, is that conditions change 
while you are compiling the figures; it takes some time to compile 
figures, and by the time you have them compiled the conditions have 
changed. 

If I may inject this thought before I forget it, Mr. Nichol referred 
to some things that are done in our company for our employees, and 
I should like to say a word for our employees. The reason we can do 
those things for our employees, pay them high wages and give them 
other things in the way of insurance, and so forth, is because they 
pay us back in more accurate, better work, but I want that in the^ 
record because I don't want anybody to get the idea that we were 
simply giving money away indiscriminately to our employees. I want 
our employees to get the credit for having earned the money that 
we paid them: 

The CiiATiniAN. The circumstance that we ought to have clear in 
our minds wIkmi we ai'o trying to appraise this problem and when 



CONCENTRATION OF ECONOMIC POWEB 16793 

we are looking at it through the eyes of the census taker, is that we 
must remember that the woman who ran the spinning machine in the 
old days before the invention of the power loom was not recorded 
as gainfully employed, but she was just as gainfully employed as any 
person working in a mill, don't you see ? 

Mr. Watson. And 3,500,000 of them are now domg good jobs right 
in factories, running machines, doing assembly work. 

The Chairman. And turning out undoubtedly in many respects 
better work, and more efficiently. There can be no question about that 
but side by side with that improvement we see this other appalling fact 
that there is displaced labor, and there is an unemployment problem 
and that industry, having been unable to solve it, government has had 
to undertake it, and government has not done it in a particularly 
effective way, I think we must all acknowledge, so, therefore, we come 
the conclusion that in the interest both of business and of government 
we must find the way' to create employment at decent wages for those 
who do not now have it. 

Mr. Watson. I agree with you, Senator, 100 percent, and another 
. thing, I don't think the government has made a complete failure in the 
work they have done on this, because it is a pretty hard job, a pretty 
hard thing to solve. 

The Chairman. I didn't mean to imply that it was a complete failure. 

Mr. Watson. I should like to ask this question, if I may. What is 
the latest figure that we talk about on unemployment ? 

The Chairman. I will let Dr. Lubin answer that. 

Dr. Lubin. There are no official figures. 

Mr. Watson. That is like these figures we were talking about. 

Dr. Lubin. You have 3 sets of figures made public, the American 
Federation of Labor, the C. I. O. and the National Industrial Con- 
ference Board, and they vary by more than 2,000,000 between the high 
and low. Certain assumptions are made in counting the number of 
people who are available for employment. If you include a certain 
number of women as available your figure goes up ; if you include a 
certain number of people between age 16 and 17, the number goes up. 
It va;ries according to the assumptions that you make as to the num- 
ber available. The method is the same. Assupie how many people 
are available for work, subtract from that the number who are work- 
ing, and that number is more or less the same for all 3 estimates, but 
the top'^timates from which you make subtractions vary depending 
upon the hypothesis you use as to who is available. 

The Chairman. The Bureau of Labor Statistics does have fairly 
^&;,^ accurate^ figures with respect to the number of persons who are actually 
%' employed. 

Dr. Lubin. That is right, very definitely so. 

The Chairman. May I ask you now, tnen, how does this figure ac- 
cording to your latest reports compare with the figure say 10 years 
ago? 

Dr. Lubin. Well, as compared let's say for the same month in 1929, 
it is down about 1,000,000. 

The Chairman. In other words for the same month in 1929 we are 
employing about 1,000,000 less persons in the United States today. Is 
that correct ? 

Dr. Lubin. Yes. 

_1244§.l-^41— pt. 30 ^89 



16794 CONCENTRATION OF ECONOMIC POWEI 

The Chairman. The Census Bureau has estimated that the total 
population of the United States is greater than it was in 1929. 

Dr. LuBiN. Yes. 

The Chairman. So that actually whatever the correct figures may 
be there nmst have been an increase in the number of persons available 
for employment over 1929. 

Dr. LuBiN. Oh, yes. 

The Chairman. So that if there are fewer persons employed than 
there were in 1929 and the pool of available workers has been increased, 
then obviously imemployment has increased. There is the center of the 
problem, and these various disagreements. 

PROVISION for UNEMPLOYABLE& 

Mr. Watson (interposing). I think along with that you will prob- 
ably find that the number of unemployables has increased, and I 
think it is very important for us to fiiid out in the number of people 
whom we list as unemployed how many are unemployable due to 
mental or physical ailments of some kind, and take those people out of 
the list of unemployed and provide proper care for all of them. 

The Chairman. Some of that may be due to age. It ia a signifi- 
cant thing that we must always take into consideration that hygiene 
has improved, medical skill has improved, longevity is increasing. 
We have many more older peop)le now than at any time in history in 
proportion to the total population ; the number of persons over 65 is 
constantly increasing in relation to the total population.. Now how 
many of those are classed as unemployable because industry has no 
place for the new applicant over 40 or 45 ? 

Mr. Watson. That is another group that we should have. That 
comes under the head of education that Dr. -Anderson brought out. 
I think we should have all those things. We can solve this problem 
if we just know what we are talking about. We will say here are a 
group of men who unfortunately lost their savings due to the depres- 
sion or some other things. Maybe some of them never saved any- 
thing, but just the same they have grown old, and the industries they 
were in feel they can't keep them on. It is our duty and it is in 
the interests of all of us to solve the problem. It isn't philanthropic, 
it is just plain good common sense business, gentlemen, and we ought 
to ^0 about it on that basis. We who are in business are just as 
anxious to help solve this as you people are down here. Now I be- 
lieve that nearly everybody representing our Government is doing 
his very best to help business and to help us solve these problems. 
On the other hand I believe that nearly everybody in business feels 
that way. We need to get together and get the information about 
these things. Now what shall we do with these old people ? 

The Chairman. Will you please include the Temporary National 
Economic Committee in that statement? 

Mr. Watson. I meant when I said 

The Chairman (interposing). I am merely talking for the benefit 
of the- newspaper men, [Laughter.] 

Mr. Watson. I stated before plainly and voluntarily that the work 
you gentlemen were doing here is going to be helpful, it is along 
educational lines. I have learned a great deal from it since you 
Rtarted your investigations. If we will, all , approach , this subject 



CONCENTRATION OF ECONOMIC POWER 16795 

from the standpoint that we all want to be pretty good citizens, and 
that we all want to help each other, we can get the answer. We can't 
get it any other way. 

The Chairman. I am awfully glad to have you say that, because it 
is most important. 

> Mr. Watson. I have said a little here about international trade 
barriers that I think are holding us back, but, on the other hand, 
I believe we have got some national trade barriers that are holding us 
back. I think class feeling in this country is a national trade barrier, 
and I think all of us in all walks of life ought to do everything possible 
to eliminate it so we can all work together and help each other. I 
think unfair criticism of government by business is a national trade 
barrier; I think unfair criticism of business by government — ^I say 
unfair — is a trade barrier. I think constructive criticism both ways 
would help. I think any form of taxation that affects the free flow 
of private capital is a trade barrier. I think if we all work together 
we can solve these national trade barriers and help solve the inter- 
national trade barriers. There isn't any one thing that is going to 
do it. 

The Chairman, it has got to be done by cooperation. 

Mr. Watson. It has ; no other way is possible. 

The Chairman. And in a spirit of tolerance and good will. 

Mr. Watson. A spirit of tolerance and fairness, and if we all follow 
the Golden Rule we can't go wrong — treat the other fellow as we want 
to be treated. 

Dr. LuBiN. Mr. Chairman, in view of the fact that the latter part 
of the discussion dealt primarily with unemployment I would like to 
say for the record, however, that during the past 7 years there has 
been added to the pay rolls of American industry something in excess 
of 8,000,000 more people than were on the pay rolls 7 years ago. 

Dr. Anderson. Despite that fact, Dr. Lubin, there has been an in- 
crease in the amount- of unemployment and an increase in the number 
of workers available for work who have not had it, and an increase in 
the number of persons who get only intermittent labor. 

Mr. Watson. And an increase in national income, too. 

The Chairman. When you say number added to the pay roll you 
mean in the sense that they were new individuals. 

Dr. Lubin. No; in other words, there are 8,000,000 more people 
working today than 7 years ago. 

The Chairman. But not more than 10 years ago. 

Dr. Lubin. No ; less than 10 years ago. 

The Chairman. Less than 10 years ago, but more than 7 years ago. 
Of course, that was borne out by many of the charts which have been 
presented here. 

Mr. Watson. That is making greater stride and that has been 
brought about; there has been a great deal of cooperation between 
labor, government, and business during these past 7 years. 

Dr. Lubin. I think we can say one thing, there has been no 7 years 
in history in any country where as many people were taken back on 
the pay roll as during the past 7 years in the United States. 

Dr. Anderson. That is right. 

Mr. Watson. You ought to feel optimistic because we are going 
in the right direction, that is one sure thing. 

Dr. Lubin. But not fast enough. 



16796 CONCENTRATION OP ECONOMIC POWER 

Mr. Watson. No ; let's improve, get into high gear. 

The Chairman. If there are not any other questions now to be 
asked, we will express our pleasure and our sense of indebtedness 
for the very interesting presentiation you have made this morning, 
Mr. Watson, with your staff. Thank you very much for having come 
here. I think it has been very helpful. 

Mr. Watson. If I may, I should like to thank all of you gentlemen 
for the consideration you have shown us aiid for the things we have 
learned since you began this study which has stimulated us to greater 
activity in this connection. 

(The witnesses, Mr. Watson and Mr. Nichol, were excused.) 

The Chairman. The committee will in recess until 2 : 30. 

(Whereupon, at 1:15 a. recess was taken until 2:30 of the same 
day.) 

AFTERNOON SESSION 

The committee resumed at 2 : 40 o'clock, on the expiration of the 
recess. • 

The Chairman. The committee will please come to order. 

Dr. Anderson. Mr. Chairman and members of the committee, this 
morning we listened to testimony in the field of the white-collar 
worker from the side of management, having as witnesses Mr. Thomas 
J. Watson and Mr. Nichol. This afternoon we are to hear tlie story 
from the side of labor involved, with Mr. Lewis Merrill, president 
of the United Office and Professional Workers Union of America, of 
New York City, N. Y., as witness. 

The Chairman. Do you solemnly swear that the testimony you are 
aljout- to give in this proceeding shall be the truth, the whole truth, 
and nothing but the truth, so help you God? 

Mr. Merrill. I do. 

The Chairman. You may proceed. 

TESTIMONY OF LEWIS MERRILL, PRESIDENT, UNITED OFFICE 
AND PROFESSIONAL WORKERS OF AMERICA, NEW YORK, N. Y. 

Dr. Anderson. Mr. Chairman, do you wish to examine the witness 
as to. his qualifications? 

The Chairman. Why, you might bring that in ; yes. 

Dr. Anderson. Mr. Merrill, what is you^ ^-elationship to the union 
you represent? 

Mr. Merrill. I am its international president. 

Dr. Anderson. Are there other unions of the same kind in the 
field? 

Mr. Merrill. There is no national union of the same kind in the 

field. 

Dr. Anderson. How many workers are organized in the Office and 
Professional Workers Union ? 

Mr. Merrill. Forty-six thousand five hundred. 

Dr. Anderson. Is that a sizable fraction of the total employees in 
this branch? 

Mr. Merrill. Well, that is less than 10 percent. 

Dr. Anderson. Less than 10 percent. Kow old is the union? 

Mr. Merrill. It is 2i/2 years old. 

Dr. Anderson. Is it an A. F. L. or C. I. O. affiliate? 



CONCENTRATION OF ECONOMIC TOWER 16797 

Mr. Merrill. Affiliated with the C. I. O. 

Dr. Anderson. What is your own relationship to this field of occu- 
pational service ? 

Mr. Merrill. In what sense, Dr. Anderson ? 

Dr. Anderson. What have you done? 

Mr. Merrill. Well, I was once a financial analyst in the employ of 
Moody's Investment Service of New York City, the Credit Clearing 
House Corporation of New York City ; I am a trained economist in 
the field of stock and bond analysis. That is my own particular 
qualification as a member of the union. 

The Chairman. What was your education? 

Mr. Merrill, I am a graduate of the University of Toronto. I 
hold what would be the equivalent of an A. B. degree in this country. 

The Chairman. How long have you been in this country? 

Mr. Merrill. I have been in this country since 1929. I am a citizen 
of the United States. 

The Chairman, How many members did you say are in the union? 

Mr, Merrill. Forty-six thousand five hundred. 

The Chairman. In how many States ? 

Mr. Merrill. In about 23 or 24 States. 

The Chairman. Where are the bulk of the members? 

Mr. Merrill. The bulk of the members of our union are in the 
eastern States; those being New York, Pennsylvania, New Jersey, and 
Massachusetts. We also have a substantial number scattered through- 
out the west coast and in the Middle West, but not as substantial as 
in the East. 

The Chairman. I suppose that most of these members are employed 
by large or comparatively large institutions ? 

Mr. Merrill. I would say in excess of 75 percent of them. 

Mr. Maginnis. Might I ask, Mr. Merrill, what do you mean by pro- 
fessional workers? 

Mr. Merrill. Well, that is more or less ot a euphemism. We mean 
anyone who is not engaged in strictly routine work, but who has a 
special training, despite the fact that he is a salaried employee. 

You can take my own instance. I am a professionally trained econ- 
omist; nevertheless I have been employed by a variety of firms on a 
salary basis, and had the same relationship to my employer that my 
stenographer had. I was and am, I believe, quite in the category of a 
professionally trained individual. I could function on my own basis, 
I could open up an office, I could put myself forward as a consultant, 
but I happened to work for somebody else. 

The Chairman. You could teach economics in the schools, I sup- 
pose? 

Mr. Merrill. I imagine after some additional training, I could 
qualify for it. For example, to make the answer a little bit clearer, 
we would consider a certified public accoui\tant as a professional, and 
we have several hundred certified public accountants in our organiza- 
tion. They are employed by firms on a salaried basis and are very 
definitely professionals in every sense of the word. 

Mr. Maginnis. Do you rate stenographers as professional? 

Mr, Merrill. No ; we do not. 

The Chairman. There is a growing number of professional em- 
ployees, I take it, is there not ? 



16798 CONCENTRATION OF ECONOMIC POWER 

Mr. Merriix. There has been a growing number of all employees. 
Consequently, there has been a growing number of professional em- 
ployees. 

The Chairman. Well, I don't think that that necessarily follows, 
as a conclusion from the premise that there is a growing number of 
employees. It would not necessarily follow- that there would be also 
a growing number of professional employees. 

Mr. Merrilx,. I would say that there are a growing number of pro- 
fessional employees employed on a salaried basis. 

The Chairman. That's right ; that is the fact. 

Mr. Merrill. That is right. 

The Chairman. You may proceed. 

Mr. Merrill. The effect of the office machine on white collar occu- 
pations cannot be seen in its full import without surveying some of the 
facts in connection with the ordinary role of these emuJoyees in our 
economic life. 

Kemote antiquity had its clerical workers. The word "clerk" itself 
is used because the keeper of official records received the "priest's por- 
tion" or the "cleruchy." 

Dr. Anderson. Mr. Merrill, might I just interrupt you for a mo- 
ment ? I see some confusion on the faces of the committee with respect 
to following your text. We have a copy before us that is a brief, as 
I understand it, of your document ?• 

Mr. Merrill. Well, this particular matter in my hands is in three 
sections. The introduction, which I was about to read to you and 
which is not included in the matter which you have, posits some of the 
statistical facts which should be known, relating to the development 
of these employees in our economic life, and after I succeed in establish- 
ing some of the statistical f acts^ I proceed to the discussion of the inno- 
vation of the machine itself, which you have there. 

May I proceed? 

Dr. Anderson. Yes, sir. 

Mr. Meriull. That is, the extension of the words "clerical workers" 
to business usage is natui'al. Business activities always required the 
making, keeping, handling, and interpreting of records. The increased 
complexity of business enterprise called into existence a variety of spe- 
cialists requiring different trainings. 

In the office or colonial times, a very simple apprenticeship could be 
served, most likely by a member of the proprietor's family. In the 
(lepersoqalized modern office, an integral part of the far-flung and com- 
plex commercial. and industrial system requiring the constant record- 
ing, receiving, analysis, and transmission of information, the appren- 
ticeship is only occasionally a simple one. 

But in colonial times and in 1940, the same essential administrative 
process takes place, without which production could not be organized 
or commodities distributed. 

Tlie growth of the white-collar group has paralleled the developing 
experience of business itself. Its requirements — that is of business — 
compelled into existence an army of clerks and professionals of every 
description. Industry was confronted with an opportunity to push 
back America's economic and geographic frontiers by exploiting a rich 
internal market, teeming with profits for the energetic and the keen 
witted, but those profits could not be secured unless there were goods. 



CONCENTRATION OF ECONOMIC POWER 16799 

To produce those goods quickly in large volume, and get them into the 
hands of the consumers became the main source of profit. 

Administrative cost, in its broad sense, became a secondary question. 
As America's economy took a firm hold of its internal market and 
reached out for foreign ones as well, it was confronted with a basic 
problem of administration, which it solved as well as it could with what 
lay at hand. The phenomenal and unplanned rise of the white-collar 
uroup and the centralized modern office are the result. 

Industry today is setting about solving the problem of administra- 
tive costs with all of its accustomed energy and ingenuity. In Factory 
and Industrial Management of September 1930 this general process 
was discussed in some detail, since post-1929, events urged speedy 
reduction of costs wherever possible. 

"Take your first problem," said a writer, a vice president of an 
eastern manufacturing concern, "the army of clerks, material clerks, 
production clerks, cost clerks, ledger clerks, note clerks, planning 
clerks, inquiry clerks, correspondents — one by one I eliminated the 
clerks, efficiency department, control department. Each department 
has 1 foreman and clerk or 1 clerk for 2 departments." 

No assistants cut indirect cost by eliminating clerical labor; use 
fewer forms ; rationalize ; systematize ; introduce machinery. 

For management, the machine is only one of the available means 
of reducing costs. For the employee, too, the question of the ma- 
chine is only one of the things with which he has to contend. Subject 
as he is to abroad social pressures which are undermining a status 
which has been his since the industrial revolution, he is confronted 
with a problem of social adjustment which is receiving inadequate 
attention from either Government or business. 

THE GROWTH AND COMPOSITION OF WHITE-COLLAR GROUP 

Mr. Merriix. Prior to the Civil War, clerical and kindred em- 
ployees were mainly engaged in service for small proprietors. The 
shift from employment in agriculture to other fields following the 
stabilization of industry after the Civil War revealed a greater per- 
centage increase among clerical workers than iimong any other group 
in our population. Alba Edwards computes the percentage increase 
between 1870 and 1930 at 2,067.5 percent, a rate of increment that 
makes the white-collar worker seem like a guinea pig. Between 1870 
and 1930, the percentage ratio of clerical and sales employees to the 
rest of the gainfully employed population rose from 2.9 to 16.7 
percent. On the other hand, figures for Great Britain made avail- 
able by the National Union of Administrative Workers show that 
in that country between 1851 and 1921 the ratio rose ^om 3.5 to 12.1 
percent. 

Alba Edwards supplies the following table based on the 1930 census, 
which I wish to introduce, Mr. Chairman, as, I am advised, "Exhibit 
No. 2609." This table shows the total number of gainful workers and 
shows the number of white collar workers, the percentage distribu- 
tion of white-collar workers and the percentage ratio of white-collar 
workers to the rest of the gainfully employed. 

The Chairman. Do you have a copy of the table ? 

Dr. Anderson. Yes. 



16800 CONCENTRATION OF ECONOMIC POWER 

The Chairman. I would like to see it. 

Mr. Merrill. This table reveals some 4,677^35 white-collar male 
workers, representing a 12.8 percent of all gainful workers in the 
TTnited States. This table also reveals the distribution of female 
wgrkers, and then distributes it as between both sexes, as between 
native white, foreign-born white, Negro, and other races. 

Di\ Anderson. Mr. Merrill, does that large number include more 
than clerical workers, as such? 

Mr. Merrill. Yes; I would say that this table includes sales em- 
ployees" and other employees in the distributive trades. 
.The Chairman. What is the source of this material ? 

Mr. Merrill. This has been secured by Alba Edwards. 

The Chairman. From the 1930 census? 

Mr. Merrill. The United States Bureau of Census for 1930. It 
appeared in the Monthly Labor Review in March 1934. It was 
quoted by him and requoted by us. 

The Chairman. The exhibit may be received. 

(The table referred to was marked "Exhibit No. 2609" and is in- 
cluded in the appendix on p. 17425.) 

Mr. Merrill. Tlie 775,140 women stenographers reported by the 
last census is a far cry from the 7 shorthand writers reported 65 
years ago. While the clerical group as a whole was iincreasing some 
2,065,5 percent, the percentage increase of females during the same 
period was 26,615 percent, representing an increase from 11,500 in 
1870 to 3,072,220 in 1930. (One writer estimates that by 1950, 1 out 
of every 3 gainfully employed people, Negro and white, will be 
Avomen.j ^n 1870, 96.9 percent of all white-collar workers were men. 
Ky 1930, 38.6 percent of all white-collar workers were women. With 
the exception of domestic service" of one type or another, there are 
more female white employees in white-collar erriploymenti than in 
any other field. 

I would like to submit, Mr. Chairman, a table^ showing the com- 
parative growth of the white-collar workers as between men and 
women. This shows the growth of the clerical class from the year 
1870 to 1930. It shows an increase in the number of men from 297,- 
000 to over 2,000,000, and an increase in the number of women from 
some 8,000 to almost 2,000,000. 

The Chairman. What is th6 source of these figures ? 

Mr. Merrill. This table has been supplied to me by Dr. Walter D. 
Polakov. 

The Chairman. Who is he ? 

Mr. Merrill. He is a management epgineer at present, I believe, in 
the employ of the United Mine Workers of America. 

The Chairman. What was the source of his information, do you 
know ? 

Mr. Merrill. I believe he made ah independent study in the field 
of office mechanization. I cannot say the source of these particular 
figures, but I think Dr. Polakov is recognized as a scientist and I think 
hi? researches could be accepted as authentic. 

The Chairman. Proceed. 

(The table referred to was marked "E^^hibit No. 2610'' and is in- 
cluded in the appendix on p. 17426.) 



CONCENTRATION OF ECONOMIC POWER 16801 

Mr. Merrill. The small percentage of Negro white-collar workers 
should be noted. The Women's Bureau reports the growth as follows : 

1910 3,000 

1920 : 8, 000 

1930 -— 11, 000 

Negro white-collar workers are uniformly paid a smaller wage than 
white workers employed at the same occupations. 

JVomen are generally employed as stenographers, typists, machine 
operators, and so forth, while the more highly paid white-collar occu- 
pations, such as credit men, accounting, collecting, and so forth, are 
dominated by men. In the in-between field, such as bookkeeping, 
cashiering, secretarial work, and so forth, women enjoy a numerical 
advantage, but there is still a high proportion of males employed. 

The common belief that women work in offices as a stop-gap between 
school and marriage is highly erroneous. While there is a low pro- 
portion of married women employed in clerical work, 18.3 percent 
being married as compared with 35.3 percent of the women employed 
in trade, nevertheless the trend is unmistakably in the direction of the 
married female office employee. Existing prejudice on the part of 
many employers to retaining married women as office, employees un- 
doubtedly has led to the concealment of this fact, while the age of the 
employees, which has been uniformly less than in other fields, has also 
played its part. 

INDUSTRIAL URBAN CONCENTRATION 

Mr. Merrill. The 1930 census listed industries employing white- 
collar workers as follows — and I would like to introduce, Mr. Chai;-- 
man, as exhibit 2611 — and its source is the Committee on Social 
Security, which issued a publication in which this t^ble was reflected. 
It is headed in their publication as "Census tabulations in the labor 
supply in the United States." 

(The table referred to is marked "Exhibit No. 2611" and is includeid 
in the appendix bn p. 17426.) ^ 

The Chairman. This is the same table that was in that publication ? 

Mr. Merrill. That is right. 

This table shows 357,000 white-collar workers in the fields of bank- 
ing and brokerage as^ compared with 624,0()0 total employees in in- 
dustry. It reflects 212,000 white-collar employees in insurance as com- 
pared with 507,000 total employees in industry. It reveals some 63,- 
000 white-collar employees in the auto factories as compared with 
some 640,000 total employees in industry. I have just read those 3 sets 
of figures to indicate the comparative location of white-collar em- 
^oyees. I will not read the table in its entirety unless the chairman 
wishes me to do so. 

Dr. LuBiN. Let me call attention to the telephone and telegraph, 
425,000 clerks ;out of a total of 587,566 in the industry, and your per- 
centage is only 82.4. 

Mr, Merrill. I examined those percentages myself this morning. 
The figures were supplied to me by my office. I would say not only is 
that peculiar, but a number of the other percentages don't make 
sense. I would suggest that we just ignore the percentage tabula- 
tions as they are shown there. I really can^ say that this is an accu- 



16802 CONCENTRATION OF ECONOMIC POWER 

rate copy in that respect. I would like to have an opportunity of 
checking myself and submitting a memorandum to the committee.^ 

Office employment shows a constantly increasing trend toward 
urbanization. Naturally these jobs must be performed in the centers 
of trade and commerce. Joel Berrall wrote a volume, The White 
Collar Class Joins the Labor Movement, and estimates that between 
1890 and 1930 the proportion of white-collar workers in the 10 
largest cities has increased from 26.7 percent to no more than 33.9 
percent. In the average American community, approximately 5 per- 
cent of the population will be engaged in white-collar employment, 
while in the larger urban centers, this will increase to 10 percent. In 
communities such as Washington, D. C.; Denver, Colo.; Hartford, 
Conn.; and so forth, the white-collar worker is overwhelmingly the 
majority group in the community. 

Unemployment among white-collar workers is no longer a personal 
problem. It is perhaps the outstanding question before employed 
and unemployed white-collar workers alike, as thousands upon thou- 
sands of them find themselves on the relief rolls with no hope of em- 
ployment in private industry. 

Not only are employment opportunities narrowing, but they never 
can keep pace with the hundreds of thousands being graduated from 
American schools and colleges every year. In 1938 alone, 148,000 
young men and women were graduated from American colleges. 

The social wastage involved in training young people for jobs 
which will never exist is incalculable. For the individual it is a 
ghastly tragedy. Disillusionment serves to heighten all the normal 
psychological difficulties of the persistently unemployed, and de- 
moralization results earlier. White-collar W. P. A. projects which 
have performed notable service in preserving these invaluable skills 
and training, have most frequently been the victims of the derisive 
description, "boondoggling." The enormous wastage of training 
thousands upon thousands yearly and having them join the swollen 
ranks of the unemployed is truly boondoggling, and on a scale so vast 
that if permitted to continue uncurbed, may have a profound effect 
upon the white-collar labor market. 

The Chairman. That criticism is not very widespread actually, 
certainly not in responsible circles. I think it is always well to bear 
in mind that when W. P. A. appropriation bills are passed in Con- 
gress, even last year, very little if any opposition is registered in 
opposition to them. For example, the last W. P. A. appropriation 
bill, which undertook, I thought unwisely, to place some restrictions 
upon expenditures, and so forth, passed in the Senate without a 
single dissenting vote, and there were only 23 votes in opposition in 
the House, so that I think there is a possibility of giving too much 
weight to 

Mr. Merrill (interposing). The criticism was not necessarily di- 
rected to Congress. 

The Chairman. Of course, what Congress does is ordinarily a 
reflection of what the people think, and it has been my experience 
that every survey which has been made of public opinion in the 
United States bears out the conclusion that Members of Congress 
for the most part have reached, which is that public opinion believes 

'Exhibit No. 2611 has been corrected to show the proper percentages. 



CONCENTRATION OF ECONOMIC POWER 16803 

it is a national obligation to take care of those for whom employment 
opportunities are denied, so I don't think you need to be very much 
disturbed about phrases. I think there is too much attention being 
given anyway to name calling and to various efforts to — you know — 
paint the picture. 

Mr. Merrill, Frankly, Senator, I am not really terribly hurt and 
I don't think my membership is. We are not very much upset about 
this thing. 

The Chairman. That is merely argumentative. It deals witn the 
superficial aspect of the problem that is before us. What we are try- 
ing to find out is not what people say about on& another but what 
the facts are. 

Mr. Merrill. I agree with you. 

Mr. Chantland. May I ask one question? Just preceding what 
the Senator was talking about, it seemed to me that you inferre 1 
that the graduates were all or mostly all headed toward white-colla r 
jobs. Did you mean that? 

Mr. Merrill, Yes. 

Mr. Chantland. On what do you base that ? 

Mr. Merrill. Well, I believe that it is statistically proven, and I 
would be glad to provide the committee with a carefully prepared 
memorandum based upon some of the reports of the school systems 
of the country, which would indicate that a vast majority of the 
people even in the lower grades are prepared for white-collar em- 
ployment, and an indisputably vast majority of graduates of colleges 
are headed toward white-collar employment. I think it can be 
proven as a quotation from the reports of the various school boards, 
throughout the country. I would be glad to prepare such a memo- 
randum for you. 

Dr. Anderson. I am somewhat familiar with the vocational studies 
on high-school students. We will have it presented in detail next 
week when certain educators come before us, but they surely substan- 
tiate what you have said, that even in industrial communities the 
children of industrial parents seek to become white-collar workers 
rather than industrial workers. 

Mr. Merrill. As a matter of fact, a number of educators have 
taken up this question with me. They are profoundly disturbed 
that they are training people for jobs which they are never going to 
occupy, and I think this problem as a whole comes in for increasing 
attention. It is a very important problem. 

The Chairman. You don't mean to suggest that you think it would 
be desirable to train more young people for industrial and mechan- 
ical jobs or hard labor? 

Mr. Merrill. Well, I don't think there is anything invidious in 
being prepared to do a job at labor if you are going to be employed 
at it. 

The Chairman. Of course the evidence that comes before us is chat 
the machine is making manual labor more and more unnecessary. We 
had Mr, Murray here the other day with his human exhibit to show 
how manual labor had been displaced by the continuous strip mill. 
Now it would seem to me that it would be a rather idle thing for any 
school, any vocational school even, to train young men to become the 
operators of handmills because the handmill is on its way out. Like- 
wise, the evidence before us with respect to technological improve- 



16804 CONCENTRATION OP ECONOMIC POWER 

ments on the railways. What was it they called that machine, the 
nutter, and the track layer? Both of these instruments and many 
others are taking the place of hand labor, so personally I can't see 
any reason why parents shouldn't desire to have their children trained 
for white-collar jobs and why graduates from high school and col- 
lege shouldn't prefer to do work of that kind rather than manual 
labor, hard labor, for which we are bringing the machine into exist- 
ence. 

Mr. Merrill. You see, Senator, I haven't a single panacea to offer. 
I am just drawing your attention to the fact that literally hundreds 
of thousands of people are being trained for jobs which they are not 
going to occupy. 

The Chairman. That is the interesting point. I was going to 
direct a question to you when you read this sentence : "Not only are 
employment opportunities narrowing, but they could never have kept 
pace with the hundreds of thousands being graduated from American 
schools and colleges every year." Now that is a very important con- 
clusion, if you have facts to substantiate it. I suppose that is the 
purpose of your paper. 

Mr. Merrill. I think if you will permit me to continue with this 
aspect of the testimony you will find that it will be substantially 
proven. 

The Biggers November 1937 Census of Unemployment found 839,- 
693 clerical and kindred workers and 143,766 professional employees 
totally unemployed. In excess of 1,500,000 employees were totally 
and partially unemployed or employed on emergency work. 

I would like to submit a table from figures of the Biggers November 
1937 Census of Unemployment showing the clerical and professional 
woi;kers employed and unemployed, revealed by this census. 

(The table referred to was marked "Exhibit No. 2612" and is in- 
cluded in the appendix on p. 17426.) 

Mr. Merrill. This table shows as follows: Totally unemployed 
clerical, 839,693; professional, 143,766. Emergency workers, 204,926, 
professional, 82,213. Partially unemployed, 237,450, professional, 58,- 
159. Total clerical employees, 1,282,069; professional, 284,238. 

Mr. Chantland. How was the classification used arrived at in 
establishing professional ? 

Mr. Merrill. I am sorry, I have not examined the original question- 
naire. I imagine it followed generally the description I liave given. 

Mr. Chantland. Many of the professionals are mechanical, engi- 
neering, so on. It isn't the narrow sense of professional? 

JNIr. Merrill. It isn't in the narrow sense of professional. Sohie- 
times it depends upon the individual investigating. He might make 
an error in judgment. It is such a peculiar distinction to make, such 
a very difficult distinction to make, that you might find totally dif- 
ferent figures from the same source of facts as between two investi- 
gators ot the Biggers census. 

Mr. Pike. I don't think there were investigators in that census, 
were there? Didn't you just fill out a form? 

Mr. Merrill. < I meant in the sense of compilation. 

I would say that there are a great many people who are, properly 
speakihg, clerical workers in the strict interpretation of the sense but 
who prefer to be called professional. 



CONCENTRATION OF ECONOMIC POWER 16805 

We can safely conclude that in every substantial urban community 
almost 17 percent of the total male unemployed and 35 percent of the 
female unemployed are clerical and professional employees. On the 
same basis in large cities, where the main groups of white-collar 
workers are employed, in New York for example, we find that clerical 
and professional employees constituted 25 percent of all males totally 
unemployed and 49 percent of all females unemployed. 

The Monthly Labor Review of May 1935 showed that of the workers 
on relief more than 6.4 percent were clerical and professional workers, 
taking the Nation as a whole, while in the city of New York clerical 
Avorkers alone constituted 10 percent of the number of workers on 
relief. The Division of Social Research of the W. P. A. estimated 
that 215,500 office workers alone were on the public relief rolls in 
1935. 

White-collar workers once unemployed are qut of work longer 
than any other group with the exception of the totally unskilled. 

There was a time when white-collar workers could hope to advance 
readily to highly paid jobs in commerce and industry. This is no 
longer true. Yet it is still more respectable to be a white-collar 
worker than to be a manual laborer, even where manual labor is 
more highly paid. It is this will-of-the-wisp respectability which 
makes white-collar jobs the objection of the majority of young people, 
particularly . students. 

Ordinarily office employment of the most routine nature requires 
at least a high-school diploma, and perhaps in addition, special 
business courses. For any job outside the range of strictly clerical 
employment, and in many cases even here, college degrees and long 
^nd arduous years of training are necessary. 

EARNINGS OF WHITE-OOLLAR WORKERS 

Mr. Merriix. The high salaries that are supposed to accrue to 
white-collar employees constitute one of the most startling myths in 
connection with American life. Frequently office and professional 
people, after long years of training, find that in order to secure prac- 
tical experience in industry they must work for little or no pay. 

Stenographers frequently start at salaries of $15 a week, and at 
times at less than $10. 

Jn Michigan, for example, half of the 247,000 clerical workers 
studied, of both sexes, earned less than $1,000 a year during 1934. 
Among the 150,000 clerical workers studied in Pennsylvania, 42 
percent earned less than $17.50 per week, and 56 percent of some 
73,000 clerical workers earned less than this amount. Female workers 
comprise this latter group. 

'Professionals fare better, but Paul Douglas, in Movement of Rela- 
tive Wages, Its Economic Significance, reports that between 1890 and 
1924 real wages of all clerical and salaried employees declined 5 
percent. The trend would appear not to have diminished but to have 
increased. 

According to the National Resources Committee, the average in- 
come of families of clerical employees was $1,901, while 6.8 percent 
had incomes below $750. 

The following table which I would like to submit, prepared by the 
Wage;and Hour Division of the United States Department of Labor, 



16806 CONCENTRATION OF ECONOMIC POWER 

shows the distribution of clerical employees in 30 cities by earnings 
for the years 1935-36. I should just like to quote you some of the 
percentages reflected in this table. 

(The table referred to was marked "Exhibit No. 2613" and is in- 
cluded in the appendix on p. 17427.) 

Mr. MERRiLii. Those earning less than $700, pen?8ititage of workers, 
21.8 ; those earning less than $1,100, percentage of workers 57.3 ; those 
earning less than $1,500, percentage of workers 75.6; those earning 
less than $2,000, percentage of workers 90.8. 

I would like also to submit to, the committee the following table 
taken from a study entitled "Labor in the United States," which 
shows the median annual incomes of clerical and professional em- 
ployees by age groups. 

(The table referred to was marked "Exhibit No. 2614" and is 
included in the appendix on p. 17427.) 

Mr. Merrill. This shows the clerical employees between the ages 
of 15 and 24 to be earning a median income, of $630 per year; be- 
tween the ages of 25 to 34, $1,080; between the ages of 35 to 44, 
$1,285; between the ages of 45 to 54, $1,270; between the ages of 55 
to 64, $1,180; 65 years and over, $985. This table also shows for 
professionals between the ages of 15 to 24, $585 ; between the ages of 
25 to 34 years, $1,270; between the ages of 35 to 44, $1,665; between 
the ages of 45 to 54, $1,735; between 55 and 64, $1,600, and 65 and 
over, $1,520. 

Mr. Maginnis. May I interrupt just a moment? In connection 
with that table, what do you mean by professionals? 

Mr. Merrhx. I am submitting without additional information the 
table as I took it from the work I quoted, which is Labor in the 
United States, by W. S. Woytinsky, sponsored by the Social Science 
Research Council and based upon figures of the Social Security 
Board. Exactly what he classified as professional I can't tell you, 
but I am submitting the figures for what they are worth. I think 
the book is rather widely accepted. I cannot tell you exactly how 
Mr. Woytinsky established these as professionals. 

Hours of work : The white-collar group is substantially on a basic 
40-hour week, but work-weeks of 50 hours and more are not uncom- 
mon. 

I should like also to submit to you a table prepared by Mr. Joel 
Berrall for the year 1928 revealing the weekly hours of work of office 
employees in private business. 

(The table referred to was marked "Exhibit No. 2615" and is in- 
cluded in the appendix on p. 17427.) 

Mr. Merrill. This table shows the weekly hours of office employees 
in the fields of banking and finance, insurance, wholesale, and retail, 
manufacturing and mining, public utility, and so on. I should 
merely like to indicate the comparative nature of the table. Those 
on a 40-hour week -would seem to number about 25.63 percent in 
banking and financing; those employed on a 40- to 42-hour week ap- 
proximately 32.42 percent, and so on. I will not go into the table in 
great detail. It requires rather careful study in order to secure the 
information. 

Mr. Pike. It is too old to be ^iven great weight. 

Mr. Merrill. I am quoting it because it is for the year 1928, and 
^rOf.diWKl vohiwiges Jia^ve taken place since that time as business has 
tried to adjust itself to a different basis of doing business. 



CONCENTRATION OF ECONOMIC POWER 16807 

Mr. Pike. It doesn't mean that it should be given great weight 
at this time. 

Mr. Merrill. Except to indicate the trend. I have some additional 
information. 

Hours of work, like other working conditions of white-collar em- 
ployees, have been under constant attack since 1929. I don't say wc 
are in a position to say to what degree this change has taken place. 
Change has taken place on a wide scale. It has undoubtedly changed 
since 1928, but if we can posit that one fact we might be able to 
get a better idea as to what has taken place. 

Unregulated overtime tends to break down existing work-week 
standards. Bulletin No. 120, of the Women's Bureau, reveals that in 
New York 78.8 percent of those finns interviewed reported overtime 
work. Overtime work is largely uncom.pensated. 

American business for December 1938 reported a survey among 287 
companies covering their overtime compensation policies. 

By far the most popular plan for compensating for overtime is the supper- 
money plan. Out of 287 companies surveyed, 139 pay supper money and no 
extra compensation for overtime. The next niost widely Tised plan is no com- 
pensation whatever, 96 companies finding it unnecessary to give either supper 
money or any allowance for overtime. 

American Business submitted a table based upon this survey which 
I described as an overtime-compensation table, which I would like 
to submit to the committee. It breaks down in detail the general 
summary which I have just read to you. 

(The table referred to was marked "Exhibit No. 2616," and is in- 
cluded in the appendix on p. 17428.) 

Mr. Merrill. The operation of the Fair Labor Standards Act has 
tended to reduce long hours of work and uncompensated overtime. 
There is, of course, no statistical information yet available which 
would show its full effect. 

Mr. Maginnis. Where did you obtain those figures? 

Mr. Merrill. From American Business. It is a publication rather 
widely read among executives. That should be the December 1939 
issue, not December 1938. 

Mr. Maginnis. That is information given in the table, which we 
have. Where were the figures obtained? 

Mr. Merrill. Yes, I see, I am quoting to you directly from Ameri- 
can Business which made this survey on its own account and did 
not give, of course, the information behind that table. I presume 
that the information was submitted in confidence by enterprises or 
firms that had confidence in them. 

Mr. Maginnis. My question was purely as to the source. 

Mr. Merrill. The source is American Business. 

CHANGING STATUS OF CLERICAL WORKERS 

Mr. Merrill. The clerical workers not only do not form a fixed 
class in the sense of fixed numbers, but are far from a fixed class in 
relation to other sections of the population. It is a truism that the 
white-collar workers occupy a middle position. In terms of econom- 
ics, the white-collar worker is very much a part of the working class, 
conforming to every established economic criteria which would justify 
that description. In terms of his social habits and values he is the 



16808 CONCENTRATION OF ECONOMIC POWER 

very backbone of middle-class America. One writer estimates the 
American middle class as about 12,500,000 persons of which 9,200,000 
are estimated to be salaried employees. A recent Gallup poll, on the 
other hand, reports that about 70 percent of all Americans consider 
themselves a part of the middle class. 

As far SIS the average whit^-coUar worker is concerned, these doubts 
about his position within society are being resolved daily. The chang- 
ing economic and social situation more and more exposes him to 
forces steadily depressing his position within society and his share 
of the national income. This is the outstanding problem before the 
white-collar worker, and it is changing his life and values. Ruptured 
social habits, continued high requirements, even to items of personal 
appearance, low pay, long hours, and exceplionally larsre unemploy- 
ment confront the white-collar worker with an aggravated problem 
of adjustment. It is not strange that it should be found that 

among the white-collar occupations, illness and physical impairment are rela- 
tively a more frequent cause of despondency than among laborers. 

THE INTRODUCTION OF THE MACHINE 

Mr. Merrill. The machine in the office has not been heralded wdth 
any fanfare because it has always been present to some extent. The 
principle of the typewriter itself has been known since 1712. Its 
intensive introduction, however, has taken place only in recent times. 
The broad economic reasons for this have been noted. As long as it 
results in more economical administration of business enterprise, it 
will continue apace. Other factors governing the introduction of 
office machines are very much the same as those of any other type of 
machine. The office machine is a tool which increases the produc- 
tivity of the worker because it multiplies the number of things per- 
formed by no greater effort. In the case of the office employee, these 
tools are not always strictly analogous to those used by the physical 
worker. Yet, the file and filing cabinet and complicated visual and 
cross-index systems which have been developed are purely memory 
machines. The typewriter is clearly seen to be a writing machine, as 
is the shorthand machine; calculating machines of all types clearly 
multiply the arithmetic process, and so forth. In the words of H. D. 
Harris of the General Motors Corporation, in discussing the office 
machine, "A piece of mechanical equipment is only a means to an 
end." As in the case of the manual worker, the office machine has 
permitted the greater division of labor and consequent standardiza- 
tion and rationalization. 

The office machine has fully justified itself as an aid in 'increasing 
productivity. How widely it is used can be shown by an article in 
American Business for March 1940 discussing the problem of costs 
of administration in which tlie administrative fate of an order for a 
Toledo scale is given. The machines mentioned in this quotation 
have been italicized by us. 

After the order is accepted, it is turned over to a clerk who makes a work 
sheet on a special form for pencil writing. On this form all the details of 
the order are entered and checked for the billora, who use Royal typewriters 
equipiK'd with .illing type and Ditto carbons. The invoice forms consist of the 
original or ma; ter. From this are run the follTHvin^r copies: Sales tax copy, 
duplicate sales( tax copy, salesman's advantse-she^ ■from which checks are 
drawn <twicc a! wopk oft Toiid clicck writer), commisstofi voucher for posting 



CONCENTRATION OF ECONOMIC POWER 16809 

to salesman's account, a statistical or cost copy on which is figured the profit 
or loss on the sale, customer's acknowledgement, branch collection copy (if 
needed), a consignment tracer copy in the event the scale is delivered from a 
branch or agency consignment stock. There is also a copy for the credit 
department. * * * All these copies are run on the Ditto machine, near the 
two EUiott-Fisher bookkeepers. 

In the cfturse of this article, description isi given of "two punches, 
a sorter, and printer in the tabulating department are kept busy 
handling a statistical sales analysis job which gives a minute break- 
down. * * * Same department handles pay rolls." Captions 
on illustrations describe bookkeeping machines, visible index sys- 
tems, mailing room rack systems, mailing machines, and so forth. 

American Business for February 1938 cites : 

Using multiple-function accounting machines, Individual Towel Co. of Chi- 
cago cuts billing costs, speeds all statement writing, and improves record of 
deliveries at one operation ; also uses same machine for pay rolls. 

Grace Coyle in Present Trends in Clerical Occupations reports that 
the Commonwealth Edison Co. puts in 1 room 80 girls, • classified 
by "temperament and ability." They are stenographers, typists, and 
dictaphone operators. When the executive wants to dictate, he tele- 
phones to the central bureau and a worker adapted to his kind of 
work is sent him. "Exit the private secretary" announces the com- 
paijy, reporting that the plan saves them 15 stenographers. The 
Chicago, Milwaukee & St. Paul Railway states that by introducing 
dictating machines they have increased the amount of work done 
by 20 percent while saving 20 percent in labor cost. The General 
Electric Co., of Schenectady, introduced 650 dictating machines and 
centralized the operators in 1 room. To increase efficiency, ^ tran- 
scribers are familiar with the work of each executive and thus some 
continuity in the work is secured. What becomes of the displaced 
workers is, of course, not mentioned in the company report. 

The record of office equipment manufacturers, perhaps more 
directly than in any other way, reveals the growing use of the ma- 
chine m the modern office. The number of workers employed in 
the manufacture of business machines is now in excess 'of 18,000, an 
increase in 2 years of 6,000 workers. Its total voluipe has been 
steadily growing. The census of manufacturers represented a yearly 
'volume in 1937 of $138,071,167 as compared with $98,383,910 in 1925. 
The Exchange, monthly publication of the New York Stock Ex- 
change^ lists in its March 1940 issue a, table showing the 1939 divi- 
dend yields of listed common stocks assembled into industrial groups. 
The business and office group was the only group showing a lOO-per- 
cent payment of cash dividends. This compares with -45.8 percent 
for the automobile industry, 78.1 percent for the chemical industry, 
68.7 percent for retail merchandising, 40 percent for the booming 
aircraft industry, and ^4.6 percent for finance. 

RATE OF TNTRODCJCnON OF MACHINES 

Mr. Merrill. Of course, the manufacture of business and office 
equipment is still a young industry. The office machine itself is, in 
a sense, still subject to experimentfli use. Its full potentialities have 
yet tc be realized. The electrically driven typewriter, for example, 
may vastly reduce the n^imber of typists. The p&st-1929 develop- 

1244&1 — 41— pt. 30^ ^40 



16810 CONCENTRATION OF ECONOMIC POWER 

ments naturally boosted the wider use of oflBce machines as a means 
of reducing costs in time of depression. 

In the periods of relative prosperity since 1929, they have been 
used to avoid hiring additional employees. Its increasing use today 
is a warning of its much wider use in the future when it can be 
secured at less cost and on easier terms. 

One of the important factors slowing up the introduction of the 
machine is the fact that reduction in operating costs is, in small enter- 
prises, frequently offset by the loss of use of the capital invested in 
the machine. In manufacturing industries, investment in machines 
is a capital outlay. Generally, however, investment in office machines 
is charged against operating administrative costs. Regardless of the 
account practice used, its net effect is to reduce the amount of income 
going into wages. Yet the working capital embodied in a machine 
can be most important t small businessmen, consequently they con- 
tent themselves with the simplest and most widely used machines. 

It is primarily because the cost of office machines requires a large 
volume of clerical work to justify the expenditure that only large- 
scale employers of white collar labor are using it to an increasing 
extent. Large volume, of course, is not always the deciding factor. 
In some cases, office machines enable the assembling of information 
which would not otherwise be available except at prohibitive cost. 

In other cases, the machine secures the information more quickly 
though not more cheaply. Where the information itself, or speed 
in securing it, is important in the making of executive decisions, the 
increased operating cost would be justified. 

In these cases the introduction of office machines has led to new 
employment. It would be quite erroneous, however, to conclude that 
this is or can be the characteristic result. The net effect of machine 
introduction h permanent job displacement. 

The relatively slow introduction of office machines compared with 
the ability to use those now available naturally serves to retard 
abrupt technological changes. Office-equipment manufacturers are 
unlikely to force the development of new machines. The need to 
realize on investment in existing plant and equipment is but one 
phase of this question. Usuallyj manufacturers do not introduce 
new types of machines in greater number than their competitors, and 
reduce competition to its simplest form, or they fail to bring out 
new competing machines because existing ones are protected by pat- 
ents or where certain types of machines have a limited market, the 
venture is deemed too hazardous. A virtual monopoly in many types 
of machines would seem to exist. 

I should like to make it perfectly clear here, Mr. Chairman, that 
I don't necessarily consider such monopoly a bad thing. The Dicta- 
phone Corporation, for example, does not grant credit terms beyond 
30 days and has consistently avoided installment payrhents of any 
kind. Yet turning in an old typewriter will result in the immediate 
delivery of a new one which can be ]:>aid for on convenient terms. 

One of these days this particular financial knot is going to become 
untied, and it will Ijeconie simpler for business to effect the capital 
outlay for many types of machines. When that occurs, its effect 
upon the white-collar employee will be to devastate existing standards 
and aggravate all of the existing trends. The result in terms of 
personal lives of the salaried employees thus affected is unpredictable. 



CONCENTRATION OF ECONOMIC POWER 16811 

We have noted that the machine greatly increases the volume of 
production. For example, H. L. Doherty Co. reports that from 
1925 to 1929 its typewriters turned out 144 percent more work while 
salaries increased only 47 percent. 

The 1937 business show in New York displayed a typewriter-computing-bill- 
ing machine that computes an entire invoice in one operation. One stenographer 
can operate the new robotyper, pneumatically operated typewriter controlled 
from a perforated roll, like a player-piano, incidental to her other duties and 
a single operator can operate up to four robotypers at one time. 

Haphazard measurement of clerical production is giving way to 
scientific measurement. Now, many establishments measure perform- 
ance on the job, including, for example, the use of typewriter 
devices, cyclometers and others, measuring strokes, errors, time per- 
formed, number of completed letters, and so forth. 

In the case of other machines, adaptable controls of some sort 
are usually instituted to enable management to judge relative 
performance. 

John Mitchell, a management engineer, in an article. Improvement 
in Office Methods, appearing in a publication of the American Man- 
agement Association, says, "Since 1930, the machine manufacturers 
have improved their products tremendously. Some of the pioneers 
in scientific management are applying the principles of motion 
economy; and it is probable that during the next 10 years radical 
changes will be made in the method of arranging and utilizing equip- 
ment in the office." Tlie more careful study of worker performance 
obviously is already leading to many refinements of existing machines. 

MACHINE DISPLACEMENT 

Mr. Merrill. While production continues unabated or at increased 
levels, leading to the use of machine terms such as "speed up," "pac- 
ing," "timing," and so forth, by white-collar workers, the volume of 
wages continues to drop, and unemployment continues to increase. 

Reference to the section on unemployment in the foregoing will 
recall that even a marked increase in reemployment by industry 
would not keep pace with the number of newly trained workers 
yearly produced by our schools in the many thousands. 

In the main, workers who are displaced by the machine must 
either secure employment with establishments which require their 
existing skills or be retrained. Retraining is an expensive process 
and reluctance to finance such retraining by the ipdividual, even when 
possible, is increased by the fact that there is no assurance that once 
this occurs there is immediate likelihood of securing employment. 

While some concerns do retrain their employees (or, rather, those 
of them retained to operate the machines) the result of machine 
displacement is generally permanent. There are no figures available 
to indicate the number of workers affected by this process. Union 
statistics merely indicate that it is substantially larger than it was 
yesterday, and affecting an increasing number of categories of 
employees. 

In the work Shifting Occupations, by Louis Dublin of the 
Metropolitan Life Insurance Co., bookkeepers were noted as among 
the occupations showing a low proportion of constancy. This is at- 
tributed to low wages and youth of the employees, but the inci- 
dence of the machine must also be included. It was noted here that 



16812 CONCENTRATION OF ECONOMIC POWER 

39.2 percent of those engaged in clerical occupations shifted to manu- 
facturing, operatives, skilled building and other trades, laborers, 
agriculture, railroad employees, in. just about that order. 

Dr. Anderson. What is the date of the study to which you have 
just referred? 

Mr. Merrill. I regret. Dr. Anderson, that I do not happen to 
recall that, but there is a very careful abstract of the volume in my 
office, and I would be glad to send it to you. 

Dr. Anderson. As far as I know, it is the only .study available, 
and it was fairly well dated, so that even if this were true when 
this study was made 

Mr. Merrill (interposing). It might be out of date, that is right. 
I am sorry I cannot proyide that information. 

effect on skilled workers 

Mr. Merrill. The increasing use of machines is leading both to 
a demand for employees with fewer skills and attainments, while the 
very specialization the machine makes possible is resulting in a re- 
quirement for more skilled workers .within these narrowing cate- 
gories. Clerical work generally has required a knowledge of busi- 
ness practice, rehability, honesty, tact, neatness, and such skills as 
shorthand, typing, knowledge of bookkeeping, as well as in some 
categories trainir ^ of a kind usually characterized as "professional." 
It can be argued, >f course, that a bookkeeper remains a bookkeeper 
even though the accounting process is accomplished through a ma- 
chine under his direction. But the use of the machine places a 
premium on mechanical aptitude in its operation, ability to main- 
tain sustained attention, and so forth. These qualities are not quicKly 
developed. The machine process, therefore, leads to a division of 
the tasks to be accomplished with especial responsibility placed upon 
the worker who is required to interpret the result. The use of the 
machine tends to freeze skills and limit advancement, or reduces 
such advancement to fewer categories of employment. 

John Mitchell says, "the department heads were unwilling to 
wea;ken their particular units by passing good workers to other 
departments; consequently when asked for a good worker they 
invariably passed the poorest one along." 

PROMOTION POLICIES 

Advancement and development of new skills are retarded not only 
by the fact that the use of the machine requires fewer skills of the 
employee, but that it consequently reduces educational requirements 
and results in inadequate preparation for the filling of vacancies in 
the higher categories. A small percentage of clerical work still 
opens the door to higher paying positions, but the levels to which 
they can rise are becoming more fixed with every turn and t\\Hst of 
the business eycle. 

F. G. Nichols reports in "A New Conception of Office Practice" 
that 88 percent of office managers questioned said that they preferred 
clerical assistants who could not rise to higher positions. The eon- 
verse to this is that when employees show a special aptitude in 
lower-paid position^ particularly in machine operation, there is a 



CONCENTRATION OF ECONOMIC POWER 16813 

reluctance to promote them, and no extra financial consideration is 
given for this discrimination in promotions. Advancement and 
regular promotion has always been haphazard and is becoming less 
possible with the increasingly routine nature of employment due to 
the increase of machines. 

The Chairman. Who is F. G. Nichols ? 

Mr. Merrill. Mr. F. G. Nichols is not an authority on this ques- 
tion. He has done considerable research in the field. ' His work is 
generally quoted in this connection. There has been so little Gov- 
ernment study into this question, there are so few Government fig- 
ures available, that naturally independent researchers who have 
worker" in the field must be drawn on rather heavily. That is why 
I quoted rather widely from American Business and other publicar 
tions of this sort, because other information more scientifically pre- 
pared and which can be authenticated is just simply not available. 

The Chairman. When did he write this? 

Mr. Merrill. This I believe was written in the early years of the 
depression; that would be some time in the thirties. 

I feel that anything Mr. Nichols might have said in this respect 
is substantially supported by statements of John Mitchell, and of 
others, and all of his writings from which I have quoted ai-e recent 
and have been published within the last 6 months or a year 

Mr. Pike. Your own experience, you have seen around Moody's, 
that is reasonably true around the larger organizations — not neces- 
sarily Moody's. 

Mr. Merrill. I was drawing attention to a condition. I would say 
that when you break a person m on a machine, there is a considerable 
investment. To retrain a person or get a new person to run that 
machine is going to cost you some money. And some firms make 
careful iallocations as to what promotions are going to cost tomorrow. 
Others do not, with the result, particularly where there is careless 
management, that there is a tendency to keep these people in these 
positions regardless of their ability. 

The Chairman. The statement which attracted my attention was 
the first one you quoted, namely, that "8 percent of office managers 
whom we, or whom somebody interviewed, said they preferred cleri- 
cal assistants who could not rise to higher positions." 

In other words, this testimony is, for what it may be worth, that 
the office manager when he seeks a person to operate a machine, wants 
one whose capacity is not any greater than that. 

'Mr. Merrill. I would say this, and in further explanation of it, 
that if I were an office manager and I had to retrain a machine oper- 
ator every year, in my department — or a large number of them — I 
think I would rather give up the job, because I don't think you can 
get production out on that basis. 

I am merely pointing to this fact; it is a very real problem — ^how 
to take care of it is again a different question. 

Of course, the union has made proposals of its own to individual 
employers. We are putting forward no panaceas, but where as in 
the past this was not an established condition, it is true today. It is 
growing, and there are sound business practices which justify it. 
There is, no use avoiding the fact that it costs money to train machine 
operators. I know that one employer with whom I discussed this 



16814 CONCENTRATION OF ECONOMIC POWER 

question, who was my particular employer, told me this when I 
wanted to leave, I w^as offered more money, and he sat down and we 
figured out that after all, I w^as a trained employee. What was the 
cost of breaking me into their particular system? It ran a little over 
$1,500, and he said, "That is what I am losing when you leave. You 
can take any raise up to that amount for the next year, and it w^ould 
be all right with me." 

I mean, he knew exactly what he was dealing with. He knew the 
cost of actually breaking in someone, a new employee on that job. 

(Discussion off the record.) 

Dr. Anderson. Mr. Merrill, isn't it well to point out, too, the other 
fact th9,t clerical labor in the earlier stages of its use, say in the early 
years of the century, was frequently looked upon as a form of work in 
which a person could begin and then rise through the ranks to some- 
thing higher ? 

Mr. Merrill. That is right. 

Dr. Anderson. And yet you point out now that with the investment 
in the worker, with the level of proficiency required, with the mecha- 
nization and the load placed upon clerical service, we have what 
amounts to a definite occupational skill, and management seeks to 
keep it that way. 

Mr. Merrill. That is right. 

And in further explanation of it, I have tried to point out that 
you cannot say, "Well, management is a big meanie, they don't pro- 
mote people with ability." It is sound business practice that compels 
this, and the difficulties of prior notions on the part of white-collar 
employees to secure exceptions of their situations, and the idea that 
they are going to become president, iust has to give way to th^ 
practical necessities. 

You have to, generally speaking, operate your office within a rea- 
sonable figure commensurate with the volume of business generally 
done. If it were merely that we are saying that management is a 
meanie, a great, big meanie, and now, let's all be good people about 
this, the situation would be different. But it can't be solved that 
simply. It is a definite social problem, in my opinion. 

On the other hand, there is a greater tendency to salary standardi- 
zation, since performance is susceptible ta the same measurements. 
To offset this in part is the comparatively recent introduction of the 
bonus and piece-work system in certain types of employment. 

No estimate can be ventured of the extent of the human problem 
involved in technological change. As yet, very few concerns main- 
tain statistics that are useful for anything but determining their 
own immediate administrative requirements. The Federal and State 
Governments have only in recent years made an effort to compile 
statistics relating to white-collar employment. It has been noted 
that the machine serves to aggravate all existing trends bearing 
down on white-collar employment. That these trends, including t\v' 
wider use of the machine, are having cruel effects is to be expected 
In this respect the white-collar worker is following in the patli 
hundreds or thousands of manual workers have had to travel. Con- 
ditions of work, hours, salaries, standing in the community, security- 
of employment, conditions of health, are being changed for every 
white-collar worker, young and old. They are being changed partly 
in terms of the machine innovation, and partly 'in terms of other 



CONCENTRATION OF ECONOMIC POWER 16815 

factors. All of them hang like the sword of Damocles, threatening 
to sever the established familiar habits of conduct. The machine is 
only one of the guns hammering away at the social fortifications of 
the white-collar workers. That these fortifications should crumble is 
to be expected. That there should be casualties is now taken for 
granted. That these casualties should increase in number from year 
to year has become familiar. What cannot be known is which gun 
is causing the greatest damage at any particular time. For the 
worker slain on the field of economic battle, description of the type of 
bullet which laid him low can be for him a question purely academic 
and about which he can hardly testify. 

The trade-unions and professional associations of the white-collar 
salaried employees have not resisted the introduction of the machine. 
They have bent their efforts to increasing their strength in order 
to make certain that its introduction would follow an orderly process 
with appropriate consideration for the human problem involved. 
The active discouragement of business management to the organiza- 
tion of their employees into self-governing unions has militated 
against their ability to insure that in given establishments this prob- 
lem will be dealt with in fairness and equity. While it is the stated 
public policy of the United States to encourage membership in such 
organizations, this has not been accompanied by vigorous application 
of existing laws. 

PUBLIC POLICY AND BUSINESS PRACTICE 

Mr. Merrill. The United Office and Professional Workers of 
America still has pending with the labor boards of the States and 
the Nation charges covering discriminatory discharges and petitions 
for elections which are more than 2 years old. Other elections, sUch 
as one held covering the employees in the New York district office of 
the Metropolitan Life Insurance Co., have been abrogated for all 
practical purposes by long-drawn-out litigation. 

The direct intervention of white-collar unions is taking place on 
an as yet limited scale, and represents only a beginning in this 
respect. Employers under contract with local unions of the United 
Office and Professional Workers of America have, during the course 
of those contracts, introduced new machines. Machine introduction, 
however, has not been accompanied by the increased speed-up, though 
production itself has naturally improved. Employees displaced by 
machines were discharged on a graduated basis, usually after pay- 
ment of a dismissal wage, while the union, because it follows em- 
ployees from job to job and is not confined to a single establishment, 
was able to make provision for their employment. The interven- 
tion of the union has served to preserve all of the beneficial features 
of the introduction of the machine, while mitigating or providing 
against its ill effects. 

The regularizing function of the union has led in frequent cases 
. the increase of wages for the remaining employees and not reduc- 
tion of wages, which is the standard accompaniment in nonunion 
establishments. This has been due not to a policy of fostering this 
development by the United States Government, but to the initiative 
of the employees in question. Inadequate appropriation for the 
enforcement of even existing legal safeguards naturally leads to gov- 



16816 (X)NCENTRATION OF ECONOMIC POWER 

ernmental indifference. The social role of the union is consequently 
limited to the size of its membership. Of course, this is the intent 
of employers, who, defeated in the field of argument and social policy 
as stated by Congress, are nevertheless able to have their own way 
in the field of social practice. The white-collar unions naturally 
propose to remedy this defect. 

Discrimination against white-collar labor in many pieces of social 
legislation is taken for granted. Unemployment, for example, due 
to the introduction of the machine and other causes, is greater among 
white-collar workers than any section of the population, yet their 
inclusion in the Social Security Act is only partial and a right which 
has to be constantly guarded against the encroachments of those who 
would narrow its applicability. Administrative procedures are slow 
and can be changed only at great expense after frequent representa- 
tion, and so forth. 

The efforts of the United Office and Professional Workers of 
America to secure inclusion in the Social Security Act of employees 
of nonprofit social agencies has not been successful, though 'A did se- 
cure the inclusion of bank employees after much expense and effort. 
Salaried employees are exposed to the same social hazards as bank 
employees or other groups of white-collar workers. Nevertheless, 
despite our efforts they are denied the benefits of the act. An em- 
ployee of a bank displaced as a result of machine introduction can 
secure unemployment insurance. An employee of a social agency, 
perhaps working in the same building, displaced as a result of 
•machine introduction, cannot secure unemploymf^t insurance. The 
social logic is not clear to the United Office and Professional Workers 
of America. Yet much of its time and income will have to be 
devoted to overcoming this lapse of the United States Government. 

The relatively poor bargaining position of the white-collar employee 
in the labor market is clear from all the facts given. Yet, an act 
designed to improve that position, such as the Fair Labor Standards 
Act, is one whose applicability to white-collar employees is in hourly 
doubt, and only preserved because of the unremitting efforts of the 
white-collar unions and the Congress of Industrial Organizations. 

The exposed position of the white-collar employees in our economy 
is clear to all. Yet slashes of W. P. A. are directed more against 
projects aiding these workers than any section of the working popu- 
lation. The pleas of the white-collar unions are ignored, and their 
representatives constantly insulted by major and minor adminis- 
trators. 

The white-collar employee in the United States today is penalized 
by governmental and business practice for a position in society he 
may once have enjoyed but which is no longer his. His right to be- 
long to a union is under constant attack. His organizations are pub- 
licly crucified by a congressional committee in Washington one day, 
while in Albany on the next the New York State Senate passes a 
measure barring bank employees from the State Labor Relations Act. 
This bill was defeated in the assembly only after an intensive cam- 
paign by the Bank and Brokerage Employees Union, a local of the 
U. O. P. W. A. 

The white-collar unions today are occupied with problems which are 
properly within the jurisdiction of the United States Government. 
They may be compared to a volunteer fire brigade which is trying to 



CONCENTRATION OF ECONOMIC POWER 16817 

do a job for which a specialized, trained fire-fighting force, with 
modern tools, is available, but which has not yet decided whether it 
is proper to put the fire out. 

The social policy of the United States is in all its implications 
progressive and liberal. Its social practice is as little of this as it 
can get away with, and it does not meet the needs of the white- 
collar workers in this country. The ^growing introduction of the 
office machine, unless modified in the light of the foregoing consid- 
erations, spells the opening for white-collar workers of a period of 
great chaos in standards of living, standards of work, job opportuni- 
ties, and all of the things which represent the ordinary aspirations 
of the ordinary citizen of the United States of America. 

For its part, the United Office and Professional Workers of America 
sees its responsibility, as a representative organization of white- 
collar workers, of expanding its own strength and that of all organ- 
ized labor; of fighting for its own legislation and the general legisla- 
tive program of the C. I. O. ; of lending its main efforts to securing 
greater expansion of production and purchasing power among white- 
collar workers and the whole people. The orderly processes of social 
adjustment cannot be accomplished without the union occupying its 
appropriate place as a natural and democratic effort with which every 
white-collar employee should be associated, to which pvery employer 
should accommodate himself, and whose voice, as the voice of people 
working for a living and speaking together and with authenticity and 
sincerity by speaking for themselves, should secure the profound re- 
spect and attention of all our divisions of government. In this re- 
spect, the United Office and Professional Workers of America will 
be enabled to discharge in its field what the Congress of Industrial 
Organizations is striving to discharge in all industry in the interests 
of the United States and its peof)le. 

The Chairman. What modification did you have in minci when you 
said, "The growing introduction of the office machine, unless modified 
in the light of the foregoing considerations, spells the opening for 
v/hite-collar workers of a period of great chaos," and so forth ? 

Mr. Merrill. Well, as I said at the opening of my testimony, 
Senator, I had no panacea. I was hoping that this committee might 
come forward with one. 

The Chairman. Well, that is a good enough word to tack on to any 
suggestion, of course. 

Mr. Merrill. Well, I agree, but apart from any facetiousness, I 
really don't know at the moment just what controls could probably 
be instituted. For one thing, it is quite certain that all social legis- 
lation which is affecting the workers generally in 'the United States 
certainly must be allowed to apply to white-collar workers. 
. Mr. Ltibin. Do you feel that the growth — well, I take it from your 
testimony that the growth of the trade-union organization and collec- 
tive bargaining would at least make it possible for those who are 
affected l3y the machines, to take part in the formulation of policies 
which will hurt or protect against the encroachment of the machine. 

Mr. Merrill. Yes ; very definitely. Of course, I am a specialized 
witness; I am not going to say anything but that I think everybody 
should join the union. As a matter of fact, it is very difficult for an 
employer to use an experimental machine, to know exactly how it is 
going to work out, and the counsel of the union has made certain 
that this thing is going to follow some orderly process. 



16818 CONCENTRATiON OF ECONOMIC POWER 

Now, no employer likes to discharge an employee for machine dis- 
placement or for any other reason, generally speaking. If the union 
can comisel with the employer as to just Jiow it should be introduced, 
its rate, the types of machines, and give us a chance to find jobs for 
these other people, we could allow these machines to be introduced 
without any serious effects from our standpoint. 

We want the concerns, particularly those concerns that are con- 
tractually related with us, to be profitable concerns. We want them 
to make more monej^ so that they can pay our workers more wages, 
and, generally speaking, we are naturally more inclined to support a 
unionized firm than a nonunionized firm. 

With that modification, I would say that we have found that the 
union has served splendidly as a means of making certain that the 
human aspects of this problem are properly satisfied, and what can 
be done is done. 

The Chairman. Well, I come back now to that question I asked 
you when you were reading your introduction. You remember I 
referred to this sentence: 

Not only are employment opportunities narrowing, but they could never have 
kept pace with the hundreds of thousands being graduated from the same 
schools and colleges every year. 

Do you think that you have substantiated that in this paper — that 
conclusion ? 

Mr. Merrill. To my satisfaction. 
The Chairman. Well, of course. 
Mr. Merrill. But I 

TJNEMPLOYMENT — SECULAR OR TECHNOLOGICAL 

The Chairman. You see, the reason I ask that question is this — 
before you answer me. You see, the contention is made to us that 
unemployment is not so much the result of the machine as it is ah 
aspect of the depression. The contention is made that machines ac- 
tually create more opportunities for jobs, and that removing the 
depression will remove the whole unemployment problem. 

Mr. Merrill. Well, you see, I can go along with that part way, as 
it affects my field. I cannot discuss the broad question as it might 
affect the steel industry or any other industry. 

Generally, as it affects white-collar employment, there is no doubt 
that white-collar unemployment is an aspect of the depression in the 
following sense : Business generally over the years developed a large 
oversized clerical force, and it is ordinary business horse sense to 
reduce the cost of that operation. Now, along comes the depression. 
It says, "You are either going to find ways of increasing the profita- 
bility of your enterprise, or you are not going to be able to show the 
same profitable return to your stockholders. 

So they look at this problem, which has not been solved. They 
start to nnd one method or another to reduce that cost. They insti- 
tute a process which will not istop necessarily with immediate solu- 
tions of the depression in its larger sense. In other words, you might 
be able to find a solution for the depression and still not be able to 
overcome this particular problem, and that is, that industry and com- 
merce in this country produced as the result of its own intensive 



CONCENTRATION OF ECONOMIC POWER 16819 

development a clerical group which is greater in size than its needs 
at the moment, or its apparent needs in the future. 

Now, then along comes the machine. It is true, as I can see it, in 
my everyday life, that certain types of machines in the oflSce field do 
produce new employment. But, generally speaking, this is not the 
result. For example, a business firm in business for 50 years, with 
an established clientele and customers which it is going to service in 
one way or another, expensively or inexpensively, has a volume of 
correspondence with those customers; say it runs to 1,000 letters a 
day. If a machine exists, either the Stenotype machine, which you 
see here, or a dictaphone machine, which can increase the productivity 
of the workers employed, they are going to do it. But; generally 
speaking, that is the kind of problem that industry or business is' 
trying to solve. It is not only getting additional information that 
enables accurate executive decisions, resulting in greater profitability, 
but it is also trying to overcome that problem of excessive adminis- 
trative costs. 

The Chairman. Yes ; but what you are telling us is this, as I gather 
it: that the future does not hold a possibility for employing all the 
machines and all the clerical workers that are being turned out. 

Mr. Merrill. At the same time? 

The Chairman. Yes. 

Mr. Merrill. No; I don't think so. I don't see how it is possible. 
For example, you take this radio-typing machine 

The Chairman (interposing). That is what you are telling us; 
that is exactly your conclusion? 

Mr. Merrill. That is right. That is exactly my conclusion. Con- 
sider this robot typewriter and the other machines that are being 
experimented with by I. B. M. and Burroughs and all these other 
companies. They don't know exactly what is going on. How can 
they? Business has not yet decided. It is making experimental uses 
of these machines. For example, it may be practical to introduce 
a patent which is known today; that is, radio-operated typewriters. 
You can set up in a room 100 typewriters and have a centrally con- 
trolled point from which you can control every indentation of that 
typewriter. That is a fact; it is a scientific fact established. There 
is no practical use of that being made at the moment, but some day 
your business, in solving or dealing with its problems, is going to find 
a practical use for it. 

At the moment everything the radio-operated typewriter can give 
you, the I. B. M. electrically operated machine can give you more 
cheaply, or in conjunction with existing processes. But that is a 
fact. 

The Chairman. Of course, the answer to that is 

Mr. Merrill (interposing). At the moment 

The Chairman. That every technological advance of that kind in 
the past has been accompanied by such an increased demand for the 
product there have been opportunities for the employment of all 
who came ap seeking the employment. 

Mr. Merrill. Well, perhaps in the industry which manulactures it. 

The Chairman. Well, for instance, let's get all the way back to 
the invention of the linotype machine. When the linotype machine 
first appeared, it was assumed that it would result in displacing 
printers. Well, it did displace a particular kind of printer, the old 



16820 CONCENTRATION OF ECONOMIC POWER 

hand type setter. If he didn't learn to use of the linotype, why, he 
gradually passed out of the picture except for job work or advertising 
copy an(l the like. But the invention of that linotype machine made 
it so much easier to turn out printed copy that a vastly increased out- 
put was the result. 

We have on the newsstands, magazines in much greater number 
than we had 25 or 30 years ago, or perhaps even 10 years ago; isn't 
that correct? 

Mr. Merrill. Generally speaking, of course; that is manifestly 
correct. 

The Chairman. In other words, this perfectly remarkable machine 
which was so extraordinary at the time it was brought in that people 
commonly said, "Why, the machine almost thinks!" — it is no com- 
parison at all with this radio-operated and controlled typewriter 
device of which you speak. But the one, as we look back, actually/ 
did not have the result of decreasing jobs. 

Now, are we to look forward and say that inventions . of this kind 
in the future will not follow the pattern which we have seen in the 
past, but will .displace workers and there will not be an opportunity 
to employ all of those who are graduated from schools and who are 
being trained for clerical jobs? 

Mr. Merrill. I hope I have made it clear that it is the contention 
of the statement which I read, that these machines are not in them- 
selves bad - 

The Chairman (interposing). Oh, no, I understand that. 

Mr. Merrill. But that their benefits must be controlled with the 
maximum intelligence. I think that yoiir general conclusions might 
be logically sound, except that the facts are not; that we are faced 
with the concrete 

The Chairman (interposing). Now, don't impute any conclusions 
to me! I am asking you a question. I am outlining the points of 
view which you have expressed, and I am trying to get your conclu- 
sions. I will conceal my own for the present. 

Mr. Merrill. My conclusion as to the effects of office machines — 
commenting generally on the use of the machines, of course — is that 
modern civilization, as we know it, would not be possible without 
machine-method production. If the administrative processes are 
affected as well, of course, it should be produced. To deny that 
would be to be willing to insert ancient ignorance in the place of 
our modern intelligence. 

The Chairman. And, of course, everybody who discusses that 
question is sometime or another accused of wanting to reestablish 
ancient ignorance, which, of course, is not the purpose of persons 
like yourself. 

Mr. Merrill. Well, I would say that the Luddites, who destroyed- 
the first machines which appeared in England, are presumed to have.-: 
continued right up to the present time in ever-growing numbers."^ 
But that is not true. I think there is a great understanding, not' 
only on the part of the white-cOllar worker generally but of the 
American people, of the importance of the machine to our economic 
and political institutions. 

I think there is also great need for the intelligent inquiry as to 
how it can be controlled. For example, I think it is marked stupidity 
on the part of certain enterprises to shunt aside the possibility of 



CONCENTRATION OF ECONOMIC POWER 16821 

securing in an orderly way the contribution of their employees on this 
and like questions. I agree with the general conclusion that in our 
field particularly the machine is at this time one of the incidental 
factors. But an incidental factor directly combined with another 
aspect of the question, the general effect of the depression can be 
social dynamite. We can say this because it is changing every day 
under our own eyes, and I can cite instance upon instance out of my 
own personal experience, of the fundamental change it has worked 
in the lives and thinking of white-collar workers in the cities of the 
United States. That change in their ideas — the way they go on, 
their standing in their community, the respect of their fellow men, 
the commendation of their employer — these are important things to 
Americans, yesterday and today, and the machine very definitely, as 
one of the implements causing this result, must be considered in its 
proper relationship. 

But the broad social factor which it is bearing upon is, in my 
opinion, outside the scope of any particular enterprise and is part 
of the general social policy of the United States, which I do not 
think business enterprise follows closely enough in its own interest 
ahd in the interest of the whole country. 

FUTILE PROSPECTS FOR EMPLOYMENT 

The Chairman. Still, what is your answer to the question, whether, 
looking in the future, the machine will or will not produce more jobs? 

Mr. Merrill. Whether the machine is capable of producing more 
jobs? I am unable to prophesy whether it will or will not. 

The Chairman. No; but you did, you did prophesy. That is 
where I am trying to pursue. You said, "Not only are employment 
opportunities narrowing, but they could never have kept pace with 
the hundreds of thousands being graduated from American schools 
and colleges every year." 

Now, if I understood that sentence of yours, it is a statement to the 
effect that no matter what happens, depression or no depression, job 
opportunities never have kept pace with the hundreds of thousands 
who are being graduated from the schools. Now, is that what you 
meant to say? 

Mr. Merrill. I think so, Senator, for the following reasons, as I 
have tried to make clear before 

The Chairman (interposing). Well, now, what are you doing — are 
you are making a prophecy now ? 

Mr. Merrill. No, I ainjiotmaking a prophecy; I am making a 
general statement. 

The Chairman. All right. 

Mr. Merrill. When it comes to prophecies, that is sayifig tTiafr~at -a^ 
specific time, this will happen or may happen. "The number of job 
opportunities todnj^— are they likely to be curtailed? 

I have tried to show that business will likely reduce the number 
of those jobs in its own interest, and I think that American business 
IS going to operate just as efficiently as, say, British business, which 
manages to get along very nicely with an administrative force repre- 
senting only sonie 12 percent of the total gainfully employed popula- 
tion. Yet in this country it is close to 18 percent or close to 17 per- 
cent. ^ 



16822 CONCENTRATION OF ECONOMIC POWER 

The Chairman. But there may be more business. 

Mr. Merrill. There may be more business, but it is unlikely, in 
my opinion, that the increased volume of this business will not be 
taken care of by the increasing use of machines in adaptation, ration- 
alization, and generally a more orderly way of doing your business 
than under the present form. 

The Chairman. In other words, in looking forward, you have given 
to us as your considered opinion that you cannot conceive of a suf- 
ficient increase in business to provide jobs for all of- those who are 
being trained and educated to work, because of the machine? 

Mr. Merrill. I think that the machine is one of the most important 
factors ; that is correct. 

The Chairman. Well, what other factor is there? 

Mr. Merrill. What other factor is there? Well, it depends upon 
the quality of the training itself. We do note a trend of reduced 
educational requirements, although they are still high. There is a 
tendency to water it down. That might be a factor, too. People 
might be willing to go into other occupations and shift to them much 
more easily than they do now. 

We have noted the tendency that when people are trained as office 
workers they will go to almost any length to avoid going into some 
manual occupation, because of the respectable inference involved in 
white-collar occupation. 

The Chairman. In other words, the machine is tending to com- 
pletely displace the white-collar worker in business offices? 

Mr. Merrill. No ; Senator, I don't go quite that far. I would say 
that there is an implication present. I wouldn't say that that tend- 
ency has already manifested itself, but the implication within the 
logic of the premise we have established, that is, including the fac- 
tors we know, is very definitely there. 

At the moment, I wouldn't go beyond saying that it is an implica- 
tion. I wouldn't say that that tendency has manifested itself beyond 
the degree to which I have testified. 

Dr. Anderson. Mr. Merrill, pursuing the topic from a slightly dif- 
ferent angle, in the morning's testimony Mr. Watson had a section 
entitled, "More machines, more employment." He oflFered evidence 
from the census indicating that in the 1930 census we had a certain 
increase in number of gainfully employed per population, in a 45- 
year span, from 1890 onward, but that in the 40-year span, the number 
reporting clerical employment had increased enormously above that. 
The first was a 7-percent increase, the latter is a 370-percent increase. 

Now, I should like to offer a little piece of evidence from that 
occupational trends book referred to by Dr. Kreps on the opening day 
of the testimony, which Dr. Davidson and I are now publishing, 
which bears upon the topic you and the Senator have been discussing. 
I have before me a display of percentage increases and numerical 
increases in the clerical workers. We have cleared them from the 
census so we have just clerical workers and no trade workers, from 
1910 to and including 1930. In the decade 1910 to 1920 there were 
added to the labor force 1,319,000 clerical workers. In the decade 
1920 to 1930 there were added to the labor force 879,000. In the 
first decade noted, clerical workers increased in the labor force by 
80 percent. In the second decade noted, they increased only by 29 



CONCENTRATION OF ECONOMIC POWER 16823 

percent. Their numerical increase had fallen off decidedly; their 
percentage increase had fallen off very markedly. 

When we projected the thing into 1940, we found. a still further 
decrease in the number of persons, a decrease in the rate of growth 
of the number of persons offering themselves as clerical workere. 

Mr. LuBiN. How do you define clerical workers there ? 
.Dr. Anderson. In this particular instance we took the classifica- 
tions of the census and broke them into the following groups : book- 
keepers; cashiers and accountants; general office clerks; messenger, 
errand, and office boys a>i;d girls; stenographers and typists. For that 
population, which covers pretty definitely the clerical group so far 
as we can separate them in the census, that was the trend. I want 
to ask, then, with that thought in mind, and with that material 
before you, this question : Can wliite-collar employment as indicated 
by this segregation of clerical workers absorb displaced workers from 
other parts of the economy or new entrants to the field of labor in the 
immediate future? 

Mr. Meerill. I would say, categorically, no. 

Dr. Anderson. In other words, despite the usual increase in the 
number of clerks as compared with the rest of the gainful workers of 
the Nation, the categories of gainful workers, you can't conceive that 
white-collar opportunities are the place to go ? 

Mr. Merrill. I would say not only despite it, but because of it. 

Dr. Anderson. What do you mean by that ? 

Mr. Merrill. The mere fact that they have already increased to 
this large extent militates againsc their ability to absorb any addi- 
tional employees. 

Dr. Anderson. So the white c liar labor force is adequate tv, meet 
any employment demands that are now available or in immediate 
propspect? 

Mr. Merrill. I would say yes. 

Mr. Maginnis. Mr. Merrill, in the light of the last page of your 
statement, "The white-collar unions are ignored and their represen- 
tatives constantly insulted my major and minor administrators," 
what you you mean by "administrators"? 

Mr. Merrill. I mean administrators of W. P. A. We have had a 
great deal of difficulty about it. Of course the Senator corrected 
me before, and I don't know whether he wants me to go into this. 

The Chairman. I really think that is just a matter of opinion. 

Mr. Merrill. Of course it i». 

The Chairman. Unless we had Y/. P. A. administrators here to 
speak for themselves I think it is a little beyond our function, as a 
matter of fact. X noted that statement but I didn't think it was 
worth bringing up. 

Mr. Merrill. I think you anticipated it. 

union contracts and technological change 

Dr. Anderson. Mr. Merrill, in your union procedure, in the con- 
tractual relationships with employers, what use has been made of any 
clauses in contracts with respect to technology ? 

Mr. Merrill. We have never embodied it in any clause. We have 
a general governing clause that any dispute arising in the course of 
employment shall be a subject of negotiation and, discussion, and 



16824 CONCENTRATION OF ECONOMIC POWER 

these matters have been taken up under that clause. The manage- 
ment usually notifies: "We want to introduce new machines in a 
department," and we discuss it with the union representatives of the 
employees in the establishment and take that problem up. That has 
been taken up just in the same manner as employer-employee rela- 
tionships of the contract. .We have never required a specific clause 
in order to guarantee that we would be permitted to discussthe ques- 
tion. I believe I am familiar with all the contracts signed by our 
local organizations, and the only case I know of that we ever had a 
clause- specifically referring to the machine was when a small em- 
ployer sought to introduce machines in order to fight the union. 
They were organized and ready to sign a contract with us^ and we 
did insist upon a clause governing the machine, but this was not 
introduced as a matter of business practice; it Was introduced as a 
nriatter of employer-employee relationship. 

Dr. Anderson. Did you include a clause in the contract with re- 
spect to the relation of the machine ? 

Mr. Merrill. Yes. This was a rather harsh clause, and I beg you 
to remember the unusual circumstances involved. In this particular 
case the employer agreed that'Mespite the fact that he had purchased 
these machines, obviously with the intent of displacing a number of 
workers, nevertheless he would guarantee that no employee would be 
discharged as a result of machine displacement for the life of the 
contract. 

Dr. Anderson. Does your organization intend to proceed with that 
kind of contractual relationship? 

Mr. Merrill. No; we feel that the general clause providing for 
discussion of all matters is quite sufficient. 

Dr. Anderson. You have touched upon the condition of married 
workers in the clerical field. Do you have anything in your con- 
tracts covering the matter of marital status of workers or changing 
marital status and its eif ect upon employment ? 

Mr. Merrill. Why, I would say no, except that in no fiiin where 
the union has a contract has anyone been permitted, to my knowl- 
edge, to be discharged because they married. If it were to happen, 
if there were objection, perhaps for practical reasons (I cannot pos- 
sibly envision the circumstances that would justify it, but I have 
come across strange things in the past, perhaps it would occur in the 
future), we could discuss that perhaps in the case of that individual 
worker or the category. 

Dr. Anderson. Do you find any attitude on the part of the man- 
agement generally or in specific instances with respect to marital 
status of workers in which married women are not regarded 
favorably? . 

Mr. Merrill. I would say that once was the prevailing attitude. 
They didn't want married women around, they should, be supported 
by their husbands and not be in offices anyhow, they should occupy 
themselves more with their homes, and that sort of thing, but I 
think that is changing; It is changing for two reasons, one I think 
that the employee who is married is usually a more consistently 
efficient worker. I couldn't vouch for statistics for this, but I tliink 
that in ordinary conversations this is generally accepted; the other, 
which is a very important reason, is that it is becoming more and 
more important for women who are capable of adding to the family 



1 



CONCENTRATION OF ECONOMIC -POWER 16825 

income to do so. With the vast majority of people in the low-income 
brackets in clerical work, obviously the need for additional income 
exists. If they can go out and get it, it helps to solve a practical 
problem, because if it is merely supplementing income already avail- 
able, the pressure to provide a higher level of income, as would be 
the case with a single wage earner who has to support a family, 
doesn't become so great. 

Dr. Anderson. You offer that as a piece of supporting evidence 
with respect to the reason for reducing wages of clerical workers? 

Mr. Merrill. Why, yes, I think so — well I wouldn't say this was 
one of the reasons. I would say that in the process of lowering 
wages, they have taken advantage of this factor as being an effective 
cushion. 

Dr. Anderson. And despite wide unemployment you find that 
management is not pressured to remove its married workers? 

Mr. Merrill. Well, I think that, as I said before, management is 
not only not being pressured, but would resist it to a much greater 
degree than it did in the past, because better home adjustment, 
which is truer of married than unmarried people," results in a better 
degree of efficiency, more persistent, more sustained, and in office 
employment I can t tell you how important a factor this is. If an 
employee, upon whom you cannot always check up, is consistently 
efficient for 99 days out of 100, and then one day goes awfully bad 
on you, it can lose you an awful lot of money and can mess up an 
awful lot of important work. This question of sustained efficiency 
is so important to management that I think they just naturally give 
way. 

Mr. Pike. I would like to ask your opinion, Mr, Merrill, on one 
effect that I don't think you brought out, and that is the effect of 
going into the office as part of a line of promotion. You used to 
go in at the shop or at the office to learn the business. Now, in a 
fair size business you go into the shop and in a year or so you end 
up tightening a nut and you haven't learned much about the business. 
More recently you go into the office, let's say, of a large bank or 
large organization and you get to pounding a comptometer and you 
don't learn much about the business there. I think industry in 
general has got its line of promotion almost unconsciously without 
looking for it, and I w6nder if you have ever broken up in both 
places by the introduction of the transmission belt system, the pro- 
duction system, a method by w^hich people can come through and take 
those positions which I take it will always be available ii one way 
or another, the managerial, executive functions, which do require a 
large general knowledge of the business as a whole. It would seem 
to me that you W'Ould have to go back to, let us say, the little man 
or the little office in order to be able to learn the business as a whole. 
After you departmentalize so much (the machine does that) you 
seem to have created a barrier both in office and shop against the 
person who either wants promotion or deserves promotion or has 
the innate ability to secure promotion providing the line is open in 
the upper ranges of the business. It seems to be quite important in 
one of the phases that you mentioned, that siocial phase, the feelinjr 
of respectability, the feeling that one is getting on and can see his 
way through better than the other people. 

Mr, Merrill. There is less opportunity of it than in the past. Of 
course, management must provide in a large corporation for con- 

124491 — 41 — pt. 30 41 



16826 CONCENTRATION OF ECONOMIC POWER 

tinuous available new managers; people grow ill, people die, people 
grow old. There are only two ways in which they can do that, or 
uiree ways. One is to recruit them from other firms. The second is 
to recruit them from the ranks of their own employees. Now, since 
the process which you refer to has taken place, that is the increasing 
loutine nature of office employment generally, and is not leading to 
the rapid appearance of these people, management is taking a bird 
step, that is, it is providing itself in advance with people, saying, "We 
are going to train this man as an executive, and we are going to take 
him through every one of these departments." They are either known 
to management already, they come from a friend, they show likeli- 
hood, or they show exceptional attributes and abilities in some other 
respects. 

Mr. Pike. But not so much hope for tlie fellow who is in there. 

Mr. Merrill. I wouldn't say it doesn't happen ; there is not as much 
likelihood. 

CHANGING STATUS OF WHITE COLLAR WORKER 

Mr. Maginnis. Mr. Merrill, there is this statement in the last of 
your paper: "The white-collar employee in the United States today 
)s penalized by governmental and business practice for a position in 
society he may once have enjoyed but which is no longer his." Do 
you refer to white-collar employees in government service or in 
private enterprise?. 

Mr. Merrill. No; I am referring to white-collar employees in 
private industry generally in the community. The white-collar em- 
ployee generally was considered pretty much, and this prevailing 
idea has continued despite the fact that the physical facts have 
changed. He isn't paid, relatively speaking, at as high a rate. Paul 
Douglas, for example, testified that the real wage of the white- 
collar worker has dropped between the period I referred to. Gen- 
erally these things have changed. Yet I have read debates in Con- 
gress in which Congi-essmen have got up and said substantially this : 
"Well, these people enjoy a privileged position in society and in busi- 
ness. Why do we have to provide exceptional things for them?" 
That has changed and is changing Even the manager of a certain 
business enterprise who might be quite realistic as concerns his own 
enterprise, is likely to attribute to some other fellow's firm the general 
condition which he believes to exist. For example, you go into insur- 
ance today, and they will tell you, "Well, in banks things are that 
way and the other way," whereas the banking field has equally errone- 
(ms ideas about the methods insurance companies employ in directing 
their employees. Both of them are wrong; they are both pretty 
much the same. They are both large-scale employers of labor and are 
following pretty much the same procedures, because they are based 
upon sensible analysis of what their production requirements are. 
The individual in the community has changed, but widely speaking, 
business management, people generally, Government, Congress, and so 
on, do not understand this, and he is penalized. I think, personally, 
of course, that white-collar unionism has more than justified itself, 
yet we are constantly having to fight off this riglit to secure the ad- 
vantage and the benefits of the Labor Relations Act. Tliat is penaliz- 
ing us. People feel that clerical workers don't need it, on account of 



CONCENTRATION OF ECONOMIC POWER 16827 

Ihe position which they may have held in 1890, but whicn^they cer- 
tainly do not hold in 1940. ' 

Mr. Maginnis. Your membership covers employees in inlustry as 
distinct from governmental service? 

Mr. Merrill. Oh, yes; we do not accept into membership any em- 
ployees in governmental service. 

Dr. Anderson. We asked a witness this morning to testify as to 
the effect of mechanization in white-collar fields on the psycho- 
physical characteristics and habits of workers. The literature is- be- 
coming increasingly filled with studies of fatigue factors, monotony, 
and so forth, and their effects on clerical workers. Do you have any 
comment to make? 

Mr. Merrill. It would only be a recapitulation of already pub- 
lished material. Of course, since this aspect of ^white-collar employ- 
ment has secured the attention of people who have been scientifically 
prepared to make such investigations we would not make any com- 
ments of our own, we would defer to them. It is only in the areas 
where scientific investigation is not taking place that we feel the 
necessity in the light of our experience to come out and make an 
opinion. I think that there is a great deal of material, as you say, 
bearing upon the fatigue factors, and what not, and for that reason 
I have not gone into that. I could only recapitulate the information 
already available. 

Dr. Anderson. But your organization is concerned about the in- 
fluence of these machines with respect to fatigue and monotony of- 
service and other effects upon workers? 

Mr. Merrill. Yes; we have a health plan, for example, covering 
some 16,000 workers in the city of New York; in connection with it 
we are having the doctors who are on our health panel maintain very 
careful statistics which incidentally have been prepared under the 
direction of the United States Government. 

After that has been concluded, perhaps we may be able to come out 
with a statement which would bear upon facts which we can actually 
trace out of our own experience or the experience of our workers. We 
have found it necessary to an increasing extent to provide these pub- 
lic-health services. We have been doing it on an experimental basis in 
New York City, and on a somewhat larger scale in Chicago. Certain 
aspects of hospitalization we are going to be able to do on a national 
sc^le, but we have found this an increasing problem as the need for it 
becomes greater on the part of white-collar workers, and as they are 
unable to provide for it out of their own incomes. 

Dr. LuBiN. Mr. Merrill, as I see the problem, there are two effects 
rather than one of displacement of labor and the ability of industry 
to absorb labor, both in the white-collar classes and in the manual 
classes. 

They divide themselves as follows: (1) Is it the machine itself 
which makes it possible for that man to do more than he would 
otherwise do ? Isn't there a second field equally wide, almost, of dis- 
placement due to greater efficiency, and -that -efficiency may in turn 
be of two parts: first, jtist tbie elimination of waste. I remember 
a man telling me in 1933 thxit he-learned about so many things during 
the depression, things he did not need in his plant, that he formerly 
felt had to be done in this piant. As a result he felt that he could 
take care of his 1929 business with 80 percent of his 1929 force, not 



16828 CONCENTRATION OF ECONOMIC POWER 

working any harder, but just eliminating a lot of %vastefiil things 
which he formerly thought were important but which he learned 
through the depression he did not have to have. 

Secondly, speed-up. Now, have you any idea as to what extent 
each of these factors have played a part in the white-collar indus- 
try? Would you say that machinery has beers the more important, 
or more important than the two other factors combined? 

In other words, the machine itself does not, although it may, in- 
crease productivity. It frequently brings with it a type of speed-up 
that did not exist before the machine was developed, because of the 
need to get a return on investment, let us say, or because there is a 
new process that makes you want to get the most out of the new 
machme. 

NON-MECHANICAL CHANGES IN TECHNOLOGY 

Mr. Merrill. I have tried to indicate that we considered the ma- 
chine only one of the factors. In estimating its relative importance, 
I would say that the machine for us at the present moment, and per- 
haps for a limited time only, is the least important factor; nmch more 
important is the more efficient organization of work, the other definite 
increases in the speed-up, as you call it. 

In white-collar work that is usually described primarily as "pac- 
ing" — "Who is pacing this department?" I don't think that 10 years 
ago or 15 years ago, management deliberately inserted into depart- 
ments the man who was going ;to pace it. For example, you can get 
someone who is just going to keep the department humming. Well, 
that has been done deliberately in machinery production, but not in 
white-collar employment to the same extent as it is done today. 

Today it is taken as a matter of course that there is going to be 
someone just pushing this thing along. I would say that these 2 
factors are by far the most important. Their relative order J w^ould 
say would be first, the question of increased efficiency in the organiza- 
tion of work, and secondly, the very definite question of speed-up 
which is combined with the aspect of machinery, but I also have to 
point out that perhaps the machinery might become the most im- 
portant factor of all of the reasons I put forward. 

Dr. LuBiN. Could you cite us any examples of the methods used to 
bring about speed-up ? I know of only a few of them. The one that 
comes first to my mind, one in large companies where the girls at the 
typewriters are put on a wordage basis, and they are expected to 
turn out a certain number of W(6rds every hour, and the number of 
words is counted, and there is an actual praduction record kept. 
Are there other methods similar to that? 

Mr. Merrill. Yes. In the credit reporting industry, employing 
some 25,000 people, they have increased speed-up simply by requir- 
ing a larger number of reports to get out, greater and more careful 
use of stuff in one department to get that stuff over into the next 
department. They speed it up. 

Dr. LuBiN. It is the application of timing systems? 

Mr. Merrill. Oh, yes; time-motion studies are being made to an 
increasing extent in the office field. 

For example, John Hancock Co. went into it in the issuing of poli- 
cies, and also most of the major insurance companies. The policy 
starts at one end of the room and they get a completely written 



CONCENTRATION OF ECONOMIC POWER 16829 

policy at the other end. It is just by simply typing the same thing, 
and it is just shifted right along. It is a regular time-belt system. 
Then you have a basis of measuring a performance, and it comes out 
with lightning speed. 

There are very important things sometimes. Suppose 3 or 4 agents 
were competing for a policy, and this frequently happens, so the 
companies might endeavor to get it, but the departments hold it up. 
Well, that agent is going to say, "There is no use pushing me for 
business, because when I wanted a policy I couldn't get it, and if I 
had been able to get it sooner, I could have sold it." 

And in other cases — and this is also a part of the promotion of a 
policy — the person getting the policy wants it immediately. There 
is a tremendous demand on the part of the policyholders to see the 
policy. 

The third important reason why they have to get the policy out 
speedily is that, generally speaking, the check comes in when the 
person gets the policy; he" says, ""I'll pay you when I get the policy." 
And to get the policy out quickly is going to make all the dinerence 
in the world as to the amount of money you are going to have on 
hand. And if that policy, along with a number of others, comes 
in 2 days later, you can see that a combination of them would make 
a considerable difference when you think of the contribution they 
make. 

And the fourth thing is policyholders. Or-e they go into this 
thing, they itch for the policy, itch to get their hands on it. They 
want to see it and show it to the wife or the loved ones. Things 
of that sort are the pressures to produce speed, and so apart from 
any economic reasons that would justify cheapness there is a great 
necessity for speed. 

That can be duplicated in a number of places. In brokerage 
houses, for example, where speed is an important factor, they are 
going to rationalize this to a great extent. Formerly you could go 
to a stock-brokerage house to purchase stocks, and you read the board, 
is was marked up in a chart. Gradually efficiency produced a black- 
board which could be marked more easily. I have not noticed this 
in Washington, but you can go into a New York stock firm now and 
see a man sitting in the corner^ just pushing the buttons as they come 
across the table. He has a relief man, but formerly the stock broker 
would use 10 or 15 runners to keep that big board marked up. Now 
1 man works that by himself. He is a telegrapher, and no longer a 
stock-board marker. They are practically completely eliminated. 

The stock exchange itself is operated, as you know, by machinery, 
apparently through necessity, but it has cut down the labor force. 

The Chairman. Are there any questions^ 

Mr, Maginnis. I take it this interesting statement you are making 
was made on the veritype? 

Mr. Merrill, It is a veritype of work, not a speedier method of 
doing it, just nicer. 

Mr. Maginnis. Also, the interchangeable type to give your set- 
ups 

Mr. Merrill. That is an interchangeable collar. 

Dr, Anderson, Before we adjourn, Mr, Chairman, I mentioned this 
morning a Government table which gives the salaries and earnings 



16830 CONCENTRATION CF ECONOMIC POWER 

of clerical workers, and compares machine and hand operators. I 
should like to offer it as an exhibit.^ 

The Chairman. It may be received. 

Is that one of the exhibits which Mr. Merrill was to revise ? 

Dr. Anderson. That is right. 

The Chairman. And your next witness will be ? 

Dr. Anderson. We start Monday with 2 witnesses treating of tex- 
tiles and new fibers. The following 2 days we discuss the impact of 
technology in agriculture. One presentation will include a film which 
I hope will be interesting. 

Then we have the problem of what education can do with respect 
to training and placement and retraining and replacement of workers. 
Then we discuss coal, and, as a wind-up, Mr. Corrington Gill will ap- 
pear to discuss in the over-all the implications of te 'hnology. 

The Chairman. The committee will stand in recess until 10 : 30 on 
Monday morning. 

(Whereupon, at 5 o'cls>ck^an adjournment was taken until Monday, 
April 22, 1940, at 10 : 30 a. m.) 

1 Previously entered as "Exhibit No. 2608." See appendix, p. 17425. 



INVESTIGATION OF CONCENTKATION OF ECONOMIC POWER 



MONDAY, APRIL 23, 1940 

United States Senate, 
Temporary National Economic Comnnittee^ 

Washington^ B.C. 

The committee met at 10 : 40 a. m., pursuant to adjournment on Fri- 
day, April 19, 1940, in the Caucus Room, Senate Office Building, Sen- 
ator Joseph C. O'Mahoney, Wyoming, presiding. 

Present: Senator O'Mahoney (chairman) ; Representative Williams, 
Messrs. O'Connell, Lubin, Pike, and Bracket!. 

Present also : S. Abbot Maginnis, 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. Mr. Chairman, today's hearings will deal with the 
subject of techilology in the field of textiles, with particular reference 
to new fibers. The entire topic will be discussed, however, and the 
first witness of the morning will be Mr. Emil Rieve, president of the 
Textile Workers Union of America, New York City, New York, He 
has with him the economist for the Textile Workers Union, Mr. 
Solomon Barkin, and they are prepared to present their testimony 
at this time. 

(Representative Williams assumed the chair.) 

Dr. Anderson. Mr. Chairman, neither of these witnesses has been 
before us. 

Acting Chairman Williams. Will you gentlemen be sworn ? 

Do each of you solemnly swear that the testimony you are about to 
give in the matter now pending shall be the truth, the whole truth, 
and nothing but the truth, so help you God? 

Mr. Rieve. I do. 

Mr. Barkin. I do, 

TESTIMONY OF EMIL RIEVE, PRESIDENT; AND SOLOMON BARKIN, 
ECONOMIST, TEXTILE WORKERS UNION OF AMERICA, NEW YORK 
CITY, N. Y, 

Dr. Anderson. Mr. Rieve, it has been cust;omary in these hearings 
to substantiate the authority of the witness in his field. You are 
president of the Textile Workere Union of America? 

Mr. Rie\'e. That is correct. 

Dr. Anderson. What is that union? What is its membership and 
what is its importance in the textile field ? 

Mr. Rieve. The Textile Workers Union of America has over 1.100 
contracts, covering about 350,000 workers in the textile industry. 

Dr. Anderson. Are there other unions in the field? 

1GS31 



16832 CONCENTRATION OF ECONOMIC POWER 

Mr. RiEVE. Yes; there is a smaller union, the United Textile Work- 
ers of America, an A. F, of L. organization. There are also some 
independent unions in the field. 

Dr. Anderson. What is your own experience in the textile in- 
dustry ? 

Mr. RiEVE. I have been working in the textile industry since I 
was 13 3'ears of age. 

Dr. Anderson. Which means you have spent how many years in 
tlie industry? 

Mr. RIE^•E. You want me to give my age away. Well, I am 48. 

Dr. Anderson. Have you been in various branches of the industry? 

Mr. Rieve. No; I specialized primarily in one branch of the in- 
dustry, but I do have some knowledge of other branches of the in- 
dustry. 

Dr. Anderson. With what organization is your union affiliated? 

Mr. RiEVE. The Congress of Industrial Organizations. 

Acting Chairman Williams. You may proceed, Mr. Rieve. 

Mr. RiE\'E. The textile industry is a most appropriate field for 
surveying the social, economic, and human impact of technological 
change. As one of the first to be modernized and to be established 
on a factory basis, its recorded history illustrates fully the costs 
attendant upon industrial progress. The English history of the tex- 
tile industry is well known to us. Protective factory legislation was 
required to correct conditions in the industry. The British settings, 
it may be ventured, predestined similar lines of development in tne 
textile industries of other countries. 

While the basic technical processes of the textile industry have 
been stabilized for many years, there has since developed an unend- 
ing line of technical improvements. These changes have been par- 
ticularly disturbing in this maturely developed industry, as it is 
now less able to cuijhion these dislocations through expansion or al- 
ternative employments for its workers. Moreover, the existence of 
some of its divisions is currently endangered by new processes and 
revolutionary departures. 

It is our purpose to offer your committee a summary statement 
of the types of technical innovations in the industry making for 
marked advances in man-hour productivity and the problems created 
by their changes. It is also our desire to outline to your committee 
the attitude and program of our organization. 

It is well to appreciate the tremendous importance of, the textile 
industries and the significance of our discussion. There are approxi- 
mately 1,250,000 persons employed in the industry and its associated 
branches. The textile workers are predominant in the South, where 
almost half are located. The welfare of the southern textile worker 
conditions the life of the South. Similarly, the more than 250,000 
textile workers determine conditions in New England. Life in cen- 
tral Pennsylvania is also colored by the life of the textile workers. 
Any development which affects the welfare of these workers will 
affect the life of their sections of the country. 

TBCHNOIX)GICAL CHANGE IN THE TEXTILE INDUSTRY 

Mr. RiEVE. All ty ^cs of technological change and all pf its problems 
may be found in th - textile industry. The transition from manual to 
machine processes \viis accomplished early in the history of the in- 



CONCENTRATION OF ECONOMIC POWER 16833 

dustry. Textile manufacture began as a tool industry. Machines 
were developed early. The greatest progress has been made since 
power machines were applied. First water-driven machines were em- 
ployed; then they were steam propelled. With the introduction of 
ele(?tricity, the motive power changed. Finally, individual motors 
replaced the belt. Each alteration meant tremendous industrial ad- 
vances and higher speeds, higher levels of production. 

During the last century, the remaining manual processes were for 
the most part mechanized, though several gaps have been closed dur- 
ing the last several decades. Most outstanding was the warp tying-in 
machine, which mechanized the process connecting warping and 
weaving. There is now hardly a manual operation left in the cotton 
mill, and relatively few in a woolen mill. The appearance of the auto- 
matic welt devices in the manufacture of full-fashioned hosiery 
presages the early development of completely automatic full-fash- 
ioned hosiery machines. 

The mechanization process has also been extended to every phase of 
mill operation. While production equipment received first attention, 
conveying equipment soon followed. Tractors superseded hand trucks ; 
hoists relieved workers of hard labor ; conveyors supplanted tractors ; 
blowers in some instances replaced conveyors. Physical rearrange- 
ment of processes and line systems of production frequently eliminated 
handling and the need for conveying equipment. 

The humidification and temperature and air-conditioning controls 
have been mechanized ; the cleaning of floors and other auxiliary 
processes are minimized by Qomposition floors and chemical com- 
pounds. In the powerhouse, in the maintenance department, and in 
every other phase,- mechanization is proceeding apace. 

Improvements on machines are an even greater source of advance 
than original basic patents. This process is continuous ; machine re- 
finements are constantly being made. As machine manufacture is 
improved in this country, machines have been built more soundly, 
better able to withstand the wear and strain of operation, with better 
lubrication devices and have been kept in better operating condition. 
The standardized machine, the expansion of the machine building 
industry have made replacement easy and added an . incentive to con- 
stant improvements. 

Patents of small and large ideas are beiiig secured constantly on 
textile equipment. In one issue of a current textile trade magazine, 
there was a patent for a self-contained cotton cleaning and extracting 
machine ; 8 patents for rayon and cellulose treatment ; 2 for winding 
frames; lior twisting frames; 9 for looms; 5 for knitting machinery; 
10 for bleaching, dyeing, and finishing of textiles. Most machines are 
now mechanically more perfect and amazingly more productive than 
original models. 

These and other innovations, have transformed the industry from 
one with manually operated or tended machines to one with semi- 
automatic and completely automatic machines. 

Everywhere in the textile industry workers are being deprived of 
their former duties. Stop motions have multiplied and photoelectric 
cells have increased in number and in their applications. Workers 
have become less necessary as machines perform the work themselves, 
require no operators and stop automatically when the process goes 
wrong. For example, a photoelectric seam detector recently installed 



16834 CONCENTRATION OF ECONOMIC POWER 

on a calendar eliminated the need of an operative to control the pres- 
sure on the calendar roll. Pressure controls are everywhere being 
substituted for workers. Automatic devices are now measuring the 
intake on machines to prevent overfilling. Recently, a mechanical 
and electrical stop motion was introduced on a filling wind for spin- 
ning frames, to assure uniformly full bobbins. As an indication of 
the extent to which controls have been developed, we need only refer 
to a tenter frame for woolen goods which, it is claimed, tenters 16- 
ounce goods at 38 yards per minute or three times as much as older 
tenters and can be operated by one man and is completely equipped 
with automatic guiders, automatic temperature and speed controls, 
selvage openers-and lint screens with starters and limit switches. 

These developments have already progressed so far in the cotton 
textile industry in particular that one can walk through entire spin- 
ning and weaving rooms and be overwhelmed by the amazing collec- 
tion of machinery and encounter difficulties in finding the employees 
patroling the machinery, repairing breaks, or cleaning, doffing, creel- 
ing, or performing sundry other duties. 

The new order of the day in textiles appears to be regular belt 
conveyors supplying automatic feeders attached to machines with 
electric or mechanical stop motions and regulating devices for the 
control of the feeder, the flow of material, the pressure or the tension 
of the material on its passage through the machine, maintained by 
automatic tiers and cleaned by moving electrical suction devices. We 
may possibly look forward to automatic devices to place materials 
onto conveyors for the next operation. Workers will be around just 
to repair, to await signals on stop motions, to oil and to perform 
sundry operations which have not become "robotized." 

Machinc^peeds also have been increased by these advances. Looms 
which started off at the beginning of the nineteenth century at less 
than 20 to 30 picks per minute are now operating at 190 picks per 
minute. Conventional slow speed cotton warpers which ran about 
50 yards per minute in 1910, have been replaced by high-speed equip- 
ment running 500 to 900 yards per minute. Slashers which operated 
at about 25 yards per minute have been superseded by slashers which 
run about 70 yards per minute. Spindles are being run up to 10,000 
and 12,000 revolutions per minute on various types of frames. Speed 
and higher speed is a common place demand. 

Production processes are also being simplified. Easier methods 
are being introduced for older processes. Less time is consumed; 
the results are better. So the portable warp-tying machine replaced 
in many instances the stationary warp tier. Flexibility was general 
and much cost was saved. The addition of a magazine creel to the 
automatic warper permitted more continuous operation of the warper 
by making available an additional set of cones on the warper. Prog- 
ress is also being made in the direction of operations. Single proc- 
esses are substituted for numerous successive operations. The single- 
process picker now does the work of the three-process pickers; the 
long draft drawing frames replaced the three-process drawing 
frames; the super draft roving frames now stand where formerly 
were intorniodiate and roving frames. In the worsted industry, 
manufacturers hope to duplicate the cotton textile industry by elim- 
inating all operations between gilling and spinning. In throwing 
a one-process machine which takes yarns on skeins and delivers them 



CONCENTRATION OF ECONOMIC POWER 16835 

either on cones for knitting or on filling bobbins for weaving is now 
sought. A completely automatic, single-unit machine for knitting 
for legs and feet on the one machine is the objective of hosiery man- 
ufacturers. Continuous dyeing and finishing is supplanting batch 
or piece methods. 

As competition became more intense after 1933, development, 
acceptance, and the absorption of these machines have been more 
rapid than ever before. Modernization programs are becoming pop- 
ular and more necessary to success in business. The byword of the 
day is to modernize. Everybody is preaching the scrapping of old 
equipment and the installation of new machinery. This trend is 
reflected by the fact that sales of textile machinery in 1939 exceeded 
those of 1929 by 5 percent. Using 1929 as a base, the Textile World, 
a trade magazine, estimates that textile machinery sales have been 
climbing back to the 1929 level since 1933. In 1936 the index was 
94; in 1937 it was 104; in 1938 it was 73; and in 1939, 105. Manu- 
facturers are investing their funds in new equipment. 

Whether the processes of modernization, mechanization, or auto- 
matization proceed individually or together, they have increased the 
productivity of the individual worker. It takes fewer and fewer 
man-hours and more expensive machinery to produce the same prod- 
ucts. In addition to the substitution of old equipment by faster and 
more automatic equipment, the raw materials are becoming easier 
to handle. Raw materials are more carefully selected; the prelimi- 
nary cleaning process is more thorough; the specifications are more 
exact ; the breaks in the yarn are less frequent ; the number of proc- 
essing operations is fewer ; the handling is less frequent. All of these 
factors, in addition to the successful preliminary processing, facili- 
tate the operations through the weave shed, the cloth room, and the 
finishing departments. These improvements in the yarn mean fewer 
breaks in warping and weaving, better cloth and fewer seconds, less 
work in the cloth room, particularly when burling and mending is 
done. The process is constantly directed toward less work and less 
labor. 

Even more fundamental are the new processes and fabrics which 
usually result in striking reductions in the amount of labor. The 
first important substitution in the cotton textile industry occurred 
when calico printed cloth replaced the hand-woven fancy cloth. 
Currently, cloth effects are being secured by the use of rayon yarns 
which react differently to dyes, thereby eliminating much fancy 
weaving. In the pile-fabrics industry latex and chemical finishes 
permit the creation of designs on carpets by cutting the required 
sections from single-colored carpets and pasting them together 
instead of weaving the patterns directly on a loom, and also insertion 
of wool in a rubber composition base without weaving. These are 
only suggestive of the multitude of substitute processes which have 
reduced work and displaced older methods. We are veritably at the 
threshold of such changes in the textile industry. 

Even more significant than the substitution of processes has been 
the replacement of fibers. This trend can be measured with great 
accuracy. Little silk is now woven. Nylon and vinyon threaten 
silk in the hosiery industry which now consumes some 75 percent 
of all silk. While 611.302 bales cf raw silk were consumed in 1929, 
the total dropped to 358,931 in 1939. Paper products were made 



16836 CONCKNTRATION OF ECONOMIC IH)WER 

inroads in the bagging field. Synthetic yarns are entirely or in part 
replacing older fibers. Bei^ides taking over almost the entire silk 
industry, synthetic yarn is now being made part of or blended with 
cotton and' woolen fiber and fabrics. New uses are being developed 
in the manufacture of draperies, filter cloths, felts, fireproofing 
materials, and thread. The replacement of silk has meant a reduc- 
tion in the amount of labor required to manufacture. Such cloths 
as rayon can be processed on more mechanized equipment and is 
betteiT subject to control. New rayon looms attain 182 picks per 
minute on wide and heavy rayons. Work assignments frequently 
range over 30 looms per weaver. 

Improved management techniques have also inci'^ased man-hour 
productivity. In its drive to reduce costs, management has con- 
stantly sought to minimize the amount of labor in its plant. It has 
imposed ever higher work assignments. Just as soon as the industry 
encountered its first important economic set-back, it turned to this 
customary method for securing lower labor cost. It extended work- 
load; reduced wages; it replaced older workers by newer help; and 
sought labor-saving machines. During the tw^enties, so-called scien- 
tific management came to the textile industry. Engineers, at man- 
agement's request, inspected mills and on the basis of time studies 
and visits recommended what they considered more efficient lay-outs, 
more modern equipment and better methods of utilizing labor, 
usually assuming the form of greater job assignments. As competi- 
tion increased, other employees endeavored to secure the same end, 
through arbitrary increases in workload, irrespective of whether such 
were justified. The result is well known. Strikes spread throughout 
the textile industry in protest against the "stretch-out." Labor pro- 
ductivity rose as job assignments were increased. 

AH these types of technological change bring tremendous problems 
in their wake. Each improvement can be spoken of most glowingly; 
each new invention is a creation of human ingenuity. The develop- 
ment of syntlietic fibers out of cellulose either from timber or lint, 
or noncellulose fibers from coal, minerals, air and water, or out of 
glass or casein or soybeans, are all amazing adventures in man's 
conquest over nature. But the effects have been staggeringly tragic. 
Like the common demand to harness the great rivers, there is a 
growing insistence and labor wants to reiterate it with particular 
emphasis, that human inventions and discoveries should become 
socially useful without incidentally creating human scrap heaps and 
human tragedy. 

Before considering the effects of these tremendous changes, it is 
well to exemplify the rapid strides in man-hour productivity in three 
constituent textile industries. Two of these, cotton and wool tex- 
tiles, are mature industries which have not undergone recent funda- 
mental terlmical change. The third is the rapidly changing synthetic 
yarn industry which is experiencing technical transformation of its 
d^Aer processes at the same time as new ones are being developed. 

TECHNOLOGICAL ADVANCES IN COTTON TEXTILES 

Mr. RiEVE. We are generally acquainted with the major outlines 
of the technical history of the cotton textile industry. In England 
the industry underwent I'adical changes because of technical ad- 
vances during the latter half of the eighteenth century. Preceded 



CONCENTRATION OF ECONOMIC POWER 16837 

by the flying shuttle invented in 1733, the drop-box on the loom in 
1760, and a series of inveaitions from 1770 to 1779 whicli resulted 
in a practical mule spinning frame, tjie modern cotton textile in- 
dustry appeared with the mechanical power loom in 1785, which 
replaced the old manual weaving process. The factory soon replaced 
the home as the work shop. The tragedies following in the wake of 
these new mills are abundantly recorded in human annals. 

The first period of the industry in this country witnessed the 
replacement of home manufacture by factories. The mills for the 
most part substituted for incidental home manufacture. The dis- 
placement of commission weaving by the factory did, however, cause 
some protest, particularly in Pennsylvania, 

American technol()o;y developed largely on the basis of English in- 
ventions adapted to American conditions. The tirst mill which fully 
employed power equipment for both spinning and weaving was estab- 
lished in 1813 in Waltham, Mass. Improvements in the methods of 
manufacture were numerous with particular emphasis on spinning 
and weaving, as cotton was relatively cheap. 

From 1813 to 1860 significant improvements completed the mech- 
anization of the industry. The power loom displaced the hand loom 
by 1825. Hand weaving was completely dislodged by 1829. Water 
power met severe competition from steam power in the late forties. 
The same period saw the introduction of belt-driven machinery; 
speeders, ring spindles, applied primarily to twisting; mule spin- 
nmg frames, cam looms, and automatic stripping on stationary flat 
cards. Stop motions appeared on a lumiber of operations. Man- 
hour productivity rose s^iarply. While operatives handled only 8 
spindles in 1790, the number rose to 22 in 1831, and 62 in 1880. Pro- 
duction per day is reported to have risen from 100 yards per operative 
in 1821 to 233 yards in 1840. Labor "ost per yard of sheeting, 18 cents 
in 1815, dropped to 4.5 cents in 1830, ^nd to 2 cents in 1860. From 
1850 to 1860, yardage production per \> rker increased 29.5 percent. 

During the latter half of the century, avMitional advances jumped 
productivity. Ring spinning replaced muie spinning. While the 
number of mule spindles equalled the number of ring spindles in 
1870, the proportion of ring spindles increased to 77 percent of all 
spindles at the beginning of the present century. Revolving cards 
replaced stationary cards; wire bobbin holders made the spooler prac- 
tical; slashers were imported in numbers by 1866, and dobby looms 
came in 1878. 

The loom itself was made automatic in 1894, through automatic 
bobbin changing devices. Work assignments increased simultane- 
ously. The weaver who in 1832 tended 2 to 3 looms, running 70 picks 
per minute, in 1879 tended 5 to 6, riiiining 130 picks; and in 1905, 8 
to 10 nonautomatics or 15 automatics. Between 1838 and 1876, pro- 
ductivity per man-hour is estimated to have increased some 300 
percent. 

The last 30 years witnessed further advances in every phase of 
cotton textile manufacture. Every type of technological change was 
found in this industry. The automat'ic loom, introduced at the begin- 
nmg of the century, was widely a])plied during the twenties. Only 
7 percent of the cotton looms are now (1937) nonautomatic. Spool- 
ers were made automatic. Other important developments have been 
the l-pi-ocess picker, controllc-t humidity, l-process drawing, long 



16838 CONCENTRATION OF ECONOMIC POWER 

draft roving mechanisms, and long draft spinning, making possible 
the spinning of coarser roving. Automatic knotting machines, port- 
able warp tying-in machines, are all current. Firmer and speedier 
automatic looms are now used. In the cloth room, shears and brush- 
ing machines are high speed and automatically controlled. 

The rapid advance of the cotton textile industry has not stopped. 
In a single year, 1939, marked improvements were made. New auto- 
matic looms run 192 picks per minute. New equipment brought on 
to the market includes new warp drawing-in machines; automatic 
drop wire inserting machines to replace the drop wire girl; paper 
spinning tubes, and improved spindle assemblies. Automatic wind- 
ers are being sold to permit an ODerative to handle 18 to 20 bobbins 
per minute. 

Technical progress in cotton mills has been continuous, Competi- 
tion is keen and each employer attempts to get ahead of the other. 
Modernization, efficiency, labor-saving devices and practices, auto- 
matic equipment, single process machines, process control devices, are 
all the passwords of management in the cotton textile industry. 

The effects are rather evident. In the period from 1910 to 1936, 
according to a survey by a prominent textile engineering company, 
man-hours required to produce eight standard cotton cloths declined 
between 31 to 60 percent, depending upon the type cloth, simply be- 
cause of the improved equipment in the plant. The largest reduc- 
tions took place on terry cloth and lawns, for which there were no 
automatic looms in 1910. The other 6 cloths witnessed reductions 
in labor time from 31.7 to 37.7 percent.^ It required approximately 
one-third as many hours to produce a yard of cotton cloth in 1936 
as it had in 1910 because of machine improvements. The rapid 
strides in the respective departments of the mill may be observed in 
this table. 

(The tables referred to were marked "Exhibits Nos. 2617 and 2618" 
and are included in the appendix on pp. 17428-17429.) 

Mr. RiEv-E. The great advance in production of cotton textile fab- 
rics is exemplified by the calculation of the same engineering concern 
that the manufacture of a yard of carded narrow sheeting requires a 
total of only 1 man-hour in a well -organized cotton textile mill. The 
longest amount of time required for any of the eight cloths studied 
was combed broadcloth, a very fine construction, which reported 
fifty-eight hundredths of 1 man-hour. 

Estimates of over-all increases in production place the rise beyond 
the above percentage because factors other than machine improvements 
must be taken into account. The elimination of inefficient producers, 
the increased rate of introduction of new equipment, new physical lay- 
outs, and new methods of management affect the results. Estimates 
made by the National Research Project of the Works Progress Admin- 
istration, on the basis of some 30 products, indicate a 16-percent in- 
crease in man-hour output between 1919 and 1929, primarily because 
of the South's acceptance of automatic weaving and the construction 
of modern textile mills. From 1928 through 1939, production per 
man-hour increased 'according to the National Research Project by 
45.7 percent, primarily in the North because the elimination of back- 
ward textile mills and the modernization of the existing mills raised 

^ See "Exkibit Nb. 2017," appendix, p. 17428. 



CONCENTRATION OP ECONOMIC POWEB 16839 

productivity.^ That these calculations are conservative is indicated 
by the estimates of the United States Bureau of Labor Statistics, that 
the increase in man-hour productivity between 1928 and 1939 was 59 
percent.^ 

(The tables referred to were marked "Exhibits Nos. 2619 and 2620" 
and are included in the appendix on p. 17429.) 

The total rise as estimated by the National Research Project from 
1919 to 1939 was 64 percent. 

Mr. RiEVE. The rise in man-hour productivity in the mature cotton 
textile industry during the last few years by reason of the intensive 
application of current methods of production and modern equipment 
has been impressive. The changes in the offing appear to be even 
more fundamental and disturbing than those of the last 2 decades. 

TECHNOLOGICAL ADVANCES IN WOOLEN AND WORSTED INDUSTRY 

Mr. RiEVE. The woolen and worsted industry experienced the same 
marked changes. Starting under special difficulties, the industry first 
supplemented home operations by performing mechanically carding 
and fulling operations. By 1830, the modern full process woolen 
enterprises appeared with equipment secured in England but improved 
through American invention. The carding equipment was made 
power driven ; the spinning operation was made semiautomatic ; water 
power drove the hand loom ; and the cloth.-finishing operations were 
developed and made power driven. The advances in carding through 
the invention of the condenser eliminated the slubbing processes and 
resulted in better quality roving. Spinning jacks mcreased their 
spindles from 120 to 200. 

The 40 years between 1830 and 1870 saw further mechanical im- 
provements. The industry spread and gained maturity. Worsted 
industry started well after 1850 when the modern combing process 
made the industry commercially practical. Important improvements 
mechanized the process of cleaning and scouring of wool; a labor- 
saving mechanical burr picker eliminated all hand labor; the woolen 
card was widened, made more automatic, and improved to produce 
better quality roving. A pattern chain in place of a cam for the 
control of harnesses made the loom better suited to the manufacture 
of varied cloths. Looms were made broader and their speed increased. 

From 1870 onward, most advances in this industry were labor-saving 
in character, since the basic techniques of a mechanical industry had 
been established. New types of cloth; new and larger machines; new 
and rnore efficient methods of production ; and improvements on old 
machines constantly raised production levels. Cards were increased 
to a width of 72 inches. They were equipped with many labor-saving 
devices such as automatic feeds, intermediate feeds, transferring de- 
vices, and final condensers. The automatic mule spinning frame sub- 
stituted for the jack spinning frame. Speedier looms registered 100 
to 125 picks per minutes on worsted and 105 picks on woolen cloths. 
Wholesale and ready-made clothing forced the industry to wider 
looms. And more significant from the point of vieAv of labor, auto- 
matic filling-changing devices were attached to the looms which 
doomed th e hand loom, particularly during recent years. So mech- 

'^ "Exhibit No. 2610," appondix, p. 17420. 

2 See "Exhibit No. 2620," appendix, p. 17420. 



16840 CONCKNTRATION OI-' ECONOMIC POWER 

anized has the industry become that for the most part only the wool 
sortinfj and burling continued to be done by hand. 

The last 30 years witnessed innovations which accentuated these 
same tendencies. During this period large package ring spinning 
substituted for small bobbin spinning and cap spinning. Just as the 
jack spinner was scrapped by the mule spinner, so now the male mule 
spinner is being replaced by the female frame spinners.- Large pack- 
ages and high speed automatic warpers have junked slower methods. 
The automatic loom is now dominant. While 19 percent of all 
woolen and worsted looms were automatic in 1927, the percentage 
had risen to 62 in 1937. In the finishing room the same trends are 
evident. 

As an indication of the rate of current changes we can report that 
our organization is witnessing the complete revamping in one mill 
of the entire card, spinning, and dyeing rooms. In the same mill, 
automatic looms were introduced last year. In another very large 
chain of mills, new automatic winding machines were displacing 
three-quarters of these winders. In 1939, significant mechanical 
changes were introduced in many departments. A new method of 
wool scouring will produce softer and cleaner wool, which will spin 
better and dye more easily, A new wool spread will prevent the 
separation of stock when wool and shoddy mixes are being blown 
into bins. An improved shoddy picker is being sold, as is also a 
new high-speed worsted garnett card. New models of woolen spin- 
ning machines result in savings in floor space, more production per 
spindle, less time, and finally better yarn. Changes are being made 
constantly. 

These and other changes have created measurable increases in 
labor productivity. A recent study of the effect of the mechanical 
improvements between 1910 and 1936 upon the man-hour productivity 
in the industry indicates for four typical woolen and worsted construc- 
tions that the amount of time required for the production of these 
materials has been almost halved. It required 45.8 percent less hours 
to produce a 32-ounce woolen overcoating in 1936 than it did in 1919. 
The percentage reduction in man-hours for a 12-ounce wool flannel 
cloth was 46.7 percent; for a worsted serge, 46.3 percent and for a 
cotton warp worsted filled suiting, 46.5 percent.^ In some depart- 
ments, a worker could produce from two to three times as much in 
1936 as he could in 1910. So, in the manufacture of woolen cloths, 
production per man-hour increased in the blending and picking de- 
partments by 208 to 237 percent; in the spooling and dressing de- 
partments by 85 to 114 percent; and in the weaving department by 
102 to 112 percent. In the manufacture of worsted cloth, production 
per man-hour had risen about 100 percent in the sorting, scouring, 
and picking departments.^ 

(The tables refeired to were marked "Exhibits Nos. 2621 and 2622," 
and are included in the appendix on p. 17430 ) 

Mr. Rtf\t,. These mechanical advances do not represent the full 
measure of the rise. As in the cotton industry, inefficient and less 
productive units have been eliminated; management has improved its 
techniques and its ability to secure more production from its workers. 

' Soe "Exhibit No. 2<i21." nppoiHlix. p, 1T4:!<>. 
= Sco "Kxhihit No. 2(>:.'L'," iippoiidix. p. ITJ'IO 



concp:ntration of economic ix)wer 16841 

Scientific management is more recent in the woolen and worsted in- 
dustry than in the cotton -textile industry. Outside consultants for 
the revamping of the production, equipment, and methods of opera- 
tion are as yet rarely employed in this industry. Nevertheless, 
workloads and job assignments are constantly being increased, fre- 
quently on the basis of rumors of similar efforts by other mills. 
Man-hour production has jumped beyond that suggested by direct 
mechanical progress. 

The same study made by the National Research Project which has 
been referred to previously also reports that the increase in man- 
hour productivity between 1919 and 1931 has risen 23 percent for 
the woolen and worsted industry as a whole, while the rise for the 
woolen industry was 31 percent, and for the worsted industry 19 
percent.^ However, the increase subsequent to 1931 was more rapid. 
From 1931 through 1939, the above group estimates an increase of 
43 percent for the entire industry, making a total of 77 percent for 
the 20-year period. Each woolen worker is now producing almost 
80 percent more, per hour, than he could during 1910. Woolen and 
worstel manufacturers are now attempting to reduce man-hour time 
per yard of cloth to the level in the cotton-textile industry.^ 

TECHNOLOGICAL. ADVANCES IN SYNTHETIC YARN 

Mr. E.IEVE. The synthetic yarn industry presents a more compli- 
cated condition. The viscose filament division has attained a degree 
of maturity which is not shared by the other divisions. Basically, 
the chemical processes have changed little since the practical intro- 
duction of the viscose rayon process in this country m 1910 by the 
American Viscose Corporation at Marcus Hook, Pa. But this branch 
of the industi-y has grown extensively and undergone very si^ifi- 
cant mechanical and engineering changas. Most of these modifica- 
tions have been in the direction of continuous operation, speeding up 
and larger-sized equipment. 

The most impressive advance toward continuous operation has oc- 
curred in the spinning and finishing operations as developed by the 
Industrial Rayon Co. at its Painesville, Ohio, plant. It has reduced 
spinning and finishing time from the customary 85-liour period in the 
plants maintaining discontinuous procedures to less than 5 minutes. 
The elimination of numerous batch processes and the construction 
of the compact spinning equipment permits the yarn to be washed, 
desulfurize'd, bleached, finished, dried, and twisted successively on 
the same machine. Large package bobbins have reduced the doffing 
time to once every 19.5 hours in comparison with the customary 4- to 
9-hour doffing periods. 

With competition increasing and the profit margin narrowing in 
the viscose filament rayon industry, manufacturers are seeking every 
possible method of reducing their labor force. One concern changed 
its method of attending to spinning and doffing and thereby dis- 
placed directly 1,100 persons. This same concern is contemplating 
the substitution of the cake wash method for its current procedure 
of reeling the skeins before washing. It is estimated that some 4,000 
girls will be displaced without any opportunities for reemployment 

1 See "Exhibit No. 2(!t!)," appendix, p. 17420. 

-See "Exhihit Nos. 2f>17 and 2r)21," api)pndi.'<:. pp. I742S and 17430. 

. 1244!>1— 41— pt. ■•50 42 



16842 CONCENTRATION OF ECONOMIC POWER 

in their communities. In one relatively small plant, production per 
man-hour increased some 100 percent in a 2-year period through the 
installation of faster, more continuous and larger machines, and the 
introduction of the cake wash methods. Employment at the same 
plant declined 46.25 percent and production rose 10.2 percent during 
this 2-year period from June 1937 to June 1939. At another small 
plant, employment declined 26 percent and production increased 60 
percent in a 2-year period. Production per employee increased some 
116 percent. 

In the acetate yarn industry, the Celanese Corporation of America 
declared in a recent annual report that actual production in 1939 was 
700 percent greater than in 1929, and that the actual investment in 
fixed assets had risen only 137 percent. The president of the corpora- 
tion declared that it had been made possible "by our intensive 
maintenance and modernization policies?' Constant improvements 
have been made which reduced the man-hours required at the cus- 
tomary employments. 

While the older processes of manufacture of filament yarn are re- 
quiring less and less persons, the industry is expanding by producing 
newer types of yarns. Staple fiber production has increased to the 
point where 1939 production amounted to 53,000,000 pounds, most of 
which has been made in plants built since 1937. New yarns now in 
commercial production include nylon for which a new mill was built 
at Seaford, Del. ; vinyon, which is now being produced at the Ameri- 
can Viscose plant at Meadville, Pa. Glass fibers are in their ele- 
mentary stages of application. 

The Works Progress Administration, National Research Project, 
has made estimates of the increase in man-hour productivity through 
the year 1937. Between 1923 and 1929, the rise was 228 percent. 
The total increase from 1923 to 1939 was 333 percent. The increases 
between 1936 and 1939 have been 41 percent.^ At best, the above 
estimates are very conservative as the same organization declares. 

As a chemical industry, in which there is a highly developed tech- 
nical and laboratory staff and in which most of the units carry on 
constant research to improve the methods of manufacture and their 
products, we may expect even more phenomenal developments than 
those which have hitherto appeared. 

TECHNOLOGICAL ADVANCES IN OTHER TEXTILE INDUSTRIES 

Mr. RiEVE. Without offering an extended outline for the other 
branches of the textile industry, we will summarize available esti- 
mates on increases in productivity. The National Research Project 
has estimated a total rise in man-hour productivity in the knit-goods 
industry from 1919 through 1935 of 86 percent, with the most striking 
developments taking place in the outerwear and knit-cloth branches 
and relatively little in the underwear division. The hosiery industry 
is currently exi)eriencing very significant developments through the 
automatization and speeding up of full-fashioned hosiery machinery. 

In the silk and rayon industry, the advance has been most impresr 
sive, particularly since rayon has supplanted silk. When figures 
become available after the 1939 census, we might well expect man- 

1 See "Exhibit No. 2619," appendix, p. 17429. 



CONCENTRATION OF ECONOMIC POWER 16843 

hour productivity to have risen well over several hundred percent. 
Between 1919 and 1935, the National Research Project estimates a 
rise of 145 percent.^ 

A study of the effect of mechanical changes on the carpet and rug 
industry from 1910 to 1936 indicates a rise of man-hour productivity 
due to mechanical advances of 23.6 percent for velvet carpets and 
39.6 for Axminster, with a 23 percent rise for Wilton carpets. 

The textile industries have witnessed every type of technological 
change. These improvements have transformed the manual processes 
into highly mechanized and autofnatized ones. Man-hour produc- 
tivity has risen phenomenally. While the rate of increase was most 
marked during earlier periods while manual operations were being 
converted into mechanized ones, the rise has been no less impressive, 
since the major sections have attained economic and mechanical ma- 
turity. Available measures of the rise in man-hour productivity 
illustrate the effects of the constant flow of improvements in the manu- 
facture of textile products. The cotton-textile industry which long 
ago completed the process of mechanization was able to increase man- 
hour productivity by at least 64 percent from 1919 to 1939. By the 
same process, the woolen and worsted w^orker now produces at least 
77 percent more per hour than in 1919. The carpet and rug worker 
can produce a minimum 6f 30 percent more than in 1910. 

In the knit-goods industry, the rise between 1919 and 1935 was 86 
percent. But the most phenomenal jumps have taken place in the 
rayon-yarn industry in which the increase has been well over 333 
percent in man-hour productivity. These summary calculations are 
in all cases most conservative. They are indicative of the veritable 
revolution which has taken place in every phase of the textile indus- 
try. The textile worker is now measurably more productive than 
ever before. He can produce more goods in less time than was true 
even 5 years ago. The rate of technological advance has been increas- 
ing and man-hour productivity has been rising fast. The problems of 
technological advance are becoming more pressing now than ever 
before 

ECONOMIC AND SOCIAL EFFECTS OF TECHNOLOGICAL CHANGE 

Mr. RiEVE. The impressive stream of technological advance brought 
many problems with its tide. It is our desire to direct the attention 
of your committee to the lot of the textile worker following on this 
history of technological progress and increase in man-hour produc- 
tivity. Too frequently, people have resolved glibly the problem of 
technological change into bright contrasts between the goods and 
services now available with those available 100 years ago. They have 
allowed years to erase memories. It is our purpose to speak both of 
the long-run effects and the immediate consequences of these changes. 
We believe that technological advance is pregnant with too much 
good for all people to allow such progress to be discredited by its 
present human toll. 

The question uppermost in everybody's mind is iwhether employ- 
ment in the textile industry has decreased as a result of these vast 

1 IbW 



16844 CONCENTRATION OF ECONOMIC POWER 

technological changes. We know that there has been a marked rise 
in total production in the textile industries. While 3,252,000,000 
pounds or textile fibers were consumed annually during the first 5 
years of the 1920's, the total volume rose to approximately 3,809,- 
000,000 pounds annually during the latter half of the 1920's, with 
most of the increase occurring in cotton and rayon consumption. 
Since 1936, we have had another impressive rise, which brought the 
average annual consumption for 1935-39 to 4,080,000,000 pounds 
("Exhibit No. 2623"). 

(The table referred to was marked "Exhibit No.' 2623" and is in- 
cluded in the appendix on p. 17431.) 

Mr. RiEVE. Three of the last five years witnessed consumption of 
approximately 4,300,000,000 pounds or more of all textile fibers. 
In 1936 the total poundage was 4,293,000,000; in 1937 it was 4,435,- 
000,000, and in 1939, 4,558,000,000. Consumption for the last 5 years 
has been about 25 percent above the level in the early part of 1920. 
Actual textile yardage has risen even more impressively, since finer 
cloths are now employed and more yardage is being secured per 
pound of rayon than is possible from other fibers. 

As further illustration of the expansion in production, one may 
refer to the estimates of the Association of Cotton Textile Mer- 
chants in New York that cotton textile yardage for 1929 was 6,448,- 
000,000, and 9.145,000,000 in 1939, a jump of 42 percent. The 
Textile Economics Bureau of New York estimates that rayon fila- 
ment yarn yardage in 1939 was three times greater than in 1930. 

Clothing and industrial fabrics are absorbing the increased vol- 
ume. The wholesale prices of textile products have been dropping 
because of technological developments in manufacture, lower raw- 
material prices, and the diversion from silk to rayon and other 
cheaper substitutes. The United States Bureau of Labor Statistics 
reports that the wholesale price of textile products has declined from 
the high price level of 1920 by 58 percent. 

(The document referred to was marked "Exhibit No. 2624" and is 
included in the appendix on p. 17431.) 

Mr. RiE\'E. While people at the same income level are now spend- 
ing less on clothing than during previous periods, there is usually 
more yardage consumed for such expenditures and the incomes of 
many groups have been' lifted sufficiently to account for the absorp- 
tion of the increased production. Industry is also consuming more 
textile products in various forms. 

This glowing picture of expansion in the volume of textile fabrics 
is marred by the lot of the textile worker. The percentage increases 
in man-hour productivity in most branches of the industry exceeded 
the percentage increases in the volume of production in all but one 
subdivision. The new expanded production was not sufficient to 
maintain man-hours of work. 

A study of 5 major branches of the textile industry indicates that 
the total number of man-hours of work contracted by 20.4 percent 
between 1919 and 1939, despite the increase in the total volume of 
production of a mininuun of 25 percent. The story of the individual 
branches is startling. 

I think at this point we might as well refer to a chart that all of 
yon gentlemen have before you. 



CONCENTRATION OF ECONOMIC POWER 



16845 



Acting Chairman Williams. It may be received for the record. 

(The chart referred to was marked "Exhibit No. 2625" and ap- 
pears below. The statistical data on which the chart is based appears 
in the appendix on p. 17431.) 



Exhibit No. 2625 
[Submitted by the Textile Workers Union of America] 

INDEXES OF 

PRODUCTION. EMPLOYMENT S MAN HOURS 

IN THE TEXTILE INDUSTRY. 1919-1939 



96==;nr- 



60 









1 1 1 

l^MAN HOURS 






















^ 




1 1 
1 1 








If 

1 

T 

f 


\ 






A 


















/.' 


\- 








/ > 


1— 


VI >i 


k 




EMPLOYMENT^ 


>'" 


\l\ 




s. 


X 


.-/ 


r w / 


/ 


Y 


/ 










^>^ 


/ 


\ 










[v 

V: 
J 




/ 


\ 
-V 


/ 


/ 






\ 


-\ 1 




\ 


/ 












J 


/ 










V 




\ 


yL^ PRODUCTION ' 

1 (Fibre Consumption) 

1 1 




\ 


\ 'i 




_--' 


\ 




























Vf 

1 


\ 


1 

-/- 


























/ 






\ 

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1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 



TEXTILE WORKERS UNION OF AMERICA 



Mr. RiEVE. Employment in the textile industry reached its peak 
about 1923. Man-hour productivity or man-hour employment also 
reached its peak in 1923. Since then, however, production of fiber 
reached its peak in 1927. Employment in the textile industry, with 
all its fluctuations, reached its low in 1932 and since then has been 
going up so that today it is about on a par with the 1919 levels, but 
man-hours worked today are 20 percent less J:han in 1919. 

On the other hand, productivity, production, is 25 percent above 
the 1919 levels, so that while we have fewer working hours, and 
employment is about the same as 1919, productivity, production, far 
exceeds these levels. 

In the cotton-textile industry, production increased 18 percent be- 
tween 1919 and 1939, but man-hours of work declined 28 percent. 
The overall increase in production of 21 percent in the woolen and 



16846 CONCENTRATION OF ECONOMIC POWER 

worsted industry between 1919 and 1939 was offset by a sharp decline 
in man-hours of work of 32 percent. The probable doubling of pro- 
duction in the silk and rayon industry was accompanied by a reduc- 
tion in man-hours of 38 percent. In the knit-goods industry, the 
total volume of man-hours declined 38 percent but actual production 
increased 87 percent. Only in the rayon industry man-hours in- 
creased by 108 percent, while production rose by 962 percent. In all 
but one branch of the industry, total man-hours dwindled. Employ- 
ment opportunities were shriveling up. 

This sharp contrast between a rising volume of textile production 
and a reduced volume of working hours for the textile worker is the 
essence of the problem which we are discussing. More and more 
goods are being produced ; their prices are declining ; demand is ex- 
panding; but man-hour productivity is rising at a more rapid rate 
than the^ development of demand, so that the actual volume of avail- 
able work continues to contract. The absolute number of work op- 
portunities within the textile industry is declining; the challenge of 
unemployment exists. 

To meet this challenge, organized labor has advocated shorter 
hours. Insofar as shorter workweeks have been introduced, the 
amount of unemployment has been reduced. Textile labor succeeded 
in establishing the 48-hour week shortly after the World War, and 
thereby protected the jobs of many workers. But during the 1920's, ., 
working hours increased in the North, and ranged from 55 to 60 
hours per week in the South. The second major attempt to offset 
the diminishing number of jobs through shorter hours was made 
by the N. R. A. The textile industries by and large accepted the 
principle of the flat 40-hour week. As a result, job opportunities 
immediately opened up. As many employers offset these shorter 
hours with higher work loads, tighter managerial procedures, and 
production economies, the increase in labor demand was not equiv- 
alent to the reduction in hours. But many thousands of workers 
who had lost their jobs secured employment in the industry. The 
N. R. A. 40-hour week offered a breathing spell in the adjustment 
to the continuous displacement of labor and the ever-rising produc- 
tivity of textile workers. 

Employment during 1937 approximated the 1927 and 1928 levels 
of employment, even though man-hours had declined. But employ- 
ment in 1939 was 5 percent below 1929 levels and 10 percent below 
1923 levels. Employment in 1939 was back to 1919 levels despite 
the rise in production of 25 percent. 

(The table referred to was marked "Exhibit No. 2626" and is in- 
cluded in the appendix on p. 17432.) 

Mr. RiEVE. Employment in the industry has been maintained dur- 
ing recent active years at slightly below 1923 levels bv reason of the 
sharp reduction in working hours. The total man-hours of work 
contracted by 20.4 percent between 1919 and 1939 despite the im- 
pressive expansion in the industry's volume of production. There 
is not how available any number of new jobs in the textile industry 
to take care of the growth in the number of wage earners. Besides 
failing to provide jobs for new-wage earners, it is not succeeding 
in maintaining the volume of jobs formerly in the industry despite 
the shorter workweek. The textile industry is declining in im- 
portance as a source of employment. The "increased productivity 



CONCENTRATION OF ECONOMIC POWER 16847 

of the textile worker is the major reason for the contra..tion in avail- 
able working hours and employment. A chronic Condition of .unem- 
ployment has appeared in this industry. 

The effects of technological change cannot be told merely in terms 
of the long-run effects of the absolute numbei? of jobs in the textile 
industry. True enough, these studies point to a chronic unemploy- 
ment problem in the industry when taken as a whole. But the in- 
dividual worker stranded in a community with a closed textile mill 
can find little solace in the fact that the total number of jobs in the 
industry has been maintained through the shorter workweek. The 
problems are infinitely more serious than even the absolute decline 
in jobs would suggest. It is our desire now to offer to your com- 
mittee summary observations of the dislocations resulting from or 
accompanying technological advance which illustrates as serious a 
phase of the effects of technological displacement as an absolute de- 
cline in jobs. 

The examples of dislocation are legion. But before suggesting 
examples, it may be well to underscore the particular seriousness of 
displacement in the textile industry. Most textile mills are located in 
small cities and towns in nonurban areas, with only one textile estab- 
lishment, or at most, two. The mill is frequer :ly the major, and 
often the only, source of income, in these communities. The fortunes 
of the mill workers determine the financial status of the town's mid- 
dle and professional classes. The overwhelming importance of these 
small towns in the textile industries is illustrated by a tabulation 
made for the cotton-textile industry in 1933 which indicated that 
29.7 percent of all wage earners were employed in cities of 100,000 
or more. In the same year, in the woolen and worsted industry, 
23.9 percent of the employee?; T^ere employed in cities under 2,500 
and 41.8 percent were in cities under 10,000, while 15.4 per-pTit were 
employed in cities of 100,000 or more. Similar observat , >us eoidd 
be made about many other divisions of Ihe industry, though several 
subdivisions, such as outerwear, are located primarily m I'di-^e cities. 
Most major plants in the synthetic yam industry are located in small 
cities and constitute the sole source of employment in them. 

Dispiacsment from the mill in most textile communities strands the 
worker. There are no other opportunities. He must seek employ- 
ment in other communities. He must move on or remain unem- 
ployed. Moving costs money; and knowledge is necessary of the 
whereabouts of jobs, and both are lacking. The Joad family 
described recently by John Steinbeck in Grapes of Wrath could 
well be duplicated a thousand times by the stories of industrial 
workers displaced by technological developments in search for jobs 
and hanging on each rumor to find a lead for new employment.. 
Our State employment services have the most elementary facilities 
to guide our displaced workers or to assist them in finding jobs in 
other communities. The above is, in short, the desperate plight of 
thousands upon thousands of textile-mill workers left unemployed 
by technological change. Increases in employment in mills located 
a thousand miles from their community cannot be of much help 
to these workers. 

To bring directly to your attention this scrap heap built up in 
individual communities by technological change, we shall cite only 
a few instances scattered among the many textile States. 



16848 CONCENTRATION OF ECONOMIC POWER 

In the State of Maine a textile mill furnishing the major source 
of employment in a small community recently determined after an 
engineering survey to modernize its operations and released perma- 
nently the least efficient of its 300 employees, 

A Massachusetts worsted mill, in a town of 1,200 workers, recently 
decided that it was overmanned and eliminated 10 percent of the 
workers in the dressing room, 9 percent in the weaving room. Near 
this mill is one which is introducing automatic winders and displac- 
ing three-quarters of its present one-hundred-and-fifty-odd winders. 

There are no other mills in these towns. Recently the Connecticut 
velvet-weaving concerns insisted upon a 4-loom stand for weavers 
instead of 2, with the result that one-half of the weavers lost their 
jobs and there are no other velvet mills to absorb them. Automatic 
stop motions on narrow ribbon looms in a New York State mill left 
narrow-loom weavers high and dry, as there are no similar mills in 
the community. The doubling of the loom load for rayon weavers 
at another plant created a serious problem, as it is the only rayon 
plant in the vicinity. The introduction of automatic lOoms in a 
Philadelphia woolen and worsted mill sharply reduced employment 
in a city already suffering from unemployment. Technical progress 
in a small rayon-yarn plant reduced employment by 47 percent in a 
1-industry town of 3,900 people. Several hundred people were dis- 
placed at one time in a 1-industry Pennsylvania community of 
14,000 inhabitants where 35 percent of the employable persons were 
already unemployed. 

Similar instances can be cited for the southern cities where the 
process of displacement is proceeding apace. A mill located in 
North Carolina introduced long-draft spinning with large packages 
and cut down its work force on battery hands and doffers by 40 
percent. Complete reorganization of South Carolina cotton mills 
m a 2-mill town reduced the work force by 20 percent. A Georgia 
2-mill town experienced simultaneous reductions in the. work force 
in both of its mills through technological change. ' 

Dislocation results also from the complete closing of mills. At 
times, plants are shut as part of the process of consolidation and 
modernization as in the case of the American Woolen Co. which has 
\.;i-educed its former 55 mills to its present 25. At other tnnes, tech- 
nological changes which have made the existing mill obsolete accom- 
pany other factors such as inducements in new locations. As a result, 
the new equipment and methods' are installed in new mills in new 
places, leaving the older plants stranded. Or, new capital may be 
invested in the more modern equipment and plants in new location 
with the same ultimate effects. The rapid rate of technological ad- 
vances facilitates this process. Older mills thereby become denuded 
of machinery and people; and dead silence replaces the hum of the 
frames and the cluck of the loom. At times the mills are converte'd 
into other uses ; and in other places they are torn down to make place 
for new developments. Ghost textile towns and mill villages abound 
through New England and the Middle Atlantic States, and are be- 
ginning to be known in the South, A few summary references may 
suffice to exemplify the facts well known to all concerninqf the migra- 
tion of textiles from New England to the South, which was accelerated 
from the lower wage scales in the latter area, but which found its 
root in the advance made by southern manufacturers in introducing 



CONCENTRATION OF ECONOMIC POWER 16849 

modern equipment and methods and the reluctance of New England 
manufacturers to modernize. 

The process of dislocation is not at an end. Technological change 
made possible the development of rayon weaving plants and their 
displacement of silk weaving plants. Now the introduction of staple 
fiber, the development of wool blends, and the increased ability of 
cotton mills to manufacture woolen blends is threatening part of the 
New England woolen busihess and is prompting consideration of the 
transfer of such business to southern manufacturers, paying lower 
wages. Simplification of processes and technological changes are 
opening up to the southern employers with lower wage scales great 
possibilities of wresting part of the remaining northern divisions of 
the textile industry, thereby threatening additional hundreds of 
thousands of textile workers in older centers. 

We can only call your attention to several outstanding instances 
in order to exemplify this development. The Amoskeag Manufac- 
turing Co. closed in 1936 at a time when it was employing some 
'17,000 workers. Drainage of capital, and obsolescence of equipment, 
management practice and marketing organization, and wage differ- 
entials doomed this company and left these workers unemployed in 
a town already suffering from a considerable volume of unemploy- 
ment. Only 14.8 percent of these displaced workers found employ- 
ment by October 15, 1936, and only 81 of these found it in textiles, 
principally outside of Manchester. The city's relief load increased. 
A government survey concludes that "a once prosperous manufac- 
turing city has been left stranded by the decline and failure of its 
largest company. The loss of employment opportunities (for its 
workers) created more social and economic problems than are visual- 
ized in the unemployment figures alone." This study of the company 
and the fate of these displaced workers is well worth reading as the 
intimate, exhaustive study of the meaning of technological displace- 
ment. The story is repeated in New Bedford, which has shrunken 
to 30 percent of its former self; Fall River, which declined to one- 
eighth of its former activity; Lowell, which now has about 60 percent 
of its former textile industry. Literally, more than 100 other New 
England towns have suffered in a similar manner. More recently, 
complete plant shut-downs occurred at a woolen mill in Bennington, 
Vt. ; a cotton mill in Dover, N. H.; a spun silk mill in New Bedford; 
and a rayon yam plant in Easthampton, Mass. Last week's news- 

Sapers reported 2 plant liquidations in New Bedford. Towns of 
ew England wdiich once had textile mills and do not have them 
now, include Glaggo and Plainfield, Conn.; Auburn and Kennebunk, 
Maine.; Chicopee, Saundersville, Three River, Mass.; White Rock, 
R. I. ; and Danville, Lynchburg, and Petersburg, Vt. 

Similar situations can be found in other parts of the country. In 
New York State, Cohoe's was the birthplace of the knitting industry. 
Now it can hardly boast of an important and stable plant. Paterson, 
N. J., has suffered the fate of the silk industry. With the disappear- 
ance of silk woven fabrics, Paterson, N. J., hag lost a major section 
of its industry. Most manufacturers failed to adjust themselves to 
the times. More than 50 small silk throwing mills have disappeared 
from the landscape of Pennsylvania as their equipment proved in- 
adequate to meet the changing demands and they proved unequal 



16850 CONCENTRATION OF ECONOMIC POWER 

to the shift to rayon. Hosiery mills which failed to modernize and 
to keep their equipment in line also suffered similar consequences. 
To those in the textile industry, the following names conjure up 
memories of ancient glory and of great activity: United States 
Worsted, Farr Alpaca, S. Slater & Sons, American Printing Co., 
Everett Mills of Lawrence, Royal Weaving, International Collar 
Mills, and Lyman Mills. 

The South also has its"^ roll of industrial casualties. Plants such 
as the following have closed, never to reopen : Erwin Manufacturing 
Co. and Lowe Manufacturing Co. of Huntsville, Ala.; Irene Mill 
in Gaffney, and a cotton mill at Landrum, S. C. Towns such as 
Athens and Cottondale, Ala. ; Beverly and Cochrane, Ga. ; and Cow- 
pens, S. C, where industry once buzzed, now have no textile mills. 

The total effects can be suggested most fully in terms of the trends 
in the cotton textile industry. Cotton spindLs in place in the New 
England States, which numbered 18,856,000 in 1921-22, dropped to 
6,143,000 in 1938-39, a loss of 67 percent. In the other States, the 
drop was from 2,014^000 in 1921-22 to 799,000 in 1938-39, a decline of 

60 percent. The cotton-growing States increased their spindleage 
until 193S-35 and since that year have dropped 1,021,00 spindles.' 
Each area is now losing cotton spindleage. Displacement is 
rampant. 

(The table referred to was marked "Exhibit No. 2627" and is 
included in the appendix on p. 17433.) 

Mr. RiEVE. Cotton textile mills ^are closing down and plants are 
being abandoned. Five New England States which claimed 506 cot- 
ton plants in 1923 lost 205 by 1933 and witnessed the scrapping of 
an additional 131 plants by 1937, so that only 170 were left. Con- 
necticut, which had 69 plants in 1923, had only 23 plants in 1937. 
Massachusetts saw its 245 plants in 1923 dwindle to 96 in 1937. 

In the five major southern States, tlie number of plants has re- 
mained approximately the same between 1927 and 1937, except for 
North Carolina, in which a number of plants have been consolidated 
and closed. While there were 764 plants in North and South Caro- 
lina, Georgia, Alabama, and Virginia in 1927, the 5 States had lost 

61 by 1937. The latter total represents a recovery of 53 plants from 
the number in 1933 when these States had 650 plants. North Caro- 
lina's 383 plants in 1927 dropped to 297 in 1933, and increased to 325 
in 1937. Only Alabama had more cotton textile mills in 1937 than 
in 1927, an increase of 8 mills, to a total of 76, 

EFFECT ON SKILLED WORKERS 

Mr. RiEVE. The effects of technological change do not end with the 
elimination of a number of jobs. Workers who retain their jobs are 
only in a comparatively better position. They have their troubles 
and problems. Tlieir lot is seldom fully happy. They are usually 
fewer in number and know that their ranks have been thinned. A 
textile engineering company calculated that on a 40-hour basis the 
number of people required in a cotton mill to produce the same 
amount of carded broadcloth in 1936 as in 1919, would decline from 
174 persons to 84 ; combed broadcloth, from 218 to 108 persons ; sheet- 

» S<»e "Exhibit No. 2627," appendix, p. 17433. 



CONCENTRATION OF ECONOMIC POWER 16851 

ing, from 238 to 112 persons; carded filling sateen from 156' to 86; 
canton flannel, from 290. to 148; print cloth, from 166 to 86; lawn, 
from 148 to 74; and terry cloth, from 242 to 114. So in a woolen 
mill, the decline -for the same period would be from 270 to 155 per- 
sons for 32-oimce overcoating; from 272 to 154 persons for 12-ounce 
woolen flannel; from 1,196 to 642 for worsted serge; and from 797 
to 425 for cotton warp worsted suitings. 

Simultaneously with the reduction in the number of jobs is the 
alteration of job contents; unskilled jobs increase in proportion to 
the total ; less skill is necessary. Employers segregate unskilled job 
elements of skilled occupations and assign them to unskilled workers 
to conserve the skilled worker's time and restrict him exclusively to 
the skilled processes. 

So the weaver has been relieved of all battery filling work, and 
battery fillers have taken over their tasks. Beam hands have fre- 
quently taken over some of the weaver's work. Spimiers have been 
relieved of much cleaning by cleaners. This replacement process has 
meant demotion for many workers. There are less opportunities for 
the skilled worker to exercise his craft and skills. The chances for 
securing work at the old craft become limited. A lower paid job is 
the fate of many of those who remain in the plant. 

In addition to reducing the relative number of skilled jobs the 
aptitudes and skills required in industry are changing. Even if the 
jobs remain skilled in character, the type of skill at the new job is 
at times very different from that which had been formerly required. 
As never before the workers have to remain plastic enough at all 
ages and ready to take new duties and responsibilities when jobs 
do open up. 

As an example of this process of change, we may refer to the 
weaver. Before the development of the automatic loom, weavers 
generally attended to all work around a loom with the exception of 
major repairs' which were usually made by loonifixers. With the 
introduction of the automatic bobbin or shuttle filling devices and 
the application of scientific management, these duties changed,. 
Various specialized workers appeared on the floor. Warp hangers — 
persons with considerable physical strength — now put in warps. 
Beam hands take away the rolls of cloth. Battery hands fill bat- 
teries with filling yarn and are only required to be deft and dexter- 
ous. Loom cleanere hose looms. Smash hands repair major warp 
breaks; pickout hands remove flaws in the cloth; reed-over men 
replace broken reeds. The weaver's own job has been sharply limited. 
No longer is it necessary to have an all-around weaver. 

The current weaver must be a person who can patiently patrol the 
long aisles of looms running in some instances well over 100 and 
generally, ili the cotton industry well over 40. The weaver must now 
keep his eyes on the wS,rps to see that the looms do not stop and the 
endsi are tied together when they do break. For this work it is not 
necessary to be as skilled as weavers were formerly required to be. 

In the woolen and worsted industry, we are witnessing the dis- 
placement of the male mule spinner by the female frame spinner. 
Employers are dismissing their skilled male mule spinners and are 
hiring women for frame spinning. This change is completely dis- 
lodging an old occupation. 



16852 CX)NCENTRATION OF ECONOMIC POWER 

In some instances, there has been an increased need for more 
skilled workers, but they have been few in number. More fixers 
and second hands have been recjuired to repair the new complicated 
machines. The substitution of a machine for a hand operation as 
in the instance of the warp tying may increase the need for more 
skilled workers, usually male. 

The worker has not been the only one affected by the technological 
changes. The type of overseer and second hand required in the, 
te^ctile industry is changing. It had been customary to advance 
workers to the position oi section hand, to second hand, and to over- 
seer. Practical training on the job was valued above all else. But 
now mill-trained supervisors are being displaced by college-trained 
executives able to meet the needs of new engineering techniques. 

The above summary review of changes in textile personnel indi- 
cates that the workers, besides being fearful of losing jobs through 
direct technological change, are also finding employment slipping 
from their own community to some other locality, frequently thou- 
sands of miles away froiii the original site of job. He is also faced 
with the possibility that his skills may not be needed, as new jobs 
develop which require new aptitudes and personal qualities. 

The woolen mule spinner can obtain very little solace from the fact 
that a spinning job is open if the employer has only a frame spinning 
job for which he prefers a woman and for which he is willing to 
pay two-thirds of the rate being paid to male mule spinners. 

One significant concomitant of technological advance is the work- 
er's suspicion of all change. The introduction of new machines, new 
methods of production, or new work assignments have long been the 
cause of much industrial unrest and many bitter strikes. Besides 
causing widespread discontent because of displacement; besides sow- 
ing the seeds of general dissatisfaction through frequent demotions 
and loss of bargaining power, the fear of overwork, the knowledge 
that neither industry nor Government will protect workers against 
these hazards; besides feeling that he is increasingly dependent upon 
management for careful and expert coordination and synchroniza- 
tion of production, workers are suspicious of the need for changes, 
their desirability, and their effects. They fear these changes, for 
they know that in their wake lie many unsolved problems. They 
fear them, since they have no opportunity to review them, or to 
determine their necessity; to regulate their introduction; to control 
the process of hiring ; to protect their service record ; to pass on their- 
installation ; to share in their benefits ; to mitigate the difficulties of 
the displaced employee. These and many other fears and alarms 
dominate the worker's attitude. He dreads the machine; Cus- 
tomarily he has taken to the only weapon of protest that he has — 
the strike. The textile industry has a long recorded history of 
strikes against technological change. The last general strike of 1934 
was basically rooted in this protest. 

Any program dealing with tecjinological displacement and ad- 
vance must take clear account of the problems of industrial unrest 
which follow in the wake of technological change. 

THE CH/\NGING CHARACTER OF THE TEXTILE INDUSTK^ 

Mr. EiEVE. The- increased importance of machinery and highly re- 
fined engineering procedures have affected the economic problems of 



CONCENTRATION OF ECONOMIC POWER 16853 

the industry. In the first place, investments in and maintenance of 
machinery and fixed assets nave come to represent a large proportion 
of the industry's costs. The Federal income-tax returns for 1937 
indicate that the capital assets less depreciation and depletion of 7,128 
textile mills corporations of $1,549,608,000 were required for total 
gross sales of $4,343,598,000. In short, approximately $1 of capital 
assets either in the form of land, buildings, or equipment was required 
for each $3 worth of sales. This figure may be ^contrasted with the 
situation in the clothing and apparel industry in which the ratio was 
$1 investment to each $20 worth of sales. 

The size of establishments has also been increasing. In the cotton 
textile industry, for example, 36 percent of the concerns employed 257 
persons or more in 1919. The percentage had risen in 1937 to 49 perr 
cent. Moreover, there is a large number of chains of mills and there is 
greater concentration of economic power in the industry. Technologi- 
cal advance has fostered larger units, more capital investments, and 
greater concentration of financial control. 

The social and economic effects of technological change have been 
so far-reaching that they have given rise to the consideration of the 
desirability of these changes. There have been definite proposals to 
prevent technical changes which bring unemployment and other forms 
of social disaster. In our review of the effects in the textile industry, 
we have observed that the increased productivity of the textile worker 
has far exceeded the expansion in the volume of output, with the result 
that the total number of man-hours' of work in the industry has de- 
clined by some 20.4 percent in 1939 in comparison with 1919, despite 
an increase in fiber consumption of some 25 percent and a probably 
larger increase in yardage. The drop in employment in 1939 was 
10 percent below 1933, though the volume was equal to 1919. It has 
not been sharp, since working hours have been reduced from an average 
of 47 hours per week in the twenties to an average of 36 hours, largely 
because of the establishment of the maximum 40-hour week in the 
industry. Nevertheless, employment has been declining, the number 
of jobs is shrinking. There is no place in the industry now for the 
expanding population ; even workers in the industry are lacking jobs. 

We have also observed that the loss of work in specific plants, 
among a smaller number of workers, even in the face of a compen- 
sating increase in the volume of production in the industry as a 
whole, leaves many workers stranded while new opportunities open 
up a thousand miles away. Plant migration results in even greater 
difficulties as entire communities become economically depressed. Ac- 
tive communities are converted into ghost towns. Workers frequently 
also lose much of their bargaining power as skills and Jobs change 
and new aptitudes and qualities become necessary. Unrest is general, 
•and much dissatisfaction follows on the installation of technological 
improvements. 

At present, technological advance^ instead of being welcomed by 
all concerned as a form of liberation from exhausting tasks and 
long grueling days, as a means of securing a higlier standard of 
living, as a method of producing wealth with less cost and in greater 
abundance, and as a tool for assuring more leisure time, is a mixed 
blessing. While it has brought some of these advantages in varying 
degree or has made them possible, the cost has been tremendous. The 



16854 CONCENTRATION OF ECONOMIC POWER 

human toll has been heavy; the disturbances created have been far 
reaching and frequently devastating. Instead of bringing new ad- 
vantages, technological advance has brought depi-ession to many com- 
munities. In fact, many of the problems which aflElict our economy 
are rooted in our inability to harness our greatest- asset, human in- 
genuity, and assure ourselves that it will be used constructively. The 
solution of the problems created b;^ technological change will go a 
long way toward increasing the stability of our democracy. ' 

So grim has befen the future of the textile worker in the face of 
these problems presented by technological advance, so inadequate the 
provisions made by industry and the community that labor has long 
fought technological change. Benefits are recognized to result in the 
long run but industry has not met the immediate problem of the 
worker and has granted him concessions only after long struggles. 
While theoretical considerations might prompt the hope of reduced 
prices, these are quite remote and unimportant to the direct victim 
of change. He is faced with the immediate problem of existence, 
adjustment, and reemployment. While the advantages of increased 
productivity might be argued, the worker knows the immediate cas- 
ualties and visible suffering; he knows also of the existence of millions 
of unemployed even in relatively active periods. The worker can 
only conclude that the answer to the problem of mechanization has 
Tiot been secured. Until practical solutions have been developed and 
industry and community have evidenced an ability to provide em- 
ployment and facilities for adjustment, labor cannot be expected to 
welcome changes. 

Practically, the national unions have developed two lines of ap- 
proach toward the technological change. They have formulated poli- 
cies for the control of technical innovations for the protection of 
tlieir members and for the mitigation of the effects of such changes. 
These policies and programs are applied to their own industries inso- 
far as it is economically feasible. But their success has been limited 
both by the extent of organization and the opportunities and prac- 
ticability of applying such policies in highly competitive industries. 

These unions have realized that such policies cannot solve or even 
begin to meet the issue of technological displacement. Besides being 
unable to prevent displacement in their own industries or to direct 
price and marketing practices in such a manner as to assure wider 
markets, .they know that technological change has frequently resulted 
, in the diversion of work from one industry to another. As such, they 
are beyond the control of the individual union. The industry pro- 

gram can be considered only as a part of a full program advocated 
y organized labor for the handling of the problem of technological 
displacement. This program embraces a wider course of action. 

It is my desire to present to your committee the practices which 
have been developed in the textile industry by the Textile Workers 
Union of America for the purpose of controlling technological prog- 
ress, protecting the worker and for mitigating the effects of displace- 
ment. We shall follow this discussion with our views as a constit- 
uent organization of the Congress of Industrial Organizations as to 
the program which might properly be followed to meet some of the 
broader economic issues. 



CONCENTRATION OF ECONOMIC POWER 16855 

UNION- POLICY REGARDING TECHNOLOGICAL CHARGE 

Mr. Rleve. The Textile Workers' Union of America has developed 
several practices for the control of the introduction of technological 
changes within the industry. While control is desirable, its extent 
and character vary markedly from places where the union has no 
review or control over the introduction of these charges to those in 
which all changes must be submitted to review by the union before 
their final application. In no instance can the union really stop or 
prevent the introduction of mechanical and technological change, 
for all of the contracts of the Textile Workers' Union of America 
provide any differences between the management and the union may 
in the final instance be submitted for resolution by an outside arbiter. 
Where the local union lias taken a position against the introduction 
of a specific change or the conditions of the change proposed by the 
management, these are subject to review by an outside party. 

We shall herein describe the procedure which obtains in the limited 
number of instances where the union exercises the greatest degree of 
control. In these plants, employers may present two major types 
of proposals concerning technological change. The first involves 
minor changes aiisirig from adjustments of basios,work assignments 
to specific constructions of yarn or cloth. In other words, a spinner 
may be assigned 12 sides of the spinning frame on 20s cotton yarns. 
Should the concern introduce 30s yarn, it may desire to establish 
14 sides as a normal job^ without changing the basic terms of em- 
ployment. These are adjustments to take care of the differences in 
the character of work due to the varying construction of materials. 
In these instances the company wi]l ordinarily notify the local union- 
Adjustments are usually quickly agreed upon. In one contract pro- 
vision is made for the right of the company to proceed with these 
changes following 24 hours' notification of such proposed changes 
and the failure of the union to interpose objections. Should the local 
union dissent, the arbitrator may be called upon to stop the change 
pending his final decision unless local management and the union 
arrive at an understanding. 

The second type of technological change involves basic changes in 
work assignment or in procedures. They may be due to a variety of 
reasons, such as improvements in the physical surroundings, the 
construction of the machine, th& physical lay-out of equipment, the 
quality of materials, or any of the other types discussed previously. 
At times, changes are proposed which have no such basic cause. 
They are motivated by the employer's desire to get more out of 
labor than had been secured before. Employers in such instances 
may have heard that other employees tend more machines or produce 
more units per hour and desire to duplicate these production records 
at their own plants. The latter type of change has been the source 
of many serious industrial disputes in the industry and have thrown 
all change into disrepute. They have aroused labor to the point 
of labeling all innovations as "stretch-out." 

In organized plants, where provision has been made for careful 
i^view, managements submit these changes to the labor union. 
The latter consults with the national office of the Textile Workers 
Union of America which maintains a research department con- 
versant with, the practices on specific jobs, current levels of produc- 



16856 (X)NCKNTRATION OF ECONOMIC l^OWER 

tion of different machines, and the various machine assignments and 
methods of labor arrangement. The proposals are reviewed by this 
department and the local union is furnished with the requisite in- 
formation on current practice. The local union consults the par- 
ticular workers affected by the proposed change. Their reactions 
and th^ir opinions are. secured concerning the practicability of the 
proposals. With this information, the local union committee starts 
negotations with the management. It is prepared to review the 
proposed changes from the point of view of competitive necessity, 
practicality, savings, and their effect upon workers in the form of 
displacement, demotions, and wages. In each instance the employ^x' 
is requested to furnish such information as might be required to 
complete the full picture of the nature, need, and effects of the 
proposed change. 

The local union in each instance negotiates with the employer to 
prevent unnecessary and impractical changes, to minimize the num- 
ber of workers displaced, assure proper jobs, to secure a share of 
the increased productivity in the form of higher earnings and other 
concessions, and to secure financial allowances for those released. 

In a highly competitive industry such as textiles, relatively few 
changes can be stopped. The industry consists of more than 7,000 
companies, many of which are ever ready to forge ahead to exploit 
new processes or to gain some special advantage over competitors, 
in the form of lower costs. The problem which the union faces is 
primarily that of controlling the pace and ternis of the change. 

Probs^'^lj :he most significant advance made by the Textile Work- 
ers' vjnion of America toward the rational review of technological 
change has been in the field of assuring proper job assignments. 
The cry of the "stretch-out" has long been heard in the textile in- 
dustry. Workers have protested against unjustified work assign- 
ments. During the N. R. A. special work assignment boards were 
established. No successful machinery for the consideration of tjie 
charge of overwork can be founded until there is a bona fide union 
in a plant prepared to deal with this problem in a realistic manner 
and affiliated with an international union ready to give it the techni- 
cal advice and assistance necessary for the handling of these 
problems. 

The Textile Workers' Union of America has made great strides 
toward the rational handling of the problems of work assignment. 
In the first place, it has recognized the necessity of establishing com- 
petitive parity as among the members of the industry. In the second 
place, it demands that no job be excessive. It has preached this 
basic assumption and is happy to. report that this conviction is 
finding wider and wider acceptance in industry. Management is 
increasingly willing to. test the propriety of a, given job assignment^ 
where labor finds or believes it to be excessive. When new assign- 
ments are proposed, local unions review such proposals, also in terms 
of their practicability or their excessiveness. If necessary, the local 
calls upon the national office to have its research department study 
the proposed jobs and to determine whether the job is excessive. 
The Textile Workers' Union believes that a thorough study of the 
job by competent, technically trained people, together with the work- 
ers on the job, will disclose the practicality of any particular job. 
The union insists that the worker be allowed sufficient personal and 



CONCENTRATION OF ECONOMIC POWER 16857 

recuperative time on the job in the form of rest allowance and 
tolerance for interference and delays so that the worker is not ex- 
hausted when he leaves the job at the end of the day. For this 
purpose it has set as a minimum a 15 percent personal and rest 
fatigue factor for all jobs and has established higher percentages for 
the more fatiguing joDs which require exceptional physical exertion. 
It has, moreover, sought and in some instances secured the rotation 
of workers on especially hazardous or exhausting jobs so that .they 
may be relieved of exposures and hazards. In the synthetic yarn 
industry, the union has succeeded in having spinners who are exposed 
to. the carbon bisulphide fumes alternate their employment during 
the day with other jobs. Compulsory rest periods of fixed duration 
have been established on a number of jobs in various plants. 

Where agreements cannot be reached between the local union and 
the management concerning the propriety of a specific job, the union 
and management submit such differences to arbitration. Frequently 
the arbitration step is preceded by an effort at conciliation first made 
by the technical representative of the national office and the second, 
by the Technical Division of the Conciliation Service of the United 
States Department of Labor. In the latter instance, both parties 
agree upon the jobs in dispute and request the Conciliation Service 
to make an impartial study of the ]db. The results are made avail- 
able to both parties as a basis for discussion. In other instances 
the results are made available to an impartial arbitrator. The usual 
arbitration procedures are followed so that each side has an oppor- 
tunity to present its case. • The arbitrator may consider other aspects 
of the technological installation, such as wages, dismissals, promo- 
tions, seniority rights, job guaranties, separation allowances, and 
pensions. But with reference to the job assignment itself, he ordi- 
narily determines permanent assignments on some of the disputed 
jobs and places other jobs on a trial run. During the trial period, 
usually 90 days, the arbitrator keeps control over such jobs. The 
local union and the management may settle their differences and nego- 
tiate an understanding. If not, the arbitrator will resolve the dif- 
ference through a final decision, usually aftet further study of the 
job. 

The above procedure is being introduced in an increasing number 
of plants and is becoming more and more typical of the procedures 
followed in the industry in the resolution of their differences. Both 
parties learn to- consider these problems in the spirit of understanding 
and frankness and are able to resolve these problems without refer- 
ence to outside parties. The arbitration procedure serves as an inter- 
mediate stage in the development of permanent democratic and 
rational collective bargaining between the two parties. 

Many problems have yet to be solved before completely satisfac- 
tory handling of these questions is possible. There are still dif- 
ferences of opinion as to what is fatigue and relief time; how 
it is to be calculated; whether continuous rest periods should ,be 
allowed; what allowance should be made for delays; and the per- 
centage of rest and personal time which should be established for 
ditferent jobs. However, the groundwork has been laid for the 
more rational consideration of these problems and for more intensive 
study by management and labor of these issues. In fact, plans are 
afoot for such studies. 

124491— 41— pt. 30 43 



16858 (?<).\'<'K.\'I'KA'11()N OF K(X)NOMIC POWKR 

IMfKOVEMENT IN EARNINGS 

Mr. EiEVE. We are determined that the textile workers should enjoy 
higher earnings as a result of the rising productivity. The more a 
man produces, the more money he is entitled to. Advanced technol- 
ogy has meanin<5 only if the working population enjoys some of its 
benefits. It is the proud boast of our American economy that there 
has been an ever-rising standard of living. If that result is to be 
realized, workers must be assured of greater earnings. The rising 
productivity is now translated into lower prices, if at all, only be- 
latedly, slowly and haphazardly. The workers directly involved in 
such change have a claim to a special share of the increased produc- 
tivity in the form of higher wages, particularly in the textile indus- 
try in which wages are low and productivity has been rising by leaps 
and bounds without automatically affecting the wages of these 
workers. 

The Textile Workers' Union wants to assure the textile workers of 
a share of the benefits of the rising productivity. Definite agreements 
have been made with a number of concerns specifying the exact 
proportions of the increased productivity which should be distribu- 
ted to the workers, to management and the public in lower prices. 
In one agreement, it is moreover specified that tne local union and 
management may distribute the savings among the various classifi- 
cations of workers in the manner they believe most desirable. Fur- 
thermore, wage standards of entire industries, such as rayon yarn, 
have been raised because of its phenomenal rises in productivity. 

The union has encountered special difficulties in securing part of 
the savings in costs of production foT the workers in the highly com- 
petitive divisions of the industry. Changes are very frequently made 
to keep abreast of, rather than to gain particular advantages over, 
competitors. Mills which are paying lower wages often lead the 
way in technological change or readily duplicate those being made 
in higher areas. The chaotic wage situation in these industries deters 
these increases. 

Our organization has made definite efforts to protect workers dur- 
ing the periods of experimentation with. new machines or methods. 
Guaranteed hourly earnings are established which assure employees 
that they will receive wages comparable to that which they have 
been receiving prior to the experimental period. In the full-fash- 
ioned hosiery industry, the experimental rate has been set at 98 per- 
cent of the average normal earnings of the individual for the previous 
5-week period. In other instances, it has been set at the equivalent 
of average hourly earnings. This protected level of earnings is of 
great value in carrying on the negotiations for the determination of 
new rates of pay and assures the nvijintenance of the wage scale. 

We consider it fundamental to any sound system of economy that 
labor share in the rising productivity of industry through higher 
wages and lower prices. In highly competitive industries, such as 
textiles, it is desirable to utilize the legislative recourse provided by 
the Labor Standards Act to- assure this result. Periodic increases in 
• minimum wages in line with jumps in productivity will achieve this 
purpose. Until our organization made extensive progress in the tex- 
tile industry this principle was hardly known, not to speak of being 
practiced. It is only with the extension of unionism that the prac- 
tice is being adopted. 



CONCENTRATION OF ECONOMIC POWER 16859 

JOB TENURE 

Mr. KiEVE. Besides limiting changes to those which are absolutely 
necessary, preventing excessive veork loads, and attempting to secure 
higher compensation for the workers who are affected, the Textile 
Workers Union has constantly endeavored to establish greater em- 
ployment security for the workers already in the industry in face of 
highly rapid rate of change. The principal means of achieving these 
ends has oeen regulations governing lay-offs and rehiring ; and the 
special rights of employees displaced by technological change. 

Seniority systems are now widely recognized in all union contracts. 
Initiated both by employers and organized labor, these plans are gen- 
erally accepted. Under seniority plans now in existence, length of 
service with a company is given foremost consideration in determin- 
ing the comparative rights of employees to their jobs. Many qual- 
ifications are frequently added to the consideration of service with 
the company which limit the protection to long-service employees. 
Some companies have introduced merit-rating plans which seek to 
minimize the importance of service by giving it a limited value in 
the determination of the total rating of the employee. The worker's 
equity in his job is therefore restricted. 

Insofar as the seniority or merit-rating systems protect the longer- 
service employees, they tend to place the cost of technological change 
upon those who are younger, and upon those with shorter service 
records, who may include older persons as well. 

The Texile Workers Union has in several instances succeeded in 
securing additional protection for the workers in the plant which 
protected them against arbitrary and discriminatory discharge. In 
several instances management agreed to introduce the changes in such 
a manner as to protect its personnel. The^ have guaranteed jobs to 
all workers, and moderated the pace at which the changes were made 
so that the normal turn-over of labor would provide sufficient jobs 
for those who remained. In the second place, the changes have fre- 
quently been accompanied by a definite program for expansion which 
opened up job opportunities. In the third place, the companies have 
installed the changes during periods of expanding business so that 
there would be no immediate repercussions. Whatever the form of 
guarantee, the organization has at all times sought to find some 
formula to protect jobs. 

When this alternative was not possible, the Textile AVorkers Union^- 
of America has secured preferential rehiring rights for displaced 
workers. In addition to enjoying the ordinary seniority rights in 
their respective departments and occupations, they obtainedj-eemploy- 
ment rights for all jobs in the plant. 

In advancing the security of the workers against technological 
change, the Textile Workers Union has gone one step further in the 
case of the American Viscose Co. It succeeded in assuring the work- 
ers a right to new jobs developing not only within the plant at which 
they are working but also in other plants of the company. This 
provision is of particular importance in this industry in which 
technological progress has been sharply reducing the volume of em- 
ployment in established plants and prompted the construction of new 
l)lants at times close to the site of the older plants but in most in- 
stances a^ay from these older plants in other communities and fre- 



16860 CX)NCENTRATION OF ECONOMIC POWER 

quently in other States. The union has established the right of the 
displaced worker to jobs in new plants built either at the old site 
or in new communities. 

New plants established at older sites are frequently governed by 
existing seniority rulings so that employees gain a preemptive right 
to their jobs. In the agreement with the American Viscose Co., 
provision is made that "employees displaced by technological changes 
shall be pkced on a preferential list for rehiring as and when vacan- 
cies thereafter occur." The arbitrator determined that the displaced 
workers had to be "placed on a preferential list for rehiring when 
appropriate vacancies occur in any of the plants of the corporation.'' 
'Hie preferential rehiring lists are handled by the central industrial 
relations department of the company rather than by the individual 
plant offices. 

In practice, employees displaced by technological changes are gen- 
erally employed at the older plants located either at Marcus Hook 
and Lewistown, Pa. ; Parkersburg, W. Va., or Roanoke, Va. On being 
placed on the preferential hiring list, they become eligible for re- 
hiring at the Front Royal,: Va., or Nitro, W. Va. or Meadville, Pa., 
plants where are located the more recently constructed and expand- 
ing plants. The employees on being displaced file applications in- 
dicating the plants to which they prefer to move. When vacancies 
occur they are notified and informed of the nature of the employ- 
ment and the rates of pay. They are selected on the basis of qualifi- 
cations, training, and experience. Seniority at the old plant is given 
secondary consideration. If the persons are found desirable, they 
are notified to report at the new plant. The persons so transferred 
enjoy no seniority record at the new job but immediately become 
permanent employees. If the;) refuse employment at another plant 
they remain on their own departmental preferential list for a period 
of 1 year and on the plant list for 3 years. It must be noted that 
the new opportunities for rehiring at the older plants are rather 
limited. 

The mcoo outstanding application of this program to date resulted 
from the reorganization of the spinning departments of four older 
plants during which some 1,100 persons were displaced. Of this 
number 598 signed transfer cards since about 1 year elapsed between 
the actual. displacement and the determination by the arbitrator of 
the right of these employees to job^ in other plants, and many had 
^secured other jobs. Some 200 persons have been reemployed on 
permanent jobs and 15 on temporary jobs at the new plants. Only 
29 workers to whom the jobs had been offered refused them. It is 
expected that in May 1940 the largest number of those willing to 
accept jobs will be. absorbed as the Front Royal plant will then get 
into operation. 

Many difficulties '.ave arisen in making these transfers. Persons 
have been reluctant to break long ties, in their cornmunities. They 
have property, friends, and family. Others found the cost of mov- 
mg prohibitive. Others felt reluctant to accept lower wages. The 
union, it niay be added, has proposed the establishment of a fund 
through joint employer-employee contributions to assist individuals 
m moving to new jobs. The lack of housing and other facilities in 
the new communities have discouraged other workers. In the near 
future, it is expected (hat some 2,000 women will be affected bv the 



1 



CONCENTRATION OF ECONOMIC POWER 16861 

cake- washing process. In their case, employment in new plants will 
be, difficult if not impossible to find. 

No one can look upon this plan as adequate nor as complete; it 
must be considered as part of a larger program to meet the insecuri- 
ties and cost of technological displacement. 

In an industry such .as synthetic yarn, which is constantly ex- 
panding, the possibilities ioP this plan are promising." New plants 
are being built ; the companies are enjoying huge profits. They are, 
in most instances, financing the expansion out of their own profits 
and surpluses. They can afford to grant workers preemptive rights 
to new jobs and to assist them in making these transfers. We look 
forward to the time when complete union organization in the in- 
dustry will provide workers displaced by technological change with 
the preferential hiring rights to jobs in all new plants. 

SEPARATION AIXOWANCES AND PENSION? 

Mr. RiEVE. The preceding two efforts at mitigating the effects of 
displacement must be supplemented by other programs. One method 
employed is to arrange a separation allowance or pension for em- 
ployees displaced by technological change. Three specific plans have 
been developed through the initiative of the Textile Workers Union. 
We are, I must add, recommending to companies with adequate 
financial reserves a separation -wage plan. Two companies have 
adopted the principle of the separation allowance in case of 
technological displacement. The Bigelow-Sanford Carpet Co. 
accepted this principle in its agreement with our organization and 
we are currently negotiating the terms of a separation allowance. 
The contract with the Celanese Corporation of America, employing 
some 9,000 workers, provides that persons displaced by technological 
change shall be entitled to a separation allowance or to be placed 
on a seniority list for future employment on a job suitable in the 
company's opinion. Employees with 2 years or more service with the 
company choosing the separation allowance, receive 1 week's pay for 
each year of service up to 10 years. A fund of $250,000 was estab- 
lished by the company to provide fbr> these pensions.' Employees 
obtaining these allowances may be rehired by the company at a 
future date but do not enjoy any seniority rights. Along with un- 
employment compensation benefits these separation allowances pro- 
vide the worker with some income for the period during which he is 
determining his future course and seeking other employment. It is 
our hope to extend this principle to as many companies as possible 
in order to establish some form of compensation to persons displaced 
by mechanical progress. 

This plan, moreover, has pi-ompted the management to minimize 
the number of persons displaced. Instead of releasing personsi, the 
company planned the introduction of technological changes in such 
a manner that persons likely to be affected might be absorbed at 
other jobs. As a result, we may testify that the most significant 
effect of the plan has been to reduce the number of displaced workers. 

The plan developed by the Textile Workers Union, together with 
the American Viscose Co., for the Marcus Hook plant, provides even 
more satisfactory financial arrangements. The company desired to' 
close the plant. After considerab' , negotiations, a plan was worked 



16862 CONCENTRATION OF ECONOMIC POWER 

out for the continuance of the plant for a 6-month trial period. In 
the meantime, all persons 65 years of age and over have been retired 
with a pension and persons under 65 entitled to jobs by reason of 
their seniority position for whom no suitable openinor could be found, 
were paid a dismissal wage. Pensions amounted to 1 percent of 
current earnings times the number of years of service with the com- 
pany. Persons between the ages of 60 and 65 years are granted pen- 
sions equivalent in value to deferred pensions at the age of 65 years 
so that a male of 60 years of age received for the same number of 
years service, 61.1 percent of the monthly allowance which a person 
65 years of age and over receives. All persons under 60 years re- 
ceived a permanent lay-off allowance which was figured on the basis 
of the average weekly earnings of the employees during the last 
12-month period in which they worked. They received 1 week's 
pay for each year of service, from 10 to 24 years, inclusive, plus '.\ 
weeks for each year of service over 24 years, with one additional week 
for each 3 years over 45 years and a deduction of 1 week for each 
3 years' age interval below 45 years. In addition,. 1 week's notice 
was granted to persons with 1 to 4 years' service, 2 weeks' notice 
for 5 or more years of service or pay in lieu thereof. The purpose 
of the plan was to give additional protection to workers 45 years of 
age and over and for those with 25 years of service and over, to 
compensate for their service and offset their special diflBculties in 
findmg new employment and for the fact that employment is likely 
to be secured at a relatively lower wage. An employee aged 30, with 
5 years' service would receive only the 2 weeks' notice or pay in lieu 
thereof. An employee 45 years of age and over with 15 years of 
service would receive 15 weeks of pay, while an employee 57 years 
of age with 15 years of service would receive 19 weeks of pay. An 
employee 57 years of age with 25 years of service would receive 31 
weeks of pay. Here also the plan has resulted in planned place- 
ments so that the number of displacements has been kept at a 
minimum. 

The technique developed by :he Textile Workers Union of 
America to control the installation of changes, to protect jobs, and 
to assure better earnings to employed workers and preferential treat- 
ment to displaced workers, as well as the program for separation 
allowances and pensions can find wider application in a national 
plan to protect workers against the undesirable effects of technologi- 
cal change. They must become part of such a larger program. 

The right of workers to organize must be protected in every plan 
to meet these problems. Without bona fide -unionism, it will be 
difficult to find an answer to the extensive problems of technological 
advance. The recent growth of industrial unionism has made it 
possible for workers to develop a control over technological ad- 
vances and to devise programs for dealing with the issues in their 
individual plants which they present.' The unionization of an in- 
dustry is the best guarantee that installations will be made in a 
rational and controlled manner. Unnecessary innovations will be 
discouraged ; but backward concerns may be prompted to make them 
as had been the case in a number of instances. Wherever changes 
are made, job assignments set by collective bargaining are more 
nearly satisfactory than thuse set m any other manner. Unions en- 
deavor to secure direct benefits for workers and also set up some 



CONCENTRATION OF ECONOMIC POWER 16863 

control over the process of lay-offs and rehirihgs to minimize the 
number of displacements and assure these workers such new jobs as 
may be found within the plants of the same company or within the 
industry. Constructive collective bargaining will produce arrange- 
ments for the movement of workers and other techniques to facilitate 
the adjustment of the individual worker and minimize the hardships. 

The demand for collective bargaining and unions is not founded 
primarily on these considerations. But it should t)e emphasized that 
the urge to organization is rooted in the- workers' desire to share in 
the determination of his own conditions of employment. There is no 
matter in which he desires to participate as much as in the decisions 
concerning technological innovations. . It is important for democratic 
and healthy industrial relations in this country that all questions 
arising about the necessity of these changes, their manner and rate 
of application, new job assignments, wages to be paid, and provisions 
to be made for the displaced worker, shall be subject to collective 
bargaining. While such negotiations will not in and by themselves 
solve the problems of technological advance, they will facilitate more 
rational handling and possibly prevent some of the undesirable social 
effects. When negotiations are carried on on a national industrial 
basis the results can be even more profitable and constructive. More- 
over, wage increases and shorter hours offer great possibilities for 
facilitating national economic adjustment to these changes and for 
establishing a more balanced national economy. 

The social and economic problems created by technological change 
are national in character and also must be dealt with by the Federal 
Government. Legislative measures such as the wage-and-hour law, 
the social-security law, and provision for the Federal Employment 
Service can be of immense value in meeting these problems. Indi 
vidual industry efforts must be supported by such legislation. Wage- 
and-hour legislation can be of great assistance in raising wage stand- 
ards and in providing a facile method of assuring labor some of the 
benefits of the increased productivity through constantly trising min- 
imum wages. This is particularly true of the textile industry in 
which competition is very keen and national in scope and wages are 
low. Our social -security laws must be liberalized ih provide for 
those displaced from industry either at an advanced ag^ or during 
active years. Workers affected by technological change after middle 
years find it particularly difficult to adjust themselves. It is there- 
fore particularly important that provisions be made for their assist- 
ance in our old-age security legislation. The experience of the Tex- 
tile Workers Union with the technological separation allowances sug- 
gests that further study might well be made of this technique to 
supplement present unemployment compensation benefits both to aid 
the worker and to afford additional inducements to employers to 
plan their installations in such a manner as to keep the number of 
displaced workers down to a minimum. It will also place a proper 
charge on technological developments. We, of course, suggest ex- 
tension of the services of our employment agencies to facilitate the 
reemployment of displaced workers. 

Insofar as the technological change affects the individual worker, 
the above suggestions are indicative of the type of program it is im- 
perative that we adopt in order that the human toll of technical ad- 
vance be reduced and that more persons enjoy some of the advantages 



16864 



CONCENTRATION OF ECONOMIC POWER 



occurriii<jj from these phenomenal advances. We are also in need of 
more planning of the location of our industries so that there be fewer 
ghost towns and depressed areas. 

The economic issues presented by technological change are funda- 
mental. They relate to the absolute number of jobs in this country. 
They concern themselves with all of our basic economic problems. 
Real adjustment to technological advance can only come when we 
have learned to increase the number of available jobs or provide 
them through public works or governmental enterprise. Higher 
wages and shorter hours constitute significant means of increasing 
national income, distributing work more widely, and facilitating 
greater balance in our economy. They are indispensable to making 
technological advance a blessing rather than an evil. 

Dr. Anderson. Shall we proceed with the questiens? 

Acting Chairman Williams. Yes. 

Mr. Chantland. May I ask a question, Mr. Chairman? 

Acting Chairrnnii "^Vtttjams. Yes. 

unions as a factor in mechanization 

Mr. Chantland. Mr. Rieve, you said legislative measures such as 
the wage-and-hour law, the social-security law, and provision for the 
Federal Employment Service can be of tremendous value in meeting 
these problems. Do you mean to say that they have not been ? 

Mr. Rieve. No ; I mean that they can be extended. 

Mr. Chantland. You said that backward concerns may be 
prompted to makethem, as has been the case in a number of instances, 
in moving forward and planning. How many of these backward con- 
cerns have been prompted by your union to adopt such measures ? 

Mr. Rieve. Well, I 

Mr. Chantland (interposing). I won't ask you to name them,, if 
you don't want to. But I was planning to get the number and the 
size and the location, perhaps. 

Mr. Rieve. In one division of the textile industry — that is in the 
full-fashioned hosiery — I would say about 60 percent of the industry 
was prompted through that method to modernize tKeir plants, mostly 
located in the North and Middle West. 

Mr. Chantland. Do you want to elaborate further ? 

Mr. Rieve. It was self-evident that/if these mills were to continue 
in busihess they would have to do something because of the highly 
competitive nature of the business. The union approached them and 
worked out a scheme with the employers for the purpose of modern- 
izing their mills. 

Mr. Chantland. To save the jobs and save the mills? 
. Mr. Rieve. To save the jobs for the people involved. The wage 
scale was readjusted and rearranged so that the worker on the new 
improved job probably earned as much,^ and a little more than on the 
old job, but it brought about material saving to the employers because 
of the nature, the productivity of the job. That is the primary in- 
stonce where this type of thing occurred. 

Mr. Chantland. That i^ concrete with me. Are there other m 
stances that you Avant to tell ? 

Mr. Rieve. No; I think that is sufficient as an example of what can 
be done. 



CONCENTRATION OF ECONOMIC POWER 16865 

Acting Chairman Williams. I notice your statement here, running 
perhaps through this paper, of the control of the union over the in- 
stallation of changes in the plant. To what extent has the union in- 
fluenced or controlled the technological improvements that have gone 
into the plant, and what is your procedure by which that is done? 

Mr. RiEVE. The procedure ? I may say this, that our outline gives 
examples of what can be done. In industries where the strength of 
the union, not in a plant but in an industry, is greater, these questions 
can be worked out more satisfactorily. In the synthetic yarn industry, 
for instance, which is a highly profitable industry and in which the 
extent of our organization is quite large, we have been able to work 
out through collective bargaining all kinds of schemes, not to solve 
the technological problem but to cushion it. In some instances it was 
delayed for 6 months or a year. 

A company may be expanding its business, in which instance it 
might be prevailed upon to delay installation until the workers that 
would be normally displaced could be absorbed. In other instances 
we have been able to prevail upon employers to pay dismissal wages 
and put the workers on a preferential list, and so forth. This state- 
ment primarily tries to show how these technological changes may be 
mitigated through proper collective bargaining in any industry. The 
wider the bargaining agency is, the better the problems can be worked 
out. 

Acting Chairman Williams. I was just wondering what your set-up 
is for that. In case a plant or the management decides to install some 
new improvement, some new invention, some labor-saving device that 
you have referred to, do they give the union management notice of that 
intention ? 

Mr. RiEVE. They do; ^v'es, sir. In many instances they do. 

Acting Chairman Williams. And then do you go into conferences 
and a discussion of the merits of the proposed installation ? 

Mr. RiEVE. That's right. The company notifies the union, provid- 
ing it is one of our regular unions, and when they notify us we try 
to check whether it is a real technological change or whether it is 
just a camouflaged speed-up, which in many instances happens. If 
it is genuine, we start to negotiate with the company, to go more into 
the detail of what their plans are, and try to work out the best possi- 
ble arrangement to mitigate the shock of such displacement. In 
many instances we cannot do anything about it. 

There is one concern that is employing about 20,000 workers. We 
knew, and we knew for a year, that technological change was com- 
ing in that was going to throw out about 2,500 girls. There was 
little we could do about it. 

Acting Chairman Williams. That is what I wanted to find out. 
In the last analysis, who has the final say ? 

Mr. RiEVE. In most instances, arbitration has the final, say. If 
we cannot agree, if we take the positioix that the change should not 
go in and management takes the position that it should, we submit 
the question to arbitration. 

Acting Chairman Williams. Wlio is the arbitrator? 

Mr. RiEA^E. Usually an outside person chosen by both jjarties, some- 
times the Mediation Service of the Department of Labor, in some 
instances the American Arbitration Society. Sometimes we have 
a named arbitrator 



1686G noNc;KNTKATiON of economic power 

Acting Cliairman Williams. Is the decision of the arbitrator final? 

Mr. RiEVE. Final and binding. 

Acting Chairman Williams. That is bound by contract, and in 
that case there would be no occasion for a strike if you did not agree. 
Strikes have not resulted from the disagreement between labor and 
management with reference to the installation of new devices. 

Mr. RiEVE. Too many strikes have resulted in the textile industry 
from the installation of new technological equipment, but they have 
not occurred in plants that have collective bargaining with the union. 
In plants w'here the union is recognized as the collective-bargaining 
agency these matters are resolved, if by no other method, by arbi- 
tration. 

Acting Chairman Williams. Then, in other words, finally the 
determination of what is introduced in the way of new improve- 
ments in a plant is in the hands of the labor unions where they exist 
and are effective, and the plant management? 

Mr. RiEVE. Yes. 

Acting Chairman Williams. And there isn't any such thing as a 
disagreement to such an extent that it isn't settled by arbitration; 
and further, labor difficult}^ is avoided. 

Mr. RiETV'E. That's right. 

Acting Chairman Williams. Is that the situation? 

Mr. RiEA'E. That is right. The union does not interfere — I will 
put it this way — in management's right to mechanize its plants, to 
improve the mechanization ofits plants. All that the union is trying 
io do is to protect the worker so that in such changes the burden of 
that type of mechanization shall not be entirely borne by the worker. 
In other words, we try to work out something so that the workers 
who are displaced will be absorbed, or given some dismissal pay, or 
something of that kind. We try to prevail upon management that 
if they have plans for expanding within a year or so, they will post- 
pone their installation of the new modernized equipment until they 
expand, so as to reabsorb in that manner the displaced^ workers. 

But in no instance does the union say to management, "This instal- 
lation, this invention, you can't have." We are practical enough to 
fealize we can't just stop invention and we probably wouldn't want 
to stop it if we could. 

Acting Chairman Williams. You try to persuade them and to at 
least get them to see your viewpoint in the matter, and if you can't 
do that and they see fit, they go ahead and install it anyway; is 
that the situation? 

Mr. RiEVE. No. When we can't agree on the jnethod of installation 
we may submit the matter to arbitration. 

Acting Chairman Williams. That is what I understood you to say 
a while ago, and there is after all no such thing as having a final 
disagreement on the installation of new appliances in the industry. 

Mr. RiEVE. Tnat is right. 

Acting Chairman Williams. In your opinion, have the benefits of 
technological advance in the reduction of cost of production and 
increased productivity been properly and equitably adjusted and dis- 
tributed betjveen the industry, labor, and the public in general? 

Mr. RiEVE. I wouldn't say so. I don't think the savings derived 

from improved productivity in the textile industry have been equita- 

• bly distributed. I don't think that labor got its share, generally 



C?ONCENTRATION OF ECONOMIC POWER 16867 

speaking. I hestitate to say it; I would guess that most of the sav- 
ings derived have been passed on to the consumer. 

Acting Chairman Wiu^iams. Then you feel — and is that just 
merely a guess, or is that opinion based upon a thorough, rather 
thorough, investigation of the situation in the textile industry by a 
man of your experience — ^that the industry itself has not unduly 
benefited by reason of these technological improvements? 

Mr. KiEVE. The industry as such probably benefited unduly up to 
about 10 years ago, but I venture to say that in the past 10 years 
the industry did not benefit unduly as a result of technological 
changes. 

Acting Chairman Williams. In other words, the income which they 
liave received on their investment, and proper compensation for effi- 
cient and skillful management, has not been overpaid ? 

Mr. RiEVE. Well, of course, when we go into that I wouldn't want 
1o make that statement, because that goes into the very beginning, 
into the financing of the company. I think that in days gone by, in 
the 1920's, and so forth, that the industry overcapitalized itself. It 
])ut out too much watered stock, and so forth, and I am not pre- 
pared to say whether they are earning enough oil that type of thing 
or not. As a matter of fact in the past 10 years I think the woolen 
industry shows, as an industry, losses and not earnings. 

Acting Chairman Williams. I am rather confining, so far as I 
am concerned, myself to the last 10 years. 

Mr. Reeve. I will say that the industry has not unduly profited as a 
result of technological improvements. 

MIGRATION or TEXTILE INDUSTRY 

Acting Chairman Williams. I got the impression from your state- 
ment that during the last 10 years there had not been an excessive mi- 
gration of the textile industry from the East, from New. England, 
and the eastern Atlantic States, to the South. 

Mr. RiEVE. That is correct so far as the cotton -textile industry is 
concerned, but it is not correct as far as other branches of the indus- 
try are concerned, such as hosiery, which has had a terrific migration 
Avithin the last 5 years. The woolen and worsted industry is begin- 
iiing to RiOve in that uiiection. 

Acting Chairman Williams. Wliat is the reason for that? 

Mr. RiEVE. Lower costs, primarily; lower labor costs, lower taxes, 
all kinds of attractions that industries are getting from communities 
and from States. 

Mr. Pike. You have to differentiate a good deal, when you talk 
about the industry, between the cotton, woolen, and synthetic fibers. 

Mr. RiEVE. The industry can be divided into five distinct parts. 
There are more, but five will cover the principal parts. There is thf 
cotton -textile industry, the woolen and worsted industry, the syn- 
thetic-yarn industry, the carpet industry, and the hosiery industry. 

Mr. Pike. And the qualifications are quite different? 

Mr. RiEVE. That is right. It does not necessarily follow that the 
occurrences in one of the divisions of that industry will occur in the 
other. 

Acting Chairman Williams. Now, taking it as a whole, I under- 
stood you to say— I want to see if I am ^torrect about that— that the 



16868 CONCENTRATION OF ECONOMIC POWER 

jiiimber of employees in the industry as a whole had decreased some 
5 percent in the last 10 years, or from '27 to '37. 

Mr, RiEVE. There has been no change in the number of employees 
in the industry as a whole since 1919. There are about the same num- 
ber of people employed today in the industry as were employed in 
J 919. 

Acting Chairman Williams. Well, now, what about the productive 
output per unit? I am talking about the industry as a whole, in 
general. 

Mr. RiEVE. It has increased about 25 percent during that period; 
iJiat is, total production. 

Mr. Pike. That was in pounds, as I remember. 

Mr. RrEVE. That's right. 

Acting Chairman Williams. You are using, of course, the same 
unit of production in both periods. 

Mr. Rieve. That is right. 

Acting Chairman Williams. Which would indicate the extent of 
increased production. That is only 25 percent? I got the impression 
it was much larger than that. 

Mr. Rieve. I am sorry I don't have man-hour productivity for the 
industry as a whole. I have it in the 5 divisions of the industry, if 
you are interested in that. In the cotton-textile industry production 
increased 18 percent from 1919 to 1939, but man-hour output in- 
creased 84 percent, and man-hour employment dropped 28 percent. 

Acting Chairman Williams. What was the cost per unit, com- 
])aratively? 

Mr. RiEve. That would depend entirely upon the fabric that was 
made. 

Acting Chairman Williams. I mean an over-all picture of it. 
Have you that? 

Mr. Rieve. There are no figures in the textile industry so that you 
can make an over-all cost. The cost varies so much, depending upon 
the fabric, that you can't arrive at that kind of figure. 

Acting Chairman Williams. I understand that there are varying 
fabrics, but I was wondering whether there are figures available 
which would show the over-all cost of the entire industry in 1929 as 
compared with 1939. 

Mr. Rieve. There are no such figures available. T haA^en't seen any. 
I don't think the Department of Labor ever prepared those. 

Mr. Pike. You find it difficult to average out between a cotton 
sheet and a silk stocking? 

Dr. LuBiN. You also have the other factor, that the same plant 
may have two fabrics, upon one of which they are making money, 
and the other on which they are losing money. 

Mr. Rieve. If you go a little further, you can't compare a cotton 
sheet with a carpet. You can get the figure for the carpet industry 
or the cotton-textile industry, but you can't lump the textile industry 
together and get an over-all cost that way. 

Acting Chairman Williams. Have you got it, then, for the dif- 
ferent branches of the industry? 

Mr. Rieve. Yes; we have it for the different branches of the in- 
dustry. 

Acting Chairman Williams. All right, what is it? 

Mr Rieve. Man-hour output in the cotton-textile industry 



CONCENTRATION OF ECONOMIC POWER 16869 

Acting Chairman Williams (interposing). I am talking about 
cost. 

Mr. Reeve. Oh, no, we don't have that. 

Acting Chairman Williams. You seem to think you can get that. 

Mr. RiEVE. That probably could be got. 

Acting Chairman WiiXiIams. But you haven't it, and that's that. 

Dr. LuBiN. I might say that the Federal Trade Commission has 
some figures on earnings of the various branches of the industry for 
a series of years starting in 1933, I think. I think they run up to 
1937 or '38. 

Mr. Barkin. To '36. 

Acting Chairman Williams. To w^hat extent have you applied 
through your bargaining agency with industry, some kind of separar 
tion allowance in the textile industry? 

Mr. RiEVE. To a very, very limited extent. We have it with a very 
few companies. I think I stated in my presentation that we only 
have it in three companies. I brought it in as an indication that 
through legislative methods, or through other means, that type of 
arrangement ought to be explored further and brought about, to thus 
cushion 

Acting Chairman Williams (interposing). Wliat kind of legisla- 
tive arrangement do you think could be made about that? 

Mr. RiEVE. There are several things that could be done. Some- 
thing could be worked out. As I say, that would have to be studied. 
As an example, we have social security, by which employers are taxed 
and workers are taxed, and when a worker reaches 65 years of age 
he is entitled to unemployment compensation. Why couldn't indus- 
try be taxed in the same manner, to set up a fund to pay workers 
as they are displaced by technological changes? That would be one 
way. I don't sa}^ that it is the proper way. I am just indicating 
that it is one way to do it. There might be many ether ways. 

Mr. Pike. You said, Mr. Rieve, that you had not nuich trouble in 
dealing with the prosperous units of this industry, and I take it that 
means pretty much the synthetic fiber end. Now, I think it is notori- 
ous that in the cotton mills there are a great many nonprosj)eroiis 
members, to put it mildly. We have had a great many large mills 
go out of business and disappear in the last several years, and in cir 
cumstances like that it almost always means there are other mills on 
the edge who just don't have the capital to do things. There has been 
technological displacement of dollars as well as men. Sometimes 
that can be painful to the owners of those dollars. But that does 
make a real problem there. 

Mr. RiEVE. That is correct. That is \yhy I stated that if we were 
to adopt a dismissal wage principle, it must be adopted thrQjugh 
governmental agencies and not through' individual mills, because if a 
marginal mill wanted to enter into an agreement with a union that if 
technological change came they would pay a dismissal wage, I don't 
know whether I would accept the agreement, because I don't think 
they could fulfill it when the time came. 

Mr. Pike. That is one of the things I am driving at. A fairly 
good indication is the price of mill shares, and you see very fre- 
quently where the total selling price of the mill, multiplying the 
number of shares by the price of the share, is less than their net 
current assets on hand, allowing nothing at all for mills and ma- 



16870 CONCENTRATION OF ECONOMIC POWER 

chinery. You remembeV probably a dozen of those in the last 
several years, so that oil the face of it it would be profttable for 
the mill to close up shop, liquidate its current assets and quit, and 
one might think a mill management might always have that under 
consideration, and a new consideration might turn their decision 
either way. It is a very difficult situation for all concerned. I 
think you recognize that. And with this very competitive industry, 
one person who is profitable can do it, this other fellow who is on 
the ragged edge won't or can't do it unless he is compelled to. 

Mr. RiEVE. It cannot be done voluntarily. It has to be done by 
action of some governmental agency. 

Acting Chairman Williams. I noticed you discussed to some extent 
the question of skilled labor being supplanted by unskilled labor. 
Is that the situation generally? Is that the trend? 

DIVISION OF LABOR IN TEXTILE PLANTS 

Mr. RiEVE. The trend is to separate the skilled worker in the textile 
mills. In days gone by he performed various tasks. It didn't nec- 
essarily follow that every minute of his time was consumed on a 
skilled task. Probably the bulk of his time was consumed on skilled 
tasks, but he was also doing some unskilled work. The tendency 
now is to separate that. As an illustration let me take a weave 
shift. A weaver in days gone by operated, say, 4 or 5 looms, and 
he would tie the cloth on the bobbins, yarn, and all these operations. 
Today, he is not doing that. He is only weaving, and they have 
battery hands who do the other tasks, and the result is that the 
weaver, instead of taking care of 4 or 5 looms, is taking care of 
60 or 60, and, in one or two instances we know, of 120 looms. 

Acting Chairman Williams.. Let me ask you this. Has the techno- 
logical improvement in the textile industry changed the nature and 
character of the skilled workman to such an extent that a man who 
formerly would be considered a skilled workman in his particular 
line, by reason of these improvements, was not fit, and didn't have the 
skill to carry on under the improvements, and in that way displaced 
many of the skilled workers? 

Mr. RiEVE. That is correct, very much so. 

It necessarily follows," as I explained in the weaving shed, that there 
were many improvements on that loom. The weaver was able to take 
care of more looms because he confined his activities entirely to skill, 
and unskilled people came in and did the other work. That means 
that other skilled weavers were laid off. 

^ Now, you liave other technological changes, such as in the woolen 
industry, where you still have the old mule spinning system that is 
being replaced by a new system where the spinner, a skilled operator, 
is being displaced by a woman. 

Acting Chairman Williams. I don't believe that is the idea that I 
had, as I understand you. We have had evidence here, for instance 
in the steel industry, of the old hand roller mill skills. When they 
introduced the strip-mill process, while the old worker, the former 
employee, was skilled in his line of work, the inauguration of the new 
machine rnade him entirely an unskilled worker so far as managing 
tha^ machine was concerned^ and he wag out entirely. He could not 
continue at all, because while he was skilled under the original process, 



CONCENTRATION OF ECONOMIC POWER 16871 

when it was supplanted by an entirely new process his skill was gone, 
and he was out. 

Mr. KiEVE. Well, that is true in some instances, as in the instance 
that I described betw^een the mule spinner and the ring spinner. A 
mule-spinner operation was an operation that w_as entirely operated 
by males. Now a new operation came in. It is also called spinning, 
but that operation is entirely different in character from the other 
one, much simpler, and the result of it is that women are employed in 
that operation, and the mule spinner is out of a job. 

Now, I wouldn^t take the position that the mule spinner could not 
become a ring spinner. Probably he could. I would question, how- 
ever,' whether he could become as efficient as a girl can be on that job. 
So he is entirely out. 

Dr. LuBiN. Mr. Rieve, as you went through your material I was 
impressed by the faqt that there were four factors operating in the 
industry, and I wonder if we could stop them. In the first place, we 
are creating unemployment by mills moving away. As you say, com- 
munities make offers of free taxes and subsidize the cost of building 
the mills, and mills move away from a certain part of the country and 
go into a new section. I take it that that movement has nothing to do, 
or little to do, with technological change. It is a question of costs; 
you can get cheaper labor some place else, somebody puts up the mill. 

Mr. Rieve. I think it is somewhat accelerated by technological 
changes. 

Dr. LuBiN. But the movement itself could take place without any 
technological changes. 

Mr. Rieve. Yes; it could. 

Dr. LuBiN. Secondly, speed-up. In other words, there is evidence 
to the effect that certain mills have increased productivity without 
changing their machinery, but by speeding up the operation. 

Mr. Rieve. That is right. 

Dr. LuBTN. And, thirdly, you have what might be considered tech- 
nological change, in the sense of better organization of the plant, 
which eliminates certain wasteful practices, and, finally, you have 
machinery. Which of these are the most important, and whicji can 
we expect to play the greatest part in the immediate future? In 
other words, can we break those four factors down and measure the 
extent to which each is responsible for unemployment? 

Mr. Rieve. Well, of coui-se, any prediction for the future would 
be a guess. I would say that probably the greatest amount of unem- 
ployment is caused by the physical layout of the mill, improved 
operations through rearrangement of processes, and so forth, secondly, 
probably by machines, unless something new and revolutionary hap- 
pens that is not now in the making. 

Dr. LuBiN.' There have been no revolutionary changes in the indus- 
try during the last 10 years? 

Mr. Rieve. No ; new things are coming in, but I wouldn't call them 
revolutionary. They are speedier, and so forth. 

Dr. LuBiN. Would you say that the bulk of this 

Mr. Rieve (interposing). Only in the rayon industry. When you 
talk about the synthetic rayon industry 

Dr. LuBiN. That is an entirely different situation. Would you still 
think that as far as cotton and wool are concerned that machinery 
would be the second factor? 



16872 CONCENTRATION OF ECONOMIC POWER 

Mr. RiEVE. In wool, especially in wool. 

Dr. LtiBiN. What effect is the nylon development goin^ to have 
upon the hosiery industry; that is, emplojTnent in the manufacture 
of silk hosiery? 

Mr. RiEVE. First I think we will have to find out what nylon really 
will be. There has been considerable in the public press. I do not 
think that it will have an effect on the hosiery industry as such, 
but it will have on the throwing industry, the silk throwing industry ; 
all that equipment will become obsolete and will have to be scrapped. 
You cannot use silk throwing;: equipment for synthetic yams. The 
hosiery machine can be used for nylon. It is cUimed that the 
nylon will wear longer. If that is true, probably to that extent sales 
will be curtailed, but outside of that I don't anticipate any difficulty 
in that industry as a result of nylon development. 

Dr. LuBiN. Following up this whole question of displacement, you 
state in your brief that the number of spindles has been very 
markedly cut down and yet the output of the industry has gone up. 
I take it that increased output is the result of using synthetic yarns 
in mixture with cotton. 

Mr. RiEVE. That is one, and also as the result of shifts ; the remain- 
mg spindles are used two and three shifts as against one shift up to 
about 7 or 8 years ago. 

Dr. LuBiN. But that would increase the man-hours of employment 
proportionately, wouldn't it? 

Mr. RiEVE. No; but it would the spindle hours. 

Dc. LuBiN. It is a question of spindle-hour increase? 

Mr. RiEVE. And there is more productivity in spinning equipment 
The new spinning equipment is nmch more productive. As a matter 
of fact, the only appreciable technological changes that the cotton 
industiT made in the last few years were in the spinning departments. 

Mr. • Chantland. Is there a difference of pay rate on the different 
shifts? 

Mr. RiEVE. No. In the bulk of the cotton industry the pay rate is 
too little whatever it is. 

Mr. ChantXiAnd. Whether it is the night shift or day shift? 

Mr. RiEM^. Whether it is the night shift or day shift. Some indi- 
vidual concerns may pay slightly more on the third shift, but it is 
not a factor in the industry. . 

Mr. Pike. You m<>ntionpd in your statement the fatigue factor, 
which I presume still shows up in several places in the textile indus- 
try. Of course, that must be getting reduced pretty well to a mini- 
mum with the short hours, isn't it, now, or do you still find that is a 
considerable factor? 

Mr. RiEVE. Oh, it is a factor, because no man or woman can work, 
even assuming that there is a lunch period, on an 8-hour employment 
day 4 hours without some rest period. The fatigue question is not 
as important an item on an 8-hour workday as it would be on a 10- 
or 12-hour day, but it is still a factor. 

Mr. Pike. Most of that work, or a great deal of it, requires close 
mental attention rather than hard physical work, doesn't it? 

Mr. Rieve. That is right ; it is tcMlious work. 

Mr. Pike. Waiting for a break? 

Mr. Rieve, Most of it is walking, these days. In the weaving 
room the man who js patrolling just keeps on patrolling. It is so 



CONCENTRATION OF ECONOMIC POWER 16873 

mechanized that he gets tired from walking; at least, he walks 
probably as much as a policeman on a beat. The only difference is 
the policeman walks in fresh air while he is walking inside a factory. 

Mr. Pike. Sometimes the policeman would be willing to swap, I 
think. 

Mr. RIE^"E. I suppose, sometimes. 

Acting Chairman Williams. Did I understand you to say there 
were 1,250,000 employed? 

Mr, RiEVE. That is right, in all the divisions of the textile industry. 

Acting Chairman Williams. How is that divided, approximately, 
between men and women? 

Mr. RiEVE. I don't have the figures. It would be just a guess as 
far as men and women are concerned. I would say about 50-50. 

Acting Chairman Williams. Has there been a tendency to employ 
one or the other more in the last 10 years? 

Mr. RiEVE. Yes; the tendency has been right along in the direction 
of more women. 

Mr. Pike. What percentage are organized of that 1,250,000? 

Mr. RiEVE. We have, as I stated, 350,000. 

Mr. Pike. And the total amount organized wouldn't be very much 
in excess of that? Would it run 450,000? 

Mr. RiEVE. I wouldn't even claim that. I don't think it necessar- 
ily follows because we have 350,000 workers covered by collective 
bargaining contracts that we claim we have that big a membership ; 
because we act as the sole collective bargaining agency it doesn't 
necessarily follow that all of the people are members of the union. 

Mr. Pike. Would you say it would be more than a quarter and less 
than a half? 

Mr. Rieat:. Oh, it is less than half; I wouldn't claim more than 
a quarter. 

Dr. Anderson. Mr, Rieve, a quarter of the workers of the industry 
are fully covered by agreements? 

Mr. Rieve. Yes; about 350,000 covered by agreements. 

EFTECrr OF unionization on production costs 

Dr. Anderson. Wliat are the possibilities of price competition be- 
tween union and nonunion plants in an industry so keenly com- 
petitive, and where only a quarter of the Avorker^- are covered by 
agreements ? 

Mr. Rieve. I think the possibilities are very good because we are 
not foolish enough, even though we have the shop organized, to make 
exorbitant demands of the employer if his competitors are not organ- 
ized. 

Dr. Anderson. In otlier words, the advantages that the unorgan- 
ized plants have in regard to technological change are not so great 
but that you can compete with them? 

Mr. Rieve. That is right, that is ri^ht. The union shops,' just as 
well as the nonunion shops, are putting in technological improve- 
ments if they have the money to do it. 

Dr. Anderson. How far are technological advance, and the other 
problems of this, rather sick textile industry, related to market ex- 
pansion itself, to increased sale of goods^ 

124401— 4X—pt, 30 44 



16874 CONCENTRATION OF ECONOMIC POWER 

Mr. RiEVE. Well, I don't know. The sale of textiles has been 
mounting for the last few years. Where the limit of it is I don't 
know. I suppose that technological improvements, mill lay-outs, and 
so forth, have had a tendency toward broadening the market. I 
suppose that because of the tendency to sell cheaper, more people 
are buying textiles, but to Avhat extent I cannot say. 

Dr. Anderson. Do you think that is the hope for the solution of 
the problem — a greatly expanded consuming market which will ab- 
sorb the workers not now used? 

Mr. RiEVE. I think thatjs one way of approaching the problem, if 
we devise some means of giving the consumer the purchasing power 
necessary to absorb these goods, but I wouldn't say that that alone 
will solve the whole problem. 

Dr. Anderson. Given present market trends, and the present 
1,250,000 workers in the fidd, is there any prospect that the textile 
industry will absorb the workers not now employed? 

Mr. RiEVE. No, not in my .opinion, unless the European war con- 
tinues and we start to buy textiles in this country. Not under normal 
processes, no. 

Dr. Anderson. Is the problem of child labor still a serious problem 
in the textile field ? 

Mr. RiEVE. Not since the wage-and-hour law passed. The wagc- 
and-hour law has in itself a provision that no children under 16 years 
of age be employed. 

Dr. Anderson. Was there a shift then to children above 16? 

Mr. RiEVE. Yes. 

Dr. Anderson. So that you did accent that problem ? 

Mr. RiEVE. Yes. 

Dr. Anderson. What is the reason for the increased use of these 
youngsters from 16, say, to 20? Is it linked with. technology? 

Mr. RiEVE. No; I would say it was linked with wages more than 
technology. 

Dr. Anderson. But the industry is such that youngsters of those 
ages can perform the necessary operEitions? 

Mr. Rieve. Yes; some operations. Of course, when a new techno- 
logical process comes in, an employer would rather teach youngsters 
that process than to reteach older people, for two reasons. It has 
to be admitted, I think, that a /oung person, never knowing an opera- 
tion, can probably learn pven operation much (juicker than an older 
person who has been trained in another operation, because the older 
person has to be untrained, and the new one does not. Secondly, the 
hope is that after that younger person acquires the necessary skills 
or routines the employer will have a longer period of use out of that 
person than out of an older one. Therefore, in new processes the 
employer tends to^ train new people for these processes rather than 
retain the older ones. 

Mr. Chantland. I thought you answered the chairmah when you 
were talking about the tendency toward unskilled workers, by telling 
him that the technological situation by which a man could supervise 
as many as 100 or more machines let them hire these boys that Dr. 
Anderson was inquiring about in unskilled positions. That is tech- 
nology, isn't it? 

Mr. Rieve. Yes. 



CX)NCENTRATION OP ECONOMIC POWER 1Q875 

Mr. Chantland. Which position do you want to take? I thought 
your answer to Dr. Anderson was that technology had nothing to do 
with hiring these 16- or 20-year-old boys. 

Mr. RiEVE. I don't think that either my answer to the Chair or to 
Mr. Anderson is contradictory. What I said about these weavers 
who control as high as 100 looms is that tl^t is not a changed tech- 
nology. 

Mr. Chantland. Isn't it? 

Mr, RiEVE, No; that is a changed process; they use their experi- 
enced men but fewer of them. They don't have to retrain these 
people. "^ 

Mr. Chantland. You mean that it isn't technology that gives a 
man the. power to supervise so many as against so few ? 

Mr. RiEVE. It is not technology in the sense of some new, radical, 
revolutionary invention that comes in. It is only technology to the 
extent that a separation took place between the skilled operations and 
I he unskilled operations.. 

Mr. Chantland. Apparently we don't agree on where technology' 
begins and leaves off. 

Mr. RiEVE. We may not talk the same language. 

Mr, Chantland. May I ask one more question if I am not inter- 
rupting? You said "customarily he has taken to the only weapon of 
protest that he has — the strike." How can there be 'any reasonable 
probability of improving the position of the laborer by a strike in a 
decreasing laboj' market such as you described ? 

Mr. RiEVE. I did not say that that was the right thing to do. I 
gave a statement of fact, iJiat that is what happened. It wasn't the 
proper way to approach the problem. It did not improve the wel- 
fare of the textile worker. 

Dr. LuBiN. Mr. Rieve, you mentioned something about speed-up, 
and you probably are still very conscious of the terminology that* was 
used in the early 1930's about the load. What has the union done to 
handle that problem? How does the union take care of these ten- 
dencies toward speed-up? 

Mr. Rieve. I don^t know, Dr, Lubin, that I entirely follow your 
question. 

Dr. Lubin. There was a tremendous amount of discussion about 
the load that each worker had to carry in the textile industry in the 
early 1930's. , The matter of fact is that you state on^ of thei reasons 
for the strike in 1934 was that the speed-up system had been put 
in effect as the result of the shortening of hours. 

Mr. Rieve. We are trying to make the worker think a little dif- 
ferent from what he had formerly been thinking. I think to a very 
limited extent we are succeeding. We do not subscribe to the theory 
that as a result of a technological improvement the remaining worker 
necessarily works harder; he may, but it does not necessarily follow 
that he does. We are rather trying to get the worker to forget 
abput this type of terminology and this type of psychology and try 
to think in terms of how he is going to protect the job for the people 
that are being replaced. I think we are succeeding remarkably well 
in that direction. That is about all that has been done in that. 
Wherever we have contractual relations, when a work assignment is 
put in effect, we send our own engineers, our own time-study men, in 



16876 CONCENTRATION OF ECONOMIC POWER 

to find out whether it is a regular speed-up, or whether something 
in the professes is being changed. 

Dr. LuBiN. There is one thing that interested me about your testi- 
mony that raises a question as to whether this is a permanent phe- 
nomenon, or whether it is temporary. After all, the textile industry 
is a very old industry. It is an industry which has been criticized 
very frequently because of the fact that it has been old-fashioned in 
the sense that there have been many, many mills in this country that 
ure still operating with equipment that was installed in the nineties. 
In fact, I think an engineering study made some years ago showed 
a tremendous number of firms with equipment more than 30 years 
old. How far has the competitive situation that has arisen in recent 
years forced these mills to be modernized? Once that modernization 
is completed will that mean that the rate at which displacement takes 
place will tend to fail? 

Mr. RiEVE. I think that the casualties in one form or another in 
these mills that you describe have been terrific lately. I think that 
probably the cotton-textile industry by and large today is moderniz- 
ing itself. There probably are some mills that have this 30-year-old 
equipment, but they probably are very few and far between, because 
the competitive situation would not permit that to continue. 

Mr. Pike. They, in general, have been forced out of business rather 
than modernized ? 

Mr. RiEVE. Well, some have had to put in new capital and modern- 
ize, and others have had to pass out of existence. I would rather say 
that the number that put in new capital is probably less than the 
number that passed out of existence. 

E)r. LuBiN. Does that mean, then, that the rate of change will tend 
to decline because these mills have done most of their modernizing? 

Mr. EiE\^. No ; I wouldn't say so. Dr. Lubin. In the cotton-textile 
industry today the equipment is not so much being modernized as 
the mill is being systematized and more and better fibers are being 
used. Put it this way : When they made silk the weaver operated 
probably 4 or 6 looms; in synthetic yarn the operator is operating 
as high as % ^nd 30 in many instances, partly because of improve- 
ment in the loom, but also in great part because synthetic yarn 
runs better, there are fewer breaks, and so on, than cotton. This 
type of change is more predominant in the cotton-textile industry 
today than the real mechanical changes. 

PROSPECTS FOR INCREASED EMPLOYMENT 

Dr. Anderson. Your industry is particularly subject to it. We 
would like your comment on this subject of ghost towns, to which 
your industry is particularly subject. You say a cotton-textile plant 
is frequently the single industry in a town. What is the prospect of 
ghost towns in the future in your industry? 

Mr. RiEVE. The prospect in the textile industry is an increased 
number of ghost towns. 

Dr. Anderson. Do you have any figures or any indication of what 
that looks like? ,/ 

Mr. RiBVE. Well, I don't have exact figures. The American Woolen 
Co., for example, at one time had about 55 mills scattered throughout 
the country, most of them in very small communities, and now has 



CONCENTRATION OF ECONOMIC POWER 16877 

about 22 or 23, or something like that. They announced last week 
that they were closing up a mill in a small one-mill town in New 
Hampshire. That means that that community is going to be another 
ghost town. The prospects are increasing in that direction. 

Dr. Anderson. Do you, as the union representative, have any sug- 
gestion to make to the committee as to what should be done with 
respect to the social assets of these towns and the prospects for the 
future ? 

Mr. RiEVE. I think that one thing can be done. I believe that, 
first, we will have to adopt a more uniform taxation system in this 
country. When I say taxation I mean in all of its forms. I think 
that any State or any community that indebts itself in order to put 
up buildings and attract industry is robbing something from another • 
community that has those mills. 

Mr. Pike. Do you feel the same way about wage differentials? 

Mr. RiEVE. I certainly do, I certainly do. 

Mr. Pike. Do you still have the problem of a rather different 
form of town, that is the out-and-out company town which was built 
for the company and has been a source of a lot of trouble in your 
industry and some others ? That is not as serious, I take it, as it was. 

Mr. RiEVE. It is not as serious as it used to be. The company town 
is tending to disappear. If the Housing Authority — and they can 
do a very good job in these company towns — would get around there 
and build a few Government houses the company town would dis- 
appear over night. 

Mr. Pike. But you don't have that problem of there being only 
one store in the town? 

Mr. RiEVE. Oh, yes; it is still there, it is still acute, and union 
organizers are still kidnaped and thrown out of towns. It is still 
there, but I am rather mclined to believe that it is not quite as acute 
as it was. It is declining in importance. 

Mr. Pike. That would be my general view. 

Mr. RiEVE. But it is still there. 

Acting Chairman Williams. Are you through with Mr. Rieve? 

Dr. Anderson. Yes, sir. 

Acting Chairman Williams. Thank you very much for your 
appearance. " We have enjoyed your presentation. It is very useful 
to us. 

What have you for this afternoon? 

Dr. Anderson. We have the management side of the same prob- 
lem, Mr. G. H. Conze, president of the Susquehanna Silk Mills. 

Acting Chairman Williams. The committee will recess until 2:30. 

("Whereupon, at 12:45 p. m. the committee recessed until 2 J 30 
p. m. of the same day.) 

AFTERNOON SESSION 

The hearing was resumed at 2 : 40 o'clock, upon the expiration of the 
recess, Mr. Joseph J. O'Connell presiding. 

Dr. Anderson. Mr. Chairman, this morning we had a witness who 
discussed the textile industry from the standpoint of labor. This 
afternoon we are to hear Mr. G. H. Conze, president of the Susque- 
hanna Silk Mills, of New York City, and Miss I. L. Blunt, secretary 



16878 CONCENTRATION OF ECONOMIC POWER 

of the National Federation of Textiles. They are ready to be sworn 
and to testify. 

Acting Chairman O'Connell. Are both. of these people to testify? 

Dr. Anderson. Yes. 

Acting Chairman O'Connell. Do each of you solemnly swear that 
the testimony that you are about to give in this proceeding will be the 
truth, the whole truth, and nothing but the truth, so help you God? 

Mr. CoNzE. I do. 

Miss Blunt. I do. 

TESTIMONY OF G. R. CONZE, PRESIDENT, SUSQUEHANNA SILK 
MILLS, NEW YORK, N. Y., AND MISS I. L. BLUNT, SECRETARY, 
NATIONAL FEDERATION OF TEXTILES, NEW YORK, N. Y. 

Dr. Anderson. Mr. Conze, you are president of the Susquehanna 
Silk Mills? 

Mr. Conze. I am. 

Dr. Anderson, What is the nature of that mill? 

Mr. Conze. It used to be silk weaving ; recently rayon weaving. 

Dr. Anderson. How long have you been identified with the textile 
industry ? 

Mr. Conze. I began 30 years ago. 

Dr. Anderson. In this country? 

Mr. Conze. Yes. 

Dr. Anderson. In that time have your operations extended to other 
than the silk field? 

Mr. Conze. No; only the silk field, and the rayon field later. 

Dr. Anderson. And it is in the rayon and silk field that much of 
the change which we have been discussing has taken place ? 

Mr. Conze. That is correct. 

Dr. Anderson. And you are prepared to discuss what has occurred? 

Mr. Conze. Yes. 

As in many other industries, technological development in the textile 
industry has meant the supplying of its products at lower cost to the 
public, and expansion of the industry's activity for management and 
worker alike. But in considering the effects of such changes on the 
stabilization of employment, and, equally important, the stabilization 
of business investment as the incentive for greater industrial develop- 
ment, we have seen both a bright and dark picture in the last' decade. 
The principal tools used in effecting the change have been the intro- 
duction of so-called man-made fibers and the perfecting of the auto- 
matic machinery that could use those fibers in finer fabrics at lower 
cost of production. These changes have proven a boon to the con- 
suming public in that they have brought within the reach of the modest 
pocketbook fabrics of luxurious appearance and excellent durability. 
They liave also proved a boon to the workers in the new. rayon yarn 
plants and have meant increased employment in the textile machinery 
establishments. But«ome of the long-range benefits are lost sight of 
in concern over the future of mill owners and workers wliosa income 
has been disrupted and whose future working life has been already 
killed or seriously threatened. Prominent in this group are the peoplje 
whose life work was invested or being spent in the plants of the fabriC- 
weaving industry formerly using silk for its raw material. 



CONCENTRATION OF ECONOMIC POWER 



16879 



SHIFr FROM SILK TO RAYON 

Mr. CoNZE. Today, to all intents and purposes, the silk-weaving 
industry no longer exists. The fabric-weaving industry uses only 
a very small percentage of the silk imported into this country, as you 
will see from "Exhibit No. 2628," a chart showing the distribution of 
silk between the two principal consuming industries, weaving and the 
knitting hi hosiery. 

Acting Chairman O'Connell. The exhibit may be received. 

(The chart referred to was marked "Exhibit No. 2628" and appears 
below.) 



1929 
81.3 



Exhibit No. 2628 
[Submitted by the National Federation of Textiles, Inc.] 

DISTRIBUTION OF SILK 

BY TRADES 

{millions of pounds/ 



59.1 


\ 
\ 
\ 

\ 

AVAIIABIE FOR 

WEAVING 
HOSIERY 


1936 
57.8 


^ W'l 


30.8 




1 ""^ ■ ■ . ^'-y 47.3 


X 


15.0 




14.4 




8.9 


38.6 




374 


38.4 


270 


22.2 



V> fCC R*vor» oor^Aftoi 



You see on this chart that in 1929, 81,300,000 pounds of raw silk 
were imported into this country, of which 59,100,000 were used for 
weaving. At that time 22,200,000 pounds were used for hosiery and 
you see how the weaving share has progressively decreased and the 
hosiery share has increased, so that for the year 1939, while the total 
of silk used dropped to 47,300,000, weaving used only 8,900,000, 
hosiery 38,400,000. I might say that for 1940, I am positive the 
weaving will be less than last year. 

It is the latter field, the hosiery field, which today can be vnore 
properly described as the silk industry, and even there a neAv man- 
made filDer, nylon, looms ominously over the figure of silk. 

Because of my long association with silk-weaving mills, I have 
been asked to describe to you, as a matter of interest in considering 



16880 CX)NCENTRATION OF ECONOMIC POWER 

the effects of technological change, what has happened to this group 
of mills which in 1927, according to the census of manufacturers, had 
1,648 establishments employing 127,643 wage earners^ with an annual 
pay roll of $140,054,000. It was located principally m Pennsylvania, 
New Jersey, and in the New England districts. Todaj, the industry 
has changed so in character that the 1937 census combines the figures 
for silk and rayon, and we are only part of a large group making 
rayon fabrics. 

Dr. Anderson. May I interrupt to call the committee's attention 
to the fact that the charts are in large form on the easel. 

Mr. CoNZE, This group comprises now three types of mills: i. 
Former cotton mills which reorganized for rayon weaving. 2. New 
mills organized solely for rayon weaving. 3. Former silk mills which 
adjusted their existing equipment to rayon weaving 

As some indication of what has happened in 10 years, we find 
that the 1937 figures show that the combined establi'shrcients of these 
three groups total only 848, about half the 1927 figure; that the wigtf 
earners are now 116,839, a reduction of 10.5 percent; and the total 
pay rolls are $92,440,000, a reduction of 34 percent. And it shjuld be 
remembered that this latter figure includes substantial increases iii 
wage rates for the lower paid workers following the N. R. A The 
amount of the reduction reflects the limited amount of work pvailable 
for many workers. And it is the workers in the silk mills who repre- 
sent a large part of this part-time or no-time activity. 

From the economic point of view, our problem might be described 
as the difficulty of coordinating the most economical methods of pro- 
duction with the distribution methods most acceptable to all our con- 
suming trades, starting with the retailer. In> the textile industry, the 
maximum efficiency of a loom is a production schedule which will 
bring the fabric to its lowest unit ccst. Such a schedule calls for the 
latest type of automatic looms operating on a continuous basis, that is, 
24 hours a day every workday of the year. The manufacturer who 
wants to make the most of his machinery and give his workers steady 
employment must follow such a schedule. In contrast to this, con- 
sumers and wholesale purchasers of textiles follow a policy of close 
hand-to-mouth buying at most irregular intervals, dictated by seasoi; 
or style changes. This can mean only that any producer of style mer- 
chandise ^nds stability impossible. The necessity of making mer- 
chandise to fit in with these seasonal and style changes is likely tc 
wreak havoc with any plan of the fabric manufacturer for stability 
in operation and employment. 

The group of mills with which I am most familiar is engaged in a , 
life-ana-death struggle to reconcile these two divergent elements. It 
is a struggle shared by labor and management. To make, the circum- 
stances more understandable, consider the background of the so-caJled 
silk industry in the United States. 

Up to the 1860's silk manufacturing was confined to crude experi- 
ments in the making of silk thread, silk hanrtkerchiefs, and so forth, 
but cloth was still an import. But the development in Europe of the 
power loom for weaving silk cloth heralded the beginning of the 
real American-silk industry. The handicap of few skilled workmen 
was overcome. For the teaching of new workers, the industry was 
indebted to a large group of experienced English weavers who emi- 



CONCENTRATION OF ECONOMIC POWER 16881 

grated to America as a result of the closing down of the British 
L=ilk industry. Following a reciprocal trade treaty between Great 
Britain and France, all duties on manufactured silk entering Great 
Britain were removed, and the result crippled the English mills. 
The emigres settled largely in Paterson, N. J., and it was here that 
the first weaving mills were started on a large scale. 

Rapidly the industry grew through the last part of the nineteenth 
century and the first two decades of the twentieth century. Improve- 
ments in some of the preparatory machinery, in the process termed 
"throwing" (an old Anglo-Saxon term meaning to twist), enabled 
the New Jersey weavers to move to new territories where unskilled 
operators could be used at a lower labor cost. The silk-throwing mills 
appeared in many villages and hamlets in the coal-mining regions 
of Pennsylvania to give employment to the women folk of the miners. 
Operation of this machinery provided light work that women could 
do eflficiently. 

That period ^as the prologue for a fabulous period of prosperity, 
and demand for silk fabrics, that followed the World War. Silk be- 
came the everyday dres§ of the average woman. The ready-to-wear 
manufacturing industry began to take hold, with its consumption of 
thousands of pieces of 60 yards each, instead of the few hundred yards 
that the average retail store could handle, "More and more machin- 
ery," was the cry. Every effort was made to speed up the loom action ; 
new plants were built rapidly. Prices for the finished fabrics were 
whatever the manufacturer wanted to ask. A new development took 
place with the advent of crepe-twisting machinery, that is, the twist- 
ing of several single threads of silk into a tight twist to produce an 
effect of creping in the fabrics. This brought with it the development 
of a fabric that must be woven direl^tly from the raw threads, with- 
out previous dyeing. We term such fabrics "piece dyed," meaning the 
fabrics are dyed in the piece rather than in the skein. It was the intro- 
duction of piece-dyed fabrics, or, rather, the weaving of fabrics in the 
"greige" or natural silk thread, that was at first the fortune and then 
the handicap of the industry. Previouslyj silk fabrics were woven 
from dyed yam 6r "skein." Skein-dyed silks cannot be turned out 
hurriedly, and it is a complicated procedure. Piece-dyed fabrics, on 
the contrary, can be turned out quickly and steadily and kept in stock 
until ready (for dyeing into popular colors of the moment. It was 
about this time that many mills began to realize that continuous oper- 
ation of the machines would lower the unit cost of the product, as the 
overhead could be shared by that much more yardage. The result was 
year-by-year increase in production. 

As profits were substantial, because of high demand for silk fabrics 
in this era, there was additional inducement to continue producing at 
d high peak. This hectic period was abetted by the introduction of 
n^.w processes that permitted the, weighting of silk fabrics so that the 
same amount of raw material would go farther in producing a yard of 
fabric. The weighting of silk involves the soaking of the silk thread 
in a solution that, through some characteristic of the silk thread, is 
absorbed into the fiber and can make the thread increase its normal 
size. As raw-material cost in a silk-manufacturing plant is a very 
important factor, the evolution of successful weighting of material 
was another big step in reducing costs and making silk fabrics avail- 



16882 CONCKNTRATION OP^ ECONOMIC POWER 

able to more people of lower incomes. Huge plants were established, 
and there seemed no end to the demand for the merchandise. 

But here and there, doubts were expressed. A group of manufac- 
turers in their trade association, the Silk Association of America, Inc., 
discussed in 1922 the formation of a statistical reporting service on 
production a:nd sales so as to get some idea of the stock on hand. As 
indicative of the times, one of the difficulties in establishing the serv- 
ice was to secure figures from some firms on the amount of their sales. 
It could be expressed only in dollars ; records were not kept of yard- 
ages. The only yardage record was production and, once a year,, in- 
ventory. Sales records were a minor consideration in the industry's 
plg,n of operation except to boast of increased dollar volume. Inven- 
tory control, or the idea of gaiting production to demand, was 
unheard of. 

But in the next 5 years increasing concern was felt about the burden- 
some stocks of fabrics on hand. Idle machinery became more common. 
Competition was being felt from small operators who had bought at 
very low prices looms discarded by the larger manufacturers as new 
models appeared. 

By 1927 appeared a new factor, the rising development of a new 
fiber originally termed "artificial silk," subsequently given the generic 
name "rayon" and destined to do exactly what its inventor, Char- 
donnet, dreamed it would do-^^supplant the natural thread of the silk 
cocoon. And following rayon came another problem, the growth of 
the automatic loom. 

INTRODUCTION Or AUTOMATIC LOOMS 

Automatic looms were being used to a small extent in the silk in- 
dustry. They made it possible to give 6 to 8 looms to a weaver instead 
of the customary 2 and 4 nonautomatic looms. But when the same 
looms were used on rayon, the loom assignment could be doubled." 
The reason is that rayon yarn is made with chemical and mechanical 
precision, which permits more rapid and smoother running than silk. 
The unit cost of a yard of goods was reduced to some extent, but the 
real reduction of costs has been made through the improvement in 
the automatic rayon looms built within the last 10 years. Loom im- 
provement and greater speed, combined with greater perfection of 
rayon yarn in uniformity and strength, has meant an increase of the 
looms per worker from 24 to 36 and more. Nor has loom improve- 
ment reached its peak. In some cases looms manufactured in 1937 
and considered extremely modern are being offered for sale at half 
price by used-machinery dealei-s today. Three or four years from now 
the looms rated today as the last word in weaving ingenuity will be 
as out of date as the nonautomatic looms of yesterday are now. 

A recent case was reported to me of a rayon-weaving mill in New 
England, formerly a cotton mill, whigh today has 320 modern looms 
cared for by 8 weavers, 2 loom fixers, and 2 Dobbin hands, a total of 
12 men for each shift. Ten years ago 320 looms of that time would 
have required at least 40 weavers and 6 loom fixers, a total of 46 men 
for each shift. As significant of the change in the manpower required 
to produce a given amount of merchandise, consider the comparison 



CONCENTRATION OF ECONOMIC POWER 



16883 



of yards produced to wage earners, based on data from the United 
States Census of Manufacturers. 

You see there that, from 1927 on, the output per wofker has more 
than doubled, and I am quite positive that this tendency is going on. 
As the old looms disappear, the output per worker will show a rising 
curve, as it has right along over the last few years. 

(The chart referred to was marked "Exhibit No. 2629" and appears 
below.) 

Exhibit No. 2629 

[Submitted by the National Federation of Textiles, Inc.] 

PRODUCTION OF 

SILK & RAYON WOVEN GOODS 

PER WAGE EARNER JAVERAGE FOR YEAR 



c 



EACH ROIL REPRESENTS 900 YARDS 

6.623 



1.000 




SOUBCC CENSUS or MA^urACTl/BCS 



CHART NO. 2 



Mr. CoNZE. This new textile fiber, the first in all the centuries since 
the discovery of cotton, wool, and silk, the product of man's research 
and ingenuity, has carried on the job begun when silk first became 
the luxury of the multitude, and has far outshone her older cousins. 
Rayon has been termed the "great common denominator" of the tex- 
tile industry, for today it is found in the cotton, silk, and wool mills 
to a greater or lesser degree. It has provided men, w^omen, and chil- 
dren with attractive clothing at the lowest prices ever seen, and has 
supplied luxurious draperies, bedspreads, and other household ar- 
ticles that would have been considered the sign of ostentatious wealth 
a few years ago, at a price within the reach of the most moderate. 

The use of rayon on highly efficient machinery has advanced to 
undreamed-of heights during the past decade. The census figures 
show a clear picture of what has happened. "Exhibit No. 2630" shows 



16884 (X)NCENTRATION OF ECONOMir! POWER 

that in 1929 the combined production of rayon and silk woven goods 
was 742,775,000 yards. In 1939, this had grown to 1,330,000,000. 

(The chart referred to was marked "Exhibit No. 2630" and appears 
below. ) 

Exhibit No. 2630 

[Submitted by the National Federation of Textiles, Inc.] 

PRODUCTION OF WOVEN GOODS 

(thousands of yards) 



( H HAYON AND RAYON MIXED 
( *s» SILK AND SIIK MIXED 



i.2sqooo 



523527 
•WI.46I 115437 

2SUH — "^■''' 





1927 1929 1931 " 1933 1935 . 1937 1939 



scucc cimuft or r-uknurACTuRcs 



Mr. CoNZE. The significant fact is that the 1929 production of 
rayon or rayon-mixed fabrics was 251,115,000 yards and the 1939 
production 1,250,000,000. Silk, on the contrary, showed in 1929 a 
production of 491,661,000 yards and in 1939 only 80,000,000. In the 
case of rayon, production increased in 10 years, 397.8 percent. In the 
case of silk, there was a decrease of 83.7 percent. The production 
record of the two fibers in cloth in shown in "Exhibit No. 2630." T 
am positive that in the current year rayon will increase and silk will 
drop materially. 

The first rayon fabrics were woven in a silk plant in 1914. The silk 
mill was the normal place for the development and use of rayon. By 
the time the National Industrial Recovery Act was enacted, in 1933, 
many of the former silk manufacturers had turned to rayon for all 
or a major part of their production. From the viewpoint of con- 
venience in use, rayon offers many advantages over silk. Silk is the 
natural fiber of the cocoon. It is subject to all the vagaries of any 
natural product. It must be carefully and painstakingly handled if 
the resulting fabric is to pass the critical eye of tlie consumer. All of 
the fiber is purchased abroad either directly or through agents in 
this country, and commitments were usually made for months in ad- 
vance. Constant fluctuation in price of raw material is another of 
the hazards that makes silk manufacturing a precarious business com- 
pared with plants engaged in other fiber processing. Rayon on the 
other hand is most uniform in size, strength, evenness, and so forth. 
Because it is made by a limited number of producers it shows a fair 



CONCENTRATION OF ECONOMIC POWER 



16885 



stability in price. In fact, rayon has shown a price structure typical 
of large industries in this country, like automobiles, where the greater 
the production the lower the cost. To the silk manufacturer, a steady 
supply of raw material at low cost and steady price presented an en- 
tirely new picture of production planning than had been the case in 
silk. 

The next chart will show you the contrast between silk and rayon 
prices over the last 13 years. You find there that silk dropped from 
$5.50 in 1927, touched $1 in 1934, went back to over $4 this winter, 
and has dropped to $2.50 now. 

(The chart referred to was marked "Exhibit No. 2631" and appears 
below.) 

Exhibit No. 2631 

[Submitted by the National Federation of Textiles, Inc.] 

SPOT SILK AND RAYON PRICES 



YEARLY AVERAGES 



J6.00 



J500 



54.00 



53.00 



J200 



n.oo 



1927 1928 1929 1930 I9JI 1932 1933 

Source : Rayon Organon 




▲ ▲ A ▲ ▲ ▲ 

1934 1935 1936 1937 1938 1939 



Chart No. 4 



Acting Chairman O'Connell. I understand you attribute the rela- 
tive stability of price of rayon to the fact that there are few pro- 
ducers in the field, few large units ? 

Mr. CoNZE. Few very large units. 



16886 



CONCENTRATION OF ECONOMIC POWER 



Acting Chairman O'Connell. And in the silk industry you have 
a multitude of ^lall establishments, or have had. 

Mr. CoNZE. Raw silk is a product of the farmer. It is reeled in 
Japan and is in the hands of a multitude of small farmers, and is 
subject to speculation or trading on exchanges in Japan, 

Acting Chairman O'CoNNEix. The instability is to a substantial 
extent in the raw silk. 

Mr. CoNZE. Yes. 

Acting Chairman O'Connell. That is the ravs'-silk price? 

Mr. CoNzE. Yes. 

Mr. Pike. Do you have crop years there? 

Mr. Conze. Exactly. Silk, being the product of the farmer, is 
subject to nature. 

Mr. Pike, There are great ups and downs in the various years 
and difference in the amounts from year to yea^ ? 

Mr. Conze. Yes; different in amount from one year to another. 

Acting Chairman O'Connell. Have you anything sliowing what 
sort of picture the w^oven product would showjn price? Does the 
finished product fluctuate as much as this? 

Mr, Conze, I have something here on that. 

Then you have the rayon yarn which for 7 or 8 years has been 
quite stable, it has fluctuated very little. 

The next chart shows the consumption of these two fibers in mil- 
lions of pounds in the United States. 

Acting Chairman O'Connell. It may be received. 

(The chart referred to was marked "Exhibit No. 2632" and appears 
below.) 

Exhibit No. 2632 
[Submitted by the National Federation of Textiles. Inc.] 

UNITED STATES CONSUMPTION 
RAW SILK AND RAYON YARN 
, WEAVING TnDUSTRY 

r MILLIONS OF pounds) 



285.7 



RAW SILK 

(AVAILA0LI FOI 



I I RAYON YARN 



22&2 



59.1 



Id 



308 



209.4 



215.0 



15.0 



144 



8.9 



1929 



1936 



1937 



1938 



1939 



CHART NO. 5 



CONCENTRATION OF ECONOMIC POWER 16887 

Mr. CoNZE. This shows the annual consumption in the weaving 
industry between silk and rayon in millions of pounds. You see 
the phenomenal growth of rayon used in weaving, from 48,500,000 
pounds in 1929 to 285,700,000 last year, whereas silk dropped from 
59,](fD0,000 to 8,900,000. That is why I say the silk industry no longer 
exists, and if you take the year 1940, this 8.9 will look big in com- 
parison. 

SHIFT OF PRODUCTION AWAY FROM SILK MILLS 

Mr. CoNZE. While the silk industry was transferring its interests to 
rayon, another group had also started — the cotton manufacturer of 
fine goods. He had lost his cotton fabric market to the silk manufac- 
turer following the boom days of gilk after the World War. He now 
started the manufacture of rayon fabrics, with the advantage of gen- 
erally lower wage costs, at the time, than the silk mills. 

In addition to the cotton group new units were formed for rayon 
weaving exclusively. These new firms started operations with new- 
plants, new machinery, and new methods of production and distri- 
bution. 

By 1933,' then, we have the three groups operating on rayon fabric^s. 
By 1940, the bulk of the rayon yarn was being woven by reorganized 
cotton mills or new rayon mills. What about the silk mill ? 

In a few isolated cases, former silk manufacturers have installed 
the same high-speed machinery as the other groups. But mills not 
equipped with machinery in this cla^S, or whose operations are con- 
centrated in certain specialties in which they excel, have found it dif- 
ficult to overcome the already existing general difficulties of bad 
coordination between production and demand, as mentioned pre- 
viously. The silk manufacturer was accustomed to working on high- 
style merchandise. Expensive raw material was used. Distribution 
cost wa3' high due to special services in designing, style obsolescence, 
the smaller volume sold. The fabric price structure, in dyed and fin- 
ished materials, 15 years ago, averaged from $1.25 to $2 a yard. The 
selling price included a sufficient margin of profit to allow for ex- 
pense, ilayon fabric prices, on the other hand, today do not carry 
the same opportunity for meeting overhead costs. Their prices, in the 
dyed and finished material, average from 35 to 65 cents a yard. The 
margin of profit must be figured in pennies. -The silk manufacturer 
has found it very difficult to adj.ust himself to thinking in terms of 
mass production at low unit cost and a small profit per yard. 

Because the ordinary silk loom could make the rayon fabric satis- 
factorily from the quality viewpoint, many silk manufacturers dur- 
ing the last 10 years have made a desperate attempt to compete with 
the better equipped and therefore lower cost mill for the rayon - 
fabric biisiness. In the race with lower and lower costs in the newly 
equipped mill, the silk manufacturer fought a losing battle. 

Incidentally, in addition to the problem of competing with low- 
cost producers, silk men frequently also had on their hands the prob- 
lem of carrjang their fixed investments, and in referrin^^ to those 1 
Would like to express my feeling of discouragement over the attitude 
of many localities in respect to old and new plants. AVhile it hi>s 
been for many years a widely pracl iced policy, I believe tliat offoriii^ 



1688S CONCENTRATION OF ECONOMIC POWER 

tax exemption and other inducements to bring new plants into a 
community is uneconomic from an industry viewpoint. The new 
manufacturer starts off with a big advantage over his longer estab- 
lished competitor, because he usually has newer equipment. If, in 
addition, he is given tax favors, it intensifies the competitive problem 
of the older millj sometimes even in the same towm. (In our industry 
plants are not widely separated over the country and in these days of 
automotive transportation, no village is too far from the nearest 
mill town. We are a relatively concentrated industry geographi- 

I can appreciate the ambitions of smaller communities who out 
of local pride desire to see their industrial life added to, but it is not 
helpful to industry in general. If they must do something to help 
industry, they might consider giving preferential treatment for 
already established plants. This community aid is responsible in 
large part for the migration of plants in our industry, although the 
silk industry has not suffered from that as much as cotton. In recent 
jears the standardization of labor rates by law has been a great help 
in preventing competition through decreased labor costs, so that a 
change of policy on the part of community would help to stabilize 
conditions. 

Today, the 108,308 silk looms recorded by the Census of Manu- 
facturers for the silk industry in 1927 are virtually obsolete. In a 
report issued in 1937 by the Crompton & Knowles Loom Works, 
it was stated that, "only the lopms that are less than 10 years old can 
be classed as modern from the economic standpoint." This same 
report shows that in 1936, 86 percent of the nonautomatic silk and 
rayon looms (owned almost entirely by the silk manufacturing 
industry) were obsolete. Today, it may be said that they all are; 
in fact, nonautomatic looms for rayon are no longer built. 

In commenting on this situation, the report states : 

Automatic loom is replacing rapidly the nonautomatic loom in the silk and 
rayon clasS * * * tlie cessation of nonautomatic loom buying which took 
place in 1931 when the automatic shuttle changing S-3 loom was introduced. 
Increased activity in rayon weaving was accompanied by curtailed operation 
in silk weaving, in which nonautomatic looms predominate. 

In terms of financial records, the silk industry is not a pleasant 
picture. Consider the reports of the Bureau of Internal Revenue on 
profits in the silk and rayon industry for 10 years. 

I turn to the next chart. 

(The chart referred to was marked "Exhibit No. 2633" and appears 
on p. 16889.) 

Mr. CoNZE. It goes only to 1936, but I don't think there would be 
a material change for the last 3 years. You see a constant decline. 

This report gives only the number of establishments. It does not 
give dollars and cents. 

Dr. Anderson. What would the dollar figures look like? 

Mr. CoNZE. It certainly would not change the picture materially. 

Dr. Anderson. Is it true that many corporations which were on 
the verge of bankruptcy at the bottom of the depression have since 
gone bankrupt, and this is, therefore, a clearer picture than we had 
in '33? 

Mr. Conze. Yes; I would say so. 



CONCENTRATION OF ECONOMIC POWER 



16889 



Dr. Anderson. So that even with the selective basis that we now 
have, a very substantial percentage do not show profits. 

Mr. CoNZE. That is quite right. 

Dr. Anderson. Is the liquidation process still going on? 

Mr. Conze. Yes, it is. 

As an example of the mortality rate in the industry, also consider 
a record given to me by our trade association, the National Federa- 
tion of Textiles, Inc. (the significant current name of our old asso- 
ciation, the Silk Association of America, Inc.). In an analysis made 



Exhibit No. 2633 
[Submitted by the National Federation of Textiles, Inc.] 

INCOME REPORTS 
SIIK AND RAYON WEAVING MILLS 

I I CORPORATIONS HEPOHTING NET fNCOME 
I I CORPORATIONS REPORTING NO NET INCOME 



53.72 



46.3% 



49.7^ 



50.3% 



56.1% 



43.9Z 



54.72 



AS.iZ 



U 



39;5% 



6052 



L 



35.1% 



64.92 



I98Z 



80.2/: ^ 67 2^ 



u 



28.2? 



71.8% 



U 



285? 



7l.57o 



3I.3Z 



68.7% 



1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 



SOURCE ' BUREAU OF inTEBflAL BCVEMUE 



in December 1938, it was found that of 131 weaving firms enrolled 
as members of the association in 1924, only 14 years earlier, 84 had 
disappeared completely and of the 47 remaining, 17 were in the hands 
of receivers or had reorganized after bankruptcy proceedings. The 
year 1939 did not make the picture any brighter. 

At the present time, those who have weathered the storm so far 
are those who have been able to install the new machinery necessary 
for efficient production of staple fabrics, in competition with the 
old cotton mills or new rayon firms, or to specialize on particular 
fabrics that are less commonly made. It is an industry considerably 
shrunken in size, both in machinery owned and in the number em- 

124491 — 41 — pt. 30 45 



16890 CONCENTRATION OF ECONOMIC POWER 

ployed. Plants have been sold or written off for a nominal value. 
The number of establishments has decreased '-from 1,648 in 1927 to 
848 in 1937. Value of products has dropped from $750,000,000 in 
1927 to $405,000,000 in 1937, and the 1937 figure includes all rayon, 
not only that in silk mills. Former silk workers have found their 
way into other fields, and it may be that the future of the industry 
will follow along the lines described by Dr. Bell of Brookings Insti- 
tution. During his testimony earlier in these hearings. Dr. Kreps 
quoted Dr. Bell as saying that when "output of workers exceeds the 
expansion of productive capacity, new employment is created, and a 
prosperous condition results which brings mutual benefits to all three 
major divisions of industry — wage earners, salaried workers, and 
investors." 

REDUCTION IN SILK AND RATON P':{ICES 

Mr. CoNZE. Certainly the industry is following his recommenda- 
tion that consumers be given the benefit of any saving in lower cost 
of production, through the supplying of better merchandise at lower 
price. The consuming public today is getting excellent value for 
very little money in the purchase of fine dress fabrics. And the 

8 reduction per worker is vastly increased as was shown in "Exhibit 
o. 2629," giving the ratio between the number of wage earners and 
the yardage produced from 1927 to 1939. 

Acting Chairman O'Connell. May I interrupt? Some general 
picture of what has happened to prices can be obtained by comparing 
the total production of woven goods, which I think has more than 
doubled between 1927 and 1939, although you have just indicated the 
value of the product in comparable years is not much more than 
half. 

Mr. CoNzE. That is why I gave you a price range. Ten years ago 
the average price, wholesale, ranged from $1.25 to $2, and today it 
runs from 35 to 60 cents. It is very diflScult to give you an exact 
comparison, because we are dealing with styles, and what was fash- 
ionable 10 years ago is no longer fashionable today. I can give you 
a price range, and it is, at wholesale, about one-third of what it was 
10 years ago. 

Using a fiber-like rayon, that is stable in price, easy to secure, uni- 
form in quality, on looms that can be operated for less cost at higher 
eflficiency, points favorably to the possibilities of better planning 
and steadier operations in the future for those who can survive. 
With these two factors must also be considered the reduced risk in 
manufacturing operations caused by the fact that the raw material 
is much lower in price and that the improvement of rayon yarn pro- 
duction is eliminating more and more of the auxiliary machinery we 
needed for silk; moreover, the heavier nature of the rayon yam 
means that it takes less threads per inch of fabric to achieve a yard 
of merchandise. For example, new high-speed warpers, the machines 
that prepare the lengthwise thread for the loom, have eliminated 
many of the workers in that department, formerly one of the most 
highly skilUd operations. Today warps can be woven in much longer 
length, reducing the handling in the loom and loom delays. . The 
longer warp ties up more yarn in the preparatory stages of weaving, 



CONCENTRATION OF ECONOMIC POWER 16891 

but with the reduced cost of our raw material that is not a serious 
objection. It has been estimated that the new automatic auxiliary 
machinery has reduced the help in these departments by about two- 
thirds. Today 3,000-yard warps are not uncommon where 300 yards 
was about the limit 10 years ago. 

One big problem still remains, the buying habits of our consuming 
groups. The average worker wants steady employment, but as fai 
as textiles are concerned, his buying habits are quite to the contrary. 
And because of his buying habits, his immediate suppliers, the 
retailers, follow an irregular, at times erratic, policy of demand for 
specific fabrics and garments. The garment maker in turn makes 
equally erratic demands for delivery of needed material. He follows 
closely the demands of the retailer for seasonable and style merchan- 
dise. As long as he does, he is unable to sustain any stability in 
operation, since he cannot accumulate stock. As a result, his de- 
mands upon the fabric manufacturer are for immediate delivery, 
frequently for fabrics or colors not being made at the moment. Not 
uncommonly, by the time the fabric he demands is woven and ready 
for delivery he is no longer as eager for it, or rather his customers 
are not. The result is too often a sacrificing sale on the part of the 
mill man of merchandise which is still as desirable in quality as it 
was before, but which a style change makes a drug on the market. 
The garment manufacturer, in his predicament, is helped somewhat 
by the employment situation in his industry. It is the custom to take 
on and lay off workers as they are needed, often without any pre- 
vious notice, at the end of the day's work. Fortunately or unfor- 
tunately, the industry is so concentrated in New York City that work- 
ers are available immediately. On the other hand, the fabric manu- 
facturer finds it very difficult, if not impossible, to operate on such 
a basis. He must keep his workers in the mill if he is to maintain 
any kind of standard of workmanship, and does the best he can to 
guess what the dress trade will want. The result, however, is not 
helpful in maintaining a balance between production and demand and 
a stable price level. 

Remedies for the situation are not easily defined. There has, for a 
long period, been a strong feeling among a large group of manu- 
facturers that the elimination of the so-called night shift, or the 
third shift, would not only be a mark of economic improvement but 
constructive social progress as well, from the viewpoint of the 
workers in the mills. From the economic viewpoint, the supporters 
of this plan believe that what the industry needs is more stability and 
regularity of production. With the amount of equipment avail- 
able for use, such regularity has a better chance both from the inter- 
ests of betterplanning by the management and steadier employment 
for the worker, if production is based on two shifts. From the social 
or health point of view, both management and labor groups believe 
that the worker on the third shift suffers both mentally and phys- 
ically, and without any real necessity, if real demand for that 
production is considered. Fuxthermore, limitation of operations 
to two shifts will mean more rapid installation o* new machinery. 
More machinery will be needed in the 2 shifts to attain the same 
production as 3 shifts of a smaller number of looms. The sup- 
porters of continuous operation contend, on the other hand, that if 
free enterprise and free competition for the public market are to be 



16892 CONCENTRATION OF ECONOMIC POWER 

maintained, then whatever system of manufacturing brings the low- 
est cost to the public is the most desirable. It has been demonstrated 
that continuous operation of the newest types of automatic machinery 
is the most economical method of producing fabrics, and the prices 
at which the public buys today are proof that the resulting saving 
is being passed on to the consumer. Furthermore, in direct connec- 
tion with our own industry, the advocates of third-shift operation 
point out that in a style industry, the answer to maintaining bal- 
ance between production and demand is rapid production keeping 
up, not trying to catch up, with style cycle requirements. By keep- 
ing up, a mill can meet the demand while it exists and promptly start 
in With new demand when the style changes. The plant with slower 
rate of production frequently finds that by the time they are ready 
to deliver goods for which a style demand is apparent at the begin- 
ning of the production schedule, the merchandise is no longer wanted, 
and it is obsolete stock. 

There are advocates of both policies, with no indication that their 
divergent views can be reconciled. At the present time, much seems 
to depend on whether the machinery owned by the proponent of 
either side, is of the new or old type. 

PROSPECTS OF CONTINUED MECHANIZATION 

Mr. Co^zE. On the basis of the 10 years past, however, both man- 
agement and labor must look* forward to continued mechanization 
of tiic industry. The tendency is definitely toward reduction in the 
number of wage earners necessary to turn out a given quantity 
of production. This will go on more and more as the old machinery 
is replaced. It will become more rapidly true if business conditions 
improve and there is new money available for the purchase of that 
macliinerv. Maragement will have the problem of finding a market 
tt) absorb the production of more and more efficient machines. Labor 
must look forward to finding new employment either in new proc- 
esses in textiles or elsewhere. The use of man made fibers, with their 
constantly decreased cost, to the exclusion of the natural fibers of 
silk, cotton, and wool will mean more merchandise at lower prices 
to the public at large, b.it less work for those accustomed to gain 
their livelihod in our mill. Indeed, one of the prominent silk manu- 
facturers, when asked what he saw in the future for ou/ industry, 
said that at the rate changes had taken place in the last 10 years, 
he did not consider improbable a future production of fabrics from 
man-made fibers that would begin with the raw material of the 
fiber and continue through highly efficient madiinery through to the 
loom weaving the finished fabric, all with a modicum of human 
labor.- The period of (ti"ansition lis even more diffixiult. in some 
respects for the man who has built up a t.isiness than for the worker, 
whose investment is his labor only. Progress cannot be stepped, but 
whether the hardships of change can be lightened, I do not know. 

Technology or no technology, what the average American >vants 
is an opportunity to secure a fair income. If he is a +extiie manu- 
facturer he wanti to operate a plant that will produce fabrics with 
a fair profit and prov'de steady employment for the workers for 
whom he is responsible, s If he is a textile worker I think he wants 
to feel that he can find einployment in a weil-eq ripped mill that will 



CONCENTRATION OF ECONOMIC POWER 16893 

give him an opportunity to show what he can do, and to earn a wage 
that is not only fair but relatively dependable. That has been pos- 
sible during the past 10 years only to a limited extent, and the 
period in tlie meantime between old and new developments is not 
easy for either employer or employee. The reasons for the difficulty 
are complex, it is true, but what some of the difficulties are I have 
tried to outline to you in this history of the technological problems 
of the silk industry. 

Since the textile industry in general was discussed here this morn- 
ing, I want to say I am only competent to talk about the silk and 
rayon industry and not about cotton, wool, or rayon yarns, or the 
carpet industry. 

Dr. Anderson. I notice you have some samples of materials there, 
and I wonder if you would explain to us what, precisely, is the dif- 
ference between rayon and silk, and why rayon has moved into the 
field so rapidly. 

Mr. CoNZE. I brought these samples along to show you that it is 
very difficult for the layman to see the difference between silk and 
rayon. 

Here, for instance, is a silk cloth that sold for around $2 10 years 
ago. They are almost relics, some of them. One is a weighted silk 
and the other is pure silk. 

Dr. Anderson. Weighted with what? 

Mr. CoNZE. A chemical composition of tin tetrachlonde. 

Mr. Pike. Would these pieces be very much the same except for 
the weighting? 

Mr. CoNZE. The weighting makes it very much heavier and also 
makes it relatively cheaper. 

Mr. Pike. And it wears oat a little faster? 

Mr. CoNZE. No ; it wears^erf ectly all right. 

Here you have an all-silk material which played a very important 
role years ago as a printed fabric, which also sold on its heyday 
around $1.75. 

Dr. Anderson. And how long ago was that? 

Mr. CoNZE. Twelve years ago. 

Dr. Anderson. You paid $1.75 a yard for that silk ? 

Mr. CoNzE. Easily, wholesale. The public pays 50 percent more. 
The retailer would have a 50 percent mark-up over these prices, 
which are wholesal'^ prices. 

You have the relics of the past there. Now we are talking of 
what is going on today. This blue one is around 65 cents. You 
have two prints, one silk and one rayon, and I am quite sure that 
the rayon one today is just as satisfactory to the public as the other 
one, which was silk. 

That is why rayon fabrics have taken such a hold; the public 
could not see any difference in them. 

Mr. Pike. What is the practical difference to the wjarer, Mr. 
Conze? 

Mr. CoNZE. Jio difference. 

Mr. Pike. That's the trouble. 

Mr. CoNzE. In fact, I don't want to take sides between silk and 
rayon, but I am inclined to believe that rayon wears better than silk. 

Dr. Anderson. What is rayon, really? 



16894 CONCENTRATION OF ECONOMIC POWER 

Mr. CoNzE. Degenerated cellulose. 

Mr. Pike. Is this an acetate or viscose rayon ? 
■ Mr. CoNzE. That is viscose. I have an acetate here, too. 

Here again, for comparison, are a piece of acetate rayon and one 
of pure silk, used for the same purpose. They are both used for 
lining purposes, and the price of the silk is at. least double that of 
the acetate. 

Dr. Anderson. How long was it after rayon was invented before 
it became commercially practicable? 

Mr. CoNZE. I don't know when Mr. Chardonnet made his inven- 
tion, but when I started in business it was quite on its way. I think 
it was before 1900, in the late eighties if I am not mistaken. 

Dr. Anderson. It was invented in the late eighties, and. became 
commercially used, I suppose, early in the century. 

Mr. CoNzE. Yes ; 1909 or '10. 

Dr. Anderson. And about how long was it before it began to 
compete successfully with silk? 

Mr. CoNZE. I would say from 1930 on it became a serious com- 
petitior. , 

Mr. Pike. They had to get their yarn sizes down. 

Mr. CoNZE. That is a development of the last few years, to get 
fine sizes. I think I have a chart here from 1929- on ; 1929 was still 
a big silk-consuming year. 

Acting Chairman O'Conneix. Kelatively, rayon was about half the 
production of silk in 1929. 

Mr. CoNZE. The last 10 years have really seen ohe greatest change. 

Dr.. Anderson. It took, then, about 15 or 20 years to move it into 
a position where it supplanted silk? Why was the time so long? 
Was there something wrong in the fabric itself, or did you have to 
ove^'come consumer prejudice? Wliat was it? 

Mr. Conze. No; I think the . perfection which rayon has attained 
during the l^st 10 years is due to improvement in the y.^rn itself. 
A rayon thread of then and today don-t compare at all, particularly 
from a millman's viewpoint. A rayon thread of 10 years ago 
wouldn't run, and one of today is perfect. 

Mr. Pike. For the wearer, too, the early rayon fabrics, when they 
got wet, gained a lot of weight and wouldn't hold their shape. 

FUTURE OF fiber INDUSTRY 

Mr. CoNZE. Tnat is all a matter of the past. Kayon is an article 
which gives perfect wearing satisfaction. 

Dr. Anderson. You hinted at the possibility of new fibers and 
resulting new fabrics. Did , you have anything in mind when you 
did that? 

Mr. CoNzE. At the present time there has been much publicity given 
to nylon. Nylon is going to be used first of ^11 in hosiery, but that 
doesn't mean at all that either nylon or similar projects will not 
revolutionize the rayon products. 

Mr. Pike. Has it been put on the loom at all ? 

Mr. CoNZE. It is relatively expensive and does not give any ad 
vantage over the viscose or acetate yarns. 

Another thing, I think the viscose and acetate yams will make 
further progress. In fact,! think the Celanese Corporation, in" its 



CONCENTRATION OF ECONOMIC POWER 16895 

annual report only a few weeks ago, spoke of having a yam which 
was twice the strength of their normal yarn. What that is going to 
mean in the fabric market in the future is very, hard for anybody 
to see. 

Mr. Pike. We haven't brought out any of these casein products 
in this country, the Italian wool substitutes ? 

Mr. CoNZE. They would go more into spun rayon. I have not 
touched on the spun rayon. I think those products would go into 
spun rayon, wool spun, and mixtures of wool and cotton. 

Dr. Anderson. Do you think it would take a new fiber as long 
to move in and capture the market, as it did rayon ? 

Mr. CoNZE. No; I think it would go faster this time. 

Dr. Anderson. Ami what do you think would be the effect upon 
the technology of the industry and its labor force? 

Mr. Conze. I don't want to prophesy. If you had asked me 10 
years ago what rayon would do to the silk industry or to those that 
were making rayon, I don't think anybody could have foretold what 
happened. So I don't want to prophesy what is going to come be- 
cause I know that 10 years ago iTo one could have foreseen the tre- 
mendous change that all of us have witnessed. 

Dr. Anderson. That leads to a question of great importance. You 
as a silk manufacturer 10 years ago did not ioresee this possibility ? 

Mr. Conze. No. 

Dr. Anderson, Ten years ago you had a heavy investment in silk 
mills? 

Mr. Conze. That is right. 

Dr. Anderson. What occurred ? How did you meet this changing, 
technology in fiber? 

Mr. Conze. As I said in my brief, the machinery which manufac- 
tured silk could also manufacture rayon, so we could' just put rayon 
on our looms and manufacture as we did before. But the new rayon 
machinery that was developed beat the old silk equipment, so that 
today it is totally obsolete. 

Dr. Anderson. In other words, you had to meet a new machinery 
that had been developed. 

Mr. Conze. We had to do two things — meet a new machine and a. 
new material. The new material we could have coped with ; in fact, 
we did, but the new machine was so superior to what we had, because 
it has been adapted to the new fiber, that the silk loom and all its 
equipment is obsolete. 

Dr. Anderson. What happens when a manufacturer like yourself 
must meet such a problem? 

Mr. Conze. You must either completely mechanize your mill or 
concentrate on specialties, as my concern has done. 

Dr. Anderson. There are two outs, then, for you — go into special- 
ties or meet the competition in the same field. 

Mr. Conze. Or a third : fold up. 

Dr. Anderson. And that third has been pretty generally practiced, 
has it not? 

Mr. Conze. To a great extent ; a very great extent. 

Dr. Ander on. When you amortize your machinery, you men- 
tioned in here tl>at you would have to cover the cost within a very 
brief period of time. Do you anticipate such drastic changes as 
have occurred, and do yoii amortize over a brief period of time ? 



16896 CONCENTRATION OF ECONOMIC POWER 

Mr. CoNZE. I don't think anybody expected any such developments 
5 or 6 years ago. The latest machinery, which is so far superior to 
what existed before, has, overnight, made obsolete a lot of machinery 
which was fairly good 4 or 5 years ago. 

Dr. Anderson. So there is no way to amortize that? 

Mr. CoNZE. No. 

Dr. Anderson. Is that the condition of the industry now, or are 
you amortizing your new machinery over a brief period o. time? 

Mr. CoNZE. I would say that it is individual. Individual concerns 
have to use their own judgment. 

Dr. Anderson. But the factor of machinery is the outstanding factor 
in this change? 

Mr. CoNZE. It is new machinery for a new product. If you had 
built this same machinery for the rayon of 10 years ago it would not 
have worked. 

Mr. Pike. It wouldn't work on silk, either then or now? 

Mr. CoNZE. No ; it is only adaptable to rayon, but the rayon of 10 
years ago wouldn't work on tbe present machinery. Kayon has in- 
creased so much in evenness and elasticity and strength that these 
developments have become possible. 

Dr. Anderson. In your own plar , what was the effect upon labor 
of the change-over as you changed irom silk to rayon? 

Mr. Conze. In our concern we had a great number of plants, and we 
closed a great number. The ones in which we were running a staple 
fabric we sold. 

Dr. Anderson. And dismissed the workers ? 

Mr. Conze. We h" i plants distributed all over Pennsylvania and 
closed a good many o* them, keeping only the specialized plants. 

Dr. Anderson. Di it generally happen that where the change-over 
occurred workers we 5 dismissed ? 

Mr. Conze. Eithei hey put in new machinery or closed up. 

Mr. Pike. Were m t of these mills in towns where there was some 
other primary employment of labor, such as in coal towns ? They were 
in a great measure auxiliary to some other industry ? 

Mr. Conze. That is correct. As was mentioned this morning, I 
think, there are very few so-called ghost towns in the silk and rayon 
industry. 

Mr. Pike. At least not due to that. 

Mr. Conze. Not due to that; no. 

labor displacement in silk mills 

Acting Chairman O'Connell. From your figures I notice that from 
1927 to 1937 there is a reduction in the wage earners in these three 
groups of mills of about 10.5 percent, so that is only a rough indication 
of the amount of displacement of labor. 

Mr. Conze. As I said, this reduction of 10 percent includes the two 
new groups of mills, the cotton mills that went into rayon and the new 
mills. If you refer to silk alone, for which there are no statistics avail- 
able, I think you will find the old silk industry has dismissed 70 or 80 
percent of its labor. 

Acting Chairman O'Connell. What has happened to those men? 
Would tney be skilled in working in rayon ? 



CONCENTRATION OF ECONOMIC POWER 16897 

Mr. CoNZE. Oh, yes ; but these new rayon groups have grown up by 
themselves, either cotton mills going into rayon or new rayon estab- 
lishments in the South. 

Acting Chairman O'Connell. But a man skilled in the old work^ 

]V|,r. CoNZE (interposing). Could go into rayon. 

Acting Chairman O'Connell. There would be no retraining neces- 



sary 



Mr. CoNZE. No. 

Mr. Pike. He would have to move to a new locality, however. 

Mr. CoNZE. He would have to move to a new locality, which many 
people have done. 

Mr. Maginnis. Mr. Conze, w^hat has been done in the silk mills 
around Paterson ? 

Mr. CoNZE. I think they are closed up. 

Mr. Maginnis. They are just closed, are they ? 

Mr. CoNZE. At the present time Paterson, I understand, has quite a 
boom on account of the aviation industry. 

Mr. Maginnis. They didn't change over to rayon at all ? 

Mr. CoNZE. Very little, because rayon requires a lot of capital, and 
most Paterson mills were small concerns who could not buy n>jw equip- 
ment. 

Mr. Maginnis. I was interested because several years ago when I was 
practicing law in New York I had some business dealings with the 
mills over there, and I know there were some large silk mills all through 
Paterson. 

Mr. CoNZE.'The largest ones had disappeared by 1930. In the last 
10 years the small ones, whatever were left, disappeared. 

Mr. Maginnis. United was still operating at that time. 

Mr. Conze. That is a dyeing concern. 1 was speaking of weaving. 
Since United was a leader in weighting they dropped out when weight- 
ing dropped out. They are operating on a reduced scale now. 

Dr. Anderson. The introduction of this new fiber placed the silk 
manufacturer directly in competition not only with itself, but with 
other elements in the textile industry with which he didn't compete 
before ? 

Mr. Conze. That is correct. 

Dr. Anderson. In other words, it intensified competition ? 

Mr. Conze. Veflry much so. 

Dr. Anderson. What do you feel is the final solution ? Is it desir- 
able to unify the industry into a few larger units, or is it best to keep 
it as it is now, broken up into small competing unit? 

Mr. Conze. I don't thmk it has a tendency to consolidate itself into 
a few big units. 

Dr. Anderson. There is no such tendency ? 

Mr. Conze. While there are a few big units, they have not been ac- 
complished by consolidation. 

Dr. Anderson. Mergers do not seem to be the way to solve this 
problem? 

Mr. Conze. The textile industry is an industry of individual initia- 
tive and individual management. 

Dr. Anderson. When you have to meet this new competition with 
installation of new machinery, what happens to the capitalization of 
your plant? Do you go into the market for money? 



16898 OONGENTRATION OF ECONOMIC POWER 

Mr. CoNzE. If yoii can get it. You have- to procure it. Either you 
have it or you have to find it. 

Dr. Anderson. Is the industry in such a condition that you can go 
into the market? 

Mr. CoNZE. The survivors of the old silk industry, hardly. The 
new ones in the market got money for an entirely new enterprise. 
People preferred to go into an entirely new venture instead of financing 
a new project in an old one. 

Mr. Pike. This new material, I think I saw a picture of that in Life 
a few weeks ago. ■ 

Dr. Anderson. You spoke of limiting production. There seem 
to be at least two schools of thought, one in which textile operators 
hoped to make their way successfully by limitmg the amount of prod- 
uct and the other in which they hoped to make their way successfully 
by expanding and increasing production as much as the traffic would 
bear. 

Mr. CoNZE. There is no question of that. 
Dr. Anderson. Which school do you hold to? 
Mr. Conze. Since I don't have the new machinery, I am of the 
school that likes the 2 shifts. The fellow who owns older machinery 
likes 2 shifts and the fellow who has the latest machinery like the 
3 shifts. It is quite obvious. 

Dr. Anderson. In other words, it is self -protection ? 
Mr. CoNZE. I think so. 

Dr. Anderson. Would you care to comment on the effectiveness, in 
connection with technological unemployment, of dismissal wages 
and technological clauses in labor contracts with labor ? 

Mr. CoNZE. Such procedure may be feasible in part of the industry. 
I particularly have in mind the rayon yarn producer, because I 
understand that is where these contracts have been made. First, 
•the concerns that write such contracts must have the money to pay 
the dismissal wages. Second, if relatively few competitors are in- 
volved and they all do the same thing, it doesn't matter. In the case 
of the rayon varn producer, as I said before, there are a relatively 
few big concerns involved so that it might be feasible there. It is 
certainly utterly unfeasible when it comes to the textile industry at 
large, because you deal with thoL .sands of concerns. 

Acting Chairman O'Conneix. As a competitive proposition ? 
Mr. CoNZE. The competitive proposition woulcTmake it impossible. 
Acting Chairman O'Connell. If you don't do it, it puts those 
who do it at an entirely competitive disadvantage ? 
Mr. CoNZE. It increases their cost. 

Mt. Pike. That would also hit pretty hard the company which 
went into quick style changes where you must stop on very short 
notice. 

Mr. CoNZE. That is right. 

Dr. Anderson. What, if any, effect has this change-over from silk 
to rayon had upon international trade with the country concerned? 
Mr. CuNZE. Well, it happened to coincide with a very substantial 
increase in silk consumption by the hosiery industry. If that. had 
not been the case, undoubtedly the Japanese trade would have suf- 
fered materially, but as "Exhibit No. 2619" shows, if you compare 
1929, an exceptionally good year, with 1936, it is only a drop from 
57,000,000 pounds to 47,000,000 pounds. That is not such a tre- 



CONCENTRATION OF ECONOMIC POWER 16899 

mendous figure, but if the silk had been limited to weaving only, 
that would have been a very substantial figure. 

Mr. Pike: Isn't it true that during this same period Japan has 
expanded its rayon manufacture so it is supposed to be the largest 
in the world? 

Mr. CoNZE. If I am not mistaken Japan is the biggest producer 
of rayon. 

Mr. Pike. I think so. 

Dr. Anderson. Is that material competing with your product in 
this country? 

Mr. CoNZE. Once in a while, very little. 

Acting Chairman O'Connell.. Rayon products from Japan? 

Mr. Conze. Rayon yarn and rayon products. 

Acting Chairman O'Connell. It does not represent effective com- 
petition? 

Mr. Conze. The importation of rayon yarns is very small. 

Dr. Anderson. I have no further questions. 

Acting Chairman O'Connell. Thank you very much, Mr. Conze. 

(The witness, Mr. Conze, was excused.) 

Dr. Anderson. Mr. Byrl Whitney is here from the Brotherhood of 
Railroad Trainmen, and he is speaking as the representative of Mr. 
A. F. Whitney, president of the Brotherhood of Railroad Trainmen, 
Cleveland, Ohio. Mr. Whitney has a prepared statement, which is 
an important document, and should be included in the section on 
American railways. 

Acting Chairman O'Connell. Do you solemnly swear that the tes- 
timony you are about to give in this proceeding will be the truth, 
the whole truth, and nothing but the truth, so help you God? 

TESTIMONY OF BYRL WHITNEY, BROTHERHOOD OF RAILROAD 
TRAINMEN, CLEVELAND, OHIO 

' Dr. Anderson. Wliat is your position? 

Mr. Whitney. Byrl A. Whitney is my name, director of education 
and research of the Brotherhood of Railroad Trainmen, Cleveland, 
Ohio. 

Dr. Anderson. You are speaking now for Mr. A. F. Whitney, 
president of the Brotherhood? 

Mr. Whitney. That is right. 

If it is agreeable with the committee, in view of the lateness of the 
hour, instead of readijlg this str.tement, which contains a lot of 
statistics^ some of which you may be familiar with, I will just extend 
it into the record and higiilight it in a few words. 

Acting Chairman O'Connell. It will go in the record. 

Mr. Whitney. The Brotherhood of Railroad Trainmen, an or- 
ganization representing approximately 145,000 members employed in 
railroad-train and yard service and on bus lines in the United States, , 
Canada, and Newfoundland, is keenly interested in the investigations 
and hearings sponsored by the Temporary National Economic Com- 
mittee. We have long hoped that out of the great store of informa- 
tion amassed by various Government agencies, concerning the Ameri- 
can economy, there would come some practical conclusions pointing 
, the road toward the elimination of the Nation's No. 1 problem: 
unemployment. 



16900 CX)NCENTRATION OF ECONOMIC POWER 

Until the current inquiry, little had been done to show us a way 
out of our dilemma. There appears to be no end to the capacity of 
Congress to appoint investigating committees, but research cannot 
go on forever. It is not an end in itself. Moreover, there is a> limit 
to the patience of the American people, particularly the jobless in- 
dustrial workers, the migratory farm workers^ the youth, and other 
exploited sections of our population, who desire, before all else, an 
immediate, practical, and effective solution to the problem of unem- 
ployment. 

It is a sad commentary on our civilization that the forgotten man 
of the hour is the job hunter. Such injusticx should stir the heart of 
every man of decency and of good will. Cojnmon sense should dic- 
tate the need of restoring opportunity to our citizenry and of giving 
everyone his rightful niche in society. 

I am happy to say that the published reports of tlie hearings before 
this committee reveal that at last a serious and intelligent effort is 
being made to understand our economic problems with a view to cor- 
recting the^ evils and abuses that are manifest. I am particularly 
pleased that the T. N. E. C. has seen fit to project its studies into the 
railroad industry field, one of the most important branches of our 
national economy, and I appreciate the opportunity that has been 
afforded me to enter into the discussion on technology and unem- 
ployment in the 'railroad industry. 

As you know, the railroad .'industry is the most statisticized indus- 
try in the country. I am sure that your committee has had access to 
the reports of the Interstate Commerce Commission and of the Bureau 
of Labor Statistics of the United States Department of Labor; there- 
fore, I do not think it necessary to consume time by presenting all 
the statistics necessary to an understanding of the railroad industry. 
It will suffice if, in touching upon various phases of the topic under 
discussion, I cite merely pertinent data to illustrate my points. 

ElVIPLOTMENT AND PAY KOl.LS 

Mr. Whitney. For the railroad worker, the depression began long 
before the 1929 debacle. Like the farmer rrsilroad labor suffered 
immediately following the World War. And now, after two decades, 
the railroad industrv has been closed to more than a million men, 
and the pay roll has been cut l)y almost $2,000,000,000. Truly a 
one-two knock-out punch ! 

The average number of workers employed by class 1 carriers in 1920 
(excluding switching and terminal companies) was 2,022,832. Be- 
tween 1920 and 1929, employment declined by 17.9 percent. In 1933, 
at the depth of the depression, the number was down to 971,196, or 
48 percent of the 1920 figure. By 1937 employment on class I railroads 
had recovered to 1,114,663, but in 1938 it" dropped to 939,171, the 
lowest point reached since the turn of the century. Estimates for 
1939 show that employment rose last year to 987,943. 

The extent to which railroad labor has suffered for lack of jobs is 
further revealed through a comparison of the index of employment 
in manufacturing industries with ii similar index for railroad employ- 
ment. This is illustrated by this table which I offer for the record. 

(The table referred to was marked "Exhibit No. 2634" and is 
included in the appendix on p. 17433.) 



CONCENTRATION OF ECONOMIC POWER 16901 

Mr. Whitney. Between 1933 and 1937 employment in manufactur- 
ing industries had recovered 44.1 percent, whereas rail employment 
increased but 14.7 percent. By 1937 factory employment was 5.8 
percent above the 1923-25 average, but rail employment was 37.6 
percent below the 1923-25 average. Factory employment has shown 
a tendency to approximate the 1923-25 levels, but railroad employment 
lags far behind. Of course, we must not overlook the fact that our 
economy as a whole has failed to provide employment for the millions 
of new workers who have since entered the labor market. Current 
estimates of total unemployment cluster about the 10,000,000 mark. 

There are certain unchallengeable facts with regard to the inci- 
dence of railroad unemployment. Railroad workers ordinarily have 
difficulty in finding employment in other industries, because the 
skills which they develop in their chosen occupations are not trans- 
ferable. In times of depression, tliese difficulties are multiplied. 

The unemployment of railroad workers has been the subject of 
investigation by the United States Department of Labor and, more 
recently, by the National Research Project of the W. P. A. The 
latter study found that, because of the almost universal application 
of the principle of seniority, for which labor has fought for so many 
years and succeeded in incorporating in contracts with the carriers, 
the unemployment which set in after 1923, and which was intensified 
after 1929, affected the younger workers much more, and more 
immediately, than the older workers. The investigation further 
revealed that unemployment resulting from permanent separation*! 
was supplemented to quite a large degi-ee by short-period unemplo; 
ment. 

As the depression deepened in the years 1930 to 1932, furloughs increased 
in number and began to bear heavily on the longer-service employees. The rate 
of furlough among employees with 15 to 20 years of service reached nv annual 
average of 9.8 percent for the 3-year period 1930-32, while even among em- 
ployees with 30 or more years of service an annual average of 3.0 percent 
were furloughed during this period.' 

The National Research Project also reported that the longer the attachment 
to the industry, the more difficult it appeared to be to find work outside the 
industry. 

The Department of Labor study which has been referred to (Carter 
Goodrich, Earnings and Standards of Living of ipOO Railway Em- 
ployees Dturing the Depression (U. S. Department of Labor, May 22^ 
1934) has been summarized by the Brotherhood of Railroad Train- 
men in a book entitled Main Street — Not Wall Street^ published in 
1938. I shall take the liberty of quoting from this summary, because 
it will serve to remind us of the human tragedies which befall 
the jobless. 

This study encompassed 1,000 families of railway men in 18 localities from 
all parts of the country. Sixty-four percent of the men interviewed were at 
least 40 years of age. All these men were working in April 1933. "Any group 
of workers who still held jobs in 1933 was a selected one, and on the railroads 
the policy of seniority preference determined that the selection should be of 
men relatively old in years and service * * ». These were men who were 
in many ways better prepared than other employees to meet the emergency 
of the depression * * * a number of agents wrd4e back from the field that 
the basis of selection understated the degree of hardship among railroad 
employees." 



1 W. p. A. National Researcn Project, Summary of Findings to Date, March 1938, p. 136. 



16902 CONCENTRATION OF ECONOMIC POWER 

Despite the fact that the group selected was one with high seniority rating, 
nevertheless even this number was visibly affected by the ravages of the eco- 
nomic depression. The earnings and income of the 980 railroad men proper, in 
1932, were such that 38% made less than $1,000 in that year, two-thirds less 
than $1,500. One hundred and two earned as little as $500 in 1932, whereas 
18% earned as much as $1,750. Only 60 of the 980 men succeeded in supple- 
menting their inc ime by outside work. Other sources of income helped but 
little : "'For the families included in the study the total income for the year 1932 
was not much greater than the income of the chief breadwinner. In more than 
half the families, 58%, the income as calculated was less than $1,500; in prac- 
tically three-fourths it was less than $1,750." 

In the course of the depression, community services bogged down, failing to 
keep pace with increased community needs. Consequently the burdens of these 
families increased. Their incomes reduced, 38% of the families also had to 
contribute cash and groceries to relatives and friends in 1932. Families dou- 
bled-up in order to save on rent. At the same time, home lives were shattered 
as families, unable to maintain a single roof, scattered throughout the country 
in search of shelter. 

Capital losses became the order of the day. Forty-four of these families lost 
their homes through foreclosure or forfeiture between 1929 and 1933; 38 of 
them lost all their investment. Half of the 884 families reporting had cash 
reserves at the beginning of the depression, but at the time of the study only 
31 families had their savings intact. Forty-seven per cent of the families, or 
464, dropped their life insurance policies to raise needed cash. For most of 
them, it meant that they could never take out nevp insurance, because rates 
would be prohibitive for men of their age. Accident insurance was also dropped, 
and to railway workers this was no small loss. 

Not only did these families lose their homes, their savings, and their insur- 
ance, but they also incurred debts, which, at the time of the study, were making 
life miserable for them. Seventy-four per cent of the families stated that they 
had outstanding debts or obligations incurred only since the beginning of the 
depression. "These debts were not only a strain on the meager resources of 
the chief breadwinner but also a source of worry and fear, since in normal 
times garnishment proceedings usually mean discharge for a railroad worker." 
One-fourth of the property owners were in arrears in tax payments ; 39% were 
in arrears in payments of principal and interest on mortgages. One hundred 
and sixty-six families had borrowed money from friends or relatives, 135, in 
desperation, had gone to loan companies, where some of them were fleeced. 
Fifty-nine per cent of the families, or 583, reported unpaid bills. A little more 
than half owed $l00 .or more. "By far the largest single item is for medical 
care." 

ilow did thesfe families- live under such depressing circumstances? One man 
reported: "And so Sunday comes and we just sit." Thirty eight percent of the 
families said they had no recreation whatsoever. Many reported that they had 
not seen a moving picture for two, three, even four years. , Trips and outings 
were no longer possible for the railroad employees, even though they had passes. 
Memberships in lodges, clubs, and churches were given up. Even social visits 
were out of the question, because the cost of refreshments for guests was pro- 
hibitive. Reading became a luxury. 

The education of the children of these railway workers suffered markedly. 
One hundred and fifty-seven boys or .girls either had dropped out of school or 
college or had deferred their entrance into the next higher course. One hun- 
dred and twenty-eight children had abandoned special instruction in music, 
drawing, dancing; and the other arts. 

Two hundred and twenty-five families moved within four years prior to 
the time of the study, mainly to reduce rent. "Families accustomed to fur- 
naces and hot-water facilities were living in 'cold flats,' often without electricity 
Qf running water. To give up inside toilets and baths, as many families had 
to, seemed like a reversion to barbarism." 

Those were the railway employees who suffered a 10% wage cut in 1932. 
Their incomes were further reduced by part-time employment. 

That they went about improperly clad goes without question. "There comes 
a time when no amount of thought and care will revitalize old garments, when 
the Important problems are warmth and decency. Many families of railroad 
workers had reached this point * * *. Many older children aliandoned school 
because of shabby clothing. Parents confided that they had borrowed clothing 
ill order to appear respectable at a child's graduation." 



CONCENTRATION OF ECONOMIC POWER 16903 

Wide-spread neglect of health met the eyes of the investigators for the 
Department of Labor. In 30% of the families one or more members required 
medical attention but could not afford it. Fifty-nine per cent of the families 
reported a need for dental care, and 26% of the families reported that at least 
one member needed eye examination or treatment. "Many families were reduced 
to monotonous and unhealthful diets * * *." 

A study made recently by the United States Public Health Service of a group 
which like this had been reduced from comfortable to moderate or poor circum- 
stances further illuminates the situation. Those who had dropped from "com- 
fortable" to "moderate" incomes showed a rate -of disabling illness 15 per cent 
higher than the "comfortable" group, which had suffered no reduction ; and for 
those who descended from "comfortable" to "poor" incomes this rate was 60 
per cent higher.^ The chief significance of this report in connection with the 
railroad workers is that it reveals a close connection between illness and 
reduction in standards of living. 

Summarizing the findings of this Department of Labor study of 1,000 railway 
workers during" a depression, the author writes: "For these veteran railway 
men, in a well-organized and thoroughly regulated industry, the study records 
a slow retreat from relative security toward destitution." 

With our economic machine stalled on dead center, it is little wonder 
that there is widespread unemployment in the railroad industry. The 
T. N. E. C. report to the President on July 14, 1939, that "evidences 
of the failure of lic economic machine have not disappeared," could 
be repeated today with more emphasis. It is more true than ever, 
despite even the short flurry of unhealthy war trade, that : 

People are still without jobs. Farmers are still without satisfactory markets, 
Industry is still without suflBcient purchasers. We are still enmeshed in an 
economy the rate of growth of which is decreasing. 

But besides general economic stagnation, there have been other fac- 
tors making for unemployment in the railroad industry, among these 
being the loss of business to other forms of transportation ; the aban- 
donment of lines; technological changes; and the increased produc- 
tivity of railroad labor. 

Instead of enjoying the one-time virtual monopoly of freight trans- 
portation, today railroads perform about two-thirds o'" the J!:'3ight 
service, and the balance is handled by highways, pipe Ii-.iC.i, and 
waterways. Thus, while employment on steam railroads constituted 
10.2 pci'cent of the working force in 1920, it was only 7 percent in 1935. 

The Interstate Commerce Commission reports that between 1921 
and 1938, inclusive, class 1 railroads abandoned 8,067 miles of road 
and constructed only 2,811 miles, leaving a net decrease of 5,256 miles. 
Obviously such a deflationary program cut rather sharply into railroad 
employment. 

PRODUCTIVITY OF RAILROAD LABOR 

Mr. Whitney. There are numerous evidences of the increased pro- 
ductivity of railroad labor— a factor which has tended to aggravate 
th problem of unemployment. Before these are considered, however, 
let us note that, paradoxical as it may seem, unemployment itself has 
increased the productivity of railroad labor. Because of the appli- 
cation of the principle of seniority, employees with the least years of 
service are bumped first, with the result that the average years of 
service of those remaining on the job has a tendency to rise. Experi- 
ence, measured by years of service, is closely correlated with efficiency, 

^ '"Comfortable" income is defined as that of $42.5 and more per capita per year, 
••moderate" income as from $150 to $425, and "poor" income as less tlian $150. U. S. 
Putilic Uealth Service: Public Health Reports, vol. 28, No. 41 (Oct. 13, 1933, p. 1261.) 



16904 CONCENTRATION OF ECONOMIC POWER 

and efficiency with productivity. In this negative sense, therefore, 
unemployment has increased the productivity of those remaining on 
the job. 

How efficient is railroad labor? The answer to this question has 
been given by numerous investigators. For the purpose of this hear- 
ing, it should suffice to understand in general outline the extent of the 
rise in the productivity of railroad workers and some of the techno- 
logical causes therefor. 

The National Research Project of the W. P. A., which has been 
cited before, makes the following observations with regard to the 
productivity of railroad labor : 

In terms of traffic units, the average output per work-hour increased from 
109 in 1923 (on a 1920 base) to 128 in 1929, to 140 in 1933, and to 175 in 1936. 
This increased productivity of railroad vporkers v^as a result of the teclinical 
reconstruction of the railroads through managerial and mechanical changes, 
made possible by large capital expenditures during the period 1923-29 and 
through the further managerial changes made during the depression to reduce 
labor costs. 

Increasing output per hour of railroad labor is not a new phenomenon. Out- 
put per hour nearly doubled during the first quarter of the pre ent century. 
In 1900, railroad labor moved au average of 62 traffic units an ho; r, while in 
1925, it moved 117. In the past, however, the growth of the volume of traffic 
was greater than the rate of increase of productivity, so that employment, too, 
continued to expand. After 1923, the rate of expansion of railroad traffic fell 
behind the rate of increase in productivity. Between 1923 and 1929, the average 
number of workers declined 11 per cent, the number of hours worked declined 
13 per cent, railroad traffic increased by 3 per cent ; productivity increased by 
more than 18 per cent. Between 1923 and 1936 the traffic volume increased by 
almost 43 per cent, but employment increased by only 3.3 per cent and hours of 
work by only 2.6 per cent ; productivity per man-hour thereby increased 39 per 
cent.' 

With only slight variations, these findings are corroborated by data 
contained in "Exhibit No. 45," appearing on page 223 of part 1 of the 
hearings before this committee. In that exhibit output per man-hour 
on steam railroads is given for the following years : 

(1923-25 AVERAGE=400) 
1914 75. 3 

1923 96. 3 

1929 . 113. 8 

1932 111. 8 

1936 : 140 4 

1937 143. 1 

Witt Bowden, of the United States Bureau of Labor Statistics, 
found that "Productivity in terms of average output per man-hour 
worked in 1936 was 32.8 percent greater than in 1926, and 80.9 percent 
greater than in 1916." (Monthly Labor Review, July 1937.) This 
study has been discussed rather fully in chapter VI of the Brother- 
hood's book, 3Iain Street — Not Wall Street — which was published in 
1938 as a reply to the railroads' demands for a 15 percent wage cut. 

It was found that the index of productivity of all employees is not 
materially less when based on hours paid for than when based on actual 
man-hours worked. 

On the basis of transportation traffic units (a formula derived by the 
American Railway Engineering Association to measure operation and 
wear and tear of equipment), the increase in productivity of all 

1 Summary of Findings, March 1938, p. 111. 



CONCENTRATION OP ECONOMIC POWER 16905 

employees, excluding the principal salaried groups, increased 37.7 
percent between 1926 and 1933, and 43.8 percent bet^Yeen 1926 and 
1936. 
I quote further from page 166 of Main Street — Not Wall Street : 

Attention is called to the fact that in 1916 it required the services of 88,715 
freight conductors and brakemen to move 362,444,307,129 revenue freight ton- 
miles, while in 1937 it required the services of but 60,455 freight conductors and 
trainmen to move 360,667,773,000 revenue freight ton-miles. In other words 
28,260 fewer employees of these classes were required to move substantially the 
same amount of business. 

Certain indices indicate the trend of productivity : 

In 1920, as of December 31, the number of steam locomotives in serv- 
ice on class 1 railroads was 64,368; in 1926, 62,342; in 1938, 42,637. 

But the average tractive power of steam locomotives in 1920 was 
36,365 ; in 1926' 41,886 ; in 1938, 49,803— or an increase of 37 percent. 

The average length of freight trains, including cabooses, was 36.6 
cars in 1920: 45.2 cars in 1926; and 48.1 cars in 1938. 

The average gross tons per freight train in 1920 was 1,443; 1,736 
in 1926; and 1,895 in 1938. 

In 1920 freight cars had an average capacity of 42.4 tons; in 1938 
the capacity had increased by 16.5 j)ercent, to 49.4 tons. 

The average speed of freight trains between terminals was 10.3 
miles per hour in 1920; 11.9 miles per hour ifc 1926; and 16.1 miles 
per hour in 1937. 

The average speed of freight trains between terroi^ials in 1939 was 
62 percent greater than in 1920.^ 

The speed with which passenger trains operate today is amazing. 
Between 1938 and 1939, the number of separate runs operating daily 
at 60 miles and more per hour increased from 864 to 997. American 
railroads now have 85 runs booked at 70 miles and more an hour. 
Contrast this with the year 1928, when, except for 1 or 2 short runs in 
New Jersey, there was not a single, train in the United States sched- 
uled to average more than 60 miles an hour. 

Certain labor-saving devices and technological improvements have 
resulted in throwing railroad men out of work. Among these are the 
following : improved rails and tools — spike drivers, wrenches", drilling 
machines — the mechanical oiling of tracks; radical changes in the 
design of the steam engine • reduction in the number of manual block- 
signal stations; centralized traffic control; and automatic signal de- 
vices. Chemical treatment of railroad ties has doubled their life- 
span. 

In discussing the matter of unemployment in the railroad industry, 
we cannot overlook the possibility that 200,000 to 350,000 jobs are at 
stake, should Congress adopt legislation calculated to open the flood- 
gates to widespread railroad consolidations. It is a known fact that 
the Wall Street interests that control the railroads would like lo solve 
their financial problems by operating only the most profitable lines, 
abandoning the so-called unprofitable Pnes, and leaving in the wake 
of this destructive program many ghost communities and several hun- 
dred thousand workers without employment. Current railroad legis- 
lation before Congress, as embodied in the omnibus transportation 
bill (S. 2009), answers the problem for Wall Street. 

* Source : Press release, Association of American Railroads, March 15, 1940. 
124491 — 41— pt. 30 46 



16906 CONCENTRATION OF ECONOMIC POWER 

The Brotherhood of Railroad Trainmen, however, does not propose 
to acquiesce in such a vicious program. We have caused to be intro- 
duced what is known as the Harrington amendment to the omnibus 
transportation bill, which would offer complete protection to railroad 
labor in the event of the consummation of consolidation schemes. A 
large majority of the Members of the House of Representatives have 
declared themselves in favor of this amendment, as have thousands 
of citizens throughout the land w^ho have signed petitions endorsing 
our proposal. Such wide support is indicative of a majority public 
opinion which says: "Congress must not pass any legislation which 
has the effect of destroying job opportunities." 

At his inaugural on March 4, 1933, President Roosevelt said : "Our 
greatest primary task is to put people to work." I submit that the 
olackout of unemployment i^ still the first point on the Nation's 
agenda. 

If we ponder the fact that the remarkable rise in industrial pro- 
duction which came at the end of the last year was accompanied by no 
appreciable rise in employment, then we shall begin to understand why 
w^e are now tobogganing downward at the fastest rate in history. The 
products of the machine are not bought by another machine. They are 
bought by employed people. 

The usual question is asked of those who laboriously demonstrate 
the existence of unemployment, and the technological causes for it, as 
we have done today as respects the railroad industry : What do you 
offer as a remedy? 

While I am not certain that it is possible to solve the problem in its 
entirety under our present economic system, which, in the last few- 
years, has proved to be of more benefit to the profit takers than to the 
wage earners, we should nevertheless be able to take some steps that 
would alleviate the situation. The shorter workday is one such 
measure. Even the Wall Street Jowmal recognized this possibility 
when it declared, on February 3, 1940, that the ability of manufac- 
turers to increase the number of their employees from December 1929 
to December 1939, while there was a general 1-percent decrease in total 
employment, in a period "in which productivity of machines has in- 
creased as much as it has since 1929 i^ undoubtedly due to the reduc- 
tion in the length of the workweek." 

The 6-hour day should therefore be considered as an immediate and 
practical remed}' for the problem of unemployment. Such a solu- 
tion was urged in a resolution adopted unanimously on June 9, 1939, 
at the Second Quadrennial Convention of the Brotherhood of Rail- 
road Trainmen, held in Cleveland, Ohio. This resolution embodied a 
comprehensive reemployment program for the railroad industry, ad- 
vocating such measures as the shorter workday, rehabilitation of rail- 
i-oad properties, grade-crossing elimination, train limit and full-crew 
legislation. It is a clear-cut expression of the railroad worker's desire 
to see America free itself, in a democratic way and through peaceful 
means, from the economic dilemma with which it is confronted. The 
resolution follows : 

REEMPLOYMENT PROGRAM IN THE EAILKOAD INDUSTRY 

Whereas the average employment of 940,000 workers on class I steam railroads 
last year was the lowest recorded for any year since 189i) and weekly wage pay- 
ments to railroad workers in 1938 averaged 13 percent smaller than in 1937 and 
41 percent below the 1929 average ; and 



CONCENTRATION OF ECONOMIC POWER 16907 

Whereas the problem of reemploying tens of thousands of railroad workers 
who have been laid off in recent years, and the problem of promoting a high 
degree of safety in railroad operations are undeniably questions of first impor- 
tance confronting railroad labor today ; and 

Whereas hundreds of thousands of railroad employees are anxiously seeking a 
solution to these problems in the form of a practicable program which will secure 
their jobs and incomes and reduce the hazards connected with this work ; and 

Whereas the Wall Street bankers who control the financial, and, therefore, the 
business, policies of the railroads have forced railroad management — often against 
its own better judgment — to curtail services, to lay off thousands of loyal em- 
ployees, to attempt to slash wages, to allow equipment to deteriorate without 
adequate repair of replacements, thereby endangering the safety of the trainmen 
and the traveling and shipping public, in short, to carry through in the railroad 
industry the game policy of sabotaging the reemployment and industrial recovery 
program of the New Deal which the United States Chamber of Commerce and the 
National Association of Manufacturers pursue in other basic industries ; and 

Whereas this sabotage of our economic institutions is coupled with a diabolical 
attempt to strike at the political and economic liberties of the Amercan people, so 
clearly evident in the Tory attacks on the Railway Labor Act, and efforts to de- 
stroy the principle of collective bargaining as embodied in the National Labor 
Relations Act ; and 

Whereas the preservation of democracy in this country demands a speedy bring- 
ing together of unemployed citizens and unemployed capital, to the end that this 
Nation may accomplish a complete economic recovery ; and 

Whereas the reemi^loyment of men and money in the railroad industry would 
provide a great stimulus to the employment of idle labor and idle capital in all 
other industries, because the railroad industry is the very lifeblood of our eco- 
nomic system ; and 

Whereas this brotherhood — in fact, all railroad labor — has in the past recog- 
nized that the ultimate solution to the railroad problem lies in Government owner- 
ship and operation of the railroads ; and 

Whereas pending the attainment of this ideal, railroad labor must initiate 
practical steps to reinvigorate the industry : Now, therefore, be it 

Resolved, That the Second Quadrennial Convention of the Brotherhood of Rail- 
road Trainmen, while reaflBrming the action of the previous convention . with 
regard to Government ownership of the railroads — namely, empowering the presi- 
dent and the grand lodge oflicers to press for Government ownership at the most 
opportune time — does hereby go on record in favor of an immediate reemployment 
program in the railroad industry, sponsored by the Federal Government in co- 
operation with railroad management and railroad labor ; and be it further 

"Resolved, That such a program shall embody the following minimum features ; 
(1) The rehabilitation of railroad properties to the extent of several billion dol- 
lars in order to reemploy idle railroad workers, to increase the safety of the em- 
ployees and the traveling public and shipping public, and to provide greater eflS- 
ciency and speed. (2) The elimination of the many thousands of grade cross- 
ings. (3) The improvement of the conditions of railroad labor by (a) enact- 
ment of train-limit and full-crew legislation; (b) amending the Adamson 8-hour 
law to provide for the 6-hour day; (c) increasing the basic rates of pay; (d) 
reimbursing trainmen for away-from-home exijenses; (e) securing vacations 
with pay; (f) liberalizing the disability features of the Railroad Retirement 
Act and giving credit for time spent in military or naval service; and (g) offer- 
ing to every able-bodied railroad man a railroad job ; and be it further 

"Resolved, That such a program shall be financed jointly by the Federal Gov- 
ernment; by the State governments, insofar as the elimination of grade cross- 
ings is concerned ; and by the railroads themselves, requiring them to reduce their 
capitalization and therefore, their debt burden ; and that in extending reemploy- 
ment loans to railroads, the Federal Government shall be given a voice in deter- 
mining business and financial practices of these roads which shall be at least 
equal to the voice given the railroad banker ; and be it further 

"Resolved, That the president of the Brotherhood and the national legisla- 
tive representative be instructed to work for the enactment of Congress of 
legislation providing for the carrying out of such a program, and to invite all 
railroad labor to unite with us in backing up this practical program of reem- 
ploying idle men and idle money in the railroad industry ; and be it finally 

"Resolved, That copies of this resolution be sent to. the President of the 
United States, to the chairmen and members of the House and Senate Commit- 



16908 CONCENTRATION OF ECONOMIC POWER 

tees on Interstate and Foreisai Commerce, to the railway labor executives, to 
the press, and printed in the forthcoming issue of the Railroad Trainman." 

In conclusion, let me state that the logic, or rather the lack of 
logic, of the contention that technology does not reduce total employ- 
ment opportunities is well illustrated by a pamphlet entitled, Ten 
Facts of Technology and EmployTnent^ published in" 1936 by the Ma- 
chinery and Allied Products Institute. I quote : 

If technological advancement did not make possible a greater volume of 
production the standard of living could be raised only by increasing hand 
labor. Had it been necessary to increase hand labor in the same proportion 
as production between 1900 and 1930, every adult man and woman in the Nation 
and several million children would have been needed in jobs. It would have 
required more than 60 percent of the entire population, whereas only about 40 
percent ever seeks gainful employment, the remaining 60 percent being consti- 
tuted chiefly of women and chiidren supported by the 40 percent. 

Thus, the Machinery and Allied Products Institute started out to 
prove that labor-saving machinery does not destroy jobs and ended 
up by proving that were it not for machines and modern technology 
there would not be enough men and women workers in the Nation to 
accomplish the work now being accomplished with extensive use of 
machines and power. 

That great American inventive genius, Thomas A. Edison, once 
said: 

Human slavery will not have been fully abolished until every task now accom- 
plished by human hands ig turned out by some machine. 

In the middle of the nineteenth century Dr. Ure, an expert English 
economist, advised the manufacturing classes of England that the goal 
of the manufacturers should be the development of machinery to the 
point where they could use the labor of women and children, which 
was cheaper than that of men, and that the ultimate goal was to 
displace all labor, as nearly as possible, through the development of 
the machine. 

We should ponder the words of Dr. Ure in the light of the great 
increase in the industrial employment of women in this technological 
age. We should ponder Thomas Edison's words in the light of the dire 
consequences to human society. If Dr. Ure's goal should be achieved, 
the male portion of humanity would live only by the grace of em- 
ployers and female income earners. If Mr. Edison's goal should be 
achieved, all of us would live, if at all, only by the grace of the 
machine owners. 

And may I add one vitally important thought? He who considers 
that technological displacement of labor comprehends only the ma- 
chine displacement of labor loses sight of a most important considera- 
tion. For the most part, in a machme age, the labor cost of making a 
product that will last for many years is no greater than the labor cost 
of making a product that has only a short period of serviceability. Ag 
competition and discovery force the improvement of products, a great 
displacement of labor thereby results. House paint that lasts lor 5 
years instead of 2i/^ years not only results in a 50 percent reduction in 
job opportunities for house painters, but there is a like reduction in 
employment in paint manufacturing, independent of the fact that 
machine methods of paint manufacture may also eliminate many 
workers. Likewise, "with automobile tires that last for 30,000 miles, 
instead of 10,000 miles, storage batteries that last for 3 years instead of 



CONCENTRATION OF ECONOMIC POWER 16909 

1 year, and so on. Not only does such longevity of these products 
reduce by two-thirds the employment in their manufacture, apart from 
machine efficiency, but also such longevity greatly reduces the business 
opportunities of the cross-road garages throughout the Nation. 

Gentlemen of the committee, we are face to face with the fact that 
the requirements of human existence cannot safely be left to the mercy 
of an unbridled private-profit motive. 

Acting Chairman O'Connell. You will supplement this statement? 

Mr. Whitney. With just a few highlights, if I may. 

I might begin by saying that I would like also, if it is agreeable 
to the committee, to introduce a document entitled Main Street Not 
Wall Street^ which was a portion of the Brotherhood of Railroad 
Trainmen's case before the 1938 President's Emergency Board in the" 
wage controversy that was up at that time, and I would direct the 
committee's special attention to chapter 6, page 162, of that book, en- 
titled "Productivity of Railroad Employees," which tells quite com- 
pletely the statistical story of the productivity in our industry. I have 
only one copy today, but if it is desirable I would be glad to furnish 
a copy for each member of the committee. 

Acting Chairman O'Connell. That will be accepted. Do you wish 
to substitute another copy for that one? 

Mr. Whitney. No; the committee may have that copy, and I can 
furnish additional copies for each member of the committee. 

Acting Chairman O'Connell. If you will make other copies avail- 
able to Dr. Anderson, it will be appreciated. 

Mr. Whitney. We will be glad to do that. 

(The document referred to was marked "Exhibit No. 2635" and is 
on file with the committee.) 

Mr. Whitney. My organization, I might say, has for a number of 
years been quite keenly aAvare of the problem you are discussing—- 
technological displacement of workers. In March 1936 our official 
publication, the Railroad Trainman, published an article entitled "Ma- 
chinery Creates Jobs — What of It?" I believe that has a lot of data 
that would interest this committee. I don't insist upon it, but if you 
are willing to receive it as an exhibit I should be glad to put that in 
also. 

Acting Chairman O'Connell. How lengthy is that? 

Mr. Whitney. It is four pages. 

Acting Chairman O'Connell. Without objection, that will be ac- 
cepted and printed in the record. 

(The document referred to was marked "Exhibit No. 2636" and is 
mcluded in the appendix on pp. 17434-17439.) 

Mr. Whitney. That is a little more inclusive than just our testimony 
today because it covers the problem as a whole. 

To highlight my president's testimony I might call your attention 
to a rather lengthy quotation from a study made by Mr. Carter Good- 
rich, of the United States Department of Labor, in May 1934, entitled 
"Earnings and Standards of Living of 1,000 Railway Employees Dur- 
ing the Depression." The human considerations there are sufficient 
to move anyone to want to do something. It shows how railroad men 
descended, as it were, into the dark ages through having to give up all 
of their insurance, their standards of living, going together several in 



16910 CONCENTRATION OF ECONOMIC POWER 

one home, sacrificing their protection in the form of accident insurance, 
and all that. 

That is a story which should move us all to deep consideration, 
but I would like the committee to fead that bearing in mind also 
the businessman's viewpoint, the terrible deflation to business that 
comes to landlords and builders when people are 'thrown together 
several in one home. It seems to. me that sometimes we become so 
deeply concerned with the human considerations of these things 
that we overlook that we are actually working against ourselves 
from a business standpoint in the deflationary effect upon our whole 
economy. 

RAILROAD CONSOLIDATIONS 

Mr, WnrrNEY. Then I would like to move on to a consideration 
in our testimony which is very prominently before the country, at 
this time, and that is a new teclmique for getting rid of labor and 
getting greater productivity — consolidations. I think we are pretty 
generally agreed that what we need in this country today is the 
employment of men and money, capital and labor. The outstanding 
characteristic of railroad consolidation, the very purpose of it, is to 
employ less money and fewer men, so it is of very genuine concern, 
it seems to me, to this committee, to ponder the possibilities of coii- 
solidations. We estimate that if a widespread consolidation pro- 

fram which would completely satisfy the ambitions of railroad 
ankers were put into force, at least 250,000 men would be eliminated 
in the railroad industry alone. 

Mr. Pike. From what sort of jobs would those people ordinarily 
come? 

Mr. Whitney. I think it would affect all classes of railroad 
workers, from the engineer down. There would be fewer trains 
run, fewer train crews, tracks would be abandoned, there would be 
less maintenance work, and certainly the clerks would be greatly 
affected. 

Mr. Pike. That is what you usually hear, that there would be less 
work at the terminals and division points and things of that sort., 

Mr. Whitney. Oh, yes, indeed. 

Dr. Anderson. Of how much immediate concern is that problem 
of merging the railroads into a unified system? 

Mr. Whitney. I was going into that. There is before Congress 
what is known as the Wheeler-Lea transportation bill, which ad- 
mittedly was designed to facilitate and encourage consolidations. 
Our organization opposed that very strenuously because while there 
are many features of the bill we favor, we felt there was no law 
worth 250,000 jobs in this day and age of unemployment. I just 
want to call to your attention one of the prominent characteristics 
of our economy today, the tendency to pay men a pauper income 
for nonproducing. So economically unimportant has man's labor 
become that we have financiers actually willing in their desire for 
profits, to pay men to do nothing to get rid of the labor; that is 
inherent in the dismissal wage. Now we have never thought, £^s a 
social policy, of paying a group of bondholders a certain portion of 
their future worth- to force them to surrender their bonds, but some 
seem to think that jobs and labor are less sacred. Therefore, capital 
proposes to pay men to take their jobs away from them and the 



CONCENTRATION OF ECONOMIC POWER 16911 

Brotherhood of Railroad Trainmen regards the dismissal wage as a 
relic of the dark ages. We believe that men should be entitled to 
work for a decent income and we don't believe they should be driven 
out of their jobs, especially when the reason for the dismissal wage is 
not improved service, it is not better incomes for workers, it is not 
lower rates to the shipper. It is to improve earnings to the bond- 
holder, so we are absolutely opposed to the idea and the concept of 
a dismissal wage. We consider it a bribery offered to workers to 
surrender their opportunity to pursue their life's calling. 

We introduced in the Congress, when we were threatened with this 
loss of 250,000 jobs, what is known as the Harrington amendment, 
which simply said to the railroads : "If you must consolidate, if you 
must make ghost communities throughout the land, you can't throw 
these men out overnight in mass numbers ; you can't take the men of 
shortest periods of seniority and throw them into the bread lines. 
You will have to take care of them, and then you may take them off 
at the other end as they die, resign, or retire." 

We consider that a very modest program. It does not offer much 
for the future in the way of increased employment, but at least it stops 
the crowding of bread lines in order to create better earnings and 
better profits. 

I might tell the committee that we state in this document that 275 
Congi'essmen signed a petition on behalf of the Harrington amend- 
ment, and we found an overwhelming majority of the Senators — in 
fact, only 1 Senator really opposed the idea of the Harrington amend- 
ment, so I believe that our Senators and Congressmen are becoming 
aware of thiB fact that disemploying men, for whatever cause, is not 
socially desirable. That was the full implication of the Harrington 
amendment, and, as I say, the dismissal wage is only a manifestation 
of the growing unimportance to profiteers of human labor. 

I heard over the radio only Saturday a man speaking on behalf of 
the rural-electrification program, who said a farmer for a nickel could 
buy enough kilowatts to equal a full day's labor of a man, so that on 
th?.<" basis human labor is reduced to 5 cents a day. Now, if we are 
going to listen to the arguments that capital efficiency brought about 
this efficiency, that labor didn't bring this about, that labor should be 
paid what it is worth but no more, on that standard a farm laborer 
would be worth 5 cents a day. 

RAILROAD FINANCES 

Mr. Pike. You don't think that capital isn't taking a spanking in 
the railroad business, too, do you ? 

Mr. Whitney. I don't know what you have reference to, but the 
thing that would loom in ray mind would be $100,000,000 lost in 
gambling in stocks and things like that. 

Mr. Pike. Another $100,000,000 was used to extend the Chicago, 
Milwaukee & St, Paul to the Pacific coast, op. which 98 percent is lost 
on today's quotations. You wouldn't call that gambling particularly. 

Mr, Whitney, I am not paiticularly familiar with the fiiiancing 
shenanigans that Avent on in that cpse, but I do know the Chicago & 
North Western has been paid for two and seven-tenths times and still 
owes its average capital indebtedness. 



16912 CONCENTRATION OP ECONOMIC POWER 

Mr. Pike. Yes; and the owner of those bonds hasn't received any 
income on his investment in some years. In the case of the Missouri 
Pacific, which sold common shares at $100 a share, that is wiped out; 
in the case of the Rock Island a great many of its bonds are running 
around here at 5 to 20 cents on the dollar. I don't want to minimize 
your statement, but if there is any implication that capital hasn't 
been displaced lay technology and other features in the railroad busi- 
ness, it is an entirely mistaken feeling. Its quoted value is about half 
of its stated value, though for purposes of the record I think the 
United States valuation showed very little water in the railroad busi- 
ness at the top, and whatever there was has been more than squeezed 
out by this deflation. The New Haven is another one which sold 
preferred shares at $100 a share and during the last week the I. C. C. 
has said there is not enough left in the entire investment to deserve 
any consideration in the receivership. 

I am not minimizing your story, but this technological change is 
not to the profit of the bondholders and the shareholders in the rail- 
road industry. Everybody has taken a licking. 

Mr. Whitney. I agree with you. I think we are just forcing oui- 
selves up on a precipice to destruction. I think after the depression 
set in — I think I am correct on this — the railroads paid the highesi 
dividends in history; they had such a momentum of big profits and 
big dividends that they couldn't stop, but, naturally, you have grad- 
ually washed up labor until now we are all upsetting the boat. I 
agree with that analysis of the situation very much. 

Mr. Pike. I think if you can point to apybody who foresaw where 
we would be in 1939 from the point of view of 1929, I believe we 
would like to have him appear before the committee. 

Mr. Maginnis. Let me make this comment. Isn't the railroad in- 
dustry the one industry that to common knowledge since the depres- 
sioB', in the last 10 years particularly, has been in terrible financial con- 
dition ; and it is not due to technology, it is due to economics, isn't it? 

Mr. Whitney. I have a friend, and I have never seen the time yet 
when he wouldn't take an hour off to tell me how busy he is. I some- 
times think that about a lot of things we read in the newspapers about 
the railroads. When in a period of around 15 years the railroads can 
spend $200,000,000 to tell you how poor they are, they are kind of like 
my friend who will take an hour out any time to tell you how busy 
he is. 

Mr. Maginnis. Don't you think that is exaggerating it slightly? 

Mr. Whitney. No; I do not. I am very sincere in making that 
statement. For instance, wouldn't you say any corporation that -pays 
out more in dividends than it pays in wages is a pretty sound 
corporation ? 

Mr. Maginnis. What corporation does that? 

Mr. Whitney. The Chesapeake & Ohio Railroad did that as re- 
cently as 1936, but that part doesn't get in the newspapers. 

INIr. Maginnis. How many other railroads have been able to do it? 

Mr. Whitney. I don't know that very many have. However, and 
this may shock you, but it is a fact, m 1931 and again in 1936 the -Besse- 
mer & Lake Erie paid 1,100 percent dividends. 

Mr. Maginnis. What railroad? 

Mr. Whitney. The Bessemer & Lake Erie. 

Mr. Magi-n^nis. That is a freight railroad. 



CONCENTRATION OF ECONOMIC POWER 16913 

Mr. Whitney. Sure. 

Mr. Maginnis. In the steel industry. 

Mr. Whitney. But when you talk about the abject poverty of rail- 
roads. you are talking about certain railroads, not all railroads. 

Mr. Maginnis. But you are talking about the railroad industry. 
Now, isn't it a fact that due to a great many conditions, including the 
economic conditions of the country during the depression period and 
the buses, the railroads have lost in revenue to such an extent that 
everybody knows that most of the railroads have been struggling 
against tremendous odds. The Interstate Commerce Commission has 
been trying to work out their problems to prevent more receiverships. 

Mr. Whitney. What you say is true, but it can be said about other 
industries that we don't hear so much about. I read a piece about the 
railroad industry back in 1890, and I swear it sounded like the morn- 
ing's newspaper. They were complaining then just like they do now. 

Mr. Pike. They were in trouble then. 

Mr. Maginnis. Tliey were in trouble then, but they didn't have the 
busses. 

Mr. Pike. They were in pitiful trouble then. 

Mr. Whitney. Of course, but we understand there are conditions 
in the railroad industry that are serious. Any industry which can 
afford to waste $1,000,000 a day must be in bad shape. Senator Burton 
K. Wheeler, after making a very thorough investigation of the rail- 
road industry, solemnly announced that the railroads were wasting 
$365,000,000 a year, $1,000,000 a day. Now that, of course, we don't 
read about every day in the papers. 

Mr. Pike. That wasn't in wages. 

Mr. Whitney. No ; they haven't wasted a thing in wages ; they are 
getting more now for their wage dollar than ever before in history. 
Whatever is wrong with the railroads, they can't lay it at the door of 
their employees, because the labor dollar today is worth more in the. 
railroad industry than ever before in history. 

Mr. Chantland. Mr. Whitney, would you accept Mr. Pike's sugges- 
tion that the Rock Island and New Haven and that west coast extension 
of the Milwaukee are typical examples of good railroading and 
financing? 

Mr. Whitney, Oh, not at all. I don't accept the statement either 
that our railroad industry is not overcapitalized. I still think there 
is a lot of water to be wrung out of the railroad industry. 

If J ou read the history of the New Haven, it would put the Teapot 
Dome scandal to shame. I think that is the road that was mixed up 
in the Westchester, that spent $1,500,000 a mile for the construction 
of the railroa 1. Well, when we go out on a drunk, we naturally have 
headaches afterward. 

Mr. Pike. That is gone, too. 

Mr. Maginnis. That is water under the bridge, large'y. 

Mr. Pike. I d'dn't mean to bring those up as cases of good judgment 
in the railroad industry at all. 

Mr. Chantland. I rather thought you did luid I wanted to know if 
Mr. Whitney accepted those as good sam'^les. 

Mr. Whitney. Not at all. 

Mr. Pike. Yon can pick out a great many cases of bad judgment 
in the railroad industry, and I do think, though, that it isn't fair, that 



16914 CONCENTRATION OF ECONOMIC POWER 

when half the stated capital has gone in market quotations it is ex- 
f remely probable from the evidence in hand of valuation that the waste 
has been eliminated and a gi"eat deal of the actual investment. It 
is particularly true in the case of that St. Paul extension; there was 
some funny business, in my opinion, on the bond financing, but the 
railroad was built, the money was spent on it, a great portion of it — 
perhaps there was a fair margin for what was regarded at that time 
as legitimate construction profit, but whatever money was put properly 
into that railroad at the time is gone. I think those St. Paul adjust- 
ments they were selling at one and a half the last time I looked at 
them, but they were the ones that finally came out of the Puget Sound 
*>itension. In the'case of the Missouri Pacific 

Mr. Chantland. Considerable was said about the cost of the 
receivership administration of the road, wasn^ there? 

Mr. Pike. I think it is fairly true. Several insurance companies 
had a set-to over that. 

Acting Chairman O'Conneix. I think it might be well to let Mr. 
Whitney proceed. We are getting too far afield. 

Mr. Whitney. I don't want to pose as an expert in railroad fi- 
nancing. I think to clear the record, though (I thought I heard you 
say the waste had been eliminated), it should be said that only a 
little over a year ago Mr. Wheeler made the statement that the rail- 
roads were wasting $1,000,000 a day. 

Mr. Pike. I didn't mean waste m operation, I meant in original 
construction that had probably gone out the window in the decline 
in quotation of bonds or lack of unearned interest. That money has 
proved to be wasted by the fact that it didn't earn enough to pay its 
board. I didn't mean the annual day-to-day waste. 

Mr. Whitney. Just the other day I read a statement that the rail- 
roads overpay on supplies purchased, through favors to shippers, and 
that they could save $100,000,000 a year on purchases if they got 
value received, as you and I are supposed to when we buy. 

Acting Chairman O'CoNNEiii. Can you tell me where the Wheeler- 
I^a bill is now? 

Mr. Whitney, It was just reported out. The conferees announced 
that they agreed Friday night. 

Acting Cnairman O'Connell. Did they include the Harrington 
amendment ? 

Mr. Whitney. I am sorry to say they didn't. They struck out 
the entire consolidation section of the bill, dealing with the facili- 
tating and expediting of railroad consolidation. 

Acting Chairman O'Connell. There is really no point to the 
Harrington amendment without the consolidation? 

Mr. Whitney. The Harrington amendment was conceived because 
of this threat of facilitation of consolidations. 

Of course, I can't too strongly urge tile necessity for shorter work 
hours as one means of meeting this problem. 

Dr. Anderson. In that connection, I have just received a distribu- 
tion of working time from Dr. Parmelee, in response to our request. 
That statement indicates that a very substantial proportion of all 
railroad workers now work very brief hours, which would not per- 
mit reducing their hours any further ; many of them were employed 
for a few days in less than 2 months of a year. You weren't talking 
about reducing hours for such part-time employed workers. 



CONCENTRATION OF ECONOMIC POWER 16915 

SIX-HOUR DAY 

Mr. Whitney. Absolutely not. I mean reducing a normal month's 
work without any reduction in pay, in other words, making the 
standard day of work 6 hours instead of the present 8 hours. 

Dr. Anderson. And how would you cover the increased costs of 
such a procedure? 

Mr. Whitney. Well, I sometimes think there are a lot of great 
economic truths which cannot be stated in terms that an economist 
would understand. I refer, of course, to the so-called "expert" eco- 
nomists who write for the financial pages of newspapers. 

What I mean by that is this: in 1932 the railroads asked us for a 
10-percent deduction in pay rolls. They solemnly told us that if we 
would take that 10-percent deduction for 1 year only — that is all they 
were asking for, and they emphasized that — it not only would solve 
the problems of the railroad industry but would restore national and 
world prosperity. Of course, that made us feel pretty important, 
and in our weaker moments we accepted the 10-percent cut, although 
our organization never felt that it was good for the country or the 
industry. In 1 year that deduction, I think, took something like 
$24,000,000 out of the purcliasing power of the Chicago area alone. 

You asked about the increased cost. This supposed reduction in 
cost meant a net increase in costs, because it didn't help the railroad, 
industry. The industry got worse, and the countr;;^ got worse, and it 
certainly didn't solve the problem of world prosperity. I think as we 
distribute wealth through shortening hours and dividing up the work, 
we don't decrease costs on an economic basis, because the social values 
far outweigh the economic costs. Most economists would want proof 
of that generalization. However, I believe observation indicates .that 
the natural consequences of constant deflation are more (X)stly, even to 
the businessman, to say nothing of society, and it seems to me that 
that is the answer. We can do more work today in 6 hours than we 
could in 10 or 12 hours back in 1910. 

Acting Chairman O'Connell. But assuming that the railroads 
are in general in a rather bad state, in part because of attempting to 
meet competition from other areas, as a practical railroad man I am 
afraid it would be a little bit difficult for him as a businessman, 
looking at his costs, to take the long-run view, as an individual, 
that a reduction in his wages is going to decrease mass purchasing 
power and is going to be part of a deflationary spiral which will 
make him worse on in the long run, because he is confronted with 
the day-to-day situation of meeting competition. While I would 
be inclined to agree with you on the social desirability of the long- 
range policy, most businessmen today confronted with the problem 
of making money are not so apt to take that broad view. 

Mr. WnrrNEY. I think that is very true. I don't think you can 
point to a thing in our industry, whether it be shorter work hours 
or increased wages or safety legislation, that the railroads haven't 
solenmly predicted it would bankrupt the industry. The Safety 
Appliance Act, which was designed to save the lives and limbs of 
working men, was hotly argued against as being a device that would 
completely bankrupt the railroads. We have grown in social con- 
science, and we haven't, bankrupted anybody. Where we went bank- 



16916 CONCENTRATION OF ECONOMIC POWER 

rupt is when we let millions of people go and destroyed their pur- 
chasing power. That is what bankrupts us all. 

Mr. Maginnis. Mr. Whitney, your remark about dismissal wages 
as being a form of bribery to the employee, isn't it a fact that every 
other industry, or we will say most of the other industries, in trying 
to meet the changing situation of progress and technology are work- 
ing for that very thing of having some sort of a system of dismissal 
wages or displacement wages, which you term bribery ? 

Mr. Whitney. If you are talking about the legal definition of 
bribery, it obviously isn't. 

Mr, Maginnis. I don't mean legal definition, I mean as a charac- 
terization. 

Mr. Whitney. It is an inducement to a man to part with his job, 
without knowing what you are going to do with him after you get 
him separated from his job. I am condemning the social conscience 
which builds up these mechanisms designed to offset the economic 
cheapness of human labor, the change from the days of the wilder- 
ness, when probably all economic production was 95 percent human 
labor, to now, when it is 2 or 3 percent human labor. Wlien you 
give a man a dismissal wage, and separate him from his job, have 
you solved anything ? Haven't you only aggravated the problem ? 

Mr. Maginnis. But if a certain railroad, being operated in a busi- 
nesslike manner, finds that the economic conditions in the territory 
in which that railroad is operating are such that its revenues are 
not keeping up to operating costs, would you argue that rather than 
cut down on the operating costs, even to the extent of letting some 
of the men out, that it wouldn't be better to keep that road in opera- 
tion, than to try to get the I. C. C. to let them abandon the road 
completely ? 

Mr. Whitney. Of course, that is the threat that the railroads 
constantly hold over us. "If you don't do something here, we are 
going to abandon, and you will lose all your jobs." 

displacement as a result of consolidation 

Mr. Whitney. That was the argument for the Wlieeler-Lea bill. 
It was argued on the floor of the House, "If you boys will just give 
up 250,000 jobs everything will be rosy, and in the end you will have 
more jobs than if you gave up none." That just doesn't appeal to 
me. The way the banker and the butcher and the candlestick maker 
get more is by getting more, but railroad employees are supposed to 
believe that by giving up a large part of what they have they will get 
more. I don't believe that. 

Mr. Pike. Do you use that 250,000,000 pretty accurately? 

Mr. Whitney. Two hundred and fifty thousand. 

Mr. Pike. I had three too many ciphers jon it. I was trying to 
remember the figure they gave us the other day of those, working in 
the railroads. As I remember, it was just about a million or a little 
under. If my memory is correct, that would mean a quarter or more 
of all railroad employees displaced under such a bill. 

Mr. Whitney. That is right. 

Mr. Pike. I think that would require some demonstration to me. 

Mr. Whitney. I can demonstrate to you in just a moment. I have 
been arguing it for the last 2 months, so I have the data at my finger- 
tips, fortunately. In the first place, the Prince plan, which was ddvo- 



CONCENTRATION OF ECONOMIC POWER 16917 

cated about 4 years ago and which didn't depend upon any enabling 
legislation at all, as I understand it, propobed to eliminate one-third 
of the railroad employees. The Wall Street Jourvial, I think, on 
January 17, 1940, said that if they could get this enabling legislation 
they could look forward to saving $500,000,000 annually through rail- 
road consolidations. 

President Daniel Williard, of the B. & O., says that in consolida- 
tions 80 percent of the savings come from labor. Well, 80 percent 
of $500,000,000 would be $400,000,000. You are going to eliminate the 
lower-paid groups, mostly. But, let's say the average elimination 
will be of men. who have $l,000-a-year jobs. Four hundred million 
dollars would eliminate 400,000 jobs, so I am basing my estimate on 
Wall Street's ambition. I don't say it will be 400,000 jobs. I believe 
Mr. Willard included in his 80 percent some indirect labor, so it seems 
to me that 250,000 or 225,000 is rather conservative. 

Mr. Pike. We just don't see along the same line. I was trying to 
see where the consolidations of corporations would have that effect. 
I would see a few runs eliminated where there are now, say, compet- 
ing runs not doing very much business, biit I can't get the mental 
picture of more than a quarter of the railroad employees being elim- 
inated. I don't take your demonstration as a complete demonstra- 
tion. You have taken one quotation from one source and another 
from another and come to a conclusion that I still don't quite feel can 
be warranted. 

Mr. Whitney. Are you familiar with the Prince plan of railroad 
consolidation ? 

Mr. Pike. That this Chicago fellow put out a few years ago ? 

Mr. Whitney. He is a Boston banker. 

Mr. Pike. I think it was the same man. 

Mr. Whitney. Mr. Prince boldly admitted that his plan would 
eliminate one-third of the employees, so I have pretty good authority 
back of me. I am telling you what the ambitions of the railroad 
bankers are. I am not admitting that we will ever consent to the 
elimination of that many. 

Mr. Pike. You are not going to stand for it ? 

Mr. Whitney. Consolidations^^ offer one very interesting aspect. 
They are the one thing that brings organized labor and the chambers 
of commerce together. When we have a threat of a railroad consoli- 
dation, the chambers of commerce all along the line threatened with 
elimination join hands with us, and we raise so much trouble about it 
that the Interstate Commerce Commission is convinced that it 
isn't a good thing, and they don't approve the consolidation. I am 
not admitting that we are going to lie down and let them eliminate 
250,000 men, but I am saying that is the ambition of the men who 
pretty largely determine the destiny of our economic system. 

Mr. Maginnis. That may be a plan, but it is a long way from being 
carried out, a consolidation plan of that size, don't you think? 

Mr. Whitney. I would feel a lot happier about your prediction if 
you were a railroad banker, because I know what their ambitions are, 
and I know that they want to do that. Whether they can do it is a 
question of how much we will protect ourselves. 

Mr. Pike. I will put it to you this way, that not one of the railroad 



16918 CONCENTRATION OF ECONOMIC POWER 

consolidations put through during the twenties eliminated anywhere 
near that proportion of men from the railroads involved. 

Mr. WnrrNEY. You bring up another question that is very im- 
portant and that probably should be answered, if we aren't getting too 
far from the subject. 

Mr. Pike. This is the subject, this elimination of men. We are 
not going far from the subject. 

]V^. Whitney. If you read the hearings and testimony and the 
arguTnent before the Senate, including the speech of Senator Cum- 
mings himself, at the time of the enactment of the 1920 Transporta- 
tion Act, you will find that the purpose of consolidation then was 
entirely different from the purposes now hoped to be achieved. I 
understand that since 1920 some two hundred railroads have been con- 
solidated, which is apparently what you have in mind. 

Heretofore consolidations in the railroad industry have been what 
is called end-to-end consolidations, the completion of lines, the throw- 
ing of two partially complete routes together. The whole purpose of 
the consolidation section of the 1920 act was not to eliminate men, or 
even to achieve economy. The word "economy" was not even men- 
tioned in connection with it. The whole idea was to establish rates 
which would give a fair return to the railroads. They had a very 
mean problem, which still exists today, which accounts for the, huge 
dividends of the C & O. and Pennsylvania and some of the other big 
roads. Theii problem was this: If they fix a rate low enough to 
make a fair return to the C. & O., it will be so low that the struggling 
roads can't live on it. 

On the other hand, if they make a rate high enough for the weak 
roads, then the Chesapeake & Ohio and the Bessemer and Lake Erie 
will pay huge dividends, and the returns would be unconscionable. 
So, they said, "The way to solve this problem is to even the thing out 
by having the strong roads absorb the weak." Now, of course, it 
was placing too much faith in railroad bankers to assume that they 
would ever go around and pick up these poor-paying roads and con- 
solidate them, so nothing has happened and we haven't had many 
major consolidations since the 1920 act went in force. But now we 
come along with a law where the whole idea is not to consolidate 
the weak with the strong but to consolidate for improved profits. 
Now, that is a major change in the purpose. I think if you will give 
that a little thought, you will see that when the whole purpose of 
consolidation is economy, you will get a greater elimination of men 
than when the purpose of consolidation is to complete routes or make 
the strong and weak come together. 

Mr. Pike. There is certainly something in what you say. 

Mr. Whitney. I want to make just 2 or 3 more points. I might 
call your attention to an article entitled "Ten Facts on Technology 
and Employment," published in 1936, by the Machinery and Allied 
Products Institute. I won't read that quotation, in order to save 
time, but the rather humorous part of that pamphlet is this. They 
started out to prove that machines do not destroy jobs, and they 
ended up by proving that if it were not for machines and- power 
there wouldn't be enough men, women, and children in the whole Na- 
tion to fill the jobs that would be required. To me that represents the 
lack of logic of the contention that machines do not eliminate jobs. 
Then, I want to callto your attention that Thomas Edison once 



CONCENTRATION OF ECONOMIC POWER 16919 

said, "Human slavery will not have been fully abolished until every 
task now accomplished by human hands is turned out by some ma- 
chine." And way back in the middle of the 19th century, Dv. Ure, an 
English expert economist, advised the manufacturing classes of 
England that the goal of manufacturers should be the development 
of machinery to the point where they could use the labor of women 
and children, which was cheaper than that of man, and that the 
ultimate goal was to displace all labor as nearly as possible through 
the development of the machine. 

Now, gentlemen, if we have in mind Thomas Edison who said all 
work should be done by machines, and bearing in mind the great 
growth of women in industry, we can see the tendency pointed out 
by Dr. Ure in the middle of the 19th century, and we are brought 
to the conclusion : How are we going to live if a few people own our 
natural resources and a few other people own our machines and 
machines do all the work or most of it? We will be living pretty 
largely by the grace of the few owners. I think that is a verj' serious 
matter. 

Another point that I want to impress upon you is this : Most people 
think of technological displacement of labor in terms of the machine. 
I would say that is only a small part of the problem. The improve- 
ment in products, for instance, paint which lasts for 5 years instead 
of 2y2 years — what does that mean? It displaces men who manu- 
facture the paint, it displaces house painters, and it displaces trans- 
portation workers, and so on. Bear in mind that the improvement in 
the quality of a product does not necessarily call for greater labor 
cost. For instance, I think for a pair of pliers that you buy in the 
10-cent store the labor cost is about the same as if you got a good 
pair of pliers that would last a lifetime. As invention and discovery 
force us into better and better products, that in itself will probably 

eliminate more jobs even than the machines as such. 

You know there is a tendency to bring the manufacturing centers 

closer to the point of consumption, to spread out Mr. Ford's idea. 

What is that going to do us railroad workers ? Naturally, it is going 

to mean less transportation. 
Finally, most all industries have a great increase in productivity 

with a very small increase in labor. It doesn't take any larger train 

crew if the passenger cars are filled or if the freight cars are filled 

than if they are partially filled. 
I don't want to be too much of a pessimist here today. I heard a 

story the other day that said the difference between an optimist, a 

pessimist, and a skeptic was well illustrated at the breakfast table. 

The optimist says, "Please pass the cream." The pessimist says, "Pass 

the milk." The skeptic says, "Pass the pitcher.'^ I am asking that 

we pass the pitcher. I think these are problems that we have just got 

to do something about. I am not a pessimist. I think they can be 

solved, but I think they are ominous, to say the least. 
Acting Chairman O'Connell. Have you any further questions? 
Dr. Anderson. No. 
Acting Chairman O'Connell. Thank you very much, Mr. Whitney, 

for coming. We will recess until tomorrow at 10 : 30. 
(The witness, Mr. Whitney, was excused.) 
(Whereupon, at 4 : 35 p. m., the committee recessed until 10 : 30 a. in., 

Tuesday, April 23, 1940.) 



INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER 



TUESDAY, APRIL 23, 1940 

United States Senate, 
Temporary National Economic Committee, 

Washington^ D. G. 

The committee met at 10:40 a. m., pursuant to adjournment on 
Monday, April 22, 1940, in the Caucus Room, Senate Office Building, 
Representative Clyde Williams, Missouri, presiding. 

Present: Representative Williams (acting chairman), Senator 
O'Mahoney (chairman) , Messrs. O'Connell, Pike, Lubin, and Brackett. 

Present also : William T. Chantland, Federal Trade Commission ; 
S. Abbot Maginnis, Department of Justice; and Dewey Anderson, 
economic consultant to the committee. 

Acting Chairman Williams. The committee will be in order, please. 

Dr. Anderson. Mr. Chairman and members of the committee, we 
are beginning today two important days of hearings on the subject of 
employment in agriculture and the whole broad field of agriculture. 
Today's witnesses are from the United States Department of Agri- 
culture, and together they form a panel which will attempt to present 
the range and scope of this problem. In working out the testimony 
with each other they have split it up into parts, each man appearing 
in the field in which he is expert. It is hoped that it will be possible 
for them to present their testimony without too much interruption. 
They will all be present after that for the questioning of the com- 
mittee, but I know we will expedite matters greatly if we can proceed 
in that way. 

The experts to be heard are Dr. Carl Taylor, of the Division of 
Farm Population and Rural Welfare, Department of Agriculture; 
Mr. Ernest Holcomb, who is reading Dr. William T. Ham's paper (he 
is.of the Division of Farm Population and Rural Welfare) ; Dr. Sher- 
man Johnson, Division of Farm Management and Costs of the Depart- 
ment of Agriculture; Dr. Louis Bean, economist, of the Bureau of 
Agricultural Economics of the Department of Agriculture; and Dr. 
Norman Wall, Division of Agricultural Finance, of the Department 
of Agriculture. It is presumed that they will take the day for their 
testimony. 

The first witness this morning will be Dr. Carl Taylor, followed by 
Mr. Ernest Holcomb. I would suggest swearing both witnesses at 
the same time. 

Acting Chairman Williams. Will you be sworn, please? Do each 
of you solemnly swear the testimony you are about to give in the 
matter now pending shall be the truth, the whole truth, and nothing 
but the truth, so help you God ? ^ 

Dr. Taylor. I do. ^ 

Mr. Holcomb. I do. 

124491 — 41— pt. 30- 47 16921 



16922 CONCENTRATION OF ECONOMIC POWER 

TESTIMONY OF DR. CARL TAYLOR AND ERNEST HOLCOMB, DIVI- 
SION OF FARM POPULATION AND RURAL WELFARE, DEPART- 
MENT OF AGRICULTURE. WASHINGTON. D. C. 

Dr. Anderson. Might we have a brief resume of yuiir professional 
experiences and background to determine your competency as wit- 
nesses in Ihis particular testimony ? 

Dr. Taylor. Well I was born and reared on an Iowa farm. After 
going through college I taught in the Agricultural College until I 
came to the Depai'tment here in Washington. I taught at the Uni- 
versity of Missouri and the North Carolina State College of Agricul- 
ture and came here with some of the newer agencies and for the past 
5 years I have been head of the Division of Farm Population and 
Rural Welfare. 

Dr. Anderson. Dr. Taylor, you have published works in this fields 

Dr. Taylor, "^es. 

Dr. Anderson. Will you give us some indication of its character? 

Dr. Taylor. I have a book on rural sociology which is just a text- 
book. I have a number of pamphlets, experiment-station pamphlets, 
having to do with farmers' organizations, community organizations, 
and so on. 

Dr. Anderson. And scientific organizations? 

Dr. Taylor. Yes. 

Dr. Anderson. Mr. Holcomb, what is your professional back- 
grouhd"? 

Mr. HoLCOMB. I was reared in Texas on a small poultry farm and 
educated at the Texas Agricultural and Mechanical College and have 
been with the Department of Agriculture for the past 4 years. Prior 
to that I worked at an experiment station in Texas. 

Dr. Anderson. We will proceed with Dr. Taylor. 

Dr. Taylor. I think Mr. Chairman, I will read a short statement, 
to give a sort of background for all the testimony that will be pre- 
sented during the day. 

technolog¥ IN agriculture 

Dr. Tayix)r. The information to be presented here has to do with the 
developpient of science and technology in farming, and their influ- 
ence upon efficiency in production, employment, pojjulation move- 
ments, and the capital debt structure in agriculture. The story in 
■brief consists of : 

(1) an increasing efficiency in the production per man in agricul- 
ture, but a steadily diniinishing opportunity for employment on 
farms ; 

(2) an increase in out-of-pocket and fixed costs of farm operations, 
and an increase in the economic risks involved in farming, due to ex- 
penses incurVed in the purchase and operation of machinery, and inter- 
est charged for debts and tax services; 

(3) an increase over several decades in the farm-mortgage debt in 
relation to farm values, resulting in a decreasing percentage of farm 
real^estate equities owned by those wlio till the soil : 



CONCENTRATION OF ECONOMIC POWER 16923 

(4) a icityward movement of farm population during pei*iods of 
prosperity, dnd a tendency of this movement to reverse itself during 
periods of depression, which has resulted in recent years in the ac- 
cumulation of a great surplus of persons of working age in the farm 
population ; 

(5) a fairly steady shift from owner to tenant operated farms since 
1880, resulting in an ever-increasing number of persons in agriculture 
occupying the lower rungs of the agricultural ladder ; 

(6) an increasingly larger share of farm income now spent for 
farm implements and machinery and for their operation, which con- 
tributes to the rigidity of the farm operating cost structure and the 
disparity of farm income and parity income, and increases the com- 
petition between operating costs and farm family standard of living ; 

(7) a sizable shift in the ownership of farms from farmers to cen^ 
tralized lending agencies in satisfaction of debts, and an increase in 
the proportion of farm-mortgage debt held by the centralized lending 
agencies; and 

(8) the effect of these trends to technological developments is seen 
in part in a somewhat different distribution of the number of farmB 
in relation to size and to income. In a number of types of farming, 
we now have a somewhat larger number of small -sized farms and a 
more marked increase in the relative number of large-gized farms 
Similarly, we now have a relatively larger proportion of inoome in thd 
relatively low-income brackets, and marked increases in the proportion 
of income in the farms of the highest-income brackets. 

That is an attempt to give a sort of over- all of the testimony to be 
presented during the day. 

My particular part of the testimony has to do with the population 
movements, unemployment in agriculture, the increase in percentage 
of farm people who are in the working-age group. 

The first chart that is before you presents the shift in the percentage 
of gainfully employed between the different occupations of the Nation, 
and shows a steadily diminishing percentage of all gainfully employed 
who are occupied in agriculture. 

Acting Chairman Williams. It may be received. 

(The chart referred to was marked "Exhibit No. 2637" and appears 
on p. 16924.) 

Dr. Taylor. This chart gives information from 1870 to 1930. I 
don't think I need to say much about it because it is pretty graphic in 
its display, but the percentage of the total gainfully employed in the 
imtion who were employed in agriculture fell from about 53 percent in 
1870 to about 21 percent in 1930. This was undoubtedly chiefly due to 
the shift to urban centers of many occupations and processes at one 
time carried on on the farm.: canning, smithing, milling, and things 
of that kind, to a point where a great deal of canning and even bread 
making and things of that kind have shifted into the city. 

The occupations which picked up the losses in gainfully employed 
from agriculture during this period were manufacturing and mechan- 
ical pursuits, which picked up steadily until about 1910, but have held 
about steady since 1910, the domestic, professional, governmental serv- 
ices of all kinds, and the trade and transportation and finance group, 
which is in those groups at the top, which increased from around 25 
percent of all gainfully employed in 1870 to about 38 percent now. 



16924 



C0N<:5ENTRATI0N OF ECONOMIC POWER 



The next chart simply takes that agricultural block and projects it 
by estimation from 1930 to 1940, although the estimation is not com- 
plete because it is now 1940. 

(The chart referred to was marked "Exhibit No. 2638" and appears 
below.) 

Dr. Taylor. During that period the decline has been stayed, due to 
lack of opportunity for rural born and reared people to continue to 
shift into urban industries. The percentage, therefore, in 1940 is pre- 

ExHiBrr No. 2637 
[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 

SHIFTS IN OCCUPATIONS. 1870-1930 

PERCENTAGE OF ALL PERSONS OVER 16 YEARS OF AGE ENGAGED IN EACH MAJOR GROUP OF OCCUPATIONS 



ProfeasiontI 

'^Public service' 

Domestic *nd 

personti 

Clerical 



Trade and 
transportation 




Manufacturing 

and 

mechanical 

industries 



1870 



1890 1900 1910 

• NOT ELSEWHERE CLASSIFIED 



US-OCMHTMEHT OF ACRICULTURC 



1930 



■URCAU OF AGKICULTUIIAL CCONOMICS 



Exhibit No. 2638 
[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 

WORKING POPULATION IN AGRICULTURE, PERCENTAGE OF U.S. 
TOTAL, GAINFUL WORKERS 10 YEARS OF AGE AND OVER 



50 



40 



30 



20 



10 




I 



V870 



1880 



1890 



1900 



1910 



1920 



1930 



1940 



U S DCFAKTIiCNT OF ACDICULTURE 



■ UREAU OF ACRICULTUHAl ECOHOMICS 



CONCENTRATION OF ECONOMIC POWER 



16925 



sumably about the same, 21 percent as in 1930, but of course the increase 
in population makes that a considerably greater number of people, I 
have not attempted to estimate just how many those people were. It 
simply tells the story that over a long period of time there has been a 
steady shift of the people of employable age out of agriculture into 
urban industries. 

The next chart is Movement to and From Farms, 1920-38. 

(The chart referred to was marked "Exhibit No. 2639" and appears 
below.) 

Exhibit No. 2639 

[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 
MOVEMENT TO AND FROM FARMS. 1920-38 

BIRTHS AND DEATHS NOT TAKEN INTO ACCOUNT 




1920 "22 

«» MnunMcm or «fiacM.niM 



34 '36 '33 



Dr. TayliOR. That shows the story for the last 20 years of that move- 
ment of population, presumably either attracted by opportunities for 
employment in cities or pushed by lack of opportunity on the farms. 
The lower block of the chart shows the movement annually from 1920 
to the end of 1938 (the estimates for 1939 are going through the mill 
at the present time) of the people who left cities to return to farms; 
there is a constant movement back and forth from farms to towns and 
cities and from towns and cities to farms. The upper curve, the one 
running from the bottom of the chart to the top, represents people 
who move from farms to cities, and the mottled section of the chart 
between the two curves is the net movement. You can see that for 
most of the period there has been a net movement of population from 
farm to city. Between 1922, which is the first high point in the top 
curve, and 1926, which is the second high point in the curve, there was 
a net movement; that is, there w^ere 3,480,000 more people, or more 
moves, from the farm to the city than there were back, leaving a net 
migration to cities from farms during that 5-year period of 3,480,000. 
That was a period of relative urban prosperity, and I think you may 
safely conclude that tvas largely the reason for the great flow from 
the farms to the cities. From 1926 until 1932 there was an almost 
steady decline annually of the people flowing from the farms to the 
cities, with the result that in 1932, the only year of which this was true, 



16926 



CONCENTRATION OF ECONOMIC POWER 



there was a net flow back to the farm. Taking the 5-year period pre- 
ceding 1932, there was a net flow of 1,588,000, or less than half what 
there was in the first 5-year period ; in 1932, at the depth of the depres- 
sion, there was a net movement of 266,000 people back to the land from 
farms and cities. In 1933 there were 318,000 movipg in the other direc- 
tion, so 1932 and. 1933 approximately balanced each other for that 
period. 

Then take the 5-year period since that time : there has been a move- 
ment back to the city again, fairly steady, but you will see that it 
has not been as great in the last 2 years as it was in the 2 years pre- 
ceding that. The net movement from farms to cities in the 5-year 
period since 1933 is about 1,604,000, or about $320,000 per year. This 
movement, as you can see, is not a depression phenomenon. The shift 
back and forth is something that is going on in our national life all 
the time, and yet I suspect we can draw the conclusion that it does 
vary with the opportunities for employment in agriculture as con- 
trasted with those elsewhere, except that when both agriculture and 
industry are down there seems to be a tendency for the people to 
seek shelter on the land. 

The next chart is, Estimated Rural-Farm Population 15-64 Years 
Old. 

(The chart referred to was marked "Exhibit No. 2640" and appears 
below.) 

Exhibit No. 2640 

[Subhiitted by the Bureau of Agricultural Economics, Department of Agriculture] 
ESTIMATED RURAL-FARM POPULATION 1 5-64 YEARS OLD. 1920-60 

( ASSUMING THAT MIGRATION AFTER 1930 IS HALF AS GREAT AS BETWEEN 1920-30*) 



MILLIONS 
20 






-rrr^Tm 


^ 




^^^^^^ 


^P 


t5 


^ 


^^^^ 




^^^^H 


^^^B 


10 
5 


^B 


^^^^^^^^75-3 9^^^^^ 


^H 


n 


^^B 


^^^^^^^^^^^^^^ 


^^^H 



1920 



1930 



1940 



1950 



1960 



tWAKKEN S.THOMPSON AND P. K. WHELPTDN -y 

BASEDON ESTIMATES OF FUTURE POPULATION BY STATES. NATIONAL 
RESOURCES BOARD. WASHINGTON. D. C I9t4 



U. S DEf ARTHENT OF ACKICULTURE 



■UREAUOr ASRICULTURltl ECONOMICS 



LABOR rOKCE ON THE FARM 



Dr. Taylor. This isolates the working-age group in the farm pop- 
ulation and shows you the trend in numbers t)f tliose people, that is 



CONCENTRATION OF ECONOMIC POWER 16927 

people from 15 to 65 years of age. That doesn't mean that no one 
works on a farm before he is 15 years of age and that everyone quits 
at 65, but we use census data and say those of working age are from 
15 to 65. You have a regularly increasing number of people in this 
group, because the migration to the city has slowed up, reversing it- 
self in 1932, and recovering a little less than half the migration of 
the twenties, and because of the number of births in the farm popula- 
tion. That rural birth rate feeds a great many more people into the 
lower end of the age limit than move out at age 65, so the number of 
people in this group constantly increases. 

That chart is projected to 1960, two decades in the future. 

That is not a very wild guess, because all the people who are 
bom in 1940 or before 1940 are now in existence and therefore the 
youngest of them will be 15 years old in 1955, so you don't have to 
guess on how many of them are going to be born. All you have 
to do is to take the mortality rates and the expectancy of deaths, 
and your calculation is pretty safe as to how many of those people 
will have reached 65, or 64, and so on down, because they are all in 
the population at the present time. 

If the amount of migration from farms to cities which prevailed in 
the twenties, when in 1 year over a million net moved into the cities 
off farms, were to take place again, our farm population would 
gradually diminish, as it did fairly steadily between 1910 and 1930. 
It was about 1,900,000 less in 1930 than it was in 1910 because of 
this cityward migration. If that happened, our farm population 
by 1960 would fall to about 29,000,000. There is no evidence, how- 
ever, in the present trend that it will fall that rapidly. On the 
other hand, if we were to have the phenomenon that we had in 1932 
and 1933, when there were just about as many people coming back 
from the cities and towns as went into the cities and towns, and the 
farm population retained all of its natural increasie, we would have 
about 45,000,000 in the farm population by 1960. We undoubtedly 
have today the largest farm population we have ever had because of 
this increase since the depression. So taking the migration from 
1930 to 1940, which you saw in Exhibit No. 2639 was around 
300,000 a year, or assuming that the migration in the next two 
decades will be one-half of what it was between 1920 and 1930 (and 
that is higher than it is running at the present time) we would 
then probably have in 1960 37,500,000 farm population. 

I think I had better read the last paragraph of the explanation 
that you have before you. 

Should the rate of net migration away from farms during the next two 
decades (1940 tol960) be half as great as during the pre-depression decade of 
the I920's (and half is considerably above the rate during the decade of the 
1930's), the increase in farm population (by 1960) will be 16 percent, or 
5,000,000 people. 

Now because most of the people are in the age group from 15 to 
65, '4,000,000 of those people would be in the working-age group, 
so we would add to the people now seeking employment in agricuir 
ture about 4,000,000 more people trying to find the way to make a 
living in agriculture. 

The next chart shoA^ that a little more graphically. 

(The chart referred to was marked "Exhibit No. 2641" and appears 
on p. 16928.) 



16928 



CONCENTRATION OF ECONOMIC POWER 



Dr. Taylor. The block to the right shows the male farm people of 
working age and the one to the left both male and female. The 
story of that chart is a continuation of the one which I just men- 
tioned, that we have a steadily growing number of farm people of 
working age in agriculture. 

And that number is far greater than the number needed to replace 
the people who die in agriculture, and far greater than the number 
needed to displace or to replace all the farmers who reach 65 years 
of age, if all of them quit, farming at that age, so on the right-hand 
block even assuming that all farmers will retire' at 65 — and they 
won't — and that they have the normal death rate according to the 
experience tables of the life insurance companies, you will have 

Exhibit No. 2641 
[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 

RURAL FARM POPULATION: TOTAL ENTRANTS TO 
AGE GROUP 15-64,1930-40 

THOUSANDS 



7.000 
6,000 
5,000 
4.000 
3«00 
2.000 
t.OOO 















:'-y. 4052 :'■'■: 


V 




\ 




\ 




^^ 




V 






,^ 


•:"•;■ 1.886 ■;•:■ 


SURPLUS AVAILABLE 

FOR MIGRATION 

NEEDED TO REPLACE 
DECEDENTS 

NEEDED TO REPLACE 
RETIREMENTS 


SX^1.59oJX8^ 




'^-.^ 




--,^ 




^■Ho^H 




mjj 



TOTAL 



MALE 



U S OtPAIITIttNT OF ACRICULTURE 



BURCAU OF ASniCULTURAL ECONOMICS 



1^886,000 boys in the farm population either hunting for opportuni- 
ties to migrate into other enterprises or piling up on the farm trying 
to make a living there. 

Now the last chart,- which is a map. 

(The chart referred to was marked- "Exhibit No. 2642" and ap- 
pears on p. 16929.) 

Dr. Taylor. There are two maps, in fact, but this one is the im- 
portant one. It is an attempt to get some judgment on what sort 
of an economic environment these 1,886,000 boys coming on in the 
farm population have. That doesn't assume tliat anybody is moving 
out from the city, but includes only boys who are on the farm now, 
who will graduate at 15 years of age. What sort of economic en- 
vironment they are going to face, as best we can calculate? Those 
data are from the Unemployment Census, and with your permission I 
will read the page here, because while we may not know exactly 
how to interpret these as we project them into the future, they 



C0NC5ENTRATI0N OF ECXDNOMIC POWER 



16929 



present a pretty serious problem. This increased farm population 
of working age is not only confronted with the lack of farms to which 
to go, and a not too rosy, picture from the standpoint of farm income, 
but they are immediately thrown into competition with a lot of 
pe(n)le out there who are already unemployed. In the face of an 
almost certain increase in the number of farm-born persons seeking 
employment in agriculture, there is a great volume of unemployment 
already existing on farms. In 1937, according to the Unemployment 
Census, 1,547,000 males living on farms were either totally or par- 
tially unemployed, or had only emergency employment. 

Acting Chairman Welliams. At what age, just in that connection ? 

Dr. tStixjr. That age, again, was, I thiSi, 15 to 65, or was it 18 to 
65 ? I think it was 15 to 65. 

Of this number, '576,000 were partially emplo3^ed and 266,000 were 
employed in emergency public works — W. P. A., C. C. C, N. Y. A., 
and so forth ; the remaining 705,000 were totally unemployed. 

Exhibit No. 2642 
[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 




UNITED STATES TOTAL 
»71.000 PERSONS 



CENSUS OF 
UNEMPLOYMENT 



tt. S. DEPARTMENT OF ASmCULTURE 



■ UREAU OF ASRICULTURAL ECONOMICS 



Unemployment on farms is not entirely due to the economic depres- 
sion but in part to a combination of long-time trends. As has been 
noted, the proportion of the total gainfully employed in the Nation 
who were employed in farming declined at an almost constant rate 
from 1870 to 1930, but during this period the increase in nonfarm 
employment created opportunities for those not needed in agriculture. 
The result was a net migration from farms to cities, which reached a 
maximum of 500,000 to 1,100,000 each year from 1922 to 1926. This 
annual net migration now is only a little more tlian 300,000 per year. 

In other words, as these people came on in the past they found an 
opportunity to leave the farm and find employment elsewhere. But 
that is not true now — neither the migration flowing to the cities as it 
did and unemployment piling up on the farm. 



16930 



CONCENTRATION OF ECONOMIC POWER 



It does not, therefore, appear that the unemployment situation 
among farm families will correct itself through natural migration 
away from farms unless we have an industrial pick-up far beyond 
anything that has happened up to the present. Should the rate of net 
migration away from farms during the next two decades be half as 
great as during the decade from 1920 to 1930, the increase in the farm 
population of productive age from 1940 to 1960 would be 23 percent, 
and the problem of unemployment on farms would become one of the 
major problems of the Nation. Unless therefore net migration to the 
cities from farms develops in great volume, or new opportunities for 
employment are developed in agriculture, the problem of unemploy- 
ifient in the farm population will grow steadily worse. 

The next chart simply shows the partially employed. 

(The chart referred to was marked "Exhibit No. 2643" and appears 
below.) 

Exhibit No. 2643 

[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 




CENSUS 01- 
UNEMPLOYMENT 



U. S. DEPARTMENT OF AGRICULTURE 



BUREAU OF AGRICULTURAL ECONOMICS 



PersonV, living on farms who registered in the nnemployment census of November 1937 
as partly unemployed were numerous in the Cotton Belt, particularly in the Mississippi 
River bottom lands of eastern Arkansas and southeastern Missouri. But large numbers 
registered also in the Appalachian region, extending from Maine to northern Georgls 
and Alabama, in Ohio, Indiana, Missouri, and the Lakes States, also in the valleys ol 
the Pacific Coast. Relatively few registered in the Corn Belt and the Wheat Belt 

Dr. TAYiiOR. The only thing I do not comment upon in the written 
statement you have there is anything concerning the location of these 
unemployed and partially employed people. I might make one gen- 
eralization concerning that, and that is that the greatest number of 
unemployed, partially employed, and employed in emergency works 
programs of different kinds appear in those very areas of the Nation 
where the birth rate is highest and where the farm population is stack- 
ing up in competition with itself in a most marked way. 

Acting Chairman Wiluams. In that connection what is considered 
"partly unemployed" on a farm ? What is the definition ? What class 
do you cover with that term ? 



CONCENTRATION OF ECONOMIC POWER 



16931 



Dr. Taylor. These data are from the unemployment census and I'm 
sorry I don't know what they used for that. In the regular census 
$150 income off the farm would make you partially employed in indus- 
try, but I am sorry I can't say what the unemployment census figures 
used. I don't know whether any of the other men know that definition 
for their unemployment or not. 

Mr. Holcomb, Mr. Chairman, will take this story of the farm popu- 
lation and farm labor on through the next charts. 

Mr. HoLcoM?. Dr. Taylor has already shown in the first chart that 
there has been a steadily diminishing percentage of the gainfully 
employed in agriculture. I am submitting a chart showing the per- 
centage in each tenure class gainfully employed in agriculture. 

(The chart referred to was marked "Exhibit No. 2644" and appears 
below.) 

Exhibit No. 2Q4t 

[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 



PERCENTAGE IN EACH TENURE CLASS GAINFULLY EMPLOYED IN AGRICULTURE. 

UNITED STATES. 1850-1935. WITH ESTIMATED CONTINUATION OF 

TREND LINES PROJECTED TO 1940 AND 195C 



80 



60 



40 



20 




1850 1860 1870 1580 1890 1900 1910 1920 1930 1940 1950 



U 9.0EPARTMENT OF a9«ICVLTUIIE 



• UREAU OF AGRICULTURAL ECONOMICS 



INCREASE OF EARM TENANCY 



Mr. Holcomb. Since 1880 there has been a continuous decrease in 
the proportion of farm owners and an accompanying increase in the 
proportion of farm tenants.. In 1880 owners were 42 percent of all 
those engaged in agric\ilture ; in 1935 they were 31.8 percent. Because 
of debt, the real.equity of operating owners was less in 1935 than these 
figures indicate. In 1880 the tenants formed 14.4 percent of all the. 
persons employed in agriculture; in 1935 they formed 23.1 percent. 

A part of the reported growth of tenancy in the United States since 
1880 has consisted of movement from the . status of laborer to that 
of cropper, which in many cases means little or no advance up the 
agricultural ladder, since the status of southern croppers is more like 
that of laborers than of tenants elsewhere. Between 1920, when it 



16932 CONCENTRATION OF ECONOMIC POWER 

first became possible to classify croppers separately from other tenants, 
and 1935 the proportion of tenants other than croppers increased from 
16 to 17.3 percent, and the proportion of croppers from 4.7 to 5.8 
percent of all persons employed in agriculture. In 1920 croppers 
constituted 22.9 percent of all tenants, and in 1930, 29.1 percent 
Between 1930 and 1935 their numbers declined from 776,000 to 716,000, 
or to 25 percent of all tenants. As further technological improve- 
ments are made, their numbers are likely to decline still further. 

The figures upon which this chart is based indicate a downward 
trend from 1880 to 1900 in the proportion of laborers and thereafter 
a trend upward. The imperfections in the census data for those years 
are such that, on slightly different assumptions as to the corrections 
to be made in the census figures, an increase in the proportion of farm 
laborers up to 1910 could be shown, and thereafter a definite slowing 
up of the rate of increase in the proportion of farm laborers. The 
main point to be observed is that during the past 30 years there has 
been no decrease in the proportion of laborers, but rather a tendency 
toward increase of that of hired hands. This development is as sig- 
nificant as the increase in the proportion of tenants. It is lively to 
continue. In many areas it has been offset to some extent by increas- 
ing use of power machinery. 

I would like to point (Jut, in connection with "Exhibit No. 2644," 
the line sloping upward between the family laborers and hired 
laborers between 1930 and 1935. We do not attach any particular 
significance to the magnitude of that change, but tlie direction of the 
change I think is significant. 

Acting Chairman Williams. Have you got a reason for that ? 

Mr. HoLcoMB. Dr. Taylor has already pointed out one thing — the 
movement of population during that period. . There was a net migra- 
tion back to the farms, and during that period I believe the following 
witness will show that there has been a more rapid increase in mech- 
anization. It is probably a joint phenomenon of increasing farm 
population and mechanization. 

Dr. Taylor. May I add a remark, Mr. Chairman ? 

Acting Chairman Williams. Yes. 

Dr..TATLOR. I think it is partly due also, as Mr. Holcomb said, that 
when you get in a tough spot on a farm you simply quit paying the 
son, therefore he is no longer hired labor but a family worker; you 
quit hiring a hired man and you and the children do the work, so in a 
period like that you naturally have fewer hired men and more family 
labor. I would like to tie this chart up also a little bit to the testimony 
I gave by saying that I think it gives a part of the result of the heavy 
competition of farmers with each other when your population piles up, 
and they do compete heavily with each other. . You find a greater and 
greater number of them shifting to the bottom rungs of the agricul- 
tural ladder, as is shown with the number of decreasing owners, and 
the increase of tenants and laborers and share croppers. That is hap- 
pening in our total farm population, an ever greater number of them 
appearing on the lower rungs of the agricultural ladder. 

Dr. Anderson. Dr. Taylor, if you substitute actual numbers for the 
percentages shown in this chart, would the number of owners be 
decreasing 

Dr. Taylor. Yes ; over the period the number of owners would de- 
crease. When you got down ,iHto the tenant group, during the last 



CONCENTRATION OF ECONOMIC POWER 16933 

few years the numbers would increase but the percentage would not 
increase, so your numbers would be different from your percentage 
figures. 

Dr. Anderson. Is that true with respect to laborers as well? The 
number of laborer? has grown. 

Dr. Taylor. By and large I think the number has remained pretty 
steady in the labor group itself. After you drop below the owner 
group, you have a different meaning for labor there than you may 
have in hired labor. You have in the upper part of the chart owner 
operatoi'S, and below that "all others"; and you have the total farm 
population in considering your percentages, rather than just those 
operating farms. 

Acting Chairman Williams. In order that' we may have in the 
record a clear understanding of tenant and share cropper, what is the 
distinction upon which that chart is based ? 

Mr. HoLCOMB. The distinction is largely the one used in the census. 
The matter of ownership of work stock and equipment was the basis 
in the several censuses. The share cropper does not own his work stock 
and equipment, the renter does. 

Acting Chairman Williams. And then what is the difference be- 
tween the laborer — or is there such a term? You don't seem to 
designate it, as a farm laborer and sharecropper. 

Mr. HoLcoMB. The wage laborer is the second group from the 
bottom. He works for a wage, monthly, weekly, or piece rate, while 
the sharecropper works for a share of the crop. 

Acting Chairman Williams. Is that hired labor in cash or part 
crop ? Always in cash ? 

earnings of farm laboiuers 

Mr. HoLcoMB. Yes. Of course, in many areas there is a custom 
of allowing them a dwelling place and garden patches and grazing 
privileges for their livestock, I should say, in addition to their 
money wage. 

Acting Chairman Williams. That was my understanding of those 
terms, but I thought it might be well to make it plain. 

Mr. Holcomb. In the next two tables we present some informa- 
tion as to the earnings of sharecroppers and wage laborers. 

(The tables referred to were marked "Exhibits Nos. 2645 and 
2646" and are included in the appendix on pp. 17440-17441.) 

Mr. Holcomb. The first one compares the income of sharecroppers 
and wage laborers. The data of incomes of hired farm workers are 
so scattered and incomplete as to defy comparison. However, it is 
apparent that such incomes are low, and that they are lower in some 
farm areas than in others. Comparable data from cotton farms in- 
dicate that in recent years the net cash earnings of hired workers, 
whether sharecroppers or wage hands, only occasionally exceed $100 
per worker per year, and that even when goods for liome use and 
perquisites are added, total annual net income ]wr worker seldom 
exceeds $150. Low net cash incomes of sharecroppeis were reported 
in recent studies from both the eastern Piedmont and the Mississippi 
Black Belt and Delta areas. The highest net cash earnings were 
in the Piney Woods area of Texas in 1938, with an average of $152 
per worker. In the case of cotton wage hands, the lowest average 



16934 CONCENTRATION OF ECONOMIC POWER 

cash earnings reported were $65 per worker per year in the Black 
Belt in 1934, while the highest earnings were in 1937 in the Delta 
areas at $112 per worker. 

The data indicate that as regards income the cropper is little better 
off than the wage hand. The slight income differential in favor of the 
former is almost wholly accounted for by the differences in the value 
of production for home use. Per family the difference is greater 
because of the larger average size of the cropper family. 

I would like to point out, in addition, in connection with this, the 
percentage of their total net income that accrues from home-use goods 
and perquisites, as is shown in the third column. That ranges from 
about 30 percent in 1936 for the Yazoo-Mississippi Delta area to ap- 
proximately 52 or 53 percent in that same area in 1932; the dollar 
values attached to those home-use goods and perquisites were not 
greatly different between the 2 years, but the percentage of the total 
increased materially. 

For the wage hands, the percentage represented by home-use goods 
and perquisites did not range quite so widely. Their home-use goods 
and perquisites are quite a bit lower than that of sharecroppers, I 
think principally because of the relative instability of that groHp of 
workers, for at least the sharecropper has 1 year that he can count on 
being on the farm. 

Passing on then to the next table, we show income figures for wage 
hands in various areas in the United States, from studies that have 
been made from time to time. 

(The table referred to was marked "Exhibit No. 2647" and is in- 
cluded in the appendix on p. 17442. ) 

Mr. HoLCOMB. These are for the period between 1930 and 1938. 
With respect to other areas and crops than, cotton, few comparable 
studies have been made, owing to variations with respect to home-use 
products, perquisites, total family earnings, and total earnings 
throughout the year. However, taking the figures as they stand, in- 
comes of farm laborers in the various areas, the studies may be grouped 
as follows : 

Arranging them from lowest to highest, from these spot studies, the 
lowest income appears to be in the tobacco area of Kentucky, between 
1935 and 1936, with cash earnings of $188. In the small-grains area 
of Minnesota and Kansas those earnings amounted to $206 and $205, 
respectively. In the truck area of New Jersey, in 1936, the earnings 
amounted to $265, and in the Corn Belt in Illinois and Iowa in 1935- 
36 the cash earnings of wage hands amounted to $306 and $312, 
respectively. 

A study made in four sugar-beet States in 1935 indicated that tlieir 
earnings amounted to about $340. 

In the State of Washington, laborers working in hops earned $352; 
that is, single persons. Heads of families earned $496. 

In California we have two studies during this period. The first was 
made in 1935 and indicated that the earnings of migrant workers who 
had applied for relief at the close of that year were $261; and in 
another study in Placer County, a fruit county in California, the earn- 
ings amounted to $651. That study took the workers as they came in 
the fields, irrespective of whether or not they were on relief. 



CONCENTRATION OF ECONOMIC POWER 16935 

Acting Chairman Wblliams. Does that mean that there has been 
that much increase in the earnings of the hired laborers in California 
during the period ? 

Mr. HoLcoMB. As a matter of fact, you will notice in section IV of 
"Exhibit No. 2647," between 1930 and 1935, there was an actual de- 
crease in the earnings of these workers. These are migrant workers 
who applied for relief at the close of the particular year. 

Actmg Chairman Williams. What is the significance of the big dif- 
ference between those two figures in the same State, of $261 and $651? 

Mr. HoLCOMB. The figures shown under section IV (A) on the chart 
are obtained from the entire State from relief applicants who had 
worked as migrant workers in agriculture durirg the past year. 
Under IV (B), the study made by the Department of Agriculture was 
made in one county in California, and they obtained information from 
workers irrespective of whether or not they obtained relief. 

Mr. Pike. You got the lowest section, though. 

Acting .Chairman Williams. I don't quite understand yet what you 
mean by "relief." Does that mean the workers who were on public 
relief? 

Mr. HoLCOMB. That is a study made by the State Relief Adminis- 
tration of California, and they obtained this information from clients 
as they applied for relief. 

Acting Chairman Williams. Take the figure of $261 ii> California 
in 1936. What does that represent? 

Mr. HoLCX)MB. That probably represents the lowest-down group 
employed in agriculture. 

Acting Chairman Williams. But if they are employed, they are 
privately employed? 

Mr. HoLCOMB. Yes. 

Dr. "Anderson. Mr. Chairman, I can explain the figure, because I 
know something about its source. Applicants for relief at the State 
relief station stated that during that year their earnings per family 
had totaled this amount. 

Mr. Pike. They were irregularly employed. 

Dr. Anderson. They were casuals, migrants, and seasonal har- 
vesters employed during that year at some sort of agricultural labor. 

Mr. Pike. That wouldn't be a fair section of the agricultural Ip-bor- 
ers in the State. 

Dr. Anderson. That is precisely what Mr. Holcomb said. It is the 
lowest rung of the agricultural group. 

Acting Chairman Williams. Is the 651 intended to be a fair 
average l 

Mr. Holcomb. I think it is a fairly representative figure for that 
one county. 

Acting Chairman Williams. Oh, just for the one county. That is 
what kind of industry, the fruit industry ? 

Mr. Holcomb. Fruit. It is in the section north and east of Sacra- 
mento. 

Acting Chairman Williams. What, in addition to cash income, do 
these hired laborers receive? What other kind of income do they 
have, if any ? 

Mr. Holcomb. Most of them receive some perquisites. It varies 
from area to area. Some studies have been made along that line. In 



16936 CONCENTRATION OF ECONOMIC POWER 

the South and East it amounts to quite a bit. What it amounts to in 
the western areas I don't know. 

Acting Chairman Williams. What is the nature of it? 

Mr. HoLCOMB. Fruits, perhaps culls, lodging, occasionally board, 
and in some instances washing and ironing for the men. 

Acting Chairman Williams. A garden patch for married men? 

Mr. HoLcoMB. For those regular workers, yes; but not the seasonal 
workers. 

Acting Chairman Williams. And a house or hut to live in? 

Mr. HoLCOMB. That is right; a place to live. 

Dr. Anderson. You wouldn't implj^ that the workers receiving $651 
in Placer County were year-round workers in that county who were 
provided these perquisites. 

Mr. HoLcoMB. No ; many of them were, as a matter of fact, migrant 
workers, and I don't know what the amount of perquisites amounted 
to in that particular study. I don't know that they obtained informa- 
tion with respect to perquisites. That figure probably should bp taken 
into account, or it should be taken into account in that figure that the 
expense of moving about was not obtained in the study. How much 
that moving around from place to place was, I don't know. 

Dr. Taylor. That includes the very best and the very lowest. It 
averages up pretty high, because it includes those permanently em- 
ployed and those who have a house, and so forth. 

Colonel Chantland. Isn't it a fact that in certain sections the com- 
mon practice is, in the employment of labor, that they are founded 
completely — they have their board and washing and ironing, so that 
what they get is net in that sense? These migrants are not in that 
class, are they? 

Mr. HoLcoMB. No. Occasionally they do receive fruits, though. 

Colonel Chantland. I heard you saj'^ that. 

Acting Chairman Williams. Have you made a study to indicate 
what influence this especially large migration in California has had 
on wage rates there when they hire farm labor ? 

Mr. Holcomb. A study was made a year or so ago. The tabulations 
are now going on in our regional office in Berkeley, Calif. Just what 
that will show I am not certain yet. The tabulations are not complete. 

Acting Chairman Williams. I was just wondering whether John 
Steinbeck's portrayal was anything like accurate in his Grapes of 
AVrath. 

Dr. Anderson. I might interrupt to say that Dr. Paul Taylor, who 
will be on the witness stand tomorrow afternoon, is the authority on 
this western problem. We brought him particularly because of the 
interest in it, and he is prepared to give such data as are available on 
that subject. 

Acting Chairman Williams. Proceed. 

Mr. Holcomb. These data are not shown on that chart. There were 
studies made in 11 different areas in the year 1936 by Folsom and 
Vasey of the Department of Agriculture which show cash earnings of 
workers in 11 different areas. The cash earnings range all the way 
from $126 in the self-sufficing area of Tennessee to this same $651 
figure in Placer County, Calif. The lower incomes were in the south- 
ern areas, and the higher incomes were in California, the dairy areas, 
and in the Corn Belt. 



CONCENTRATION OF ECONOMIC POWER 16937 

Acting Chairman Williams. Is there any indication — let me ask 
you in connection with the various figures that you have given here — 
as to the time in which these laborers were employed during the year; 
for instance, whether their period of employment was much longer in 
onei area of the country than it was in another, and for that reason 
perhaps their wages might be higher or lower, depending upon the 
period of regular employment? I am talking now about the ones 
who are regularly employed and considered so, 

Mr. HoLCOMB. There is some data available on the seasonal dis- 
tribution of employment, and we parleyed once about presenting that 
information, but we decided against it because of the length of testi- 
mony and the shortness of the time we were permitted to use. That 
information could be made available. I don t have it with me now. 

Concerning the seasonal distribution of workers in the Southern 
States, they have two peak periods, particularly in cotton, around the 
cotton chopping and hoeing times, and again in the cotton-harvest 
times. That varies from one part of the Cotton Belt to the other. 
In the Southern States the first peak in cotton chopping and hoeing is 
far more significant than it is in the western end of the belt, in western 
Oklahoma and Texas. That particular peak is negligible in the 
Cotton Belt, but in the cotton harvest it is quite significant in all areas. 

Acting Chairman Williams. The annual income might not be an 
index as to the hourly wage he received. 

Mr. HoLCOMB. That is right. 

Acting Chairman Williams. By reason of varying periods of em- 
ployment in the same year in one place and another. 

Mr. HoLcoMB. We have two studies, the manuscripts for which have 
been completed. One is for two counties in South Carolina, one in the 
Piedmont cotton area, and one in the Coast Plains tobacco section. 
Also, there is another study in Arkansas. A mimeographed bulletin 
has been released to three counties, and the manuscript is now in hand 
to be published in the near future for six additional studies, three of 
which are in the delta and three in the hills. 

In those studies the seasonal distribution of employment and the 
earnings by month are shown. There is quite a significant change in 
earnings from January to May, the first peak, and it dropped along 
about in August, which is comparable, perhaps, with March or Feb- 
ruary, the peak rising again and continuing until early November, 
when it drops off to a low during the winter months. With that 
distribution of earnings and the hours of work, from the number of 
days worked, it is possible to show the daily earnings in terms of real 
wage rates received by sharecroppers and wage laborers, and as I recall 
in the South Carolina study, it runs around 70 cents a day. 

Acting Chairman Williams. Of course, I believe you stated that it 
was a fact that the annual income, perhaps as the daily income, of the 
farm laborer in the South was lower than it was in Northern and 
Western States. That is pretty generally recognized, isn't it? 

Mr. HoLCOMB. I think it is fairly true. There haven't been many 
studies made that can be used to compare it to make it a statement of 
fact, but there is reason to believe that. 

124491 — 41— pt. 30 48 



16938 CONCENTRATION OF ECONOMIC POWER 

"gainfully employed" in agriculture 

Mr. HoLcoMB. The next table shows the number of gainfully em- 
ployed persons in agriculture. The table shows the total employ- 
nent between 1909 and 1939. The index of the trend line, based 
upon the 1924-29 average, shows the number of family workers, 
which includes the operators of the farms themselves, and their de- 
pendents who worked with them without pay, and the number of hired 
workers. 

(The table referred to was marked "Exhibit No. 2648" and is in- 
cluded in the appendix on p. 17443.) 

Acting Chairman Williams. I don't believe we have had a definition 
in connection with this study here as' to what you mean by gainfully 
employed. 

Mr. Holcomb. I think, according to the Census definition used by 
the Agricultural Marketing Service in developing this series of data, it 
is those persons 10 years of age ajid over gainfully employed in 
agriculture. 

Acting Chairman Williams. Just the expression "gainfully em- 
ployed" itself is what I am inquiring about. 

Mr, HoLCXDMB. In this it is the number of persons who worked 2 
weeks or more during the month of January, so it is conditioned by 
census enumeration data. However, these data were adjusted to in- 
dicate an average for the year, to eliminate the bias of a particular 
date of enumeration. 

Acting Chairman Williams. I must confess that that isn't very 
clear to me yet. It may be to all the others, and I don't want to labor 
the question any further. It isn't entirely clear in my mind what is 
meant by the expression "gainfully employed." 

Dt". Taylor. It simply means that the person does work. He may 
be past 10 years of age, but .if he does no work in any occupation, he 
is not classed as gainfully employed. 

Acting Chairman Williams. Regardless of the amount he does. 
If he worked 1 day during the year, he would be gainfully employed. 

Dr. Taylor. If he earned money; yes. You asked a moment ago 
about the partially employed in the unemployment. I don't know 
what definition they used there, but if a fellow works and earns $5, he 
would be partially employed. 

Acting Chairman Williams. Let me see that I understand it. As I 
understand you now, it would mean anybody that was employed for 
any length of time during the year would be considered gainfully em- 
ployed. 

Dr. Taylor. That is right. 

Acting Chairman Williams. If he did anything for which he re- 
ceived money during the year. 

Dr. Taylor. Thixt is right. And the figure that Mr. Holcomb gave 
of those who were employed for a given period of time preceding the 
taking of the census applied only to farm labor, as to whether he 
would be counted a farm laborer or not, provided he had been em- 
ployed then, but there is a difference of meaning in the descriptions 
as to whether you are a farm laborer of working age, or gainfully em- 
ployed. They are all different things. 

Acting Chairman Williams. You might say all those who are avail- 
able for employment within certain ages during that year, because if 



CONCENTRATION OF ECONOMIC POWER 16939 

he IS only employed for an hour or a day, it would cover the entire 
field. 

Dr. Taylor.- It can't be quite all those who are available, because 
there would be some in there who didn't work. 

Mr. HoLCOMB. As a matter of fact, I believe the census in 1930 
showed about 8 percent 6f the females 10 years of age and over who 
lived in rural farm areas were employed in agriculture, and about 69 
percent or 70 percent, something like that, of males working, came 
from employment in agriculture, but these figures are the average 
number of persons employed on the first of each month. 

Acting Chairman Williams. It doesn't, then, include the family 
workers, the boys, and I will say the girls, who were working at home 
for their parents. 

Mr. HoLcoMB. Yes; they are included in that middle column, family 
workers. 

Acting Chairman Williams. They are included as gainfully em- 
ployed, are they? 

Mr. HoLCOMB. Yes; they are helping produce on farms — the num- 
ber of family workers employed on farms, including the farm operator 
himself, on the first day of each month. 

Acting Chairman Williams. Then it really includes everybody who 
does any work on the farm ? 

Mr. HoLCOMB. That is right — 10 years of age and over. 

Acting Chairman Williams. We are getting about down to it now, 
I think. 

Mr. HoLCOMB. It appears that from 1909 to 1915 there was a slight 
decrease in agricultural employment which, after a slight increase in 
1916, fell rapidly until 1919, owing to the competition of other indus- 
tries with agriculture for manpower. From 1919 there was a slight 
increase until 1926, when a downward trend set in which continued 
without interruption in 1935 until 1939. 

Wage laborers in agriculture numbered 2,868,000 in 1909, while in 
1939 this number had been reduced to 2,479,000. However, between 
1909 and 1929 the trend was slightly upward. Thereafter, until 1934, 
there was a decrease in hired laborers and an increase in the number 
of family workers. Although from 1935 to 1937 there was an increase 
in the number of hired laborers, in 1938 the trend was again down- 
ward. 

Dr. Anderson. Mr. Holcomb, what was the proportion of hired 
laborers to family workers, including the farmer himself, in 1939 — 
2,479,000 to 8,150,000? 

Mr. HoLcoMB. The proportion of hired laborers represented by 
family workers? 

Dr. Anderson. The proportion hired laborers are of the total, which 
would give the percentage rate. 

Mr. HoLCOMB. I am not sure that I follow you. 

Dr. Anderson. Let me put it this way. It would appear from this 
that about 30 percent of farm employment is hired-labor employment. 

Dr. Taylor. Only about 25 percent. 

Mr. HoLcoMB. About 25 percent of all persons employed in 1939 
were hired labor. I think there is quite a variation in those pro- 
portions with changes in prices and changes in wage rates. You take 
both of them into consideration. 



16940 CONCENTRATION OF ECONOMIC POWER 

Dr. Taylor. It varies greatly in certain sections of the country, too. 

Dr. ANDERSON. Well, I would like to have comment on this other 
point. In the census of gainful workers— and this will explain partly 
the chairman's question of a moment a«^o — which includes both em- 
ployed and unemployed, but available for employment, the total in 
1930 was 4,392,000 agricultural laborers. In your segregation of hired 
workers actually employed at a given time in the month average em- 
ployment for the year 1930 was 2,850,000. 

Mr. HoLCOMB. Yes; the census, I believe, obtained their informa- 
tion as to the number of hired workers as of the date of enumeration. 

Dr. Anderson. That is right. 

Mr. HoLCOMB. These are monthly averages as obtained from the 
crop reporters from the farmers. 

Dr. Anderson. Would the difference, roughly, approximate the 
number of agricultural laborers available but unemployed? In other 
words, there is apparently a plentiful supply of agricultural labor. 

Mr. HoLcxDMBE. Yes ; I am sure there must be. 

Dr. Anderson. Would this indicate an oversupply of agricultural 
labor in terms of employment, available employment opportunities? 

Mr. HoLCOMBE. I suspect that it would. I haven't that accurately. 

Dr. Anderson. Mr. Chairman, that concludes the testimony, and we 
can go on to the next witness. 

Acting Chairman Williams. Thank you, gentlemen. 

(The witnesses, Dr. Taylor and Mr. Holcombe, were excused.) 

Dr. Anderson. The next two witnesses are Dr. Sherman Johnson, 
Division of Farm Management and costs; and Dr. Louis Bean, the 
economist of the Bureau of Agricultural Economics; and I would 
like of have Dr. Kifer, of the Division of Farm Management and 
Costs, at the same time. 

Acting Chairman Williams. Have you been sworn? 

Dr. Bean. I have, sir. 

Acting Chairman Williams. Do you and each of you solemnly 
swear that the 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 ? 

Dr. Johnson. I do. 

Dr. Kifer. I do. 

TESTIMONY OF SHEKMAN E. JOHNSON, HEAD OF DIVISION OF 
FARM MANAGEMENT AND COSTS, UNITED STATES DEPARTMENT 
OF AGRICULTURE, WASHINGTON, D. C, AND LOUIS H. BEAN, 
ECONOMIST, BUREAU OF AGRICULTURAL ECONOMICS, UNITED 
STATES DEPARTMENT OF AGRICULTURE, WASHINGTON, D. C, 
AND DR. R. S. KIFER, DIVISION OF FARM MANAGEMENT AND 
COSTS, UNITED STATES DEPARTMENT OF AGRICULTURE, 
WASHINGTON, D. C. 

Dr. Anderson. Mr. Chairman, we just asked for a definition of 
partially employed workers according to the 1937 census, and learned 
that the Census Bureau made no precise definition at the time for use 
by enumerators. The enumerators left cards with farmers, and they 



CONCENTRATION OF ECONOMIC POWER 16941 

were filled out on each farm according to approximation of partial 
emplo3'ment on the farm. 

Acting Chairman Williams. Have you a statement to make first? 

Dr. Anderson. The witness may proceed. 

Dr. Johnson. My testimony will be concerned primarily with four 
points: First of all, the reduction in the amount of labor used for 
producing different crops, largely accounted for by increases in 
mechanization; then some tendencies of increases in mechanization 
on the farm, shown by increase in tractors, and so on; thirdly, the 
effect of mechanization on physical efficiency in the use of labor on 
farms; and, lastly, the effect of mechanization on the investment in 
the farm business, and on operating expenses. 

The first two charts show labor used in producing wheat and oats. 

(The charts referred to were marked ''Exhibits Nos. 2649 and 2650"" 
and appear on pp. 16942-16943.) 

PRODUCTIVITY IN AGRICULTURE 

Dr. Johnson. They show the changes in the amount of labor used 
in producing wheat and oats. The first chart refers to- the amount 
of labor used in producing wheat by different areas and in different 
jieriods from 1909 to 1936. The different perpendicular bars show 
the amount of labor used for these different periods, reading from 
left to right. The bar labeled A refers to the period 1909-13, the 
B bar, 1917-21; the C bar, 1927-31; and the D bar, 1931-36. 
That information is shown for different regions in the country, 
which are labeled. The first set of bars indicates the changes 
in the ainount of labor used in wheat production for the United 
States as a whole. Then we come to the Corn Belt region, next the 
eastern dairy, which is largely the northeastern part of the country, 
and next the western dairy region, the Lake States. 

Acting Chairman Williams. Before you go any further, I think I 
would like you to tie up those with the years. 

Dr. Johnson. The first one is 1909-13, the second is 1917-21, the 
third is 1927-31, and the fourth is 1934-36; roughly, we can say 
pre-war, the World War period, the late twenties, and the post-war. 

On the amount of labor used per acre in wheat production, taking 
it first for the United States as a whole, you will notice that only 
about half as much labor was used per acre in 1934-36 as was used 
in the first period, 1909-13. This is largely accounted for by the 
use of tractors, tractor equipment, combines, of course, along with 
tillage equipment for use with the tractor. There is also the question 
of shifting of wheat production to the plains areas, to the more 
level areas, where machines can be used to better advantage. The 
least amount of labor per acre is used in the small grain area which, 
as indicated in the exhibit here, includes the Dakotas, Montana, 
Nebraska, and Kansas; and also the region called the western cotton 
area, which is the wheat-producing area of Texas and Oklahoma. 

Only about 3 or 4 hours of labor per acre were used in the small- 
grain areas and in the western cotton area, and those areas or re- 
gions actually used less labor in 1909-13 than some of the Eastern 
and southern" areas did in 1934-36. 

Mr. Pike. Those are the highly important areas in grain growing? 

Dr. Johnson. Those are the most important areas in grain pro- 



16942 



CONCENTRATION OF ECONOMIC POWER 




CONCENTRATION OF ECONOMIC POWER 



16943 



05 = 




16944 CONCENTRATION OF ECONOMIC POWER 

duction. One should include also the northwestern area, Wash- 
ington, Oregon, and Idaho. 

Dr. Anderson. Why do you use the measure of hours per acre? 

Dr. Johnson. Hours per acre ? Well, of course, one could use hours 
per hundred bushels, or hours producing a bushel of wheat. 

Mr. Pike. You have done that on potatoes ? 

Dr. Johnson. We have done that on potatoes, that is right, and also 
in the wheat tier ; for the western cotton area and for the small grain 
area it runs from 0.3 to 0.4 hours per bushel. The average yield out 
there is about 10 bushels per acre. I might say that that is the 
customary method. 

Dr. Anderson. That is the commonly accepted method ? 

Dr. Johnson. That is the commonly accepted way of portraying the 
amount of labor used in production. 

Turning to the next set of charts, I want to discuss corn first. 
* (The chart referred to was marked "Exhibit No. 2651" and appears 
on p. 16945.) 

Dr. Johnson. The labor used per acre for corn production does not 
show as marked a proportional decrease as does the labor used pe^ acre 
in wheat production. The most outstanding evidence that we liave of 
the effect of mechanization is on wheat production. However, as far 
a§ labor used per acre, the reduction in actual hours per acre is con- 
cerned, it amounts to about the same reduction in corn production for 
the country as a whole as it does for wheat production, namely, about 
6 hours per acre; a change for the country as a whole from 29 :iours 
in the 1909 period to 23 hours in the 1936 period. 

A part of this decrease in corn product on is due to the use of corn 
pickers in. the Corn Belt, but probably more resulted from the use of 
tractors and multi-equipment. J think that is much more important. 

I want to call attention also to the fact that a relatively small amount 
of labor is used in corn production in the winter wheat and spring 
wheat areas. They have less cultivation, less tillage, and very often, 
of course, the yields are much less. 

The next chart is Labor Used Per A/'ve Producing Cotton in Major 
Areas. 

(The chart referred to was marked "Exhibjt No. 2652" and appears 
on p. 16946.) 

Mr. Pike. The chart is not complete ? 

Dr. Johnson. That is right. Tliey were borrowed from another 
source. Reading from left to right, the first set of 4 bars is for the 
United States as a whole ; the second one is for the eastern cotton area ; 
the third set is the Delta area, Arkansas, Mississippi, Louisiana ; and 
the last set is for the western area, Texas and Oklahoma, the latter 
representing the newer cotton areas where mechanization up to pick- 
ing time has become very important. As a matter of fact, it is the only 
area where there is outstanding evidence of a reduction of labor in 
cotton production. Most cotton is still picked by hand. 

The decrease shown, then, for the country as a whole is largely due 
to the shifting of cotton production during that period to the western 
cotton area. 

I might say that the development of an acceptable cotton picker 
would, of course, make a revolution in cotton production comparable 
to that which has already taken place in wheat production, perliaps. 



CONCENTRATION OF ECONOMIC POWER 



16945 



Exhibit No. 2651 

[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 
Variations by Areas in Labor Used Per Acre in Producing Corn, 1909-36 







16946 



CONCENTRATION OF ECONOMIC POWER 



The next chart shows the amount of labor used in potato production 
by selected counties rather than for areas as a Avhole, and those counties 
are, first, Clay County, Minn. ; second, Waupaca County, Wis. ; third, 
Montcalm County, Mich.; fourth, Steuben County, N. Y. ; fifth, Suf- 
folk County, N. Y. ; and, last; Aroostook County, Maine, 

(The cliart referred to was marked "Exhibit No. 2653" and appears 
on p. 16947.) 

Dr. Johnson. In Aroostook County, Maine, there has been a net 
reduction of 14 hours per acre, and in that county the yields werei 
increased nearly 90 bushels per acre between 1909 to 1936, so that the 
time used to produce and market 100 bushels of potatoes — and here 
we put it in the other terms — in 1936 w^as only 16 percent of that 
required in 1909. 



Exhibit No. 2652 
[Submitted by me Bureau of Agricultural Economics, Department of Agriculture] 




In Clay County the yields per acre were down during the period; 
consequently the man-hours per hundred bushels actually went up. 

I am going to read a short statement here on mechanization in other 
lines. 

Some of the most striking examples of labor saving equipment are those used 
on relatively minor crops. Although these types of equipment — the can^ stripper, 
the pick-up baler, the field ensilage cutter, Uie mechanical beet blocker, etc. — have 
not been used on large acreages, they do have an actual or a potential influence 
on labor requirements in particular sections of the United States. A good 
exjunple is the combination of mechanical pea harvester and huller in use with 
newly developed processes of quick-freezing and packaging in the preparations of 
peas for market. 

(The chart referred to was marked "Exhibit No. 2654" and appears 
on p. 16948.) 



CONCENTRATION OF ECONOMIC POWER 



16947 



Dr. Johnston. I turn now to the second part of the testimony, 
some evidences of mechanization. The next chart is on tractors. 

(The chart referred to was marked "Exhibit No. 2655" and appears 
on p. 16948.) 

Dr. Johnson. This shows the number of tractors of all types on 
farms January 1, 1915, to January 1, 1939. Starting from an almost 
insignificant number in 1915 we see a spurt during the World War 
period which extended up to 1921, a slowing down during the depres- 
sion of the early 1920's, and then again a spurt in the latter 20's, a 
slowing down again in the early 30's, and again a later spurt after 

1935. 

Exhibit No. 2653 

[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 

Labor Used in Potato Production in Selected Areas 1909 36 

MAN- MAN-HOURS PER ACRE 




CLAY Ca MINN 



WAUBkCA CQ WIS MONTCALM CO MICH STEUBEN CO. NY SUFFOLK CO NY 



WPA- National Reseaech Project 

A-IO 



In 1930 there were 900,000 tractors on farms. These were mostly 
either the standard type or the crawler tractors. Some standard 
tractors were used in the Corn Belt, particularly on the large farms, 
but with the development of the general purpose tractor, and par- 
ticularly with the addition of pneumatic tires to tractors, the use of 
tractors and mechanical equipment increased rapidly in the Corn 
Belt and in the Eastern States, so that we have estimated for 1939 
1,600,000 tractors. With further improvement in tractor design and 
especially with the recent introductions of the small tractors, we can 
expect mechanization to take place in some of the eastern areas and 
the Southeastern States where tractor use has not made the advances 
that it has in the Midwest and the small grain regions. 



16948 



CONCENTRATION OF ECONOMIC POWER 



Exhibit No. 2654 

[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 

Labor Used in Potato Production in Selected Areas, 1909-36 



MAN - HOURS PER 100 BUSHELS 




Dtnom 



t» '19 -29 '36 '09 19 -29 36 X)9 19 '29 '36 '09 '19 'Zg 36 09 '19 "29 "36 "09 19 '29 36 
CLAY CO MINN VW\Un\CA CO WIS MONTCALM CO MOi STEUBEN CO MY SUTFOLK CO. N Y AnOOSTOOK CO ME 



THKOUCH PU^NTINC 



I 1 mCHARVCST AFTCM PLAMTMK fSSSSSfl HAMVCST AMD MMKCT 

wPA - National Research Project 

A-IO 

Exhibit No. 2655 
[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 

TRACTORS ( ALL TYPES ); NUMBER ON FARMS. JAN. 1, 1915 - JAN. 1. 1939 



THOUSANDS 
1.500 

1.200 

900 

600 

300 

n 










/ 










/ 








^^ 


/^ 






y 








^^ 








_^ 


1 1 1 1 


1 1 1 1 


1 1 1 1 


1 1 1 



1915 



1920 



1925 



1930 



U. t. OErARTHtNT OF AGRICULTURE 



1935 

BURCAV OF ACRKULTURAL ECONOMICt 



CONCENTRATION OF ECONOMIC POWER 



16949 



Acting Chairman Williams. Has there been a tendency toward the 
use of smaller tra(5tors in recent years than larger ones ? 

Dr. Johnson. Qh, yes ; there has been a very decided shift to the 
smaller, general-purpose tractor with pneumatic tires. 

Acting Chairman Williams. That is perhaps due partly at least to 
using them on smaller farms than they did formerly. 

Dr. Johnson. Right, and, of course, the general-purpose tractor is 
more adapted ; it is adapted for a good many different operations, and 
with the power take-o^ the usefulness of the tractor has been vastly 
modified. 

Mr. Pike. That has been a development of the last few years. 

Dr. Johnson. That has been a development in, you might say, the 
30's, although, of course, the general-purpose tractor came in the 
middle 1920's. 

Mr. Pike. There has been a great change, though, in the last decade. 

Dr. Johnson. Oh, yes, there has been a great change in the last 2 
or 3 years, especially in the development of the small tractor suitable 
for a small family farm. 

The other side of the story of tractor increase is shown on the next 
chart. 

(The chart referred to was market "Exhibit No. 2656" and appears 
below. ) 

Exhibit No. 2656 

[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 
HORSES AND MULES: NUMBER ON FARMS, JAN. 1. 1915 - JAN. 1. 1939 

MILLIONS 



20 



15 



10 





^^ Horses 












^^ 










"^ 




^ 






y0^ Mules 






1 1 1 1 


1 1 1 1 


1 1 1 1 


1 1 1 1 


1 1 I 



1915 

K S. DtMRTMENT OF ACRICULTWRE 



1920 



1925 



1930 



1935 

•UHEAB OF ACmCUlTURAL ECONOMICS 



Dr. Johnson. As the number of tractors has increased on the 
farms we have had a corresponding decrease of horses and mules. 
The chart of horses and mules shows the trend in numbers for the 
same period as was shown for the trend in numbers of tractors. The 
number of mules has decreased more slowly than horses, largely 
because mules are used in the South, where mechanization has pro- 
ceeded more slowly, and also because they are serviceable to a longer 
age. We find this downward trend in liorse numbers is pretty closely 



16950 CONCENTRATION OF ECONOMIC POWER 

related to lack of replacement of horses, that is young colts, and the 
horses that are on farms today average much oldfer. 

Acting Chairman WiiiLiAMS. I would think there would be another 
very important reason .in there. It strikes me that the mule is an 
animal that is used almost exclusively on the farm, while the horse 
formerly was used as a means of transportation which has been sup- 
planted almost entirely by the automobile. 

Dr. Johnson. Yes; that is true. The horses were used, of course, 
for hauling and for going to town. 

Acting Chairman Williams. And for riding horseback. 

Dr. Johnson. Yes; but, af course, the horse numbers that are 
shown here are horses on farms. 

Acting Chairman Williams. Well, of course, they would be on the 
farm. You don't mean the horses and mules that are simply w^orked 
on the farm as work animals. 

Dr. Johnson. Oh, no; I mean kept on farms. 

The decrease of about 10,000,000 head of horses and mules during 
this period releases approximately 50,000,000 acres of land for other 
purposes; that represents the amount of land that was needed to 
produce horses' fe^d, hay, grain, and pasture, horse and mule feed. 

Colonel Chantland. Five acres? 

Dr. Johnson. Approximately five acres per animal, so that that 
becomes available for cash crops, for pasture and feed crops, for 
other livestock, for market, and it represents, of course, a part of our 
surplus crop situation. 

The total number of horses and mules is now, roughly, 15,000,000, 
and it is probable that the number might be stabilized at about 
12,500,000 head. However, the recent introduction of the small 1- 
plow tractor may reduce the horses and mules still further. • 

The next chart is Percentage of Wheat Acreage Harvested With 
the Combine. 

( The chart referred to was marked "Exhibit No. 2657" and appears 
on p. 16951.) 

mechanization of farming 

Dr. Johnson. This chart shows the percentage of wheat acreage 
that was harvested with the combine in 1938. It indicates that the 
combine is almost universally used in the hard winter-wheat region, 
in Kansas, Oklahoma, Texas, and southwestern Nebraska. If the 
crops had been better in previous years, I would expect a much larger 
number of combines to have gone into the Red River Valley and a 
part of the important spring-wheat area. Of course, in the Pacific 
Northwest and in California the combine has been in Use for a long 
time. 

The combine is making a very strong bid for the wheat harvest 
in the soft winter-wheat country of Illinois, Indiana, parts of Iowa, 
and Minnesota, and Ohio as well. As a result of the use of the com- 
bine a crew of 3 men can now perform the same work that was per- 
formed by a crew of 8 to 10 men, and can do the work in less time. 
Probably 110,000 combines are now in use. It has been estimated that 
somewhere between 100,000 and 200,000 casual migrant laborers found 
employment in wheat areas in 1920. This opportunity for employ- 



CONCENTRATION OF ECONOMIC POWER 



16951 




16952 CONCENTRATION OF ECONOMIC POWER 

ment has practically disappeared and the extra labor required at 
harvest is for the most part supplied from local sources. 

The next chart is Percentage of Acreage of Corn for Grain Har- 
vested With Mechnical Field Picker, 1938. 

(The chart referred to was marked "Exhibit Na. 2658" and appears 
on p. 16953.) 

Dr. Johnson. I want to call attention to a difference between this 
chart and the one preceding on combines. The percentages are lower ; 
that is even the areas of greatest concentration here start with 35 per- 
cent of the corn harvested with the picker rather than 70 percent in 
the preceding chart. You will notice, of course, the field pickers have 
made the greatest inroads in the heart of the Corn Belt, although it 
is interesting to see that it goes up pretty far into southwestern Minne- 
sota and the eastern Dakotas. 

Mr. Pike. How recent a development is that ? 

Dr. Johnson. The corn picker has been on the market for, I should 
say, about 15 years, but there have been some very decided improve- 
ments in recent years. 

Mr. Pike. They probably have got the cost down to where they 
have on the combines. 

Dr. Johnson. They have got the cost dow^n and it is a much more 
manageable machine. With a 2-row picker and facilities for hauling 
and cribbing corn yields of 60 to 70 bushels per acre can be harvested, 
with only II/2 to 2 man-hours per acre. Hand picking and scooping 
would require about 9 man-hours per acre to harvest a 70-bushel yield. 
Thus it cuts down the labor of harvesting about one- fourth and prob- 
ably where the picker is used the work will be done largely with family 
labor. 

The next chart is Labor on a 320- Acre Central Kansas Farm. 

(The chart referred to was marked "Exhibit No. 2659" and appears 
on p. 16954.) 

Dr. Johnson. This chart portrays the changes in the seasonal 
use of labor, the seasonal distribution of labor, on a half-section 
central Kansas wheat farm before and after the purchase of tractors. 
The solid perpendicular bars show the man labor actiially used, by 
weeks, on this farm when it was operated as a horse farm, that is, 
with horses for power and horse equipment. The Cross-hatched bars 
represent an estimate of the amount of man labor required by weeks 
when the same farm is operated with tractors and tractor equip- 
ment. You will find a broken horizontal line running across the 
fhart which shows the available family labor, available for work 
on the farm. It represents a man and boy who goes to school part 
of the year but is available for work in the summertime. You will 
note, by comparing the solid and the cross-hatched bars, the very 
important reduction in the amount of labor needed' m excess of the 
family labor, especially during the peak periods which are largely 
represented, there by harvest, first of all, and alfalfa cutters. They 
have different seasons for the stjmmer months. On this farm when 
it was operated with horse equipment a hired, man was used on the 
farm for approximately 90 days, or 3 months. With a shift to 
tractor equipment only about 10 days in extra labor would be re- 
quired, and this could probably be furnished by exchanging labor 
with the neighbors. Thus 3 months of hard labor has been elimi- 
nated. . 



CONCENTRATION OF ECONOMIC POWER 



16953 




124491—41 — nt •.<.()- 



16954 



CONCENTRATION OF ECONOMIC POWER 



Dr. Anderson, Eliminated by the purchase and use of one tractor? 

Dr. Johnson. By the purchase and use of one tractor and comple- 
mentary equipment, combine and tillage equipment to go with the 
tractor. 

Dr. Anderson. Is this a typical example of what would occur on 
that size farm generally? 

Dr. Johnson. It is a typical example of what would occur on that 
size and type of farm. 

Mr. Pike. That is a mixed farm? 

Dr. Johnson. No. 

Mr. Pike. It is mostly wheat? 

Dr. Johnson. Mostly w^ieat, with some alfalfa and some livestock, 
but the major income comes from wheat. 

Mr. Pike. And the major work involved, peaks of work, is wheat. 

Dr. Johnson. -Peaks of work represented largely by w4ieat. 

Exhibit No. 2659 

[Submitted by the Bureau of AgricuUural Economics, Department of Agriculture] 

LABOR ON A 320-ACRE CENTRAL KANSAS FARM, BY WEEKS 




Mr, Pike. It is winter wheat. 

Dr. Johnson. Winter wheat. You do the seeding in September. 

We turn now to the third part of the testimony w-nich indicates the 
effect of these mechanization changes on physical efficiency in agricul- 
ture as a whole. 

(The chart referred to was maf ked "Exhibit No. 2660" and appears 
on p. 16955.) 

INCREASED EFFICIENCY IN AGRICULTURE 

Dr. Johnson. The solid line represents the eniployment figures from 
column 3 of "Exhibit No. 2648," the number employed in agi-iculture 
the first of each month, averaged for the year. The line is an index 
Jine, with the 1924-29 average considered 100, and the changes are 



CONCENTRATION OF ECONOMIC I'OWER 



16955 



percentage changes from that base. The circled line represents the 
size of the total farm business in this country in terms of acres of 
crops and numbers of livestocks-weighted on a 1924-29 base, and com- 
bined according to the amount of labor that was used during that 
period. The third line, the broken line, shows the change in size, 
that is, in acres of crops and numbers of livestock handled per worker, 
from 1910 to 1938. In the period from 1910 to '16, '17, or up to 1920, 
we had a rather constant increase in the size of the farm plant, the 
total size of the farm business. We had a constant decrease in em- 
ployment in agriculture because of the city-ward movement which has 
already been portraj'ed by Dr. Taylor, but, because of the increased 
eflficiency of production, that expansion of agriculture took place with 
a constant decrease in employment and with a constant increase in 
the acres of crops and numbers of livestock handled per worker. 



Exhibit No. 2660 

[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 

RELATION OF EMPLOYMENT IN AGRICULTURE TO 
THE SIZE OF AGRICULTURAL ENTERPRISE 



INDEX NUMBERS (192 4-29 = 100) 



I 10 



100 



90 



80 



70 




1910 



1915 



1920 



1925 



1930 



1935 



1940 



•ItNl Of »8RICunUR£ 



BUREAU OF AGRICULTUDAl ECONOMICS 



Mr. Pike. Tlie type of expansion we were having is mostly exten- 
sive farming of new wheat Ir.nds on the western edge of the plains? 

Dr. Johnson. Yes, at that time; but also a considerable extension 
in farming; you find increase of dairy farming during that period., 
which is fairly intensive. 

Mr. Pike. I was thinking about western Kansas and the Panhandle, 
and so on. 

i)r. Johnson. Yes; I think that is the most important development. 
The later part of tlie period, of course, 1934 to 1938, is very much 
influenced by the very serious drought years of 1934 and 1936, with 
not very much of a recovery in 1935. Still this index shows a larger 
enterprise handled per worker in that last period than in 1910. 

Dr. LuBiN. It is rather significant, is it not, that the really great 
increase in productivity in the agricultural industry occurred between 



16956 



CONCENTRATION OF ECONOMIC POWER 



1910 and 1918, and nothing since then, despite the tractor and all the 
new equipment, has caused an increase of productivity anywhere near 
approaching it in an equal length of time? 

Dr. Johnson. Well, I think that that question will be answered a 
little bit better by the next chart. 

(The chart referred to was marked "Exhibit No. 2661" and appears 
below.) 

Exhibit No. 2661 

[Submitted by the Bureau of Agricultural Economies, Department of Agriculture] 

RELATION OF EMPLOYMENT IN AGRICULTURE 
TO AGRICULTURAL PRODUCTION 

INDEX NUMBERS ( 1924-29^100) 



100 



90 



80 



70 




1910 



1915 



1920 



1925 



1930 



1935 



1940 



U S OEPHRTMtNT OF AGRICULTURE 



BUREAU Of A&RICUL 



ECONOMICS 



Dr. Johnson. This chart shows the same employment in agricul- 
tural index as the previous chart did, but the other two lines, the total 
agricultural production and production per worker, are made up in 
terms of the output from acres in crops and the output in numbers 
of livestock; in other words, the total physical crop. That goes up 
rather constantly throughout the period with the exception of the 
severe drought years which are outstanding here, 1934 and 1936. You 
will jiote also that total output is the highest, and production per 
worker in terms of output is also higher, in the latter period tliaii at 
any other time. 

Dr. LuBiN. What is the difference between the two charts? When 
you talk about size of farm enterprise are you talking in acreage or 
values? 

Dr. JoiiN'SON. In acreage and numbers, in terms of acreage in crops 
and numbers of livestock. In the hist chart we are talking in terms 
of bushels of wheat, pounds of cotton, pounds of butter, and so on. 

Dr. Lunix. In otlier words, you are getting a larger yield per 
acre ? 

Dr. Johnson. We are getting a larger yield per acre, especially in 
recent years. The corn crops have been very high in yield per acre, 
the cotton crop Iv.is been high in yield per acre. 



CONCENTRATION OF ECONOMIC POWER 16957 

Dr. LuBiN. Which then would be the better measure of produc- 
tivity? I noticed in your earning charts you talked in terms of the • 
number of hours per acre. I take it that would cover the preceding ' 
chart, namely the relation of employment in agriculture to the size 
of the agricultural enterprise. Wouldn't the former chart be the 
better index of what has actually happened to productivity ? 

Dr. Johnson. The acreage chart? 

Dr. LuBiN. Yes, the acreage and numbers. 

Dr. Johnson. Of course, production varies more fron^ year to 
year — that is especially true of crops — than does acreage, and there- 
fore the acreage measure is a more stable measure. I should say 
that we need both in order to get the picture. 

Dn LuBiN. I mean, in one case, you are dealing with a fortuitous 
element. If you haven't got a rain and good weather conditions, you 
get a big crop and get more off that acre than you otherwise would, 
but in the preceding chart, you are dealing with the actual size of 
the enterprise, the number of acres taken care of and number of 
livestock taken care of. 

Isn't that really the best measure of what the productivity of labor 
is? If, by the use of better fertilizer, you get more of that produc- 
tion, that isn't attributable to the workers or 

Dr. Johnson. M3' reply would be that it is a more stable measure, 
but that we do need to look at this other measure, too, because there 
has been an increase in yields per acre and output per man-hour. 

Dr. LuBiN. Isn't it rather significant, however, and your preceding 
chart shows an actual decline in the efficiency of labor on farms, and 
as a matter of fact, for the year, the last year on your chart, which 
I think is 1939, we are way below 

Dr. Johnson (interposing). It is 1938. 

Dr. LuBiN. We are way below any point since 1914. 

Dr. Johnson." Yes, because of the drought influence, and in small 
part because of acreage adjustment programs. 

Dr. LtTuiN. But if you take that whole period, however, let's take 
the peak of- 1930 and 1931, you were slightly above where you were 
in 1918 — liardly any above. 

Dr. Johnson. Yes. 

Dr. LuBiN. So that in terms of the amount of territory covered, 
as it weie, and livestock taken care of, there has been relatively little 
increase since the war years in the efficiency of labor on farms, as 
measured b}^ the size of the enterprise handled per worker. 

Dr. Be.\n. I think you need to take into account the size of enter- 
prise as it would have been if you had not had adjustment programs 
in eflfect, do you not? 

Dr. Johnson, Yes; and also the drought. 

Dr. LuBiN. That would apply to any economic activity, the pro- 
duction policy of a given industry — in other words, the policy of some 
nidustries of cutting down on production when prices fall. - 

Dr. Bean. If you put it on production pej* factory and if you 
defined the industrial plant in terms of the number of factories in- 
volved, and you put two out of use because Qf a depression, I think 
you might have the '^ame sort of showing you have here. 

Dr. Anderson. Ii n the previous charts you used a bushel, or pro- 
duction, basis, inst' id of an acre basis, you got an accentuated pic- 



16958 CONCENTRATION OF ECONOMIC POWER 

ture, didn't you? You got an increased productivity which corre- 
sponded to the last presentation you have made. 

Dr. Johnson. That is correct. In any area where the yield per 
acre grows during the period that will be true. 

Dr. Anderson. Is it possible to distinguish between the effects 
upon productivity of these natural factors of climate and weather 
conditions, man's increased productivity due to mechanization? 

Dr. Johnson. Well, it is very difficult to isolate the effect of the 
two. 

Dr. A-NDEESON. In other words, both are included in this chart. 

Dr. Johnson. That is correct, because even the acreage harvested 
was reduced on account of the drought. 

PROSPECTS FOR INCREASED EMPLOYMENT 

Dr. Anderson. Granted this increased productivity per worker em- 
ployed, and the absorptive powers of the market which I presume 
will be discussed, do you expect an increased or decreased number of 
workers on the farm? 

Dr. Johnson. I think the evidence points toward a decrease. 

Dr. Anderson. Do you attribute much of that to the technological 
change which has occurred ? 

Dr. Johnson. Yes; I would say quite a little. The evidence as 
we have had it presented by types of farms, on the wheat farms, and 
the amount of labor used in w^heat production in the different 
areas 

Dr. Anderson (interposing). In other words, a summary chart 
such as Exhibit No. 2660 conceals very important and vital infor- 
mation concerning productivity increases? 

Dr. Johnson. Well, I wouldn't say that it conceals 

Dr. Anderson (interposing). Fails to reveal, let's put it. 

Dr. Johnson, (continuing). Productivity increases. I would say 
that it fails to differentiate between increases in productivity per 
worker* due to technological, developments,. and increases due to other 
causes. 

Dr. Anderson. And it fails, of course, to distinguish vital move- 
nients and changes that might be occurring in such a crop, for ex- 
ample, as corn or cotton, or has occurred in wheat? 

Dr. Johnson. Yes. 

Dr. Anderson. And it would also fail to distinguish such differ- 
ences by geographical areas, and the impact of such changes on par- 
ticula:r localities? 

Dr. JoTiNsoN, Eight. 

Dr. Anderson, li won't .tell us the story of the depressed condition 
of the Dakotas, i6r example ? 

Dr. Johnson. No. 

Table I, the next exhibit here, has already been discussed by Mr. 
Holcomb, so we will pass over it. 

Dr. ANDt:7isoN; Is that already in the record? 

Dr. JoHN-tsoN. It is already in the record in Mr. Holcomb's testi- 
mony, for a longer period. 

The next chart begins the last phase of the testimony and per- 
centage. 



CONCENTRATION OF ECONOMIC POWER 



16959 



Dr. Anderson. Combined investment in work stock, machinery, and 
mechanical power on farms operated with horses and tractors. 

(The chart referred to was marked "Exhibit No. 2662" and appears 
below.) 

Exhibit No. 2662 

[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 

COMBINED INVESTMENT IN WORK STOCK, MACHINERY AND MECHANHZAL 
POWER ON FARMS OPERATED WITH HORSES ANDTRACTORS 



DOLLARS 

i 



IOWA 
CORN BELT FARM 
160 CROP ACRES 

1937 

SOUTH DAKOTA 

SMALL GRAIN 

360 CROP acres' 

1931 

MISSISSIPPI DELTA 

COTTON PLANTATION 

750 ACRES 

1937 



2.343 



4,920 



U.825 



10 



DOLLARS ( HUNDREDS ) 
20 30 



50 



^MSSS^^ 



^TRACJOR 9f ERATED 



U S DEPARTMENT OF AGRICULTURE 



BUREAU or AORICULTURAL ECONOMICS 



EFFECT OF MECHANIZATION ON INVESTMENT 

Dr. Johnson. This phase oi the testimony is concerned with the 
effect of mechanization on investment in the farm business, largely, of 
course, in the part of investment represented by machinery and me- 
chanical power, and different both in the amount and the nature of the 
operating expenses that result. We have taken here again some typical 
situations. 

The first is an Iowa Corn Belt farm of 160 crop acres, on April 19, 
1937. The equipment investment on farms using horses for power and 
horse equipment (which includes work stock) is less than for the Corn 
Belt farms of the same size that used tractor power and tractor equip- 
ment. It should be said, however, that those farms actually had more 
equipment. In other words, when they bought a tractor, they bought 
a combine, perhaps, to go with it, or a corn picker, so that they actually 
had more equipment, and part of the increased investment in equip- 
ment made it possible for them to reduce tjie amount of the contract 
work, or hired labor on that farm, such^ for instance, as threshing. 

Acting Chairman Williams. Does your term "traitor" there include 
the investment of all tlie equipment that goes with it, or just confined to 
the .tractor alone ? 

Dr. Johnson. No, no. 

Acting Chairman Williams. It includes all the equi[)ment to go 
with it? 



16960 CONCENTRATION OF ECONOMIC POWER 

Dr. Johnson. It includes all the equipment to go with it, with its 
present viihie of work stock, machinery, and mechanical power on those 
farms. 

Acting Chairman Williams. It is contrasting horsepower formerly 
used on the farm with the mechanized farming of the present. 

Dr. Johnson. It is contrasting the farms of that same size that used 
liorses in 1937, and liad horse equipment, with the farms that used 
tractors and luid tractor equipment, as of the same date, the same sized 
farm. 

Acting Chairman Williams. Do you mean, now, that is the invest- 
ment in the animals, in the one case, and in machines in the other? 

Dr. Johnson. It is the total value on both kinds of farms. It is the 
total present value of horses, if they had them, and most of them do, 
you see, even though they have tractors — horses, tractors, and other 
machinery. 

Mr. Pike. There would be different types of plows say, if you had 
horses, and if you had tractors? 

Dr. Johnson. That is right ; yes. 

The next situation, then, is on small grain farms. We had to go 
back to 1931 for a comparable situation ; that is, where we could com- 
pare horses with tractors in a small-grain area, because mechanization 
is just about complete in the wheat-producing areas. We took there a 
comparison for South Dakota, 360 crop acres, and again you will 
notice that the tractor-operatecl farms had a larger present value of 
investment in their work stock, machinery, and mechanical power than 
did the horse-operated farms. 

You will find a little different situation on a Mississippi Delta cotton 
plantation. This represents a fairly large business, of course — 750 
acres — and the data are for 1937. When you take the present value of 
work stock, machinery, and mechanical power on such a plantation, 
you will find that the mules represent a very iinportant part of the 
investment and that therefore the actual present value of that part of 
the plantation investment represented by those items is larger on mule- 
operated farms than it is on the tractor-operated farms. 

Mr. Pike. Would it be fair to guess that in general the differential 
in investment against this mechanized farm increases as the size of the 
farm decreases? In other words, wuth the small farm, your added 
acre, let's say, would be rather larger than if you could split it 

Dr. Johnson. I didn't have any evidence readily available, but my 
own judgment is that on a smaller cotton farm you would have a 
larger investment resulting from the use of tractor power. 

Mr. Pike. You probably won't be able to make as full use of your 
mechanization on a small farm. 

Dr. Johnson. That is correct. I might add another statement to 
that, and that is that on a good many farms and in a good many types 
of farming areas, and on a good many different kinds of farms, when 
you add a tractor, and when you substitute a tractor for horsepower 
and the complementary equipment that goes with the tractor, you have 
capacity for operating a larger acreage than you had before. Conse- 
quently, there is a constant pressure because of unused capa^^ity for 
attempting to increase the number of acreas operated per farm. 

Dr. Anderson. These displays are made up on the basis of actual 
farms that were in operation on the dates mentioned? 

Dr. Johnson. Oh, yes. 



CONCENTRATION OF ECONOMIC POWER 16961 

Dr. Anderson. In the same area, and covering how many farms, say, 
in the Iowa Corn Belt farm under review here? 

Dr. Johnson. I cannot answer that. Can you, Mr. Kifer — ^how 
many farms are covered ? 

Mr. Kifer. I can't tell you exactly how many farms there were of 
this particular size, but I think it Avas something like 56 or 60. 

Dr. Anderson. So that you take it to be typical of what occurred ? 

Mr. Kifer. I think the sample was large enough so that the aver- 
age was reasonably stable. The group of South Dakota farms in- 
cluded a few more than 100. 

Dr. Anderson. Do you comment on the substantially larger mar- 
gin of difference there between tractor-operated farms and horse- 
operated farms in the Corn Belt as compared with the other two, 
the difference in cost being, say, five-hundred-odd dollars? 

Dr. Johnson. Yes. 

Well, I would expect that the relationship would be in that direc- 
tion. I would not make a great point of any wide disparity. 

The next exhibit is a table showing comparative costs in operating 
a 320-acre wheat farm with horses and with tractors. 

(The table referred to was marked "Exhibit No. 2663" and is in- 
cluded in the appendix on p. 17444.) 

Dr. Johnson. This shows the operating expenses in terms of cash 
outlay, broken down by direct crop expense and other expense, ma- 
chinery, replacement, the total charges, and receipts, and the differ- 
ence between the cash farm receipts and expenses, including ma- 
chinery replacement. 

Hired labor expense is reduced materially. The threshing expense 
disappears, but there is an increased expense for machinery, repairs, 
fuel, and oil. Total cash expense increased somewhat ;. machinery 
replacement, depreciation charge on machinery considerably in- 
creased. 

There is an increase of income from wheat because more wheat 
is produced. 

The difference between cash receipts and the expense is indicated 
as approximately the same, so that one offsets the other. A higher 
investment in equipment is shown. 

That doesn't quite tell the full story, because the significant dif- 
ference to the wheat farmer is that the expense for operating and 
replacing equipment is no longer a variable cost, varying directly 
with his production, and consequently with his income. The neces- 
sity for meeting these payments 'in years when incomes are low, 
because of low prices or drought, has added to the agricultural dis- 
tress in drought areas. I mentioned a moment ago that, of course, 
when this change takes place on a half section farm of this size, 
there is some unused capacity, so that in good years, this farmer 
will have that inducement for renting or purchasing additional land, 
and increasing the size of his business, which in good crop and price 
years would be profitable for him. 

COMPARATHTE COSTS OF OPERATION 

Dr. Johnson. The next table shows the comparative cost of op- 
erating a 200-acre Corn Belt farm with horses and horse. equipment 
as compared with tractor and tractor equipment. 



16962 CONCENTRATION OF ECONOMIC POWER 

(The table referred to was marked "Exhibit No. 26G4'' and is in- 
cluded in the appendix on p. 17445.) 

Dr. Johnson. We find here approximately the same changes in 
expenses ; a decrease in direct crop expense, a decrease in hired labor, 
an increase in expense for operating equipment, an increase in ma- 
chinery replacement expense, and some increase in receipts, so that 
there is a slight increase in the difference between receipts and ex- 
penses, and a small increase in investment in equipment and hoi-ses. 

The next table shows the comparative expenses of operating planta- 
tions in the Mississippi Delta situation, with croppers and mules, with 
wage hands and mules, and with wage hands and tractors. 

(The table referred to was marked "Exhibit No. 2665" and is in- 
cluded in tlie appendix on p. 17445.) 

Dr. Johnson. The first column shows the cash outlay and the de- 
preciation for work stock and equipment, and the net income to the 
plantation for the investment in the business as well as for labor and 
management. The first column shows figures for operation with crop- 
per labor and mules, the second column with hired labor rather than 
cropper labor, but operating with mule equipment, and the third col- 
umn with hired labor and tractor power. 

Now, for the situation that prevailed in 1938, with the prices that 
prevailed at that time, a very considerably higher net income to the 
plantation would result from operating with hired labor and tractor 
power. More cotton could be produced, by the way. There would 
be a reduced number of families on the plantation. That comparison 
is for a situation with a picking charge at 90 cents per J.0O pounds of 
seed cotton, and other labor at $1 a day. 

The last table compares the net plantation income under two dif- 
ferent systems with different prices of cotton and different wage 
rates. The. first comparison, w^ith cotton lint selling for 12 cents a 
pound, labor $1 a dp,y, and the yields as above, 350 pounds of lint 
per acre, shows a very considerable advantage of operating wdth 
wage hands and tractors. When labor is raised to $1.50 a day, with 
the price of cotton remaining the same, that advantage of operating 
with wage hands and tractors is very much reduced. With cotton 
down to 6 cent$ a pound and labor $1 a day, a plantation operator 
would lose less money by operating with cropper labor and mule 
])ower than he w^ould by operating with wage hands and tractor power. 
If labor were 50. cents a day, the situation would be reversed, and 
it would pay him to shift to wage hands and tractors. 

(The table referred to was marked "Exhibit No. 2666" and is in- 
cluded in the appendix on p. 17446.) 

Dr. Anderson. Mr. Chairman, might we break for lunch and come 
back? 

Acting Chairman Williams. I suppose you have concluded with 
Dr. Johnson. We appreciate your statement. 

The committee will be in recess until 2 : 30. 

(Whereupon, at 12: 50 p. m., a recess was taken until 2: 30 p. m. of 
the same day.) 

AFTERNOON SESSION 

The hearing was resumed at 2:45 o'clock, upon the expiration of 
the recess, Senator 0'Mahoney,the chairman, presiding. 



CONCENTRATION OF ECONOMIC POWER 



16963 



The Chairman. The committee will please come to order. 

Dr. Anderson. Mr. Chairman, we are proceeding with the remain- 
der of the testimony from the Department of Agriculture experts. 

We have composed them into a panel for this purpose, each giving 
his testimony with as few interruptions as possible, and they are going 
to remain thereafter for questioning on the entire day's testimony. 

There are two witnesses this afternoon, Mr. Louis Bean and Mr. 
Norman J. Wall. Mr. Wall will proceed next. He is head of the 
Division of Agricultural Finance of the Bureau of Agricultural 
Economics of the Department. 

The Chairman. Mr. Wall has appeared before us before. You may 
proceed. 

TESTIMONY OF NORMAN J. WALL, DIVISION OF AGRICULTURAL 
FINANCE, BUREAU OF AGRICULTURAL ECONOMICS, DEPART- 
MENT OF AGRICULTURE, WASHINGTON, D. C. 

Mr. Wall. During the forenoon you listened to the exposition 
which showed the gi-eat increase in productivity in agriculture. Dur- 
ing this same time there was also a ver^ rapid rise in farm-land 
values, which was the basis for a large increase in farm-mortgage 
indebtedness. 

The Chairman. Would you mind summarizing for me, because I 
was absent attending the Committee on Appropriations this morning, 
the story of the increased productivity of agi'iculture ? 

Mr. Wall. I am sorry. Senator, but I was also absent. 

The Chairman. Well, then I will read the record. 

Mr. Wall. This chart shows that there has been a very substantial 
increase in farm-mortgage indebtedness from 1910 to about 1934. 

(The chart referred to was marked "Exhibit No. 2667" and appears 
below. ) 

Exhibit No. 2667 

[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 

TOTAL FARM MORTGAGE DEBT AND RATIO OF DEBT TO VALUE OF 
FARM REAL ESTATE, UNITED STATES. 1910-39 



DOLLARS 
( MILLIONS) 

12.000 

10,000 
8.000 
6.000 



4.000 =-, 



2.000 



- Farm mot 


-tgage debt 










&-v__ 




/v 






j 


0-. -..: 


^x ^- 




J 


* 






"^ 


.'^ 


^-., 


* 


of debt to V 






'^ 










1 M 1 


1 1 1 1 


1 1 1 1 


1 1 1 1 


1 1 1 1 


1 1 1 1 



30 
25 



-- 20 



1910 1915 

U S OEPARTMtNT OF ASRICUITURC 



1920 



1925 



1930 



15 



10 



1935 1940 

(UREAUOFACRICULTURAI. ECONOMICS 



16964 CONCENTRATION OF ECONOMIC POWER 

Mr. Wall. Farm-land values, however, rose more rapidly, and as 
as consequence the ratio of debt to value did not show as large an 
increase in the total farm-mortgage debt in the 1920's. However, the 
situation was reversed, as you will note that total farm-mortgage 
debt continued to decline, but the ratio of debt values stayed at prac- 
tically a constant value during the period. Farm-land values also 
declined. 

You will note the high peak in the ratio of debt to value in 1933, at 
which point it amounted to 28 percent of the total value of farms, and 
since that time, it has been reduced to about the level of the twenties. 

Representative Williams. You are talking now about the entire 
farm values, as compared with the entire farm-mortgage indebted- 
ness; is that true? 

Mr. Wall. That is right. 

Representative Williams. Are you going to show later on, or have 
you the figures there, to show the relation of the farm debt to the 
farms upon which the debt is placed? 

Mr. Wall. We do have some information on that, showing the 
ratio of debt to value, which I can supply for the record, if you wish. 
Of course, it is much higher on the mortgaged farms. About 34 ])er- 
cent of all farms are mortgaged, so you can see that the ratio of debt 
to value on the mortgaged farm would be substantially higher. 

Representative Williams. Oh, yes, undoubtedly. I was just won- 
dering about what that was, whether it was 65 or 80 percent? 

Mr. Wall. Well, I would judge, just offhand, that it might run 
around 50 percent. 

The Chairman. Now, to explain this chart, which I understand 
you want to admit to the record? 

Mr. Wall. Yes, sir. 

farm indebtedness and farm values 

The Chairman. It represents, in a solid line, the curve of the farm- 
mortgage debt of the United States from 1910 to the present time, in 
terms of dollars. 

Mr. Wall. That is correct. 

The Chairman. And in the dotted line, it represents the ratio of 
debt to the value of the farm property mortgaged, in terms of 
percentage. 

Mr. Wall. The value of all farms, including those not mortgaged. 

The Chairman. All right. The chart represents the ratio of the 
entire mortgage debt to all of the farms in the United States. 

Mr. Wall. That is correct. Senator. 

The Chairman. In terms of percentages? 

Mr. Wall. That is correct. 

The Chairman. The dollar scale appearing at the left-hand sside 
and the percentage on the right-hand side. 

Mr. Wali^. That is correct. 

The Chairman. So thtit it would appear that in 1915, Avhen the farm 
mortgage debt amounted to about $5,000,000,000, that debt was ap- 
proximately 121/^ percent of the value of all the farms in the United 
States; is that correct? 
Mr Wall. That is true. 



CONCENTRATION OF ECONOMIC POWER 16965 

The Chairman. In 1930 the farm debt amounted to almost $10,000,- 
000,000, and the percentage had risen to 20 percent ? 

Mr. Wall. That is correct. 

The Chairman. Then there was a very sharp rise between 1930 and 
1934 of the ratio of debt to value? 

Mr. Wall. From 1930 to 1933. 

The Chairman. In 1931 or 1932, the ratio for the first time went 
above 21 or 22 percent. 

Mr. Wall. Yes. 

The Chairman. And it is now back to about 20 percent ? 

Mr. \V' VLL. That is correct. 

The CiL'iRMAN. That shows a trend of reduction of the farm mort- 
gage debt at the present time, arid likewise of the ratio. 

Mr. Wall. And a lower level of land values as compared to the 
twenties. 

The Chairman. There is nothing on this chart to indicate any lower 
level of land values, is there ? 

Mr. Wall. "Exhibit No. 26C8" is a short table showing the mort- 
gage debt, the value of farm real estate, and ratio of debt to value. 
In 1935 the value of all farm real estate was about $35,000,000,000, 
which is lower than at any time during the twenties. 

(The table referred to* was marked "Exhibit No. 2668" and is in- 
cluded in the appendix on p. 17446.) 

The Chairman. Yes; but in 1933 the value of farm real estate was 
only $30,724,000,000. 

Mr. Wall. That is correct. 

The Chairman. Which was far lower than it was in 1910. 

Mr. Wall. Yes, sir. 

The Chairman. And it has been increasing since that time? 

Mr. Wall. That is right. 

The Chairman. Now, what have you to sa}^ about the future as indi- 
cated by these trends ? 

Mr. Wall. It is probable that the total farm mortgage debt will 
not decline much further, assuming that we have a reasonable pros- 
perity in agriculture. In other words, we would rather look for an 
increase in farm mortgage debt as the acquired farms of leading lend- 
ing agencies are sold back to farm operators. 

The Chairman. You think we can make that assumption? 

Mr. Wall. Well 

The Chairman. Of a reasonable prosperity in agriculture? 

Mr. Wall. That is up to Congress. [Laughter.] 

The Chairman. Oh, I wish it were. [Laughter.] It would be 
settled tomorrow. Don't you agree with me on that. Congressman ? 

Representative Willia*ms. Yes; but I won't say what I think, 
would like to say it off the record. [Laughter.] 

Let me ask you a question in connection with this. There has 
been an actual reduction in the farm indebtedness from about 
$11,000,000,000 to $7,000,000,000. 

Mr. Waix. That is right. 

Representative Williams. Along what line has that been? Has 
that been the result of foreclosures, scaling down of the indebted- 
ness between the mortgagor and mortgagee or simply the paying off 
of the indebt( Iness? 



16966 CONCENTRATION OF ECONOMIC POWER 

Mr. Wall. I think it represents a combination of ali those factors. 

Representative Williams. What has been the main factor? 

Mr. Wall. In the period from 1930 to about 1934, I think perhaps 
the rnajor factor was .the liquidation of debt through foreclosure and 
assignment, yet we find from our studies that in certain areas where 
income has been fairly favorable there is a fairly sizeable amount of 
loans liquidated through payments. There- is another factor of 
increased debt put on for one cause or another, so that you have a 
combination of several factors there. Of course, debt adjustment 
was another factor, particularly during the pei"ix)d of commercial 
financing of the Farm Credit Administration, but I w^ould jlidge 
that if you were going to single out any one single factor, it prob- 
ably w^ould have been foreclosure. 

liepresentative Williams. Have you those separate figures, the 
figures which would indicate the extent which each of these factors 
played in that farm-mortgage reduction ? 

Mr. Wall. It would be difficult to give you exact figures because 
there are so many outstanding factors. We could put into the record 
some indications of the different factors, such as foreclosures and 
new loans closed, which would tend to give you a fair picture of the 
situation. We do come to some material i-^tpr on in the exhibit that 
does have some bearing upon that. 

The next table shows a break-down 'of the total farm-mortgage 
• indebtedness by geographic divisions. 

(The table referred to was marked "Exhibit No. 2669" and is 
included in the appendix on p. 17447.) 

Mr. Wall. I thmk the most significant thing the, table brings out 
is thfe change in the importance of the West and the South during 
the 30-year period. The North Atlantic States accounted for roughly 
11 percent of the entire farm-mortgage debt in 1910, as compared 
with, 8 percent in 1939. On the other hand, the Southern States, 
which accounted for only ' 16 percent of the total in 1910, now 
account for aboiit 22 percent of the total. The Western States now 
account for about 17 percent, as compared with 8 percent in 1910. 

The Chairman. This is the table representing the estimated 
amount of f arm-riiortgage loans outstanding by geographic ^divisions. 

Mr. Wall. It is merely a break-down of the heavy black line 
which you see on the chart before you.^ 

The Chairman. How were th£se figures obtained? 

Mr. Wall. The estimates of farm -mortgage indebtedness are based 
upon the data for the known sources, that is for the Federal land 
banks, life-insurance companies, commercial banks, and State credit 
agencies, and in addition to that a W: P. A. study w^as conducted in 
which data were obtained on farm mortgages filed and recorded in 
the several hundred agricultural counties, and tli£se w^ere used to 
estimate the loans other than those of the known agencies. Then in 
each census period, the Census Bureau obtained a figure on the total 
amdunt of debt on owner-operated farms', and on the basis of this 
infornuition and special surveys we develop estimates for debt on 
part -owned farms and on tenant farms, so that the other dAta are 
linked to the census dates as bench marks. 



' See "Exhibit I^o 2667' supra, p. IGOO.'l 



CONCENTRATION OF ECONOMIC POWER 16967 

The Chairman. What is the significance of this division into 
regions? Is there very much significance in the table without figures 
to accompany this table indicating the value of farm lands in those 
same areas? 

Mr. Wall. I think that is a very good point, Senator. I have 
right before me a chart which we do not include in the exhibit which 
shows that the rise in land values in the five divisions, Mountain 
States, Pacific States, South Atlantic, East South Central, and West 
South Central States, has been much more rapid than in other sec- 
tions of the country or for the United States as a whole, and that 
in part explains why there has been a more rapid increase in mort- 
gage debt in these geograpiiic divisions. These are the sections of 
the country which have been developed very rapidly during the last 
three decades, and as a consequence have provided a greater amount 
of security for obtaining loans. 

The Chairman. So that increasing debt in a particular region 
might only be an indication of increasing values. 

Mr. Wall. Increasing development of that particular area. 

FARM OWNERSHIP AND OPERATION 

Mr. Wall. The next chart deals with the percentage of the value 
of farm real estate belonging to the farm operator. United States, 
for census years 1890-1935, and by States, 1930 and 1935. 

(The chart referred to was marked "Exhibit No. 2670" and appears 
on p. 16968. The statistical data on which this chart is based are 
included in the appendix on p. — .) 

Mr. Wall. You will note at the top of this chart several black 
bars, which indicate the percentage of the value of farm real estate 
belonging to the farm operator; a.nd there has been a very significant 
trend in this series from 1890 to 1935. In the earlier period, the 
equity of the farm operators in their real estate was 59 percent of 
the total value of that farm real estate, while in 1935 it represented 
only 39 percent.. In the two maps you will note the differences by 
individual States from 1930 to 1935, and during this period there was 
also a decrease in the equity from about 41 to 39 percent. This de- 
crease occurred in practically every State. Only about six States 
showed slight increases. The decrease in equities during the 5-year 
period were particularly marked in some of the Mid-West States, 
where there had been a high ratio of debt to value, and a sharp drop 
in farm income caused a very large number of farms to come under 
foreclosure. 

Mr. O'CoNNELL. When you refer to the equity of this group, do 
you mean the percentage of the total of farm property that is at 
present owned by the farm operators, or do you mean the equity of 
individual farmers as against the value of the property? 

Mr. Wall. This refers to the total value of farm real estate, and 
refers only to the equity of owners. In other words, it excludes the 
mortgage debt. It is the equity of owners, compared to the total 
value of farm real estate. 

The next table shows a breakdown. 

(The table referred to was marked "Exhibit No. 2671" and is in- 
cluded in the appendix on p. 17448.) 



16968 



CONCENTRATION OF ECONOMIC POWER 



Exhibit No. 2670 
[Submitted by the Bureau of Agricultural Economics, Etepartment of Agriculture] 

PERCENTAGE OF THE VALUE OF FARM REAL ESTATE BELONGING TO THE 

FARM OPERATOR. UNITED STATES. FOR CENSUS YEARS 1890-1935. 

AND BY STATES. 1930 AND 1935 




« S OCPAITMCNT or ACRICULTURC 



BUMEAU OF AGRICULTURAL ECONOMICS 



CONCENTRATION OF ECONOMIC POWER 16969 

Dr. LuBiN. Do you mean the figures for 1930 and '35 refer to 
the value existing in those years of all farm real estate that is owned, 
or do you use a fixed base for both periods ? 

Mr. Wall. It refers to the value of farms in each of those periods. 

X>r. LuBiN. So despite the fact that the values in these farms went 
down, the equities went down as well. 

Mr. Wall. More rapidly. 

If there are no further questions on that particular chart, we will 
turn to the table entitled "Total farm mortgage debt and amounts 
held by principal lender groups, January 1, 1910-39. 

(The table referred to was marked "Exhibit No. 2672" and is in- 
cluded in the appendix on p. 17449.) 

Mr. Wall. I think the chief significance of this table is to indicate 
that there has been a rapid shift of the mortgage indebtedness into the 
hands of the centralized lending agencies and out of the hands of 
individual investors. 

(Representative Williams assumed the chair.) 

Mr. Wall. For instance, on January 1, 1939, the land banks and 
the Land Bank Commissioner, life insurance companies, and commer- 
cial banks held about 60 percent of the entire farm mortgage debt. 
Individuals and others held about 40 percent of the total, as compared 
with 75 percent in 1910. A large part of this shift to the centralized 
lending agencies, of course, represents the substantial increase in the 
holdings of the Federal land banks and Land Bank Commissioner as 
a result of the emergency refinancing program following 1933 and 
1934. Life insurance companies have reduced their outstanding loans 
by more than one-half in the past 10 years; commercial banks have 
show^n a very substantial reduction, and the joint stock land banks, 
which are now in liquidation, of course, have shown the greatest de- 
crease of any of these groups. 

The picture of the indebtedness situation of the American farmer, 
however, is incomplete if we consider solely the farm mortgage in- 
debtedness, as in addition to such debts he also borrows various 
amounts from commercial banks, government sponsored agencies, in- 
dividuals, and others. 

The next chart which you see before you, "Short-Term Loans to 
Farmers Held by Commercial Banks and Federal Agencies, Com- 
pared with Index of Prices Received by Farmers," will give you a 
picture of the changes that have occurred in non-real estate debt of 
farmers. 

(The chart referred to was marked "Exhibit No. 2673" and appears 
on p. 16970.) 

Mr. Wall. There has been an even more drastic reduction in per- 
sonal and collateral loans to farmers held by commercial banks than 
there has been in the farm mortgage indebtedness. On December 31, 
1920, commercial banks held commercial and collateral loans to farm- 
ers in the amount of about $3,870,000,000. By the end of 1936 this 
had been reduced to about $593,000,000, and since that time there has 
been an increase of about 100 percent, but this has represented largely 
commodity loans under the Commodity Credit Corporation loan pro- 
gram. The loans from federally sponsored agencies of the character 
similar to those made by commercial banks, which are indicated in 
the chart as of bankable quality, now amount to about $195,000,000, 

124401— 41— pt. .'^0 50 



16970 



CONCENTRATION OF ECONOMIC POWER 



or roughly about one-fifth of the loans held by commercial banks. 
This type of loan has not increased materially since 1934. The big- 
gest increase was in 1931-32, when the regional Agricultural Credit 
Corporations were established to cope with the emergency that existed 
in agricultural areas at that time. There has been, however, a very 
substantial increase in another type of loan made by Federal agencies, 
and that is represented primarily by emergency crop and feed loans, 
rehabilitation loans, and loans made to stabilize the prices of agricul- 
tural commodities, the latter under the Commodity Credit Corpora- 
tion loan program. 

Exhibit No. 2673 

[Submitted by the Bureau of Agricultural Economics, Department of Agriculture] 

SHORT-TERM LOANS TO FARMERS HELD BY COMMERCIAL BANKS 

AND FEDERAL AGENCIES. COMPARED WITH INDEX OF 

PRICES RECEIVED BY FARMERS 




1910 



1915 



1920 



1925 



1930 



1935 



1940 



D S DEPARTMENT OF AGRICULTURE 



BUREAU Of AGRICULTURAL ECONOMICS 



We might make a rough estimate of the total indebtedness of Amer- 
ican agriculture, which would be roughl}' about $10,000,000,000,' repre- 
senting about $7,000,000,000 of farm mortgage indebtedness, about $2,- 
000,000,000 of short-term loans obtained from commercial banks and 
Federally-sponsored agencies, and the balance of roughly 1,000,000,- 
000 representing loans obtained from individuals, amounts owed to 
merchants and dealers, and so forth. 

You will note that we have charted the index of prices received 
by farmers along with the data for the short-term loans, and it will 
be noted that as prices rise there is a general tendency for the 
volume of agricultural loans of this character to expand, and con- 
versely, when prices decline, there is a consequent reduction in the 
volume of that type of loan. 

Changes in farm income naturally result in a change of the valiie 
of the collateral that the farmer has to offer in obtaining credit, 
and also influence his ability to repay advances already obtained. 



CONCENTRATION OF ECONOMIC POWER 16971 

Dr. LuBiN. Mr. Wall, do these figures include short-term loans 
in the sense that they represent debts of farmers for purchases of 
equipment, in other words, if the financing is done by the selling 
agency rather than the bank? 

Mr. Wall. No ; they would not, these are direct loans to farmers. 
If the advance were financed through, say, an implement manufac- 
turer who, in turn, obtained credit from a commercial bank, that 
would not be in these figures, but would be in this rough catchall 
figure of $1,000,000,000, that I mentioned a moment ago. 

Acting Chairman Williams. What, taking the entire farm indebt- 
edness, is the indebtedness of the farmers at the present time, com- 
pared with what it was at the peak, its highest point ? 

Mr. Wall. Well, I would say about $15,000,000,000, compared with 
$10,000,000,000. It was up around $15,000,000,000 in the very early' 
twenties. Then, as the mortgage indebtedness increased following 
1920, there was some refinancing of short-term loans which didn't 
represent an increase in the total debt but merely resulted in a shift 
from the short-term category to the long-term category. 

That likewise occurred to some extent following 1933; the increase 
in loans, we will say, of the Farm Credit Administration represented 
a refinancing of a considerable amount of short-term indebtedness. 

Acting Chairman Williams. There has been, roughly, then, a de- 
crease of $5,000,000,000 in farm indebtedness. 

Mr. Wall. Yes; as a rough figure. 

Acting Chairman Williams. What about the rate of interest during 
that same period of time? How does the entire interest load which 
he carries now compare with what it did at that time? 

Mr. Wall. Well, I have with me material on the total farm mort- 
gage interest payments, I do not have immediately available the inter- 
est payments on the short-term indebtedness. In 1922 total interest 
charges on the farm mortgage indebtedness amounted to about $680,- 
000,000, and in 1938 that had been reduced to about $357,000,000. That 
represents, of course, a substantial reduction in the mortgage debt, but 
also some decrease in the rate of interest. 

FARM INTEREST RATES 

Mr. Wall; i^or instance, the average rate of interest paid on out- 
standing farm mortgages in 1923 was 6,35 percent, and in 1939 that 
had decreased to 4.99, or about 5 percent. There has also been a re- 
duction in interest rates and short-term indebtedness to the increasing, 
proportion of short-term indebtedness held by Federal agencies, of 
course, reduces the average rate in all outstanding short-term indebt- 
edness, and we know from fragmentary data that commercial banks 
have also reduced quite sharply, particularly in some areas, the 
interest rates that they charge farmers on personal collateral security. 

Acting Chairman Williams, It would appear from that that the 
interest load today was perhaps not over half what it was in the early 
twenties, 

Mr. Wall. Well, the relation of farm mortgage interest pa^nients 
to farm income is about the same now as it was in the pre-war period, 
1909 to 1914. The next table shows total farm real-estate taxes and 
farm-mortgage interest payable, and the, percentage they form of cash 



16972 CONCENTRATION OF ECONOMIC POWER 

farm income. In 1938 the total of both taxes and interest charges 
represented about 9.5 percent as compared with 6.4 percent in 1910, 
but that increase in percentage is accounted for largely by an increase 
in farm taxes in relation to farm income. 

(The table referred to was marked "Exhibit No. 2674" and is 
included in the ai)pendix on p. 17450.) 

Dr. LuBiN. Mr. Wall, in your previous charts you have an item 
called "Loans of bankable quality held by Federal agencies." You men- 
tioned emergency legislation in the early tliirties. Are there any Gov- 
ernment sources to which a farmer can go for a so-called commercial 
loan of a bankable quality that will make loans today? 

Mr. Wall. Yes, indeed. There are something over 500 production 
credit associations located throughout the United States, in which 
farmers can obtain credit on good collateral at interest rates around 
41/^ percent per annum. These production credit associations cover 
the entire United States. 

Dr. LuBiN. Evidently the number of loans they have been making 
since the value of loans has not been increasing, judging by these 
borrowers, but has held more or less the same since 1936? 

Mr. Wall. That is just about right. I have before me some figures 
here for December 1936, $172,000,000; and in 1938, $181,000,000; in 
December 1^39, $194,000,000. Of course, these are year-end figures, at 
which time such loans are lower than they are in the middle of the 
year, which is the peak season for short-term advances. 

Dr. LuBiN. Does this mean that commercial banks are meeting their 
needs, so they don't have to have recourse to these commercial credit 
agencies ? 

Mr. Wall. Well, there are a number of factors involved there. In 
some areas the commercial banks are giving very active competition in 
obtaining loans of this sort, so that these production credit associations 
have not shown as large an increase as they did in earlier years. On 
the other hand, there are certain areas, like the livestock areas, where 
the local institutions are not able to handle all the loan business, and 
in those areas the production credit associations have shown a very 
satisfactory business. 

Dr. LuBiN. Are they incorporated ? 

Mr. Wall. Yes; each borrower must take stock in the amount of 
5 percent of his loan. 

Acting Chairman Williams. In that respect they parallel exactly 
the Federal land-bank system ? 

Mr. Wall. That is correct. 

Acting Chairman Williams. And what about the rural rehabilitation 
program ? 

Mr. Wall. Those are direct loans made by the Farm Security Ad- 
ministration to farmers who cannot qualify for credit from other 
agencies. 

Acting Chairman Williams. That is an additional agency to make 
these nonbankable loans? 

Mr. Wall. That is right. 

The next table, which is entitled "Number of Farms Changing Own- 
er.ship by Voluntary and Forced Sales, Per 1,000 of All Farms, by Geo- 
graphic Divisions, 1926-39," will have some bearing on the question 
which you raised earlier in connection with the factors that accounted 



CONCENTRATION OF ECONOMIC POWER 16973 

for the sharp reduction in mortgage indebtedness. The amount of 
forced sales rose rapidly after March 1931 and reached a peak during 
the year ended in March 1933, at which time they were about two and 
a half times the average prevailing during the 5-year period 1926 to 
1930. The portion of that that is just sales has been quite large in the 
West and North Central States, and this is accounted for by the larger 
percentage of farms mortgaged, together with the relatively high rates 
on the mortgage debts to land values in these particular areas before 
the depression set in. 

(The table referred to was marked "Exhibit No. 2675" and is in- 
cluded in the appendix on p. 17451.) 

Mr. Wall. Now, if you want to see the result of all these develop- 
ments, you might turn to the following table, which shows farm real 
estate held by leading lending agencies. 

(The table referred to was marked "Exhibit No. 2676" and is in- 
cluded in the appendix on p. 17451.) 

Mr. Wall. As a result of the depression and the large volume of 
forced sales, there has been a considerable shift in the ownership of 
farms from owners to the large lending agencies. 

At the beginning of 1939 a group of five of the most important lend- 
ing agencies held acquired farms in an estimated investment of slightly 
over $1,000,000,000. This represents roughly around 28,000,000 acres. 
These holdings are largely concentrated in the Midwest States, where 
land values were relatively higher in other sections of the country, and 
with, as I mentioned a moment ago, the ratio of debt to A^alue and 
percentage of farms mortgaged were both quite high before the de- 
pression set in. 

Acting Chairman Williams. Are there any further questions? I 
think that is all; thank you. 

Dr. Anderson. The next witness of the panel is Dr. Louis Bean. 
He has been previously sworn. 

TESTIMONY OF DR. LOUIS BEAN, ECONOMIST, BUREAU OF AGRI- 
CULTURAL ECONOMICS, DEPARTMENT OF AGRICULTURE, 
WASHINGTON, D. C— Resumed 

Dr. Bean. I should like to begin, Mr. Chairman, with the very last 
tabulation in that small document that was brought together. 

Acting Chairman Williams. What is the title of it? 

Dr. Bean. The title of that tabulation is "Gross income from farm 
production, expenditures for labor, and value of farm implements and 
machinery on farms, by types of farms, 1899 and 1929." 

(The table referred to was marked "Exhibit No. 2677" and is in- 
cluded in the appendix on p. 17452.) 

Dr. Bean. The purpose of this table is to give a very general im- 
pression as to the relation between expenditures for labor and the 
expanded use of farm machinery during the period of 30 yea,rs, 1899 
to 1929, with the assumption that there will be a great deal more 
detailed information presented for the most recent decade. 

Another reason for presenting this table is that it gives information 
which has not been presented so far, on the relation of expenditures 
for labor and machinery, by types of farms. 



16974 CONCENTRATIUN OF ECONOMIC POWER 

The contrast is presented here in terms of the expenditures for labor 
as estimated or tabulated by the censuses in these 2 years, as percentages 
of gross vahie of production, sometimes called the gross income from 
agricultural production. 

Similarly, I ha\e used the value of machinery on farms as reported 
by the Census, as a ratio to gross income, merely to get some indication 
of the changes in these two items as between types of farms and over 
this 30-year period, not purporting to say that this represents the situa- 
tion of 1939 but merely to supply the committee with material for 
that 30-year period as a background for more recent data. As indi- 
cated by the testimony of this morning, much more striking changes 
have taken place in the past few years than took place during the 
earlier 20 or 30 years. 

The gist of this tabulation, then, is that between 1899 and 1929, ex- 
penditures for farm labor as a> percentage of gross income^^ declined 
from 9.7 percent to 8.7 percent. 

Dr. LuBiN. Does the series in the 1929 figure include the same things 
as the 1899 figure? They are labeled differently, but taken as a whole, 
are they the same? 

Dr. Bean. That is right. They are essentially the products of agri- 
culture, exclusive of products fed to livestock, sometimes defined as 
the value of sales plus the vajue of products consumed in the farm 
home. 

In that same interval, the ratio of farm machinery inventorv to 
income increased from 20.2 percent to 30 percent. 

Dr. Anderson. Your ratio for farm machinery is based on inven- 
tory and total gross income? 

Dr. Bean. That is right. 

Dr. Anderson. Let me ask you, first, what does farm machinery 
include? 

Dr. Bean. It includes all of the farm implements plus the motor 
equipment that farmers have bought during the past generation or 
so. In other words, you had, in 1899, farm implements and machinery 
exclusive of the motor equipment which is now typical of farming. 

Dr. Anderson. In other words, it would include automobiles? 

Dr. Bean. Automobiles and tractors. 

Dr. Anderson. And trucks? 

Dr. Bean. That is right. 

Dr. Anderson. And would it include household machinery, sewing 
machines, and so on? 

Dr. Bean. No; this is only machinery on farms, for productive 
purposes. 

Dr. Anderson. The ratio in 1899 was 20 and in 1929 it was 30. 
Do you have any break-down to indicate what would make the 
difference ? 

Dr. Bean. I will come to that a little later. We have some infor- 
mation on the relative increase in the plurchases and costs of motor 
equipment. 

Dr. Anderson. But this is an inventory figure, and would not be 
taken to mean in any sense the proportion of an income that would 
be spent for machinery 

Dr. Bean. Not directly, only as indicative of the, say, incidence 
of costs for machinery in relation to gross income. Insofar as a 



CONCENTRATION OF ECONOMIC POWER 16975 

change in the value of inventories is representative of a change in 
depreciation costs. 

Dr. Anderson. And we will discuss the detail of it later? 

Dr. Bean. I will have a little more detail on that in another tabu- 
lation. 

If you will take the cash grain farms for that interval, we find 
that in 1899 the inventory figure increased from 21.8 percent to 46.7 
percent. That is the largest increase of any of the types of farms 
shown here. The proportion of income paid out for labor in this 
group of farms declined from 10 percent in 1899 to 8.3 percent in 
1929. In the ' se of cotton, the proportion going for wages was the 
same in 1929 aS in 1899, namely, 5.9 percent; while the farm ma- 
chinery inventory figure rose from 10.4 to 16.4 percent. Similar 
changes took place on dairy farms. There, wages took 13.3 percent 
in 1899, and 8.6 percent in 1929. Farm machinery inventories in- 
creased from 25.6 percent to 34.4 percent. 

On livestock farms the shift in the wage proportion was from 
8.2 to 6.2, and the machinery item increased from 19.1 to 29.5. The 
smallest change occurred on fruit farms. There wages took 20.1 
percent of income in 1899 and 23.7 in 1929, the macliinery item rose 
from 19.1 to 24.7. 

EFFECT OF MECHANIZATION ON LABOR COSTS 

Dr. LuBiN. Is it fair to conclude from these figures that in some 
instances the large increase in the use of machinery had little or no 
effect upoii percentage of income that went to labor whereas in 
other instances the relatively small increase through this machinery 
affected labor costs rather markedly 'i 

Dr. Bean. Well, I present this material for such inferences as 
any of you may make, and I think you are in about as good a 
position to draw inferences from this as I am. I thought that you 
were interested in such quantitative expressions of that question as 
we can bring to you. 

Dr. LuBiN. Evidently the table shows that a 50-percent increase in 
machinery inventory resulted in about a 9-percent decline in the 
amount of farm income that w^ent to labor. 

Dr. Bean. That is the over-all evidence, that you could have a 
substantial increase in machinery costs and not have a similar offset 
in the reduction in the wage bill. 

Dr. LuBiN. In many instances no offset at all, in fact an actual 
increase. 

Dr. Bean. That is possible. 

Mr. Pike. You probably had a much higher rate of wages in 1929 
than in 1899. 

Dr. Bean. All values were different. 

Mr. Pike. But the man-hour reduction doesn't show\ 

Dr. Anderson. Dr. Bean, the question I raised earlier w^as to fix the 
pomt you have just brought up about an increase in machinery costs. 
Do I take it that we can consider inventory figures as machinery-cost 
figures ? 

Dr. Bean. Sometimes, lacking better information, it is possible to 
take an inventory item and allow, say, 10 percent of inventory as cost 
of depreciation, or some suCh formula; it doesn't have to be 10 percent. 



16976 CONCENTRATION OF ECONOMIC POWER 

It is for that purpose that I have used tliis over-all impressionistic 
ratio of inventory to gross income. I think it represents fairly well 
a shift or change in the relative importance of this item as a cost, not 
an absolute, but a relative change. I think we come a little closer in 
answer to your question in the next exhibit, which is called "Cash 
Farm Income FrOm Marketings and C6st of Operating Farm Machin- 
ery, Depreciation, ai^d Wages Paid for Labor as Percent of Farm Cash 
Income, 1910-39.'' 

(The tabic' referred to was marked "Exhibit No. 2678" and is 
included in the appendix on p. 17453. ) 

Dr. Bean. The Bureau of Agricultural Economics is in the process 
of making estimates of items in the cost of producing the annual farm 
production, and I have utilized that material, which has not yet been 
fully published, in the form of ratios to cash income from the market- 
ings of farm products. 

The estimates of depreciation allowance on all farm machinery and 
farm equipment as a percentage of cash income appear in the second 
column, and you will notice that in the pre-war years that figu •. repre- 
sented close to 6 percent of the annual receipts. In the post-war years 
of the 1920's, that percentage is something over 6 percent, between 6 
and 7 percent. In 1931-32, naturally that proportion rises sharply as 
it did in 1921 because of the sharp shrinkage in income. In the more 
recent years, 1938 and '39, that depreciation ratio stands at about 9 
percent. 

Mr. Pike. It is a pretty high depreciation there, better than 20 per- 
cent. The only year where it is comparable, in 1929, you had 30 
percent inventory and 6.8 depreciation 

Dr. Bean. That would be a fifth. 

Mr. Pike. Yes ; you were amortizing there in less than 5 years on 
your farm machinery. 

Dr. Bean. These are the facts and if you would like to argue about 
them I will get you the reasons for them. For the moment I think all 
that I want you to use these figvires for is to get an impression of rela- 
tive change. The 5 or 6 percent before the war isn't absolutely signifi- 
cant, but the change from 5 or 6 before the war to 8 and 9 now I 
think is. 

Tlie next column represents the net cost of operating farm machin- 
ery, which is essentially automobiles, trucks, and tractors, including 
gasoline, tires, oil, things of that sort. And you will notice that in 
the pre-war years that cost was insignificant because this type of farm 
-equipment didn't exist. In the 192^s, it had risen to over 7 percent of 
annual receipts, and in the last 2 years, it was slightly under 12 percent, 
or 11.7. 

Mr. Pike. For a man operating equipment with his own horse, you 
wouldn't charge that 

Dr. Bean (interposing). No; it is cash outlay. 

Dr. Lubin. What would the percentage be now if the level of farm 
prices were equal to what they w^ere in 1929 ? 

Dr. Bean. Farm prices now are approximately 100; in 1929 they 
were 50 percent higher. I suppose this ratio would drop to perhaps 8. 

Dr. Lubin. You would be close to where you were in the '20's. 

Dr. Bean. That's right. The wage proportion is shown in the next 
column, and here it appears that in the pre-war years farmers paid out 



CONCENTRATION OP ECONOMIC POWER 16977 

annually a little over 9 percent as cash wages. In the 1920's it was 
something under ^ percent, but not a great deal. In 1929, it was 8.5, 
compared with 9.1 lr> 1910 ; since then it has fallen off to 7.1 in 1939, 
having gone lower in i934. 

Dr. LuBiN. Do these wages include all wages on the farm or only 
those wages for the cost of operating machines? 

Dr. Bean. This is all wages, cash wages for hired labor. The sum 
of these three cost items in relation to income is in the last column, 
and we find here that nearly 16 percent of receipts in the pre-war years 
went for these three costs. By 1929, the figure amounted to 23 percent, 
and in the last 2 years, it has averaged 28 percent. As you study the 
make-up of this aggregate figure, it is clear that there has been some 
offset as between the increase in the depreciation column and the de- 
crease in the cash wage column, so that the net increase in the relative 
importance of these three cost items is almost entirely accounted for 
by the increased importance in the cost of operating automobiles, 
trucks, asd tractors. 

Dr. LuBiN. Has there been an increase in the cost of operation, or an 
increase in proportion of income that has been devoted to it ? 

Dr. Bean. All this information shows is that there has been ah 
increase in the proportion of income going for this type of expenditure. 

Dr. LuBiN. The costs may have gone down. 

Dr Bean. Whether or not other costs have gone down to offset this 
is another question, and I think'on that I can tell you that there have 
been some reductions naturally in the past few years, taxes and in- 
terest 

Dr. Lubin {interposing) . Even in operation, I mean if you had tbe 
same cash income in 1939 that you had in '29, your actual percentage 
of income that goes to operation of these machine^ would have been 
lower. 

Dr. Bean. Oh, naturally. 

Dr, Lubin. In other words, it isn't cost of operation that has gone 
up, that may have gone down for all we know, but as a ratio to total 
cash income 

Dr. Bean (interposing). That is right; and I thought it was im- 
portant to give you the relation of costs to income and not merely the 
absolute figures which you already have. 

Colonel Chantland. Wasn't there a figure given this morning that 
indicated that the farm help without the payment of wages did go up 
during this time at the same time that these other costs went down ? 

Dr. Bean. "Exhibit No, 2648" gave the annual average of persons 
employed, divided into three groups, total employment, family work- 
ers, and hired workers. I have just been studying this tabulation, 
because I wanted to see what relation it bore to the course of the 
number of tractors on farms,^ and if you wish I will give you the 
relation of those two. 

Colonel Chantland, In other words, if they did pay less wages, but 
had more of their own family on without paying the wages, the cost 
still was there, if the boy is entitled to anything, 

,Dr. Bean. If you will hold that "if" for a moment, we will see if i' 
is really pertinent, 

1 See "Exhibit No. 2655," appendix, p. 17440. 



16978 CONCENTRATION OF ECONOMIC POWER 

I would like to give you the figures for three separate periods. You 
may recall from "Exhibit No. 2655" that the number of tractors on 
farms rose fairly persistently from 191S to 1939. It was pointed out 
that there were three periods when the expansion in the use of trac- 
tors was more marked than in other periods. We had a rapid expan- 
sion which culminated in about 1920, then you had another expansion 
which was more rapid than in other years, which culminated shortly 
after 1930, and then you had another expansion in the last few years. 

CHANGES IN FARM LABOR FORCE 

Dr. Bean. I want to present the figure^ for your question for these 
three periods. Family workers, during that first period of expansion 
in farm machinery of this type, dropped from an index of 107 to 101, 
the years being 1915 to 1920- In other words, you had a 7-percent de- 
cline in family workers. During that same period you had a decline 
of 2 percent in hired workers. 

Colonel Chanland. But that is family wages. Supposing they 
don't pay family wages, or do you figure it at any rate? 

Dr. Bean. May I first present the physical aspect of the question, 
numbers of people, because it underlies the problem of evaluation. 
That family workers declined 7 percent, hired workers 2 percent dur- 
ing that first period when farmers went into motor equipment fairly 
heavily. During the second period of expansion, which I mark off 
as between 1925 and 1932, over that period of 7 to 8 years there was 
no change in the number of family workers, the index being 102 in 
each of those 2 years, but during that interval family workers de- 
clined from 102 in 1925 to 99 in 1929, which is a decline of 3 percent 
prior to the onset of the depression, so that the subsequent increase 
in family workers from 99 in 1920 to 102 in 1932 is apparently a 
function or a result of the low prices and the depression. 

Dufing that same period, froni 1925 to 1932, we have a decline in 
the number of hired workers from an index of 97 to 85; in other 
words, 12 points, or approximately 12 or 13 percent. 

Now we come to the final, the most recent, period of expansion, 
and there, taking the period from 1935 to 1939, we find a reduction 
in the number of family workers of 6 points, from 103 to 97, or, 
roughly, 6 percent, but no change in the number of hired workers, 
the index being 84 in 1935 and 84 in 1939, with some increase in that 
interval, and a subsequent decrease. The net change over that 5-year 
period is zero. 

So that over this period you have a reduction in the number of 
people producing as one of the factors in this wage bill, and at the 
same time I think you see the relation between the change in the 
number of workers to possibly one of the factors which is at least 
logically associated with that change. 

Dr. Anderson. Dr. Bean, why do you select the particular periods 
of time that you do? 

Dr. Bean. They are selected for me by the data. 

Dr. Anderson. Let's see that clearly, sir. 

Dr. Bean. Is it possible to get ''Exhibit No. 2C55" back on the" 
easel ? 

pf. Anderson. In other words, you are basing it upon that dis- 
tribution of time? We would like to see the connection between the 
two sets of data. 



CONCENTRATION OF ECONOMIC POWER 16979 

Dr. Bean. While the predominant record nere is of a sharp in- 
crease in the inventory of tractors on farms, it is clear that the 
changes in that rate of expansion are an indication of the more or 
less rapid rat€ of accumulation or purchases. This curve peaks up 
at January 1920, indicating that there was a rapid increase in pur- 
chases or expansion in purchases of tractors. In 1922 the inventory 
figure was about the same, indicating that there was practically no 
additional purchase of tractors in that year, or at least a very srnall 
one. To put it another way, it was only enough to offset depreciation. 

The next period of rapid accumulation occurred during the late 
1920's, culminating with 1932, and the final, or the most recent 
jieriod, occurred during the last 5 or 6 yeai-s, so I select these three 
periods merely because the record suggests that those are the periods 
when, if this has any relation to employment of farm labor, you 
would expect to find it in the record. 

Dr. Anderson. Would it be possible to take, instead of the in- 
ventory of farm tractors, actual increased sales? 

Dr. Bean. I think, if you can visualize numbers of tractors around 
this line, you will have essentially annual purchases, assuming that 
you have a constant purchase for replacement, but these variations 
in the rate of increase of this line represent variations in annual 
purchases. 

Dr. LuBiN. Dr. Bean, I am sorry I wasn't here this morning when 
the question of farm population was discussed, but evidently, judging 
by the tables which were submitted, and the charts, there has been a 
very marked increase in agricultural population in the last 15 or 20 
years. 

Dr. Bean. No. 

Dr. Taylor. Since 1932 there has been, Mr. Lubin ; up to 1932 there 
was a gradual decline. 

Dr. Lubin. The chart here 

Dr. Bean (interposing). That is certain groups in the farm popu- 
lation. That is not the total farm population. May I give you the 
total farm population? In 1909 it is estimated at 32,000,000; in 1920 
at 30,200,000, in 1939 at 32,000,000. In other words, between 1909 and 
1939 there has been no real change in the farm population. The 
change that you have there represents the changes in the age groups. 

Dr. Lubin. That was a 6-percent increase, roughly. 

Dr. Bean. Between 1929 and 1939 you have an increase of about 
1,800,000; yes; about 6 percent, 

Dr, Lubin. The increase in your family workers, however, at the 
maximum, was 4 percent, is that right? 

Dr. Bean. The increase in family workers? There has been no 
increase in family workers. 

Dr. Lubin. Between 1929 and 1935 there was an increase of about 
4 percent. 

Dr. Bean. Yes ; for that period there has been. 

Dr. Lubin. Well, now, what do these people do? You have in- 
creased your population by 6 percent on farms. Do you assume that 
most of these people are doing nothing on the farm, that they don't 
help at all? 

Dr. Bean. I personally assume that they are doing very little, if 
anything ; that some of thefh are on relief work and some of them 
perhaps are doing nothing. We have no 



16980 CONCENTRATION OF ECONOMIC POWER 

Dr. LuBiN (interposing). Although you have 6 percent more peo- 
ple on the farm, about 2 percent less of them are working, which 
means they are either on relief oi- do notliing at m11. They are not 
helping on tlie farm. 

Dr. Bean. All I can say is that we have a general impression that 
there is a surplus population on the land, bot-h total and working. 

Dr. LuBiN. There may be a surplus in terms that they are not 
necessary, but the question is, are they doing anything? 

Dr. Bean. Well, what do you think they are doing? 

Dr. LuBiN. I get the impression that they have been doing odds 
and ends and, consequently I can't reconcile your decline in the 
number of family workers since 1929 with the increase of farm 
population since 1929. It assumes not only that everybody who went 
back to the farm is doing nothing, but all new additions are doing 
nothing, plus some others who formerly were doing something who 
are now doing nothing. 

Dr. Bean. Unfortunately, I don't have any qualitative impression 
of this thing, and I doubt if anybody has, so that whatever I say is 
hardly worth the saying. You might, however, assume that since 
a larger proportion of your population is in the higher-age gioups, 
over 60 or above 65, perhaps they are not working as much as they 
used to, if they can rely on some of the folks who have come back 
from the cities onto the land. But that is all speculation. 

Dr. LuBiN. That assumes that everybody w^ho came back from the 
city, plus 2 percent more who formerly were working, are not work- 
ing today. 

Dr. Bean. I don't know that it is worth while pursuing this. I 
don't have any information, and I don't think anybody else has, as 
to what this excess of population is. If they are working, then it is 
clear that they are not working economically. 

Dr. LuBiN. I will agree with that. That we can all agree on. But 
I am just wondering; it seems unreal to assume that the net differ- 
ence, the increase in farm population, both through migration and 
birth, is not doing anything — let's not use the word "employed" be- 
cause that has an economic significance — plus 2 percent more who 
formerly were working who aren't doing anything at all. 

Dr. Bean. It is your privilege to make that assumption. I might 
assume something different, but I don't think either of us knows. 

Dr. Anderson. The designation "family worker" has never been 
precise, and any small percentage of change would mean nothing 
significantly in a series of data. As a matter of fact, we are getting 
more improved data as we go along, but nobody would stake his life 
on the precise meaning of 'family worker" in 1 year of collection of 
data as compared with another. I think that would have something 
to do with the interpretation to be made of the changes that have 
occurred. 

Dr. Bean. Your remarks lead me to add that between 1929 and 
1935 there was an increase in the number of fai'ms, and therefore 
presumably an increase of something like 600,000 or 700,000 persons 
who are engaged on these farms as part of this farm family labor 
group. 

Dr. LuBiN. But they seem to have disappeared since '35, because 
you are down below where you were in 1929. 



CONCENTRATION OF ECONOMIC POWER 16981 

INCREASE IN FARM PRODUCTIVITY 

Dr. Bean. I think we will be a little clearer on that point as soon 
as we have the next census data. But this happens to be the best 
information we have, and roughly, the data indicate that your total 
farm population is the same as it was 25 years ago; there has been 
some increase, of uncertain magnitude, in the past few years and 
that all the evidence we have indicates that there are more people on 
the land than are now required for production. 

Colonel Chantland. Omitting all idea of exports, how many more 
people in the United States' have they had to take care of during these 
same periods ? 

Dr. Bean. You might say, very roughly, that 32,000,000 people on 
the land are now feeding or taking care of 99,000,000 people. 

Colonel Chantland. Besides themselves. 

Dr. Bean. Besides themselves; whereas in 1909 they took care of 
nearly 58,000,000. In other words, the same number of people on 
the land now feed roughly 70 percent more people. If you make 
one further assumption, which is not unrealistic, that over this pe- 
riod of years there has been no material change in the per capita 
consumption of food products for the Nation as a whole, the annual 
intake of agricultural products tends to be a pretty constant figure 
per person. 

If that is so, then you might say that 32,000,000 people on the land 
today are 70 percent more productive than 32,000,000 people on the land 
in '99. 

Colonel Chantland. That is assuming that your export remains 
at a sort of constant factor. If it changed it would throw it out of 
kilter. 

Dr. Bean. We know within what period that change may take 
place. Before the war — I am giving you a figure from memory now— 
something like 18 percent of our total output went out as exports. 
In the past few years it has been only 7 or 8 percent. 

Colonel Chantland. That makes quite a difference. 

Dr. Bean. It makes a difference of 10 percent. 

Dr. Anderson. But let's put in the import picture and see what 
happens. What were our imports before the war as compared with 
what we import now? 

Dr. Bean. I don't have that here. 

Dr. Anderson. As I remember it, it cuts it down materially, 
so that 10 percent doesn't look quite like that. 

Dr. Bean. I^« put it this way: in 1909 you had 100 units of 
domestic consuinption plus 18 units of exports; today you have 100 
units of domestic production and 8 units of exports, giving' you a 
total of 118 in one case and 108 in the other. That is a difference of 
9 percent in the 70 percent figure I gave you. 

Colonel Chantland. But Dr. Anderson says that 108 is to be 
reduced by certain imports. 

Dr. Bean. Let's leave it this way. 

Colonel Chantland. I think we had better not pursue it because 
we haven't the figures. 

Dr. Bean. I w^ould like to leave an impression as to where that 
figure might lie. If it isn't 70 it might be 60 or it might be 50, but 



16982 



CONCENTRATION OF ECONOMIC POWElt 



it isn't less than 50 percent increase in productivity in terms of 
people engaged on the land. 

Colonel Chantland. That is really all we can say. 

Dr. Bean. And that is, I think, the long-time history of agriculture 
in this country, that a fairly constant number on the land is decade 
by decade able to produce for an increasing industrial population, 
without increasing the number of people on the land. 

I have two items that I would like to call to your attention. One 
is in connection with the chart labeled "Per Capita Farm and Non- 
agricultural Income Available for Living." ' 

(The chart referred to was marked "Exhibit No. 2679" and ap- 
pears below. ) 

Exhibit No. 2679 

[Submitted by the Bureau of AgricuUural Economics, Department of AgricuUureJ 

PER CAPITA FARM AND NON AGRICU LTU RAL 
INCOME AVAILABLE FOR LIVI NG. 1909-39 



220 

leo 

140 



100 -sg 



60 



20. 



1910-14 = 100 


1 
Per capita farm income 
/ 1 








/v 






Per capita 






/ 4 


y^ nonfarm incom 


e 




/ / 

Iff \ 


^ ' > 


^^ — \\ 


>^^^^ 

* 


**I%__r»-fcBn* 






\ 


y ^.- Vv 


s'sHir' *♦»•■' 


\ .^M*** 


^ 




Ratio farm to ^-^ 


v^ 






^^*^^*-»*« 


non/arm income 
1 1 1 1 1 1 1 1 


1 1 1 1 


1 1 1 r 


1 1 1 1 


III! 



1909 



1915 



1920 



1925 



1930 



1935 



1940 



U I OEPARTHENT Of MRICULTURC 



Dr. Bean. I want to use this material in relation to the cost items 
that we discussed earlier. 

FARM IN(X)ME 

Dr. Bean. There are two sets of data in this illustration. One rep- 
resents the per capita income received by individuals not on farms. 
It is the income per person of the nonfarm population. If you will, 
it is the national income, exclpsive of agricultural income, on a per 
capita basis. That is the dotted line which reaches the high point in 
1929 above the other lines that you see there. The second set of data 
is income available to persons on the land derived from agricultural, 
production. It is obtained by deducting from the gi^oss income from 
farm output a selected list of business expenditures, including these 
machinery cost items that we have here before us — costs of feeds and 
fertilizer and building materials and various other things — so that 
we have here the amount of money available per person living on 
farms for living purposes, as contrasted with mcome available for 
business purposes. 



CONCENTRATION OF ECONOMIC POWER 16983 

Acting Chairman Williams. Are you talking about cash income?. 

Dr. Bean. I am now talking about cash plus the value of things 
consumed, goods consumed in the home, derived from farming. 

In 1939, the last point on the chart, income per person not on farms 
was roughl}' 156 percent of the pre-war level. Agricultural income 
available to people living on the land — that is, income from farm 
production — was approximately 120 percent of the pre-war figure, and 
the difference between those two is represented by a ratio of 80. In 
other words, had farm income been higher by the equivalent of $1,500,- 
000,000, the farm-income line would have been up where the non- 
agricultural income line is in 1929. The nonagricultural income line, 
incidentally, is what the Department of Agriculture calls parity in- 
come ; it is the level of income of nonfarm people to which farm income 
would need to rise if parity income for agriculture were attained, 
and that difference in 1929, in addition to the Government payments 
made to farmers, approximates $1,500,000,000. 

Dr. LuBiN. Where would that be if you would change your base 
from 1915 to 1920? 

Dr. Bean. It would have to turn back and make some mental 
computations. 

Dr. LuBiN. The farm income would be greater than nonfarm in- 
come average per capita. 

Dr. Bean. Naturally that relationship depends upon the base period 
selected. If you want to go into wliy that period is selected I will do 
that, but I don't think that is what you need this afternoon. 

Dr. LuBiN. I am trying to find out what significance this is. If you 
change to a different base you find the farm income higher thart tl^it. 

Dr. Bean. If you took 1919 as a base, then, of course, farm income 
would be much lower in relation to other income than it is; if you ^6ok 
it at 1929 it might not be quite as low. Perhaps that disparity wtruld 
be completely wiped out. 

Acting Chairman Williams. I had the impression that when we 
were talking about parity we were talking about that period between 
1909 and 1914 or '15. The purchasing power of the farm products 
as compared with the value of manufactured products'would be that 
period on which that line seems to run about parallel from 19()l^ to 
1915. I have always understood that when legislators talk ^tout 
parity of agriculture to industry it meant l:Hat period of time. 

Dr. Bean. There are two things. This represents parity income. 
You are referring to parity price. In concept, they are essentially the 
same except that one is a price comparison and this is an income 
comparison. It is true that in both cases the pre-war years are taken 
as a point of departure, and the relationship of the pre-war years con- 
stitutes the parity relationship. The parity relationship, these two 
lines, may come together at any point. They may come together at 
156, in which case you have restored parity. That is, one would have 
the same relation to the other at this higher level of 156 as they Jiad 
in the pre-war years, when they were equated at a lower level.- 

The main point is that equation ; that is, the two series of data have 
the same numerical value. They have been given a value of 100 bef6re 
the war, and if i;hey both should have the value of 156 in 1939, then 
they would have parity of income. 

Similarly with prices. Industrial prices are now, speaking fi;om 
memory, about 125 or 128 percent of the pre-war level,; farm prices are 



16984 CONCENTRATION OF ECONOMIC POWER 

at about the pre-war level, so you have a discrepancy there indicated 
by a ratio of 80 or 82. I think 80 is the most recent figure, so that 
both in terms of price ratio and income ratio, we come to practically 
the same point in terms of the parity level. 

Acting Chairman Wiixiams. What in figures was the farm income 
for 1939, if you have that? 

Dr. Bean. The cash income figure was about $8,500,000,000. A 
gross income figure, including the value of things consumed from 
farm production, would bring it close to $10,000,000,000. In 1929, it 
was around $12,000,000,000. That is gross income. 

For the purposes of this comparison, it is necessary to deduct busi- 
ness expenditures from that gross-income figure to obtain income 
available to (farm families for living purposes, and to make it com- 
parable with the income of the nonfarming population, because no 
business expenditures or income are included in the non-farm-income 
line. 

May I make one other observation about this discrepancy of $1,500,- 
000,000 ? In one of the previous tables, I indicated that there has been 
a net increase in the cost of operating farm machinery from 0.2 per- 
cent of income in 1910 to ll.T percent in 1939. Part of that increase 
represents the use of automobiles for home or pleasure use as against 
production use so that not all of this increase of nearly 12 percent is 
to be associated with the increased costs of running the farms. If 
we assume that only about 8 percent of this increase is to be so asso- 
ciated, then that net increase of 8 percent is the equivalent of some- 
thing like $500,000,000 to $600,000,000 in an annual cash income of 
nearly $8,000,000,000. Six billion dollars of income represented in 
this column of expenditures associated .with machinery is approxi- 
mately 40 percent of this discrepancy between actual farm income in 
1939 and parity income. 

Now, I would like to turn to a table entitled "Distribution of gross 
farm income in each of 10 equal groups of farms arranged accord- 
ing to the size of income," for the years 1899 and 1929. 

(The table referred to was marked "Exhibit No. 2680" and is in- 
cluded in the appendix on p. 17454.) 

Dr. Bean. This material has been gotten together hastily. It was 
done last night, so that many questions about it I may have to stall 
on, or ask you to give some additional time. There are additional 
comparisons that we need and want to make and hope that we can 
either present at a later occasion or for the record. As it stands, this 
material gives some impression as'to what is happening to farm income 
in relation to the number of farms in the different income brackets. 

You will notice that in the column marked "All farms," the number 
of farms up to the first 10 percent in the lowest income group there, 
we find less than 1 percent of the value of farm products in 1899 and 
a little more than 1 percent in 1929. 

If you go to the other extreme and examine the income which falls 
in the last 10 .percent of the farms associated with the higher-income 
brackets, namely, in a group I have marked 90 to 100 percent, we find 
nearly 40 percent of all farm income in that group of 10 percent of 
the farms in 1899 and 41 percent in 1929 — in other words, a shift of 
1.5 points. 

As you look down the third column of that tabulation marked "Dif- 
ference," it is clear that there has be6n some shift in income into the 



CX)NC5ENTRATI0N OF E(X)NOMIC POWER 16985 

lowest-income groups, and some shift into the very highest income 
groups. There is an additional comparison given so that you may 
see whether that increase in the. highest income brackets took place 
evenly as between the last 5 percent and the next to the last 5 percent. 

When you take all farms you find that the increase in the highest 
income bracket occurred for that bracket which I have marked 95 to 
100 percent; in other words, the 5 percent of the farms getting 4he 
highest income in 1929 got a little bit more than similar farms got in 
1899. 

The next column is labeled "Cotton farms." Here we also find that 
there has been some increase, not a great deal, but some increase in the 
proportion of income associated with the farms ir the lowest-income 
brackets and some decrease in the farms associated with the highest- 
income brackets. It is particularly in connection with this column that 
we want to do some more work to examine this type of data with 
respect to the owner-operated farms, the tenant farms, and the share- 
cropper farms. 

Mr. Pike. The present census will affect that. 

Dr. Bean. We are really waiting eagerly for the 1939 results. It is 
really in anticipation of that that we are preparing this background 
material. 

In the case of the grain farms, the same situation appears, with a 
somewhat lower concentration in the grain farms, with a somewhat 
higher concentration in the last 5 percent of the high-income farms. 

In the case of livestock, the thing which differentiates that column 
from the others is the increase of 7.5 points in the group of 90 to 100 
percent of the farms, and there, too, the increase occurs chiefly in the 
last 5 percent. The most striking of these groups is the fruit-farm 
group. Here we have a decrease in the. proportion of- income for each 
of the income brackets except the lowest 10 percent, and a very marked 
increase in the last income bracket, an increase of 16.7 points in the 
95- to 100-percent bracket. In the final column, labeled "Crop specialty 
farms," which is a catch-all, including vegetable farms, truck crops, 
tobacco, and sugar, we have the same general showing, that there has 
been an increase in the prop6rtinate income in the low-income 
brackets, and only a very slight mci-ease in the highest-income brackets. 

With respect to that last column, I think it would be worth while 
to show that in its detail because the groups that are included here 
represent a great diversity. In general, then, I would say that the 
low income brackets have received somewhat more than the former 
share and that the middle income brackets have received somewhat 
less, but that the very high income brackets are receiving, or in 
1929 received, relatively more. That fact checks also with the usual 
data supplied by the census on the size of farms, and just to give 
you a brief comparison in these terms, if you take the number of 
farms with 20 acres or less, we find that in 1920 there were 12.4 
percent of all farms in that low acreage group. 

Mr. Pike. That is just number of farms? 

Dr. Bean. That is number of farms. In 1930, it is 14.6, an in- 
crease of 2.2. In all other size groups, there is a relative reduction 
similar to what I have just discussed in terms of income. When we 
get to the group of 500 to 1,000 acres, we find a slight increase, from 
2.3 percent of all farms in 1920 to 2.5, about an, 8-percent Jncrease 

124491— 41— pt. 30 -51 



16986 CONCENTRATION OF ECONOMIC POWER 

relative to numbers; and in the size of farms over 1,000 acres, the 
proportion goes from 1 percent in 1920 to 1.3 in 1930. Also, con- 
trasting this size of farm with the relative importance of farm 
implements and machinery, we find something of the same general 
characteristic, that in the lowest size group, under 20 acres, the 
value of implements and machinery rises from 3.2 percent of the 
total in 1920 to 4 percent of the total. 

In the next size groups up to above the average, we find relative 
reductions, but in the group of 175 to 500 acres, the value of farm 
implements and machinery rises from 31.7 percent of the total in 
1920 to 32.2 percent in 1930, and in the next two groups, or all the 
rest, above 500, the increase is from 11.3 in 1920 to 15.1 in 1930, so 
that you have three sets of data here, the distribution of your farm 
machinery by size group, the distribution of the number of farms 
by size, and the distribution of the number of farms by income 
group, which seem to present three patterns of the same general 
characteristics. 

Mr. Pike. You would infer some increase in corporate farming, 
what is happening in the larger farms, wouldn't you ? 

Dr. Bean. That would be an inference but I don't know whether 
that is a fact. 

Mr. Pike. It isn't necessarily so but it sounds very much that way. 

Dr. Bean. It would lead one to investigate that question. 

Acting Chairman Williams. What is your definition of "farm''? 
What do you consider "farm" ?- 

Dr. Bean. I have ndopted the census definition, whatever it is. I 
think it is generally 3 acres or more, producing something like $250 
worth of goods. That figure has changed over the years, but I think 
between 1900 and 1929 the definition hasn't been much different. 

Acting Chairman Williams. I notice you spoke of an average. Do 
you mean an average-size farm ? 

Dr. BeaN: The groups that I have here run under 20 acres, 20 to 49, 
50 to 99, and 100 to 174, and the average-sizs farm falls within that 
bracket of 100 to' 174 acres to a farm. It is beyond that bracket of 100 
to }74 that we find a relative concentration of farm implements and 
madhinery.- 

Acting Chairman Williams. Have you figured actually how many 
farms there are in the country ? 

Dr. Bean. For 1900 the number- of farms is given as 5,700,000; for 
1929 it is given as 6,200,000 in rough figures, and for 1935, 6,800,000. 

Acting. Chairman Williams. Something was said a while ago by 
s.omeone about the number of farms that were mortgaged. Have you 
that figure ? 

Dr. Bean. Mr. Wall, who I hope is still here, had that. 

Acting Chairman Williams. I -don't know whether he gave the 
number. 

Mr. Wall. It is 341/2 percent of all farms. 

Dr. Bean Which would be a third of the 6,800^000, which is 2,- 
300,000, for a quick calculation. 

Dr. LuBiN. I wonder whether you would repeat for the record the 
percentage of gross farm income that goes to the upper 10 percent, in 
each of these groups. 

Dr. Bean. Do you want the contrast for each group ? 



CONCENTRATION OF ECONOMIC POWER 16987 

Dr. LuBiN. No ; just for the year 1929. 

Dr. Bean. Just the 1929 figure? 

Dr. LuBiN. Yes. 

Dr. Bean. For all farms, 41 percent of the value of products, or 
gross income, went to the highest 10 percent in 1929, 32 percent in the 
case of cotton farms. 31.5 percent in the case of cash grain farms, 41.3 
percent in the case ot livestock farms — that livestock includes what the 
census called animal- specialty, poultry, and stock ranches — 48.3 per- 
cent in the case of fruit farms, and 42.8 percent in the case of crop 
specialty farms. 

May I say that this proportion would probably be a little larger if 
it were put on a cash-income basis. 

Dr. Anderson. "Mr. Bean, I wish some of the other members of the 
staff would come up to the "mikes" so we could talk a little better. 

PROSPECT OF GREAT TECHNOLOGICAL CHANGE 

Dr. Anderson. Several questions occurred as we were going along, 
some of which were not cleared up during the morning session. There 
was one point raised just in passing, I think by Mr. Taylor, concern- 
ing impending technology on the farm. Your testimony this morn- 
ing indicated major changes that have occurred and suggested that 
should one or another thing happen, there would be drastic results. 
You mentioned the Rust cotton picker. As experts in the field, have 
you come to any conclusion about impending technology which would 
drastically alter the material that we have been discussing today? 

Do you anticipate any such drastic changes in the immediate or 
near future, and if so w^hat do you think the trend would be? 

Dr. Johnson. It is awfully difficult to anticipate something like 
that, and you have this kind of situation. A good many of these ma- 
chines are on the horizon for a good many years before they are 
finally perfected, and also priced low enough in relation to the price 
of the product and of hand labor so that they w^ill be widely adopted. 
I confess that I do not know at what stage the varioua kinds of pick- 
ers that are being experimented with will be adapted. We know that 
they ore not ready for adoption today. How long it will be before 
they are generally adopted is a real question. For instance, the com- 
bine harvester was being experimented with, I think, as early as 
1850, just quoting the date from memory, and, of course, it was used 
in the Pacific Northwest for a good many jears before it got into 
the Great Plains country. Finally now in the last 4 or 5 years, it is 
coming into w ide use in the Corn JBelt. If the cotton picker does be- 
come perfected so it can be widely adopted it will create a revolution 
in cotton which will be gt_least as important, perhaps much more 
important, than the revolution in wheat machinery — the combine and 
the associated tillage machinery in the small-grain areas. 

Mr. Pike. ^ Just one question occurs to me. From what I have heard 
about the cotton pickers, my memory is that the trouble is not with 
the picker but with the cotton plant. I wonder what your idea would 
be in a-griculture toward giving the country a cotton plant, if you 
thought you could, 

Mr. Johnson. Well, I am not a plant breeder, but I do know that 
plant breeders are working on that at the present time. Of course, 
the uneveness ot the ripening period varies in different sections of 



16988 CONCENTRATION OF ECONOMIC POWER 

the cotton South. You have much more uniform ripening periods and 
the cotton is left so that it can be picked much more at the same time 
in the western cotton area than in tlie Delta. 

Mr. Pike. Say, the Texas Panhandle area? They do use some 
mechanical means now and have for some years. 

Mr. JoHNSOK. Yes, but the Texas station especially is working with 
cotton plants more adapted to machine picking. 

Dr. Bean. The changes are slow. Perhaps it is easier for Mo- 
hammed to come to the mountain than it is for the plants to ac- 
commodate themselves to the picker. 

Mr. I*iKE. Well, you have done some very funny things with plants 
in the last several vears. 

Dr. Bean. Or shall I say the time involved is too long? 
Dr. LuBiN. That raises a very significant question, and I wonder 
whether we can get an opinion for the committee from this group, on 
the relative importance of machine technique and the other scientific 
information which has become available in the last generation. Now, 
Dr. Bean stated that the same number of people today are producing 
food for a much larger population than, say, 25 years ago, which 
means in turn an increased productivity of the farm population as a 
whole, of something between 50 and 70 percent. 

Now, how much of that increased productivity is the result of 
better fertilizer, better breeding, the use of better seed, more efficient 
operation of farms, better use of land in the sense that it is selected 
and the more efficient acreage being used, and how much of it is 
attributable to machines as such ? 

In industry, several witnesses, have stated that the big improve- 
ments of productivity have not come necessarily from machines in 
their particular cases, but from better organization, better knowledge 
of their products, and things of that sort. 

One gets the impression, by looking at these figures that were 
submitted here today, that if you are going to explain that 50 to 70 
percent increase in productivity, you must explain it in terms of 
scientific information, of the sort I mentioned, rather than in terms 
of the machine as such, although the machine must have played an 
awfully important part. 

Now, is there any way of measuring the relative importance of the 
machine as opposed to these otlier things in measuring this increased 
productivity ? Would it be 50-50 or 75-25 or what ? 

Dr. Johnson. I wouldn't have any quantitative basis for judging. 
I can give one illustration. Hybrid corn, for instance, has been 
tremendously important already because it has been widely adapted 
in the Com Belt. Now, as it spreads out from the Corn Belt, it will, 
perhaps, be again as important in increasing the yield of com as it 
has been today. So that you would have there an increase of about 
200 bushels of corn as against! an average corn crop of — speaking 
from memory— 2,500,000,000 bushels. 

Now, there is one significant increase in productivity of agricul- 
ture, coming from a scientific discovery. It is just an illustration. 

Dr. LuBiN. Your land utilization problem would come into the 

picture there, wouldn't it? I mean, you select the better acreage? 

Dr. Johnson. That has been done in recent years ; yes. You have 

some, increase in production per cow ; you mentioned the question of 

commercial fertilizer. The sales of fertilizer are very closely asso- 



C0NC5ENTRATI0N OF ECONOMIC POWER 16989 

ciated with the prices and income of the previous year in the fer- 
tilizer-using areas. 

Dr. LuBiN. Have there been improvements in fertilizer? 

Dr. Johnson. Oh, yes. 

Dr. LuBiN. So that it is advantageous? 

Dr. Johnson. Yes. 

Dr. Bean. May I supplement that comment? Insofar as fertili- 
zer has been used chiefly in the South, you would expect to find some 
evidence of that increased use of fertilizer in terms of increased 
acreage, increased yield per acre in the South. My impression is 
that there has been no change in the level of acreage, or yield per 
acre, in the cotton South, up to recent years, say, the early 1930's. 
There has been a marked change in the level of yield per acre, in the 
average yield per acre, in the past 3 or 4 years, which apparently is 
associated with neither weather nor — I was going to say, with the 
fertilizer use, but I want to qualify that because I don't have those 
fertilizer figures per acre well enough in mind. 

The fact that the change came rather abruptly in the years 1935 
and 1937 would suggest that it may have been associated with the 
adjustment programs, where the emphasis, after 1935, was on im- 
proving yield per acre. 

Mr. Pike. Of course, in a great many cases, fertilizer is used more 
to check a decline — or as much to check a decline as it is to increase 
yield. I think that perhaps has been true in the South, that it became 
absolutely necessary to use fertilizer to get any reasonable return 
at all, and perhaps it dampened or checked the decline in that area 
that otherwise would definitely have occurred. 

Dr. Bean. I wonder. Dr. Lubin, if the answer to your question 
might not be put tentatively in this form, that insofar as you have 
an increase in productivity as the result of a reduction in the number 
of persons engaged in farming, that proportion of it may be asso- 
ciated with the increased use of machinery, and the excess or the 
balance of that increase of productivity might be associated with- the 
scientific advances of hybrid seeds, more efficient use of feed, and 
the various other things ? 

Dr. Lubin. In other words, the ratio would be about 4 to 1 ? In 
other words, 80 percent of the increased productivity of the agri- 
cultural plant country is attributable to science and the application 

of 

Dr. Bean (interposing). No, I would put it more nearly 50-50, 
because you have had something like a 25 percent increase in pro- 
ductivity per person — no, you have had a reduction in the number 
of people engaged, which would account for what? About 20 percent 
increase in productivity? 

Dr. Lubin. No, in the past 25 years, you say there has been no 
change in the number of people who are feeding the country. 

Dr. Bean. But that is not exactly talking about workers in agri- 
culture. I meant to check vou on that earlier. The fact that we have 
30,000,000 people on the land today and had 32,000,000 in 1910 doesn't 
mean that the same number of people are engaged in production ; in 
fact, I am inclined to think that you have fewer people engaged in 
production, but the same number of people, the total number of 
persons, on the land. 



16990 CONCENTRATION OF ECONOMIC POWER 

Dr. LuBiN. Well, there has been a decline since 1915 of 1,300,000 
people, which is approximately a 10-percent decline, in the total em- 
ployment on the farm? 

Dr. Bean. Yes. 

Dr. LuBiN. During that period of time, however, that 25 years, 
the population has increased by what? About 30 percent? So the 
ratio is 3 to 1. In other words, science has contributed 3 times as 
mlich to the increased efficiency as machinery. 

,Dr. Bean. Well, you have come down from 8 to 1 to 3 to 1, and 
you might come down to 2 to 1. 

Dr. LuBiN. So then it is 2 to 1 ? Is it 66-33 ? 

Dr. Bean. Well, I w^ould like to 

Dr. Anderson (interposing). May I ask it in this way, Dr. Bean: 
aren't we dealing with things that are so vague and difficult to get 
at, that it is impossible, at this stage of our knowledge, to make 
even a rough estimate of the proportionate weights of these 
influences ? 

Dr. Bean. That is why I would suggest that if the committee must 
have a figure, 50-50 is about as good a one as it can take. [Laughter.] 

Dr. Anderson. I was going to put it a little bit differently, but 
isn't it possible to be much more precise by making your analysis in 
terms of particular crops for particular areas? In other words, 
just a moment ago you talked about the cotton in a certain area. 
This morning we saw some relationship to. corn in a certain area. 
Isn't it possible, when you go into a specific crop and area, that you 
can get very much closer to the answer to Mr. Lubin's question ? 

Dr. Pean. ^es; but you should not be too hopeful, because even on 
this question of hybrid corn, which has been talked about a great deal, 
there is no exact estimate as yet as to how much that scientific de- 
velopment has increased productivity. A figure of about 20 percent 
has been bandied about, but I happen to know the origin of that 
figure, so that I am inclined to say that we still don't know exactly 
what the truth is. 

Dr. Anderson. Well, it would be triie, w^ould it notj that some areas 
in the country show a much higher rate of productivity, in volume of 
products and workers employed, than other areas ? 

-Dr. Bean. You mean a greater change in productivity ? 

Dr. Anderson. That is right. 

Dr. Bean. Yes. 

B:r. Anderson. Are any scientific studies how in progress or recently 
completed which would attempt to measure these factors and their 
relative weights? 

Dr.^BEAN. I think. Dr. Johnson, that is yours. 

Dr. Johnson. There are studies in progress that "have not reached 
conclusion by any means, but the attempt is being made to measure 
it\i>y commodities and by types of farms in the way that you have 
indicated. 

Dr. Anderson. What is the purpose of making such a study ? Why 
do we want to know precisely the weights of the relative influences? 

Dr. Johnson. Well, I would say that that is the first requisite to 
understa>iHling the situation. I think that it gives a much better 
background if we understand the forces that make up the total change. 

Dr. Bean. May I say •something on that, too? Another reason for 
trying to discover .the answer is to see whether we can anticipate the 



CONCENTRATION OF ECONOMIC POWER 16991 

number of people that will be required on the land to supply the food 
that the Nation is going to need over the next 5 or 10 years. 
(Senator O'Mahoney resumed the chair.) 

FUTURE MOVEMENT OF FARM POPULATION 

Dr. Anderson. That leads to a question we have been asking altnost 
every witness we have had before us, and we would* like to put it 
here now. You indicated this morning a surplus labor supply on the 
farm available for migration, and you also indicated that, with con- 
ditions as they are in urban communities, this migration might not 
take place. Will that farm population, then, continue to grow; will 
there be more people on the farm in the immediate future, and possibly 
more unemployed on the farm also in the ihunediate future ? 

Dr. Bean. Do you want to answer that, Mr. Taeuber? 

Mr. Taeuber. I see no escape from that conclusion, if there is no 
resumption of the migration sufficient to offset the excess of births over 
deaths on farms, which is now between 300,000 and 400,000 per year. 

Dr. Anderson. So that the farm, in your opinion, does not offer, the 
opportunity to these unemployed city workers that it did in the past ? 

Mr. Taeuber. No. 

Dr. Anderson. Well, in that connection, what happens to the whole 
program of so-called public subsistence farming, the maintaining of 
people on the land even though they are not able to Compete on com- 
mercial terms? 

Dr. Bean, You mean what is the significance of it ? 

Dr. Anderson. That is right, and its future. 

• Dr. Bean. Well, in my mind, if we have a subsistence farming 
program, we would be altering our notions as to the kind of life that 
certain groups in the country should lead. 

The Chairman. It would be a complete alteration of the American 
idea of what constitutes society, wouldn't it? 

Dr. Bean. Yes. So far we have accepted the notion that if you 
can't make a living on the land you move into town and try your 
hand there. A subsistence kind of existence would mean that, since 
you can't find a place in the cities and since by remaining on the land 
you are just producing more and lowering the general standard of. 
living for those commercially engaged, you'd better find yourself an- 
other kind of life which would be neither commercial farming nor 
industrial activity. What that intermediate is is something that we 
will probably have to do some tall thinking about. 

Kepresentative Wilulams. After all, that might be better than to 
be in the congested cities and in the slums without anything to do, 
and dependent entirely upon charity relief. 

Dr. Bean. There is a great deal behind that word "better," and it 
is there where you begin to deal with different notions of standard of 
living. 

Representative Williams. I have been interested in one thing I 
wanied to ask, and that is, the effect that our agricultural adjustment 
program has had on production. It seems that from 1934 to 1937 this 
jajoduction rose from a percentage of 82 in 1934 to 104, according to 
the plat I have here in front of me. During that same period ther* 
was considerable acre age taken out of cultivation, wasn't there ? 



16992 CONCENTRATION OF ECONOMIC POWER 

Dr. Bean. I think you can bring those two together by studying not 
only the index of production but the size of the farm enterprise. 

Representative Williams. That is the fact, though, is it — the pro- 
duction was very much greater in 1937 than it was in 1934 ? 

Dr. Bean. Well, you have there the extreme difference between a 
drought of 1934 and the most abundant year of 1937. 

Representative Williams. All right; you take 1937 and it is above 
all time. 

Dr. Bean. Yes ; you have record production of cotton and sub- 
stantial production of grains. 

Representative Williams. And in 1938 it had come down ; 1938 is 
the last one shown there, but it is still far above the average. That 
has taken place notwithstanding the fact, as I understood this pro- 
gram, that it was to at least try to adjust production to consumption 
and maintairt a higher standard for the farmers of the country^ and 
to that end the Government itself has spent many, many million 
dollars. It doesn't seem to be working, and that is what I would like 
to know ; if we are not doing any good along that line, I feel like we 
ought to quit the program, maybe. 

Mr. Holcomb. I believe in 1937 the volunteer program was on, and 
quite a few of them did overplant in cotton acreage. 

.Dr. Bean. The Secretary of Agriculture commented with respect 
to the production changes after 1936, that prior to the Supreme 
Court decision, the programs were more exact, more specific, in that 
they dealt with specific crops. ^After that decision the agricultural 
programs became general. They became soil-conservation programs, 
where you didn't have exact control of acreage, because you were 
dealing with a general program instead of /Commodity programs. The 
combination of an expansion in acreage, under that system, and good 
weather, produced, say, the bumper crop of 1937, part of which we 
still have on hand. 

Representative Williams. The fact is, isn't it, that there has been 
a .very substantial reduction in acreage? Is that a fact or not? 

Mr. HoLCOMB. Of certain crops. 

Mr. Bean. That is indicated in this measure labeled "Site of the 
farm enterprise," which is really nothing more than the aggregate 
acreage harvested. 

Dr. Johnson. Plus numbers of livestock. 

Dr. Bean. Which went down from an index of 102 or 103 in 1931 or 
1932, to about 93 in 1938, so that you had approximately a 10-percent 
reduction in aggregate acreage and livestock. 

Jlepresentative Williams. That was the very deliberate purpose of 
the-. program, wasn't it? 

Dr. BeXn. Yes. There was an attempt to reduce production for 
export. 

Representative Williams. In order to adjust production to domes- 
tic consumption and, therefore, give the farmers a better price. Now, 
that was the very fundamental of the program, as I understood it. Is 
that correct? 

Dr. Bean. Yes ; farmers have better prices, have higher incomes, 
but I am not sure that this is where you want a dissertation in defense 
of A. A. A. programs. 

Representative Williams. I was just wondering and asking j^ou 
men who have made a study of it what effect it has had on production 



C0NC5ENTRATI0N OF ECONOMIC POWER 16993 

and prices. It is sometimes claimed by some who are not in favor of 
the program that it has been disastrous to the farmers, and not effec- 
tive. I have not b?en one of those, but I was wondering how the men 
who have made a particular study of the situation think of it. 

Dr. Bean. In general, I find myself in your company on that 
question. 

Representative Williams. But on the other hand, it does seem that 
there has been a very substantial increase of production there, and the 
piling up of an inordinate surplus in some products, especially cotton. 

Dr. Bean. There is no denying that acreage control by itself doesn't 
effectively control production, where you have variations in the 
weather to contend with, and for that reason Congress has written 
into the law certain controls of marketing as well as control of acre- 
age, to deal with the weather factor as well as with acreage. 

The Chairman. I like this euphemism, "Congress has written into 
the law." We pass the law that you fellows write. 

Dr. Johnson. You flatter us. 

The Chairman. I was very much interested in some of the charts 
that were presented here earlier in the afternoon, which illustrate the 
fact which is well known to all students of the agricultural problem, 
that the percentage of farm ownership is steadily decreasing in the 
United States, the number of farmer-owner operators has been stead- 
ily decreasing year by year for more than 50 years. That is a fact, 
isn't it? 

Mr. Wall. That is true. 

increase of corporate farm ownership 

The Chairman. Corporate farming, institutional farming, has been 
increasing during this time ; isn't that true ? 

Mr. Wall. Particularly during the last decade. 

The Chairman. Exactly. 

Dr. Johnson. Corporate ownership, wouldn't you say, more than 
corporate farming? 

Mr. Wall. Corporate ownership. 

The Chairman. Tenant farming has been increasing and corporate 
ownership has been increasing, but all of these farm programs are based 
not upon any concept of the effect upon the operator or the tenant as 
an individual, but in terms of production. Am I right? 

Dr. Bean. I think that statement would cover pretty well the agri- 
cultural adjustment philosophy of 1933, where the problem was prices, 
volume, and income for the Nation as a whole, the creation of a new 
flow of purchasing power. 

The Chairman. Isn't that a correct statement of the present philos- 
ophy? Soil conservation is carried on and the payments are made 
regardless of the type of ownership. 

Dr. Bean. Well, I think you have additional things that have been 
created since 1933. The farm-security program, I think, is not quite 
the way you describe it. 

The Chairman. No ; of course, the farm-security program, I think, 
is separate and distinct policy, and that has to do with an attempt to 
preserve families upon the land ; that is trua 



I 



16994 CONCENTRATION OF ECONOMIC POWER 

Dr. Bean. You have the tenant program in the same category. 
True, it is very small, but at least the philosophy has been developed, 
and here and there accepted. 

The Chairman. Yes ; but neither of those is geared to production, 
and soil conservation is geared to production. 

Dr. Bean. That's right. 

The Chairman. That's correct, isn't it ? 

Dr. Bean. Yes. 

The Chairman. So that in whatever benefits or subsidies we extend 
to the farmer, we make no differentiation between the corporate farmer 
and the flesh-and-blood farmer. Is that right? 

Dr. Bean. That is right. 

Dr. Johnson. We limit the size of the benefits. 

Representative Williams. We limit the size of the benefits we pay 
to them. 

The Chairman. That is one concession that has been granted to 
them. 

Dr. Bean. That may also affect the noncorporate farmer of large 
size as well. 

Mr. Pike. How does this control tie in — well^ I just went back to 
the country last year and found a barn half full of superphosphates 
that the Government had given me to improve what was left of the 
acreage, so that I could raise, perhaps, as much on, I should think, 
about one-third of the acreage as I did on the whole of it before. I 
couldn't tie that in, lying for 2 or 3 years. It would make good farm- 
ers crajnp themselves, I am afraid, by holdmg down, taking out of 
production here, and then all this refertilization. I couldn't rational- 
ize it. We had to take it and put it on the land. It was sort of 
contradictory. 

Dr. Bean. In general, I would say that the philosophy probably is 
that if we are going to produce, we might as well produce as eflBciently 
whatever the country requires, and if you are going to produce a 
certain amount of bales of cotton, say 12,000,000 or 13,000,000 bales, you 
want to produce it as efficiently as possible. 

Mr. Pike. That still isn't quite clear. 

Dr. Bean. Also, if you want to produce' 5,000,000 automobiles, you 
produce those as efficiently as possible In terms of manpower and other 
costs. That is what I take it is society's frame of mind at the present 
time. 

The Chairman. Have you, in these discussions, indicated the trend 
of agricultural development in relation to employment? 

Dr. Anderson. Yes. 

The Chairman. You have. And wliat is that trend ? 

Dr. Bean. In general, it is that over the years we can expect to 
produce either more agricultural products with the same number of 
people that are now on the la^id, or the same volume of production 
with fewer people on the land, and unless there is an opening up of an 
entirely new channel of consumption, it would be difficult to see any 
opportunities on the land for people who are not now there. In fact, 
there is difficulty to see opportunities for all the people that are now 
living on the land. 

The Chairman. Well, what opportunities do you see for new uses 
of agricultural products? 



CONCENTRATION OF ECONOMIC POWER 16995 

Dr. Bean. There are a thousand and one uses of agricultural prod- 
ucts, new uses, that are being experimented with but, for some reason 
or other, these uses just don't occur rapidly enough for the immediate 
situation within the next 2 or 3 or 4 years. 

Dr. Johnson. For the future, but not for the immediate time. 

Dr. Bean. We have an exhibit in the Department of Agriculture 
now of the many uses of cotton that have been developed — gears and 
handles and what-not, all sorts of things it is difficult to imagine that 
you can use cotton for, but in the aggregate those things at present 
don't consume a great deal of cotton. They may in time, but that 
is in the lap of genius of the scientists. 

The Chairman. What can be done to stimulate the development of 
new uses? 

Dr. Bean. The Department of Agriculture, I believe, has quite an 
extensive program of effort in that direction. 

The Chairman. The opportunity is ^here, is it not, and it is recog- 
nized. 

Dr. Bean. I would say the hope is there. Whether opportunity is, 
I don't know. For example, a good deal 

The Chairman (interposing). I didn't mean opportunity in the 
commercialized sense. You speak of all these possible uses of cotton 
but for some reason or another they don't develop. Is that because 
they have not been made commercially profitable as yet ? 

Dr. Bean. That is probably a factor. 

The Chairman. Is it true, for example, that the use of alcohol as a 
fuel has long been recognized but it cannot yet be produced at a price 
to make it competitive with oil or gasoline ? Is that correct ? 

Dr. Bean. Yes, sir. 

The Chairman. So science, chemistry, already can point out to us 
innumerable new uses for agricultural products which are not being 
taken advantage of because they are not yet in a competitive stage. 

Dr. Bean. Yes; but that same science needs to make one more re- 
mark, namely, that we scientists need to discover how to use agricul- 
tural products in these new ways on a commercial basis, but it isift 
up to the farmer or to any of us who are not scientists to develop the 
new uses, after scientists merely tell u£ that here is a place ; it is still 
the scientists' job to discover the next trick, which is to bring that 
process down onto a commercial level. 

The Chairman. Well, could we bring it to a commercial level by 
using the same device that we used to bring so-called infant industries 
to a commercial level ? 

Dr. Bean. I am not sure I have in mind 

The Chairman. Tariff as an exclusion policy, an isolation policy. 

Dr. Bean. That is a question of many, many colors. 

The Chairman. It presents itself to any student of this problem 
because the alternative seems to be the subsistence homestead and the 
reduction of a large proportion of our people to a peasant cl^ss. 

Dr. Bean. Not necessarily. 

The Chairman. What is the alternative if that isn't it? We liave 
the Farm Security Administration, which is an effort to keep farm 
families on the land, whereas we know that your testimony here is 
absolutely correct, namely, that production per man is increasing, and 
the market is not increasing. 



1699G CONCENTRATION OF ECONOMIC POWER 

Dr. Bean. If you will allow me to make a statement without 
spelling it out in detail, because I don't have the detail, I would say 
this: We ought to be able to look forward to opportunities of 
employment which are not in the industrial centers and not in com- 
mercial agriculture, but somewhere in between where we utilize our 
resources more effectively then we now do. Some people call that 
a rural works program, or some kind of a set of opportunities for 
work which doesirt necessarily have to be a subsistence type of 
living. 

EFFECT OF INCREASED EMPLOYMENT ON FARM PRODUCOTON 

Dr. LuBiN. Mr. Bean, let's assume the per capita consumption of 
all goods in America were equal today to what they were in 1929, 
which means in turn, let's say, that we would be employing in indus- 
try and jn service trades and transportation, just for the sake of 
argument — I don't know what the figures would be — 6,000,000 or 
7,000,000 more people than we are employing in those forms of 
activity today. What would that mean in terms of consumption of 
farm products? Or put it this way, wouldn't an increase in employ- 
ment by 7,000,000 or 8,000,000 in other types of economic activities so 
increase the demand for farm products that this problem you are 
talking about would disappear? 

Dr. Bean. It all depends on how much time you are goin^ to take 
to get that increase in employment. If you can do it immediately, 
overnight, then, of course, you have a stepping-up of agricultural 
consumption. The extent of that stepping-up will depend on the 
extent to which consumption by the unemployed is now below stand- 
ard, and it probably isn't as much below standard as the overall 
impression would suggest. It would still leav*:- us, incidentally, with 
an unemployment pioblem on the land, becaus when you merely 
absorb 6,000,000 people in your industry, you are not even doing a 
good job of employing the number that are variously estimated to be 
unemployed in the cities. In the testimony this morning, you had 
various figures which, while the figures were of wide range, never- 
theless indicated a substantial unemployment problem in the rural 
and farm areas, somewhere perhaps around 2,000,000 people. 

The Chairman. Are you indicating to us that if all of the unem- 
ployed were capable of purchasing food and agricultural commodities 
as though they were receiving $1,200 a year, there would still not be 
an appreciable increase of the market for agricultural products? 

Dr. Bean. Yes ; I think there would be an increase, but I think it 
would be an increase which the farmers on the land now can supply 
and still leave us with a block of people on the land who ought to be 
working more effectively in other pursuits. 

The Chairman. Ouv^vhat do -you base that conclusion ? Is that an 
im])rossion that you get from your readings and your studies, or is it a 
well-developed conclusion? I ask you that question because the Sur- 
plus Commodities Corporation seems to feel that there would be a 
very substantial increase of consumption. 

Dr. Bean. Provided you channelize that increased purchasing power 
into food or farm products. Do I make myself clear? The Surplus 
Commodities Corporation adds purchasing power to the family with 
tlie proviso that that increased purchasing power be spent for food. 



CONCENTRATION OF ECONOMIC POWER 16997 

Whether or not you would get the same increase, the same use of pur- 
chasing power, if it were created without any strings tied to it, I don't 
know. The fact that so-called size of farm income, the average of 
acreage harvested in the past few years, has been roughly 10 percent 
less than in 1930, with from 8,000,000 to 10,000,000 people employed in 
agriculture today as against 11,300,000 in 1929 — which suggests to me 
that there are additional people around there somewhere that are not 
working — all that suggests to me that the people now on the land can 
produce more than we are now producing to supply this increased con- 
sumption that you might expect from an increase in purchasing power. 

The Chairman. Of course, what is true of our economy, of our agri- 
cultural economy, is necessarily true of every other agricultural econ- 
omy, too, in varying degrees. The capacity of the land to produce is 
not altered by the flag that flies over the land, is it ? 

Dr. Bean. Well, if you have in mind such technological advances as 
we make, they are easily and quickly transferred to other countries, in 
expansion of agricultural output, just as in the United States. 

The Chairman. So that leads us to the question whether we should 
be content to see our future in the marketing of surpluses in other 
countries which eventually, if not immediately, will be producing their 
own surpluses. 

Dr. Bean. That, of course, opens up the area where statesmanship 
has its task for ^he next few years, dealing with the international flow 
of surplus raw materials. 

Dr. Anderson. Dr. Bean, the National Resources Committee's 
study of consumer expenditures indicates that it would take an ex- 
penditure of about $2,000,000,000 for food to move the lowest third 
up to the level of the middle third. Would that size exj^enditure, 
in your opinion, alter the employment situation in agriculture? 

Mr. Bean. You assume that an increase in expenditures for food 
must be effected in the form of an increase in the volume of intake 
which I think isn't a necessary assumption. 

Dr. Anderson. It would take an additional expenditure of $2,000,- 
000,000 on food to move these people into the level of consumption 
expenditure with the middle third of the Nation. 

Dr. Bean. I say that that increase in expenditures doesn't neces- 
sarily mean a comparable increase in volume. 

Dr. Anderson. That is quite likely. **" 

Dr. Bean. We have the whole question of change of diet and 
quality; 

Mr. Wall. If we were to increase consumer income by the propor- 
tions that you have indicated, the increase in farm income would give 
rise to additional employment in the service occupations and in per- 
haps farm construction, because with a higher level of farm income 
you would open up, I think, a certain amount of additional employ- 
ment in agricultural areas, in rural areas. 

Dr. Anderson. In the over-all. 

Mr. Wall, In the over-all. 

Dr. Bean. That is right. Let's see if we can get a little closer to 
the implication of that figure. You have $1,900,000,000 increase in 
consumer expenditures. Farmers would get roughly half of that, 
close to $1,000,000,000. Then the question is, will consumers buy 10 
percent more in volume, or will they merely be changing their type of 
intake without increasing their volume, merely paying for another 



1699S CONCENTRATION OF ECONOMIC POWER 

set of services? If half of that increase in purchasing power means 
increased volume, that would mean what, roughly, a 10-percent in- 
crease in the aggregate volume of farm products? 

Dr. Anderson. Possibly. 

Dr. Bean. But you have the underlying fact that over the years 
the aggregate volume of consumption of farm products doesn't vary 
with the rise and fall of the national income^ and this computation 
is based partly on that concept, so that it is difficult to conclude that 
that much increase in income would actually give you that much 
more employment in agriculture for additional production. 

Dr. Anderson. There is one other problem that has bothered me 
all day long during the discussion. Having something of a farm 
background, I have been led to regard farming and independent 
ownership as somehow linked with the concept of Americanism, that 
as landed people we have the right to own a farm and operate it. 
In your discussion this morning you showed that apparently the 
rungs are being taken out of the agricultural ladder and we can't 
move so readily from the bottom to the top. Is that a continuing 
trend which will foredoom an increasingly large number of people 
to tenancy, and keep them from ever becoming independent owners 
on the farm? 

Mr. HoLCOMB. I don't know about the doom, but I think that there 
is reason to believe it will become increasingly difficult to rise from 
the lower rungs of the ladder to the higher ones, as we increase the 
amount of capital necessary to become owners or tenants. If the 
machinery is made available to them at lower and lower prices, that 
may facilitate the rise in the ladder. However, the increased pro- 
ductivity of individuals may tend to shunt out an increasing number 
of workers in the field. 

The Chairman. Have any of these farm experts testified as to any 
relationship between the machine and the amount of food consumed 
by the individual who uses the machine ? In other words, did a hand 
worker in the old days eat more than a machine worker today ? 

Dr. Bean. Have we had that kind of testimony for the rest of the 
ec(momy ? 

The Chairman. No. 

Dr. Bean. None was brought here this morning. 

I have a feeling that that is a real question. 

The Chairman. I would naturally assume that a person who worked 
with his hands laboriously would consume a great deal more food 
than one who didn't work so laboriously. I would assume, for ex- 
ample, that an outdoor worker, a laborer, would eat more than an 
office worker because of the increased demand upon the body for ef- 
fort, and naturally an increased consumption of body forces. I won- 
dered if the statisticians and philosophers of the Department of 
Agriculture had ever studied that possibility. 

Dr. Bean. Like yourself we have thought about it and have come 
to about the same conclusion, that it must be so. 

Mr. LuBiN. I think in many types of industrial activity the amount 
of energy a man uses is much greater, concentrated for a shorter 
period of time, of course, than work by hahd ; I should assume that 
running a caterpillar tractor 8 hours a day probably takes more energy 
out of you than if you were digging a hole. 



C0NC5ENTRATI0N OF ECJONOMIC POWER 16999 

The Chairman. Undqubtedly that would be true ii^ many in- 
stances, but I think it is also probably true that the use of the ma- 
chine by and large has reduced the amount of physical effort which 
all workers must exert. 

Dr. Bean. I think that a complementary question to yours has to 
do with the increase in the service industry, and that probably is 
related to the reduction in the per capita consumption of such thmgs 
r.s wheat. 

The Chairman. Of course we do know that there has been a very 
marked change in the diet, the change from meat to salads has been 
marked, ^ome of your experts in domestic economy have testified 
from time to time with respect to that. 

Dr. Bean. We have had a net reduction in the per capita consump- 
tion of pork and cereals in the past generation. 

The Chaibman. And it seems to me that I have a very distinct rec- 
ollection of an intensive drive that was made several years ago against 
some of the publications of the Department of Agriculture, because 
it was alleged that they were tending to impair the consumption of 
wheat and flour. 

Well, are there any other questions? If not, what is your pro- 
gram? 

(Off-the-record statement by Dr. Anderson.) 

The Chaibman. Then we will stand adjourned until 10 : 30 o'clock 
tomorrow morning, in room 357. 

(Whereupon, at 5 : 20 o'clock, a recess was taken until Wednesday, 
April 24, 1940, at 10 : 30 a. m. ) 



I 



1 



INVESTIGATION OF CONCENTRATION OF ECONOMIC POWEB 



WEDNESDAY, APRIL 24, 1940 

United States Senate, 
Temporary National Economic Committee, 

Washington^ D. G. 

The committee met at 10:40 a. m., pursuant to adjournment on 
Tuesday, April 23, 1940, in room 357, Senate Office Building, the 
chairman, Senator Joseph C. O'Mahoney, presiding. 

Present: Senators O'Mahoney (chairman), and Kin^; Representa 
tive Sumners (vice chairman) ; M^'T'TT's. Kades, Lubm, O Connell, 
Pike, Kreps, and Brackett. 

Present also : S. Abbot Maginnis, Department of Justice, William 
T. Chantland, Federal Trade Commission, and Dewey Anderson, 
economic^ consultant to the committee. 

(The committee meeting was preceded by the showing of moving 
picture films of mechanization in farming operations.) 

The Chairman. The committee will please come to order. Your 
first witness this morning. 

Dr. Anderson. 'Die first witness this morning is Mr. Fowler Mc- 
Cormick, vice president of the International Harvester Co., of Chi- 
cago, 111. Mr. McCormick has prepared a statement which he wants 
to read and offer certain exhibits. 

The Chairman. If Mr. McCormick will come forward, we will 
begin. 

Do you solemnly swear that the 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. McCormick. I do. 

TESTIMONY OF FOWLER McCORMICK, VICE PRESIDENT, INTER- 
NATIONAL HARVESTER CO., CHICAGO, ILL. 

The Chairman. Won't you please give your name to the reporter, 
for the record. 

Mr. McCormick. My name is Fowler McCormick. 

The Chairman. And your position. v 

Mr. McCormick. I am vice president of the International Har- 
vester Co. 

The Chairman. How long have you occupied that position? 

Mr. McCormick. I have been vice president since 1934. 

The Chairman. Afid are you not a descendant of the original 
McCormick who was the inventor of the first harvester? 

Mr. McCormick. I am a grandson. Senator. 

The Chairman, You are his grandson? 

124491— 41— pt. 30 52 17001* 



17002 CONCENTRATION OF ECONOMIC POWER 

Mr. McCoRMicK. Yes, sir. 

The Chairman. Are there any other questions that you wanted 
to ask? 

Dr. Andeeson. Mr. McCormick, how long have you been engaged 
in the business of farm implements? 

Mr. MoCoRMiCK. Well, L have been in the business for 41 years, 
in a sense, in another sense, 15. 

Dr. Anderson. In other words, you grew up in the business. 

Mr. McCoRMiOK. Just about. 

Dr. Anderson. And you observed its effect and growth and de- 
velopment. 

Mr. MoCoRMicK. For a considerable period I have been directly 
connected with it; yes. 

The Chairman. Mr. McCormick, the committee is indebted to 
you and to your associates for the presentation of the motion picture 
which we have just seen exhibited in another room in this building. 
It certainly leaves no doubt that farming is much less a back-breaking 
job in 1940 than at any other time in the long history of upward 
progress of the human race. There can be no question about that. 
I suppose, however, that there still remains unanswered the problem 
of markets for increased production. All the testimony which we 
have had presented to us to date in this committee, from every angle, 
whether from the point of view of the manufacturer of machines or 
from the point of view of the representatives of labor, has been to 
the effect that by reason of technological advance we are now having 
much greater production per man than ever before. The machine is 
unquestionably a labor-saving device, and there is some testimony 
to the effect, a good deal of testimony, I may say, that it is also a 
job-displacing device, and, of course, it is obvious that the use of 
machines and the purchase of the product of the machines depends 
upon the ability of i>eople to buy the machine and to buy the prod- 
uct, so finally we come down to the question of how we are going to 
promote markets for the products of th^ farm and of the factory. 

Mr. McCormick. That is very true. 

The Chairman. You may proceed. . 

The Vice Chairman. Mr. Chairman, just before Mr. McCormick 
proceeds, may I make a little observation, a very short one? 

The Chairman. We will be very, very happy to have you do so. 
Your observations are always interesting and constructive. 

The Vice Chairman. This observation I suggest for the considera- 
tion of the country as a whole in connection with this record. It was 
stated in connection with this magnificent exhibition to this effect. 
The question was asked, "Where are the people who could or would do 
the work now done by machine?" 

That query would indicate a great progress in the strength and 
eflSciency of the machine, probably a corresponding deterioration in 
the stren^h and courage and determination ana capacity of the 
human being. I don't make that observation in any criticism of 
what we call progress, but it seems to me that society should give 
some consideration in connection with its progress as to whether or 
not it is developing, whether or not it is making strong machines 
and weak people, whether or not the capacity to do things and the 
responsibility of doing things is being shifted from people to 
machines. 



CONCENTRATION OF ECONOMIC POWER 17003 

One of the interesting observations that was made in connection 
with this exhibition — and I want to repeat that certainly what I am 
paying is no criticism of anything that is being done — was that it 
wasn't any strain on the fellow's suspenders to operate those machines. 
There is not much strain on his muscles, and muscles grow stronger 
with us. There i3 not awfully much strain on his head. It doesn't 
tend to strengthen the thinking machine. Of course, it is a little more 
difficult to operate a complex machine, but, after all, there was a good 
deal of individual resourcefulness required when a fellow was plow- 
ing on a hillside with a bull-tongue plow in the days of long ago. 

Something was said about putting hay up on the wagon by the Arm- 
strong method. It musn't be forgotten that when you changed from 
putting it up on the wagon by the Armstrong method, the tendency 
was for the arm^ to cease to be strong, because nature is not disposed 
to. let strength remain where it is not used. 

Now, I hope I make myself clear. I am not at all criticizing. I do 
have a good deal of the f ogie in me ; I admit that, but I am reasonable. 
I am not criticizing this progress. I know that machinery has done a 
great thing in progress. But in connection with this appreciation of 
what machinery is doing, it seems to me, as indicated by our chair- 
man, we are going to probably have to be cautious that we don't 
develop a sort of warfare between machinery and human beings. He 
has indicated that. That is one of the big problems that you are not 
here to talk about, but I think you will probably have to think about 
it. When I was looking at the work that was being done by the mag- 
nificent machine, I was thinking of the picture I see when I go home, 
of these tenant farmers sitting around on the streets, living oiff direct 
or indirect contributions from other people. It presents a serious 
question. 

I want to continue to repeat, because I don't want to be misunder- 
stood about it, I am not saying this in any criticism of what you 
gentlemen have done who are making this wojiderful progress, but I 
think society is well able to realize it charges them with some addi- 
tional responsibility, and we have to meet that. 

That is the line of talk that I thought might impress my people. 
I have got to come up for reelection pretty soon. 

The Chairman. Well, the vice chairman's talk to his constituents 
prompts the chairman to add a few remarks to what has already been 
said in this record. I think there can be no doubt that the ma- 
chinery has done a great deal to improve the living standards of the 
human race. No one, I think, would have the hardihood to deny 
that. The trouble, as I see it, is that it hasn't done enough. Our 
problem is to find a way by which it can do the remaining job, which 
is, of course, to provide full employment for all who want and need 
jobs. The machine has certainly been very successful in contributing 
to the creation of abundance, abundance of farm products and 
abundance of all typeg of natural resources, abundance of all types 
of commodities that the human race needs or desires. There can be 
ho doubt that the machine has also created a great deal of leisure. 
We saw the leisure in the farm home on the picture that you pre- 
sented this morning, Mr. McCormick. The loijg, long day of the 
farmer has been made unnecessary by farm machinery, and the long 
day in the shop has been made unnecessary. There is no question 
about that. 



17004 CONCENTRATION OF ECONOMIC POWER 

The machine has created leisure. The trouble is that it has also 
created a certain amount of unpaid' leisure. That is the forced 
leisure of the workman who, though he wants a job, can't find a job, 
and because he can't find a job, if he is a farmer or a farm tenant 
he can't get the land upon which to buy the tractors that the Inter- 
national Harvester and Allis Chalmers and the others make. 

I'm sorry. 

Dr. Anderson. May we proceed? 

The Chairman. That was also a speech to my constituents. 
[Laughter.] 

Senator King, May I make an observation, but not in the way of 
explanation ? I am listening, and after the testimony is all in, than I 
may submit a statement for the record. 

Dr. Anderson. Very good. 

Mr. MoCoRMiCK. Mr. Chairman, if I might defer any comment 
on the Congressman's remark, I think they are very pertinent in- 
deed, and perhaps we can go into them more fully a little .bit later. 
I want to express at the beginning our appreciation of the time that 
you gentlemen have taken to see those pictures given by Allis Chal- 
mers, the Deere Co., and ourselves. We had a feeling that they might 
be illustrative of some of the modern practices in the industry, and 
we very much appreciate the time you have taken. 

Mr. Chairman, if I may ask your permission, we have prepared 
a statement on behalf of our company which I will ask your per- 
mission to insert in the record because there are two exhibits in the 
back of the statement, and than I should like to read the greater 
proportion of the statement, if I may. 

The Chairman. To avoid duplication, this statement now pre- 
sented will appear in the record as the statement which you are 
making. 

Mr. McCoRMicK. If that is permissible. 

The Chairman. Without objection that will be the rule. 

(The charts referred to were marked "Exhibits Nos. 2681 and 
2682" and appear facing p. 17604 and on p. 17005.) 

Mr. McCormick. I am glad to come here to give any assistance I 
can to your study of the progress of technology. No such inquiry, 
naturally, could be complete without a careful examination of the 
technology of farming, for the farm is the basis of our civilization. 
If there had been no developing farm technology, there could be 
no industrial America as we know it today. 

That is true, I believe, because the farm has furnished two of 
the absolute essentials of an industrial society — adequate food and 
available manpower. Today we take those things for granted. This 
could not have come about unless farm technology had removed the 
fear of famine and set men free to work in industry, at manufac- 
turing, selling, and transporting goods of all kinds. 

In addition to these general benefits, the progress of farm mech- 
anization has made the farmer's life more attractive and enabled 
him to raise his income by reducing his costs of production. 

There are many questions touching on farming which I am not 
competent to discuss. I do not come before you today as an agricul- 
tural economist or a sociologist. I am able to suggest no panacea 
for unemployment, on or off the farm. I think it is obvious that 
advancing technology, whether in farms or in industrial regions, 



CONCENTRATION OF ECONOMIC POWER 
Exhibit No, 2682 



170Q5 



THE FARM DOLLAR 
DISTRIBUTION OF U.S. FARMER'S 1931 EXPENSES 




BASED 

ON THE 

BEST DATA 

AVAILABLE. 

PftlNaPAL 

SOURCE OF 

INFORMATION : 

as. DECVKHTMENT OP 

A6RICULTURE. BUREAU 

OF AGRICULTURAL 

EOONOMCS. WASHINGTON. DC 



YEAR 

1932 
1933 
1934 
1935 
1936 
1937 
1938 
1939 



GROSS 
FARM , , 
INCOME (l) 

♦ 5,562 
6.404 
7.629 
8.688 
9.672 
10.425 
9.290 
9,100 



EXPENDITURES FOR 
FARM IMPLEMENTS. 
TRACTORS AND 
REPAIRS (1) 

$ 95 
96 
194 
343 
464 
585 
475 
422 



<* OF 

FARM MACHINERY 
EXPENDITURES TO 
GROSS FARM INCOME 

1.7% 

1.5 

2.5 

3.9 

4.8 

5.6 

5.1 

4.9 



(1) IN MILLIONS OF DOLLARS 



sometimes results in displacements of labor. Although the distress 
caused in this way is generally temporary and local, it is neverthe- 
less acute to those affected and is important to society in general. 
Obviously, solutions of these problems are of vital importance. 



MECHANIZATION IN AGRICUI/TUKE 



Mr. McCoRMiCK. I think I must limit myself to the contributions 
to farm technology which have been made by the industry with which 
I am connected, and I say that in the sense, Mr, Chairman, that I 
think technology can rightly include other fields in which we are 

124491— 41— pt. 30 51 



17006 CONCENTRATION OF ECONOMIC POWER 

not expert or engaged, such as the improvement of seed, improve- 
ment of plants and fertilizers and farm buildings, and so forth, and 
I don't intend to touch on them todaj'. 

These contributions of our industry lie chiefly in two areas — 
the mechanization of farm production methods and the development 
of farm transportation through the use of the motor truck. 

The problem of the farmer under any economic system is to pro- 
duce as efficiently, as unfailingly, and as easily as possible. The 
business of our industry is to improve the farmer's ability to do that. 
I want to talk a little, if I may, about what machines have achlryed, 
what they have failed to achieve, what the sources of farm mechaiu- 
zation are, what some of the present tendencies and future possibili- 
ties are, and what some of the results and contributions have been as 
I see them. 

Most of you are generally familiar, I believe, with the evolution of 
farm machinery. But since my later remarks will be based on the 
course which that evolution has followed, it might be well to review 
briefly some of the high spots in the history of farm mechanization. 

Prior to 1831 agriculture had been for many centuries an industry 
which utilized human labor as its source of power. Animal power 
had been brought into the-picture only partially. The most notable 
uses of animal power were in plowing with wooden or cast-iron 
plows, and in hauling. The other processes, planting, cultivation, 
harvesting, were carried on almost entirely by hand. 

The two decades between 1830 and 1850 witnessed a remarkable 
revolution in agricultural methods. The reaper was invented in 1831. 
The machine that was to become the basic mower appeared 3 years 
later. The steel plow, which made it possible to plow the rich, sticky 
soil of the prairies was invented in 1837. The threshing machine 
came in 1834 ; the earliest combine in 1836. Grain drills, permitting 
more accurate planting of seed than was possible with hand sowing, 
appeared in the forties. 

The effect of these inventions was almost immediately apparent. 
The time required to harvest an acre of wheat, for instance, was 
reduced approximately 65 percent between 1830 and 1840, from an 
estimated 37 hours in 1830 to an estimated 11% hours in 1840. 

These new machines all utilized animal power, usually in the form 
of horses or mules. 

The next half century between 1850 and 1900 witnessed the develop- 
ment of many other machines, including the corn planter, improved 
types of harrows and cultivators, the grain binder which was evolved 
from the reaper, and, on the Pacific coast, the big combine powered by 
from 18 to 50 horses. 

Throughout the period, farm machinery underwent a continuing 
process of improvement in design, production methods, materials, and 
utility, and new machines and accessories continued to be developed 
for special purposes according to the needs and demands of a changing 
agriculture. 

This period was notable for the first effort to substitute mechanical 
power for animal power. This was the steam engine, which appeared 
in the middle of the century and was useful chiefly as a mobile source 
of power for threshing machines. Occasionally these steam engines 
were used in plowing, in regions where the terrain permitted. 



OONCENl^RATION OP ECONOMIC POWER 17007 

In the last decade of the nineteenth century many experimenters 
began work with the internal-combustion engine, looking toward the 
development of the tractor. 

(Representative Sumners assumed the chair.) 

Mr. McCoRMicK. Commercial production of tractors powered by 
gasoline engines may be said to have begun in the first decade of this 
.present century. Before the World War their use was widespread 
and during the war it greatly increased. 

The basic tractor from 1910 to 1924 was a four-wheel machine useful 
mainly in preparing the seedbed and in harvesting operations. These 
tractors were intended to pull machines which were essentially of a 
horse-drawn type, although the construction of many such machines 
wns strengthened to stand up under tractor use. In field work these 
tractors applied their power principally through the drawbar. 

Two devices enabled the power of the tractor engine to be applied 
to related machines. The belt pulley made it possible to use the 
tractor to run stationary threshers, hammer mills, ensilage cutters and 
blowers, small sawmills, and other such machinery. The power take- 
off, through a drive shaft, operated grain binders, corn binders, corn 
pickers, potato diggers, and other machines with moving parts, thus 
making these machines independent of power from ground traction 
for the first time. In other words, before this time the mechanism 
of an implement pulled before by a' horse was motivated by power 
derived from the wheel. 

From this time forward the wheel became something simply to 
carry the implement, and the power necessary to move the mecha- 
nism of a binder or mower was derived by a shaft running from the 
rear end of the tractor to the front end of the implement. That 
made quite a revolution in machinery design. 

Side by side with the growth of the tractor came another applica- 
tion of the gasoline engme to farm technology. This was the rise 
of the automobile and motortruck. 

The importance of the automobile and the motortruck led a num- 
ber of farm equipment manufacturers to enter that fifld during 
this period. No company in the farm equipment industry is now 
engaged in making passenger automobiles. Our company is the only 
one in the industry which manufactures motortrucks. I consider 
our motortruck business a contribution to technological advance on 
the farm in the same sense as our other products. Although our 
motortruck sales eventually J)ecame greater in urbt^n areas than in 
farm areas, we entered the business originally with the needs of 
farm transportation foremost in view. 

In this period, too, a third type of tractor was introduced, the 
crawler or tracklaying type. It appeared about 1905, an^ soon became 
available in several sizes. Its chief advantages are its g,reat tractive 
power in hilly or loose soil conditions, and its relatively low height. 

Small crawlers are used extensively in orchard work while larger 
ones have been adopted in many regions where great power on the 
drawbar is the principal need. 

During these same years the large Pacific-type combine was 
adapted in a greatly reduced size to the smaller farms of the prairies. 
These prairie-type combines, having cutting widths of from 12 to 16 
feet, became available about 1914. 



17008 CONCENTRATION OF ECONOMIC POWER 

Such developments as the power take-off, the belt pulley and the 
prairie-type combine added greatly to the utility of the tractor but 
it still could not perform one of the essential farm operations, the 
cultivation of growing crops. This did not become possible until 
the Farmall tractor was introduced in 1924. 

The great contribution of the Farmall tractor was its ability to 
do everything the earlier tractors had done, and in addition, to 
cultivate row crops without injury to the growing crops. It made 
possible for the first time the s application of tractor power to all 
field operations. It took the tractor out of the class of a partial 
substitute for animal power and made it unnecessary to keep horses 
at all. 

The Farmall differs from standard tractors in that it is a 3- 
wheeled machine with a higher axle clearance. 

It derives its traction from two large drive wheels at the rear, its 
steering from the small wheel centered at the front of the ^xachine. 
Its rear wheels are adjustable to different row spacings and its 
design enables the operator to see the work he is doing better than 
with a four-wheeled machine. The popularity of this type of trac- 
tor has influenced all subsequent tractor design and has made all- 
purpose tractors standard in the industry. 

I don't mean by that that the four-wheeled tractor is an extinct 
type of tractor, but it means that all manufacturers manufacture an 
all-purpose type of tractor at the present time. There is a use for 
four-wheeled tractors in certain sections of the country where row 
crops are not the all-important feature. 

Under the influence of the all-purpose tractor the principal farm 
machines underwent a radical revision in design. An important 
phase of this change was the construction of machines not to be 
pulled by the tractor but to be mounted directly on it as quick- 
attachable tools. 

The all-purpose tractors had their greatest usefulness in farming 
areas where row crops predominate, particularly in the Corn Belt 
and the Cotton Belt, where the previous four-wheel models had been 
of limited utility. 

During this period between 1924 and 1932 the prairie combine 
underwent still further changes which tended to reduce its size and 
the width of its cut. Ten-foot machines and 8-foot machines were 
introduced. 

The census of 1930 showed 900,000 motortrucks on farms. By 
1935 manufacturers' estimates place the figure at nearly 1,000,000. 
I believe the 1940 census will show more than 1,000,000. The figure 
does not in itself reflect the importance of the motortruck in farm 
transportation, since much farm produce moves to market in common- 
carrier trucks. I know of no statistics covering the number of such 
trucks. 

Before the present development of the motortruck, the farm view- 
point was bounded by the number of miles a horse could cover in a 
day. The farmer's market was the nearest market, unless he enjoyed 
an unusually favorable location on a railroad. There were costly 
delays in shipping. Stock lost weight, which meant dollars to the 
farmer, on the way to market. 

By 1932, 40 percent of livestock went to market on the highways. 
By last year that proportion had increased greatly. Department of 



CONCENTRATION OF ECONOMIC POWER 17009 

Agriculture studies in October 1939 of 67 major markets showed that 
58.8 percent of the cattle, 66.9 percent of the hogs, 58.4 percent of the 
calves, 40.5 percent of the horses and mules, and 25.7 percent of the 
sheep and lambs went to market by motortruck. 

Aside from livestock marketing, I think it is proljably not neces- 
sary to do more than refer to the obvious boon the motortruck has 
been to dairymen, fruit and vegetable growers in increased speed of 
delivery, widening of markets and lessening of spoilage losses. 

Turning again to the field of farm machiney, the year 1933 was 
notable for the introduction of an all-purpose tractor substantially 
smaller and cheaper than ^ny other theretofore built. This was the 
Parmall 12. While designed primarily for use with one plow for 
which it poved popular, it also developed that in many soils it had 
enough power for two-plow operations. Competitive developments 
in the one-plow tractor field immediately followed with the result 
that still smaller and cheaper one-plow tractors were introduced and 
a substantial demand from farmers for this small type of tractor 
has been clearly demonstrated. At the present time 4 or 5 of the 
tractor manufacturers of the country have one-plow tractors and 
those who have not will presumably have tractors of this type within 
a short time. Last year the Harvester Co. introduced two new one- 
plow tractors, smaller and substantially cheaper than its original 
one-plow tractor of 1933. 

The year 1933 was also notable for the first introduction of a 
tractor with rubber tires as regular equipment. And you gentlemen, 
I am sure, noticed the large number of implements and tractors 
you saw with rubber tires in those pictures. 

Since that date the increase in demand for rubber tires has been 
remarkably rapid until today the overwhelming majority of all trac- 
tors of all sizes made by all manufacturers go out on rubber. 

Although rubber tires increase the first cost of a tractor their 
advantages more than offset their disadvantages. Their rolling re- 
sistance is much less than that of the steel wheel with lugs. Under 
most conditions, therefore, the use of rubber tires permits either 
higher speed of operation, or the use of larger implements, or a 
reduction in fuel costs while using the old implements at the oil 
speeds. 

By their cushioning action rubber tires save wear and tear on 
the tractor and, even more important, add greatly to the comfort of 
the operator. Furthermore, the rubber tire admits the tractor to the 
paved highway, either to move implements from field to field or for 
road hauling with a rubber-tired wagon. The utility of the rubber- 
tired tractor for road work is causing manufacturers to build greater 
speeds into tractors, and road speeds of 8 to 15 miles an hour are 
commonplace on current models. 

In addition to the use of tires on tractors, an increasing number 
of wheeled implements, such as plows and combines, are being 
mounted on tires. 

You will be interested to know that an eifort is being made by 
our company, and I believe by other implement companies generally, 
to standardize the wheel sizes of implements on which rubber tires 
are desirable, in order that the farmer may equip his machine with 
Second-hand automobile tires. Tires with worn-down treads no 
longer safe for automobile use can still give long and cheap service 



17010 CONCENTRATION OF ECONOMIC POWER 

on implements which are not required to furnish their own traction, 
but are drawn or powered by tractors or horses. 

I might say at that point that one of the resistances to the intro- 
duction of rubber tires some years ago was just that fact of the first 
cost. There was a natural skepticism and doubt about whether the 
farmer was really warranted in adding that additional cost. to his 
tractor or to his implement. There was a further question about 
the durability of tires on the farm. You men know that around a 
farm and out on country roads there are any number of nails and 
sharp things loose, and it was thought that the life of a tire might 
be short. That has not proven to be true. 

Another thing that caused a resistance to the introduction of the 
rubber tire was the thought that it would not have sufficient traction 
under a large number of conditions. That hasn't been proved true 
either. It is true that under certain limited conditions, for instance 
frozen soil on which there is a little thawing on top, the rubber tire 
has not had the desired traction, but in other conditions you have 
either equal or better traction than another tire, and it looks as if it 
were here to stay. 

The Vice Chairman. Does the rubber tire help to prolong the life 
of the machine? 

Mr. McCoRMicK. Yes, sir; it does very definitely, and it has 
another definite effect: When you take away by the use of rubber 
tires the sharp shocks, the shock of a steel lug on a hard surface, a 
frozen surface, for example, or a steel wheel hitting a stone, you are 
able to design your whole machine less heavily, less strongly, and 
therefore more inexpensively. The rubber tire has had a distinct 
influence on our being able to lessen and lower the cost of the tractor, 
and I believe that that will maintain to a degree in imp]ements, 
although not to as great a degree. 

Another notable development since 1932 has been the small combine. 
Prior to that date, the smallest combine had an 8-foot cut, and there 
had been sufficient sales of these machines east of the Mississippi to 
indicate that combine harvesting was not limited to the dry areas. 
The development of the small one-plow tractor naturally led to exper 
imentation with small combines which could be pulled with the one 
plow tractor, operated with a power take-off and handled success 
fully by the operator of the tractor without other assistance. The 
Allis-Chalmers Co. w^as the first in the field with a successful small 
combine having a cut of 5 feet. Othel- manufacturers, including the 
Harvester Co., were soon in the field with small combines of their 
own designs having various cutting widtlis. At the present time 
the farmer has a wide range of choice of combines, with cutting 
widths varying from 3^/2 to 6 feet, all of which can be operated with 
small tractors.- 

One of the reasons for the popularity of tlie small combine is that 
it will harvest many other crops besides the grain crops which 
the larger combines were designed to handle. The small combines 
have harvested successfully almost 100 different kinds of crops. 
Some of the most important, in addition to the grain crops, are soy- 
beans, clover, edible beans, lespedeza, buckwheat, flax, peas, and 
sorghum. 

Time will not be taken to list other newly designed implements 
for use with the one-plow tractor other than to say that many spe- 



CONCENTRATIONOF ECONOMIC POWER 17011 

cial machines have been recently designed and are now available. 
The pesult is that w;th the old implements formerly available and 
all of the new machines specially designed for use with the one-plow 
tractor, the purchaser of such a tractor can use it for practically all 
farm operations; that is, a complete line of implements is available 
and each purchaser may choose those needed in his operations. 

Reviewing the technological changes in farm machinery since 1932 
as listed above, your attention is called to the fact that in the main 
they relate to equipment for small farming, and that a remarkable 
number of new machines have been designed, put out and proved 
popular, within a short time. When the history of this period is 
reviewed at a later date, it may well be that it will stand out like 
the period of 100 years ago as a time of concentrated invention having 
a marked effect on the future of agriculture. 

The inventions of 1831 to 1850, with their subsequent refinements, 
made possible the rapid development of our prairie States and the 
building of our industrial civilization. The recent technological ad- 
vances in farm machinery from which the family-size farm will 
greatly benefit, may well become a bulwark to preserve this important 
part of our social structure. 

There are in the States about 6,800,000 farms of which the great 
majority are family-size farms operated without hired help. The 
United States census figures indicate that only about 1 farm out of 7 
has hired help. In the 1920 decade most of the tractors were used on 
the larger farms with the exception of the specialized small fruit 
and vegetable farms. This was largely because one-plow tractors 
were not available and many farmers who would like to have farmed 
with tractors did not feel justified in making the investment required 
for a two-plow tractor and its tools. 

Because of the situation some dire prophecies were made that farm 
mechanization would lead to corporate farming and the elimination 
of the family, farm. The development and production of the one- 
plow tractor and all of the small-tool equipment to go with it, reflects 
the determination of the family-size farmer to remain in business 
and his desire to share in the benefits of mechanization. Only in 
response to such a demand could the many small tractor and the 
many tools to go with them have been designed, produced, and 
marketed. The small farmer wanted an automobile and in many 
cases had one, purchased perhaps in the second-hand market. Not 
needing his horses on the road, he wanted to do away with the care 
and expense of horses on the farm and enjoy the savings in time and 
shorter hours made possible by the use of improved farm machinery. 

With the mechanized equipment now available for small and me- 
dium-sized farms it seems reasonable to believe that the family farm 
which has often been called the backbone of our Nation will still 
stand and perhaps be in a stronger position than ever. 

(Dr. LuBiN assumed the chair.)' 

Mr. McCoRMicK. The foregoing is a very condensed outline of the 
technological progress in . labor-saving farm machinery during the 
last century, with an indication of the pronounced present-day trends. 

farmers' demand for mechanization 

Mr. McCoRMicK. One conclusion seems fairly clear. It has not been 
the implement manufacturers who have directed the efforts of the 



17012 CONCENTRATION OF ECONOMIC POWER 

farmers, but rather the farmers who have directed and inspired the 
efforts of investors, engineers, and manufacturers to solve their prob- 
lems and supply their needs. 

The early implements were in many cases invented or designed by 
farmers themselves. Highly trained engineers now design farm 
machinery, but their efforts are naturally directed to the solution of 
the problems actually presented by farmers. These problems of 
demands for different kinds of equipment find constant expression 
in contacts with farmers and are transmitted to manufacturers 
through their sales and research organizations. 

Now, Dr. Anderson, with your permission, if I could skip over to 
page 12, in the interest of saving time, the- material covered there I 
would be very glad to discuss any questions which you might care to 
cover at a later date. We will go to the bottom of page 12, then.^ 

(The material omitted appears below) : 

Refrigeration has only recently become an important part of farm equip- 
ment, and is one more example of the industry's response to the farmers' 
demands. The demand began when health authorities required the cooling 
of milk on the farm before delivery to the cities, and it has been stimulated by 
the farmers' desire for household refrigeration. 

Ordinarily not very many types of implements are required to handle the 
operations of a single family-sized farm, but most people would probably be 
astounded at the immense variety of implements and tools required for the 
many varied farm operations throughout the country, and also for similar 
operations under varying weather or soil conditions. 

Progress in developing better implements, and by better I mean more 
efficient, more durable and less expensive, has been continuous and is still going 
on ; but it is a gradual process, requiring field experimentals, including waiting 
periods between seasons for further experimentals. 

MAJOR EFFECTS OF THE USE OF FARM MACHINERY 

Mr. McCoRMiCK. As already noted, all the principal labor-saving 
devices for the preparation of the soil, planting, cultivating, harvest- 
ing, and handling of farm crops have been developed or invented 
within the last century, and during that time a continuous process 
of development and improvement has been going on. It is worthy 
of note that all this happened in our country and also that American 
manufacturers, unprotected by any tariff, have led the world in the 
manufacture of farm machinery, and that the American farmers 
have always been the greatest users of farm machinery. 

It would seem, therefore, that the history of the last century should 
reveal in long-range perspective the effect of the use of farm ma- 
chinery and the contribution it has made toward the progress of our 
country to its outstanding position in the world. The four major 
effects may be stated brie/ly as follows : 

(1) Farm machinery has brc)ught about an assured food supply 
and freedom from famine. 

(2) Farm machinery, through enabling a much smaller proportion 
of the total population to produce food for the wdiole, has released 
from the soil tjie manpower which has made possible our great in 
dustrial pro^jess. 

(3) Farm machinery has done much to relieve the drudgery and 
shorten the hours of labor for that portion of the population remain- 
ing on the farms. 

1 Referring to prenorod statement. 



CONCENTRATION OF ECONOMIC POWER 17013 

(4) Farm machinery has brought more profit to the farmers. 
(And not alone or mainly through labor displacement, but also in 
the many ways by which better yields and better quality of crops 
are obtained and assured through improved methods of soil prepara- 
tion, planting, cultivating, and harvesting. Tlie weather always will 
be one of the greatest farm hazards. The speed and timeliness of 
cultivation can do much to conserve moisture and effect weed control, 
and the speed of mechanized harvesting has greatly reduced the risk 
of losing matured crops through rain, hail, wind, heat, or other 
adverse weather conditions.) 

(Senator O'Mahoney resumed the chair.) 

Mr. McCoRMiCK. These four statements are self-explanatory, but 
I want to add a few comments on some of them, and in this connec- 
tion discuss the subject of present-day labor displacement by farm 
machinery. 

An assured food supply is a condition which never existed any- 
where at any time in the world's history until it became a reality 
here within comparatively recent times. The change is so great that 
we no longer think of crop failure in terms of hunger and starvation, 
but rather in terms of the effect of a short crop on farm prices and 
farm income. We regard our food supply as so certain that we do 
not worry about the matter at all. Credit for this change belongs, 
of course, in part to the governmental and private agencies which 
have contributed to the control of pests and diseases, produced new 
and better varieties of plants, and improved the quality of livestock 
breeding and handling. But I believe the mechanization of farming 
between 1831 and the present day has been a foremost factor. 

We can all remember the World War slogan, "Food will win the 
war." We can also remember that the machines available made it 
possible to bring about a vast increase in food production to 'meet 
the unparalleled demand of that period. I believe our imequaled 
capacity to produce food is the foundation of our strength from the 
standpoint of national defense. The present uncertain state of the 
world certainly brings home the vital importance of this productive 
capacity. 

At present there are surpluses of some farm products, but in the 
main these are surpluses in the sense that they are not currently 
salable rather than in the sense that our people do not need or could 
not use the products. Regarding these surpluses, I am in substantial 
agreement with the views expressed by Dr. Mordecai Ezekiel, of the 
Department of Agriculture, before the National Industrial Confer- 
ence iBoard meeting in New York last January. 

Dr. Ezekiel gave it as his opinion that a level of industrial em- 
ployment comparable to what existed in the 1920's would cause a 
substantially larger demand for farm products, and might even 
require an increase in acreage of some crops. He suggested that the 
more fundamental problem is how to put back to work the city people 
who are not working and are ready to work, and ready to buy more 
food for their families. When that problem is solved he believes 
the remaining farm problems will be comparatively simple of solu- 
tion. I think that is probably true. And* I have faith enough in the 
future of the United States to believe that these problems will be 
solved. 



17014 CONCENTRATION OF ECONOMIC POWER 

Next in importance to our assured food supply, and conditioned 
upon it, is the fact that without agricultural mechanization our in- 
dustrial society would be impossible. Only when men were released 
from physical toil in the fields could they apply their stren^h and 
intelligence to the development of industry. 

From the beginning of history until very recently the necessity of 
producing food by crude hand method^ chained the vast majority of 
people everywhere to a life of hard labor on the land. Secretary 
Wallace has clearly stated the' dramatic change that has taken place: 

One liiuidred fifty years ago it required 19 people living on the land to' support 
themselves and one person in town. Today, under greatly commercialized and 
industrialized conditions, one person on the land supports himself, 3 people in 
town, and contributes to the support of another person overseas. 

The mechanization of agriculture, including farm transportation, 
made the farm population a great reservoir from which almost con- 
stantly man power has been drawn for the expanding industries that 
have made the United States the foremost nation of the world. For 
more than 100 years, right down to the depression of 1929, the pressure 
for release of men from farms to join the ranks of industry has never 
cea-sed. 

This* movement halted witTi the depression, and now the persisting 
industrial unemployment has made socially undesirable, for the present 
at least, this very process of release of men from the soil which for so 
many years was of social and economic benefit. 

This brings us to consideration of the present situation. Naturally 
the question arises as to whether the continuing sale of farm machinery 
is aggravating the unemployment problem of the Nation. 

First let us agree that farm machinery is labor-saving without ques- 
tion. No machines have ever been demanded or salable unless they 
enabled farmers to perform farm operations in less time and in a more 
efficient manner. That is their very purpose. 

The Chairman. May I interrupt you there? Going back 1 or 2 
paragraphs to your statement that for more than 100 years, right down 
to the depression of 1929, the pressure for release of men from farms 
to join the ranks of industry never ceased, do you mean to imply by 
that that industry is something new, or do you agree with me that it 
is merely a transfer of the situs of industry, so to speak? 

Mr. MoCoRMiCK. That is correct, Mr. Chairman. 

The Chairman. Before the invention of the "modern machine, in- 
dustry was carried on on the farm. 

Mr. McCoRMiCK. Going way back, before even city industry, yes. 

The Chairman. Yes, and the story of our industrial development, 
the development of the factory system and the machine age, has been 
the story of the gradual transfer of industrial activities from the farm 
to the city as well as the story of the substitution of machine labor for 
hand labor. 

Mr. McCoRMiCK The substitution of machine labor for hand labor 
on the farm ? 

The Chairman. In the industries. 

Mr. McCormick. Yes, I think of course that statement is true, with 
perhaps the addition that new industries were created in the cities 
which never did exist perhaps on the farm. 

The Chairman. Yes ; that is perfectly true. 



CONCENTRATION OF ECONOMIC POWER 17015 

Mr. McCoRMiCK. This only means to imply I think just what you 
mean, that there has been a demand as industry moved into and 
grew in the city, for this labor which now is freed from 'agricultural 
use to go into the industry. Of course that is a broad statement, and 
undoubtedly there were periods in the past where that process was 
held up, just as it is held up at tlie present time. 

The Chairman. In other words, by reason of the inventions of 
thoughtful and skillful men and the discoveries of science, we are able 
as a race to produce many things which were impossible to produce 
100 years ago, 50 years ago, even iO years ago. 

Mr. McCoRMiCK. Exactly. 

The Chairman. In earlier days mankind had to be satisfied witli 
what he could produce in the circumstances that then existed, 

Mr. McCoRMiCK. That is right. 

The Chairman. So industry is changing both its form and its 
locale, so to speak. 

Mr. McCoRMicK. Naturally, yes. 

The Chairman. And our problem is, as you stated here, to provide 
for the absiorption of those who may be thrown out of employment. 

Mr. MoCoRMiCK. That is true. 

farm MACHINERY AS LABOR SAVER 

Mr. McCoRMiCK. But in appraising the effec^ of farm machinery, 
an important distinction must be made between labor saving and 
labor displacing. The labor hours saved by machines may be re- 
flected in shorter hours for those working on the farm or in someone 
leaving the farm to seek other work. I believe both effects have 
occurred in varying degrees at different times and placesi. 

There have been long periods when the attraction of city jobs led 
many farm workers, both hired hands and farmers' children, to leave 
the farm. During these pei-iods the benefits of labor-saving ma- 
chinery were mainly applied to replacing those leaving the farms, 
and in less degree to shortening the iabor day of those remaining on 
the farm. 

At the present time, however, and looking ahead, I believe it can be 
gaid with some assurance that the tendency is to shorten the houre 
of the workers on the farm rather than to decrease their number. 
The working hours of industrial labor have been substantially short- 
ened by law, agi-eement, or custom. The farmers' working hours 
have been much longer than the hours of factory labor, and it is only 
natural that they should desire shorter hours and also relief from 
the most back-breaking farm operations. 

In addition, there is the important fact already mentioned that the 
great majority of farms are family farms without hired help where 
no labor displacement takes place, as ffirmers do not fire themselves 
or their children when the time required for farm operations is 
shortened. These farmers earnestly desire the help of machinery. 
They constitute the great market for which the newer and ^nailer 
tractors and implements are being made and on which the farm- 
equipment industry is pinning its hopes. 

When farmers think of labor-saving machinery, they are thinking 
primarily in terms of shorter hours and release from physical labor 
of the most w^aring.kind, and secondarily of the cost reduction which 



17016 CONCENTRATION OF ECONOMIC POWER 

in many cases results from and can be obtained by the improved 
methods of production and handling of crops made possible by ma- 
chinery. Any farmer who has ever walked 15 miles a day in the 
furrow, wrestling every foot of the way to keep the plow in a true 
course, knows what the tractor and the tractor plow really mean. 

Anyone who has ever plodded through a cornfield in freezing fall 
weather, husking by hand, knows what a blessing the mechanical corn 
picker is in terms of labor saving. 

This kind of labor saving has small effect on employment. Its 
main effect is in shortening the working day for the family group, 
father, mother, and children, and making the group work more effi- 
cient, more pleasant, and more profitable. Farming, as has been 
said many times, should be a way of life as well as a way of earning 
a living. Labor-saving machinery has contributed much to a more 
attractive way of living for the farm family, and it will contribute 
more. 

We know there has been an improvement in rural educational 
facilities. We can see it in the new consolidated schools and in the 
growth of the agricultural colleges. That growth could not have 
taken place unless young people had been released from work by 
machines. 

We know there has been an increase in the social opportunities of 
the farmer arid his family. We need only consider as one example 
the really wonderful work which has been done and is being done 
through the 4-H Clubs to train farm children for better living. We 
know that before mechanization, such a program could not have been 
carried out. 

We observe that the Federal Government through the Rural Elec- 
trification Administration is itself concerned to extend mechanization 
on the farm by making available a new source of power. 

In short, farm life can be made more attractive than it ever was, 
and is being made so, and the farmers want it that way. There is 
no longer tne vast gap between farm living and customs and city 
living and customs which once existed and there should not be. 

In this connection I should like to quote from a radio address by 
S. H. McCrory, Chief of the Bureau of Agricultural Engineering, 
delivered July 22, 1938. Speaking of the effect of machinery on the 
farmer's way of living, Mr. McCrory said : 

He must still keep close to his work, but he has been given such able assist- 
ants he can lift his nose from the grindstone of the past md give more atten- 
tion to the business of farming and living. 

While stressing the major effects of farm machinery and shortening 
hours, I do not mean to imply that farm machinery has brought about 
no recent labor dis'placements. No doubt it has brought about such 
displacements. But not, I think, to any such extent or to the degree 
which has occurred in industry. In addition to the family size farms 
there are, of course, larger farm operations in various parts of the 
country employing hired labor which have had and are having dif- 
ficult times on account of the low prices of their products. Such 
farms, if they are to survive, must be operated in the most efficient 
way to achieve the lowest costs and this in some cases has brought 
about the use of machinery to reduce the amount of hired labor. 



CONCENTRATION OF ECONOMIC POWER 17017 

These situations parallel to a certain extent industrial operations. 
I firmly believe that the best interests of our society as a whole are 
served by encouraging technological advances tending to bring about 
the production of cheaper, better, and more goods for general use. 
But no intelligent person, and no one of good will, would ignore 
the fact that the benefits of such progress are sometimes achieved at 
the cost of temporary labor displacements involving hardships and 
readjustments. The answer, I believe, lies in recognizing these situa- 
tions as social problems to be handled with sympathy and with poli- 
ces calculated to alleviate the hardships of tho necessary readjust- 
ments. 

The extent of labor displacement by farm machinery is sometimes 
exaggerated by confusion with other causes. Nature smiled during 
the ^'s on the settlement of the semi-arid areas of the Midwest 
plains. Then followed many successive y^-rs of cruel drought, want, 
and poverty. Naturally this led to miration, and the lure of an 
Eldorado where a certain amount of migrant labor was needed led 
to the concentration of this migration and its dramatization. 

Straight thinking on the problem may be easier if we consider what 
would be a sound national policy for the resettlement of these unfor- 
tunate people. Surely they should not be returned to the dust bowl 
now that we know how severe and prolonged the drought periods can 
be. The human hazard of concentrating populations in such areas 
is too great. To the extent that a sound national-conservation policy 
would include the use of these lands for farming operations, it would 
seem advisable that they be conducted with a minimum amount of 
population and maximum efficiency of mechanization. Only in this 
way can the human and economic hazards of drought be minimized. 

Bearing on the effects of farm machinery on the farmer's income, 
the National Resources Committee in its study of technological trends 
and national policy says: 

That the income of the agricultural worker tends strongly to increase with 
increase in power and machinery available for his use is indicated in comparing 
by states the average gross annual income, available power, and value of farm 
mechanical equipment. * * * Fragmentary data from foreign countries 
seem to indicate that throughout the world increase in the amount of power 
available, within the limits observed, tends to increase the Income of the agri- 
cultural worker. 

This increase in the income of the agricultural population, through 
mechanization of the farm has also been of importance to urban in- 
dustry in maintaining^ market for its products, since the ability of 
the farmer to buy industry's product depends upon his income. I do 
not Jbelieve that the American type of high-volume, low-cost industry 
could have developed in connection with a backward, underpowerea 
agriculture. 

The extended use of labor-saving machinery on the farms of the 
Nation is indispensable if any fair balance is to be maintained be- 
tween the farm worker and the industrial worker with respect to 
their ability to produce and exchange their products. 

FUTURE TREND TOWARD SMALL MACHINES 

Mr. McCoRMicK. No one, of course, can predict what the future 
may hold. But some things about the future may be said, I believe, 

124491— 41— pt. 30 53 



17018 CONCENTRATION OF ECONOMIC POWER 

on the basis of what has happened in the past. On that basis, I 
believe the future will witness continued progress in the application 
of mechanical power to farming. I believe the changes will be grad- 
ual, as all changes in agriculture are. I believe that they will come 
in response to the changing needs of the farm population. I believe 
that tliey will have the same objectives as before — to increase the 
farmer's income and improve his way of living. I am convinced that 
the pronounced trend toward smaller machines will continue and 
that the end result will be to improve the position of the family- 
sized farm which has always been held as the ideal basis for American 
farming. 

(Appendix A to Mr. McCormick's testimony, which was not read, 
follows :) 

At the request of Mr. H. Dewey Anderson of the committee, the following 
brief sketch of the organization of the farm-equipment industry has been 
prepared. 

Prior to the Civil War the manufacture of farm machinery was carried on 
in small factories, each of which usually produced only one type of implement, 
and many of which were owned by local mechanics or blacksmiths. 

As the industry grew, individual manufacturers tended to make more than 
one implement, but they generally confined themselves to one classification of 
implements. A plow maker, for instance,, might add to his list of. products 
such other tillage tools as harrows and cultivators, but was not likely to 
engage in the thresher business. 

In this way the industry by the end of the last century had developed- several 
fairly well defined branches. These might be enumerated as plows and tillage 
tools, drills and planters, threshers, wagons, spreaders, engines, harvesting 
machines and cream separators. 

The turn of the century saw a trend toward consolidations of companies in 
this industry, as in several others, which resulted in larger units, and which 
also resulted in a tendency to broaden the range of implements supplied by 
the individual company. 

The impetus toward broadening the line of products came from the system 
of distribution of implements. Most manufacturers had found it necessary to 
maintain wholesale branch sales houses in various parts of the country to 
handle their sales, since unafiSliated wholesale houses often lacked either the 
knowledge or the energy required to promote the sale of new or little known 
implements. Maintenance of these branch houses, however, was expensive 
when only a single line of implements was sold, because of the seasonal nature 
of the business. The tendency toward broadening a company's line resulted 
from the desire to have something to sell at each season of the year. 

This tendency has led to the growth of 8 companies which are known as long 
line companies. They are Deere & Company ; J. I. Case Company ; Allis- 
Chalmers Manufacturing Company ; Oliver Farm Equipment Company ; Min- 
neapolis-Moline Power Implement Company ; Massey-Harris Company, Incorpo- 
rated ; B. F. Avery & Sons Company ; and International Harvester Company. 

In addition to these "long line" companies, there are many smaller concerns 
engaged in manufacturing lines which range from a single machine, such as a 
cream separator, to a line of implements and machines of considerable length. 
Among the more important "short line" companies are New Idea, Inc. ; Avery 
Farm Machinery Co. ; Gleaner Harvester Corp. ; Dempster Mill Manufacturing 
Co. ; Stover Manufacturing & Engine Co. ; A. B. Farquahar Co., Ltd. ; Lynchburg 
Foundry Co. ; Papec Machine Co. ; Wood Bros. Threshing Co. ; Ann Arbor 
Machine Co. ; Del^^aval Separator Co. ; Anker-Holth Manufacturing Co., Inc. ; Ohio 
Cultivator Co., and Farm Tools, Inc. 

In all, the "long line" and "short line" companies engaged In the farm equip- 
ment industry total approximately 200. To these should be added 2 of the large 
mail or^er houses, Sears, Roebuck & Co. and Montgomery, Ward & Co., both of 
which engage in the selling of farm machinery on a large scale, and the Ford 
Motor Company, which has recently reentered the farm equipment field and is 
now marketing a tractor with some implements. 

The majority of agricultural implement factories are located in the Midwest, 
especially in the state of Illinois, Indiana, Ohio, Wisconsin, Minnesota, and Iowa, 
although factories are to be found also in such other States as New York, Penn- 



CONCENTRATION OF ECONOMIC POWER 17019 

sylvania, Kentucky, Nebraska, Tennessee, and Michigan. A number of specialty 
implement factories are on the Pacific coast because of the special requirements 
of West Coast agriculture. The Midwest has been favored as a manufacturing 
area because of its central location, its transportation facilities, and its poistion 
in the heart of a rich farming area suitable for mechanized cultivation. 

Probably the two most important districts in manufacturing are the Chicago- 
Milwaukee district and the Rock Island-Moline-East Moline-Davenport district. 

Individual factories tend to specialize on certain related groups of machines 
and implements rather than to make many products. A factory may thus make 
only tractors, tillage tools, or harvesting machinery. There are, however, 
numerous exceptions. 

The distribution system of the larger and many of the smaller companies is 
usually national in scope. The sales unit of the manufacturer is the company- 
owned branch house, whose territory usually embraces a number -et covmties 
and may even, in sparsely settled regions, take an entire state or parts of 
several states. The branch houses sell to dealers in the local communities who 
in turn sell the goods to the users. 

The blockman, or whosale salesman, is the principal contact of the manufac- 
turer between the manufacturer's branch house and the local dealer. It is his 
responsibility to secure dealers, to assist them in merchandising, to advise them 
on stocking machines and repairs, and to help, when needed. In closing sales. 
Ordinarily there are 3 to 10 blockmen to each sales branch. 

The branch houses at all times carry large stocks of new machines and of 
factory-made repair parts which are available both to dealers and users of the 
machines. The maintenance of adequate repair stocks is vital, since any long 
loss of time due to the breakdown of a machine means a considerable monetary 
loss to the farmer.) 

The Chairman. I note with much interest, Mr. McCormick, the 
statement that the answer lies in recognizing these situations which 
you have described as "social problems which are to be handled with 
sympathy and with policies calculated to alleviate the hardships of 
the necessary readjustments." I assume from what you have said 
that you regard this policy as one of national responsibility. 

Mr. McCormick. Yes, sir; I do. 

The Chairman. Policies to be undertaken by the Government. 

Mr. McCormick. Where the localities are unable to handle them, 
the national Government certainly must take care of them. 

The Chairman. Have you given any thought to the particular poli- 
cies that might be adopted? 

Mr. McCormick. No, sir ; I haven't. Naturally we all think about 
those things, but I am unable to give anything of a definite nature 
in that way. 

The Chairman. Of course, there are certain national policies, for 
example, reclamation, which is of great interest to those of us who 
come from the so-called arid-land States. The Reclamation Service 
was first established in 1902, and many large reclamation projects 
were undertaken. Later the feeling grew up that we had too much 
farm production and for many years the Federal contribution by 
way of appropriation to the building of new reclamation projects 
was delayed. Practically one might almost say it was abandoned. 
In my own State, in Wyoming, though that State contributed 
by way of oil royalties to the public domain, millions of dol- 
lars to the reclamation fund, more than $25,000,000, for example, 
came^ out of a single county in my State into the reclamation fund, 
there was no atempt at all to expand the reclamation projects in 
the State or to develop new ones. During the last 7 years new recla- 
mation projects have been constructed and are now under construc- 
tion in various of the States, and some of these Dust Bowl families 
to whom you have alluded are being settled on these new lands. You 



17020 CONCENTRATION OF ECONOMIC POWER 

don't regard that as an undesirable policy, do you, from what you 
stated here? 

Mr. McCoRMiCK. I think, Senator, that my opinion on individual 
matters isn't worth very much. I think, in general, we have to take, 
care of temporary situations, that is all there is to it. In other 
words, when distress arises in a given section of the population, it- 
must be taken care of. Aside from that, the only position I could 
take would be that whatever is for the permanent good of the farmer 
in each iiidividual case is what we want. 

The Chairman. Your use of the word "permanent" points again 
to the real significance, we need a permanent policy. 

Mr. McCoRMiCK. That is right, not a flash in the pan or a thing 
that isn't fundamentally sound, but something which year by year we 
can build on as a permanent thing. 

The Chairman. You have no suggestion to make on that? 

Mr. McCoRMiCK. I have no suggestion. 

The Chairman. Who buys the farm machinery you manufacture? 

Mr. McCoRMiCK. On the whole, speaking generally, we, the manu- 
facturing company, sell to dealers and the dealers are those who 
sell to the farmers. 

The Chairman. Do the dealers in farm machinery, like the dealers 
in automobiles, absorb the difficulties that are inherent in the used 
tractor, the used machine ? 

Mr. McCormick. The situation is very similar. In many instances 
they take a trade-in, in some cases recondition it and resell it. 

The Chairman. When you dispose of your product to the dealer, 
your story is told. 

Mr. McCormick. That is right, Senator, in general. 

EFFECT OF TENANT FARMING ON MECHANIZATION 

The Chairman. So that you don't have any figures, certainly no 
experience, with respect to the relative importance of the tenart as a 
purchaser of these machines? 

Mr. McCormick. No; I wouldn't have any — do you mean as a pur- 
chaser of a second-hand machine? 

The Chairman. Of any machine. You see, the testimony is here, 
and it is clear from the census returns that the number of tenant 
farmers is steadily increasing. 

Mr. McCormick. Yes. I am sorry I wouldn't have any concrete 
information that would be of any use as to what proportion of our 
sales went to tenant farmers and what went to owners. 

The Chairman. Do you think it would be a reasonable assumption 
that the tenant farmer is unlikely to be as good a purchaser as the 
owner? 

Mr. McCormick. I would rather have the feeling that it would 
depend a great deal on the indi\*dual and his capacity, ability, and 
financial worthiness rather than w nether he was a tenant or owner. 
That is just an offhand statement. 

The Chairman. Well, the figures presented to us indicate not only 
an increase of the tenant farmer, but also an increase of what might 
be called institutional farming, that is, corporate farming, the own- 
ership of fanns by corporations. Insurance companies, for example, 
have been compelled, through no choice of their own, but by reason 
of the depression, to take over many farms. 



CJONCENTRATION OF ECONOMIC POWER 17021 

Mr. McCoRMicK. Yes, and if that is the case, and farming can 
come back to a more profitable position, wouldn't we consider that 
part of it a temporary phase, that wouldn't be an underlying trend 
toward larger farms in that particular connection. In other words, 
insurance companies, as you say, are not taking those farms because 
they like to do it, tney have to, and I understand they are trying 
to put them in good condition and then sell them. So, after the 
end of that cycle^ you might say of transfer of ownership, those 
farms I should think would revert to individual owners. 

The Chairman. That may be true to some extent, but the steady 
increase of the proportion of tenants seems to be independent of the 
depression. 

Mr. McCoRMiCK. Oh, yes ; that is a quite different thing. 

Dr. Anderson. I wonder if you could discuss the used farm ma- 
chinery market, and tell us whether the used farm machinery market 
offers a possibility to farmers in lower circumstances to mechanize 
their operations and compete successfully with other farmers who 
buy original and new equipment. 

Mr. McCoRMiCK. Dr. Anderson, I think there is no question about 
that. It is entirely parallel to the automobile situation. The used 
tractor or the used implement does go toward supplying the farmer 
with the lower income so that he can have the benefit of mechaniza- 
tion without the cost of the original equipment. 

With your permission I should like to i-ead that section of my 
printed statement, if I may. 

An effective factor in extending the benefits of farm machinery to a larger 
proportion of the farmers has been the development of resale markets in 
vphich serviceable used equipment of many kinds is being purchased at prices 
substantially below the cost of new equipment. This development has been 
greatly accelerated since 1935. Most of the tractors in use during the depres- 
sion were manufactured in the late '20's. The improvement in farm income 
which took place after the worst of the depression, together with the improved 
machines offered by the industry, resulted in extensive buying of new tractors 
and implements and the trading in of the old machines and these old machines 
after reconditioning were in turn sold to other farmers. 

We estimate that currently about 80 percent of the sales of new tractors 
involve the trading in of an older tractor. Naturally, the percentage on these 
very small tractors that are now being introduced to some farms which have 
been exclusively horse or mule farms before won't huve as high a percentage 
of trade-in as that. 

This makes tractor power in the form of a used tractor available at low cost 
to farmers who might not otherwise obtain it. 

You gentlemen ai-e probably familiar with the somewhat similar situation 
in the automobile industry, where a very large proportion of all automobile 
owners have never owned anything but a used car. 

In the case of farm equipment, the potential usefulness of a machine pur- 
chased at resale is even greater than usual as the industry has an outstanding 
record of good repair service on old models which are no longer in production. 

The result is that the purchaser of a us* d iractor is able to get parts and 
service and need put no arbitrary limit on tlip length of time he will use the 
machine. As a matter of fact, no one knows what the life of a tractor is. The 
first Farmall tractor ever sold, which was manufactured in 1925, is still in 
daily use on an Iowa farm. 

The history of the motor truck on the farm parallels that of the tractor. 
Here again the resale market and the practice of reconditioning machines for 
resale has made the motor truck available at very low cost. 

Dr. Anderson. Mr. McCormick, yesterday when we were exam- 
ining this question with the experts in the Department of Agricul- 



17022 CONCENTRATION OF ECONOMIC POWER 

ture we were given some depreciation figures that would not be in 
line with the statement you have just made. The indication was 
then that depreciation was relatively high and replacement neces- 
sary within a rather brief period of time. Carrying out the state- 
ment you have just made, that this first Farmall tractor ever sold 
is still in operation, is it your judgment from your observation of 
the industry that the depreciation period is relatively high or not ? 

Mr. McCoRMiCK. I would say that any time that we sold a tractor 
that you couldn't use for more than 5 years we would be cheating 
the man out of his money. 

Dr. Anderson. In other words, a person buying farm machinery 
and installing it on his farm has a prospect of a life of, what would 
you guess for the tractor? 

Mr. McCoRMicK. I would put the lowest figure at 8 years, the 
very lowest. Iwould say that 10 years should be a fair average. 
Just as I say here in this paper, the first Farmall is being used on 
an Iowa farm and that is 16 yeare. That isn't the only one. We 
have got thousands and hundreds of thousands of them still out, 
and I am quoting just from memory now and I can't back it up, 
but it seems to me that I have seen figures which indicated there 
were some hundred thousand Fordson tractors still in use. The 
Fordson tractor was last produced in 1927, which would make those 
tractors at least 13 years old. 

Dr. Anderson. What is this process of mechanization? How does 
the farmer go about becoming meclianized, changing over from the 
horse to the tractor? 

Mr. McCoRMicK. Well, that is a pretty broad question to answer, 
and I should like to know if you mean that in a rather historical 
sense, or if a man who had been just a horse farmer up to today 
were to change today. 

Dr. Anderson. What does he do today? 

Mr. McCoRMiCK, What kind, an Iowa corn farmer? 

Dr. Anderson. Take an Iowa corn farmer, to make it specific. 

Mr. McCoRMicK. If he were a liorse farmer up to today he would 
naturally be preparing the soil with horses. He would have pre- 
sumably a horse plow, probably a 2-bottom gang plow; he would 
have a horse disk; he ^-atjuld have a horse peg-tooth harrow, or 
smoothing harrow. Suppose he was going to start in at the begin- 
ning of the year to prepare his soil, he would have to buy his tractor; 
some of those things it would be difficult to do with the plow; he 
could do it to a lesser extent, not quite successfully, with a harrow ; 
he might cut hh tongue off and try to make a tractor hitch out of 
his horse hitch. He might u?6 ihat for the first year^ and maybe the 
second year, I don't know, l>ut he wouldn't be satisfied with it very 
long. Let's say that he wasn't satisfied with it when he first tried 
it out in the field, and he v/ent to the dealer, and said, "That doesn't 
work very well, I think I'll just li.ive to buy a tractor disk," then he 
would buy a tractor disk harrow which would cover the ground 
faster than the horse disk; he would buy his peg sections that he 
could use beliind the tract r>r; he could put on new chains behind the 
tractor. 



CONCENTRATION OF ECONOMIC POWER 17023 

COST OF MECHANIZING A SMALL FARM 

The Chairman. What would l?e the capital investment, let's say, 
for a 50-acre farm? 

Mr. McCoRMicK. Well, Senator, that is a very difficult question to 
answer, because we have to decide whether we are going to talk about 
new price, or, what most farmers do, buy some new and some old. 

The Chairman. Well, of course, there would be a change of capital 
invested. He would dispose of his horses. 

Mr. McCoRMiCK. Yes. 

The Chairman. And buy the machinery. 

Mr. MoCoRMicK. Yes. 

The Chairman. Comparatively speaking, by and large what is 
the relation of those two items? 

Mr. McCoRMiCK. Well, that is a difficult figure to arrive at. We 
had yesterday, I think it was in Dr. Johnson's testimony, if I can 
find it, some figures given here that I will just cite for reference, 
speaking of an Iowa farm. Dr. Johnson gave $2,445. 

Mr. Pike. That is for a 160-acre farm? 

Mr. McCoRMiCK. That is for a 200-acre Corn Belt farm. 

Colonel Chantland. That didn't include a wheat combine, then. 

Mr. McCoRMicK. I don't believe he had a wheat combine included. 
I don't know just what was included. They don't give the list. 

Colonel Chantland. What is the retail price of your small combine, 
ordinarily ? 

Mr. McCoRMicK. The smallest we are manufacturing this year is 
$405, retail price, a 4-foot machine. The next size is a 6-foot machine 
that retails for $665. . . ' . 

Colonel Chantland. And the retail price of this Farmall 12 tractor ? 

Mr. McCoRMiCK. The new one, Colonel ? 

Colonel Chantland. Yes. 

Mr. McCoRMicK. In one-row size that lists at $515. In the two- 
row, which is a little change-over of that same machine, it lists for 
$535. 

Colonel Chantland. And you figure. the average life of that is 
10 years? 

* Mr. McCoRMicK. We would be ashamed of it if it didn't last 10 
years. 

Colonel Chantland. What about the life of a combine ? I suppose 
that is a matter of housing? 

Mr. McCoRMicK. That is a great dfeal a matter of how the farmer 
takes care of his machine. There are many combines being operated 
in Kansas and Nebraska and other wheat sections that I venture to say 
were bought in at least the late twenties. I don't know why with 
good use a combine should not last 12 to 15 years. 

Colonel Chantland. Suppose we take what we would call a rea- 
sonably diversified Iowa farm, including, then, a combine. Would 
yould feel that that $2,400 figure or a $3,000 figure as an initial 
investment would be reasonable? 

Mr. MoCoRMicK. lam just giving it to you off-hand. 

Colonel Chantland. For all the implements needed ? I think jyou 
ought to include in the implement's needed the grinding and storiiigpblE 
it, ought you not? 



17024 CONCENTRATION OF ECONOMIC POWER 

Mr. McCoRMiCK. I should say that it would come to some place in 
that neighborhood, although I would have to sit down and add up this 
thing. Let's say some place between $2,000 and $2,600. I am just 
giving an ofF-hand fi^re. Let's say between $2,000 and $3,000. I 
think that might be a little more accurate. 

Colonel Chantland. Your exhibit 2682 shows that the average 
per year for '39 has gone up to 442. I don't quite know what that 
means. I suppose that is maintenance and replacement. That is the 
last of your exhibits. 

Mr. MoCoRMiCK. Will you say that again? I am sorry I missed 
that. 

Colonel Chantland. Well, it shows down at the bottom, there, 422 
as the 1939 figure. I take it^- 

Mr. McCoRMiCK (interposing) . That is millions of dollars of ex- 
penditures for farm implements, tractors, and repairs. That won't 
give you anything comparable there. 

Colonel Chantland. I see up above there in your 100-percent circle, 
you have the machinery down to 3.2 of the farmer's dollar. 

Mr. McCoRMiCK. That is a question of the proportion of the farm- 
er's cash outlay or dollar used in different ways. That item of 3.2 
represents the purchase; in other wordsj that is his cash outlay for 
his farm implements, his tractors, and his repairs. 

Ci >lonel Chantland. I was just wondering whether that is his initial 
expense. 

Mr. McCoRMiCK. It is initial. It is, in other words, whether he buys 
a machine for the first time or* if he replaces it when he gets his second 
machine. It is whatever he spends for equipment. That is not the 
cost of operating. Down here at the bottom you have another oper- 
ating figure. 

Colonel Chantland. I understand that. 

The Chairman. How does that capital investment in machinery 
compare with capital investment in animals? 

Mr. MoCoRMiCK. Well, we have the figure given here by the gentle- 
men yesterday, the figure they gave on this Corn Belt farmer, "In- 
vestment in equipment and horses, $2,265. Investment in tr&.ctor and 
equipment, $2,445," or a difference of $180. 

The Chairman. Do you accept that as being reasonably accurate? 

Mr. McCoRMiCK. I would say so, in general. I wouldn't want to 
be committed to it, because I haven't studied it, Mr Chairman. 

The Chairman. Do you care to make any comments upon this other 
phase of the transfer, from horse power to motor power, that when 
horses were used for motor power on the farm, the farmer raised 
his own fuel, so to speak? 

Mr. McCoRMiCK. That is true. 

The Chairman. Because he raised the feed. Today the farmer 
buys the fuel. 

Mr. MoCoRMicK. That is true. 

The Chairman. Now, what is the effect of that change? 

Mr. McCoRMiCK. The effect of that, naturally, was to take a certain 
amount of crops on a certain number of acres ^hat were used for 
feeding horses and the crops from those acres then were transferred 
to other uses, such as increased livestock on the farm, increased dairy 
cattle, and other livestock, which are consuming a great proportion of 
that. 



CONCENTRATION OF ECONOMIC POWER 17025 

Another thing that happened, strikingly in my home State of Illi- 
nois, a new crop, the soybean crop, has grown in the last 10 years 
to absorb millions of acres. I won't say just the number; that may 
be an exaggeration, but a great number in Illinois, which forms, 
probably, some of the feed. 

' The Chairman. Did it contribute to the farm surplus of which we 
talk so much? 

Mr. McCoRMiCK. Not in this particular way. The soybeans weren't 
a surplus ; they are a growing size crop in this country. 

The Chairman. Of course, it has increased our own self-sufficiency. 

Mr. McCoRMiCK. That is right. Instead of importing these we 
grow them ourselves. 

The Chairman. I noticed with interest that you spoke of the need 
of new farm machinery in the raising of sugar beets. 

Mr. McCoRMiCK. Yes. 

The Chairman. Experimentation with the development of such 
machinery, of course, is going on. 

Mr. MoCoRMiCK. It is important in your State. 

The Chairman. Very important in my State, and^ of course, the 
development of such machinery would do away completely with the 
problem of child labor on the beet farm, if it weren't already done 
away with substantially by the Sugar Act, and it would tend to re- 
duce the problem of hired labor. 

Mr. McCoRMiCK. Yes. There are certain cases like that. Senator, 
that you have mentioned. 

We had a case the other day. I read in the newspaper of a group 
of people, I think in one of the Carolinas, who were clamoring for 
some machine to help them with their peanuts. They had a certain 
labor situation which was bothering them there, and they didn't 
come to us. We just saw in the paper that somebody was trying to 
work that problem out. The present farm mechanization is just a 
series of such instances, one after the other. 

The Chairman. And as we continue technological advance with in- 
formation from the farm, does it follow that we become increasingly 
independent of the foreign sources of supply? 

Mr. McCormick. Well, I don't think mechanization 

The Chairman (interposing). Because machines make us capable 
of developing our own? 

Mr. McCoRMiOK. I don't think mechanization can claim the sole 
credit for that. I think many other agencies, such as governmental 
agencies experimenting with new crops, various agricultural agencies 
and research people, are all doing that, but to the extent a new 
machine would be needed, it would be our job to see if we coiild 
develop a machine for the new crop. 

The Chairman. And does it make it necessary for us, if we are 
to take full advantage of techaoiogical gains, to make ourselves inde- 
pendent of the supplies of given commodities, agricultural com- 
modities which may be secured from areas not as advanced, tech- 
nologically, as we are? 

Mr. McCormick. That is a pretty deep question, Senator. 

The Chairman. You don't want to go into it? Very well, I will 
pass that. 

Mr. McCormick. We are getting into pretty wide fields. 



17026 CONCENTRATION OF ECONOMIC POWER 

CREDIT POLICY OF INTERNATIONAL HARVESTER 

Dr. Anderson. Getting back to this question which I think is of 
fundamental importance, how the farmer becomes mechanized. 
Your thesis is that mechanization, and particularly the all-purpose 
tractor, has now made it possible — as a matter of fact you went 
on to say pointedly that this perhaps means the saving of mdepend- 
ent farm ownership on the small farm. How available is mechan- 
isation to the average farmer ? You pointed out that he turns in part 
of his old equipment, he turns in his horses. He doesn't make any 
such cash outlay, does he, as $2,445 right on the spot? 
. Is it important for him to become mechanized without any con- 
siderable cash outlay ? 

Mr. McCoRMicK. That would depend a great deal on the locality 
in which he is. In other words, our credit terms in one part of the 
country are more stringent than they are in others, naturally. If he 
had — of course I am speaking again second -handed, because as the 
Senator has brought out, it is the dealer who does this and we don't 
have any part. in it except in a few minor instances — if he had, for 
example, horses and maybe some horse equipment to trade in, it is 
very likely that a good dealer could arrange to take the horses and 
horse equipment in as a down payment and perhaps more. In other 
words, that equipment, "depending on the amount of equipment he 
was going to buy, might be sufficient to handle his down payment 
so he could go into farm powering. 

Dr. LuBiN. What isi the maximum period of credit extended for 
these purposes? 

Mr. McCoRMiCK. The maximum period we extend is 30 months. 
One may say, "Why 30 months?" The general thing is that we en- 
deavor to give the farmer 2 crop periods in order to enable him to 
pay for his equipment. 

Colonel Chant LAND. He can raise a 2-year-old steer in that time, 
tod. 

Mr. McCormick. Yes; he could do that. 

Dr. Anderson. In other words, Mr. McCormick 

Mr. McCormick (interposing). That is the longest. The average 
is far below that, very far below that. 

Dr. Anderson. He has approximately two growing seasons in 
which to move into mechanization on a growing scale? 

Mr. McCormick. That has been the custom of the farm equipment 
industry pi*actically since its inception. 

Dr. Anderson. Does the farm equipment industry itself underwrite 
these credits? 

Mr. McCormick. We do. Tliere are some companies which to a 
greater or less degree have finance companies finance some of their 
paper. Local banks do quite a bit of farm equipment financing, and 
we do the balance. 

I)r. Anderson. And, in your judgment, then,, the benefits of mech- 
anization to the small independent farmer are not in any serious 
way impeded or denied by reason of a credit structure that is not 
suitable, or by his failure to have access to the machines themselves? 

Mr. McCormick. No, sir. We endeavor, and we have been doing 
it increasingly as the years have gone on and our experience has 
grown, to suit our credit policy to the individual and to get away 



CONCENTRATION OF ECONOMIC POWER 17027 

from broad classifications which might be unfair or bad business. 
We have been endeavoring to fit these credit policies to the individ- 
ual. In any size of farm, I would say, and almost in any category, 
there would be men who could buy equipment. There is no question 
about it. 

The Chairman. The committee will stand in recess until 2 : 30. 

(Whereupon, at 12 : 45 o'clock, a recess was taken until 2 : 30 p. m. 
of the same day.) 

AFTERNOON SESSION 

The hearing resumed at 2 : 30 o'clock, upon the expiration of the 
recess. Representative Hatton W. Siunners, the vice chairman, 
presiding. 

The Vice Chairman. The committee will please come to order. 

Colonel Chantland. I think, Mr. McCormick, we left one open 
before the lunch period. What I was trying to find out was whetner 
you had or whether the figures given yesterday indicated at the 
present time how many tractors were out and actually in use on th-^e 
6,800,000 farms that you gave as a figure for the United States. 

Mr. McCormick. Colonel, we have an exhibit here that was sub- 
mitted yesterday by Dr. Johnson,^ giving the trend in numbers of 
tractors on farms from 1915 to 1939, which would indicate that at the. 
end of 1938 there were something over 1,500,000 tractors on farms. 

Colonel Chantland. Were they on farms or is that the number 
that had been sold? Did they take into account any obsolescence? 

Mr. CoRMicK. I would assume, without knowing exactly the date 
on which this is based, that would represent an actual census on 
farms. I might be mistaken. 

Colonel Chantland. Just one other question on this last exhibit '— 
let's get that out of the way. 

I was trying to make something out of that last figure. That is 
total expenditures per annum for all farm implements, isn't it? 

Mr. McCormick. All purchases. 

Colonel Chantland. Not mechanized or anything else. 

Mr. McCormick. What distinction — do you mean not necessarily 
power-driven ? 

Colonel Chantland. That is what I mean. 

Mr. McCormick. All farm equipment, tractors, and repairs. 

Colonel Chantland. And we can't tell how much of that is new, 
replacement or maintenance. 

Mr. McCormick. That is correct. 

Colonel Chantland. So there is no use of trying to do anything 
with that figure as applied to what you are talking about here. 

Mr. MoCoRMiCK. Except that one could say from the chart that 
that was the total outlay of a farmer for his equipment. 

Colonel Chantland. But we don't 

Mr. McCormick (interposing). We can't correlate it. 

Colonel Chantland. As to your problem. 

Mr. McCormick. No; as to the cost of equipping the individual 
farm, for example. 

Dr. Anderson. But ^e do know that the percentage of farm ma- 
chinery expenditure to gross farm income rose from 1931 to 1937. 
dropped slightly in '38, and again in '39. 

' See "Exhibit No. 2655," supra, p. 16048. 
' See "Exhibit No. 2682," supra, p. 17005. 



17028 CONCENTRATION OF ECONOMIC POWER 

Mr, MoCoRMiCK. That is correct. 

Dr. Anderson. In other words, there was a gradual increase, a 
rather gradual increase, in the percentage of farm machinery ex- 
penditures as compared with the gross income. 

Mr. McCoRMiCK. That is a cyclical feature, of course. The farmer, 
of course, purchases in proportion to his estimation of his ability to 
buy, and when his prices are reasonable and his income is expected 
to be good, he invests more in equipment than he would otherwise. 
Dr. Anderson. And if we took the high point of 1937 with over 
$10,000,000,000 of farm income, we have the highest percentage ex- 
penditure as well for farm machinery. 
Mr. MoCoRMiCK. That is correct. 

Dr. Anderson. In other words, in an especially good year he buys 
more machinery and becomes mechanized faster in good years than 
in bad. 

Mr. McCoRMiOK. That is characteristic of the industry at all times. 
Colonel Chantland. And, of course, , on any gross at the top is 
where the net comes from, so that the small addition to the expendi- 
ture might mean considerable increase in the net. 

In other words, you have to go up to a certain percent before you 
make cost, don't you, in your gross — on anything? 
Mr. McCoRMiOK. Yes. 

Colonel Chantland. So that the top part is the net; so that a 
small percent of iiicrease in expenditures here might be a very good 

thing 

Mr. • MoCoRMioK (interposing) . Toward stimulating the top 

part- 

Colonel Chantland (interposing). Which is the net. 
Dr. Anderson. Mr. McCormick, before lunch the chairman asked 
about the cost of mechanizing a given sized farm. I understand that 
you have a compilation on that point. 

Mr. MoCoRMiCK. Yes, Dr. Anderson. Some of my associates fur- 
nished me here with roughly retail prices on typical implements to 
equip a family farm in the 50-70 acre plats. We assume that on that 
farm a man would use a small tractor, a 14-inch tractor plow, a 
1-row cultivator, a 2-row planter, 1 of the small combines, and a disk 
harrow. The total cost of that equipment, retail, f. o. b. factory, 
would be $1,207. 

Now, on the assumption, which is justified in most cases, that that 
man was a horse farmer previously, he naturally had a team or two 
of horses and some horse equipment. It is impossible to estimate 
what the value of that equipment would be in a trade-in at the dealer, 
but assuming that it ran, to be conservative, $250, which I believe 
would be low — I think, if he had a good team of horses, he would 
probably get better than that — but just for the sake or argument 
suppose it was $250, he would have a net balance to pay of $957. 

The Vice Chairman. I don't believe I followed you there. What 
are his horses worth ? Would you assume he would retain his same 
team of horses? ^ 

Mr. MoCoRMiCK. I was assuming that by buying the tractor he 
would be able to gell at least a team of horses: 

The Vice Chairman. This farm that you have in mind — is that a 
2-horse farm? 



CMDNCENTRATION OP ECONOMIC POWER 17029 

Mr. MoCoRMiCK. It might be a 4-hor3e farm, but if he bought a 
tractor he might say, "Well, I will keep a team of those horses, and 
I will trade in a team." Just assuming for the sake of argument 
(this is purely hypothetical) that he did trade in a team, and some 
other equipment; for instance, a horse cultivator and a horse plow 

The Vice Chairman (interposing). You have started in with new 
machinery ? 

Mr. McCoRMiCK. That is correct. 

The Vice Chairman, Wouldn't it be better if you had figured on 
the cost of installing it? But I won't disturb your figures, though. 

Mr, McCoRMiCK. It is just on the assumption, you see — that he 
was an entirely new farmer who had no equipment. Then he would 
have to pay, naturally, $1,207. But let's just suppose that he had 
been a horse farmer. He could spare at least a team of horses if he 
bought this small tractor, and he wouldn't need his horse plow, he 
wouldn't need his horse cultivator, and he wouldn't need his disk har- 
row. So he would say, "I will see what I can get for that in a 
trade-in." I am just making an assumption, Mr. Chairman, that the 
dealer would be able to allow him $250 for that. It might be con- 
siderably more ; in some instances it might be less. But suppose the 
dealer did allow him $250, He would then have a net balance to pay 
of $957, and that balance, then, could be paid for in accordance with 
the usual credit terms over a period of two harvests. 

Dr. Anderson. In other words, Mr. McCormick, his annual pay- 
ments would be around $400 to $500. 

Mr. McCormick. About $475, 

Dr, Anderson, And I take it from your testimony this morning that 
it is possible for an up and coming ambitious farmer who seeks to 
compete with mechanized farms in his neighborhood and in his crops 
to get access to the $400 or $500 and the equipment in the first year. 

Mr. McCormick. Without any question in my mind, Mr. Anderson. 
In fact, a great deal of our equipment is sold and works! out on the 
basis that the investment in that equipment will be returned in in- 
creased yield and increased income to him, and we must assume that 
that has been the case in hundreds of thousands of instances on the 
farm. 

The Vice Chairman. Now, how do you know that his yield is 
greater? Have you statistics showing that the yield average is 
greater on a farm cultivated with machinery as distinct from horses? 

Mr. McCormick. There are figures, Mr. Chairman, some of which 
were submitted yesterday by the Department of Agriculture, indicat- 
ing that in the case of the fully equipped farm, the mechanized farm 
or the tractor farm, the yields are increased over the horse farm. 
That won't maintain, naturally, in every case, but there is considerable 
evidence that there is an increased production on those farms in 
which machinery is used. 

The Vice Chairman. Were those figures based on statistics gathered 
from a given farm. cultivated by animals, and that same farm culti- 
vated by machinery, or do you know ? 

Mr. McCormick. I don't know that. I don't know the basis on 
which these department figures were arrived at, but Mr. Johnson yes- 
terday submitted figures showing an increase, I think in one case of 7 
percent, and in another case of 15 percent in the case of a mechanized 
farm or the horse farm. You see, with tractor power you can make 



17030 concKnI'raI'IOn DF economic power 

operations more timely than you can with horsepower. You know 
the importance of that in planting and seeding^ and harvesting, and 
those things do tend toward an increased production. 

EFFECT OF MECHANIZATION ON LABOR COSTS 

The Vice Chairman. What effect upon labor costs on this 50- to 
70-acre farm will result from the change to mechanized farming? 

Mr. McCoRMiCK. Well, the assumption that we must make in that 
case — it is only an assumption, but I am making it because I believe 
it would be the typical case rather than the exception — is that a 50- 
to 70-acre farm was a family farm. In other words, a farm of that 
size, unless it was a very specialized truck farm or something of that 
nature, could most easily be handled by one family. In that case you 
would have an instance where the advantage to the farmer was a 
lessening of his hours of work and the arduousness of his labor, and 
an increase, or rather, let me say a decrease in the cost of his produc- 
tion along with an increase in his production of crop. In other words, 
in that case I would assume that you wouldn't have a displacement of 
labor. That is only an assumption, and I wouldn't say that there 
might not be some farms of that size which had a hired man who per- 
haps then wouldn't be necessary if you had this mechanized equip- 
ment. 

The Vice Chairman. Wliat is the difference between the element 
of obsolescence or wear-out in the two sorts of farming equipment? 

Mr.MoCoRMiCK. Well, we have to consider two things tnere. We 
have to consider, in the first place, machinery versus machinery — in 
other words, a horse tool versus a tractor tool. I don't believe there 
would be any difference in the obsolescence or depreciation there. In 
other words, a horse cultivator probably, I would think, would last 
as long as a tractor cultivator, although, due to the bearings, and 
wheels, and so forth, it might not. Then we Jiave to consider the 
obsolescence, or the depreciation, if you choose to call it that, of the 
horse versus the tractor. That is a figure that I am not prepared to 
give you. That is a question I am not prepared to give you exact 
figures on, but I should say that the depreciation, the period of 
depreciation, of a tractor would be somewhat longer than what you 
have to figure on a horse. In other words, the expected life of a 
tractor would be longer than the working life of a horse. 

Dr. Anderson. Mr. McCormick, that covers substantially the story 
with respect to the family-sized farm. You have been putting out, 
however, combines which have gone into the harvest fields, particu- 
larly into the prairie harvest fields, for a number of years. There 
undoubtedly, as these combines have met man competition, a num- 
ber of harvest hands have been affected. Wliat, in your judgment, 
has been the net effect of the introduction of harvest combines in 
the prairie areas? 

Mr, McCormick. I should think that one might characterize the 
net effect, briefly, to sum it up, as one of stabilization of employment. 
If you remember, back in the days when the binder and the thresh- 
ing rake were used you had the situation in which a large number of 
men were needed to shock the grain that came from the binder, and 
tlien you had the situation of the threshing crew wandering around 
the country, either in a ring among farmers, or a traveling commercial 



CX)NCENTRATION OF ECONOMIC POWER 17031 

crew, and that kind of operation was characterized especially in the 
western plains by a very distinct type of migratory labor. There 
was a large number of men who traveled from the Mexican — well, 
not quite from the Mexican border, but from Texas, through Okla- 
homa and Nebraska, and up to the Dakotas and Montana, and even 
Canada. Now, if anything has happened, I would say that in the 
first place the living conditions for the farm wife have been enor- 
mously improved, because she doesn't have to take care of this gang 
of men who crowded in on her and dirtied the kitchen up and both- 
ered the life out of her, and, secondly, that the work of the harvest 
now is stabilized within the individual farm, or a very small group 
of neighbors, one of whom may rent the machine from his other 
neighbor, or borrow it in exchange for other work. So I think we 
could characterize it by the increase of stability. 

The Vice Chairman. Wasn't the question as to what effect it had 
on labor? 

Mr. McCoRMiCK. The general stabilizing of labor, I would say, 
Mr. Chairman, and that is borne out by the peak figures as shown in 
Dr. Johnson's chart of labor on a 320-acre central Kansas farm, in 
which is it very obvious that the harvest peaks involve a great num- 
ber of men who just have that amount of work, and then have to 
drift on. 

The Vice Chairman. Yes, but the effect, isn't it, is to eliminate 
the jobs of these migratory laborers and make it possible for each 
community to take care of its own harvest? 

Mr. McCoRMiCK. That is it exactly, and, of course — 

Dr. Anderson (interposing). What happens to these migrants or 
transient laborers who found their sustenance in the harvest fields, 
^nd were able in some way to eke out a year-round existence as a 
result of what they got there, and what they could pick up elsewhere? 

Mr. McCoRMicK. I am not able to answer that question in detail. 
Dr. Anderson. I imagine those — it is not only imagination — men 
have had to find more regular employment in some locality rather 
than wandering ; but aren't we safe in making it — or taking the posi- 
tion that if any form of labor has to be obviated, the floating or 
migratory form is possibly socially the best one? 

Dr. Anderson, In other words, you are assuming that if labor 
is to be displaced, it had better be the floater than the person who 
has a tie in the land? 

Mr. McCoRMiCK. That is it exactly. 

Dr. Kreps. Is that stability or stabilization of employment taking 
place in other than wheat farming? Is the effect, for example, in 
fruit and vegetable growing in California of the introduction of the 
machine, of the same order? 

Mr. McCoRMicK. Well, I am not really prepared to answer that 
question with a great deal of confidence. However, I think it is 
true that in any situation in which you have peak demands for labor, 
the use of a machine on the individual farm would tend to stabilize 
labor, at the same time displaces that migratory laborer. 

Dr. Kreps. Now, mechanization is used, say, for plowing opera- 
tions and cultivating operations, and your peak laborer is engaged 
in picking, such as is frequently the case in fruit farming. Then 
would it not be true that you would use fewer laborers in the seasons 



17032 CONCENTRATION OF ECONOMIC POWER 

in which you would do plowing and cultivating, seasons which are 
slack, in which labor is slack anyhow, and that on the whole, the 
peak labor which is used for picking would not be eliminated. 

Mr. McCoRMicK. That is true. In other words, in certain opera- 
tions, there are bottlenecks, and until there is something that can be 
done about those, they still remain. 

Dr. Kreps. That is what I was trying to bring out. You are quite 
right. In the Kansas wheat area, the mechanization has served to get 
at the peak of the harvesting demand 

Mr. McCoRMicK. Yes, and level it off. 

Dr. Kreps. Yes, it leveled it off. But therfe are an array of other 
products in which that may not be true. 

Mr. MoCoRMiCK No, because you have not been able to eliminate 
that particular operation. 

The Vice Chairman. Well, you just cut the top off, don't you? 
You just eliminate these people who travel around getting em- 
ployment ? 

Mr. McCormick. That is right, Mr. Chairman. 

The Vice Chairman. And what became of them we just don't 
know. 

Mr. McCormick. Well, that is the question which Dr Anderson 
raised, and that is one of the social questions we all have to find 
some answer to 

prospect of further technological change 

Dr. Anderson. I have one more question I want to ask. We have 
asked it successively in these hearings of witnesses on the topic of 
technology and its impact. 

Mr. McCormick, in the field of agriculture, do you know of any 
impeding major technological changes, such as, for exampk the 
cotton picker and others that might occur to you, in your laboratories 
or in the process of development in th*^ area, that will have an effect, 
and what effect will they have, on agricultural labor and the develop- 
ment of American agriculture^ 

Mr. McCormick. Well, Dr. Anderson, if I may have your permis- 
sion, I could best cover that, I believe, by reading a portion that I 
omitted this morning, if I have the chairman's consent to tliat'^ 

The Vice Chairman. Yes, sir. 

Mr. McCormick. At the present time, machinery is available for 
handling all processes in the production of hay, small grain and some 
row crops. On the other hand, the production of cotton, tobacco, and 
vegetables can only be handled in part by machinery. It might be of 
interest to enumerate some of the major farm operations for which 
so far no satisfactory commercial machines have been developed. 

A crop which badly needs mechanical assistance at present is the 
sugar beet crop. What is required is a machine that will pull the 
beet out of the ground, cut off the green top without removing a 
wasteful amount of the beet itself, and load the beet into a truck. 
Fairly successful machines can be built, but none now exists which 
can justify itself on a medium or small-sized farm from an invest- 
ment standpoint. 

Secondly, there is now a demand for a corn combine, a machine 
to do for corn harvesting what the combine does for wheat; that is. 



CONCENTRATION OF ECONOMIC POWER 17033 

to pick, husk, and shell the corn in one continuous operation. The 
problem is not yet solved. It is not a mechanical problem, but one 
of the moisture content of the corn. The corn must in some way 
be dehydrated after shelling so that it may be safely stored in bins. 

Thirdly, similarly, there is a large demand for a sugarcane har- 
vester. Cane presents a problem because it varies greatly in size and 
requires three operations by a commercially successful machine. The 
cane stalk must be cut as close as possible to the ground, the leaves 
must be stripped from it, and the two upper joints of the stalk, which 
have no sugar content, must be cut off. There is a great demand for 
this machine, but you might be interested to know that the problem 
has defied satisfactory solution so far as we are concerned for more 
than 35 years. 

Now, it is a fact that several machines have been built for these 
purposes, but they are very large and bulky and expensive machines, 
and we have never come anywhere near finding a solution to that 
problem mechanically and what we think is a commercial product. 

The Vice Chairman. Mr. McCormick, right on that point, we 
have now an arrangement under which we can cut the stalk close to 
the ground. 

Mr. MoCoRMiCK. In the sugarcane? 

The Vice Chairman. Yes; by human beings. 

Mr. McCormick. Yes ; you mean with a knife ? 

The Vice Chairman. Yes. I mean, it is possible now to cut the 
stalk close to the ground. 

Mr. McCormick. Correct. 

The Vice Chairman. It is possible how to strip the leaves from the 
stalk. It is possible now to cut those two upper joints off. 

Mr. McCormick. All by hand, you mean? 

The Vice Chairman. Yes. But I say it is possible to do that thing, 

Mr. McCormick. Yes. 

The Vice Chairman. Now, being done by human beings with their 
hands — then we get a machine that does it. There is no job that we 
know of for those people to engage in who used to do stripping, cut- 
ting, that sort of thing. As I said this morning, I appreciate that we 
have got to go ahead with this business. There is no way to turn 
back that I can see. We cannot let those people starve, it is against 
the law to kill them, and if you killed them, why, it would shut down 
the use of the sugar and you would put the sugar fellow out of busi- 
ness. [Laughter.] This whole business is not a one-sided business, 
is it? i mean, it really has two sides to it. 

Mr. McCormick. Of course it does. 

The Vice Chairman. How much real progress is there in a trend 
that is displacing a human being with a machine and putting him 
out on the road? I hope you will understand that I am not criti- 
cizing this trend, but I am not unmindful that it obtains. 

Mr. McCormick. I do. What you are saying is that any advance 
in any technology creates new problems that didn't exist before, it 
solves some and creates others. 

The Vice Chairman. When we have accumulated such a surplus of 
unemployed people, I have had a serious question as to whether or 
not the government ought to continue to offer a premium in the nature 
of a patent. 

Mr. McCormick. In the nature of what? 

124491— 41— pt. 30 54 



17034 CONCENTRATION OF ECONOMIC POWER 

The Vice Chairman. A patent. I have had a question in my mind, 
when you accumulate this surphis of unemployed people and with 
such an inefficiency on the part of the generation of which I am a 
part to deal with these big problems which we are creating by our 
unusual or rapid advancement in the supplanting of human beings 
by machines, whether or not it is a sound policy to continue to offer 
a premium, a bid, for more inventions or more machines and put 
more people out of business. This is something we have got to face. 
Of course, a patent is not a natural right ; it is a thing given by gov- 
ernment, and the government is now bidding 17 years of the right 
of monopolistic use to anybody who will int-ent a machine that will 
add some more idle people to what we have already got. I know that 
is not the whole picture. I am just stating one side of it. The other 
side we all understand. But it is there, and I wish these gentlemen 
who are digging up testimony would bring us 2 or 3 people who are 
smart enough to handle it. 

Mr. MoCorancK. I would like to find them. 

The Vice Chairman. Yes ; I would, too. You are making an inter- 
esting and helpful witness. 

Dr. Anderson. There is one other feature of the new technology 
that has come to our attention. I wonder if you would comment on 
such a thing as this rotary tillage that we have been seeing so much 
about in the papers in recent days. Does it offer something for the 
future which will increasingly displace the use of man-power on 
the farm? 

Mr. McCoRMioK. By rotary tillage, do you mean that type of plow 
which may have a share but up above you have a revolving member 
which breaks up the soil? 

Dr. Anderson. That is right. 

Mr. McCoRMiCK. I haven't see the recent press notices on that or 
the stories on it, but that is not a new idea, as you know. That has 
been experimented with for a great many years. We have made 
some tests of it. I think there were quite extensive tests made in 
Iowa on that kind of implement. The point of it I think probably 
would be that in certain soils it would do a very good job of pulver- 
ization of the soil, we might not have to do any disking after such 
a plow ; on the other hand, in some soils it probably would do too good 
a job of pulverizing. I wouldn't care to comment on it because I 
haven't read just what you are referring to, but if I may say so, 
I am doubtful that it would be a thing in the nature of a great 
revolution. It might be a moderate change in farm methods. 

Dr. Anderson. And it is your contention that new technologies or 
impending ones have an introductory phase sufficiently long for 
adjustments to be made to meet them as they arise, as they become 
widespread ? 

Mr. McCoRMicK. I believe that to be true in almost every case. 
You take this case of the cotton picker. I was going to refer to 
that in a moment. That is a similar thing, and the development of 
these machines is a very long process, as you know. It takes years 
of experiment. We have been working on the cotton picker for a 
great many years, and the sugarcane harvester, and many other things 
that we haven't found the solution to. Then, furthermore, the intro- 
duction and use of those machines is not just over night, on the 
whole. I remember when we came out in 1924 with the Farmall 



OONCENTBATION OF ECONOMIC POWER 17036 

type of tractor, a thing that has been as revolutionary in its effect 
on farm mechanization as ahnost anything, the farmers . were slow 
to take hold of it. It was a funny looking thing to them, it wasn't 
like the conventional tractor. I believe that is the general case, as 
you mentioned. 

Dr. Anderson. When Rust was planning the introduction of the 
cotton picker, scientific journals and popular journals mentioned that 
Rust had developed a contract which he proposed to enter into with 
purchasers or users of the cotton picker, in which he took account 
of this very problem. He realized the probability of the displace- 
ment on a large scale of workers, and therefore would attempt to 
ameliorate this in his contract which introduced the Rust cotton 
picker by certain things that would be to the advantage of the labor 
there displaced. Do you know of any practical attempts on the 
part of either implement makers or others to meet this problem in 
some fashion? 

Mr. McCoRMicK. I do not. I do not know of any such action as 
you speak of. 

The Vice Chairman. Well, you couldn't get a contract that would 
stand up through any long period of time under which somebody 
would agree just to hand over part of his property to take care of 
somebody who was sitting on the fence. 

Dr. Anderson. That is perhaps a weakness of the Rust contract. 

Mr. McCoRMicK. If I might read this section, it might bring out 
that point. 

For many years there has been a demand for a mechanical cotton picker. 
This was especially true during the 1920 decade when labor was fully employed 
and foreign migrant labor was frequently imported to pick cotton. Several 
machines now exist which will get the cotton off the plants in a fairly, satis- 
factory manner provided the conditions are favorable. 

Our company's experimental work on cotton pickers has extended over ap- 
proximately 30 years, but we are not yet really satisfied with the results and 
have never offered a machine for sale. The necessity of leaving the cotton 
plant uninjured for further growth and subsequent pickings, and the great 
irregularities in the size of the cotton plants present difficult problems. Cotton 
picked with present experimental machines is usually graded down because 
of the presence of leaf stains and more or less trash, and the grading down 
means a lower price and less possibility of saving. 

A special stvidy of mechanical cotton pickers was made in 1937 by R. L. 
Home and E. G. McKibben under the direction of the Works Progress Adminis- 
tration. The authors state, page 18 : 

"Even though a mechanically successful and economically feasible cotton 
picker may be near at hand, its spread will probably be gradual rather than 
sudden. This view is strengthened by the history of the introduction of other 
agricultural machines. Rapid mechanization has occurred only where the 
financial rewards have been high or labor short&ge acute. Therefore, as long 
as there is an abundance of cotton pickers willing to pick cotton for 75 cents 
to $1 per 100 pounds, and as long as other prices maintain their present align- 
ment, the mechanical picker cannot be expected to take the Cotton Belt by 
storm." 

I concur in this view that if and when the cotton picker comes into com- 
mercial production, its use and spread will probably be gradual. 

PROSPECT FOR INCREASED FARM EMPLOYMENT 

Mr. O'Connelx,. Mr. McCormick, referring generally to the unem- 
ployment problems of the country, would it oe fair to conclude from 
your statement that in your judgment the agricultural industry or 
that line of endeavor affords little hope for absorbing any substan- 



17036 CONCENTRATION OF ECONOMIC POWER 

tial number of the unemployed in the country today, at even assum- 
ing a much higher level of mcome? 

Mr, McCoRMiCK. When you say the agricultural industry you 
mean the farm? 

Mr. O'CoNNELL. I mean the farm, of course. 

Mr. McCoRMicK. I am afraid I am not competent to give a judg- 
ment on that. 

Mr. O'CoNNELL, The thing that caused me to believe that was 
your general belief was that you quoted with approval that state- 
ment from Dr. Ezekiel in which he suggested that the more funda- 
mental problem is how to put back to work the city people who are 
not now working and who are ready to work. 

Mr. McCoRMicK. Right. 

Mr. O'CoNNELL. It occurred to me that even assuming no more 
rapid technological advance is taking place at the present time, with 
the ptesent people on the farm, the farmers would probably be able 
to produce enough of the products that they are presently engaged 
in producing to take care of those persons even assuming much more 
mass purchasing power than exists today. I thought that was the 
general tenor of your remarks. Maybe I am wrong. 

Mr. McCoRMiCK. Yes ; that is the point that we heard quite a liUle 
discussion on yesterday, whether a pick-up in industrial centers will 
mean a large or a small or a negative pick-up in farm employment. 
Now, I am not prepared, I am not expert enough, to give a really 
valid opinion on that, but my feeling is along the lines stated there, 
that industrial pickup, increased employment in the cities, should 
mean some improvement in the farm situation, and to my mind that, 
plus the other thing that was talked about yesterday, namely, the 
introduction of new farm products as time goes on, are two of the 
most hopeful possibilities for reemployment on the farm, or increas- 
ing employment. 

Mr. O'CoNNELL, That rather interested me because we have had 
witnesses here who in other fields took something of the same posi- 
tion. For instance, the representative of the white-collar workers is 
of the belief that that particular line of endeavor is already very 
overcrowded and that there will be little or no opportunity to absorb 
any of the unemployed in that area. The farmers take the same view. 
Other groups seem, on the one hand, to feel confident that something 
is going to happen to take up the slack of the unemployed, but insofar 
as their particular line of endeavor is concerned their position is, "Let 
George do it because we can't " If that becomes general it leaves us 
rather hanging in midair as far as any place, any specific place, to 
absorb the people who are unemployed. It isn't very helptui to the 
unemployed to have someone say that technological advance ulti- 
mately increases productivity and therefore more work and all that 
sort of thing, when you have accom panying that fact what is assumed 
to be a fact, that there are 10,000,000 people out of work. 

Mr. McCoRMicK. Well, those, of course, are very difficult problems 
to talk about, and one cannot safely make predictions. On the other 
hand, I have the feeling that it is just as unsafe to take a given set of 
conditions and say that that set of conditions is goin^f to continue 
forever. In other words, there might be the introduction of this thing 
new or that new thing which is quite unforeseen today. You know 
what I mean. 



CX)NCENTRATION OF ECONOMIC POWER 17037 

Mr. O'CoNNELL. Oh, of course, but it ^s somewhat nebulous when 
the only alternative is to say that something about which we know 
nothing is going to happen. 

Mr. McCoRMicK. That is correct. 

Mr. O'CoNNELL. The most concrete thing about the condition is 
10,000,000 or 12,000,000,000 people out of work. 

Mr. McCoRMicK. It is necessarily nebulous, as the same kind of 
thing in history has been nebulous many times. There have been 
times when the future looked just as dark as it may at the moment. 

Mr. O'CoNNELL. There may have been. 

Mr. McCoRMiCK. I am saying that I can't, and I don't believe any- 
body can see clearly into the future, yet, on the other hand, I per- 
sonally wouldn't dare take the position that something couldn't 
happen that we are not able to see at the moment. I do say that in 
the meantime we have to do temporary things to clear the situation. 

Mr. O'CoNNELL. It seems to me perfectly obvious that as between 
hoping for something to happen and trying to make something hap- 
pen, the balance is in favor of the latter. 

The Vice Chairman. I think this kind of business is a whole lot 
more important than about these machinery improvements you have 
made, because we all know about that. Anybody going down the 
road can see machinery has been improved, and it is interesting too, 
but we are trying to find out something about what we are going 
to do about it, not what you did about your job, but what we are 
goin^ to do about it. That is what this gets down to. If we could 

fet rid of about 90 percent of these words and get down to business — 
think, though, we have some other kind of a doctor coming on 
who knows something about this. 

Mr. Pike. I have one before you go, Mr. McCormick, and I am 
afraid it is impractical, too, but we heard yesterday about the wages 
of farm hands. I was really pleased to know that somebody was 
hiring people at $1 a day to work on the farm. They are not in my 
area. But it sounded pretty bad when you got to the all-yearly 
wages of a good deal less than $1 a day all over the country. So 
you not only have the problem of the unemployed labor and the 
partially employed labor, but as nearly as I could read it the fully 
employed laborer had quite i little problem. He didn't have any 
leisure and he didn't have much income. The steel worker in 30 
days could earn more than the farm worker in a year, according to 
the figures that were presented, and I just wondered if you ap- 
proached, as part of the solution, the same thing that we have done 
in industrial lines, and if Congress, in its wisdom, passed a minimum 
wages-and-hours law for farm workers, giving them something like 
the same minimum wage that industrial workers have, it would, 
without question, have a great upsetting effect in tremendous areas. 
It would change some cost figures enormously. 

Mr. MoCoRMiOK. Yes. 

Mr. Pike. Well now, it wouldn't change the cost figures on a 
family farm much of anything. The thing I wanted to ask you was, 
if something like that did happen and there aren't enough solutions 
around so that you can afford to throw away anything that offers 
3ven the shadow of one, you probably would increase mechanization 
further on farms which had part-time labor, almost surely, if you 



17038 CONCENTRATION OF ECONOMIC POWER 

really had to pay a decent day's wages. And* you would probably 
have quite an eflfect on further mechanization in what we may call 
corporate farming, very large-scale farming if *you, say, double the 
wage rate. The incentive to mechanization would be much greater,, 
of course. 

Mr. McCoRMiCK. Yes. 

Mr. Pike. You have a further displacement of substantial size of 
these partially employed, and I should think perhaps of some fully 
•employed who still end up with $126 a y^ar in the Mississippi Delta, 
but it is .a real question whether that would be a loss, whether that 
would end up in a loss or a gain. It is a sort of inchoate thing in 
my mind; I didn't mean to say I am for it. That is one of the 
thmgs that has to be looked at. Farm wages, even for the fellow 
who is working all the time, are way out of line with industrial 
wages. I believe they are further out of line than the so-called parity 
prices that we saw yesterday between farm products and industrial 
products. 

The Vice Chairman. But it doesn't seem to me, as a plain farmer, 
that there ought to be much difficulty about that. Whenever your 
labor cost gets higher than you can afford to pay, as against the job 
where the man was you get a machine. That is all there is to it, and 
you take these factories — they have organized labor, they sell their 
labor; but you take a producer of an exportable agricultural com- 
modity and he sells to the highest bidder in the world market, and 
to him the domestic market is the lowest market, because he has to 
sell his commodity in the domestic market at prices much lower 
than the world market, with the cost of transportation from the 
domestic market over the world. You people can take your surplus 
up to Canada and sell it at a less price. 

Mr. MoCoRMiCK. We don't do that. 

The Vice Chairman. I know you don't. I just said you could. 

EMPLOYMENT IN FARM MACHINERY INDUSTRY 

Dr. LuBiN. Mr. McCormick, this is a little bit aside from the 
subject of this testimony, but in view of the fact that you are here 
and we are interested not only in agricultural employment but in 
industrial employment, I wonder if we could get 2 or 3 minutes of 
your time to discuss some of the elements of employment in your 
own industry. 

How many people do you employ, roughly? 

Mr. McCoRMiCK. Well, that varies, or course, Mr. Commissioner. 
I should say, roughly, around 50,000 at the present time. 

Dr. LuBiN. And nas the trend over the past several years been 
upward or downward? 

Mr. MoCoRMiCK. In our plant it has been upward. In '37 we 
employed considerably more people than we did in 1929. 

Dr. LuBiN. You people have the problem of technological dis- 
placement in your plant, I take it? 

Mr. McCoRMicK. Eight. 

Dr. LuBiN. Do you have any policy relative to installation of 
machinery to ease displacement? 

Mr. McCormick. I think I would have to answer that question m 
two ways. If it were proportionately a small number of men 



CONCENTRATION OF ECONOMIC POWER 17039 

involved, the situation would be handled more or less in just the 
regular ways, having regard to seniority arrangements and agree- 
ments, and it is not a simple problem. I mean it isn't simply to 
analyze. It isn't just as if, let's say, a new machine was installed 
and one man was put out of work and then the question was, Would 
he be on the street or wouldn't he? It isn't as simple as that. That 
man who was displaced by the machine, let us say, has a given senior- 
ity standing in that plant. Therefore, if he had a long service, he 
would take the place of a man with a shorter service. 

Now, then, that process would go on down the usual line until vou 
came to the last man in that chain. Now, what happened to the last 
man would depend — and here is the complicating factor — on the 
nature of our employment at that time. If our employment was even 
slightly going up, and I should say under any even keel of employ- 
ment, that man would not be thrown out of work. If employment 
was decreasing at the time, then he, along imfortunately with others, 
would be laid off for the time being. So in that sense it is not a 
simple problem to answer. 

Now, suppose, to take a very extreme case, a very major thing 
should occur that I can't conceive of occurring, but should it, that a 
whole department, let's say, or a whole plant, due to some techno- 
logical change, was affected in such a way that employment was 
greatly decreased. I could cite to you what we did in a similar case, 
not for that but because we were moving the manufacture of a given 
number of machines from one plant to another. In a case like that 
the men who were of pensionable age would be pensioned. We have 
had a pension plan for some 32 years. 

The men who were nearly of pensionable age we would give a pre- 
pension. The rest of the men we would try to employ in some neigh- 
boring plant of ours. And then, down to a service of perhaps 3 to 
5 years, we would do something in the neighborhood of termination 
wage or something of that nature for them. 

I am just speaking of a very extreme case, to illustrate the prin- 
ciple, and I have never seen that happen in our company. 

Dr. LuBiN. I take it from what you say, then, that changes in 
technology in your industry are not radical or revolutionary m the 
sense that something comes along and displaces a whole series of 
men. 

Mr. McCoRMiCK. That is correct. 

Dr. LuBiN. A gradual change is taking place from day to day or 
when you change a model or something of that sort. 

Mr. MoCoRMiCK. That is correct. 

Dr. LuBiN. And consequently this technological shift is taking 
place every day in the work. 

Mr. MoOrmick. That is correct. 

Dr. LuBiN. And it is your policy to provide for these people, either 
through normal turn-over or through expansion periods, or when 
yoa come to an acute crisis, through giving a man a pension before 
he is entitled to it, or a dismissal wage. 

Dr. Anderson. Mr. Chairman, we have another witness this after- 
noon that I would like to interject here. 

The Vice Chairman. Bring him on. 

(The witness, Mr. McCormick, was excused.) 



17040 CONCENTRATION OP ECONOMIC POWER 

Dr. Anderson. Mr. Chairman, the final witness in this series on 
the discussion of technology and its impact on agriculture is Dr. Paul 
Taylor, professor of economics, University of California, Berkeley, 
Calif. Dr. Taylor hasn't been before the committee and should be 
sworn. 

The Vice Chairman. Do you solemnly swear the testimony you 
are about to give shall be the truth, the whole truth, and nothing 
but the truth, so help you God? 

Dr. Tatix)r. I do. 

TESTIMONY OF DR. PAUL TAYLOR, PROFESSOR OF ECONOMICS, 
UNIVERSITY OF CALIFORNIA, BERKELEY, CALIF. 

Colonel Chantland. Dr. Taylor, before you start, may I ask a 
question ? 

Dr. Anderson. May I qualify him first ? 

Dr. Taylor, how long have you been engaged in the study of agri- 
cultural economics? 

l)r. Taylor. Something over 12 years, Dr. Anderson, undej various 
auspices — my own institution, the . University of California; the 
Social Science Research Council of New York; and with the Cali- 
fornia Emergency Relief Administration, as field director of the 
Division of Rural Rehabilitation ; regional labor adviser of the Re- 
settlement Administration ; and consultant to the Social Security 
Board. I am professor of economics at tlie University of California. 

Dr. Anderson. Have you published in this field that you are going 
to give testimony on ? 

Dr. Taylor. I have published numerous materials. Government 
reports, articles, and several books. 

Colonel Chantland. Before you start with your paper, may I 
ask a question? I see you are from California where the trek ended, 
and I notice by the papers this morning that this committee was 
presumed to have gotten into a discussion of Steinbeck's book yester- 
day. I wonder if you could give us your judgment as to the truth 
of the picture of the conditions there discussed? 

The Vice Chairman. Oh, now wait a minute ! Do you want him 
to jump on the book as a competitor? 

Colonel Chantland. Oh, I don't think they are competitors. 

The Vice Chairman. But I mean, would you have any embarrass- 
ment in doing that? 

Dr. Taylor. It would be very nice if I could be a competitor. 
His sales have been very fine. 

The Vice Chairman. But I mean, seriously now, do you want to 
discuss the book or do you just want to give your testimony? 

Dr. Taylor. Well, Congressman, perhaps I can put it this way : 
It is in a sense embarrassing to ask a social scientist to venture into 
the fields of literary criticism, and in that sense I am not at all 
competent to answer. But if, on tlie other hand 

The Vice Chairman. We might have some criticism of the social 
scientist. 

Dr. Taylor. Tlie purport of the question is this: Have you a 
serious, even critical, problem among migratory agricultural workers 
in California? I can answer that question unhesitatingly. Yes; 
we have. 



CMDNCENTRATION OF ECONOMIC POWER 17041 

I brought with me a photograph furnished by the Bureau of Agri- 
cultural Economics, which your committee may wish to examine. 

Dr. Anderson. What is the photograph? 

Dr. Taylor. That photograph was taken only a month ago* and 
shows migratory agricultural laborers, mostly families, encamped 
behind the levees at Sacramento, our State capital. I think you can 
see from that photograph the conditions of these laborers in our 
State. 

Before leaving the question, however, I should like to say this: 
That many people believe we have a problem in California which is 
peculiar to our State. I think it quite true that we have the problem 
in its most acute and most dramatic aspects. I hope before my testi- 
mony is completed, however, that I will have brought you to a 
realization of the fact that in varying forms and degrees, similar 
problems are developing in a number of parts of our country and 
that we have the problem only in its most acute form. 

The Vice Chairman. I think the entire committee has recognized 
that fact. Doctor. I believe you wouldn't have to take much time to 
convince us of that fact. You say it is most prevalent, but wherever 
there are any migratory laborers, they follow along these seasonal 
activities, you have similar situations to that? 

Dr. Taylor. Yes. 

The Vice Chairman. I think the committee is convinced of that 
fact. 

Dr. Taylor. I am glad. 

Dr. Anderson. Do you want to proceed with your testimony? 

Dr. Taylor. Shall I proceed with my formal statement ? 

Dr. Anderson. Y6s. 

EFFECTS OF FARM MECHANIZATION 

Dr. Taylor. The effects of machinery on agriculture which are 
beneficial are well known. The saving of arduous labor, the cheapen- 
ing of costs of production, and, for many, the elevation of living 
standards on the land are so important that no reason exists to attack 
men or corporations simply because they manufacture or use agri- 
cultural machines. At the same time, the advance of machinery on 
the land is causing human and socio-economic problems which grow 
increasingly acute. Even in times of industrial prosperity these ef- 
fects would be serious, for they permeate and alter in important re- 
spects the social and political structure of our Nation. In times of 
unemployment like the present, they are critical. Distress, severance 
of families from the land, reduction in status, and complete disloca- 
tion of farm people are appearing with striking similarities in widely 
separated areas. These effects and their import are the aspects I 
wish to discuss of those problems in agriculture which technological 
progress creates. 

Ample statistics and other data on the increasing use of agricul- 
tural machinery, and the prospect that this will continue rapidly to 
spread already have been presented to your committee. I should like, 
as my contribution to your deliberations, to describe the social pat- 
terns which result, directing your attention, first, to the Cotton Belt, 
then, successively, to the Wheat Belt, the Corn Belt, and to the fruit 
and vegetable industry. 



17042 CONCENTRATION OF ECONOMIC POWER 

The landscape and towns of the western Cotton Belt today show 
clearly the effects of spreading displacement. We had believed that 
these would not appear until the manufacture of mechanical cotton 
pickers in commercial quantities. However, displacement is occur- 
ring now over large areas because of introduction of all-purpose trac- 
tors and auxiliary machinery. In west Texas, the Black Wax Prairie, 
the Panhandle, and the southwest quarter of Oklahoma, consolidation 
of cotton farms and displacement of substantial tenant farmers is 
proceeding rapidly. Landlords replace their tenants with tractors 
and hired laborers — sometimes 1, sometimes 6 or 8 or 10 laborers, 
when their holdings are large. Tenants with foresight and sufficient 
resources buy tractors, rent a second farm, operate them both — and 
another white American farm family has been cut from the land. 
Farmers not protected by ownership or strong family ties to the land 
are starkly fearful that their turn to go may oe next. 

Towns are crowded with the displaced. The local W. P. A. and 
relief rolls are loaded with them, a stream of distressed humanity 
forms and hopefully seeks outlet to the West, in Arizona and Cali- 
fornia. Empty houses of families who used to make their living 
from the land strew the landscape, windows are boarded, and culti- 
vated fields close. 

Letters from rural folk deeply troubled by what they see occur- 
ring appear in the Dallas Farm News, especially around the turn of 
the year when old leases expire and new arrangements for the com- 
ing year are made. The following are recent examples : 

From Henderson County, Tex., December 1939: 

I ask the editor kindly to publish the following copy of a petition. I ask 
every county in the state to send similar i)etitions to their Congressmen before 
Congress meets in January. It is for the purpose of asking some protection 
for the one-team and two-team farmers of Texas. 

Do you love your neighbor? Something must be done. We, the undersigned, 
are opposed to a few men renting the whole country in order to get the gov- 
ernment checks and the full cotton acreage the little farmer had and rerent 
the same house back to him. The little farmer has to then sign up for WPA 
work or relief. One man told me he was renting over 400 acres and nearly 
500 acres of land, which deprive 15 one-team renters. 

From Tishomingo, Okla., March 1940: 

. . . the land hog is all-powerful. He may buy a tractor and get possession 
of all the land in a community and, with a little hired help, farm all the land 
and thereby drive all his neighbors off the land to starve — ^just for his own 
private gains. 

From Crockett, Tex., February 1940 : 

The big landowner does wrong in dlschargin.!:, his tenants and working his 
land with hired labor, but since that is the only way he can get a fair compen- 
sation he can't be blamed. This situation Is causing more people to be without 
work than anything else. 

The ground for these popular fears is confirmed by experts. Pro- 
fessors Bonnen and Magee state in the Journal of Farm Economics 
for August 1938, that within little more than a decade, by introduction 
of tractors and four-row tillage equipment on cotton farms on the 
high plains, "the amount of cropland that can be handled by a farm 
family has increased * * ♦ from approximately 100 to approxi- 
mately 450 acres." 

This process has some advantage for the one in four who may 
survive as a farm operator, but the other three face alternatives, 



CJONCENTRATION OF ECONOMIC POWER 



17043 



"none of which," say those Texas authorities, "are particularly 
promising." 

In the first place, they may migrate to less productive land in lower rainfall 
■ zones on the western fringe of the area or in older areas to the east. Secondly, 
they may find their way into other occupations, in most cases as laborers. 
Thirdly, they may remain in the area as agricultural laborers with small 
chance for employment except during the hoeing and harvesting seasons, and 
perhaps be forced to depend upon relief during a large part of the year. The 
latter alternative" has been the one most frequently resorted to during the 
past 3 or 4 years. 

What this opportunity to become an agricultural laborer means 
to those who have been farmers is told by Dr. C. H. Hamilton of the 
Texas Agricultural Experiment Station in a 1938 report. 

The typical farm tenant in the High Plains or in the Blackland (Prairie) 
may be exi)ected to earn a net farm income of from $800 to $1,000 annually, 
even with cotton prices as they are today. As either a common or an agricul- 
tural laborer the same tenant cannot expect to earn more than from $250 to 
$300. 

A fourth alternative of the displaced — farmers, laborers, and small 
townsfolk alike — is to take to the highways leading west. 

The process which I am describing so briefly has contributing causes 
more complex than time permits me to explain, such as drought, de- 
pression, and phases of the agricultural and relief program. But the 
, displacing effects of machinery on the cotton land are final, and they 
are not limited to areas of drought. 

May I call your attention at this point to the first chart, which 
shows the origins of migrants to California. 

(The chart referred to was marked "Exhibit No. 2683" and appears 
below.) 

Exhibit No. 2683 

[Submitted by Dr. Paul Taylor] 

ORIGINS OF MIGRANTS TO CALIFORNIA* 
June 16. 1935 - November 15, 1937 




Shown OS percentage, by States, 
of total number reported. 

Source: (form Security Administrotion and 
Colifomio Deportntent of Agriculture. 
Data on 210,268 invnigrants. 



I 



17044 CONCENTRATION OF ECONOMIC POWER 

ORIOrN OF MIGRANTS TO THE WEST COAST 

Dr. Taylor. This chart is, of course, not a measure of persons dis- 
placed by mechanization, for no such classification is possible in ob- 
taining the data. However^ it does show the origins of the people 
who have come to us in California seeking employment over about a 
2-year period. The width of the line is proportioned to the per- 
centage of the total influx to California that came from each particu- 
lar State. 

The Vice Chairman. Does that line bend back into the country "J 
from whence they came? ■ 

Dr. Taylor. It does, and by looking at the width of the line, you 
can approximate the proportion of tne whole migration that came 
from that particular State. 

The Vice Chairman. What I was asking is, you have three lines 
that bring these people into California? 

Dr. Tatlor. Yes. 

The Vice Chairman. Do they move out of California ? 

Dr. Taylor. Out of California ? No statistics are now available of 
the migration out of California. 

The Vice Chairman. How do you accumulate these facts ? 

Dr. Taylcmr. These statistics are obtained by a count at the Cali- 
fornia border maintained by the California State Department of 
Agriculture. 

The Vice Chairman. They do not maintain any count as they go 
out of California? 

Dr. Taylor. The Bureau of Agricultural Economics a few months 
ago completed arrangements with the Arizona Department of Agri 
culture which will give us that back movement concerning which 
you inquire. Congressman, but at the present time that is not avail- 
able. We know tnat there is a sizeatje return migration. We know 
also the net deposit in California is heavy. 

The Vice Chairman. These are what you call migratory workers, 
largely, these people. 

Dr. Taylor. These people may very well find themselves in , the 
kind of camp shown in the photograph at Sacramento. They are 
likely to be working in the southern San Joaquin Valley, migrating 
about, or seeking to settle themselves in one way or another. 

The Vice Chairman. Those camps represent places where people 
who come into California, maybe who have been in California, who 
have no better place than those places in which to stay. That is all 
there is about it. 

Dr. Taylor. The kind of camp that is exhibited in the j^oto- 
graph? 

The Vice Chairman. Yes. 

Dr. Taylor. There is no other facility available. The Farm Se- 
curity Administration, you understand. Congressman, has placed a 
chain of camps through California to which may of these people 
come, and those camps have been very effective in eliminating the 
kind of condition that still prevails in Sacramento. 

The Vice Chairman. To give the same person who is here a better 
place to live. 

Dr. Taylor. To give the same kind of person who is shown in 
those tents and trailers a better place to live as he follows the crops. 



CONCENTRATION OF ECONOMIC POWER 17045 

There are other projects of the Farm Security Administration 
which endeavor to provide a better place. There are some of those 
projects in California and Arizona. 

The Vice Chairman. What is the type of those ? 

Dr. Taylor. The project is of two types. Both are based upon 
decent housing. One type provides a small plot of ground around 
the house on which a garden may be cultivated. The other type pro- 
vides what is called a cooperative part-time farm, in which approxi- 
mately, it is believed, the rental paid for a decent house can be 
earned. The remainder of the income of the migratory labor family 
living in such a project is expected to be derived from seasonal 
employment in crops in California. 

The Vice Chairman. In the meantime the difference is being taken 
care of in some way from the treasury of some governmental agency. 

Dr. Taylor. That is very likely to be true among those in the 
lower income groups. There are of course some who will keep off 
relief. 

The Vice Chairman. But do these hoOses that are put up bring a 
rental that will take care of the cost of production and construction 
and maintenance? 

Dr. Taylor. I think, Congressman, that the Farm Security Ad- 
ministration could furnish you figures on that. I am sure that that is 
the intention, that the costs shall be kept low by extensive construc- 
tion, and that the rental shall be such as can be paid by these people. 

The Vice Chairman. Yes. I beg your pardon for leading you into 
that field, because it is a little aside from what you are discussing. 

Dr. Taylor. Not at all, Congressman. I don't mind the questions 
in any way. 

Colonel Chantland. May I ask if there is any other project that 
tends to more permanency ? 

Dr. Taylor. Yes, Colonel; I planned to discuss that a little later, 
if that is agreeable, but I hope that question will recur. I don't 
know whether time is going to permit. I should like very much to 
answer that question. I would prefer to do so a little later. 

May I invite your attention to the next chart, which shows origins 
of migrants to Oregon. 

(The chart referred to was marked "Exhibit No. 2684" and ap- 
pears on p. 17046.) 

Dr. Taylor. This chart is constructed in similar fashion. The 
base of the data is somewhat different. It is based upon something 
over 5,000 rural immigrant families studied by the Oregon State 
Agricultural College. You may again compare the breadth of these 
lines showing origins from the different States, You cannot com- 
pare the breadth of these lines with the breadth of those on the 
preceding chart. In other words, the volume of migration to Cali- 
fornia is very much larger than the migration to Oregon. This 
shows the relative importance of different sources of origin of immi- 
grants to Oregon. 

The Vice Chairman. Doctor, what is the point about that ? What 
lesson do we draw from the fact that people who are close by move 
in more numerously than people who are far away ? 

Dr. Taylor. My purpose in introducing the chart is twofold : First, 
to show that the problem is broad in respect to the destinations of 
those who are cut loose from the land ; second, that the area of dis- 



17046 CONCENTRATION OF ECONOMIC POWER 

placement is broad. You will notice that the California migFanta 
come mainly from Oklahoma, Texas, Arkansas, and Missouri. You 
will notice from the chart which I am now exhibiting that the North- 
em Great Plains States show up in much more important fashion. 
There is a whole belt of emigration which is not apparent as you look 
at the single chart. 

The Vice Chairman. Do you think it is because there are better 
opportunities, relatively better opportunities, in that belt to which 
they are going, than would have been afforded if they had stopped 
closer to the point where they started moving from ? 

Dr. Taylor. I don't think that the reason they came to the west 
coast is primarily that opportunities are so good for them. I think 
the expelling forces are their principal reasons for leaving. I shall 
describe those in a moment. 

Exhibit No. 2684 
[Submitted by Dr. Paul Taylor] 

ORIGINS OF MIGRANTS TO OREGON* 
January 1933 -June 1936 




Shown OS percentage, by Sfotes, 
of tofol number reported 

Source: Breithoupt, L R.ond Hoffmon.CS 
Oregon Stote Agricultural College, Stotion 
Circular of Informotion No. 157. Dato on 
5,022 rurol immigront families. 



CHART NO. « 



You 



The_ third chart shows origins of migrants to Washington, 
notice the source of emigrants lies still farther northward. 

Dr. Anderson. That will be "Exhibit No. 2685." 

(The chart referred to was marked "Exhibit No. 2685" and appears 
on p. 17047.) 

SHARECROPPING ON CXXTTON PLANTATIONS 

Dr. Taylor. Displacement of cotton farmers in the rich lands of 
Mississippi and Arkansas is beginning to be heavy. Sharecroppers, 
supplanted by machinery and wage laboi-ers, are being swept from 
the plantations. Tliey crowd the towns of the Delta and choke the 
slums of Memphis, Tenn. During cotton chopping in spring and 
picking season in the fall they are hauled daily in great trucks to 
work on plantations as far as 43 miles distant. The rest of the year 



CONCENTRATION OF ECONOMIC POWER 



17047 



they remain largely unemployed, and a heavy burden on relief. Tliey 
constitute a mobile labor reserve, supported at public expense in tii6 
winter, and by this fact make possible further mechanization and 
further displacement of sharecroppers. 

It is the impact of these changes on the plantation system that 
produced the highway demonstrations in the Arkansas Delta and 
boot heel of Missouri in January 1939, and the eviction crisis in Jan- 
uary of this year. From this area where both Negroes and whites are 
victims of technological progress, the displaced whites already iiave 
appeared in numbers as migrator}' workers in the cotton fields of 
Arizona and the pea fields of California. 

The displaced plantation Negroes who are not left on the land as 
wage laborers flock to towns. Some are seeking outlet in the indus- 
trial cities of the North. No tide of Negroes has yet started west. 

The advance of machinery in the Cotton Belt is irregular. It 



Exhibit No. 2685 
[Submitted by Dr. Paul Taylor] 

ORIGINS OF MIGRANTS TO WASHINGTON* 
1932-1936 




* Shown OS percentage, by States 
of totol number reported. 



Source: Landis, Paul H., Rural Immigrants 
to Washmgton State, 1932-1936, Washington 
Stole Agricultural Experiment Stotion 
Doto on 467 rurol immigrant households. 



spreads over delta and river bottom lands, and appears in spots where 
topography and other conditions are favorable, in Alabama, Georgia, 
and North Carolina. Behind this disclocation on the plantations is 
the economic pressure cited by a report of the Mississippi Delta Ex- 
periment Station which forecast in 1932, that "from 30 to 50 percent 
of present Delta farm labor must ultimately be' replaced by ma- 
chinery * * *." When plantations follow this program they are 
transformed into large industrialized farms. The starkest exatnple 
of this change which I have personally encountered was told me by a 
planter who purchased 22 tractors and 13 four-!row cultivators, let 
go 130 of his 160 sharecropper families, and retaine4 only 30 for day 
labor, ■ , 



17048 CONCENTRATION OF ECONOMIC POWER 

In the Journal of Rural Sociology of September 1939, Prof. B. O. 
Williams, of Clemson Agricultural College, South Carolina, formally 
advances the proposition that — 

The mechanization of agriculture in the Soutli has already gone forward 
much further than is generally recognized * * * (It) will result in a dis- 
ruption of the family-farm institution * * * It is probable that the owner- 
manager type of organization will come to prevail, changing the system of 
social organization from the family-farm type to the manager-labor type * * * 
The mechanization of Southern agriculture would result in either (1) a lowering 
of material living standards of large numbers of the farm population; or (2) 
the migration of large numbers of surplus and displaced laborers to other areas. 

Mr. Maginnis. Mr. Chairman, may I ask a question at this time? 
Isn't the situation so far as the Cotton Belt is concerned due pri- 
marily to the low price of cotton as a result of the loss of the world 
markets in the last several years ? 

Dr. Taylor. Of course that is a very serious factor in cotton pro- 
duction. I don't think that is the major factor in the changes in 
the structure of production which I am describing. 

Mr. Maginnis. You don't think that primarily that is the cause 
of most of the difficulty in the Cotton Belt in line with what has been 
written in the last several years about the necessity of changing pro- 
duction in the cotton States to other commodities ? 

Dr. Taylor. There is, of course, pressure for lowered costs and 
undoubtedly machinery is sought as one of the means of meeting that. 
I agree entirely with that. I think the use of the machinery, then, 
is the factor that cuts the pattern which I described. 

Mr. Maginnis. In other words, the price of cotton in the last few 
years due to the loss of the world markets has forced to a large extent 
placement of machinery for more economical operation to avoid, if 
possible, the giving up of the raising of cotton. 

Dr. Taylor. Possibly hastened it. I think there is always pressure 
for lower costs of production in a competitive market. 

Dr. Kreps. Dr. Taylor, in that connection ^ if the price of cotton 
should rise appreciably, is it your feeling that the pace of mechaniza- 
tion would be retarded or is it likely to be accelerated in that farmers 
will have more funds in order to buy machinery? 

Dr. Taylor. I think that a rise in the price would accelerate the 
process ; as has been presented here by preceding witnesses, the pur- 
chases of machinery depend in part upon the income of the farmers. 

The Vice Chairman. The reduction of the number of people to be 
found on the farm would seem due to the fact that we have lost a 
good deal of the world market regardless of how we lost it. It takes 
fewer people to raise 10,000,000 bales of cotton than 15,000,000. 

Dr. Taylor. Certainly. 

The Vice Chairman. Then you have this mechanization and that 
has something to do with it. I wonder if our governmental farm 
policy — are you going to discuss that — has anything to do with it. 

Dr. Taylor. The agricultural adjustment program? I am going 
to make one recommendation with reference to' it if I am permitted 
to at the conclusion of this statement. 

The Vice Chairman. If you will be permitted to do it. [Laugh- 
ter.] 

Dr. Anderson. Dr. Taylor, I have before me the figures of the 
Department of Agriculture on the production of cotton, just to clear 



C50NCENTRATI0N OF ECONOMIC POWER 17049 

this point under discussion. It is your contention that these major 
mechanical mechanization changes have taken place in the last few 
years ? 

Dr. Taylor. In the Cotton Belt that is true. 

Dr. Anderson. If that is true, that it has occurred, say, since the 
depression, since 1932-33, except for the year '37, we have had a 
rather steady production of cotton^ so that the production of cotton 
itself would not be a factor. 

Dr. Taylor. I think there is no question that mechanization is an 
extremely important factor in displacing people in the Cotton Belt. 

MECHANIZATION IN THE WHEAT BELT 

Dr. TAixoR. In the Wheat Belt the combine harvester and tractor 
have been displacing farmers, laborers, and many of the townsfolk 
dependent upon them, during 15 years or more. In Oklahoma, so the 
State commissioner of labor reports, adoption of the combine har- 
vester was already so general by 1932 that laborers furnished by 
State employment oflfices to wheat farmers dropped from 11,298 in 
1921 to 165 in 1932, and that the machine had — 

* * ♦ completely reversed our harvest lai)or problems of finding and distrib- 
uting an adequate supply of labor to that of preventing a surplus from coming 
into the state during the harvest season, as an oversupply of labor in any locality 
is almost as disastrous as a shortage and more so as far as the community in 
general is concerned. 

A notable and significant, if extreme, instance of mechanization 
and labor displacement in Oklahoma wheat was drawn to my atten- 
tion in 1937. In one of the northern wheat counties one man had 
purchased successively 100 quarter sections. He introduces ma- 
chinery, leaves one tenant on each section, and displaces from one to 
three tenants. 

The effects of the combine harvester on the inland empire wheat 
country of eastern Washington were described in 1932 by the United 
States Department of Conmieree in a report of Edwin Bates. The 
report quotes first a leading wheat fanner : 

We no longer raise wheat here in eastern Washington ; we manufacture it. 
With large tractors, gang plows, seeders and combines for production and trucks 
for transiKtrtation to shipping points, we have virtually a factory system of pro- 
duction in which horses are rapidly passing out of the picture, and lab^r de- 
mands are decreasing. Under the new system this "wheat factory" can run 24 
hours a day. Most of our operations can be carried on at night if necessary. 
In dispensing with work stock we reduce the number of men required. (Com- 
mercial Survey of the Pacific Northwest, p. 273.) 

Bates, after traveling through the country, noting the abandoneu 
farm homes and talking with townspeople, observed significantly 
that— 

* * * there are two sides to this story. It is easy enough to reconcile the 
above statement of the wheat rancher with that of the implement dealer who 
estimates that every time he sells a tractor he drives at least 5 customers off 
the farms. The general merchant has frequent expressed it as follows: "This 
movement toward power farming is damaging every small town in this section of 
the State. Towns which had a good volume of business a few years ago are 
now very dull. There are fewer farms and less people on them. A few years 
ago we had a heavy seasonal labor movement into this section. The harvest 
hands would come in about the 15th of July and stay through the greater part 
of the summer. Now the harvesting season is much shorter, and there is a, 
124491— 41— pt. 30^—55 



17050 <'ON("K\TI{ATIf).\ OF ECONOMIC POWER 

snialh'r nunibei- of workers. Our sales of work shoes and work clothing of all 
kinds as well as foodstuffs have fallen off very heavily. 

These divergent points of view, (continued the Department of Commerce re- 
port) "one from the wheat rancher with his eye fixed on lower costs of produc- 
tion, and Ilie other from the retail merchant whose interest centers in an increas- 
ing population with an expanding volume of retail sales, are evidence of the 
changes which the technical revolution in grain production is working in the 
economic fabric of this area." 

Between 1 920 and 1930 in 7 counties of eastern Washington affected 
by this process of mechanization, the average size of farm increased 
25 percent, the number of farms declined 19 percent, and the popuhi- 
tion fell 15 percent. 

The effects of machinery on the wheat country of North Dakota to- 
day are described in the March 1940 issue of Rural Sociology by 
l*rofessor J. M. Gillette of the University of North Dakota. In an 
article entitled '■''Socuil-economiG Submergence in a Plams State" 
he writes : 

There has been and is thus being formed a self-perpetuating class of socio- 
economically submerged individuals in a wide region where it would least be 
expected. 

♦ * * Rapid mechanization of farm production anu farm processes and 
forced foreclosure of farm mortgages during recent years are the most imi)ortant 
of the immediate aiuT local factors. New types of rubber-tire tractors which 
propel new and larger plows, disks, harrows, seeders, harvesters and threshers, 
cultivators, sprayers, and so on, are rapidly transforming much farming into a 
highly sedentary mechanized and technically industrialized business. These 
machines are rapidly displacing agricultural labor of regular and seasonal kinds. 
I was repeatedly told that within 6 years the number of laborers required to 
harvest and thresh a crop of grain has been reduced from three or five to one. 
This means a displacement of 2 out of 3 or 4 out of 5 workers. It is also dis- 
placing many small farmers. Many men who operated a quarter or a half sec- 
tion a few years ago with horse power are now operating from twice to four 
or more times as much with tractor power, combines, and trucks. Two or three 
men in Bottineau County are operating 45 quarter sections of land, with a very 
few men as hired laborers * * *. This alone has caused the displacement of 
many small farmers and scores of laborers. It is a most serious situation for 
the young men and women on farms who are just coming to maturity. Farming 
no longer has power to absorb them; and after remaining idle parasites on the 
farmstead for a tinu they float into towns and villages, marry, and join the 
Work Projects (sic) Administration f orcein. For them and the stranded agricul- 
tural laborers and farmers there is no longer a i-etreat in great cities to join the 
armies of manual and white collar workers; for those cities are filled with unem- 
ployed millions, and new recruits generally soon apply for relief and are then 
sent back to the Dakota counties from which they derived and where their 
legal residence is. 

Professor Gillette estimates the probable future extent of this 
"submerged class" at from 5 percent in some counties to 15 or 20 
percent in others. 

Tlie Vice Chairman. Doctor, I don't know how limited your time 
is. You are covering things that ought to go in the record, but they 
are matters with which the committee are very familiar. If you are 
not in a hurry and have plenty of time just go ahead and read, but 
iT you you are in a hurry just discuss the points you want to discuss 
with us. 

Dr. Taylor. My time is at j^our disposal, Congressman. 

The Vice Chairman. How much more have you ? 

Dr. Taylor. I have a half dozen pages. 

The Vice Chairman. We want that all in the record for the 
permanent record, but the men who are sitting at this table are j)retty 
familiar with that general picture. We are anxious that you get to 



OONOBNTRATION OF ECONOMIC POWER 17051 

the point where you are going to make some suggestions. Pick out 
anything in there in particular that you would like to call attention 
to. 

(The material omitted appears below) : 

CORN BELT MECHANIZATION 

Dr. Taylor. The Corn Belt, like "Wheat and Cotton Belts, is ex- 
periencing rapid mechanization, and with similar effects — displace- 
ment of laborers, expanding farms, displacement of farmers, replace- 
ment of tenants by wage laborers. As early as November 1937, Kay 
Murray, formerly Secretary of Agriculture of Iowa reported : 

Despite the fact the we have this year in Iowa one of the biggest and best 
crops for a period of some 20 years, and despite the fact that these products 
have been selling for a price above the average for the past 5 years, and de- 
spite the known resumption of normal business conditions which are as 
favorable in Iowa as in any other part of the United States, we still find that 
thousands of Iowa people, farm-trained and farm-minded, are still without 
employment * ♦ *. The greatest contributing factor in this distressing pic- 
ture is the mechanization of Iowa farms with modern power machinery * ♦ *. 
One man with a tractor behind which he can haul two disks and one harrow 
can thus do at less expense and less time the work that 3 men and 3 horse- 
drawn outfits would in an earlier day * * * many Iowa farms are now 
equipped with three- and four-row power-driven corn planters, and three- and 
four-row tractor-driven corn cultivators * ♦ ♦. Other farm operations such 
as haying have been greatly simplified and hastened in their operations by 
such labor-saving equipment as side-delivery hay racks, mechanical hay stack- 
ers, sweep rakes, hay loaders, universal adoption of slings for unloading, and 
so forth. Modern manure spj^eaders, grain elevators, portable feed grinders 
and other such modern mach«iei*y have, also, contributed greatly to the ease 
and speed of farm operations, but have not been so successful in contributing 
toward the employment of men who make at least part of their living from 
such farm operation. We have seen the tractor-pulled binder shorten the 
harvest of our small grains by a considerable length of time and the introduc- 
tion of small threshing machines have made a couple of weeks' job out of what 
used to be a month or two's work every year during the harvesting season 
• • *. The use of such machines eliminates the services of thousands 
of men who previously found work shocking the crop of oats, wheat, barley, 
and so forth * * ♦ we could say roughly that the mechanical corn pickers 
in Iowa this year are replacing 15,000 to 20,000 men who formerly were em- 
ployed at hand picking during this season of the year * * *. With the ex- 
ception of Des Moines and Sioux City * ♦ * in * * * our cities and 
villages, all the people who are not gainfully or continuously employed either 
as hired help or in their own establishments are men who depend to a greater 
or less degree on whole or part-time farm labor as their means of subsistence. 
With one single machine eliminating the jobs of over 15,000 of this class of 
people annually and with similar situations arising from the use of other power 
machinery, one can easily glimpse the position in which these people now find 
themselves. 

From the Illinois Emergency Relief Administration come reports 
on April 29, 1938, that suddenly the spring farm-labor supply con- 
ferences held to help farmers needing laborers have turned into con- 
ferences to help laborers needing farm jobs which no longer exist. 
From county after county the reports came in — 

From Calhoun County: As in other counties, power machinery is supplanting 
farm labor. 

From Greene County: The supervisor of Kane Township gave us, before the 
meeting, some very interesting information as to what is occurring in his 
township. There are 10 farmers who are planning to plant 75 acres of corn 
each and intend to cultivate this crop without any help. There is one farmer 
who is tending 1,500 acres of land. He has 6 tractors and will. hire only 6 or 



17052 CONCENTRATION OF ECONOMIC POWER 

7 men, when previously between 15 and 20 men were employed to tend this 
amount of land. 

From Ogle County: One person who is a farmer on a large scale, stated 
that modern machinery has replaced to a large extent the need of farm hands 
and has tended to level off the cycle of farm work. He stated that in his own 
community of Polo there have been 70 tractors sold during tWs last year and 
that as a rough estimate each of these has displaced one farm worker. 

From Vermilion County : The farm advisor and several members of the Farm 
Bureau pointed out that the displacement of the casual farm laborer was due 
in a large measure to the general use of power machinery and sugb^jsted that 
some program of public employment would have to be planned to absorb these 
permanently displaced agricultural workers. 

From Peoria County : It is reported from the Jacksonville area that farmers 
are using their tractors day and night rather than hire additional labor. 

Displacement by i .chinery in the Corn Belt is not limited to farm 
laborers. For farm operators, too, it is extinguishing the chance to 
make a living from the land. The chairman of the Iowa Farm 
Tenancy Committee stated in 1938: 

A matter which received considerable discussion * * * is the operating 
of a number of farm units by one operator, thus displacing many farm 
homes. • * * Landlords naturally seek the greatest net income from their 
land regardless of possible destructive effects upon the social conditions of the 
country. Farmers with large sets of machinery bid up the rent to a point 
where a tenant family with little power equipment can no longer compete with 
large-scale operators. 

In July 1939 Wallaces' Farmer and Iowa Homestead carried an 
article entitled, "Pushing Farm Families Off the Land." A State- 
wide questionnaire was sent out which asked, "How many farmers 
who were running farms in your school district 3 years ago have been 
squeezed out as a result of such expansion by big operators?" Draw- 
ing its conclusion, after eliminating the sniftless and incompetent 
from the count of the displaced, Wallaces' Farmer states : 

If this sample is typical of the State it means that over 6 percent of Iowa's 
farm families have been pushed off their farms in the last 3 years. 

On March 9, 1940, Wallaces' Farmer published a leading article 
called Men Left Without Land, which states after a field survey, "If 
those questioned are representative, there are around 2,000 new land- 
less tenants this year."^ Displacement comes about under a number 
of circumstances, which are reflected in the attitudes of people toward 
(hem, says Arthur T. Thompson, author of the article: 

I have listened to a lot of talk, trying to size up attitudes. Not much is said, 
I find, when a man goes back on his own place. This is still a free country; 
it's got to be expected. Nor is there much talk when a farm is sold to an 
enterprising chap who has been a good tenant, or when a father helps his son 
lo buy a place. There is a little more stir when one man keeps increasing his 
string of tenant-operated farms, but this depends on how he treats the tenants. 
Sometimes, through his capital help, the multiple landlord actually helps the 
tenant to make more money. 

Its when a landlord throws off a tenant and starts working the land with 
hired help, especially trailer-house migrants, that voices raise and you see 
anger on men's faces. Or when the farm is leased to a nearby owner-operator 
who, say the neighbors, already has "a God's plenty." 

A friend of mine says this thing is going to end up in a farm-tenant's pro- 
tective association or something of the sort, just like the share-croppers' union 
of tlie Sontli. That seems a little extreme, yet I wouldn't be too sure if greedy 
owners and landlords keep reaching for more and more land. As I said at the 
beginning. I have been looking into the eyes of these landless men, and I see 
something there that is pretty sure to snap if they are pushed too far. 

Dr. Taylor. I should like to call attention to the fact that dis- 
placement is moving rapidly into the Corn Belt, which has always 



CONCENTRATION OF ECONOMIC POWER 17053 

been regarded as one of the most stable sections of our American 
social and political life, that the same pattern of displacement of 
laborers and of small farmers which appears in the Cotton Belt is 
now occurring also in the Corn Belt. Tractors, smaller combines, a 
variety of machines, pre accomplishing that. The farm laborers are 
hit with the utmost severity, and the smaller farmers are now feel- 
ing the pressure of displacement from machinery, and they are writ- 
ing to Wallace's Farmer and Iowa Homestead the same kind of let- 
ters that the displaced tenants of Texas are writing to the Dallas 
Farm News. 

The Vice Chairman. When you say the small farmer do you mean 
the tenant farmer or the owner of a small farm ? 

Dr. Taylor. I think mainly they are tenant farmers. They are 
the northern counterpart of what in Texas you call, I believe, the 
tenant farmers on thirds and fourths, substantial citizens with a 
substantial amount of propery who find themselves deprived of an 
opportunity to make their living on the land. 

Studies have been made by Wallace's Farmer and Iowa Homestead 
which indicate that for the last 3 or 4 years this has been progressing 
at the rate of something like 2,000 tenant farmers per annum. 

Dr. Anderson. Dr. Taylor, is that a nevr phenomenon in the Corn 
Belt area? 

Dr. Tayeor. So far as I know, that has not appeared in the Com 
Belt before. Certainly it has not been conspicuous, either to outside 
observers or to the people themselves in the Corn Belt. 

The Vice Chairman. It has to follow, though, that wherever you 
have curtailment or reduction of acres, regardless of whether you 
have to do it or not, when you put in machines — I mean it just has 
to happen. Any field of production where you curtail your acres 
as a part of the program and then you put in machines, of course, 
you will have reduction of hours of work, but the tendency of those 
two things is bound to put somebody off the farm. 

EXPANSION OF HOLDINGS AFTER MECHANIZATION 

Dr. Taylor. When you put in the machinery, the tendency is to ex- 
pend the size of your farm, in order to make use of the otherwise 
unused capacity of your machine. 

The Vice Chairman. And when you have an agricultural program 
that requires a reduction in the number of acres that you us^ to 
have in a given crop, then that means a reduction, too. I don't mean 
to say that it isn't necessary to do it, but that is one of the con- 
sequences. 

Dr. LuBiN. Mr. Taylor, just how does this happen — I was inter- 
ested in your statement to the Judge just now, in other words, the 
farmer buys more land in order to make the machine pay its keep, 
or does he refuse to rent his land? 

Dr. Taylor. In the Cotton Belt, it usually starts by a renting of 
more land. Take, for example, the tenant farmers in the plains 
of Texas. If they expand the size of the farm by placing machinery 
upon it, it throws 2 farmers together and 1 tenant leaves. Some- 
times 2 enants leave if the landlord moves in and operates directly 



17054 CONCENTRATION OF ECONOMIC POWER 

with hired labor. There is a loss of status of the tenant-farmers 
and replacement with someone of the hired-labor status. 

Dr. LuBiN. And the same thing happens in Iowa? "Wliat form 
does it take? 

Dr. Taylor. "Well, I think the record will show that the pattern is 
strikingly similar in Iowa to what happens in Texas, that one man 
leases more land, or not infrequently, that a farmer with means buys 
another farm. 

The Vice Chairman. I happen to come from Texas. If a man 
who owns maybe five or six hundred acres of land, who used to have 
5 or 10 tenants there, he would get in 1 or 2 hired hands and a tractor 
and the tenant would have to get out. 

Dr. Taylor. I have seen that in Ellis County, Tex., which I under- 
stand is in your district. 

The Vice Chairman. Right in my neighborhood; yes. 

Dr. Taylor. I have here. Dr. Lubin, a description from the Des 
Moines Register of March 3, 1940, under the title "Tractor brings 
trend toward fewer and larger farms in Iowa," which tells exactly 
what is happening. I don't know whether you wish to hear it. 

The Vice Chairman. Let's hear it. 

Mr. Taylor (reading) : 

Is it "good" or is it "bad"? Is it toward an agriculture based on a more 
stable family-sized farm or is it toward a different kind of farming community? 

Apparently the movement is dual. In some instances it is toward a healthier 
farm community in terms of the past — the owner-operator farming with little 
or no hired help but with all members of the family pitching in, the individual 
farm' and the community based on farming as a way of life as well as a 
business. But in other instances the change seems clearly to be toward 
something different. And the differknce between these two tendencies is 

LAlUiELY ONE OF DEGREE. 

In some cases, multiple farm operation is undoubtedly better for the soil. 

But what about the people? Is it better to have a large number of farm 
families b;uely above .subsistence levels or a smaller number operating larger 
units and e.irniiig incomes in excess of their minimum requirement? Better, 
certainly, for those who .survive, but is it better for those who. lose their farms? 

THtrv Ml'ST BE TAKEN CARE OF — Is IT BETTER TO TAKE CARE OF THEM IN THI2 
< OUNTKY OR IN TUr: CITIES AND TOWNS? 

Those problems will press us more fiercely if multiple farm operation radically 
changes our Iowa (>((jnomy in a direction in which the other phase of the 
trend seems headed. Larger farms means fewer farms; fewer farmers and 
■niore mechanization mean fewer farmers and their families. And this means 
keener competition ainong tennats for farms, with greater insecurity for those 
who get fanns and many who do not get farms. 

It means a larger transient iKjpulation, moving from county to county, state 
1o slate, with hurt to themselves and damage to institutions like the school. 
It means, j)robably, a larger agricultural proletariat class * * *. 

This proldem, like all problems of its kind, will not be solved by blind pas- 
sionate opi)osition. Its soiuMon demands that we answer in our own mind the 
• inestion, "What kind of an agriculture do Wf want?" 

The Vice Chairman. What kind of a citizeusliip do you want, too. 

Dr. Taylor. Certainly. 

Tlie Vice Chairman. That is involved. 

Dr. LiTiuN. Does this mean that it is harder for a man to rent a 
farm in that area now tlian before the tractor came up? 

Dr. Taylor. Unquestionably; for many, imposible. 

Tlie Vice Chairman. I live in that country, and the year before 
last I was in a connnmiity where the sons of people whom I had 
known ever since I have been in Texas, friends of mine, young fel- 
lows, wanted to have a home and they weie good people. They told 



CONCENTRATION OF ECONOMIC POWER 17055 

me that it is absolutely impossible for them to rent a place. They 
were young fellows who wanted to farm awhile and then buy a place 
after awhile, and they just couldn't rent a place anywhere. 

Dr. Tati/)r. Traditionally, we have insisted upon maintaining the 
agricultural ladder as the opportunity by which men could rise. As 
the capital equipment on farms increases, it becomes increasingly 
difficult to ascend that ladder from laborer to owner, and for those 
who make the ascent it becomes increasingly a matter of inheritance. 
Those who are not favored in their parentage find increasing diffi- 
culties. 

The people in the Com Belt are becoming conscious of that, as I am 
sure they are in your country. 

The fullest development oi mechanization with which I am familiar 
in the field of agriculture is in the fruit and vegetable industry. 
There, mechanization has transformed market gardening into a highly 
mechanized industry within a generation, with factory methods of 
production on the land, factory methods of processing materials, and 
with hordes of laborers working in gangs at piece rates on the land, 
moving from harvest to harvest, hired and fired in thp manner 
familiar among old-fashioned industrialists. 

There should be called to the attention of this committee, it seems 
to me, the fact that when mechanization has moved as far as it has 
in the vegetable industry there is apt to take place an integration, the 
same sort of thing that occurs in, say, the manufacture of automo- 
biles, a control of the industry spreading from a processor clear 
back to the land, or from the middleman back to the land. 

The concentration of economic power with which you are so 
familiar in industry has its counterpart in the vegetable industry. 

Dr. Keeps. Dr. Taylor, do you have any figures showing the extent 
to which you have concentration of production in agriculture in Cali- 
fomia-T-in various agricultural products? 

Dr. Taylor. As you know. Dr. Kreps, a subcommittee of the Senate 
Committee on Education and Labor recently came to California in 
order to make investigations in agriculture. Their staff has fur- 
nished me with a table showing crop concentration. Perhaps the 
committee would like this introduced in the record ? 

Dr. Anderson. Yes. Mr. Chairman, tjie table should be admitted 
to the record. 

(The table referred to was marked "Exhibit No. 2685-A" and is in- 
cluded in the appendix on p. 17455.) 

Dr. Tatlor. I think you have that before you. I might then read 
just three or four examples of the crop concentration. 

In canning asparagus, for example, based upon 1939 datai II/2 
percent of all producers produced 23.4 percent of the entire product 
in terms of deliveries to canneries. In cotton production, 3.5 per- 
cent of all producers produced 33.3 percent of cotton in terms of 
ticreage. 

In lemon production, less than 3 percent of all producer*? in 1940 
produced 34.6 percent in terms of acreage. 

There are other ways of measuring concentration. Under the 
A. A. A. prfegram, for example, the sugar-beet concentration of 
the production shows 2.1 percent of all payees received 20.6 percent 
of the total of all payments under the program. For agricultural 
conservation, 2 percent received 43.6 percent of all payments. 



17056 CONCENTRATION OF ECONOMIC POWER 

There are other measures also. Ten percent of all farms in Cali- 
fornia received 53 percent of the 1939 gross farm income; 9.4 per- 
cent of all farms made 65 percent of all expenditures for wage 
labor in 1929. 

The Vice Chairman. Doctor, will you kindly repeat those figures 
just before you gave us these figures? I would like to ask you to 
repeat the acreage there, if you have it. Will you repeat the figures 
just before the ones you have just given? 

Dr. Taylor. The sugar beets? 

The Vice Chairman. No; the income. 

Dr. Taylor. Ten percent of all farms received 53.2 percent of the 
1939 gross income. Is that it? 

The Vice Chairman. Yes. Now, I wanted to know what acreage, 
what relative acreage, did that 10 percent in number make up? 

Dr. Taylor, I am not able to answer that question, but I may say 
this, that with respect to California, acreage is the most misleading 
measure of concentration. 

The Vice Chairman. Yes; that is so. 

Dr. Taylor. Much more in my State, I think, than in yours, be- 
cause we have everything from range land to irrigated acreage. 

The Vice Chairman. That is right. 

Dr. Taylor. And very often, on 20 acres, we have a tremendous 
product. So, I think the measures which are employed in these 
figures are more accurate than if I tried to ^ive you an acreage figure. 

The Vice Chairman. Yes ; I know that is so, and I beg your par- 
don for asking the question. 

agricultural concentration by states 

Dr. Anderson. One question before we leave this important ex- 
hibit. This, I take it, is a measure of the concentration in "Calif ornia 
agriculture. Dr. Taylor, are there any comparable figures available 
anywhere co^icerning agriculture concentration State by State? 

Dr. Taylor. There are, Dr. Anderson; I have had prepared the 
next chart, which 

Dr. Anderson (interposing). I think I anticipated you. 

Dr. Taylor. Shows the percentage distribution of number of farms 
and value of 9,11 products sold, traded, or used in the United States 
in 1939. 

Dr. Anderson. That will be admitted to the record. 

(The chart referred to was marked "Exhibit No. 2686" and appears 
on p. 17057.) 

Dr. Taylor. You will observe there that 1.4 percent of all of the 
farms of the United States produced 15 percent of all products by 
value, or combining the lower two categories, that 3.9 percent of all 
farms produced 25.6 perceot of all products by value. The chart 
which follows presents figures for the United States on another basis. 

(The chart referred to was marked "Exhibit No. 2687" and appears 
on p. 17058.) 

Dr. Taylor. This chart classifies farms of the United States in 
terms' of the numbers of laborers employed per farm. In July of 
1935, this was estimated by the Social Security Board from the 
census of 1935 and the seasonal indices of the Bureau of Agricultural 
EcOinomics. 



CONCENTRATION OF ECONOMIC POWER 



17057 



May I call your attention to the fact that some 78 percent of all 
farms in the United States, of the 6,800,000 farms, employed no 
laborers, no hired laborers at all.> 

Dr. Kreps. Do you mean to imply by that that taxes on labor, 
such as social security taxes and others, would leave such farms 
completely exempt? 



FARMS WITH PRODUCTS 

VALUED AT> 

UNDER I 400 



Exhibit No. 2686 
[Submitted by Dr. Paul Taylor] 



PERCENT 
30 25 . 20 IS 10 



FARMS 
15.2X1 



PERCENT 
10 15 20 25 



VALUE Of PRODUCTS 



2.2% 



•400-1599 



i2.ex 



3.4X 




17.7 X 



I8.4X 



UNITED STATES 

PERCENTAGE DISTRIBUTION OF .NUMBER OF FARMS AND 

VALUE OF ALL PRODUCTS SOLD, TRADED, OR USED. 

1929 



SOURCE- COMPIteb FROM 1930 CENSUS 



Dr. Taylor. Virtually that, Mr. Kreps. You realize that this 
figure is employment at a particular month in the year, so it is not 
identical with your question, but it comes fairly close to answering 
your question. 

Dr. Kreps. Would you say that July was a period in which, on 
the whole, the amount of farm labor would tend to be as large as 
in any other month during the year? 

Dr. Taylor. Something below the peak. It is a month of large 
employment, but below the peak. 

Dr. Kreps. At any rate, better than average, possibly ? 

Dr. Taylor. It is average or a little better. 



17058 



CONCENTRATION OF ECONOMIC POWER 



FARMS 



Exhibit No. 2087 

[Submitted by Dr. Paul Taylor] 

NUMBER OF WAGE WORKERS 
PER FARM 



WAGE WORKERS 



78.2 





OR MORE 








ONE 




2IB 








TWO 


OR MORE 








6.0 [_ 


■IH 




59.9 




THREE 


OR MORE 








2.7 1_ 




1 43.1 






pran 


DP unor 







100.0 



UNITED STATES 

FARMS AND WAGE WORKERS. BT NUMBER OF W/V3E WORKERS PER FARM 

CUMULATTVE PERCENTAGE DISTRIBUTION ESTIMATE 

JULY 1936 

SOURCE ' WENOZEL, SOCIAL SECUMTY BOARD 



CONCENTRATION OF ECONOMIC POWER 17059 

Dr. Ejieps. That would mean then that, on the whole, we tend to 
subsidize, as I ^et it, large-scale agriculture in the United States and 
mechanization in large-scale agriculture? 

Dr. Tatlor. Well, it seems to me that there is another way of look- 
ing at the exemptions from social legislation which generally Con- 
gress has granted to agriculture. I think in general it has been felt 
that because of the peculiar importance of agriculture to our national 
life, and for some other reasons, it was appropriate that social legis- 
lation should exempt agriculture 

I think upon examination of "Exhibit No. 2687" it becomes plain 
that that is not exactly what we have been doing. On the contrary, 
you notice that most of the farmers employ verj, little or no labor. 
It has been proposed by the Social Security Board, for example, that 
old-age insurance should be extended to cover hired farm laborers 
with exemptions for the family farmer. So that an agricultural 
labor exemption which is complete in its coverage of agriculture, it 
seems to me, may well be looked at as a public subsidy, not to agri- 
culture in general but to a particular manner of carrying on agricul- 
ture. In other words, it is industrialized agriculture which in a sense 
is in competition with the working farmer, that we are subsidizing 
by our so-called exemptions to agriculture, and insofar as mechani- 
zation plays its role in building up an industrialized form of agri- 
culture we are thereby subsidizing further displacement from the 
land and reduction of working farmers in status. 

Dr. Kreps. I believe you will recall that there was a reemployment 
commission recently, will you not? 

Dr. Taylor. Yes. 

Dr. Kreps. Do these farm laborers receive support from other 
groups, and particularly from governmental groups, in addition to 
the support which they receive during the time they are employed 
on the larm ? Is there a seasonal problem there ? 

Dr. Taylor. In terms of relief? 

Dr. Kjieps. Yes. 

Dr. Taylor. There is a very serious relief problem, and the curves 
of. employment on the land and of relief show a very considerable 
dovetailing, which means, of course, that the taxpayers of California 
are supporting the unused labor supply of the agricultural enter- 
prises during their slack seasons. 

May I ask, with further reference to the suggestion that I have 
just made, that we look again at the effects of the agricultural 
exemptions which we have granted in the past. The President's 
Farm Tenanc}' Committee of 1937 recommended to Congress that it 

g've very careful consideration to the extension of social-labor legis- 
tion to agricultural enterprises above the size operated by the 
working farmer. 

Dr. LuBiN. Dr. Taylor, if the social security, that is, the unem- 
ployment compensation and old-age insurance, were made appli- 
cable to agriculture, as far as this industry itself is concerned, only 
about 20 — what is it, 21 percent of the farmers ? — would have to pay 
any taxes for social security; is that right? 

Dr. Taylor. It depends on where the exemption is drawn. 

Dr. LuBiN. I don't mean 

Dr. Taylor (interposing). If it covered all of the labor, the figure 
based upon the 1935 census is something like 22 percent. 



17060 CONCENTRATION OF ECONOMIC POWER 

Dr. Ltjbin. In other words, 22 percent of the farmers would haxe to 
bear the burden ? 

Dr. Taylor, That is right. 

Dr. LuBiN. That is, pay taxes. Now, if you put it at, let's say you 
exempted every farmer who had one employee ? 

Dr. Taylor. If you exempted every farmer who has 1 employee, 
only 6 percent of the entire 6,000,000 would be covered. You under- 
stand, I am giving you simplified figures that would need elaborating 
in a more careful discussion. 

Dr. Anderson. Suppose you made it on a parity with present con- 
ditions of the Unemployment Compensation Act ; how many farmers 
would be affected, how many employers? What would the propor- 
tion be ? 

Dr. Taylor. Well, the Unemployment Compensation acts vary 
from State to State, I believe. The Federal has an exemption of four. 

Dr. Anderson. That is right. 

Dr. Taylor. A good many States, I think, have no exemption. 

Dr. Anderson. Suppose we took an exemption of four? 

Dr. Taylor. Well, if you took four, it appears that 1.6 percent of 
our agricultural employers employ something over one-third of all 
the hired labor. May I point out a further aspect of this problem of 
coverage of agricultural employers and their employees by social and 
labor legislation ? May I refer now, Dr. Anderson, to my next chart ? 
It is the average cash expenditure for labor performed, reporting by 
tenure of operator. 

Dr. Anderson. That will be admitted. 

(The chart referred to was marked "Exhibit No. 2688" and ap- 
pears on p. 17061.) 

CASH PAYMENTS TO LABOR 

Dr. Taylor. This chart is derived from the 1930 census. It shows 
the average expenditures in cash for farm labor per farmer reporting. 
In other words, all of the farms which spent no cash for labor are ex- 
cluded, and we are dealing here only with that minority of farms which 
spent money to hire labor. 

Please note, at the top, for the United States as a whole, the aver- 
age cash expenditure for farm labor was $356, by owners. The open 
bars refer to owners, the next bars refer to tenants, and the solid black 
bars refer to farms operated by managers. Please note that the av- 
erage expenitudres for owners are $365 a year; for tenants, $261 per 
year ; and for managers, $2,985. 

Dr. Taylor. The chart permits you to carry out comparisons of that 
kind through every division of the country. The point of the chart 
is this: That the manager-operated agricultural enterprise typically 
is the industrialized enterpise, and if these so-called agricultural ex- 
emptions were reinoved, retaining always an exemption for the man 
who is a bona fide working farmer, the enterprises which would be 
most surely covered, are those where the manager hired labor type of 
industrialized agriculture has developed. 

Dr. LuBiN. In summarizing your previous statement then, is it fair 
to say that insofar as your agricultural industry does not give steady 
employment and consequently, places upon the rest of the economy 
the burden of taking care of the people who are not unemployed during 



CONCENTRATION OF ECONOMIC POWER 



17061 



periods of slack, that 78 percent of the farmers insofar as they are 
taxpayers, and consequently through their taxes, are helping to support 
the unemployed, are helping to bear the burden to praTide a suffi- 
cient 

ExHiBrr No 2688 

[Submitted by Dr. Paul Taylor] , 

,00 1000 isoo aooo ^'oo '00° ",°° 520° «soo |ooo 




EAST 

SOUTH 

CENTRAL 

WEST 

SOUTH 

CENTRAL 



MOUNTAIN 



PACIFIC 



•^ «000 4S00 9000 



AVERAGE CASH EXPENDITURE FOR LABOR, 
PER FARM REPORTING. BY TENURE OF OPERATOR 

SOURCE' l>30 CENSUS 
FARMS MOT REPORTINS EXftNniTURE FOR LABOR ARE EXCLUOCO 

Dr. Taylor (interposing) . In connection with which they have now 

a problem. , , , /e • x 

Dr. LuBiN. To the other 21 percent, when they need a sufficient 

^^I)r.^TATix)R. The answer. Dr. Lubin, is yes. I would like to make 
just one additional remark at this point, so if anyone examines the 



17062 CONCENTRATION OF ECONOMIC POWER 

record, he will realize that these conclusions are based upon that single 
estimate. There should be compared with these estimates the expendi- 
tures for labor derived from the 1930 census, so that you cannot say, 
21 and 78 percent. You must give other estimates which show a range. 

In principle, your statement is correct, but I wouldn't want someone 
to read from the record and quote me as apparently ignorant of the 
fact that other estimates might be made which would vary som<»what 
from the answer I have given. 

Dr. Anderson. Go ahead. 

Dr. Keeps. Pursuing that question of integration, Dr. Taylor, just 
a bit further, as I understand this statement of yours, this isn't only a 
matter of concentration of production in agriculture as such, but an 
interrelationship betweeit agriculture and variety of enterprises of 
industries, that is, concentration in agriculture as a part and parcel of 
concentration in variety of industries. Is that correct? 

Dr. Taylor. I think that is essentially correct, Mr. Kreps. You are 
undoubtedly familiar with the reports of the subcommittee of the 
Senate Committee on Education and Labor, which have developed 
that, I think, very fully. They have pointed out, for example, the devel- 
opment of large-scale processing corporations which move back into 
control of the land through ownership, through finanping, leasing 
arrangements, and so f orth.^ 

Again, my emphasis is that although in California we perhaps have 
the most extreme development of this industrialized* and integrated 
agriculture, it is very conspicuous in quite a number of other parts of 
the CQuntry. For example, one of our largest corporations, the Califor- 
nia Packing Corporation, to quote from some testimony which recently 
was introduced into the Senate committee record, "the California Pack- 
ing Corporation owns and operates some 20,000 acres of farm land in 
California, valued at $9,000,000. In Illinois, Hawaii, and the Philip- 
pine Islands, the corporation leases and operates 47,000 acres additional. 
The American Fruit Growers, Inc.," continuing the quotation, "is an- 
other Nation-wide shipping and brokerage firm which controls a con- 
siderable amount of farm property. It owns some 15,000 acres of farm 
iai)d in 10 States, of which 2,500 were planted with citrus fruits, grapes, 
and vegetables in California. In 1936, this company handled 34,225 
cars of fruit, of which about 9,000 cars originated in California and 
Arizona, where the company maintains 31 })acking houses." 

Mr. Pike. They get the same exemptions from social security, wages 
and hours, as any farmer would get, do they ? 

Dr. Taylor. It would be difficult to answer your question yes or no, 
because each of the laws has its own definition, its own 

Mr, Pike (interposing) . The statute would vary ? 

Dr Taylor. The statutes vary. I have been discussing in these 
charts the employment of workers for cash on the land. Now, I point 
out the fact that the processing industry has moved back on the land. 
The exemption of those who work in the processing plants, and those 
who work on the land for farmers are somewhat different in nature. 

Mr. Pike. Yes; but these people, when they are farming, get all the 
compensations that family farmers get ? I mean in their farm opera- 
tions. 

Dr. Taylor. Not entirely, but to a large extent, that is true. 

^See Hearings before the subcommittee of the United States Senate Committee on 
Sducr.tion and Labor, Part 47, pp. 1735a ff. 



CONCENTRATION OF ECONOMIC POWER 17063 

Dr. LuBiN. Well, as far as they employ workers in agriculture on 
the land they are exempt from social security and the wage-and-hour 
law, those people. 

Dr. Tayi/dr. I believe that under the latest amendments, that is so. 

Dr. LuBiN. But as I understand the law itself, in other words, the 
corporation happens to be running a farm and doesn't pay any social 
security taxes for the workers working on that farm directly, that is, 
on the land hoeing, plowing, and so forth. 

Dr. Taylor. They did until the amendments of a year ago. 

Dr. Anderson. Are we to understand, Mr. Taylor, that these cor- 
porate groups engaged in processing, moving back now onto the land,, 
who come frojn California and ramify out into other States and other 
counties, are to be found not only in California, but elsewhere over the 
country, that is, developing to the extent that this begins to characterize 
an aspect of the agricultural change ? 

Dr. Tayix)r. It appears to be of growing importance. Certainly it 
characterizes portions of the country like Florida and south Texas and 
other important fruits and vegetable producing areas. I think it is a 
very significant development. 

Dr. Anderson. Has it moved beyond the fruit and vegetable pro- 
ducing groups into any of the other agricultural groups that you know 
ot? 

Dr. Taylor. I do not. 

Dr. Anderson. Milling houses, for example are not engaged, as you 
know them ? 

Dr. Taylor. I am not able to answer. 

citizens' associations and farm labor 

Mr. Kreps. Again, referring back to this report by the Committee on 
Education and Labor, on violations of free speech and rights of labor, 
and particularly part 46, 1 notice throughout that subpenas are issued 
to about the same groups. Is this an integrated ^roup? Was this 
subpena issued on the whole to the same group but with different inter- 
ests ? I'd like to read some of this group to you because the variety of 
interests involved is truly amazing. They start with the Associated 
Farmers of California. I presume that is tne farm organization. 

Dr. Taylor. That is the organization of the agricultural employer'. 

Mr. Kreps. Then I notice immediately Industrial 

Dr. Taylor (interposing) . Processors. 

Mr. Kreps. Yes. Then I notice Industrial Association of San Fran 
cisco. Is that affiliated with the farm group ? 

Dr. Taylor. It had relations with the Associated Farmers. I be- 
lieve the committee reported or found that it had financed in part the 
Associated Farmers. The Industrial Association no longer is in exist- 
ence. 

Dr. Kreps. Well, then, I notice that they have the Growers-Shippers 
Vegetable Association, as you indicated a moment ago, a citizens' asso- 
ciation of various areas. Then the California Processors and Growers, 
and then the chambers of commerce, I take it, in California, find 
kindred interests in the agricultural groups. 

Dr. Taylor. I believe, Dr. Kreps, that the committee was concerned 
with these various organizations because it was endeavoring to ascer- 
tain the facts concerning interrelationships which developed concen- 



17064 CONCENTRATION OF ECONOMIC POWER 

tration of economic power. I am not in a position to speak in the fullest 
detail. I am sure they appear amply in the reports. I know that it is 
the purpose of the committee, in general, to discover those relationships, 
and I assume that that is why those subpenas were issued. Its reports 
will show the facts in full concerning your question. 

Dr. Keeps. That means, then, that 'on the whole the assumption is 
correct that these organizations are all interrelated and subject to a 
common control, for example, the Association of San Francisco Dis- 
tributors, the San Francisco Retailers Council, the Water Front Em- 
ployers Associations, and Southern Calif omians. Inc.? 

Dr. Tatlor. I am speakmg now from newspaper reports written 
very largely at the time that the Senate committee held its sessions. 
I believe it is largely an employers' organization which has had very 
close relations witn the agricultural employers. 

Dr. ICreps. Organized to attract tourists? 

Dr. Taylor. No, not at all ; concerned to a considerable extent with 
labor relations on the farms in California. 

Dr. Kreps. I notice other organizations, the Union of Ca,lifomia 
Citizens, California Crusaders, Neutral Thousands, Women of the 
Pacific, Merchants and Manufacturers Association, East Bay Defense 
Association. Are those interrelated ? 

Dr. Taylor. They are a wide variety of organizations into which 
the. committee made inquiries. No simple answer :would cover, and 
in fact I can't give you a categorical answer with respect to tiiem, but 
I am sure that the Senate committee report which is now in process 
of publication would carry a full anf^wer to your questions. I was 
furnished today with a typewritten listing of expert testimony pre- 
sented at hearings of the Subcommittee of the Senate Committee on 
Education and Labor with reference to the concentration of economic 
power in agriculture and allied industries in California.^ It may be 
that you would wish to carry this in your record. I am sure it would 
answer your questions more completely and satisfactorily than I can. 

Dr. Anderson. The exhibit is accepted for the record. 

(The document referred to was marked "Exhibit No. 2689-A" and 
is included in the appendix on p. 17456. ) 

Dr. Keeps. I get the impre-ssion that this is a regional economic 
emipre. Do you know whether it obtains on the Pacific Coast? 

Dr. Taylor. Perhaps that is a good way of characterizing it Cer- 
tainly the interrelationr,hips between the various elements of industry 
and agriculture are close and the controls are more or less centralized 
or at least coordinated, I think, to a rather surprising degree. . 

Dr. Kreps. So that the mechanization in agriculture is tied up with 
mechanization in industry and gives us a concentrated economic con- 
trol both of agriculture and industry. 

Dr. Taylor. I think the evidence shows a good deal of what you 
have just stated. 

The course of mechanization and economic development has run so 
far in sections of the fruit and vegetable industry, that the patterns 
produced by its advanced stages of development, merit examination. 
As early as 1929 Wells A. Sherman, late chief marketing specialist of 
the Bureau of Agricultural Economics said : 

1 See hearings before the subcommittee of the United States Senate Committee on 
Education and Labor, pt. 46. 



CONCENTRATION OF ECONOMIC POWER 17065 

"Within a generation market gardening has largely changed from a hand and 
horse to a mechanized industry.. The changes in the production and handling of 
most of our annual vegetable crops have been generally comparable to the 
changes in industries once conducted in homes or private shops but which are 
now centralized in immense factories. These changes begin with seed production 
and run through to the final delivery of the goods to the consumer. They com- 
prehend all of the changes from their small beginnings to the present era of mass 
production, 

"* * * squat labor is as essential to our mass production of some vegetables 
as is the tractor or power sprayer * * * In the bar-vesting of most truck 
crops and all fruit crops a large amount of hand labor is still necessary. To meet 
this need we have thousands of itinerant harvesting and packing crews in the 
fruit districts picking the fruit from the trees and performing every operation in 
the packing house ; in the vegetable districts, selecting and picking cantaloupes or 
tomatoes, or * * * cabbage. Mass production has thus brought about what 
may be called the mechanization of the human element in the industry. The 
harvesting gangs are called in when wanted just as the tractor and the gang plow 
are brought out of the sheds when needed. These waves of itinerant labor ebb 
and flow with the seasons. Alimost every district of important specialized com- 
mercial production counts upon them as it counts upon the succession of the 
seasons * * *. 

This policy of "hire and fire," without responsibility for carrying 
the overhead cost of supporting their laborers between seasons is 
itself a contributory factor to that acute specialization which makes 
employment so highly seasonal and laborers so mobile. Under this 
systeni, which utilizes foremen, gang labor, piece rates, recruiting by 
labor contractors, the personal paternalism traditional between farmer 
and hired man is virtually absent, unemployment is intermittent and 
severe, milling about from crop to crop is necessary in order to obtain 
work, the average annual earnings are low despite wage rates which 
appear high, and opportunity to ascend the agricultural ladder from 
laborer to tenant is practically closed. 

In some areas, particularly in the West, the vegetable industry has 
become highly integrated, not infrequently with a single corporatioi 
carrying on every phase from planting the seed to marketing the prod- 
uct in cities 3,000 miles away. Some corporations maintain exten- 
sive field and processing activities scattered all the way from Washing- 
ton and Arizona to Florida. Ranch headquarters maintain direct 
wire services to sensitive eastern markets, and have the appurtenances 
of modern business oflBces. 

FUTURE OF FAMILY-SIZED FARM 

Dr. Taylor. May I, in conclusion, on the California situation, quote 
to you briefly from the official organ of the fruit and vegetable industry 
in our State, the Western Grower a,nd Shipper of Lkds Angeles, which 
describes itself as "a monthly publication serving the West's great 
fresh-vegetable and melon-growing shipping industry." It says in 
October 1939 that the family-size farm cannot survive in California 
agricultural industry, particularly of its type : 

It is true, of course, that a large sector of California agriculture is indus- 
trialized. * * * The incidents of husbandry, the family-sized farm with all 
of its pastoral glamor, is a lovely idyll — elsewhere than most sections of Cali- 
fornia. California is not unfriendly to husbandry and farming as a mode of 
life, but costly experience has shown that a large percentage of its acres, no 
matter how attractive to the inexperienced eye, are not suited to such purposes. 
The history of attempted development of many sections now successful under 
industrialized agriculture to small farming is a history of blasted hopes and 
broken" hearts. 

124491— 41— pt. 30 56 



17066 CONCENTRATION OF ECONOMIC POWER 

Mr. Pike. Do you subscribe to that view ? 

Dr. TATiiOR. I think, on the whole, that is pretty close to the truth. 
You understand I am not generalizing for the United States as a 
whole, 

Mr. Pike. But where irrigation costs are high, and all that ? 

Dr. Taylor. Yes. The course of economic development very clearly 
is adverse to the family farm. We had them there. They were swept 
out by the process which I have been describing. 

Dr. Anderson. Do you generalize from that? Would you care to 
even hint at such possible tendencies with respect to the rest of the 
country and other crops? 

Dr. Taylor. I think that the testimony which I have prepared, not 
all of which I have read, but which I take it you are more or less 
familiar with, shows very clearly the appearance in widely separated 
areas of agricultural production on a pattern of industrialized agri- 
culture — the Wheat Belt, the Corn Belt, the Cotton Belt, fruits and 
vegetables. 

The Vice Chairman. Doctor, do you find any parallel between this 
tendency with regard to agriculture and the tendency of a good many 
years ago, which has greatly developed now, where the little manufac- 
turer went out of business ? 

Dr. Taylor. I think that there are a great many parallels between 
the entry of machines on a large scale into agriculture and the entry 
of machines into industry. Certainly I think we are in the earlier 
stages of an important counterpart to what we call the industrial 
revolution. 

The Vice Chairman. Isn't that perhaps one of the biggest things 
in this whole picture to be looked at ? 

Dr. Tayi^r. It seems to me that it is. 

The Vice Chairman. You have something to go out and sit on the 
fence a good while and think about. 

Dr. Taylor. May I, Congressman, read a couple of pages which 
will perhaps open up some other aspects of this problem ? I want to 
speak for a moment on changes in status of farmers and the hired man. 

Ninety years ago during the debates on the homestead bill, a Con- 
gressman Irom Indiana voiced the traditional American ideal of work- 
ing farmers on the land in these words : 

Instead of baronial possessions, let us facilitate the increase of indei)€ndent 
homesteads. Let us keep the plow in the hands of the owner. Every new home 
that is established, the independent possessor of which cultivates his own free- 
hold, is establishing a new republic within the old, and adding a new and 
strong pillar to the edifice of the state. 

American land policy and pioneer conditions developed a common 
type of farm-operator known as "the farmer," distinguished alike from 
the European peasant and the landlord. "The farmer," says Dr. 
Joseph Schafer of the State Historical Society of Wisconsin, in a de- 
scription of the type, "is one who operates a 'family-sized farm' for a 
'living,' rather than for 'an actual or potential modern fortune' ; a farm 
on which the owner and his son or sons can perform the actual work 
of tillage, the female members of the household smoothing the way by 
providing home comforts, assisting about chores, or in field or meadow 
as pressure of work may indicate. Hired men are rather the exception 
than the rule in this typical agriculture. So far as they are employed, 
it is usually with the instinctive purpose of raising the labor force to 



CONCENTRATION OF ECONOMIC POWER 17067 

the normal family plane rather than in hope of abnormally expanding 
the business beyond the family-farm size." 

The progress of technology on the land not only displaces many of 
this type of farmer and his hired men; it also changes their status. 
The type of land oper:ator which may result when change runs its full 
course can be illustrated from the citrus industry of southern Califor- 
nia. The "farmer" is being displaced there not physically, but in a 
far subtler fashion which leaves him a resident on the land, but strips 
him of the traditional functions of a farmer who tills the soil. The 
packing of his fruit is usually performed in large packing plants co- 
operatively or privately owned, valued on the average at $100,000, 
highly organized, and not located on the farm. But more than that, 
even the work in the grove of pruning, fumigating, spraying, picking, 
and so forth, commonly is performed by gangs of laborers under con- 
tract, or employed and directed by the manager of a citrus association. 
In an economic affidavit prepared for California citrus employers this 
has been stated by J. Eliot Coit very succinctly : 

The term "farm" in the old or commonly accepted sense in the East, South, and 
Middle West is long since obsolete in respect to the highly specialized agricultural 
occupation of growing such products as citrus fruits, walnuts, avocados, and a 
large number of other specialty crops grown on the Pacific coast. 

In some instances this removal of the farmer from work has become 
so complete that Mr. Coit declares : 

In fact, there .are some farmers who do no manual work on their farms. 

To most Americans accustomed to thinking of farming as a family 
enterprise carried on by a "farmer" working beside his sons and an oc- 
casional hired man, these citrus growers clearly are no longer "farmers." 
Their functions, as such, have been progressively assumed by associa- 
tions, corporations, and labor contractors. 

Another subtle change away from the American farmer type results 
from replacement of "farmers" by managers, especially on large-scale 
and multiple farms. Such absentee operation of the land is perhaps 
more common than supposed. According to the census of 1930, one- 
eighth of all cash wages paid to farm laborers in the United States were 
paid by farm managers, and in Arizona and California one-quarter. 

These changes which affect the status of the farmer have their 
counterpart in changes which affect the wage worker. It is a far cry 
frtom the migratory gang labor of industrialized cotton farms and the 
vegetable industry to the "hired man" described 20 years ago by 
Henry C. Taylor, now head of the Farm Foundation, in these words : 

On the general farm in the northern part of the country the typical wage worlser 
on the farm is a young man who is temporarily a, member of the farmer's family 
as well as part of the farm crew. He eats at the family table, reads the paper in 
the family living room after supper, puts his soiled clothes into the family washing, 
and in general shares the life of the farm home. If he is a good hand he will soon 
become interested in the work of the farm and attached to the farm by many ties 
other than the wages he draws. This young man is a part of the farm family, and 
whether he is contented with the life and interested in the work depends largely 
upon the success of the farmer and his wife in developing sympathetic and 
happy relations. There are no class distinctions. The young man expects to be- 
come an independent farmer and feels that he is gaining skill, money, and credit 
which will enable him to establish a home of his own in a few years. 

That is a picture of a scene which is passing in many parts of the 
country. ' 



17068 CONCENTRATION OF ECONOMIC POWER 

The Vice Chairman. Doctor, that was largely true, too, with the 
small cabinet maker, the small implement maKer, just a few decades 
ago. 

Dr. Taylor. Yes ; the apprentice became the journeyman, married 
the daughter of the master, and became a master himself. 

Dr. Anderson.- I take it that is what you implied by "the ties that 
bind." 

Dr. Taylor. If I may proceed, I have about 3 pages more which 
bring this together. 

Perhaps I am wearing you out. 

The Vice Chairman. No, sir, you are not. You are one doctor that 
seems to know what he is talking about. 

Dr. Taylor. The course of mechanization in agriculture reveals a 
strong economic pressure to expand the scale of farm operations. En- 
largement of the farm results in manifest benefits to those who are suc- 
cessful in thus obtaining fuller utilization of their machines, and some 
benefits may accrue also to laborers who are retained. But the eflFects 
of technology fall unequally upon our agricultural classes. 

displacement of farm owners and laborers 

Dr. Taylor. Many farm families — both farmers and laborers — are 
being displaced completely or driven into uneconomic subsistence agri- 
culture. The result of combined forces — a narrowed outlet for farm 
youth in industrial employment, a high rural birth rate, and the intro- 
duction of machines — is a piling up of rural population on poorer 
lands. The Dallas Farm News, citing a study of the United States 
Department of Agriculture, stated on April 5 : 

Mechanization has driven many of the farmers from the better land and forced 
them to live on poorer land, subdividing the remaining small farms in poorer areas. 

When mechanization achieves success in planting and cultivating, 
but not in harvesting a crop, agricultural employers must then depend 
for the harvest upon hordes of underemployed, mobile laborers. These 
conditions are conspicuous already in vegetable and fruit production 
and are spreading in cotton. This stratification upon the land is ac- 
companied by bitter strife. It has appeared in the Arkansas delta and 
the Missouri boot-heel, in the onion fields of Hardin County, Ohio, 
where industrialized agriculture is conspicuous, in the potato fields of 
southern New Jersey, the pea fields of Idaho, the cotton fields of Ari- 
zona, the orchards of Yakima Valley, Wash. Its intensity in California 
and adjoining States moved the United States Senate last year to ap- 
point a committee to investigate and report on violations of civil 
liberties in agriculture on the Pacific coast. 

The socio-economic displacement pattern varies when mechanization 
of all processes from planting to harvest is completed. The seasonal 
laborers in wheat are virtually eliminated from all employment where 
the combine harvester. is adopted. Farmers are completely displaced 
by enlarging farms, and merchants suffer. The success of sugar beet 
or onion harvesting machinery would strand the communities of beet 
and onion tenders now resident and necessary in Colorado and Ohio. 

In the Corn Belt the effects seem to follow different directions. Ex- 
pansion of the farms of middle-sized farmers eliminates other middle- 
sized farmers and smaller farmers. Carried far, this trend results 



CONCENTRATION OF ECONOMIC POWER 17069 

in industrialized farms, multiple farms, change in status from tenant 
to hired labor, displacement of both laborers and farmers, and com- 
mercialization of the relations between agricultural employers and 
those wage workers whom they retain. 

On March 3, 1940, the Des Moines Kegister, in the heart of the Com 
Belt, stated: 

All in all, our Iowa agriculture may be on the road toward a sharp division 
into three kinds of farming: (1) large, highly industrialized, commercialized 
and mechanized crop farms ; (2) specialized farms such as for dairy and hog 
operations, which are largely independent of the size of the farm and have been 
profitable in spite of ruinous grain prices; and (3) subsistence farms, growing as 
much as possible for home consumption. 

A few of the implications are suggested : An emotional and jwlitical alignment 
of the farm-operator with the industrialist of the city and of the farm laborer 
with the urban laborer ; a decreasing birth rate among the farm population, 
which is the principal source of repopulation of our cities today ; a lower standard 
of education and culture for those who migrate to other parts of the Nation. 

The story, in brief, could be the sacrifice of agriculture as a way of life for 
the many upon the altar of agriculture as a way of making a living for the few. 

The trend hasn't gone far in this direction yet. And there are forces working 
against it. Tenants compete for farms. Attention is being focused upon their 
problems and they are being encouraged and helped to secure better tenure or to 
purchase their farms by Farm Security Administration and others. 

The great mass of Iowa farmers strongly opposes the change toward fewer 
and larger farms. Greater value has recently been put upon the nonmaterial 
elements in rural life. There is a law of "diminishing returns" in operating large 
farms in Iowa, as elsewhere — the bigger the farm the higher the profits in good 
times under good management, but the bigger the loss in poor times or under 
inefficient management. 

But economic factors are working tovi'ard larger and fewer units ♦ * • 

Sometimes it is well to look backward also as we strive to see ahead. 
About three generations ago Daniel Webster said : 

Our New England ancestors brought thither no great capitals from Europe ; 
and if they had, there was nothing productive in which they could have been 
invested. They left behind them the whole feudal policy of the other con- 
tinent. * * ♦ They came to a new country. There were as yet no lands 
yielding rent, and no tenants rendering service. The whole soil was unre- 
claimed from barbarism. They were themselves either from their original 
condition, or from the necessity of their common interest, nearly on a general 
level in respect to property. Their situation demanded a parceling out and 
division of the land, and it may fairly be said that this necessary act fisDed the 
future frame and form of their government. [Webster's italics.] The charac- 
ter of their political institutions wi\s determined by the fundamental laws re- 
specting property * * • The consequence of all these causes has been a 
great subdivision of the soil and a great equality of condition ; the true basis, 
most certainly, of popular gQvernment * * • 

The freest government, if it could exist, would not be long acceptable, if the 
tendency of the laws were to cr'^nte a rapid accumulation of property in a 
few hands and to render the great mass of population dependent and penniless. 
In such a case, the popular power must break m ui)on the rights of property, 
or else the influence of property must limit and control the exercise of popular 
power. Universal suffrage, for example, could not long exist in a com- 
munity where there was great inequality of property. The holders of estates 
would be obliged in such case either in some way to restrain the right of 
suffrage, or else such right of suffrage would ere long divide the property. 

Already we hear half articulate appeals from distressed and fear- 
ful farmers against "land monopoly," "land hogs," and "tractoring 
out." We see vague efforts to curb expansion of farms, or to dis- 
tribute land more widely. Their aim is somehow to hold a broad 
popular base on the land. Also we hear talk of placing limits on 
the right of suffrage of those who are victims of mechanization in 



17070 CONCENTRATION OF ECONOMIC POWER 

agriculture. Native white American farmers displaced by power 
farming in Texas and Arkansas are virtually disfranchised by older 
poll-tax statutes. 

The Vice Chairman. What was that statement ? 

Dr. Tatix)R. Native white American farmers displaced by power 
farming in Texas and Arkansas are virtually disfranchised by older 
poll-tax statutes. 

The Vice Chairman. A poll tax disfranchises? Do you make 
that statement on your own responsibility? 

Dr. Taylor. I have been informed by many who are so disfran- 
chised — you understand the reason they are disfranchised is when 
they are stripped of their property, they don't feel able to pay the 
amount of money required in your State, and they are, many of them, 
many of your white tenant farmers whom I have seen, reduced to 
such estate that they don't feel able to pay the tax. 

In California attempts are made to restrict the vote of migrant 
workers who serve our agriculture. 

The issues which we face in the effort to distribute the benefits 
of machinery more broadly among our agricultural people are not 
alone economic. That they are also political in a fundamental sense 
is coming to be recognized. A week ago the chairman of the 1938 
farm tenancy committee of Iowa said of this problem : 

I am fearful that unless something is done about it within the next decade 
it will bring about and develop such unrest among our people that it will 
threaten our democracy. 

mechanization as a force for expanding acreage 

Dr. Anderson. Dr. Taylor, Mr. McCormick said this morning : "The 
recent technological advances in farm machinery from which the fam- 
ily-sized farm will greatly benefit may well become a bulwark to 
preserve this important part of our social structure." I take it the 
discussion this morning hinged largely on the fact that we are now 
changing from a kind of mechanization which benefited particularly 
the large scale corporation and manager ^arm that you have been 
discussing, to a kind which benefits particularly the family-sized farm. 
The implication is that this new type of mechanization may make it 
possible to equip a family-sized farm with the necessary machinery to 
enable them to compete succesfully with larger units, and that 
mechanization now becomes a great benefit rather than a hazard to 
independent farmers. 

Wiiat is your position with respect to that ? 

Dr. Taylor. In other words, the argument runs that the small 
farmer now bias a security and independence on the land which he has 
not had in years recently past because of the rapid development of 
smaller machines which he is able easily to purchase. I cannot share 
the optimism of that position, and I agree with the statement which 
was made by an earlier witness before this committee, Mr. Sherman 
Johnson, of the Department of Agriculture, when he said that when 
the small farmer buys a tractor and machinery to go with it, he has 
capacity to operate more land. In other words, when the jnachiner7/ 
is there, there is economic pressure to use it to the full. You can't 
simply put your tractor and all the' auxiliary machinery in the shed 
with no expense to yourself. You can cut off the fuel expenses, to be 



CONCE?ITRATIOX OF ECONOMIC POWER 17071 

sure, but you can't cut oil Lin overheadN&psts, the depi-eciatioii of that 
machinery. It is good farm managenierit practice, I believe, to use 
vour raachinery to the full, tf- use your own labor to the full, and that 
pressure which exists, it seems to me, will continue to exist when the 
smaller farmer is abla to bi;;- machinery which now is not available 
to lor^u 

It iiu.y well be that the small farmer "• rould like to CGme in from the 
field earlier and reed his paper in the evening in the parlor of the 
hov'te, and leave his tractor in the shed, but it seems to me that tlue 
pressure of costs and -^he chance to earn wages for himself in operat- 
ing the machine to maximum capacity will prevent many of them from 
d(.i]:g what undoubtec'ly I'ley would like to do. I don't say that none 
cf them will do it, b t I. say there exists this continous and strong 
economic pressure wl.ich prevents me from accepting that conclusion. 

It seems to me, th^-;i, i'wt while the smaller machinery may enable 
some smf'll working farmers to resist displacement and hold their 
places on the land, it is more likely actually to spread the area of dis- 
placement into peaces where it was not taking place before. 

May I illustrate th^t ^ th perhaps two examples. The first is the 
combine harvester. I bt eve that the large combine harvesters oper- 
ated first, in the western 'heat country. The Corn Belt was closed to 
them by their great size !i.nd cost. When smaller machines were de- 
veloped, smaller combines with shorter cutting bars ; it was possible to 
use combines in the Corn Belt, so the area of displacement spread from 
the great wheat country of the plains aiid California to the Corn Belt, 
where previously it had been absent. 

And it is this same pressure to which I referred earlier, to use the ma- 
chine to capacity, that mttkes the owner of the smaller machine Avish 
to enlarge his farm when he gets his combine and other machinery. 

Another illustration, it seems to me, can be derived from the history 
of tlie introduction of tractors. In my part of the country, on the 
west coast, we are pretty highly mechanized. We use to a considerable 
extent the caterpillar tractor or tracklaying type of tractor, many of 
them huge machines costing a good many thousands of dollars. These 
machines, which are so familiar in California and Arizona, occasioned 
no displacement at all in the western dry country of Texas, or in the 
black lands of Texas. It wasn't until much smaller machines were 
developed in the form of the all-purpose tractor that displacement by 
machinery entered into the high plains of Texas and the black lands 
of the Delta ; so it was the smaller machine, costing perhaps a quarter 
or less of the cost of the large tractor, which spread displacement into 
an entirely new area. 

In the western part of Texas and Oklahoma the all-purpose tractors 
for some years have been oi)erated with 4-row cultivating equipment. 
As smaller tractors are ]eveloi)ed they pull 2-row and 1-row outfits. 
It seems to me that the natural effect of those smaller machines will 
be to spread the displacement into areas of the cotton belt wliere, for 
reasons of topography or otherwise, the larger machines with 4-ro\v 
.-cultivators couldn't operate. 

May I repeat, I am not attacking the machines any moi-e than the 
Congressman is attacking them. I am trying to answer the question, 
and to i)oint out that I do not believe that continued mcchanizatio:! 
in terms of the sn ,il machines offers a stable bulwark against dis- 
nlacement at certain points. It may assist the small working rariner 



17072 CONCENTRATION OF ECONOMIC POWER 

to maintain a balance for a time. For how long I don't know. But 
its additional effect will be to spread the area of displacement where 
it did not occur before. That, of course, refers to the farm operator. 
It is plain that the smaller machines are bound to displace hired work- 
ers, and indeed they are advertised to do exactly that.^ 

Mr. Pike. I would like to ask you, Doctor — it worries me a good 
deal — about these people who are required at harvest time only, in 
some of these highly mechanized farming operations that you have 
mentioned. Here the farms are going to need operators for a week 
to 2 weeks or 6 weeks, and here, scattered all over the State or over 
several States are relief camps operated by the Government, some of 
them perhaps of the sort you showed us in the photograph. 

Dr. Taylor. Those camps which I showed in the photographs are 
not Government camps. 

Mr. Pike. I realize that. They are overflow. But here are these 
pools of unemployed workers and here are these jobs that are coming 
up. I think it would be a grand chance for the industrial people to 
get working with the people who are managing relief so that the un- 
employed laborer is in a warehouse just as truly as the unemployed 
machine, with the exception that the farmer doesn't have to pay his 
depreciation, even, or any of his support. He can pull him out of 
the relief camp or off the relief rolls almost the moment he needs him, 
but the worst of it is, he shoots him back there the moment he is 
through with him, so that the Government supports and 

Dr. Taylor (interposing). Someone else carries the overhead. 

Mr. Pike. And if it weren't done in a highly legitimate manner, re- 
quiring almost inhumanly perfect management, you would think there 
would be a chance for dovetailing and you would have the boys on the 
job for a few days and then back in the cooler. It is one of the greatest 
possibilities for the inhuman handling of labor that I ever saw. Have 
you seen some of that, or am I describmg something that doesn't exist? 

Dr. Taylor. I am not familiar with the industry-relief dovetailing. 

Mr. Pike. I mean the agricultural labor and the relief. 

DF! Taylor. Oh, yes ; that is the constant procedure. 

In other words, the relief administration in California stores a 
large percentage of the worJters engaged in agriculture. 

Mr. Pike. You are subsidizing the big farm people again. 

The Vice Chairman. I would like to know if anybody has an opinion 
as to whether or not these migratory peoples become accustomed to 
that way of living, and wouldn't like to change it. 

Dr. Taylor. Congressman, I think I can answer for the people who 
have come from Texas and Oklahoma and adjacent States. They 
don't like the migratory labor life which we provide for them in 
California. 



^ On June 20, 1940, Dr. Taylor submitted the following relevant quotation from 
"Economic Information for Wisconsin Farmers, prepared by members of the staff of the 
College of Agriculture" (December 1939) : 

"It has been estimated that the power and machinery on Wisconsin farms at the 
present time would be sufficient to handle satisfactorily two or three times the acreage 
now covered. * • • A farm of 40 to 60 crop acres usually has a rather complete 
set of farm machinery and in many cases these machines could successfully handle a much 
larger acreage. For example, a man with 15 acres of hay would probably have a 5-foot 
mower, a side-delivery rako, and a hay loader ; a man with 45 acres would probably have 
the same machines ; thus the investment per acre is only one-third as much on the larger 
area. * * • Many farmers are enlarging their farms by buying or renting neighbor- 
ing farms in order to utilize their equipment to a greater extent. Even though there is 
a notable tendency to develop equipment suitable to small farms, further mechanization 
may tend to result in increased size of farms and reduced farm labor requirements." 



CONCENTRATION OF ECONOMIC POWER 17073 

The Vice Chairman. They would like to settle down somewhere ? 

Dr. Taylor. They would like it very much. 

Dr. Keeps. Dr. Taylor, I had an uncomfortable feeling during part 
of this afternoon of rereading Gibbon's Decline and Fall of the Roman 
Empire, where he described the displacement of the independent farm- 
ers by formation of huge latif undia operated by slaves. I also agree 
with Mr. O'Connell that I hate to just sit around and hope for some- 
thing to happen. I wonder whether you could not tell us what might 
be done. Do you have any recommendations that you could make to 
us that might serve a useful purpose in the problem ? 

recommendations to eliminate displacement 

Dr. Taylor. I have some rather specific suggestions which might be 
helpful. I have tried to suggest things that are practicable, that can 
be done and done fairly soon. I have suggested already that we stop 
subsidizing displacement by giving exemptions which are not exemp- 
tions to the working farmer. That I have already discussed and 
shan't repeat it. 

Another way to stop subsidizing displacement is to remove the in- 
centive for landlords to displace their tenants in order to get their 
A. A. A. checks. I understand that Congressman Snow has intro- 
duced Ml amendment to the act directed to this point. 

Another suggestion is that the funds available for rural rehabilita- 
tion loans be increased. At the present time, I am informed, there are 
120,000 eligible applicants who are rejected by the Farm Security Ad- 
ministration in the States of Oklahoma, Arkansas, Kansas, Missouri, 
and Texas, for lack of funds. About a like number were taken care of 
with the funds available. 

The Vice Chairman. Doctor, do you know whether that is for lack 
of funds or because, to a considerable degree at least, the applicants 
did not provide, in themselves, a fair prospect in the judgment of those 
who are responsible. 

Dr. Taylor. I am informed by the administrators. Congressman, 
that these 120,000 applicants who were rejected were in every respect 
eligible. 

The Vice Chairman. They just didn't have the money ? 

Dr. Taylor. The agency did not have the money to take care of the 
situation. 

I would suggest, further, with respect to rural rehabilitation, that 
the level at which loans for cooperative purchase of machinery are 
available be elevated in order to forestall and anticipate displace- 
ment. 

At the present time, in general, the practice is to give loans for coop- 
erative purchase of machinery, and tuus cut the costs of operation for 
the small-work farmer on the land, to make those loans after he is 
already in distress, perhaps displaced by tractors on other farms. I 
suggest that the rural rehabilitation loans for the cooperative purchase 
of machinery be made available to small working farmers before they 
are displaced, in order to anticipate and forestall it. 

The Vice Chairman, Doctor, it is all right to borrow money, but 
they would still be owing it, wouldn't they ? 

Dr. Taylor. Well, I can't give you offhand the record of repayment 
of the Rural Rehabilitation clients. I am sure the representative of 



17074 (JOXCENTRATIOX OF ECONOMIC POWER 

that agency could tell you exactly what percentage of repayment the 
Government gets ircrii the funds it makes available for that program. 
I understand that it is a high percentage. 

Mr. O'CoxNELL. May I ask a question ? On that question of making 
,f*.inds available to Ihcso people at reasonable rrtes of interest, that 
alone would do nothing more than delay the inevitable, would it? 
AVouldn't you have to tie. that in with other things that you have re- 
ferred to, which would tend to otherwise retard the progress of the 
integrated interests ? 

Dr. Taylor. I am suggesting these points as part of a pattern, a pro- 
gram, not with the intention of implying that any single one, or even 
all of them together, would entirely meet the situation. I am trying 
to make practicable suggestions to ameliorate the situation. I think, 
in some respects, those loans for cooperative purchase of machinery 
would be permanently stabilizing, for they would keep down ihe over- 
head costs of operation, and that is an important thing in holding 
working people on the land against those operators who, through lower 
costs, might displace them. 

A third point involves consideration of the funds available for pur- 
chase of land. We have now what is called the tenant-purchase pro- 
gram which, in view of the magnitude and urgency of this situation, 
should, by all means, be continued and expanded in amount and in the 
flexibility with which the program can be administered. That, of 
course, involves direct appropriations for land purchased to take care of 
tenants. 

I think, coupled with that, we might very advantageously provide 
for Government insurance of private loans for purchase of land to 
maintain working farmers on the land, as provided, I understand, in 
the Lee-Jones bill, S. 1836. 

The Vice Chairman. Private loans which the Government would 
guarantee? 

Dr. Taylor. That's right. If the Government would extend a 
guaranty, we might hope for a large volume of private loans which 
could go into the stabilization of our working farmers on the land, 
which would involve no heavy outlay by Congress. 

It is essentially the procedure* of the Federal Housing Agency. 

The Vice Chairman. In that sort of situation, the Government would 
permit private money to take a chance on the profit, while the Govern- 
ment would be taking all the chances on the loss, wouldn't it? 

Dr. Taylor. That, of course, is true. It is correct that the Govern- 
ment stands in the position of guarantor, and it is to be expected that 
there will be some losses. It seems to me, however, that the net cost 
to the Public Treasury may be a good deal less, and the chance of giving 
momentum to this program of holding people on the land may be so 
much more that it would be well worth enlisting private funds, even 
at the cost of the guaranty. 

Dr. Kreps. Certainly, if the Government is going to lose money, it 
would much rather subsidize smnll farmers remaining on the farm 
than increase the subsidy to hu-ge-scale farming through its present 
relief payments. Isn't that coi'iTct ? 

Dr. Tayi/ir. I think so. 

Another roconunendntion is mow lochimation projects. 

The Vice Chairman. You mean ])u( more land into cultivation? 

Dr. Taylor. I mean ])ut more land ii\lo cultivation. 



COXOENTRATIOX OF ECONOMIC POWER 17075 

The Vice Chairman, That is interesting. We have turned out a 
lot of land already. 

Dr. Taylor. I realize that. I realize the inconsistency. 

The Vice Chairman. I didn't say that is inconsistent. I said it was 
interesting. 

Dr. Taylor. Perhaps both. Ne>^ertheless, I recommend that in the 
circumstances there be some more reclamation projects. I think it 
would do a good deal to hold people in an economic position in areas 
of the country from which many of them now are in flight. 

The Vice Chairman. Why don't they do some of this migrating and 
turn the tide back from California? Come back to the place where 
they didn't have to have an irrigation projeci , 

Dr. Taylor. Wliy don't the people go back : 

The Vice Chairman. Why put in an irrigation plant and put more 
land in cultivation? Why not let the tide of cultivation turn back? 

Dr. Taylor. I am sorry. I perhaps don't iiiKierstand. 

The Vice Chairman. I don't wonder, because I don't think I under- 
stand the question myself. 

Dr. Taylor. Thank you. 

The Vice Chairman. My question is, Why not let the population 
move away from those sections where it is necessary to irrigate in 
order to cultivate, and let them go back to the country where such 
necessity does not obtain, and where the land is available for cultiva- 
tion? 

Dr. Taylor. Could you make any specific suggestions as to where 
they could go ? 

The Vice Chairman. Except for just what you have indicated, 
yes — Texas, anywhere. 

Dr. Taylor. Where would your people farm in Texas, under pres- 
ent conditions ? 

The Vice Chairman. On farms. There are a lot of farms. But as 
you say, the tenants are being run off those farms. That is the diffi- 
culty, and we have been turning out a lot of land, you know, in order 
for the farmers to get the advantage of the three A's, putting out of 
cultivation. 

Dr. Taylor. Perhaps the reason for my suggestion is that I don't 
think that the other program is likely, in practice, to be sufficiently 
and rapidly effective. 

The Vice Chairman. You see. Doctor, what I mean to say is that 
we have had a general policy of reducing the utilization of land that 
is susceptible of cultivation, and to put in these crops. We have re- 
quired people to reduce their acreage, in order to get the benefit of the 
Government's policy. Now, then, why put in some more land, and 
increase the burden on the Government, when you have the land already 
that could Be cultivated ? 

Dr. Taylor. If you could reshape our social policies to deal with 
mechanization 

The Vice Chairman (interposing). In other words, if we are able 
to have a certain number of acres under cultivation under the general 
policy, the more land you put under cultivation, if the policy is sound, 
it.seems you would have to make a corresponding reduction somewhere 
else, and make an additional burden on the Treasury, one, the burden 
of putting in the reclamation project, and two, the burden of taking 



17076 CONCENTRATION OF ECONOMIC POWER 

out this land. I don't want to go into that now. We can think that 
over after we have gone to it. 

Dr. Tatlor. I see your point, Congressman. 

The Vice Chairman. Let's not bother with it any more. We will 
take it under advisement. 

Dr. Taylor. I would like to raise for your consideration just one 
more point, which is rather long range in its implications. I will make 
is very brief, for the time is passing. 

It seems to me that in our thought* we should begin to give some con- 
sideration to one or two points that we have been a little reluctant to 
think about. Our land policy has been based upon such acts as the 
homestead law, giving land m fee simple absolute to the man who 
settled upon it. We have believed, through a large part of our history, 
that that meant security and independence for tlie working farmer on 
the land. 

It seems to me that it is time to raise, in our thoughts, the question. 
In certain situations, particularly in irrigated lands, I think the rec- 
ord is rather clear that it has not meant security and independence. 

The suggestion I am making grows out of a statement in the Presi- 
dent's Farm Tenancy Committee in 1937, which said, "The land 
policy adopted by this country under which title to practically all 
of the agricultural land of the Nation passed to private owners in fee 
simple absolute has proved defective as a means of keeping the land 
in the ownership of those who work it." 

We have seen how, in some areas, there is a concentration of control 
of the operation of the land which very commonly accompanies ex- 
tensive mechanization. As I say, that has been particularly conspic- 
uous in areas where there is irrigation. 

To cite a conspicuous example, the San Carlos irrigation project in 
Arizona irrigates about 100,000 acres of land. Under the basic laws 
governing land policy, the Homestead Act, the Desert Entry Act, 
those lands initially could be taken up only in 160-acre blocks, and 
that was done. Virtually all of the land passed into private ownership 
in the early 1900's. 

Then it was found that no sooner had the land passed to private 
ownership than concentration of ownership began, and larger land 
holdings developed. Then, in the early 1920's, Congress passed an 
enabling act to provide for construction of Coolidge Dam. As a 
condition it was provided that there should be no holdings of land 
larger than 160 acres, again following our traditional policy. That 
was done in conformity with law. The water was put on the land 
in the middle 1920's. In hardly more than a decade, the land was 
all concentrated again. 

The Government, through the Farm Security Administration, pur- 
chased a block of about 3,600 acres of this land, and the concentra- 
tion, the type of agriculture that is developed upon it is illuminating. 
It illustrates the futility, under some conditions, of protecting the 
working farmer on the land by a device so simple as fee simple abso- 
lute ownership. I am taking the facts of my illustration from expert 
testimony by W. E. Packard, placed in the record of the subcom- 
mittee of the Senate Committee on Education and Labor. 

TTie Vice Chairman. You mean. Doctor, that the Government 
establishes a limitation insofar as the original occupant is con- 
cerned, and leaves to him the power, then, to sell it immediately? 



CONCENTRATION OF ECONOMIC POWER 17077 

Dr. TATiiOR. In a few years you have the enforcement of three 
acts, each of them endeavoring to do it, and the last time, within a 
decade since the water has gone on the land, there were only nine 
owners of this 3,600 acres. 

The Vice Chairman. In those cases^ a lot of people simply go 
on that property, in order to get possession, and sell out. I know 
that is true in the ranch country in my section and I am sure that 
is true there. 

Dr. Tatlor. I am quite sure, in 1936, when the land was bought 
by the Government, there were only nine owners of the entire prop- 
erty. Eight of the farms were operated by tenants using hired fore- 
men and migratory laborers. That was only one of the nine owners 
who was operating, and he was operating 800 acres of irrigated land, 
which is a great deal of land. He was living 75 miles away, and 
operated with hired labor. In other words, there is a story of com- 
plete absenteeism, extreme mechanization, entire use of hired labor, 
most of which is migratory, without settled abode. There was only 
one decent house on the entire project. 

There were only 7 families livmg on the project at the time of the 
purchase, though on one of the properties alone as many as 35 families 
lived during the cotton-picking season. 

We see in this example, then, the development within 10 or 12 years 
of a rural slum of the worst type, of the most concentrated ownership, 
miserable housing, manager-hired labor or operation, and virtually 
everything that we have regarded as undesirable in our rural way of 
life. 

Dr. LuBiN. Would you recommend a life lease or an option to the 
Government to repurchase, in the sense that the Government would 
have to pay for such improvements as were made by the original home- 
steaders In other words, if he wants to sell, all he can sell is his own 
improvements and give the property back to the Government if he does 
not want to keep it ? 

Dr. Taylor. I have not given close thought to the details of dealing 
with this, but I am sure it is a fertile suggestion and worth considera- 
tion. 

I think there are many ways, ranging in this situation all the way 
from Government ownership and secure leases, to protected situations 
such as you have described, that would ameliorate this condition and 
prevent it from 

The Vice Chairman (interposing). You could put a condition 
forcibly in the deed to run with the land, that it was never to be owned 
by anybody who didn't occupy the land, or any condition you want 
to put in. 

Dr. Tatlor. It seems to me 

The Vice Chairman (interposing) . And limit the ownership. 

Dr. Taylor. It seems to me, Congressman, there are real possibilities 
in modifications which will protect the working farmer. 

The Vice Chairman. In other words, your reasoning is, if there is 
any necessity in the first instance to have a 160-acre limit, it ought to 
run with the title ? 

Dr. Taylor. There is some reason for the continuance. I would 
avoid excessive rigidities because in the course of a generation some- 
what different conditions may obtain. The development of machines 



17078 CONCENTRATION OF ECONOMIC POWER 

which we do not now foresee, or the development of different t3'pes of 
culture, different crops, and so forth, might alter it so that 160 acres 
might not always bo correct. But the assurance of 

ECONOMY OF OPERATING LAIIGE X NITS 

The Vice Chairman (interposing). You could put a maxiir-nm on 
it. Doctor, let me ask you one questic^ • Does the fact that Ir.rger 
ownerships make it possible better to market the product of th.'. soil 
cut any figure in the advantage of bigger ownerships over little own- 
erships ? 

Dr. Taylor. I think that an integration, which has gone far in 
California, and which I described earlier, is a factor in the economy 
of operation by large industrialized outnts. 

Tlie Vice Chairman. You would have to have a large acreage to 
maintain a big processing plant that would handle your own 'com- 
modities ? 

Dr. Taylor. Yes. 
■ The Vice Chairman. And then, having got a big processing plant 
and a big acreage, you could probably maintain a marketing organiza- 
tion to give you economical distribution. 

Dr. Iaylor. Yes, I think those things work together. 

The Vice Chairman. Any further questions ? 

Dr. Anderson. Mr. Chairman, Mr. Elliott, counsel for the Interna- 
tional Harvester Co., has asked permission to make a very b^ief state- 
ment in counter to Dr. Taylor's difference with Mr. McCorniick's testi- 
mony this morning. If it is the pleasure of the committee that he make 
such a statement 

The Vice Chairman. Anything to stir up a row. This meeting is 
getting mighty tame. 

Dr. Anderson. This witness has not been sworn. 

The Vice Chairman. Do you solemnly swear that the testimony you 
are about to give shall the the truth, the whole truth and nothing but 
the truth, so help you God ? 

Mr. Elliott. I do. 

TESTIMONY OF WILLIAM S. ELLIOTT, VICE PRESIDENT, INTER- 
NATIONAL HARVESTER CO., CHICAGO, ILL. 

Dr Anderson. Mr. Elliott, I presume you refer to my quotation of 
Mr. McCormick's statement thnt the recent technological advances in 
farm machinery, in which the family size farm will greatly benefit, 
may well become a bulwark to preserve this important part of our 
social culture. Mr. Taylor dissented from that opinion, giving his 
reasons. 

I take it you want to dissent from his dissent. 

Mr. Ellioti'. That is the only reason I wanted to say anything. Mr. 
McCormick had to leave and asked that if there was anything I thought 
should be added, I should dO' so. 

Dr. Taylor has expressed the directly opposite opinion that the new 
farm machinery, which is much cheaper and smaller than has ever been 
offered before, so far from helping to preserve the small farms, is going 
to aggravate the movement the other way. He gave onl}^ one reason 
for that opinion, which was that the statements put in the record by 



CONCENTRATION OF ECONOMIC POWER 17079 

the Department of Agriculture, or some of their statements tended to 
show that the investment in farm machinery was so high that larger 
acreage had to be acquired by the owner to make it pay. I wanted to 
call attention 

The Vice Chairman (interposing). Your statement — pardon me, 
Mr. Elliott — as I understood it, was that it would tend toward a dis- 
position on the part of the owner of the machinery to use it to the full 
capacity of that machine to operate. 

Mr. Elliott. That is another way of stating my same point. I 
wanted to call attention to the fact that all the statements put in the 
record yesterday by representatives of the Department of Agriculture 
related to the larger machinery, to the 320-acre wheat farm, the 200- 
acre corn farm, both of which would use a two-plow tractor or larger, 
and that nobody has any figures as yet on this recent development 
under which a farmer would buy a small tractor and a combine for 
less- than he could buy a tractor and a binder before, I realize Mr. Mc- 
Cormick is expressing an opinion on an undemonstrated thing, but 
I think Dr. Taylor will also agree that the fact that a man with a 
two-plow tractor will want to enlarge his operation in order to use 
it to the fullest capacity, may not be true of this smaller tractor which 
is for farms from 50 to 100 acres. 

That is an undemonstrated fact as yet. 

Now, we are not alone in developing that theory. There are sev- 
eral — I am no agricultural economist — ^but there are several for whom 
Dr. Taylor would have the highest respect who fully agree that this 
small machinery development which is very recent represents an 
eflfort oh the part of the manufacturers to meet the desire of the fam- 
ily sized farmer, not to be put out of business, but to have shorter 
hours and an easier life. That machinery is produced in response 
to his demand. 

It has not been demonstrated that this is going to lead to larger 
acreage and it should not, because the machinery itself is adjusted for 
use on the single small farm. 

I just wanted to say that there is no aata on that yet, Dr. Taylor. 
I am not disagreeing with you as to the effect of the larger machinery 
in some places. 

I should like to ask, if I may, that we might have peimission to 
put into the record some statements of our own as to our estimates of 
the relative cost of horse farming and power farming.^ We find the 
industry in a curious position. Mr. Johnson of the Department of 
Agriculture put figures in here yesterday to show that the farmer 
made no more money out of tractor farming than he did out of horse 
farming, and today Dr. Taylor shows that it is so much more eco- 
nomical that it is sweeping the country and will go further. 

Now, it is quite possible that' technological progress may -produce 
tendencies running in different directions. The larger farm machin- 
ery, the problems of marketing, and the association of farmers who 
farm in California may produce one tendency. The technological ad- 
vance of this small machinery may be the very thing which persuades 
the family-size farmer to stay there and keep on rather than go some 
other place. 

^ See data submitted by Mr. Elliott under date of July 9, 1940, which appears In the 
appendix on p. 17597. 



17080 CONCENTRATION OF ECONOMIC POWER 

I do not think we are going to keep him there by depriving him of 
the benefits of technology and by telling him, "Your job is "to work 16 



hours a day, with a back-breaking job." 
I think tne whole tendency or i 



making his hours shorter and giving 
him some of the benefits which other parts of our population are get- 
ting, is going to make it a more livable life which he will try to preserve. 

The Vice Chairman. But anyway, it seems to be fairly reasonable 
that you probably wouldn't make the machine unless there was some- 
body who wanted to buy it? I mean, that is fairly reasonable. 

Mr. Elx>i6tt. We think the farmers know 50,000,000 Frenchmen 
can't be wrong. The farmers know perhaps more than some other 
people [laughter] about what they save by buying that machinery, 
and we are asking permission to put in tables here of actual farm 
operations. 

The Vice Chairman. Do those tables show whether he is getting 
lazier or greedier ? 

Mr. Elliott. Well, I don't know whether you would say that, Mr. 
Chairman. We don't call our laborers, our factory laborers, lazier 
because they now have a 40-hour week instead of a 50, and I don't 
believe anyone in this room would deny the ri^ht of the farmer to get 
his hours shortened, if it can possibly be done without bad social effects ; 
and in itself, it is a good social effect. 

The Vice Chairman. We understand, and I think the committee 
can appreciate the strength of the poinfs. In other words, if you can 
make life on the farm easier, you have a greater tendency to hold the 
farm boy on the farm than to go to town and work in a job where it 
is more mechanized. There are many different aspects to the thing. 

Now, Dr. Taylor — and this may be off the record. 

(Off the record.) 

Do you want to say anything further. Dr. Taylor ? 

Dr. Taylor. Well, Dr. Anderson invited me to return to the stand 
and I would like to say just one or two things. 

The Vice Chairman. Well, go ahead. 

Dr. Taylor. As a man who has husked corn and plowed corn with 
a walking plow behind a team of mules, I am fully appreciative of 
what the manufacturers of machinery are doing, to make labor less 
arduous. 

I think the farmers sense their economic increase pretty well when 
they buy the machines. I think that that is the driving force behind 
the social and economic effects on others, of which I am so appreheli- 
sive. So I recognize the force and do not deny the fact that the farmers 
buy the tractors and other machines because it is good for them to 
do so. 

The Vice Chairman. Well, now, that looks like a pretty good quit- 
ting point, doesn't it ? Let's quit. 

Dr. Taylor. May I add just one more thing? May I end on a note 
of harmony also? 

There are ways of holding working farmers oin the land, as we have 
discussed a few moments ago, a variety of ways, and one form of do- 
ing that, to which I think we should give more consideration than we 
have been disposed to give it in the past, is the cooperative farm. 

There are a number of cooperative farms in the country and we are 
beginning to get records on them. I am going to cite only one, not to 



(X)NCENTRATION OF ECONOMIC POWER 17081 

generalize or say that the records of all of them are of that kind, but to 
indicate that they seem to be worthy of very serious consideration. 

In San Joaquin Valley, where we recently had so much trouble that 
the Senate came out to look us over, the agricultural employers felt so 
aggrieved and so just in their cause that they felt, in their own words, 
it was necessary to take rubber hose and fan belts to drive striking 
cotton pickers out of the city park of Madera. (I am quoting now 
from the record of the Senate committee.)^ 

Very close to that same area, we have a cooperative farm. The cot- 
ton strikers last fall were asking for more than 80 cents a hundred, 
which is what the agricultural employers felt was all, in justice, they 
could afford to pay and all that they should pay. 

Two counties away was this cooperative farm, operated by the Gov- 
ernment. The 15 families on that farm (this I draw from the records 
of the Senate committee also, the testimony of Mn Packard)," these 15 
families made their monthly wages as participants in the farm. Out 
of the profits of the year's operation, after meeting all of their obliga- 
tions to the Government and to everyone else, they put aside $500, ap- 
proximately, in an educational fund, and $2,500 in a reserve fund in 
order to finance their operations the next year independently of the 
banks. In addition to that, they allocated $1,200 to pay the cotton 
pickers, who were employees and not members of the cooperative and 
whom they had already paid 90 cents, $1, or even more, when the agri- 
cultural employers felt that they could not pay more than 90 cents. 

Having paid them 90 cents, $1 and even more, for 100 pounds of 
cotton picked, they allocated from their profits something like $1,200 
for distribution among 201 cotton pickers as a bonus. The amounts 
ranged from, I believe, 7 cents to $55. 

It seems to me evidence of that kind suggests that in our eflfort to 
hold working farmers securely on the land, we should give more atten- 
tion to the possibilities of domg it through cooperation, than we have 
given in the past. 

Dr. Anderson. The last three charts in Dr. Taylor's brief will be 
admitted to the record. 

(The charts referred to were marked "Exhibits Nos. 2689 to 2691" 
and are included in the appendix on pp. 17456 and 17457-17458.) 

The Vice Chairman. I am afraid we are going to have to adjourn. 
We are very much obliged to you. 

We stand adjourned until 10 : 30 tomorrow morning. 

(Whereupon, at 5:45 o'clock, the hearing adjourned until 10:30 
in the morning of the following dayj April 25, 1940.) 

1 See hearings before the subcommittee of the United States Senate Committee on 
Education and Labor, Part 51, p. 18685. 
= Ibid, Part 50, p. 21823. 

124491— 41— pt. 30 57 



I 



I 



I 



INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER 



I 



THURSDAY, APRIL 25, 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 24, 1940, in the Caucus Room, Senate Office Build- 
ing, Senator William H. King, of Utahj presiding. 

Present: Senators King (acting chairman), and O'Mahoney (chair- 
man) ; Representative Williams; Messrs. Kades, O'Connell, Berge, 
Pike, Lubin, Kreps, and Brackett. 

Present also: William T. Chantland, Federal Trade Commission; 
S. Abbot Maginnis, Department of Justice; and Dewey Anderson, 
economic consultant to the committee. 

Acting Chairman King. The committee will be in order. Call your 
first witness. 

Dr. Anderson. Some 3 weeks ago we started these hearings with an 
over-all view of the situation presented by Dr. Kreps and Mr. Watson 
Davis, who reviewed what was occurring in the field of industry and 
agriculture with respect to scientific and technological advance, and 
pointed out some of the problems which confront us, in an attempt to 
solve this unemployment situation. In the last 2 weeks we have pre- 
sented a whole series of what amounted to case studies of the situation. 

Today we propose to examine what can be done about this big prob- 
lem of training and placing and retraining and replacing the labor 
force of the Nation. We have assembled a panel of witnesses, each 
expert in a particular field. They iare educational men and applied 
educational or vocational-educational experts, whose business it is to 
deal realistically with the training and placement of the youth and th^ 
adult population of the Nation. 

Each member of the panel will speak on a particular phase of the 
topic. The first witness will be Dr. John K. Norton, formerly head 
of the division of research of the National Education Association here 
in Washington for many years, and for several years now professor 
of education ard an expert in the field of educational finance and school 
support at Teachers College, Columbia University. 

Acting Chairman King. That is not the City College that Bertrand 
Russell wanted to be connected with ? 

Dr. Anderson. No ; it'is not. 

The second witness in the panel is Dr. Harold F. Clark, an economist 
who is now professor of economics at the same university. The third 
witness is Dr. J. C. Wright, Assistant Commissioner in charge of Voca- 
tional Education of the United States Office of Education. The fourth 
witness will be Dr. William G. Carr, executive secretary of the Educa- 

17083 



17084 CONCENTRATION OF ECONOMIC POWER 

tional Policies Commission and research director of the National Edu- 
cation Association. We hope to follow through with this panel today. 

We do have, however, a witness who was not able to come at his 
scheduled time, Mr. William Green, who will appear this afternoon. 
It may be necessary, therefore, to carry some of today's witnesses over 
to tomorrow. 

Acting Chairman Xing. By that you mean that Mr. Green may not 
be callea? 

Dr. Anderson. Mr. Green will be called in any case as the first wit- 
ness this afternoon, after lunch. 

(Senator O'Mahoney assumed the Chair.) 

Dr. Anderson. Our first witness, then, this morning, in this discus- 
sion of education and its influences in placing the Tabor force and 
raising the economy to a prosperity level, is Dr. John K. Norton, whom 
we will ask to come to the stand at this time. 

Before Dr. Norton is sworn, Mr. Chairman, the Educational Policies 
Commission, a commission of professional and lay people brought to- 
gether under the auspices of the National Education Association to 
study the problem of education in a democracy and the relationships 
of education to recovery, has prepared and presented to us a series of 
charts which are pertinent to the discussion of the day. I would ask 
that they be accepted as exhibits, as they are basic material for our 
study. 

The Chairman. You want them entered in the record ? 

Dr. Anderson. That is right. 

The Chairman. Without objection, it is so ordered. 

(The charts referred to were marked "Exhibits Nos. 2692 to 2718" 
and are included in the appendix on pp. 17459-17485.) 

Senator King. May I make one inquiry before you start? Do you 
intend to discuss the question of education for — what shall I say? — 
farming and for irrigation and for land development, or is it merely an 
intellectual excursion we are going to enter upon this morning ? 

Dr^ Anderson. I am glad you asked the question. I believe these 
men are something extraordinary in the field of educators, in that they 
will hew to the practical line all the way through. One of the wit- 
nesses will deal specifically with the matter of vocational education of 
an applied kind, the training of young and old so that they can do the 
work of the workaday world . 

Mr. Chairman, Dr. John K. Norton, professor of education of 
Teachers College, the first witness, is ready to be sworn. 

The Chairman. Do you solemnly swear the 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 ? 

Dr. Norton. I do. 

TESTIMONY OF DR. JOHN K. NORTON, PROFESSOR OF EDUCATION, 
TEACHERS COLLEGE, COLUMBIA UNIVERSJTY, NEW YORK, 
N. Y. 

Dr. Anderson. Dr. Norton, you are professoi of education of 
Teachers College at Columbia University? 
Dr. Norton. Yes. 

Dr. Anderson. How long have you been professor of education ? 
Dr. Norton. A little over 10 years. 



CONCENTRATION OF ECONOMIC POWER 17085 

Dr. Anderson. What is your specific field of study and teaching ? 

Dr. Norton. Educational administration and educational finance. 

Dr. Anderson. You have published books in the field of finance? 

Dr. Norton. Yes ; such things at Wealth, Children, and Education.^ 
and other things. 

Dr. Anderson. You are also a member of the Educational Policies 
Commission ? 

Dr. Norton. Yes. 

Dr. Anderson. And as such are responsible for the writing and 
publishing of this very recent work, Education and Economic Well- 
Being in American Democracy ? ^ 

Dr. Norton. Yes; with the cooperation of other members of the 
Commission, economists, and other people. 

Dr. Anderson. This is one of the basic studies being made by edu- 
cators and economists ? 

Dr. Norton. It is one of the 4 major reports issued by the Educa- 
tional Policies Commission to date. 

Dr. Anderson. I think the committee has been supplied with copies 
of this volume, and I hope they have had time to review it. 

The Chairman. The members of the committee have not yet re- 
ceived copies of it, nor have they received copies of the charts. I 
think they are on the way up. 

Dr. Anderson. The material you are presenting is on the subject 
of education and economic well-being, and I take it you are laying the 
groundwork for the discussion that will follow during the day ? 

Dr. Norton. That is true, although I will particularly focus my 
remarks on the relationship of education to production and produc- 
tivity. 

Dr. Anderson. Would you proceed? 

Dr. Norton. Mr. Chairman, members of the committee, the Educa- 
tional Policies Commission recently issued a report dealing with the 
interrelations of education and economic well-being. In preparing 
this document, the Commission sought the counsel of economists, edu- 
cators, and other competent scholars. The technical literature of 
economics, education, and other fields pertinent to the investigation 
was carefully examined. As a result of this work, which extended for 
a period of several years, we are in a better position than ever before 
to attempt the difficult task of assessing the relationship of educa- 
tion and economic well-being. 

potential production of the united states 

Dr. Norton. I will begin by pointing out that one of the striking 
features in the development of the United States has been the enor- 
mous increase in its production, both actual and potential. When the 
Nation was founded, it had an annual current income of some $677,- 
000,000; that is, total income, social income, of all the people, less 
than $1,000,000,000. Now it receives a yearly income which, even in 
years of limited prosperity, runs somewhere between $60,000,000,000 
and $70,000,000,000, and which in prosperous years is between $80,000,- 

^ John K. and Mary A. Norton, Wealth, Children, and Education, New York, 1938. 
^ Educational Policies Commission, Education and Economic Well-Being in American 
Democracy, Washington, D. C, 1940. 



17086 (X>NCENTRATION OF ECONOMIC POWER 

000,000 and $90,000,000,000. Furthermore, competent researches by 
the Brookings Institution group and others have demonstrated that 
without expanding existing plant and resources the national income 
could be increased more than $15,000,000,000 above even the most 
prosperous years. 

Now, I recognize clearly that the problem of realizing that potential 
productivity is an exceedingly difficult and complex one, and I have 
come here to offer no quick and easy panaceas for taking care of that 
problem. 

I rather am interested in analyzing one element which doubtless 
will be, must be, in the picture when the problem is met. I refer to 
education. 

Per capita production and per capita income increased several fold 
during the past century in nations like Great Britain and the United 
States. During the last 70 years population in the United States in- 
creased threefold, while the physical volume of goods produced and 
consumed increased more than ninefold. 

The Chairman. What is the authority for that statement ? 

Dr. Norton. Investigations of the Twentieth Century Fund in one 
of their recent publications, and other sources. 

The Chairman. The Twentieth Century Fund staff made an analy- 
sis of authentic figures ? 

Dr. Norton. A competent staff of economists an dother experts. 

The Chairman. So that this conclusion is drawn from those figures 
which are taken from authentic statistics ? 

Dr. Norton. I believe that they are drawn from absolutely reliable 
statistics properly interpreted, yes. 

A primary factor in this phenomenal expansion of productivity has 
been the application of science, invention, and the power-driven ma- 
chine, and that whole complex of forces we sometimes call technology, 
to the processes of agricultural and industrial production. Education, 
and here is where we get down to our topic more directly, is also in 
the picture. The purpose of this statement is to examine the relation 
of education to increasing production and increasing productivity. 

If you will examine economic literature you will find that economists 
generally recognize four basic factors in the productive process. 
These are labor, the human factor, natural resources, capital, and 
management. A properly planned and administered system of edu- 
cation makes one of its greatest contributions to economic well-being 
because of its effect on the first of these — namely, labor. In the United 
States this contribution has been exercised through various means, 
and I would like briefly to point out some of those in outline form as 
a basis for further discussion. 

First, and I put this first one advisedly, the development of an open- 
door policy in education, we might say the American way in education, 
served as a driving influence throughout our history to encourage each 
individual to rise through his own efforts. As Thomas Nixon Carver, 
well known economist, has said : 

The greatest stimulus that can be given Xo the human spirit is to serve notice 
upon it that its achievements are to be limited solely by its own native power, 
* * ♦ that neither birth nor family prestige will count for much, and that 
humble birth and lack of prestige are no handicap to the person of ability and 
industry. This has made the typical American a model of energy. Our public 
school system has provided him a free chance to train whatever native ability 
he possesses. 



I 



CONCENTRATION OF ECONOMIC POWER 17087 

We have done that in education at least to a degree. We need to 
do it more effectively in the future, but we have done it to a degree 
that has made education an important factor m developing individual 
initiative. 

With the passing of each decade, graduation from high school and 
even more extended schooling are prerequisite to admission to a grow- 
ing percentage of occupations. My point here is that actual formal 
schooling, the ability to answer "Yes" when an employer, asks you 
whether you are a graduate from a high school, in the practical worka- 
day world — and one could give many illustrations of this — is becom- 
ing a prerequisite to employment. 

In some industries that one is surprised to hear about they are even 
calling for college graduation. 

Energy and graduation from the "school of hard knocks" no longer 
promise success in most callings. Maybe in some the exceptional in- 
dividual may get by with graduation from the "school of hard 
knocks," but not for the rank and file. Opportunity more and more 
lies along the route of extensive general education and specific voca- 
tional or professional training. The doors of educational opportunity 
must be wider than ever before if all Americans are to feel that no 
insuperable obstacles prevent the individual from realizing the best 
that is in him. Such a feeling must prevail if the dynamic economic 
effects of education are to be continued. 

If you are interested in future evidence to support that whole gen- 
eral thesis, we would be glad to come back to it later. 

Senator King. May I interrupt you ? 

Dr. Norton. Yes. 

Senator King. Have you elaborated upon the views expressed by 
Herbert Spencer in his great work in education and other classical 
writers of that period, one or two from Germany? 

Dr. Norton. You refer to such things as education's worth ? 

Senator King. In part ; yes. Of coui se, I wouldn't want to confine 
is to a materialistic eduction; there must always be the moral and 
spiritual, a factor which, after all, is basic in any proper education, 
but Herbert Spencer devoted some of his great ability to the -elabora- 
tion of what education is 

Dr. Norton. Yes. 

Senator King (continuing) . What it must do, and he discusses the 
various spheres of activity in which the human being may operate. I 
was wondering if back of your thesis and the views of those with 
whom you are associated, the exposition made by Spencer has any 
recognition. 

Dr. Norton. I would say yes. In fact, almost any fundamental 
idea if you trace it to its roots often goes back a great many years or 
centuries, even. If you take material of the type that Spencer issued, 
and The Wealth of Nations, of Adam Smith, who -a century or more 
ago pronounced in these areas, and add to that the experience of a 
century (they were hypotheses when they stated them), I think we 
have a right to say that many of those ideas now have to a consider- 
able degree been proved in the practical laboratory of social develop- 
ment. 

Second, education has increased productivity by directly or indi- 
rectly contributing to the occupational efficiency of the individual 
worker. As the number and proportion of unskilled laborers have de- 



17088 CONCENTRATION OF ECONOMIC POWER 

clined, the number find proportion of semiskilled, skilled, and techni- 
cally trained workers has increased. In fact, the economic growth of 
the United States may be epitomized in the fact that a growing per- 
centage of trained workers have used more and more effective methods 
of work. I would emphasize both of those, trained workers using more 
effective methods of work, as responsible for the tremendous increase 
in productivity that has occurred in the industrial revolution. 

Mr. O'CbNNELL. Wlien you speak of trained workers you are using 
that phrase, I take it, as meaning skilled in doing a particular job? 

Dr. Norton. I am using it in a very broad sense, here meaning every- 
thing from professional workers to semiskilled workers. 

Mr. O'CoNNELL. AVould it have the same significance as the old skilled 
worker, meaning a craftsman or master mechanic? I have in mind 
that we have had a substantial amount of testimony here by other 
witnesses to the effect that mechanization resulted in — the word used I 
think was "degrading" the quality of the worker in that the type of 
training that was required was something that could be acquired in a 
period of maybe 30 days, and while they were in a sense highly trained 
workers they were not comparable to the old skilled mechanic at all. 
I was curious to know on what basis you came to the conclusion that 
the number and proportion of semiskilled, skilled, and technically 
trained workers has increased. It seemed to me that it might be that 
you would construe all the people on a production line in an automobile 
factory as technically trained workers and yet not skilled in tlxe old 
traditional sense. 

Dr. Norton. I am referring to evidence such as is presented on 
pages 84, 85, and 86 of this report, and I would say further that 

The Chairman (interposing). You are referring to the report of 
the Educational Policies Commission ? 

INCREASE IN OCCUPATIONAL TTAINING 

Dr. Norton. Yes ; in which we cite a number of scientific investiga- 
tions. In discussing the general trend of that evidence I would say 
that it is very important, as you have indicated, to define what area of 
occupations you are discussing. First, dealing with the area that we 
call manufacturing, in which the highest degree or percentage of the 
automatic machine has come into the picture, I tried to find every in- 
vestigation on that subject that had been made, and after looking them 
all up and very carefully reviewing the evidence, I think it is fair to 
say that it is inconclusive. Some investigators say that even in manu- 
facturing the total amount of training must be more, if you consider 
all workers, than it was a decade or 2 or 3 decades ago. Some say that 
it is not as much. Quite frankly, when you consider all investigations 
it is inconclusive if you think only of the field of manufacture. But 
please have in mind that workers in manufacturing constitute a minor 
fraction of all workers, and a declining proportion of all workers. 
Now, if you will direct your attention away from mechanized industry 
to occupations as a whole, the evidence there is quite clear and definite 
that the total amount of training per worker on the average is defi- 
nitely increasing, and from all reasonable interpretation of present 
trends it is going to continue in the future. So it is very important to 
distinguish between one segment of occupational life, manufacturing, 



CONCENTRATION OF ECONOMIC TOWER 17089 

and all occupational life involving everything from the professions 
down. 

Mr. O'CoNNELL. By training you mean training which is rather 
directly connected with the particular work that the man does as 
distinguished from general education? 

Dr. Norton. Yes; although you can leave general education out 
of the picture altogether. M^^ emphasis here is on what we should 
call direct occupational trairxng. 

The most immediate and apparent economic outcome of educa- 
tion is where it provides specific training for a trade or profession, 
which you were just asking about. The objective here is to give 
each worker the general and the specific training which will permit 
him to work, in whatever occupation he may find himself, in an 
intelligent and eflEicient manner. Such training may be provided 
through a variety of agencies — trade schools, public or private, as 
well as industry itself, or labor may be in the picture. The important 
factor, however, is that the provision of such training has positive 
economic effects. There is complete agreement on this among econ- 
omists. I quote one : 

Without education one is likely to be limited to unskilled occupations. With 
education he is able to find more remunerative employment. The general effect 
of more widespread schooling is to increase the ranks of skilled workmen and 
to decrease the number of people capable only of cruder manual work. 

A series of factors are now operating in American life which make 
carefully planned and effectively organized occupational training of 
first importance. The decline in immigration has largely cut off our 
supply of skilled workers from Europe, and it happens that many 
of them who came here 2, 3, and 4 decades ago are beginning to reach 
the age of retirement. The percentage of occupations in which 
definite training is either desirable or imperative is increasing. I am 
referring now to occupations as a whole. It seems probable that 
education can and should make increasing contributions to produc- 
tivity in the future through expanding and perfecting its training 
of youths for occupational efficiency. I would emphasize that point 
of perfecting its training. I think in many respects, as in other 
areas of life, we have fallen considerably short of the ideal of doing 
what we should, so I am not arguing for just more of the( same 
kind of education we have had in the past ; I would rather urge that 
we need more of a different kind of education. In this publication 
that has already been brought to your attention, you will find two 
chapters right near the front of the book and two very important 
chapters dealing with the kind of general education for economic 
well-being. Dr. Carr, one of the later witnesses, is going to deal 
with that particularly, and Dr. Wright will be particularly con- 
cerned with another chapter, Kind of Occupational Education for 
Economic Well Being. 

However, it is important that education to increase efficiency of labor 
should not be conceived in narrow terms. The effective operation of 
enormous aggregations of labor and capital, characteristic of con- 
temporary economy, demands high types of vocational and economic 
intelligence. I am referring there both to occupational and general 
education. Improved organization and industrial techniques can be the 
outgrowth of suggestion and initiative on the part of the rank and file 
worker, as well as the product of research and managerial ingenuity. 



17090 CONCENTRATION OF ECONOMIC POWER 

The general pattern of organization in a business enterprise is likely to 
be different, as well as more efficient, when the manager is able to as- 
sume a degree of judgment and initiative on the part of the worker, as 
opposed to the ability merely to follow simple directions in a routine 
manner. That was brought very strikingly to my attention repeatedly 
on a little journey that took me through the Orient here 2 or 3 years 
ago, in which I visited mills in Indian and China and talked with man- 
agers and talked mith them particularly as to the problem that is in- 
volved in the fact that the typical worker they have to deal with has 
little education. Even in mechanized plants such as cotton mills — 
they emphasize that what they can do even in that highly mechanized 
process is very much conditioned by the general economic and educa- 
tional background of their workers. One gets a much clearer picture 
of some of these things that we take for granted in our country when 
one goes to countries in which the general level of education is not so 
high. 

One industrial leader from a background of practical experience in 
directing a large business organization has stated : 

* * * the effectiveness of individual capacity to produce, or to manage pro- 
duction, is determined by the degree of social cooperation, and that this coopera- 
tion depends primarily upon education * • * 

I am quoting from Chester I. Barnard, as you notice. 

High productive eflBciency is impossible without widespread education. This is 
not simply a matter of securing leaders in science, invention, industrial organiza- 
tion, statecraft, etc., by an educational screening of the masses. No greater error 
could be made, it seems to me, than to adopt the notion too commonly held that 
either political or economic effectiveness is chiefly a matter of leadership. When 
generals can find no colonels, they must become mere captains. Captains are 
limited by the character, spirit, and ability of the men they command. The in- 
tensive training given to recruits is significant. 

Now a third area. Education increases productivity by promoting 
occupational mobility. It is an accepted tenet of economics (and this 
idea occurs over and over again in standard economic literature) that 
the ability of labor to secure the training needed to transfer from 
crowded and low-paid occupations to those less crowded arid better- 
paid tends to increase the national income. It is simply that if the 
individual worker on the average is working with greater skill and 
is producing more, by definition the national income is increased. 
When workers of energy and capacity must continue in low-paid com- 
mon labor because of inability to secure training requisite to entering 
higher-paid callings, the national income tends to be decreased. 

Occupational mobility is of increasing importance in a dynamic 
economy in which new discoveries are continually creating new voca- 
tions, many of which involve technical training. Education in the 
past has assisted in thinning out the overcrowded ranks of unskilled 
labor by increasing the proportion of workers in skilled and profes- 
sional occupations. Its contribution in this area in the future should 
and can be made more effective. There is a whole series of ways in 
which that can be more effective. We give them in this publication, 
such matters as the collection of much more significant and definitive 
data as to what the occupational trends are, so that vocational advice 
which is pertinent can be given to high school youths, information as to 
the kind of training which is required, so that the kind of traiiiing 



CONCENTRATION OF ECONOMIC POWER 17091 

given in the school will be that which it can give best, leaving it to 
other agencies to give the ti^ming that can be given best by other 
agencies. 

POSSIBILITY OF DISCRIMINATION IN VOCATIONAL TRAINING 

The Chairman. The objection has been made in the past to voca- 
tional training, particularly for mechanical and industrial putsuits, 
that it would tend to limit the opportunities for advancement of those 
who take the vocational training rather than broader training in what 
in the old days used to be called the humanities. 

Dr. Norton. I don't believe you can speak in easy generalities in 
dealing with that problem. I begin by saying that every citizen, if 
you are going to assume a democratic order, needs a certain amount of 
general citizenship training, and he needs that particularly in the 
economic realm. We have just eliminated from the census the ques- 
tion about illiteracy because education has pretty well conquered the 
problem of what we call alphabetical illiteracy. I would say we still 
have the great problem of conquering what we call economic illiteracy. 
That applies to all workers. When you go beyond that and get into 
the more specific vocational or occupational training, I don't believe 
you can generalize too easily. 

The Chairman. Well, does vocational training^ vocational educa- 
tion, tend to diiferentiate youth into classes according to the economic 
standards of the parents ? 

Dr. Norton, It should not if there is proper vocational guidance, 
because the area into which a youth goes should rest upon, first, 
knowledge of the various areas in which he might go, factual infor- 
mation, and, second, knowledge of his capacity and aptitudes and 
industry and all of those things. 

The Chairman. You started out by quoting from Thomas Nixon 
Carver. 

Dr. Norton. Yes. 

The Chairman (continuing) : 

That neither birth nor family prestige will count for much, and that humble 
birth and lack of prestige are no handicap to the person of ability and energy. 

Now, I take it that you quoted that statement from Carver with 
entire approval. 

Dr. Norton. I did. 

The Chairman. It still remains the general desire of all American 
educators 

Dr. Norton (interposing). The ideal. 

The Chairman. But do you not tend to divert from the ideal when 
you undertake to establish a different kind of education for different 
kinds of children ? 

Dr. Norton. No ; I don't believe 

The Chairman (interposing). And liow are you going to determine 
the kind of children which should take this particular training of 
which you speak? 

Dr. Norton. I would say first generally that I do not believe that 
there is anything undemocratic in the principle of differentiation, 
that is having different kinds of education. Now it is true that in 
the field of general education up to a considerable level, up, to a 



17092 CONCENTRATION OF ECONOMIC POWER 

relatively high level, limited only by capacity and such factors, we 
should have the same kind of education, the same general cultural 
background, but along about the end of high school, maybe before, 
certainly not very much after (it depends on the individual), there 
should be pretty careful assessment of the vocational opportunities 
of the country and the capacities and diligence and all that of the 
individual child, and out of that should come the best possible guess 
as to where he will achieve greatest success. Please don't misunder- 
stand me. I do not mean T would have any board say, "You have 
to go this way." That is not what I am arguing for. I am rather 
saying that you should put in the possession of the parents f a 
child and of the youth himself by the time he hat "^ached 17, 1' or 
19 years of age, the information on which he can maKe an inlelligent 
choice himself. Now we have done that to a very limited extent. 

We should do it far more, and I would say that to the extent that 
3 ou do that you encourage each person to rise through his own energy 
through the areas of work where he is most likely to rise. 

The Chairman. Then your idea is that the preliminary education 
and high-school education should all be upon the highest cultural 
basis and for all children alike. That is, the public-school system 
should be so arranged that all children in the community should 
receive the same high cultural training, the very best that the com- 
munity can afford. 

Dr. Norton. And I would go further and say also the very best 
occupational training for them. 

The CirAiRMAN, Yes; but I was leading now to the point of the 
introduction of the vocational training. As I understand your state- 
ment now, it is that that vocational training should not be imposed 
upon youtn, but should be opened as an opportunity to him after this 
cultural training for all has been completed. 

Dr. Norton. No ; I wouldn't cut it off that way. 

The Chairman. I didn't intend to imply that it was being cut off. 

Dr. Norton. They would run parallel. You would begin prevoca- 
tional education, some thinking about what they were going to do 
in vocation, perhaps even as early as 13 or 14 or 15 years of age. You 
begin the actual vocational education at age 16, 17, 18, depending 
upon where the youth was going and his capacity, and certainly all 
would, by the time they were through high school, have some kind 
of an idea of the general route they were taking. 

The Chairman. In any event, the choice would lie with the student 
and not with the school board or the school master or whatever. 

Dr. Norton. I would say in our society, in a democratic society, the 
final decision would rest with the student and his parents. 

The Chairman. Now, that is a qualification. You say, "the final 
decision." What preliminary decision would not rest with them ? 

Dr. Norton. I wouldn't say that things would be called preliminary 
decisions; I would say that the function of the school is to collect 
the most accurate, unbiased data bearing on the whole situation, both 
occupations and his capacity, honestly interpret them, and then try 
to show him exactly where the best opportunities are for him, with 
the hope that he will make the proper choice. In most cases where 
we have better develoj)ed programs they do take the proper choice. I 
Buppos^ gometimes mistakes are made, human beings always make. 



CONCENTRATION OF ECONOMIC tOWEtl 17093 

some mistakes, but in the long run there will be far fewer than if we 
give them no information and have a situation such as exists in some 
places today. 

The Chairman. In any event, you want to preserve complete 
freedom of choice on the part of every student. 

Dr. Norton. Yes. 

The Chairman. So that there will be no measuring of the quality 
and kind of education by the economic level of the parents. 

Dr. Norton. Right, or putting it negatively, I would certainly not 
want to make any change in the school system that would be in the 
direction of making it a class-school system, the type that they have 
had in Europe, and still have in some places. 

Senator King. Dr. Norton, in your very interesting, instructive 
presentation thus far you have frequently used the word "cultural," 
cultural teaching, cultural education. What definition do you give to 
the word "cultural"? 

Dr. Norton. Well, perhaps a better term, one that is used more in 
education, would be general education. By general education I 
mean preparation for all of those responsibilities of citizenship, both 
individual and group, which lie out of the field of specific training 
for a vocation or occupation. 

Senator King. You would not exclude the preparation for farm- 
ers or blacksmiths or persons engaged in various manual pursuits? 

Dr. Norton. No; I would say that those parts of our population, 
just as all parts of our population, should have full opportunity for 
cultural or general education as well as for vocational education. 

Senator King. Do you think that the educational trend is toward — 
I don't use the term offensively, of course — the white-collar profes- 
sion or the white-collar class, with a growing disposition to avoid 
manual labor, the manufacture of furniture, the manufacture of 
beautiful things with the hands, as our fathers and our forefathers 
did? I remember in my State we had some fine English cabinet 
workers who built a ^eat organ, one of the finest in the world; they 
didn't have the machinery they have these days. We had men there 
who would make the finest violins, and their skill and technic was 
great, they had been taught that from youth — men who made the 
finest tables and furniture that would be an ornament a thousand 
years from now. I was wondering if we are not drifting away from 
the concept that labor by hand is honorable and involves cultural 
development and appreciation of the fine cultural things of life. 

INCREASED EMPHASES ON SKILLS 

Dr. Norton. If you put it on the basis of what is the trend, I do not 
think the trend is in that direction. I might adjnit that in the past, 
due to a series of factors which we won't review now, there has been 
that emphasis in many schools. I think the trend is away from that 
emphasis. For example, I spent a day in one of the well-developed 
vocational high schools of Pittsburgh recently. I happen to be asso- 
ciated with a general school survey that is going on there now. You 
can go into those high schools in Pittsburgh and you find them getting 
the foundation training that leads in the directions that you were speci- 
fying. They are gaining respect for skilled work of the manual type. 



17094 CONCENTRATION OF ECONOMIC POWER 

Now, if you had gone into Pittsburgh 30 or 40 years ago, or when I 
went to school, you wouldn't have found that type of thing. Those 
schools have all come in, or nearly all of them, within the last genera- 
tion. I would say the trend is very much in the direction of giving 
respect for and training for what you would call highly skilled callings. 
Professor Taussig deals with the whole thing that we have been dis- 
cussing in a very beautiful sentence because it is so sweeping and yet 
I belieA'^e is so fundamental : 

The removal of all artificial barriers to choice of occupation Is the most Impor- 
tant goal of society. 

•In addition to the quantity and quality of its labor supply, the natu- 
ral resources of a nation constitute another basic factor affecting pro- 
ductivity. The lack of foresight in America's wasteful depletion of 
natural resources is an outcome of their plenitude. Other peoples 
have gained from experience the lesson which the United States is just 
beginning to learn. 

Schools and colleges have already made substantial contributions to 
the conservation of natural resources. Schools and extension services 
are teaching farmers the importance of contour farming, crop rota- 
tion, soil fertilization, and protection of forests. Dr. Wright, when 
he comes on this afternoon, can give you many more details on this 
area. Colleges and universities are conducting research and impart- 
ing technical knowledge to agricultural and chemical engineers, busi- 
ness executives, and other experts. 

Further contributions of education in conserving our heritage of 
physical resources should be made in directions already begun. There 
should be increased appreciation of the fortunate position of the 
United States with reference to resources. I don't believe many of us 
realize just how fortunate we are to have taken possession of a conti- 
nent with none of its resources depleted as we did a few centuries ago. 
We have but 6.2 percent of the world's population, but we produce and 
consume some 50 percent of the world s mechanical energy. The 
United States ranks first among world powers as to national self- 
sufficiency in iron ore, coal, petroleumj copper, lead, sulphur, alumi- 
num, zinc, phosphates, and other strategic resources. 

We ought to understand the significance of that position. Educa- 
tion for conservation of the right kind emphasizes wise and economic 
use, not only conservation but wise and economic use of natural re- 
sources and develop3 vigorous public disapproval of flagrant waste 
whenever it exists. If you will go to the courses of study that are be- 
ing developed in otir high schools, you will find that this is coming in 
as a subject of specific and autnorvtative study, and I would say mat 
there is no place where education cah make a more fundamental con- 
tribution to preserving our economic foundations in the field of pro- 
duction than in this realm. 

Capital is a third basic element in production. Here we are con- 
cerned with tools, machinery^ plants, and technical processes em- 
ployed in transforming materials into consumer goods. Science and 
technology are involved since they play a major role in discovering 
the tools and technical processes which give capital its peculiar mcd- 
ern characteristics. 

Colleges and universities have conducted much of the significant 
research resulting in basic modifications in technics of production and 



CONCENTRATION OF ECONOMIC POWER 17095 

' designs of machines and equipment. Research in the field of agricul- 
ture has perhaps been the most continuous and effective, going back, 
as you know, to the establishment of the land-grant colleges in 1862. 
Investigations concerning agricultural an