Skip to main content

Full text of "Post-war economic policy and planning. Joint hearings before the special committees on post-war economic policy and planning, Congress of the United States, Seventy-eighth Congress, second session, pursuant to S. Res. 102 and H. Res. 408, resolutions creating special committees on post-war economic policy and planning"

See other formats

Q lMs4^jJi> 











H. Res. 408 



JUNE 7, 8, 13, 14, AND 15, 1944 


Printed for the use of the Special Committee on Post- War 
Economic Policy and Planning 

99579 WASHINGTON : 1944 


AUG 25 1944 



WILLIAM M. COLMER, Mississippi, Chairman 

JERE COOPER, Tennessee 
FRANCIS WALTER, Pennsylvania 
JERRY VOORHIS, California 
THOMAS J. O'BRIEN, Illinois 
JOHN E. FOGARTY, Rhode Island 

Marion B. Folsom, Director of Staff 

Guy C. Gamble, Economic Adviser to committee 

A. D. H. Kaplan, Consultant 


CHARLES L. GIFFORD, Massachusetts 
B. CARROLL RBECE, Tennessee 
RICHARD J. WELCH, California 


Statement of — ■ 

Nelson, Donald M., Chairman, War Production Board 495 

Abbott, Dr. Charles Cortez, chairman. New England Council 525 

Maverick, Maury, Chairman, Smaller War Plants Corporation 537 

Cameron, D. P., president, Merchants Company of Mississippi 555 

Blucher, Walter H., executive director, American Society of Planning 

Officials 575 

Chatters, Carl, executive director, Municipal Finance Officers Asso- ' -I 

elation 586 

Fennelly, John F., executive director, Committee for Economic' Devel- 
opment 595 



at page 

on page 


H. R. 5125, bill to provide for disposal of surplus Govern- 
ment property and plants. Introduced by Mr. Colmer._ 





House of Representatives, 
Special Coimmittee on Post- War 

Economic Policy and Planning, 

Washi-nc/ton, D. O. 
The special committee met at 10 : 30 a. m., in room 1304, New House 
Office Building, Hon. William M. Colmer (chairman) presiding. 

Present: Representatives Colmer (chairman). Cooper, Zimmerman, 
Voorhis, Murdock, Lynch, O'Brien, Worley, Fish, Reece, Welch, and 

Also present : Marion B. Folsom, director. 
The Chairman. The committee will come to order. 
We are pleased to have Donald Nelson, Chairman of the War Pro- 
duction Board, with us this morning. I might say preliminarily that 
this appearance of Mr. Nelson had been scheduled for some time to 
discuss the question of the plans of the W. P. B. for cut-backs after 
the termination of the war. 

It seems a little psychological that we should discuss that subject this 
morning, not at the termination, but at the beginning of the invasion. 


The Chairman. We are glad to have you with us, Mr. Nelson. We 
think you have done a splendid job in preparing for the invasion. Of 
course, this committee is primarily interested in what is going to 
happen after victory comes. We believe, unfortunately, psychological 
as this might be, that it is just as important now to plan for the post- 
war days as it was to plan for the war days prior to the invasion. So 
we are glad to have 3^ou with us, Mr. Nelson. 

While it is an important question, the House meets this m-orning 
at 11 o'clock; but some of us will remain until you conclude your testi- 
mony. You ma3" utilize the time as you see fit. 

Mr. Nelson. Well, Mr. Chairman, I quite agree with you that it is 
timely to be prepared for any emergency. While we know definitely, 
of course, that Ave have got to keep up war production just as long as 
the military services require that production, the Chiefs of Staff de- 
termine our military programs, we get our programs from them and 
they are the ones who know the strategy of the war, and while they 
need the materiel, it is our job to get it for them and not to let any- 
thing interfere with it. 

At the same time, I am glad to see the committees of Congress, your 
committee particularly, surveying this problem, because I believe it 



would be unfortunate if we were as unprepared for the peace as we were 
for the war. The war came on us suddenly. It was forced on us 
suddenly, and we had to oo in and do a job in scrambling these facili- 
ties as best we could in order to get out war production. 

Now, of course, the job that will face us some day — none of us knows 
when — some day we will be faced with the job of uscrambling the 
facilities and getting them back into peacetime production again. 

I believe if the people of this country know that the Government is 
ready to meet that emergency, they will go forward with their war 
job in better fashion, and they will produce with more confidence and 
not be disturbed by the future. I think one of the characteristics of 
the human race that we must always take into account is that they 
want security insofar as they can possibly get it. 

Now, I did not come up with a prepared statement for you, sir, but 
I am prepared to discuss this in any way you want. I would like to 
make a few observations for the the committee which I think are very 
important for you to consider. 

First, I think our job following the war, in the post-war period, is 
to get as full utilization of our facilities as we possibly can. "We are 
going to have to do this in order to keep up employment. It is not 
going to be possible to shrink our economy back to what it was 
before we went into this war, because we have an expanded economy 
in war production, and it is not possible to take the 1944 economy and 
shrink it back into the 1939 or 1940 position. You cannot move back- 
ward. We have moved forward in too many directions. New tech- 
niques have been developed; new processes, new facilities have been 
built all over this country. In building these new facilities we tried 
to keep before us all the time the question of the utilization of our 
resources in the various regions of the country. 

One of the things we tried to do was to get more manufacturing into 
the South, more manufacturing into the Middle West, and into parts 
of the country where they had not had manufacturing before. 

In the distribution of our material resources, we were building 
plants near the point of utilization, insofar as we could do that without 
interfering with tlie progress of the preparation for war. That was the 
pattern by which we determined the location of many of these re- 
sources. We could not, of course, do it on a slide-rule basis, because 
speed was one of the most important essentials that we had to consider, 
but all things being equal, we tried to locate the facilities which were 
built in sections of the country where they had not had them before, 
where labor was available, transportation, and and other things. 

You will find that pattern has been pretty generally followed in the 
location of facilities wherever it could be done without interfering with 
the speed of preparation for war. So, first, I think we have got to be 
thinking in terms of the fullest utilization possible of the resources 
of the country. That is No. 1. 

Now, I think it is also axiomatic, although it is not generally thought 
of, that 3'ou cannot have a full utilization of the resources of this 
country unless, first, agriculture is prosperous, and that goes without 
saying. Such a large proportion of our population lives on the farm 
pnxlucing food and agricultural raw materials for industrial processes, 
that unless that large segment of the population is prosperous, you 
cannot have the full utilization of your facilities. 


Secondly, you cannot have the full utilization of your facilities 
unless the consumer goods industries are prosperous. 

Now, that is divided into two classes: Durable and nondurable. 
By "durable" we mean refrigerators, vacuum cleaners, washing ma- 
chines, automobiles, and that whole range of products. 

Thirdl}', and I think it is very important in our thinking, we can- 
not have full utilization of the resources in this country unless our 
capital goods industries are prosperous. 

Now, there is not much doubt in anyone's mind today that agricul- 
ture for some time, I do not know what the length of time is, for the 
post-war period, is going to have to furnish food both for our popula- 
tion and for the world. 

Our consumer goods industries I feel as soon as the resources can be 
released can be prosperous because of the pent-up demand. 

One of the things we had to do in building up this program was to 
shut off the manufacture of consumer durable goods, because those 
facilities were badly needed for the war program. 

One of the first things I did in assuming the chairmanship of the 
War Production Board was to cut off the manufacture of automobiles 
and to make possible the use of those facilities for all kinds of mate- 
riel for the war, such as airplanes, tanks, guns, just a wide variety of 
products. The automobile industry has done a grand job. The min- 
ute the production of automobiles was stopped, they immediately 
turned to the production of war goods, and made an outstanding 
record. And so it was with refrigerators, and vacuum cleaners, and 
a wide range of consumer durable goods. 

So, for some little time, as soon as those facilities can be released 
and they can go back to the manufacturing of consumer durable goods, 
I think we will have a market, not only in this country, but in other 
countries of the world where they need them badly, and where they 
]\ave tlie money to pay for them. 

But the place I think where a great deal of thinking has to be done 
is in the matter of capital-goods industries. That is beyond the 
scope of the War Production Board, and one of the reasons I present 
it to you is because it concerns this whole question of capital-goods 
industries, the building of homes, the building of machine tools, and 
so forth. Our machine-tools industry has had to expand tremend- 
ously, almost 10 times its pre-war average of production. They have 
done a grand job of making billions of dollars' worth of machine 
tools for ourselves and our allies. 

Now, unless we can develop an export market, and a broad export 
market for capital goods, I do not see the chance in the reconversion 
period for the capital-goods industries to be prosperous, and I think 
we have got to be thinking in terms of that broad scope of the capital- 
goods industries, because if you look at war materiel, it is very largely 
made by capital-goods industries, tanks, aircraft, and guns, and a 
wide variety of things are made on exactly the same machinery and 
with the same tools that other capital-goods are made on. 

So I think we have got to be thinking in those terms. I set that as 
a broad pattern. 

Now, let us look at the job of the War Production Board. In pre- 
paring for war, we had to put on limitation orders of various kinds 
directing the flow of materials into the thinjxs that were most 


needed, and above all we had to work out a scheduled program for 
(Components. Until we got components properly scheduled, these 
programs were conflicting with themselves all over the map, each 
program was conflicting with the other, and there was confusion. 
That confusion was eliminated, and war production was able to go 
ahead by leaps and bounds when we got these common components 

Look at one simple thing like fractional horsepower motors. Frac- 
tional horsepower motors are used in practically everj^ piece of mov- 
ing equipment that the Army uses. The airplane uses a tremendous 
number of fractional horsepower motors. There are from 150 to 200 
in an airplane. They are used for tanks. They are used for control 
mechanisms of various kinds in a great many different industries. 
Until we got those fractional horsepower motors properly scheduled, 
these programs were conflicting all over the map. 

Or, let us take another item like valves. Valves were one of the 
most important essentials in the building of ships, in the building of 
our rubber program, 100 octane gasoline program, and they went into 
construction widely all over the country, into many, many things. 
You could not build tanks, giuis, locomotives, or any of that equipment 
without valves. Until we found the way both to expand valve pro- 
duction and to schedule it so we knew when it was going to be used 
and it was there on time to be used, and not too far ahead of time — 
until it was properly scheduled, these programs were wallowing around 
all over the map. 

We had first to put a limitation on the Tises, the less essential uses — 
I never like to think in terms of nonessential, but it is the less essen- 
tial in war economy — we limited first the less essential uses of things 
made of steel, copper, aluminum, zinc, lead, practically every com- 
modity, chemicals, a wide range of things that had to have a 
limitation on their uses; and, secondly, the scheduling of the com- 
ponents, which meant how many comjDonents you were going to need, 
and when, and getting them properly scheduled so they went into 
each program without conflicting with the others. 

Now, as to the reconversion- job, I like to think of the War Produc- 
tion Board's part in the reconversion job as readjustment. Recon- 
version is a much broader aspect. It goes into the disposition of 
suri)lus property, contract termination, and a wide range of things. 
Even taxes become important in a reconversion job, but ours is the 
narrower problem of readjustment. When the Army no longer needs 
a certain facility, ours is the problem of trying to see what can be 
done with tliat facility, first, for further use in the war; secondly, for 
essential civilian programs; and thirdly if it cannot be used for 
essential civilian programs, for other production which will not con- 
flict with the rest of the war effort. Can we give it the material? 
Can we give it the components, and so forth ? In addition to the war 
production program dictated by the Chiefs of Staff, the War Produc- 
tion Board lias had to think in terms of facilities that were needed to 
maintain essential civilian economy. You cannot fight a great war 
unless you think in terms of providing the absolutely essential things 
which are needed in the civilian economy. 

But even though we got thinking of those things in terms of being 
civilian items, they are really indirect military items; the}' are also 
used by people who work in war plants. 


Let us take a simple thinjr like work oloves. Without work gloves 
a worker cannot work in a factory and therefore it is essential that we 
see to it that the work gloves are made so that the work can be 
carried on. 

The same applies to the automobiles, the transportation, and you 
can go into a wide range of tilings that we consider essential in order 
that the civilian economy can operate. 

Now, when we think about the civilian programs, agricultural ma- 
chinery is a very important element in one of the essential civilian 
programs. Production of food is as essential, of course, as the pro- 
duction of tanks or anything else. The problem was properly to 
schedule those things, so they would not interfere, and to get just as 
much agricultural machinery as we possibly could while at the same 
time we Avere building up the war programs. 

So we have had the essential civilian programs constantly before 
us. They expand or contract, according to the necessity for the 
production of material for war. 

Xaturally, some items liear a greater priority than others. For in- 
stance, in preparation for this invasion, one of the most important 
single items we had to ])rovide was landing craft. Upon the produc- 
tion of landing craft depended the safety of our forces as they got 
on to the invasion coast. 

We gave an overriding priority to landing craft. If there was a 
conflict between landing craft and agricultural machinery, we had to 
resolve it in favor of landing craft, because that was the most im- 
portant sinjile thing we had to do. 

Just so with other things that were of the greatest of importance. 
While we consider the production of agricultural machinery essen- 
tial, its importance is relative to other things, because if he hasn't a 
new plow, a patriotic farmer will use an old one; repair it, and use it. 
I know it is difficult to do, but he will do it ; he will make it work ; he 
will make an old corn planter work ; he will make an old combine work 
if he knows the thing is held back because of some other thing which 
is more important, such as landing craft. 

We had the programs outlined. Dr. Elliott, who is the Vice Chair- 
man of the War Production Board in charge of the Office of Civilian 
Requirements, has a large number of programs that we consider in 
degree of essentiality, and which we want to put in at the first oppor- 
tunity. When any resources are cut back, we think in terms of what 
essential program can we put in there. 

First, we consider what war program is an essential program. Then 
we try to think in terms of the release of material or components, if 
they can be manufactured, for something that is wanted by the civilian 
economy but not absolutely needed. 

Now, the controlling factor is the question of interference w'ith the 
war production program which has to go forward. 

Right at the present time, for example, it is very difficult for some 
people to understand why constiniction cannot go forward. They 
say reinforcing bars are available, concrete is available, and in some 
communities labor is available, so why cannot construction go ahead? 

Well, we come immediately into conflict with lumber. Now, lumber 
is a very important item from the standpoint of the military forces 
today, not alone for the construction of bases, camps, and so forth, but 
the minute we invade a new island, or in the invasion of France, an 


immense amount of lumber has to follow the services, so we can pro- 
vide the necessary bases from which to carry on our operations. We 
need a tremendous amount of lumber to package the various things 
in the way of war material, so accordingly lumber grows tighter and 
tighter all the time. 

At the same time, we have diminished manpower, due to a number 
of reasons. First, induction of men into the military sei'vices was con- 
sidered absolutely essential by the Chiefs of Staff to carry on the war, 
and when you have a diminishing manpower and at the same time a 
constantly increasing requirement, you can see that lumber is a very 
critical item at the present time. You cannot carry on construction 
without lumber, and, therefore, it just is not possible. 

While we would like to release materials for construction, lumber 
is a very limiting factor. 

This whole question of having the economy produce the necessary 
materials for war and at the same time do the essential things that you 
need and try to fit in the less essential, is quite a tricky job, I can as- 
sure you. 

You will have a limitation in this post-war period, certainly, if the 
war goes along as it is expected. We will say Germany is licked first, 
then we still have Japan to lick. You will have to carry forward a 
big war program at the same time that you are releasing a large num- 
ber of facilities that will not be needed because of the ending of 
the war in the East, the European theater. 

So that our part of the job in the War Production Board is to see 
to it that whatever facilities are released by the military services — 
mind you, they determine what they need — but when they say they 
no longer need item X, Y, or Z, then our job is to see what facilities 
are making items X, Y, or Z ; how those facilities could be used either 
for other essential war programs or other essential civilian programs, 
or how they can be used by releasing limitation orders or releasing 
components and getting them into the manufacture of other things 
which the civilian population wants, but does not absolutely need. 

I just tried to sketch very briefly, because you are in a hurry, some 
of our thinking on this. 

Now, what do we do from the standpoint of organization? How 
do we handle it? Dr. Elliott, in the Office of Civilian Requirements, 
is constantly surveying the civilian economy. He knows the needs of 
civilian economy from the standpoint of years of study, and at the 
same time he knows the picture in the industry divisions of the com- 
jDonent situation, and he prepares a program which goes in to the 
Program Committee. 

We have a Direct Requirements Committee, which was another very 
essential mechanism by which we straightened out these war programs 
by having all of the claimants sit around the table and prove their 
claims for materials. At first one of our jobs was trying to get the 
requirements down in shape so that they could be interpreted into 
material resources and component resources, as I have explained to 

Now, the claimants, by sitting around the table, and dividing up the 
pie, dispose of the resources we have. We try to divide them wisely 
among the different claiming agencies, such as the War Department, 
Navy Department, Maritime Commission, Office of Defense Transpor- 


tatioii, "Will* Food Administration, Petroleum Administrator, Rubber 
Director, F. E. A., and we go on with the long list of claimant 

Now, at the same time, another group in the War Production Board 
has been set up to work with the Army and Navy and Maritime Com- 
mission, and with our own industry divisions on facilities which are 
going to be released, which are no longer needed. 

For example, a war program is cut down, program X, so we will 
not get into confusion talking in generalities. Program X is to be 
cut back; now the xVrmy, the Navy, and Maritime Commission sit 
down with the staff of the Production Executive Committee and look 
over the sources that have been making that particular part of the 
program, not alone the prime contractors but, insofar as we can, the 
principal subcontractors, and think in terms of what can be done with 
those facilities, with the idea of releasing, so far as possible, facilities 
which can be used for some other program, or facilities which will 
relieve the manpower problem in certan tight areas. 

I will not go into the manpower problem because you undoubtedly 
have had that explained to you, but we do have certain critical areas 
today where manpower is needed badly to carry through all of the 
things that we have to do in that particular community. Those 
criteria will be established in that staff of the Production Executive 
Committee of which Dr. Elliott is a member, and they will recommend 
to the Production Executive Committee and to the Program and Re- 
quirements Committee those facilities which they recommend releas- 
ing, and then if new war production can be placed therein, it is done 
innnediately ; if it cannot be, then we will survey the limitation orders, 
the L and M orders, so that materials can be made available if the 
manpower is available in the community, and if the components are 

Now, there is one thing I think we have to consider in this. We 
cannot, from AVashington, find work for every concern in the United 
States today. To do that, in my opinion, we will be doing great vio- 
lence to the free enterprise system which we hold dear in this country, 
the virility of which helped us to carry through the war-production 

If we set up an office in Washington to tell every firm in the United 
States what they can do or cannot do, or attempt to find work for 
everyone of them from our point of view, without their determining 
what they want to do, then in my opinion, by doing that you will do 
great violence to the free enterprise system. 

Tliere is a lot of loose thinking going on in this country as to what 
will happen in this readjustment period. 

Now, the main part of the decision as to what a concern wants to do 
has to come from the concern itself, rather than from the Government, 
rather than simply saying to them, "This is what you must do," or 
"this is what you must not do." 

In the case of converting production for war, we had to do that 
definitely. We had to say to a firm, ''We require that you make parts 
for airplanes, or parts for tanks, or this, that or the other thing," in 
order to get this conversion from peace to war. 

Now. in the readjustment back from war to peace, I think we have 
to be careful, so that we preserve the integrity of the free enterprise 
sj'stem. I do not like that word; it is too inclusive and it is too 


sloganized, but let iis put it "the competitive system." The competi- 
tive system has been developed in the United States and has made the 
United States what it is, and if we set the pattern in this post-war 
period, or attempt to so refrulate business in the country when we can 
release facilities, I think we will do great violence to the United States 
system of doing business. . 

Our plan is rather the reverse, to try to give them the facilities when 
the facilities become available, to try to give them the materials and 
components if it does not interfere with the war, and let them exercise 
their judgment Avhen they get into the field of making consumer goods 
instead of a great many of the things that we absolutely have to have 
in order to carry on the war. 

Now, perhaps I have OA-ersimplified the statement that I made to 
you, but I think it is very important, and I think it is important for 
the committees of Congress to consider what kind of controls we 
set up in the post-war period. 

From my point of view, I would like to see the minimum of con- 
trol. I would like to see, in the post-war period, only those controls 
which are absolutely essential, looking forward to their release at 
the earliest possible moment so business can ^o on, but I would like 
to see business, during this post-war period, this readjustment period, 
using its individual enterprise, using its individual initiative, and 
using its abilities to determine what it shall make, rather than com- 
ing down to the Government and throwing its arms around the 
shoulders of the Government and saying, "What shall I do?" We 
will tell them what can be done, but the individual companies must 
determine what they want to do rather than having us simpl}^ setting 
up machinery to find work for every concern in the United States 
whose war contracts may be cut back. 

Now, I tried to give you very generally, my thinking and obser- 
vation. I will be glad to answer any questions. I know what I 
said must have opened up a lot of questions in your minds, and it 
probably will take some time to discuss it. 

The Chairman. It has been a very interesting statement, Mr. Nel- 
son. I have just one or two questions and observations that I would 
make briefly, in the interest of the element of time. 

Some members of this committee were up in Detroit last week end 
getting first-hand information, getting a first-hand view and knowl- 
edge of some of the problems that would confront us in this recon- 
version period. 

Mr. Nelson. Yes, sir; that is a good place to look at the problem, 
because there are going to be lots of them there. I was there yester- 
day and the day before. 

The Chairman. We were impressed with the fact that, if we had 
the same problems in proportion all over the rest of the country, they 
would be insurmountable. 

We found there, without going into detail, that these manufac- 
turers, who formerly were manufacturing automobiles and automo- 
bile parts and who are now doing such a wonderful job in war pro- 
duction, were concerned about the reconversion at the speediest pos- 
sible moment. 

Mr. Nelson. That is right. 

The Chairman. They recognized the problems, of course, that we 
are confronted with, namely, of seeing to it that you do have suffi- 


cient war production; but they seemed to be concerned lest they 
were not going to be able to go gradually into production of civilian 
goods but all at once would be cut off with a wire from Washington. 

I am sure this committee can appreciate your responsibility in that 
connection. We do not want to have a situation of "too little and 
too late" or "not enough at the right time." 

Mr. Nelson. That is right. 

The Chairman. So far as I am concerned, even though there may 
be great waste as the result of overproduction, I do not think we can 
afford to take a chance in not having enough of war materials. 

Mr. Nelson. No, sir. We must never take a chance with that. I 
think it is highly essential. There are many, I know, who feel the 
Army and Navy have too much. I have always felt, as a matter of 
fact I know, that the country that has too much at the end of the war 
is the country that is going to win the war. We must have toa much 
by the very nature of affairs. We do not want to take any chances of 
not having enougli. Nobody can determine how many tanks you 
need in an invasion, because you have to think in terms of whatever 
your enemy will do. So I think we have to have too much. I would 
not like to see us have too much, but where the point comes I do not 

The Chairman. Feeling that way, I am just wondering what your 
Board was doing, what consideration it was giving. To be a little 
more specific, for instance, here was the Packard plant that was making 
the Rolls Royce engine. 

;Mr. Nelson. That is right. They are making the Merlin engine, 
a very important engine, and it will be used all through the Japanese 
phase of the war. 

The Chairiman. We were under the impression they were appre- 
hensive that they would be compelled to go on producing these engines ; 
then all at once they would be shut down and all of the transformation 
back to peacetime would occur. 

Any questions, Mr. Zinmierman ? 

Mr. Zimmerman. Mr. Nelson, I had the privilege of going up to 
Detroit for 2 daj^s, and I talked to those who were going to run the 
plant, a plant built by the Government, so large that you could hardly 
visualize its magnitude. 

Mr. Nelson. We have bigger ones than that. 

INIr. Zimmerman. It appeared larger than the rest of them. While 
we were there, we saw two planes ready to roll. 

]\Ir, Nelson. We have some bigger ones now in Willow Rim. 

Mr. Zimmerman. There is a plant there now owned by the Gov- 
ernment, and, when production ceases, that plant will be owned by 
the Government. It seems to me that is something that has to be 
worked out. Maybe we can take half of it, or a part of it, and start 
reconversion, as you say. 

Mr. Nelson. The disposal of plants is not my problem. 

Mr. Zimmerman. I appreciate that, but it iDcars on what we are 
talking about. 

Mr. Nelson. It does, sir, but the way I think that ought to be 
worked out is that the Ford Motor Co., who had been operating the 
plant, know the facilities and everything else; and a part of it is 
scrambled with their own facilities. They ought to first determine 


Avliether they can make anythintr else at that plant and use it in any 
expansion that they might plan. 

One thing we must get into our minds is that in the post-war j^eriod 
we have got to be expansionists. You cannot maintain this economy 
if you think back in terms of 1939 or 1940. It has to be expanded. 
Instead of the Government sitting down and figuring out what they 
are going to do with Willow Run, what they are going to make of it, 
I would like to see the Ford Motor Co. investigate what they can use 
the facilities for, and then if they cannot use the facilities, they can 
come back to the Government and say, "We cannot use it," and let 
somebody else sit down and figure. I would not like to see an organ- 
ization in the Government that figures out just what we are going to 
do, what we are going to produce in every one of these plants. 

If you do that, then there is great danger that the whole system 
of free enterprise will change. 

Mr. Zimmerman. That would be regimentation from the top. 

Mr. Nelson. That would be regimentation from the top, and I 
think that is a thing we have got to carefully avoid. There are 
tendencies in that direction which I think must be avoided. I think 
industry in this country has got to sit dow^i and figure out what 
they are going to do with these resources. I think they have got to 
consider regionally how they can do it. 

I was in the South recently and talked to a group of them in the 
southeastern part of the United States, and urged them, from the com- 
munity standpoint to consider what they could do with these plants 
that were located in their community. You have got to figure out 
regionally just how they can be utilized. 

I think a great deal can be done. If we think regionally in terms 
of the utilization of these facilities, and get businessmen working to- 
gether in the regions figuring out what can be done with these facili- 
ties, we would go a long way toward preserving our free enterprise. 
I would like to see the people of this country figure it out, and not 
have the Government figure out what we will do with the Willow Run 
and these other big plants in the country. 

The Chairman. I agree with you that the Willow Run plant pre- 
sents a different problem. To my mind, there is not so much a prob- 
lem there of reconversion as it is in the case of the privately owned 
plant. I think that goes into the question of the policy of disposition. 

Mr. Nelson. That's right. That is why I say it is not my phase 
of the business. 

The Chairman. I used the Packard plant as an illustration of a 
privately owned plant. 

Mr. Nelson. Let us take the automobile industry. Let me follow 
through with what we are doing in the automobile industry. We 
have an automobile industry advisory committee composed of the 
large and small companies. We have sat down with them and talked 
about the problem of producing automobiles in the post-war period, 
and told them just when we thought automobiles can be ]:)roduced. 
It certainly will not be until after the war, unless it takes an entirely 
different turn, because we still need their facilities for other important 
programs, but there will come a time when those facilities can be 
released. ,j 



Now, you have the problem that the automobile industry is, to a 
very large extent, an assembly industry. They buy the parts from all 
over the country. The glassmakers make glass for it; the fabric 
makers make the fabric for it, and parts are made for them from 
all over the United States. 

Just as soon as the programs are cut back to any great extent, and 
of course, as soon as it becomes clearer to the military authorities 
that these things can be cut back, then you can do more work on it. 

At the present time all you can do is think about it. You have 
got to have a release of facilities and an interchange of facilities so 
the}' can be released to go ahead and let them make automobiles. We 
are working right now with the automobile industry on that. We 
had them submit to us their plans as to what they would like to do. 
In making, say, 2.000,000 automobiles, which was the minimum num- 
ber they thought they could make and keep their lines for it, and also 
in having an unlimited production of automobiles, what are the steps 
we must take first? What new machinery do they have to install? 
What tools, dies, and jigs do they have to install. Do they want to 
do experimentation work in the production of automobiles, or do they 
want to start on the old models, and then, after a limited time, go 
into the question of new models? The whole competitive situation 
in the automobile industry enters into it. We are working on that 
job with the automobile industry right now. 

The same applies to the refrigerator industry, and the same applies 
to the washing machine industry. We are trying to get plans and 
policies set so they will know what they can do, what the Government 
will permit them to do, and what we think they can do with the release 
of facilities. 

We have had some 500 or 600 industry committees telling us what 
they want to do, what they feel the best policy for the Government is. 
We then, from the standpoint of the War Production Board, will get 
all the agencies in Washington together and determine what the policy 
should be in connection with this readjustment. It will vary for 
each industry, it will vary widely. 

The Chairman. It is highly important that those plans should be 

^h\ Nelson. Mr. Chairman, I think it is highly important. 

The Chairman. Just as it was important that the plans were made 
for the invasion. 

Mr. Xelson. Exactly, sir. We must not be caught without at least 
having done some major thinking on what we are going to do about 
it if certain eventualities should happen. 

The Chairman. I shall not take any further time. Mr. Zimmer- 
man, are there any further questions? 

Mr. Zimmerman. Xo. 

The Chairman. Mr. Reece. 

Mr. Reece. The problem that disturbs me most, Mr. Nelson, is the 
one of continuing employment. As you say, the operation of our 
continent depends upon various factors, as you very clearly demon- 
strated. If the war should end. or an important phase of the war 
should come to a close unexpectedly, as we hope it may and as we are 
led to believe that such may be the case, and many of our production 
facilities are suddenly no longer needed for war production, and if 


plans have not been completed so that they can readjust themselves 
and proceed in a very short time to civilian production, it means that 
there will be thousands of employees thrown out of jobs. If that is 
carried very far, if there is a very long period of readjustment in 
which a very large percentage of our employees are thrown out of 
jobs, then chaos is going to begin to develop. 

Mr. Nelson. That is certainly right, Mr. Congressman, but I see 
no reason for that occurring. 

Mr. Eeece. I am not quite that optimistic, but I hope it can be 
avoided and I believe it can be avoided. 

Now the witnesses which we have had before the committee, many 
of them have demonstrated the falling off in requirements as certain 
phases of the war come to a close, but what has disturbed me, Mr. 
Nelson, so far has been the lack of demonstration that any Government 
officials — and to a certain extent private industry — have not demon- 
strated that they are really getting industry set to go into civilian 
conversion in the shortest length of time possible. 

I realize there is going to be a slowing up, I realize that is neces- 
sary, but there is a certain amount of reaction time, ust as there is in 
changing speeds in an automobile, that is required. I am desperately 
apprehensive that we may get stalled and we will have a very long 
period of unemployment. 

To illustrate what I have in mind, when one of the officials of the 
motor companies was before the committee, in response to a question 
which was propounded to him as to what would be necessary when he 
got instructions from you to cease war production to get into civilian 
production, one of the things he stated that would be necessary was 
that he would have to order and receive some 3..500 strategic machine 
tools, and so forth. Now, as the requirements for the production of 
machine tools lessen and lessen, is it feasible for that motor manu- 
facturer, taking him as an illustration, to have his machines and 
tools produce? Could facilities for the production of those strategic 
machines and tools be released so that he would be in readiness, so far 
as the tools are concerned, when he got his stop order to immediately 
proceed to the production of automolDiles when his plant can be cleared 
for it? 

In connection with clearing the plants, one motor company official 
advised me, in response to a question, that there were some 9,000 
strategic machines and tools employed in that particular division and 
that he could use possibly 3,000 of them in a reconversion program, 
but those machines and tools now belong to the Government. 

Could not some appropriate officer of the Government now nego- 
tiate with that motor manufacturer for the sale of those tools and 
machines which ho can use. so that he would know that he had them 
and could count upon them in determining his requirements, in deter- 
mining what he would have to order, and then, as I say, as to the 
other tools that he might need, that the production of them might be 
permitted when facilities for that purpose can be released? 

Mr. Nelson. That is one of the things we are working on now with 
the industry. We are asking them to have prepared for us just what 
they are going to need in the way of machinery. I think the first 
thing for them to do would be for them to survey with the Surplus 
Property Administrator just what machine tools we have that are 
going to become available out of surplus first, and, secondl}', what 


we have in mind is allowing them to place their orders for machine 
tools with machine tool manufacturers, give them priorities to enable 
them to be built when they can be built without interfering with the 
war effort. That can go along in a perfectly orderly way. 

You say, well, we are late with it. Well, we have still got a tre- 
mendously big war program. If this thing should suddenly, of course, 
change, woi-k would be taken from your machine-tool people imme- 
diately and they would go right into the production of machine tools 
for civilian requirements. You can not build machine tools, however, 
at the present time when the machine-tool manufacturer has first got 
to use the material in making new machinery for the munitions ]:»ro- 
gram, for the making of parts in the war eifort. Mind you, when the 
machine-tool industry went down, when their demand went down, we 
rescrambled them into other things which we badly needed. Some 
of them are making parts for airplane engines, some of them are 
making parts for various other things. They have gotten other busi- 
ness. It was important that we utilize those facilities. 

I think the automobile industry should be allowed to place orders 
for the machinery that they want to be made when it can be made, 
but it can only be made wlien you can release those facilities from the 
work which they are now doing for the war effort. 

Mr. Reece. I realize that. I realize the facilities cannot be released 
until the war effort justifies the release for that purpose. I think, 
when we are geared up for war production, with the war spirit, as 
should be the case, that there is a tendency for us to overlook this 

Mr. Nelson. I agree with you, Mr. Congressman. 

ISIr. Reece. We were not prepared for the war. We did not know 
the war was coming, or at least hoped it might not come, and we were 
not ready. We know that peace is coming and I do not feel that 
there is any justification for us not to be reasonably well prepared 
for the peace; we cannot afford to overlook doing everything pos- 
sible in a practical way to be ready, without permitting this period 
of chaos. If that ever develops, I am very pessimistic as to how 
you are going to get out of it. 

jSIr. Nelson. Mr. Congressman, in the first place, I agree thoroughly 
with you : but, as to the period of chaos developing, I can assure you, 
in ni}' opinion, it will not develop. If you just go back over the record, 
I would like some day to show you the predictions of chaos that was 
going to occur in this war program. I can recall very distinctly the 
automobile manufacturers and everyone else telling us about the chaos 
that was going to occur in Detroit if we cut out automobile produc- 
tion. We cut it out and that chaos did not come about. We have 
got great ingenuity in this country. This period of chaos will not 
come, sir, in my opinion. 

Mr. Reece. And, Mr. Nelson, we had every phase of that ingenuity 
directed to changing our industry to war production. 

Mr. Nelson. That is right, and that same ingenuity will help us 
to change from war to peace. 

IMr. Reece. If we can get the same amount of energy, the same 
amount of intelligent direction directed to peacetime conversion, then 
I have no apprehension as to what is going to result. I am afraid 

90579—44 — pt. 3 2 


we may overlook putting that effort to it in onr reconversion to 

Mr. Nelson. That is right, but the point is this : I think we very 
definitely have to rely on private initiative putting in that energy 
rather than setting up the initiative of the Government that is going 
to plan everything for the automobile manufacturer. I want to see 
the automobile manufacturer use his ingenuity on his own behalf. 
True, there are certain things that he cannot do today; but he has 
shown great initiative in changing over from peace to war. I am 
sure he will do the same in changing over from war to peace. 

Mr. Reece. That is why we must do everything toward putting him 
in a position where he would willingly do it. 

Mr. Nelson. As soon as the war program is cut down, that will be 
done. We are not going to have any restrictions on him that are not 
absolutely essential. When that time comes that man is going to 
use his private initiative. He knows now pretty well what he wants 
to do. The only thing I want to emphasize there is these predictions 
of chaos do not come true when you have got a lot of initiative in 
this country. 

Mr. IvEECE. Mr. Chairman, I had other questions but, in deference 
to the other members of this committee, I shall not continue to ask 

The Chairman. Mr. Welch desires to ask a question. 

Mr. Welch. Mr. Nelson, you stated it will be necessary to expand 
our production after the war. 

Mr. Nelson. Yes, sir. 

Mr. Welch. Will it not be necessary to find foreign markets in 
proportion to our increased production? 

Mr. Nelson. That is very definitely true, we will have to find foreign 
markets. Your principal solution of the capital-goods industry, in 
my opinion, is foreign markets. 

INIr. Welch. You are aware of the fact, of course, that for years 
before the war we were producing 10 percent in excess of the goods 

Mr. Nelson. The world is going to wau.t capital goods. 

Mr. Welch. For domestic consumption ? 

Mr. Nelson. For domestic consumption, and to rebuild the world. 
I think we have got to find the way, to find the machinery by which 
that can be financed, can be paid for. There is a large export market 
in capital goods to be developed just as quickly as we can. If we can 
do tluit, tlien I am not afraid of any chaos or unemployment. 

If we can solve the problem of the capital-goods industry — and I 
believe it can be solved by a proper exploring of the export market — 
we will be going a long way. We are making some effort in that 
respect, and I will be ghid to talk to the committee in executive session 
on what we have been doing about it. I would not like to do it in a 
public session. I would be glad to give you some of the thinking I 
have liad on that subject. 

The CnAiR:MAX. I am sure (if I may interject, Mr. Welch) that the 
connnittee would be highly pleased to have such information. 

Mr. Nelson. I would he glad to sit down and discuss with you ways 
and means by which I think it can be done. 


Mr. Welch. It is regrettable that we cannot avail ourselves of more 
of Mr. Nelson's time. I desire, Mr. Chairman, to compliment Mr. 
Nelson on his splendid constructive statement to this committee. 

Mr. Nelson. Tliank you, sir. 

]\Ir. Fish. ]\Ir. Nelson, you made a very interesting statement about 
rebuilding the world. I just want to ask you one question about that. 

Mr. Nels(^n. Believe me, sir, I did not mean by that that it was our 
job to rebuild the world. ISIaybe it would be more correct for me to 
say the world will want to rebuild itself and we have the facilities that 
they can use. 

Slv. Fish. There is no question about our facilities and our produc- 
tive capacity, but where are we going to get the money to pa}' for our 
own goods ? 

Mr. Nelson. Of course, it has to be paid for, and one of the things 
I would like to discuss in executive session with the committee is how 
we will pay for it, because I have some ideas on it that I would like to 
present to you. 

Mr, Fish. I know what happened in the last war when we gave 
billions away. 

Mr. Nelson. I am not thinking about what happened in the last war 
or about giving it away ; I am thinking of a business arrangement. 

Mr. Fish. \ ou want an executive session to give that information 

INIr. Nelson. Yes, sir; I would like to. 

Mr. Fish. I would be delighted to hear you. 

Mr. Zimmerman. Mr. Nelson, while you are on that line, will you 
meet this committee in executive session? 

Mr. Nelson. I will be delighted to do it, sir. 

Mr. Zimmerman. I do not know whether you had anything to do 
with the agricultural problems. 

Mr. Nelson. No, sir ; I had very little to do with agriculture except 
to furnish the machinery. 

Mr. Zimmerman. I hoped you had an expert in that field. I happen 
to represent an agricultural section of the country, the Mississippi 
Valley, that is the bread basket of the Nation. We can produce all the 
world needs if we can get the facilities to do it. We have got a prob- 
lem. AVe want to get money that you need to buy these automobiles 
and washing machines, the vacuum cleaners and radios, and we can 
get it if we can sell our stuff. This thing is far-reaching. 

jNIr. Nelson. Very. 

]\Ir. Zimmerman. 'Maybe you can throw some light on the industrial 
side that will help us. 

]Mr. Nelson. I do not know that I can do much for you in agriculture, 
but I think I have a plan for selling— mind you, when I say "selling" 
I mean sometlung to be paid for — on a wide scale our capital goods to 
the world that they are going to need very badly and that will enable 
us to use our facilities. I think you will agree, Mr. Congressman, that 
when your industries are busy they consume more food. Agriculture 
and in'dustrv are very closely'interrelated ; in fact, I think of agricul- 
ture as being an industry. "^It is an industry, it is a food-producing 

Mr. Zimmerman. That is right ; it produces fiber materials. 
The Chairman. Mr. Voorhis. 


Mr. VooRHis. Mr. Nelson, you said in the course of your remarks 
that you did not want the Government to phm what everybody was 
supposed to produce. 

Mr. NeIv?ox. That is correct. 

Mr. VooRHis. I think you are quite correct in that. I have been 

very deeply conce]-ned, and I am sure you have, too, about the position 

that the smaller scale industry and business w^ill face after the war. 

Mr. Nelson. T think when you talk about small industry, that is 

another problem. 

Mr. VooRHis. It seems to me that their position is going to be very 
largely determined by this one factor: Whether or not in connection 
with such cut-backs, as become possible on the basis of too much 
for the Army and Navy, such cut-backs can be arranged so as to let 
small business get started on essential civilian production at least as 
soon, if not a little sooner, than the fellows who have grown so great 
during the war. 

Mr. Nelson. I agree with you, sir, that it ought to be done sooner ; 
not as soon but sooner. 

Mr, VooiJHTs. T am very glad, indeed, to hear you say that. 

Mr. Nelson. In this w^ork of passing this business through the area 
production urgency committees, we have exempted production con- 
cerns with 50 or less on the Pacific coast and 100 or less in the East, 
witli the idea that would give them a start. I think we have to go 
even further with small business. I think you have got in Mr. Maver- 
ick a very sound and able fellow who is thinking in just those terms. 

Mr. VooRHis. I want to ask you this question, Mr. Nelson, in con- 
nection with those small businesses. ' It is not going to be enough, 
under present circumstances to say, "Now, you fellows are free to go 
and produce what you like." because they are going to have to have 
priorities ; they are going to have some kind of "go ahead" from you 
on some basis before they are going to be able to do that. 

Mr. Nelson. That is right. I do not believe we ought to go around 
and pick every one of those companies and say, "You are going to 
make agricultural implements," or "You are going to make this, 
that, and the other thing." I want them to come to us and say just 
what they are going to make. 

Mr. VooRHis. Under those circumstances you will be prepared to . 
lend a sympathetic ear? 

Mr. Nelson. Yes : and to aid them in more ways than we would big 
business. I would not want to see a W. P. A. established for small 
business, because I do not think that is what small business wants. I 
think they want a fair set of conditions under whicli they can operate. 

Mr. VcoRHis. I think it is obvious there are plenty of lines into 
which they can go now and get a very early start. 

Mr. Nelson. That is right, sir. 

Mr. VoORHis. If that is only made possible, I think that is enough. 

Mr. Fish. Is it not a fact that they need a little more help than 
the big ones? That they need a little more consideration from you 
and your organization than big business? 

Mr. Nelson. That is right, sir; and I think they should haA'e it. 
I am 100 percent in favor of giving it to them, provided we do not 
think in terms of too broad a scale. We shoidd not think in terms 
of helping them with the idea that we are going to run them. I do 
not Avant to see the Government run small business. I want small 


business to run itself, with the Government only making it possible for 
them to do it. 

Mr. VooKHis. You said you had to think in terms of an expanded 

Mr. ISelsgn. Yes. 

Mr. VooRHis. Then you spoke of the export of capital goods as one 
factor in making that possible. You assumed, and quite correctly 
so, that we were not going to do it the way we did after the First 
World AVar. It is time we were going to have a sound method of 
handling international balances. 

Mr. Nelson. That is right, sir. 

Mr. VooRHis. If that be true, then would you not agree that the 
fundamental thing necessary to make possible a capital goods export 
on the part of our country is a sufficiently large home market in the 
United States, not only to absorb all we can produce but also to leave 
room for the importation of certain goods from foreign countries to 
which we export the capital goods ? 

Mr. Nelson. There is no way, sir, they can pay for it unless we do 

Mr, VooEHis. Then we must devise ways and means of sustaining 
a much higher level of effective consumer demand in the United States 
than we have ever had before in history. 

Mr. Nelson. In my opinion that is absolutely correct, sir, and must 
be faced, I think, as a fundamental philosophy. 

Mr. VooRHis, Then as one step in that direction — and with this I 
am through — do you think it is important to provide some kind of 
what we might term "conversion financing" for labor in the period 
of transition which would correspond with the interim financing which 
is being provided for business during that same period ? 

Mr, Nelson, If I may, I would rather not answer that question. 
There are other Government agencies that work on that, and I do 
not want to cross-fire with them, I think there are others to whom 
that is delegated, who are working on that problem. 

The Chairman, Mr, Murdock, 

Mr. Murdock. Mr, Nelson, first I want to compliment you on one 
of the most splendid statements I have heard. One of your points 
in that statement was to this effect, that our post-war salvation 
depends upon the fullest possible utilization of the resources of the 
United States. I wish it could be expanded immensely, I presume 
one of the utilizations you have in mind is the soil, is agriculture, 

Mr, Nelson, Yes, sir, 

Mr, Murdock, I am glad to hear you say that, although you dis- 
claim full knowledge in that field. We have had it pointed out to 
us that, in order to service the enormous debt which now hangs over 
us, we must continue to have an income of at least $140,000,000,000 

Mr, Nelson. Somewhere between 120 billion and 140 billion is cer- 
tainly absolutely necessary. 

Mr. Murdock, And that, of course, means the expanding of indus- 
try on which you spoke. Now, you yourself recognize agriculture as 
an industry, a basic industry. Statistics show that national income 
is closely related with the farm income. 


Mr. Nelson. Very definitely. There is no doubt in my mind about 
that, I have followed the statistics for years, and industry and ag- 
riculture will come in that basic pattern. 

Mr. MuEDOCK. That relationship is about 1 to 7. 

Mr. Nelson. That is right. 

Mr. IVIuRDOCK. In other words through many years, national farm 
income has been one-seventh of the national income. I think there 
is a definite relationship between them and it is not a happenstance. 

Mr. Nelson. That is my belief. Before I came here I was con- 
nected with a business that was dependent on farm income and I 
studied it most thoroughly. To me there is a very close interdepend- 
ence between the prosperity of agriculture and the prosperity of 
industry, and vice versa. It works both ways. 

Mr. MuRDOCK. If then, we want the national income to continue 
after the war in the amount of $140,000,000,000, we must see to it that 
agriculture has at least an income of $20,000,000,000 annually. That 
would be one-seventh, $20,000,000,000 annually. Now, the big question 
in my mind is, how are we going to do that? During the war and 
for some years following the war, there can be no such thing as a 
surplus of food and fiber. 

Mr. Nelson. We have destroyed so much that that is true, particu- 
larly in the fiber field. 

Mr. MuRDOCK. But when we think of the years ahead, it is con- 
ceivable that we may have again what is called a surplus of food and 
fiber. Part of our post-war planning, I take it, Mr. Chairman, is to 
so expand our needs in order that we can utilize any possible surplus 
of food and fiber. I would like, sometime when we meet with Mr. 
Nelson in executive session, for him to discuss that matter further. 

Mr. Nelson. I am afraid you are a little bit off my field there, but 
I will give you my thinking on it. There is no answer to that sir. I 
wish I did have one. I only know a limited number of the answers. 
I do not have an answer to the over-all picture. 

Mr. INIuRDOCK. The question for which I seek an answer is only one 
of many, but it is this : How can we continue to have agi'iculture en- 
joy one-seventh of the national income and the national income ex- 
panded to the point high enough for us to survive? 

Mr. Nelson. You bring up a point that is very fundamental in our 
whole economy. I do not think there is any question about that. 

The Chairman. Mr. Wolverton. 

Mr. Wolverton. I agree with the chairman. We have had a very 
helpful statement from Mr. Nelson this morning. I regret this roll 
call necessitates my leaving sooner than I would like to, but there are 
one or two questions that I would like to ask. To put one briefly: 
What policy would you suggest to prevent the recurrence of the 
Brewster case? 

Mr. Nelson, The Brewster case will not recur again. You will 
have it in a different form. Now, the Brewster case was one in which 
there had been a lot of work done by the Navy. The Navy was prac- 
tically running the concern, because they were giving them the money. 
They were going through various vicissitudes, and so forth. We 
learned a lot in the Brewster case and we will not have a repetition 
of exactly tha.t one. But may I say this very definitely : I think there 
is a question of how you are going to be able to supply work to a 


company like the Brewster Co. I believe it is incumbent upon the 
management of the Brewster Co., and other airplane companies, to 
figure what they are going to do. Their contracts are going to be 
cut back some day. They must not just come into the Government 
and say, "Our contract is canceled. Wliat do we do now?" That is 
not the American system. When we went into this war I had con- 
cerns coming in saying, "Find us some business." I said to them 
definitely just this: "That is not the way you built the business, by 
coming to the Government and asking the Government to find you 
business. You built your business by going out and finding it your- 
selves. Find it yourselves. You determine what you can make 
for us." 

If we had set up a system at that time of just absolutely requiring 
that we find business for every concern that wanted war business, we 
would have changed our whole system of government. Now, I will 
just say in this reconversion I think it is up to the aircraft companies, 
as it is with others, to figure out how they are going to keep their 
facilities busy when their products are no longer needed, because the 
time is coming when they will have to do that. 

Mr. WoLAERTON. While we deplore a situation like that, I am very 
glad it happened as early as it did. It seems to me that it directs our 
attention to the importance of showing where the Government can 
be of assistance in providing employment. Government should be 
ready and willing to throw itself into the breach first, either by plan- 
ning so that that situation would not arise or, in the second place, 
having in mind that if it would recur in plant after plant, we- would 
soon have a situation on our hands that might get out of bounds. 

Mr. Nelson. That is right, sir. 

Mr. WoLVERTON. Now, when you speak about the initiative that 
must be exercised by management in finding its own business, I can 
readily follow j^ou and in a good many instances apply it as you have 
in mind. However, having in mind the shipbuilding industry, which 
I happen to know something about because it is in the community in 
which I live 

Mr. Nelson (interposing). That is right, sir. 

Mr. WoL^'ERTON. I will use, as an illustration, the New York Ship- 
building Co. that now employs many thousands of workers; prior to 
the war it was 3,000. I can hardly figure how the management of the 
New York Shipbuilding Co. could utilize initiative to keep up a pro- 
gram that would in any way approach the level of the current ship- 
building program. 

Mr. Nelsox. That is right, sir. Do you think it is up to the Gov- 
ernment to buy the ships that they can keep on building when we do 
not need them ? 

Mr. WoLA-ERTON. That is not the situation as I would want to pre- 
sent it. I am having in mind your emphasis on the initiative of man- 

]\Ir. Nelson. That is right, sir. 

Mr. WoLVERTON. I am merely calling your attention to the fact, 
without offering any solution myself, that there are certain industries 
where the initiative of management can not fulfill the attainment of 
that objective to the extent that you have emphasized in your report. 

Mr. Nelson. I quite agree with you, sir, and I am only pointing out 


and I mean to emphasize the fact that there are certain industries that 
are built up as the result of the war, that unless manacjement can find 
a way I do not know how they can go ahead. Shipbuilding is a per- 
fectly good example. 

Mr. WoLVERTON. I only felt compelled to mention that because of 
the emphasis you had laid on the initiative of private management. 
I cannot just see how that would work out in that particular industry. 
It is so largely overbuilt from a peacetime standpoint that I just can- 
not realize how management could initiate a program of continued 

Mr. Nelson. Not the building of ships, perhaps, but perhaps the 
building of something else. If the Government tries to find a way 
of keeping every one of the shipyards busy that has expanded to the 
full extent of their ability to expand in building ships, we will never 

Mr. WoLVERTON. Then there is some limitation to the initiative that 
management can carry on. 

Mr. Nelson. In the building of ships, yes, sir; but how about other 
things that they might be able to do ? 

Mr, WoLVTRTON. I am just discussing the difficulty that I know about 
a particular problem. 

Mr. Nelson. We know definitely today; I mean, anybody can see 
that we will never find a market for 8,900 airplanes a month. That 
is what we produced last month. There is no possible wa}^ that I know 
of to find a market for 8,900 airplanes a month. I do not know what 
you can do to find a market for the 8,900 airplanes a month. 

Mr. Wolverton. Except as one airplane manufacturer has stated 
to the committee, of which I was a member, in going through his 
plant, that they want to destroy them all and start building them over 

Mr. Nelson. You would have to have another war in order to build 
8,900 ships a month. I do not think you want to start another war 
right away. 

Mr. WoL^^:RTON. The airplane situation does not approach the 
importance of the shipbuilding that I speak of for the reason that so 
many of the airplane companies are getting back into the manufacture 
of automobiles. There is a chance for them to return to their previous 
employment. I cannot see that there is that chance in the other case. 

Mr. Nelson. I would like to have the time to follow this through 
with you, because there are some very fundamental points that I 
think we have got to come to grips with right away. The Brewster 
case illustrates one, where we can find work for them, and where 
we will not have all this confusion. Before this thing came up pub- 
licly, we were at work trying to find whether we could put part of 
the artillery program in there, part of the ammunition program in 
there, making other airplane parts, and so forth. We were busy 
at work on that. 

The question that I am bringing up is — and it is a very fundamental 
question — Is it up to the Government to take every one of these con- 
cerns that has been expanded and find work for them to do in their 
present expanded condition? 

Mr. Wolverton. I do not think that is in the mind of any member 
of this committee. 

Mr. Nelson. I am sure it is not. 


Mr. Fish. Has your organization any post-war authority to plan 
on this final question of employment of those war workers who are 
demobilized ? Have you the power to do so, and are you doing it 'i 

Mr. Nelson. No, sir. 

Mr. Fish. So if the shipbuilding plant is shut down, you would 
know where it is possible to move these men to find other employ- 
ment. Is there any program or plan or organization in respect to 

Mr. Nelson. As I understand it, that is General Hines' job. That 
is his commission from Mr. Byrnes. 

Mr. Fish. That is not your job? 

Mr. Nelson. No, sir. My job, as I conceive it, in the War Pro- 
duction Board is to first see whether there is other war business 
that can be given when it is shut down ; or, second, whether there are 
other essential civilian programs which they can take on in case we 
are not able to release to them materials and components to make 
other things which they determine they want to make and can sell. 

It is not the intention of the War Production Board to plan what 
every concern in the United States is going to make after the war. 

Mr. Fish. What I want to find out is whether you have any power 
or authority from Congress to do this thing. 

Mr. Nelson. As long as the war is on, sir, of course we have the 
priority power. 

Mr. Fish. You have to do with war production ? 

Mr. Nelson. That is right, sir. 

Mr. Fish. Have you got anything to do with peacetime production 
after the end of the war? Are you planning to do anything at all 
on the question of the employment of American labor after the war 
is won? 

Mr. Nelson. No, sir; I do not conceive of that as our job. 

Mr. Fish. I did not think ^o. I wanted to make sure about that, as 
to whether we had some organization that has that power from Con- 

The Chairman. Mr. Lynch ? 

Mr. Lynch. Mr. Nelson, I just want to add my word to what has 
been said in a complimentary way about the statement that you 
made this morning. There are one or two things in my mind that I 
would like to have cleared up. What is the attitude of the War Pro- 
duction Board with respect to the stand-by policy of the Army and 
Navy, insofar as facilities are concerned ? 

Mr. Nelson. Well, we will work with them on stand-by facilities 
to be sure the stand-by facilities which they set up are the right 
ones to set up. We cannot determine what stand-by facilities they 
are going to need. They are going to have to determine that. But 
we can determine, sir, whether we use as a stand-by facility a Gov- 
ernment-built plant or a private plant. For instance, j^ou may make 
a decision that we are going to hold this particular plant as a stand- 
by, and it may be that we may need that plant badly, or you may be 
able to convert it, and thereb}^ create employment and still use it as 
a stand-by. That will be the type of work that we will work with 
the Army and Navy on. 

Mr. Lynch. You said a very important thing before when you 
asserted that one of the most involved questions was whether there 
would be much too much. 


Mr. Nelson. That is right, sir. 

Mr. Lynch. Who presently determines whether there will be too 
much too much, or whether there is too much too much ? 

Mr. Nelson. When the Office of War Mobilization was set up, Mr. 
Byrnes had various committees at work with the Army and Navy and 
the Maritime Commission on these programs to determine that very 
question. He has been at work on that. It has not been our job. 

Mr. Lynch. Do you know of any instances where it has been held 
that there has been too much material ? 

Mr. Nelson. Yes, sir. 

Mr. Lynch. What has become of the plants that have produced 
those materials? 

Mr. Nelson. Some of them have closed down. For the small-arms 
ammunition plants, the single-purpose plants, for the most part, the 
whole program has been rearranged. 

]Mr. Lynch. Has anything been done to restore those plants to 
civilian production ? 

Mr. Nelson. Where it could be done, sir; but. in those cases, we 
were not able to convert them to civilian production because the Army 
wanted them kept intact in case they needed more ammunition. It 
is fortunate they did, because some of them have come back to produce 
the ammunition. 

Mr. Lynch. I mean other than single-purpose plants ; has anything 
been done to restore those to civilian production? 

Mr. Nelson. Oh, yes. Of course, this readjustment has been going 
on constantly. We can give you any number of instances of it. 
That has been going on constantly for over a year and a half. 

Mr. liYNCH. Can you give me one outstanding instance of a plant 
engaged in war production that has been restored to civilian pro- 
duction ? 

Mr. NrL«oN. Oh, yes ; we can give any number of them. 

Take the stove production, the flat irons, things where we had the 
materials available, there have been a number of plants restored to 
civilian production ; yes, sir. 

In the agricultural-implement prograim we had to make many 
rearrangements to make the agricultural-implement program possible. 
By rearranging the production programs we have done some releas- 
ing of facilities. I would be glad to prepare a statement for you on 

Mr. Lynch. I would be very glad, Mr. Nelson, to have you do that, 
and T would like to ask that it might be included in the record. 

The Chairman. It may be included in the record. 

Mr. Nelson. I will be glad to do that, sir. 

Mr. Wclverton. When these contracts have been canceled, has the 
cancelation been considered in the light of the labor market in that 
particular area? 

Mr. Nelson. That has been one of the prime considerations, because 
the manpower was verv short. 

Mr. WoLA^KTON. Why was not that done in the Brewster Aero- 
nautics case? 

Mr. Nelson. That was done in the Brewster Aeronautics case, sir. 
The War Manpower Commission went to the Long Island plant, and 
offered jobs to 8,000 workers. They were right there ready to move 
them into doinff other things. 


Mr. WoL\'ERTON. Was that after they were shut down, or before? 

Mr. NEI.SON. That was simultaneously with it, sir. 

Mr. AVoLA-ERTON. Because I had4'eceived letters probably days be- 
forehand from employees. That plant is just across the river from 
where I live. I received letters to the effect that there was danger 
of a shut-down. They were very skeptical of getting any employment 
in New York, because, as you know, there is no scarcity of labor 

Mr. Nfxson. There are a number of programs close to New York. 
You may not get it in that immediate community, but where we have 
got a manpower shortage, I think it is fair to assume that people will 
move reasonable distances to their work. Take, for instance, at 
Johnsville, 12 miles from Philadelphia, we need manpower badly in 
Philadelphia, and it would be very easy for those employees to go to 
Philadelphia, to commute. I do not know the details about Long 
Island. All I know is that the War Manpower Commission were 
offering jobs to those people, they were asking them to move to other 

]\Ir. WoRLEY. Why did not they take them? 

Mr. Nelsox. There are various reasons. For instance, the salary 
differences. The jobs were not at the same salary that they were get- 
ting, and it involved commuting. I think the War Manpower Com- 
mission can give you all the reasons. 

In the Brewster case there were jobs offered to these people definitely. 
They may not have been the ones that they wanted, but there were 
jobs offered them. 

Mr. WoLVERTON. Of course, there is alwaj's a difference between one 
job and another. 

Mr. Nelson. That is right, sir. 

Mr. WoLVERTON. There might be some very good reason why people 
would not want to, for instance, travel from the Bronx out to Newark, 
which takes about 2 hours to make that trip, and 4 hours of traveling 
a day for a laboring man is a considerable time. 

Mr. Nelson. I think there are a lot of other places than in Newark. 

ISIr. WoiA-ERTON, Are there any places in New York where labor can 
get employment ? The people in New York would appreciate getting 
it, because there is a great overflow of labor there — not a great over- 
flow, but a considerable overflow. 

Do you think, Mr. Nelson, after the war terminates there should be 
any agency of the Government somewhat lilve the present War Produc- 
tion Boarcl to handle the allocation that I assume must be necessary? 

Mr. Nelson. Allocations of what, sir? Of materials? 

Mr. Wol\Ti:rton. Allocations of materials. 

Mr. Nelson. That, of course, is the job of the War Production 

Mr, WoLVERTON. It is after the war that I am talking about. I know 
that it has delegated to your present Board to do that now ; but I mean 
after the war, do you think there should be a continuance of such an 
agency as the one which you have now ? 

Mr. Nelson. I do, sir. Of course, what I think ought to be done is 
just as you have the Office of War Mobilization. You have an Office 
of War Demobilization, which I understand has been set up by the 
President, and if it needs congressional action, it ought to have that, 


SO it could focus all of the various problems and set up agencies which 
can deal Avith them. I think it would be possible for the War Produc- 
tion Board to be so condensed that it could be moved into some other 
agency and carry on as a part of tlie Government. 

If you had a director of demobilization who was also a director of 
mobilization his would be the job of recombining- the activities of 
Government agencies. For instance, I hope these emergency agencies 
can disappear eventually, and if there is a continuing job then part 
of it could be put into a Government agency so it could be carried on 
as a part of the work of the Government, if it is a necessary thing to 
be done, rather than having it in an emergency agency. 

We deal with power. You have other divisions of the Govern- 
ment dealing with power. Eventually, it will not be necessary for us 
to handle the power problems. When the power problems diminish 
to such an extent that they are no longer emergency problems, then 
they ouirht to go to some other Government agency. 

Mr. WoLVERTON. I assume there will be a great shortage of mate- 
rials after the war. 

Mr. Nelson. Certain ones, and certain ones not, of course. 

Mr. WoLA'ERTON. And in those certain ones that will be, there will 
have to be, I assume, an allocation of those materials to various in- 

Mr. Nelson. There will be relatively few, sir, after the war. The 
onlv ones I anticipate at the present time after the war will be lumber 
and paper, until the manpower situation can be straightened out there, 
and the shipments overseas and other things diminished, and in that 
case the lumber and paper shortage will diminish. 

Mr. WoLAT.RTON. Your bringing up the question of linnber brings 
me to a point in which I am interested, in a matter before the sub- 
committee on construction, I understand there is a great shortage of 
such things as bulldozers and cranes, and the like. 

Mr. Nelson. There is, sir, at the present time. 

Mr. WoLA'ERTON. Of course all construction will be delaved until 
that equipment can be manufactured. Is there any possibility of an 
early release so that, insofar as construction might be concerned, that 
equipment might be had at any time when construction might be 

Mr. Nelson. Well, sir, the Armv and Navy is taking most of that 
equipment at the present time, I think 95 percent of it is going to the 
Army and Navy, Now, as soon as their requirements diminish, and 
those concerns have the present manufacturing capacitv, it is my 
belief that equipment will become available just as quickly as very 
larffe construction will become possible, 

Mr, VooRHis. Isn't that an instance where some of that material 
will be surplus? 

M^\ Nelson. A frood deal of it. 

Mr. VooRHis. Will not there be a good deal of that sort of equip- 
ment that can be sold back to civilian use? 

Mr. Nelson, Certainlv. Just takinp- the amount of that in pipe 
lines alone, is a tremendous quantity. The Army and Navy are u-^ing 
an immense amount of earth-moving equipment. It took a vast amount 
of bulldozers riffht in tliat invasion. 

Mr. Lynch. Most of that surplus will be in foreign lands? 


Mr. Nelson. In the pipe line alone there is a large anionnt of that 
equipment. Answering your question directly, it is not possible to 
increase the production for civilian use of those classes of items without 
an expansion of facilities, and I do not think we want to go into an 
expansion of those facilities at the present time. 

Mr. Lynch. Going back to the question of need on the part of the 
Army and Navy, do you find it is the policy of the Army and Navy to 
take all that they can get in the way of material so that they are insur- 
ing and reinsuring themselves against the possibility that there might 
be a shortage, or that they might need them in the future ? 

Mr. Nelson. Well, they come before our requirements committee, 
sir. Their requirements are allocated to them. They make a show- 
ing of their need. 

Now, on most of these principal items, the Army and Navy and 
Maritime Commission come before the Requirements Committee and 
show us that they absolutely need them. I have no doubt, and I think 
we would all want it so, that they think in broad terms rather than 
"too little, too late," in ''too much, too soon," and I want them to think 
in those terms. Where there ever was an element of doubt as to 
whether they needed it or not, we resolved it in their favor, sir, because 
I think that is the right way to do it. 

Mr. Lynch. I think there 'seemed to be a very strong opinion in 
certain quarters that the policy of the Army and Nav}' is to look only 
to their prospective needs. 

Mr. Nelson. That is right, and we wanted them to do that, sir. 

Mr. Lynch. Without regard at all to the civilian economy. 

iSIr. Nelson. That is right, sir. We have been the ones who deter- 
mine what the civilian economy needs. We wanted the Army and 
Navy to think in terms only of their own needs. I do not believe we 
want them to be concerned about what the civilian economy needs. 
When tlie civilian economy needs something we have made the deter- 
mination as to whether they should get it or the Army and Navy. All 
the time the War Production Board has been in existence we wanted 
the Army and Navy to think in terms of their own needs. 

Mr. Lynch. In thinking in terms of their own needs, there seemed 
to be a feeling that these officers were not at all considering civilian 

Mr. Nelson. It is up to us to do that. 

Mr. Lynch. Because if they did, and something developed, they 
would be the ones to be blamed. 

Mr. Nelson. That is right. 

Mr. Lynch. That is the polk-y that they have adopted, I am told. 
Is that the policy that the War Production Board approves with 
respect to that? 

Mr. Nelson. No. sir. If I may take the time to take you through 
all of the work of the Requirements Committee, one of the jobs that 
Dr. Elliott has now — and Mr. Whiteside had it before him — is to make 
the claim before the Requirements Committee for the things that the 
civilian economy needs, and where it was shown to be needed it was 
allocated to the civilian economy. The Army and Navy do not agree 
on agricultural machinery right now. That is perfectly all right, but 
we make the determination in the Requirements Committee, and set 
it up. 


Now, I think you want tFiem thinking in terms of safety and in 
terms of resources. 

Mr. Lynch. Certainly. 

Mr. Nelson. I have never had any criticism of the Army and Navy 
for thinking in terms of their own needs first, even though it meant 
many arguments. I wanted them to think in terms of tlieir own needs. 
It was our job to think in terms of the civilian economy, and make 
provision for it. 

We haven't been able to give everybody everything they wanted. 

Mr. Lynch. Whose job is it now to allocate in the post-war period? 

Mr. Nelson. In what way, sir? Because thinking in terms of the 
post-war, that is a tremendous subject. 

Mr. Lynch. Within the scope of this committee, insofar as unem- 
ployment is concerned, and insofar as industry generally is concerned. 

Mr. Nelson. Taking construction equipment, for example, it is our 
job to think about the construction equipment that the civilian econ- 
omy is going to need, and at the first opportunity when it can be done 
without hurting the Army and Navy in their war effort, we will 
divert some of that material. I know the problem of the construc- 
tion industry; I have talked to many of them. I know what their 
feeling is. There is not enough equipment now to take care of the 
construction for the civilian economy. If there was a way to produce 
more, I would do it, but I do not know how to produce more at the 
present time without more facilities. 

I have the \evy definite feeling, and I think the figures will prove 
it, that just the amount of that equipment in the pipe line — and by 
the "pine line" I mean the actual amount now being produced by the 
factories or in shipment, or w^aiting for shipment, or inventory of 
the Army and Navy located in the United States in addition to what 
industry can produce, will provide a surplus over what the civilian 
population will need after the war. 

Mr. Lynch. I agree with you the Army and Navy requirements come 
first above everything else. 

Mr. Nelson. That is right. 

Mr. Lynch. I wanted to bring out whether or not the War Pro- 
duction Board was also looking into the question of post-war civilian 

]Mr. Nelson. Very definitely, sir. 

Mr. Lynch. I am very glad to know that, 

Mr. Nelson. That is one of Dr. Elliott's jobs. An}' time 3^ou want 
to. Dr. Elliott w )uld be very glad to explain to the connnittee just 
what he is doing in planning these programs, so we can take up the 
slack wherever it can be done. 

Mr. Lynch. I am very glad to know that the attitude of the Army 
and Navy is not the attitude of grab all, but just the attitude of getting 
all that is necessary for the prospective military' and naval require- 

Mr. Nelson. It is our job to see that they do not grab all, that they 
do n )t take more than they need, but I say if there is ever a doubt as 
to whether they need it or not, I would resolve it in favor of them. 

Mr. Lynch. Sure. 

The Chairman. If I may emphasize that, Mr. Nelson, you woidd 
not want to be put in the position in tliis invasion of the armed services 
not havinii; sufficient auns and tanks. 


Mr. Nelson. No, sir; not when human lives are involved, and we 
have had to in many cases, over Dr. Elliott's protest, although I was 
in agreement with his policy, to cut down on essential things for the 
civilian economy in order to make way for essential things for the 

Tlie Chairman. Mv. Worley ? 

Mr. AVoRLEY. On the question of civilian requirements, on the ques- 
tion of farm machinery, combines and farm tractors, could you give 
me briefl}^ for the record the attention that has been paid to those 

Mr. Nelson. "Well, sir, I do not know of any program that I have 
paid more attention to, certainly no other civilian program that I have 
paid more attention to than I have paid to the requirements for farm 
machinery in the past year, because I felt that we needed more farm 
machinery. We have had a good production job on farm machinery. 
I will not apologize at all for the job we have dine on farm machinery. 

We have not produced everything that the farmer has wanted nor, 
in many cases, everything he has needed, but I honestly feel we have 
produced everything we could without interfering with the important 
war programs. 

Let us take the combines. We had a production program also out 
f )r combines. Experience showed the Army needed more tractor- 
drawn artillery. Well, the one concern making combines had to dis- 
continue their manufacture, badly as we knew the farmer needed 
combines in order to prepare the artillery. That had to be done. 
I know every farmer in the country would approve that even though 
he went short of the combine. There is not a farmer in the country 
that would not approve of the Army getting it, provided they were 
certain that the Army and Navy needed it badly. 

Mv. WosLEY. Yes. 

Mr. NiLsoN. That did interfere with the combines. We had in- 
terference witli the tractor program in connection with the landing 
craft. One of our principal bottlenecks at the present time in the 
country is foundries, castings, gray iron castings, malleable castings, 
steel castings. It is the principal limiting factor in the making of a 
lot more tractors today, but we are doing a good tractor job. 

We produced week before last 6,000 tractors. That is at an annual 
rate greater than anything we previously j)roduced in this country. 
At an annual rate, that figures out somewliere around 312,000 tractors. 
Tlie War Food Administration wants for next year 303,000 tractors. 
We have got those schedided in 9 months. We have some 89,000 
tractors that we can throw in that ])rogram and make that manjy 

Tliere is some equipment that we have not done as well with, because 
of conflicts. By and large, when you look at the amount of farm 
machinery that has been produced in conjunction with all the war 
material of a rush nature that we ]ieeded — new weapons, more land- 
ing ci'aft. more artillery, and more of a lot of things which the Army 
and Xavy needed — I do not apologize for an instant for our farm- 
machinery production. 

^Ir. Wcrley. What do you think of the increase in farm machinery 
for next year? 

]\rr. NiLsoN. I tliink tlie rate at which we are going now, it will 
gi\'e us a greatly increased amount of farm machinery for next year. 


Mr. WoRLEY. That is not a post-war question, that is a present 

Mr, Nelson, That is riijht; that is not a post-war question. I con- 
sider the food-production industry as an important industry, im- 
portant for the war and important for the maintenance of the civilian 
economy, and important for the maintenance of the economy of the 
world, and certainly the farmer has to have the machinery to do it, 

Mr, AVoRLEY. That is all, 

Mr, Zimmerman, We have transgressed, I think, on ISIr, Nelson's 

Mr, Nelson, I will be glad to come up again, Mr, Chairman, 

The Chairman, Tliank you. sir. 

Mr. Nelson. The subject you are considering is very near and dear 
to my heart. I do not liegi'udge the time in talking to you about it, 

Mr. Zimmerman, Some time we will want to talk about the dis- 
position of surpluses, 

Mr, Nelson. I have nothing to do with the disposition of surpluses. 

Mr. Zimmerman. You know something about what is going on. 

Mr. Nelson, Yes; I do, 

Mr, Zimmerman, That is what I want to discuss, but I do not want 
to go into it today. The question is, What are we going to do with 
some of these plants; are wx going to close the tank factories down 
or continue to make tanks? I think we have got to keep on making 
airplanes, and we have got to keep on with our experimental work. 

Mr. Nelson. We have certainly got to keep on with our experimental 

Mr. WoLVERTON. I am sorry I had to answer the roll call, and I did 
not finish my questioning. I ]vave in my mind that you have had 
a large part in the transfer from our peace economy to our y^var- 
production economy. Looking forward to the day when w^e go back 
into peace economy, my personal opinion is there is no one who is 
better equipped Avith the experience you have already had, now than 
you to handle that kind of situation. Is there any additional legis- 
lation necessary? 

Mr. Nelson. I will be very glad, sir, to discuss that. If you would 
like to have me present to the committee what I think is necessary, I 
will be glad to do it, sir. 

Mr. WoLVERToN. This committee has been set up, not only to make 
a study, to make recommendations, but we had thought it was incum- 
bent upon us to suggest legislation. 

Mr. Nelson. I shall be very glad to discuss that with you. 

Mr. WoLVERTON. I wonder whether your powers as Director of tbe 
War Production Board are sufficiently broad to enable you to continue 
in tlie fornudating of the peace economy, or whether it needs some 
supph^ment to tlie powers that you already have. 

Mr. Nelson. I will be glad, sir, to give you a memorandum on that. 
It would take additional powers, not necessarily for me, but for 
the carrying out of the conversion; it does take some additional 

Mr. WoL^^:RTON. Is it your opinion that there is some legislation 
that is necessary or advisable? 

Mr. Nelson. Yes, sir, I do ; and I would be very glad to present you 
a memorandum on what I think is necessary. 


Mr. WoL\^ERTON. The other question I had has already been touched 
upon. If my friend, Mr. Zimmerman, will not take the time to 
press it, neither will I. 

I have a very great interest in the policy that is to be pursued with 
respect to the allotment of surpluses that are on hand between the 
large businesses and the small businesses; between those that go back 
into their old business, and those that will go into entirely new busi- 
ness, using the initiative that you speak of 

Mr. Nelson. That is right. 

Mr. WoLVERTON. And as to whether there will be any distinction 
between those who participated in the war effort and those who did 
not. In other words, when you have only limited production in the 
early stages of our peace, I can realize there may be problems some- 
what similar to what you had to decide in making your priorities and 

Mr. Nelson. That is true, sir. 

Mr. WoLvERTON. I would like to go into that some other time. 

The Chairman. Mr. Folsom, I wonder if you have any questions 

Mr. FoLsoM. Just one question. I understand you have a numbei 
of industry advisory committees, such as the Automobile Industry 

Mr. Nelson. That is right. 

Mr. FoLSOM. With which you are discussing all the reconversion 

Mr. Nelson. That is right. 

Mr. Folsom. Are any of them active besides the Automobile Com- 
mittee ? 

Mr. Nelson. Oh, yes. We have activated them all, I think. There 
are many of them that I think are looking at this readjustment prob- 
lem. There are many of these industries that have no great readjust- 
ment problem except the problem of getting business. 

There are a lot fewer of them than we think. There is a relatively 
narrow field that we get into from the standpoint of basic industries 
that will have difficulty in getting back. Their problem will be that 
of getting business. For instance, the automobile tire industry has 
been practically reconverted to making tires. 

True they are making the military sizes now, and they are making 
mostly military tires, but they will have no problem with respect to 
the tire production. I expect that we will have plenty of synthetic 
rubber and plenty of fabric. Their problem will be selling tires. 

While a certain proportion of the textile industry has been diverted, 
they have not changed their facilities or their set-up. The textile in- 
dustry will have the problem of making its own readjustment in the 
selling of its goods once the releases can be made. That is true of 
the agricultural implements production. Many of them have had to 
expand facilities or take on new facilities, but all the farm equipment 
industry needs is a release of materials and components to go ahead 
and make the machinery. 

Your readjustment problem with respect to getting the industry 
back from war to peace is not as broad as most people think it is. 

Mr. FoLsoM. I am glad you brought that out, because I happened to 
think of the automobile industry. 

99579 — 44— pt. 3 3 


Mr. Nelson. The die maker has been making tools, jigs, and dies 
for the war. He does not have to reconvert, but he goes on and makes 
the other kind of machinery that may be required. When we release 
him from making machinery for war, he simply makes them for 
peace. That is true of many, many industries in this country. 

The Chairman. Mr. Nelson, again I want to reiterate what we have 
already said, that the committee is very grateful to you for your 
very splendid statement and it's contribution to the thinking of this 

Mr. Nelson. Thank you. I am at your disposal any time, Mr. 
Chairman, I think it is important, and I do not believe you should 
have any hesitancy in discussing what we are going to do in the post- 
war, or even when we are fighting the war, because it is highly import- ' 
ant that this economy carry on, and one of the important things is I 
will assure you we will not let it interfere with war production. 

The Chairman. I am sure we are all in accord with you on that. 

I want to thank you again, Mr. Nelson. 

The committee will stand adjourned until 10 : 30 tomorrow. 

(Whereupon, at 12 : 10 p. m., the committee recessed to 10 : 30 a. m., 
of the following day, Thursday, June 8, 1944.) 



House of Representatives, 
Special Committee on Post-War 

Economic Policy and Planning, 

Washington, D. C. 
The special committee met at 10 : 30 o'clock a. m., in room 1304, 
New House Office Building, Hon. William M. Colmer (chairman) 

Present: Representatives Colmer (chairman), Cooper, Worley, 
Reece, Welch, and Wolverton. 

Also present : Marion B. Folsom, director of staff, and Dr. Kaplan, 
consultant, of the committee. 

The Chairman. The committee will come to order. 

We are glad to have this morning Dr. Charles C. Abbott from the 
Harvard School of Business Administration. Doctor, without any 
preliminaries on our part, we will be glad to have your statement. 


Dr. Abbott. Thank you, Mr. Chairman. I would like to state first 
that although I am here as chairman of the New England Council, 
Special Committee on the Financing and Ownership of Business En- 
terprise, my remarks represent my own views and are not necessarily 
those of the committee. Perhaps it will facilitate matters if I do not 
read my entire statement but only the suggestions which I wish to lay 
before the committee. Will that meet with your approval ? 

The Chairman. With the understanding your statement will be 
incorporated in the record. 

Dr. Abbott. Yes. 

The Chairman. Without objection, that is so ordered. 

Dr. Abbott. My name is Charles Cortez Abbott. I am an associate 
professor in the Harvard University graduate school of business 
administration. I am appearing here on the invitation of Mr. Fol- 
som, director of your committee, in my capacity as chairman of the 
New England Council's Special Committee on the Financing and 
Ownership of Business Enterprise in New England. I have been 
asked to talk about the financing and ownership of business enter- 
prise in the post-war period, giving particular attention to the posi- 
tion of smaller concerns. 



In thinking about tlie financing and ownership of business enter- 
prise in the period ahead, it seems to me that there are three matters 
of primary importance which are useful points of reference for this 
subject. The first of these is the rise of so-called institutional savings 
during the last 25 years, as shown by the increase in the assets of 
life-insurance companies, investment trusts, savings banks, and pen- 
sion and retirement funds, including the various Government trust 
funds. The second is the very large amounts of liquid funds ac- 
cumulated during the last 3 years or so by individuals, particularly 
by persons in the lower income brackets, and held in the form of cur- 
rency, "demand deposits, and Government bonds. The third is the 
disfavor into which ownership, as a business and economic function, 
seems to have fallen during the last 10 or 15 years, and the apparent 
disinclination of a large and perhaps a growing segment of our pop- 
ulation to own a share of American business and assume the risks 
and responsibilities of ownership. I should like to comment briefly 
on each of these three points, since I believe they form important 
parts of this subject, the financing and ownership of business en- 
terprise; and I would then like to go on to make such suggestions 
ns I can for the consideration of the committee. 

The absolute growth in what I have called institutional savings 
has been so great during the last 25 years that the significance of 
this kind of savings in the economy is quite different, and much 
greater, than was formerly the case. A few statistics will indicate 
the magnitude of this change. 

In 1921 and 1922 the annual increases in the admitted assets of 
life-insurance companies were of the magnitude of 600 to 700 million 
dollars ; by 1943 this figure had risen to 2,744 million dollars. 

Deposits of mutual savings banks in 1920 were about $5,000,000,000; 
by 1930 they had approximately doubled. During the 1930's such 
deposits declined slightly, if allowance is made for annual dividend 
payments ; but in 1943 they advanced sharply by more than $1,000,000,- 
000 — roughly 10 percent in a single year. 

In 1943 the monthly averages of postal-savings deposits were around 
$300,000,000, more than 10 times the comparable figures for 1920. 

No reliable data are available on the growth of pension and retire- 
ment funds, but it is common knowledge that savings in this form 
have greatly increased during the last 20 years; and Government 
trust funds, which hardly existed in 1920, are now accumulating sav- 
ings at a rate of about $3,000,000,000 a year. 

Two points seem to be of significance here. First, very large 
amounts of savings are not being invested in business enterprise by 
the persons who make the savings. Instead, the funds are turned over 
to institutions for investment. Second, the annual amounts of savings ' 
becoming available for investment in the hands of these institutions 
greatly exceed — if we disregard Government bonds — the amounts of 
new securities which, under the regulations and policies that govern 
the investment procedures of these bodies, annually become available 
for purchase by these organizations. 

I should like now to turn to the matter of liquid funds — cash, de- 
mand deposits, and Government bonds in the hands of individuals. 

There is reason to believe that in the 2 years, 1942 and 1943, savings 
of individuals have been in excess of the tremendous total of $50,000,- 
000,000, and that while 10 or 15 billion dollars has taken the form of 


debt reduction and accumulations in insurance and pensions funds, 
the remainder — say $35,000,000,000 — ^lias been accumulated in the form 
of currency, bank deposits, and Government bonds. The great bulk 
of this amount, perhaps 80 percent, has not gone into the hands of 
the wealthy, so far as I can determine. On the contrary, the bulk 
of this saving seems to have gone into the hands of persons in the 
middle and lower income brackets, into the hands of persons making 
$5,000 or $6,000 a year or less. That is, during the last 3 years or so 
a very large number of people have accumulated a stake. 

The amounts of savings made by individuals during the war, the 
quantity of savings held by them in these liquid forms, and this sudden 
creation of a large class of small capitalists, are things quite unprece- 
dented in the country's history. In my opinion the consequences of 
these developments, whatever they ultimately prove to be, will be as 
far reaching as any wartime occurrence in the field of business or 
economics. From my point of view it would be a most constructive 
development if some considerable portion of these funds should ulti- 
mately be invested in small local business concerns, largely in the form 
of equity investment. 

Equity investment of course implies ownership, and as I have in- 
dicated, ownership of business enterprise unfortunately seems to have 
fallen into disfavor with a large segment of our population. Var- 
ious pieces of evidence can be assembled in support of this point. 

The rise of institutional savings which I have commented on is one 
such piece of evidence, since this rise appears to indicate — among 
other things — that many persons are not interested in being owners. 
The large amounts of liquid funds accumulated during the war also 
suggests that many people would rather hold cash than own a share 
of a business. 

The sale of equity securities, particularly the sale of securities in 
blocks of $500,000 or less, has been peculiarly difficult for 10 years or 
more. In many cases such sales have been all but impossible. It is 
generally admitted, I believe, that the obstacles that impede the sale 
of small blocks of stock issued by small concerns constitute one of the 
major bottlenecks in our economic system. But if more people were 
more anxious to be owners, I do not believe these obstacles would be 
nearly so great. 

During the entire period 1900-1929 the annual increase in the num- 
ber of stockholdings — which is the best index of the number of 
stockholders — appears to have fluctuated in the narrow range of 
10-13 percent. That is, the dispersion of ownership of American 
business seems to have annually increased at the relatively constant 
rate of 10-13 percent. But since 1933 the average annual rate of in- 
crease, so nearly as I can estimate, has been only 0.1: percent. That 
is, the number of owners has ceased to grow. In a country with a 
growing population this check in the dispersion of ownership and 
the number of owners is not simply stagnation — it is retrogression. 
We seem to have had not only a relative but perhaps even an absolute 
decline in the number of people who are willing to own a share in 
American business — in the productive and distributive organizations 
that constitute the arsenal of democracy. 

Even the decline in recent years in security loans made by com- 
mercial banks reflects in some degree, I think, this distaste for own- 
ing a share in business enterprise. As you know, the virtual disap- 


pearance of the security loan has been one of the major changes in 
commercial banking during the last 15 years. Although securitj 
loans were greatly inflated in 1929, it hardly seems healthy for the 
economy that security loans in 1943 should have been only one-fifth of 
what they were 23 years earlier, in 1920 — $681,000,000 as against 
$3,128,000,000 in 1920. 

What I have said so far leaves us, I think, with these questions : 
How can a larger proportion of the very great amounts of existing 
institutional savings be induced to flow into business enterprise, 
particularly small- and medium-sized enterprise? What is necessary 
in order to make ownership of business firms more attractive and 
thereby induce some part of the very large liquid funds in the hands 
of individuals to assume the risks and responsibilities of ownership ? 
To these two questions I think it is pertinent to add one other : What 
steps can be taken to the end that the admittedly great facilities of 
(he banking system shall be more fully utilized by business concerns, 
especially small- and medium-sized concerns? 

I do not have a program for solving these problems. But I do have 
a number of suggestions that I am happy to place before the com- 
mittee for its consideration. Before doing so, however, I wish to say 
that in my opinion these problems are not of such a nature that the}'' 
can be solved by any one single action, such as the creation of a new 
lending agency or the adoption of a new regulation by the Comp- 
troller of the Currency or the Federal Reserve System. In order to 
cure these problems I believe it is necessary that they be broken down 
and attacked piecemeal, through a series of remedial measures. 

I have seven sugestions which I would like to place before the 
committee for its consideration. 

1. That security dealers — particularly dealers in local, unlisted se- 
curities — and commercial bankers and other types of financial insti- 
tutions, be encouraged to improve the local market for the unlisted 
securities of local firms. 

The reason for this suggestion is clear. So long as the securities 
of a considerable number of well-established firms with good earnings 
records commonly sell at less than their net quick assets per share, 
it is clear, first, that such concerns will obviously have great difficulty 
in raising additional equity funds when needed; and, second, that 
equity money for new undertakings will be virtually impossible to 

I might give you an example. A friend of mine recently was of- 
ferred some bank stock, 50 shares of bank stock in a small Connecticut 
bank. There was no bid anywhere for the bank stock. He inquired 
as to what its book value was, which was about $120 a share. Its book 
value net of real estate was about $90 a share. The stock had paid 
$2 a share for many years and had within the last 4 or 5 years gone to 
a $4 dividend basis. 

My friend did not wish to buy the stock, but in order to help out 
the seller he bid 50 and after the seller tried for a week to get another 
bid, which he was unable to do, he sold the shares. 

Now, I submit that as long as bank stocks, primarily represented by 
Government securities, are selling on that basis in that local area 
it is virtually impossible for any other concern, whether a bank or 
any other type, to raise additional money through the sale of stock. 


It is also most difficult for any new company to get started when that 
situation exists. 

I could give other examples, but I do not wish to take the com- 
mittee's time. 

2. That commercial bankers be encouraged to be ingenious in find- 
ing ways or means to make bankable credits that do not, at first 
glance, perhaps, appear to be prime credits; and that commercial 
bankers be particularly encouraged to develop even further than they 
have techniques of administering credits, servicing loans, and follow- 
ing loans which they have made to the end that their borrowers make 
money and the quality of the bankers' earning assets improve. After 
all, no loan ever went really sour so long as the borrower was making 

I might give another example here, sir. A New York banking 
friend of mine the other day told me with great pride that after 3 
weeks' work on trying to plan a deal he had at last found a way to 
lend $1,000,000 to a small concern that had a net worth of $35,000. I 
think the point of that example is that it took 3 weeks' steady work 
by a man who, in my opinion, is extremely competent, to find ways 
whereby that credit could be made bankable on a safe and acceptable 

I can cite other examples. There is the example of a little banker 
up in Merrimac Valley whom I know who has spent a great deal of 
time in developing a particular kind of participation loan which is a 
very useful device both for him and for the local concerns. 

He has two varieties, one whereby a piece of business is participated 
in bj'' the commercial bankers in the Merrimac Valley, and second, in 
cases where the piece of business is of such a nature that the maturities 
are longer than commercial bankers can safely take, he has worked out 
methods whereby savings banks take the long maturities and the com- 
mercial banks take the short maturities. 

Both of those instances indicate what I mean by being ingenious in 
finding ways to finance desirable pieces of business originating from 
small concerns. 

3. That in the case of fiduciary institutions — savings banks, insur- 
ance companies, building and loan associations, trust funds, etc. — con- 
sideration be given to the desirability of relaxing, as regards, say, 
5 percent of the earning assets of each such institution, the regulations 
that control the investment of their funds. The purpose of this sug- 
gestion would be to put a larger proportion of what are called institu- 
tional savings at work in business enterprise providing jobs. Such 
relaxation might be made in any one of a nuhber of ways. For ex- 
ample, all restriction on investment of the assets of fiduciary institu- 
tions might be waived up to 5 percent of the total assets of each institu- 
tion. Or the "prudent man" rule of investment might be made ap- 
plicable to 5 percent of the assets of each institution, leaving the re- 
maining 95 percent bound by existing regulations. Or a group of 
savings banks or building and loan associations in a particular State 
might be permitted to invest 5 percent of their assets in a fund ad- 
ministered by savings banks or building and loan association officers, 
but administered under somewhat less rigorous standards than prevail 
as resrards the investments of the individual banks. 


I realize that suggestions such as tliese mainly fall in the area of 
State action rather than in the orbit of Federal action, but neverthe- 
less I include them as being of possible interest to the committee. 

4. That consideration be given to existing Federal bank examina- 
tion policies and practices, and particularly to the effects which exist- 
ing practices have on the flow of capital and credit into business enter- 

As you know, bank examination covers a multitude of matters — 
commercial loans, mortgages, investments, the quality of individual 
items, the proportions of different types of bonds in bond portfolios, 
the pattern of maturities of the bonds, accounting methods, loan and 
investment procedures, the diligence of the officers and directors, and 
many other matters. It is reasonable to suppose, I think, that such 
thorough examinations exert a considerable influence on banking poll' 
cies and practices. 

In the post-war period I believe we will have a considerable need 
for so-called character loans and for medium term industrial mortgage 
credit. Credits of these two types have not been particularly popular 
in recent years, and I believe it to be most important that examination 
policy and practice — within the proper limits of safety — encourage 
the type of lending which society needs. 

5. That efforts be made to encourage the establishment of local or- 
ganizations, operating on a State or regional basis, which will have 
the best possible financial and business sponsorship, and which will 
concern themselves with — 

(a) Showing businessmen, particularly small businessmen, how to 
prepare financing plans and proposals in such a way that these plans 
or proposals will be realistic and of a character to interest financing 
institutions; that is, these organizations will do the preliminary spade 
work in setting up a financing proposition ; and 

•(&) Directing businessmen to the type or types of financing institu- 
tion most likely to be interested in such proposals ; and 

(c) Assisting owners, or owner-management groups, who wdsh to 
sell out, in discovering strong buyers who are interested in operating 
rather than in liquidating properties. 

Le me speak briefly on some of these points. 

I believe that it would not be possible to administer effectively an 
organization such as is contemplated on a national scale, and thus I 
suggest that the proper form of organization is a local or regional basis. 

In my observation, the success of any type of financial institution 
is very largely determined by the character of its sponsorship, and thus 
it seems to me essential that organizations of the type proj^osed should 
have the best banking and business sponsorship obtainable. Further- 
more, in order that local confidence be obtained and knowledge of local 
conditions be utilized, this sponsorship should be by men known in 
their local communities and familiar with local conditions. In pass- 
ing, I should like to point out that the men who might be expected to 
have the greatest immediate interest in the welfare of local business 
firms are the commercial bankers, security dealers, railway and utility- 
company executives, retailers and hotel men in the local communities, 
and that sponsorship of the type desired might well be sought from 
such sources. 


Furthermore, it lias been my observation that many small or new 
comi^anies, seeking financing;, typically have considerable difficulty in 
interesting sponsors who have a first-class reputation in the business 
and financial world. As a result, such concerns commonly suffer hard- 
ships, tangible and intangible, that larger concerns do not encounter. 
This suggestion is designed to provide small and new firms with better 
connections and backing than they are now generally able to obtain. 

Finally, I wish to point out that many businessmen who run small 
companies, concerns where there are only two or three executives, 
usually are primarily production men or salesmen rather than finan- 
cial people. Consequently, such businessmen often are not as famil- 
iar with financial matters as they are with other aspects of their 
business. Thus this suggestion is aimed at providing assistance at 
the point where the small- or medium-sized businessman is often least 
well equipped. 

6. That ways and means be explored whereby the clearance of a 
prospectus with the Securities and Exchange Commission might be 
made less onerous, particularly in the case of small and medium- 
sized issues of securities. Careful attention, I believe, should be 
given to the desirability of lifting the exemption limit from $100,000 
to $500,000 or even higher, even though I realize that the opportuni- 
ties for fraud might thereby be increased. 

In this connection I should like to make three points. First, it is 
generally agreed, I believe, that the difficulties encountered in raising 
capital funds in amounts in the range from $25,000 to $1,000,000 con- 
stitute one of the major bottlenecks in the economic system, and any 
measure which gives promise of easing this bottleneck deserves to be 
most carefully considered. 

In the second place, companies which wish to raise capital in 
amounts of $25,000 to $1,000,000 are typically companies run by one 
to four men — at most, six men in the case of the larger companies. 
For a three- or four-man company, compliance with the law is an 
entirely different problem from what it is in a company with a la^er 
executive force, whether we talk about security regulation, taxation, 
price control, or any other sphere of Government regulation. The 
burden of compliance is disproportionately heavier — often much 
heavier — in the case of a three- or four-man company than it is in 
the case of a larger concern. 

In the third place, the record of securities issued and deals done 
in compliance with the law tells only half the story. It does not and 
cannot tell the story of deals done — not in evasion — but in avoidance 
of the law, or the story of prospective deals that were abandoned 
because it was believed compliance would constitute more of a drain 
on executive time and energy than the company could stand. 

Some years ago, sir, I made a small collection of security deals 
done in what I considered to be laborious and tortuous ways, to come 
witliin the limits of this $100,000 exemption. 

There are numerous ways to split a piece of financing : Between 2 
fiscal years, or 2 calendar years, $100,000 in 1 year and $100,000 in 
another, although this seems to be palpably bad practice; to issue 
$100,000 or less on an interstate basis and the balance of needed 
money on an intrastate basis, thereby getting an exemption ; to issue 
on ari interstate basis up to $100,000, the balance of the money to be 


obtained through so-called private placement with an insurance com- 
pany or group of insurance companies. 

I could cite examples of the effect which the tax laws have on the 
pressure toward debt financing rather than equity. I know you are 
familiar with those. I think this matter of the influence which these 
two kinds of regulation have had on the way in which money has been 
raised, and the forms of capital structure which result therefrom, is 
most serious. 

lam also aware that it is extremely hard to find records of proposed 
financing which was abandoned because of the difficulties, real or 
imagined, of clearing a prospectus. I know of a few myself. But 
typically, security dealers and businessmen do not wish to talk very 
much about those things and it is, I think quite hard to get any im- 
pressive record, although I believe there are a good many cases which 

7. That in studying the financial problems of individual business 
firms during the transition period these problems should not be ap- 
praised independently of the removal of the. controls on the flow of 
materials through the economy. 

It is clear, I think, that if, as war work declines, individual com- 
panies are not able to return to civilian production because they are 
unable to obtain raw materials to chew up, no amount of financial 
assistance, whether public or private, will solve their problems. 

I have made no suggestions about taxation, since I have no special 
competence in that field. But I think it is clear that the present 
structure bears extremely heavily upon owners and substantially con- 
tributes to making ownership unattractive in the eyes of many persons. 
Reform and simplification of the tax system would certainly make the 
position of owners much easier, even if the financial burden imposed 
on them were not reduced to any great extent. 

The Chairman. Are there any questions? 

Mr. FoLsoM. I thought you might indicate very briefly some of your 
background for these suggestions — the study you have made of small 
business in New England. 

Dr. Abbott. These suggestions arise, sir, you might say, from three 
lines of inquiry. For the last 12 months or more I have been doing 
a considerable amount of research work for the Harvard Graduate 
School of Business Administration in this particular field, and I have 
published four short reports on the financial problems of business 
during the war and in the immediate post-war period. I have also 
been on the research staff of the Committee for Economic Development 
and I have filed with the committee a manuscript dealing with that 

Thirdly, since the first of the year I have been chairman of the New 
England Council Committee on the financing and ownership of New 
England business enterprise, and that work has brought me into con- 
tact with a good many small businessmen. Most New England busi- 
nessmen are small businessmen and I have come in contact with a good 
many bankers and security dealers and businessmen in the New Eng- 
land area. 

The suggestions which I have just laid before you are a result of 
conclusions which I have come to in connection with my work in these 
three areas. 


Mr. FoLsoM. Do you think that the Government should set up any 
machineiy for furnishing capital to these small companies, or do you 
think it ought to be left entirely to the private banking and investment 
system ? 

Dr. Abbott. Well, sir, I am quite dubious about the desirability of 
the Government coming into this field for a number of reasons. 

During the last 10 yeixrs we have had quite a good deal of experience 
with Government lending in the field of business. If we set aside 
the salvage operations, which I think fall into a special category 
undertaken by the Reconstruction Finance Corporation, the Govern- 
ment has never been able to place enough money in the field of business 
lending to really make unj difference. I think if you examine the 
figures you will see that the total amount of business loans made under 
section 13 (b) of the Federal Reserve Act, by the Reconstruction 
Finance Corporation and even by the Smaller War Plants Corpora- 
tion is an almost insignificant fraction of the total amount of business 
lending made by private institutions. I see no reason to suppose that 
in tlie future a Government lending organization would have any 
greater degree of success than we have had during the last 10 years. 

In the second place, I know a considerable number of businessmen, 
more especially small businessmen, who are quite willing to admit 
chat thev are undercapitalized, that they need more money, that they 
would get along better if they had more capital and that probably 
tliey would make a greater return, but they are unwilling to borrow 
from any of the existing Government lending agencies. I see no 
reason to suppose that those men would change their minds simply 
if there was a new agency created. 

In the third place, I am quite skeptical, in view of our experience of 
the last 10 years, whether it would be politically feasible for any 
Government lending agency to lend or to supply equity capital on 
terms tliat would be acceptable to many of the small businessmen. I 
feel that if men will not borrow they would be even more hesitant about 
taking a Government agency into partnership with them. 

]\rr. FoLSoM. You do not think the Government should get into it. 
What do you think is the prospect of local groups being formed in 
these local communities to help provide equity capital to these small 
concerns that want to expand? 

Dr. Abbott. I think there are a great many persons, certainly in the 
local community I know about, who would be very much interested in 
undertakings such as I have outlined, more specifically if they felt 
they Avere having encouragement in their efforts from the Federal 
Government in some respect. 

Mr. FoLSOM. What definite encouragement? It does not seem to 
me it could really cover the whole situation if we only let up on the 
S. E. C. regulations. Many small concerns come below $100,000 lim- 

Dr. Abbott. Yes ; that would be so. 

Mr. FoLSOM. You are not worried about the S. E. C. in that respect? 

Dr. Abbott. I think one of the great difficulties with the very small 
issues is the fact that practically no market exists for outstanding 
issues of small concerns. 

Mr. FoLsoM. There is not much Congress can do about that, is there? 

Dr. Abbott. Not in the way of legislation, I think. But I think 
an expression of intent or desire might have a very considerable effect 


in local areas. I think it would be beneficial if local businessmen 
and bunkers were given some kind of an indication that Congress 
wished them to move in this general direction. I am not talking 
about legislation, I am talking about a little encouragement. 

Mr. FoLsoM. That would take the form of changing tax laws more 
than anything else, wouldn't it? 

Dr. Abbott. Tax laws will be a very considerable help but I think 
other things can be done in addition. I said in my prepared state- 
ment this is not a program which I have attempted to lay out, it is 
merely a number of suggestions. 

Dr. Kaplan. I wonder, Congresman Colmer, whether Dr. Abbott 
could sum up this question which seems to have been left in this form, 

■ that small business is in need of relief but it does not want the Gov- 
ernment to do anything about it. Well, what is the issue: Wliere 
does something have to be done in which the Federal Government 
can participate other than a pious wish that small business get along? 
After all, there are some very serious questions as to whether the 
Smaller War Plants Corporation, for example, should have its power 
extended or its powers limited or how far it is going into the buying 
and selling of business or into the expansion of business. I think an 
expression from business itself is just as important as any expression 
from Congress. 

What would you consider if their expression, that is from business, 
would be, what it wants or what it needs in the way of help ? 

Mr. Abbott. I think you have two questions there, sir, if I may 
answer them one by one. 

In the first place, I believe this matter of the future welfare of small 
-and medium-sized business which we are discussing here this morning 
is a matter of extreme importance. I do not believe that the present 
situation can be alleviated by any one single mechanism or statute. I 
think the various problems must be broken down and treated piece- 
meal through a series of remedial measures, of which taxes would be 
one and the improvement in the market for local securities would be 
another, a change in the regulations for S. E. C. prospectuses would 
be a third, and I have so indicated. 

What I have said is by no means a complete list of the things which 
I think should be done to correct certain of the existing difficulties. 
It seems to me it is a matter which has to be w^orked on from various 
angles, with this step here and that step there. 

Your second question is. What kind of an expression of opinion 
can business give? I do not quite know how to answer that. There 
are many business associations — the Smaller Businessmen's Associa- 
tion, the National Association of jNIanufacturers, the chamber of 
commerce, and trade associations. You might ask, I suppose, each 
such association for a program. How valuable the answers would 
be, I do not know. Nor do I quite know how you would get business 
to speak as a unit, because business is made up of many diverse inter- 
■ests, as you know. 

Mr. WoLVERTON. I regret I was not able to hear all your statement, 
.but the part I have heard and the questions that have been asked have 
created some thought in my mind. 

■ You do not seem to think that there is any legislation needed but 
that it could be accomplished by an expression of good will, I would 
take it, from the Government or from businessmen. 


From a practical standpoint, I do not see where that will raise 
capital. If you got it from a local source, it would probably have to 
be the local' bank. The local bank is interested in security for tne 
loan that it makes. During the war the effort of small businessmen, 
as well as large, has been greatly facilitated by the guaranties that 
the Government has given to banks in making loans of that kind for 
that purpose. It would seem to me that you would have to have some- 
thing more substantial than a mere expression of good will, either 
from the Government or business, before the capital would be 

What have you to say about that? 

Dr. Abbott. Sir. if I might make a distinction between credit and 
capital, meaning by capital long-term financing 

Mr. WoLVERTON (interposing). I am speaking of loans that would 
cover both phases that you now mention. 

Dr. Abbott. Well, sir, if I might speak first to the point of long- 
term financing, meaning thereby stock or bond financing, of course, the 
banks cannot own stocks. The proper people to own stocks of small 
concerns, I believe, are the individual citizens in local communities 
where those concerns exist and there is admittedly in the country 
at the present time a very large amount of liquid fimds in the form 
of currency and demand deposits not invested. 

Mr. WoLVERTON. That is all true. They are not going to ,i'elease 
that money without some assurance that the loan will be repaid. 

Dr. Abbott. I was speaking to the point of equity financing, sir. 
I think that is the proper place from which equity financing should 

Now, as to loans and bonds, by and large, I think I am correct in 
saying that under the present system of banking examination it is 
extremely hard for any bank to own the bonds of a small local concern 
or even a large local concern, primarily because of the use which the 
bank examiners make of bond ratings as issued by the individual 
investigation services. 

I think the present situation is that a bank in order to buy a bond 
must find that it is rated, as I recall, better than B. A. A., by two 
of the tliree services, and I would point out to you that these 
services are private services. 

Now, these private services are unable, since it is not profitable for 
them, even to issue ratings to small issues. I do not know what the 
minimum is, but I have a feeling it is around half a million or a little 
less. They do not have enough demand for anything below that. 

Under those circumstances a bank simply cannot buy a bond of a 
small local concern if the bond issue has no rating. At least, that is 
my strong impression from talking to many bankers. 

In the State of Maine at the present time I am credibly informed 
that no Maine bank can own any bonds of any railroad in Maine. Now, 
there are probably some bonds of the Maine railroads which banks 
should not own, but if the Maine banks cannot buy Maine railroad 
bonds I do not know whom we can expect to buy those bonds. 

In the case of credit loans, I think two things are involved, sir. I 
think, first, that there is plenty of lending power in the banking sys- 
tem if the bankers wish to make use of it. 


Mr. WoLVERTON. If they wish to make use of it? A banker al- 
ways wishes to make use of it. The only difficulty comes in in making 
use of it so that he can be assured it will be a safe investment for the 

Dr. Abbott. I am not sure that I entirely agree with you that 
bankers are always eager and ingenious in making use of their lending 

Mr. WoLVEKTON. Maybe my limited experience in the banking jBeld 
does not enable me to express an opinion as positively as I have, but 
such experience as I have would certainly encourage me to make the 
statement that I have, and forcibly, as I have. 

Dr. ArmoTT. My impression, if I might go on, is that we have an 
adequate lending power. We have a very wide range of different 
kinds of financial instruments and arrangements and it is my feeling 
that, if a loan officer is diligent and ingenious, he can usually find a 
way to do the deal. 

Mr. WoRLEY. Without assistance from the Government? 

Dr. Abrott. That is right, sir. 

The Chairman. We are very grateful, Dr. Abbott, for your state- 
ment. I am sorry, but due to the fact the House is in session, we 
are all anxious to get away. 

Thank you very much. 

The committee will meet again on June 13, 1944. 

(Whereupon, at 11:40 a. m., the committee adjourned until June 
13, 1944.) 


TUESDAY, JUNE 13, 1944 

House of Representatives, 
Special Committee on Post-War 

Economic Policy and Planning, 

Washington^ D. C. 

The special committee met at 10 : 30 a, m, in room 1304, New House 
Office Building, Hon. William M. Colmer (chairman) presiding. 

Present: Representatives Colmer (chairman). Cooper, Zimmerman, 
Voorhis, Ljaich, O'Brien, Fogarty, Worley, Fish, Gifford, Reece, 
Welch, Wolverton, and Dewey. 

Also present : Marion B. Folsom, director of staff, and Dr. Kaplan, 
consultant, of the committee. 

The Chairman. The committee will come to order. 

We have with us this morning Maury Maverick, who needs no in- 
troduction to this committee. He is a former jSIember of the House, 
presently serving as Chairman of the Smaller War Plants Corpora- 
tion. Mr. Maverick is particularly interested in the problems of the 
small businessman. We are all interested in that. 

Mr. Maverick, we are glad to have you here this morning. Our 
custom in this committee is to permit the witness to make a statement 
and then we interrogate him. However, the time is yours and we 
hope you feel free to conduct yourself as you desire and we know you 
will do that anyhow. 


Mr. Maverick. You gentlemen compose one of the most important 
committees in the entire Congress. Your committee represents a land- 
mark in democratic legislation. Upon you depends the formulation 
of policy to guide the Nation during reconversion. In looking over 
the list of members of the committee, I find many old friends — and 
new friends. And it is reason for encouragement to note that this 
vital committee includes so many leaders of both parties ; for indeed, 
post-war planning is a nonpartisan responsibility. 

We must plan now for what is to come with the end of the war. 

AVe must plan to see that the soldiers who return will have a fair 

We must realize that if we want a free enterprise system and an 
un])lanned economy we must plan for them. 

Thus, in the very midst of this invasion, and while we shall give it 
every support, at the same time we will prepare for the future. 




Mr. Chairman, my testimony will be devoted principally to small 
business, or, I might say, free enterprise. Small business can exist 
only M^here free enterprise is guaranteed. And this is not an attack 
on big business. Any honestly conducted business, however big, which 
does not indulge in unfair discrimination, or any unfair practice, and 
does not violate the Sherman Antitrust Act is also entitled to encour- 
agement and good will from the Government of the United States. 

Naturally, however, I shall emphasize little business, since I am 
Chairman of the Smaller War Plants Corporation and charged by 
Congress with the duty of aiding small business. 


I will discuss the following points : 

I. Contract terminations. 
II. Disposal of surplus property. 

III. Resumption of civilian activities. 

IV. Financial problems. 

V. The taxation of little business. 
VI. Patents and technological information. 

By following this outline we can develop an orderly and relevant 
presentation of the problems of small business. I proceed : 


The most immediate problem confronting American business, large 
and small, is contract terminations. 


It is not difficult to state the needs of small business in this field. 
When contracts are terminated small business needs speedy, final and 
fair settlement of its claims. It needs prompt removal of war materials 
and machinery from its factories. It needs, in many instances, some 
form of financing during the period between the termination of the 
war contract and the settlement of the claim. 

The contract termination bill has not been adopted yet, but it has 
passed the Senate, and substantially similar versions have been ap- 
proved by your committee, the House Judiciary Committee, and it has 
been reported out by the House Rules Committee. 

In at least two respects I fear that this bill does not adequately safe- 
guard the interests of small business. It does not protect subcontractors 
whose primes go broke ; at least, the protection is not mandatory. And 
in the event of mass termination of war contracts it does not provide 
adequate interim financing for small subcontractors. 



Many small businessmen have felt compelled for patriotic reasons or 
because no other work was available to undertake subcontracts for con- 
cerns other than those with whom they were accustomed to do business. 
In certain instances the credit standing of these prime concerns was not 
good. It is a foregone conclusion that some of them will go broke 
when their contracts are terminated. 

To remedy this situation, I advocate enactment of legislation by 
Congress directing the purchase by the Smaller War Plants Corpora- 
tion of the claims of subcontractors whose prime contractors or higher 
tier subcontractors become bankrupt and the payment of a full and 
fair compensation therefor. 

I am convinced that only by such purchases will complete justice be 
done. The cost to the Government will not be large, and the benefit 
to small businesses will be enormous. An interesting byproduct will 
be the assistance it will give the procurement agencies in placing new 
war contracts. Once relieved of this fear of loss by failure of the 
primes, businessmen will be much more willing to participate in war 
jjroduction. It will bring national confidence. 

The problem of furnishing war contractors with funds to replace 
the money tied up in inventories and accounts receivable during the 
period after termination of their war contracts, and prior to the 
settlement of their claims, is a very difficult one. 

The contract termination bill seeks to solve this problem two ways. 
One, is by authorizing substantial partial payments (to be treated as 
loans in the event they turn out to be excessive.) And two, by author- 
izing the services to guarantee bank loans based on termination claims 
in a manner similar to the guaranteed V-loans made for war pro- 


There are over a million, and some say 2,000,000, war contracts 
in existence today. Obviously, if a large number of these contracts 
are canceled, there will be an enormous number of individual cases 
where financial assistance will be absolutely essential. I am not sat- 
isfied that this need can be met by a system which relies on individual 
scrutiny and guarantee of loans. I can't see how the little fellow is 
going to get aboard this band wagon when the rush starts. 


To deal with this possible emergency, I advocate establishment of 
a system of Government credit insurance which I will discuss in greater 
detail at a later point. 



The surplus property problem is also of most urgent and grave 
importance. Because of its vastness, it appears only natural that at 
the present time accurate information hasn't been compiled as to the 

99579— 44— pt. 3 4 


amounts or kinds of surplus property that are available or will be 
available at the end of the war. But there is reason to believe that 
huge quantities of such property will be available. 

The methods of disposal will profoundly affect the life or death of 
thousands of little businesses. Indeed, it will affect our entire econ- 
omy ; our way of life. 



Small business must be protected in this as in other fields. Other- 
wise, it is a foregone conclusion that the bigs will get whatever benefits 
there may be. As usual, the little fellows will be left holding little 
empty peanut bags. 

There are a few general provisions which should be made a part of 
any legislation ultimately adopted to deal with the disposal problem. 
I suggest the following five principles ? 

1. Any bill dealing with the subject should require that all surplus 
property be disposed of in lots small enough to assure the participation 
of small business in all purchases. This should be specifically required 
in clear and emphatic terms. 

2. The widest possible advertisement of all sales should be required. 
Rules and regulations governing such advertisements should provide 
ample notice to small business. 

3. Liberal credit terms and leasing provisions should be used in 
order that small producers may participate in all purchases. 

4. Smaller War Plants Corj^oration should receive at least 15 days' 
advance notice of all proposed sales and the terms and conditions 
thereof. It should have time to pass this information on to small 
concerns which may be interested. At the same time it should have 
the opportunity to object if the terms and conditions are not fair to 
small business. 

5. Subject to the over-all control of a surplus-property administra- 
tion, Smaller War Plants Corporation should be authorized to acquire 
and distribute surplus property among the small business concerns of 
the country. 

As time goes on we will find specific situations in which the interests 
of little business are not being properly protected. I hope that this 
committee will continue to function so that such matters can be called 
to its attention from time to time and appropriate legislation suggesed. 



At some time civilian production must be resumed in this country. 
The only considerations involved are when and how. However, these 
have not been discussed sufficiently because the military authorities 
have believed it might in some way weaken the invasion. 

In some spots pools of idle labor exist, and for certain types of 
manufacture materials are available. 



Positive steps should be taken to put these materials and manpower 
together, and i)roduce some things to meet civilian requirements. 
Hundreds of small plants exist that can do this, and without detri- 
ment to the war effort. 

I am bound to report that all suggestions by this corporation or by 
me, made on behalf of small business and for the use of this surplus 
labor and materials, have been turned down. 


So far as any long-range plan or policy for releasing war controls 
and permitting resumption of the manufacture of civilian goods, it 
simply does not exist. Nor can I see any indication that such a policy 
will be developed and adopted by the war agencies until the emergency 
of reconversion actiually hits us. In such a situation, as usual, small 
business will suffer. Of course, all business will suffer. Little busi- 
ness always suffers most when there are no plans and no rules. 

At this point, I want to include in the record an editorial appear- 
ing in the Baltimore Sun, June 6, 1944. I offer it not in criticism of 
Congi-ess but rather to point out again that the Nation is looking to 
Congress for leadership in the matter of reconversion. 

Stalled Pl-vks foe a Reconversion Program 

Several weeks ago Messrs Bernard M. Baruch and John M. Hancock, authors 
of the famous reconversion report, dissolved their advisory unit within the 
Office of War Mobilization on war and post-war economic adjustments. There 
may be nothing particularly significant in this. Perhaps, as Mr. Baruch has 
suggested, they felt that the unit had completed its work. But it is now known, 
that at the same tiu:j8 they presented Office of War Mobilization Director James 
F. Byrnes a letter vigorously criticizing Congress and certain executive agencies, 
notably the War Production Board, for continued delay in adopting effective 
reconversion plans. 

On the face of the record, as available to the lay observer, such criticism is 
well justified. 

The Baruch-Hancock report was submitted back in mid-February. Among 
the most urgent recommendations was one for "the immediate preparation" of 
an "X-day reconversion plan," a program to be put into effect on the day of 
German collapse. The sooner this could be prepared, the better, for essentially 
the same procedure could be followed in applying any "cut-backs" in production 
possible before that day. It is apparent now that no such plan has been pre- 
pared. In fact, it was not until 3 months later, when the Baruch-Hancock 
letter was written, that War Production Board Chairman Donald M. Nelson 
finally assigned the task to a special group of his associates. And meanwhile 
the Brewster stay-in strike has shown the danger of further delay. 

If an X-day — an advance reconversion — plan had been ready, cancelation of the 
Brewster aircraft contract could have been accompanied by an orderly program 
for redistribution of the Brewster workers to other war plants in the same gen- 
eral area still suffering from labor shortages. Instead, when the workers staged 
their demionstration, a frantic .scrambled was begiin to find what the military 
procurement agencies said they did not need — and perhaps ought not to be 
found — new contracts for that particular company. The War Production Board 
and the War Manpower Commission simply were not ready to follow up the 
cancelation in efficient manner. 

Congress, for its part, has done little to aid the executive agencies in this 
matter. The Baruch-Hancock report urged repeatedly that Congress has a re- 


sponsibility to lay down policies for and give legislative status to the oflScials 
who must handle reconversion problems. The Senate Post-War Planning Com- 
mittee itself noted even earlier than the executive agencies could scarcely make 
final plans until they had a "pattern of legislation" ; that it was "imperatively 
necessary" to establish such a pattern "at the earliest possible moment." Yet 
to date not a single measure in the field has been enacted. 

Even the contract-termination bill, rated the most urgent and lifted out of 
a more comprehensive bill for speedy action, has been passed only by the 
Senate and still remains in House committee. No other current reconversion 
bill has been brought to the floor of either house. 

The time grows shorter with each passing day. Mr. Nelson has admitted 
that August "might be the best guess" for the "turning point," the shift of 
emphasis once again toward increasing civilian production. Now that the 
assault on north Europe is imder way, the prospect of X-day, though un- 
predictable, is definitely on the horizon. Mr. Byrnes should have much to say 
when he appears next Monday before the Senate Post-War Planning Committee. 


Now I suggest the following as basic principles in the resumption 
of civilian production of little business : 

1. Because of the emergency created at the beginning of the war, 
small business suffered unduly. We must focus our attention on 
its problems at this time to make sure that its needs are not again 

2. In general small business can be permitted to resume civilian 
production without the heavy drain on materials and labor which 
large business would impose. Small business is therefore the logical 
candidate for prior reconversion. 

3. Small business is more flexible than big business. Moreover, if 
necessary, it can promptly return to war production with a minimum 
of delay. 

4. Allotments of material for civilian production to small pro- 
ducers must be made large enough to ensure profitable operations. 
A uniform quota using some arbitrary percentage of pre-war pro- 
duction can never be adequate or fair. There is no point in per- 
mitting a man to open his business and operate it a short period 
if bankruptcy is to be his reward. 

5. Quotas should not be based on percentages of pre-war busi- 
ness. Such quotas — known as grandfather clauses — are a first step 
toward forming American business into cartels and monopolies. All 
cartels seek to maintain their preferred position by use of quotas. 
Let us fight vigorously against any procedure which tends to en- 
courage cartels and stifle free enterprise in America. Furthermore, 
such quotas eliminate new business, and new business is an integral 
part of American economy and must be protected. 



Where financial matters are concerned, I would like to offer the fol- 
lowing as a basic American economic philosophy. 

Small business is entitled to the same financial facilities and the 
same financial service as big business. It is the duty of government I 
to see that such facilities and service are provided by stimulating * 
private financial institutions if possible and by direct governmental 
action if necessary. 





However, small business does not have such facilities and services at 
the present time. Nor can we expect our financial institutions to 
furnish such facilities and services under present circumstances. 

Or banks and trust companies are the largest single sources of credit 
for industrial enterprises, both large and small. The credit which 
they supply, however, is in general only short-term credit. This is 
right and proper, since their assets should always be kept in liquid 
form to meet the possible demands of their depositors. 

But even in this short-term field, the big industries get considerably 
lower rates of interest along with other advantageous terms. Often 
little concerns get no credit at all. 

Our banks and trust companies do not, or at least should not, fur- 
nish any appreciable amount of intermediate or long-term credit, 
or equity-capital financing. 


The fact is, and it is a matter of common knowledge, that there is 
almost a complete absence of financial facilities for small business in 
the intermediate, long-term, and equity-capital fields, except as these 
requirements are supplied by the investment market. In other words, 
small as well as large firms must generally secure funds of this type 
by making a public issue of bonds or stock. 

A myriad of troubles beset the small businessman who attempts to 
secure financing in this manner. His name and financial record are 
not such as to attract the investing public. The amount of money 
which he requires is too small to justify the overhead expense involved 
in qualifying his securities before Government authorities and selling 
them to the public. It frequently happens that the general public's 
attitude toward the securities market is such as to prevent a favorable 
reception of the stock or bonds which he has to offer. 

This lack of intermediate, long-term and equity-capital financing 
facilities has been with us for a long time and, unless steps are taken 
by Congress, such tendencies will continue. Furthermore, it will be 
in evidence during the reconversion period, and just at the wrong 
time. Then small businessmen will need money badly and in a hurry. 

Some will need it to reconvert their plants to their former civilian 
lines. Many will wish to exploit technological processes developed 
during the war. And in almost all instances the demand will be for 
intermediate, long-term or equity-capital financing. 

In this we must plan now — this is a job of hurry up post-war plan- 


We must not forget another factor. We all believe that the national 
income should be raised from the pre-war level of $80,000,000,000 to 
somewhere near the present $150,000,000,000 level. This cannot be 
done without an enormous capital investment. Business must have 
available capital if it is to have the tools with which to produce its 
share of this income. 



I have no miracle-workino; plan to offer which will suddenly solve 
all the varied financial problems of small business. I suspect that 
all previous financial techniques must be used — but many new ones 
invented. We must be bold. If we are not bold, the country may 
suffer seriously enoug^h to greatly alter our form of government. 

Two ways occur to me, which could be used to help in this situation 
and might go far in the right direction. 

The first of these methods would be a credit insurance plan similar 
to that in use by the F. H. A. but adapted to the needs of small business. 

The second would be a small business financial corporation similar 
to that recently presented to the Canadian Parliament by the Minister 
of Finance. 

As to the first point, I have mentioned credit insurance before as 
a possible means of assisting small business and the small banks of the 
country through the difficult contract termination period. 

By credit insurance I mean a system where qualified banks can 
automatically insure all or a percentage of all of their loans of a given 
type and size with a Government or other insuring organization. 
Such a system operates on the principle of spreading the risk and 
paying losses from resources built up out of small premiums. It does 
away with the necessity for individual examination of loans by the 
insuring organization. 

While such insurance would be peculiarly adapted to the mass pro- 
duction of loans which may be necessary in the termination period, 
the success of the F. H. A. in using such insurance to strengthen 
all types of mortgage loans inevitably points to the fact that it can 
be used extensively and successfully in the small business fields. 


In this financial field I do not believe we can or should distinguish 
between small manufacturing concerns and other types of small busi- 
ness. Consequently, we are dealing with a vast number of small 
businesses. In view of this fact, and the small size of the average 
loan, it would be difficult and certainly undesirable for a Government 
organization to undertake to make all the necessary individual loans 
and guaranties. 

The 15,000 banks of America, with their 300,000 employees, are the 
proper organizations to finance small business. Government should 
not attempt to set up financial offices in competition with them. Use 
of private banks will eliminate the vast number of details which are 
inevitable in dealing with any Government organization and will 
make it possible for small businessmen to fill their credit needs in 
their own communities. This will save them time and money. 

Credit insurance may very well be one of the methods for accom- 
plishing this desirable result. On the one hand, it lends itself to 
mass production and decentralized operation, and, on the other, it 
tends to stimulate private transactions rather than to compete with 






The Industrial Development Bank proposed by the Canadian 
Minister of Finance is an interesting idea. This bank is to be Gov- 
ernment owned and operated. It is given broad power to make or 
guarantee loans and to acquire stocks, bonds, or debentures, either by 
underwriting or purchasing direct from the issuing corporation. In 
its present version its scope is limited to industrial concerns which 
seems to narrow. And it draws no distinction between large and 
small business, although the Government has stated that it expects 
it will be used largely to finance new and existing small business. 

An interesting side light is the provision that the bank must operate 
"on the assumption that there will be on the average a relatively high 
level of economic activity." The Canadians have decided to be bold; 
they have faith in their future ; and they intend to decide whether or 
not a borrower is credit worthy against such a background. 

It seems to me that a plan similar to the one proposed by the 
Canadian Government could be developed and adapted to the needs 
of small business in this country. 

I wish to emphasize I do not advocate and would not advocate any 
organization which would compete in any way with existing banks, 
investment houses, or other financial institutions. It should be the 
purpose of such an agency to fill gaps and to strengthen existing 
institutions rather than to weaken them. 


This is surely a fact: Small business must have a chance to get 
started by reasonable tax relief. Moreover, if new businesses are not 
started, the old ones merely get bigger, or even stand still; result, low 
production and financial stagnation. The final or end result might 
also mean the break-down of the free enterprise system and the de- 
velopment of cartels and monopolies, leading into a type of socialism 
and communism. 

Thus we must have inducement taxation for the new free enterpriser. 

In formulating this new tax policy and framing the tax laws we 
must also be mindful not only of the part new enterprises play in our 
economic life but also of the vital importance of an environment 
favorable for business expansion. A tax policy adopted without any 
consideration of the role of small business will inevitably increase the 
degree of concentration in American industry. Conversely, a tax 
policy which takes into account the importance of new and expanding 
firms can contribute greatly to the preservation of a well-balanced 
economy, one in which the distribution of firms by size classes ap- 
proaches the ideal. 

The greatest possibilities of improving the tax position of small 
business is by the Federal Government. Wliile some of the sugges- 
tions 'I shall make would be of value for businesses of all size classes, 
all of them would be particularly valuable for small business. 



First, I believe that the specific exemption under tlie excess-profits 
tax sliould be increased well beyond the $10,000 provided by the Reve- 
nue Act of 1943. This exemption might well be increased to some- 
thing like $50,000, effective not later than the first taxable year begin- 
ning after the end of the war. If it is so desired, this exemption 
could be restricted to corporations with excess profits net income — be- 
fore the exemption — of not over $50,000. 

Regardless of the precise form which this exemption might take, 
businesses of small and moderate size would be the principal benefi- 
ciaries. Obviously, the larger exemption would be regarded with 
favor by those contemplating the establishment of small business cor- 
porations immediately after the war. 

The recommendation just made implies that I do not believe the 
excess-profits tax will be repealed, effectively immediately after the 
war. While it is widely believed that the excess-profits tax should be 
repealed at the earliest practicable date, because of the present provi- 
sions covering carry -backs of unused excess-profits credits, it would not 
appear to be in the interest of business and the Government to have 
the excess-profits tax repealed immediately upon the cessation of hos- 
tilities. This is particularly true of those corporations which it may 
be reasonably expected will incur losses — or earn only nominal profits — 
in the first post-war year. In the second or third post-war year, it 
might be possible to abandon this tax completely. Future events, how- 
ever, will determine such action. 


If equity capital is to flow freely into business channels, and is to 
become available to small business on terms not markedly more oner- 
ous than in the case of large business, specific investment incentives in 
the form of preferred rates on dividend income of new equities might 
be granted. 

If the small-time capitalist is to regain a place in the economy, we 
must not again try to operate the tax system on a "heads I win, tails 
you lose" basis. We must not overtax dividend income, and we must 
allow liberal treatment — carry-overs or carry-backs — of operating 
losses. Liberal depreciation allowances on new plant and equipment 
are also essential. 

As the tax laws now stand, the exactions imposed by the Federal 
and other governments appear to be a barrier to those who are 
contemplating the establishment of new enterprises. Therefore, 
everything possible should be done to minimize the forbidding appear- 
ance of the Federal tax structure and to encourage the establishment 
of new companies. 

As is well known, the number of business units has declined sharply 
during the war period. An appropriate tax policy can do a great deal 
to hasten the return of our business population to a more normal level, 
while at the same time bringing about a desirable distribution of that 
population by size classes. 



A specific suggestion that has been offered is that new corporations 
should be granted special treatment under the Federal corporation 
income tax for a period of years. One proposal is that new manufac- 
turing corporations might be exempted for the period of 3 yesLVs from 
whatever special tax is imposed on corporations after the war; for 
the fourth and fifth years one-half the regular rate has been sug- 

In concluding my remarks on taxation, I should like to emphasize 
that the taxation of small business cannot be viewed as something 
aside and apart from other aspects of the small business problem. 
The one great draw-back to the expansion of the small enterprise has 
been its inability to obtain the necessary equity capital. In the future, 
as in the past, small business will look to earnings for a substantial 
part of the capital that is essential to growth. Until such time as our 
financial mechanism is improved to a point where the small business- 
is not at a serious disadvantage in obtaining equity and long-term 
loan capital, the tax laws cannot be regarded as a completely separate 
and independent factor in the environment in which small business 



The difficulties of small business in this field are legion. Certain of 
our small businesses are placed under their greatest handicaps by the 
operation of our patent system. 

To the average small businessman, patents often mean just one 
thing — litigation, and of the most expensive and time-consuming 



Patents mean litigation whether the small businessman acquires 
one or has inadvertently done anything which might be classified as an- 
infringement. Furthermore, he may involve his distributors in liti- 

The so-called umbrella type patent, which covers an entire field 
activity, and the so-called bottleneck type patent, which can block 
an entire field of activity, can usually prevent all but the very largest 
manufacturers from entering a given field because enormous expense' 
is involved in designing machinery and products in such a manner as 
to avoid possible infringements. 


Perhaps the worst feature of the present patent system from the 
fc'inall business viewpoint is the patent pools maintained and operated 
by most of our truly large concerns. These patent pools depend 
for their strength, not on the essential validity of any one patent^ 


but on the combined effect of a large number of patents, any one 
of which ma}'^ turn out to be worthless. The possession of these large 
numbers of patents plus the financial resources with which to back 
them up through endless litigation is usually sufficient to expell all 
small businessmen from any particularly lucrative field. 

If the post-war plans you are developing are to be adequate for 
small business they must contain some program for remedying these 
patent abuses. Only if this is done can small business compete with 
big business on anything like even terms. 

I suggest for your consideration the bill prepared by the Antitrust 
Division of the Department of Justice. It suggests that patent com- 
binations be subject to the antitrust laws in the same manner as other 
combinations. I believe this proposal has merit. Certainly it should 
be given very careful consideration. 


In modern business technological information is essential. Up 
to this time it has been largely impossible for small business to secure 
such information on any basis which would enable it to compete with 
large business. 

From a manufacturing standpoint the important technological in- 
formation is largely developed by and is in the possession of the large 
private commercial laboratories and research organizations. 

The injustice arises from the fact that it costs the large business 
only a small fraction of its total income to maintain these laboratories, 
gigantic though many of them are. But a small business which un- 
dertakes to maintain even a moderate laboratory rapidly discovers 
that a large percentage of its income is going into this service. 


Some 2 years ago Senator Kilgore presented a bill with which you 
are familiar. This proposed to establish a Government technological 
and scientific office which, as I understand it, was to operate along 
much the same lines as the laboratories and research dej^artments 
maintained by our large corporations. Its findings would be available 
to all business in the country. It was the hope that this scientific 
service would prevent the withholding of information for monopo- 
listic purposes and would enable all business to participate in 
technological advances. 

This bill should be carefully considered. I do not say that it is 
the final solution, but the principle is absolutely sound. You gentle- 
men can determine the exact shape or form the proposal should take. 


The war has brought forth probably the greatest release of creative 
energy within the field of technology in all history. 

The engineers and scientists of this country are already exploring 
the ways in which their new and improved products and processes can 
be adapted to peacetime uses. 

But here is a point of crucial importance to small business. This 
tremendous array of technological improvements, although paid for 


largely by the people through their Government, will, unless some- 
thing is done, probably become the private property of big business. 
Although most of these improvements have been created at Govern- 
ment expense and under Government direction, their actual develop- 
ment has physically taken place in the laboratories and plants of large 
corporations. The corporations have already started to obtain patents 
on the more valuable of these developments. It can be expected that, 
before long, most of tlie more desirable of these developments will have 
been patented by the large corporations. 


This, obviously, will shut the door in the face of small business, 
insofar as obtaining access to these Government-financed developments 
is concerned. Should this be allowed to happen? Should tech- 
nological improvements of gi-eat usefulness and value, paid for directly 
by the people, be denied to small business and become the private 
property of big business? 

The answer, to my way of thinking, is obvious. All technological 
improvements paid for by the people should be the common property 
of the people. To put such a policy into effect, legislation is required 
which will make it impossible for any private firm to obtain patents 
on technological improvements or adaptations thereof, developed 
within the physical properties of such concern, but at Government 
expense during wartime. 

Unless such legislation is enacted, small business will be placed at a 
hopeless competitive disadvantage after the war. Society will suffer 
because the big corporations will be able to charge high monopolistic 


But, in any event, I offer you this point: Science, know-how, re- 
search, must be available to the little businessman. The reason is we 
live in a new scientific industrial world, and we can't have them in a 
primitive age while the big concerns are operating scientifically and 
on a modern basis. Big business itself ought to favor this, so that 
when little businesses have subcontracts they can fill them with scien- 
tific knowledge and know-how. 

In an}^ event, technical advice is highly important. Congress has 
given all this and much more to the farmers for over 50 years. What 
Congress does for farmers — who are little businessmen who live out 
in the country — they should do for the little businessmen who live 
in town. 



In reconversion, as in war, we need both large and small business. 
Both are vital. 

As Chairman of the Smaller War Plants Corporation, my interest 
is in seeing that small business has the opportunity and ability to com- 
pete. For that reason, I have discussed those fields in which small 
business is not only at a disadvantage but an unfair and unjustifiable 


The difficulties can be corrected and to the benefit of both large and 
small business. For large business grows stronger as small business 

Aiid so, gentlemen, although I have spoken primarily of small busi- 
ness, I have in mind the success of our entire free enterprise, capitalist 

Americans have made up their minds to make a success of the free 
enterprise system. They have in view no other system of government. 
Indeed, Americans believe in individual freedom and liberty, and each 
man wants his own business, or interest in the business, or his own 
job. He may want to change his business or change his job. In the 
civilization that is to come after the war, we want to preserve this indi- 
vidual liberty where every temperament of American personality, 
every member of a race, religion, or creed will have his place. 

American people are dedicated to the Constitution. There will be 
conflicts, but they will be conflicts within the Constitution and as a 
part of the free enterprise systems. 

Upon the foregoing I have presented my facts today. In doing so 
I have given my viewpoints in the preservation of the free-enterprise 
system, and of little business, which latter or both constitute the 
foundation stone of our American economy in life. 

The Chairman. Thank you, Mr. Maverick, for a very interesting, 
illuminating statement, one that reflects considerable thought in 

Time will not permit the many questions that some of us would 
like to ask. I am not going to take a great deal of time, but I would 
like to ask one question and leave the rest of the time to the other 

You stated in the beginning of your statement that "small business 
needs speedy, final, and fair settlement of its claims" in its deter- 

You are familiar with the bill that this committee has endorsed, 
which you referred to. Do you think that bill will give the needed 
"speedy, final, and fair settlement of its claims"? 

Mr. Maverick. It forms the groundwork of speedy termination, 
but there should be special attention given to interim financing be- 
cause there are something like 165,000 subcontractors and all of them 
are going to be canceled out. Every one of them is going to need 

Another thing regarding that bill that I am not sure is complete, 
therein, though I cannot remember the words exactly, it says that 
if the claim of a subcontractor is equitable, the Army or Navy or 
military agency is entitled to go in and pay it. Congress put those 
words in because everybody is afraid of this business of double pay- 
ment. I think we ought to admit that when a prime or upper-tier 
contractor goes broke, the Government of the United States will pay 
a subcontractor over again, even though the prime contractor has 
been paid. There is a definite reason for that. 

Before this war, for instance, in the building of the Boulder Dam 
all States had lien laws and bonding statutes for State contractors. 
Provisions designed to accomplish the same results should be adopted 
for war work. The individual subcontractor is not being paid twice, 
you understand. 


' The Chairman. In other words, you think the Government should 
in some cases perhaps pay twice ? 

Mr. ]\Iaverick. Yes, sir. 

Mr. Zimmerman. I thought we provided for that in the bill; that 
is, if it were equitable. 

Mr. Maverick. There are some qualifying words, to the effect "if 
it appears equitable or desirable." But if a man does the work and 
it is honest work, there ought not to be any question whatsoever about 
it. If you leave it to Army officers all over the country they may be 
afraid they will get into trouble about it later on, and they may hesi- 
tate in doing it. This does not involve fraud, you understand. It 
ought to be clearly stated that when a man has done the work and de- 
livered the goods, he shall be paid. 

The Chairman. If you do not do that, you are going to have thou- 
sands of small claims against the Government, aren't you, in the form 
of relief bills in the House ? 

Mr. Maverick. They will be coming in the shape of thousands of bills 
for years to come, when my unborn grandson gets elected as a Con- 

Mr. VooRHis. What do you mean by double payment ? 

The Chairman. If I may answer, as we must make haste, I think 
what Mr. Maverick means, Mr. Voorhis, is where the prime contractor 
goes broke the Government will pay him and the little fellow will be 
left out, the subcontractor. The thought is that the Government still 
owes him something; is that correct? 

Mr. INIaverick. That is correct. 

The Chairman. One other question I wanted to ask you, sir : You 
are familiar with the May bill, Vinson bill, and others along that 

A sharp question has arisen about whether the Comptroller should 
be brought into the picture where he has never been, to preaudit these 
claims. What is your opinion about that ? 

]Mr. Ma\-erick. I think I can give you an absolute, unbiased answer 
insofar as I am concerned, very definitely the answer is "No." 

The General Accounting Office is a very capable Office; the Comp- 
troller. Mr. Warren, is one of finest, ablest, and most intelligent gen- 
tleman in the Capital. Notwithstanding that, the termination of con- 
tracts should not be handled any different from any other Govern- 
ment obligation any more than they should make a preaudit of the 
Smaller War Plants Corporation or any other governmental agency. 
The officers of our Army and Navy have the same level of honesty 
and integrity as other officials in the Government. I can assure you 
of this, that the Army and Nav;y have developed through a period of 
several months' study a very high level of efficiency and standards 
for the termination of contracts. 

If there is a preaudit it will hold things up, in my opinion, and 
will lessen the chance for quick terminations. 

The Chair:man. I am glad to have your opinion on that. 

Mr. Fish. I just want to commend you for your very clear and pre- 
cise and able statement, and particularly for presenting it in type- 
written form. It can be easily available to the members of the com- 
mittee and they can take it home and read it if they care to consider 
certain phases of it. I also want to commend you for the statement 


you made about preauditing. It will be a big controversy in the 
House and I tliink you have expressed yourself very well. 

I would like to ask a rather simple question. Just how does it op- 
erate now if a small business firm wants to borrow $5,000 ? Perhaps 
the business wants some new machinery that is available and wants to 
go ahead with some new business. Does that firm come to you, to the 
Smaller War Plants Corporation? 

Mr. Maverick. Did you say new business? 

Mr. Fish. I have in mind something that has been bothering me a 
little. Suppose a business, a small business, was in another line and 
that line has more or less gone out and due to the war it has gone* 
into another line of business. They then find some new machinery 
they could buy if they had the money, they would want, say, $5,000, 
$6,000. They have orders of $30,000 if they could go ahead and they 
want the money, they want a loan. It is really a question of small 
business entirely. I want to know what you have to say about that. 

I might want to see you after the meeting about it. 

Mr. Maverick. The law is we have a right to make loans for war 
production or essential civilian production. 

In any amount under $25,000 it is done in the field. In the case of 
the State of New York, we have a regional office in New York City 
and a district office in Albany. The man could go to the district 
office in Albany and within a very short period make a loan up to 
$25,000, or he could lease the machinery, if it was something needed in 
the war, at II/2 percent per month on the value of the machinery. The 
reason that high rate is put on there is because there will be prac- 
tically a 75 to 100 percent loss when the war is over on that machinery. 

Mr. Fish. Suppose this arose, that they were in some line of business 
and they were making some kind of war goods and they might not con- 
tinue to make that after the war. I suppose you find that out before 
making these loans. I do not understand that situation at all. Perhaps 
I had better not take the time of the committee to press the question 
any further. 

Mr. Maverick I can answer that very rapidly. 

The answer is that we have no business to impose "grandfather 
clause" and I am making that a national campaign. 

Mr. Fish. I am glad of it. I am disturbed as to that. question and 
I would rather not take the time of the committee on it. 

Mr. Maverick, We are for the free enterprise system and capitalist 
democracy and, if so, we have no right to come in with a "granclf ather 
clause" and say that, because you did not have a vested interest before 
Pearl Harbor, you cannot go into any new business. 

Mr. Fish. I am delighted to hear that. It looked to me as though 
you were protecting the big industries instead of helping small busi- 
ness. I did not know your attitude and I was going to come to see 
you about it. 

The Chairman. Mr. Maverick, if you will pardon me a minute, I 
am advised that there is a record vote being taken in the House, I 
assume the Members feel it necessary to be recorded on that, I would 
like to know what the pleasure of the committee is, 

Mr. Voorhis, Mr, Chairman, I have a number of questions I would 
like to ask Mr, Maverick. Would it be possible for him to come 



Mr. Maverick. I have a heavy emotional desire on account of my 
previous membership to be catechized, cross-examined, and criticized — 
and complimented, if possible — and I would like to be at the dis- 
posal of this committee and come back, if you care to hear me. 

The Chairman. Thus far you have only had compliments, Mr. 

The committee will stand adjourned until tomorrow morning at 
10 : 30 o'clock. 

I will contact Mr. Maverick as to any further appearance he may 
make here. 

(Whereupon, at 11:30 a. m., the committee adjourned until Wed- 
nesday, June 14, 1944, at 10 : 30 a. m.) 



House of Representatives, 
Special Committee on Post-war 
Economic Policy and Planning, 

Washington, D. G. 

The special committee met at 10 : 30 a. m. in room 1304, New House 
Office Building, Hon, William M. Colmer (chairman) presiding. 

Present: Representatives Colmer (chairman), Cooper, Vooji'his, ■ 
Murdock, Lynch, O'Brien, Worley, Fish, Reece, Welch, Wolverton, 
Hope, and Dewey. 

Also present : Marion B. Folsom, director of staff, and Dr. Kaplan, 
consultant, of the committee. 

The Chairman. The committee will come to order. 

We have with us this morning Mr. D. P. Cameron, appearing in 
behalf of small business. Of course, down where Mr. Cameron, 
comes from — the State of Mississippi — most business is small busi- 
ness. He is an outstanding businessman down there among small 
businessmen. I thought it would be well for the committee to have 
some testimony from just an ordinary businessman with no Govern- 
ment connections so that we might get the "grass roots" point of view, 
so to speak, 

Mr. Cameron, you have a prepared statement, I believe. You may 
be seated and proceed with your statement. 



Mr, Cameron, The gentleman that preceded me yesterday said he 
had the honor to have been a Congressman once. I have never had 
that honor other than to vote for Congressmen or did I ever have any 
Government connection. 

Mr. Chairman, members of the Post-war Planning Committee, I 
appear before your committee representing the little businessmen of 
our country, my section in jiarticular. I am not here as a Democrat or 
Republican, iior as a Xew Dealer or anti-New Dealer — I am here rep- 
resenting the "grass root" American citizens who are vitally interested 
in the post-war plannings of your committee. 

The big job at present, of course, is to win the war. and we, the little 
businessmen of America, have nothing but praise for Congi-ess and 
others for the splendid progress already made along this line. Nothing 
must be done or said to cause you or others to let up one iota, but you 
and tlie rest of the home front must also immediately begin planning 
to preserve America and the American way of living at the termina- 

99579— 44— pt. 3 5 555 


tion of the war. If the phms are constructive, we have no reason to 
ch"ead the future, and we will be able to look our boys and girls in the 
face upon their return from the fighting fronts and truthfully tell them 
that their efforts and sacrifices were not in vain; that we, the home 
front, have kept the faith in their absence. 

■ We will owe them a great debt, and this debt must be paid. Upon 
their return only a very few will feel that their country owes them any- 
thing other than a job; the right to work and be fairly compensated, 
thereby enabling them to be independent, self-respecting citizens and 
to rear their families accordingly. 

I have talked to a great number of these boys and girls and they are 
not interested in being regimented after they have won the war. (No 
doubt they have had enough of this while in the Army.) They state 
their victory in winning the war will be a hollow one if we, the home 
front, fail to preserve for them the democracy that they fought for, 
and in instances died for. 

Congress by necessity must assume the leadership in this under- 
taking and bring forth constructive legislation that will be fair to the 
majority of these boys and girls. Every citizen, be he big or little, 
must assist. 

When your chairman asked if I would appear before your commit- 
tee, I hesitated in accepting, not for selfish or unpatriotic reasons, but 
because I felt — and still feel — there are others far better qualified to 
represent the little businessman than I. Representing the little busi- 
nessmen of America is no small assignment ; 99.6 percent of all business 
in America has a capital structure of $1,000,000 or less, and therefore 
is classified as "little business"; only four-tenths of 1 percent American 
business has a capital of over $1,000,000, according to Bradstreet sta- 
tistics. You can readily see from the numerical standi:)oint what a 
large percentage of American business is carried on by the little' busi- 
nessman. America was settled and has been developed by this type 
of citizen. It has been the little businessman who has led in the 
pionesring of every foot of our great Nation. If America is preserved, 
it will be the little businessman who will preserve it. The economic 
activities of America are based upon the existence of this tremendous 
number of small enterprises. 

Small business constitutes not only so large a segment of our 
business field, but also makes contributions to the four-tenths of 1 
percent that is in the high bracket class, because small business in the 
aggregate is the determining factor in the life of large business. Small 
enterprise with its initiative and experience is the living expression 
of evei'v open competitive economic system and supports and serves 
the bulk of our population. 

It was big business that prior to and at the beginning of the war 
placed its business at the disposal of the country to be used by the 
country to furnish the fighting equipment and material for our armed 
forces. This was correct, because it had facilities and organizations 
€quij)])ed to do the job. America's hat is off to big business for the 
magnificent manner in which it has done the job. Without its services, 
our soldiers would have been helpless, but with superior fighting equip- 
ment, they are doing a wonderful job. In order to do this splendid 
job, it was necessary that big business tremendously increase its man- 
power. Little business was not equipped, nor did it have facilities to 


make this tj'pe of contribution; its responsibility was to furnisli the 
manpower to do the fighting. I dare say if you were to check the 
personnel of the millions of fighting men and women, you would find 
the majority of them had come from little business and little com- 
munities. Thousands upon thousands of little businesses lost as high 
as 50 percent or more of their personnel to the armed forces, and in 
very few instances did they complain. Little business has not hoarded 
manjiower while its country was at war. It has found ways and 
means of carrying on its activities under high pi-essure with less man- 
power in order that the armed forces and war material industries might 
have the advantage of its saving in manpower. 

It is natural to assume that these fighting boys and girls, who came 
from little business and small connimnities, are thinking of the day 
when the war is won and they will be permitted to return to the 
connnunities and little business which they left to enter the service. 
With these facts confronting us, it is easy to understand why the 
little business and little communities are so vitally interested in post- 
Vt ar planning. 

Your committee, if I correctly understand, is^very much interested 
in formulating a program which will enable business at the termina- 
tion ot the war to return to normalcy and above all to absorb the 
]-etnrn]ng soldiers, who have been carrying on the fight on the battle 
fronts, and to provide jobs to those released from war industries who 
want to work. From the testimony submitted by big industries before 
30ur committee, it is very evident that these large war industries 
cannot possibly maintain their present personnel. Any employment 
in these industries to returning soldiers will be at the expense of some- 
one already on their pay rolls. This being the case, it is doubly im- 
portant that the returning soldiers from small business and small 
communities are not allowed to drift into these heavy industrial sec- 
tions which at the termination of the war will have surplus manpower 
in their communities. 

"With this in mind, I appear before your committee representing 
little business to offer suggestions as to what we feel your committee 
can and should do to encourage and help little business in order that 
it might be able to furnish employment to returning soldiers and re- 
leased war workers and continue to make contributions to the preser- 
vation and development of America and free enterprise. 


The little businesses which I rej^resent have participated only in a 
small way in war contracts ; therefore being a nonparticipant, we are 
not in position to widely discuss this question. If I understand cor- 
rectly, your committee has been giving this important matter first 
consideration and has had before it some of the outstanding indus- 
trialists of the country seeking a solution of this all-important prob- 
lem. The press has inferred that the committee had probably gathered 
sufficient data to enable it to proceed with the termination of these 
contracts on a just and equitable basis. I will say that little business 
is vitally concerned indirecly; any bottleneck created in the termi- 
nation of these contracts will soon be reflected throughout the width 
and breadth of the country. I have read the testimony of Mr. Wilson, 
president of General Motors Co., also the testimony of Mr. Eric A. 


Johnson, president of the United States Chamber of Commerce, be- 
fore your committee. I concur in their views 100 percent — namely, 
need of immediate action on legislation for a prompt and equitable 
settlement of war contracts. 

Congress and the Government should deal promptly and fairly with 
the institutions that have so admirably acquitted themselves by accept- 
ing these contracts and fulfilling them in a manner that was a revela- 
tion to the world. In most instances, they accepted them in good 
faith and acted promptly to execute them, as it were, overnight At 
the termination, the Government should do likewise. In simple 
words, "practice the Golden Rule." The Government in the past, as 
you gentleme]! know, has not been as prompt and diligent in settling its 
claims with the public as it has compelled the public to do in settling 
with the Government. This creates a little misgiving in the public 
mind. I think the contracts should be settled promptly, justly, and 

If there should be subcontracts involved, which are usually with 
little concerns, they should be dealt with accordingly. 

A very large percentage of successful businessmen are honest. 
(This is a prerequisite to their success.) I will admit that there may 
be some contractors whom the Government will have to audit, but this 
<;an and should be handled at a later date, and if found guilty, make 
them pay dearly, but do not keep the entire class in after school in 
order to punish one pupil for a misdemenaor. 

Prompt settlement of these contracts will go a long way toward 
furnishing the working capital necessary to enable contractors to 
start other activities and create employment; a delay will create a 
bottleneck and cost the Government many, many times what it would 
lose on account of a little off-color found occasionally among con- 



Again, I say that I am sure your committee has had before it those 
who are in better position to advise on these matters than I. Little 
business has invested liberally in War bonds in order that its Govern- 
ment might accumulate war commodities, build war plants and so 
forth. Naturally, we are interested when it comes to the disposal 
of these things to see that the Government, as far as possible, protects 
the people in their disposal. In other words, not dispose of them in- 
discriminately regardless of their value. 

Government-owned plants and their equipment, I presume, repre- 
sent the greatest problem when it comes to their disposal. Govern- 
ment-owned war commodities, I presume, cover everything from ships 
to a can of tomatoes. The disposal of these plants and commodities 
is going to be one of the major tasks of the Government. I commend 
the Government for placing in charge of this program a man of Mr. 
Clayton's ability. Mr. Clayton is an international merchant. He has 
proved his ability in handling his own affairs and marketing one of 
the Nation's most liazardous commodities, namely, cotton. 

I feel that the American public, especially the little businessman of 
the South, has implicit confidence in his ability to handle this tre- 
mendous assignment. I feel that it would be unbecoming of one of 


my limited experience to offer Mr. Clayton or Congress suggestions 
as to how he slioukl handle this job. I think he should be given 
carte blanche and instructed to proceed with the job along the lines 
that will be fair and equitable to the taxpayers of our country. 

Mr. Clayton knows that to dump these connnodities on the market 
indiscriminately Avoidd thoroughly demoralize the domestic market. 
The merchants and others of the country have had some past experi- 
ence following AVorld War I with the hasty disposal of surplus com- 
modities. They have a feeling that some of these commodities were 
sold at absurd prices to organizations or corporations that were created 
solely to speculate in these commodities. I hope and feel sure that 
Mr. Clayton and his associates will not permit this to recur, and so 
far as possible dispose of them through regular trade channels. 

Due publicity should be given to the items owned by the Govern- 
ment, their location and minimum quantity in which they will be dis- 
posed of. With this procedure the large and the small will have an 
opportunity to participate in the buying, thereby (1) obtaining a 
greater value for the items disposed of and (2) getting a fair distri- 
bution over the country as a whole. Whatever method of advertising 
these commodities is adopted, should be given full publicity to the 
Nation as a whole. 

Regarding Government-owned plants, no doubt these plants could 
be best utilized b}^ orderly disposal ; maj^be some sold to rehabilitate 
our foreign allies, but of course preference always to domestic oper- 
ators if the}^ are in position to operate them for the good of our 
country and create emplo3anent, and so forth. It has been suggested 
by some of the small businessmen with whom I have come in contact, 
that in some instances it might be wise to dispose of these plants to> 
industrialists who could utilize them by removing them from heavy 
industrial sections and rebuilding them in communities and sections 
away from the congested areas where land is inexpensive and pro- 
ductive, and enable the operator to make a contribution to the wel- 
fare of America by working two shifts, each 30 hours per week, one 
shift 3 days, 10 hours, in succession, another shift three 10-hour days 
m succession, and to compensate his employees for the short week by 
furnishing them a plot of land and a home thereon. In his 3 off days 
the worker would be able and would have time to grow a good manj'' 
of the products consumed by his family; namely, vegetables, fruits, 
poultry, dairy products and, in many instances, meat products. They 
suggested that this would in the long run be advantageous to the 
worker, because he would be able to produce food consumed by his 
family with this t^^pe of set-up, instead of buying it at high prices in 
highly industrial sections. It would create a healthier and happier 
family environment and labor situation. 

If this ])rogram were adopted the operator of the plant would neces- 
sarily have to commit himself to furnish employment and these other 
facilities for his laborers before being allowed to purchase the plants. 


The two items listed above are inseparable and very vital to little 
business. The preservation of free enterprise cannot be accomplished 
without the maintenance of the standard of the American way of life. 


The wonderful record made in the past under the free enterprise 
system, with all its faults, should be convincing to all that there is no 
other economic system that will bring to our people and our country 
so much happiness and progress and at the same time preserve free- 

Small business is vitally interested in the maintenance of the stand- 
ard of the American way of life. We believe that the only way this 
American way of life can be maintained and caused to grow by the 
enlargement of the ability, capacity, and enterprise of our people is 
through the preservation of individual free enterprise. If planned 
economy, Government regimentation, bureaucratic government, busi- 
ness and Government partnership (all stepping stones to national 
socialism) are substituted for free enterprise, then it is self-evident 
truth that we shall lose constitutional government — the American 
way of life. 

Little business must not abandon the fundamental truths practiced 
by our forefathers and as given to us by our Declaration of Independ- 
ence and our Constitution. We believe that the preservation of our 
democratic institutions depends in a large measure on our ability to 
maintain and strengthen the foundation of small and medium-sized 

We representatives of the average-citizen group of this country, 
together with all other good citizens, are not the only people who are 
alarmed at the present trend to abolish private enterprise; the sys- 
tem that gives the man a right to choose his own means of earning 
a living for himself and family. We have observed that during the 
present year those advocating a new order have been coming more 
and more in the open with details of their revolutionary theory that 
would demoralize our present generation and destroy all the hopes 
of its successors. The theorists and visionaries, who give lip service 
to free enterprise but who preach doctrines of economic revolution, 
may be sincere in their Utopian philosophy, but the principles they 
advocate can lead only to complete regimented economy. If and 
when more than a small fraction of the electorate comes to depend for 
their livelihood upon the temporary masters of the mechanism of the 
State — that is, upon the politicians — then democracy as we have known 
it in the past is at an end. 

Before either small business or big business can take steps to insure 
the continuation of the free enterprise, the only system under which 
reasonably full employment may be made certain, Congress must do 
those things necessary to insure the people that we are again living 
under a government of laws rather than a government of men. Free 
enterprise and individual initiative have made us a great and pow- 
erful nation — the greatest nation on earth, a nation which has brought 
more comfort, happiness, and freedom to more people than any other 
nation in the history of the world. We have recently come a long way 
from the principles laid down for our freedom; we, the little busi- 
nessmen, think there are some in this country that are hell-bent on 
destroying the foundation of our free enterprise upon which the 
American successes have rested. We refer to the power-grasping 
bureaus and world planners. 

Therefore, it seems to the little business group that the first thing 
necessary for Congress to do in connection with many of the vital 


post-war programs is to see that our Government is returned to the 
people as provided for under our Constitution. After this has been 
done, our present tax hiws must be changed so as to encourage "venture 
capitaL" With the return of peace, it will be vital to the Jife of 
free enterprise that capital flow into new enterprises to provide em- 
ployment and to increase the national income. This cannot be done 
under our present tax system. Little business, of necessity, must ob- 
tain its "venture capital" from its neighbors. Its stock is not sold 
to strangers; as stated, its stock is sold to its neighbors. Under our 
present tax system, the small business hesitates to ask its neighbors 
to put new capital into its business for the purpose of expanding it 
and creating employment for returned soldiers for fear that it will be 
unable under the tax system to properly compensate them for their 

You gentlemen know that when you take money from your neighbor 
for stock or what not and do not repay him, you are in bad with your 
neighbor. Little business does not need S. E. C. to supervise its stock 

Mr. Reece. I intended to ask Mr. Maverick when he was before the 
committee yesterday, but our session was so brief I did not have an 
opportunity to do so, if he had made a study of the Securities Act 
with a view of seeing if he had any recommendations for amendments 
to the act which might make it easier for our small businesses to obtain 
capital through the sale of securities, and I am glad to see you touch 
upon tliat subject here and that you have given some thought to the 
subject. I believe that is one of the subjects which is of great im- 
portance to small business. 

Mr. Cameron. The Truman committee recently rapped excessive 
Government control, saying ''Experience has taught us that our coun- 
try will flourish best when least hampered by Government control," 
and speaking of free enterprise, the committee said: "Even in war- 
times it was the flow of private initiative that made possible the suc- 
cess of the war program." Continuing, the committee said: "It was 
the job of the Government to devise the rules of the road, but not to 
tell the driver where he must travel." Those are the sentiments of 
little business. Nor should it be necessary to give facts and figures 
showing why there should be a restoration of government by law, as 
guaranteed in the Constitution, and the conduct of government by 
thousands of bureaus, agencies, executive orders, and a few individuals. 
The number of civilian employes on the Federal pay rolls of all of 
these bureaus and agencies exceeds three million, with an annual cost 
to the taxpayers of over $8,000,000,000. That is $150 per year for each 
of the 53,000,000 working men and women in the United States. 

One does not have to spend much time among the employees of 
many of these bureaus to be impressed with the destroying amount of 
red tape and waste. This red tape and waste, plus meddling and di- 
rectives, have caused over 275,000 small businessmen to fold up during 
the past 3 years. Yes, the bill of the bureaucrats is plent}- ; it is being 
paid in cash, debt, and liberty — and the greatest of these is liberty. 

Speaking for small business, may we most respectfully submit the 
following recommendations : 

(1) Tliat onr Government be returned to the people as provided for 
under the Constitution. This will require courage and wisdom on the 
part of our elected representatives, but you are the gentlemen whom 


the little businessmen elected to represent them in Wushinoiton. We 
didn't elect the bureaus. You are the men who we feel have the cour- 
age and wisdom to properly represent the average man. You must 
resolve that Bill of Eights shall not be destroyed by either direct at- 
tack or by blissfullv ignoring or disdainfully bypassing it. 

(2) That the rides of the game, which are necessaij to create 
the proper atmosphere for the preservation and growth of free enter- 
prise and the return of the American way of life, shall be prepared 
by the legislative branch of our Government with the help of public 
opinion, that these rules shall be enforced by the executive officers 
who do not make the rules, that these rules should not be changed 
or altered in the interest of pressure groups or self -centered groups, 
be they petitioners or groups representing either labor or manage- 
ment ; "that our Government be the umpire in the great game of in- 
dividual free enterprise; and that as a fair umpire our Government 
must never be a player of the game. 


Foreign markets: The average little businessman is not familiar 
with or competent to offer suggestions relative to foreign markets 
and the possibilities of developing same. These markets come with- 
in the sphere of large business, bankers, and, in many instances, the 
State Department. The little businessman by necessity has to be a 
trained and experienced buyer. For the benefit of our Government 
officials, who at times assume the role of salesman to foreign nations, 
we believe, as buj^ers for small business, in the old saying, "Be it ^hat 
the name, I fear the Grecians even when they offer gifts." The little 
business and the buyer for little business lose respect for the salesman 
and the'compan}^ he represents when they are approached on any basis 
other than cold-blooded business transaction. No business transac- 
tion can survive if all parties thereto do not profit thereb}^ 

America, if it expects to sell its products to other nations, must be 
in position to reciprocate or else they will find seller nations that 
will reciprocate. 

Domestic markets : Our business institutions in the past have pros- 
pered to the extent of their ability to develop products with merit, 
then create a market for these prochicts. Our past growth speaks for 
itself along these lines. Business institutions will continue to do 
this in the future if they are assured (1) that they will not have to 
compete with the Government; no business has an incentive to attempt 
to develop products and develop new markets when it feels that in 
doing so it is competing with any Government agency operating busi- 
nesses as competitors. Government agencies invariably are tax- 
exempt; the capital is furnished with the taxpayers' money. Private 
business cannot compete with such agencies when the biggest item in 
their expense budgets is taxes and when they are directly responsible 
to the stockholders for their invested capital. (2) Tax programs 
will have to be adjusted so there will be an incentive for little business 
to expand. There has been a good deal said about there being no 
more "venture money." I disagree with this statement 100 percent; 
there is more "venture money" in America today than in the history 
of the country, but management, due to many reasons, will not venture 


to accept the responsibility of using such money, because it is not 
certain that it can use it and protect it. 

(3) There are so many Federal agencies and bureaus at the pres- 
ent time that a major portion of the little businessman's time is con- 
sumed in filing Government reports and interviewing representatives 
of Government bureaus. It has been stated that a little combination 
grocerman and marketman was required to make out 47 different 
reports in 1 week's time. The little businessman is not in as favor- 
able position as a large organization who can set up special clerical 
and legal departments whose sole duty it is to handle these matters, 
because his business is not large enough to sustain the expense. If 
Congress will correct and remove these handicaps, the morale of the 
little businessman of the country will go up 100 percent; he will take 
on new life and he will have an incentive to develop new products, 
create new markets, and, last but not least, furnish increased employ- 
ment for deserving people who are anxious to work. 

Mr. Chairman, haven't you already passed on the problem in effect 
on the question of demobilization? 

The Chairman. No, sir; that is one of the things we are discussing. 
However, if you want to leave that in your statement and not read 
it, that is up to you. 

Mr. Cameron. I know that your time is limited. I will say for 
the benefit of Congress that I would hate to be in your shoes if you 
do not set up a satisfactory program. Every mother and father in 
this country will beseech you for special favors for members of their 

Mr. WoRLEY. With no desire to pass any compliments, I think you 
are the best witness we have had. I would like to have this in full. 
Suppose you continue reading. 


]\Ir. Ca:meron. I presume that at the termination of the war there 
will be in the neighborhood of ten or eleven million men and women 
in our armed forces. The demobilization and turning back into reg- 
ular channels of this great number of people presents a serious prob- 
lem, a ]3roblem that is going to require cool judgment and an impar- 
tial policy in handling. 

Naturally, every man and woman in the armed services is going 
to feel thai the minute fighting ceases he should be released. This 
will be impossible and impractical. Whatever policy is adopted re- 
garding releasing discharged soldiers must be iron-clad and show no 
favoritism. If a policy of this kind is not adopted, these men and 
their families will try to use whatever prestige and influence they 
may have upon Government officials in behalf of the members of their 
families in the service. This should not be allowed to happen, and 
to prevent it from ha])pening regulations should be set up that would 
be thoroughly impartial and, after set up, they should be lived up to 

( (^) I — when I say "I", I mean little business — feel that our country 
v.ill never consent again to allow its Army and Navy to become a mere 
skeleton; in other words, we will maintain a much larger standing 
Army and Nav}^ than we maintained prior to Pearl Harbor, for se- 
curity reasons if for no other reason. 


(h) I presume there will be a certain percent of the men in service 
that would be inclined to continue in the service for a period. Every 
service man should be given an opportunity to express his preference 
in the matter — whether he wants to continue in the service or desires 
to be returned to civilian life. Naturally, if he desires to stay in the 
service and is needed, he should be kept in the service. 

(o) The men in the service who have been engaged in actual combat 
during the war should be given first preference in their release. Those 
who have not been engaged in actual combat and have not exposed 
their life and limbs should not resent a program of this kind. 

(d) Thousands of teen-age boys went from school and college into 
the armed services before they had completed their high schooling and 
college education. They should be given an opportunity to return to 
school or college while they are young. These are boys and girls that 
business is not obligated to place back into their old jobs. 

(e) I feel that from the balance of the men, those who are married 
and have families should be released before the men with no de- 

By following a program of this kind you would be fair to the men 
in the service, rewarding all in accordance with their service. You 
would not create any unsurmountable unemployment problem in wash- 
ing out and replacing the fighting forces back in civilian life on short 


The average little businessman is going to turn heaven and earth 
to reemploy those who left his service voluntarily or who were drafted 
by the Government in the armed forces and fought for the existence 
of this country. As stated previously, a big percentage of the fighting 
forces of our country were drawn from small communities, small 
business, and the farms. Small business assures Congress that so far 
as humanly possible it is going to live up to the letter as well as the 
spirit of the law. namely, take care of them and give them their old 
jobs when the fighting is over. 

We are certain that it will be best for the country and best for the 
men for them to return to the comnnniities and jobs they left, if 
possible. These men who left the farms will return to the farms if 
we are able to market our farm products profitably. Congress and 
the Nation should give every consideration toward maintaining a fair 
price for farm products. It will not only stimulate employment on 
the farms but it will stimulate employment in the industries, because 
farmers are big consumers of manufactured goods; they can only 
consume these when they obtain a fair price for the products they 
have to sell. If it does not create overproduction, the Government 
could well afford to reestablish some of the farmer-soldier boys on 
farms of their own that would be sold to them on a fair basis and 
easy terms. 

Little business, as a rule, kept the men that left their service to 
go into the armed forces in mind during the war. They have not 
and could not build up their personnel with additional help while 
these boys were away. In many instances they replaced them with 
older men and in some instances with women, who will be at the age 


and ready to retire or return to their own duties when the war is 
won, and this will make available places for returning soldiers. 

Little business will be willing and ready to expand if necessary 
to take care of them, provided, as stated previously, we are assured 
by the Government, that it will be possible for us to exist. Little 
business will be glad to take some of the teen-age boys who do not 
care to go to college or return to school into their organizations 
and educate these boys with practical experience for useful vocations. 
The most dependable men today in every little business organiza- 
tion are those who came into the business as boys and grew up 
with the business. Some of the recent regulations of the Govern- 
ment are having a tendency to prohibit this policy at the present 
time. Service organizations, mercantile establishments, and so forth, 
by necessity have to train their own personnel. The Government has 
gone far afield in taking young men and teaching them trades at 
the expense of the Government but have made no provision for 
teaching young men a vocation in service organizations. Service 
organizations, as a rule, are invariably small business. We feel 
that the Government has not given us a fair break in some instances by 
not giving us opportunity to educate and train young beginners for 
responsible jobs in our organizations. We are not asking for a 
subsidy, we are asking for an opportunity; given an opportunity we 
dare say that the young man who comes with us and proves himself 
will never regret it. Pardon a personal reference, but there is not 
a key man in our organization who did not years ago start in as a 
mere boy and learn the business from the ground up. 


I would like to state that the State governments and local govern- 
ments are in a better financial position than they have ever been, and 
they should assume, as far as possible, a large proportion in this 
public-works program. 

]\Ir. WoLVERTON. That was the position taken by Governors Bricker 
and Taft last night in the forum discussion on the radio with Governor 
Neely and Senator Kilgore. 

Mr. WoRLEY, I am glad to hear those men took that position, but 
the question is whether they will carry it out. 

Mr. Lynch. They probably will not have the opportunity to carry 
it out. 

Mr. WoLA-ERTON. Hope springs eternal. 

Mr. Cameron. Public works have ever constituted the one mighty 
source of means for attack on unemployment. Such works are al- 
wjivs ready for immediate launching, into all necessary or consistent 
expansion and are likewise subject to desirable contraction. 

Undoubtedly, the whole peo):)le feel that there can be no more 
logical, fruitful, or beneficial achievement of government, whether it 
be Federal, State, or local, than wisely and fairly conceived programs 
for enduring public improvements, honestly and efficiently accom- 
plished. Such performances, on the part of the Federal Government, 
promote the entire national economy and permanently enhance the 
welfare and prosperity of the public in general. On the part of the 


subordinate governments, they further advance and improve the life 
of the commonwealth and the municipalities. 

I have in mind only highly productive public works, wherefrom 
the people will get the worth of their tax money in what they need 
for the promotion of their progress and happiness. It is to be de- 
voutly hoped that never again shall we see the erstwhile "boon-dog- 
gling.^' I feel that nevei'theless it would be both futile and officious 
to offer here any specific suggestions concerning programs or policies 
of ])ublic works. Congress can well attend to that. 

In the coming days when the safety of the Nation may greatly 
depend upon the wide and steady employment of the whole people, 
it cannot seem otherwise than that Congress should resort freely and 
courageously to wise public works to absorb any dangerous unemploy- 
ment which private enterprise cannot take up. 

In this connection it would be superfluous to suggest that Congress 
encourage the States, during the aftermath of the war, to employ 
generously the joint Federal and State programs for highway con- 
struction in harmonj^ with the vital purposes of all Federal public 
works, and as far as Congress may do so, a]:)peal to the States and 
their municipal governments to provide their own plans and pro- 
grams to supplement all such Federal activities in accordance with 
the necessities. 



Ideas suggested are in connection with little business, and laws re- 
ferred to are by their popular names : 
(1) Income-tax law. 

(<z) There is no present shortage of cajiital necessary to finance 
■small business which will be necessary in the post-war period. Such 
capital is available to worthy people willing to start new business — • 
but it must often come from friends of the organizer who are con- 
vinced and believe in the ability and honesty of the person, provided 
they know that if the business does succeed, they will get a reasonable 
dividend on the investment consistent with the chance taken. Such 
friends with capital will be willing to take the chance of loss of in- 
vestment, but not of liability beyond this. So, corporate form is nec- 
essary. Putting the money in a new enterprise to be run by one or a 
few individuals, which business might or might not succeed, then 
they are entitled to more profit if it does succeed, than what is now 
declared to be reasonable for excess profits taxes under the present 
revenue act. 

I agree with Mr. Maverick $50,000 would be reasonable for a little 

The small exemption now allowed before computing excess profits 
is not sufficient because if most small businesses succeed, they must 
liaA'e enough capital to operate without borrowing money for capital 
purposes and be strong enough to meet the competition of big business. 
So, I suggest modification of excess profits taxes in such a way as to 
encourage such investments in new businesses. This modification is 
not suggested as to large corporations, whose businesses are already 
established, and whose capital is not furnished by friends willing to 
take the chance referred to. 


(6) Capital-stock taxes: Capital-stock and other taxes applicable 
only to corporations should be abolished or applied only to big busi- 
ness so as to enable small business to operate by corporate form. If 
capital stock taxes were abolished so far as small business is concerned,, 
there would be no loss in revenue to the Government because the in- 
crease in small business and normal income taxes thereon will more 
than offset the small loss in revenue. 

{'2) Reports and returns. 

Complicated reports and returns to the hundreds of bureaus and 
agencies created by the Government : These agencies are so numerous 
it would take two or more pages to list them by iaiitials only. Small 
business must be operated by one or only a few keymen, all of whose 
time, energy, and talent must be devoted to the management and 
operation of the business, and if they must spend their time trying 
to learn and obey the many thousands of rules and regulations 
adopted by these various bureaus and agencies and then supervise 
the making of the required reports and returns, no time will be left 
to give to the business itself. Small business cannot employ experts: 
to look after these matters. Such experts are not available and even 
if they were, the cost is so high as to destroy any hope of profit. Big 
business may afford these experts but little business cannot. 

(3) Wage stabilisation lato. 

Capital for little business will not be furnished even by friends 
unless the operators of the business are themselves willing to take a 
chance on its success. In many cases all they can put in the business 
is time and effort, not capital, so their chance must be taken in con- 
nection with their own personal efforts. Results: Salaries must be 
fixed to start with at much less than the services are worth ; if the 
business succeeds, then increased according to the success of the busi- 
ness. "What the increase should be, or the basis on which it will be 
made, cannot be determined in advance nor any set formula fixed. 
But, under existing laws this cannot be done without approval of some 
Government agency, which one depends on the amount involved, 
where the business is located and where the various branches of the 
agencies are located — and to do this requires the employment of more 
auditors and lawyers than little business can afford. 

What is said here applies also to employees when employed in start- 
ing little business who may or may not prove their worth. No stand- 
ard can be set in service institutions on employees' worth until they 
have been tried and their merit demonstraied. It is not the same 
as where machinery is used and the employee takes care of the product 
that goes into or comes from the machines. The wage freeze has been 
very unjust to deserving white-collared employees, and management is 
powerless to reward them according to their j)roven merit. 

]\Ir. Fish. As to that white collar question, I think that is a very im- 
portant question, and it may come up toda}^ in Congress. Have you 
any particular suggestions as to what we can really do to help them'^ 

.\lr. Camekox. All I can say to you. Congressman, is that my own 
organization lias carried on two and a half times as much work as it 
did in 1940 with only about 1-percent increase in personnel. That 
means the efficient white-collar employees have had to work, and work 
harder, and I cannot reward them because wages are frozen. 

JNlr. InsH. You cannot give them any wage increase? 


Mr. Cameron. I can go tlirough the red tape and after 3 months get 
a little extra compensation. I do not believe white-collar employees 
under $200 should come under the wage freeze. 

Mr. Fish. I am offering an amendment along that line, at least I 
am supporting it, limiting it to $37.50; that is, taking the ceiling off 
up to $37.50 a week, so that faithful and efficient employees that the 
employers want to give raises can get them without going through all 
that red tape. You raised the limit to $200. 

Mr. Cameron. I think it ought to be $200. 

Mr. Fish. That would be about $150 a month. 

Mr. Cameron. You have a little higher bracket there that is carrying 
on a tremendous amount of work because the new ones are very in- 

Mr. Fish. I am surprised someone from the South advocates a 
higher bracket. I could understand someone like Mr. Lynch from 
New York advocating a $200 ceiling, but I am surprised at someone 
from the South advocating that. We thought you were paying low 
wages down there. We thought you were taking all our business away 
because of that. I can see you have real statesmen doAvn there. 

Mr. Cameron. Thank you, but we do not object to what wages we 
pay if you will pay us for our products. 

(4) Social-security taxes, 'particularly wnem'ployraent compeTisation. 

This deals, of course, Avith both Federal and State laws. Any fixed 
percentage or arbitrary amount to be paid for this purpose is unjust, 
unfair toward little business, and so unjustly increases the cost of doing 
business. Most employees of little business personally know the man- 
agement and the management knows them. The emplojanent begins 
because of this mutual acquaintance, knowledge, and trust, and each 
has a personal interest in the other, and so both are interested in 
making the association permanent and the business successful. Result : 
Practically no turn-over in labor and no unemployment compensation 
paid. But in large business the contrary is true. So the money so 
paid by little business goes to employees of big business, and the money 
paid by little business, which is not needed, has enabled the authorities 
to accumulate enormous surpluses in these funds. 

Recommendation : A reasonable assessment based on experience — a 
merit system. 

Most little businesses compensate their regular employees when ill 
and are reluctant to lay them off during slack periods. They receive 
no reward for their generosity in their social-security and unemploy- 
ment-compensation taxes. Our company paid into the Federal and 
State treasuries during the year of 1943, which was an average year, 
to this fund upAvard of $13,000. There was returned to our employees 
less than $500. We feel that we have contributed to the payment of 
unemployment compensation to others who were not as generous and 
as fair with their employees. 

{6) Antitrust laws. 

No repeal or radical change in our existing antitrust laws should be 
made, provided a reasonable and fair policy of enforcement is followed. 
These laAvs are essential to the existence and success of little business. 
Without them unfair competition and trade practices on the part of 
large business could destroy any little business, no matter how large 
or small the competition might be. 


I admit this matter involves more a matter of enforcement of exist- 
ing laws, or the lack thereof, than it does changes in the laws them- 

(6) Ofjice of Price Administration. 

Little business is 100 percent against inflation, therefore has been in 
accord with the principles of O. P. A. during war. We have very 
much disapproved of their regulation methods. In many instances 
they have been very unfair to little business. Little business feels that 
it has not had the voice that Congress intended for it to have in formu- 
lating policies in conjunction with the appointed authorities. Large 
business has invariably promulgated and dominated these policies, 
and the little man feels that they were often very discriminatory to 
his business. 

No two sections of the Nation are alike, some rural, some agricultural, 
some industrial ; therefore the national 3^ardstick applied to all busi- 
ness of the Nation, regardless of the type of service rendered, is unfair. 
O. P. A. has been rather insistent on destroying the little corner grocer, 
eliminating the middleman who from time immemorial has rendered a 
needed service to certain types of merchants and to certain sections, 
and in instances O. P. A. has forced the little merchant to post in his 
place of business the prices offered by large chain stores which rend- 
ered no service in comparison with his. Little business resented this, 
but it accepted tlie discrimination because its country was at Avar. 

INIr. Reece. We had a very good example of that called to our atten- 

A man had organized a grocery combination store out in a com- 
munity where there were some 100 families living who had petitioned 
him to do so. After he got into operation the Gasoline Rationing 
Division denied him any gas for the operation of his pick-up truck, 
which meant he could not do business at all. 

Those sections are making a substantial contribution to the war 
■effort. They are producing crops, they are producing lumber and yet 
they go on the theory they should stay out there and starve and v.-e 
get no concessions. 

Mr. WoRLET. With all these faults, ]Mr. Cameron, of the O. P. A., 
and they are numerous, is it better to continue with the O. P. A. or 
would you prefer to see all restrictions lifted? 

Mr. Cameron. Within 6 months after the termination of the war, 
O. P. A. should positively be discontinued. Does that answer your 
question ? 

Mr. WoRi>EY. Yes; it does. 

The Chairman. I think the law provides that the O. P. xV. should 
be terminated. 

Mr. Cameron. I have never seen one of these agencies limited ; they 
always work some scheme to continue the job. 

I have no objection to it, I am against inflation. It is common sense. 
A man dealing in commodities like I am dealing in is scared to death 
of it, but I like a man who comes to tell me about it who knows what 
he is talking about. 

The Chairman. Just following that along, if I understand your 
position on the O. P. A. and other governmental regimentation, that 
is, it is essential dui'ing the war. 

Mr. Cameron. Absolutely. 


The Chairman. But the people want to have some assurance that it 
will terminate at the end of the war? 

JMr. Cameron. Yon are correct 100 percent. At the present time 
there is many a little businessman who is going to carry on until the 
war is over. ^ But when it is over, if he has to go tlirough what he is 
going through now, he is not going to consider expanding, but, in fact, 
he is considering retracting. 

Mr. Rekce. Do you think that is true in a measure of what might be 
termed '"the larger business men," too ? For example, I heard a man 
say the other day, who is drawing a $100,000 salary, which only netted 
him in view of the income bracket he was in, $4,000, while he could not 
atford to quit while the war was going on, when the war was over there 
would be no incentive to continue. 

Mr. Cameron. I think that is probably correct, but I am speaking 
for little business, I cannot speak for the $100,000 man. 

If O. P. A. is not discontinued, little business will have no desire to 
further expand and in many instances will discontinue its present 

10. war BONDS 

The Government has sold many, many billions of dollars worth of 
bonds in order to finance the prosecution of the war. These bonds 
have been bought and are now owned by every t}'pe of business, large 
and small, and last but not least, by the banks of our Nation, both 
large and small, who are very large owners of the same. To all in- 
tents and purposes, Government request of banks to purchase bonds 
is tantamount to demand. No one criticizes the Government for sell- 
ing the bonds, or demanding their purchase, if necessary, but the Gov- 
ernment must keep faith with the public and institutions who have 
bought them, by sustaining their value after the war. Shortly after 
Yvorld War I, War bonds sold as low as 80 cents on the dollar; if this 
is allowed to happen again, it will bankrupt the entire Nation. 

The Government in order to protect itself must find ways and means 
to protect the market value of its security, namely. War bonds. 

The little businessman is looking to C(mgress for bold and coura- 
geous action during the trjdng time confronting us, where nothing 
short of courage will suffice. 

The Chairman. Thank you very much, Mr. Cameron. It was 
splendid of you to come up here at your own expense to give this 
important committee of Congress your views as to the little business- 
man and the ])oint of view of what you term the "grass roots." I 
think this committee and the Congress are intensely interested in your 
views and in the statement that you have made. 

Mr. Welch. I desire to compliment ]Mr. Cameron on his fine, con- 
structive statement. You are absolutely right. The little business- 
man must by all means be encouraged and rehabilitated. It should be 
one of the principal objects and aims of this committee to put little 
business back on its feet insofar as it is possible. 

Mr. Fish. You say "the wage freeze has been very unjust to deserv- 
ing white-collar employees, and management is powerless to reward 
them according to their proven merits." You can apply to the War 
Labor Board for increases. 


Mr. Cameron. You can apply to the War Labor Board; they have 
three of these boards. My experience has been as to the lower brackets, 
that is very satisfactorily handled ; it is a State organization. When 
it comes to the next group, the salaried group, which is not termed 
"hourly employees," it has not been satisfactory. We have gotten 
some increased compensation. As an illustration, prior to 1940 our 
company operated a very small distributing feed house at Gulfport, 
Miss. With the advent of the Army and Navy into that vicinity we 
were approached to enlarge our facilities and put in an excessive 
amount of refrigeration equipment — there being no refrigeration for 
the storage of fresh fruits and vegetables in that vicinity. The vol- 
ume of this business, when expanded, increased tenfold. Therefore, 
we had to change the personnel accordingly. The young lady who 
kept a small set of books there drew about $125 a month, which was 
in line with the work she was doing- Naturally, when we expanded 
the business we had to place an experienced accountant in charge of 
the office. I applied for compensation for this accountant on the basis 
that we were paying for similar work at our other branches. It was 
i\ herculean job to explain to the authorities why this was necessary. 

Mr. Fish. You tind a lot of red tape, I suppose, and wasted effort, 
and you have to hire lawyers and accountants to even get any increase 
for the small employees. 

]Mr. Cameron. You are exactly right. On the 1st of January when 
we found it was necessary to increase salaries, due to the increased 
cost of living of our employees, we hired an accountant from a distant 
point, also an attorney to prepare the papers. They were submitted 
and then returned to us on two different occasions. Finally, the man- 
agement itself had to give 2 weeks full time to preparing them. 

Mr. Fish. I think it would be a good idea to take the ceiling price 
off up to, say $87.50 a week, entirely, and let the employers deal with 
the employees to increase the salary. 

Mr. Cameron. Mr. Fish, in service establishments you ought to 
regard people according to their merits and according to their con- 
duct. If they are on a job and are superior and more efficient and do 
more work, why they ought not to be put in the same bracket with the 
type who will not do anything. If they are, they are not going to be 
contented and the management cannot, censor them when the man- 
agement knows their cost of living is increasing. 

]Mr. Fish. I want to commend you for a very excellent statement, 
and for submitting this in writing so that we can use some of it when 
we look into this matter and we get ready to submit legislation. 

Mr. Lynch. ]Mr. Chairman, I want to compliment Mr. Cameron on 
his fine presentation here this morning, and it occurs to me, as a result 
of his statement, that if we have not already formed a subcommittee 
on small business, that it might be well for this committee to have a 
subcommittee to look into the points that have been raised here this 
morning by Mr. Cameron. I offer that suggestion. 

The Chairman. I think that is a suggestion, Mr. Lynch, well Avorth 
considering. Of course, the two are so related that it is rather hard to 
distinguisli between them. The problems are very much the same. 
However, I think it should be considered. 

Mr. Dewey. Mr. Chairman, I was tremendously interested, and I 
wish to compliment your statement. 

99579 — 44— pt. 3 6 


Mr. Cameron. Thank you. 

Mr. Dewey. There is one thing overlooked, I think, by little busi- 
ness, and I hope in your talks and consideration of this subject you 
will think of that, and that is the inheritance tax. 

Under our present tax laws on renegotiation of contracts, practically 
all profits and reserves have been taken away, particularly from the 
small business that does not have a capital set-up. 

Mr. Cameron. That is correct. 

Mr. Dewey. There are many small companies owned by an indi- 
vidual, where he has put in and brought back year after year every- 
thing he has inade into the gi-owth of his company. When the day 
comes for him to leave this life, how will he meet the inheritance tax 
on that basis? I liave already made some suggestions in the Ways 
iind Means Committee at various times as to the present payment of 
some form of nontaxable life insurance or the setting up of some fund 
or the purchase of some particular type of security out of his earnings 
which would be kept by the Treasury and applied later on to pay the 
inheritance tax on the company, but which would not be added to the 
man's estate. You get into one of the pyramiding situations, and a 
man would have an income tax to pay, we will say, of $100,000 and he 
sets aside the $100,000 to meet that, but that $100,000 goes on top and 
he does not need $100,000, he needs $120,000. Then that extra $20,000 
is taxed as part of his estate, so he does not need $120,000, he needs 
$130,000 and that extra $10,000 is again taxed. He never finds an end. 
I'here will be many little businesses that will be thrown on the market, 
picked up for a small sum by a competitor or go out of business com- 
pletely. I think that is one of the situations that must be given con- 
sideration at the time of our tax reforms. 

Mr. Cameron. I am certainly delighted to hear you say that. I 
would like to say this off the record. 

The Chairman. Off the record. 

(Discussion off the record.) 

Mr. Dewey. While your interesting statement covered many points, 
I wanted to inject that because I thought that it should be given your 

Mr. Cameron. I am glad you brought it out. 

Mr. WoLVERTON. I ha\e waited mereh* to express the same com- 
mendation that the other members of the committee have expressed 
with reference to this well prepared and well considered state- 
ment that has been given by you this morning. You have certainly 
given a statement that bristles with self-evident truths, and I felt I 
should stay long enough, though I had no question to ask, to add my 
word of commendation to the service you have rendered by making 
the statement before the committee, 

Mr. Cameron. I appreciate that. 

The Chairman. Mr. Worley wanted to ask a question. 

Mr. WoRLEY. I would like to concur very heartily in the statement 
made by Mr. Wolverton. You have spoken plainly, in simple, under- 
standable language, it is easy to understand you speak our language, 
Texas language 

You brought up a matter that I would like to elaborate on just for 
a minute. You, of course, like everyone else, endorse the idea of 
eliminating these bureaus. You said awhile ago you saw a lot of 
them created but none of them was abolished. We have abolished 


W. p. A,, P. W. A., the National Resources Planning Board, the 
N. Y. A., the H. O. L. C. is in the process of liquidation now and most 
of the peacetime agencies have been abolished. 

But, on that very point. Congress in an effort to help little business, 
created the Smaller War Plants Corporation, which is another bureau. 
Congress has been interested in that problem, but those who are not 
interested in the smaller war plants or the smaller industries say we 
have created an additional bureau. 

What are your views on that? Do you think it was necessary or 
desirable to create another bureau to help the smaller war plants or 
businesses ? 

Mr. Cameron. You had the chairman of that bureau here yesterday, 
didn't you ? 

]\Ir. \Yorley. That is right ; Maury Maverick. 

Mr. Cameron. I thought he presented a very, very constructive 
statement. He went right to the heart of the thing. Of course, he 
referred particularly to small industry. Well, when you get into 
small business, why, you cover a lot of activities that aren't grouped 
that way. In other words, you have your service establishments, your 
mercantile establishments, your laundries, every kind of agency that 
comes under the class of small business. 

Mr. WoRLEY. You endorse the idea behind the Smaller War Plants 

Mr. Cameron. I certainly do. 

Mr. WoRLEY. At the same time, Mr. Maverick is considered a 
bureaucrat and ought to be eliminated; that is thought by a lot of 

Mr. Cameron. There are different types of bureaucrats. 

IMr. Worley. That is right, there are different reasons as to why 
these bureaus are set up. 

Mr. Cameron. I am in favor of any bureau that comes in with a 
view of helping. I am opposed to any bureau or bureaucrat who has 
no practical experience or knowledge of the business that he is super- 
vising, who cannot interpret the regulations, and who, when asked for 
information, invariabl}?^ has to get it from Atlanta or Washington. 

Mr. WoRLEY. I think there would be unanimity of opinion as to 
your statement there. 

The Chairman. The committee will stand adjourned. 

(Whereupon, at 11:4.5 a. m., the committee adjourned.) 


THURSDAY, JUNE 15, 1944 

House of Eepresentatives, 
Special Commitiee on Post-war 

Economic Policy and Planning, 

Washington, D. C. 

The special committee met, pursuant to adjournment, at 10:30 
a. m., in room 1304. New House Office Building, Hon. William M. 
Colmer (chairman) presiding. 

Present : Eepresentatives Colmer (chairman) , Lynch, O'Brien, Fish, 
Reece, Welch, and Dewey. 

Also present: Marion 13. Folsom, director. 

The Chairman. The committee will come to order. 

Mr. Folsom, you had a statement? 

Mr. Folsom. Yes ; we planned to have Mr. Fennelly before the com- 
mittee yesterday on the question of small business after the war. 

Mr. Fennelly is executive director of the Committee for Economic 

Because of lack of time we didn't get to him, but he has a prepared 
statement and would like to submit it as part of the record. 

The Chairman. Without objection, it will be considered a part 
of the record. 

(The statement referred to follows the testimony of Mr. Chatters 
and starts on p. 595.) 

Mr. Reece. Will that be printed in the record ? 

The Chairman. Yes. We regret that we couldn't have heard Mr. 
Fennelly yesterday because he is a very capable man and one who 
knows the subject very well. 

We are glad to have Mr. Walter Blucher, executive director of 
the American Society of Planning Officials, with us this morning 
and Mr. Blucher, if you would just have a seat there and utilize 
the time. 

Do you have a prepared statement? 

Mr. Bluchir. 1 have a very brief statement, Mr. Chairman. 

The Chairman. Well, if you desire to read that, you can proceed. 


Mr. Blucher. The American Society of Planning Officials is a 
private organization of some 1,200 members, representing practically 
every active official planning agency in the United States. Two-thirds 
of the members of the society are representatives of official planning 
agencies in cities, counties, regions. States. 



We also have members in more than 20 foreign countries, includ- 
ing a number of Central American and South American countries. 
One-third of the members of the society represent business and in- 
dustrjT^ or persons with a general interest in planning, 

I have been asked to speak also for the Illinois Post- War Planning 
Commission, of which I am a member. 

In this formal statement I would like to confine myself to two 
aspects of the planning problem. Although these are crucial as- 
pects for the post-war years, they are problems that are with us 
today. We certainly cannot wait until the war is over to attack 

These two problems involve general community planning and the 
preparation of plans and specifications for specific post-war public 
works projects. I am making no comments in this statement with 
respect to the financing or actual construction of post-war public 

There has been a great deal of talk throughout the Nation regarding 
the need for specific plans and specifications for public works that 
might be constructed when the war is over. There has been a great 
deal of talk but, in the total picture, comparatively little effective 
action. The total amount of public works in the plan stage, with 
financing arranged and necessary land acquired, is pitifully small. 

The first test of a public work should be its necessity and desirability 
in the community, but we do think in terms of public works as a 
method of providing post-war employment. 

If all of the projects that have been listed throughout the United 
States were in the plan and sjDecification stage, the amount of em- 
ployment that might be provided would still be small in relation 
to the total employment picture. 

For that reason, we don't wish to overemphasize the importance 
of public works. 

We believe that there has been underemphasis on an even more 
important aspect of the planning program, and that is general com- 
munity planning. It is not possible to have a rational program of 
public works until a community knows what its over-all needs will be. 

Those needs are not determined by listing every public improvement 
that everybody in the community can think of. 

The community should first know what its probable economic 
future will be. 

The community must know how many people and what kinds of 
people will reside in the community. 

Determining these two points is not always easy, but an attempt 
must be made to determine what the community's future will be be- 
fore that community engages in the construction of specific public 

Permit me to give you some examples. 

A community in central New York has written to us saying that 
its population, which was 3,000 before the war, has increased to more 
than 10,000 during the war. That community manufactures a part 
for airplanes. 

Some of the people in that community believe that they will retain 
their increased population. 


The first thing that a town must do is to make a realistic appraisal 
of its future. Is it going to develop a public-works program, in- 
cluding sewers and sewage-disposal facilities, water facilities, high- 
ways and transportation, housing, recreation, community facilities, 
and so fortli. for 3,000 people or for 10,000? Obvioush^ if the com- 
munity's population is going to shrink to 3,000, it would be wasteful 
to extend public facilities to provide for a population of 10,000. 

Yet we find many communities throughout the United States talk- 
ing about specific public improvements without having done the pre- 
liminary job of determining what the community's economic future 
will be ; how many people will be in the community, and what their 
requirements will be. 

I wish to repeat that this is not a simple task in cities like Portland, 
Seattle, Detroit, and Wichita, but it is a task that must be done by 
every community in the United States, and that it is much simpler 
in the communities which have not had the wartime dislocations of 
the cities I have mentioned. 

In a large city in Ohio that I visited recently only 11 percent of 
the school facilities in one particular area are being used. 

This is not a run-down, blighted area where the population has 
left. This is one of the newer outlying developing areas. 

The school authorities apparently failed to make the necessary 
general studies to determine the nature of the development in the 
community, the direction of growth, the size of families, the speed 
of growth, the number of people, the number of children. 

Those decisions are what we mean by community planning. 

In another State that I ^dsited recently the State has made an 
appropriation for assistance to cities in the preparation of specific 
plans for public works. 

The first application to be received from any city was for a bridge 
to cost $70,000. The total grant from the State to that city will be 
taken up in the preparation of plans for this single improvement. 

The question I asked at a meeting I attended was whether the com- 
munity had prepared a general community plan, whether it was in a 
position to determine whether that bridge was the most-needed pub- 
lic improvement or was so important to the community that it was 
willing to spend its entire State appropriation for a single project. 

There are some people who believe that the function of a com- 
munity planning organization is the preparation of a public-works 

We believe that the preparation of such a program is a final step 
rather than a first step. 

The American Society of Planning Officials has been putting on a 
series of community planning institutes in various parts of the 
United States. 

They have been held in Michigan, Illinois, Minnesota, California, 
Kansas City, Mo. Most of them lasted for 4I/2 days. 

Persons who participated were mayors, city managers, councilmen, 
citv engineers, chamber of commerce representatives. 

We liave spent the 414 days showing these people how they them- 
selves can make tlie necessary studies in their communities to determine 
what their probable future will be or can be. 


We have emphasized that community programs can be developed 
only by the community, but we have been very specific in telling them 
what factors they must consider, what steps they must take, before 
they can develop sound public-works programs. 

These have been very successful and fruitful meetings. 

I mention this merely to point out that I have been meeting with 
public officials in various parts of the United States and that my 
comments are based upon direct contact with such public officials. 

It is rather generally assumed in this country that cities do not 
have the money with which to undei'take the general community plans 
or to prepare specific plans and specifications. It is a fact that there 
is a great shortage of personnel for such planning work. 

At a recent meeting in an Ohio city with the mayor and finance 
officer, it was pointed out that thigj city, subject to the 10-mill consti- 
tutional limitation, actually doesn't have the funds with which to pro- 
vide all the necessary public facilities. Although the maj^or was 
very much in favor in getting a planning program under way, he 
didn't know where the money could be raised. 

Since the cost of general community planning is comparatively 
small, it is my opinion that every community in the United States 
that really wants to undertake a community-planning program could 
find money within that community to finance that pi'ogram. 

It is also my opinion that every community in the I'nited States that 
really wants to prepare plans and specifications for necessary com- 
munity projects could do a considerable amount of such work with its 
own finances. 

In spite of that opinion I am convinced that a comparatively small 
amount of general community planning and more specific planning is 
going to be done in this country. 

If the war would end within 30 days or even within a year, at the 
present rate of progress, we would be a long way from ready vv^ith any 
substantial number of public improvements. 

If we are interested in having a large-scale public-w^orks program 
ready which is based upon a sound program for community develop- 
ment, which takes into account the future needs of the community, 
some form of "stimulation" is going to be necessary. 

I said earlier that one of the last steps in planning is the preparation 
of a public- works program. 

In view of the fact that public works will provide comparatively 
little employment, it seems to us that it is the function of local gov- 
ernment to show what it can do to stimulate other forms of develop- 

Mr. Lynch. Would you read that again, please. 

Mr. Blucher. In view of the fact that public works will provide 
comparatively little employment, it seems to us that it is the function 
of local government to show what it can do to stimidate other forms 
of development. . 

I do not have in mind such things as tax exemption. ' 

We do know, however, that some comnninities might advance in- 
dustrially if they were more adequately served with transportation 
and housing and recreation and water and sewage disposal facilities. 

Part of the job of community planning is to determine what the 
community itself can do to insure its own well-being. 



The job simply isn't going to be done withont some form of stimu- 

I say this because I have met with hundreds of public officials who, 
at the moment, are convinced that they haven't the resources available 
within the community Avith which to do the job. 

I would like to summarize my brief statement: 

1. Much of the emphasis on post-war planning has dealt with the 
preparation of plans for specific public works. 

2. It is even more important, in my opinion, that the cities have 
general comnuuiity plans first, then that they proceed with the prep- 
aration of plans for specific projects. 

3. Since public works will provide a comparatively small amount 
of employment, cities nuist develop plans which will encourage and 
assist other forms of development. 

4. Although State resources appear to be available, they have actu- 
ally been appropriated in only two States and in those two States 
the funds are available for specific plans and not for general community 

5. Many local officials are of the opinion that they do not have funds 
available for general community planning or the preparation of 
specific plans. 

6. I am of the opinion that practically every community could find 
the money for communit}^ planning if it really wished to do so. 

7. In view of this commonly held opinion that no funds are avail- 
able, I believe that no extensive Nation-wide community plans or 
specific plans will be made unless some outside stimulation is provided. 

The Chairman. INIr. Bhicher, I think your statement is fine as far 
as it goes, but I don't know just what you had in mind in the way 
of augmentation of it, and there are several questions there that seem 
rather pertinent. 

You suggest the necessity of planning. Do you recommend some 
form of Government stimulation for these plans ? 

Mr. Blucher. Mr. Chairman, my answer is that I don't think the 
job is going to be done unless there is some form of Government 

The Chairman. Well, what is your specific recommendation upon it? 

]Mr. Blucher. Well, you will see from my statement that I have 
said things which are apparently inconsistent, and I recognize the 
inconsistency of my statement. 

I have said that I believe the resources are available within every 
community if it really wanted to do a job of community planning. 

At the same time I recognize from talking with public officials 
that they are not going to do the job. They simply say that they 
haven't the money available. 

The Chairmax. Well, isn't it a fact that they are looking to gov- 
ernmental guidance, they are all looking to Washington? 

Mr. Blucher. I think that is true. 

The Chairman. As a matter of fact, that is what we have kind of 
educated them up to, isn't it ? 

Mr. Blucher. I think they are looking to Washington for a deci- 
sion of one kind or another, and are hoping for a favorable decision. 

The Chairman. I grant they are looking to Washington for the 
sinews to do the thing. 

Mr. Blucher. Yes. 


Many just said they are doing nothing. 

The Chairman. Do you recommend that Congress authorize a fund 
for this development ? 

Mr. Blucher, Yes, Mr. Chairman. 

I think that Congress and the Nation as a whole is interested in 
having this kind of thing done. 

Now, recognizing that this is the responsibility of local government, 
and realizing that local government is not going to do the job, I think 
it would still be wise for Congress to provide the stimulation to have 
the job done. 

The Chairman. Well, on what appropriation do you think the job 
should be done? 

Mr. Blucher. Well, I think this should be done on a matching basis. 
I think that every community ought to contribute something to this. 

The Chairman. To the planning? 

Mr. Blucher. To the planning ; that's right. 

There are two States which have made State appropriations. 

A good many States have funds available in the State treasury 
which have not been made available to the cities. 

The State of New York and the State of Michigan have made 
State appropriations to the cities, and that is on a matching 50-percent 

The Chairman. Well, could you be more specific and say what part 
should be paid by them ? 

Mr. Blucher. I would say a 50-percent matching. 

The Chairman. Fifty percent? 

Mr. Blucher. Yes. 

The Chairman. Well, that brings it to the $64 question. Who is 
going to pay for the public works as such ? 

Do you mean a matching on that? 

Mr. Blucher. Do you mean on the actual construction of the public 
works ? 

The Chairman. On the cost of the actual construction. 

Mr. Blucher. Well, you will recall, Mr. Chairman, in my state- 
ment that I said I was not discussing that particular question, because 
it seems to me that the important thing at the moment is to get 
some plans ready. 

The Chairman. Yes ; and personally, I have the thought that before 
the communities, States, and counties and their subdivisions can in- 
telligently plan, they must know where they are going to get the funds. 

That is what an individual would do if he was going to build a 
structure, wouldn't he? 

Mr. Blucher. May I give an example ? 

In a New York community we met with the ways and means com- 
mittee, which consisted of the mayor and a number of the leading 
merchants and industrialists. 

There was presented to this committee a program of public works 
totaling $90,000,000, and the committee just threw up its hands and 
said, ''Why not make it $900,000,000?" And they were ready to throw 
it out until we analyzed the program a little bit. 

Now, it was discovered that some of the projects were street im- 
provements, sewer improvements, to the total of $3,000,000. 

I turned to the mayor and said, "Wliere is the money coming from?" 
He said, ''We have the money already." 


Then we looked at the highway improvements. That totaled ap- 
proximately $20,000,000 and the question was asked, "Where is it 
coming from?" 

''Well, it is coming in part from Federal highway funds, from State 
tax funds, and county funds. Does everybody agree we can find that 

Everybody agreed. 

Then you had $23,000,000 already taken out that the people were 
agreed on. 

When we looked at the other projects that remained there was a 
new city auditorium, a new library, a museum; there were new public 
buildings — all of them considered necessary and desirable in the com- 
munitv — and the question was asked, "Where is the monev coming 
from?" "We don't know." 

And the next thing was, "In view of the fact that you don't know 
where the money is coming from, should you throw these things out 
the window?" 

And the answer was, "That wouldn't be very wise; what we ought 
to do is get enough money to make some of the plans for these projects 
so. if and when the funds are available, we will have plans made." 

The Chairman. All right. 

Now, I am thinking in terms of the individual and I think that the 
Government ought to operate upon the same sound basis that in- 
dividuals would operate on. 

Now, do you think that either the Federal Government or the com- 
munities ought to expend money for plans unless they know where 
they would go to get the money to execute those plans ? 

Mr. BluCiier. Yes, I do on certain things. 

^lay I give you another example? 

Here is a community which has been ordered by the State health 
department to provide a sewage-disposal plant. 

It doesn't have the money at the present time with which to con- 
struct that sewage-disposal plant. 

Now, there are various methods of financing a sewage-disposal plant. 
For instance, you can make a sewer rental charge. That is one method 
of financing. 

I say, if you need a sewage-disposal plant that the smart thing to do 
is to have your plans ready ; you will find the way in which to get the 
money, one way or another. 

The Chairman. All right. 

I am going to build a house. I decide I need a new home. 

Now, I am not going out and spend several hundred dollars for 
plans and s]:)ecifications for that house unless I know where 1 am going 
to get the funds to build the house on to begin with. 

Is that sound? 

Mr. Blucher. That is sound. Tliat is very sound. 

Tlie Chairman. Then why isn't that sound 

Mr. Blucher (interposing). Well, I think the situation is a little 
bit different with respect to Government, and particularly with re- 
spect to local government. 

We admit if we are going to run local government there are cer- 
tain minimum facilities that we ought to have. 

The Chairman. Surely. 

Mr. Blucher. Sewers is one ; water is another. 


Now, they can raise the funds for improvements of that kind. 
The Chairman. Yes. But why not plan for th.ose in advance? 

Mr. Blucher. Well, here is the situation with respect to public 
works : 

The public works that have been planned so far and are ready to 
go are street improvements and sewer improvements, things of that 
kind, for two reasons: The amount of planning is very small; and, 
secondly, most communities have the funds available, or at least a 
number of them do. 

There are a number of things that some of them need, such as sewage- 
disposal plants. 

Now, it is my opinion that we ought to prepare for some of these 
badly needed improvements. 

I wouldn't say where tliey need a new hospital or city hall that they 
ought to have final plans and specifications. In some cases they ought 
to have preliminary plans so they can estimate the cost. 

But I think it is the part of wisdom to have some of the plans 

Let us say that we have reached a very bad employment situation 
when the war is over and Congress decides very quickly to provide 
funds for public works on a matching basis. 

Where will we be if we don't have those plans ready ? 

The Chairman. I quite agree with you that the plans should be 
ready, but I differ with you that we shouldn't also plan where we are 
going to get the money. 

Mr. Blucher. I agree with you. 

The Chairman. I think one is dependent on the other. I think that 
that community before it can intelligently plan what it is going to do 
in the way of post-war construction should know hoAv much, if any- 
thing, the Federal Government is going to put up and how much they 
are going to be forced to put up. 

But I shall not press that further. 

Mr. Blucher. There is one point I want to make; I think we are 
beginning to get agreement on an important point. 

I said it is very important that we have community planning as dis- 
tinguished from plans and specifications. 

One of the important functions of community planning is to know 
how much a community can do. 

In other words, there isn't any point in a community making plans 
for elaborate developments that are, let us say, desirable, rather than 
necessary, which there isn't any chance that they can finance, in the 
hope that somebody will come along and provide the money. 

I would agree with you that far. 

I think it would be very hel]Dful to the commimities if they knew 
one way or the other whether Congress is going to do anything with 
res]:)ect to ap]Dropriations for public works. 

Even if Congress said, "no," definitel}^, that would be helpful to the 

The Chairman. Well, as I said — maybe I am too fundamental and 
realistic about this thing — I don't know. 

General Fleming was before this committee and he suggested that 
the Fedei-al Government appropriate I forget how many million dol- 
lars for this question of planning. 


He seemed to agree with you that we shoukl do that, then the com- 
munity should start to planning. 

Well, I just want to make this observation, and then I am going to 
defer to some of the members of the connnittee. I am sure they w^ant 
to ask some questions. 

I want to make this prediction, that if that is done, we are going to 
find a lot of extravagant plans inade by the communities at the ex- 
pense of the Federal Government and plans that will never be 
executed when the communities find that they are going to have to 
put up all the money or any substantial part of it. 

Mr. Lynch, chairman of the subcommittee of this committee, I am 
sure has some questions — subcommittee dealing with this same sub- 
ject — I am sure he has some questions he desires to ask. 

Mr. Lynch. To what extent do you think public works will give 
employment after the war? 

Mr. Blucher. I think to a very small extent on the basis of projects 
that are being considered so far. 

^lay I just briefly give you a summary of a recent study that has 
been made? For instance, the International City Managers Asso- 
ciation has recentl)^ sent a questionnaire to all of the cities over 
10,000 in this country. And we have summarized their findings. 

I am reading now from an editorial which appears on the front 
page of the May issue of the News Letter of the American Society 
of Planning Officials. The title is ""Let's Stop and Review the 
Situation" [reading] : 

How many public-works projects are being planned and how ready are they? 
The survey shows that 167 cities over 25,000 have listed projects to be under- 
taken within 5 years after the war totaling $3,300,000,000, but $2,000,000,000 
of this amount is reported by eight large cities. 

Xot including Chicago in the survey. 

Now, if you include the Chicago figures which are about a billion 
dollars, you have a total of $5,000,000,000 worth of projects for the 
0-year period reported by most of the larger cities in the United 

That is a billion dollars a year only. 

And we go on to say : 

But are such plans ready? It is apparent that plans and specifications are 
ready for the patchwork jobs. It doesn't take long to prepare a plan for a 
sewer extension or for the grading, surfacing, or resurfacing of a street. Sewers 
and streets rank first in the list of projects in most cities irrespective of their 

In a few instances plans have been prepared for larger improvements, some 
of which have been delayed by the war, hut for the most part, and with few 
exceptions, plans are in the most preliminary stages. 

A further study shows that only between 10 and 20 percent of the 
total of $5,000,006,000 that has been listed is actually in the plan and 
specification stage. 

On the basis that it would provide a very small amount of em- 

Mr. Lynch. Well, assuming that the Federal Government did con- 
tribute 50 percent to the cost of that planning of cities and munici- 
palities, to what extent under those circumstances do you think that 
employment would be given? 

Mr. Blucher. Well, all I can do is venture a guess. 


It is my guess Ihat if Federal funds were provided for planning 
purposes that the activity in planing would increase at least five 

I think this is apparent from what has happened in Michigan 
already where a very short time ago the State legislature appro- 
priated $5,000,000, $3",000,000 of which is for the cities. Wlien 1 was 
in Michigan a week ago, and this was only 5 days after the notice 
had gone out, I think something like 600 communities had already 
made inquiries about the kind of assistance they could get. 

Mr. Lynch. How many communities indicated any other interest 
besides the question of assistance they would get ? Did they indicate 
that they had any plans of their own that they were waiting to re- 
ceive financial assistance on or did they indicate that they had no 
plans ? 

Mr. Blucher. Let me answer this by saying that one of these insti- 
tutes that we put on not long ago was a 1-day institute in Galesburg, 
111., where we had something like 90 municipal and county officials 

I would say that everyone of them was interested in doing some- 
thing. Everyone of them thought it was important that he do some- 
thing immediately; and at the same time the opinion was almost 
equally unanimous that they didn't have the money to do anything. 

Mr. Lynch. And the taxpayers didn't want their taxes raised? 

Mr. Blucher. In many cases the taxpayers didn't want their taxes 

Mr. Lynch. So they are looking to the Federal Government. 

Mr. Blucher. Well, they are looking to somebody. 

I think it is fair to say that many of these communities are looking 
to the State government and the State surpluses, but unfortunately 
there just hasn't been any State action in most of the States. 

In my own State of Illinois I think the State Post-war Planning 
Commission of which I am a member is of the opinion that there ought 
to be a State appropriation to assist the cities, and yet there cannot be 
a State appropriation without action by the legislature. 

Mr. Lynch. Well, do you think this matching should be three ways? 

Mr. Blucher. I think if you try to match three ways you will delay 
it a great deal. 

Mr. Lynch. In other words, the States will lay back with their 
surpluses and let the Federal Government do what the}'^ ought to do? 

Mr. Blucher. I think that is the case. 

Mr. Lynch. And then they will complain about the centralization 
of power in Washington. 

Mr. Blucher. I think that's right. They will complain with their 
left hand and with their right hand accept the gift. 

Mr. Lynch. We are having a subcommittee meeting this afternoon. 
Mr. Blucher is the name? 

Mr. Blucher. Yes. > 

]Mr. Lynch. Well, I won't take any further time. ' 

The Chairman. Mr. Welch? 

Mr. Welch. Mr. Blucher, in addition to the post-w^ar public works 
program has j^our organization given consideration for a plan of 
rehabilitation and reconversion of industries now producing wai 
materials ? 


Mr. Blucher. One of the reasons we want a community to do a 
community planning job is so that they can look into their industrial 

^Vllen you do a community planning job it is government and labor 
and industry that gets together, and they review the situation, and 
one of tlie things which they determine is what has hapj^ened to this 
conimunity during the war; what changes in population there have 
been, and Avhat new industries have developed; to what extent can 
these new industries be developed, to what extent can the community 
itself hj using community initiative utilize these plants for other 

We are very mucli concerned about these matters. 

]Mr. Welch. Well, shouldn't first consideration be that of assisting 
conununities to prepare plans? 

Mr. Blucher. You will i-ecall that T tried to emphasize that point. 
There are undoubtedly some who will disagree with me. The plan- 
ning of public works is the last step in this community planning pro- 
gram, and not the first step. T think that it is more important that 
we do this other kind of planning job of determining where our 
communities are and what they can be. 

That T think is the fii'st step, because if the community is going to 
lose population, certainly you don't want to plan specific improve- 
ments that won't be needed. 

Mr. Welch. Well, you say where do communities go. They all 
come here. 

INIr. Bluc HER. No : I meant what their future is. 

]Mr. Welch (continuing). Looking for public money out of the 
United States Treasury. 

Mr. Blucher. This job of community planning is not being done 
on the scale that it should be done throughout the country. 

;Mr. Welch. That is all. Mr. Chairman. 

The Chairman. Mr. O'Brien? 

JNIr. O'Brien. I would like to ask one question : 

In Illinois there is a sur])lus of about $75,000,000 in the State treas- 
ury. They are doing nothing with it. Don't you think you should 
finance before you come down here ? 

Mr. Blucher. I definitely think we should finance it, and can. 
And I would like to add that I don't think it is going to be done in 
the immediate future but I agree absolutely with you that it is a 
matter of State responsibility that should be met by the State. 

7 he CHATR^rAN. Mr. Dewey ? 

jNIr. Dewey. I have no questions, jNIr. Chairman. 

Mr. Chair:max. Thank you very much, Mr. Blucher. 

We also have ]Mr. Carl Chattersj executive director of the Municipal 
Finance Officers Association. 

Mr. Chatters, we will be glad to hear from you, sir. I am sure you 
can throw some light on this job questicm that we have been dis- 



Mr. Chatters. Mr. Chairman, I have no prepared statement be- 
cause I haven't been in my office since the committee staff asked me to 
appear here. I do have some notes which I shall be glad to use. 

The Chairman. Just use your own pleasure, sir. 

Mr. Chatters. The hrst thing I should like to mention briefly is 
the present fiscal condition of the cities and States. 

The States do have the large surpluses which we have discussed 
and at the same time they have greatly reduced their debts. 

The State debts in the aggregate are less than $3,000,000,000, so they 
are not a material factor in our national economy. 

The States have increased their surpluses and incomes because of 
the increased yield of the sales taxes, in Illinois and other States as 

The cities have reduced their debts to a point where they are not 
a serious threat to their future except in isolated areas. The cities 
in the past 4 years have reduced their debts in the aggregate about 

They have improved their tax collections to the point where de- 
linquency is not a factor at the moment. 

In 1933, for instance, the average tax delinquency, or the median 
tax delinquency in the large cities was 20.35 percent, whereas, in 1943 
that has been reduced to 4.70 percent. 

In other words, tax delinquency has been reduced from over 26 
percent to slightly under 5 percent. 

The short-term loans of the cities are low, in fact, they are the 
lowest they have been probably in a generation and perhaps longer 
than that, and that is a favorable factor, because when we went into 
the depression the thing that caused the difficulty in our cities was 
the short-term loans. 

The cities and the States have both set up reserves. 

The State reserves are in the neighborhood of $3,000,000,000, and 
probably the cities' reserves are in the neighborhood of $1,000,000,000. 

At the same time they have created reserves by paying their debts, 
so that they have other reserves. 

Mr. Dewey. Mr. Chairman. 

The Chairman. Mr. Dewey. 

Mr. Dewey. What form are those reserves in ? 

Mr. Chatters. Most of them are either in cash or the}^ are in Gov- 
ernment bonds. I would estimate from the statistics I have seen in 
individual cases that at least 75 percent of the money is invested in 
Government obligations. 

Now, on the other hand the assessed valuations of the municipalities 
have gone down. 

Strange as it may seem, when everything else has been going up the 
assessed valuation of the cities, the assessed valuation of real estate 
in the cities, by and large, has continued to decrease. 

And when we realize that the cities get their monej' from the real 
property you can see that this is quite a factor in considering their 
finance programs. 


It simpl}' means that the vahies were inflated in 1929 and that they 
have been in the process of deflation since that time. 

Now, it is true that the localities are dependent upon the States for 
their revenues, and it is necessary to look not only upon the city but also- 
to the State and the control the State has over municipal revenues. 

And another thing is this fact : 

That while the increased cost of labor and materials has been offset 
during these last few years bv the fact that municipalities have cur- 
tailed their capital outlays and curtailed community maintenance 
costs, they are going to be placed in a ver}^ serious situation when they 
can again do maintenance work. 

They are going to be stuck with the higher rates of pay and higher 
costs of gootls. and at the same time they are going to be forced to rein- 
state on their financial programs the cost of major maintenance plus, 
the cost of capital outlays, and I think none of us feel that the rates- 
of pay are going to be decreased or that the price levels are going to 
go down. 

So you will see that the costs municipalities have now plus the in- 
creased cost means that we are going to get some shocks in the commun- 
ities where the people think we are going to get back to normal as soon 
as the war is over, due to the things that must be done that have been 
neglected in the immediate past. 

Perhaps two things will need to be done if unemployment occurs. 

Certainly the States ought to give greater grants-in-aid, and per- 
haps the Federal Government ought to have responsibility for un- 
employment. I will go into that a little more fully a little bit later. 

Now, you are primarily interested in the public-works aspect. 

I agree with Mr. Blucher that plans are not far advanced, and the 
number of municipalities that have plans where they could go to work 
immediately, are relatively small. The amount is not great; it is not 
sufficient to take care of widespread unemployment if widespread un- 
employment should occur. 

The Chaiioiax. If I may interrupt there, Mr. Chatters. 

Public works as an answer to unemployment, well, it just isn't an 
answer, is it. on a wide basis ? 

Mr. Chatters. In my opinion public works cannot solve the problem 
of unemployment. It can be very helpful in a transition period in 
special communities with special problems and for limited periods 
of time, but as the sole solution of unemployment, it simply is not 
the answer, because of the cost involved. We couldn't afford to take 
care of tremendous amounts of unemployment b}^ public works alone 
because of the cost. 

The Chairman. We only have to analyze the situation in 1933 when 
we had a national indebtedness of approximately $50,000,000,000, I 
think, and we undertook the P- W. A. and the W. P. A., and so on, 
to bring up employment. 

At that time at the height of the ^Y. P. A. we only gave employ- 
ment to about 3,000.000 people, didn't we, on a subsistence wage scale? 

Mr. Chatters- At one time it ran slightly more than that. 

The Chairman. Well, approximately. 

So we recognize that that is not the answer. 

Ot the same time, sir, I agree with you, and I hope I won't be mis- 
understood about that, there should be plans for public works in the 
post-war period, and I think that it is essential that we do it. 

99579 — 44— pt. 3 7 

1 ^ 


The question of how we do it of course is a question. 

Mr. Chatters. Well, the question of timing 

Mr. Dewey (interposing). 

The Chairman. Mr. Dewey. 

Mr. Dewey I just have not heard mentioned in any the witnesses' 
testimony where it comes to public works in this period that may 
follow the cessation of the war before we can get reconversion accom- 
plished and before employment is started again, I have never heard 
any of the witnesses make any reference to this tremendous back-log 
of savings that has developed during this period of the war. 

Now, the last time I investigated it, which was during the last tax 
bill, I think my colleague on Ways and Means, Mr. Lynch, will bear 
me out, it was running somewhere from 91 billions to 95 billions of 
dollars in actual savings accounts or savings bonds, private deposits, 
leaving out corporations. 

Now, that comes pretty near to a sum that is almost equal to li/'^ 
years pre-war national income. 

Now, as it was developed, our national income at the present time — 
four-fifths of the national income at the present time falls into the 
hands of individuals whose annual income is $5,000 or less ; which must 
mean except in the very low-income group that 91 to 95 billions of 
dollars — and I presume it is much more than that now — must be 
pretty well spread. 

In other words, the people have fat to live on for a brief period, but 
I have never heard that taken into account or considered in these em- 
ployment plans that are to be put into effect immediately following j 
the cessation of the war and until normal employment can be taken up. 

Have you given consideration to. it ? 

Mr. Chatters. Mr. Dewey, I have gotten my experience in public 
offices and not as an economist and so I am not prepared to answer 
that, except to say that I think you are correct, and unless public | 
works are properly timed, they may contribute to inflation rather than 1 
prevent inflation. 

Mr. Dewey. I think though that you gentlemen who are giving such , 
careful consideration and study to the public w^orks program should j 
take into account and keep in touch a little with the savings of the I 
people. I 

Mr. Chatters. Well, I think this is true, that unless the cities spend 
their money at the proper time, they may do more harm than good. 

They ought not necessarily plan to spend their money the minute 
the war is over. It may be 6 months, 1 year, or 2 years before they 
should spend. 

Therefore the timing of the expenditure is just as important or more ! 
important than the amounts, and though public works may be com- 
paratively small in amount, that doesn't minimize their importance in 
the conversion period or in the period when we may have deflation. 

Mr. Dewey. I think the timing factor is most important. 

Mr. Chatters. The timing factor in my opinion is perhaps the 
most important of all, because the volume is relatively small, and 
therefore the timing must be proper in order to get the benefit from 
public works. 

Otherwise we will not relieve unemployment and we may create 


Now, this is true and it is one argument for planning;, that in the 
cities when master pLans are prepared, the expenditure of large 
sums of money may do more harm than good. 

Our cities are run down at their centers, and if they spend money on 
public works which will tend to aggravate that situation, we may put 
our cities back for a generation or two generations instead of putting 
them ahead as we should. 

If we develo]) the outlying areas instead of redeveloping tlie inside 
areas, then we may do more harm than good. 

Therefore, I think the first thing is a master plan around which 
cities may do their work. 

I say that as one primarily interested in financing, not necessarily 
in planning. 

If there are Federal grants or State grants for work or work relief, 
then the municipalities which have some money of their own and 
have plans, they will get something permanent, whereas, the cities 
that have no plans or no money may come out with leaf -raking. 

J^ow, some of you may think that the city of Chicago doesn't amount 
to much. I live there and I think it does amount to something. The 
Chicago Park Commission had plans and we have something to show 
for the amount of money spent in Chicago. 

One thing that interests you is the amount of money which the local 
governments may have available for public works. In my opinion that 
amount is very definitely limited by the sum of tliree or four items. 

It is not the amount of the deferred maintenance of the municipali- 
ties. The money which municipalities will spend on public works is 
made up in the aggregate of their post-war reserves, which they have 
in the form of cash, plus some increases in taxes, plus saleable loans 
tliat the people or the legislative body, or both, will authorize, plus the 
relatively small amounts now being spent for operating purposes that 
may be spent for capital outlay ; and in my opinion that is the amount 
of money that is going to be spent. 

You are going to take their reserves, you are going to take some 
very mild increase in taxation, and you are going to take the amount 
of bonds that the municipalities can sell and that the governing body 
will authorize. 

The total for all municipalities, I think, will be somewhere between 
one and one-half and three billion a year for 5 years. 

Now, that will not develop a tremendous amount of jobs. 

It would provide somewhere between 300,000 and 600,000 jobs on . 
all public works. 

And that is one of tlie reasons why timing is so important. The 
figures are for municipalities, and not for the States or the expendi- 
tures from Federal funds. 

Now, it seems to me the States ought to accept greater responsibility. 

In the first place they have the fiscal powers, and in the second place 
they have the money at the present time; and in the third place they 
have the i-esi)onsil)ility beci)use of the powers they are given under the 
State c'(jnstitution. 

In the first place States ought to share more of their revenue with 
the localities. 

The localities over a j^eriodof 40 years or more have spent a major 
portion of their money to make it possible to operate automobiles, but 
the States have taken practically all of the automobile revenues. 


In my opinion, that is the greatest fiscal injustice that has ever been 

The municipalities have the direct expense to make it possible to 
operate the automobile, either througli the construction of streets, the 
maintenance of streets, or the policing of the highways. 

It seems to me the States ought to accept greater leadership in 
planning, the expense of planning, and so on. 

Now, secondly, what might the Federal Government do now ? 

The Federal Govei'mnent ought to make as clear as possible its own 
plans for the conversion and post-war period, because the Federal 
Government by its action can upset any and all plans of the States and 
localities and, regardless of what the States and localities may plan to 
do, your action here can upset any and all plans which they may make, 
because you may make plans which may be difierent from theirs or will 
encourage other programs. 

And, therefore, if it can be clear in a general way what the Federal 
Government expects to do it will make it easier for JDoth the States and 
the localities. 

Next, I think you have to take responsibility in the communities 
which have been upset b^^ the war, either by war industry or the loca- 
tion of camps. 

That is an expense connected with the war and it is a consequence 
of war activity. 

It seems to me that the entire country would be better off if you 
would accept the responsibility now of going into those communities 
and helping them plan what they are to do when the war is over, or 
before the war is over and the activity slows up or ceases entirely. 

That is a cost of the war, it is primarily a Federal problem, it would 
cut down greatly the total expense of a program of public works or 
unemployment relief or any other program of that kind if you first 
take care of the communities which are most upset. If you do not, 
then you are going to make a program on a national scale which will 
be aimed at spending the money at the highest possible level to meet 
the difficulties in the places that are most upset, and if you should take 
care of those places which are in the greatest difficulty because of the 
war, you would cut down by nearly 50 percent, in my opinion, the 
total amount that you would need to spend after the war to get the 
whole country on its feet. 

The difficulties will be greatest in those communities upset by the 
war through either the influx of population or through the migration 
of the population to other places, and if you could take the responsi- 
bility for seeing that those communities are pi-operly taken care of, 
even if you give help in excess of what you give other places, I think it 
would be well taken. 

And I think you have the responsibility in those places, regardless 
of what you think about the res])onsibi]ity in other places. 

Mr. Dewey. I was just going to ask you to elaborate a little bit on 
the kind of help you would suggest giving. 

Mr. Chatters. I think you ought to go in there, the same as you do 
now through the Committee on Conjested Areas, which is operating 
] understand through the Bureau of the Budget. 

I believe that you should go into those communities and that you 
should try to take the initiative with the local people in working out 
their problems for the present, and for the future as well. Those- 



comiminities need to kno^Y most of all what is going to happen to 

The Chairman. Well, specifically how would you help them ? 

Mr. Chatters. Unfortunately, there is no longer, as I understand 
it, any over-all planning agency in the executive branch of the Govern- 
ment" through which that could be done, but I think it should be set 
up either in the executive branch or in the legislative branch as a 
planning agency and go on directly with the proper kind of a staff 
to advise those places. 

You need to tell them what they need to look for, and then help 
them see when industry is going to leave and when the military situa- 
t ion is going to change. 

You know those things now, or you are able to get the information, 
where the people of the communities cannot. 

You should help those people understand in advance what is go- 
ing to happen to their communities, and you ought to then help them 
survey the situation to know where the people came from, where they 
are likely to go to ; and you need to help to get rid of those people, 
get them back to where they want to go, and plan special programs 
where the need is going to be the greatest. 

The Chair:max. Well, if I may interrupt, Mr. Chatters, right there : 

A lot of these communities which you refer to are scattered over 
the country and they are going to have real problems. I can ap- 
preciate that. 

I live in a little community, normal population of 5,000. Now, due 
to shipbuilding it is around 30,000. 

The Federal Government under the provision of the Lanham Act 
passed by the Congress would help these communities. It has helped 
that particular community. It has assisted them in collecting their 
sewage, in their streets and other facilities, has even helped them in 
some instances on their j^olice and fire forces. 

Now, of course, we all recognize that when the war is over and 
the shipbuilding is finished that there is not going to be employment 
for 30,000 people in a 5,000 community. 

Now, are you suggesting the Federal Government should under- 
take to tell those 20,000 or 25,000 people that are going to leave this 
community where they should go, assist them in transportation, and 
so on ? 

Mr. Chatters. No; I am suggesting that it would be wise for the 
community to know where the}' came from and perhaps what the plans 
of those people are, and it might also be wise if that community has 
further neecls on maintenance of ways or rebuilding of its streets, 
that in those communities the public-works program should be started 
first to alleviate unemployment. 

The Chairman. Well, I am wondering if under the provisions of the 
Lanham Act if they are not going to be better off, so far as the streets 
and facilities are concerned, than tlie communities that haven't been 
helped directly by the Federal Government. 

Mr. Chatters. My answer to that is, "No"; that there were probably 
5,000 people in that town, which was probably a nice little Mississippi 
town before the war, but it is going to be a mess, and the people are 
going to find themselves living in a city which is not half as desirable 
as it was before the war. 


The Chairman. I nm in thorough sympathy with that because I 
have experienced that. 

Mr. Chatters. I don't know what community it is but they are 
going to have to operate those facilities which they won't need. You 
are going to have a plant for 30,000 people and a population of 10,000 
or maybe 15,000 and they are stuck with the operation of that plant. 

The Chairman. Well, rather than suggesting that Federal funds 
should be used for rehabilitating that community, you are suggesting 
that some agency ought to be authorized to study their problem? 

Mr. Chatters. That is what they need to know first, just what their 
problem is. 

Mr. Dewey. Mr. Chairman. 

The Chairman. Mr. Dewey. 

Mr. Dewey. In the good old days there apparently was a little more 
self -dependency than there is now. 

There isn't a town in the country that doesn't have a chamber of com- 
merce or businessmen's organization, and I should think rather than 
attempting to set up some new big agency that is centralized rather 
than being decentralized, that we might stir up these organizations, 
these chambers of commerce, and have them now start making investi 
gations for the facts that they may want to know later. 

They are the best ones to know. 

Mr. Chatters. Well, Mr. Dewey 

Mr. Welch. Mr. Chairman. 

The Chairman. Mr. Welch. 

Mr. Welch. Off the record. 

(Discussion off the record.) 

The Chairman. I am sorry that you asked that this colloquy be off 
the record, because I think it ought to be in the record. I am in accord 
with both of you. 

Mr. Keece. Mr. Chairman, Mr. Blucher referred in his testimony 
to his organization as a similar organization and possibly this applies 
in a measure to you also : 

Is not one of the purposes of those voluntary organizations to co- 
operate and encourage the municipalities to do systematic planning? 

Mr. Chatters. Yes. 

Mr. Reece. And if so why couldn't those organizations be the 
motivating force for the cities, motivating and guiding, rather than 
the Federal Government, since those comprise the representatives of 
the cities ? 

Mr. Chatters. There are several organizations of that kind that 
are interested in helping the cities and getting them the leadership 
they want, and I think that is a practical way of helping them out 
of their difficulties. 

Mr. Blucher. May I interpose there too in answer to Mr. Reece? 

The Chairman. Yes. 

Mr. Blucher. One of the things we have been doing is to hold these 
meetings throughout the United States, to which we brought the 
mayors and councilmen and city engineers and city representatives 
for the sole purpose of telling these people that it is their local respon- 
sibility, they have got to do the job, and showing them how they can 
do the job. 


That is one of our prime interests at the present time, and I just 
Avanted to tell you that I agree with you completely that that is 'a 
thing that ought to be done. 

The Chairman. All right, Mr. Chatters. 

Mr. Chatters. The other things are brief. They won't take over 
5 or 6 minutes I think. 

Thei-e is an honest question of course as to how much money the 
States and municipalities could spend for planning if they actually 
had the money. 

That is, can they obtain the engineering services and the services of 
expert planners if the money is available ? 

If there is money to be advanced for planning it ought to be clear 
whether that money can be spent properly, whether the people are 
available to do the planning. 

It seems to me the Federal Government should not do a tremendous 
amount of planning but that it should do the work of stimulating 

I agree with Mr. Dewey that the planning ought to be done in the 
community and not try to build up another large Government agency. 

It ought to be an agency that would stimulate the planning by 
telling them what facts to get and how to interpret them. 

That seems to me ought to be the part of the Federal Government 
in the planning. 

The Chairman. Are you familiar with the work that is being done 
bv the Committee for Economic Development? 

i\Ir. Chatters. The office of the Director of the Committee for Eco- 
nomic Planning is right next to me. 

The Chairman. Don't you think they are doing a good job? 

Mr. Chatters. I certainly do. The industrialists are going to know 
a good deal more than ever before about conversion of industry. 

Xow, you talked about the financing of improvements. I have said 
for the last 10 years that it does little good to plan unless you know 
where the money is coming from. If it is for unemployment relief, 
perhaps the Federal Government has a responsibility there, but beyond 
that there is one thing the Federal Government can do, which it has 
done before, which will be veiT helpful, under the program in which 
the R. F. C. and P. W. A. cooperated. 

Sums were loaned to the communities so that they financed their 
construction with their own funds. 

Self-respecting communities that are not able to borrow for one rea- 
son or another can get the money through an agency of that kind. 

One of the things that could properly be provided for by the Fed- 
eral Government would be another program of loans on a sound basis, 
as sound as it was through R. F. C. and P. W. A. 

The history of those loans is a good record. Most of them have 
been paid back. Most of the bonds have been sold at a large profit, 
and there are comparatively few bonds left in the hands of the R. F. C. 

The small municipalities which cannot get into the public market 
can finance their needs this way. 

I know tlu'ough being a member of the Board of Review of the 
P. W. A. that the loans were soundly made, and a thing of that kind 
would be excellent to have ajrain. 


The smaller places do need help and they need leadership, and I say 
again, that I do not believe the Federal Government has responsibility 
for local public works except as it is related to unemployment. 

Unemployment is a national problem, not a local problem. It be- 
comes more and more a national problem. The unemployment grow- 
ing out of the war seems to me a national problem. 

To that extent the Federal Government has a responsibility in the 
localities, but I feel that it has no responsibility for public works as 
such unless they are related to unemployment. 

What we need more than anything else is some leadership, and, unless 
the Federal program would develop the leadership, then there would 
be no use in putting out the money. 

The Chairman. Thank you for your statement. 

Any further questions? 

Mr." Folsom 

Mr. Fish. Mr. Chairman. 

The Chairiman. Mr. Fish. 

Mr. Fish. How do you propose that this committee get in touch 
with the local committee or the city committee or county committee 
that is interested in public works and their efforts to provide em- 
ployment ? 

jVir. Chatters. Were you addressing that to me or to Mr. Folsom? 

The Chairman. It is Mr. Fish. 

Mr. Chatpers. I heard you mention Mr. Folsom. I thought you 
were addressing that to him. 

Mr. Fish. No. 

Mr. Chatters. I think you need a small Federal agency which will 
stimulate planning. The bulk of the work should be done through 
State planning agencies and local planning agencies, with the stim- 
ulation and pressure coming from here. 

That would be my suggestion. 

The Chairman. Mr. Folsom. 

Mr. Folsom. As far as the Federal Government is concerned, do 
you agree v.-ith Mr. Blucher that it ought to be on a 50-50 basis right 
through the cities, without going through the State? 

Mr. Chatters. I think largely you have to go through the States, 

I would make an exception to that. In the communities directly 
affected by the war I think it might be preferable to deal directly 
with the localities or permit them to file special requests tlirough the 
State ])lanning agencies. However, for the rank and file I would 
deal through the States. 

Mr. FoLsoM. With reference to the special planning agency, do you 
think that it is time to do that now or would you deal later with that? 

Mr. Chatters. I Ijelieve most of the States have a planning agency, 

Mr. Folsom. Well, have most of the States got a planning commis- 
sion set up now to do the things you suggest? 

Mr. Chatters. A large number of them have. 

Mr. Folsom. Well, isn't that the better approach rather than have 
them come here ? 

Mr. Chatters. If the Federal Government has an interest in em- 
ployment or unem])loyment then I think it needs to stimulate the ac- 
tivity, and that should be its primary job, except in communities 
directly affected by the war, and I think there the Federal Govern- 
ment has the primary responsibility. 



Mr. FoLsOM. I know it is true in New York State they have a post- 
war phmnino; commission there. They are actually working with the 
Jocal communities. 

Why can't they do a lot of stimulatino- themselves? 

Mr. Chatters. They can, and they should. 

Mr. FoLj^OM. There may be other connnittees working on the same 

Mr. Chatters, Yes. 

Where there is a strong planning agency in the State I think things 
should be focused through the State planning agency, with the pos- 
sible exception of communities which are war casualties. 

Mr. FoLsoM. But you think the matching 50-50 would stimulate a 
great deal of planning? 

Mr. Chatters. Well, I cannot say that I api:)rove that formula more 
than any others, because if it works in half the places it doesn't work 
in tlie other half. And I believe there are places where the Govern- 
ment ought to pay the entire cost. 

You take Vallejo and other places in California. The Federal 
Government has considerable responsibility in places like that be- 
cause the people who lived in those communities before the war were 
not interested in having their cities grow from 20.000 to 100,000. 
They would rather see it back like it was before the war. 

Mr. FoLso^r. But you would suggest a 50-50 allocation? 

Mr. Chatters. I would much ])refer to see it flexible. If you make 
it rigid it misfits more than it fits. It can be justified as a compromise, 
and that is all. 

Mr. FoLso^r. Well, what do you do with States that already have a 
matching proposition, like Michigan and New York? 

Mr. Chatters. There your only hope is to work it out through the 
State i)lanning commission to see whether or not you need to put up 

The Chairman. Thank you very much, sir. 

The committee will stand adjourned until tomorrow morning at 10 
Avhen we meet with the Post -War Committee of the Senate in the 
caucus room, Senate Office Building. 

(Whereupon, at 12 : 10 p. m., the committee adjourned.) 


Mr. Fennelly. I welcome the opportunity to present to the House 
Committee on Post-war Economic Policy and Planning the views of 
the Committee for Economic Development on the problems which 
small business in the United States will face after the end of the war. 
As you doubtless realize, the C. E. D. is concentrating its attention 
entirely on the post-war aspects of such problems and has avoided 
entering into consideration of more immediate problems which have 
arisen in coimection with the wartime emergency. 

Since its inception, the C. E. D. has devoted particular attention 
to small business problems and, at an early meeting, the board of 
trustees expressed its conviction that the maintenance of conditions 
favorable to the organization and growth of small, independent en- 
terprise is essential to the preservation of a free society after the war. 


As a result of this conviction, tlic C. E. D. established last year a 
national committee on the special problems of small business, consist- 
ing of representative small businessmen and under the chairmanship 
of Mr. Lou Holland, president of the Holland Engraving Co., of 
Kansas City, and former chairman of the Smaller War Plants Corpora- 
tion. This committee has been meeting regularly in an earnest study 
of the problems of small business and some months ago published a 
statement entitled "Small Business After the War," which set forth 
a proposed program of action. 

The core of this program is expressed in the following quotation 
from this statement : 

No solution of the problems of small business can be evolved within a brief 
period of time, or by the activities of any one group. These problems do not 
lend themselves to quick and ingenious answers, nor can they be solved merely 
by the enactment of remedial or punitive legislation. 

What is called for is a concerted attack on the special problems of small 
business over a long period of time by many different private groups and by 
various agencies of Federal, State, and local Governments. Concurrent pro- 
grams of national action and of action by each separate community will be 

As an integral part of its proposals, the committee urged the forma- 
tion of community committees on the special problems of small busi- 
ness in each of the 2,000 separate communities in which the C. E. D. 
is now operating. 

While it recognized the importance of national action on the prob- 
lems of small business, the committee emphasized the value and impor- 
tance of decentralized and local action in each community to help small 
business help itself. We believe that such a program is much more 
consistent with the American spirit of individual enterprise than one 
which would propose to solve the problems of small business by means 
of governmental subsidies. 

In its Nation-wide efforts to stimulate American businessmen to 
prepare bold and intelligent plans for the post-war period, the C. E. D. 
is concentrating its attention very largely upon the problems of the 
2,000.000 medium-sized and small-business employers. It recognizes 
that the less than 3,500 business establishments which employ 1,000 or 
more workers each are usually capable of doing their own post-war 
planning without outside assistance. 

The committee is now engaged in preparing a handbook for the use 
of community C. E. D. committees to guide them in coming to grips 
with the special problems of small business. This handbook shortly 
to be issued will emphasize the following areas in which community 
action can help small business help itself. 

1. Aids to management, information needed to guide small business 
in general business decisions and planning. 

2. Technical information, guidance, and assistance on research, new 
production methods, and so forth. 

3. Financial and credit assistance, both as to short-term credit and 
long-term capital needs. 

4. Opportunities for new business, particularly for veterans and war 
workers seeking to go into business for themselves. 

5. Eemoval of local obstacles to the birth and growth of small enter- 


In a statement issued last fall entitled "Post-war Employment and 
the Settlement of Terminated War Contracts," the research committee 
of the C E. D. iii'oed the importance of giving special consideration to 
small business in the speedy and equitable settlement of war contracts. 
In this connection- it recommended that mandatory loans against war- 
contract claims be made available directly to small subcontractors as 
well as to prime contractors. 

The C. E. D. research committee will shortly issue a statement in 
connection with Dr. A. D. H. Kaplan's research study on the subject 
of the liquidation of war production, contract termination, disposal of 
Government surpluses, war plants, and equipment. In this statement 
the committee will urge that contract-termination policies give special 
consideration to the problems of small business, particularly during 
the period of partial reconversion. To the extent compatible with 
military needs during such a period, the reopening of civilian produc- 
tion should be timed to coincide with contract cancelations so that small 
manufacturers will not be left stranded without any war orders and 
still unable to resume the production of peacetime goods. In connec- 
tion with surplus disposal, the statement will urge that goods be made 
available to consumers and other ultimate users on the widest possible 
scale with equal opportunity and bidding, and goods offered in quanti- 
ties within the reach of small purchasers. In connection with the dis- 
posal of Government plants, the statement will urge that the disposal 
policy be aimed at a wider disposition of facilities, and provide suffi- 
ciently liberal terms to give small business the opportunity to 

In the pamphlet entitled "Small Business After the War," the 
C. E. D. committee on the special problems of small business made the 
following statement : 

If, as now seems likely, the first phase of reconversion involves a partial re- 
opening of civilian industry, it is most important that small industrial units be 
accorded fair treatment in the allocation of materials and the establishment of 
production quotas. The conversion of industry to war production involved 
severe handicaps for many small businesses Such handicaps should be mini- 
mized during the peroid of reconversion. 

If the smaller units can reconvert more rapidly than the larger establishments, 
the small businesses should not be required to wait on the time schedules of the 
large companies. Moreover, limited production quotas should not be established 
so as to place the smaller members of an industry on an unprofitable operating 
basis, while permitting the larger concerns to operate at a profit. 

This same pamphlet stated a belief that the antitrust laws of the 
United States should be strictly enforced, and recommended that con- 
tinuing studies be undertaken by governmental and private agencies 
of monopolistic business practices, cartels, patents, trade barriers, 
building codes, and all governmental, business, and labor restrictions 
to the birth and growth of small enterprise. 

I hope the above summary of our program and of our recommenda- 
tions to date provides sufficient evidence that the C. E. D. recognizes 
fully the importance of the problems of small business and is doing 
its utmost to assist in the solution of these problems in a manner which 
will promote a dynamic and expending economy under a system of 
private enterprise. As stated above, we believe that the best solu- 
tion lies in enabling small businessmen to help themselves rather than 
one which would make them increasingly dependent upon hand-outs 
from the Government. If this is to be accomplished, we are convinced 


small business, as well as large, must have a favorable economic cli- 
mate in which to operate when the war is over. Small business has 
been particularly hampered by existing tax policies and by many war- 
time regulations and tlie enormous weight of paper work induced 
by a central system of control. 

From conversations with many businessmen from all j^arts of the 
country, I can assure you that small Inisinessmen are vastly more con- 
cerned about the removal of such regulations when the war is over and 
in a revision of Federal tax policies which will provide adeqate in- 
centives for risk capital than they are in any other forms of assistance 
which the Federal Government might provide. I can also assure you 
of my conviction that such a recasting of the Federal tax system after 
the war is vital if we are genuinely interested in the health of small 
business and in the preservation of a free society. 

We in the C. E. D. are urging businessmen both large and small 
to make bold and intelligent plans for the post-war period without 
waiting for the necessary changes in taxation to be effected. We tell 
them that if they wait until all such national policy problems are 
settled, most of them never will be settled. We urge them to take 
action now in the faith that the creation of a favorable economic cli- 
mate for private enterprise after the war can and will be achieved. 
I can assure you, however, that the sooner assurances can be given 
on such subjects as taxation, the sooner will it be possible for the 
country to move ahead into an era of expansion which we believe 
will be essential to solve the post-w^ar problems of employment and 
all specific problems related thereto. 

In addition to the committee on the special problems of small busi- 
ness, the C. E, D. has established a financial advisory committee, 
in conjunction with the American Bankers Association and the In- 
vestment Bankers Association, to advise with it on best ways and 
means of providing financial assistance to small business in the post- 
war period. Through this committee, we have been advised of the 
program of the American Bankers Association for providing adequate 
credit for small business throughout the country. We believe that 
this program is sound and constructive and offers great promise for 
small enterprise in the years that lie ahead. 

Through C. E. D. community committees, we are urging the form- 
ation in every community of a central group to provide assistance 
to local small business in obtaining their credit and capital require- 
ments. We are convinced that the heart of the small businessman's 
financial problems is securing adequate equity capital, and that the 
greatest hope for a solution of this problem lies in community action. 
The committee recognizes, however, that the ability of small busi- 
ness to obtain credit and capital will depend largely upon the broad 
question of a satisfactory climate for private entei'prise, and that 
unless the Federal-tax structure is revised after the war so as to en- 
courage the investment of risk capital, private efforts to finance small 
enterprise either on a local or a national basis are likely to prove un- 
availing. While the C. E. D. has as reached no definitive conclu- 
sions on the subject of financing of small business after the war, 
it does believe that every opportunity should be given to provide 
such financing needs through private sources, and that resort to gov- 
ernmental financing of small business should not be had unless and 
until it can be proved that private agencies cannot do the job. 


Finally, I should like to express my own personal conviction that 
adequate financing will be available from private sources provided 
only that business enterprise is given a favorable economic climate 
in which to operate. 

As an example of what I mean, I shoidd like to cite from my own 
personal business experiences. For many years prior to my coming 
to ^^'ashino•ton. at the time of Pearl Harbor, I served as an invest- 
ment banker. As yoti dotibtless realize, the investment -banking busi- 
ness was neither a very popular nor profitable profession during the 
whole decade after 1929. At best it is a highly risky business but, 
tinder the tax laws of recent years, it has been impossible for the 
jjrofits of 1 year to offset the losses of another. As a result of such 
taxation and of losses incurred, the amount of capital in the invest- 
ment-banking business suffered a severe decline from 1929 to 1940. 
J could cite you many specific instances of individuals who withdrew 
their money from this business because the tax laws made it a game 
of "heads you win, tails I lose."". 

As a result of these developments, T have recently heard fears ex- 
pressed that the capital remaining in the business will not prove ade- 
quate to handle the volume of financing which will be required for an 
expanding economy in the post-war period. I can assure 3^011 that 
this will not be the case if there is a genuine demand for such capital 
expansion and pi'ovided tax laws are revised so as to make it once 
more attractive for venture capital to invest once more in what is 
essentially risk enterprise. In speaking of the investment business, 
I hope you will realize that 1 am talking about small business as 
well as large. There are many hundreds of small investment dealers 
throughout this country with capital resources of $50,000 and less, 
as well as a small number of itationally known investment firms with 
large resources. From my personal knowledge of this business, I can 
assure you there is ample capital available to enter it and that it will 
be readily forthcoming provided only that opportunities exist for 
profitable operations and that taxation policies are such as to justify 
an individual to take the risks inherent in the business. Although I 
cannot speak with the same intimate knowledge, I strongly suspect 
that the same situation prevails in businesses of all kinds. 

In conclusion I should like to emphasize my own personal convic- 
tion that it is time we all make up our minds whether or not we really 
wish to preserve a system of private enterprise in the United States 
after the war. 

If we do, we must recognize that we cannot ride two horses moving 
in opposite directions. We cannot merely give lip service to a sys- 
tem of free enterprit;e and at the same time advocate policies which 
make impossible the proper functioning of such a system and promote 
the development of an entirely different kind of society. 

Note: See appendix, exhibit No. 14, for H. R. 5125, bill introduced by Mr. 
t Colmer to provide for disposal of surplus Government property and plants. 

600 post-war economic policy and planning 

Exhibit No, 14 

[H. R. 5125, 78th Cong., 2d sess.] 

A BILL To provide for the disposal of surplus Government property and plants, and for 

otlier purposes 

Be it enacted by the Senate and House of Representatives of the United States 
of America in Congress assembled, 


Section 1. The Congress herebj^ declares that the objectives of this Act are to 
facilitate and regulate the orderly disposal of surplus property so as — 

(a) to assure the most effective use of such property for the purposes of 
war and national defense ; 

(b) to facilitate the transition of enterprises from wartime to peacetime 
production and of individuals from wartime to peacetime employment ; 

(c) to promote production, employment of labor, and utilization of the 
productive capacity, and the natural and agricultural resources of the 
country ; 

(d) to avoid dislocations of the domestic economy and of international 
economic relations ; 

(e) to discourage monopolistic practices, preserve and strengthen tlie com- 
petitive position of small business ; 

(f ) to foster the wide distribution of surplus commodities to consumers at 
fair prices ; 

(g) to effect broad and equitable distribution of surplus property ; and 
(h) to realize the highest obtainable return for the Government consistent 

with the maintenance and encouragement of a healthy competitive economy. 


Sec. £•. As used in this Act — 

(a) The term "Government agency" means any executive department, board, 
bureau, independent commission, or other agency in the executive branch of the 
Federal Government, and any corporation wholly owned and controlled by the 
United States. 

(b) The term "owning agency" means a Government agency having control 
of property at or before the time when it is determined to be surplus to the 
needs and responsibilities of that agency. 

(c) The term "disposal agency" means any Government agency designated 
imder this Act to handle disposition of one or more classes of surplus property. 

(d) The term "property" means any interest in property, real or personal, 
owned by the United States or any Government agency, including, but not limited 
to plants, facilities, equipment, machinery, accessories, parts, assemblies, prod- 
ucts, commodities, materials, and supplies of all kinds, whether new or used, 
and wherever located. 

(e) The term "sui'plus proi)erty" means any property which has been de- 
termined to be surplus to the needs and responsibilities of the owning agencies 
in accordance with section 7 of this Act. 

(f) The term "contractor inventoi-y" means (1) any property related to a 
terminated contract of any type with a Government agency or to a subcontract 
thereunder (except any machinery or equipment subject to a separate contract 
or contract article specifically governing its use or disposition) ; and (2) any 
property acquired under a cost-plus-a-fixed-fee contract and in excess of the 
amounts needed to complete performance thereunder; and (3) any projjerty 
which the Government is obligated to take over under any type of contract as a 
result of any change in the specifications or plans thereunder. 

(g) The term "'care and handling" includes repairing, converting, rehabilitat- 
ing, operating, maintaining, preserving, protecting, insuring, storing, packing, 
handling, and transporting. 

(h) The term "option" means any contractural right to retain or acquire any 
property at a price and upon terms prescribed or determined by the contract. 

(i) The term "person" means any individual, corporation, partnership, firm, 
association, trust, estate, or other entity. 

(j) The term "Administrator" means the Surplus Property Administrator. 



Sec. 3. (a) There is hereby established the Surplus Property Administration 
which shall be headed by a Surplus Property Administrator. The Administrator 
shall be appointed by the President by and with the consent of the Senate, shall 
receive compensation at the rate of $12,000 per year, and shall serve for a term 
of two years. 

(b) The Administrator may, within the limits of funds which may be made 
available, employ and fix the compensation of necessary personnel without regard 
to the provisions of the civil-service laws and the Classification Act of 1923 and 
make expenditures for supplies, facilities, and services necessary for the per- 
formance (if his functions under this Act. The Administrator shall perform the 
duties imposed upon him through the personnel and facilities of the established 
Government agencies so far as consistent with his duty to insure uniform and 
efficient administration of the provisions of this Act. 

(c) The Administrator shall have general supervision and direction over (1) 
the care and handling and disposition of surplus property and (2) The transfer 
of surplus property between Government agencies. 


Sec. 4. There is hereby created a Surplus Property Advisory Board with which 
the Administrator shall advise and consult. The Board shall be composed of the 
Administrator, who shall act as its chairman, and of the Secretary of State, the 
Secretary of the Treasury, the Secretary of War, the Secretary of the Navy, the 
Attorney General, the Secretary of Commerce, the Secretary of the Interior, 
the Chairman of the Board of Directors of Smaller War Plants Corporation, the 
Chairman of the United States Maritime Commission, the Chairman of the War 
Production Board, the Director of the Bureau of the Budget, the Administrator 
of the War Food Administration, the Administrator of the Federal Works Agency, 
the Chairman of the Civil Aeronautics Board, and the Administrator of the For- 
eign Economic Administration, or any alternate or representative designated by 
any of them. 


Sec. 5. (a) To assist the Congress in appraising the administration of this Act 
and in developing such amendments or related legislation as may be necessary 
to accomplish the objectives of the Act, the appropriate committees of the Senate 
and the House of Representatives shall study the reports and information sub- 
mitted to the Congress imder this Act and shall otherwise maintain continuous 
surveillance of the oi>erations of the Government agencies under the Act. 

(b) Within three months after the enactment of this Act, and thereafter in 
January, April, July, and October of each year, the Administrator shall submit 
to the Senate and House of Representatives a quarterly progress report on the 
exercise of his authority and discretion under this Act, the status of surplus 
property disposition, and such other pertinent information on the administra- 
tion of the Act as will enable the Congress to evaluate its administration and the 
need for amendments and related legislation. 

(c) The Administrator shall submit to the Senate and House of Representatives 
copies of the regulations prescribed by him from time to time under this Act 
within thirty days after the effective date of such regulation. 


Sec. 6. (a) The Administrator shall formulate as rapidly as possible detailed 
plans — 

(1) for the care and handling, and disposition of surplus property in 
accordance with this Act; 

(2) for converting to civilian production by private industry as rapidly 
as war needs and conditions i^ermit any Government-owned plants which 
are not needed for national and are capable of use for civilian 
production ; and 

(3) for facilitating the most economical use and disposition of Govern- 
ment-owned plants which are not needed for national defense but are not 
capable of use for civilian production. 

(b) The Administrator shall make such studies as he deems necessarv for the 
formulation of such plans or shall cause such studies to be made by other Gov- 
ernment agencies. 



Sec. 7. (a) Each owning agency shall have the duty and responsibility con- 
tinuously to survey the property in its control and to determine which of such 
property is surplus to its needs and responsibilities. For the duration of hostili- 
ties in the present war, such determination shall be the exclusive province of the 
owning agencies, but thereafter the Administrator shall have power to require 
such a determination upon a finding by him that any property is surplus to tho 
needs and responsibilities of an owning agency. 

(b) Each owning agency shall promptly report to the appropriate disposal 
agency all surplus property in its control which the owning agency does not 
dispose of under section 8. 


Sec. 8. (a) Any owning agency may dispose of any iiroperty for the purpose 
of war production or authorize any contractor with such agency or subcon- 
tractor thereunder to retain or dispose of any contractor inventories for the 
purpose of war production, subject only to the regulations of the Administrator 
with respect to price policies. 

(b) Subject to subsection (c) of this .section, any owning agency may 

(1) any property which is damaged or worn beyond economical repair; 

(2) any waste, salvage, scrap, or other similar items; 

(3) any products of industrial, research, agricultural, or livestock opera- 
tions, or of any public works construction or maintenance ijroject, carried 
on by such agency ; 

(4) any contractor inventory in its control; and 

(5) any other class or type of surplus property designated by the Admin- 

(c) Whenever he deems such actions necessary to effectuate the objectives 
and policies of this Act, the Administrator, by regulations, shall restrict the 
authority of any owning agency to dispose of any class of surplus property luider 
subsection (b) of this section. 


Sec. 9. (a) The Administrator, by regulations, shall designate one or more 
Government agencies to act as disposal agencies under this Act and shall prescribe 
the class or classes of surplus property to be handled by each such agency : 
Provided, however. That the United States Maritime Commission shall be the sole 
disposal agency for merchant vessels or vessels capable of conversion to merchant 
use, and that such vessels shall be disposed of in accordance with the provisions 
of the Merchant Marine Act. 1930, as amended, and other laws authorizing the 
sale of such vessels. 

(b) When any surplus property is reported to it under subsection (b) of section 
7, the disposal agency shall have re.sponsibility and authority for the disposition 
of such property, and for the care and handling of such property pending its 
disposition. Where any disposal agency is not prepared, at the time of its desig-v 
nation under this Act, to undertake the care and handling of such surplus prop- 
erty, the Administrator may postpone the responsibility of the agency to assume its 
duty for care and handling for such period as he deems necessary to ijermit its 
preparation therefor, but the owning agency shall be reimbursed, pursuant to 
subsection (b) of section 17. for its expenses for the care and handling of such 
surplus property during such period. 

(c) The Administrator, by regulations, shall prescribe policies, standards, 
methods, and procedures to govei-n the exercise by any disposal agency of its 
authority under subsection (b) of this section. 


Sec. 10. (a) The Administrator shall establish procedures to facilitate the 
transfer to each Government agency, for the performance of its functions, of 
surplus property of other Government agencies. Each Government agency shall 
make the fullest practicable use of surplus property in order to avoid unnecessary 
commercial purchases. 


(b) The disposal agency responsible for any such property shall transfer it to 
the agency acquiring it at the fair value of the property as fixed by the disposal 
agency, under regulations of the Administrator, unless transfer without reim- 
bursement or transfer of funds is otherwise authorized by law. 


Skc. 11. (a) Wiierever any C4overnment agency is authorized to dispose of 
property under this Act, then, notwithstanding the provisions of any other law 
but subject to the provisions of this Act, the agency may dispose of such property 
by sale, exchange, lease. Transfer, or other disposition, for cash, credit, other 
property, or otherwise, with or without warranty, and upon such other terms and 
conditions, as the agency deems proper. 

(b) Whenever the Goverunient agency authorized to dispose of any property 
finds that it has no commercial value or that the cost of its iiandling and sale 
would exceed the estimated proceeds, the agency may donate such property to 
any agency or institution supported by the Federal Government or any State or 
local government, or to any nonprofit educational or charitable organization, or, 
if that is not feasible, shall destroy or otherwise dispose of such property. 

(c) The Administrator, by regulations, shall prescribe such policies governing 
prices and other terms and conditions of dispositions under the authority of sub- 
sections (a) and (b) of this section, as he deems necessary to effectuate the 
objectives and policies of this Act. 

(d) A deed, bill of sale, lease, or other instrument executed by or on behalf 
of any Government agency purporting to transfer title or any other interest in 
property under this Act shall be conclusive evidence of compliance with the pro- 
visions of this Act insofar as title or other interest of any bona fide purchasers for 
value is concerned. 


Sec. 12. In formulating regulations to govern the care and handling and dis- 
position of surplus property under this Act. the Administrator shall be guided by 
the fibjectives stated in section 1 of this Act. and shall give effect to the following 
policies to the extent feasible, and in the public interest : 

(a.) To facilitate transfers of surplus property of one Government agency to 
other Government agencies for their use. 

(b) To afford public, governmental, educational, charitable, and eleemosynary 
institutions and cooperative organizations an opportunity to fulfill their legitijnate 

(c) To afford returning veterans an opportunity to establish themselves as 
proprietors of agricultural and business enterprises. 

(dl To afford smaller business concerns and agricultural enterprises generally 
an opportunity to acquire surplus property on equal terms with larger competitors ; 
to prescribe regulations and issue directives necessary to provide as far as prac- 
ticable for uniform and wide public notice concerning surplus property available 
for sale and for adequate time intervals between notice and sale so that all 
interested purchasers shall have a fair opportunity to buy ; to utilize commercial 
channels of distribution to the extent consistent with efficient and economic distri- 
bution, and to discourage sales to speculators; to collaborate with Smaller War 
Plants Corporation and to employ other appropriate means to give effect to this 

(e) To afford former owners of surplus real property acquired by the Govern- 
ment by the exercise of its war powers an opportunity to reacquire such property. 

(f) To encourage mutually beneficial trade i-elations with foreign nations and 
to develop foreign markets. 

(g) To dispose of surplus property as promptly as feasible without fostering 
monopoly or restraint of trade, or unduly disturbing the economy, or encouraging 
hoarding of .such property: and to facilitate prompt redistribution of such prop- 
erty to consumers. 

(hi To realize the highest obtainable return for the Government from such 
surplus property, consistent with the policies and objectives set forth in this Act. 


Seo. 13. Nothing in this Act .shall impair, amend, or modify the antitrust laws 
or limit or prevent their application to persons why buy or otherwise acquire 
property under the provisions of this Act. Upon the request of the Attorney 
99579 — 44— pt. .3 8 


General the Adiuiuistratoi- or any other GovernDient agency shall furnish or 
cause to be furnished to the Attorney General such inf<n-mation as the Adminis- 
trator or any such agency may possess which the Attorney General determines to 
be pertinent to the application of the antitrust laws to the disposition of surplus 
property under the provisions of this Act. As used in tiiis section, the tei'm 
"antitrust laws" includes the Act of July 2, 1890 (ch. 26, Stat. 209), as amended; 
the Act of October 15, 1914 (ch. 323, 38 Stat. 730), as amended; the Federal 
Trade Commission Act; and the Act of August 27. 1894 (ch. 349, sec. 73, 74, 
28 Stat. 570) , as amended. 

Sec. 14. ( a ) No Government agency shall dispose of any surplus Government- 
owned plant for the production of synthetic rubber, or aluminum, which originally 
cost the Government $5,000,000 or more, except in accordance with this section 
or pursuant to an option therefor. 

(b) The Administrator may authorize any disposal agency to lease any such 
surplus plant for a term of not more than five years. 

(c) The Administrator shall prepare and submit to Congress a report as to 
each class of such property — 

(1) describing the number, cost, and location of such surplus plants and 
setting forth other descriptive information relative to the use and potential 
use thereof ; 

(2) outlining the economic problems that may be created by the dis- 
position thereof; 

(8) setting forth a plan or program for the care and handling, disposition, 
and use thereof consistent with the policies and ob.iectives of this Act ; and 

(4) describing any steps already taken with respect to the care and 
handling, disposition, and use of the property, including any contracts 
relating thereto. 

The Administrator shall request Government agencies to submit information 
and suggestions for use in the preparation of such reports and shall encourage 
States, political subdivisions thereof, and private persons to submit such infor- 
mation and suggestions, and he shall submit to the Congress, together with each 
such report, copies or summaries of such information and suggestions. After six 
months from the submission of a report hereunder, unless the Congress provides 
otherwise by law, the Administrator may authorize the appropriate disposal agen- 
cies to dispose of such property in accordance with the plan or program proposed 
in the report to Congress. 

(d) The Administrator may authorize any disposal agency to dispose of any 
materials or equipment related to any surplus plant covered by subsection (a) 
of this section, if such materials and equipment are not necessary for the opera- 
tion of the plant in the manner for which it is designed. 

(e) This section shall not apply to any Government-owned equipment, struc- 
ture, or other property operated as as integral part of a privately owned plant 
and not capable of economic operation as a separate and independent unit. 


Sec. 15. The Administrator shall prescribe regulations to effectuate the pro- 
visions of this Act. Each Government agency shall carry out such regulations 
of the Administrator expeditiously, and shall issue such regulations with respect 
to its operations and procedures as may be necessary for that purpose. Any 
Government agency may issue such further regulations not inconsistent with the 
regulations of the Administrator as it deems necessary and desirable to carry 
out the provisions of this Act. The regulations prescribed under this Act shall 
be published in the Federal Register. 


SEC.lf?. (a) Each Government agency shall submit to the Administrator (1) 
such information and reports with respect to surplus property in its control, in 
such form and at such times as the Administrator may direct; and (2) informa- 
tion and reports with respect to other property in its control, to such extent, and 
in such form as the agency deems consistent with national security. 

(b) Any Government agency may execute such documents for the transfer of 
title or other interest in property or take such other action as it deems necessary 
or proper to transfer or dispose of surplus property or otherwise to carry out 
the provisions of this Act. and shall do so to the extent required by the regula- 
tions of the Administrator. 


(oi Where any property is disposed of iu accordance with this Act aud any 
regulations prescribed under this Act, no officer or employee of the Government 
shall (1) be liable with respect to such disposition except for his own fraud or 
(2) be accountable for the collection of any purchase price which is determined 
to be uncollectible by the agency responsible therefor. 

(d) Any interested Government agency may take such action for the care and 
handling of property subject to disposition under this Act, and for completion 
of any semifabricated property, as it deems necessary or desirable to effectuate 
the objectives and policies of this Act. 

(e) Each disposal agency shall maintain in each of its disposal offices such 
records of its inventories of surplus property and of each disposal transaction 
negotiated by that office as the Administrator may prescribe. The information 
in such records shall be available at all reasonable times for public inspection. 

(f) Nothing iu this Act shall be deemed to impair or modify any contract or 
any term or provision of any contract without the consent of the contractor, if 
the contract or the term or provision thereof is otherwise valid. 


Skc. 17. (a) All proceeds from any transfer or disposition of property under 
this Act shall be deposited and covered into the Treasury as miscellaneous 
receipts, except as provided in subsections (b), (c), (d), and (e) of this section. 

(b) From the proceeds of such transfers or dispositions, the agency may deduct 
all expenses incurred for the case and handling, completion, and transfers or 
dispositions of such property under this xict, and may reimburse the fund or 
appropriation bearing such expenses, or the corresponding fund or appropriation 
currently available at the time of reimbursement. 

(c) Where the property transferred or disposed of was acquired by the use of 
funds either not appropriated from the general fund of the Treasury or appro- 
priated from the general fund of the Treasury but by law reimbursable from 
assessment, tax, or other revenue or receipts, then upon the request of the 
interested agency the proceeds of the disposition or transfer remaining after any 
deductions under subsection (b) of this section shall be credited to the reim- 
bursable fund or appropriation or paid to the owning agency. 

(d) To the extent authorized by the Administrator, any Government agency 
disposing of property under this Act (1) may deposit, in a special account 
with the Treasurer of the United States, such amount of the proceeds of such 
dispositions as it deems necessary to permit appropriate refunds to purchasers 
when any disposition is rescinded or does not become final, or payments for 
breach of any warranty, and (2) may withdraw therefrom amounts so to be 
refunded or paid, without regard to the origin of the funds withdrawn. 

(e) Where a contract or subcontract authorizes the proceeds of any sale of 
property in the custody of the contractor or subcontractor to be credited to the 
price or cost of the work covered by such contract or subcontract, the proceeds 
of any such sale shall be credited in accordance with the contract or subcontract 
and shall not be subject to subsection (a) of this section. 


Sec. 18. (a) Any Government agency is authorized to use for the disposition 
of property under this Act and for its completion, care, and handling, pending 
such disposition, any funds heretofore or hereafter appropriated, allocated, or 
available to it for such purposes or for the purpose of production or procure- 
ment of such property. 

(b) Any Gi)Vornnient agency is authorized to use in payment for the transfer 
to it of any surplus property imder this Act any funds heretofore or hereafter 
appropriated, allocated, or available to it for the acquisition of property of the 
same kind. 

(c) There are authorized to be appropriated such sums as may be necessary 
or approiiriate for administering the provisions of this Act. 


Sec. 19. (a.) The Administrator may delegate any authority and discretion 
conferred upon him by this Act to any Deputy Administrator, and may delegate 
such authority and discretion upon such terms and conditions as he may pre- 
scribe, to the head of any Government agency to the extent necessary to the 
handling and solution of problems peculiar to that agency. 


(b) The tie;ul of any Government agency may delegate, and autliorize succes- 
sive redelegations of, any authority and discretion conferred upon him or his 
agency by or pursuant to this Act to any officer, agent, or employee of such 
agency or, with the approval of the Administrator, to any other Government 

(c) Any two or more Government agencies may exercise jointly any authority 
and discretion conferred upon each of them individually by or pursuant to 
this Act. 


Sec. 20. All policies and procedures relating to surplus property prescribed 
by the Surplus War Property Administration, created by Executive Order Num- 
bered 9425, dated February 19, 1944, or any other Government agency in effect 
upon the effective date of this Act, and not inconsistent with this Act, shall 
remain in full force and effect unless and until superseded by regulations uf the 
Administrator or of the agency in accordance with this Act. 

Sec. 21. (a) Nothing in this Act shall limit or affect the authority of com- 
manders in active theaters of military operations to dispose of proiierty in 
their control. 

(b) The provisions of this Act shall be applicable to dispositions of property 
within the United States and elsewhere, but the AdministJ-ator may exempt from 
some or all of the provisions hereof, dispositions of property located outside of 
the continental United States or in Alaska, whenever he deems that such i)ro- 
visions would obstruct the efficient and economic disposition of such property in 
accordance with the objectives of this Act. 

Sec. 22. (a) The authority conferred by this Act is in addition to any authority 
conferred by any other law and shall not be subject to the provisions of any law 
inconsistent herewith. This Act shall not impair or affect any authority for the 
disposition of property under any other law. except that the Administrator may 
prescribe regulations to govern any disposition of surplus property under any 
such authority to the same extent as if tlie disposition were made under this Act, 
whenever he deems such action necessary to effectuate the objectives and policies 
of this Act. 

(b) Nothing in this Act shall impair or affect the provisions of the Emergency 
Price <'oiitrol Act of 1942. as amended: or the Act of October 2, 1942 (ch. 57S. 
56 Stat. 765), as amended ; or of section 301 of the Second War Powers Act, 1942 ; 
or of the Act of March 11. 1941 (55 Stat. 31). as amended; or Acts supplenienfal 
thereto, or of any law regulating the exi)ortation of property from the United 


Sec. 23. This Act shall become effective from the date of its enactnient. Unh'ss 
extended by law, this Act shall expire at the end of three years following the date 
of the cessation of hostilities in the present war. as proclaimed by the President 
or by concurrent resolution of the two Houses of Congress. 


Sec. 24. If any provision of this Act, or the application of such provision to any 
person or ciicnmstance. is held invalid, the remainder of this Act or the applica- 
tion of such provision to persons or circumstances other than those as to which 
it is held invalid, shall not be affected thereby. 


Sec. 25. This Act may be cited as the "Surplus Property Act of 1944." 



3 9999 


046 2