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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"

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Given By 



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S- Qly.,U>^U^: M»~** • BEFORE THE 






H. Res. 60 



APRIL 25; JUNE 20, 27; JULY 6; NOVEMBER 8, 9, 28; 
DECEMBER 6, 12, 13, 14, 1945; JANUARY 31, 1946 


Printed for the use of the Special Committee on Postwar 
Economic Policy and Planning 


99579 WASHINGTON : 1946 


JUL 25 1946 



WILLIAM M. COLMER, Mississippi, Chairman 

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

Edwin B. George, Consultant A. D. .H. Kaplan^ Consultant 

Norman Bdrns, Consultant Henry B. Arthur, Consultant 


CHARLES L. GIFFORD, Massachusetts 
B. CARROLL REECE, Tennessee 
RICHARD J. WELCH, California 
JAY LeFEVRE, New York 
SID SIMPSON, Illinois 


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A -f'r 


Statement of: Page 

Krug, J. A., Chairman, War Production Board 2080 

Rubicam, Raymond, Research Committee, Committee for Economic 

Development 2108 

Bowles, Chester, Admistrator, Office of Price Administration 2130 

Silvey, Ted F., chairman, CIO Reconversion Committee 2153 

Green, John, national president. Industrial Union of Marine and 

Shipbuilding Workers of America 2168 

Snyder, John W., Director of War Mobilization and Reconversion 2187 

Wason, Robert R., chairman, Reconversion Council of the National 

Association of Manufacturers 2203 

Airey, John, president, King-Seeley Corp., Ann Arbor, Mich.; chair- 
man. War Controls Committee of the National Association of 

Manufacturers 2214 

Randall, Clarence B., vice president. Inland Steel Co., Chicago; 
member of the Labor Legislation Committee of the National Associ- 
ation of Manufacturers 2224 

Wason, Robert R. — resumed 2231 

Small, John D., Administrator, Civilian Production .\dmiiiistration_. 2233 

Seidel, Robert A., vice president and comptroller, W. T. Grant Co 2259 

Flanders, Ralph E., president, Federal Reserve Bank of Boston, and 
chairman. Research Committee, Committee for Economic De- 
velopment . 2285 

Ney, Jerome, deputy administrator. Office of Price Administration, 

in charge of price 2299 

Goodman, Leo, secretary, CIO Cost-of-Living Committee 2324 

Warne, Colston E., president. Consumers Union of the United States, 

Inc 2347 

Somers, Mrs. Laura, representing the League of Women Shoppers 2359 

Hyslop, Miss Edith, representing the American Association of Uni- 
versity Women 2363 

• Introduced Appear 

No, _ at page on page 

1. Maritime Commission construction for foreign accounts, table 

and covering letter 2093 2366 

2. Proposals for tripartite planning in the shipbuilding industry 

on reconversion-postwar employment problems 2173 2367 

3. Summary of union proposals outlined to Robert Nathan 2174 2372 

4. Supplementary statement by Jerome M. Ney 2303 2373 

5. Excerpts from letter on inflation in the housing market in 

Milwaukee, Wis 2364 2374 




House of Representatives, Special Committee 

ON Postwar Economic Policy and Planning, 

• Washington^ D. G. 

The special committee met at 10 a. m. in room 1012, New House 
Office Building, Hon. William M. Colmer (chairman) presiding. 

Present: Representatives Colmer (chairman), Voorhis, Murdock, 
Fogarty, Gifford, Reece, Welch, Wolcott, LeFevre, and Simpson. 

Also present: M. B. Folsom, staff director; C. A. Sienkiewicz, A. D. 
H. Kaplan, and H. B. Arthur, consultants. 

The Chairman. The committee will come to order. 

As is generally understood, one of the primary purposes of this 
coimnittee is to aid, assist, and abet in the reconversion program, so 
far as possible, to prevent any sharp set-backs to our economy as a 
result of the necessary reconversion program. 

With that end in view, this committee started out, in the words of 
the late distinguished citizen of this country, to attack the first prob- 
lems first. 

We took up the question of setting up the Office of War Mobiliza- 
tion and Reconversion, the Surplus Property Board, and Contract 
Termination, all of which legislation was sponsored by this committee, 
and now that VE-day is approaching, we hope, naturally we are 
concerning ourselves with the immediate prospects should that day 
happen in Germany. 

In line with this, some weeks ago your director, Mr. Folsom, and 
I went down and had a talk with Mr. James Byrnes. We discussed 
this whole program and asked Mr. Byrnes if there was any legisla- 
tion that his Office needed, now that these matters I have referred to 
had been cared for. Mr. Byrnes did not think that any legislation was 
immediately necessary. So, we have this morning asked Mr. Krug, 
Chairman of the War Production Board, to come before us and discuss 
the general problem of reconversion from the standpoint of his po- 

Mr. Krug, I want to say by way of introduction that this committee 
has a great deal of sympathy with the problems with which your 
organization is confronted. We realize that you, of necessity, are 
going to be confronted with many intricate problems and yet we, the 
committee, feel that it is our duty to keep in touch with this situation 
to insure as much as possible that there won't be any sharp set-backs 
to our economy insofar as our ability to prevent it is concerned. 

So, we are glad to have you here with us this morning, and we will 
be glad for you to make any such statement as you see fit, after which, 
I am sure, we would like to ask you some questions. 




Mr. Krug. Mr. Chairman, I am very appreciative for the chance to 
come before this committee. We know, of course, what the commit- 
tee has done in the past and how helpful it has been to all Govern- 
ment agencies with the very difficult problems that they have had and 
which they have ahead of them now. 

I don't have any formal statement to make, but I want to make 
clear right at the start two things. One, that the Government gen- 
erally is in much better shape to beat the problems of changing from 
war to peace in ihis war than it was in the last war, because of many 
things that have been done to get the ways greased in advance. 

I have in mind such things as contract termination and surplus 
property and the close coordination of military contract adjustments 
with the peacetime production fabric. I think all businessmen who 
have lived through the two wars will tell you that. 

Your committee had a lot to do with getting those things set up. 

The second point I want to make clear is that we in the War Pro- 
duction Board, despite the lack of talk, are in much better position 
now to meet the problems that confront us than We were last fall, 
and we were in pretty good shape last fall, as this committee knows. 

What I have to say here today will be very informal and if any 
of the committee members want to interrupt to ask questions as I go 
along, that is fine with me, because in talking this way about a very 
complex problem I may not make all these points clear. 

I know that the committee is primarily interested in the period 
which lies ahead. However, you can't understand those problems and 
what we must do to resolve them without having some picture of how 
we got where we are now, and I would like to take a few minutes of the 
committee's time to summarize again a picture, I think one that all 
of you know ; but to give a perspective of what I have to say I would 
like to go over it again. 

We started building up our war production in 1940 and we started 
out with virtually nothing. By the end of 1943 we built that pro- 
duction up from virtually nothing to $5,600,000,000 a month, or a 
yearly rate of something over $60,000,000,000 a year. 

In order to do that, month by month, during that penod the Gov- 
ernment took positive, concrete action to direct our resources from 
nonessential things or less essential things, into war production. 
That was accomplished in a number of ways. 

At the start we had just a simple priority system which told indus- 
try it had to take care of war work first. But as things became 
tighter and tighter the simple priority system was insufficient to do 
the job. 

So we added this fabric of complicated orders which restricted 
production of nonessential or less essential things, which prescribed 
what materials you could use to produce such things — and even for 
essential things specified the number that could be produced in given 
periods of time. 

Then for practically all of the basic raw matisrials used in the war 
effort we devised allocation systems that divided up the supply over 
all the essential uses, so that we had a balanced flow of copper, alu- 
minum, steel, lead, zinc, et cetera, to the various war programs and the 
programs needed for supporting the war economy. 


That system put a lot of strains on our economy, but it produced 
the desired results, and by the end of 1943 we had production built 
up to the level necessary to maintain an all-out war in Europe and 
in the Pacific, and about that level has been maintained since that 
time. It has fluctuated up and down. 

Now, it is necessary to keep in mind a number of very important 
factors bearing- on that development. In the first place, that war 
production was primarily in metal products. Over 80 percent of all 
the war program is tied up in things that are made up of metal and 
require metals fabrication to turn them in to war items. Ships, 
planes, guns, ammunition, are typical examples. 

That meant that during that time we had to take our working force 
and direct it into the metal trades and into basic metal production. 
So, we have a great many people now who consider themselves 
machinists or fabricators and machine operators who at one time, per- 
haps, worked on the farm, in the woods, or in textile mills. 

The other point to keep in mind is that during this same period we 
took over 12 million of our best men out of our working force and 
put them in the Army and Navy. 

So we had to do this job of building up that production at a time 
when we were losing a large part of our most competent working 

Now, during the early part of our build-up the strain was on the 
less essential, or nonessential items almost entirely. You will recall 
we stopped production of automobiles, refrigerators, and washing ma- 
chines because we figured we had enough to last us for a while, and 
we needed that labor and materials and facilities for war work. 

However, for a long time in 1943 we didn't have enough labor in 
nonessentials to do the entire job with the controls we had, and dur- 
ing that period we started to drain labor away from our essential 
raw materials and we lost almost continuously people from the tex- 
tile industry, and from the lumber industry, and from steel, and from 
copper, and from lead — all the way across. For a while we got along 
by getting more and more production out of the remaining man- 
power. ^But starting late last year we began eating up our reserves 
in many of those fields. 

That brings me to the present situation, and I am talking about the 
last 3 or 4 months. In terms of what we can do with our economy 
during the last 3 or 4 months, I think we have been just about at the 
top. Not only is that indicated by the dollar volume but also by the 
amount of materials that have been going into the total effort. 

We have been straining our raw-materials supply almost to the 
breaking point. Steel and lead particularly have been in desperately 
short supply over the last 4 or 5 months. And the net effect 
is that many things you would like to do to get the economy ready 
for what it must face in future months have been deferred because 
.of the pressing and constant demand on our industrial machine for 
what we had to do to keep the big push going in Europe and keep 
the expanding war rolling in the Pacific. 

Now, with that picture covering the last several months, at the 
m.oment we are reaching the period where military production is 
being readjusted to the changing war picture. Last month we ad- 
justed ammunition and, recently, tanks; and from day to day there 
will be other adjustments. 


I think it is important for the committee to keep in mind that 
military production, by and large, is not adjusted to a day of victory 
in Europe. It is adjusted to what the military uses, and they have 
worked out a practical and, I think, workable, scheme for tying the 
procurement into what they use, taking into account stock levels 
and pipe lines and what not. 

So, as the use of various military supplies changes at the battle- 
front, the clianges are reflected back in procurement over a period of 
time. So whether or not the war in Europe ends, the change in the 
military picture in Europe begins to affect supply as the use of 
these various materials changes with the military development. 

So, in short, we are at a period now when the military procurement 
will be adjusted. How much the adjustment will be varies in the 
opinion of the various agencies, but the concrete figures we have at 
the present time would indicate that over a period of 3 or 4 
months there probably will be a cut of some 12 to 15 percent in mili- 
tary procurement, and that cut will build up so I think tliat within 
the next year or 15 months we will be down to perhaps 60 percent, 
or something like that, of the going rate of production, but of course 
we have experienced unexpected changes in military requirements 
in the past and ayo cannot be sure that we will not have other changes 
in the future which may change the whole picture. 

I think most of that adjustment will take place independently of 
how long it takes to fight out this bitter war in Europe. Unfortu- 
nately, while we are making these adjustments in production, the 
war must go on over there, and I presume that thousands of our 
boys will lose their lives in this terribly bitter cleanup process. 

However, I think the Army and the Army Air Forces have worked 
out ways of adjusting their production to whatever changes develop 
in the picture in Europe, and that reasonably promptly. 

I think I would be less than frank if I didn't tell you they play it 
on the safe side, and I think you gentlemen would want them to play 
it on the safe side. We know that if production falls below what we 
need to maintain for the war effort at this stage of the game, it is going 
to be pretty hard to get it back up again. ^ 

On the labor picture I have some figures here that might be of 
interest to the committee if you don't already have them here. I 
wanted to bring the picture up to date as to where we stand in labor 
because I think that is one of the important problems we have to 
meet on the way out. 

The figures indicate that, by and large, our expanded war effort, 
both the military and the production end, has been made possible ' 
through three principal factors. 

First, a substantial increase in the total labor force that has come 
about from drawing more and more people into the available labor 
force, some of them becoming of age, and others going into war work 
for the first time. 

We started out with a labor force at the end of 1940 of about 
53,500,000. At the present time we have almost 63,500,000 in 
the labor force (including the armed forces) which is an increase of 
10,000,000 during that period of time. Now, of that increase about 
4,500,000 were in male labor and the other in female labor. 

The Army during that period increased from less than 1,000,000 
to 12,000,000, which is about the present number. That meant our 


total labor force, despite that great increase, did not substantially 
decline during that period. It dropped from 52,700,000 at the end 
of 1940 to 51,400,000 in February of 1945. 

Now, most of that was accomplished through a decrease in unem- 
ployment. The unemployment figures dropped from 6,300,000 to 
700,000 which, in the view of the War Manpower Commission, is some- 
what below the minimum for ordinary turn-over. 

But, looking at the break-down you will find that munitions indus- 
tries went up from 4,800,000 at the beginning of that period to 
9,100,000 at the present time. 

Agriculture during that period lost about 1,200,000 workers, a 
decline from 8,000,000 to 6,800,000. 

Other manufacturing did not change materially during the period, 
but it did drop from the high point we built it up to in 1942 and 1943 
of 7,700,000 down to about 6 800,000. 

So, contrasting it with the peak we had in those industries at one 
time, we have lost about 1,000,000 men th^re, too. 

The Federal Government has goiie up from 200,000 to 1,600,000. 

The other changes are not very important. 

Now, I mentioned before that one of our difficulties in the way out 
will come from having drained people away from certain of our basic 
industries needed in peace time, to the war effort, and I think that is 
a factor your committee will want to bear in mind. We have lost these 
people in textiles and in lumber and in pulpwood production, and 
unless we get them back we can't hope to get back to a balanced econ- 
omy, because we need those products for the things we made in 
peace time. 

That means, in brief, that during this adjustment the time of pro- 
curement is cut back. 

The people who are now working in shipyards, aircraft factories, 
and in other war work must, in part, find job opportunities in these 
basic industries in order to move their production up. We pulled 
the economy out of balance as we moved into the war by the pre- 
dominance of this metal working and metal production. 

But from here on out we have got to boost up the production of 
things like that — lumber, forest products, and textiles. All of those 
are very important in our peacetime economy. 

Just as one example, you can't hope to have much construction with- 
out having lumber. We have barely enough lumber now to take care 
of our military needs and our most important civilian needs, and 
yet in 1940 we had 2,000,000 workers in construction. Now we have 
about 500,000. Now, those 1,500,000 workers can't go back into con- 
struction unless we get 125,000 people or so to go back into the woods 
to help with lumber. 

So much for the present picture. 

I think the distortions that have taken place in our economy during 
this war period are very important factors in deciding how rapidly 
we can cut loose our controls in going back to a mixed economy of all- 
out war production for the Pacific and using the balance of our re- 
serves for whatever peacetime needs might be desirable. 

I am rather reluctant to lay down policies without having the con- 
crete implementation — all of them — ready at the same time. But as 
a guide for our people in working out the implementation we have 
tried to set up some policies that will help them work out the me- 


chanics. I would like to cover these policies before I tell you about 
some of the specific things we have done to move forward with them. 

The first, of course, is that we must devote our attention and see 
to it that Pacific war requirements are met and met on schedule. 

The second is, furnish preferential assistance to the production of 
a limited number of nonwar products now so scarce as to endanger 
the war-supporting economy. 

In short, we will certainly continue to help the railroads, and pro- 
duce the farm machinery we need and repair parts for the farm 
machinery, and our entire transportation facilities, keep (?ur oil in- 
dustry at its maximmn capacity. Things of that kind must still 
come first. 

Third, through guiding the distribution of military procurement 
cut-backs and of continuing military procurement, and through other 
appropriate measures, assist, to the extent possible, the relief of par- 
ticularly serious local unemployment. I will explain later what we 
are doing on that. I just want to put in a word of caution at this 

I don't want you to think that any of these things can be done 100 
percent. There is no device known to us that will cure the dislocations 
that will come as these adjustments are made. 

Fourth, facilitate rapid reconversion through positive assistance 
for some equipment, construction, and long lead time materials. 

Fifth, assist the most urgently needed nonwar construction. As 
you know, for 4 years now the criterion has been nothing except what 
was needed in the war effort can be built, and that has imposed a most 
serious hardship on certain facilities that ought to be built. 

Sixth, provide a fair o]iportunity for small manufacturers, includ- 
ing veterans and new producers. 

Seventh, consistent with these objectives, simplify and eliminate 
controls as quickly as possible. 

Eighth, the progressive removal and relaxation of War Production 
Board controls does not affect such controls as other agencies will 
have to continue. In resuming or expanding civilian production, 
manufacturers remain subject to all applicable regulations of the 
Office of Price Administration, the War Manpower (I!ommission, and 
other Federal agencies. 

Now, I don't mean by that point that our controls are not interrelated 
to some extent; they are. In our work we have developed very close 
relationships with the other agencies that have parallel problems 
to the end that our own procedures will be closely coordinated with 

Those are the basic policies. I am sure the committee will want 
to know what the War Production Board has done about implementing 

In the first place, on securing and making certain that we maintain 
the Japanese war production we have had under way for some months 
the most intensive effort with industries that are involved in that 
phase of the job to make sure that they continue to carry out those 
programs. We feel quite certain that they can. 

There is one great worry in the minds of all of us, and that is whether 
or not in some of these areas they can retain their labor in war work. 
Most manufacturers feel that they can. 


In some areas where working conditions are unpleasant, where 
the community is war-swollen, there is concern about it. That is one 
of the problems that must be closely watched in any adjustment we 
make in opening up peace-time jobs. 

In the second place, on the planned cut-backs of military procure- 
ment and production, we have set up what sounds like a rather elaborate 
organization, but is really, I think, a practicable and workable one, 
bringing together the military procurement agencies and the War 
Manpower Commission with our own group to look at all the major 
adjustments and make sure that first they are properly coordinated as 
between the military; in short, that the Army isn't cutting outi a 
facility that the Navy is going to expand ; that they aren't reducing 
facilities that one of the other services is pressing hard to expand. 

There had been for some months early in the war lack of close liaison, 
and this committee has accomplished a lot in drawing that together. 

This group, known as the Production Eeadjustment Committee, 
tries to make sure, to the extent it is possible with the objective of 
getting the production for the Japanese war, to cut the contracts in 
the tight labor areas and try to maintain them in the communities 
that have no other prospect for handling their people. 

The War Manpower Commission is represented in this group and 
they take advantage of the knowledge of these cut -backs to let workers 
know, in areas where no other jobs are available, where new job op- 
portunities exist in other areas. Mr. John D. Small, who is in charge 
of that group, is here this morning, and if the committee is interested 
in the details of how it operates, I would like to have him explain 
it to you in further detail. 

I think, despite some creaks and groans, we are making some head- 
way, and that it is better than at any time during the war. 

The Chairman. If time permits, we will be glad to hear Mr. Small 
and give him an opportunity to testify. 

Mr. Krug. Three, we had a number of things that were put into 
effect last summer. In certain areas we have had to limit their 
operation, but they are still effective in areas where labor is available, 
and even in the tight labor areas where it can be done, without inter- 
fering with the war work. 

I have in mind the spot-authorization plan, the experimental model 
order which permits industry to develop new models, and the machine- 
tool and equipment order which, for a long period of months, per- 
mitted the placing and filling of unrated orders. We had to cut part 
of that out for several months starting late in January when the 
machine tools and equipment for our ammunition programs were so 
urgently needed. We couldn't have any interference with the war 

But the spot-authorization plan still is in effect, and it also works 
in the No. 1 labor areas where the various claimant agencies are sure 
it will not interfere with their programs. 

The fourth point is the aid to industry which converted to the war 
effort and has the problem of reconversion after the war effort. '• 

I am afraid that the public press normally assumes that automobiles 
is the only industry affected. As a matter of fact, our studies cover 
72 industries which converted in considerable part from their peace- 


time production to war production, and will have certain problems in 
going back to peacetime output. 

For those industries we have granted priority assistance on the 
bottleneck items they need for getting back to the minimum economic 
level of production. The reason we have restricted it to that at the 
present time is we have so little leeway in the picture at the moment 
that we thought it was better to give all of them minimum help rather 
than pick out a few and let them go to what they would like to have 
as their projected level of production. 

I think I have some figures on the 72 industries that might be of 
interest to the committee. For these 72 the figures are something like 
this : Their present rate of production, on a quarterly basis, so as to 
give you some idea as to what segments of our productive economy they 
represent, is a little over $3,000,000,000. If we took off all the re- 
strictions and gave them everything they needed in the way of 
machine tools and new facilities, assuming some adjustment in their 
military contracts to permit it, they could get to a peacetime produc- 
tion of about $3,358,000,000. Their minimum or break-even rate of 
production, in their judgment, is about $1,200,000,000 of quarterly pro- 

Now, to get to this minimum rate of production these 72 industries 
would need a little over $41,000,000 of new construction. You can see 
what a very limited amount it is in terms of the scope of business en- 
compassed. They would need about $61,000,000 of machine tools and 
equipment. Understand, these are not all the machine tools and 
equipment they need. These are what they must have from new 
supply to supplement what they have to get back to a minimum eco- 
nomic rate of production. 

If they were to go to the all-out rate of production, which most of 
them would like to do at the earliest possible date, they would need 
about $231,000,000 of new construction and about $183,000,000 of 
machine tools and equipment. Now, it is oii this minimum rate that 
we have given these industries positive help so that their long lead 
items can be scheduled and can be brought out at the earliest possible 

Included in the 72 industries are a great many plants that can get 
started without anything. They are fortunatety situated and their 
competitors have lost their tools during the war or have sold them or 
tied up their tools in war work and can't release them and have to 
get new tools if they are going to go into peacetime production. 

In addition, as other measures that will be necessary to pave the way 
on the way out, I refer generally to the need for added production in 
the items that will continue in short supply. We have started pro- 
duction drives during the past 6 months in practically all of those 
materials. At the present time, we are adding n concentrated drive 
on textiles, lumber, and pulp. That has been "impossible heretofore, 
because the labor wasn't available to do it. Now, with the adjusting 
war contracts we are hopeful we can move some of the released labor 
back to these plants by showing them the job opportunities there as 
against the war communities M'here they are residing at the moment. 

That is the function of the War Manpower Commission, and so far 
it hasn't been too effective because most of these workers would much 
prefer to have some additional war work brought into those com- 


munities, because, <>ener;illy, the Tvar jobs pay better than what they 
would get back at the job they held in peacetime. 

Now, in addition to getting us production on these short items, we 
are and will continue to release our orders on materials that turn up in 
long supply. At the same time we will release our production con- 
trols on items that can be produced from materials which are in long 
supply. A number of orders have been released during the last 5 or 
6 months, and I think within the next 4 or 5 weeks many more orders 
can be released. 

We will have to time that closely to the adjustment of the military 
procurement, giving consideration to the lead time necessary to get 
these industries that have been chained down going again to pick up 
the slack in the resources that will be released when the military con- 
tracts are cut back. 

Now, there are two other very important points in connnection with 
this partial adjustment to a peacetime economy. There could be 
situations in which there would be a scramble for the material and the 
small fellow would be squeezed out. We recognize our responsibility 
for making sure he doesn't get squeezed out. Whether that should 
be done by giving the small producer some blanket authority which 
would protect his position, or whether we should do it case by case 
will depend upon which seems to be the best mechanics. 

We are appreciative of our responsibility. We have talked with 
most of the industry committees involved in that problem. We have 
found them understanding and sympathetic and, I think, willing to 
assume their fair part of the responsibility of making sure that the 
small purchaser isn't squeezed out. 

We also have the problem of the returning veteran, and, obviously, 
the Government must do everything in its power to see to it that the 
returning veteran gets a square deal. 

On the other end of maldng certain that there will not be a wild 
scramble for materials, we will have to continue our inventory con- 
trols and enforce them. We must make sure that speculators or large 
interests will not preempt the market in an effort to drive up prices 
and make a speculative profit or an effort to drive out competition in 
a given field. 

Now, to carry on the elaborate planning that must be done within 
our organization and in cooperation with the Office of War Mobiliza- 
tion and Reconversion, the War Manpower Commission, the Office 
of Price Administration, and others, we have set up within the War 
Production Board a rather elaborate structure of committees, but 
with a simple function. We call the top committee, "The Committee 
on Period 1," which is what we call the period following the collapse 
of Germany. That committee has been at'w^ork for many months now 
perfecting the picture on each one of these industries that has a recon- 
version problem, and projecting, as well as we are able to project it, 
the picture we will encounter in each one of these materials that has 
been in short supply, and in the various components that would be 
critical to a return of peacetime production, which have been in short 
supply. Electric motors is a good example. 

I think the information assembled by that committee will put us 
in a fair position to deal with the problems which lie ahead. One of 
the jobs of the committee will be assembling information on these 72 
industries that I referred to a few moments ago. 


I want to call your attention, however, to one thing that I am sure 
the committee well understands. This business of going back from 
all-out war production to at least a partial restoration of our peace- 
time production will create a great many local dislocations, some of 
them of very serious proportions. We must do everything we can to 
deal with them, but there they are, and some of them you just can't 
relieve. If we shut down a bag-loading plant out on the prairie that 
is now employing 10,000 people, we can't use that plant innnediately 
for anything else, and in many cases those 10,000 people cannot be em- 
ployee! in that area. The War Manpower Commission plans to treat 
each of those cases as one of its responsibilities in laying out jobs and 
opportunities so the men and women employed there will get back to 
another job with a minimum loss of time. But at the time when those 
plants close down and those people are put out of work they are not 
going to be very happy about it, and the readjustments they nmst go 
through will parallel the readjustments we went through in 1941, 1942, 
and 1943, when we got the production built up. 

Our primary concern, of course, comes in a feeling that some of 
those local dislocations will be built up to a point through misunder- 
standing. So, in doing what we must do to keep the Japanese War 
program going and to make sure that industry, employing a lot of 
people, can get started promptly again we nuist not yield to the many 
pressures that will try to urge things that will interfere with the prose- 
cution of the Japanese War. 

I am sure that this committee will be very helpful to us in its under- 
standing of these problems and in the confidence I think that 99 
percent of our people have in the job of war direction that Congress 
and the Administration have performed. 

That closes my general remarks. If you would like Mr. Small to 
explain the workings of the Production Readjustment Committee or 
the Committee on Period 1, he is here and I am sure will be glad to 
tell you about it. If you would like to ask me some questions, I 
will be pleased to try to answer them. 

The Chairman. I think it would be in the interest of orderly pro- 
cedure if we would first interrogate you. 

I want to ask just one question to start it off, Mr. Folsom, before 
I turn it over to you. 

On this question of controls, Mr. Krug, I think this committee, and 
Congress, and the people generally would like to see these controls 
released as soon as possible. Yet I think we all realize that to sum- 
marily dismiss all the controls might possibly bring about havoc in 
our economy. 

I am, personally, especially concerned that those controls be elimi- 
nated as soon as possible without, as I say, bringing about chaos in 
our economy. 

I wonder if you would care to venture or hazard a suggestion as to 
the date when we might look forward to ridding ourselves of these 
wartime controls and restrictions ? 

Mr. Krug. I rather hate to speculate on something like that. If 
you will take it as a speculation, which it must bs 

The Chairman (interposing). I think I tried to make my question 
in that form. 

Mr. Krug. I know you understand. I am not sure everyone else 
here understands. This is the way I look at it. We, of course, sub- 


scribe to your policy, ;ind the policy of Congress, that we ought to get 
rid of these controls at the earliest possible date. 

They are built up as war measures, and as long as we have the war 
to tie them to, we have the administrative machinery to make them 
work. When that purpose is served, frankly, the War Production 
Board is not equipped to deal with governmental authority to appor- 
tion materials and decide on division of components and what 
products should be made in terms of long-range planning of the 
economy. We want that clearly understood. We don't look upon 
that as our function. However, as long as these materials remain, or 
components remain 

Mr. Reece (interposing). Would you permit an interjection there? 

The Chairman. Yes. 

Mr. Reece. You say you don't look upon that as a function of 
the War Production Board. Do you, as an official of the War Pro- 
duction Board, look upon it as a function of the Government ^ 

Mr. Krug. If you want my personal view, I don't think it can be 
done by government. I think I have had as much experience with 
these controls as anyone, and I don't think it can be done by govern- 
ment. However, as long as the material or component is in serious 
short supply, and you want to keep the war effort going against the 
Japs you must continue control. So, that makes it work out some- 
thing like this : I think within the next 3 or 4 months, probably a 
fourth or a third of our 400-odd controls can be released. They have 
a small segment of the economy tied up, and its return to peacetime 
will not involve the war effort, and they involve materials in reason- 
able supply. For example, from all we can see now, when the air- 
craft program is adjusted, there will be plenty of aluminum, and 
there is no use of continuing the detailed control over aluminum when 
there is plenty of aluminum. 

I think in the period following that, assuming the continuation of 
the Japanese war, the situation will clarify in the entire field with 
the exception of these basic things I mentioned before. Textiles, I 
think, will be in short supply throughout the Japanese war and prob- 
ably for civilian needs after that. Lumber will be in short supply 
throughout the Japanese war. Forest products, pulp, containers, 
and the like, will be in short supply. Tin will be in short supply. 
At least for a while, lead will be in short supply. However, I hope 
our production drive on lead will bring that up. We also get help 
there from military adjustments on the lead picture. There are 
certain chemicals that will continue in short supply. 

Those must be controlled, I think, throughout the Japanese war. 
However, with the Government pulling out of the market for muni- 
tions at the end of the Japanese war, approximately all of these things 
will return to adequate supply, and I think during this phase, the 
phase between now and the end of the Japanese war, we can get the 
economy around to a reasonable balance. So, when the Japanese war 
ends, our controls can be released. 

I hope that somebody won't come back 6 months from now and tell 
me, "You promised you would do so and so, and you haven't done it." 
The whole picture nuist be flexible, and I think one thing we have 
learned in the war is that you can't forecast its future. Things may 
develop in the Japanese war that will tighten up some of these things 
that look at the moment as if they will be in loose supply. 


We have tried to set up a working relationship with the Army, 
Navy, and Air Forces so that we have maximum warning of those 
changes, but some of them come so suddenly that they, too, are caught 
short, and all we can hope to do is be ready for those extreme changes 
when they come. 

The Chairman. Mr. Krug, I tried to so word my inquiry as to make 
it clear that personally I don't think these controls ought to be released 
as long as they are necessary for the war effort. The thing that con. 
cerns some of us — I think a great many of us — and certainly concerns 
the businessmen of this country is that they are apprehensive that 
the war will be used as a justification for continuing these controls un- 
necessarily. There are those who are apprehensive that we will get 
these controls going in the wartime and continue them in the postwar 
era or indefinitely. That was primarily what my question was directed 

I wonder if we might not see what Mr. Folsom has on his mind. 

Mr. Welch. May I ask Mr. Krug a question ? 

The Chairman. Yes, Mr. Welch. 

Mr. Welch. Mr. Krug, in sections of the country, particularly the 
Pacific coast where thousands of men are being laid off daily in the 
shipbuilding and airplane industries, should there not be a resump- 
tion of peacetime production to help take up the slack of unemploy- 
ment ? 

Mr. Krug. I think there should be, but first we have to take care of 
our basic needs on the west coast. It happens that at the present 
time we are desperately short in a number of industries on the west 
coast and we haven't been able to get the manpower to man them. 
Take the Northwest. We are seriously short of people in the woods ; 
we are short of people in aluminum, and we are short of people in 
lead. We haven't been able to get the people released from the ship- 
yards in Portland to take those jobs. But, if we take up all the slack 
in that area with peacetime procluction. You will not have any peace- 
time production anyway, because we can't carry it out without con- 
tainers and without lead and without metals. 

Mr. Welch. Is it not a fact that you have a stockpile of aluminum 
to last for the duration of the war? 

Mr. Krug. No, that is not a fact. We are making the most desperate 
effort to get our alundnum systems manned again. 

Mr. Welch. When you speak of aluminum, do you refer to the 
Canadian plant, the plant built up in Canada by this country, or the 
aluminum plants on the Pacific coast? 

Mr. Krug. I am referring to all of the plants that operate with 
hydroelectric power. 

Mr. Welch. They closed down some of them. 

Mr. Krug. They closed them down last year. We are now opening 
all of them so far as possible. 

Mr. Welch. Are you opening up the ones in California? 

Mr. Krug. We are not opening those in California primarily because 
we can't get labor to man them. 

Mr. Welch. You had labor before they were closed down, and the 
labor is still available. I know the communities where those indus- 
tries are located and I have visited them in the past. You closed down 
the plant at River Bank, which cost the Government $15,000,000. 


Mr. Krug. All I can tell you on that is that we not only consulted 
the Washington representiitive of the War Manpower Commission but 
the local people in California, and they assured us that they could 
not get the thousand men back at River Bank in time to meet that need. 

Mr. Welch. Who gave you that information? 

Mr. Krug. Everyone in the War Manpower Commission, from Gov- 
ernor McNutt on down to the local director in California. 

Mr. Welch. If you get assui-ance from California that the labor will 
be supplied, will you guarantee to reopen the plant ^ 

IVIr. Krug. If they can meet the time schedule, I think we would. 

Mr. Welch. Men out of employment will go where they can to 
secure work. There are thousands of men all along the Pacific coast 
being laid off in shipyards and in airplane industries. Those men are 
not going to stay around and spend their last dollar. They will go 
any place where inducements are offered, reasonable inducements, for 
the purpose of securing employment. 

Mr. Krug. I think they will, Mr. Welch, after a while, although 
our experience in San Francisco 

Mr. Welch (interposing). They will right now. First-class me- 
chanics, semiskilled mechanics are walking the streets in San Francisco 
looking for work. 

Mr. Krug. Yet the War Manpower Commission has thousands of 
jobs open in the San Francisco office that they could take if they were 
willing to take them, and they have refused, because they are not in 
the same skill and not at the same wage rate. 

Mr. Welch. What type of employment? 

Mr. Krug. Almost any type you can speak of, although I think 
most of them are in the logging industries and mining industries. 

Mr. Welch. I know something about logging, 

Mr, Krug. A gi-eat many of those men came in there from the 
logging industry. 

Mr. Welch. Not so many. Most of them came to the ship-building 
plants from the Middle West. Trainload after trainload of colored 
men were brought in from south of the Mason-Dixon Line. They 
are still with us, and many of them are out of employment. 

Mr. Krug. I think it is safe to say that anyone on the west coast 
who wants a job can have his choice of a number of jobs at the present 
time. He may not be able to get a job in a town where he happens 
to be at the wage rate which he has been getting. A man who has 
been brought in frqm the Middle West who used to get 50 cents an 
hour as a common laborer and has now worked up a skill so he can 
make one certain part of a Liberty ship or Victory ship cannot im- 
mediately find work of exactly that same type, that same skill, or at 
that same wage rate. There are many other jobs open. 

Mr. Welch, There will be only skeleton forces left in the shipyards 
by early fall. As a matter of fact, the shipbuilding program will be 
finishecl either in July or August. Some shipbuildino- will be carried 
on until early fall. What are we going to do with those men that 
were brought to the Pacific coast at the expense of the Government? 
What is the Government going to do to help the Pacific coast solve 
this serious unemployment problem that is facing us ? 

99579 — 46— pt 7 2 


Mr. Krug. I think there are a number of things that are being 
done and will be done. In the first place, ship repair is moving up. 
It will not take all of them but it will take a lot of them. 

Mr. Welch. The ratio of men engaged in new construction and 
I'epair work is 8 to 10, 10 men on new work and 3 men on old work. 

Mr. Krug. It has been that, but the ratio is not that high when you 
get along to the later months of 1945, because the ship repair load is 
rapidly pulling up. 

Of course, the things I have mentioned are in desperate need. As 
I tried to explain before, if we don't try to meet them we are not 
going to get our economy going again. If we don't get lumber and 
mining and textiles up, there is no use talking about local manufac- 
ture, because the material won't be there to make the things they 
would like to make. 

Mr. Welch. What about steel? 

Mr. Krug. Steel will be in reasonably tight supj^ly throughout the 
Japanese war if the expansion of peacetime industiy is anything like 
it appears it will be. I am quite sure that the total demand, count- 
ing the war demand, the essential civilian demand and all other de- 
mands, will exceed what we can get out of the steel industry. 

Mr. Welch. If steel is still tight why are thousands of men en- 
gaged in building ships in this country for foreign countries for their 
postwar trade? 

Mr. Krug. There are not thousands of men in this country 

Mr. Welch. Oh, yes. 

Mr. Krug. I beg to disagree with you. 

Mr. Welch. I will take you within 3 hours from where we are 
sitting to the Sun Shipyard in Philadelphia. If you care to go to 
the Pacific Coast and go to the Columbia River you will find thou- 
sands of men there building ships for foreign countries for their 
postwar trade. 

Mr. Krug. The point I would like to make is that all the ships 
being built are part of the shipping pool needed to carry on the war. 

Mr. Welch. No, no, I beg to differ with you. They are for their 
postwar trade, Tlie Dutch secured a loan of $100,000,000 from a 
group of New York bankers only recently to build ships for their 
postwar trade, and contracts have been let to tlie Sun Shipyard and 
to a shipyard on the Columbia River. 

Mr. Krug. I don't think I should argue the point with a member 
of Congress, but the fact is that no steel can be obtained for any ship 
unless it is part of the essential maritime fleet of the world. 

Mr. Welch. Well, I am a member of Congress and proud of the 
fact, and I have been a member of the Committee on Merchant Marine 
and Fisheries for 20 years, and last year and the year before I visited 
every major shipyard on the Pacific Coast. I know what is going on. 
What I have told you I can substantiate with any kind of proof you 
want. We can go up to the Sun Shipyard and I will be glad to go 
up there with you at any time. 

Mr. Krug. I think that would be an excellent idea. If there is 
any steel going into ships that are not part of the war effort, I would 
like to know about it. 

Mr. Welch. They are getting their money at 11/^ percent interest. 
That is 2 percent less than an American shipowner can borrow money 
from the United States Government. 


The Chairman. Mr. Welch, if you will pardon me, and with due 
respect to both you and Mr. Krug, I would like to say that is a 
very serious matter and one I think we would all be interested in. 
May I suggest that Mr. Krug check on that matter further and 
advise ypu about it ? 

Mr. Welch. He won't have to go any further (han the Chairman 
of the Maritime Commission. Bring up Admiral Land and he will 
give you the same information that I have given for the record. 

The Chairman. I am sure you will be happy to check on that 
matter and advise us. 

Mr. Krug. I will be very happy to have Admiral Land write to 
the committee. He happens to be the claimant for all the steel 
for all the shipping. If the Admiral has been asking us for steel 
for war shipping and turning it loose for postwar shipping, I cer- 
tainly would like to know about it. (See exhibit 1, p. 2366.) 

The Chairman. I think we would all like to know about it. 

Any further questions, Mr. Welch? 

Mr. Welch. No. 

The Chairman. Mr. Folsom, did you have any questions ? 

Mr. FoLSOM. Just two or three. Of course, the committee is very 
much concerned, and all of us are, in reducing as much as possible 
this unemployment that will occur during the reconversion period. 

There are a few aspects that seem to me to be most important. The 
first is that the contractor should have as much advance notice of 
contract termination as possible. Second, he has to have a period in 
which to retool and get up the new models and prepare for the new 
civilian work, and then he must have materials. 

Now, wdien it comes to advance notice, the committee was told last 
fall by officials of the War Production Board, and the Army and 
the Navy, the plan you had at that time for systematic telling of 
the individual contractors several months in advance of what the 
cut-backs were going to be on VE-day and then keeping them right 
up to date as you went along as to when cut-backs might come. 

I gather from what you say you think you have a better plan now 
than you had last fall in that respect. 

Mr. Krug. About the same plan except I think it has been per- 
fected beyond that stage. 

Mr. Folsom. Do you get notice of what these cut-backs are going 
to be or does the Army and Navy go to these plants — and sometimes 
it is very short notice — and cut it back without you knowing any- 
thing about it ? 

Mr. Krug. We get all the major cut-backs in advance. There is 
a proviso that in an emergency they can cut back without notice. 
I think that emergency clause hasn't been used very much. 

Mr. Folsom. You are informed by the Army and Navy ? 

Mr. Krug. Yes, although I must say the timing is not all that 
might be desired. If you had desirable set-ups you have to have 
five or six months' notice. They have not found that possible. 

We have a deal now that they give us 7 days' notice. If they have 
a cut-back planned in advance we discuss it in advance, but some 
of these things come in rather suddenly. 

Mr. Folsom. You try to give several weeks' notice if you can. 

Mr. Krug Yes. I might explain on that, Mr. Folsom, as an 
example, the aircraft adjustment plan has been worked out, at least 


in the interim stage, and they are now discussing it with the in- 
dustry. Those cuts are taking place right now and will run on 
until the end of the year. They are laying them on the table so 
industry will have that much advance warning. 

Mr. FoLSOM. When it comes to giving them a chance to get tooled 
up and make models, I noticed in the paper not long ago that you had 
given automobiles permission to buy machine tools and get mate- 
rials for models, and so forth. How did you happen to pick out the 
automobile industry ? 

Mr. Krug. The newspapers picked out the automobile industry. 
We didn't. 

The policy in the War Production Board is to give all industries 
in that category exactly the same treatment. So far, I think there are 
about 72 industries that have converted to the war effort and have 
problems of these kinds in reconverting. All of them will get the 
same consideration on their bottleneck tools and facility changes they 
must make. 

Mr. FoLSOM. They are all starting on the same basis ? 

Mr. Krug. Yes. 

Mr. FoLSOM. When it comes to allocating materials, you won't have 
enough materials to go around. 

Mr. Krug. This is only to get ready. We will take care of their 
get-ready steps. 

Mr. l<'uLS0M. You feel you have enough material available for that? 

Mr. Krug. We will have to take it. It isn't so large that we feel 
it will be an impact on the war effort to a serious extent. At the 
present time we are so short of materials and machine tools and some 
of the components, you have to work it in at the expense of some of 
these other things which are very important too. 

Mr. FoLSOM. In connection with that retooling, as you know up 
ulitil recently, the last three or four months, deferments have been 
given to men who are doing experimental work and research work in 
the plants, mostly for the war, and in the last two or three months, 
due to the draft changes, many of those people have been taken away. 

Of course, they are the very men that would be the most helpful in 
reconversion. Has that situation changed any since the war situation 
changed so? 

Mr. Krug. It has improved a little, but it is far from perfect. It is 
a tough situation. Here is a gentleman who can be very helpful to 
the automobile industry in getting them ready for peacetime produc- 
tion. That is his only function. Here is a fellow who has been fight- 
ing for four years and ought to be discharged anyway because of the 
strain he has been through. Are you going to tell him to fight on for 
another 'year and let this fellow work on automobiles ? 

Mr. FoLSOM. The point is that these people have been deferred all 
this time and now one man like that can probably be more important 
furnishing jobs than any other hundred men or thousand men at the 

Mr. Krug. We have advocated that the local draft boards give 
maximum consideration to this in meeting their essential quotas. As- 
suming they have drained them all off, I think you come down to a 
pretty hard choice. 


Mr. FoLSOM. I think that policy was adopted at the time of the Bel- 
gian bulge. Has it been changed since? 

Mr. Krug. We change it every week. I think the first arrangement 
was 30 percent of the deferred class could be retained. That has been 
gradually opened up until now it must be 70 percent. So, I feel that 
if it is carefully done in the field the people who will be taken out 
of this group will not be the indispensable people. I think that if 
any industry has an indispensable man, for the purpose you have in 
mind, it can get him deferred and make up the quota from people who 
are in less essential positions. 

Mr. FoLSOM. I know we have had a lot of complaints. 

Mr. Krug. We went through a trying period when we had to get 
them, but I think that has been somewhat improved. 

Mr. FoLSOM. When it comes to the question of allocating materials 
when they become available, I imagine you are going to find that a 
pretty difficult job. You have complete inventory figures from the 
services as to raw material? 

Mr. Krug. We have inventory figures on all the major plants of the 
country, whether they are military plants or privately owned plants. 

Mr. FoLSOM. When you have a lot of material on hand, where a 
contract has been terminated, what plans do you have to allocate that 
fairly to small businesses and other businesses you might know about ? 

Mr. Krug. Our own proposal — rather, this is the proposal of the 
Surplus Property Board — is to let that material go without controls. 
We feel if we step in to decide who should get it, that will slow up 
reconversion. The problem is so difficult in itself — to get that material 
disposed of to someone who can use it, we don't feel it is practical to 
try to control that end of the priorities. 

I think the Surplus Property Board still has some idea that they 
will set up a disposition of it by giving preference to small business 
and Government agencies as prescribed in the act. I can see great 
difficulties if you try to make that procedure too formal in terms of 
who gets first preference to it. You won't sell it at all and it will end 
up on some scrap pile. 

Mr. FoLsoM. What about raw materials as they become available? 

Mr. Krug. We have our controls of those. As long as they remain 
in short supply we will have allocation orders for dividing them up. 
When they get in long supply we would like to back out of the field 
and let the market divide them up. 

Mr. FoLsoM. When it comes to these spot authorizations, do you 
consult with your management and labor people in the various local- 
ities on those? 

Mr. Krug. Yes. That is handled locally. The way that works is 
local management decides it has material, manpower, facilities, to 
make a particular product. The manufacturer of that at the present 
time is stopped by Nation-wide order. He goes to our local office and 
says, "I can make such-and-such, I have got the men and I have got 
the material, or I understand the material can be obtained and I want 
to make it." 

Then a meeting is called of the procurement services and the War 
Manpower Commission, and if they feel that his operation will not 
interfere with the war effort he is given permission to produce that 


and ^iven a priority for the materials that he needs, assuming he can 
get those materials without interfering with the war effort. 

Mr, Foi.soM. Yon mentioned that you thought the cut-backs might 
amount to 12i/^ percent during the first four months, or the over-all 
production might decline I214 percent during the first 4 months. 

Mv. Krug. Those are the figures they give us at the present time. 
I think the reduction will be somewhat larger right straight through 
as the figures are laid out. This is the en-d product. It is important 
to keep in mind that these figures relate to end products. The compo- 
nents have a lead time. So, the cuts made 6 months hence affect 
materials immediately. So the cut in productive effort is greater than 
that indicated in the cut in the end product. 

There is also the factor of using up inventories and adjusting inven- 
tories at the lower level of production. It tends to cut the material 
producer and component producer more than the fellow actually pro- 
duced on his prime contract. 

Mr. FoLSOM. At the end of the year that might go to 40 percent? 

Mr. Krug, Yes, 

Tlie Chairman, Dr. Kaplan, do you have any questions? 

Mr. Kaplan. Most of them have been asked and answered. 

I would appreciate it, Mr. Krug, if you would elaborate on the 
matter of treatment to small business, on whicli you touched in your 
formal statement. What has happened to the program that was 
started last year of providing materials and giving releases to small 
businesses, to what extent did you have to stop that with the counter- 
attack, and to what extent has it been restored as part of your policy 
right now ? 

Mr, Krug. It is still part of our policy. We held up on it in the 
critical' labor areas, except in those cases Avhei'e tlie various agencies 
"were agreed that the operation would not interfere with the war ef- 
fort. Incidentall3^ there have been hundreds of those cases where 
they have agreed ca ; n in critical labor areas. 

ISTow, with the change in the war we feel that additional incentive 
must be given to the small businessman to get going again. One thing 
would be to lelease him from our orders, if the production isn't below 
a certain amount, and let him go ahead on his. I don't think that 
would cause any interference to the war effort. 

The other is to give him some positive priority help so he is en- 
couraged and knows he will get his materials and start back in pro- 
duction again. We are still considering whether that method or the 
first one I mentioned would be the desirable way of doing it when this 
productive capacity becomes available again. 

Mr. Kaplan. What efforts are- being made where a cut-back is con- 
templated several weeks in advance to tie in the cut-back with a pro- 
gram of release or allocation of materials so as to keep the labor, or 
force it to go where that is practical? Do you have any machinery 
for that? 

Mr, Krug. Yes, we have the machinery for that. It is part of this 
Production Readjustment Committee. lu tlie first ])lace, we try to 
make the cut-backs in the plants where that is a possibility, holding 
the remaining production in plants where you don't have that pos- 
sibility. The next step is to free up plants which produce components 
that are needed in the over-all effort. There is a definite list of criteria 
that was worked out in cooperation with the Byrnes Office several 


months a^o that tlie procurement arrencies use as guides to them, and 
which our production readjustment committee uses in reviewing the 

As I said before, that is far from perfect, but it is a lot better than, 
anything we have ever had before. 

i\Ir. Kai'Lan. I am wondering wliether the preparations are such 
that if you shoukl hit, we will say, an early VJ-day, will you be able to 
cope with the multiplicity of these situations in wliidi you have to 
save the manpower set-up by quick reconversion or allocatiton. Do 
you have your plans ready to go for that kind of a situation ? 

Mr. KrVg. This isn't a very popular answer, but I think I should 
tell you quite frankly that we don't expect to plan what should go into 
each plant on VJ-day. , 

We do plan to tell manufacturers that we are going to get out of 
the way on VJ-day and they ought to make their plans now. The 
materials will be available and the labor will be available, and the 
plants will be available and they had better get busy as to what they 
are going to put in there. We don't think we ought to tell them what 
to put in or try to work out some super plan of strategy that some- 
thing is going to fall in each one of these plants. I think our efforts 
toward that end would be an interference rather than a help. 

On the other liand, in guiding adjustments during this interim 
period we would like to make them in such a way that when the time 
comes they will provide the maximum stimulus in getting the get- 
ready steps all completed, and the businessman will not have too many 
barriers to hurdle when he wants to turn that facility to some other use. 

Just one little instance there. The automobile industry is perhaps 
talked too much about, but it does have a tremendous problem of 
reconversion and a great many people are involved. The military 
have been busy for months trying to adjust contracts so those peace- 
time facilities are going to be freed-up and ready to go when VJ-day 
comes anyway, if not before, so they can promptly go ahead with 
building automobiles and taking up that employment that is being 
released from the military work being done in the same area. 

Mr. Kaplan. I felt there may be a tendency on the part of business 
to expect the War Production Board to do its planning for them in 
that connection, and I am inclined to think that perhaps there isn't 
enough initiative encouraged b}^ the Government agencies among the 
private industries themselves. 

Mr. Krug. I think you are right on that, although I have talked 
to a great many businessmen and you would be amazed how far their 
planning has gone forward. Most of them want to stay alive and 
they have been pretty active in finding out wdiat they ought to be doing 
after this war is over and how they can get going at the earliest possible 
time. They camp on our doorstep almost constantly to see that we 
take the steps necessary so they will be ready to go when the time comes. 

I think I ought to make it dear that the War Production Board is 
only one part of this problem and they have to get a deal from Defense 
Plants Corporation, RFC, Surplus Property Board, and so on. We 
try to help them get all those other decisions made, but, by and large, 
ours have been the negative ones. 

The Chairman. I might observe that my experience has been that 
most businessmen are looking forward to when they can get out from 
under your control. 


Mr. Reece, did you have some questions you wanted to ask ? 

Mr. Reece. The questions I had in mind were asked by Mr. Folsom 
and Dr. Kaplan. 

I do want to make this observation. I am very much gratified with 
the phms you have indicated have been formuhxted to effect this 
change-over to peacetime production, insofar as possible, in advance 
of wlien the change actually will be made. 

I am particularly pleased with your effort in setting up the com- 

The subject referred to in Doctor Kaplan's inquiry is particularly 
in my mind, and that is the extent to which these appropriate com- 
mittees or other agencies in the War Production Board had made a 
study of the 72 industries which have converted to war production, 
and with the view of the War Production Board having taken so 
far as possible the necessary steps to put them in a position to get into 
peace-time production as soon as they are released from war-time 

It is all very well to say that that is a problem of the industries and 
that they are very greatly interested in it. But on the other hand, 
that is a problem which the industry involved, or the company 
involved, cannot solve now by reason of the limitations placed by the 
War Production Board in getting the facilities necessary for him 
to reenter peacetime production. 

I have been particularly interested in the extent to which these 
committees have gone in encouraging the companies to present what 
is necessary to be done to enable them to begin to produce peace-time 
goods for which their factories ai-e suitable when they are released 
from war production. 

For instance, last fall when the president of one of the motor com- 
panies was before the committee I asked him what would be necessary 
if he were released from war production today for him to begin to 
produce automobiles. 

One phase of his reply was that 3,600 machine tools and so forth 
would be required before he could produce an automobile. In a lesser 
degree that is true of the smaller companies. 

Now, you have indicated that insofar as possible you are releasing 
the production facilities now to provide machine tools and other 
facilities necessary to put them in a position to begin peace-time 

This isn't a question so much as an observation. If the War Pro- 
duction Board realizes the responsibility of getting into peace-time 
production as greatly as you realized the responsibility and urgency 
in getting into war production when the emergency arose, then I 
am satisfied it is going to be done. Then, I think, the same urge, 
the same determination, that this job must be done should exist as 
obtained when we were converting from peacetime to war production. 

I readily agree that we are in a much better position to make the 
changeover now than we were in 1918, but we must realize the problem 
is very much greater than it was in 1918. It compares to putting 
into reverse an automobile that is going 80 miles an hour and one 
that is going 10 miles an hour. 

If we permit war production to be stopped — and these 72 industries 
will not be in position within a reasonable time to absorb a substantial 


amount of the labor — and ever permitted a condition to arise in pro- 
duction where we will have 12, 18, or 20 million people unemployed, 
we are going to have a state of chaos in this country that is going to 
make reconversion impossible, certainly without the Government 
coming in and exercising a controlling hand just as it did in getting 
into war production. 

I for one have been greatly disturbed about the slowness with which 
we are getting ready. I am encouraged by what the War Production 
Board had been doing. This is an observation and no question. 

Mr. Krug. I certainly agree with what you said. 

I would like to make on observation so the committee is clear on it. 
Obviously, there are things that would have been desirable during 
the war as get-ready steps for this period we face ahead. We haven't 
been able to take them without interfering with the steps we had to 
take to keep the war going. That was a risk. We resolved it in 
favor of tossing the stuff to the military that we felt they had to have 
as against these other things, such as building new plants and having 
them tooled up and ready to go when the war work ends. 

We didn't have the resources to do it. Now we are getting to the 
period where we have the resources to do it. I think these industries 
will be ready to do it when we have the material to turn loose. 

If the timing isn't perfect I want the committee to know that it was 
not because we didn't plan for it. It was because of the tremendous 
drain on our economy in the last 6 months trying to finish off the war 
in Europe. 

Mr. Reece. If you will put the same energy and the same determi- 
nation to solving the changeover to peace production as you did in 
changeover to war production, I for one am satisfied it will be done. 

Mr. Krug. Thank you, sir. To be candid with you, I don't know 
whether any of us can go through the period we went through in 1940 
and 1941 again. As you know, we thought the Germans might be 
coming across the Atlantic any day then, and American industry, in 
getting ready for the war, did an amazing thing. I hope they will— 
and I think they will — do as good a job in going back. 

Mr. Reece. That is the point. The Germans were coming at us 
then. Unless we can do this job reasonably well, chaos is going to 
be coming at us and it is going to be just about as serious. 

Mr. Krug.. Right. 

The Chairman. Mr. Voorhis ? 

Mr. Voorhis. I would like to observe that I agree with everything 
you and Mr. Reece have said here. I can't see how you can possibly 
go at this job of conversion back to peacetime in quite the same way 
that you went at the job of conversion into war production. 

I would like to add that I hope you won't. I think we made some 
mistakes that we don?t want to repeat. 

Mr. Krug. What mistakes ? 

Mr. Voorhis. I don't mean you. I mean everybody. I think that 
we got too ready for an early end of the war and then it didn't happen. 
I think we have got to recognize the fact that it is much more difficult 
to know when you can do things now. For that reason it is much 
more necessary to do all the things that Mr. Reece said. 

Mr. Krug. I think that is a very wise observation. I hope m the 
natural desire of everyone to make this match perfectly you won t 


match the peace production into a point where it shoves the Japanese 
war production back. 

Now, I know how delicate that is. The first thing I know is that 
somebody will be saying, "Cap Krug advocates unemployment so we 
can protect the Japanese war." I don't. I think you have to play 
this thing in safeguarding the Japanese war effort rather than having 
a tremendous rush to do something and find out later that we have 
crossed up what we have really set our minds on doing. 

Mr. VooRHis. Now I want ito ask you a couple of questions about 
the West Coast if you don't mind. 

Mr. Krug. Not at all. 

Mr. VooRHis. The first one is that assuming the war in Europe 
ends soon, what assurance do we on the west coast have that we 
won't have a picture of wholesale reconversions on the east coast 
without some corresponding reconversion on the west coast? In 
other words, if all war production is concentrated on the west coast 
for the Japanese war and the east coast production for war is very 
sharply cut below what our production out West is cut, w^e would 
suffer tremendously in the future. What do you contemplate on that 
problem ? 

Mr. Krug. We are very appreciative of that problem. It is one 
of the things that has bothered us now for' a year and a half. 

We set up this Production Readjustment Committee for the very 
purpose of equalizing, to the extent possible, the adjustments through- 
out the country. I haven't seen them analyzed in detail by regions, 
but it is not much different than it was last fall when we did analyze 
it in detail, and the disparities were not very great. 

Mr. VooRHis. About how much ? 

Mr. Krug. As I recall, the over-all cut-back for the average for the 
year after victory in Europe w-as 33 percent for the country as a 
whole and 25 percent on the west coast. I think there will be dis- 
parity in that vicinity, but I think you will have all the resources out 
there you will want for moving forward with whatever the west coast 
war plans might be. 

If anything, I think you are going to have a problem in finding 
work for all the people you now have on the west coast. 

Mr. VooRHis. So do I. That is the one reason why I am concerned 
about this. 

Mr. Krug. In short, I don't feel it is going to be a problem of 
keeping too much war production out there. Your problem is going 
to be to use the resources released from the war effort. 

Mr. VooRHis. That is true. But we have got to take something of 
a long-range view of that unemployment ]3roblem itself. 

Mr. Krug. I think you should have that come gradually rather 
than hit you ail in one day. 

Mr. VooRHis. I do, too. Would you agree generally on this 
proposition that where civilian goods would have to be imported to 
the west coast from the east coast that it would be just as reasonable 
to ship a certain amount of war goods from the east coast to the west 
coast, transportationwise as it would be to produce those war goods 
on the Pacific coast, and shift civilian goods just for our own con- 
sumption ? 

Mr. Krug. Yes. 


Mr. VoORHis. I heard you say that the aUiininum plants couldn't 
be started out there because of the manpower shortage. Only yes- 
terday I read an article in the Los Angeles Daily News where Mr. 
Fay Hunter and other big Government officials on the coast luid 
pointed out that the aircraft and shipbuilding industries are today 
employing 300,000 people less than they employed at the peak and 
there will be 100,000 more people discharged by those two industries 
between now and July, and that they hope the net unemployment at 
that date will be no more than 25,000 people. 

How does that fit with the manpower shortage? 

Mr. Krug. You will recall that it was 21/2 months ago that the 
decisions were made as to what aluminum plants we could continue 
on to get the supply. 

]\Tr. VooRiiis. I shouldn't have mentioned aluminum, maybe. 

Mr. Krug. I think your situation is going to improve greatly 
during the next ?> or 4 months. 

Mr. VooRHis. How soon are we going to get a recognition of that 
fact and get a change in the restrictions on the production flow? 

Mr. Krug. As far as we are concerned, we feel that our controls are 
such that the instant your labor eases up out there, the controls on 
the spot basis ease up with it. For example, the reclassification of 
labor areas is automatic. As soon as the labor area is noncritical, the 
spot authorization goes in effect with everything exactly the same as it 
was last summer. 

Mr. Voorhis. I don't exactly agree. That would happen if it 
weren't for the fact that some of the big employing groups, I am afraid, 
sometimes have a particular interest in maintaining a tight-labor area 
classification. I thi]ik that Government officials are going to have to 
watch that tendency pretty carefully on their own hook. You don't 
need to answer that. 

Mr. KRua. We have been worried about the speed with which these 
reclassifications will be made. If they are not made, we are in 
trouble. The War Manpower Commission tells us, "Don't put pro- 
duction in critical labor areas. If you do, we won't promise to get 
out war production." 

At the same time, if the plant isn't sufficiently flexible to adjust 
immediately, not after labor becomes loose, but when the proper timing 
comes as to when it is going to become loose, we are in trouble because 
we don't have the production started in time to take up the slack. 

Mr. Voorhis. I just have two more questions. 

The first one is about farm machinery. I am on the House Agricul- 
ture Committee, Mr. Krug, and we have been deeply concerned, because 
it appears to us that a certain amormt of steel and other materials are 
being permitted to be used in other nonwar production when still 
there isn't very much being done to increase production of farm 

I would like to have you comment on that. I would also like to 
have you comment on my personal observation to the effect that the 
problem may be complicated by the fact that large-scale producers, 
not only in this line but in other lines, may not want to see some of 
these things produced for the civilian economy too quickly because 
they think that the smaller producers will get the first whack at it. 
Mr. Krug. I don't think you are asking me to answer the second 


part of your question. But on farm fachinery the conflict has not 
been with nonessential production. Farm machinery has been de- 
layed for two reasons. In the first place, the castings that they need 
are in direct conflict with the military, and there has been a shortage 
of castings for the military itself. 

In the second place, they have been short of labor. 

Now, we have taken steps. I hope the press people won't use this 
until it is officially released from the War Production Board. We have 
restored the allocation to production of farm machinery on the level 
of the first quarter, because we feel the change in the military picture 
is such that we should not cut that production down but builcl it up. 
So they will go back to that rate. 

They will still have this basic difficulty that has affected the total 
production. They will still have the problem of getting steel. We ' 
could have given them many more steel tickets, but you wouldn't have 
any more machinery because the foundries were the bottleneck. 

Mr. VooRHTS. Do you think the foundry labor has had anything to 
do with that? 

Mr. Keug. We thought it did and we adjusted it. Now the foundry 
people tell us it is on the right level, and I think we have to take 
their word for it. 

Mr. VooRHis. Finally, as far as small business having prior op- 
portunities, insofar as it fits with the war effort toward getting 
started at reconversion, you would agree that insofar as that can 
be done it should be done? 

Mr. Krug. Yes, sir. 

The Chairman. Mr. Wolcott, did you have anything? 

Mr. WoLcoTT. I have nothing. 

The Chairman. Mr. LeFevre? 

Mr. LeFevre, Mr. Folsom brought up the matter of surplus in- 
ventory in plants that have their contracts terminated. Wouldn't 
your board be in better shape to know where to dispose of their 
surplus inventories than the Surplus Property Board? 

Mr. Krug. We have in the past helped a great deal on that, and 
we still have regional staffs that help. However, when the board 
was set up — I think even dating before that — we gradually tried 
to turn over our responsibility to the group officially set up to do it. 

I think, as a continuing proposition, the board is in a better position 
to do it than we are, because the surpluses will be a factor during 
the war, but a much greater factor in the peace and they ought to 
be organizing the kind of group they need to specialize in that kind 
of problem. We have offered to help them in every possible way. 
And, as I say, we still have in our field offices a group of people 
who know plants in short supply and they refer them to these sur- 
plus inventories where they seem to match their needs. 

The Chairman. Mr. Murdock, do you have any questions? 

Mr. Murdock. I think not, Mr. Chairman. My questions have 
been asked and answered. 

The Chairman. Mr. Simpson? 

Mr. Simpson. Mr. Chairman, with your permission I would like 
to ask a question or two for Mr. Fogarty, who had to leave. 

Of the available lumber today, Mr. Krug, Mr. Fogarty would like 
to know to whom it is being allocated. 


Mr. Krug. We could give him that in detail. It is being allocated 
pursuant to a pattern which gives priorities to war contractors and 
the Army and the Navy. Most of it goes into those channels. Another 
considerable segment goes to construction that we have approved as 
essential in the war. Then, there is a small-order exception which 
takes care of the farmer and the fellow who has a little repair to do, 
and whatnot, and that accounts for the balance. We do not have the 
detailed customer-by-customer allocation. 

Mr. Simpson. Is any of it being allocated to lease-lend? 

Mr. Krug. I don't think it has been allocated to liberated countries. 
Some of it is going to Great Britain. They have wanted to get some 
for bomb repair, but we haven't been able to give them any more 
than they need for the war effort. 

Mr. Simpson. Is any of it being sent to foreign countries to re- 
build their cities? 

Mr. Krug. As I said, the only case so far is Great Britain, and they 
have requested some, but so far we havn't been able to allocate it. 

Mr. Simpson. Mr. Fogarty would further like to know how long 
it will be before lumber will be available for private and public con- 
struction, such as schools and hospitals ? 

Mr. Krug. I think there will be a degree of easing after resistance 
in Germany collapses, but it will not come immediately on VE-day. 
There will be a tight lumber supply, I think, for the entire period of 
the Japanese war. I think we ought to except the smaller user of 
lumber, the fellow who wants to build a small house, and essential 
public buildings. The bigger projects will have to be decided on the 
project-by-pro]ect basis in the light of the lumber available. 

Mr. VooRHis. What about veterans' hospitals? 

Mr. Krug. We will take care of that. 

Mr. Simpson. I would like to ask two short questions for myself. 

Mr. Krug, on the suppliers of automobile manufacturers, what has 
been done to take care of them ? 

Mr. Krug. They are being treated exactly as the automobile in- 
dustry is being treated. 

Mr. Simpson. There are thousands of them and I was wondering if 
they were receiving the same treatment. 

Mr. Krug. It is hard to make sure they get the same treatment. 

Mr. Simpson. As far as possible ? 

Mr. Krug. Yes. We have tried to broadcast it down through the 
industry that they had better take care of these get-ready steps. 

Of course, that is of great interest to the industry on the assembly 
end, because if their supplies aren't ready to go, it isn't going to help 

Mr. Simpson. One small supplier can stop the production of one 

Mr. Krug. They have been very conscious of that, and some of them 
have been to elaborate pains to try to make sure their subcontractors 
will be ready to build. 

Mr. Simpson. I have had an instance or two — I think I called your 
office about it, and the War Food Administration. I have an instance 
of where a returning veteran has been honorably discharged, and was 
engaged in agricultural pursuit before he went into the service and 
could not get farm machinery to go back to his agricultural pursuit 


Nothing was able to be done about it before this spring. I did re- 
ceive a letter that they hoped to take care of it by fall. What can you 
tell me about it now ? 

Mr. Krug. We are at fault to the end that production isn't up to 
the desired level. As I explained before, that is because so far the 
conflict has been with direct military and we can't produce more 
machinery than we have been producing. However, the allocation 
of that machinery, as to who gets it, is entirely in the hands of the 
War Food Administration. They backed away on the decision some 
6 months ago, saying that they weren't in any better position to de- 
cide who should get it than the dealer was. At the present time, if 
the veteran is to be taken care of, it would be through some system 
they would work out with the dealers to meet their demands first. 

Mr. Simpson. I can appreciate what you said about the castings for 
that farm machinery. But I do think that if there is any possible way 
to take care of a veteran, honorably discharged, who had been in 
agricultural pursuit before he entered the service, he should be taken 
care of, if at all possible. 

Mr. Krug. I agree with you on that. In our procedures, we do 
everything we can to help him. In some cases it is awfully hard to 
take care of him. 

Right now we don't have enough print to print all the books they 
would like to print. xVny returning veteran can get some fellow who 
wants to print a book to insist on an allocation for l^ook ]:)rint. He 
has no function in the thing other than capitalizing on his status as 
a veteran. 

Mr. Simpson. If he hadn't been in the book-printing business prior 
to the time he went into the service, he would not have a very sub- 
stantial case. 

Mr. Krug. We don't think so either. But that does not make the 
fellow feel very happy, who has been told by some fellow that he 
could get on his feet fast by asking for an allocation of material. 

Mr. Simpson. Where a fellow has been in a certain pursuit before 
he went into service, he should be taken care of to try to get him back 
on his feet if it is at all possible. 

Mr. Krug. Yes. 

The Chairman. Mr. Murdock, do you have a question? 

Mr. Murdock. I would like to ask one question. 

I have not been able to be here during all the testimony. 

I would like a further statement with regard to the strategic and 
critical minerals and metals, as, for instance, copper, lead, and zinc. 

Are you prepared, Mr. Krug, to state how you are now supplied 
and whether you are ready to release for civilian uses those supplies? 

Mr. Krug. I think I can answer it in this way. It appears that 
copper and aluminum, when these adjustments in production can be 
made, with the collapse of Germany, will be in reasonably loose supply. 
Steel will be tight for some period of months. Lead will be exceed- 
ingly tight for some period of months. 

We are going to have to exert desperate efforts if we are going to 
get enough lead production out to take care of some of the things that 
really should go forward. It would be a crime if we couldn't build 
automobiles due to the fact that we didn't have enough lead for . 
batteries. We must pull that production up. 

Tin continues in tight supply, through the Japanese war. 


Zinc will not be too badly off when the production load on the 
European war eases up. 

Rubber, while close, I think will work out. The war demands for 
rubber have been fantastic. They tell us they will conliinie. I have 
a feeling- they can't continue at the levels now })rojectcd. 

That, I thnik, covers most of the basic metals. 

Mr. MuKDOCK. Does it seem to you that we should continue our 
efforts to get domestic production as we have thus far in the war 
period ? 

Mr. Krug. We feel, when it is a question of getting material for 
the domestic economy, as far as production is concerned, we ought to 
do everything we can. The price question is a very ticklish OPA 
question. During the war, we have, as a war agency, sponsored 
subsidies to take care of war production. We don't think we have 
legal authority to take care of peacetime production, but the OPA, 
I presume, could resolve that with increase in price or subsidy as they 
saw fit. 

The Chairman. Mr. Krug, just briefly, I wonder if you could throw 
some light on a question that has been giving me just a little concern. 
We have certain critical materials. You referred to them a moment 
ago, such as lumber, lumber products, paper, and things of that sort. 
To what extent are we exporting these items to other countries where 
those countries possibly could obtain those materials from other 
sources ? 

I realize under our lend-lease, good-neighbor policy, and all that, 
there is some urge, and possibly necessity, for sending a lot of these 
strategic materials to the countries concerned, but, is there proper con- 
sideration being given to the availability of those materials by those 
countries from other sources? 

Mr. Krug. Well, I guess I shouldn't try to tell 3^011 a perfect job has 
been done, but it has received a great deal of attention. With that par- 
ticular problem in mind, Justice Byrnes created some time ago a 
committee, including all of the top-side war agencies, to concentrate 
on problems of that kind, to make sure that we are not drawing down 
our economy unnecessarily for export demands. 

I must say that the people who are primarily responsible for export 
demands, such as the Foreign Economic Administration and the State 
Department, feel that our policy has been most niggardly and we 
haven't given them enough to really supply their economy in our own 
interest, so that we will have the kind of world-wide basic economy 
that we need to secure the peace. 

I think we have probably done a pretty fair job. I don't think 
there is any great leak there in terms of short materials that we need 
in this country. 

The Chairman. I shall not pursue that further. I wanted to get 
your views, broadly, on that question. 

Mr. Krug, we are very grateful to you for your attendance here 
this morning.' We appreciate your forthright manner in presenting 
these problems, and I am sure that the committee feels as I do, that you 
are doing good work on a rather difficult job. 

Since there are some conference reports on the floor, I am afraid 
we won't have an opportunity to hear Mr. Small, but if Mr. Small has 
a prepared statement, we will be glad to have it for the record. 


Mr Krug. We might give you an explanation of how these com- 
mitees work. We have some material that we will send up that outhnes 
just how these committees operate. 

The Chairman. We will appreciate that. 

Mr. Krug. Thank you for your courtesy, Mr. Chairman. 

The Chairman. Thank you. ^ i x 

(Whereupon, at 12:01 p. m., an adjournment was taken.) 



House Of Kepresentatives, 
Special Committee Postwar 
Economic Policy and Planning, 

Washington^ D. C. 

The special committee met, pursuant to notice, at 10:45 a. m., in 
room 1012, New House Office Building, Hon. William M. Colmer 
(chairman) presiding. 

Present: Representatives Colmer (chairman), Zimmerman, Wol- 
verton, O'Brien, Simpson, and LeFevre. 

Also present: Marion B. Folsom, staff director; A. D, H. Kap- 
lan, and Edwin B. George, consultants for the committee. 

Witnesses : Raymond Rubicam, member of the research committee 
of the Committee for Economic Development, accompanied by Howard 
B. Myers, executive secretary of the research committee of the Com- 
mittee for Economic Dc^velopnient. 

The Chairman. The committee will come to order. 

With the victory in the European field, the advancements in the 
Pacific and, we hope victory in a short time in that theater, we natur- 
ally come closer to postwar problems, and with that arises the ques- 
tion that so many of us are interested in, about when and where to 
drop some of these Federal controls. 

I think there is one think we are all agreed upon in this committee, 
and that is, we want to get rid of these governmental controls as soon 
as possible, yet consistent with ultimate and speedy victory. 

We all recognize the necessity for these wartime controls but we 
dislike very much to think of them as perpetual, so with that thought 
in mind, we have arranged these meetings. I am going to ask Mr. 
Folsom, the director of our committee, at this point to make such state- 
ment, either adding to, differing from or independent of, the state- 
ments that I have just labored with. 

Mr. Folsom. Mr. Chairman, as we indicated in the fourth report ^ 
that the committee issued on the economic problems of reconversion, 
the removal of war-time controls is a question which the committee 
thought it should take up actively. We have been able to get Mr. 
Edwin B. George as consultant to the committee to help with this 
work. He is with Dun & Bradstreet in New York and has also had 
quite a little experience with the WPB in the last 2 or 3 years in 
special studies for the chairman of the War Production Board on the 
question of controls. 

We thought it would be advisable to have a series of hearings to 
give the committee the background of this problem. Our witness today 

iH. Rept. 1855, 78th Cong. 

99579 — 46— pt. 7 3 2107 


is Mr, Kubicam, representing the Research Committee of the Committee 
for Economic Development, which has made quite a study of this 
problem, and we have asked him to give us a broad background of 
what the problem is and their idea as to when the controls should be 
removed. Then we also plan to have with us members of the National 
Planning Association who have studied this problem quite extensively ; 
Mr. Moulton of Brookings Institution and Eric Johnston, president 
of the Chamber of Conmierce of the United States, We have asked 
Mr. Bowles of the Office of Price Administration next week to give his 
views and later we will probably have Mr. Krug again, then Mr. Clay- 
ton to tell us about the export foreign trade controls and someone to go 
into the question, of Federal reserves, the question of removal of con- 
trols on installment payments and financial controls. That is our 

The Chairman. Our witness this morning is Mr. Rubicam, member 
of the research committee of the Committee for Economic Develop- 
ment and also of the firm of Young & Rubicam. 

We are very glad to have you here this morning, Mr. Rubicam. I 
wonder if I might just digress to say that, as a member of this com- 
mittee and I think I speak pretty largely for the committee as a whole, 
we are very appreciative of the splendid work that the Committee for 
Economic Development is doing in this field. Personally, I think it 
has done one of the finest jobs of any organization that has under- 
taken some of these tremendous problems. We are glad to have you 
with us, Mr. Rubicam. 

Mr. Rubicam. Thank you for those remarks, INIr. Chairman. I 
know that my associates will be glad to hear that. Perhaps you 
have already told them, but I will tell them, too. 


Mr. Rubicam. My name is Raymond Rubicam, Until several 
months ago I was chairman of the board of the national advertising 
agency of Young & Rubicam, Inc. I am interested, as a director and 
owner, in a number of other companies, three of them small businesses. 
I am a member of the research committee of the Committee for Eco- 
nomic Development, and was chairman of the subcommittee which 
drafted the recent CED policy statement on Postwar Employment 
and the Removal of Wartime Controls. I am here to present and to 
interpret the views expressed in that statement. 

The primary purpose of the CED is to encourage and assist busi- 
nessmen to make their maximum contribution to the achievement and 
maintenance of high production, high consumption, and high employ- 
ment in the Nation. These objectives must be attained within the 
framework of a vigorous and expanding economy in which the great 
volume of jobs will be provided by free private enterprise. 

To this end, the CED had helped organize more than 2,800 local 
CED committees, with a working membership of more than 60.000 
businessmen. The CED's National Field Development Committee 
acts as a clearing house for the best ideas on company planning and, 
through the local committees, gives assistance to individual companies 
and businessmen in the form of market studies, step-by-step planning 
procedures, hand books, panel discussions, sound slide films, charts, 
and so forth. 


But the efforts of individual businessmen and companies to expand 
and increase employment — important as they are — cannot succeed 
unless we have a favorable economic climate in which individual plans 
will have a chance to become realities. For this reason, the CED 
established its national research committee. Its work is to study 
economic conditions and economic policies objectively and impartially, 
in order to discover what policies, whether of government, business, 
labor, or agriculture will create a climate in which such growth can 
take place. 

Following such studies, the research committee from time to time 
issues recommendations as to the policies which, in its considered 
judgment, should be pursued if we are to have a high level of jobs and 
production after the war. The statement recently issued, and which 
I am here to discuss, called Postwar Employment and the Removal 
of Wartime Controls, is one such policy statement. 

I wish to emphasize that the research committee's recommenda- 
tions on this subject are the result of long and careful study. While 
the committee has been assisted by an able group of economists, the 
conclusions reached are those of the businessmen themselves. The 
committee's study of the subject of wartime controls has extended over 
a period of nearly a year, during which all angles of the problem were 
carefully explored. The committee's statement is thus a responsible 
one, arrived at in a responsible manner by responsible businessmen. 

The Research Committee's statement does not necessarily represent 
the views of all of the 2,800 local CED committees or of all of their 
members, since they did not participate in the discussions from which 
the statement was developed. It does represent, however, the unani- 
mous views of the businessmen who are members of the research 

At this point I should like to name the members of the committee : 

Ralph E. Flanders, chairman; president, Federal Reserve Bank, Boston, Mass. 

William Benton, vice chairman ; chairman of the board, Encyclopaedia Bri- 
tannica. Inc., New York, N. Y. 

Chester C. Davis, vice chairman ; president. Federal Reserve Bank, St. Louis, Mo. 

William C. Foster, vice president, Pressed & Welded Steel Products Co., Inc., 
Lonj? Island City, N. Y. 

Paul G. Hoffman, president, Studebaker Corp., South Bend. Ind. 

Eric A. Johnston, president, Brown-Johnston Co., in care of Chamber of Com- 
merce of United States, Washington, D. C. 

Ernest Kanzler, chairman of the board, Universal Credit Corp., Detroit, Mich. 

Raymond Rubicam, 444 Madison Avenue, New York, N. Y. 

Gardner Cowles, president and publisher, Des Moines Register & Tribune, Des 
Moines, Iowa. 

Donald David, dean. Graduate School of Business Administration, Harvard 
University, Cambridge, Mass. 

John Fennelly, partner, Glore, Forgan & Co., 135 South LaSalle Street, 
Chicago, 111. 

Beardsley Ruml, treasurer, R. PI. Macy & Co., Inc., New York, N. Y. 

Harry Scherman, president, Book-of-the-Month Club, New Y^ork, N. Y. 

Marion B. Folsom, treasurer, Eastman Kodak Co., Rochester, N. Y". 

R. Gordon Wasson, vice president, J. P. Morgan & Co., Inc., New York, N. Y. 

Copies of the committee's policy statement have been supplied to 
3^ou. It is brief and I urge each member of your committee to read 
it in full. I shall now summarize its principal findings and recom- 

First, the committee lays down the basic principle that controls 
should be removed as soon as possible after the emergency need for 


them has passed. This does not mean, however, that the duration of 
the emergency will be the same for all controls. With some specific 
controls the emergency is beginning to end now; in other cases it will 
end Mith victory over Japan; in still others it may extend for some 
time into the postwar period. With some specific controls, gradual 
steps toward removal will be advisable — with others removal can be 

Clearly, no control should be removed at a time when its removal 
would jeopardize any phase of the war effort or threaten the success- 
ful transition to a healthy peacetime economy. But we should guard 
against indefinite continuance of any of these emergency controls just 
because they are there, or because they have worked well during the 

The second general principle which the committee believes should 
guide the removal of wartime controls is this: Controls are interde- 
pendent, they supplement one another. The ending of each control 
must, therefore, be considered in the light of its relation to other 
controls. For example, price control would be more ditlicult if ration- 
ing and wage controls were ended. As controls are so interdepend- 
ent, their suspension or removal must be effectively coordinated. 
Piecemeal action by separate agencies subject to conflicting pressures 
would not ])roduce orderly demobilization. 

The third principle which the committee believes should guide us 
is this: That until victory over Japan is won, controls should be re- 
moved by administrative action only where the need for them no 
longer exists. It is universally conceded that if legislative authority 
to control is ended and later needed, its timely restoration would be 
difficult, if not impossible. 

World War I showed us that the forces of demand and supply were 
not sufficient to cope with the economic problems of modern war, and 
showed us the need of controls. But even with the controls then put 
into effect, the war years 1917-18 brought rising prices, delays in 
conversion, maldistribution of vital materials, waste of manpower, 
consumer shortages, and hoarding of both raw materials and con- 
sumer goods. 

Moreover, in World War I controls were removed too early. In 
late 1918 and early 1919 came a fall in prices, a decline in business 
activity — what might be called a temporary deflation. But this was 
a trap for the unwary. By June 1919 prices had reboiuided and were 
well started on a dizzy spiral of inflation. Then in 1920 they crashed, 
carrying the Nation into depression and unemployment. Out of that 
experience and the experience of other nations, we formed some new 
convictions about how the job ought to be done next time. 

In consequence, we set up controls in this war with a fourfold 
objective : 

1. To insure a more effective use of our resources for victory; 

2. To provide equitable distribution of the more vital civilian goods 
and services ; 

3. To prevent a disorderly rise in prices ; and 

4. To facilitate a safe return to a peacetnne econom3^ 

Each of these reasons is of vital importance to the Nation ; together 
they are all-important. But it is obvious that the first one, "to insure 
a more effective use of our resources for victory," is the most compelling 


one. As we move toward total victory there is bound to be a mounting 
demand for removal or crippling of controls which may still be needed 
in the transition period to help us win the peace as well as the war. 
With victory over Germany won, we now face the first test of our 
determination to decide the continuance or removal of controls with 
full regard for all four requirements of our objective. 

From now until the end of the Japanese war, we shall be confronted 
with a set of abnormal and unbalanced conditions marked by — 

a. Shortages of many civilian goods, particularly durable and semi- 
durable goods. 

h. Large accumulated purchasing power. 

c. Low output of many shortage goods. 

d. Sui'pluses of important raw materials, and of manpower in many 

The seriousness of these conditions at VJ-day will depend on the 
length and character of the war and the speed and extent of recon- 
version at that time. 

Shortages will be most severe in the field of residential dwelling 
and consumer durable goods, the production of which has been re- 
stricted or prohibited during the war period. Shortages are expected 
in such semidurable goods as clothing, textiles, rubber goods, shoes 
and other leather goods. While food shortages are expected to end 
earlier, the}^ inay continue to be serious in some lines throughout the 

Where we have shortages, the demands of other counti'ies will accent 
them. American production facilities will be called u])on to help sup- 
ply food and clothing and to help rebuild the economies of war-ravaged 

Shortages will be relieved to some extent by surplus supplies held 
by the armed forces and other Government agencies. The probable 
size and composition of such surpluses have been discussed in the 
CED policy statement Postwar Employment and the Liquidation 
of War Production. Some of these supplies will be suitable to relieve 
civilian shortages at home or abroad. At the same time care nmst 
be taken to see that they are not disposed of in such a way as to disrupt 
production here or abroad. 

In contrast to this shortage of civilian goods, we have an unprece- 
dented total of potential purchasing power available in the hands of 
civilians. Aggregate savings by individuals since Pearl Harbor have 
been well over a hundred billion dollars, about half of which is im- 
mediately available j)urchasing i)ower. Many types of family debts, 
which constitute a brake on spending in ordinarj' times, have been 
retired or reduced; long-term farm debts have been reduced by more 
than a billion dollars. 

On the other hand we face some decline in current earnings of work- 
ers, and in the aggregate income of the Nation. Even if wage rates 
are fully maintained, reduction in ciirrent income will occur as a re- 
sult of the elimination of overtime pay. shifts to lower-wage-rate 
civilian industries, and a drop in total employment from its abnor- 
mally high wartime level. 

The over-all effect of these influences will be largely governed by 
the speed with which workers are reemployed, by wage levels, and by 
general confidence in the future. But there is a strong chance that 


risiiio- consumer deniaiid, amplified by the need of distributors to re- 
plenisli nondepleted inventories, may so exceed quick supply that, Avith- 
out effective price control, inflation might sweep the economy. Even 
with such control, rapid expansion of production is of utmost im- 
portance as the only real protection against inflation. 

How speedily high i)roduction can be achieved will vary from in- 
dustry to industry. From a few days to 6 months and more may elapse 
after the go-ahead has been received by a plant before large-scale 
civilian production can get going. In the case of most consumer dura- 
ble goods, such as automobiles, electrical equipment, and washing 
machines, there will be delay while physical reconversion of plants 
is under way. With most semidurable and perishable goods there 
should be little delay, for usually these industries have negligible 
reconversion problems. 

It should be ])arti('ulMrly noted tliat even when war i^ermits a rapid 
increase in civilian production, there will be a considerable delay be- 
tween actual producticm and the putting of goods into the hands of 
consumers. Much of the first wave of civilian products must go into 
facilities and a rebuilding of inventories, while high civilian pur- 
chasing power will be pressing on the market. 

Factors peculiar to particular industries will appear. Reconver' 
sion of the construction industry involves, for example, not only the 
problem of materials and eciuipment. but the length of time required 
for building, together with questions of financing, location, and so 
forth; these may be expected to cause a considerable delay before the 
supply of homes can catch u}) with the accumulated demand. But this 
delay may mean that building will hit its full stride when demand in 
other lines has begun to tai>er off, and will thus help combat deflation- 
ary influences. 

In contrast to the shortage of finished goods, there will be growing 
surpluses between now and VJ-day in important raw materials, and 
in manpower. As such surpluses grow, rapid expansion of production 
is imperative, but no advance time table can be laid down wth cer- 
tainty. The timing, volume, and type of military cut-backs and the 
length of time between VE-day and VJ-day will be determining 
factors in the degree of reconversion possible. 

Should victory over Japan come sooner than expected — before 
civilian production could get well started — a longer period of control 
might be necessary, although some controls would be removed faster. 
If, on the other hand, a considerable period intervenes between VE-day 
and VJ-day and the cut -backs are very large, reconversion may have 
reached such an advanced stage that few controls would be needed 
after VJ-day. 

A long war, while making the process of reconversion gradual and 
thus reducing the severity of the shock to our economy, would increase 
and extend problems such as, for example : 

Keeping adequate manpower on war production jobs in the face 
of temptation to switch to civilian work ; 

Deciding which plants in an industry may reconvert and which 
must continue in war production; 

Determining whether or not and how to allocate still limited ma- 
terials to competing civilian firms and uses; and 

Coping with regional dislocations. 


Although the period between VE-day and VJ-day will be a con- 
fusing one, this should at all times be kept in miiid : war controls 
exist to serve emergency needs. They should be relaxed or suspended 
at the earliest moment they no longer serve a definite need. There 
is a national obligation to have a civilian economy ready to pick up 
the slack in the interim period, and to shoulder the whole load at the 
earliest possible moment after coniplete victory. 

Both inflationary and deflationary pressures may plague us. In 
those fields where there are great surpluses and/or production is ex- 
cessive with relation to peacetime demands, prices may go down and 
business failures and unemployment result. In fields which are still 
short, and where civilian production picks up slowly, strong upw^ard 
pressures will set in. 

Thus concurrentl}^ the economy may feel the strain of inflationary 
and deflationary pressures. Analysts differ as to which of the two will 
become dominant. 

Our greatest danger may actuall}'' be : Successive deflation, iiiflation, 
and deflation. It is not generally recalled that at the end of World 
War I inflation did not begin immediately. In December 1918 a sharp 
decline in prices started. People assumed the economic home front 
was safe from inflation. Then, when they were unprepared, inflation 
struck. That inflation, as we have noted earlier, continued until May 
1920, when the depression began. 

Signs of deflation may appear first and yet be a trap similar to the 
decline beginning in December 1918. We may drop our guard and 
he a set-u]) for later inflationar}^ influences. 

Hence the timing and the manner in which controls are to be ended 
must be coordinated not only with the progress of war production 
cut-backs, but with probable economic consequences. If deflation 
should occur and continue, the present controls are not adapted to 
meet that threat and they could be ended the more rapidly. In that 
case policy must focus much more on the skillful use of "indirect" 
controls. This problem is now being analyzed in a CED study on 
business fluctuations. 

Insofar as deflation may affect farm products, it will be treated in 
a separate CED study on agriculture. But whatever national 
policy may be needed or recommended by the committee in reference 
to agriculture, the committee is opposed to a policy of price floors and 
direct controls of surpluses in other activities. It belieA^es that such 
controls would perpetuate existing maladjustments, eliminate the 
stimulus to consumption caused by low prices, and be detrimental to 
expansion and employment. Ours must be an economy of abundance. 
Scarcity should not be perpetuated and sponsored. 


Depending upon the specific need, many different types of controls 
have been set up on the production front. For example, there have 
been prohibitions or limitations on the production of less essential 
civilian goods. There has been allocation or controlled distribution 
of essential materials and components. Inventories have been re- 
ported regularly and limited as to their size. Standardization and 
simplification orders have served to reduce the number of models 



In cutting back, each of these may require different handling, but, 
in general, the committee believes that : 

Prohibition or quota limitations on production should be among the 
first suspended. Action on this by the War Production Board has 

When production restrictions are suspended, orders requiring the 
use of substitute materials should also be ended to the fullest extent 
permitted by the availability of materials. 

The suspension of production controls should be paralleled by the 
suspension of construction controls, subject to available materials and 
manpower. Cases of industrial construction which will aid employ- 
ment are particularly important. They should be facilitated at the 
earliest possible moment. 

Materials and components should still be allocated for military ])ur- 
poses and ample strategic stock piles held until the end of the Japanese 
war. The military should not have to compete with civilian industry 
for its supplies. 

Allocation controls for civilian production should be ended selec- 
tively at any time a serious shortage of a particular material no longer 
exists, and supply and demand come close enough in balance to remove 
danger of inflationary price levels. 

Inventory limitations should be suspended by administrative action 
as soon as the supply of the particular materials or product is suf- 
ficient to remove allocation controls. As long as there is any threat 
of inventory hoarding, however, it is desirable that some form of 
inventory reporting be required to permit authorities to spot this 
potent symptom of inflationary pressure. 

It must be borne in mind that ending controls will not, in itself, 
create high production. So long as there are existing shortages of 
certain materials, the freedom of civilian industry may in some cases 
be more illusory than real. In many fields, however, there will be a 
progressive easing of important materials, and VJ-day will bring 
surplus. And even where needed materials are short, the use of 
ingenuity and resourcefulness by industry will often lead to accept- 
able substitutes. 

The pattern between VE-da}'^ and VJ-day will present such difficult 
problems as these : 

a. Materials may be available when production facilities and man- 
power are still tight ; or both materials and facilities may be available 
while manpower is still short, or vice versa. Local or regional short- 
ages of labor may exist concurrently with a national manpower sur- 
plus. These situations present various problems. No simple rule can 
be given to solve them. 

h. Materials, facilities, and manpower may be available in limited 
amounts which are far less than needed to fill the combined war and 
civilian demand. This would impose difficult problems of establish- 
ing limited production quotas for some industries and for units of an 

Policy in this period must prevent a competitive scramble for 
scarce materials, which might have dangerous effects. Such a scram- 
ble might interfere with military needs. Small business would suffer 
in comparison to large. The pressure on the price structure might 
prove irresistible. 



If price controls were suddenly ended while supplies were still in- 
adequate, prices might soar chaotically to inflated levels. If the war- 
time pattern of prices were rigidly maintained, existing maladjust- 
ments in costs and prices would retard postwar business expansion. 

Prices hold a key position in the whole control problem. 

The heart of the committee's views on the administration of price 
controls is expressed in the following sentence from the report: 

General price advances should be resisted, but prompt adjustment should be 
permitted prices which deter production because they do not bear a reasonable 
relation to cost at normal levels of production. 

The objective should be a level of prices high enough to induce the 
required expansion of production and employment, and at the same 
time low enough to maintain the necessary consumption under normal 
conditions of demand and supplj^ 

The individual producer who cannot produce profitably at ceilings 
which are adequate to draw out most of the volume of an industry 
should be afforded relief through administrative action, but the price 
level of the industry should not be fixed for him. 

The more nearly the objective cited can be reached in the period 
between VE-day and VJ-day the better. The attaining of this objec- 
tive under price control will depend not simply upon price admin- 
istration, but also upon materials, facilities, and production during the 
control period. 


^Production of consumer durable goods is now being resumed. 
Because many of these have not been manufactured since 1942, there 
will b^ a tremendous demand which will threaten to force prices 
upward. Control of prices must continue in that period, and as much 
longer as it may be needed. 

Prices, of course, must be related to existing cost levels rather than 
prewar cost levels, but it is important prices be set on the basis of 
long-run rather than short-run expectations as to cost and volume. 
The goal should be a scale of prices as low as possible, which will 
stimulate a high rate of consumption and still allow a reasonable 
margin of profit to encourage high ])roduction. This will provide 
the most stable prospect for production and employment in postwar 

Manufacturers and distributors should not be permitted to increase 
their prices — on a supply and demand basis — to take advantage of 
the temporary shortage of supplies and the large accumulated demand. 


Price policies on perishable and semidurable goods are much more 
subject to short-run influences. Among these goods are food and 
clothing and others which represent basic necessities of living. Price 
stabilization in these areas has, therefore, a greater social importance 
than in the case of more durable goods. 

What can happen in the case of food products is well illustrated by 
the gyration in the price of raw sugar in World War I and after. 


From a low of 4.99 cents per pound in 1918, it rose to 22.5G cents per 
pound in 1920 and then collapsed to 2 cents per pound in 1921. 

Price ceilings on many perishable and semidurable articles will 
probably be necessary for some time after the war. Such price ceilings 
should be raised when it is clear that they are lower in relation to 
current costs than a stable level of peacetime prices would justify. 


Rent controls should be liquidated as soon as practicable. Never- 
theless they may be necessary in some areas for a longer period than 
now seems needed for most other controls. 

When private building can be resumed, policy should bs liberal 
enough to stimulate new construction and to encourage improvement 
and modernization of existing structures. At the same time, if any 
more-than-normal gap appears between the cost of new construction 
and rent levels, it should not serve as a basis for upward revision 
of rents on already existing housing. 

Continued control after the war will be necessary in areas where 
housing remains acutely short. Under such conditions, ending of rent 
control would prove inflationary and chaotic. Action to end rent 
controls should take place on a local rather than on a national basis, 
and controls should be ended in any area as soon as serious shortages 


As long as fighting continues anywhere, some rationing will be nec- 
essary. Even after all fighting is over, it may not be advisable to 
end rationing at once clear across the boards. Immediately after 
the war there may be heavy enough shortages of durable and semi- 
durable goods to require some measure of rationing for tli« fair 
sharing of such goods. 

Rationing, moreover, aids effective price control by reducing or 
eliminating the excess of effective demand over supply, thus reducing 
the strain on ceiling prices. 

The committee, therefore, recommends that — 

a. Formal rationing of consumer goods continue wherever serious 
shortages exist. 

b. When shortages cease to be severe, particularly in nonessential 
products, formal rationing methods give way, in advance of the 
removal of price control, to informal dealer-controlled rationing. 

Informal rationing has two points to recommend it: First, formal 
rationing will probably be increasingly difficult to enforce as the 
end of the war approaches, and still more difficult after the fighting 
stops; second, in the case of many articles, the American people are 
likely to prefer some inequity to the continued red tape or formal 


The application of manpower controls should end at any time 
from now until VJ-day in any area where the need for them dis- 
appears. Because of wide variation in local conditions they were 
set up on an area basis after consultation with local management- 
labor committees. For the same reason they should be ended in the 
same way. 


Much of the work of the War Manpower Commission lies in the 
field of facilities and services rather than legal controls — as, for 
example, the United States Employment Service and the several 
training programs for war workers. These will continue to be useful 
in the reconversion period. Their role will be discussed in another 
CED study on Manpower Demobilization and Reemployment. 


The committee believes that while price controls continue, it will 
be necessary to apply hold-the-line standards to wage rates wherever 
the threat of inflation is clearly demonstrated. If wage controls 
were first removed, the pressure for wage increases would be directed 
primarily against the mechanism of price control. It is doubtful 
whether the price-control mechanism could stand the strain. In 
making this recommendation, the committee wishes this to be clear: 
It does not either recommend or oppose any particular formula or 
interpretation of hold-the-line standards. Those are questions to be 
determined by the Government in terms of the facts in the particular 

During reconversion, wage controls should be more flexibly ad- 
ministered, but within the framework of a defined Government 
policy. Increased freedom should be provided for independent 
employer-employee decisions consistent with that policy. General 
wage advances should be resisted, but prompt adjustments should be 
permitted of wage rates which are out of line. 

Flexible administration is of the utmost importance to civilian 
industry to enable it to reach high production in the shortest possible 

The number of decisions which must be made, and made quickly, 
will be great. Workers will shift jobs, old jobs will be redefined. 
Pricing policies will have to be established, staffs built up and trained 
for production and for distribution of products. The review and 
approval of all these actions would be a tremendous administrative 
job, even for the most efficient and fully accepted Government agency. 
The greatest speed will be achieved if these decisions are left as 
broadly as possible to individual establishments to determine on 
the customary basis. To require prior approval of wage increases by 
a Government agency would occasion delay that might retard pro- 
duction, cause continued shortage, and thus threaten inflation instead 
of preventing it. 

Finally, wages in the peacetime economy should be determined 
under conditions of free collective or individual bargaining within 
the framework of peacetime labor laws. 

The Economic Stabilization Act provides authority to prevent 
wage-rate decreases as well as increases. The power to prevent such 
decreases should be exercised up to the time the controls are aban- 
doned whenever such decreases would have a deflationary effect. 


At least until high production has relieved domestic shortages of 
civilian goods, some control over exports should be maintained. 

Although it seems clear that this country should adopt a generous 
attitude in the matter of foreign relief and rehabilitation, the volume 


and type of such exports should be gaged carefully in relation to 
domestic supplies and should not be permitted to become a serious 
factor in promoting price inflation. 

The control over imports during the war has been much less rigid. 
They have been restricted largely by the availability of shipping. 
When the w^ar ends, every effort should be made to encourage a re- 
vival of our import trade, as means of checking an inflationary rise 
in prices. 


Direct financial controls have been applied during the war to 
limit the use of credit for the purchase of civilian goods. Thus, the 
use of charge accounts has been restricted, selling on installment 
credit has been sharply curtailed, and the use of bank credit for 
consumer purchases has also been restricted. 

The committee believes that all these controls should be continued 
until the war ends on all fronts. After VJ-day their retention will 
still be advisable if there are serious shortages of durable goods. 


An important function can be served by the use of indirect finan- 
cial controls during the transition ])e]-iod. If dangerous inflationary 
pressures arise, it would seem desirable to maintain Federal taxes 
at relatively high levels so long as this danger exists. A similar 
check to consumer purchasing power could be provided by continuing 
the Avartime bond-selling campaigns during the early stages of transi- 
tion, supplemented by a vigorous educational campaign to promote 
bond holding. 

As soon as inflationary forces are clearly under control, taxes should 
be sharply reduced as a stimulus to purchasing power and to business 
expansion, (This has been discussed in the CED policy statement, 
A Postwar Federal Tax Plan for High Employment.) 

If such a program is to be effective, it will require careful advance 
planning by the Congress. Thus, the Congress should prepare and 
announce at the earliest possible date a program for postwar Federal 
tax revision. The advance announcement of such a program would 
stimulate both business action and consumer demand. The actual tax 
reduction itself w^ould stimulate them a second time. The plan 
should be ready to put into effect at a time when tax reduction would 
provide an important check to deflationary influences. 


One type of extremist will tend toward the ending of controls too 
early for the sake of freedom of action all along the line. Another 
type of extremist will tend to cling to controls because he cannot 
foresee the full consequences of giving them up. The adoption of 
either extreme view could be disastrous. As reconversion progresses 
and when fighting ends, pressure for complete removal of controls 
will und(>ubtedly grow greater, and even where controls are plainly 
needed and remain they may be emasculated and rendered ineffective. 

No control should be relaxed or ended until it can be done without 
jeopardy to any phase of war production, but on some controls — 


production controls, for example — action must not wait beyond that, 
if high civilian production and employment are to be reached at the 
earliest possible moment. Other controls, notably those affecting 
prices, may have even an increased importance for a period after 
production controls are ended. 

The committee recommends the following procedure for the ending 
of controls : 

From the present until 6 months after final victory, controls should he re- 
moved by administrative action only, wherever the need for them no longer 
exists. During fighting each such suspension must be justified by cut-backs or 
surpluses which make facilities, materials, and manpower adequately available 
over full military needs. 

As controls are interdependent, their administrative suspension must be effec- 
tively coordinated. I^iecemeal action by separate agencies subject to conflicting 
pressures would not produce an orderly demobilization. Adequate powers have 
been given to the Director of Mobilization and Reconversion to control such 

Within six months after final victory, the Director of Mobilization and Recon- 
version should review all controls and should, not later than six months after 
victory, remove all remaining controls not clearly necessary beyond that date. 
A period of six months after final victory will permit substantial reconversion, 
and will also coincide with the expiration of some of the President's emergency 
wa r powers. 

Legislative authority should be contiuTied or extended beyond that date only 
for such wartime controls as may be plainly needed to hold inflation in checii 
during the remainder of the transition period. The legislative authority should 
not, however, lie exercised except as determined by the Director of Mobilization 
and Reconversion. 

At the end of the transition period as determined by Congress, legislative 
authority for the last of the wartime controls should be ended. 

The recommended procedure would end. reduce, or modify most 
controls before or by six months after war's end. Yet it would keep 
us prepared for prompt preventive action if "economic fires" broke 
out later in the transition period. 

National policy on the ending of controls should be clearly stated 
at the earliest possible time. The American people should be informed 
that such policy aims at the complete ending of all wartime controls 
within a limited period of time. 

The Chairman. Thank you for a very informative and exhaustive 
statement, Mr. Rubicam, on this controversial and difficult prob- 
lem of release of controls. 

As I followed your statement, this is one thing that I think we are 
pretty generally in accord on in this committee and that is the neces- 
sity of doing away with these controls as soon as possible as an incen- 
tive to business and economic recovery. As I get the full gist 
of your statement, and I am pretty largely in accord with it per- 
sonally, we should relinquish these controls as rapidly as possible 
without interfering in au}^ way with the war effort. 

Then when you get down to a discussion of the day, the hour, the 
time when these controls are to be released, you seem to have the same 
difficulty that most of us have in fixing the hour. For instance, on 
rent controls, you stated that it is your opinion that these controls 
should be released on a local rather than a national basis. I do not 
know tliat I could improve upon that and yet I recognize this difficulty : 
whenever you leave it to the discretion of an administrative agency as 
to when it is to be released rather than by an edict of the Congress, 
the danger, it seems to me. is always present of that agenc}^ trying to 
hold on and perpetuate itself. 


I am ill accord with the statement that they cannot all be cut off 
but bearing in mind that the Congress provided in most of these war 
powers, war controls, that they should terminate in six months after 
final victory, I am just wondering whether that can be improved upon 
or not. 

That is just a rambling expression of apprehension. 

Mr, EuBiCAM. We agree substantially as to the last statement you 
made on the ending of controls. 

The Chairman. Yes. What I am trying to say is in the final 
analysis, are we not going to have to say beyond a certain date all 
these controls must be eliminated ? 

Mr. RuBicAM. The determination of the end of the transition 
period should be a determination by Congress. 

The Chairman. Yes. 

Mr. RuBicAM. The recommendation here is that individual controls 
be removed and relaxed as necessary to aid reconversion. We recom- 
mend further that six months after the end of the Japanese war, as a 
double check on the administrators, the Director of Mobilization 
and Reconversion examine all controls and cut off any remaining 
after that examination which in his opinion are not needed. 

The Chairman. I wonder if this would not simplify it. Are we 
in accord with this, that there should be a final date fixed by Congress 
beyond which the controls should not go? Pending that, the time 
between the victory and the statutory limitation, the Director of 
Mobilization should have the discretion to remove such controls. 

Mr. EuBicAM. That is right. 

The Chairman. Mr. Zimmerman, do you have some questions? 

Mr. Zimmerman. I was going to ask the witness if, in their study, 
they gave consideration to the time limit fixed by Congress in the 
establishment of most of these restrictions that you have been talking 
about ? 

Mr. RuBiCAM. Insofar as we knew those in detail we have, yes. 

Mr. Zimmerman. I think I have been a member of this body ever 
since the war started and I think we sought to fix a definite date for 
the termination of all these controls. 

Mr. RuBicAM. As I understand it, the termination date varies. 
For instance, the one under which the OPA operates is up for ex- 
tension now. 

The Chairman. If j'ou will pardon the interruption, the OPA is 
HOW in process of being extendecl for 12 months. 

Mr. Zimmerman. I understand that is true, that some of them 
have been extended from time to time. 

Mr. RuBiCAM. That is a case in point. Our recommendation, as 
applied to OPA and its authority, would mean that we would be 
hi favor of i-enewal of that authority. We would actually be in 
favor of the retention of legislative authority for price control until 
six months after the end of the Japanese war. That authority need 
not be granted for the full length of time at once. We testified in 
favor of a renewal of at least 1 year without amendment, our 
feeling being that a renewal for less than 1 year would indicate 
a loss of belief by Congress that price control was essential. 

Mr. Zimmerman. And would reflect on the public. 

Mr. RuBiGAM. And would reflect in the public mind, unquestionably. 


Mr. ZiMMEEMAN. Do you think that is a matter that Congress has 
got to give consideration to as the time arrives and confronts them? 
I take it that is your recommendation. 

Mr. EuBiOAM. Yes, we believe that the final decision should abso- 
lutely be in the hands of the Congress. 

Mr. Zimmerman. And it is a matter that Congress will have to 
work out? 

Mr. EuBiGAM. The final termination date in each case. 

The Chairman. Anything further, Mr. Zimmerman ? 

Mr. Zimmerman. That is all. 

The Chairman. Mr. Wolverton. 

Mr. Wolverton. Mr. Rubicam, I note that the committee which 
made this study does not seem to include any representatives of labor 
or agriculture. What explanation do you have for that? It 
would seem to me that those two elements are very important elements 
in arriving at a decision as to what is to be done with respect to con- 

Mr. Eubtcam. That is a good question and I will answer it to the 
best of my ability and maybe Mr. Mvers will supplement my state- 
ment. CED is an organization of businessmen to take the kind 
of voluntary action that businessmen can take to help achieve high 
levels of productive employment. Therefore, the members of the com- 
mittee are all businessmen. However, representatives of labor attend 
all of tlie meetings of the Research Committee and take part in all 

We almost invariably have a rep- esenlative of both the CIO and 
the AFL present. They see all of the niaterials at all stages. Tliey 
are free to express their opinions on any subjects. We have, as a 
matter of fact, been more willing to have them than they have been 
to come. In the earliest days, they did not respond too readily to 
' the invitation. That has changed. They apparently have acquired 
more confidence in CED, and they now attend all our sessions. 

With respect to the situation in agriculture, I know that agricultural 
representatives are wanted in the committee meetings. 1 have heard 
discussions of that subject. I do not know whether any have been 
asked to attend and if they haven't I do not know why; but it is not 
an unwillingness on our j^art to have members of such organizations 
sit in on discussions. 

Do you know what the status is there, Mr. Myers ? 

Mr. Myers. They have attended a number of sessions — not all, I 
think, but all those where the subject under discussion had any refer- 
ence to agricultural policies — those particularly and some others as 

Mr. RuBiCAM. May I add one thing, that not too long ago we had 
a press conference here in Washington on tliis subject of controls, 
Paul Hoffman and I, an economist of the AFL, Mrs. Fage, attended 
the press conference and voluntarily made the observation that these 
decisions had been taken in her presence and with her participation. 

Mr. WoL\T.RTON. Am I to assume from what you have said that the 
conclusions that appear in this booklet entitled "Postwar Employment 
and the Removal of Wartime Controls" and the statement which you 
have made to the committee this morning are concurred in by labor 
and agriculture ? 



Mr. RuiiiCAM. I could not make that statement, no. I do not know 
of any oiiicial endorsement of these statements by leaders either of 
labor or of agriculture. 

Mr. WoLVEKTON. I think that is a very important consideration. 

Ml-. RuBicAM. So do we. 

Mr. WoLVERTON. There is a distinction between beino: given the 
privilege of participating with a group in a discussion and the de- 
cision the group may arrive at which may be entirely different from 
one that I w^ould be in favor of. 

Mr. RumcAM. I wouhl suggest tliat you ask them. 

Mr. WoLVERTOx. The mere fact they were enabled in some instances 
to participate in your discussions does not mean a thing to me in the 
absence of concurrence of established representatives of those indus- 
tries in the conclusion that you have reached. If we may get at it a 
little bit more intimately, who participated on the part of labor in 
these discussi(ms with your business group? 

Mr. RuBiGAM. The regular participant for tlie AFL is an economist, 
I believe, named Mrs. Page. The regular participant for the CIO is 
an economist whose name Mr. Myers may be able to furnish. 

Mr. Myers. Robert Lamb and Lincoln Fairley. Mr. Meany and 
Mr. Carey have also been invited and have attended some sessions. 

Mr. RuBiCAM. Those representatives, sir, fire not of our choice. 
In other words, we would be delighted to have Phili]) Murray and 
William Green attend our meetings. 

Mr. WoEVERTON. What do you mean when you say they were not 
your representatives bj^ choice? You do not mean to infer that you 
were displeased ? 

Mr. RuBiCAM. No ; I mean we did not select the individuals. 

Mr. WoLVERTON. That is what I thought you meant. 

Mr. RuHiCAM. Their presence was definitely by our choice. 

Mr. WoLVERTON. Was the request submitted to Mr. Murray and/ 
Mr. Green ? 

Mr. RuBiCAM. I am sure they have been invited repeatedly to attend 
any meetings of the CED research connnittee. 

Mv. Myers. That is correct. 

Mr. RuBiCAM. We took the initiative in inviting labor representa- 
tives. Mr. Carey, of the CIO, in a speech at a CED meeting, re- 
ferred to the earlier invitations of Mr. Hoffman to him and others 
to attend the CED meetings and admitted his reluctance to attend 
at that time, questioning perhaps the stability or maybe the conclusions 
of the group. He also testified to a change of mind on his part and 
said he thought we were doing excellent work and that we could look 
to him and his associates for any reasonable help they could give. 
That is the nearest thing I know of to an endorsement of the CED 
work by any labor official. 

That would not apply, however, to ever}^ conclusion in this report. 

Mr. WoLVERTOx. No, I should say not. I would understand from 
that statement that they generally approve of the effort that is being- 
made but that they do not necessarily agree with the decisions that 
have been reached. 

Mr. RuBiCAM. That is true of our own local chairmen and local 
committee members, as we say here. There is no way we can get 
the agreement of all businessmen to this, either. 


Tlie job of making these studies and stating policy for CED has 
been delegated to the research committee by the CED trustees. 

Mr. WoLVERTON. AVho are the representatives of agriculture who 
have participated ? 

Mr. E.UBICAM. Mr. Myers, can you answer that ? 

Mr. Myers, I do not believe 1 can. I know Mr. Hutson of Mr. 
Vinson's office has been in a time or two. 

Mr. WoLVERTON. I did not have in mind any (lovernment official. 
I had in mind the recognized agricultural groups of this country. Did 
they have any representative participating? 

Mr. Myers. Mr. Chester Davis and Professor Schultz of the Uni- 
vei'sity of Chicago met with that group several times but I have not 
attended those meetings and I cannot state wdio was there. 

Mr. WoLVERTON. The gentlemen you have mentioned have knowl- 
edge of agricultural matters, but you would not take it that they were 
in a position to speak for agricultural organizations in this country, 
would you ? 

Mr. Myers. No. 

Mr. WoLVERTON. That is what I am trying to understand, as to 
whether the representatives of labor and agriculture have been given 
an opportunity to participate to the extent that you would say that 
the statement wdiich has been made here his morning or that appears in 
the pamphlet represents their views and I take it you do not take that 

Mr. RuBicAM. No, we do not. 

The Chairman. Would you just yield for an observation there, Mr. 
Wolverton 'I 

Mr. Wolverton. Surely. 

The Chairman. Of course, I think we are all in accord that all 
these elements of our economy must be considered — yet, and I am not 
trying to come to the aid of a representative of the CED this morning, 
but as I understand it tlie CED is an organization made up of busi- 
nessmen to make recommendations upon the economy as they see it 
just as labor has its organizations, agriculture, and so on. I think 
thjit all of that must be taken into consideration. 

Mr. Wolverton. Mr. Chairman, I hope that nothing I have said or 
have indicated by my questions w^ould in any way give rise to the 
thought that I do not think it is important to have the viewpoint of 
this organization of businessmen, but from the standpoint of a com- 
mittee of Congress that makes recommendations on this important 
matter, I feel that our discussion of the subject or our consideration of 
the subject should be broad enough to include not only the business- 
men's viewpoint but the viewpoint of labor and agriculture. 

I say that preliminary to a suggestion or request that I was going 
to make and that is that we make some effort to have before this 
committee outstanding labor and agricultural interests to testify with 
reference to this important question. 

I have pending with me, as a result of a meeting with the Interna- 
tional Shipbuilders Union, requests that they be given the opportunity 
to appear before this committee and give their views with respect to 
postwar employment in the shipbuilding industry. I have sat on 

99579— 46— pt. 7 4 



this committee a long while and I have heard a good many business- 
men come before us. 

I have never heard a businessman yet who could give us any solution 
of the shipbuilding situation. There are thousands of employees in 
that industry today that the future does not look very promising for 
and I think that they should have an opportunity to be heard and I 
hope you will r)rovide for that. 

The ChaikMxVN. Will you pardon me, Mr. Wolverton? Of course, 
the distinguished gentleman from New Jersey recognizes that I would 
not undertake to limit his line of questioning of the witness or any 
other member of the committee. 1 just thought that my observation 
there might be helpful. 

So far as hearing from labor and agriculture on these problems is 
concerned, we have set up subcommittees to hear from those people. 
Not only that, but one of the first things that was done when this 
committee was set up was to invite the heads of both the AFL and 
the CIO to appear before this committee and Mr. Green of the AFL 
has appeared as a witness. 

So far, we have never been successful in getting the head or a rep- 
resentative of the CIO to appear before the committee. We recognize 
the importance of labor's point of view and we certainly want to hear 
it and we are going to continue to hear from these various groups. 

The point 1 was trying to make to my learned friend was that, as 
I conceived it, this witness is a representative primarily of a business 
group and that we were getting the point of view of that group. 

Mr. FoL.soM. I would like to say that we have asked Mr. Golden of 
the CIO to appear and he has accepted. We had hoped he would be 
here tomorrow but that date was not acceptable to him. 

Mr. Zimmerman. Pardon me for interrupting at this point but do 
you not think it would be well to have some representative of the 
Grange here before the committee ? 

Mr. FoLSOM. We thought thS subcommittee for agriculture might 
go into that. 

Mr. Zimmerman. That is dealing with a postwar period. This is 
a matter for immediate consideration, as I take it. It is a problem 
that is facing us and which we hope will face us right soon. 

Mr. RuBicAM. Between now and the end of the emergency is the 
time this report deals with. 

Mr. Zimmerman. You can see our committee is not so much con- 
cerned with present conditions as that we are trying to do something 
for a postwar period, the period following the war. 

Mr, RuBiCAM. This, however, is important as a basis or as a spring- 
board for the postwar period. 

Mr. Zimmerman. I think perhaps during this hearing we should 
get the views of some of the men on the things that Mr. Wolverton 
has brought out. 

The Chairman. May I make this observation and then I will turn 
it back to IMr. Wolverton ? As far as the Chairman of this committee 
is concerned, if we can keep these members here and get them to attend 
the meetings, I am perfectly agreeable to continuing these hearings 
right on now pending the recess and during the recess, I do not want 
to cut off anybody and I am sure that is the reaction of our staff. We 
will try to get the broad picture from everyone. 


Mr. Zimmerman. Let us not take up all of the recess for the hearings. 

The Chairman. That is the trouble we run into. 

Mr. Wolverton, I am sorry. Go ahead. We do not differ on this. 

Mr. Wolverton. I was just about to say that I am certain that the 
Chairman and myself do not differ in any respect on tlie objectives 
we are seeking. I merely sought to emphasize or to first ascertain 
that this was a businessman's viewpoint and I thought it equally 
important to have before this main committee the testimony of wit- 
nesses from the labor and agricultural organizations of the country 
in order that we might have a full picture. 

That does not in any way discount or discredit the viewpoint that 
has been expressed on the part of business but it is merely done in an 
effort to supplement the viewpoint of the businessmen. 

The Chairman. Then I helped you to emphasize that. 

Mr. Myers. Could I make a comment on the committee's position 
here? As Mr. Kubicam has indicated, the committee has been anxious 
to have representatives of both labor and agriculture attend the ses- 
sions but, of course, it does not purport to speak for either labor or 
agriculture. I think it is proper to say, from the viewpoint of the 
committee, that the committee would feel it would be highly desirable 
for both labor and agriculture also to study these problems and to 
bring forth their recommendations independently and that this would 
be followed by the interchange of ideas and discussions with the hope 
that the wisest possible policy could be evolved bj^ the Congress. 

Mr. Wolverton. I do not think there is any (juestion of that. 

The Chairman. That is exactly what we are planning to do. 

Mr. RuBicAM. I came in here fully believing it would be your pro- 
cedure to hear from labor organizations and organizations of agri- 
culture. We are frankly an organization of businessmen and, as a 
matter of fact, our first purpose is not the making of such studies as 
the one dealt with this morning. Our first job is the stimulation of 
action and planning by businessmen to create employment. That 
leads, however, to the making of studies to arrive at the policies which 
will aid effective action. That is really the w^ay the emphasis should 

Mr. Wolverton. I agree entirely with the statement the Chairman 
made when he stated that your organization had performed a vei'y 
great service in dealing with that. This committee is appreciative of 
these important matters. 

There is another organization, if I remember correctly, and I am 
sorry I cannot think of the exact name but it is composed of repre- 
sentatives of business, representatives of labor and representatives of 
agriculture. What is the name of that organization? 

Mr. FoLsoM. That is the National Planning Association and that is 
the group we were anxious to have here tomorrow. We were going 
to have Mr. Golden, who represents the labor group and we wanted 
someone from business and agriculture but we have not been able to 
get a date on which they can come, but we have them definitely in mind. 

Mr. Wolverton. They have some very outstanding representatives 
of labor, agriculture, and business in that group. 

Mr. FoLSOM. And Mr. Golden was the man who was going to repre- 
sent labor. 

Mr. Wolverton. I do not want any misunderstanding about 
whether Mr. Golden speaks for labor or not. I think we had better 


contact the heads of labor organizations which would be Mr. Green 
and Mr. Murray and the head of the railroad brotherhoods, possibly, 
and Mr. George Harrison. 

Mr. FoLSOM. All we were trying to do with the first witnesses was 
to give the committee a broad, over-all picture of the whole thing 
and then we will go on down the line. 

Mr. WoLVERToN. Please do not think I am critical of the method 
you are pursuing. I am trying to make certain it covers every ele- 

In view of the purpose to broaden the inquiry sufficiently to include 
the viewpoint of these to whom I referred, I do not think at this 
time I should take any further time in going into tlie matter in this 
l)articular statement. "^ I think it shows a great deal of study and I 
must confess it leaves me somewhat like Alice in Wonderland. It 
has so many implications and so many suggestions and so many pos- 
sibilities that I do not feel that I am in a position to find my way out 
this morning from the standpoint of congressional action so that I 
i^hall give it further study. 

The Chairman. Mr. O'Brien, do vou have some questions? 

Mr. O'Brien. No. 

The Chairman. Mr. LeFevre. 

Mr. LeFevre. ]\Ir. Rubicam. I am wondering Avhen the Congress 
should announce a definite date when all controls will be released, 
would there not be a tendency on the part of industry to build up 
huge inventories for the time when such releases are off? Wliat effect 
woidd tliat liave throughout the country? 

]Mr. RrniCAM. I do not know that working out the fonnula laid 
down here would include the announcement of a final date far in 
ndvance. What we refer to when we speak of advance announcement 
is the advan(^e announcement of tlie formula wliich would guide the 
termination of controls. 

In other words, beyond the date, 6 months after the Japanese 
war, we do not believe you can tell the exact date on which the last 
control should go off. You could not tell that very early. This is a 
recommended procedure wliich we hope will at least, stimulate the 
thoughts of others, and will direct attention to the need for coordina- 
tion and over-all planning regarding the removal of controls. 

This may not be the exact formula that you decide is the right one. 

The Chairman. Is that all, Mr. LeFevre^ 

Mr. LeFe\'re. That is all. 

The Chairman. We have Mr. George present who is a recent addi- 
tion to our staff on this subject. 

I wondered if 3^ou had some questions. JNIr. George, that you would 
like to ask, 

Mr. George. I do not know that it would be useful at this time. 
They run into detail that the committee might not have time to ex- 
amine very closely. 

On the general point of inventories, a great many people are sen- 
sitive to that danger. I have no idea, of course, what WPB policy 
is going to be in the interim period but I know there is apprehension 
lest the removal of controls would lead to the accumulations you speak 
of and would have the effect of diverting materials urgently needed 
by consumers and industry so that I suspect the policy of retaining 


inventory controls np to the end of VJ-day, at least, is being very 
seriously considered. 

I do know that industry, generally, seems to feel more sympathetic 
to that policy than to many of the others that are more controversial. 
They are aware of the danger as well. 

There are many detailed questions, Mr. Chairman, that of course 
come to mind but I am not sure that you want to go into them iiow. 

The CiiAiRMAN. In view of the fact that it is time for the House to 
convene, I am apprehensive that we would not have time to go into 
a detailed discussion so if there are no further questions, Ave will 

Mr. Folsom, do you have anything further ? 

Mr. FoLSOM. No. 

The Chair? IAN. We extend our thanks and deep appreciation to 3^ou, 
Mr. Rubicam, for your courtesy this morning and for this statement 
that reflects so much study. 

Mr. Rubicam. I want to thank you, Mr. Chairman, for the oppor- 
tunity to come. 

The Chairman. We are very gratefuly to you. 

The committee will stand adjourned until call. 

(Whereupon, at 12 noon, the committee adjourned, subject to call 
of the Chair.) 



House of Representative, 
Special Committee on Postwar 
Economic Policy and Planning, 

Washington^ D. C. 

The special committee met, pursuant to notice, at 10 : 15 a. m., in 
room 1012 New House Office Building, Hon. William M. Colmer 
(chairman) , presiding. 

Present : Representatives Colmer (chairman), Zimmerman, Gifford, 
LeFevre, Simpson, Reece, AVolverton, Voorhis, Murdock, and Hope. 

Also present: Marion B. Folsom, staff director, and Edwin B. 
George, consultant for the committee. 

The Chairman. The committee will come to order. 

In furtherance of the investigation that the committee has been 
conducting with reference to the ultimate removal of wartime con- 
trols, we have Mr. Chester Bowles, head of the Office of Price Ad- 

Mr. Bowles, we ^re grateful to you for appearing here this morning. 
We realize that you must be a very busy man. 

Off the record. 

(Discussion off the record.) 

The Chairman. Now, this may be either on or off the record. We 
realize that you have a very hard job, and I am sure the country does 
also. I might say off the record 

(Discussion off the record.) 

The Chairman. Mr. Bowles, of course you understand that the 
purpose of these hearings has nothing to do with the current opera- 
tion of wartime controls by the Office of Price Administration or 
anyone else. These hearings are primarily being conducted, I might 
say exclusively being conducted, on the subject of the future of these 
controls. I think the whole Congress, and I am sure that you join 
us, hopes it will not be too long until we can get rid of all of these 
wartime controls. I am sure, personally, you would welcome that 

We have asked you, in the light of your experience, to come here 
this morning to give us your views upon just how soon these controls, 
with particular reference to your own Office of Price Administration^ 
could be eliminated. We realize they could not be eliminated now. 

So We would appreciate hearing your views in your own words, 
and take such time as you see fit. 




Mr. Bowles. I very much welcome the opportunity of coming up 
here. I have been very much impressed with the work you are doing 
and think it is tremendously important. 

We have a complicated economic system built up over a period of 
years. I think a few people understand its complexities — I doubt 
whether anybody understands them thoroughly — but the greater pub- 
lic understanding of what we can make work or fail to work, the 
more likely we are to get the higher level of employment after the 
war, which we are chiefly interested in. 

In thinking of price control we have to distinguish pretty n:iuch 
between what is theoretically right and what is practically right, and 
finally, what is possible. We have those three divisions. You can 
write a treatise on price control and its functions, and the length of 
time it shoidd be necessary to maintain a relatively stable level of 
prices, and that might be quite out of line with the practical situation 
of what you can do or should do. 

In other words, your theoretical outline of the problem might lead 
you to keep price controls regardless of other factors in the economy. 
While the price controls might theoretically be kept for that period, 
at some point they will interfere with other functions of the economy, 
either psychologically or actually so they may do more harm than 
good, even though theoretically you can prove they are advisable. 

Finally you have the question. What can you do? Can you main- 
tain them even as long as practically necessary? We are very weary 
of the war. If you go out and make a speech somewhere and talk 
about how we are going to lick those Japs, everybody will cheer, but 
many people, either secretly or oi)enly will say "After all, we are 
pretty well along and we can go back to our normal way of doing 
business." ^ 

The fact is we have a big war left, but in some way we do not 
quite recognize it. We have had a much greater dose of bureaucracy 
and regulation than has ever been instituted in this country, and we 
are anxious to get rid of it and are tired of it and would like to get 
out from under red tape. 

You have all of that background to operate against, and with that 
background I would like to go back a bit and discuss what our prob- 
lems have been and what they are likely to be. 

I think we all understand why the controls have been necessary. 
You have had a great distortion of the supply of goods available to 
consumers, and on the other hand you have the amount of money on 
hand to buy with. Actually our program has been tremendously 
lielped by the amount of production we have had. I can remember 
in the winter of 1942 it was stated we could not have all-out war 
production and at the same time have more than $40,000,000,000 or 
$50,000,000,000 of goods for civilians. Actually, the experts were 
wrong. We have had all-out production and also $95,000,000,000 of 
civilian goods and services available. It is nowhere near enough, 
however, to meet demand. 

Putting these controls in was difficult. No one knew how to do it. 
There was no trained personnel. People did not thoroughly under- 
stand the need for it. In the handling you were bound to step on 


people's toes. You had to say no probably 10 times to every time you 
said yes, and that is a diflicult and unpleasant business. Neverthe- 
less, I tliink so far we all have a ri<Tht to feel somewhat proud of 
what has been accomplished. 

I say "we all." Certainly it is not alone the OPA. If Congress 
did not want the job done, it could not have been done, and if the 
general public had not wanted it done, it could not have been done. 
So I think it is a tribute to the good sense and sanity of the country 
that we have been able to go this far. 

We are now approachino; a different period, the period of reconver- 
sion. I think I should point out that reconversion, as far as inflation 
control is concerned, begins with your first real cut-backs from war 
production, and extends until you get supply and demand in reason- 
able balance. The Jap war is a step in that direction. It will hurry 
up the day when you can get full production moving faster. The 
Jap war does not mean the inflationary danger is necessarily ended; 
you are simpl}'^ taking that one big step closer to getting production 
to a point where you can get rid of controls. 

I might review what happened after the First World War. As you 
know, we had controls in the last war that were quite mild. The in- 
crease in industrial production only amounted to 25 percent, and 
strangely enough, in the last year of that war industrial production 
actually dropped 1 percent. I have been told by several business- 
men that one reason it dropped was that businessmen were completely 
in the dark as to what their prices were going to be in many areas; 
there was a scramble for inventories, controlled in some areas to a de- 
gree, but not at all in many others. Businessmen had no idea of what 
their costs would be, and there was a general scramble that was de- 
structive to consistent planning. 

In any case, we had big price increases before the war ended in No- 
vember '19, in practically all fields, but what is less well understood 
is that about 40 percent of your World War inflation came after 
the Armistice. 

Immediately after the Armistice there was a sag in some prices 
which led people who had been fearful of inflation to feel the danger 
was pretty well over and controls could be wiped out. They were 
wiped out in 6 weeks. The sag in prices continued through the win- 
ter of 1918-19 until about March. During that period industry was 
reconverting to peace and getting their plants started again, and about 
in March began an inventory scramble. I used to know salesmen 
who had a way of going around, perfectly legitimately by all stand- 
ards of selling, and saying, "There may be a price increase this fall 
and you fellows will be smart to buy a carload instead of a quarter 
of a 'carload; I want to protect you.'" So that happened on a huge 
scale beginning in March 1919, and business began to lay in inven- 
tories at a huge rate, guarding against the price increases they felt 
were coming, and, of course, the price increases came. You had a 
scramble for inventory at retail, wholesale, and manufacturing levels. 
Any man who could build up an inventory would find it worth more 
money each month ; the more goods you could get, whatever you were 
using' for manufacturing, the better off you seemed to be. Even those 
who feared the inflation felt that their best hedge was to get in inven- 


Of course, that drove prices up rapidly. In May and June 1920 we 
had a period where prices started to fall extremely rapidly and j^ou 
had an inventor}^ loss of $11,000,000,000. It hit small business par- 
ticularly hard because small business had not had the purchasing 
power and capital funds to get in on this buying earl}'. Manufacturers 
and wholesalers would rather sell to big customers, so the little fellows 
began to get in on it for the most part in March, April and May of 
1920, with the result that they bought pretty well at the top, and the 
crack hit them hard. 

There were 106,000 bankruptcies within the next couple of years. 
Factor}^ pay rolls fell 44 percent and there were 51/2 million unem- 
ployed. It hit the farmer very hard. He had a 06 percent drop in 
farm income, and there were about 430,000 farm foreclosures in the 
period of the next 2 or 3 years. 

We recovei'ed from that and moved ahead again iu the rather nerv- 
ous prosperity of the later 1920's, until the final crack-up in 1929. 

I do not think there is much question that the inflation and the 
savage deflation that followed set us back at least a couple of years 
in getting set after the war. This time, of course, your problems are 
infinitely greater. We have, first of all, a 116 percent increase in 
industrial production as against 25 percent in the last war. 

Mr. VooRHis. How much ? 

Mr. Bowles. 116 percent. Your farm production increase the last 
time was only 10 percent, whereas now it is 35 percent. I think the 
farmers have done a terrific job in this war. The increase between 
1914 and 1918 was only 10 percent, and in this war from 1939 until 
now, it is 35 percent. 

You have also piled up substantially more in the way of savings 
and liquid assets all through your econom}^ It has been roughlv 
estimated that these liquid assets total $320,000,000,000. That is the 
figure the Federal Reserve has used. The cost of the Jap war, as now 
programed throuirh this year, will be double the cost of the whole 
of World War I. ^ That cost will be roughly $60,000,000,000. the esti- 
mated cost of the war through the next fiscal year. The cost of World 
War I was only $32,000,000^000. 

So you get some idea of the different type of situation we are deal- 
ing with this time. At that time your inflationary drive was terri- 
fyingly great. On the other side of the ledger, however, we have 
much greater productive ability, and production will be the final 
answer to inflationary danger. We can turn out goods faster and 
build up production quicker and that tends to help neutralize the far 
greater inflationary crisis we are facing. 

We have stated and will continue to state in every way we can that 
the main thing we have to get is production, but we have to get it 
while at the same time not throwing away our price levels and going 
into an inflationary spiral in order to get it. Certainh\ to do that, 
will not pay us anything. We have to steer our way very carefully, 
doing all we can to make sure our program is securir.g all we can get 
in the way of production. I said the other day, and I think we will 
live up to it, that while there will be a lot of bottlenecks in this infla- 
tion program, we are determined not to be one of them. 

As we move ahead in this next year, we have some very major ad- 
vantages over 1918. First of all, our price relationships all through 


the economy are probably in better shape than in that period, although 
no doubt they are not perfect. Prices are always more or less out of 
joint, and there are some out of joint today. But in 1918 they were 
thoroughly out of joint; they were based so much on scarcity and 
demand. Today we have a much more sound set of price relation- 
ships to start from. 

• I feel the way we will be able to get out from under these controls — 
let me state first in the theor}^ school and then in the practical school. 
Theoretically you should maintain control until supply and demand 
are in balance all through the economy, all of the different phases of 
it. If you adopt that principle literally you would have had rent 
control in Los Angeles for I do not know how long and also in many 
other big city areas. You would have it until you had housing in 
balance with demand throughout the country. That will take a long 
time. I think that is a pretty g\x)d illustration of the practical against 
the theoretical. That would be true probably in automobiles and 
l)uilding materials, that if you kept price control until you had every- 
thing exactly in balance, you would have it for a good long period, 
much longer than I think you could practically keep it, because it 
will take some time to balance out the demand for housing against 
available materials and also for cars against the available funds going 
into them. But my feeling, practically, is we will probably take all of 
the fields individually. We went into price control on a fundamental 
basis. We started in the areas where it was most necessary, steel and 
basic metals. We went into the areas where the pressure was greatest 
and we should come out the same way. 

As industry after industry or product after product you get supply 
and demand more or less equalizing themselves, I think we should 
suspend ceilings for probably something like -90 days and watch to 
see what happens, and if the price slackens a little, you can take the 
ceiling away, provided it is not merely a temporary situation as far 
as you can see, and as soon as you have assurance it will last, you pull 
out of that field. Tliat will come much quicker in some fields than in 
others. We are terribly short of textiles now. There is a tremendous 
demand for the Army and Navy, and the textile industry has had 
great difficulty in getting good labor. They have lost it to a large 
degree. They are struggling hard to get production up, but when 
the war demands close down, I feel you will find textile production 
will go up extremely rapidly and you will get supply and demand in 
balance quicker than some people think. 

In some other fields it will not be long. In the food field, if we 
could get good fruit and vegetable crops in the South next winter and 
in the early spring, we can probably pull out of that field. 

Also we can move out of our various rental areas when we can get 
the landlord and tenant on a bargaining basis. When Mrs. Jones will 
say to the landlord, "I will not pay the $10 increase ; I will go to an- 
other house," at that point you do not need control. 

We have already pulled out of four or five areas. We have had to 
go back into two of them. There were enough vacancies to establish a 
bargaining situation, but we evidently were wrong on those because 
rents promptly shot up and the Army and Navy came piling in on us 
asking us to get back in there and give them some help. So those 
experiments were only 50 percent successful. AVe ai'e pulling out of 
two more in June, and are studying f oiir for July, 


As Army and Navy set-ups are either disbanded or diminished,, 
where some local camp or shipyard has caused a major distortion, we 
can pull out very readily. 

At some point on rent control the Federal Government has to make 
a decision. AVe have o;ot to decide if the Federal Government is going 
to maintain responsibility for a period of control in isolated areas, or 
whether at some point the Federal Government is going to say, "We 
will no longer take the responsibility; the general inflationary danger 
is past." If the local State or municipality wants to continue, all right,, 
but it should be delegated back to them to handle ; the Federal Govern- 
ment can tell them how to do it^nd will let them take it. 

My own feeling is the Federal Goveinment should do that and not 
maintain a long-range responsibility on it. 

In England they maintain rent control, the same control which was 
in effect on September 1, 1930, and which was passed as a war measure 
in the last war. In other words, they never did take rent control out in 
England. On new housing, they did, but on old houses they left it in. 
I do not think we want to do that. AVe should move out when thei'e 
is no further rent pressure. 

One of the fields that is going to be most difficult is building materials 
where, as far as I can make out, every other family in the United States 
has its heart set of buihling a new home and the money saved up. 
There is a tremendous shortage of lumber and building materials and 
there is likely to be one for a long while. That will be a tough situation. 
Automobiles, vacuum cleaners, and washing machines will be difficult,, 
but I believe they can be handled somewhat quicker than building mate- 

In the automobile industry we have one advantage in that many 
of the companies have a control down through their distributorships. 
In other words, the automobile manufacturer has a pretty good say 
on what the car finally sells at by the dealer. I think those people 
will be intelligent and cooperative and will do a lot of self-policing. 
I do not think we will have to sit here until everybody in the country 
who is able to buy a car can get one. I think we can move out in 
advance of that. I think 1 year from today you will find us out of a 
good many fields and very close to being out of others. However, there 
will still be many others which will need control, but I think it is up 
to Congress to decide just how it wants to handle it from then on, and 
it will be a difficult decision. Pressure on Congress will be tremendous. 
People will say they have had enough red tape, regulation, and bureau- 

A A^ear from today you probably will not be ready to do that, even on 
a practical basis, regardless of the theoretical, but that is a question 
Congress will have on its hands a year from today. 

Now, these pressures we are under are first, technical pressures, and 
second, public pressures. As I say, the whole psychological pattern of 
the country has changed in the last 2 or o months. Very frankly, it 
has not changed as much as I feared it migh.t. I was very mnch en- 
couraged over the fact that in our volunteer organization we were able 
to recruit more volunteers in May 1945 after VE-day than in 1944, a 
year before. So evidently the public is still pretty conscious of the 

In my own contacts with the public, and we are probably closer 
than any other organization through our local-board organizations, 


they seem to have a pretty keen awareness of these inflationary 
dangers and of what could happen if this thing blows up on us. I 
have been very much encouraged by that. I am encouraged with 
the generally enlightened public viewpoint that runs all througli Ihia 
period. You see it on all of these international problems that we are 
dealing with as well as on this j^roblem of ours. 

In the Gallup and Denver polls there are shown huge majorities 
saying they realize the need for price control, rent control, and ration- 
ing; they are able to ignore the irritations involved in those programs 
and concentrate on the main issue. That is a rambling discussion 
covering a lot of points, but I will be glad to expand on any part you 
may like. 

The Chairman. I am sure the membership of the committee would 
like to ask some questions, Mr. Bowles. Your preliminary statement 
has been very enlightening. 

I think there is a feeling in the Congress, and in this committee, and 
certainly so far as I am concerned, that we want to get out from under- 
neath controls at the earliest possible practical moment 

Mr. Bowles. I think everybody does. 

The Chairman. I think we are all in accord on that. The question 
is just when. 

Now, personally, the tiling that worries me is if we are going to do 
this gradually, whether we are going to be able to do it at all. It may 
be it is not desirable to do it at all, but personally I think it is. 

Mr. Bowles. I think it is, too. 

The Chairman. You touched on that in your statement in your 
illustration of England on rent control, that they still had in effect 
the rent control they had from the World War. Of course, if a thing 
is so desirable that it should be perpetuated, then I assume it will be 
done, but this committee is primarily concerned, it seems to me, with 
the question specifically of ])ostwar employment, realizing that there 
will be a considerable transition from the production of war materials 
back to items for the civilian market. I do not know how we are 
going to speed up employment unless we do remove some of the 
shackles from business. Business is going to have to be encouraged 
if we are going to have private employment. 

Mr. Bowles. Could I add one more thing? First, let me say I 
think that is 100 percent right. We have to remember that most 
businessmen who come to see us say, "We do not see any reason for 
control on our prices." We have some, but not so many as you would 
think, who say, "Do not take price control off my cost; you have got 
to control my cost; do not drop price control on what I buy because 
if you do I will be in a mess." 

If you set fair ceilings people can produce under, you are not putting 
anything in the way of getting production. At the same time, you 
are giving businessmen a great advantage in knowing what his cost 
will be. He knows what he will have to pay for all the products he 
puts into the item he is manufacturing; he knows they will not sky- 
rocket; he does not have to spend half of his time guessing what his 
inventory is worth. 

I think the way to control inventory is to give people confidence, 
first that the general price level is not going up — of course things will 
move up and down within a level and the level may shift gradually, 
we do not mean freezing prices, but averaging out pretty generally — 



and second that his competitor across the street is not going to have an 
inventory advantage. That is very essential, that his competitor is 
not going to have the right to have any more inventory than he can 
get — in other words they will have plenty of inventory to operate on 
but they cannot scramble for it. Of course that is the WPB program. 
If tliey know those two things they will settle down. It is that psy- 
chological urge that starts them off on the inflationary cycle. 

We have moved into some places in price control that normally 
we would not go into. When I came to Washington 2 years ago it 
seemed to me rather unnecessary to put price control on luxury 
products. I soon found, however, that without strict manpower con- 
trols and control over all material, you are forced into that position. 
In England, in a case of a bird cage manufacturer or someone manu- 
facturing an unnecessary item, they will give no manpower and no 
material; they just cannot produce. They say that products that 
are not completely necessary are luxuries and no manpower and no 
material are allowed. 

In this country we did not do that; we did not carry our control 
that far, and as a result we foiuid in some areas that farmers would 
drop snap beans, onions, potatoes, or other things and start raising 
watermelons, on which there is no control ; so farmers would lose their 
manpower to watermelon growers, and at one time they were carrying 
watermelons around worth about $2 apiece so that you had a distor- 
tion in your whole agricuUural situation. The OPA had to go in 
and put a price on watermelons, and then your manpower, fertilizer 
and everything else pulled back into balance. 

We had a similar situation in expensive coats. If we did not put 
it on, all of the manpower was soon drawn away from making inex- 
pensive coats for shop girls and other people, so that material and 
manpower began to go into that and you got a bad distortion. 

So, in the absence of strict manpower and material control, price 
control was put into a whole lot of areas where it did not go in 
England. As soon as the manpower situation loosens up there will 
be no reason for price control and we can pull out of a whole lot of 
areas. I just wanted to add that. 

The Chairman. Yes. Now finally, along the lines of the thought 
I was advancing there, while it might be desirable to make these 
relinquishments gradually in different fields at different times, would 
you not agree that there is going to have to be some final period 
beyond which none of you can go by statutory enactment? 

Mr. Bowles. I agree definitely. 

The Chairman. Mr. Zimmerman, do you have some questions? 

Mr. Zimmerman. You said something about the cost of the war 
with Japan this year as compared with the whole of the last war; 
would you mind restating those figures? 

Mr. JBowLES. The World War this vear, the Jap war. the cost will 
be $60,000,000,000 for this fiscal year. That is the best estimate, 
assuming the war goes on at its present rate, with the cut-backs they 
are expecting. The cost of World War I was $32,000,000,000. 

Mr. Zimmerman. How will the cost of the war with Japan for the 
coming fiscal year compare with our war effort in the past year ? 

Mr. Bowles. About $90,000,000,000 has been the figure right 


Mr. VooRHis. About two-thirds? 

Mr. Bowles. Yes. 

Mr. Zimmerman. So the war is not over yet as far as national 
expenditures are concerned? 

Mr. Bowles. Definitely not. We worried about the $32,000,000^000 
war, and we are putting twice that much money into just this next 
year, which many of us think is near the end. 

Mr. Zimmerman. What effect do you think the release of a great 
many men in the European theater will have upon our manpower 
in this country ? 

]Mr. Bowles. I think it is going to help it. A lot of those men 
will be young and able skilled workers who have learned various 
techniques in the Army and Navy. A lot of them, however, will go 
into trade, some 60 percent, I understand of the boys never having 
had a job. Some have learned to be radio operators and technicians^ 
but I believe a lot of them will go into sales, distribution, and retail 
trade. I feel a lot of them will probably end up in that area. 

Mr. Zimmerman. You do not think they will go into our war 
industries and relieve the manpower situation there ? 

Mr. Bowles. Some of them will, but you will have a problem 
between now and fall of relative unemployment. Some of the figures 
are that between three and five million will be temporarily out of 
work while we are getting reconverted. 

So you will have a loosening in that area just as you have in 
Detroit now. We are probably a little overemployed now. We have 
a lot of people who will not want to continue, older people and high 
school boys and others who will want to resume their education. A 
lot of the older men who have come forward during the war will 
want to quit and there will be a dropping out of people of that 
kind and others moving in. 

Mr. Zimmerman. Do you not think that is one of the big problems^ 
the shifting of manpower from centers where there has been a cut- 
back or reduction in employment to places where there is a growing 
need for manpower? 

Mr. Bowles. Definitely. 

Mr. Zimmerman. That is One of the biggest problems we have to 
face in the immediate future. 

Mr. Bowles. Yes. So many people during the war moved into a 
part of the country they never dreamed of going to, such as Cali- 
fornia or Texas, and a lot of them find they like it and want to stay 
there. So you will have a terrific distortion. 

Mr. Zimmerman. I believe that is all, Mr. Chairman. 

The Chairman. Mr. Gifford. 

Mr. GiFFORD. I just came from a crowded committee room of 
Senators and Congressmen with your Mr. Madigan. I would like 
to know about the recent ruling of the OPA based on the shipments 
during January, February, and March of this year. 

Mr. Bowles. A year ago, 1944. 

Mr. GiFFORD. In January, February, and March. 

]\Ir. Bowles. 1944 ; not 1945. 

Mr. GiFFORD. I represent Cape Cod, Marthas Vineyard, and Nan- 
tucket. I wish to God you had to answer my mail. 


Mr. Bowles. I live in a town that has a swollen population in it, 
and I know what your mail is. That is not a postwar problem ; it is 
current. You have a pr(jblem, however. Some people think that war 

Avorkers in Detroit and coal miners 

Mr. GiFFOED. I do not brin^^ it up to argue before this committee, 
Mr. Bowles, but to show you the heat that existed in that room against 
OPA. Let me say I recognize price control must continue, but about 
the Gallup poll, if you go into those sections, your Gallup poll would 
have to be a selective group in order to get a favorable poll. 
Mr. Bowles. I do not know why, 

Mr. GirroRD. You would have to go to a selective group in order to 
get a favorable report on price control, and I fear if it came to a 
demand for my vote today, it would not be very favorable. 

Mr. Bowles. Mr. Giti'ord, I am not asking for your vote. I am try- 
ing to lay out a problem that exists. The point you make is a key 
one. It is something that requires study and a conception and under- 
standing of the ramifications of it, and they are working on it, the 
problem of shipments from one ai'ea to another, and all of that will 
undoubtedly be with us in greater or less degree. You are going to 
have some scarcities and war weariness and a lot of people are thor- 
oughly tired of regulation red tape and bureaucrats, no one is more 
tired of it than I. If anybody thinks he is more tired of red tape 
and regulations and Government jobs 

Mr. GiFFOLD. The psychology this mouiing is all against price con- 
trol because our people liold us responsible for what you do. 

Secondly, I think price control must exist for some time in some mat- 
ters, but 1 ask you whether it cannot be done by statute rather than 
as at present. You said we legislated a good deal last Saturday; we 
actually put on many amendments to the price control law. I ask 
you whether cr not those things that will be necessary to be con- 
trolled after the war could not be handled by the usual method of 
legislation and then by the usual enforcement officers of the courts. 

Certainly there was a lot of legislation put on last Saturday. 

Mr. Bowles. Some of it may change or shift within the next 2 
or 3 days. 

Mr. GiFFORD. It looked pretty definite. I was. particularly inter- 
ested in, the Pat man amendment. 

Mr. Bowles. I think it is an excellent amendment. 

Mr. GiFFORD. I want to say I think Mr. Bowles is wonderful. I 
(hink you handled it splendidly this morning; you put us to sleep. 
You aie a thorough-going businessman and I pay you high compli- 
ment, but the OPA in my section at this moment is pretty bad. My 
fishermen say in no uncertain terms, "To hell with the OPA." 

Mr. Bowles. The fishermen have done pretty well, I think. 

Mr. GiFFORD. Talk about your Gallup poll, I believe I have heard 
from my section. Of course you can get a favorable poll if you select 
from a certain group. You can get a favorable report on it if you 
want it. 

Mr. Bowles. I do not know Mr. Gallup, so I do not think he is trying 
to help. 

Mr. GiFFORD. I do not like figures or statistics any more. I have 
been lied to so much. I think there are principles that should not 
be allowed to be set aside by figures. 


Mr. Bowles. I agree. 

Mr. GiFFORD. Statistics are something you can talk with great 
accuracy about but know nothing about. I will not take the time 
of the committee, but I have been so worked up, Mr. Chairman, espe- 
cially this morning. I do not want Mr. Bowles to take any of my 
venom. I pay him the highest type of compliment, but as one mem- 
ber of the Cosmos Club told me, "You know the OPA when set up 
had to take several thousand employees nobody else wanted " 

Mr. Bowles. I would like to add that of the people in our organiza- 
tion earning $3,200 or more, two-thirds of these people are getting 
less money than they made in 1939. 

Mr. GiFFORD. They are worth less, are they not ? 

Mr. Bowles. I think you will agree most people are now gettino- 
more than they got in 1939, and it may be some of these people are 
doing it because they think it is important war work. 

Mr. GiFFORD. You will agree, Mr. Bowles, that when the OPA was 
set up, it was one of the later ones and they got people that the other 
organizations were willing to release. So, for instance, you did not 
have the set-up the WPB was able to get. 

Mr. Bowles. True, it is terrifically hard to get good manpower. I 
get two or three enforcement cases a week where someone tells me, 
"This looks to be wrong," and sometimes it is. However, we had 
.52,000 enforcement cases last year, and if only 150 come to my desk in 
a period of a year that look to be wrong, I do not think that is a high 

However, I think it is true most businesses have had a terrifically 
hard time getting people. I was complaining about our turn-over to 
a group of businessmen and they pointed out that theirs was higher 
than that. So you do get people in OPA who are not good, but I 
think most of them are. 

When you consider Mr. Madigan, for instance, nobody has to take 
the kind of beating Mr. Madigan is getting this morning. He earned 
substantially more before the war than he earns today. His firm 
has been trying to get him back all of the time. He is not there for 
his health, he is trying to do a job. 

Mr. GiFFORD. I remember someone said a certain man with four 
children is no good and ought to be in the Army. That exception 
does not prove the rule. 

I had been informed, Mr. Chairman, they had been handicapped 
because they did not have the best type of employees and had to pick 
up those whom the other departments were willing to let go. 

Mr. Bowles. I would not say that is right. I think our personnel 
will measure up to that of any Government agency. 

Mr. GiFFORD. With the multiplicity of your jobs, I do not know how 
you can supervise all those things. I hope that price control will be 
continued by way of legislation and only where we find it is necessary, 
in accordance with the action last Saturday. 

The Chairman. Mr. Reece. 

Mr. Reece. I do not know whether I have aiiy questions, but I might 
have an observation. I agree with Mr. Giftord that finding some 
way of relinquishing controls has a vital effect on our postwar situation. 
If we can find some people who will devote the same effort and in- 

99579— 46— pt. 7 5 


genuity, people within the Government, to find a way of relinquish- 
ing control that they exercise in finding a way to establish and ex- 
ercise control, I think our problem will be solved. 

What disturbs me is the lack of concern on the part of those in re- 
sponsibility in actually evolving some way of relinquishing control, 
and part of that possibly arises out of personal considerations. It 
is true, as you say, that there are some men in the organization who 
have come in on a volunteer basis and who could return to their old 
connections with profit to themselves. On the other hand there are 
a great many division inspection chiefs who are not in that position 
and their salarj^ schedule can be justified only by keeping their sections 
and divisions built up, and that, in a measure, I might say, also goes 
for the military. 

Only yesterday an officer of considerable rank discussed with me the 
possibility of getting a release. He said he is performing no useful 
service but if too many of them leave the division to which he belongs, 
the rank of the chief of the division will not be justified, and that 
runs throughout the situation. 

I am giving that as an illustration that applies to the military and 
likewise to the civil bureaus, and I think it has a very important bear- 
ing on this whole question. 

I had a letter only a few days ago from a man who owns a little 
apartment building. The ceiling price on his apartments is $15 a 
month. They are right good-sized apartments, four rooms and the 
utilities are furnished. A man who occupies one of those apartments 
and who occupied it during the base period, at that time was making 
$15 a week. He was paying $15 a month for the apartment. Now that 
same man occupying the same apartment makes $133.60 each 2 
weeks. The apartment owner is being very hard pressed. There is 
some question in that area as to whether rent control should be con- 
tinued at all. There is no major reason evident on the surface why 
it should be. 

Mr. Bowles. I will be glad to have it studied. We are looking at a 
lot of them now to see if we can get out. There are something like 30, 

If you will tell me where it is 

Mr, Reece. This happens to be Johnson City, Tenn., my home town. 
Mr. Bowles. I will look it up. 

Mr. Reece. I do not think I will ask any particular questions, Mr. 
Chairman, but this question of relinquishment of -control and finding 
some way of doing it, I think, is important. Controls must be con- 
tinued, but unless we find some way of alleviating the pent-up public 
'feeling to which Mr. Gifford referred, the whole thing will be wiped 
out as soon as the war is over. I do not think we need fool ourselves 
on that score, because the feeling is becoming so great. In these legis- 
lative enactments we go in that direction; they all apparently have to 
be made against the influence of the organization that is administering 
it; they have to be made against the influence of propaganda that 
emanates from that and other agencies, and it is not creating good will. 
Mr. Bo^vLEs. I would like to make an observation on some of the 
things you said. 

Mr. Reece. I think it would be helpful if you could get into a posir 
tlon where you could claim controls were voluntarily relinquished. 
Mr. Bowles. I agree. 


I would like to say this on the two different points you made. First 
of all, the fact is there will always be some people who would like to 
keep control because they can get a better job that way than any- 
where else. There will always be people wanting to hang on to a 
Government job. When you get all through with this thing there will 
be many people who do not want to try to find something else to do, 
but I believe they are in the minority. If you take all of the way 
through our top people, they do not make the policy decisions, I 
brougTit over 100 people from business and I think it is safe to say those 
people with no exceptions, practically, are making consideralily less 
money than they can make in private business tomorrow. 

Mr. Reece. If you will permit an interruption, decisions are finally 
made under the name of the top head, but does the man at the top 
become sufficiently familiar with all of the facts so that he originates 
the decision, or is that made by a subordinate way down the line who 
has assembled the facts ? 

Mr. Bowles. He only provides the facts; he does not make the 

Mr. Reece. Take the broadcast last night which put you in the posi- 
tion of having issued an order with reference to this restaurant situa- 
tion on the west coast. The order was isued under your name, but 
for all practical purposes you are not the one who issues the order. 

~Mr. Bowles. May I comment off the record on the broadcast, which 
I am familiar with but did not hear ? 

(Discussion off the record.) 

Mr. Reece. There are a great many people throughout the country 
who are coming to the conclusion that there is a group in these agencies 
who are wanting to create a situation which is going to make it neces- 
sary for the Government to continue to exercise control, or even 
create a situation where it will be necessary for the Government to 
come in and function in the first instance in order to continue the 
service for the people. When that is engendered throughout the 
country it is very dangerous, Mr. Bowles. Your agency is in as good 
a position as any to help alleviate that situation and that impression, 
and I hope you and the men at the top will assume the responsibility 
for doing so. 

Mr. Bowles. Well, I can assure you I know exactly how we all 
feel. We want to get out as quickly as we can and I think we can get 
out of many areas quicker than people think we can. I have great 
faith in* what we can produce in this country. In this war we have 
proved it. The production we are capable of is going to be a factor 
that will wipe out the need for control. 

Mr. Reece. Let us not create the impression or get ourselves in 
the position that when someone criticises or someone differs, that he 
is not as sincere and patriotic in what he is doing as we are ourselves. 

Mr. Bowles. I agree heartily with that. 

Mr. Reece. As it applies to the case to which we referred awhile 
ago, I am sure in that instance the man is just as patriotic and anxious 
to see price controls with reference to inflation made effective and 
succeed as you are, because he has got just as much at stake as j^ou 
have. We all have everything involved in this situation, and the 
man who criticises and appears to have a basis for his criticism, even 
though we may not be able to see it, I think those in responsibility 


ought to explore it. It might be he is right and the other man is 

Mr. Bowles. That was explored by pretty able people. 
I think criticisms coming from businessmen divide into three groups. 
There is first of all the situation where obvious errors have been made 
in the administration of a very huge program. We all have our 
off-days and some prices might be out of adjustment where there has 
been delay due to lack of personnel. We are understaffed in many 
sections. "One of the things I worry about is getting enough people 
to give the individual adj ustments I believe that we will have to give 
in the reconversion period. Delaying will delay reconversion. We 
need people to do that and we will have to have enough to do that and 
lick the black market. 

First of all, we have an area where we have been wrong. Eight 
million prices cannot all be right; there are some that need adjust- 
ments, and in some cases we are slow. Perfectly honest, conscientious 
people point them out and we try to fix them. 

No. 2, people are fearful of something that may occur. Again there 
are perfectly sincere, conscientious, earnest people — for instance, I 
have been told over and over again that certain things were about to 
happen by people I know in business, good friends of mine — off the 

(Discussion off the record.) 

Mr. Reece. I want to say if you can demonstrate to the country 
that the OPA is anxious to relinquish control as soon as possible, 
I think your problems will be very greatly narrowed. 

Mr. Bowles. I have said that many times, and I think you will see 
the proof of it. 

The Chairman. Wliat I think Mr. Reece is driving at, Mr. Bowles, 
is a thing that concerns all of us who observe Government depart- 
ments generally. Yours may be an exception, and we hope it will be. 
That is, that once a bureau or agency is set up, there seems to be a 
tendency on the part of that agency to perpetuate itself in existence, 
and that is just human nature, and I think that was what Mr. Reece 
was emphasizing. 

Incidentally, I do not want you to feel I ask this in any critical 
sense, but I would like to know what is the personnel of your agency. 
INIr. BoAV'LES. We have 225,000 volunteers. It is much the biggest 
volunteer organization that has ever been put together. In j[iddition 
to that we have 60,000 people, and of that 60,000, 38,000 are in local 
boards responsible to volunteers. The volunteers are their bosses ; they 
pick them and choose them. 

The Chairman. There are 60,000 on the pay roll ? 
Mr. Bowles. When I came here we had 42,000 in Washington. I 
reduced it so that we have 37,000. While the organization has in- 
creased in size with responsibilities, the Washington staff has been 
brought down, because when you get outside of Washington you get 
close to the people. 

The Chairman. I am sure Mr. Voorhis has some questions he 
wanted to ask. 

Mr. Voorhis. You are correct, Mr. Chairman. 

The Chairman. He has been very patiently waiting. 

Mr. Voorhis. I have two questions, Mr. Chairman. 


In tlie first place, Mr. Bowles, as we face this problem of reconver- 
sion, the OPA may be in an extremely critical position for the 
following reasons : 

Small companies and in some instances companies entering new into 
a certain field of production, are going to have to come in with requests 
for ceiling prices. Some will be companies which have come into exist- 
ence during the war and produce only war goods and their contracts 
are cut back. Others may be companies which produced a somewhat 
different commodity from what they want to produce for postwar. In 
any event you have a pattern of small industries, and a good many 
of them are maybe wasting goods. If you pursue a price policy which 
simply attempts to average prices throughout the country and base 
the price on what a big producer can get by on, you are actually 
closing The door so this liltle company cannot reconvert. 

What are you going to do about things like that ? 

Mr. Bowles. You have a peculiar situation in a case we are working 
on now. Some of these people are coming in with products that have 
never been produced, and we are working on ways by which some of 
those could be exempted, knocked out from under price control. 

Mr. VooRHis. Could you not have an exception for companies whose 
volume is less than a certain amount ? 

Mr. Bowles. We have an automatic pricing set-up for all firms 
under $200,000, and that is three-fourths of all firms. They will not 
have to go to OPA. They get a formula on which to set up prices 
and they set them based on their own costs, their own books. They 
set that price and report to OPA and they can go ahead and sell with- 
out any approval on it. We will then go back and check into a certain 
proportion of them to correct any that are way off base, where they 
figured wrong. We have tried to eliminate as much of that problem 
as possible by that automatic pricing. 

Mr. VooRHis. You mean self -pricing subject to OPA review. 

Mr. Bowles. That is right. We are also working out an individual 
adjustment arrangement. We have got individual adjustment in a 
good many of our regulations now, and we are working toward getting 
into all of them, whereby any firm has a local problem that entails 
high cost will at least be guaranteed from going into a loss position; in 
other words, they will get at least their total cost. 

Mr. VoORHis. Of course, it is not going to be much of an inducement 
for them to be able to recover only their costs. 

Mr. BowxEs. In normal times 25 percent of all sales volume in the 
United States was sold at a loss ; that is from 1926 to 1939. Everyone 
now feels he should be guaranteed against loss, and that guaranty has 
never been given in the history of this country. 

Mr. VooRHis. I do not believe in that, Mr. Bowles, but where you 
have a government agency deciding that question 

Mr. Bowles. On the coast you have this problem : Industry on the 
coast has to compete with the rest of the country. They have to have 
costs that are comparable and be able to compete with other products 
from other places. The point of view is while that is true over the 
long haul, it is not necessarily true of the next year or two when there 
will be a great scarcity of goods 

Mr. VooRHis. You can understand why we are jittery. _ We are out 
farther on a limb from the point of view of overproduction than any 
other section. 


Mr. Bowles. By giving higher prices now than the rest of ^he coun- 
try gets the west-coast manufactures can get those prices and will be 
able to finance themselves over the period when they are getting the 
know-how and will be able to bring their costs down to those of the 
rest of the country. 

In other words, you give people a break to allow them to get started, 
knowing that sooner or later they have got to come down and compete 
with other prices elsewhere. We are trying to work on that and get the 
right answer. I have made the statement vve cannot stand in the way 
of any firm going into business ; we have got to get out of their way. 

Mr. VooKHis. You do not guarantee the firm will get the prices you 
allow them to charge ? 

Mr. Bowles. No. Our i^rices should be set so we can get people 
employed and get production going. 

Mr.' VooRHis. And that would be important in the reconversion 

Mr. Bowles. Extremely so ; it is the guts of the whole problem. 

Mr. VooRHis. You stated here and I have heard other people state 
that the basis upon which price control may be removed from certain 
products, is where supplies become adequate to the demand? 

Mr. Bowles. Yes. 

Mr. VooRHis. And you mentioned fruits and vegetables and other 

Mr. Bowles. Yes. 

Mr. VooRiiis. And you made the sound observation you want rea- 
sonable assurance to think that situation will continue before you 
pull out. 

Mr. Bowles. Yes. 

Mr. VooRHis. Would it not be a good idea and helpful from a 
point of view of the psychology of the Nation if they had clearly before 
them just exactly what the formula is as to when, where, and how the 
relaxation of price control will take place and when it will not; do 
you not believe that would be helpful ? 

Mr. Bowles. I think it would if you can get it. I think most in- 
dustries will know pretty well by our own discussions. We have 600 
advisory committees we are continually working with and they will 
come to us and say, "Here is a condition in our industry and here is 
our outlook", and we will work that out with them. 

Mr. VooRHis. I was speaking product-wise rather than individual 
plant-wise; you were, too? 

Mr. Bowles. Yes, product. 

Mr. VoORHis. The chairman has already alluded to the fact some 
people were worried lest OPA tried to perpetuate itself, and it seemed 
to me if we could have written some set formula — and when I put that 
in the bill in the house I only got four votes 

Mr. Bo^vLES. On fresh fruits and vegetables ? 

Mr. VooRHis. No ; that was only one. I said price control should be 
relinquished when the supply of a commodity could be reasonably 
expected to meet demand or be in excess of demand. 

Mr. Bowles. I agree with that. 

Mr. VooRHis. I feel if we could have written that into the law we 
would have given the formula. 

Mr. Bowles. We have said that many times. That is exactly it. 


Mr. VooRHis. This is a personal request, but would it be possible for 
your office to furnish me a little outline of what you are proposing to 
do about this reconversion pricing problem on small industries, with 
particular reference to the west coast? 

Mr. Bowles. Definitely. We do not have the west coast completely 
worked out. You have a different problem. More of the problem 
is out there than anywhere else. 

Mr. VooRHis. I think so. We have a couple of million people in 
California alone who came to build planes and ships. 

Mr. Bowles. And a lot of them want to stay. 

Mr. VooRHis. That is right, a lot of them want to stay, and unless 
we can develop some peacetime industry, we will have a bad time. 

Mr. Bowles. I think you can do it. 

Mr. VooRHis. We will need some help, I think. 

Mr. Bowles. We will get you the story on it. 

The Chairman. Mr. Hope. 

Mr. Hope. Mr. Chairman, I am sorry I did not get here in time to 
hear most of Mr. Bowles' statement. I do not know whether this ques- 
tion deals so much with postwar, although it has a bearing. This 
problem has been brought to your attention many times and I have 
never heard any satisfactory explanation of it, Mr. Bowles, although 
you may have offered a very satisfactory explanation. It is this prob- 
lem of the individual producer coming into a field and producing a 
commodity where they are not under a price ceiling. 

Talking about the furniture business, for example, I have a letter 
from a furniture dealer who says his furniture suppliers cannot supply 
him with furniture he has been getting, but he can get a very poor 
quality of furniture from some upstart firm that has just come into 
the field during the time OPA has been in operation and which he 
says he will not have on his floor, and yet the price they can charge 
him for that very poor quality furniture is much more than the ceiling 
price on the good furniture of well-known established quality manu- 
factured by a reputable firm. 

The same thing, I know, is true in the cigar and other industries 
where new brands have come out, and apparently they are operating 
either without ceiling or under a ceiling which puts to a great dis- 
advantage a man w^ho has been in business for many years and making 
a reputable product. That only gets into the postwar picture in the 
sense some of these people are being forced out of business by new 
firms coming in, and I am wondering where they will be if that is 
allowed to continue. 

Mr. Bowles. I think that probably has happened in some cases, 
maybe too many, but generally speaking, a new firm coming in and 
starting to make furniture would get "in-line pricing", in line with 
other comparable furniture. They would try to find other tables and 
chairs and sofas that were similar and give comparable prices. That 
is a pretty rough kind of justice, but it is a hard problem. It is subject 
to administrative error and you can get many errors in it. 

A new firm coming in would get that in-line pricing which always 
has a certain looseness to it. It is a matter of human judgment as to 
whether the articles are the same. We used to try to handle it here 
in Washington where we had an expert staff, but we had to delegate 
it to the field organization, and you will find in some of these places 


that thej do not have the personnel they might, but it is a quick way 
of getting those prices out. 

That is true of a good many items. 

Mr. Hope. It is true of clothing ? 

Mr. Bow:les. Lack of quality ? 

JSIr. Hope. Yes. 

Mr. Bowles. That is right. I think one of the poorest jobs in the 
entire inflation program has been a tendency to allow shocldy mer- 
chandise, and it has not been handled as well as it should. It is a 
joint problem that belongs between WPB and OPA, and neither of 
us is proud of it. If you will give me a specific case 

Mr. Hope. I may send you the letter to which I referred. 

Mr. Bowles. I will look into it and get a report on it. 

Mr. Hope. I hear the same complaint in other fields. I do not 
happen to smoke, but my friends all talk about how they have to pay 
two or three times as much for a poor quality cigar as they paid for 
an old established brand no longer manufactured. 

Mr. Bowles. Some of those brands have been given in-line prices on 
their cigars, and it did not work very well. 

Mr. Hope. It is a very common complaint, and I think everybody 
has heard of it, and I wonder if there is anything more you can do 
than you are doing. It is certainly an injustice to an old established 
manufacturer if he has to go out of business because of a selling price 
he cannot operate under. 

In this particular case of furniture, as I understand it, you have 
given the manufacturer a 5 percent mark-up. and in many instances 
they say they cannot go ahead and operate with that mark-up, but if 
it was 10 percent or 15 percent they might be able to do it, and furnish 
the consumer a much better quality of furniture than he gets now 
under the way the plan is operating, where the quality has deteriorated 
and the price ceilings are either the same or maybe in some cases a 
little hioher. 

Mr. BoAALES. There has been an awful lot of up-grading. They 
have dropped off from inexpensive lines and have moved into the 
higher prices. The result is while we gave a 5-percent increase, 
the actual price the public pays is much higher because the lower 
priced stuff has dropped out. 

jNIr. Hope. That would not be bad if they were getting quality, but 
they say they are not getting it. 

Mr. Bowles. I do not think we have done a good job on quality. 
The whole thing has been so big and so new, and that is one of the 
places where we have been rather sloppy. 

Mr. Hope. That is all. Mr. Chairman. 

The Chairman. Mr. Murdock. 

Mr. Mup.DocK. I had one or two questions to ask, but before I ask 
them I want to make an observation and also a statement. 

My questions might lead one to infer I am not too sympathetic with 
OPA, but Iwant to say I am quite sympathetic. I think I understand 
the problem you have been up against in part, and I have been praying 
for you and betting on you at the same time. 

Mr. Bowles. Pray, but do not bet. 

Mr. Murdock. I call you frequently on the phone and I might add 
to what my colleague from Kansas just said, that I too have a letter 
from a furniture dealer asking about the same question. 


I think you have done a magnificent job. You spoke about having 
some men on your staff who got more pay before the war than they get 
now, and that is a fine spirit. I hope that they are motivated by a true 
spirit of patriotism. The thing that went through my mind is, there 
are a good many men wearing the uniforms of their country today 
who get less pay than they got before the war. I hope for the same 
reason they are not complaining about the pay. I just cite that in 

You indicated in the first part of your discourse that we went into 
this price-control business gradually and probably we should come out 
the same way, that is, in reverse order. I had several conversations 
with Leon Henderson before any law was passed creating this OPA 
by statute, and I know, of course, it was more or less a voluntary 
matter. I almost hesitate to say this on the record. I argued with 
Leon Henderson, saying, if he wanted to get copper, which my State 
produces in great quantity, but not sufficient quantity, he could bring 
out the production if he would let the price go up. He said, "No; 
we are going to peg the price at 12 cents." "Well, you will not get 
enough copper that way," I told him. There are only a few copper 
companies producing now in the State of Arizona — only one-fifth as 
many as were producing in the First World War. In the First 
World War the price went up to 37 cents. Leon Henderson then made 
a change and he said, "We will let the price of copper go up 1, 2, 3, 
4, or 5 cents a pound, up to 17 cents, above the pegged price, and we 
will pay for prewar production the pegged price and we will pay the 
premium price over and above, for all produced over and above the 
prewar production." 

That has been done and we are continuing that program during the 

Now, my question is. What is going to happen after the war? With 
all of these metals, copper, lead, and zinc, there is a premium now 
being paid. How can we get out of this situation and let the law of 
, supply and demand operate and let those copper people out there go 
ahead and produce copper which the country needs, and yet, when the 
war controls are removed 

Mr. Bowles. I think it is a very important question. You have this 
whole substantive problem all of the way through the economy. We 
have spent less money on subsidies than have England or Canada, and 
they have done a good job of maintaining a stable economy. We all 
agree subsidies are a necessary evil, but I do not think anyone is for 
subsidy. It is the cheap way out of a bad situation. If we had to 
give up subsidies on food you would have had food moving up 7 or 
8 percent at a time you were trying to maintain stable wage rates. 
Nobody I know likes subsidies. The trick we have to find is to get 
rid of them in a way they will not hurt the producer. 

Mr. MuRDOCK. I saw the copper camps of Arizona ghost towns in 
the early 1930's, and I never want to see them that way again. From 
their very nature, if mines close down, even though intended for a 
short time, it will likely be for a long time. 

Mr. BoAVLEs. We have got to find a way to move out of there so we 
do not upset the stabilization program and at the same time get to a 
point where the producer can get into the free market and free prices. 
If we pull those subsidies out at some point — for instance, if milk 
fell below ceiling, the dairy farmer would be in a bad jam. In some 


cases we will have to pull out of subsidies and allow the price to go up. 
The question is the timing, so you do not upset the intricate balance of 
prices and everything else we are trying to protect. It is all a matter 
of timing. 

I have had talks with Ed O'Neal of the Farm Bureau, and I think 
we are together. I wrote him a letter saying what we are going to 
try to do. You have the same problem, and I think it is one of the 
trickiest ones in this whole situation. 

Mr. MuRDOCK. I do not think I have any more questions, Mr. 

The Chairman. Mr. LeFevre. 

Mr. LeFe\t?e. I have no questions, Mr. Chairman. 

The Chairman. Mr. Bowles, I express the appreciation of the 


Mr. Reece. I would like to get Mr. Bowles' idea on the question of 
subsidies, either on metals or food. 

What is the relative effect on inflation of paying the price of milk 
of 15 cents a quart to the farmer direct, and paying the farmer 12 
cents and a subsidy of 3 or 4 cents ? 

Mr. Bowles. What we had in the Stabilization Act 

Mr. Reece. If you pay the farmer the price for the milk when 
controls were released, then the farmer would not be confronted with 
that readjustment problem that he is confronted with when you with- 
draw the subsidy. 

Mr. Bowles. That is the thought of the subsidy. 
Mr. Reece. But what is the advantage? 

Mr. BoAVLES. The advantage is this. The stabilization program of 
1942 — the act stated that wages and prices would be stabilized at that 
point, roughly, the point of September 15, 1942. In spite of that 
language, prices continued on upAvard in the winter of 1942 rather 
substantially. There was an increase of something like 6 or 7 percent 
in the cost of living during that winter. Labor very reasonably stated 
that prices and wages had not been stabilized together, that prices were 
moving up and that Aye did not have the stabilization we talked about. 
You had a very ticklish situation in trying to maintain the two in 
balance. In Australia and Canada, they worked out a system whereby 
any increase in price allows an increase in wages. We have had that 
only by broad direction. 

Mr. Reece. If you could give us the advantage of paying a subsidy 
to compensate for the loss in cost of production, over-paying the price 

which covers cost of production plus reasonable profit 

Mr. Bowles. If we had not put subsidies into effect on milk and 
meat products and various other products in the fall of 1943 and the 
winter of 1944, what would have happened is that the cost of food in 
the retail stores would have risen 7 or 8 percent immediately. I do 
not think under those circumstances you would have had a chance of 
holding wages stable at that point. Wages would also have risen, and 
that would have put every businessman's cost up and they would have 
been in for further increases in price to take care of the increased 
costs, and your whole spiral would start to go up. You try to main- 
tain a balance, an artificial balance, maintained only with the help of 
subsidy payments on certain important cost-of-living items, and if 
they moved up it would tend to move up the whole wage structure and 
everything else. Australia, New Zealand, Canada, and the United 


States, democratic countries which have stabilized prices, have all 
had to use subsidies. In England, they purchased a lot of food right 
at the docks and resold at a lower price to the consumers in order to 
maintain a stable price level in the country. 

The evil of the thing is not the money spent because our food 
subsidies cost only $1,500,000,000, while the increase in price without 
subsidy would have been substantially more. 

It is true you have difficulty in moving out of them. We certainly 
intend to do the least harm possible to the farm groups who have 
been extremely cooperative, so there will be no harm to the income 
of the farmer, so he can get his price in a free market and maintain 
a high farm income which we want to see with subsidies out of the 

As I say, the question is the timing, and I hope a year from today 
we will be w^fell on our way toward making a good deal of adaptations 
and changes. 

Mr. Reece. I hope we will be entirely out a year from now. 

Mr. Hope. Mr. Chairman. 

The Chaikman. Let me say there is no disposition on the part of 
the Chair to rush this thing, and I want you to ask any questions you 
see fit, but I hope those of us who are here will remain for a minute 
after we are through. 

Mr. Hope. On this question of subsidy which I think has caused the 
farmers a lot of concern — in the first place they do not like them and 
in the second place their fear has been they do not know how they 
will get out ; they do not know how jow will end it and where it will 
leave them. I assume you have no idea of dropping subsidy payments 
without at the same either increasing the ceiling up to the amount of 
the subsidy withdrawn or taking it off altogether. 

Mr. Bowles. That is right. We will work that out to the full 
satisfaction of the farmer. I think the farmer is in a ticklish position 
and if we do not see that the farmer gets a good income after the 
war — he took an awful licking in the period before the war — in 1939, 
25 percent of our people were farmers and they got only 8 percent 
of the national income. They lived in that more or less forgotten 
part of our economy. If we are to get full production of all of the 
electrical gadgets and household equipment in the postwar period, 
our farmers are one of our great undeveloped markets. I have been 
encouraged to sit with management, labor, and farm groups and hear 
them express their mutual interdependency. Business says if the 
workers and farmers do not have incomes it will not have any cus- 
tomers, and the farmers are vei-y well aware it has been the high 
income in the cities that has given them the market they have had 
for their .products, and I think the workers know the farmer has 
to get a good income in order to make employment. 

I think one of the big problems is maintaining a good farm income. 

We have had very strong backing in OPA from farm groups. 
They may have irritations, but when you get through those people 
have as good an understanding or perhaps more understanding of 
the inflationary danger than any group I know. 

Mr. Hope. I think that is true. I think farmers are particularly 
conscious of that because they remember what happened after the 
last war. 



Mr. Bowles. They remember very vividly. They know if prices 
start to spiral, everything will cost them more. 

May 1 sa}^ this off the record? 

(Discussion off the record.) 

]\Ir. Hope. The farmers have the fear that consumers who have 
been getting their food at reasonable prices because of the subsidy 
which reduces their out-of-pocket cost for food, they fear when 
you take the subsidy away and take the ceiling off the consumers 
will say, "We should not pay more for our food than during the 
war," and yet our price level may be as high or higher if you take 
ceilings off, and that causes very great concern among farmers. They 
are afraid of the psychology that food prices should not be any 
higher than they are now. 

If, of course, the general price level goes higher, food prices will 
have to go higher in order to maintain even the balance we have now, 
even if wages and costs do not go higher. 

Mr. Bowles. Is not the answer getting distribution costs down? 

Mr. Hope. I think so. 

INIr. Bowles. You now have your margins established based on a 
national income of from 80 to 90 billion dollars. Assuming we get 
r;p to and hold a national income of 150 billion dollars, certainly 
goods and services will be in great demand and the distributive 
trades will find themselves making far more money at smaller mar- 
gins. Those margins are now set for 80 to 90 billion dollars, and 
when you jump up to 150 billion dollars, they would take smaller 
margins and make more money. That is one way some of the selling 
costs will come down. They come down very fast as you put the 
volume up. 

Mr. Hope. That will not be true of farm products. Your volume 
is pretty well determined now. Peof)le will not eat more after the 
war than they are eating now. 

Mr. Bowles. I think they will. Take meat, for instance 

Mr. Hope. Our per capita consumption of food during the war 
has been greiter than ever before. 

Mr. Bowles. I wish >ou would state it publicly right now. 

Mr. Hope. I am stating it and I know it is true. 

Mr. Bowles. But people do not realize it. 

Mr. Hope. They have eaten better and more than ever in our 
history, in spite of the fact we have had a few shortages. But the 
trouble is they have had it at a very low cost, and my fear is that 
people will continue to get farm products — take bread, for instance; 
bread is selling at the same price now that it was in 1941 and 1942. 
It has not gone up because you have had a subsidy on flour. 

Take distribution costs, the distribution cost on bread was pretty 
well squeezed out because you held that price down all the time. So 
the thing has been pretty well squeezed down so there is no chance 
there for distribution cost in something like bread. But if you take 
the subsidy off flour, bread may go up a cent or a cent and a half 
a loaf. 

The thing I am wondering is how the housewife who has been pay- 
ing 10 cents for a loaf of bread is going to react when 11-cent bread 
comes in after this is over. 


Mr. Bowles. Wlien the war is over, and your inflationary danger 
is out, some prices are going up and some will go down, but I thinlq 
agriculture in some way will cut its costs. We are going to have 
some remarkable nev/ machinery. We have two factors working to 
maintain farm income. Also there is no reason why the farmer 
should work the hours he is now working. He is working much too 
lono" now. So you have farm machinery which will lower costs and 
there will be some degree of lowering of distribution costs. 

After the inflationary danger is over, I am not worried about see- 
ing the price of bread go up. The level is the important thing. I 
think you have factors to hold that level under a free-enterprise sys- 
tem. We have to make sure we have the purchasing power to buy all 
of these things. We have to maintain heavy purchasing power. We 
have proved what we can manufacture, but we have to get the income 
into people's pockets so they can buy. 

I am not a pessimist. I do not think the world is going to pieces. 
I think we are in for some good times under our traditional system. 
I would like to make it very clear I think you will find all of the 
people running OPA in our regional and district offices and my staff 
in Washington will probably he more pleased even than Congress 
when the need for this, is finished. 

I would say if there are mistakes, they will be more in pulling out 
before the pressure is gone than in the opposite direction. We are all 
committed to that, clearly, and I would like to restate that. 

These are unnatural controls jDUt in to hold a distorted economy 
built up through the war. J[f we had not had them, I think you 
gentlemen know what might have happened. Steel went up 450 per- 
cent in the last war and has been held to one or two percent in this 
war. What would your battleships and tanks have cost if you had 
the crazy prices of the last war ? 

The cost of the war already will be $300,000,000,000 or at least 
$250,000,000,000. If you had had the prices in the other war, they 
would have reached such proportions we could not have carried the 

We have also had to hold down the cost of living and we have done 
a; better job than many of us thought we could do. We have got to 
work our way out of it as quickly as we can. That is our job, and 
I think when Congress discusses the Price Control Act a year from 
today, I am extremely hopeful they will say we have lived up to our 
assei'tion and intention of moving as fast as we can. 
Off the record please. 
(Discussion off the record.) 

The Chaieman. Mr. Bowles, it is encouraging to know that at least 
the head of the organization feels as you do and we are very grateful 
for your appearance here this morning. 
Mr. GiFFORD. Off the record. 
(Discussion off the record.) 

The Chairman. Thank you very much, Mr. Bowles. 
The committee will now^ go into executive session for a minute. 
(Whereupon, the committee retired into executive session at 12:25 
o'clock p. m., the reporter being excused.) 


FRIDAY, JULY 6, 1945 

House of Representatives, 
Speciai, Committee on Postwar 
Economic Policy and Planning, 

Washington^ D. G. 

The special committee met, pursuant to notice, at 10 : 15 a. m., in 
room 1012, New House Office Building, Hon. William M. Colmer 
(chairman) presiding. 

Present: Representatives Colmer (chairman), Voorhis, Murdock, 
Welch, Wolverton, Hope, and LeFevre. 

Also present : H. B. Arthur, consultant ; E. B. George, consultant, 
and Norman Burns, consultant. 

The Chairman. The committee will come to order. 

The meeting this morning is a continuance of the hearing on the sub- 
ject of relinquishment of Government control, wartime control. In 
furtherance of that, and particularly in line with the request of Mr. 
Wolverton of New Jersey, a member of the committee, we are going 
to hear Mr. Silvey. 

Mr. Silvey, I might further say that we have on several occasions 
invited members of your organization, as well as other labor organiza- 
tions, but we seem to have a little trouble in ever getting the appoint- 
ments to work out. So, we are glad to have you here this morning. 

You may identify yourself and proceed as you see fit. 


Mr. Silvey. My name is Ted F. Silvey. I am chairman of the CIO 
Reconversion Committee. It was good of you to allow me to come. 

Mr. George, when he first issued the committee's invitation, suggested 
July 3. I had to be down at Camp Lee that day to speak so he made 
arrangements for me to come over today. 

We have a very definite point of view with respect to controls. With 
your permission, I should like to speak about our attitude toward them 
and the whole system of our economy. 

I noticed this morning in the Washington Post that the Civil Aero- 
nautics Board has permitted three American aviation corporations to 
fly the Atlantic Ocean. When I read the story I thought about what 
some of the businessmen of a century ago might have said about the 
Government butting in and telling them they could go across the 
Atlantic Ocean. This matter of international aviation is something 
someone doesn't go about as he pleases without regard of consequences 



to society or different countries or people. So you have to have a con- 
trol of the Government to say whether or not an aviation company can 
set up passenger and freight lines across the Atlantic Ocean. 

This is only an extension of highway traffic control, and laAvs as to 
how you drive an automobile, whether you stop at a red light or not. 
These things are controls, and they are controls that have been 
adopted in the interest of the whole people. They are laws. 

Now we think that controls in their democratic application are pro- 
tection for the people who want to do right as against those who 
would, without controls, do things that are bad for the bulk of the 
people. For instance, if a man who is in business decides to be a 
pirate and do what he pleases and what is goocl for him, without 
regard to the consequences on his employees, consumers of his prod- 
uct, his competitors, or the community in which he lives, then the 
society steps in and says "no ;" it exercises the police power, and that 
police power is in the interest of the people who do want to be law- 

It just comes to my mind that in some sections of a residential area 
of a city you can't raise pigs or chickens. It is antisocial; it is bad 
for the population. So the Government steps in w^ith controls. 

Now our point of view is that controls invoked during war have 
been necessar}^ for the security of the Nation and to get out war pro- 
duction. We think that there is too much loose talk about just 
getting rid of controls as though it is of no consequence that we had 
those controls in the first place, and that therefore when the war 
production program was over, pay no attention to what impact war 
production and the war has had upon the economy, but just letting 
everything go. 

We say sometimes that the economy during the war is like a tightly 
wound spring. If you just release it all at once, somebody is going 
to get hit in the eye and get hurt. If you gradually unwind it and 
do it by the use of controls invoked in the first place for the successful 
function of the economy, for the security of the Nation in the war 
period, peoi)ie will not be hurt and we will have a smooth transition 
in the postwar period. Then we can determine, out of our experience, 
what additional controls we need. 

One of the commonest characteristics of our society is cultural lag, 
the unwillingness or inability of enough people to bring their think- 
ing and attitudes about social, political, and economic relationships 
into line with the facts of a high-power technology. 

I remember reading when Robert Fulton had his steamboat on 
the Hudson River, the people lined up on the banks to jeer at him. 
Everybody knew, of course, that a boat could not run without a sail. 
It was impossible. One of the stories that I think will illustrate this 
question of cultural lag is the story of the B. & O. Railroad when 
the}' tried to put their line across the Ohio River. They went to the 
county commissioners of Fairfield County, Ohio, asked for permis- 
sion, and the county commissioners met and considered their request 
and replied in due course no, saying, "If God had wanted a man to 
go as fast as 15 miles an hour, he would have made him that way." 
We lookback and laugh at that. 

I well remember that during the depression serious people said, 
"If a man is unemployed it must be his own fault." 


This cultural lag is one of the greatest handicaps in looking at this 
business of controls. The surest thing in human affairs is change. The 
challenge we face is to meet the change and adapt ourselves to it so as 
to make real progress instead of just having change for its own sake. 

You may be interested in a paragraph from Judge Vinson's report, 
The Road to Tokyo and Beyond, which I would like to read : 

The word "reconversion" carries with it absence of going back to what existed 
before. In many ways, we do want to go back to the comforts and pleasures of 
peacetime America, but as far as our national economy is concerned it would be 
disastrous to go back, for we would be going back to the misery of mass unem- 

After the war, the American economy must be dynamic, with expanding busi- 
ness, expanding markets, expanding employment, and opportunity. The Ameri- 
can people are in the pleasant predicament of having to learn to live 50 percent 
better than they ever lived before. Only the defeatist can scoff at this inescapable 
fact that we must build our economy on that basis. 

This expansion must be brought about by positive policies on the part of busi- 
ness, agriculture, labor, and local, State, and Federal governments. 

The time to start hammering out these policies is now, while the transition is 
still young. 

We had nothing to do with the preparation of that text, but we 
think Judge Vinson has expressed a great wisdom in connection with 
what he has said here. 

Now there is going to be control in the economy. We ought to face 
up to that fact first, we think. Is the control going to be exercised by 
those people who, in the development of commercial empires and 
economic empires, set back and made decisions that affected the whole 
people when those who make those decisions are not responsible to the 
electorate? The American Telephone & Telegraph Co.'s board can 
sit down at an annual business meeting and tiiey can decide certain 
things and they never have to think when they make those decisions : 
How will this affect my chance of being reelected at the polls next 
November? They only think how this will affect their profit position 
and what it will do for them. The American Telephone & Telegraph 
Co. makes decisions about rates, about installations, many economic 
matters, as well as engineering matters. Certainly, it is a mar- 
velous institution, but it is not an institution which is subject in any 
way to the will of the people. There is no democracy in it. Whereas, 
in the Congress of the United States and in the legislative bodies and 
executive departments, we have an attitude, that when the decision is 
made there will be a reaction about that decision in the minds of the 
people throughout the country. And the decision, therefore, is made 
in terms of what the people will think about it and how they will act 
at the polls. This is democracy, and it is all to the good. 

Government controls are Government laws. During the war some 
of these laws have been applied under emergency conditions and 
are necessarily of temporary duration. All laws, permanent and 
temporary, arise out of need for them. 

It was early in this century that the novelist Upton Sinclair wrote 
a book called The Jungle about the meat-packing industry. He 
was interested in exposing the terrible working conditions of the 
employees in the Chicago meat-packing plants. In telling the story, 
it was necessary for him to describe the conditions under which 
people had their meat processed. As a result of this book. President 

99579— 46— pt. 7 6 


Theodore Roosevelt appointed a commission to investigate the meat- 
packing industry, out of which commission's report came our meat- 
inspection laws. 

Upton Sinclair said later that he was aiming at the public^s heart, 
but that he hit them in the stomach. The law which followed arose 
out of the need which was present for it. 

Similarly, the National Labor Relations Act came into existence, 
in more recent times, from the abuses of civil liberties that were 
revealed from the investigations and hearings of the La Follette 
Senate committee. 

Out of w^artime Government controls or laws, there must continue 
a certain policing of the economy. These are controls or laws which 
came only partly because of war. They came sooner and were ac- 
cepted more readily, but they would have had to come, even without 
war, if our economy was to prosper. 

There are two kinds of wartime controls. Those which limit and 
restrict — a manufacturer cannot make a vacuum cleaner, and you 
and I cannot buy a pair of shoes without a ration coupon — and those 
which are designed for expansion and the accomplishment of desig- 
nated desirable objectives, such as the President's wartime powers 
allocated to the War Production Board. 

Perhaps the greatest control which the Government exercises at 
the present time over the economy is the fact that it is the great 
customer of all business, and that practically everything which can 
be made is bought by the Government. In the future absence of 
Government on the market, we shall have to organize to assure pur- 
chasing power to maintain this guaranteed market, which means our 
economic controls. 

Economic controls are not new. Controls have been exercised by 
private groups — by the railroads, the electric power and telephone 
utilities, financial institutions, oil and steel and coal corporations. 
Many of these economic empires have been more powerful than the 
United States Government itself. 

What we are currently experiencing and will see, I think, during 
ensuing years is a democratization of the privately decided controls 
or laws, and the necessary changes of those private controls for the 
public welfare. This is all to the good and is part of the progress 
of the American people. . 

Now, one of the most important controls is that which is exercised 
over a man's life by deciding whether he shall be permitted to work 
and earn a living. Samuel InsuU's statement that the surest guaran- 
tee of a contented working force is a long line at the employment 
window is completely out of date. That was a control. It was 
exercised by the employer. The idea was that he had two or three 
hundred people showing up at the gates every morning wanting 
jobs. The people on the inside would look out and they would be 
very quiet about asking the boss for any raise or object to any policy 
or make mention of any grievance, because the boss could always 
point to those people outside and say, "You had better keep your 
mouth shut or you will get fired out of here." Such a working force 
was really never contented nor fully productive. Workmen are not 
only producers, they are more important in this time of technology 
as consumers. What we need, then, is a long line at the cash register. 


You can't have a long line at the cash register unless you have people 
with money in their pockets. 

Now business will learn, we think, that this long line at the cash 
register is more profitable than a long line at the employment window, 
and come to accept it. Society is learning it, because society is 
interested first in surviving. There is no longer a moral question of 
whether a man shall have high wages. High wages and constant 
earning power is absolutely essential to keeping the economy going, 
because we can't afford to have people without purchasing power. 

Well, then, there is a new concept, not the old idea of exploiting 
those who are less powerful or less fortunately situated, but of all 
groups combining to harness the riches of nature for the betterment 
of all of us. It is at that point that I want to come in with our 
discussion of controls, because in the transition of the present controls 
to the postwar economy we want participation by all the groups 
instead of one group of powerful financial people sitting back making 
decisions without us having any say in the matter. 

Business has done terrific things in America in increasing produc- 
tion, and making new scientific and technological methods available. 
The whole business of making more worth less effort is the great 
thing about American enterprise. This isn't going to stop. It is 
going on, and it should go on, and we want it to go on. 

Mr. Evans over at the Bureau of Labor Statistics has made some 
analyses with respect to postwar productivity. He thinks there will 
be a plateau for 1 year, then rapidly accelerating in 3 years at about 
10 percent a year, so at the end of 3 years there will be one-third more 
production with the same working force there was before. The 
impact of this on the economy will be terrific. 

Then there is this talk about automatic control mechanisms that 
are coming — the fact that machines through the vacuum tube, the 
electronics and television, can be made to think, not think originally, 
but think according to human patterns that are set up in advance 
and that are fed into the machine on tapes or wires or ribbons, or 
anything like this system of player-piano roll that makes a machine 

Because this might be true, and we look for it, economy will become 
so fruitful, machines will become so productive that they will be able 
to do most anything except buy wliat they can make, and it takes 
money in people's pockets to do that. 

We are looking, therefore, with eagerness to a time of even greater 
productivity than we have got during the war. We want to partici- 
pate in it and we want to help it come in the labor movement. We 
want an ever larger number of people to have the higher standard 
of living that Mr. Vinson talks about in his report, and not have a 
continuously smaller island of wealth in a sea of mass unemployment, 
because the nature of society that business has made with the develop- 
ment of technology means that everybody has got to participate in it 
or nobody is secure. 

The International Labor Office meeting at Philadelphia last year 
came out with the Philadelphia charter and emphasized that lead 
line; ''Poverty anywhere is a threat to prosperity everywhere." 

The extension of steam and electric power in our day has reached 
so far that wages and consumption become the keystone of continued 


operation. Now the war has been snccessful in prochiction because 
we have had a national oneness of purpose, which has made victory 
possible. We still have the Japanese war to win, and we still have 
a national oneness of purpose to accomplish that objective. The 
problem is can we merge this oneness of purpose for victory into a 
oneness of purpose for full employment and full production; in other 
words, accomplish .Judge Vinson's statement which I read. 

Controls are in the picture. We want them to be democratic con- 
trols. We want them to be controls adapted to every group and by 
Government pirticipating instead of being decisions that are made in 
isolated areas by poAverful interests. 

The organized labor movement, the CIO, is concerned with fiscal 
policies, and we are concerned with management of the national budget, 
but we think more is necessary than just arranging bookkeeping tiun.s- 
actions in the Treasury Department or in the Appropriations Com- 
mittee or similar committees of the Congress. 

We have a feeling that wealth comes from production and not from 
reordering and rearranging the things we already have. ]^roduction 
comes from the application of human energy, human intelligence, and 
human skill to the forces of nature and raw material. How to get these 
human qualities applied to the forces of nature to create constantly 
neAV wealth is the thing we speak about and is the point about which 
we emphasized the need for democratic controls. 

Manufacturers are currently saying they cannot pi-oduce all the jobs 
necessary in the postwar period. They declare they must not be ex- 
pected to come through with as many manufacturing jobs as they now 
have. They say it will be necessary to have more of these jobs in the 
professions, in the services, and in the distributive trades. Well that 
may, in part, be true, although we think there can be more jobs in 
production, and in manufacturing. 

Suppose manufacturing does not provide for jobs. Where are these 
jobs to be found that have to come? Well, they come in the field of 
health, more doctors, more nurses, more laboratory technicians, more 
dentists, more hospitals, and hospital staffs, and so forth. 

They would come in the field of education, more schools, more sub- 
jects taught, more adult education, longer period of training for some 
people; all of the business related to the educational system would 
have to increase. 

Maybe people will be interested in astronomy as a hobby. Maybe 
there will have to be more swimming pools, more playgrounds, more 
parks and so forth. All of these things will provide jobs, it is true, 
but where does the payment for these things come from? Well, they 
come from taxes almost exclusively. At the same time, the manufac- 
turer says, "Don't ask us to give you the jobs. Look for them in the 
service and professional fields." 

Then we look for them there and we see that payment for them has 
to come out of taxes. Then we find those same manufacturers saying, 
"Eeduce our taxes." That isn't quite consistent and therefore becomes 
a subject of control, and tax policy. 

So, it is in the field of mining, manufacturing, transportation, and 
agriculture M'here wealth is produced. The wealth thus created must 
provide dividends, wages, and taxes in proper proportion to keep the 
economy going. 


None of the things we do are in isolated boxes. All of them have an 
effect on each other. 

Now I should like to speak for a few minutes about a concept we have 
in respect to postwar controls. I use the word "control," of course, in 
the sense I explained that it is a law. 

The CIO for a number of years have spoken of what we call our 
industry council plan. We ask for a democratic teamwork for full 
production and employment. With your permission, I will read part 
of our convention statement on that : 

The CIO made the first proposals for the conversion of America's vast indus- 
trial facilities to war production. Among these proposals were the industry 
council plan and the programs of several CIO unions for converting the steel, 
automobile, aluminum and other industries. 

These programs were based on one fundamental proposition : 

There must be teamwork on the part of labor, industry, and Government in 
organizing production around an over-all national plan and component industry 

This principle was to be applied by establishing a national production board 
and industry councils, composed of representatives of management and labor with 
Government chairmen. 

As the war went on, the importance of planning and labor participation was 
more and more fully recognized and the results became manifest in amazing pro- 
duction records. 

The same fundamental proposition must be applied in the transition 
to peacetime production and the maintenance of capacity output and employment 

Labor, management, and Government got together successfully to produce the 
weapons of victory. They should stick together to build an enduring prosperity. 

These steps should be taken : 

a. A national production council should be set up, properly linked with the 
War Production Board and other agencies, which will be responsible for taking 
the country through reconversion and keeping it prosperous. It should be com- 
posed of representatives of labor, industry, agriculture, and Government. 

&. Industry councils should be established in the great basic and mass-produc- 
tion industries, composed of representatives of labor, management, and 

c. The national council and the industry councils should work out an over-all 
national program and component industry programs for changing over to peace- 
time production and operating at capacity thereafter. 

Many of our great corporations are preparing plans now for their operations 
after the war. They are planning their investments in new equipment and 
machinery. They are counting on running certain plants and shutting down 
others. They are estimating their expected sales and fixing their sights for 
production and employment accordingly. 

Now, the labor movement for years had as its No. 1 enemy this 
Frenchman by the name of Bedaux, selling speed-up systems. There 
were many others. When the war came, and when the national one- 
ness of purpose, of which I speak, began to solidify, then the labor 
movement came to Government and offered to throw its resources, its 
intelligence into the fullest possible production. Although we fought 
the Bedaux speed-up systems for years, we turned right around and 
created our own speed-up system. What was the reason for that? 

Well, it was more than a patriotic concept of labor. It was a realiza- 
tion that Muth a great avalanche of production, there would be a greater 
security of jobs. 

We don't want to stop at the end of the war and go back to fighting 
speed-up systems again. That is "no soap." There is no progress 
there. We want to continue to accelerate production, because it means 
the creation of new wealth. But we say it must be done democrat- 


ically, and that we shall have our reasonable share of that acceleration 
of wealth. 

The people of this country have a vital interest in these activities. 

The plans which management is making for capital investment in new plants, 
machinery and equipment must be big enough to add up, along with public 
investment and foreign investment, to whatever is necessary to keep our capital 
goods industries going. 

The levels of production and employment which our big corporations are 
scheduling must be high enough, together with the employment provided by small 
business and government, to provide a job for every person in the country who 
wishes to work. , 

The people in every community in the land have a right to know whether 
the companies intend to operate the plants in that community and what they 
intend to produce. 

High wage rates are an imperative of the transition and the peace. It is 
likewise an imperative that our plants and factories be kept open and oper- 
ating. The jobs must be there before men can earn money. A 25 percent cut 
in employment can be just as disastrous as a 25 percent cut in wages, and can 
be imposed overnight. We want none of that in the postwar years. 

All these matters are proper and necessary subjects for consultation and 

These problems should be dealt with by the national production council and 
the industry councils. 

If the corporations continue to do the planning job alone without relation to 
programs of other companies, and of the national. State, and local governments, 
they will inevitably shoot too low. 

We must get all our programs out on the table where we can look thei^i over 
and see whether they measure up to the total national production, employment, 
and investment levels which are possible and necessary if the deflationary gap 
is to be closed. 

What we say here is that through this arrangement, when these 
decisions are made, all the people who are interested in them, shall 
have some voice. That doesn't mean that labor is interested in taking 
management's decision away from it at all ; nothing of the sort. We 
know that no enterprise can function unless you have a responsible 
executive at the t( p of it. We have responsible executives in our 
organizations, and in a sense we have management problems, and so 

We are not interested in cutting in or taking away any of those 
management prerogatives in respect to their operation of their busi- 
ness. But Ave do not believe that these decision should be made in 
secluded boardrooms of New York financial houses or elsewhere, but 
they must be made in the light of the country's interests and the 
people's examination of their decisions. 

For example, if we had an industry council in the shoe industry, 
there would be in this industry council representatives, of course, 
of the leather industry, fabric industry, shoe industry, machinery 
industry, and representatives of manageiiient and labor, together with 
agricultural people who are interested in the hide production, and 
the Government. 

I mentioned the shoe industry because the shoe industry is an 
industry which produces three or four times as much in a year as 
the people have ever been able to buy of its products. An\body can 
go into the shoe industry who has enough money to rent a machine, 
without regard to the market or anything about it. 

Now it is going to be necessary through an industry council plan, 
as we visualize it, to think about the market and to see if we can get 
production of shoes up to the point where all the shoe factories will 
work enough so that there will be full employment. 


This has its ramifications not only in wages and dividends, but also 
on the farm communities in the production of hides. 

And then if this went on with respect to all other industry groups, 
with everyone setting up their programs, instead of setting their 
programs just short of what they think the market will be, there 
would be the tendency to increase the market because of the in- 
creased wages and production that would follow. 

It would be possible for everybody to aim just a little bit higher 
and the expanded programs in the shoe industry would make better 
employment in the steel industry, in the automobile industry, and 
other industries. 

Now we do not feel that controls as they have been put on in wartime 
are desirable to continue for the indefinite future. They are made for 
the purpose, just like an Army truck is made for the purpose. An 
Army truck isn't going to be any good for laundry delivery after the 
war or hauling coal. So these war controls have been fabricated to 
meet the problems. 

Now, we can complain about the controls, but we don't need to 
complain about the theory of the controls, and what was accom- 
plished by the use of them. 

So, we will get rid of these controls. We too want to get rid of 
them. But we don't want to say everything is wide open and let 
the strong gobble up the weak regardless of the consequences on the 

We make a considerable emphasis on the time of the elimination of 
the wartime controls. We think it is not wise now even to open steel 
because there is a terrific shortage of certain kinds of steel. We have, 
in our discussions with the War Production Board and the Office of 
Economic Stabilization, been concerned about this matter of opening 
steel. There are three-quarters of a million tons of sheet steel short 
for the third quarter of this year with respect to the programed 

When steel is laid out in the free market with that kind of shortage, 
then, of course, the wild scramble that will follow will not only be 
inflationary and create a black market, but it will tend to put the use 
of steel in the production of luxury, high-priced items instead of 
the things that the citizens of the country most need. 

Luxury items may take precedence over cooking vessels, or juke boxes 
over washing machines, just because it is natural for a few to do the 
things that will be the most profitable for them, regardless of the effect 
on the rest of the economy. 

Now the illustration I gave you somewhat gives our point of view 
with respect to most of the controls. We do understand they are 
tailor-made for the purpose. Too, we do understand they won't 
be useful in the postwar period. We do, however, say that economic 
controls, democratically arrived at are part of the essentials that 
have come because of the technological nature of our society. We 
want to see the transition operated in such a manner that we won't 
get in the old scramble of everybody getting for himself while the 
getting is good, and the devil take the hindmost. 

At that point, I will be satisfied to stop and say I have had a good 
hearing and I appreciate the time you have allotted me, and the good 
attention you have given me. I will be subject to any questions. 

The Chairman. Thank you. 



I am sure that some of the members of the committee desire to ask 
some questions. However, Ave will have to all bear in mind that the 
House is meeting this morning at 11 :00 o'clock and we may possibly 
be called to the House fairly shortly. So, the membership will bear 
that in mind in asking their questions, and also bear in mind that we 
have Mr. John Green this morning, of the Marine and Shipbuilding 

Mr. VooRHis. Mr. Chairman, it can't be done. 

The Chairman. Mr. Voorhis, I will be glad to let somebody else 
manipulate it. I am just facing a realistic situation. 

Mr. VooRHis. We can't do all those things. 

The Chairman. That is our trouble always, Mr. Voorhis. I thought 
I Avould call the committee's attention to that, 

Mr. Voorhis, we will start with you and give you the first honor. 

Mr. Voorhis, What I said didn't have that in mind. 

Mr. MuRDOCK. May I ask a question? 

The Chairman. Yes. 

Mr. MuRDOCK. Do we have general debate on the tax bill today? If 
so, the committee might sit during general debate'. 

The Chairman. I am not advised just what the program is going to 
be. Off the record. 

(Discussion off the record.) 

The C^hairmax. Mr. Voorhis. 

Mr. VooRiirs. I am just going to ask one question. 

Do I understand your principal point to be that you believe that 
the kind of so-called controls that should be exercised, are those that 
■will lead to increased production and expanding economy, that will 
prevent bottlenecks from developing, rather than the sort of restrictive 
controls that have been in effect during the war? 

Mr. SiL\Ti:T. Yes, sir. 

Let me repeat that part of my testimony where I said there are two 
kinds of controls. There is the restrictive control, the kind that says 
you can't buy a vacuum cleaner ; and then the kind of control in the 
War Production Board that hasn't been restrictive but has been 

For example, the question of subsidies are controls. The subsidies 
that produced copper out of North Michigan where it couldn't be 
mined at ceiling price was an expansionist control. 

Mr. Voorhis. When most people talk about controls, they mean 
restrictive controls. 

Mr. SiLVEY. We don't look at it in that sense. 

Mr. MuRDOCK. Premium payments to encourage copper output were 
made not only in north Michigan, but in several other parts of the 

Mr. Voorhis. For example, Arizona. 

ISIr. SiLVEY. I mentioned that because it was the first one that came 
to my mind. 

The Chairman, Is that all, Mr. Voorhis? 

Mr. Voorhis. That is all. 

The Chairman. Mr. Welch ? 

Mr. Welch. No questions. 

The Chairman. Mr. Wolverton ? 

Mr. Wolverton. I have no question except to make the observation 
that I think the committee has been greatly benefited by the testimony 


that Mr. Silvey has given to us, and I am very glad that we have had 
that privilege, Mr. Silvey. It is a statement that can be re-read and 
can be studied with a great deal of benefit in formulating policies with 
reference to the postwar period. 

Mr. Silvey. Thank you, sir. 

The Chairman. Mr. Hope ? 

Mr. Hope. I had one question I would like to ask. I was interested 
in what Mr. Silvey said about these industrial committees. 

Mr. Silvey. Inclustrj^ councils. 

Mr. Hope. What bothers me about that is I am wondering if an in- 
dustry council, even though it represents management and labor and 
all the factors in the industry, if it would be any different when it 
came to a show-down than a sort of a cartel set-up. Do you under- 
stand what I mean? 

Mr. SiLAEY. I do. 

Mr. Hope. I would like to have you go into that a little bit. You 
mentioned the A. T. & T. just meeting and considering what would be 
to the financial interest of the A. T. & T. Unless we think and believe 
that whole industry itself takes a broader view of that industry in its 
relationship with the rest of the economy than capital or management 
would take, then, it seems to me 3^011 are likely to run into exactly the 
same situation that you have been complaining about. I would like 
to have you go into that. 

Mr. Silvey. The question is often asked : "Does this mean carteliza- 
tion ? Does this mean a corporate state ?" 

Most emphatically, it does not, because we are opposed to all of those 

Mr. Hope. I know you are. I am wondering how 

Mr. Silvey (interposing). We feel that the industry council plan 
for each industry, being tied together with the National Production 
Council, or the National Production Board, will have due weight 
given to the various elements in the economy that need consideration, 
and when each industry council meets it is not, for example, the Shef- 
field Farms Corporation sitting down with the union of the milk wagon 
drivers and saying, "Look, if you go along with raising the price of 
milk 3 cents a quart, we will give you $6 a week increase in wages." 

That is the bad effect of two economic groups getting together and 
conspiring against another economic group. We feel that by enlarging 
the industry council plan so that it doesn't include just one set of em- 
ployers and one set of workmen, but every element that there is no 
danger of what you speak of. It will be tied in with the National Pro- 
duction Council and through that tie-in, will have research people to 
go into all the problems so that when the industry councils make their 
decisions they will know the effect of their decisions on the whole 

Now, the consumers, of course, are the biggest unit to be considered. 
If, for example, in the farm machinery industry, the manufacturers 
and the unions would do something to set a cartelized arrangement 
similar to what they already had, or even more intensification of 
what they already had, then right away the people who represent 
agriculture, who are from the farms, and who buy that agricultural 
machinery, have an interest in it. They say, "Now look, you can't do 
that and expect us to pay this inflated price, or you can't cheapen the 
quality of this thing and expect us to pay the same price." 


It is the same with the Government. 

I can see that the Antitrust Division would be very properly inter- 
ested in this industry council arrangement. I didn't read you further 
in our statement, but we very definitely ask that the Antitrust Division 
shall see that none of the monopolistic practices are permitted. We 
think it will not be necessary, because it is hardly likely that all four 
groups who represent everybody would go along on a cartel. There- 
fore, the thing seems to us to be self -policing. 

Mr. Hope. From what you have said, it indicates, of course, that 
you are fearful of that thing. 

Mr. SiLVEY. Conscious of it. 

Mr. Hope. And realize it is a very important factor that has to be 
conscientiously overcome. That is, you have got to prevent it if the 
thing is going to work at all. 

Even in the shoe industry, don't you think there would be a tendency 
on the part of all those various groups to regard themselves not as 
consumers, but as producers, to get the largest income for the shoe 
industry? I am just wondering how you are going to overcome that 
viewpoint. It seems to me it is going to take a long process of educa- 
tion to overcome that tendency that all of us have, to forget that we 
are consumers and consider ourselves only as producers with a desire 
to get as large a part of the national income for tliat particular pro- 
ductive group. 

Mr. SiLVEY. Shall I speak again, or are you pres^sed for time? 

Mr. Hope. I don't want to take up too nuich time, but I would like 
to have a little elaboration. 

Mr. Sil\'i:y. I emphasized the point of view we hold, which I read 
also out of Judge Vinson's report. There is a break-even point in in- 
dustry where at even as low as 25 percent of operation, they can make 
the biggest profit for themselves. With one group making the deci- 
sion, it is constantly to do less. When they set their sights for pro- 
duction to meet just short of what the market will absorb, which is 
the normal business way of doing it, and everybody else doing the 
same thing, you have a constantly retracting or drawback so as to 
restrict. Now, this concept of the greatest good of each group being 
found in the greatest good of a whole country, is a complete reversal 
of this thing and has come to pass, in our point of view, because of 
the scientific and technological developments, which will not allow the 
country to exist profitably and prosperously by constantly drawing 
back and restricting. Our new prosperity and new welfare is found 
in increasing, expanding and making more. We are not going to 
get rid of human selfishness, but we can turn human selfishness toward 
the common good. 

Mr. Hope. Let me ask you another question. Wouldn't you get the 
same results, and perhaps get it more effectively, if we got back to a 
system of free and open competition in every line ? 

Mr. SIL^^;Y. I think not, sir. 

Mr. Hope. Tell me why. 

Mr. SiLVEY. Why do I have to pay $12 for a pair of shoes? I will 
ask the clerk that. He doesn't know. I have to study economics to 
find out why they cost me that much. It takes me way back through a 
long channel of activity. 

Finally, I find down in South America there is a tree, the bark of 
which is called quebracho, and it has a peculiar chemical quality for 


tannino; leather. And this thing away down there under the world is 
controlled by British and American cartel systems which keeps the 
price at astronomical figures. They even cut down the trees and burn 
them so as not to let enough quebracho come on the market to reduce 
the price. So I find out the biggest cost is right there in that cartel. 
If that thing were broadcast all over the world, and gets eventually, 
I hope, to the social and economic council of the new world organiza- 
tion, something will be done about quebracho which will affect the 
price of shoes to you and me. A free competitive economy, absolutely 
free, will produce more and more quebracho situations so that society 
has got to police cartels. 

Mr. VooRHis. But if government actually prevented those cartel 
controls, and monopolistic controls, you woulcl have a different situ- 
ation, and unless government did that, jow couldn't be said to have 
a free competitive system. 

Mr. Hope. I appreciate your bringing that point out. What I am 
trying to get at — and I don't want to take up any more time — is 
whether it might not be better, as far as the function is concerned, 
to exercise governmental powers in preventing these things which do 
prevent free and open competition. In other words, isn't there a 
better opportunity for the Government to accomplish its part in this 
thing by doing away with these practices, prohibiting these practices, 
which have brought about the cartel system ? 

Mr. SiLVEY. In a quarter of a century it has not succeeded. If the 
Civil Aeronautics Board hadn't stepped in, there might be 42 corpora- 
tions trying to fly the Atlantic Ocean. Three are permitted. That 
is control. That is law. The same thing will have to apply with 
respect to some of these other things, because of technology. 

Mr. MuRDOCK. I think there should be some set-up in this Govern- 
ment by which businessmen or industrial councils, of the type Mr. 
Silvey mentioned, could have an opportunity when they have reached 
agreement, to present to the antitrust division of the Department of 
Justice to ascertain whether that would be a violation, in their opinion, 
subject to prosecution of the antitrust laws. Frequently businessmen 
do tlie thing they think is right, and then afterwards they find they 
have violated the law. So I think that is part of what would have to 
be considered in setting up industrial councils. 

Mr. Silvey. I have something further that I feel constrained now 
to read into the record. This, again, is from the official CIO conven- 
tion statement last year. 

This says : 

Labor is ready and willing to cooperate and to contribute its own working 
knowledge of production and its familiarity with the needs of the people. 

There must be no conspiracies in restraint of trade in the operation of the 
industry council plan. The antitrust laws must be enforced, not relaxed. Re- 
stricted production and monopoly prices cannot be countenanced. 

Purchasing power of people is as much a result of low prices as high wages. 
High production schedules mean low unit costs so that fair prices will be possible. 

Small business must be helped and protected. Planned cooperation must be 
based on industrial expansion, not contraction. 

The most pressing need of the peace, after a sound wage and labor policy, is 
for this working partnership of labor, management, agriculture, and government 
in the preparation and execution of programs of full production, full employment, 
and a high rate of capital investment, fitted into a total national peacetime 
production plan. 


The Chairman. Mr. Murdock, would you permit me to ask one 
question ? 

Mr. Murdock. Surely. 

The Chairman. I was interested in the witness's statement about 
the cost of this tanning extract that comes from one of the South 
American countries. I think you called it quebracho. You said that 
was an enormous proportion of the cost of a pair of shoes. Do you 
know just what part it is ? 

Mr. SiLVET. That I can't tell you. One of Mr. Berge's documents 
has the whole story of this. 

The Chairman. Very well. ' 

Mr. Murdock. I wanted to reenforce what my friend over here said 
about that statement. It is a good statement, and one which will 
bear rereading. I am going to give it close study. 

Mr. Hope. Would you yield for interruption? 

Mr. Murdock. Yes. 

Mr. Hope. I want to say that I think it is a fine statement and 
very interesting. My questions about it, of course, were only for the 
purpose of bringing out some points that arose in my mind. It was 
a very stimulatino^ statement. 

Mr. Murdock. There are several questions in my mind. As I have 
viewed our economic society in the past, it seems to me we are de- 
pendent upon it being automatic, but sometimes it isn't automatic. 
Now, tlie question is how far will public officials, representing the 
public generally, have to enter into all this management that you 
speak of ? How far should government enter into that ? 

Mr. SiLM^Y. I think it is going to be necessary to enter into it to 
a considerable extent. When you talk about the economy being 
automatic, I am reminded of a remark we picked out of Mr. Krug's 
press release. He talked about the resiliency of the economy. We 
feel that the resiliency of the economy is like the resiliency of u 
rubber ball. You hit the floor hard and the ball bounces high. Our 
economy needs something to give it the bounce each time. Our theory 
is economic salvation for everybody and not just for a few. It has 
got to be organized. It has got to be planned. Government will have 
to be in it. The only point is how government will be in it so it will 
be democratic. 

Mr. Murdock. You have stated you are not in favor of repeal of 
the antitrust measures, but rather of enforcement. I take it there 
must be revision, however, of the interpretation if not the law. 
Perhaps we ought to have a new concept written into the statute. 

Mr. Sil\t:y. Philosophically, I would agree with you ; but not being 
a Jaw3'er, or expert in that subject, I can't say. 

Mr. Murdock. I am not a lawyer either. I do think, Mr. Chairman, 
that the great task that lies ahead is not going to depend on the 
official statesmen, "unofficial statesmen," enrolled in the legislative 
halls alone, but other statesmen who represent great groups of our 
economic society in management and labor throughout. 

Mr. SiLVET. if I may interpose— you have such an example here, 
I have had great pleasure working with Mr. George. Mr. George is 
a statesman. You depend on him because you are busy. That is an 
example of what you are talking about right here in your own 


Mr. MuRDOCK. That is all. 

The Chairman. Mr. LeFevre? 

Mr. LeFevre. Mr. Chairman, Mr. Murdock asked my question. I 
simply want to second what Mr. Wolverton said and compliment the 
witness on his testimony. 

The Chairman. We want to express the appreciation of the com- 
mittee for your appearance here this morning, and for your statement. 
I am sure there are a lot of questions we would all like to ask if time 

Mr. SiLVEY. Thank you. 

The Chairman. If I may have the attention of the committee, the 
second call of the House has been sounded. We have Mr. Green here 
who represents the CIO also. I would like to know what the pleasure 
of the committee is. I see Mr. Green has a prepared statement here. 
It may be that since he has copies for all the members, that it would 
be agreeable with him to have his statement placed in the record and 
the members take it and read it separately. I believe in view of the 
status of the congressional session, that might be advisable. What 
is the pleasure of the committee ? 

Mr. Welch. I had hoped, if possible, to have Mr. Green make a 
statement to the committee. 

The Chairman. So had I, Mr. Welch. 

Mr. Welch. Could it be arranged for some future time, if it is 
agreeable to Mr. Green ? 

The Chairman. The Chairman again repeats that he is merely the 
servant of the committee. Whatever the committee desires is agree- 
able to the Chair. 

Mr. Wolverton. I am awfully, awfully anxious that Mr. Green 
have an opportunity to present his case to the committee for this rea- 
son : Mr. Silvey has given a very fine statement as to the aims and 
purposes of the organization which he represents with respect to the 

Mr. Green's organization is the Industrial Union of Marine and 
Shipbuilding Workers of America, CIO; and that organization has 
gone a long ways to implement into actual working conditions that 
which was recommended by Mr. Silvey. 

The organization that he represents has over 400,000 workers, and 
I don't think there has been a single industry in this nation during 
the war effort that has worked more patriotically without any stop- 
page in work than that one organization, above all others. In my 
own city there is a local No. 1, which has 30,000 employees at the peak, 
and there hasn't been a single day of stoppage of work during the 
whole war period. Therefore, it would seem to me what we could 
hear from Mr. Green as head of that international organization would 
be very helpful. 

I don't like to ask Members to remain away from the floor. I didn't 
know the bells had rung. I suppose we have missed that roll call. 

Mr. Welch. If we have missed the roll call, why not let Mr. Green 
proceed ? 

Mr. WoL^•ERTON. That is what I would like to do, if the Members are 
willing to stay. 

The Chairman. That suits the Chair. 

Mr. Green, will you identify yourself for the record? 



Mr. Green. My name is John Green, and I am national president 
of the Industrial Union of Marine and Shipbuilding Workers of 
America, CIO. 

Mr. WoLVERTON. Mr. Green was an artisan himself in the shipyards, 
and he formed the first union in Camden, N. J., which is known 
as Local No. 1. It has grown to this international union which takes 
in most of our important shipyards, and Mr. Green rose from the ranks 
to the president of this international organization. So he knows it 
from the bottom up. 

Mr. Green, Gentlemen, on behalf of over 400,000 shipyard workers, 
whom I am privileged to represent, I want to sound a solemn warn- 
ing. As of today, Congress has failed in its obligations both to the 
Nation's industrial workers and to the men and women in our armed 
forces who have carried on so magnificently to place our Nation on 
the way to victory. I don't want to be misunderstood. I am not just 
speaking for the Nation's shipyard workers. My plea is for the work- 
ers in all industries; for the middle class, for the farmers, and for our 
loyal men and women in the armed forces. We are all in the same 
boat. We will sink or swim together in the current of America's 
economic outlook. 

It is a horrible thing to say, but I voice this in all solomnit3\ Though 
every one of us is hoping and praying for a speedy triumph over the 
Japs, we dread the chaos which must inevitably ensue after VJ-day. 
Our Nation today, and I am repeating what everyone of you well 
knows, is as unprepared for peace as we were for war at Pearl Harbor. 
We, the Nation's shipyard workers, who are feeling the dread hand 
of the future now, cry out to Congress to act to preserve the American 
way of life, for which we have made so great a sacrifice in blood and in 
toil. There is not much time left before us. VJ-day stands as an 
onrushing, ever-nearing goal to wliich we are bending all our energies. 
But the moment we reach that goal, unless something is done now by 
Congress, by Government, industry, and labor working together, to 
prepare for the return to peace, we will find our victory bringing us 
the bitter fruits of economic depression and all its attendant miseries. 

We shipyard workers are feeling the hand of the future now. We 
felt it last September while the shipbuilding industry was still in 
the full flush of all-out war production. At that time our organiza- 
tion, meeting in national convention adopted a program to provide 
maximum emplo3anent during the inevitable period of cut-back and 
reconversion which we saw before us, and as many jobs as possible 
after the peace is won. 

In anal3^zing the status of the shipyard workers in our Nation's 
economy, we came to the inescapable conclusion that it is necessary 
not only for America's prosperity, but also for its national security, 
that an efficient shipbuilding industry be maintained. It's ships for 
jobs, trade, and peace, right now. 

We look back upon history, and saw that the United States, which 
once was one of the leading maritime powers of the world, had be- 
come dependent upon other nations to carry its goods in recent years. 
We noted the steady decline of the American merchant marine, and 


its consequent effect upon American industry. In merchant and naval 
ship construction in the early 30's, you could have counted on your 
hand the vessels built. True, our industry was revived somewhat in 
the ensuing years, but it was nowhere near the status reciuired for 
America's economic prosperity and national security. The merchant 
marine program of 1936 involved the first realization of how far 
our country had sunk into a grave situation regarding the merchant 
marine. Then we entered into a national defense shipbuilding pro- 
gram. But all that was a drop in the bucket to the requirements that 
were suddenly forced upon us by Pearl Harbor. 

Gentlemen, our Nation must never again face the contingency it did 
on December 7, 1941. In drafting our proposals for full employment 
for the shipbuilding industry, the CIO Shipbuilders Union took into 
consideration the relationship of its members not only to our Nation's 
economy, but also to their fellow workers in this country and in all 
of the other nations of the world. We realized that if America's 
shipyard workers and shipbuilding were not to become wartime cas- 
ualties, were not to be considered the expendables of our military 
effort, our program would have to encompass national needs and 
national welfare. 

We determined that the highly trained skills, both managerial and 
production, of the Nation's shipyard workers, which we required so 
painfully and through such bitter exjDerience in meeting the demands 
for wartime transport; and the vast supplies of raw materials and 
other resources which are waiting to be employed,. which are here to 
answer our Nation's needs, must not be passed into the discard if 
we have learned anything from the experiences of this war and from 
the hope^ that have been voiced of the nature of our postwar world. 

Shipping and shipbuilding are not merely romantic phrases. They 
are the means whereby nations grow great, and remain great. Ship- 
ping and shipbuilding are one of the keys to a postwar era of such 
unrivaled prosperity that we may well anticipate the rise of a new 
civilization throughout the world. 

Now if there is one thing that we have learned out of the war, it is 
that labor, government, and industry can sit down together. We 
did this in the shipbuilding stabilization program, one of the major 
factors contributing to the almost miraculous production of our 
industry. And we look forward to the same cooperative action after 
the war. National defense is so reliant on shipping that tripartite 
planning for the industry is a self-defense must. Therefore, we 
propose that there should be a shipbuilding and shipping conference 
called after the war to investigate the possibilities of trade expansion. 

As far as our country is concerned, we have a pretty good idea of 
the kind of merchant marine that we need after the war. We thinli 
it should involve at least 20 to 25 million tons of shipping, of a modern 
type, capable of meeting international competition. While I will 
return to this subject later, I make the point here and now that much 
of the shipping that we built to meet the needs of emergency wartime 
transportation, especially the Liberty ships, must be considered ex- 
pendable just as a bomb or a bullet. If we attempt to salvage any of 
our investment in these ships, we will be encouraging ship speculation, 
and putting a millstone around the neck of our shipping industry 
which will drag down the United States to its former position as a 



minor maritime nation. As I see it,, the backbone of the American 
merchant marine must be made up of fast combination passenger- 
cargo vessels, which can be operated profitably. We also need nu- 
merous tankers, coastal vessels, or transports, and various other types 
of vessels for which our war production has not anwered the need. 
In every respect, we need the kind of vessels that can be operated 
profitably by an American merchant marine. 

In the interests of national security, we must never halt our naval 
construction program, the modernization of our fleet, the maintenance 
of constant experimental construction to develop new types of vessels 
reflecting the latest scientific advances. And again I say, let us go 
back to the tried and tested method we worked out during the war, 
through tripartite planning of Government, labor, and industry. 

The previous speaker hit upon the councils. I want to just em- 
phasize that this is something he was referring to. All industries, 
whether we like it or not, have been subsidized in some form or 
another by the Government. Therefore, here is one place that we can 
experiment and see if we can get that harmony that is necessary for 
good production and good relationship. I strongly urge the creation 
of such a committee to consider postwar planning for the industry 
along the lines I have indicated above. 

We already have such a tripartite committee functioning, the Ship- 
building Stabilization Committee. This committee coulcl very read- 
ily be adapted to consideration of the future of the industry. If it 
cannot assume this responsibility, it should be reconstituted, with an 
adequate number of technical experts who will be qualified to assume 
the task of building the future of our industry. 

Since the problems of ship]:)ing and shipbuilding are so closely tied 
up with those of foreign trade, and hence with. the foreign policy of 
our Nation, I also feel that a representative of the State Department 
should be delegated to assist this technical committee in its 

I have not paid much attention to the major financial interest of the 
Government in shipbuilding, because these are self-evident. You 
gentlemen are no doubt familiar with the Government's huge invest- 
ments in permanent shipbuilding facilities and in housing in and 
around shipyard areas. I make the point solely to bring out the fact 
that only the productive utilization of these facilities will return to 
the Government its investment. . 

We now come to the most important phase of the problem, namely, 
the workers themselves, who, as I urged you previously, should not be 
considered the expendables of the war effort. For shipyard workers 
cannot be trained overnight. Once the nucleus of our highly skilled 
shipbuilding force is gone, the shipbuilding industry will be lost to 
the Nation for good. Therefore, postwar shipbuilding and ship re- 
pair are dependent upon the continuous employment of skilled crafts- 
men in well established modern shipyards. In order to maintain the 
employment of this group, and thus to maintain the industry, shipyard 
employment must be made attractive. It must maintain the same 
cooperative wage level as other industries in our Nation. 

We feel that this can best be done by the establishment of a guaran- 
teed annual wage, and our union has proposed such a plan for consider- 


ation by the Shipbuilding Stabilization Committee. In order to set 
up an equitable and satisfactory guaranteed annual wage plan, we 
again propose a tripartite technical subcommittee of Government, 
management, and labor representatives. True, there already is a 
committee functioning for study of the guaranteed annual wage plan, 
which was organized upon instructions by the late President Roose- 
velt. But the shipbuilding industry, because of its division into two 
major types of occupations, new construction and ship repair, presents 
further difficult and unique problems in any consideration of a fixed 
annual vv'age. 

However, we believe that a technical subcommittee considering a 
guaranteed annual wage plan should be responsible for the formula- 
tion of definite proposals. This should be left to collective bargaining 
between labor and industry or to determination by the full stabiliza- 
tion committee. 

In advancing our proposal for a guaranteed annual wage, our union 
recognized the fact that there must of necessity be a decline in the man- 
power requirements of shipbuilding and ship repair work. We think 
a healthy industry could be achieved for the United States by main- 
taining die level of employment at about 1,000,000 workers for the 
remainder of this year, 750,000 workers in 1946, and a half million 
workers in 1947 and thereafter. We arrive at those figures from the 
data and information supplied us by the Navy Department and the 
Maritime Commission. 

As far as i can see, a minimum of 400,000 to 500,000 workers in 
shipbuilding and ship repair will be needed to carry out the ambitious 
program which we foresee as necessary in the interests of national 
prosperity and national security. 

It must be realized that the demands of war production are be- 
ginning to taper off. Therefore, in order to maintain this employ- 
ment, which will alone prevent a chaotic disruption of the industry, 
the workweek must be reduced from the present 48 hours to 40 hours 
and then to 35 hours. At the same time, we insist that it is absolutely 
essential that our present earning levels be maintained in order to as- 
sure adequate purchasing power among the workers. 

All the wasteful practices of the industry must be eliminated. In 
order to make maximum utilization of the manpower resources, we 
see the necessity for such ])rograms as industry-wide insurance of the 
w^orker and his family against the hazards of injury and illness — 
with labor and management each bearing half of the cost. There must 
be a full year's employment for every worker, or at least a full year's 
pay under the guaranteed annual wage plan. And in order to regular- 
ize employment, port-wnde union hiring halls must be established. Un- 
der such a program, work must be regularly scheduled so that the 
working force within each port will be kept constantly employed, 
whether in one yard or another, and established seniority nuist be 
maintained accordingly. 

Similarly, wasteful practices like the shape-up in repair yards must 
be abolished in favor of union hiring, and workers who are required 
for repair of vessels should be given at least 24 hours notice in ad- 
vance of their employment. 

99579 — 46— pt. 7- 


Government navy yards, which have been the weather vane of the 
industry, will have to realize the role they play and mend their ways. 
Much grief has been caused to both shipbuilders and shipyard work- 
ers by unilateral navy yard action in industry. Government yards 
must recognize and engage in the same type of collective bargaining 
and labor relations as do private yards unless they are to be a mill- 
stone around the neck of the industry. In 1932 navy yards instituted 
a 15-percent cut in wages. With the speed of an avalanche private 
yards, too, cut the pay of their employees by 15 percent. Govern- 
ment 3^ards also developed the system of several classifications of 
mechanic, handyman, and helper, which is now plaguing the industry 
by acting as a bar to interchangeability of skills and flexibility wnthin 
crafts. Navy yards must begin to regard themselves as an integral 
part of the industry and must strive for its stabilization rat^^er than 
act as a chaotic influence. 

Finally, working conditions within the various shipyards must be 
improved. Proper sanitary facilities and eating facilities must be 
installed in older shipyards. And in all shipyards wage structures 
should be adjusted to correct the Nation-wide inequities which have 
arisen as a result of the Stabilization Act of 1942. These are the 
conditions which will make shipbuilding emplo3anent attractive and 
desirable, and which will maintain a labor force in the industry now 
and after the war. 

We owe it not only to the workei's, but also the thonsands upon 
thousands of shipyard workers who answered the call of their nation 
to go into the armed forces to assure them full emplojanent. And 
we owe it to our Nation to keep a smany of these workers employed 
as possible so that they can contribute their part toward its economic 
prosperity and its military security. 

In conclusion, there is one more idea that I would like to advance. 
And that is that shipyard labor and its leadership should be repre- 
sented on any group which will decide the future allocation of con- 
tracts in the industry. 

At the beginning of the national emergency the union proposed to 
the ]:)rocurement agencies a tripartite discussion of the allocation of 
contracts, so that labor facilities and materials would be used in a 
regulated and orderly fashion. This was never put into practice, and 
the lack of orderly allocation of work has made itself felt throughout 
the history of our Nation's wartime shipbuilding and ship repair 

From the very beginning of our war effort, our industry was char- 
acterised by a series of crises. First, it was a cargo-ship crisis, then 
an anti-submarine-boat crisis, then an aircraft-carrier crisis, and 
crisis after crisis until now we are confronted with a repair crisis. 
In 1942 we warned the Government procurement agencies that there 
would be a crisis in repair work on the west coast and also on the 
east coast, although not so much in the latter because of the long- 
established yards there. Three years ago w^e told the Government 
that this nucleus of highly skilled shipyard workers who were essen- 
tial to ship repair and also to new ship construction were being dis- 
sipated because of substandard conditions, namely, the refusal of the 
Government procurement agencies to permit the payment of a differ- 


ential for the higher skills involved in repair work in southern 
California yards and the refusal of the Navy to pay such a differential 
in its own shore establishments. 

Today we are reaping the fruits of these seeds of dissatisfaction 
about which the union warned 3 years ago, and to which the Govern- 
nient agencies turned deaf ears because there was no tripartite plan- 
ning agency to plan for the future. 

I reiterate again and again, gentlemen, shipping and shipbuilding 
must be planned. Ships are long-range propositions that take time 
to build. Shipyard workers cannot be made overnight. They re- 
quire extensive apprenticeship and training courses, as well as ex- 
perience on the job. Shipyard facilities are huge industrial plants 
requiring vast concentration of capital over a long period of time 
before they are set up upon an efficient, functioning basis. 

Gentlemen, we must plan to make use of these facilities, of tbe 
Nation's shipbuilding experiences, of the Nation's qualified shiyyard 
workers. We must plan for the peace as we did not plan for the 
war. Because in the peace we cannot afford to repeat the mistakes 
which gravely threaten our Nation's welfare. 

On behalf of myself and my fellow members of the CIO shipyard 
workers, I say to you we must not go through another depression, 
which for us began in the 1920's. but we also do not again want to 
see another Pearl Harbor, with a Nation caught Avith its production 
pants down. 

There is only one answer to this. There is only one method to 
assure Dur Nation's economic prosperity and its future security, and 
that is by planning. And wa of labor insist that we have earned a 
right to sit in on any council which will conduct such planning. 

Mr. WoLMSRTON. Mr. Chairman, I notice in the statement made by 
Mr. Green, which we all appreciate, that he made reference to a 
proposal of tripartite planning in the shipbuilding industry on re- 
conversion, and I would assume that it would be helpful and probably 
desired by Mr. Green that that be made a part of his remarks. 

The Chairman. I see no objection. Without objection, it will be 
done. (See exhibit 2, p. 2367.) 

Mr. Green. When I asked for this tripartite set-up, that meant 
plan for new work as well as reconversion. While there are some 
yards that do only new construction or repair, there are many yards 
that do both — they are called combination yards. They include such 
yards as Federal Shipbuilding & Dr3^dock Co. ; Sullivan Dryclock & 
Repair Corp.; Bethlehem Steel Co. (Staten Island yard and San 
Pedro yard) ; Alabama Shipbuilding & Drydock Co.; George Lawley 
& Sons, Inc. ; Luders Marine Construction Co. ; and Sun Shipbuilding 
& Drydock Co. 

You cannot divide the industry up and say that j^ou will have tri- 
partite planning and operation in this section of the industry and 
none in that section. Not only would it bring chaos into the industry, 
but it would result in chaos in the individual combination yards listed 
above. Furthermore, the training of a skilled mechanic requires the 
same length of time for workers on new construction as it does for 
repair and conversion workers. 


This planning must be port-wide, in order to keep a nucleus of 
skilled men within each port. If we hope to keep the industry as a 
cohesive entity, we cannot afford to neglect this problem of stabilizing 
employment on a port-wide basis. 

Mr. WoLVERTON. I notice you have a summary of the union pro- 
posals to Robert Nathan. Will you explain to the conmiittee who 
Robert Nathan is, and whether you would like that to be part of 
your remarks? 

Mr. Grken. Robert Nathan, I understand, works very closely with 
the President on postwar planning, and this union presented to him 
certain proposals which he, in turn, I suppose, was to present to the 
President of the United States. He is Assistant Director in Charge of 
Reconversion of the Office of War Mobilization and Reconversion. 

I have no objection to that becoming a part of the record. 

The Chairman. Without objection, so ordered. (See exhibit 3, 
p. 2:372.) 

Mr. Welch. Mr. Green, I desire to compliment you on your force- 
ful and convincing statement with reference to an American mer- 
chant marine adequate to meet the requirements of national security 
and our postwar economy. 

There are forces working at this time, as you perhaps know, which 
would reduce our American merchant marine to the level of a small 
fleet of tramp steamers. A very influential force as I am informed is 
at work on that. 

Mr. Green. I think your sentiments are pretty much along the 
same line as my own. 

Mr. AVoLNT.RTON. I would like to say. Congressman Welch is a 
member of the Committee on Merchant JNIarine, and anything he 
would say in that respect you can rest assured has a basis of real fact. 

]\Ir. Green. Well, gentlemen, this charter that was finally worked 
out in San Francisco will not be worth the paper it is wiitten on 
unless America takes the leading role, and she can only do it by 
having a merchant marine that places her in the leading position to 
carry out the trade that will be necessary to make that charter 

Let me stress that basic to any political move the country undertakes 
is the economic goal and its satisfaction or lack of satisfaction with 
the consequen.t fears, prejudices, and hatreds which each country 

Today we are in a favorable economic position while the rest of the 
world is in an unfavorable position. The rest of the world will be 
looking to us for the spark that will send them off to greater industrial 
development and activity than they ever knew before. 

We linve the power to give or deny them that spark — the raw 
materials, the food, the machinery, ancl the half -processed and fully 
processed goods. The advantage they will receive from us if we give 
them the push is evident. No less exident is the advantage we will 
receive in the employment of money, materials, plants, and men in 
providing the materials for the push. 

ipp. 49, 50, 51. 


The National Planning Association pamphlets Nos. 37-38, culled 
America's New Opportunities in World Trade says as follows : ^ 

The United States will have a postwar producer's goods industry of a size 
at least twice that likely to be needed to meet maxiuunn domestic requirements, 
even under conditions of sustained full employment. Conversion of a large part 
of this heavy industry to other lines of production is impossible. Machine tools, 
construction and mining equipment, railroad equipment and veliicles, and aux- 
iliary materials such as rails to go with the exported machinery, will be sorely 
needed by foreign countries after the war. The mdustries which produce these 
materials have expanded most during the war. By meeting foreign needs, they 
could not only substantially contribute to full employnient, but could facilitate 
correction of the presently distorted productive capacity by enabling adjustment 
over a period of 5, 10, or more years. Activity in these "investment" industries 
would have the strangest expansion effect upon the economy as a whole * * * 
[Furthermore] opportunities for sound foreign investment would help reduce 
the excess savings which stand in the way of full employment, and which other- 
wise will have to be drained off by other means * * * it is therefore sound 
national policy to strive for maximum stimulus to private foreign investment. 
(Supplemental when necessary by public capital exiiort) as well as maximum 
private domestic investment. We refer, of course, to sound and productive 
foreign investment. 

It has been said that the loans and investments made by the United 
States since the last war were almost entirely lost. This is untrue, as 
the following table shows : - 

1. What the United States put in— Billions of dollars 

Estimated investments abroad at the end of 1919 6. 5 

Net new investments abroad from 1920 through 1940 (gross new in- 
vestments abroad of 11.8 billion dollars less amortization receipts on 
foreign dollar bonds and net resales of foreign securities to foreigners 
of 4.9 billion) I 6.9 

Total 13.4 

2. What the United States got out- 

value of investments abroad at end of 1940 9. 8 

Income payments received on investments abroad from 1920 through 

1940 13.9 

Total 23.7 

3. Excess of what the United States got out over what the United States 

put in 10. 3 

The article goes on to say : 

The "average" investor with well-diversified holdings abroad not only got 
his money back, but also a substantial sum in addition. 

It should be noted that income payments received from invest- 
ments abroad from 1920 to 1940 exceeded net new investments in 
the same period by $7,000,000,000, and exceeded total foreign in- 
vestments by $500,000,000. 

At this point, I think that we should remind ourselves that as the 
countries achieve full industrialization, it does not mean that they 
will cease buying from us. The truth is that as they industralize 
more fully, they will increase their purchases here and we will 
increase our purchases there. In the past our biggest customers were 
I'Ot India and China, but Japan. Canada, and England. Likewise, 

iPp. 49-51. 

' Surve.v of Current Business, November 1944, p. 11, in an article called Foreign Trade 
in the Postwar Economy, by August Maffry. chief. International Economics and Statistics 
Unit, Bureau of Foreign and Domestic Commerce. 



most of our imports came from Japan, Canada, and England, and 
not from India, China, and Egypt. 

An analysis of the foreign trade (imports and exports) of the 
United States, with three highly industrialized and three poorly 
industrialized countries from 1933 to 1939, supports my statements. 
I herewith submit the table, computed from data compiled and tabu- 
lated by the Bureau of Foreign and Domestic Commerce of the 
Department of Commerce in its 1942 Supplement to the Survey of 
Current Business, pages 90, 92. 

United States foreign trade average monthly value of imports and exports in thousands 

of dollars 














Unit-'d Kingdom 

Canada. _ 

15, 451 
10, 701 

25, 978 



1, 655 



19, 308 

31, 896 

25. 203 

17. 540 

2. 2S7 



12, 940 

23, 870 

12, 742 

5, 165 



36, 117 

20, 933 

16, 940 




16. 699 
14, 312 




, 36,677 
32, 013 

Japan ,. 


British India 















United Kingdom 

16. 891 
33. 192 
7. 995 

44, 707 

42, 443 

24, 047 

3, 646 



21, 681 
10. 564 

43. 407 

38. 981 

19, 972 


2, 893 


28, 330 
13. 434 
5, ,533 

42, 117 


40, 759 


19, 349 

British India 

3. 568 

China . 




Source: U. S. Department of Commerce, Bureau of Foreign and Domestic Trade, 1942 Supplement, 
Survey of Current Business, pp. 90, 92. 

Two things are requisite to providing the push that will insure the 
economic stability that is the basis for political stability and harmony 
within and between nations : 

1. We must be prepared to buy as well as .sell. We must accept the 
products of other nations as payment for the products of our nation. 

2. We must have a merchant marine adequate to provide for the 
transportation of these goods. Since the United States vnll, for a 
longer time than we can envisage, remain dominant in foreign trade, 
our merchant fleet should likewise remain dominant in the world's 
merchant marine. 

Mr. Welch. There should be no restrictions placed on our American 
merchant marine. It should have equal opportunity with merchant 
fleets of all other maritime nations. Restrictions, however, have been 
placed on our American merchant maiine through the interpretation 
of the Civil Aeronautics Act of 1938 by the Civil Aeronautics Board 
in denying to the American Merchant Marine the coordination of air 
and surface service in foreign trade. 

Mr. Green. I don't have copies of the Bland bill with me, but on 
a casual perusal of it:, I am afraid that bill, if finally passed in its 
present set-up, will bring about the things that you and I are afraid of. 



Mr. Welch. You mean the recent bill reported by the committee? 

Mr. Green. I think this is the thii-d change. 

Mr. Welch. That bill ^Yill have to be clianged. I did not have that 
Lill in mind. I had in mind the Civil Aeronautics Act of 1938 as inter- 
preted and construed by the Civil Aeronautics Board, which denies 
to the American merchant marine equal opportunity with merchant 
marines of all other maritime nations. 

Mr. Green. I am not familiar with that, sir, but thanks for the in- 
formation. We will look it up and we will have a say at the right 
time, I hope. 

Mr. Welch. Congressman Wolverton is in position to acquaint you 
with the facts concerning it. He has been assisting in the fight, and 
very materially, to give our merchant marine equal opportunity with 
every other foreign flag merchant marine. 

Mr. Green. I wouldn't like to see the same thing happen after this 
war that happened after the last war when we turned over a lot of 
our shipping to Japan and put it on the way to being the third biggest 
maritime nation. 

Mr. Welch. I have been a member of the Committee on Merchant 
Marine for the past 20 years. I would like to have your observations 
with reference to the Bland bill recently reported by the committee. 

Mr. Wolverton. You don't mean today, do you ? 

Mr. Welch. No, not today. 

Mr. Green. I will see that you get that. 

Mr. Welch. I would like to have you send me a statement express- 
ing your views. 

Mr, Green. You can rest assured that I will do that. 

The CiiAHiMAN. Mr. Wolverton, did you have anything further? 

Mr. Wolverton. Nothing, except to say I feel justified in having 
made the request for Mr. Green to be called as a witness before this 
committee, by this enlightening statement that he has given it, and 
I am sure it is a statement, Mr. Green, that the committee will give 
very careful and serious consideration to. 

Mr. MuRnocK. Mr. Chairman, I am a landlubber from the desert. 
I do not have a lot of interest in this matter, but I do need a lot of 

I take it, ]Mr. Green, that you feel the world commerce and trade 
plays a mighty important part in our economy ? 

Mr. Green. Yes, sir. I don't have a chart here with me. I forget 
the year, but it showed in that chart that our industry was at its peak 
in this country, while our foreign imports were at the same level, and 
as it went down, so went employment in our industry. 

I may be called a free-trader, but I believe in the exchange of goods. 
As I said, if that charter is going to mean anything, and I hope it does, 
then it means the interchange of goods. I hope it means the uplifting 
of standards of living. 

The Survey of Current Business of the Department of Commerce 
for November 1944, on pages 5 and 8, had charts which show the re- 
lationship between American foreign trade, our national income, and 
our industrial production. All three followed almost the same ups 
and downs for the same periods of time. 

This has definitely been the case from 1923 to 1941, as the table I 
herewith submit demonstrates. 


Foreign trade and national income, United States, 1923-41 


value of 
imports ' 

value of 
exports 1 

product 2 


value of 
imports i 

value of 
exports ' 


1923.. - 










Thotis. ofdol. 
300, 830 
352, 216 
369, 241 
348, 729 
340, 954 
366, 613 
255, 076 
174, 220 

Thous. ofdol. 
340, 893 
374, 804 
392, 643 
396, 572 
419, 175 
429, 757 
315, 098 
198, 165 
131, 346 

of dol. 



1935. _ _ 







Thous. ofdol. 
170, 624 
201, 883 
256, 972 
163, 369 
278. 802 

Thous. of dol. 
137, 268 
201, 581 
254. 764 
260, 279 
327, 848 
416, 702 

of dol. 

1 Monthly average, from Survey of Current Business, 1912 Supplement, U. S. Department of Commerce, 
p. 91 (imports); p. 93 (e.ifports). 

2 Adjusted to 1941 price levels, from National Budgets for Full Employment, National Planning As- 
sociation, Washington, D. C, table B-2, p. 72. 

The free exchange of goods will help cement friendly relations 
between nations. I think that all this talk about foreign countries 
being our competitors neglected one im])ortant thing. These coun- 
tries are also our customers, and we theirs. You may engage in 
economic and political wars with your competitors, but you do not 
do so with your customers. 

The Charter means political stability which will encourage the free 
exchange of goods, and international agreements like Bretton Woods 
will provide the economic stability which will also encourage the free 
exchange of goods. 

Together, the Charter and Bretton Woods will mean increasing 
standards of living of all the peoples of the world. 

Mr. MuRDOCK. You are from the Atlantic coast. Do you feel like 
making a comparison, not odious, of the Atlantic with the Pacific 
coast? Do you believe that the Pacific Ocean, henceforth, will be the 
ocean of commerce ? 

Mr. Green. I would be shortsighted if I didn't think the Pacific 
coast will expand insofar as shipping is concerned. 

In an article in the Journal of Commerce of December 18, 1944, 
Stanley Ferguson writes as follows : 

The Pacific Ocean, to all present appearances, offers one of the most promising 
fields for expansion of American-flag shipping in the years following the war. 

Besides being the highway between our own industries and the gi-eatest po- 
tential market in the world, it is a road upon which our own merchant marine 
can expand to a very large degree at the expense of virtually no one but the 
Japanese who can scarcely expect much consideration when their account comes 
up for final settlement. It is not surprising that the first applications for post- 
war routes filed by shipping interests with the Maritime Commission show a 
strong leaning toward this area. 

Mr. Ferguson goes on to say that while the Japanese market, which 
absorbed 78 percent of our exports to East and Southeast Asia in 1937, 
and which produced or absorbed 60 percent of the 17,576,735 tons of 
our exports and imports moving in the trans-Pacific trade in that year, 
will be eliminated. China, India, the East Indies, and southeast 
Asia — a bloc which not only offers the world's greatest potential mar- 
ket, but also has virtually no shipping of its own — will offer us great 
opportunities for shipping and trade. 


At the same time, we must forget that industrialization of our own 
for the western ports of South America, particuhirly Bolivia and 
Chile, offers the great opportunities for intercoastal shipping on the 

Both transoceanic and intercoastal shipping on the west coast should 
have great opportunities for expansion. 

Mr. MuRDocK. Yes, it will. I certainly agree with vou that we don't 
want to see happen again what happened' after the other war. We have 
built a great merchant marine. Let's keep it and use it. 

Mr. Green. I think we have to face these facts. I want you to get 
me correct here. I am not a war-monger, but I believe we have earnecl 
a rightful place in history, and we ought to take the opportunity of it, 
and spread a little bit if this American democracy to other parts of 
the world, and the best way to do it is to help people help themselves. 
The way to lielp people help themselves is to encourage them to in- 
dustrialize and to increase their standard of living. There are three 
things we must do. We must first help provide the necessary political 
and economic stability of money and prices. The Charter, Bretton 
Woods, and relief and rehabilitation v\nll satisfy this necessity. Sec- 
ond, we must lend these countries the necessary capital goods and raw 
materials which they will need for their industrialization. Third, 
we must be prepared to buy from them so that they will have money 
with which to pay for purchases and loans from us. 

The Chairman. Mr. Hope? 

Mr. Hope. Mr. Chairman, I am just another landlubber. 

Mr. WoLVERTON. I^Iay I say for the benefit of these so-called land- 
lubbers, that my study of the shipbuilding industry shows that the 
material that goes into a ship comes from every State in the Union. 
I further want to emphasize the fact that when Mr. Green made refer- 
ence to skilled workers who would be lost to this industry unless there 
is a program of building in the future, he spoke of a very vital matter. 

There is no industry that requires so many varied trade skills as the 
vshipbuilding industry. So when he speaks of that being lost, that is 
a very important item to be considered. 

I remember the time when we had but one ship being built in Cam- 
den, and we went to the Secretary of the Navy and begged and pleaded 
for additional work, when that ship would be completed in order that 
we might keep together a skeleton force. There is very little common 
labor, that enters into a shipbuilding program. It is mostly skilled 
M'orkers of every type and kind. 

The Chairman. I am sure we appreciate that contribution, Mr. 

Mr. Hope ? 

Mr. Hope. When I confessed to being a landlubber, I wasn't brag- 
ging about it, but I was trying to offer it as an excuse for my ignorance 
if I should ask some questions here that didn't seem to be very sensible. 
I depend on men like Mr. Wolverton and Mr. Welch to keep me straight 
on this question of merchant marine and shipbuilding. We consider 
them experts. 

I am asking this question purely for information. 

A program such as you have outlined here would require a Govern- 
ment subsidy to keep it going, wouldn't it? 

Mr. Green. Correct. The Government has subsidized the ship- 
building industry in one form or another. I suppose you can ask the 



question of tlie Secretary of the Navy. He makes no bones about it. 
It has been the practice of the Navy Department to give work to cer- 
tain big yards to keep them going in peacetime. By legislation, you 
have subsidized the shipping end of the business, and certainly when 
you subsidized the shipping end, that is reflected in the building end. 

If my memory serves me correctly, j^our two Camden liners that 
were built in the city of Camden, the Washington^ and Manhattan^ 
were subsidized straight out by the United States Government. I 
think we have got to face this thing and be candid about it, because 
practically every maritime nation in the world has subsidized their 
merchant marine and shipbuilding. I think you gentlemen know 
that the Queen Mary and Queen Elizahetk were two shi]:»s that were 
built to create jobs and were subsidized by the British Government. 
They have subsidized other ships. The same is true for Norway, 
France, Italy, and other nations. 

I believe that if we get an efficient fleet, it would be well worth the 
subsidy, because it will bring back returns, and those returns are good 
will of the people throughout the world. 

I want to add this thought: Subsidies are paid to the American 
shipping companies in order to reduce the difference in labor costs 
that exist between American and foreign shipping operations. We 
hope that these subsidies will decrease in size and that they will soon 
be eliminated, as international agreements on wages and working 
conditions of men in the maritime industry are consummated. 

Mr. Hope. I presume you are considering also in that connection 
the benefits to national defense that might accrue from such a pro- 
gi'am ? 

Mr. Green. Yes, sir. 

Mr. Hope. I am not questioning the policy. I have no well-defined 
views on it. I am just asking for information. It seems to me it 
would be necessary to subsidize it, as you have said, and I think we 
might as well face that question frankly. As you say, other nations 
are subsidizing merchant marine and shipbuilding. 

I suppose tliere is no industry that is more competitive internation- 
ally than the shipping industry ; is that correct? 

^Ir. Greex. That is correct. 

Mr. Hope. That is all. 

The Chairman. Mr. LeFevre? 

Mr. LeFevre. I am not too familiar with this merchant marine 
set-up either. 

You recommend postwar tonnage of 20 to 25 million tons. Could 
I ask you what the tonnage is today? 

]Mr. Green. According to the latest figures we have about 45 
million tons of shipping. This should increase to about 56 million 
tons by the end of the shipbuilding program. How much of that is 
Liberty ship, I am not prepared to state, but we will have built, by 
the end of the Liberty-ship program, 2.661 Liberty ships. I would 
conservatively estimate that between 22.500,000 and 25,000,000 tons- 
of merchant shipping today are Liberty ships. This means that wB' 
have between 2,250 Liberty ships left unsunk. 

Mr. LeFevre. You state that we should maintain about 1,000,000 
workers and cut it to about 750,000 in 1945 and to about one-half 
million the next year. 

Could I ask you how many ship workers there are now ? 


Mr. Green. Accordino; to the Bureau of Labor Statistics there were 
about 1,400,800 workers in the industry in February 1945. Those 
figures we gave you are figures according to the shipbuikling progi-am 
as we know it today. 

Mr. LeFevre. Have you any idea out of that 1,400,800, how many 
are out of the building industry ? 

Mr. Green. I coukln't give you any figures as far as that is con- 
cerned. I would say, insofar as the west coast is concerned, a bulk 
of the mechanics were men who came out of the construction industry. 
That is not true of this coast, because this coast had established 

We have in the industry on the east coast a considerable number of 
miners. The latest figures showed that we had somewhere around 
12,000 in 3 of our yards, who came from the Pennsylvania coal 
fields. It should be remembered that in January 1935, there were only 
63,000 workers in the shipbuilding industry. This includes naval and 
private shipbuilding and ship repair. That means that at present, 
about 1,340,000 workers came from other industries. A good number 
of these learned their electrical pipefitting, plumbing, machinist, 
boilermaking, and so forth, trades in other industries. 

Mr. LeFevre. Someone told me about some yard out on the west 
coast built up just during the wartime, having 40,000 workers. Isn't 
it a natural thing to expect when that building is over those men 
would drift back into the construction industry '( 

Mr. Green. Some of them will drift back to the construction in- 
dustry and some of them will drift back to the farms, or back home 
wherever they come from. It depends upon the availability of work 
in their former industries and trades. We have made some survey 
of reemployment of laid-off shipyard workers. 

In the Norfolk ShipbuiJding Co. yard (Newport News, Va.), 70 
percent of those laid off found jobs in other shipyards while the rest 
have gone to other industries. 

In the Dravo Corp., Neville Island yard (Pittsburgh, Pa.), the laid- 
off workers found jobs in the Pittsburgh-Des Moines yard on Neville 
Island, in the American Bridge Co. yard in Ambridge Pa., or with 
subcontractors in this yard, and some have gone to Baltimore and 
even California. 

In the Sun Shipbuilding & Drydock Co, yard in Chester, Pa., some of 
those laid off got jobs in other industries, or went back to their old 

In the Jeffersonville Boat & Machine Works yard in Jeffersonville, 
Ind., the workers laid off went into other industries and some refused 
to come back when called back to work, figuring that the postwar 
status of their new jobs was more secure than that of their old jobs. 

In the New England Shipbuilding Corp. yard in Portlancl, Maine, 
where lay-offs have been especially hard, 10 percent of those 
v^orkers laid off found jobs in other shipyards, 70 percent in other in- 
dustries, and 20 percent into self-employment in their own shops and 

Mr. LeFevre. I think there is a problem that we have. What are 
we going to do with them ? 

Mr. Green. Well, as I said in my opening statement, I wasn't only 
talking for shipyard workers, but for workers in general. I suppose 


that is the job of your committee to try to find the ^yays and means 
for getting employment, no matter what the industry is. 

I was born andraised in the shipbuilding industry. I came to this 
country at the age of 14, and was surprised that a country of this size 
had no maritime fleet, and no shii)building program of any size. 
Employment went down as low as 36,000 in this industry duriiig the 
twenties. Prior to the defense program, we had 63,000 people in the 
industry, and that was built up to a little over 1,750,000. It was a 
tremendous job. We did it. We trained the people with the nucleus 
we had. 

I can say this without fear of contradiction. Most of the people 
employed in the shipbuilding industry during this war effort, never 
saw a ship in their lives. I think that is to the credit of l)oth manage- 
ment and labor in the industry. 

I^Ir. LeFevre. That is all. 

Mr. Hope. I woidd like to ask one question on that point. 

Has any effort been made to determine how many of these people 
who are now in the shij^building industry, most of whom have never 
seen a ship, would like to remain in that industry? 

Have there been any polls made? 

Mr. (tREEN. About 10 percent of the wage earners and 10 ])erccnt of 
all workers in the industry are women. These will be leaving the in- 
dustry as the need for shipyard workers is reduced. They will go back 
to their homes or to their previous employment. It is also to be pre- 
sumed that those workers who came from the building trades will 
want to return as the employment in the shi])buil(ling industry is 
reduced and as employment in the building construction indusny in- 
creases. In the area from which I come, the local i)ut out a question- 
naire, and we found that an average of about "25 percent want to leave 
the industry. But, unfortunately, with the cut-backs and War ]Man- 
power Commission controls, we can't get these people to move, and it 
is rather unfortunate because there are lay-offs and the people who 
want to stay in the industry are the people that are laid off. 

Those who want to go back to their old line of business are kept on. 

Mr. Hope. How do you account for that ? 

]\Ir. Green. We have got the War JNIanpower Commission controls 
right now. Until they are loosened u]), there is nothing to do about it. 

Mr. Hope. What you are saying is there ought to be some considera- 
tion given at the present time to keeping on the job those people who 
want to stay and that the War Manpower Commission gives no con- 
sideration whatever to that fact? 

Mr. Greex. That is true. 

Mr. Welch. How long will it require to complete the present pro- 
gram of new construction on the east coast ? 

Mr. Green. In some of the yards we have got Navy work that 
takes us through to the middle of 1946. Merchant-marine work will 
take about to the latter part of this year. Up until the present time, 
no new construction has been let. 

Mr. Welch. In asking that question, I have in mind the sale of 
surplus sliips estimated at about 28 to 30 million tons which cost 
approximately 17 to 18 billion dollars. However, they are not 
entirely the type of ships necessary for our postwar economy. The 
Liberty ship has served its purpose during the war, but it is a slow 


ship. It is not the type of ship to meet foreign competition. We 
must have a better type of ship. 

We will have but few passenger ships. Our coastwise and inter- 
coastal ships have been practically wiped out. Those particular lines 
should be rehabilitated and better and faster ships for overseas trade 
should be built by this country in order to compete with foreign 
nations which are now building better and faster ships than we have 
at the present time, with all our surplus of ships. 

Mr. Green. I hope I stressed that point. If not, I wish to repeat 
again that we must build a new type of cargo passenger anywhere 
from 18 to 22 knots. The Liberty ships are expendables, and I think 
we should treat them as such. 

Mr. Welch. The Japs had a fleet of dry-cargo ships before the 
war with a speed of from 20 to 22 knots. The average speed of our 
merchant marine before the war was something like 9, 10, or 11 knots, 
with the result that many lives were sacrificed by reason of their 
being so slow. 

Mr. Green. I think the Liberty ship served its purpose. 

Mr. Wolverton. I would like to emphasize just what you said, Mr. 
Welch, with reference to speed. It is a matter of histor}^ that this 
Nation stood foremost as a merchant-marine nation in the days of 
clipper ships. At that time the clipper ships were the fastest that 
were on the seas. Consequently, the trade went to our clipper ships. 

Mr. Hope. What happened. What ]iap[;ened that we lost the 
supremacy you speak of ^ 

jNIr. Wolverton. We lost it because otlier nations took up the speed 
idea and subsidized their mercliant marine and made it impossible 
from a competition standpoint for American merchant marine to 
stand up. 

]\Ir. Hope. Did we subsidize the clipper ship? 

Mr. Wolverton. No, sir, 

Mr. Hope. Here we were the greatest maritim.e nation, as I under- 
stand it, with speedy ships, and all of a sudden we drop clear down 
to the bottom. 

The Chairman. Will you pardon an interruption there? I think 
this will throw some light on it. It was about that time we began 
to put emphasis upon industrialization. We went iidand. We neg- 
lected our merchant marine. 

Mr. Hope. Change in the national policy? 

The Chairman. That is right. 

Mr, Green. For your information, I think we have got to go back 
to the Civil War. It was during that period that we began to lose 
our trade. Even during that period a lot of our money left this 
country and went to Great Britain to build ships. I think that' is 
about where it started. 

The Chairman. Time is growing short. 

Mr. Green, I want to extend my thanks to you for appearing here 
this morning. I want to add to the compliments that have been paid, 
and I also want to quarrel with you a little bit, which seems to be 
refresliing here this morning. 

In the first place, I want to say to mv friend I know something about 
building ships, and I have watched this. I have got quite a number 
of big shipyards in my own front yard where we are building these 



ships you are talking about. I agree with you on what you said about 
the necessity of a program after this war. 

I want you to bear in mind that this committee has given consider- 
able study to the question of the future of the merchant marine in 
foreign trade, the necessity for a mechant marine. The committee 
set up a subcommittee, of which Mr. Worley of Texas, was chairman, 
and Mr. Welch and jMr. Wolverton and others were members, and we 
made a report, the sixth report of this committee.^ It is that that 
I want to quarrel wath you a little bit about. 

In your opening statement you say : 

As of today, Congress has failed in its obligations both to the Nation's industrial 
workers and to the men and women in our armed forces, who have carried on 
so magnificently to place our Nation on the way tx> victory. 

To me, that seems to be a pretty strong indictment of the Congress 
and of this committee when I point out, as I did, this committee made 
a study of that subject, made a report, which report, by the way, was 
generally favorably acclaimed by the country. 

I recall, for instance, that the New York Times said, editorially, 
that that was one of the best, if not the best reports that had come out 
of any congressional committee in many years. 

There were many other editorials. Among them was the Washing- 
ton Post. The State Department received our report with acclaim, 

Tlien I want to call your attention further to the fact that for 
the first time in the history of this country, the Congress has set up 
during a war period connnittees of the Congress to make special 
studies of the postwar era. 

Some of these remarks in your statement, for instance, might have 
been taken from my own statement presented to the Congress upon the 
adoption of the resolution setting up this committee to study these 
postwar problems. 

What I am trying to say is that the Congress has been on the alert; 
the Congress has been diligent ; the Congress has, for the first time in 
the history of the country set about to try to meet these problems. 

Of course, these problems are many and intricate. We are pioneer- 
ing. The whole world economy is involved in this sut)ject. 

While I agree with you that it is the duty of the United States, the 
duty of the Congress, of the American people, to see that our merchant 
marine never goes back to the status that it had at the beginning of 
the war, yet, I want to call your attention to the fact that in the report 
that this committee made to the Congress, we took into consideration 
those matters and made certain recommendations. 

Among others, we said that very thing you have just said — that the 
merchant marine shouldn't go back. We recommended, as I recall, 
that it was necessary for the Government to subsidize both the ship- 
building industry and the operation thereof, in view of world condi- 
tions, and world competition both in shipbuilding and in the matter 
of the standard of living in order to keep that merchant marine up to 
gain that objective. 

Of course, this committee must consider the whole problem, and 
not just one angle of it. You and I are particularly interested in 
shipbuilding. Yet, if we were to follow that to its final conclusion, 

1 H. Kept. 541, 79th Cong. 


-we might run into this world economic situation which might be 
embarrassing and might defeat our objectives. 

Suppose we so accentuated and emphasized the merchant marine 
that we took it away from Britain, Norway, Sweden, and other na- 
tions. We might run into complications there that would upset 
the whole world trade and defeat the objective that we want. 

We might not all agree on free trade. I am not so sure where I 
stand; but I am inclined to be with you along that line. But there 
iire many things to be considered. 

This committee, for the past 15 months, has been meeting around 
t]ie table. We have heard from every group, every segment of our 
economy from industry, from labor, from agriculture, from every 
segment of the people, trying to make recommendations to the Con- 
gress that would solve some of these many and intricate problems 
tliat are going to face us in the postwar period. 

There is one thing above everything else that this committee has 
stressed — two things, I might say, and if I am incorrect in that, I 
am sure someone will feel free to so state. We have stressed that 
in this postw^ar economy, there were two things necessary, and that 
was gainful employment and an atmosphere for private industry to 
make that employment full and fruitful. That is the thing we 
have been working on. 

I am sure you will pardon me for this recital. I could dwell on 
that. I think I could even get eloquent on the time we have spent 
on this thing. 

I don't mean that we liave found the answers. I don't think you or 
any other group can find the answers. I don't think any one person 
or any group of persons could find all of the answers to the stu- 
pendous and multitudinous problems that are going to confront us. 

We have had some of the best minds in the country to come here 
to advise with us, with the hope of trying to avert economic depres- 
sion at the end of this war, such as we had at the end of the last 
one, and as we have had at the end of every war. 

We are trying to do a job. What we may recommend may not 
meet with universal acclaim, but there have been no party lines. 

I may say that of these seven reports that this committee has issued, 
everyone of them has been unanimous. The committee is made up of 
10 Democrats and 8 Republicans. We have approached it from a 
patriotic point of view. 

We are glad to have your contribution to this, but I just want to 
quarrel with you a little bit about that statement. 

Mr. Green. I don't know whether you are quarreling with me or 
not, because that is one of the reasons we are here this morning. We 
read the committee's report, and we acclaimed it. We want some 
action on the report. Let's find out how we can put that into concrete 
action. I can't go before Congress and speak to Congress. 

When I made that statement — there is a little Scotch in me — I ex- 
cluded present company. The wheels of our democracy move slowly 
and a little prodding once in a while doesn't do any harm. 

Mr. WoLVERTON. I want to say, Mr. Green, what the chairman was 
emphasizing, and very properly emphasizing, was the work that this 
committee has done over a period of months that has been so well 
received. It must be made clear, however, that this committee does 



not have legislative power. We are a special committee to study these 
questions and make report of our findings in order that the legislative 
committees of the Congress could proceed with matters of legislation. 

I don't wonder that the chairman Avould feel inclined to quarrel, but, 
as you see, when he quarrels it is alwaj^s in the constructive way, and 
never with any ill feeling. But it does emphasize the fact that this 
committee has done work of which every member of this committee is 

I confess, Mr. Chairman, that I have never served on a committee 
in Congress that I have been more satisfied with the study, the con- 
scientious effort, that has been made to arrive at some solution of these 
important questions. 

I did think, however, that there is some justification in the criticism 
of Mr, Green, which he has made clear does not apply to this com- 
mittee. There has been some delay or laxity in the carrying out of 
the solutions in the form of legislative action. 

The Chairman. In that criticism, you and I join him. 

Mr. WoLVERTON. Yes. 

The Chairman. Very well. 

Mr. Green. Mr. Chairman, the question of subsidies is important. 
The Maritime Commission estimates that the total operating-differen- 
tial payments from 1987 to 1942 amounted to $51,000,000, of which it 
is estimated $80,000,000 will be recaptured. This means that about 
$21,000,000 will have been spent in ' 5 years for subsidies, or about 
$4,000,000 a year, after recapture. 

Assuming that we have a yearly export trade of $10,0{]0,000,0:)0, 
the highest possible under full em]:)loyment, as compared with a vearly 
average exi)ort trade of $4,000,000,000 during 1937 to 1912— figures 
from the United States Department of Commerce — and no recapture 
]3rovisions, the subsidies would be about 2y.> times a year what they 
were from 1937 to 1942 before recapture— $fo,000,000 a year— or $25",- 
000,000 a year. Figuring the same percentage of reca]5ture as existed 
from 1937 to 1942, our operating subsidies would not be more than 
$16,333,000 a year, 

Mr. John E. Otterson, chairman of the American Maritime Council, 
in an article in the Journal of Commerce of April 23, 1945, states that 
total operating-differential payments for a merchant fleet of 20.000,000 
tons will be between $20,000,000 a year and $30,000,000 a year, and 
that total operatinir and construction subsidies would be between 
$50,000,000 and $70^000,000 a year, without deducting anything for 
possible recapture. 

The Chairman. Thank you very much. 

Mr. Welch. I would like to say that the necessity of an adequate 
merchant marine has never been properW explained or sold to the 
American people. You are doing missionary work today, Mr. Green, 
The owners and operators of our ships have been very lax in that re- 
spect. They have not kept the American people sufficiently informed 
as to the necessity of an adequate American merchant marine. 

The Chairman. Thank you again, Mr. Green, for your appearance. 

Mr. Green. Thank you, sir. 

The Chairman. The committee will stand adjourned until further 

(Whereupon, at 12 : 40 p. m., the committee adjourned, to reconvene 
at the call of the Chair.) 



House of Representatives, 
Special Committee ox Postwar 
Economic Policy and Planning, 

Washington, D, C. 

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

Present: Representatives Colmer (chairman), Walter, Voorhis, 
Worley, Reece, Hope, and Wolcott. 

Also present : M. B. Folsom, staff director, and E. B. George, con- 

The Chairman. The committee will please come to order. 

It will be recalled that just before the recess we called a number 
of witnesses to testify on the question of removal of wartime controls. 
Among the witnesses that appeared at that time were Mr. Bowles, 
of the OPA, and ISIr. Krug, of the War Production Board. We are 
glad to have this morning, in pursuit of that same subject, Mr. J:)lm 
W. Sn3'der, Director of the Oftice of War Mobilization and Reconver- 
sion. It might be well also to point out that this committee sponsored 
the legislation that set up the organization of which Mr. Snyder now 
is the directing head. 

We are glad to have Mr. Snyder this morning and to have his state- 
ment. I would appreciate also — I am sure the committee would — if 
Mr. Snyder woidd indicate, if he has not done so in his prepared state- 
ment, just what, if anything, he thinks is necessary in the way of 
legislation to bring about the reconversion of our economy fi-om a 
wartime to a peacetime economy, in order to bring to fruition our hopes 
of full employment in peacetime. 

Mr. Snyder, we are glad to have you here this morning and glad you 
could get away fi-om your arduous duties. 


Mr. Snyder. Thank you, sir. I am always glad to come to this 
committee because you have certainly been most helpful to the office 
that I hold. 

I have a prepared statement, Mr. Chairman, and with your permis- 
sion I shall read from it. 

The Chairman. Very well, sir, any way you like. 

Mr. Snyder. Mr. Chairman, I welcome this opportunity to appear 
before the Committee on Postwar Economic Planning and Policy. The 

99579— 46— pt. 7— — 8 2187 


work you gentlemen accomplished by planning aliead while war still 
dominated our economy has been of innneasurable assistance to my 
office in speeding reconversion and expanding peacetime production. 

The sudden capitulation of Japan put our reconversion plans to the 
severest kind of test. There had not been time in tlie o months fol- 
lowing the fall of Germany to accomplish the full readjustment of 
our economy from a two-front to a one-front war basis. Munitions 
schedules had just begun to taper off, and our civilian economy was 
expanding only gradually when the last of our enemies sued for peace. 

But our preparations for reconversion were well advanced. Im- 
mediately after Japan's surrender had been confirmed, the Govern- 
ment acted swiftly and decisively. The following steps were taken : 

Unneeded war production was stopped without delay. 

Unnecessary wartime controls were lifted. 

Clearance of inventory and equipment from war plants was* under- 
taken with all possible speed. 

Demobilization of men no longer needed in the armed forces was 
speeded up. 

Release of supplies and equipment to civilian industry was ex- 

Safeguards against inflation were reviewed and tightened where 

The immediate shock to our economy was severe. Termination of 
prime contracts in August alone canceled commitments of some 
$24,000,000,000. By September ;U) there were some 108,000 prime 
contracts, involving^ $37,000,000,000, which were awaiting settlement. 

The soundness of the steps taken in advance of this avalanche of 
cancellations lias been proved. No new major problems of policy and 
procedure in this field have arisen since VJ-day, and contract settle- 
ment is proceeding rapidly. In September almost 20,000 contracts 
were settled, twice the number in any previous month. We hope to 
settle the bulk of outstanding contracts before the end of this year, 
and present indications are that substantially all of the remainder 
will be out of the way by next July if contractors file their claims 

The Government has been assisting contractors to clear their plants 
just as quickly as it can. In almost all cases termination inventories 
and Government-owned equipment are being removed from plants 
within the 60 da^'s prescribed by the Contract Settlement Act. Of 
the 21,000 clearances completed during the third quarter, some 14,000 
required only 40 days or less. A heavy volume of clearance requests 
is still ahead, but the machinery to cope with this peak when it comes 
is r^ady and functioning efficiently. 

The thorough advance preparation that both business and Govern- 
ment made to switch from war to peacetime production has, without 
doubt, saved the Nation months of time and billions of dollars in its 
progress toward reconversion. Likewise, the amount of our unem- 
employment during the transition period has been substantially cur- 

Already reports from major industrial cities show that many of 
those laid off from war work have been, or soon will be, called back 
to peace time jobs. Industry has made remarkable progress on the 
physical side of reconversion. From now on, there is every indica- 


tion that the rate of hiring will be substantially ahead of the rate of 
job displacement. The major challenge is to step up the rate of hiring 
still further so as to provide job opportunities for our servicemen who 
are returning to the labor force at a rate of more than 1,000,000 men 
a month. 

The number of people at work will be steadily rising. But at tlie 
same time unemployment will be rising too, because our peacetime 
economy has not been able to expand as rapidly as our servicemen 
are being demobilized. 

Our goal is a high level of production. It will give us the abund- 
ance of goods needed to smother threatened inflation. It will produce 
the jobs and good wages needed to sustain purchasing power and to 
counter deflation. 

To encourage full production the various Government agencies are 
removing restrictive controls just as rapidly as they can safety do so 
and are strengthening those that are still needed. The pace of revo- 
cation has been so swift that at times serious questions as to the 
advisability of proceeding so rapidly have been raised. But it has 
been our policy when the issues are finely drawn to resolve these 
questions in favor of revocation if it appeared that production would 
be speeded up by such action. 

Recent developments in the construction industry provide an ex- 
cellent example of how our reconversion control and decontrol policy 

As you gentlemen know, there is an overwhelming need for all kinds 
of new construction in this country right now. Because of the short- 
age of buildings, especially of houses, and a heavy demand, created 
by such factors as the large increase in the number of families, the 
limitations on construction during the war years, and the large accu- 
mulation of assets in the hands of persons who desire better housing, 
inflationary pressures are exceedingly strong in this field. Stimulation 
of activity in construction, therefore, we believe is one of our chief 
responsibilities in the period just ahead. 

During the years when materials were scarce, the War Production 
Board restricted construction with the order known as Li-Al. This 
was essentially a rationing device which channeled materials into 
construction of war plants, military establishments, homes for war 
workers in congested areas, and so forth. 

After the defeat of Japan it was felt that L-41 would unduly delay 
expansion of the construction industry. So, on October 15 the order 
was revoked. 

Mere revocation of that major control, however, did not solve the 
construction industry's problems. It was free to build houses wher- 
ever and of whatever type it felt were needed, but it could not get all 
the materials which were required. It was necessary, therefore, for 
other controls to continue functioning. 

Mr. Walter. May I interrupt, Mr. Snyder? 

Mr. Snyder. Yes, sir. 

Mr. Walter. I have heard that, as these materials become avail- 
able, they are going into the construction of higher-cost houses, rather 
than to provide the much-needed housing in the lower-income class 
groups. Are those charges true? 

Mr. Snyder. Well, the materials really have not been freed long 
enough to prove that true or not, sir. 



Mr. Walter. Would it be possible to huAe tbe Government prevent 
that sort of thing from happening ? 

Mr. Snyder. Not unless we put a ceiling price on houses that can be 
built — a prohibition against building houses above a certain price — or 
something of that sort, similar to the L-41 order. But that LA41 order 
is not a proper order to carry out a peacetime job. Tliat was simply 
a rationing job. to channel short materials into wartime production, 
and to try to carry on under that order would have set up a tremendous 
number of requirements that would not have been proper in peacetime 

Mr. Walter. Don't you feel that, with the cancellation of L-41, 
there should have been another order so as to prevent, for the moment 
at least, channeling of all building materials into high-cost construc- 

Mr. Sxyder. Well. I don't know just what sort of an order coidd 
have been prepared. We have given a great deal of thought to it, and 
the principal answer to the problem is to try to get materials into 
production so there will be ample materials to do the job. We have 
had continual conferences with the construction industry and we 
have been led to have some confidence in the fact that if the materials 
oet to flowing there will be ample for all ty]>es of construction. We 
are limited, too, by the difficulty of getting people back into construc- 
tion activities. During the war, of course, many of the small con- 
tractors disappeared into other activities. \\m\ we ai'e having to 
encourage them to go back to work. When we once get to moving in 
construction, the larger houses will not be in demand sufficiently 
so as to really curtail the amount of materials that go into small 
JiQUses — when we have a free market for those materials. 

Mr. WoRi.KY. On that same point, Mr. Snyder, the tax bill passed 
a week or so ago provides for the repeal of the excess profits tax on 
January 1, 1946. Consequently there seems to be a tendency on the 
part of' a lot of people who are already in that bracket to keep their 
goods until next year before selling them. Have you noticed any such 
tendency ? 

]Mr. Snyder. We have had the WPB look into that, checking back 
to see if large inventories are building up. and their report looks very 
encouraging on that point; except in isolated cases, they have not 
found that to be the case at all. 

Mr. WoRLEY. None seem to be holding back ? 

Mr. SxYDER. What led to that belief was the fact that in building 
up national distribution manufacturers have had to get samples out 
first to their various agencies and then follow through with getting 
some stock on the shelves, before they could release it for sale, or 
else they would have had a distorted situation. Mr. Small, who is 
heading up that activity, made a very encouraging report on it at 
our confei-ence last week. We have had him check, and he is con- 
tinuing that regularly. If we run into any instances, we are endeav- 
oring to clear them up. 

Mr. WoRLEY. So far as j^ou know, that has not entered into recon- 
version in the automobile industry ? 

Mr. SxYDER. Not as far as I could find out. 

Mr. Reece. In the following paragraph I notice that there was 
permitted the increase in the price of brick by $2 per thousand, so 


that wages could be raised to attract additional workers to the bi'ick 
plants. How closely has a study been made in other industries to 
see whether the same thing could have been done advantageously^ 
Mr. Snyder. Well, on those items, Mr. Congressman, where bottle- 
necks have been created, we have been pushing rapidly to move 
obstacles out of the way so that a free flow of materials into the 
various industries would be forthcoming. And in those cases where 
it meant a price adjustment in order to get the bottleneck cleared out, 
Ave have attempted to adjust the price so as to relieve that shortage. 
We have attempted to anticipate this pi-oblem of disagreement b}^ 
calling in the representatives of management and labor and having 
their assurance that during this reconversion period things were going 
to move along. But the war being over, and folks being tired, 
p ;ssib]y, and waning a vacation fifter t^3 pressure of the w-ar, they 
are led into a position where they say, ''Well, let's get this all settled 
right now instead of when the reconversion is moving along." And 
so the wage demands came along, and for those wage demands many 
of the industi'ies have requested price adjustments. The President 
has announced his policy on this, and we have been trying to operate 
under that policy and hold the pricing in line to. prevent any sub- 
stantial rise in cost of living or an inflationary trend. We are con- 
stantly and daily reviewing those matters and studying them and. 
trying to find paths and methods to follow to bring about composure 
of these disjMites and arguments that are going on. We feel that if 
labor and management come out of this meeting with an agreement 
on some things, they will have demonstrated to themselves that there 
is a way of composing their differences and they will settle down to 
working out their disputes and we will get production under way. 

Mr. liEECE. Do you think there is grave clanger of uncontrolled 
inflation as long as you have the authority to regulate prices and 
other factors i 

Mr. Snyder. Well, it would not if you just settle individual cases. 
But if you give a general price increase it might cau-e a very definite 
move toward an inflationary spiral. If you give a general increase 
and it reflects back into the cost of living again, then labor wants a 
further w^age increase, and so on. But w^e have made provision so 
if there is a case where an industry can't give a wage increase that 
is needed to hold tlie cost-of-living wage rate up, we can make adjust- 
ments in prices. We are doing it regularly in individual cases, but not 
as a general price increase. 

Mr. VooRiiis. I w^onder if I could ask a question? 

The Chairman. Mr. Voorhis. 

Mr. Voorhis. Mr. Snyder, how does the situation with regard to 
loss of time in labor disputes at present compare with the correspond- 
ing period after the First World War? 

Mr. Snyder. So far, reconversion has moved along exceptionally 
well. We do not have a tremendous number of people out on strike 
right now. It is the potential threat that disturbs people more than 
anything else. If the strikes happen that threaten to happen, unless 
we can get these ironed out, they will be the real danger. Everything 
has been moving along unusually well, as the Congressman said just 
a while ago, and there is a tremendous amount of goods flowing into 
the pipe lines and onto the shelves i-ight now. You are finding things 



beinfT offered in your newspaper, advetisements of articles that are 
now being offered for sale that are new in the market since the war 
began, and if we can compare these threatened strike problems and 
disputes, we really have not lost a great deal of ground up to now; 
if that answers your question. 

Mr. VooRHis. I think it does. 

Mr. Snyder. I think the Depatment of Labor figures show that 
there are less than 200,000 men on strike right now, so that is a 
comparatively small figure. 

The Chairman. All right, Mr. Snyder. 

Mr. Snyder. Brick plants for instance, could not attract the work- 
ers they needed to expand production because wage ceilings in that 
industry were too low. The Office of Price Administration permitted 
manufacturers to increase the price of brick by $2 per thousand so 
that pay raises could be granted. Likewise, price increases were' 
granted to increase production of cast-iron soil pipe. 

At the same time the regional and district offices of the OPA 
thoughout the country were at work preparing simple dollar-and- 
cent ceiling prices on building materials. Prices are based on local 
cost conditions, and will apply not only to building materials, but 
also to such manufactured articles as doors, windows, cabinets, septic 
tanks, and bathroom equipment. As rapidly as possible these ceiling 
prices will be posted publicly in building-material stores, lumber 
yards, and other points. Both buyers and sellers will thus be provided 
with definite knowledge of the ceiling prices. 

The OPA will continue iis rent control program as a further safe- 
guard against inflationary dangers. This has been successful 
throughout the war in keeping rents within reason and should remain 
as long as there is danger of an unhealthy rise. 

The Civilian Production Administration, whicli took the place of 
the War Production Board when that agency expired last week, will 
maintain control over inventories to prevent hoarding or preemptive 
buying of building materials which might dela^- construction by cre- 
ating artificial shortages. Where real shortages exist, the CPA will 
break bottlenecks in cases of real emergency through the exercise of 
its priority powers. 

I have cited the construction industry as an example, but the same 
policy of revoking controls when they are not needed and using those 
controls that are needed is being followed across the whole industrial 

Industry for some time will continue to face serious shortages in 
certain critical areas where our war stock piles have become depleted 
and imports are still inadequate. This makes it imperative to retain 
the allocation and conservation controls which are authorized by 
title III of the Second War Powers Act. Equitable distribution of 
criticall}^ tight materials can be achieved only through allocation. 
It is the one way we can make sure that most important needs are 
met first when there is insufficient material to meet all needs. 

Tin, natural rubber, and lead are examples of the materials whose 
distribution must be carefully controlled for the benefit of the whole 
economy while they are critically scarce. It would be most unwise, 
for instance, to permit tin to be diverted to nonessential items while 
there is not enough of it in the country to meet far more urgent 


Mr. Walter. Now, Mr. Snyder, your entire discussion is l)asod on 
the theory that there will not be a repeal of the War Powers Act. 
Don't you think that at this time it would be a oreat mistake if that 
act were repealed? 

Mr. Snyder. I definitely do, sir. It has to be extended. It expires 
the 31st of December. We are urging that it be extended for a year 
to help us through this reconversion transition. We feel definitely 
that the Second War Powers Act should be extended, and have re- 
quested the Congress to do so. 

Mr. Reece. Have you considered whether it is necessary for all the 
provisions of the act to be extended, or whether certain provisions 
could be extended to accomplish your purposes ? 

Mr. Snyder. That is a very pertinent question. The House Ju- 
diciary Committee is conducting hearings now, not only on the Sec- 
ond War Powers Act, but on all wartime statutes that expire on the 
cessation of hostilities or the termination of the war. I have prom- 
ised them and am now carrying out that ]iromise to have every agency 
using war powers give us an analysis of those powers: (1) to show 
those that can be dropped immediately; (2) to show those that need 
some extension, and the reasons why they should be extended for the 
reconversion period. 

Mr. Walter. Now, Mr. Snyder, I happen to be a member of the 
Judiciary Committee that is considering this legislation. Don't you 
feel that it would be more desirable to present a bill showing just 
exactly what controls should be continued, rather than to continue 
the War Powers Act. By doing that the Congress and the people 
will know exactly what controls it is intended to retain? The War 
Powers Act is an all-embracing thing, and many of those things that 
are controlled because of it should no longer come within the pur- 
view of any law. 

Mr. Snyder. We are going much beyond the Second War Powers 
Act, as you know, in this study. We are studying every war power. 
There are a great number of acts. 

Mr. Walter. Yet you are studying it only in this light, you are 
trying to advance an argument as to why the act, itself, should be 
continued. It seems to me that that is the wrong approach. 

Mr. Snyder. That is not our purpose. 

Mr. Walter. In other words, the thing to do is to let the act 
expire and then, in its place, suggest new legislation. 

Mr. Snyder. Well, we are only requesting extension of powers 
that are essential for the winding up of the war. 

Mr. Walter. You could probably get the substitute legislation 
enacted to take effect before the expiration of the War Powers Act. 

Mr. Snyder. Well, the end is exactly the same. We are hopeful of 
not losing some of the powers that are urgently needed. That is 
why we are making this definite study so as to provide you folks 
with the definite information. 

Mr. Walter. I disagree with you. The end is not the same. You 
say now this act should be continued because of the controls that 
must be exercised, but at the same time we are continuing controls 
which, in the judgment of some of us, ought not to continue beyond 
the war period. 

Mr. Snyder. We are perfectly willing for those that should be 
deleted to be deleted. We are not asking that the act as a whole 



be renewed, but only those titles of it that are necessary for this 
reconversion period, particularly title III. We are trying to set 
out the reasons why we are asking those specific titles be continued. 
If you were to renew the Second War Powers Act, less certain titles, 
it is perfectly in accord with our plans. That is why I say our 
end is exactly the same. We just don't want to lose those poAvers 
that we feel are so necessary in the next few months of this re- 
conversion program. We are not at cross-purposes at all. We want 
to do exactly the same thing. We are not asking for the renewal 
of the Second War Powers Act in toto. That is why we are trying 
to find out from everybody, and make them give good and sufficient 
reasons why they think certain ones should be continued. Then you 
can delete those items that are no longer required. 

Mr. Walter. Some of the membeis of my committee have not the 
confidence in all the members of the executive of our Govern- 
ment-that we have in you, unfortunately. 

Mr. Snyder. We are trying to help you by making the various 
agencies put down in black and white why they think those titles 
are necessary. We can scrutinize those, and if we do not agree, we 
can either delete them or make the agency give a further and more 
definite explanation. That is exactly the ])urpose of our requiring 
the agencies to prove their case, not simply to say they think it is 
a good thing. They have to put dowm the reasons why it is necessary. 

The Chairman. If I understand you and Mr. Walter correctly, you 
both have tlie same objective, and so far as you are concerned you 
would have no objection to the mechanics of the thing, just so you 
got the objective. 

Mr. Snyder. That is why I said our purpose in the end is the same. 
We both want to retain the tilings that are necessary, and neither 
of us has any interest in retaining those that are outmoded or un- 

Mr. WoLCOTT. Mr. Snyder, this morning before the Small Business 
Committee there was a large group of Congressmen who had been 
inspired to appear before that committee in protest against certain 
expected restrictions on the sale of automobiles. You are probably 
familiar with this ruling. It has to do with the contracts between 
the manufacturers and the dealers, likewise the contracts between 
the dealers and their salesmen. We all realize, of course, the au- 
thority that has been given under the Constitution to protect the 
obligation of contracts and there has always been a question as to 
whether the Congress could delegate that authority to an executive 
establishment to prepare the obligation contract by regulation. 
Under what authority does the Government claim to be able to pre- 
pare the obligation of a contract between a manufacturer and a 
dealer in automobiles, to the extent of regulating the commission 
which the salesman would get and the profit which the dealer would 

Mr. Snyder. That matter just came to my attention last night, 
Mr. Congressman, and I have not had a chance to go into it. That 
would be under the OPA regulation, under their price-control powers. 
As I understand, they are setting a price on the car that the manu- 
facturer sells to the dealer, and then they are setting a final sale 
price to the consumer of the car. 


Mr. WoLCOTT. That is perfectly all right. But what authoritj' has 
the OPA to state that the contract between the manufacturer and 
the dealer, or between the dealer and the salesman, shall not involve 
a commission over a certain amount ? 

Mr. Snyder. That is what I will kwk into. As I say, it just came 
to my attention that such a thing was contemplated, last night. I had 
a number of Congressmen and Senators call me last night. 

i^Ir. WoLCOTT. I don't know that there is any constitutional author- 
ity for a department of the Government to prepare obligation con- 
tracts. There has always been some question whether the Constituti(m 
vests that power in Congress, and whether we can delegate that to 
the Government. I think it has got to be considered in the light of 
what these dealers fear might happen to them. 

Mr. Snyder. We are lookiisg into tha<:. I have been told that action 
w^as under consideration, and we are going to look into it today. 

Mr. Reece. As I understand it, the OPA is basing its contemplated 
action on the theory that the cost of sales now to the dealers — there 
being a big demand and a scarcity of cars — is reduced, and therefore 
their commission to salesmen ought to be reduced. 1 question very 
seriously if those who are studjnng this matter and contemplating 
this action have had the experience in matters of this type to justify 
them in reaching such a conclusion. An organization can't discharge 
its salesmen because sales happen to be good, and then bring them back 
on when sales are not good. Many of those companies have had to keep 
some salesmen all during this period when there were no cars. Others 
will be coming back from the service. It is evident from the number of 
telegrams we are getting that it must ]:e serious. 

Mr. Snyder. It all descended on us yesterday, Mr. Congressman. 
Mr. Reece. If I had known this subject would come up, I think 
I would have brought a basketful over. I think that is something that 
you ought to give serious consideration to. 

Mr. Snyder. We already have it under studj- right now, sir. 
The Chairman. If I may interject at this point, I think that is a 
very live question on the Hill today, Mr. Snydei-, and I would just like 
to put my 2 bits' worth in, since we have got onto that subject. I can't 
understand how we can proceed on a basis of postwar economy when 
we are going to cut down the manufacturer, the dealer, and everybody 
that has anything to do with the production or handling of products 
and at the same time take a mandate from the Government that they 
all must raise wages. It may be sound economy but it just does not 
make good horse sense to me. I am just woncleriiig if we can have 
stable postwar economy based upon a false premise like that. I don't 
see how it is going to work. 

Mr. Reece. I hope nothing will be done until you have time to look. 
into it, Mr. Snyder. 

Mr. Snyder. I will take time. 

Mr. Reece. They were fearful it was going to happen before 6 o'clock 
last night. 

The Chairman. It is a serious matter. 
Mr. Snyder. It will be given very careful attention. 
Mr. WoLCOTT. Well, can we be assured, Mr. Snyder, that before any 
action is taken by OPA or anyone else who claims to have the authority 
to do it, that the matter will be considered by you ? 


Mr. Snyder. I have assured you of that, sir. 

Mr. WoLCOTT. And tliere is no innninent danger of that order being 
issued in the next few days ? 

Mr. Snyder. I am going to look into it at once. 

Mr. WoLCOTT. Mr. Chairman, there is one other thing. 

On page 15 of your report you discuss inflationary prices in respect 
to construction costs in the real-estate field, which, of course, will be 
reflected in real estate. Are you in a position to tell us whether you 
contemplate any request for legislation to authorize the OPA to put 
a ceiling on real estate? 

Mr. Snyder. We are not contemplating requesting such a bill. I dis- 
cussed that matter with Mr. Bowles and Mr. Blandford and Judge 
Collett, and we are in agreement that we will not ask for such legisla- 
tion, sir. at this time. 

The Chairman. All right, Mr. Snyder. 

Mr. Snyder. The priority powers which the Civilian Production 
Administration inherited from the WPB are another essential to 
•orderly reconversion. They are being used sparingly now only to 
break bottlenecks which threaten to delay civilian production unduly 
or to retard reemployment. There have been numerous instances 
recently in which WPB's assistance in obtaining one or two items of 
machinery has been sufficient to put into operation a plant which other- 
wise would have been forced to stand idle for weeks, or even months. 

Continued use of priorities will be necessary for some months to 
insure an adequate flow of textiles into lower-priced garments. 

The military will continue to need priorities to make sure that there 
is no interruption in the scheduled production of the supplies our 
servicemen still overseas will need. 

It is not possible today for anyone to predict accurately how, or 
where, or when all the shortages and bottlenecks that may crop up from 
time to time during the transition period will occur. The (Jovernment 
must be prepared, as it is now, to step in when these obstacles threaten 
to slow down reconversion and thereby delay the return of unemployed 
men and women to their postwar jobs. 

Earlier, I mentioned how inventory controls are being used in the 
construction industry to prevent artificial shortages. These controls 
reach out wherever demand is running ahead of supply. They are 
one of our major defenses against runaway inflation. Without them 
there might very easily be a wave of speculative buying and inventory 
hoarding such as we had after the last war. You gentlemen are fa- 
miliar with the story of what happened then. Unwise buying and in- 
ventory hoarding were among the factors that set off the inflationary 
boom that ended in the crash of 1920. We learned a lesson then, and 
we must not repeat those tragic errors again. 

]Mr. VooRHis, Do you think we are avoiding them pretty effectively 
so far, Mr. Snyder ? 

Mr. Snyder. When you compare our prices today with what they 
were in 1919 and 1920, there is no question but what we have done an 
effective job until now. 

Mr. WoRLET. How about the volume of money? 

Mr. Snyder. Well, of course, it is tremendously greater. I would 
have to get you that figure if you would like to know exactly what 
the amount of currency in circulation was at the same period after 
the last war. 



Mr. WoRLEY. T think such information would be helpful. 

Mr. Snyder. Well, of course, with all that money in circulation to- 
day as compared with what was in circulation before, and considering 
the price levels of today, it will accentuate the fact that we have done 
a pretty ^od job in holding things down. 

Mr. WoRLEY. If you could insert that at this point, we would ap- 
preciate it. 

Mr. Walti':r. I think it might be well to include both price and 

Mr. Snyder. Both price and circulation? 

Mr. Walter. Yes. 

Changes in money and prices in 2 wars 

Volume of money (millions of dollars): 

Money in circulation 

Demand deposits 

Wholesale prices (1926=100) 

Cost of living (1935-39=100) 










27, 656 

10, 082 

17, 624 


38, 992 

74, 300 









105. 2 





While money in circulation increased by 6S percent, and demand deposits by 
75 percent, between 1914 and 1919, wholesale prices rose by 104 percent and cost 
of living by 73 percent. (Before mid-1920, as inflationary forces exerted their 
pressure, wholesale prices and the cost of living rose by an additional 20 percent 
when the collapse occurred. Between 1941 and August 194,5, though much 
greater inei-eases occurred in money in circulation and in demand deposits, the 
rise in prices was less than one-third as great as that from 1914 to 1919. 

Mr. WoLCOTT. Here is a subject which is rather closely affiliated 
with that question. There are some who think we are developing a 
Government policy with respect to prices which will result in the main- 
tenance of high prices — or we might put it this way — that will cheapen 
the dollar, as of necessity with respect to carrying our national debt. 
I think if there is anything like that being discussed, Congress should, 
of course, consider it, because the Congress has the responsibility of 
legislating these policies. That is too important a matter to be left 
to the discretion of someone who might issue an Executive order or a 
regulation with respect to it. We are given the authority and the 
responsibility of coining money and regulating the value of it. 

Now, is there anything that you know of that contemplates any 
action by the Executive in respect to the value of the currency, either 
by direct or indirect action? 

Mr, Snyder. I have not heard it discussed, sir. 

The Chairman. All right, Mr. Snyder. 

Mr. Snyder. The Civilian Production Administration requires that 
businessmen restrict their inventories of scarce goods to the amounts 
they actually need to meet curi-ent demands. This is a sound rule of 
business. It permits the widest possible distribution of the goods that 
are scarcest. As quickly as production catches up with demand, or 
even approaches it CPA will relax these controls, or suspend them. 
But it is essential that authority be retained to curb any speculative 
hoarding which might create artificial shortages. 

Mr. Reece. Mr. Chairman, I realize we are anxious to get through 
and I do not want to take too much time. I am wondering if you have 
looked into the question of the surpluses of consumer goods which 


various military installations, and other installations closely allied 
with the military, had on hand at the end of the war. In some in- 
stances of which I loiow, they had very substantial stocks of consumer 
goods of different types. There seems to be a disposition to find othei 
governmental installations to take them over instead of making them 
generally available. That is all right, but there is a tendency on the 
part of some of those other installations to take more than their im- 
mediate needs require in order to be in a good position over a long 
period of time. 

Mr. Snyder. Mr. Congressman, I have a group that are spending 
every day in the week on that very subject. We are constantly review- 
ing the inventories of the Army and the Navy. We are trying to break 
loose all those surpluses as rapidly as possible. 

Mr. Reece. I think there is quite a wide field there. 

Mr. Snyder. It is a tremendous job; yes, sir, when you recognize the 
size of our Army installations and the storage spaces. My staff is a 
very small one, as you know, and we have used other agencies of the 
Government as much as possible. The law that created our Office said 
that we should use the staffs of the other agencies, and we are doing 
that. I have had, compared with m}' other sections, a rather large staff 
digging into these problems. 

Mr. Reece. I am not sure but what you will find in some instances 
agencies have bought beyond their requirements, and when the war 
ended they were left with embarrassingly large quantities of some of 
these goods on hand. If they can find other installations to take those 
commodities off their hands before it becomes generally known, it 
relieves them of embarrassment, and for that reason I think it is easier 
for another Government office to get those surpluses and to find them in 
large quantities. 

Mr. Snyder. As I say, we are giving that very careful attention, Mr. 
Congressman. We get suggestions daih', and Ave are trjdng to follow 
them up to get the surpluses declared. 

Before it expired, the WPB had revoked, or suspended, all but 55 
of the some 650 controls which it exercised over materials and supplies 
at its peak. The CPA is following the same policy as its predecessor — 
it has assured industry that no control will be kept in force one day 
longer than is absolutely necessary. 

The Office of Price Administration has made rapid progress in 
divesting itself of its rationing programs. At the peak there were 13 
such programs, but now only 3 remain — meats, fats and oils, sugar, 
and automobile tires. Like the other 10, these programs will be 
dropped just as soon as increased supplies permit. 

The reconstruction needs of foreign countries, particularly the liber- 
ated areas, are large. The dangers of widespread starvation, disease, 
and continuing unrest abroad impose an obligation upon this Xation 
to send some of its resources to those countries. As a matter of fact, 
those are ]3ledges that this country has made. This can only be ac- 
complished through the e?:ercise of CPA's allocation and priority 

As you gentlemen are fully aware, the emergency rationing and 
allocation j^owers upon which the reconversion program is depending 
so heavily, are derived from title III of the Second War Powers Act. 
This statute will automatically expire on December 31, unless Con- 
gress acts in the meantime to extend it. 


At hearings before a subcommittee of the House Judiciary Com- 
mittee recently I urged that the Second War Po\Yers Act be extended 
for another year. I would like to repeat that recommendation here. 
I feel very sti'ongly that the authority granted under provision.; of 
title III of this act are essential for orderly reconversujn while we 
still have serious economic dislocations arising out of our war effort. 
Without these provisions, the Government wdl not be equipped to 
meet the crises and economic problems which are arising in this tem- 
porary period of major readjustment. 

However, there are some emergency statutes on the books which 
have outlived their usefulness. I have asked the various Government 
agencies exercising powers whicli are limited to the duration of hostili- 
ties, the end of the war, or some similar period, to examine those 
statutes in detail and report to me which of them may be dispensed 
with now and which should be retained until some future date. In 
this latter category, I am asking that the earliest possible termination 
date be suggested for the emergency |)owers which should continue. 
I shall, of course, review these reports carefully and shall do m^?^ best 
to see to it that only those powers arc retained which can clearly be 
proved essential. 

It is of the utmost importance, I believe, that each of the emergency 
statutes should receive individual study and the implications of its 
revocation be carefully weighed before final action toward revocation 
is taken. As President Truman has pointed out, a program of blanket 
revocation of wartime controls, such as would result from an untimely 
proclamation of the cessation of hostilities, would be unwise and 
unfortunate. Very shortly, I shall make recommendations as to the 
specific emergency powers which can, in our judgment, be removed at 
this time. 

I look forward to a time in the not so distant future when reconver- 
sion of our economy will be sufficiently advanced to permit revocation 
of all the emergency powers which have been granted to the Govern- 
ment to prosecute the war. Many of them are warranted only by the 
extreme emergencies we have had to face. In removing these con- 
trols, however, we must be fully aware of the emergencies which their 
very revocation might create. 

The long-range study -of the postwar economic jiroblems facing 
our country which this committee has undertaken will prove of great 
assistance, I am confident, in evaluating the need for dropping addi- 
tional controls and the need for continuing some of the others beyond 
their expiration date in 194G. 

The Chairman. Are there any questions from an}' of the gentlemen 
of the committee ? 

Mr. Walter. Do you have any idea, Mr. Snyder, how long it will 
be before we can drop all controls ? 

Mr. Snyder. I think that by the end of next summer we will 
have the biggest majority of them gone. There may be some that will 
have to go a little longer — construction, for instance. We are going 
to have a tremendous amount of construction, houses particularly, and 
a great deal of industrial and commercial construction, and until the 
supply somewhat approaches the demand, we may have to try to hold 
on to some of those powers a little longer. But, by and large, I 
think that by next summer a great many of them will be out of the 


way, I think we have demonstrated the desire of our office to get rid 
of them as ra])idly as possible. 

Mr. Waltek. Mr. Snyder, on page 4 of your statement, you said, for 
instance, that brick phmts could not attract the workers they needed 
to expand production because wage ceilings in that industry were toc^ 
low. Now, did they take into consideration the wages paid in indus- 
tries in which there was a decreased demand for workers ^ 

Mr. Snydkr. I do not get your quest ion. 

Mr. Walter. When it was determined that the wages in brick plants 
were too low, was consideration given to the fact that there would be 
unemployment in other industries, or was an attempt made to keep 
the wages up in brick plants to what the workers had been receiving 
in war work i 

Mr. Snyder. AVell, in brick plants wages have always been rather 
low. It is an unattractive type of labor or work, and something had 
to be done there. Laborers just were not going to work in the brick 

Mr. Walter. Of course, during the war many people who engaged 
in that type of work were encouraged to go to the shipyards and into 
war work. 

INIr. Snyder. That is true. 

Mr. Walter. Now, normally they would have gone back to what 
they had been doing before, at the same wages. 

Mr. Snyder. They would not do it, sir. 

Mr. Walter. They either would not work at all or they would find 
work in some other type of industry. In other words, when the 
de.ermination that the wages were too low was made wdth the idea 
of raising wages in low-paid industry 

Mr. Snydkr. The idea w'as definitely to try to get production where 
there was extreme shortage. 

Mr. Walter. Well, unless the wages were increased, the people 
would not leave the ship3^ards and war industries and work. They 
Avould just do nothing. 

Mr. Snyder. We just could not get them back in there. We put on 
recruitment i)rograms and tried to get labor through the USES, and 
they just would not go. 

Ml'. Walter. All right. Now^, suppose, "for example, that slaters, 
men engaged in the manufacture of roofing slate, who have been em- 
ployed during the war in the manufacture of munitions, went back to 
the slate quarries and refused to work because the wages were not 
increased. Don't you feel that, under those circumstances, the manu- 
facturer would be justified or permitted to raise prices in order to 
pay those former slaters what they had been getting in war work i 

Mr. Snyder. If that became a definite bottleneck to getting con- 
struction moving, we would have to give it consideration. 

Mr. Walit^r. Well, suppose he could not operate his plant and pay 
increased wages ? 

Mr. Snyder. Well, the President has said that the Government must 
not ask for w^age increases where it would put the manufacturer in the 
red. If it is going to do that, then he is entitled to consideration for 
a price raise. 

Does that answer your question ? 

Mr. Walter. Is that wdiat he said, or did he say, raise the wages and. 
see whether they could keep their heads above water for 6 months ? 


Mr. Snyder. No; there are special hardship cases that are being con- 
sidered every day. 

Mr. Walter. Who would grant relief to the manufacturers who 
could not keep their businesses going? 

Mr. Snyder. Where there is a question of raising wages to prevent 
maladjustments or inequalities which would interfere with reconver- 
sion and the employer cannot do it witliout a price raise, he applies for 
a price raise and that is finally settled by the Stabilization Admin- 

The Chairman. Is there anything further ? 

Mr. WoLCOTT. Mr. Chairman, in that respect 

Mr. Snyder. Mr. Congressman, were you under the impression that 
there was an attempt to raise the wages to as higli a point as the 
wages were in the war plants ? 

Mr. Walter. Yes. 

Mr. Snyder. Oh, no. They were only raised sufficiently to get men 
into this type of work, just a little over the previous wage, nothing 
compared with the war plants. 

Mr. Walter. When I mentioned slate, that was hypothetical. 

Mr. WoLCOTT. ]Mr. Chairman, the OPA put a floor under wages by 
providing that no wage or salary could be put less than the highest 
wage or salary paid between January 1 and September 15, 1912. As 
I understand it, the Congress has never put a ceiling on v.ages or 
salaries, so that there is no legislative restriction against the increase 
of salaries and wages there. 

Mr. Snyder. No, sir ; no specific ceiling. But the Stabilization Act 
requires that wage increases be kept within general stabilization 

Mr. WoLCOTT. Is there any legislation wliich is necessary to help 
you or the Administration adjust the wages and salaries? 

Mr. Snyder. Well, I would not want to make a statement on that 
until we see how these present negotiations work out, to see whether 
we can get together on a basis of getting production started, and then,. 
if we can, I think that will take cai'e of itself. 

Mr. WoLCOTT. Unless j^ou want to set a wage lower than the highest 
wage paid between January 1 and September 15, 1942, there is no- 
restriction that will require an adjustment? 

Mr. Snyder. I do not know, sir. 

Mr. VooRHis. I want to ask Mr. Snyder, going back to Mv. Walter's 
question, about the desperate need of housing for the middle-class and 
low-class people, whether 3^ou suggest any specific step be taken. You 
mentioned the possibility of fixing a ceiling on the cost at which 
housing could be sold. Is that in contemplation as a possible move? 

Mr. Snyder. No ; I said a while ago that we were not contemplating 
such a move. 

Mr. Voorhis. Do you support Mr. Bowles' proposal for additional 
cost control on housing? 

Mr. Sn^tjer. Mr. Bowles and I are in agreement that we are not 
going to ask for such legislation now. We are going to work out, 
under our present powers, to stimulate and encourage construction. 

Mr. Walter. Yes ; but don't you see, if I may be permitted to inter- 
rupt at this point, what is going to happen? Builders are going to 
build higher-priced houses because they are going to get a greater 


profit, and the very people that ought to be assisted are the last ones 
that are going to get any relief. 

Mr. Snyder. That is under constant study. During the winter 
months there is a -lull in the construction program. We are trying to 
get this whole program reviewed in a very careful manner, sir, and if 
it does develop — as I have stated on two or three occasions — if it does 
develop, we are going to have to ask for some further powers, and we 
will certainly do it. 

Mr. Walter. I suggest that you look at building permits in the 
Philadelphia area. They are all for houses in the $10,000 to $20,000 
categories. There is considerable demand for that type of house, and 
obviously the profits on that type of construction are greater than on 
a house that sells in the $5,000 to $10,000 class. You have a look at 
those building permits. 

Mr. Snyder. Do you think that Congress would consider a bill that 
would put a limitation on a price that a house could cost? Say that 
you could not build houses over a certain cost ? That is a question that 
comes up. It is one thing for us to be considering legislation, and 
another is we have to decide whether, if we bring it up here, you folks 
will give it real consideration. You are awfully busy people and we 
do not want to pile up a lot of things on your desks unless we feel that 
there is some feeling of reception up here for it. That has been very 
seriously considered across the board and has been debated and argued 
back and forth, and if we arrive at something that we think is feasible 
and that you folks would support us in, then we might consider doing 

Mr. Walter. Well, with your present controls over materials, would 
it not be possible to see that those materials are channeled into certain 
types of construction? 

Mr. Snyder. We can do the textiles that way and we can possibly 
do the same thing in other areas if that trend is positive there. I am 
going to check on this present idea that you have just advanced about 
the building permits, and we will take a cross section across the country 
and see just how that is working out. 
(Discussion off the record.) 

The Chairman. This committee was set up primarily to study the 
problems of postwar reconversion, with the idea of securing full em- 
ployment in that era, a continuation of the American system of free 
enterprise, and a stable economy based upon that. I think it is the 
duty of this committee and the duty of the Congress to see that noth- 
ing is done to prevent all of the hopes and aspirations and efforts of 
the Congress and the administration from bringing about that desired 
goal. I think the people of this country expect that and they have a 
right to obtain it. 

If there are no further questions of Mr, Snyder, I would like to ex- 
press the appreciation of the committee for your appearance here 
this morning, Mr. Snyder, and for the valuable information that 
you have given us. Thank you very much. 

Mr. Snyder. Thank you very much, gentlemen. 
( Wliereupon, at 11 : 45 a. m., an adjournment was taken until the fol- 
lowing day, Friday, November 9, 1945, at 10 : 30 a. m.) 



House of Representatives, 
Special Committee on Postwar 
Economic Policy and Planning, 

Washington^ D. C. 

The special committee met, pursuant to adjournment, at LO : 30 a. m., 
in room 1304 New House Office Building, Hon. William M. Colmei 
(chairman) presiding. 

Present : Representatives Colmer (chairman). Cooper, Walter, Zim- 
merman, Worley, Welch, and LeFevre. 

Also present : E. B. George, consultant. 

The Chairman. The committee will come to order. 

In furtherance of the hearing on the question of removal of wartime 
controls, we are very pleased this morning to have with us Mr. Robert 
R. Wason, president of Manning, Maxwell & Moore, Inc. He is ap- 
pearing as chairman of the reconversion council of the National 
Association of Manufacturers. 

Mr. Wason, we will be glad to hear from you, sir. And I believe 
you have a prepared statement. i 

Mr. Wason. Yes, sir. 

The Chairman. You may read it. And 'if you prefer, we will per- 
mit you to make your statement first and then ask you questions. 

Mr, Wason. I will be grateful to you for that privilege. 

The Chairman. Very well, sir. Without objection, that order of 
procedure will be followed. 


Mr. Wason, Mr. Chairman, we are grateful to you for hearing us. 

My name is Robert R. Wason. I am president of Manning, Maxwell 
& Moore, Inc. For 50 years my company has manufactured equipment 
for heavy industry. 

I appear as cliairman of the reconversion council of the National 
Association of Manufacturers. The reconversion council consists of 
the chairmen and vice chairmen of 29 separate connnittees dealing 
with 29 separate phases of reconversion. 

Wlien the war with Japan neared its end, this council was formed 
to give unity to the judgments of the different committees which had 
worked for 3 years. The result is a single program intended to ex- 
press the collective opinion of 14,000 manufacturers employing four 
out of five of all the working force in American manufacturing in- 

99579— 46— pt. 7 9 2203 


The companies in the National Association of Manufacturers are 
owned by about 3,000,000 shareholders, not including the equities 
and preferred i^ositions of insurance companies, savings banks, and 
endowed private institutions. 

By board resolution of the National Association of Manufacturers 
directors, I am authorized to state its concern about obstructions to 
reconversion imposed by Government action and inaction. 

The concern of the manufacturers whom I represent is not theoreti- 
cal but highly practical. They are on the receiving end of every 
governmental intervention in the economic scene, both long range and 
emergency. For that reason, they are qualified by direct and practical 
experience to say whether any particular Government intervention 
works for the public good, as it was proposed to do, or whether it 
defeats its own purpose when it comes into application. 

Eighteen months ago the Congress by resolution chartered your 
committee, Mr. Chairman, to assist in the restoration of balance to the 
Nation's postwar economy — between the areas of the country expanded 
during the war, between agriculture and industry, between small 
and large business, between available goods and available pilrchasing 
power. Now I appear to present the consolidated result of 3 years of 
thinking by 2,000 committeemen working on the many reconversion 
problems. Their findings are addressed to your committee. They are 
available to you in total upon request. 

Inasmuch as your conunittee has allowed 2 hours in which to hear 
the conclusions of our committees, my connnents will be in sentences 
instead of pages. With your permission, I will be followed by Mr. 
John Airey, president of King-Seeley Corp., Ann Arbor, Mich., who 
will talk on governmental controls, and Mr. Clarence Randall, vice 
president of Inland Steel Co., Chicago, 111., who will talk on labor 
relations. Because of the brief time allowed us, the chairmen of com- 
mittees on other reconversion subjects have not been asked to join us 
to appear here. 

Eoughly, as you know, the economy divides into four quarters. One 
quarter is manufacturing, one quarter is distribution, including trans- 
portation, one quarter is agriculture, the remaining quarter is the serv- 
ice occupations. The total working force of all creates and consumes 
one another's products and services, builds one another's tools, creates 
one another's employment. In total, it is the economic system. It is 
the public. 

The interests of industry are indivisible from the interests of dis- 
tribution and transportation, from agriculture and the service occu- 
pations. Except all quadrants of the economy prosper, none can 
long prosper separately. 

America has paid to learn that you cannot legislate prosperity any 
more than you can legislate happiness or good health. Legislation 
can only be supported by more legislation. 

Now, gentlemen, allow me to read and file with you the formal 
recommendations of the reconversion council of the National Associa- 
tion of Manufacturers : 

Recommendations of Reconvebsion Council Adopted by the NAM 
Board of Directors 

The reconversion council of the National Association of Manufacturers be- 
lieves the problem of i*econversion is the recovery of freedom. The vpay in 


which reconversion problems are solved may determine the future of American 

The elements of prosperity are now present in the Nation. 

If they can be released to pursue their natural course, the reconversion council 
of the National Association of Manufacturers is convinced that this country 
can have a long period of liigh-level production and employment. 

The council is equally sure that the prolongation of wartime regulations into 
peacetime can only impede the American people doing busiess with one another. 
Prosperity in the past has come to this country through the free exchange of 
goods and services. To persist in trying to produce for peace under wartime 
regulations, is to choke the forces of plenty and to forfeit the fruits of the fight 
we have won for freedom militarily. 

To reconvert is to rebuild and restore the production and distribution of peace- 
time goods. Whatever speeds reconvei-sion is good ; whatever impedes it is bad, 
whether the obstruction be by Government, by labor, or by management. 

Only mounting production of goods and services can supply workmen with 
satisfactory wages, industry with sufficient employment, and the Government 
with the necessary i-evenues to meet postwar expenses. 

We can have as much unemployment as the Government is willing to cause 
through restrictions, and as the people are willing to pay for in taxes and deficit 
financing, which is a deferred tax. Such Government payment for unemployment 
is a charge on the earnings of workers as well as on the savings of the thrifty. 

The council commends to the conscience of all citizens this simple question. 
Is the war over or is it not? If it is over, have we the courage to act on that 
faith? When will we recognize that the only possible way to resume the pros- 
perity of peacetime and the practice of individual freedom in America, is to 
go ahead and resume them? 

There can be no prospect of productive employment unless there is prospect 
of wages for employers in supplying the tools of production and organizing man- 
power and machinery to produce what customers want at prices they are willing 
to pay. 

The presence of profit for employers is the workers' only guaranty of employ- 
ment and wages. Profit is far more important to workers than to owners, how- 
ever falsely they are now persuaded to the contrary. 

Payments to corporate stockholders have been grossly exaggerated. The 
wages and salary payments to workers in America have since the turn of the 
century been 12 times as large as the dividend payments to corporate stock- 

The American system is based on freedom of contract between employer and 
employee, and on freedom from Government control over wages, prices, and 
output. American workmen are expected to get as much as they can in wages, 
and, for a century and a half, they have recognized that their welfare was 
based on increased production. Employers were expected to make as much 
profit as possible, subject to the rules of fair competition. Government was 
principally concerned in assuring free and fair competition — among workmen 
for jobs, and among employers for markets. 

Under this American system, our country far surpassed all others in produc- 
tion per man-hour in peacetime. In war, the American system of free enter- 
prise produced war materials that saved the world, whether in the hands of 
the Russians, the British, the Chinese, or our own forces. 

The reconversion council proposes that the American system of free employ- 
ment, free production, and free markets be reestablished and facilitated in 
America. Only the free-enterprise system of America is being asked to heal 
the war wounds of allies and enemies alike. 

So that the Nation may convert to freedom, the National Association of 
Manufacturers reconversion council recommends the following program: 


We advocate the continued and accelerated removal of all wartime controls. 
They serve only as a deterrent to free, full, competitive production in peace. 
WPB has shown commendable speed and efficiency in the realistic liquidation 
of many wartime controls and already the beneficial results are apparent in the 

All OPA price controls should be removed no later than February 15, 1946, 
which is 6 months after the surrender of Japan (August 14, 1945). 


Wage and salary stabilization by government should be eliminated. The 
determination of compensation in each plant should be promptly restored to 
management and the employees. 


Management accepts collective bargaining as the law of the land and the 
basis for industrial-labor relations. 

We advocate the reestablishment of free collective bargaining between 
employers and employees. 

The representation of labor should be of labor's own choosing, free from 
compulsion or coercion at all times. 

Compulsory payments by workers as a condition of securing or retaining em- 
ployment should be eliminated as impairing the freedom to work. 

Agreements should be faithfully kept by all parties, and suitable penalties 
provided for those who break them. 

Irresponsibility and bad faith provoke dissension, interfere with production 
and operate to the detriment of the public, of the responsible elements in labor 
and of those who have provided the factories and tools with which men work. 

It is to be hoped the current conference between labor and management may 
make some important contribution to the solution of this industrial-labor con- 
flict which is now so seriously impeding reconversion. 


Industry is eager to offer job opportunities to veterans, and asks the Congress 
to enact legislation promptly to clarify their rights. 


Reconstruction and reconversion call for vast sums of industrial capital. We 
are opposed to Government financing of industry and we advocate reliance on 
private capital for investment and industrial expansion. 

We believe that new capital, under private enterprise, should come from the 
retained earnings of industry and from the savings of individuals. 

Government should withdraw from the financing of peacetime industry. Such 
financing tends to Government domination and determination of the whole 


We recommend the elimination of the system of priorities and preferences 
contained in the Surplus Property Act so that it will operate to the benefit of 
the entire economy rather than to special groups. 

Government-owned plants and equipment should promptly be sold or leased 
to the highest bidder with the exception of those plants required for national 

The delays and uncertainties surrounding present procedures for the disposal 
of plants are not such as to encourage their prompt acquisition and operation by 
private industry. 

We further believe that the Government sliould not operate any of these plants 
or facilities in competition with private industry. 


We urge the disclosure to the public of all available information regarding 
the availability of raw materials, particularly the extent of present stock piles, 
Government commitments and future policy. 


We advocate the prompt filing of contract termination claims by industry and 
the prompt processing by the Government so as to expedite their settlement and 
speed reconversion and full peacetime production. In this connection we com- 
mend the public authorities for the efficient manner in which contract settlement 
has thus far been handled. 



We favor the discontinuance of any wartime subsidies still in existence, not 
later than the date of the termination of price control. 

No. 9 is the tax program for 1946 which has now become history. 
The law that was passed by the Congress assists and expedites re- 
conversion. I will not read it for those reasons. 


Assistance by the United States in the rehabilitation of the world economy 
is a proper factor in reconversion policy. But a sharp distinction should be 
drawn between gifts and loans. There is real danger that various agencies 
of the Federal Government may make advances on foreign accounts under 
the guise of loans, whereas these loans will be uncollectible and thus in reality 
become gifts. 

Wide extension of uncollectible Federal credit would create unhealthy and 
temporary economic activity in the United States. It would accentuate infla- 
tionary tendencies in domestic commodity prices and it would create interna- 
tional economic confusion when such credits are withdi-awn. Hence, we be- 
lieve that gifts should be labeled as such. 

We further believe that loans should not be undertaken by the Federal 
Government or its agencies but should be left to individuals and credit institu- 
tions which may be willing to assume the attendant risks. 

And finally, we believe that the Government should promptly withdraw from 
acting as agent in the importation or exportation of merchandise from abroad. 
Reconversion will be delayed and disturbed until foreign trade, foreign finance, 
and foreign shipping are again entrusted to individual enterprises. 

Government's peacetime contribution to foreign trade should be that of 
protecting American enterprise, particularly against discrimination and con- 
fiscation and against unfairness in foreign trade practices, such as exchange 
restrictions, blocked currencies, dumping, unified purchasing and the like. 

The Reconversion Council of NAM 

As VJ-day approached, the National Association of Manufacturers appointed 
a reconversion council to coordinate and consolidate the thinking of its various 
standing committees in the postwar field. The members of this council — in most 
cases — chairman and vice chairman in charge of the intei-ested committees 
are as follows : 

NAM Committee Affiliation 
Chairman : 

Robert R. Wason, president. Manning, Maxwell & Moore, Inc., New York, 
N. Y. ; advisory committee on economic policy. 
"Vice chairman : 

Enders M. Voo'rhees, chairman, finance. United States Steel Corp., New 
York, N. Y. ; industrial financing. 
Associates : 

John Airey, president, King-Seeley Corp., Ann Arbor, Mich. ; war control 

M. M. Anderson, vice president, AJuminum Co. of America, Pittsburgh, 

Pa. : labor-management. 
Melvin H. Baker, president, National Gypsum Co., Buffalo, N. Y. ; advisorljr 

committee on economic policy. 
Thomas J. Bannan. president, Western Gear Works, Seattle, Wash. ; dis- 
posal of Government-owned plants and materials. 
Howard E. Blood, president, Norge Division, Borg-Warner Corp., Detroit, 

jMich. ; distribution. 
William H. Brown, treasurer, American Viscose Corp., Wilmington, Del. ; 

Earl Bunting, president, O'Sullivan Rubber Co., Inc., Winchester, Va. ; 


Associates — Continued 

Clayton R. Burt, chairman of board, Pratt & Whitney Division, Niles-Be- 
ment-Pond Co., West Hartford, Conn.; disposal of Government-owned 
plants and materials. 

Ward M. Canaday, chairman, Willys-Overland Motors, Inc., Toledo, Ohio; 
war control termination. 

Clarence L. Collens, chairman, Reliance Electric & Engineering Co., Cleve- 
land, Ohio ; contract termination. 

Charles S. Davis, president, Borg-Warner Corp., Chicago, III. ; inflation con- 

H. L. Derby, president, American Cyanamid Sc Chemical Corp., New York, 
N. Y., veteran reemployment. 

Lewis A. Dibble, president. Eastern Malleable Iron Co., Naugatuck, Conn. ; 
Government spending. 

Roger E. Gay, president, Bristol Brass Corp., Bristol, Conn. ; contract ter- 

H. E. Humphreys, .Jr., chairman, finance cornmittee, U. S. Rubber Co., New 
York, N. Y. ; taxation. 

B. E. Hutchinson, chairman, finance committee, Chrysler Corp., Detroit, 
Mich. ; war production. 

Whipple .Jacobs, president, Belden Manufacturing Co., Chicago, 111. ; in- 
flation control. 

Nathaniel Leverone, chairman. Automatic Canteen Co. of America, Chi- 
cago, 111. ; civilian production resumption. 

R. S. Livingstone, vice president, Thompson Products, Inc., Cleveland, Ohio; 
industrial relations program. 

Hanford IMain, president, Loose-Wiles Bi.scuit Co., Long Island City, N. Y. ; 
industrial relations program. 

William H. Mooney, president, American Oak Leather Co., Cincinnati, Ohio ; 
tax administration. 

Charles E. Moore, president, Joshua Hendy Iron Works, San Francisco, Calif. ; 
world trade policy. 

Clarence B. Randall, vice president. Inland Steel Co., Chicago, 111. ; labor 

Herbert H. Schell, president, Sidney Blumenthal & Co., Inc., New York, 
N. Y. ; world trade policy. 

Richard J. Simmons, vice president, Birthman Electric Co., Chicago, 111. ; 
civilian-production resumption. 
Advisers : 

W. W. Cummberland, partner, Ladenburg, Thalmann & Co., New York, N. Y. ; 
advisory committee on economic policy. 

Bradford Bixby Smith, economist, United States Steel Corp., New York, 
N. Y. ; advisory committee on economic policy. 
Their task was completed with the drafting of these attached recommenda- 
tions which were approved by the board of directors of the NAM. 

Mr. Wason. That concludes our formal recommendations. 

May I now add that, up to date, the reconversion progress industry 
has made is greater than all Washington predictions. The unem- 
ployed totals are lower than Government forecasts. The flow of some 
goods into consumers' hands is months ahead of Government 

But the reconversion prospect is not good. It can be assisted by the 
prompt recommendations of your committee. 

Many consumer's items are not being produced. They canndt be 
produced under present OPA ceilings. 

Many consumer items are choked in the distribution channels. 
They cannot be forced through except OPA restrictions be relaxed 
or removed. 

Important shortages of labor exist in the presence of released labor 
supply. Thousands of employees who worked the war years without 


important interruption are vacationing on unemployment-insurance 
income. No one can blame them, nor does industry, for accepting 
these moneys which the law provides. 

Labor demands that war overtime rates be continued in peacetime 
wages. Strikes take place in various parts of the Nation. Govern- 
mental agencies assist rather than retard the agitation. 

Conversion progress, therefore, proceeds at the slow pace required 
by OPA controls and labor agitation. 

Mr. John Airey, president of the King-Seeley Co., Ann Arbor, 
Mich., will discuss war control termination recommendations of our 
reconversion council in detail. 

Mr. Airey. 

The Chairman. Before you do, I think in the interest of orderly 
procedure it might be well if we exercised our prerogatives now, to ask 
you some questions. Don't you think that would be better ? 

Mr. Wason. It is entirely agreeable. 

The Chairman. Mr. Cooper? 

Mr. Cooper. No questions. • 

The Chairman. Mr. Walter. 

Mr. Walter. Yes. 

I was very much interested in your statement concerning Govern- 
ment controls. These controls, of course, are apparent to everyone. 
Don't you think that if all controls are removed immediately, we will 
find our selves in an inflationary spiral ? 

Mr. Wason. Mr. Walter, I would be happy to attempt an answer 
to that question. Mr. Airey will develop the subject of Government 
controls in some detail. The answer that I would like to offer, if I 
may, is this : We have debated whether the control on rents should be 
continued. It is our feeling that if any controls are to be continued 
that should be the only one, but we are in a situation where the OPA 
prevents production, and only production can solve our problems. 
The specific instances of that are well known throughout the 14,000 
members of our organization, and it would be senseless for me to at- 
tempt to take up specifice instances. Recently Mr. Bowles, the head of 
that bureau, made the statement, as I understand it, that industry was 
not making requests for price increases. But industry has learned 
over a period of many months of dealing with that particular bureau 
that the run-around they get is so circuitous and so misleading and 
so misinformative in the various levels of the OPA organization that it 
is senseless to devote the time of top executives trying to get increases 
that finally are impossible. 

Mr. Walter. What manufacturers you know of suffered losses be- 
cause of their inability to get a price increase. 

Mr. Wason. I would say that many products that should have come 
onto the market have not come onto the market because people in 
industry are not willing to deal with the OPA. I am well aware that 
new prices can be established on new products, but in the instances 
where the new products are modifications or improvements or other 
modernization of old products they feel that they would be better 
off to wait 6 months, 1 year, or 2 years, than to attempt to go through 
the machinery of the OPA. 



Mr. Walter. Then, as I understand your statement, or your atti- 
tude, you would not continue the War Powers Act but feel that legis- 
lation ought to be enacted that would create an agency dealing only 
with rents. 

Mr. Wasox. Well, the stand of our association is that all controls 
including rents, should be removed as of, and not later than Feb- 
ruary 15. The statement about rents is part of the discussions among 
us, and since I am speaking here under authorization from the board 
of directors of the National Association of Manufacturers, I do not 
want to enter my own personal opinion. 

Mr. Walter. You stated that agreements with respect to industrial 
relations should be faithfully kept by all parties and suitable penalties 
provided for those who break them. Have you an}^ suggestions as to 
how to deal with that question ? 

Mr. Wasok. Mr. Randall will develop that in considerable detail, 
answering your question specifically, Mr. Walter, if you please. 

JNIr. Walter. Thank you very much. 

The Chairincax. Mr. LeFevi^. 

Mr. LeFevre. No, sir. 

The Chairman. Mr. Zimmerman? 

Mr. Zimmerman. Well, speaking of rent controls, you spoke of a 
lack of production. Do you refer to housing ? 

Mr. Wason. My reference was principally to the manufacturing 
industry, which, of course, produces many items entering into 
housing, but there is a lack of production of housing and there has 
been for much of the past 15 years. 

Mr. Zimmerman. Well, of course, during the war you know lumber 
and building material have been in very short supply. 

Mr. Wason. Yes, sir, 

INIr. Zimmerman. And I think you are aware of the fact that it 
would take a long time for our lumber supply to catch up. 
. Mr. Wason, Yes, sir. 

]\Ir. Zimmerman. Maybe some controls would be necessary in order 
to keep the public from being imposed upon. Don't you think that is 

Mr. Wason, Your question explains my statement on the subject of 
rents, that is, that there might well be control of rents and no controls 
other than controls of rents. 

Mr. Zimmerman. But of course we all know that this housing situ- 
ation is rather acute and is going to be for some time to come. We 
almost depleted our forests in order to meet a war emergency. 

Mr. Wason. Yes, sir. 

Mr. Zimmerman. To quote the famous poem, "Only God can make 
a tree." Ifc takes time to grow a tree. Maybe the controls should be 
continued a little while. I agree with you that controls should be 
removed just as speedily as possible to let us get back to normal. 

Mr. Wason. Yes, sir. 

The Chairman. Anything further? 

]\Ir. Zimmerman. That is all. 

The Chairman. In that connection, Mr. Wason, I might observe 


that I think this committee which has been working on tliis problem 
of removal of wartime controls for some time is definitely in accord 
Avith your suggestion that they should be removed at the earliest pos- 
sible moment. 

Now, the question, of course, is what is that moment? Wlien does 
that moment arrive? We are all in accord, I am sure, with that 
thought, but what we are trying to work out is the proper time to 
remove these controls. Some of us recently returned from a rather 
extended mission to Europe and the conditions we observed there fiist- 
liand with reference to inflation caused us all to stop and think on 
that subject. When you see a pair of wooden-soled shoes selling for 
$80, it makes you do a little stopping, looking, and listening, as well 
as thinking. We want to get rid of these controls, and I agree with 
you, sir, that there should be a definite period — and I personally have 
emphasized that — beyond wdiich these controls cannot go. We all 
recognize the danger of governmental agencies, bureaucrats if you 
want to use that term, desiring to perpetuate controls. But in the 
interest of the i)eople of the country and the welfare of tlie Nation, 
we feel that that is a subject requiring considerable thought and con- 

Mr. Wason. May I comment? The situation in Europe which you 
say and about which we have read in the press of course is tragic 
beyond description. Tlie supply of money, however, in the United 
States has multiplied times 6 since 1933, and our great anxiety is to 
continue the great production that took place in the war, which is 
the only offset available in our economy to establish balance against 
the money outstanding. Wage increases do not do it. It requires pro- 
duction. And our recommendation on price control eliminations is 
solely to assist the forces of production to create goods. 

The Chairman. I can find no fault with that statement, sir. That 
is one of the objectives of this committee, to bring about full pro- 
duction and employment. 

Mr. Walter. May I interrupt at that point? How do you recon- 
cile what you say with the recommendation that the Government 
should withdraw from the financing of peacetime industry, when 
most of the financing during the wartime was by the Government? 

Mr. Wason. The financing which the Government undertook during 
the war — and it had undertaken since before the war, as we all know — 
was for the extraordinary requirement imposed on us by the enemy, 
and the Government asked industry to assist. The Government gave 
industry amortization of its facilities in many instances to assist the 
investment of private money. 

Mr. Walter. Due entirely to the fact that no private banking insti- 
tution, because of the law, has a right to finance a business to the 
extent that its needs required. 

Mr. Wason. There is no private institution in America which, under 
the law, could conceivably finance the Consolidated Vultee or the ex- 
pansion of Douglas or the expansion of North American or others, 
or the construction of tank plants, and neither the airplanes which 
were financed by the Government, nor the tanks which were financed 
by the Government, which were not items entering into commercial 
or industrial use ; they were military. 


Mr. Walter. Those companies that produced those things we hope 
will produce things during peacetime, which, of course, will require 
the same kind of financing. 

Mr. Wason. May I comment on that statement? 

Mr. Walter. Yes. 

Mr. Zimmerman. May I ask a question before he does ? 

This committee brought out a bill, you know, for the termination 
of war contracts, and that bill provided for loans to companies to 
reconvert and get back into peacetime production. Did you agree 
with that report of this committee and the legislation that was passed 
following its recommendation? 

INIr. Wason. That was a helpful act. 

Mr. Zimmerman. You were in favor of that Government financing, 
weren't you ? 

Mr. Wason. It was of great value to many corporations, particu- 
lai-ly those that had developed during the war. 

Mr. Zimmerman. Now, is that in opposition to what you have just 
said ? 

Mr. Wason. May I offer a comment to Mr. Walter? 

Mr. Zimmerman. Well, I wanted to give you those facts, in order 
that you might answer that question. 

Mr. Wason. IMay I offer a comment to Mr. Walter in that connection 
wh'ch is in part but not in total answer to your question? 

Mr. Walter. Of course, it would be ideal — being connected with 
several banks, as I am — if private banking institutions were in a posi- 
tion where they could meet all of the demands. But I may say that 
it is utterly impossible because you come to the point where your 
surplus and undivided profits are not sufficient to justify or make it 
possible for a bank to make a loan. Then, immediately, the prospec- 
tive borrower is confronted with one of two things : Either he has to 
go to one of the great banking institutions in New York and perhaps 
they do it — in many instances they can — or he must turn to the 

Mr. Wason. May I take up your first question first? 

There are tremendous war plants idle. They are filled with tools 
of great value. Many corporations, including our own small com- 
pany, would like to buy some of those tools. Months pass. Trip 
after trip is made by plane or train to the cities in which these plants 
are located in an effort to obtain those tools. But after months of 
effort they are still unreleasable to the industries that could utilize 

The Chairman. Do you refer there to Government-owned tools? 
Mr. Wason. Ye»^sir, Government-owned tools in Government-built 

The Chairman. I am sure, from my point of view at least, that 
you are correct in that statement, unfortunately, because we here on 
the Hill are experiencing the receipt of many complaints along the 
same line in the disposal of our surplus property. I think the indict- 
ment is well made on that point. 

Do you have something, Mr. Worley ? 


Mr. WoRLEY. On the whole your remarks are very sound. I hope 
all business agrees with you in practice what you have stated in your 
recommendations. You ask one question in here: Is the war over? 
I think everybody agrees the shooting has stopped, but don't you 
agree that we are sitting right now on a powder keg of inflation? 
So far as our economy is concerned, the war is not over because of 
the conditions which the war has brought about. I think it has 
grown progressively worse since the war ended. Do you agree with 

Mr. Wason. Yes, sir. 

Mr. WoRLEY. All right. You come here and recommend that all 
these price controls be released at a given, fixed arbitrary date, within 
6 months after cessation of hostilities. 

]\Ir. Wason. Yes, sir. 

Mr. WoRLEY. I can't believe that you have given a great deal of 
sound study to that position, have you ? 

Mr. Wason. Yes, sir. 

Mr. WoRLEY. We had Mr. Snyder before this committee yesterday 
and he assured us positively that WPB and all Government agencies 
are removing controls as fast as they can. Do you agree with that? 

Mr. Wason. I do not think that is true of OPA. We think that the 
War Production Board 

Mr. WoRLEY. Do you agree with Mr. Snyder's statement that the 
WPB is removing them as fast as they can? 

Mr. Wason. No ; I do not agree with that. 

Mr. WoRLEY. All right. We had Mr. Bowles before the Commit- 
tee on Agriculture and before this committee. He made the state- 
ment, and has made it repeatedly, that just as soon as the supply of a 
given commodity reaches the point of demand, price controls are 
removed. Do you agree that he has followed out that policy? 

Mr. Wason. No. I think he has choked production so that supply 
can't meet the demand with the speed that is needed by the economy 
to get off this volcano on which we sit. 

^Ir. WoRLEY. Suppose you turn loose all controls, say today, what 
would happen ? 

Mr. Wason. We have no recommendation that they be turned off 

Mr. WoRLEY. What changes will come about betATeen now and 
February 15 which will change your opinion as of today? What do 
you expect to happen in the meantime ? 

Mr. Wason. We think there will be a continued struggle on the 
part of industry to get into manufacturing of peacetime goodc under 
continued restrictions imposed by the OPA and that some progress 
will be made. It will be costly, and it will be without profit, and em- 
ployment will suffer seriously as the result of the failure of industry to 
get into production. We have a background of unbought goods that 
goes back to 1930. In 1935, Colonel Leonard Ayers estimated that the 
backlog of unbought goods was unj^aralleled in American history. 
Now, what is the backlog that has accumulated in five further years 
of depression and much of 4 years of war? The opportunity avail- 
able for the use of this tremendous industrial mechanism, financed 


in part by Government and in part by industry, and all of us working 
together, is being restricted, and it is onr belief— and I began by 
saying that I come here as the representative of 14,000 manufacturers 
through their board of directors who, by foi-mal resolution, have 
authorized me to make the statements contained in this document. It 
is not a personal opinion I am attempting to express. 

Mr. WoRLEY. Do you suppose all those 14,000 have sat down and 
listed on the one hand the supply of a given commodity and over here 
(indicating) tlie demand ? Do you think they are sufficiently informed 
to express the opinion that you expressed ? 

Mr. Wason. Yes, sir; I believe that they are. They have been 
supported by a research department which has studied this subject 
extensively, and the director of that research department is in this 
room and available to answer the questions that you may ask: Did 
he do it or did he not ? 

The Chaikman. If there is nothing further, then we will hear from 
Mr. Airey. 

Mr. Wason. Thank you very much, gentlemen. 

The Chairman. Thank you very much, Mr. Wason, for a very 
splendid statement. 


The CirAiRMAN. Will you identify yourself, please, for the record? 

Mr. Airey. Mr. Chairman and gentlemen, my name is John Airey. 
I am president of the King-Seeley Corp., of Ann Arbor, Mich., a cor- 
poration which started from zero in the manufacture of automobile 
parts in 1922. I appear as chairman of the war-controls committee 
of the National Association of Manufacturers, in support of the rec- 
ommendations of its reconversion council. 

Government controls were necessary in wartime for many sound 
reasons. They were accepted by the Nation as a price to be paid for 
fighting a total war to victorious. conclusion. 

With the end of the war, some controls were eliminated — with com- 
mendable promptness — notably manpower and materials for civilian 
production. But a needless prolongation of other controls during 
peacetime — notably the price controls — can serve only as a deterrent 
to production and, therefore, to employment. 

Long before Germany was defeated, both Government and manage- 
ment directed much thought to the anticipated problems of recon- 
version and employment. Speculation over the speed with which in- 
dustry would be able to reconvert to civilian production led generally 
to the conclusion that one of the greatest difficulties would be con- 
fronted in the physical reconversion of industrial facilities; i. e. in 
retooling, in rearrangement of production and assembly lines, in 
clearing plants of Government-owned materials, and in winding up 
quickly contractual dealings with the Government. 

The great progress made since VJ-day in getting plants ready to 
produce peacetime goods demonstrates that this concern was un- 
founded. Reports from businessmen over the country that industry 
has, with few exceptions, solved the problem of physical reconversion 


are borne out by a recent survey made by the Chairman of the War 
Production Board. 

A lar<?e sliare of the credit for this progress may be laid at the door- 
step of WPB itself and the agencies carrying out the policies of the 
Office of Contract Settlement. 

WPB has given great impetus to the resumption of civilian produc- 
tion by getting out of the picture. WPB officials on numerous occa- 
sions stated that production controls would not be continued for the 
sake of directing the economy. 

The policies laid down by the Office of Contract Settlement, based 
on the sound provisions of tlie Contract Settlement Act of 1944, have 
paved the way for prompt settlement of industry's claims against the 
Government arising out of terminated war contracts. Contracting 
agencies have demonstrated their desire to leave no obstacles in the 
way of industrial reconversion by removing in short time Government- 
owned equipment and materials from contractors' plants. 

It is no coincidence that great progress in reconversion has been 
made in those areas where Government has withdrawn controls or is 
actively removing obstacles to plant reconversion. If WPB had main- 
tained its controls in an effort to decide how much material and pro- 
duction each industry would be allowed, physical reconversion would 
have been stalemated. Because restrictions were removed, plants now 
are prepared with few exceptions to achieve that great volume of 
production necessary to provide consumers with goods and labor with 

Despite the progress made in preparing plants for peacetime pro- 
duction, their actual operation is being seriously delayed through the 
cumbersomeness of price control administration and the uncertainty 
of its final termination date. Some manufacturers cannot afford to 
maximize operations already started because of the present uncertainty 
of profits or the extent of losses. Such uncertainty is still greater in 
planning expansion. 

Industry finds itself caught in a squeeze resulting from the rise in 
costs of production and the restrictions upon prices. According to the 
Bureau of Labor Statistics, the price which manufacturers now have 
to pay for raw materials is approximately 26 percent above the price 
level "at the time of Pearl Harbor, while labor, costs, as measured by 
hourly earnings, have increased 31 percent. On the other hand, during 
the time since Pearl Harbor, factory prices for manufactured com- 
modities have gone up only 8 percent. This discrepancy clearly re- 
veals the extent of the price squeeze. These figures also belie the claims 
of OPA that it has protected the manufacturer by stabilizing the cost 
of his materials. 

The profit squeeze is particularly dangerous for small business. 
Large and well-established businesses may have enough capital to tide 
them over periods of losses, but small businesses which must pay as 
they go are dependent upon day-to-day profitable operations for their 
very existence. To deny a reasonable chance for profit to them is to 
condemn them to bankruptcy. 

Even if price control were continued indefinitely, it would be admin- 
istratively impossible to maintain the necessary continuous reviews 
and readjustments of prices in the light of changing costs. OPA has 
already demonstrated an inability to review promptly requests for 
price adjustment. Statistics compiled by the Brookings Institution 



from OPA records reveal serious delays. From January 1, 1943, 
through September 1944, stove producers filed 78 applications for ad- 
justments ill ceiling prices. Only 20 percent of the applications were 
decided within a month — 50 percent more took up to 3 months — and 
the remaining 30 percent took up to 9 months. Here, then, is striking 
evidence of the impracticability of requiring administrative review of 
price ceilings in the face of constantly fluctuating costs. Now that the 
war's end makes increased civilian production possible, the adminis- 
trative problem is increased enormously. 

This administrative log- jam is increased by the failure of many 
manufacturers to seek needed price adjustment during the war on 
thousands of civilian items, because such losses were carried by war 
profits. The necessary time of the technicians required for this could 
be ill-spared from war effort — and such relief would not affect the 
over-all profit figure. 

A price squeeze pattern would evolve a series of continuing price 
adjustments, due to the inter-relation of suppliers and final pro- 
ducers — which pattern would cause a succession of small increases as 
opposed to one major increase. Successive price increases relatively 
close together in timing, although small in magnitude, would be deadly 
as they would increase forward buying, A single increase equal to 
the sum of such successive increases is harmless by comparison. 

Therefore, in the interests of securing promptly the large volume of 
goods which the country needs and the high level of employment which 
we all want, the NAM reconversion council recommends that price 
control be eliminated not later than February 15, 1946, which is 6 
months after the surrender of Japan. 

To continue price control longer is to invite prolongation of the 
present uncertainty and lag in the growth and development of civilian 

In the meantime, however, OPA should revise its reconversion price 
policy so that increased costs will be recognized and manufacturers 
permitted a chance to make the profit earned under competitive con- 
ditions in some prewar base period such as 1939 or 1940. The more 
quickly we can get back to reliance on competitive forces the higher 
will be production and hence the standard of living. 

A recent report by the House Select Committee to Investigate Exec- 
utive Agencies clearly brought out the retading effect of OPA policies. 
One experienced manufacturer of electric irons was not allowed to 
sell at $3, but a newcomer, under a formula, unhandicapped by past 
practice, could sell at $5.50. 

It is a fact that two foundries by swapping business, each thereby 
making a product new to it, may enjoy a higher ceiling based on for- 
mula as opposed to the limitation of its own historical pricing. This 
is really unsound manufacturing and decreases total output. 

Coupled with price control as a deterrent to production is the re- 
luctance of the Government to withdraw completely from wage and 
salary determination. In peacetime, wages should be determined by 
uninfluenced negotiation between management and employees. The 
NAM reconversion council applauds the following statement in Presi- 
dent Tnunan's recent wage-price speech recognizing this principle: 

I am convinced that we nuist get away as quickly as possible from Government 
controls, and that we must get back to the free operation of our competitive 


system. Where wages are concerned, this means that we must get back to free 
and fair collective bargaining. 

However, the effect of the President's policy of encouraging wage 
increases while keeping the lid on prices is to maintain Government 
intrusion in the wage determining process. 

The encouragement by the Government of wage increases, while at 
the same time adhering to the policy of strict price control is an 
inconsistency which can only further the delay already experienced 
in reconversion. Wages are the most important costs of production 
and therefore the most important element in prices. No matter how 
sincere Government officials may be in attempting to divorce the two 
interrelated factors of wages and prices, it is axiomatic that to in- 
crease wages is to increase costs of production. 

This does not mean that higher wages cannot be granted; wages 
can rise to the extent to which the public is willing to pay for the in- 
creased costs of products in higher prices. Or the effect of wage in- 
creases can be minimized through greater and greater productivity so 
that costs spread less strongly or not at all in prices. But at a time 
when greater productivity has not been secured, the Government only 
creates confusion in attempting to establish an artificial relationship 
between wages and prices. 

By encouraging wage increases, the Government is making it ex- 
tremely difficult for OPA to maintain price stabilization. The most 
that OPA can expect to accomplish is to delay price advances by delays 
in granting price relief, and this practice will deter much needed ex- 
pansion capital. On the other hand, if OPA continues to apply the 
profit squeeze, it must recognize that the profit squeeze has a limitation 
beyond which production growth can not be maintained. 

The Government's objective in the reconversion period — to avoid 
both inflation and deflation — can be achieved through production. The 
Price Administrator himself has proclaimed that "the way to answer 
inflationary threats is with production." Only through an abundance 
of commodities can the reservoir of excess dollars be soaked up. Only 
through increased production can labor have more. 

The achievement of production is being delayed through the con- 
tinuation of Government controls over prices and wages. The elimi- 
nation of these controls will open the gates to an avalanche of goods 
which our factories are now preparing to produce. 

The most pressing need is to know, at the present time, when price 
control will be eliminated. That is the real green light to reconversion 
and prosperity and jobs. 

The Chairman. Thank you very much, Mr. Airey, for your very 
splendid statement. 

Mr. Cooper, do you have some questions ? 

Mr. Cooper. No questions. 

The Chairman. Mr. LeFevre? 

Mr. LeFevre. No. 

The Chairman. Mr. Walter ? 

Mr. Walter. I am afraid that you are not mindful of the fact that 
there will be a period, or that there is a period when the manufacturers 
can't meet the terrific pressure of the present buying power. 

Mr. AiREY. Yes, I am fully aware of that. Might I add, Mr. Walter, 
that we are conscious of that and that is why we want to get our supply 
maximized as rapidly as possible. 


Mr. Walter. I think everybody wants that, but don't you feel that 
until the time arrives when there is an adequate supply throughout, 
there ought to be controls ? 

Mr. AiEEY. No, I do not feel that way. I think that when a balance 
between suppl}^ and demand is in the visible future — by that I mean 
a few months away — I think Ave can make the most speed by then 
taking off the controls. We are not calling for them off right now. 
By so doing, we shall make the most speed in bringing about that con- 
dition which we all desire. 

Mr. Walter. I feel this way about it. If the manufacturers of this 
country, who after all supply the jobs, knew when all governmental 
controls would be removed, it would act as a very great stimulant. 

Mr. AiREY. Oh, absolutely, absolutely. 

Mr. Walter. But then the question is, what date should they be re- 
moved, when should they be removed? 

Mr. AiREY. Well, our date is February 15. 

Mr. Walter. Did you reach into the air far that? 

Mr. Airey. No. we did not. It is a rather long story to tell you how 
we got that, but I might attempt it as briefly as I can. 

The Chairman. That will be very interesting. 

Mr. Walter. That is what we want to know. 

Mr. Atrey. To do this, it is necessary to give you the thought pat- 
tern developed in our war control termination committee and to 
follow its changes. In starting out, we studied why it was neces- 
sary to have price control at all. It was not because of the technical 
fact that the countiy was in a state of war. Price controls were 
not necessary in the time of the Mexican or Spanish Wars. We did 
not even have price control in World War I. The cause lay in the 
fact that the strictly war content of the economy — amnnmition, guns, 
tanks, planes, and ships — became greater than ever before and got 
to the point where it pushed out civilian production. Then, there 
was a shortage of supply, and so prices would rise continuously unless 
controlled; wages similarly. We wondered if this shortage could 
be measured. Technically, I did not think it could. The research 
department of the NAM explored all the data furnished by the De- 
partment of Commerce, but could not find what we were after. 
Finally, they uncovered the War Production Board's munition index. 
This was substantially the complement to the object of our search. 

This index gave munition activity from the begining of 1940 — 
not in dollar values, because dollars have a habit of being phoney at 
times in war work — but in physical units. It is an interesting index 
and is based on 100 average for the year 1943. After Pearl Harbor 
it climbs very steeply and gives a feel of how quickly we converted. 

Now reconversion could and should be a simple problem compared 
to conversion. In converting, we had to manufacture products in 
which we had no experience and, more important, had to design 
and construct special tools before we could start. In reconversion, 
by contrast, we are going back to our former seasoned activities with 
the special tools in storage and ready to use. 

We decided that when some certain vacuum in the production of 
civilian goods existed, that is, facilities were no longer used for the 
war content of the economy, then 6 months thereafter would be a big 
plenty to get production rolling. My own opinion was that 3 months 


would be enough for all except a few segments of the economy, and 
I still think that. 

Mr. Walter. Did you consider the patriotism of the people as a 
factor ? 

Mr. AiREY. Not exactly. We considered that the war work fever 
would be over, continuity of work might suffer and so we stretched it to 
6 months after some certain vacuum developed for the production of 
civilian goods. The tliinking on timing went something like this: 
The index I have briefly described — well, we took a look at February 
1942. I come from Michigan where the automobile is the main activ- 
ity. You gentlemen may remember that February 1942 was the last 
full month of automobile production; similarly, for refrigerators, 
radios, washing machines, and so forth. 

In February 1942, the civilian economy of this country was very, 
very healthy in spite of the fact that we were producing quite a little 
war work by that time. In fact, I think the civilian economy at that 
time was at an all time peak historically. The munition index in this 
period was around 35. In otlier words, we were producing munitions 
at the rate of 35, and in addition, had a very healthy civilian economy. 
The next month much civilian production was shopped off, including 
my company's activity, automobile parts. 

It may interest you to know that this WPB munition index which 
is very little known and not appreciated as it should be, shows that we 
reached the top in late 1943, which startles a lot of people, including 
myself. The reason is that the building and equipping of the "Wil- 
low Euns" and similar projects tapered off. 

The index peak was 117 and was 105 at the time of VE-day, I think. 
Now, all this which I have told you so far was thought through before 
VE-day, The analysis continued from month to month in our war 
control termination committee. After VE-day we had to look forward 
further and our thinlving pattern ran about like this : 

AVe did not foresee that Japan would be licked so quickly. In fact, 
there was one school of thought that believed it would take 2 or 3 
years to lick Japan, so we had to take that into consideration. Now, 
if it did take 2 or 3 years, it seemed to us it would be because of 
continued scattered guerilla fighting in which the military content 
of the economy might be low — in fact, it might go back to that of 
early 1942 or less. 

If this happened, there was no useful purpose to be served in 
keeping controls on until the technical ending of the war — in fact 
they would be a deterrent to reconversion. 

So, we wanted to get some method, some specification, which in- 
stead of tying the removal of economic controls to an event, like 
the end of the war, which is a technical thing, w^ould tie it into the 
economic condition of the country. 

Just prior to VJ-day, our picture was this : If and when the WPB 
nmnition index comes down to 35, that is, about the value of Febru- 
ary 1942, there will be enough unused facilities for producing civilian 
goods to give a very healthy civilian economy, specifically that of 
February and ]March 1942. "However, we would have to reconvert. 
Now give industry 6 months after the index falls to 35 and there 
is no excuse after" that for control continuation, unless we have, all 
of us, done something ^ ery, very foolish in the meantime. 

99579 — 46 — pt. 7 10 



Now, VJ came on us overnight. The munition index, I think, was 
around 100 before VJ-day, but, of course, it fell like a plummet. 
Specifically, in my own company, munition items fell about 95 percent 
in, I would say, about 24 hours. I did not like it, as a manufacturer, 
but as a citizen and a taxpayer, I quite admired that speed. And 
that is pretty much what happened around the country. 

So that is the story, Mr. Chairman and gentlemen, of how we hap- 
pened to specify 6 months after the termination of the war. It looks 
as if we picked it out of the air, but we did not, neither the interval 
of 6 months nor the event of VJ-day. 

The Chairman. Very interesting. 

Mr. LeFevre. Mr. Airey, I do not know whether you studied the 
lumber production, but do you believe that by February 15 the supply 
of lumber will take care of the demand ? 

Mr. Airey. I don't know much about lumber, Mr. LeFevre. I 
think there are many things where the supply will not take care of 
the demand by February lb. 

Mr. LeFe-s-re. That is the reason why I wondered at the statement 
that all controls should be taken off by February 15. 

Mr. Airey. The only reservation I have is the rent situation. 

Mr. Worley. ^Yhy do you except that? What is different about 

Mr. Airey. Again this is an individual rather than a reconversion 
council opinion, I personally think there is a very good reason for 
it. I am speaking of rents of old houses only, not of new houses, 
because that does not disturb production; it does not interfere with 
the act of producing anything new. It merely means that, if I rent 
an old house, then my rent stays down a little longer. 

Mr. Worley. Why do you advocate rent controls but not other 
price controls ? 

Mr. Airey. Because of the shortage, and the fact that we want to 
maximize production. 

Mr. Worley. Aren't other things in short supply ? " What about 
automobiles, radios and refrigerators? Wliy except one without 
excepting the others when they are all scarce or short ? 

Mr. Airey. I would not follow with that, Mr. Worley, at all. I 
draw your attention to the fact that in the lowest income bracket 
rent is a much bigger factor of total expenditure than is anything 

Mr. Worley. Well, all things that price controls are now on are 
short. The reason for the controls is because they are short, as I 
understand you found in your study. As soon as the production 
fell below that healthiest normal in 1942, you decided price controls 
would be necessary for those short products. Is that correct, Mr. 
Airey ? 

Mr. Airey. Yes. 

Mr. Worley. All right, they are still short. 

Mr. Airey. Yes ; they are still short, but provided in a few months 
ahead there is a fighting chance to produce a balance, I say we shall 
get the balance at an earlier date in a free market, and I would like to 
enlarge on that. 

, As long as price controls continue, many keymen spend time in 
compiling cost data and in contacting OPA. The time taken by this 


activity is appreciated only by men involved. I can speak feelingly on 
(his from my own company's standpoint. The time of such men is 
needed in removing the log jams of production. 

Take big business, although my own company is small. Big business 
can and does take a long view of its ultimate competitive position. It 
must or it is not intelligently acquisitive. 

Smaller business, such as my own company, which feeds supplies 
of parts to bigger business, must follow suit either due to pressure or 
again because of intelligent acquisitiveness. We are not looking for 
profit this month or next, nor until we get volume reestablished. 

There is not going to be the hogging that some people are theo- 
retically afraid of. 

Mr. Walter. That is the one thing OPA does not seem to under- 
stand, that you can price yourself out of business. 

Mr. AiREY. I know they don't. 

Mr. Walter. That is one thing Mr. Bowles just does not seem to 

Mr. WoRLEY. Let me ask you this: The tax bill passed a week or 
so ago repealed the excess-profits tax. What efi'ect will that have on 
your reconversion process? 

Mr. AiREY. That is a very interesting question. I am glad to answer 
it, speaking for our industry — automobiles. We just laugh at the 
removal of the excess-profits tax. Mind you, it is a good thing to do 
and I am not disapproving of it. I would be delighted to pay excess- 
profits tax in this current fiscal year. In other words, we do not expect 
to make that amount of profit. Our volume fell down from over 
$1,000,000 a month to a quarter of a million, just like that [illustrating] 
to a small volume of peacetime products. Now we are climbing up. 
We are operating on inadequately low prices — parts for the automobile 
industry — but figure that some solution is going to be found and we 
are not squawking. 

Mr. WoRLEY. Have you noticed any tendency on the part of any 
manufacturers to defer production until next year in order to take 
advantage of the excess-profits repeal? 

Mr. AiREY. I hear that said, but I do not believe it. I suppose 
anything can happen in a sprinkling of cases, but I feel that a manu- 
facturer is not intelligently self-interested — I will qualify that in a 
moment — who does not produce all he can. I know that we are doing 
it, even though the prices are unsatisfactory, because if you produce 
more, you do lose a little less. In other words, there is such a thing 
as fixed overhead, whicn in a highly integrated industry is very heavy. 
We may sell an article at a price which is an over-all loss beyond am- 
biguity, but nevertheless we lose just a little more if we fail to produce 
it. That is speaking for the high-production type industry ; it is hot 
true for all types. 

The Chairman. I wonder if I might just interject here — wouldn't 
a manufacturer make himself liable to losses in the future by such a 
selfish policy in that he might lose his trade if he failed to produce now ? 

Mr. AiREY. Positively. My company would be severely harmed. 
The Ford Motor Co. is our biggest customer. If we refused to produce, 
it would take 10 years to live it down. 

Mr. WoRLEY. I have one further question, on page 5 

Mr. AiREY. May I make another comment ? Take the small manu- 
facturer — my own activity is of medium size — the newcomer is the 


man we have got to watch in the coming era. On him depends the 
industrial vigor of the future. The newcomer has to make money 
month by month, and that is a serious thing. He cannot do what the 
large or medium operator can do — take a long look at the horizon G or 
12 months ahead and say, "Well, we will weather the storm." 

The way we are now moving with the price structure is this: If you 
are in trouble in month's time, you can come and ask for relief. 
Now comes a lot of detail work by keymen, badly needed constructively, 
and more time elapsing. 

Let's look at that 6 months or more if you are small and in trouble. 
The manager of a business, if he is making a proiit, or even if lie only 
thinks he is making a profit, say next month or the month after, will 
probably spend or commit that profit in advance because of the demand 
he can see around liim. If he has, or can see a profit, he will also use 
bank credit in order to increase inventory and maybe a little plant 
expansion, thereby increasing his production. 

If, on the other hand, profits are not there, or if he is losing, he knows 
that he has to meet the pay roll and so will hold back. Now that is 
nothing but plain common sense to a man operating a business. I think 
that that is the most important factor that we now have to watch. 

Mr. WoKLEY. You say on page 5, "In peacetime wages should be 
determined l)y uninfluenced negotiation between management and em< 
ployee." I do not think that anybody can disagree with that point, but 
suppose they do not get together. ^\'hat is the alternative i 

Mr. AiKEY. I am not very expert on labor relations, having had ex 
perience only with an open shop, and so can give you only a layman's 

Mr. WoRLEY. What are your views as a layman? 

]Mr, AiREY. I say we would get together one way or another. 

Mr. WoRLEY. When ? When you saw your profits going down and 
when labor saw their wages going down ? 

Mr. Atrey. Yes, and presumably befoi-e that time. 

Mr. WoRLEY. Should the government step in and enact legislation ? 

Mr. AiREY. We can't afford to let the whole economy down, but my 
judgment on that subject is that the administration could, by suitable 
publicity and propaganda, without definitely interfering, be very help- 
ful, but I prefer to leave that subject to Mr. Randall. 

Mr. WoRLEY. Thank you. 

Mr. Walter. May I add just one question? 

The Chairman. Yes. 

Mr. Walter. Is there available to industry generally the tools and 
equipment that it needs now to reconvert ? 

Mr. AiREY. Yes, decidedly. 

Mr. Zimmerman. I would like to ask a question. You have been 
talking about the laboring man. What about John Q. Public ? Who 
is going to look after him ? 

Mr. Airey. He is the most important man of all. 

Mr. Zimmerman. You are against the public having anything to do 
with these operations ? Is that right ? You don't want the government 
in the picture at all, do you ? 

Mr. Airey. I don't know how far you are going with that, Mr. Zim- 


Mr. Zimmerman. I am talking about tlie question of prices and the 
question of labor. 

Mr. AiREY. I would prefer to stick to price. 

Mr. ZiaiMERMAN. I understood you to say that you thought the 
Government ought to stay out of it and let them work it out them- 

Mr. AiREY. I don't think Government should specify what wages 
labor should receive, or prices employers should receive. 

Mr. Zimmerman. That does not answer the question, you are 
hedging a little bit there. Whenever we come to a situation that John 
Q. Public is suffering because of the fact that labor and management 
agree to get together and won't get together, and we have a condition 
throughout the country that we feel might became a very serious 
threat, who is going to protect John Q. Public if the Government does 
not have something to say about it ? 

Mr. AiREY. My answer to that, Mr. Zimmerman, is that public 
opinion, if the situation gets bad enough 

Mr. Zimmerman. Well, if you are sick enough and ready to die, it 
does not do any good to call a doctor does it ? Is that a wise policy ? 

Mr. Aieey. Well, I would welcome any method that prevents that 
which you are talking about as a temporary expedient, but for the 
long run, we certainly must leave compensation to negotiation and 
prices to competitive supply and demand. 

Mr. Zimmerman. That is all right. It is a fine theory, but it looks 
like we have almost reached the point where it would not work out. 

Mr. Walter. Don't you think that after our experience with the 
Smith-Connally bill we ought to be content ? 

Mr. Zimmerman. Well, anybody knows that that was not the ex- 
pressed will of Congress ; it was a makeshift to start with. 

Mr. Walter. It was an abortion. 

Mr. Zimmerman. It was known that it would not work. It was an 
abortion, exactly, and it was just something handed out that thev 
thought would satisfy for the time being. Mr. Walter has described 
it — it was an abortion, pure and simple. They knew it would never 
do the job a lot of people hoped it would do, but I think the time 
has come when we have to sit down and work out something whereby 
labor will be protected and industry protected and John Q. Public 
protected. Now, if it takes some government — I do not want too much 
government, I am against Government interference just as mucli as 
anybody, but I think there is a place for Government in there. You 
turn business loose and we know what they will do for the country; 
we know what they have done in the past, and if you turn labor loose, 
they will do the same thing.* Now there has got to be some curb 
somewhere, in my honest opinion, and I know of no other source than 
a sane policy by Government. 

Mr. Chairman. I have no disposition to cut this question and an- 
swer period, but I think we are getting off the subject of controls, and 
we have another witness that we want to hear. 

Mr. Zimmerman. Just one further question. 

Mr. Chairman. Very well. 

Mr. Zimmerman. You spoke about this new man in business, his 
problem. I thought he was the fellow who was occupying the advan- 
tage point under this price-control system. 


Mr. WoRLEY. He got $5.50 per iron. 

Mr. Zimmerman. I thought he was sitting up there and getting 
ftlong beautifully. 

Mr. LeFevre. That was during the war. 

Mr. Walter. But just a little while. 

Mr. AiREY. Can I answer that, Mr. Chairman ? 

I am not quite sure of what I am saying but will clear it up in a 
moment. Whether the man who made the $5.50 iron was a new manu- 
facturer or not, I do not know, but doubt it. To come to the next 
remark made in my direct presentation, the confusion in foundry 
pricing is well-known. 

A foundry has made, say, this product [indicating an ash tray], 
and so has a history of price covering that, which history, modified, 
governs the resumption of production price. 

If a new type of item is considered by that same foundry [indicating 
an eye-glass case], the price ceiling is controlled by a formula based 
on the costs of current labor and overhead. It would be a miracle if 
similar margins of profit resulted in the two cases. 

It is not facetious but is a literal truth to say that cases exist where 
two foundries could pick up the patterns and exchange them like this 
[indicating] and both be able to use higher ceiling prices. 

I do not know that that has actually been done, but I do Imow that 
there are many cases of different ceiling prices for the same product 
in different foundries. 

I say that noncritically of OPA, because the OPA has done an 
excellent job in wartime. The peacetime job is just too big to be 
handled. Munition profits no longer mask losses on some civilian 
goods, which in turn requires a great volume of added decisions and 

Mr. Zimmerman. If Mr. Bowles will carry out the promise he made 
to the Committee on Agriculture the other day, that just as soon as 
the supply of anything reaches the point of demand, the ceilings will 
go off, isn't that a sane policy ? 

Mr. AiREY. I disagree with Mr. Bowles. He will wait an awfully 
long time, because the gradient in getting out the supply will be very 
very slight compared with what it would be were the ceilings off. 

Mr. Zimmerman. You praise him in one breath and give him the 
devil in the next. 

Mr. Airey. Well, that is fairly logical. 

Mr. CiiAnaiAN. Our time is getting limited here. 


Mr. Randall. I will try to be brief, Mr. Chairman. 

My name is Clarence B. Eandall. I am vice president of Inland 
Steel Co., of Chicago. I appear as a member of the labor legislation 
committee of the National Association of Manufacturers in support 
of the recommendations of its reconversion council. 

The National Association of Manufacturers has no part in the 
formulation of labor policy for individual employers, but through 
the cumulative experience of its 14,000 members, the association does 


have a composite viewpoint as to the part which Government should 
play in the solution of these questions. 

The association believes that in the field of employment relation- 
ships governmental policy, whether administrative or legislative, 
should take the following factors into consideration : 

1. The function of industry is to produce goods. These must be 
goods that the public wants and they must be offered at prices that 
the public will pay. When that occurs, the employees, the consum- 
ers, and the investors all benefit. 

2. High quality goods at favorable prices are the product of 
efficiency, and efficiency depends upon sound employment relation- 

3. Such sound employment relationships are not brought about by 
a national formula: they are the function of a happy relationship 
between a jjarticular employer and his workers. Government cannot 
create that relationship, but it may do much to foster the atmosphere 
within which it will thrive. It is for Government to create equality 
in privileges and obligations as between employer and employee. 
And it is for Government at all times to be diligent to protect the 
public interest and the rights of individual citizens. 

4. Government must scrupulously protest the right of workers to 
bargain individually or collectively through representatives of their 
own choosing. In such bargaining there must be a genuine effort 
on each side to reach a mutually satisfactory arrangement, but either 
party must be free to accept or reject proposals made by the other. 
The form of employee organization should never be dictated nor 
controlled by any governmental agency. Government should protect 
the right of workers to engage in lawful strikes, by lawful methods, 
but Government must be equally diligent to protect the right to work. 

Both the law itself and the administration of the law must strictly 
preserve the rights of free speech, the rights of property, and the 
right to work or not to work. It must not be forgotten that we still 
have a constitution. 

The association has embodied the foregoing in an approved state- 
ment, which is as follows : 

We believe in bona fide collective bargaining, with both parties entering upon 
negotiations in good faith to determine terms and working conditions of em- 
ployment that will further the progress of the enterprise and will provide an 
environment in which management and labor may work together in harmony 
and contentment. 

A. The association advocates the reestablishment of free collective 
bargaining at the plant level. 

I used the word "reestablishment" intentionally because in many 
ways and at many times during the past few years it has not been free. 

It is not free when union security is placed above the right of the 
worker to make his own decisions. 

It is not free if organized labor is permitted to coerce public agen- 
cies by political methods. 

It is not free if strikes occur in open violation of contracts. 

It is not free if the individual employer is placed under Govern- 
ment pressures to join in industry-wide bargaining without regard 
to the individual problems of his business or the geographical con- 
siderations of his area. 



B. The association advocates the establishment of eqnality of re- 
sponsibility and obligation in the performance of labor contracts. 

For many years past it has been the employer only who has been 
held responsible. 

Severe penalties have often been imposed upon the employer, but 
never upon organized labor. Government sanctions have been in- 
voked against management that have had no counterpart with labor. 

In open violation of carefully written contracts there have been 
strikes without notice, strikes that were political rather than economic 
in purpose, and strikas that were said to be unauthorized although 
obviously planned and directed. 

It is of no avail to "sit down at the conference table and iron out 
our troubles together," in the manner so ably suggested by the Presi- 
dent, if when the conclusions thus arrived at have been embodied in 
a written agreement, that contract is not lived up to. IManagement 
is answerable at every turn for its commitments, but laboi- sutFers no 
penalty for violation. There will be no equality at the bargaining 
table until labor is made to assume the same measure of responsibility 
for its contractual obligations that it expects and receives from man- 

Penalties must not only be established for the breaking of agree- 
ments arrived at through collective bargaining, but steps must be 
taken to i)rotect property from damage caused by violence in labor 
disputes, and the severe losses suffered often by business institutions 
who have no relationship whatever to the disi)ute, by the mass picket- 
ing or violence in other institutions with whom they have business 

Only by the imposition of legal penalties that cari*y substantial 
weight can this assumption of full legal responsibility iDy organized 
labor be made a reality. 

C. The association urgently advocates the elimination of compul- 
sory payments by workers as a condition for securing or retaining 
employment. If the American tradition is to be maintained, each 
w^orkingman must be free to join or not to join a union as he may 
desire. And it follows from this that he must be free to resign 
from a union which he has previously joined if he no longer finds 
himself in sympathy with the leadership or objectives of that organi- 

Mr. Walter. You ought to go just a little bit farther and say he 
should not be penalized for so doing. 

Mr. Randall. The doctrine of union maintenance and compulsory 
check-off was imposed upon industry during the war without its 
consent, and industry must now be freed from that conspiracy to 
coerce the individual freedom of the worker. The whole institution 
of collective bargaining must be made to rest permanently upon the 
free action of the workers. There is no place in. this American insti- 
tution for physical violence or any other form of compulsion or coer- 
cion. The public interest demands from Government that no group, 
whether management or labor, be permitted to interfere with the pri- 
vacy of that choice by the worker. 

Veterans : 

The association pledges itself to do everything within its power 
to promote jobs for returning veterans. 


Clarification is most urgently needed, however, from Congress and 
governmental agencies as to the exact legal rights of veterans insofar 
as jobs in industry are concerned. 

Unfortunate confusion now surrounds this whole subject because 
of conflicting interpretations of the employment provisions of the 
Selective Service and Training Act, and the opposing views of ad- 
ministrative agencies, as well as court decisions. There are added 
uncertainties and difficulties with respect to the employment of those 
veterans who have no established rights to particular jobs, or who 
prefer not to exercise those rights which they have. 

The association has, therefore, adopted the following recommenda- 

1. That the administration of all veteran employment should be 
placed immediately b}- Congress in a single agency with full authority 
to make such orders and regulations as may be necessary to carry out 
the intents and purposes of the Selective Service and Training Act, 
and any new legislation dealing with veteran emploj^ment rights. 
This is necessary to assure uniform procedure, to safeguard the veter- 
an's employment righ.ts, and to help make prompt determination of the 
employer's obligations. 

2. That Congress clarify the provisions of the Selective Service and 
Training Act, either by amendment or new legislation, that will specify 
the full terms and conditions governing the reinstatement of employee 
veterans and the employment of nonemployee veterans. The follow- 
ing specific points need clarification : 

(a) By what rule shall we distinguish between a permanent peace- 
time employee and a temporary or war-expansion employee ? 

(h) Shall a returning employee veteran supplant a permanent 
peacetime worker who has more years of service? 

(c) Has a returning veteran who was a temporary employee tlie 
same rights or lesser '( 

(d) Shall seniority practices prevent making a job available to a 
veteran who never before had a job? 

(e) Shall a veteran be given credit for his time in the armed forces, 
as though that time had been spent in the service of the employer? 
And if so, shall he first serve a probationary period on the job? 

(/) Shall a disabled veteran have top priority in jobs regardless of 
all other rules? 

I feel sure that the committee is fully aware of the confusion and 
controversy surrounding these and similar questions. There can be 
no doubt that they serve to retard the country's goal of maximum em- 
ployment for veterans. The need for clarification cannot be stated in 
terms of too great urgency. 

I am equally certain that American industry will enter most en- 
thusiastically upon the fulfillment of its pledge to provide jobs for the 
returning veterans, as soon as these troublesome questions have been 
clarified by Congress and the responsible governmental agencies. 

The Chairman. Thank you very much. 

Mr. Walter? 

Mr. Walter. Yes. You stated that steps must be taken to protect 
property from damage caused by violence in labor disputes. Don't 
you think that is a local State matter rather than something with 
which the Federal Government should be concerned ? 


Mr. Randall. I am sure, Mr. Walter, that you are aware of the 
lengths to 'which Congress has gone in widening the doctrine of inter- 
state commerce. If interstate commerce is wide enough to bring our 
labor relations within the power of Congress, it is wide enough to 
bring the protection of property within the power of Congress. 

Mr. Walter. Aren't you advocating a further extension of Govern- 
ment controls when most of us feel it is too highly centralized now? 

Mr. Randall. I am not advocating any further extension of con- 
trols. I am simply saying that if it takes it over in part, it should take 
it over in whole. 

> Mr. Walter. It seems to me that private property is a matter for 
the States. 

Mr. Randall. I think I made my point. Congi-ess probably knows 
that in these large industrial centers, the local forces are often totally 
unable to cope with mass violence. 

Mr. Zimmerman. Our States have tried to pass some laws and then 
the Supreme Court comes along and says you have not the power to 
do that, because you are interfering with a Federal law, the riglit to 
strike. If that picket line destroys my automobile, that is all right. 
If Mr. Walter goes out and destroys my automobile, they would have 
him in jail in 2 or 3 hours. You agree that there is a place for Gov- 
ernment to come in here and do something ? 

Mr. Randall. I say where Government is in, they must go the whole 
distance. They must go the whole way, not part way. 

Mr. Zimmerman. The Government should try to see that labor is 
protected in their right, and I believe this. At the same time I think 
that management should be protected in its rights, and the public 
should be protected. That is the function of Government, that there 
be an arbiter or an umpire somewhere to sit in there and see that the 
right thing is done. 

Mr. Worley. You are an expert on labor relations? 

Mr. Randall. I disclaim that, sir. 

Mr. Worley. Are you optimistic over the prospect of a favorable 
settlement in the Washington conference now going on ? 

Mr. Randall. I have no information, sir, that you have not. I am 
perfectly certain that the men have gone in with earnestness of purpose. 

Mr. Worley. Suppose they i-each a stalemate, what then ? 

Mr. Randall. We certainly are better off than we were in that there 
has been a quiet and peaceful period of discussion without^ anger for 
a period of time in which each may get the other's viewpoint. I think 
this is a good period of cooling off. 

Mr. Worley. But what if nothing constructive comes from the con- 
ference ? 

Mr. Randall. I think Congressman Zimmerman addressed a ques- 
tion to Mr. Airey on this same line. I have never heard this subject 
discussed in the association. This is personal. I have the feeling 
that the thing which makes labor relations so acute at the present time 
is that all during the war Government has been on the bargaining side 
for labor. As soon as Government stops bar2:aining for labor, we will 
get somewhere. Industry has never been allowed ito say "No." Once 
we have equality of bargaining, with the two forces sitting across the 
table without the third man in the ring on the other side, we will 
settle these questions. 


Mr. WoKLET. You don't think you need a third man in the ring 
at all? 

Mr. Randall. I do not. 

Mr. Zimmerman. You don't believe Government ought to be in 
there ? 

Mr. Randall. No, sir. 

Mr. WoRLE Y. In any capacity ? 

Mr. Randall. No, sir. 

Mr. Zimmerman. I thought you recommended that the Government 
make some laws ? 

Mr. Randall. Well, I think the Congressman asked Mr. Wason what 
were the things that should be done. The lack of equality im 
bargaining comes from the lack of responsibility on the labor side. 
The lack of bargaining is on management's side and the excessive 
power is on the labor side. The thing for Government to do to restore 
equality of bargaining is to withdraw protection of labor when it 
violates a contract. 

Mr. Zimmerman. You have to change the law. 

Mr. Randall. Exactly. 

Mr. Zimmerman. That is where Government has to step in. 

Mr. Randall. Certainly, no one of us means to suggest that we are 
happy about the present labor laws. I think the finest thing Congress 
could do would be to overhaul the entire sj^stem of labor laws, into 
one code that a plain-minded fellow can read and understand and 
know that it is all in the same book. 

The Chairman. I would like to ask you one question on the subject 
of veterans, just toget the reaction of the manufacturers. There has 
been some talk over the period of the last year and a half about a 
statute that would permit a veteran to join a union or not join a union; 
in other words, he could not be discriminated against because he did 
not belong to a union. Would you care to comment on that? 

Mr. Randall. I think that' ties into the whole subject of voluntar- 
ism. I think it is awfully important that every man, whether a 
veteran or not, be free to join or not to join a union, and to stay in or 
get out, as he may please. 

The Chairman. I quite agree with the observation. As a matter of 
expediency — political expediency, if you please — that would not 
possibly be attainable right now. The question is whether or not a 
veteran should be given that preference because he had fought his 
country's battles. 

Mr. Randall. I am no judge, sir, of political expediency, but I 
should certainly say it should be done for the veterans. 

The Chairman. Thank you very much, Mr. Randall. 

Mr. Wason. I believe you have something. 

Mr. Wason. Mr. Chairman, may I supplement briefly, in reply to 
comment by Mr. Walter ? He asked whether the Government should 
get out of the picture. Briefly, yes, out of controls ; no, on regulations. 
Industry accepts regulation and offers no objection whatsoever, but it 
does not like to be choked as it is choked by many controls which have 
been discussed by Mr. Randall. 

The Chairman. Let's not forget that all of these controls are war- 
time things. It was brought about because of the terrible pressure 


on our country durinf^ the war. I do not think anybody wants price 
controls in peacetime at all. I think no sane person would advocate 
the continuation of these controls in peacethne. 

Mr. Wason. It should be recognized, Congressman Zimmerman, 
that in January 1941 there were more than 10,000,000 unemployed all 
as the result of controls that prevented the investment of funds. 

Mr. Zimmerman. I would like for you to explain a little; I mean 
elucidate a little. You say 10,000,000 men out ? 

Mr. Wason. My information comes from the Economic Almanac. 

Mr. Zimmerman. What do you know about it ? " 

Mr. Wason. This was in 1940. 

Mr. Zimmerman. I thought you said 1941. 

Mr. Wason. I am sorry. It was 1940. The unemployment was 
greatly reduced in 1941. 

Mr. Zimmerman. In 19 10 it was how many millions ? 

Mr. Wason. It was 10,000,000 in February. 

INIr. Zimmerman. That was due to what ? 

Mr. Wason. Largely due to controls which prevented investment. 

Mr. Zimmerman, What controls? 

]\Ir. Wason. Such things as the SEC and other devices. 

Mr, Zimmerman. I don't think the SEC has been responsible for 

Mr. Wason. Well, that is a long discussion. Congressman, and I 
would be happy to enter into it if the time permitted, and I am not 
using the time as an alibi. 

Mr. Zimmerman. Of course; I have lived a good while and I have 
lived through a period when business was operating without controls, 
and I know what happened. I have personal experience. We would 
have a pretty long debate, if that is the kind of controls you are talking 
about. It has some faults but there are a lot of virtues. 

Mr. Wason. Congressman Worlej^ asked a question that has some 
implications in it, and they ought to be cleared; and Mr. Aire}^ did 
clear some of them. He asked if there would be malingering on the 
part of industry waiting to enjoy the benefits conferred by the recent 
tax bill. During the war 45,000 corporations paid excess profits taxes ; 
435.000 did not pay it. Therefore, the malingering would be confined 
to about 10 percent. 

Mr, WoRLEY. But that 10 percent had the biggest part of the con- 
tracts. Isn't that correct? 

Mr. Wason. Yes, sir. 

Mr. WoRLET. Therefore, when they slowed down or lingered, as you 
say, reconversion would be retarded if that is going on. Is it going 
on, or is it not, in your opinion ? 

Mr. Was-on. To the best of my judgment and belief, and in my 
opinion, it is not, because such malingering on the part of industry 
would assist such industry's destruclaon by piling up losses. Their 
overhead is constant in every industry and its task must be to absorb 
that overhead, and it can best be absorbed by operating in as full a 
measure as is possible. 

Mr. WoRLEY. A minute ago, you said these restrictions had choked 
industry. It is my information that most industries have made at 
least a reasonable margin of profit during the war; am I correct or 
am I in error? 


Mr. Wason. Secretary Patterson has made the statement that in- 
dustrj^ should be grateful for — I am not using his words, and I do 
not recall them — for the fact that it has not made unusual war profits, 

Mr. WoRLEY. Has your company lost any money? I do not mean 
to pry into your business affairs, but for an example : Have you lost 
any money as a result of these controls ? 

Mr. Wason. We think that we have. 

Mr. WoRLEY. Very much ? 

Mr. Wason. No, sir. 

Mr. WoRLEY. Do you think you would have made more without 
price controls? You would probably have made more dollars, but 
you couldn't buy as much with them. 

Mr. Wason. Congressman Worley, you mean the war period by 
"recent years." We are not recommending nor did we recommend 
the elimination of price controls during the war and all the require- 
ments of every Government organization were accepted by industry 
without objection, and regardless of the conflicting orders that came 
from different bureaus and different divisions of the same bureau — 
without complaint. 

Mr. Worley. We want to see these controls removed just as soon as 
they can be removed without hurting you and one-hundred-and-thirty- 
odd-million other people. 

Mr. Wason. I would like to specifically answer your question. Our 
earnings reached a peak in 1942, less in 1943, less in 1944, less in 1945, 
and unless controls are eliminated, they will be less in 1946. 

Mr. Zimmerman. They were still plenty big, weren't they, plenty 

Mr. Wason. Our earnings? 

Mr. Zimmerman. Yes. 

Mr. Wason. No, we do not think they are. Our labor rates have 
gone up about 70 percent on a direct hourly basis. And the dividends 
of the owners have gone up not in any manner whatsoever. 

Mr. Zimmerman. Have they kept on a par? 

Mr. Wason. They are what they were in 1939, 1940, and so forth. 

Mr. Zimmerman. You are pretty lucky. I have not been so fortu- 
nate in some of mv investments. 


Mr. Wason. Mr. Chairman, with your permission, I should like to 
resume the stand to summarize the views of the National Association 
of Manufacturers in some 300 words. 

Industry is now struggling to complete its reconversion. It is ready 
to go all out for civilian production when permitted to do so. In- 
dustry can't go all out so long as OPA prevents production by requir- 
ing losses in some instances and an over-all balancing of profit's against 
losses in other instances. 

OPA's unwillingness to permit profits often prevents production. 
Wages rise, production stands still, inflation results to the detriment 
of the total economy. 

Government controls retard small business organizations first and 
large organizations last because size permits them to weather losses 
that cannot be taken by small businesses. The Price Administrator 
admits that production is the preventive to inflation. The Congress 


supports him in liis limitations on production. It is the judgment of 
2,000 committeemen represented in our reconversion council, whose 
opinions are expressed in the documents read here this morning that 
all rationing and price controls should be eliminated not later than 
February 15 of the coming year. 

It is their further judgment that the expanding production -which 
would result from tlie freeing of the economy at that time would permit 
more easy and orderly settlement of labor-engagement differences that 
bedevil all of us at this time. 

During the war, industry sold one customer — whether it be Army, 
N^v}', Air Corps, or other of the militar}' services. Now it must 
reconvert to thousands of civilian customers. The task of getting 
into peacetime manufacturing is equally as great as the task of tooling 
up for war. 

You may recall that amortization of facilities was resisted for many 
months by Government officials when war began. Industi'y faces com- 
parable resistances in its present attempts to reconvert to peace. Our 
reconversion council of the National Association of Manufacturers 
earnestly believes that everything your committee can do to permit 
and assist the free exchange of goods and services within the economy 
is in the interest of all people in all quadrants of the economy and 
our Nation in which they function. 

This reconversion council of the Nationul Association of Manufac- 
turers thanks Mr. Colmer and all the gentlemen of your reconversion 
committee for the considerate and helpful treatment you have given 
us today. 

The Chairman. Thank j^ou, again, Mr. Wason, and on behalf of 
the committee I desire to express appreciation of the committee for 
your very able remarks and those of your associates, Mr. Airey and 
Mr. Randall. 

Mr. Wasox. Thank you, sir. 

The Chairman. We are very grateful for your contribution. The 
committee will stand adjourned until further call. 

(Whereupon, at 12 : 20 p. m., an adjourmnent was taken, subject to 



House of Representatives, 
Special Committee on Postwar 
EcONOiviic Policy and Planning, 

Washington^ D. G. 
The special committee met, pursuant to call, at 10 : 30 a. m., in room 
J 012, New House Office Building, Hon. Francis Walter (chairman 
pro tempore) presiding. 

Present: Representatives Walter (chairman pro tempore), Reece, 
Worley, Murdock, Lynch, Simpson, Welch, Wolcott, and LeFevre, 
Also present : Marion B. Folsom, stalf director. 

Mr. Walter. The meeting will come to order. Mr. Small of the 
Civilian Production Administration will make a statement. We 
appreciate your being here, Mr. Small. 


Mr. Small. Thank you, sir. I am delighted to be here. I will 
try to give you any information I can on this problem. I have 
given to you a prepared statement which is in substance the same state- 
ment that I made about a month ago before the House Judiciary 
Committee, who, as you know, went into this and have recently come 
out with their report. 

The conditions are pretty much the same as we saw them at the 
time I submitted this report, a little darker perhaps than they were 
then, but this covers the field pretty well. 

If you like, Mr. Chairman, I will be glad to go through this, 
summarizing it for you, rather than read it. It is quite a lengthy 
statement. 1 will be glad to answer any questions while I am doing 
it, or later. 

Mr. Walter. You just stated that conditions are perhaps darker 
than they were when you appeared before the Judiciary Committee. 
I think this committee would be interested in knowing what change 
in conditions caused you to make that statement. 

Mr. Small. Labor troubles. The slowing down at various levels 
in the industial chain due to labor difficulties in one plant which in 
turn stops the production of things going up the manufacturing 
chain, there and elsewhere, and that slows down their production. 

Mr. Worley. Where is the fault, in your opinion, on labor's side 
or management's side, or both sides ? 

Mr. Small. Definitely on both sides. Back during the war period 
we had the same personalities involved in this problem as we have 




now. We had pretty much the same problems but people were rea- 
sonable, they were sensible, they were flexible and they were in good 
humor. True, they had an incentive — the winning of the war — and 
that overrode anything else, and they were able to get together 
without too much difficulty and pull together and get out production. 
That is the only reason that we were able to get our war production 
in the volume that we did turn it out. 

With the coming of VJ-day and the wimiing of the war there has 
been a logical change. People are weary and tired. Both manage- 
ment and labor people are tired. They have become more irritable, 
more quarrelsome, and many of them are no longer guided by common 
sense. They are guided by emotions to a greater degree than they were 
before. I know of instances where people 3 or 4 years ago would have 
settled their problems without an}^ great to do, and now they get 
hysterical about them. I suppose that is the natural result of the 
ending of the war and a changed psychology. It is a great part of 
their problem. 

Mr. Walter. To what extent has reconversion been retarded by 
these labor disputes? 

Mr. Small. It is not measurable in terms of percentage, Mr. Chair- 
man. The early part of last month we came out with a report on re- 
conversion which showed the progress the metal-working industries 
were making. It showed their actual production in Ssptember. It 
showed their forecast for Octoboi-, November, and December and up 
until next June. The actual production in September was gratifying. 
It was greater than we had expected before VJ-day even. Their fore- 
cast for the succeeding months and for next June were based on a 
very simple condition, that during this period we would have some 
measure of industrial peace, some substantial measure of it, and as 
I say, would be able to get components and materials in adequate 
volume when they needed them. 

Mr. Walter. That is exactly what I mean. In other words, all 
the estimates as to production in the spring were based on the theory 
that labor and management would together try to bring about normal 
economic conditions quickly. 

Mr. Small. That is right. 

Mr. Eeece. You made the statement, I believe, that labor and man- 
agement had grown tired. Now unless I underestimate the situation 
they are not the onl}^ ones that have grown tired. 

Mr. Small. I am tired, too. 

Mr. Reece. The soldiers are tired. The consumers are tired. 
Everybody is tired, and with reference to percentage by which pro- 
duction has been slowing down, I think it is relatively unimportant. 
It is manifest in strikes, threat of strike, shut-downs and threat of 
shut-downs, fear that our whole production machinery is going to 
be thrown out of kilter and we are going to have chaos in this country. 
Is not that right? 

Mr. Small. Well, I am a little more optimistic than that. I think 
"chaos"" is far too strong a word. We are going to have undoubtedly, 
if these conditions continue, we are going to have a slowing down of 
production considerably below the goals we could have reached with- 
out them. Now I do not think that is going to lead to industrial chaos. 

Mr. Reece. It has been suggested that I probably should have used 


the words ''considerable chaos." I had in mind tlie same thing you 
were describing in your more moderate and possibly less-tired man- 
ner, despite the very difficult position that you hold because you seem 
to be a person of calm disposition and I am sure of calm judgment. 
But to complete my statement, if we foresee such a condition abuut to 
develop, then it seems to me that it becomes the responsibility of all of 
us, both legislative and executive, to undertake to give some direction 
to this situation. So far I am unable to see Vvhere Congress has done 
anything and I am unable to see where the executive has done any- 
thing — and I am not referring to any particular individual in the 
executive department but simpiy as the executive arm of the Govern- 
ment — and 1 believe the people are beginning to feel very strongly 
that we have«not yet accepted our responsibility in the situation and we 
are just sitting by watcliing a very serious situation develop in this 
countr}'^ which they feel can be avoided and which I, myself, certainly 
hope can be avoided. 

Mr. kSmall. We have ahead of us two dangers. We have the danger 
of inflation which would be ruinous to us all. We have the danger of 
defhition which would mean tremendous unemployment and needless 
su tiering. 

In one way or another we have got to choose a path that is between 
those, between inflation and deflation. The surest and only cure that 
I know for inflation is production. If we can get goods out in volume 
on the shelves, we are not going to have any inflation and the sooner 
we get about it the better. 

Air. WoRLEY. How do you propose to get about it with management 
and labor having their difliculties which result in little or no produc- 
tion? How would you suggest that it be done ? 

Mr. fcMALL. That is one way you are putting me on the spot because 
it is a terificaily complicated problem. You have got a lot of legisla- 
tion up here now on the subject which attacks it from a good many 
angles. The better way to solve this thing, if it is possible to solve it, 
and I am sure that it is, is the way in which we got ailong during the 
war period. Xow we had a lot of people during the war that you gen- 
tlemen probably never heard of working out of the War Production 
Board, who got in on these labor disputes and settled them before they 
became disputes. They got to the root of the problem, got to the people 
and got them together, before their emotions were aroused, before they 
had adopted a set position, and a great deal of the smoothness with 
which things went along was caused — was due to just that very thing. 

Mr. WoRLEY. Wasn't the main thing because we were engaged in 
the most dangerous war ever? 

Mr. Small. Certainly. You had a single objective that everybody 
was aiming for. This is more serious now except for loss of life. 

Mr. WoRLEY. It is more serious than during the war period. Wliat 
is your answer to that? Here we have a conference going on between 
labor and management. According to my information I am afraid 
it is doomed to failure. Do you agree? 

Mr. Small. I am afraid the results are not going to be very good. 

Mr. WoRLEY. If they come out of this conference with nothing 
whatever accomplished, then what? 

Mr. Small. Then the Executive and Congress have got to act. 

Mr. WoRLEY. How ? Would you advocate the Government 

99579—46 — pt. 7 11 


Mr. Welch. Why are you taking this pessimistic view, that it is 
due to fail? 

Mr. WoRLEY. Well, all the signs point to that. 

Mr. Welch. Well, there are always a lot of pessimists. You should 
take an optimistic view. You might as well be optimistic as pessi- 
mistic. It does not cost any more. 

Mr. Walter. Gentlemen, I think we have gone quite far aheld. 

ISIr. Welch. No, we have not, Mr. Chairman. 

Mr. Walter. Well, we will get to that as soon as we have finished 
this statement. Do you care to summarize the statement you have 
prepared ? 

Mr. Reece. Mr. Chairman. In any event, Mr. Small, might it not 
be well for this to go in the record as your statement iind then add 
any summary which you think advisable to it? 

Mr. WAL:rER. Yes. Yv^ithout objection the . f^tatement vrill be 
inserted in the record at this point. 

Mr. Reece. In full. 

Mr. Walter. Yes. 

(The prepared statement in full, referred to, submitted by Mr. 
Small, is as follows: ) 

About a month ago, I outlinod to the House Judiciai-y Committee the need 
for an extension beyond the end of the year of tit^.o III of the Second War 
Powers Act. As the need for this legislation has .not changed materially. I 
propose to make you substantially the same statement as I made to that 

Title III is the authority under which the WPB has exercised the priorities 
and allocations functions during the war. I bidieve the most helpful tiling I 
can do will be to explain to you the functions which we are still carrying on 
under this authority and point out those for which we anticipate there will 
still be a need after the end of the ye:ir. 

Last spring just before and after VE-day we in the WPI^ were under con- 
siderable pressure from certain segments of industry to continue many of our 
controls, on the theory that it would cause endless confusion and retard 
reconversion if we took them off. We did not agi-ee with them. It was our 
opinion then, as it is now, that reconversion would be best aided by a lifting 
of control orders as rapidly as it could be safely done. Vv'e followed this policy 
and I think the results have demonstrated that we were right. I should like 
to read a paragraph from Mr. Krug's report on \V;xr Production and Ilecon- 
version, of May 19, 1945. 

"Desirable though it may be to attempt to prevent temporary economic dis- 
locations, the exijerieuce of those who have lived with these controls during 
the war clearly indicates that the controls are not suited to that job. Moreover, 
reason and history indicate that in any readjustment from a war to a peacetime 
economy, temporary dislocations are inevitable. We must not be stampeded by 
such dislocations into elaborate controls or special dispensations. Our economy 
is a jigsaw pattern of interlocking buyers and sellers, producers and consuniprs. 
The pieces of the Jigsaw will move into place best if we give people scope and 
leeway — with a niininuim of rules, regulations, and production controls." 

That may sound like a strange statement for me to read when I am here dis- 
cussing a possible extension of our statutory authority, but I do not believe it is. 
Our thinking is the same today as it was then. 

Early last spring the WPB had outstanding about 6.j0 basic orders and sched- 
ules. The production and disti-ibution machinery of the United States was pretty 
well enmeshed with our controls in order to assure the flow of materials to militar;r 
and essential civilian needs. By the end of May, shortly after VE-day. approxi- 
mately 200 of these basic orders and schedules had been lifted. By the end of 
August, after the Japanese had surrendered, another SOO orders had been lifted, 
and by the first of November we will have outstanding less than 75 orders and 

The timing of removal of the individual controls has been the i-esult of careful 
study by oiu- experienced men attempting to appraise in advance the effects of 


the removal of particular orders, taking into account the supply and demand 
situation for the materials involved. We have had committees studying these 
problems and working vpith the other interested agencies since the summer of 
1944. so that when VE-day and VJ-day arrived we were prepared to take the 
action upon which seemed to us appropriate. 

Between VE-day and VJ-day, as rapidly as military orders were cancelled, 
facilities were converted to civilian production, and raw materials were quickly 
diverted to civilian uses. Reconversion was proceeding at a rapid rate and 
increasing supplies of most materials and products made it appear that only a 
few remaining controls would be needed beyond the end of the year. Since 
VJ-day, however, there has been a definite slowing down in the reconversion 
process, and nuTnerons uncertainties in the picture make it impossible for me to 
predict just how far lieyond the first of the year some of these controls will be 
needed if we are to avoid additional serious dislocations in our economy. 

While reconversicm is under way, therefore, and in some cases is moving very 
smoothly, we are not yet by any means wholly out of the woods on materials 
shortages. It is for this reason that we still retain certain controls and believe 
that a few of them, out of the many hundreds which we had during active hos- 
tilities, should be continued beyond the end of the year. In order that the 
Congress can best detei-niine whether this authority should be continued, I am 
explaining briefly the controls we now have and the types of purposes for which 
they may be needed into 1946. Speaking for our agency, we would propose in no 
case to exercise such authority beyond the time during which the need is clearly 
evident and furthermore to exercise it as sparingly as possible. 

Now let me try to outline the purposes for which we believe the Civilian 
Production Administration may need to exercise the powers created by tlie 
Second War Powers Act. 


While the volume of military procurement is now extremely small, compared 
with its pre-V.I-day level, there are still considerable requirements for our forces 
of occupation overseas and for servicemen pending demobilization. It is of first 
importance that there be no delay in the continued supply of these needs. While 
in most cases no trouble is now experienced in obtaining them on the open 
market, it would seem desirable that the priorities authority be maintained in 
reserve to make certain of their fulfillment. 

Executive order 

The Executive order of October 4, which established Civilian Production Ad- 
ministration, sets forth six general purposes : 

1. Expand the production of materials which are in short supply ; 

2. Limit the manufacture of products for which materials or facilities are 
insufficient ; 

3. Control the accumulation of inventories so as to avoid speculative 
hoarding and unbalanced distribution which would curtail total production; 

4. Grant priority assistance to break bottlenecks which would impede the 
reconversion process ; 

5. Facilitate the fulfillment of relief and other essential export programs; 

6. Allocate scarce materials and facilities necessary for the production of 
low-priced items essential to the continued success of the stabilization pro- 
gram of the Federal Government. 

I want to take these up in order and illustrate under each heading some of 
the problems which we now have and some which will still exist after January 
1, 1946. 

(1) Expand production of materials in short supply 

This is the type of activity thi'ough which Civilian Production Administration 
can make its greatest contribution to rapid reconversion and the termination of 
all wartime controls. As has been frequently stated, all-out production is the 
quickest way to end the necessity not only for our controls, but for price controls 
as well. Certain bottleneck materials, many of them imported, and others 
domestically produced but now scarce because of conditions arising out of the 
war, will be the limiting factors in increasing industrial production I'apidly to 
all-out levels. Here are some examples: 



(a) Tin. — This essential material is entirely imported, and is needed not only 
for food preservation in tin cans, but also in small but vital quantities in every 
variety of reconversion production. Speedy restoration of normal supplies is 
dependent on delivery of equipment items, many of which have very long pro- 
duction cycles. By a vigorous expediting campaign, including the judicious 
use of priorities authority, we have diverted into tin mining such standardized 
items as power sliovels and tractors, and we hope to speed up the delivery of 
heavy dredges by 7 or 8 months from the original schedule which ran through 
June 1947. In this type of program, it is impossible to predict the specific bot- 
tlenecks wliich may delay the entire job. We have overcome troubles so far 
with clutches, witii 50-cycle motors, with electric welders, and with many other 
types of materials and components 

(b) Buildiny materials. — Tlie 1946 construction program, especially in housing, 
is looked upon to play a major part in providing full employment and a demand 
for many types of equipment and supplies. The rate at which construction can 
be speeded up depends in large measure on achieving increased supplies of 
such materials as bricks, structural clay tile, clay sewer pipe, cast iron soil 
pipe, and lumber. While manpower is the main problem in increasing these 
supplies, situations often arise in which speedier delivery of equipment can 
substantially improve the production picture. The assurance of adequate truck 
and tire supplies in the forests, for example, is an important element in full 
lumber production. We are keeping a close watch on these industries, and 
feel it essential that we be in a position, if necessary, to speed up equipment 
deliveries so that no time is lost in getting them ready to play their full part 
in the reconversion construction program. 

(c) Coal mining nuichincry.— This is a vital factor in maintaining and ex- 
panding output of bituminous coal east of the Mississippi. The shortage of 
this basic material, which has been intensified by the recent strike, threatens 
supplies of steel and manufactured gas, as well as direct fuel needs for many 
other industries and general civilian health and comfort. We have engaged 
on an intensive campaign to stimulate the production of specialized under- 
ground mining machinery and to as-sure the supply of tractors and shovels for 
the highly productive strip mining operations. This campaign involves priority 
actions both to speed up machinery production and to channel equipment into 
the most productive mines Wo believe this program should be continued as 
long as it can help meet the coal deficit for the coal year ending next April 30. 

(d) Streptomyacin. — This new "wonder drug" conquers many infections which 
flo not respond to penicillin or the sulfa compounds. While its development 
came too late to permit its use on the battlefield, the lives of hundreds of 
wounded veterans can be saved if large scale production can be secured 
quickly. For many months, the needs for treatment of injured veterans alone 
will exceed possible production. In fuil cooperation with the armed services 
and the pharmaceutical industry, the War Production Board is doing every- 
thing possible to expedite completion of new plants for streptomyacin produc- 
tion. It has been necessary in a coni?iderable number of instances to divert 
component and equipment items into this program from less essential uses 
in order to avoid construction delays of many weeks or months. 

In all these cases, our principal reliance is on voluntary action by the 
Industries concerned. On occasion, however, priority action has proved 
pecessary either because the supplier is bound by contracts to less essential 
customers or because he i?. unwilling to accept the order. The possession of 
priority authority, even if it is not used, is often a vital factor in obtaining 
full voluntary cooperation. 

(2) Limit the use of scarce materials 

Since VE-day, War Production Board has eliminated all prohibitions on the 
production of end products as such. In the case of a few acutely scarce mate- 
rials, however, it has been and will continue necessary to keep certain limitations 
on their use. In all cases, these controls are designed to spread available sup- 
plies thinly so as to cover all essential uses, and thereby prevent the shortages 
from stopping reconversion production. Here are some examples : 

(a) Tin. — Until imported supplies are again fully available, the lifting of 
controls over the use of tin would result in a rapid dissipation of stocks and a 
period of dearth in which there would be insufficient supplies either for essential 
food preservation or for minimum industrial production needs. The present 


stock pile of about 30,000 tons can be made to last beyond the end of 1946 by 
careful husbanding and constant etfort to increase imports. Without control, 
this small stock could be fully dissipated within a few months. Our tin con- 
servation order permits the use of tin wherever it is clearly necessary but pre- 
vents wasteful or nonessential use. By prescribing lighter coatings and pro- 
hibiting tiiiplate where it is not needed, we have reduced the use of tin in the 
canning industry from about 42,000 tons in 1941 to an expected figure of 24,000 
tons in 1946. Strict conservation has brought the use of tin in automobiles 
from almost 4 pounds per car before the war to less than 2 pounds today. As 
increasing supplies come in from abroad, we will continue the policy of gradual 
relaxation of this control. It would be dangerous in the extreme to discontinue 
this control before supplies are adequate. 

(b) Lead.— Jjeafl is another material of very widespread use now in short 
supply. While most of our lead is produced in this country, domestic supplies 
must be heavily supplemented by imports. The basic uses of lead include 
storage batteries, ethyl gasoline, paint, cable covering, chemicals, collapsible 
tubes, bearings, terne plate, free turning brass, etc. The present estimate of 
1946 supplies is about 840,000 tons, of which 100,000 tons will be imported. If 
our present restrictions on the use of lead remain in effect, the demand will 
be 850,000 to 880,000 tons, while if these restrictions were removed the demand 
would probably rise as high as 1,100,000 tons. Meanwhile, stocks have fallen 
from a high point at the beginning of 1943 of 276,000 tons to an estimated figure 
at January 1, 1946 of only 88,000 tons. We can obviously no longer depend on the 
use of stocks to meet current deficits. 

There is no relief in sight until additional new production is available from 
sources in the Far East, the Mediterranean, and eastern Europe. Mounting 
European requirements will make imports into this country increasingly diffi- 
cult, especially as the primary foreign producing areas are not under American 

(c) Crude rubber. — The tremendous new American synthetic rubber industry 
places us in the happy position of having no problem on total supplies of rubber. 
However, crude rubber comes wholly from foreign sources and it will take at 
least a year and probably longer for Far Eastern supplies to be restored to 
normal. In 1945 crude rubber imports were only 134,000 long tons, compared 
with 1,029,000 tons in 1941. Until more nearly normal supplies are available, 
crude rubber must continue to be allocated to uses for which synthetics cannot 
serve. Thus heavy truck and bus tires require a high proportion of crude rubber 
to obtain satisfactory wearing qualities. In other uses, such as passenger tires, 
the proportion of crude rubber can be made very low without a substantial 
sacrifice in quality. As imported supplies increase, the controls will be grad- 
ually relaxed to permit larger proportions of crude and additional uses. With 
present uncertainties in the supply areas, especially the Dutch Indies, and with 
uncertainty as to the precise United States share in future output, the safe 
date for the abandonment of control cannot yet be predicted. 

(d) Burlap. — Burlap is another material on which this country is wholly 
dependent on foreign sources. Inadequate supplies of coal and food in India 
have seriously curtailed production. Control is exercised to channel the scarce 
supplies into agricultural bagging in order to prevent the loss of perishable 
foods. Until the combined supply of burlap and cotton bagging materials be- 
comes adequate, the absence of such control might easily lead to a diversion 
of this material into furniture, automobiles, rugs, linoleum, and other uses 
where satisfactory substitutes are easily available. 

Other materials now expected to be so scarce after the end of 1945 as to need 
continuing control over and uses include molasses, cordage fibers, antimony, 
quinidine and resin. The future outlook on imported materials is especially 
uncertain. It is not always possible to predict which materials may require 
such control. Thus, the recent coal strike, curtailing new supplies when stocks 
were already at an unprecedentedly low level because of the war, necessitated 
a temporary new control to increase the production of gas utilities of water 
gas made from coke and oil, and to reduce the utilities' demand for high-volatile 
coal. This action was part of a cooperative program between WPB and the 
Solid Fuels Administration designed to protect minimum public utility, trans- 
portation, and hospital needs and to get necessary coal stocks to Great Lakes 
points before the winter season. 


(S) Inventory control 

Another purpose for which I would suppose the Congress would want the 
allocation power extended is to permit the continuance of inventory controls 
to prevent hoarding or preemptive buying of materials during the reconversion 

It is difficult to say just how long such a control is needed. I am not an 
economist, but the history as I understand it after the last war, plus the 
obvious motives on which business operates, would seem to indicate pretty 
clearly that whenever there is a possibility of higher prices there is an incentive 
for companies all along the line to stock up on goods which they will need in 
their operations. You will recall the disastrous cycle of sharp inflation and 
deflation in the years 1919-21, in which first the accumulation and later the 
unloading of excessive inventories played an important part. The National 
Association of Purchasing Agents has reported to us within a month current 
conditions which appear to threaten a repetition of the post-World War I 
catastrophe. For this reason, I believe that there is a need for inventory 
controls at this time and that this need will exist beyond the end of the year. 
The only sure way of making inventoi-y controls unnecessary seems to me to 
be an increased supply of goods brought about through continued and increased 

Apart from its general effect on economic stabilization, the hoarding of 
scarce materials by some producers deprives others of an opportunity to put 
those materials into employment-creating use. Such hoarding is likely to 
impinge with particular severity on small business concerns lacking the resources 
to compete effectively in a buyer's scramble. It has been and will continue to 
be a major element of War Production Board and Civilian Production Admin- 
istration policy to minimize such scranil)les, hoarding, or preemptive buying. 

We have consolidated our manufacturing inventory limitations in a single 
document. Priorities Regulation 32, which is x-eviewed semimonthly to remove 
from control materials no longer .scarce and to tighten control on other materials 
where needed. We also expect to con.solidate and strengthen existing inventory 
controls over distributors. Enforcement of these controls will be the principal 
responsibility of our field compliance force of 350 men. 

(4) Priority assistance to break hottlenecks which impede the reconversion 


Our primary aim in handling bottleneck items is to obtain the most rapid 
possible increase in their output so that industry may proceed without fear of 
material shortages. Until this objective is achieved, however, it has been our 
experience that it is important to be able to step in with an occasional use of 
the priority authority in order to break specific reconversion production bottle- 
necks or to assure minimum needed supplies to small plants, particularly those 
operated by veterans. On the whole, industry is doing a fine job in distributing 
28, which is used for breaking reconversion bottlenecks, we have had thus far 
scarce supplies equitably among consumers. Under our Priorities Regulation 
a gratifying small volume of applications. Since some material and component 
shortages will persist well into 1946, we feel it desirable to maintain in reserve, 
for very sparing use, the authority to break occasional bottlenecks and to relieve 
specific hardship situations. 

A few examples of the use of such bottleneck breaking authority during the 
past few months will indicate the type of purpose for which we feel it may be 
needed during the early part of next year. 

In one instance, a large automobile axle plant was being held up because of 
failure to obtain wooden floor blocks. This delay threatened reconversion and 
reemployment in a number of assembly plants, involving tens of thousands of 
jobs. The assignment of a CC rating to this small quantity of material avoided 
a serious delay in reconversion progress. 

In another case, a pilot boat had to be removed from service in one of our 
most congested eastern ports with a large volume of war traffic, owing to the 
break-down of a generator set and the wearing out of a special type storage 
battery. Available suppliers were contacted and the urgency of other orders was 
ascertained. It proved possible to expedite the delivery of the battei-y without 
a priority, but a rating had to be assigned to assure early delivery of the gen- 
erator set. By these means, the boat was returned to service in a few weeks 


rather than the period of several months which would otherwise have been 

Similar action has also been used in obtaining rapid delivery of X-ray equipment 
for military and veterans' hospitals. Another group of cases involves veterans 
returning to business. In one such case, a veteran returning to his pi'ewar business 
of producing electric fans was unable to get delivery on the bottleneck motors 
until well into next year. In this instance, it was possible to find an alternate 
supplier to give early delivery without using a formal priority. In another 
instance, a veteran returning to the photographic business needed $300 worth 
of drying machinery to replace worn out equipment. A preference rating under 
Priority Regulation 28 enabled him to resume business many months earlier 
than would otherwise have been possible. Such spot priority assistance is also 
occasionally needed in emergencies to prevent break-down in service of public 
utilities, food processing plants, or other basic services. In many such industries, 
maintenance has been starved during the war and delivery times on replace- 
ments are extended for beyond normal. This type of situation will in due course 
rectify itself as production is stepped up, but the authority for emergency priority 
action still appears necessary for some months. 

It should be reemphasized that Priorities Regulation 28 was not intended, and 
will not be used, as a substitute for individual self-reliance and resourcefulness. 
We do not want to encourage industry to come to the Government for priorities 
when the exercise of their own initiative wovild enable them to satisfy their 
needs. Applications are rigorously screened and are approved only where the 
need is demonstrated beyond question. The great majority of the cases thus far 
approved involve small quantities of materials to be used in small manufacturing 
plants. The exercise of this authority is sparing in the extreme and is main- 
tained only to adjust those few serious inequities which are inevitable in this 
transitional period of materials shortage. As production grows, the need for 
this instrument will disappear and its use will be self -liquidating. 

(5) The fulfillment of relief and other essential export programs 

Through cooperative arrangements with the Foreign Economic Administration 
(now the Office of International Trade Operations, Commerce Department), the 
War Production Board has taken steps to prevent the undue drain abroad of 
materials or products in short supply in this country. Such action will be con- 
tinued under the Civilian Production Administration. In certain types of cases, 
however, positive assistance must be given to exports to fulfill international 
commitments or to obtain supplies from abroad which are vital to reconversion. 

Certain crucial import programs cannot be carried through without incentive 
trade goods and necessary production equipment. These programs include tin, 
crude rubber, manila fiber, fats and oils, quinine and quinidine, and other prod- 
ucts. In many i^uch cases, money alone is no inducement to the foreign pro- 
duction; it must l)e supplemented by goods such as textiles, household utensils, 
bicycles, small hand tools, etc. Restoration of production requires prompt 
delivery of such items as heavy dredges, tiansportation equipment, tractors, 
power shovels, machetes, and the like. Since the affected foreign areas are often 
not long-run postwar markets, industry is sometimes reluctant to provide sup- 
plies without Government action. In such cases, the existence of the priorities 
authority, which is used only when needed, makes it possible to insure speedy 
delivery of these materials and to obtain the most rapid possible increase 
in these important reconversion supplies. 

Assurance of minimum supplies for relief and rehabilitation in war-damaged 
areas is a matter of high public policy repeatedly reaffirmed by the President. 
Such requirements include not only supplies for UNRRA, but also for the 
European paying countries, such as Belgium, Holland, and France, and for 
the barest minimum needs of the Philippine Islands, China, and the Nether- 
lands Indies. The relief programs include textiles and clothing, hospital equip- 
ment and medical supplies, coal-mining machinery, transportation repair parts, 
and certain types of factory equipment. Here, too, the affected areas are often 
not sufficiently attractive as long-run postwar markets to be assured of supplies 
without priorities assistance. 

iPriorities assistance has also occassionally been found necessary to meet 
other essential export requirements. For example, it was recently necessary to 
obtain some equipment for a butter plant in New Zealand to keep up the flow 
of butter to our forces of occupation in the Pacific areas. In a number of coun- 
tries, the packing of meat and other food products, some of which is used by 
our Army overseas, is dependent on tin plate supplied from this country. 


(6) Allocation for production of loiv-priced items essential to the stabilization 
As a part of the general stabilization program, tlie War Production Board has 
worked with the Office of Price Administration in developing the fourth quarter 
low end clothing programs. It is our sincere hope tliat production will be suffi- 
ciently increased by the end of the year so that continued action of this type 
will no longer be needed and that ample supplies of low-priced clothing will 
again be flowing into retail channels on a free market basis. At this time, it 
is too early to predict accurately the first quarter production and distribution 
situation. Should it be determined necessary to continue these programs beyond 
the end of the year, the Civilian Production Administration should have the 
necessary authority to channel scarce fabrics into the hands of low-cost clothing 
manufacturers and to distributors of low-cost piece goods for resale. 

Mr. Small. The Second War PoAvers Act is the real weapon with 
which the War Production Board and the Civihan Production Admini- 
stration is able to accomplish its task. The use of the title, the use 
of the powers under the title, I believe the War Production Board 
and certainly the Civilian Production Administration since we have 
been in, have used sparingly, as sparingly as they could, and the policy 
still remains to use them sparingly for so long as they exist. 

Last spring we had in the War Production Board about 650 orders 
and schedules. As a matter of fact we had the whole economy of the 
country tied up by control and regulations. We had to. If we had 
not, we would not have gotten materials and products flowing to the 
places where they had to go. I think the thing worked out fairly 
well. We did get the production. We were able to meet emergencies 
during that period without disrupting the flow to other tilings. I 
will give you a typical example. Before the invasion in Normandy 
there was a terrific demand for additional landing craft. That pro- 
gram hit across the whole economy here. It bothered everything. 
It was going to upset the whole picture in one way or another. By 
judicious handling of the powers we had, we were able to accomplish 
the landing program, meet the goals we had to have, and still accom- 
plish everything else that we did have to accomplish. To an engineer 
looking back at it it was an unbelievable performance but it was 

We had, as I said, about 650 orders at the beginning of this year 
We had at the peak of our personnel about 23,000 people involved in 
this thing either here in Washington or in the field. By VJ-day we 
dropped the number of outstanding orders very substantially. We 
had also dropped in personnel. We had dropped out of the 650 orders 
by VJ-clay 500, 500 had been eliminated, showing that we were giving 
up these powers as rapidly as we felt we could. As of today we have 
about 50 orders outstanding, including about 20 schedules which were 
separate bits of the orders. We have gone down from 650 to about 
70 controls of that kind. We dropped from 23,000 people at the peak 
to 11,500 at VJ-day. We are down to about 3,500 as of today and we 
will be down to 2,100 as of December 31. 

In other words, both personnel-wise and by specific orders that we 
have in force we have demonstrated that we are trying to set the 
economy free wherever we can do so without chaos, wherever we can 
do so without putting obstacles in the way of conversion that would be 
extremely serious and creating conditions that would greatly upset 

We have removed those controls by the thinking of a great many 
men who are expert in the particular materials that are short, and 


who are experts in the method of handling the materials you get, 
the thin supplies spread thinly and equitably. The timing of the 
removal of the controls has been open to a very considerable amount 
of criticism. Back last year and early this year, a great many people 
were screaming to high Heaven that we were going to hold on to these 
controls forever, that we were going to regiment industry. When 
the time came to lift these orders — in our judgment safely lift them — 
people all over the place reversed themselves : "You ought to lift all 
the orders but clon't lift the one that affects me. You ought to give 
up priorities, but let me continue to have priorities so I can ride the 
gravy train." 

That psychology has been very clear as we have gone along during 
the last 7 or 8 months. 

Mr. Lynch. That applies to taxes, too. 

Mr. Small. That is human nature. 

Mr. Lynch. That is right. 

Mr. Small. We set the policy and told the Congress of our policies 
repeatedly, that it is our intention to lift these controls just as rapidly 
as we can without really interfering with reconversion. In doing it 
we take some risks, but we do not take a risk that we think is too 
serious. We will err on the side of lifting the control rather than err 
on the side of holding on to the control. 

Mr. Walter. Don't you think that all controls can be removed by 
June 30 next year? 

Mr. Small. I am afraid not, unfortunately, 'Mx. Chairman. I am 
very certain by June 30 next year you will find conditions are such 
that in your judgment, or at least if I were sitting in your seat, in 
my judgment, at that time it would be very unwise to lift, for ex- 
ample, the control over tin. That just simply is not going to be 
possible, there is not enough tin to permit unrestricted use of it. 

Mr. Walter. Well, by that time it will be evident to everyone just 
where the shortages are. 

Mr. Small. That is on the individual materials. 

Mr. Walter. Yes. 

Mr. Small. Well, no, not quite, because I would say today that 
steel is in a pretty good position. We are still short of some forms 
of steel. Production is coming up. The pipe line is being filled and 
we are getting steel spread around pretty well. The number of re- 
quests that we get in for help on steel is not great. But let there be 
a coal strike or a steel strike and you have immediately got a far 
worse condition than we had at any time during the war. 

Mr. Worley. Do you anticipate any such strikes? 

Mr. Small. Speaking as a fellow who reads the newspaper, I would 
say they are under discussion. Whether they will come about or not 
I could not prophesy. 

Mr. Worley. That will slow down our reconversion even more so, 
will it not? 

Mr. Lynch. What do you mean by "reconversion" ? 

Mr. Small. Reconversion is getting back our industrial plant from 
its use on direct war or war-supporting industries into purely civilian 
production in great part. There is still some war-supporting that 
goes on. Strictly speaking, reconversion applies to a plant which 
converted from washing machines to guns or tanks or whatever. It 
has now returned to all-out production of washing machines or some- 


tliin<j else. That is not 100 percent true, but many, many plants were 
working on war goods ; for example, I will give you one that is quite 
simple to understand : the textile mills. They were producing textiles. 
They are continuing to produce textiles. You say we have got no re- 
conversion problem. On the contrary, the fabrics that they used in 
special types of uniforms required adjustment of the looms to a degree 
that it has taken us, from the time of cutting back from military con- 
tract, about 4 months to get into the production of civilian-type fabrics. 
That is almost as much reconversion as it is to change over an auto- 
mobile plant from tanks to automobiles. 

Mr. Lynch. Do you mean to say that it takes 4 months to turn tex- 
tile fabrics back to civilian production? 

Mr. Small. No, not all, but some of them. 

Mr. Lynch. I think the testimony has been that not more than 15 
percent of the industry of the country has to have real reconversion. 
That is the reason why I asked you before what you meant by recon- 
version. I think that is tlie most currently misused word that we 
have today. Don't you think that the majority of business in this 
country is fit now to proceed in their own lines of they care to go? 

Mr. Smai^. No ; not the majority. I think, Mr. Congressman, that 
a very substantial portion is. Others are almost ready. They have 
been adjusting their lines, getting tools out, equipment out, stocks of 
other things out and new stull' in; but reconversion was going along 
picking uj) speed much better than we had ever dared liope between 
VE-day and VJ-day; and by VJ-day, late in July and August, the 
readjustment of the resources that were released into production of 
civilian things was proceeding at a much faster pace than any of us 
had hoped. That pace has now slowed down. 

Mr. Lynch. That has slowed down in large part, especially in the 
textile supply, because of the repeal of the excess-profits tax ; that has 
caused them to keep skeleton forces, and they won't go into production 
until after the first of the year, 

Mr. Small. No; the figures do not quite bear that out. The pro- 
duction of textiles, cotton textiles, has been dropping steadily for 2 
years. That has been due to dropping of a number of workers. Many 
Iiave gone to Selective Service, many have gone to war plants, and 
many of them may have gone because of selectivity on the part of the 
mills releasing peo})le. In rayon, our production is aboA^e — it is about 
three times — what it was prewar; and it is maintaining its position. 
On woolens, it is going up ; and it is well above what it was 6 months 

Mr. Lynch. Well, the general impression seems to me in the com- 
munity from which I come, that is New York, that all these firms are 
not manufacturing and will not manufacture until after the first of 
the year because of the repeal of the excess profits taxes. They have 
made enough monej' for this year and next year with the lower taxes 
they will start in and take orders for next ^^ear. They won't even take 
orders in New York now. 

Mr. Small. Well, it is a good, simple slogan to use that, as we have 
used many simple slogans in political campaigns, which does not mean 
that it is true. We have made an investigation of textile mills be- 
cause that is the first place where slowing down or withholding as we 
call it, for tax purposes, will show up. We find that the inventories 


of finished textiles in the mills is less than 2 weeks as compared with 
6 to 8 weeks prewar. I think they are running on a low inventory. 
I think some mills are withholding for tax reasons, but I do not be- 
lieve it is substantial. We have gone into the converters, the next level 
up from the mill where they take the goods and print and color them. 
We have investigated a number of the converters and we find that their 
inventories of finished goods are a month or less. Considering the 
number of types of fabrics that they have, got, the choice of fabrics 
they offer, I think it is a pretty good record. It is far less than in 
prewar. The indication is that there are probably more converters 
withholding for tax reasons than there are mills, but in neither in- 
stance is it a serious threat to our clothing program. There is enough 
fire behind the smoke which you are talking about to give it some 
semblance of truth, but it is not the real reason why we are having 
trouble with clothing. Tlie real reason is that in spite of the fact 
that textile production is either close to or in some cases as in the 
case of woolens, above the past production, the demand is simply 
enormous. Tlie people have just got to spend their money. They want 
clothes. Now we instituted some time ago — you are all familiar with 
the fact that low-cost clothing has not been on the shelves of the stores 
for many, many months. It has been a great hardship to the little 
people — the housewives and small children. You are beginning to 
see, if you will read the ads — and I recommend to you that you do 
read the ads — you are beginning to see $1.98 dresses for children, 
$3.98 and $5.98 dresses for women. You are beginning to see shorts 
at $0.85. I have not seen any shorts advertised under $2.50 or $3 for a 
long time. But you are beginning to see these things coming. 

Now, after all, this program of throwing cloth into the low-cost 
brackets, into suits that wholesale below $21, into women's dresses 
that wholesale at $5.98 and below, only really started after VJ-day 
because we did not have enough cloth before that. We did start after 
VJ-day. It takes time to get the cloth in the mills to the converter, 
to the maker of the garment, to the store. The shelves are empty 
of this particular kind of stuff. You have got to fill that pipe line, 
but there is a trickle beginning. Week by week and month by month 
I know you are going to see more low-cost garments on the shelves. 

Mr. Walter. Couldn't the Civilian Production Administration do 
something to alleviate that condition by directing that materials go 
to companies manufacturing low-cost garments? 

Mr. Small. That is exactly what we have done. Take the case of 
woolens, for example. We have directed 40 million yards of wools 
and worsteds out of a total supply for this quarter of around 100 to 
110 million into the very class of garment that I am talking about. 

Now, we are getting results on that, but the demand is so terrific that 
the minute the stuff hits the stores it is sopped right up. Therefore, 
you go into the store the next day and they have nothing there, but 
progress is being made on it. It is not as much as I would like. 
You cannot cure a deficiency like that overnight. It is impossible. 

Mr. Lynch. How does the new type of goods compare in quality 
with material of the same type prewar ? 

Mr. Small. You mean in the garments ? 

Mr. Lynch. Yes. 

Mr. Small, I think on the whole it is down-graded. 


Mr. Reece. That is only natural. 

Mr. WoRLEY. The price is about the same. Well, Mr. Lynch brought 
out a good point. Some concerns on account of the excess-profit 
brackets are waiting until next year in order to produce. Aren't 
they running a risk of pretty strong competition from somebody else 
in case they take that action ? 

Mr. Small. Yes; but in the garment trade that is not too great 
because the demand is so overwhelming I think they can sell anything 
after the turn of the year they could sell today. 

Mr. E.EECE. In line with the wise counsel that our friend Mr. Welch 
put out a while ago about being too pessimistic, I think it applies with 
reference to the comments on the subject matter now under discussion, 
which is that it is unfortunate for us to disseminate that view too 
widely unless there is sound ground for it. As you have said, there 
may, in certain instances, be some basis for it, but if the over-all situa- 
tion does not justify that observation then I question the advisability 
of placing too much emphasis upon it. 

Mr. WoRLEY. You are of the opinion then, Mr. Small, that rela- 
tively few concerns are doing that ; is that right ? 

Mr. Small. Out of the many thousands involved relatively few are 
doing it, and to show you how these generalities disappear when you 
get into specifics there are a very great many firms whose fiscal year 
does not end at the end of the year. My belief is — I will put it this 
way — after the compliance investigation — we have had three or four 
hundred men going around and digging into this and getting reports 
and showing the exact inventories of these people, my opinion is that 
the withholding at the mill and converter level has not been of sub- 
stantial effect. It is self-curative in any event. 

Mr. Lynch. Will you yield a moment ? 

ISIr. WoRLEY. Yes. 

Mr. Lynch. Besides the mill and converter you have the garment 
makers. Before it gets down to the actual making of the garment 
you have three or four steps, haven't you ? 

Mr. Small. The mill weaves the fabric. In the case of gray goods 
a converter buys the fabric from the mill and sends the fabric to a 
dyer and printer and tells him how they want it dyed and printed. 
They bring the fabric back from the dyer and printer and turn it 
over to the garment maker, who makes the clothes. 

Mr. Lynch. Now before it gets into the hands of the garment 
maker where labor is, you have the manufacturer and the converter. 
Now how many cases did you people examine in New York City? 

Mr. Small. On which level? 

Mr. Lynch. On the level of the converter. 

Mr. Small. I think about — I would have to check this, Mr. Con- 
gressman, but I think 27 or 30. 

Mr. Lynch. How many converters are there in New York? 

Mr. Small. There are an awful lot but if you check the substantial 
ones, the larger ones, you get a pretty clear picture. They are the 
ones who really hurt you, not the little fellow. 

Mr. Lynch. You mean to say that your examination of 27 or 30 — 
how many did you find that were withholding? 

Mr. Small. My recollection is that we found two out of the com- 
plete list who could be criticized for having too much on hand of 



finished goods. Then when you began to dig down into that you 
found out there was usually a reason why that was; it was a cloth 
which they had made for some Army or Navy use that they could 
not sell to civilians. For example, a Melton for overcoats and civilians 
do not want it because it costs too much. 

Mr. Lynch. Only two could be criticized, and those two had an 
explanation ? Is that what you said ^ 

Mr. Small. Only two were reallj^ open to criticism, and we found 
none so far that we could take into court, which is the touchstone 
that we have to use. 

Now I have no doubt that there are a large number of converters, 
particularly little fellows who are on a converter level, including the 
dyer and printer, who may be withholding. In addition to that, as 
you probably know, coming from New York, you have the situation 
complicated by the dyer and printer strike up there. That is causing 
a lot of goods to be held because they are frozen. The unions won't 
let them go in or out. They are frozen where they are. 

Mr. Lynch. How long has the dyers and printers strike been going 

Mr. Small. It has been going on a good many weeks. 

Mr. Lynch. Not enough to stop production up there. 

Mr. Small. Stop production where? 

Mr. Lynch. In New York. 

Mr. Small. Oh no ; that is onlj' an area up in the northeast, but a 
very substantial area. It has definitely affected our ability to make 
men's suits because of the inability to get linings. 

Mr. Lynch. Would you say that the shortage in these woolens and 
clothing materials generally is due not to the withholding by firms 
but rather by the action of labor? 

Mr. Small. I would say that the shortage of fabrics throughout 
the country is due to the fact that the demand is five or six times the 
possible supply. 

Mr. Lynch. Of course we all know that because it is my informa- 
tion that manufacturers are not manufacturing for one reason or an- 
other and for no reason as far as labor is concerned. They are simply 
not manufacturing, either because they claim a ruling won't let them 
make money or else they are withholding on account of expecting to 
go into bigger profits next year. Is there anything in your investiga- 
tion to substantiate that? 

Mr. Small. The investigations that we have made, as I told you, 
at mill level, shows no evidence at all. You take the rayon mills. 
They have less than 4 days' stock on hand. That certainly shows 
a very rapid movement out. 

Mr. Lynch. Is there a rapid movement out or no movement in ? 

Mr. Small. No, with production maintaining its current pace which 
is a little better than it was, it means that they are getting, their in- 
ventories out as rapidly as they possibly can. On the cotton mills, 
production is increasing but is not going up substantially. They have 
less than 2 weeks' supply of finished goods on hand. When you get 
into the converter level, as I said, you will find some withholding. 

We would be delighted to get somebody who has a widely adver- 
tised product who is willfully violating our regulations and nail his 


hide to the wall where everybody in the country could see it, because 
that would stop any of that sort of thing and we would get the goods 
on him if he were doing something against the law. We can't find 

Mr. Lynch. I could find them for you. 

]Mr. Small. We would be delighted. 

Mr. Walter. Proceed, Mr. Small. 

Mr. WoLCOTT. Mr. Small, in the course of your discussion I hope 
you will comment on how ])rice control has interfered if it has at all, 
in the reconversion and full production. 

Mr. Small, Well, price control as you know is entirely outside of 
the jurisdiction of the agency which I head. Price control, OPA, is 
accused of a multitude of crimes and no organization is perfect. Un- 
doubtedly there are places where pricing is not an incentive to pro- 
duction, where people are holding back. I will give you an example 
of that. One of the things most bothersome to us is the shortage of 
housing; and the shortage of housing is terrific. We have got a need 
of perhaps 121/2 million houses over the next 10 years. The most 
that we can possibly hope to build during the calendar year of 1946 
is between 400,000 and 500,000 houses. 

Mr. WoRLEY. And you need 10 or 12 million ? 

Mr. Small. We could use 10 or 12 million, I certainly would not 
believe it is sound for the country to build 10 or 12 million in 1 year. 
It should be spread out, but we could use II/2 million or a million and 
a quarter and relieve a lot of hardship that is going on today. One 
of the reasons why we cannot build more houses in 1946 is the shortage 
of certain materials. Take a typical material, cast-iron soil pipe. 
Before the war, back in 19:^9 and 1940, there were 52 foundries pro- 
ducing cast-iron soil pipe. They were producing 585,000 tons of soil 
pipe a year. If we had 585,000 tons of soil pipe during 1946 we would 
not have any shortage of soil pipe. That would be plenty, all we 
could possibly use. But the first half of this year up to June, we had 
about 28 foundries working. The rest were closed down, stopped 

Mr. WoRLEY. Wliy were those closed down ? 

Mr. Small. A multitude of reasons if you investigate it. You will 
find that Joe Doaks died and his widow does not know how to run 
the business. She has closed it down until after the war is over. Or 
Jim Smith was called into service and he was the real manager of 
the plant and so the plant closed down. 

Mr. WcRLEY. There is no reason common to all? 

Mr. Small. People say that the price ceiling closed it. That is 
the easy answer. That is a generality. When you get down to 
specifics, you find there are other reasons involved. By June of this 
year we were producing less than 175,000 tons a year, from 28 
foundries. We just simply have to get more production of soil pipe 
or it is going to be a controlling bottleneck of housing. 

We went to work on it. We went after the individual foundries 
to find out what they needed to increase production. They needed 
new tools, handling equipment, and one thing and another. By 
September we boosted it from 12,000 tons a month to 17,000. By 
October it was up to 19,000, November up to 22,000 and I think by 
the end of the year we will be above 26,000 and we will be well on our 


"way to 30,000. In other words, we are well on the way to curing that 

In the meantime by one method or another, in dealing locally 
Avith people, we have managed to get five or six of these foundries of 
the largest size opened up because we said, "All right, we will go in and 
help you with the equipment and to expedite it." 

Mr. Walter. In your agency do you ever recommend that it be 
made possible to increase wages for workers ? 

Mr. Small. No, I was going on, if you will permit me, Mr. Chair- 

Mr. AV ALTER. Yes, go ahead, 

Mr. Small. To say that we found upon our investigation that 
the concensus of the industry — and we were talking to pretty sound, 
sensible people — was that the price ceiling was too low. We there- 
fore went informally to the OPA and recommended a j^rice in- 
crease, said that our investigation showed that one was needed if 
we were going to get any production. They increased the price of 
soi? pipe $3 a ton. 

Now, an increase in the price of soil pipe of $3 a ton means that 
on a small house the cost of the house goes up $0.70. On a big house, 
$8,000 or $10,000, it goes up $3. We feel that we could stand a rise of 
$3 in the cost of a big house to get production. 

Mr. Simpson. Will the OPA let you raise the price ? 

Mr, Small. They did raise the price. 

Mr. Welch. Is it not a fact that the Government has large quan- 
tities of plumbing, hardware, lumber, and other materials in stor- 
age in different sections of the country ? 

Mr. Small. With my fingers crossed, because I might be proved 
AN-rong in some instances, I think the amount of lumber held by the 
services that is usuable for housing is negligible. There is a con- 
siderable amount of lumber held by the services for boxing and 
cratijig that they got to move the stuff overseas or that they used 
to stoi'e the stuff' coming back, but the record we have from the serv- 
ices shows that that is not a solution to the lumber difficulty, and I 
tliink a couple of committees of Congress have investigated it. 

Mr. Welch. What percentage of lumber now ])iled up in differ- 
ent sections of the United States could be used for building homes? 

Mr. Small. Oh, I suppose if you take all the bits and pieces 

iMr. WixcH. I do not mean bits and pieces. I mean large stacks 
of lumber piled 15 or 20 feet high. I have been making some ob- 
servations myself. 

Mr. Small. The figures that we have sliow that tlie Army, Navy, 
Marine Corps, altogether have less than 5 million feet of lumber 
of all types, including; boxing and crating wiiich is the greatest pro- 
portion, and that they went out of the market at VJ-day. They are 
not buying any lumber whatever and that stock of 5 million feet will 
soon be used up, by next year. Stopping buying is an easier method 
than trying to declare surplus and get it out through those channels. 

I am convinced that that is not — I do think that is going to be 
another ''butter" where we found enormous stocks hoarded up. They 
look big now. 

Mr. Welcih. I know enormous stocks exist in the San Francisco 
Bay area. I know further that onl}' recently public opinion brought 


them to a point where they began to distribute the vast stores of 
lumber and other buikling materials in order to help meet the de- 
mand for homes, particularly for returned servicemen. 

If the same conditions apply throughout other sections of the United 
States it would far exceed your figures. I do not dispute that but 
I happen to know of conditions in the San Francisco Bay area. 

Mr. Small. Well, that is a shipping point and you would have a 
concentration there, 

Mr. Welch. I know where in ])lock after block in that area lumber 
is stacked higher than this room by far and in some cases is beginning 
to show dry rot. 

Mr. Small. Of course, any figures we give you are figures we 
receive from others, from the services, and so forth. We have gone 
into this several times. Several committees have had this particular 
point up. I think "the figures are pretty sound. We produce nor- 
mally around 2 billion feet of lumber a quarter, and the total stocks 
for all purposes as I say were less than 500,000,000, which is less than 
a month's production. 

Mr. Reece. Will you yield to permit me to ask a question? 

Mr. Welch. Yes. 

Mr. Eeece. In line with the thought that you are discussing, have 
you made a survey to determine the quantity of consumer goods on 
hand in the installations which are operating under the War Depart- 
ment — that is th.e ordnance companies and rather large installations? 
I might say before you ansAver the question that in some of these in- 
stallations there appears to have been large quantities of supplies, 
such as sheets, pillow cases, towels, soap and paper of different types, 
tissues. Instead of declaring that surplus and letting it go into con- 
sumer channels a special effort lias been made to get other Govern- 
ment agencies to take that over, stocking up so as to meet their antici- 
pated requirements for a considerable number of years. Has your 
office gone into that question or does it come within your jurisdiction? 

Mr. Small. It does not come within our jurisdiction. We have 
gone into it perforce, but it is not within our jurisdiction. The figures 
are available. The Army has large books of figures which they will 
be glad to give you on their inventories of these individual items, 
so has the Navy, so has the Coast Guard, and the rest of the agencies. 

Now, we have said to the Arm}?^ and the others: "On certain things 
which are short in the civilian economy we want these declared surplus 
without delay, no matter what your paper work is, get these done 

Mr. Reece. My information is, Mr. Small, that many of these in- 
stallations before they actually declare the material surplus they 
make a special effort to shop around to see if they cannot get some 
Government agencj^ to take it off their hands. Those agencies then, 
being governed by just ordinary human beings, are seeing an oppor- 
tunity to get supplies without cost and are building up tremendous 
inventories, in some instances a sufficient quantity maybe to operate 
5 years or more. I do not know just what agency should give attention 
to it, but it is something that really deserves attention and I am 
not saying that as a criticism of any department or any particular 


Mr. Small. Well, I think you have a cure for that that is quite 
simple. Under the law which the Congress passed they are forced — 
the Surplus Property Administration is forced to offer' these agencies 
the supplies first. 

Now, the amount of money that they can spend on these individual 
things must come out of the appropriations that Congress has given 
to them, and I think you will find that the Budget Bureau would be 
right on their necks if they were storing up 5 years' worth of stuff 
out of a current appropriation. 

Mr. R.EECE. Weil, no money is involved except the cost of trans- 
portation, and in many instances it is transported free. The receiv- 
ing agency pays nothing for it. In some instances, of which I happen 
to know, and tliat does not mean there is any material going to waste, 
but it is a question of whether it is being put to the greatest use at 
the present time. 

Mr. Small. That is entirely outside of the jurisdiction of this 

Mr. Reece. I can see that. Possibly I should not have raised it but 
it is a matter of some importance. 

Mr. Small. Yes, very great importance. Take, for example, one 
of the things ver}^ short in this country, men's shirts. The Navy 
about 3 weeks ago declared surplus to the Surplus Property 8,000,000 
men's shirts. My understanding is that those 8,000,000 shirts in that 
short space of time have already been offered to the trade and are 
beginning to move out into the retail channels of trade. They also 
offered — my recollection is — 8 or 9 million pairs of dungaree trousers, 
work clothes, and that those also are moving out. That is a typical 
example that I happen to know about where a civilian shortage is 
being readily relieved to the extent the services can. 

Mr. WoLcoTT. Mr. Small, I asked a question to begin with as to the 
influence which prices have on reconversion. We have seen some 
examples in the textile industry. The shops are full of white sport 
shirts selling from $5 to $10. You cannot buy a white dress shirt to 
save your life. Now, why can't the cloth be channeled into the manu- 
facture of dress shirts instead of high-priced sport shirts? Of course, 
price is the motivating influence there. They can put a little styling 
on the shirt collar and another button on the sleeve and call it a 
sport shirt and get $5 or $10 for it, when perhaps they would sell the 
same material in a dress shirt for $3 or something of that nature. 

Mr. Small. That has been one of the serious problems for a long 
time in that field, where you certainly had a drift upward in prices. 
People starting up in business would say, "I want to make $5 shirts 
or $8 shirts," and the fellow who makes the $2.50 shirts could not 
get any cloth. 

The Civilian Production Administration in many sections has allo- 
cated — given priority ratings to a very large number of millions 
of yards of cloth to go into shirts. We are going to begin to get some 
shirts. There has been the same treatment with shorts, undershirts, 
women's dresses, children's clothes, and so forth. That we did by 
specific allocation to specific companies and said: "You can have 
100,000 yards of this kind of cloth if you will make shirts out of it 
for less than $2.50 apiece." It is beginning to work. 

99579— 46— pt. 7 12 



Mr. WoLCOTT. There has been— vou have had trouble in the textile 
industry ever since the Btmkhead Control Act, haven't you? 

Mr. Small. Yes. That has been 18 mor.ths. Again, you are get- 
ting over into a field tliat is outside of our jurisdiction, but we are 
doing our darndest to help out in the situation. 

]Mr. WoLooTT. Yes. I know. 

Mr. Walter. Mr. Small, you stated that there are 72 regulations 
that you feel ought to be continued. Can you tell us what they are 
and why? 

Mr. Small. Well, not quite, Mr. Chairman. We have on the books 
today 50 orders and 20 schedules. Now, I will just go over some of 
these orders for you and show j^ou why I think we still need these 
particular orders' on the books as of today. By December 31, some 
of these will have gone. If the Second War Powers Act is continued, 
more of them will be gone and most of them will be gone by June. 
We will have only a very few — that is assuming that we get produc- 
tion — if we do not have new shortages developing. One of these is 
L-25 covering the export of automobiles and trucks. I do not think 
we dare allow unrestricted export as of today until Ave get some of the 
demand filled back here. 

Another one is molasses. There is a woi-ld shortage on molasses. 
If we did not have this control order, we would not have the distribu- 
tion of molasses that we must have if we are to fill all the essential 
needs in the country. 

Another is Quechua bark, that is quinine. There is a serious world 
shortage of quinine. 

Another is tapioca flour. Another is lead chemicals. Another is 
resin. Y\"e have an extremely short position on resin as of today and 
I think that order will probably have to remain on the books — it may 
be possible to relax it somewhat but if the Second War Powers are 
continued I think that order would have to remain on the boc^ks until 
the new crop comes in. Avhich will be next spring sometime, March, 
I think. 

We have L-103 on glass containers. That is a sim[)lification order. 
We have reduced the number of styles and sizes of glass containers 
because we get more ])roduc-tion that way. People can get along with 
the standard container. If we had not we would have more of a 
shortage than we have today. 

M-81 is on caiis, that is because of tin. The order on collapsible 
tubes is also because of the shortage of tin. If we permitted unlimited 
production, our stockpile would disappear. 

Another is on the textile bags. If we can get inci'eased production 
on burlap there will be enough bags to supply agricultural needs and 
we won't need that order. 

L-269 is on mining equipment. The main use for that today is the 
deep-cut coal-mining equipment to be directed into the mines that need 
it most, where we can really get production. Therefore, I think that 
order should stay on. 

Corundum is another. There is a world shortage of corundum. 

Another is rough diamonds and another is uranium. I do not think 
we dare lift the uranium order as long as we have the power to hold 
on to it. 

Mr. WoRLEY. There is quite a shortage on that, isn't there? 


Mr. Small. We do not permit its sale. 

We have an order on paperboard and one on newspaper print. 
That order is necessary as there is a considerable shortage of news 
print, far less than would probably be called for if news print were 
set free. If yon lift the order today, I am afraid the fellow that 
would suffer would be the little fellow, the little newspaper. He 
might have a hard time getting his paper published. Yet on the 
other hand, I think that order will have to be lifted as soon as we 

We have another order, M-293, for scheduled products, which is 
an insurance order. We do not use it at the moment but will if the 
need arises, 

R-1 is on rubber. We have not enough crude rubber and I expect 
some power will have to continue beyond June of next year, just as 
I expect it on tin. 

M-63 governs the import of strategic materials. Through the use 
of that order, we control the imports and prevent in many instances 
a very drastic price rise immediately. If we lifted the order, we 
would get a world price rise. 

Mr. Reece. Would you permit a question there, Mr. Chairman? 

Mr, Walter. Yes. 

Mr. Reece. Has your agency or the agencies with which you have 
been working — and possibly I should ask our presiding officer, a dis- 
tinguished member of the Judiciary Committee, the question, rather — 
considered the feasibility of bringing together the various powers 
which you feel should be continued in effect and ask that they be 
continued rather than to suggest that War Powers Acts 1, 2, and 3 be 
continued in full ? 

Mr. Small. You mean as of the present time ? 

Mr. Reece, As of the present time. 

Mr. Small. We have tried unavailably to do that, to write up a 
simplified bill that would do exactly what^ you are talking about. We 
have failed completely to do it. 

Mr. Walter. I think the Judiciary Committee will probably do it 
for you, Mr. Small. It seems to me that it would be more palatable 
to our people to have legislation giving the authority that you are 
now exercising through the War Powers Act, Certainly we ought 
not to continue the War Powers Act when there is no war. 

The thing about it which impressed me was this, in talking with the 
legislative service, I found that they thought about 250 laws were 
affected by the War Powers Act. I talked with someone in the De- 
partment of Justice and they felt that there were perhaps more, and 
a mere casual investigation on my part convinces me that there are 
upward of 400 laws affected by the Second War Powers Act. What 
they are, nobody knows. 

Mr. Small. There is a list of the laws that you are referring to, 
Mr. Chairman. 

Mr. Walter. Yes, I know, and that is not complete, 

Mr. Small. But they are affected, as I understand it — Mr. Lom- 
bard, our general counsel will correct me if I am wrong — they are 
affected by the date of the termination of hostilities, not by the Sec- 
ond War Powers Act as such. Is that right, Larry ? 



Mr. Lombard. They vary. Some terminate by cessation of hostili- 
ties, some by specific dates, some extend on through 1946, some of them 
halfway through, some of them until the end of the war, all in differ- 
ent language, and the Judiciary Committee was going into that and 
getting a report. Mr. Snyder's office. Director of War Mobilization 
and Reconversion, is recommending those statutes which can be 
dropped immediately and those which should be continued. 

Mr. Welch. To what degree has the manufacture of synthetic rub- 
ber been curtailed in this country ? 

Mr. Small. As yet the lack of crude— you see, the crude stock pile 
is down to a very dangerous low limit. We do not see enough crude 
possibly in sight from abroad to permit any substantial relaxation. 
The result is that the demand for synthetic has not dropped off sub- 
stantially yet. It will as more crude becomes available. 

Mr. Welch. Well, imported crude rubber. 

Mr. Small. The major part of our crude is imported. 

Mr. Welch. Why should there be any curtailment of synthetic 
rubber by this Government while there is still a demand, as you have 
stated, for rubber ? 

Mr. Small. There would be no curtailment of production of syn- 
thetic as long as the demand was there, but when crude becomes avail- 
able — you take in a passenger tire. We use a small proportion of 
crude today in the tire. The life of that tire is not as good as it would 
be if you increased the proportion of crude and decreased the propor- 
tion of synthetic. You can get a better tire with more crude in it 
than you can without the crude, so if there were ample crude and the 
tire company was trjnng to produce the best possible product, it would 
reduce its sjnithetic in the passenger tire and increase its crude on 
synthetic as they now know them. 

Mr. W^ELCH. If there is a shortage of crude rubber, why has the 
Government curtailed or stopped the production of rubber in this 
country ? 

Mr. Small. I think that is mainly the law of diminishing returns on 
the thinir. We are getting some crude in. 

Mr. Welch. Well, if we can manufacture it here and give employ- 
ment to men and women in this country, why should we import crude 

Mr. Smaix. That would mean a subsidy. 

Mr. Welch. What ? 

Mr. Small. That would mean a subsidy. 

Mr. Welch. Well, we are paying a subsidy to keep men at work. 
If they are employed in the production of rubber and other materials 
instead of raking leaves — by the way, I hope that day will never re- 
turn, but one cannot tell what is ahead of us — I sincerely think it is a 
mistake to stop the production of either synthetic or rubber made from 
the guayule plant. 

Mr. Small. Shall I go on, Mr. Chairman ? 

Mr. Walter. Yes. 

Mr. Small. Is that a sufficient answer to you ? Because that is en- 
tirely within the province of Congress, if you want to pay a subsidy 
for that purpose. 


Mr. Welch, Well, Congress generally acts on recommendation of 
the departments. 

Mr. Simpson. A while ago I understood you to say that you people 
are looking for some manufacturer to nail to the wall. Will you elab- 
orate on that a little bit ? 

Mr. Small. Yes, sir ; one of the biggest dangers to the econom;y and 
to production and to reconversion, if you like, is the shortage of cer- 
tain materials. The thin supply must be spread thinly and equitably 
across industry. I am con^dnced that on most of these things there is 
enough, if everybody plays the game fairly, holds his inventories down 
to a bare minimum, I am convinced there is enough to see us over the 
hump until we get production up where supplies are adequate, but if 
anyone, or any substantial number of people, try to j)lay safe, try to 
hold on to more than they have to have, or who deliberately for specu- 
lative reasons try to hoard or exercise preemptive buying, there will 
not be enough and we will have artificial shortages created that will 
wreak havoc in industry. 

Therefore, we have the inventory regulations which say a man must 
not hold more than a certain amount of these scarce materials. 

Mr. Simpson. I see. 

Mr. Small. We do not include anything that is in free supply, let 
them buy all they want, but the things that are scarce, unless he is held 
down to a bare minimum for the good of all, we are going to have 
artificial shortages and the whole mechanism will in turn slow down. 

Now, that inventory regulation, Mr. Chairman, is one that is under 
daily review to be sure that we have not got anything on the regula- 
tion that is in good supply because we do not want to keep people from 
buying anything that they can buy without harming anybod}; but 
that it does cover the things that are dangerous to production. 

If you remember the last war, after Armistice Day, November 11, 
hoarding started, speculative buying started. Prices went up like a 
skyrocket and they went up until the middle of 1920. The net result 
was terrific depression that you saw later. 

Now, that can be prevented by the Government if it wishes to do it. 
It can be prevented by one simple mechanism, the inventory control. 

Mr. Simpson. That means no specific type of manufacturer that you 
wanted to nail to the wall ? 

Mr. Small. Anybody who is hoarding and who is thereby creating 
needless unemployment. 

Mr. Walter. In other words, you had in mind the speculator? 

Mr. Small. The speculator or the fellow who is trying to play too 
safe or who is not playing the game with his country. We are not a 
Gestapo trying to go out and get people at all. Quite the contrary. 
Most of the work we do is by agreement with people, rather than using 
the club on them. But anybody who does that particular thing and 
who hoards needless amounts of material I believe deserves exposure. 

Mr. Simpson. Have you found any of it? 

Mr. Small. No, with the exception of some cases involving small 
amounts. The big fellows either understand the importance of not 
doing it or are afraid of exposure. They are good citizens, but inven- 
tory control is an added safeguard. 



Mr, Welch. Mr. Small, you stated at the beginning that there is 
still a steel shortage in this country. Can you explain why there 
should be any shortage of steel at this time, now that they have prac- 
tically ceased building ships, tanks, and airplanes and other war 
materials for which steel is used ? 

Mr. Small. Yes, sir; the answer to that, Mr. Welch, is one that 
seems to be lost sight of most of the time. A great deal of the steel 
that was produced during the war for war goods was in kinds of steel 
that are not needed in the civilian economy. The machines that you 
used to produce that steel are now idle because nobody can use it. That 
is the reason that our percentage of production of steel, which is 
currently running around 79.3, I think, against the 100, is down. 
We can't reach 100 because nobody wants the heavy plates we used 
in ships. They want light sheets. We are running the light sheet 
capacity of the country to the maximum. We are producing all we 
possibly can and trying to increase the capacity to pi-oduce. There 
are a number of forms of steel of that kind that we produced during 
the war that there is no longer any market for and the machines 
are not adaptable to making anything else. 

Mr. Welch. Which particular type of steel is in the greatest de- 

Mr. Small. The one type of steel that runs throughout civilian 
industry is sheet, light-gage sheets. You use that in automobiles, 
washing macliines, practicall}' everything 3'ou can think of, and going 
beyond the light -gage sheets you get into galvanized sheets, which 
is light gage with galvanized coating. 

In those forms of steel we have an insatiable demand at present. 
We are spreading a thin supply thinly. We are trying to get 
enough to get by on into the hands of all producers but we have not 
got enough to give any producer all he would like to have. 

Mr. Walter. Jklr. Worley ? 

Mr. Worley. Mr. Small, are you 

Mr. Welch. Some agencies of the Government are very busy dis- 
couraging the decentralization of steel in this country. One of the 
finest steel plants in the world is located in the State of Utah. I do not 
know whether they are still producing or not. Every effort possible is 
being made to discourage the continuance of two plants built at 
Geneva and Fontana largel}' by the United States Government. Still 
we have a shortage of the very types of steel those plants are capable 
of turning out. 

Mr. Walter. We only have a veiy few minutes, Mr. Welch. 

Mr. Welch. It is a matter of economy and I think it should be 
looked into by our committee. 

Mr. Small. I can give you one sidelight on it, Mr. Welch. Geneva 
was equipped primarily to produce plate for the maritime program, 
the Nav}^ program on the west coast, and it has very limited capacity 
to produce sheet, and sheet is what everybody needs. It would take 
a lot of time to get over completely into sheet making. 

Mr. Welch. Not very long. It only took a few months to build 
Fontana, I recall very well. I was down there during the construc- 
tion. It should not require so much time to reconvert from heavy 
plate to light plate and from larger forms to angles, iron, and smaller 
types of steel necessary for construction purposes. 


Mr, Small. I can ojet the fifjures for you, Mr. Welch, but my im- 
pression is that it would require 6 to 9 months to do it and a great 
man}' millions of dollars. 

Mr. WcRLEY. Do you have any reason to be optimistic over our 
reconversion progress to date? 

Mr. Small. I think our reconversion progress has been considerably 
better than you get the impression from the newspapers or from 
reports that you hear. The little people, the bits and pieces here and 
there, all through industry are going ahead. They are making 
progress. As I mentioned earlier, when I first came in, about our 
September report, it showed that they were considerably ahead. The 
October repmis are just coming in from the companies, their October 
production. I cannot even hazard a guess as to what the figures will 
show, but I will be very much surprised if production during October 
is not considerably better than we would get the general impression 
from reatling the headlines of the strikes, the dramatic things, be- 
cause, after all, this country is not all just a few big companies and big 
industries. It is a lot of little people. Nevertheless, the strikes and 
labor troubles are having their effect, which will be felt later as the 
slow-downs occur due to lack of components, and so forth. I am 
far more optimistic, really, than the average citizen is today as to 
the progress of reconversion. 

Mr. Walter. Mr. Small, what recommendations do you care to 
make to this committee? 

Mr. Small. I strongly recommend, Mr. Chairman, that you sup- 
port the continuance of the Second War Powers x^ct, as amended by 
the House Judiciaiy Committee. That is my recommendation. 

Mr. WoRLEY. Do you recommend any additional legislation? 

Mr. Small. You mean on Second War Powers? 

Mr. WoRi>EY. On anything. 

Mr. Small. No, I think — and I might point this danger out to you — 
the House Judiciary Committee has recommended that the Second 
War Povvers Act as now amended be extended for a period of 6 months, 
that is, until June 30 next year. Undoubtedly there are some things 
which we can tell the Congress and tell you now, that there is no ques- 
tion about it that these troubles are not going to be ended by June 30. 

Mr. Simpson. How long do you think it should be extended for? 

Mr. Small. It would make it a lot easier if it were extended for a 
year. I think, we can get along with an extension of 6 months if the 
Congress understands that next lebruary or next March it should 
decide what powers are to be extended beyond that time. If the people 
think that the act — that those powers are going to stop as of June 30 — 
then about 3 months before that 3'ou are going to have something 
like we are having today, which is slow-downs and "Let's wait, let's 
not do an3'thing, let's drag our heels a little bit." You are going to 
have that same condition starting about March or perhaps April of 
next year. 

My recommendation would be that the Congress consider promptly 
wliat they are going to do about this as of next Jtme. I hope that by 
that time my own organization will be out of business because the few 
remaining things can be done in some other part of the Government. 
You do not need an organization of our size to accomplish that. Ac- 


tually, with the money that we have left in our bank roll, we are not 
going to be able to do much beyond next March. 

Mr. Walter. Mr. Folsom, are there any questions you wanted to 

Mr. FoLsoM. No, sir. 

Mr. Walter. Any members of the committee want to ask any 
further questions ? 

Mr. Lynch. I move we adjourn. 

Mr. Walter. The committee is adjourned. 

(Whereupon, at 12 noon, the committee adjourned.) 



House of Representatives, 
Special Commiitee on Postwar Economic Policy and Planning, 

Washmgton^ D. G. 

The special committee met, pursuant to call, at 10 : 30 a. m., in room 
1012, New House Office Building, Hon. Francis Walter (chairman pro 
tempore) presiding. 

Present: Representatives Walter (chairman pro tempore), Mur- 
dock. Lynch, Worley, Gifford, Welch, and Wolverton. 

Also present: Edwin B. George and W. Y. Elliott, consultants. 

Mr. Walter. The meeting will come to order. 

Mr. Seidel of the W. T, Grant Co, will make a statement. 


Mr. Seidel. I would like to make the same statement I made yester- 
day to the Senate Small Business Committee, and then after I finish 
with that, we can discuss everything that I am able to. 

My name is Robert A. Seidel, vice president and comptroller of the 
W. T. Grant Co. 

Our company operates 490 stores in 39 States, and we deal primarily 
in low-priced textiles and clothing and variety-store merchandise. 
While I don't presume that you would call our company small business, 
our average volume per store during the past year approximated only 

The primary problem we are faced with today, and this concerns 
all distributors, small and large alike, is inability to obtain consumer 
essentials of satisfactory quality in reasonable price ranges and in 
adequate quantities. 

We endeavor to distribute merchandise to consumers at the lowest 
possible prices, but we have been severely handicapped throughout the 
wartime period and currently by a series of OPA actions that have 
caused line after line of low-priced goods to disappear from the market 
and have forced drastic deterioration in quality in those lines that have 

It is perfectly clear that inadequate pricing provisions have played 
a major part in causing these goods to disappear. It is also clear that 
the current unrealistic, theoretical, and inequitable approaches to pric- 
ing problems are impeding production and liteially throttling indus- 
trial activity throughout the country. 




Presumably, OPA is actini^ in the interests of consumers and perhaps 
their intentions are to do so, but the fact remains that the bulk of their 
important regulations, particularly insofar as low-priced essentials are 
concerned, have worked in reverse and the end result has been a forced 
cheapening of quality and disappearance of goods, thus compelling 
consumers to purchase in price ranges much higher than those in which 
they would normally buy. 

The series of regulations to which I refer maj^ be briefly desci'ibed as 
first, the "rigid-freeze" technique, which plainly discriminated against 
the low margin producer; second, the "highest price line limitation," 
under which thousands of low-priced producers could not possibly 
operate; the "maximum average price plan," which fails to make ade- 
quate provision for mounting labor and material costs, notwithstand- 
ing the fact that it has been amended countless times; and now in addi- 
tion to these three, we have "cost absorption," simply a new name for 
the same type of unrealistic and inequitable ai)proach as has obtained 
throughout the past 3 yeare. 

Keep in mind that price indexes do not reflect quality deterioration, 
nor do they reflect production. Any appraisal of current living costs 
based on such indexes is therefore highly erroneous. 

OPA stubbornly insists that they are acting clearly in accordance 
with the Stabilization Act and the President's Executive Order 9599, 
and that the Administrator has little if any discretion except to adhere 
rigidly to September 15, 1942, price levels. 

Of course, as every housewife in the country knows, it is ridiculous 
to assume that the "line" has been held. 

You men in Congress must decide whether or not you want to con- 
tinue to countenance a forced cheapening of quality to meet a price 
ticket. .If you do not, you must insist on immediate major policy 
changes in the administration of the pricing agency. 

Of coui*se there are honest differences on pricing technique, but every 
reasonable person agrees that competent, equitable and clean-cut de- 
cisions are needed to encourage industry, to put men to work, and to 
produce goods quickly and thus counteract the inflationary trends that 
are now being aggravated by forced acute shortages induced by Gov- 
ernmental restriction. 

OPA would have you believe that they are making programs and 
they describe their low-end-goods program in glittering terms, but I 
will tell you that insofar as our company is concerned, the shortage 
of low-end merchandise is more serious at the moment than at any 
time during the war. 

Approximately half of our sales are obtained in dresses, hosiery, 
underwear, lingerie, draperies, domestics and yard goods, and in these 
important lines our total inventories on November 1 were less than half 
of what they were 1 year ago, and approximately one-third of what 
they were 3 years ago, and, gentlemen, we have purchased every single 
piece of low-end goods that we could buy. If we, with hundreds of 
buyers in New York, cannot get goods, it is no wonder that small 
outlying stores cannot buy merchandise. 

OPA continually attempts to justify their actions by preparing 
charts and booklets showing national averages in total industry sales 
and profits. Ordinarily, for the retail business, they use the figures 
of the controllers' congress of the National Retail Dry Goods Associa- 


tioii. These are the figures of about 250 large successful stores. They 
are completely meaningless when applied to the operation of our 
company, for example, and of course are miles away from the actual 
operating experiences of the hundreds of thousands of small stores 
throughout the country. 

Every letail trade association in the country has consistently objected 
to OPA's using national average figures, but they insist on doing so, 
and they fail to give any consideration whatsoever to the wide dif- 
ferences in margins and operating expense rates of the various types 
of distributors. For example, the gross margins of the 250 stores 
in the Dry Goods Association vary from a low of 32.8 percent to a high 
of 45.7 percent. Variety store margins vary from 27 to 42 percent; 
furniture stores from 21 to 43 percent ; hardware stores from 11 to 41 

All of these stores have similar differences in operating expense 
rates. Department stores vary from 18 to 30 percent. Variety stores 
from 21 to 35 percent. Hardware stores from 7 to 39 percent. 

It is perfectly clear, considering these wide dispersions of margins 
and expense rates, that it is quite impossible for any pricing regulations 
based on national averages to be fair and equitable. 

OP A would have you believe that anyone who does not agree 100 
percent with their ari3itrary narrow viewpoint is against price control 
and is advocating runaway inflation. 

On the other hand everyone knows that labor costs and consequently 
material costs have increased sharply since 1942, that operating costs 
for every type of business are far above 1942, and that industry is 
generally faced with further increases in labor costs. Under the cir- 
cumstances it is hardly possible to prevent some increases in prices 
to consumers, but this does not mean advocating runaway prices or 

OP A implies in their letters to Congress and in their state- 
ments to the press that present pricing policies permit manufacturers 
a price sufficient to defray current costs and yield prewar profits, but 
all industry knows that this is not the case. The pricing formulas 
make only partial allowances for current labor and material costs 
and administrative expenses. The strict application of this policy 
has been and is currently a major impediment to production. Manu- 
facturers are compelled to discontinue production of prewar com- 
modities they were skilled in making in great volume, and to shift 
to lines in which they were not experienced. They have been forced 
to develop "new" wholly unnecessary products as a subterfuge to obtain 
price relief, whereas tlie new products are in most cases not equal to 
the prewar products in either quality or utility. At the same time, 
the pricing agency has permitted countless thousands of new-comers to 
enter the manufacturing field and manufacture such commodities at 
prices considerably higher than would be necessary to enable old-line 
manufacturers to remain in their regular businesses. 

This situation is of course completely ridiculous, but the exhibit that 
has been made available to your committee clearly shows that the 
situation not only exists but that it is widespread. 

If OPA would only concentrate their activities on encouraging pro< 
duction, they would get the unqualified and solid support of industry 
generally. A tremendous amount of good could be accomplished be- 


tween now and next July toward satisfying the pent-up demand for 
"hard to get" goods. If such action were taken now, there would be 
much less likelihood of any widespread upward price trend when 
controls are lifted next year. 

Keeping in mind that production is our primary objective and that 
no one will produce goods except at a profit, it would seem to me 
that you must compel OPA to grant every producer a price sufficient 
to cover all current costs plus prewar profits. 

The Smith committee in the House had held many hearings on this 
subject and in their eighth intermediate report, dated October 22, 1945, 
they made seven recommendations which I believe would go a long 
way toward solving our problem. These may be paraphrased as 
follows : 

I. Allow manufacturer's current costs plus prewar profits. 

II. Decentralize and simplify granting of prices. 

III. Once granted, in absence of fraud, the price to remain. 

IV. Increase consumer prices by exact amount of increase to 
manufacturer (no pyramiding). 

V. Decontrol as soon as practicable. 

VI. Concentrate OPA activity on these objectives. 

VII. Revoke or modify MAP. 

Unless action of this type is taken promptly, our transition to a 
normal peacetime economy will be severely handicapped. 

Mr. Walter. Are there any questions? 

Mr. LyNCii. What you have given here this morning is similar to 
the testimony j^ou have given before other committees of the 
House and Senate, isn't that true? 

Mr. Seidel. That is quite true. 

Mr. Lynch. May I ask you whether or not your company, the W. T. 
Grant Co., does not show higher profits before taxes for the year 1944 
than at any time in its previous history? 

Mr. Seidel. That is quite true. 

Mr. Lynch. So, despite, OPA and all the regulations of OPA which 
have been imposed upon business, your concern has before taxes made 
more money in 1944 than ever before. 

Mr. Seidel. That is exactly right. 

Now, let me continue my answer a minute on profits. 

During the years 1936,' 1937, 1938, and 1939, we averaged a profit 
on every dollar of sales of 3.6 cents. Ever since then the profit that 
we have made in percent of sales has gone steadily down excepting 
for 1 year, 1941. 

In 1940, it was 3.2 cents : in 1941 it went up to 3.4 cents ; in 1942, it 
dropped to 2.4 cents; in 1943 it dropped to 2.3 cents. 

Mr. Lynch. When did the OPA go into effect in 1942? 

Mr. Seidel. In March of 1942. I don't believe that their regula- 
tions were very effective until about May, but I think they started 
in March. 

Mr. Lynch. You think that the 1942 drop is due to OPA regula- 

Mr. Seidel. Oh, yes. 

Mr. Lynch. All right. 

Mr. Seidel. Partly, and partly to our pricing practices. We sell, 
I will have you know, wholly half of our goods at less than OPA 


ceiling prices. We feel that we are better qualified to determine what 
our goods should be sold for than OPA. 

Mr. Lynch. Don't you feel that every manufacturer feels that he 
should be better able to figure those prices than OPA ? 

Mr. Seidel. I know that most of tb.em know better than OPA does. 
As long as Dr. Kettering is in General Motors and they have no similar 
person in OPA 

Mr. Walter. OPA doesn't tell you what you have to charge, just a 
ceiling ? 

Mr. Seidel. That is right, and very often their ceilings are lower 
than they should be and very often than they should be. 

But let me go ahead with these profits. 

For the last 2 years, 1943 and 1944, our profit of 2.3 cents per 

Mr. Walter. Before taxes ? 

Mr. Seidel. After taxes. 

Mr. Lynch. What about before taxes? After all, the way to judge 
whether or not your business has increased, whether you had been 
bothered by OPA, is by the volume of your business before taxes. 

Mr. Walter. Not "volume" of business. 

Mr. Lynch. The gross profits. 

Mr. Seidel. The only money we have that you can consider as 
ability to absorb increases that are coming up is the money that we 
have left after we pay our taxes. 

Mr. Lynch. I quite agree with you on that. I am trying to find 
out from you what was your profit before taxes in these years that 
you claim that OPA has restricted you. 

Now, OPA is not responsible for taxes, 

Mr. Seidel. Let me make the point again very clearly. 

I didn't say OPA had restricted us from making sales, and I didn't 
say OPA had restricted us from making profits. I said that OPA had 
forced us to sell merchandise that continually is deteriorating in qual- 
ity, that they are forcing a quality deterioration on the American 

That is my point. I am not down here to complain about OPA's 
effect on the W. T. Grant Co.'s profit. Nor have we ever asked OPA 
for any kind of relief in pricing. We will sell our goods at or below 
anv price that Chester Bowles will set on the goods. 

We have no quarrel with that at all, but we don't want him to con- 
tinually force the cheapening of the products we have to sell to our 

Mr. Lynch. Don't you think that a good part of this scarcity that 
you talk about has been due in the last few months to the fact that 
some manufacturers are not manufacturing because they are taking 
advantage of the repeal of the excess-profits taxes ? 

Mr. Seidel. No ; I think exactly none of it is due to failure to 
manufacture. I think some of it is due to failure to sell the goods 
after they manufacture because of the reason you suggest. 

Mr. Walter. You know 

Mr. Seidel. Let me finish that answer. 

Mr. Walter. Do you know the names of any companies that have 
processed materials and are not selling them, in order to take ad- 
vantage of the new tax situation ? 



Mr. Seidel. Let me continue the answer. 

We employed Lionel Edie in New York. He is a well-known econo- 
mist, and asked him to make a study of that very situation to deter- 
mine, if he could, just exactly how much is being held back because 
of this tax reason. 

He assured us that, after quite a comprehensive survey of the thing, 
that all of the goods held back in the textile line would not mean at 
most more than 1 week's supply to all of the stores. 

Now, you ask about particular names. I don't know the names of 
people that are holding back goods. I can tell you things of this kind : 
The whole underwear industry continued to produce underwear, but 
they didn't sell the underwear because they couldn't sell it without 
selling at a loss. 

Mr. Walter. Isn't that due to the fact that most of those people 
have three or four different lines? On the cheapest grade, which 
they sold largely for advertising purposes, they made little or no 
proiit, and with the scarcity of materials, they put all of the materials 
into the lines in which there was a greater profit? 

INlr. Seidel. Not at all. The biggest firms in the United States — 
take people like the Standard Knitting Mills — didn't ship a suit for 
montlis in any price, because every single product they made under 
the OPA ceiling price would be at a loss. 

We have 500 stores, we will buy any kind of undei-wear that we can. 
AVe haven't had a knitted union suit iu anv store in the United States 
all fall. 

Now, OPA has granted the underAvear people some relief. They 
are going to ship this month and for the month of December we will 
get a partial allocation of goods. This will be some fraction of what 
we had during December of 11)39 or 1940, whichever they use for their 

We are also told that the first 3 months of next spring we can get an 
additional allocation of winter underwear. The underwear industry 
hasn't yet a price on spring underwear. We would like to start buy- 
ing spring underwear in January. We won't be able to, and I dare 
say if the OPA follows its practices, it will be late in the spring before 
the underwear people know how to price their underwear. 

JNfr. Welch. How do 3'our postwar consumer prices compare with 
wartime consumer prices? 

Mr. Seidel. They are up very sharply in practically every line that 
we handle. The price to consumers of almost any kind of goods is 
sharply up from what it was before the war. 

Is that your question? 

IMr. Welch. No ; during the war. Perhaps you didn't get my ques- 
tion. I will repeat it . 

How do your postwar prices compare — that is, postwar consumer 
prices, compare with wartime consumer prices? 

Mr. Seidel. I would say they are higher. They are going up 

Mr. Welch. AVliy? 

Mr. Seidel. Because of this forced cheapening of quality due to in- 
creases in labor costs, material costs. 

Mr. Walter. Then do I understand you to mean that for cheap 
articles you are charging more today than you did during the war? 


Mr. Seidel. Oi" coiii'se. Prices continue to rise, Congressman. They 
fire risin<2: all the time, 

Mr. AVoRLEY. Doesn't OPA have any influence? 

Mr. Seidel. They have very little influence on most of the textile 
lines. Very little influence on the clothing prices. They have kept 
them from rising as far as they would have had it not been for OPA, 
but a dress that a housewife bought in March 1912, for $2, is just as 
good as the dress she is going to buy today for $10. 

As far back as 2 years ago, I came down here and told people 59- 
cent dresses had not disappeared, they were selling then for $2. $2.95 
dresses are being sold for $5. 

Mr. Lynch. Is your profit the same or has it increased on those 
dresses ? 

Mr. Seidel. In percentage of profit we are making a lower per- 
centage. In dollars we are making a greater amount of dollars. But 
we are one industry that you can't criticize the profit of. Our profits 
have gone up 6 percent for the whole war. Our sales have gone up 75 

Now, if we increase our business 75 percent, wait on 75 percent more 
customers, and earn 6 percent more profit, we are doing pretty well for 
the consumer. 

Mr. Walter. You made a statement a moment ago that I am sure 
I didn't understand. 

You said that these inflationary trends could only be curbed by per- 
mitting an increase in prices. 

Mr. Seidel. That is right. 

Mr. Walter. Will you explain that. 

Mr. Seidel. Let me make that clear. 

Mr. Bowles has a loAV-priced goods program, and he has talked an 
awful lot about that. We will take one of the major manufacturers of 
goods under the low-priced goods program, and the particular one I 
would like to tell you about now is the Milan Co. down in Mississippi, 
for example, a very large manufacturer of children's wash suits. 

His capacity is 90,000 dozens per quarter, 360,000 dozens a year, be- 
tween 4 and 5 million garments. 

Now, under the low-priced goods program, he is expected to produce 
a wash suit at 71 cents. And that is to be sold to consuuiers at $1.05. 

Now, he claims that he can't produce that wash suit for 71 cents, that 
he has to have 93 cents. 

Now, OPA won't give him 93 cents, at least they haven'l to date. 
So he isn't making the wash suit. In the past 3 months he has made 
7,500 dozens. He could have made 90,000 dozens. 

I want to read a letter that he has just written to OPA recently; 
that is, November 8, to point out that price, and price alone, is keep- 
ing this man from making between 4 and 5 million wash suits a 

Now, at the same time that he is not permitted to have 93 cents, 
there are hundreds of manufacturers throughout the country that are 
getting prices far in excess of 93 cents for wash suits that aren't nearly 
as good as this man's wash suits. 

Mr. Walter. If you are referring to manufacturers set up in busi- 
ness since the reo;ulations 


Mr. Seidel. Some, and some that were in other business. They 
can't get a price in their own business, so they go to OPA and get 
a price in wash suits. 

Or. they are people that start a new business, but the end result is 
just the same. 

If you go into a store now and buy a wash suit, you buy one of the 
new man's products at a higher price than you would have to pay if 
you bought this man's product. 

Mr. Walter. What explanation does OPA make for giving a new 
concern a higher price, permitting a higher price than is permitted in 
a concern that has been manufacturing a line for some time? 

Mr. Seidel. They wouldn't do it intentionally, but they can't help 
but do those things. They make mistakes. They don't have people 
in OPA qualified to determine what a proper price is for the new man 
that comes to them. Anybody can go to OPA with a list of two or 
three items and apply for pricing. 

Let's say tliey set the 20 prices. When the man goes away from 
OPA he finds that he has 8 out of the 20 that he can make money on, 
and the other 12 he can't make any money on. 

He will turn his production loose on the 8, and certain of those 
will be too high. 

Mr. Walter. Certainly the OPA knows the price of this company 
in Mississippi, and when a new man comes in and asks for a price, 
they don't arbitrarily set a price. 

Mr. Seidel. Instead of taking the company in ]Mississippi as a 
comparison, he takes some company that got an absurdly high price 

He says: "You have John Smith in Little Rock, Ark.^that got this 
price, and I want this price." 

It is pretty hard for OPA not to give him that price. 

You have got this new man getting a price based on an in-line price 
of some kind. 

1 don't say that OPA could prevent that, but the best way lO prevent 
that would be to give the man in Mississippi a price to produce the 
5,000,000 garments, and the fact that they are produced and being- 
sold at a low price to the customer is going to automatically knock 
out this newcomer. 

Mr. Walter. I saw in the paper the other day where Mr. Bowles 
stated that retail merchants made a profit of, I think, in excess of a 
thousand percent over the profit they made in 1939. 

Mr. Seidel. Yes, sir; he made the statement that the increase in 
department store profits was 1,324 percent, and yesterday I explained 
to the Senate committee that that was just a statistical mirage, and 
this morning the retail industry is liaving Professor McNair of Har- 
vard University come before the committee and point out that the 
Bowles figures are entirely wrong. 

Mr. W^ALTJiR. You say that those figures are wrong ^ 

Mr. Seidel. Yes- 

Mr. Walter. What do you tliink tliey are? 

Mv. f^ETDEL. I can tell vou, I think, exactly. 

Mr. Walter. Half of what i\Ir. Bowles said i 

Mr. Seidel. Nowhere near that. 

Mr. WoRLEY. Do yon mean he wasn't even half right? 


Mr. Seidel. That is right. All retail corporations, according to 
this chart, had an increase in profits using 1939 as a base, of 3G8 per- 

Mr. Lynch. What chart are you referring to ? 

Mr. Seidel. That is the chart ; the source of it is the Department of 
Commerce, and it is published in a booklet by Dr. Backman. 

JNIr. AVoRLEY. They are profits for all retail stores? 

Mr. Seidel. Yes; all retail incorporated stores. All retail trade 

Mr. Worley. Are those profits gross or net ? 

Mr. Seidel. This is earnings before taxes. 

Mr. Worley. What is your own net? 

Mr. Seidel. I can give you that, too. Let me explain too, while I 
am at it, the fallacy in some of these averages. 

Mr. Walter. Before we get to that 

Mr. Seidel. Here is the net profit in 1939. Department stores had 
3.35 percent net profit, in 1944 they had 3.6 percent net profit. 

Mr. Walter. On sales? 

Mr. Seidel. Yes; percentage of sales. Three and thirty-five hun- 
dredths in 1939, 3.6 in 1944. 

Now, variety stores had 5.5 in 1939, and they dropped to 3.6. 

You see, the type of business I am in, our percentage of profits has 
gone down. In the department-store business the percentage of 
profits has gone up somewhat. 

Now, these 1936 to 1939 figures, you have got in there losses averaged 
with profits to make a base. Let's say that you had a store, and that 
in your store during the base period you made $200, and I had one 
and in my store during the base period I lost $100. When j^ou add the 
two together, we get an average profit of $50. 

You go ahead and make the same $200 that you made before, and it 
is perfectly factual to say that you have got a 300-percent increase over 
the average profit of the base period, although you haven't increased 
your profit a 5-cent piece. That is what is wrong with these averages. 

During the years 1936 to 1939 more businesses lost money than made 
money, according to the Treasury. 

Mr. Walter. In spite of OPA, the retail merchants of this country 
have made a greater profit than they made during 1939 ? 

Mr. Seidel. Of course, they have. So have we. But that isn't what 
we are here to talk about, or is it ? 

Mr. Worley. What are we talking about ? 

Mr. Seidel. I thought I was talking about OPA's forced cheapen- 
ing of the quality of goods that consumers are buying today. 

Now, if we are here to talk about whether or not we have made too 
much profit during the war, we can talk about that. I haven't any- 
thing to apologize about. 

Mr. Worley. We wanted to get a well-rounded picture of how OPA 
is operating in your field. 

Mr. SEmEL. I think the big problem we are faced with today is to 
get goods produced, and I think that is the only thing we can do to 
stop prices going up is to get goods produced, and anything that can 
be done to make people produce goods is very important. 

Mr. Welch. Why should it cost more to produce consumer goods 
today than it cost during the war ? In view of the fact that hundreds 

99579 — 46— pt. 7 13 


of thousands of young men and women are being released from tlie 
Government service and going into private industry daily ? 
Mr. Seidel. I don't think it should continue to cost — — 
Mr. Welch. And take-home pay has been reduced. 
Mr. Seidel. Whose take-home pay? 

Mr. Welch. The man employed in industry whose goods you 

Mr. Seidel. I don't believe it. 
Mr. Welch. I believe it and have facts to prove it. 
Mr. Seidel. I think that the take-home pay has been reduced for 
people in war production. 

Mr. Welch. The increased costs of consumer goods to the greater 
masses of the people, mounting, as you have said, every day, has 
reduced the purchasing power of the take-home pay, and is largely 
responsible for a great deal of labor troubles that are taking place in 
the country today. 

Mr. Seidel. In our business there hasn't been a nickel reduction in 
take-home pay of any envelope we have. That is going up steadily. 
Now, let me give you some figures. 

During 1940, and that is prewar, and that is pre-OPA, when a 
customer came into our store they spent 33 cents. That is what the 
average customer spent. 

Our margin of that 33 cents was 10.6. Now, it cost us to wait on 
that customer in expenses 9.14 cents. We paid the Government in 
taxes 0.43 cents, and we kept as profits 1.03 cents per customer in 1940. 
Now, let's take 1944, last year. From 1940 to 1944, prices were 
going up, sales were going up, and instead of selling the customer 
33 cents in 1944, we sold him 61 cents. 

The margin that they had to work on on 61 cents was 20.95 cents, 
but now we come to the question of how much it cost us, and that went 
up from 9.14 cents to 15.9 cents. 

Then, our taxes were 3.67 cents, and we kept 1.38 cents. That is 
Now, what is happening this year, one year after 1944? 
The average customer is spending a little bit more than 63 cents 
this year instead of 61 cents last year. And the margin is up from 
20.95 cents to 21.27 cents, and the cost of waiting on that customer 
is up again. 

Last year it was 15.9, this year 17.52 to wait on him. 
Now, our taxes this year are going to be down, because our earnings 
are going to be down from last year in dollars. 

Mr. Lynch. They will be down for other reasons. They are going 
to be down because we have repealed some of the taxes, haven't we? 
IVIr. Seidel. Not until next year. I am talking about this year. 
Our profits this vear are down in dollars. 
Mr. Worley. Wlien did they start going down? 
Mr. Seidel. On the 1st of August, and they have been going down 
very steadily and very sharply during August, September, October, 
and November. 
Mr. WoRLEY. Why? 

Mr. Seidel. Because we can't get goods that we need. 
Mr. Lynch. Is it also true because of the reason Mr. Welch has 
pointed out that take-home wages of people since VJ-Day have de- 
creased, and that there isn't the buying power that was there before? 


Mr. Seidel. That isn't right according to Mr. Bowles. He says 
we have greater buying power riglit now. 

Mr. Lynch. Do you accept Mr. Bowles as an authority ? 

Mr. Seidel. Not as an authority for anything. 

Mr. Lynch. Well, answer my question without referring to Mr. 

Let me have your own opinion. 

Mr. Seidel. My own opinion is that there is no reduction of buying 
power, as evidenced by total retail sales volume of the country. 

But the sales volume in our type of business is going down because 
we cannot get the goods we need. 

Now, let me give you some inventory figures. As of November 1, 
our inventory in these lines is less than half of what it was 12 months 
ago and half of our business in these lines. 

The first one is domestics, the next is hosiery, the next is under- 
wear, the next is draperies, the next is yard goods, the next is lingerie, 
and the last is women's dresses. 

Now, in those lines as of November 1, 1942, we had $14,800,000 
worth of those goods. 

In November of 1943 we had $11,900,000, dropping. 

In November of 1944 we had $9,800,000, still dropping. 

And now we have $4,700,000, less than half of what we had 12 
months ago, and 30 percent or so of what we had 3 years ago. 

Mr. Lynch. When did you buy that stock 3 years ago ? 

Mr. Seidel. We buy it 

Mr. Lynch. Was that laid up ? 

Mr. Seidf.l. No ; nor do we ever keep stock more than 60 days. 

Mr. WoRLEY. Is that high-priced or cheap stock? 

Mr. Seidel. All cheap. We are in the low-priced business. What 
I am talking about is the low-priced business, and I am talking about 
OPA's actions that have stopped people from getting low-priced 

You can't throw industry into a basket and say : "You are all mak- 
ing too much money, and OPA is right, and we have to follow their 
policies 100 percent or have inflation." That is merely ridiculous. 

You people have to take a straight middle-of-the-road approach 
to this. 

Mr. WoL\^RTON. Are they manufacturing to the extent they did 
when 3^our inventory was higher ? 

Mr. Seidel. Yes, sir. 

Mr. Wolvertgn. How do you account for the fact that the inven- 
tory is low ? 

Mr. Seidel. Most manufacturing is diverted to the products on 
which they can make more profit. If they can make more money on 
a higher-priced piece of goods, and they are permitted, they will 
do so. 

Mr. WoRLEY. Your suggestion is not to bring down that high cost, 

Mr. Seidel. I would suggest both, where the pricing is wrong — 
let's take a specific example. 

I can, and I think I have got one here. Let's take broadcloth. 

You need broadcloth, and you need it for shorts, and for shirts. You 
can't fuid any shirt today and you can't find any shorts, and just last 


week we had the shoppers start at Fourteenth Street in New York 
and go right through to Fifty-ninth Street, and go to every store and 
see if they could find a stock of men's white broadcloth shirts of any 
make in any store. 

Mr. Walter. Isn't that because those materials that formerly went 
into them are being made into sports shirts and different things 
wherein they can get a bigger profit ? 

Mr. Seidel. No ; it is because no broadcloth of any kind is being pro- 
duced at all. 

Mr. WoLVERTON. Wliy ? 

Mr. Seidel. Because, I think, of unsatisfactory price ceiling on ii. 

Mr. WoLVERTON. Do you think it is due in any way to a desire to wait 
until after the first of the year to have the benefit of tax laws? 

INIr. Seidel. No ; because they are producing other goods now instead 
of the broadcloth. 

Mr. Walter. Mr. Elliott, would you like to ask a question ? 

Mr. Elliott. Yes ; I think one or two would be worth making. 

Isn't it true that the combed yarn mills (cotton) as a whole had 
about 50 or 60 percent conversion to make all sorts of things for the 
Army, including covers for sleeping bags — in an amount, by the way, 
that I protested about? 

Mr. Seidel. Yes. 

Mr. Elliott. As a matter of fact, that you had not had available 
the type of production because you didn't have the type of facilities 
to produce and you didn't have the yarn to put into it 

Mr. Seidel. The war has been over for some time. 

Mr. Elliott. You are a merchant, and I have had the advice of your 
company in my set-up, and it has been very helpful, and I don't want 
to disagree with much you have said. 

But it takes 3, 4, or 6 months to move that kind of stuff from the yarn 
to the shelves, and get the effect of it, doesn't it? 

Mr. Seidel. I am quite sure, but^^ — 

Mr. Elliott. If you were looking for shirts today, you would look 
back and find out what was happening about 4 months ago? 

Mr. Seidel. Yes. 

Mr. Elliott. And during that period the armed forces have been 
buying and were allocated the lion's share of production. I under- 
stand that it was about 2 months ago that the armed forces stopped 
acquiring this type of material. 

Mr. Seidel. Yes ; but only last week we had one of our men inter- 
view one of the biggest producers in the United States of broadcloth, 
and they are not making a yaf'd right now. 

Now, will we get shirts if they are not now making them, if this 
man is an important factor in the business? You know better than 
I do about this broadcloth and piecegoods situation. You have been 
much better able to advise the committee about it. 

]VIr. Elliott. I wouldn't pose as having kept up with it. I don't 
believe the price factor on combed goods was a heavy factor, and 
probably is not today. 

What you are really saying, Mr. Seidel, is not, I hope, that there 
isn't a tremendous scarcity of goods. 

You were saying that the mills produced as much. Actually, the 
mills haven't yet gotten up on textiles to anything like a normal year, 
and certainly not like 1943 or 1944. 


They were shy at the rate of about 2 to 3 billion linear yards of 
cotton textiles this year as against 1943. 

Mr. Seidel. I didn't give the answer on mills. He asked me a 
general question about all of the production of goods. 

Mr. Elliott. It has to come from the mills. 

If you don't get yarn, then you don't get goods. Or a variety of 
factors, including the fact that the textile industry hasn't been able 
to get people back, perhaps because of price factors. 

Mr. Seidel, I wasn't thinking only about textiles, either. 

Mr. Elliott. We are talking about textiles here pretty largely, and 
I should like to nail this one down. 

It is fair to put into the record, surely, that the real difficulty is 
that you have an extreme shortage for a backed-up consumer's demand 
that has been existing for a very long time. 

Now, would you propose to take off price control in that kind of 
market and let the manufacturers of garments and the manufacturers 
at the mill level set their own prices in what is obviously still a big 
sellers' market? 

]Mr. Seidel. Absolutely not, I didn't suggest that. 

Mr. Elliott. Price controls, we are all agreed, have to be main- 
tained. Is that right? 

Mr. Seidel. Yes; I quite agree, except- 

Mr. Elliott. The type of price control 

Mr. Seidel. It has to be changed. 

Mr. Elliott. The type of price control that you are concerned 
about as I gather, your concern is, and I think you could be backed 
up by quite a lot of evidence, is that there is such a quality deteriora- 
tion that you have had a tremendous inflation of prices at the consumer 

Mr. Seidel. Yes. 

Mr. Elliott. And that the OPA controls have not been effective. 

Mr. Seidel. Yes. 

Mr. Elliott. Now, has the low-end program of WPB and OPA 
gone out legally ? Has that control been taken off ? 

Mr. Seidel. No, there is still a low-end program, but it isn't effec- 
tive for a number of reasons. 

Mr, Elliott. We will develop those with you because I think we 
will agree on many points. 

When you take a mill that can manufacture 90,000 dozens like the 
one you mentioned 

Mr. Seidel. Yes, sir. 

Mr. Elliott. Is there enough cloth under the allocation of WPB 
to furnish that mill its full capacity and furnish its competitors 
equally the full capacity? 

Your point is that 

Mr. Seidel, There is sufficient, 

Mr, Elliott, He may tell you he can get the cloth, but he can't 
get it under those allocations, 

Mr. Seidel. This man, I believe, has the cloth, 

Mr, Elliott. That is quite a different problem. 

Mr, Wolverton, It is probably the reason I suggested. 

Mr. Seidel. Not at all. He has said he would make these goods if 
he could have a price of 93 cents, and OPA says he can't have a price 
of more than 71 cents. 


Mr. Walter. Wliat percentage of profit did he make on the 71- 
cent garment? 

Mr. Seidel. He claims that he loses money if he makes the 7l-cent 

Mr. WoRLET, But he still made 7,000 dozen? 

Mr. Seidel. Yes ; instead of 90,000 dozen. 

Mr. Worley. He allocated the rest of the material to producing 
high-cost goods ? 

Mr. Seidel. No; he is operating 17 percent of capacity. 

Mr. Worley. I was under the impression that when OPA refused 
to grant him an increase on the children's wash goods that he devoted 
the balance of his inventory to the production of high-cost goods. 

Mr. Seidel. No, he didn't. 

Mr. Worley. He is operating at 17 percent capacity? 

Mr. Elliott. He has the inventory to operate at 90,000 dozen, he 
tells you that ? 

Mr. Seidel. Yes. 

Mr. Elliott. Now, the point you are making essentially is that 
the people who can get the goods under allocation can do it. 

But there is a point, under the Reconversion Act, the War Produc- 
tion Board has to allocate to newcomers as well as to the old people 
in the market, even though the newcomers may not be as qualified 
to produce a good article. 

That is a legal angle that has caused a good deal of trouble. 

The OPA's method of pricing has in some instances played into 
the hands of the newcomers, where they get an in-line pricing that 
makes it out of line with the people who could produce cheaper goods 
at cheaper prices. 

Mr. Seidel. ^^V11, yes ; I would quite agree with that. 

Mr. Elliott. Wouldn't the remedy be to allocate goods to people 
who will produce low-end goods under quality specifications? 

Mr. Seidel. Yes; and the OPA approach was a very effective ap- 
proach, and was successful to the degree that it was applied. 

Now, when they made the mistake of not ear-marking the goods for 
the prices that were actually needed, the program got out of hand. 

Let me cite an example. In womens' dresses, 44 percent of the 
dresses are made at $3.75. Thirty-two percent additional are made 
between $3.75 and $5.75. So that you would have a total — I am talk- 
ing now of normal prewar sale of dresses, and I am talking too about 
wholesalers' prices, manufacturers' prices — $3.75 and $5.75 accounts 
for 76 percent, and then we go up in price, and when you get to $12.75, 
you have covered 94 percent of all the dresses. 

Now, when the War Production Board set cut-off point at $12.75, 
you see, and gave every manufacturer all the way to $12.75 the same 
right to get goods, the program was a failure because it meant that 94 
percent of people had a priority. 

I mean, for instance, a medal becomes meaningless if 94 percent of 
the people have that medal. A priority is useless under the same cir- 

Mr. Elliott. They were given a quota of that production, a per- 
centage quota? 

Mr. Seidel. Yes; but you will agree that had WPB been able to 
make a certain set-aside to the people that made $3.75's and given 
them an allocation to make $3.75's 


Mr. Elliott. It was done in very wide limits. There was about 
40 percent on the strictly low-end stuff. Many people wanted to do 

Mr. Seidel. If the WPB had said that we are going to confine this 
to $3.75, you would have had all the $5.75 manufacturers in New York 
down here with their Congressmen. 

So they take them in, then we take in a little higher, and a little 
higher, and then you get all the way up to $12.75, and then you have 
got a lot of $22.50 dresses in the store, but that isn't what people really 
need. The low-price consumer ought to be able to buy dresses for 

Mr. Elliott. Now, just one question more. 

Allowing for the fact that you have put on the record, and I think 
it probably could be substantiated, for heavyweight underwear, 
though I don't think you are right about all other underwear, but I 
think the proposition about the heavy underwear was right. 

That is to say, OPA pricing on low-end heavy underwear did in 
fact prevent production for a considerable period. 

Mr. Seidel. Yes. 

Mr. Elliott. That is your testimony ? 

Mr. Seidel. Yes; winter underwear. 

Mr. Elliott. That has been very slow in being remedied, and I 
would be the last to deny that. But doesn't this recent low-end direc- 
tive of the OPA look in that direction, 15 percent, that was rather 
more than the manufacturers allegedly need ? 

Mr. Seidel. In the new directive program which granted the 15 per- 
cent, they have a series of cut-off prices. All underwear doesn't get a 15 
percent, and underwear made up to a cut-off price — now, let's take 
men's union suits under 9 pounds. 

In that garment, the cut-off price was $6.62, and the Standard 
Knitting Mills tell me it has to be around $9 or the program won't be 
any good. 

Mr. Elliott. Of course, the stuff under 9 pounds is not heavy- 
weight underwear, and you have got to have heavy-weight because of 
the shortage of yarn. 

Mr. Seidel. That is the only underwear in it, that I am reading 

Mr. WoLVERTON. Maybe you technical men had better explain 9- 
pound underwear. 

Mr. Seidel. Nine pounds to the dozen. 

Mr. Elliott. I don't want to continue this, but I do want to get the 
point across that there is a shortage, which I think Mr. Seidel will 

Mr. Seidel. Yes. 

_Mr. Elliott. If you are going to put yarn into the right part of the 
picture, you are trying to get them into the heavyweight underwear, 
because there has been no 

Mr. Seidel. The only underwear covered in Mr. Bowles' new order, 
SO-139, is men's union suits under 9 pounds to the dozen. That is the 
only underwear. 

Mr. Elliott. Does not cover the heavyweight? 

Mr. Seidel. Not in this order. 

Mr. Elliott. I am sure that should be covered. 


Mr. Seidel. He has issued an order along this line, permits the un- 
derwear people to apply to him for price relief on the heavier-weight 

Now, the people have made their applications for that price. They 
hope to get that price, and right now on the fourth-quarter allocation 
that we are going to get of underwear, we are going to take that 
underwear on open billing. We are going to take the underwear from 
the mill without knowing what we are going to pay the mill for that 

We are going to sell it to the customer at the price we always sell. 
We hope we won't come up on the short end. 

Mr. Elliott. I just wanted to get into the picture that there was a 
shortage here that had somehow to be controlled. 

I believe Mr. Seidel's point is that the quality deterioration in low- 
end goods has in fact produced a great up-trading or up-grading. 
Some of that would happen under any conditions where people could 
make higher profits in a shortage market, and unless you maintain 
control of the flow of the goods and price ceilings, you would have a 
greater up-trading. 

Mr. Seidel. Yes, but I think it has been aggravated by several of 
these regulations. 

Mr. GiiTOKD. Does ISIississippi have a good unemployment compen- 
sation law ? I am a little worried about this take-home pay. 

I represent a textile city, and I am interested. 

Mr. Seidel. Yes, sir. 

Mr. GiFFORD. We ran up to 65 cents minimum, didn't wait for the 

Take-home pay is greater. The cost is greater. You gentlemen 
are not worried because I can see all of you wearing smiles. 

You voted on that excess profits tax 

Mr. Lynch. I say we made a mistake. 

Mr. GiFFORD. We didn't, but you fellows made a lot of mistakes. 
Don't look serious, I don't see it. 

I am greatly interested in the fact that my people have been forced 
to deteriorate goods in order to manufacture, and you claim, do you 
not, that you say there is great deterioration of goods ? 

Mr. Seidel. Yes, sir. 

Mr. GiFFORD. And they found something new that isn't yet under 
price ceilings, and they started to manufacture something similar, but 
where they can make a profit ? 

Mr. Seidel. That is quite right. 

Mr. GiFFORD. A great deal has been done, and, of course, you have 
made money on women's dresses because we have always made a lot 
of money on women's dresses, and they can't confine you, can they, to 
any type of dress? You can make something else and charge more, 
can't you ? 

Mr. Seidel. No ; they can't confine us, and there is virtually no price 
control in these high-style items. They have regulations that say to 
hold a manufacturer to the highest price line that he used to produce, 
but there is nothing to stop him from making any type of dress for 
that price. 

Mr. GiFFORD. You always mark down 100 percent on women's 
dresses whenever you want to. The prices on women's dresses, gentle- 
men — there is a fearful profit. 


Mr. Elliott. For that reason, a good deal of clotli was taken away 
from the women's dress manufacturers and put into the other things. 

Mr. GiFFORD. They can just put on another ribbon 

Mr. Elliott. If they get more cloth, it is outside the order. You 
have agreed, haven't you, Mr. Seidel, that the way to cure this is to 
direct the cloth into low-end programs? 

Mr. Seidel. I think the cure for this has got to be to give that man- 
ufacturer a price that will enable him to def raj'' his permanent current 
costs and yield him a profit similar to what he made before the war. 

That is the main thing that needs to be done. 

Mr. Elliott. I won't try to dispute what you have said. OPA 
should be heard. But 

Mr. Seidel. That is the primary thing, rather than allocations. 

Mr. Elliott. If you don't have the allocations, wouldn't it remain 
true that the cloth would go into the higher-priced garment because 
of the market pull that people could pay for it ? 

Mr. GiFFORD. I want to make a point very plain, if I can, that this 
answer, 'Inflation, inflation if you do this and do that" — is such non- 
sense. A fair price doesn't make inflation. They drive it into some- 
thing else where they are fooled worse. 

They are imposing upon the public. There is no question about it. 
I want this committee to make a statement that inflation should not 
be used as the excuse granted for much of this that is being done, be- 
cause it is not inflation. 

I can't express myself as I would like to about it, but I could get 
voluble after I got my wind on it, maybe. 

Mr. Lynch. Would you call it ''highway robbery of the public" 
instead of "inflation." 

Mr. GiEFORD. You can raise wages 30 percent, but that wouldn't be 
inflation. But I want to say that inflation is what we constantly hear, 
but it isn't inflation at all when supply and demand force conditions 
because they have to stop. They won't manufacture at a loss, but they 
will manufacture some other things that the public will have to buy 
and even pay more for. 

That is so comforting to hear you say. I tried to buy heavy under- 
wear to go to New England, and couldn't get any. You are very com- 
forting' to say that I can get it next spring. 

Mr. Seidel. Let me, while we are talking on underwear, just give 
you these figures on underwear 3 years ago — our inventory of under- 
wear on November 1 was $2,400,000. This year on November 1, our 
inventory on underwear is $204,000. It is 10 percent of what it was 
3 years ago. 

Last year it was $640,000. Our inventory now is less than half 
of what it was last year, and that covers all types of underwear. 

Mr. Walter. And had the demand of the military for heavy under- 
wear gone on for another 2 months, it would have been half of that. 

Mr. Seidel. If they had been given a fair price 3 months ago, we 
wouldn't have been in that situation now. 

Mr. Elliott. I think it should have been done before 3 months ago. 

Mr. Seidel. Yes, long before. 

Mr. Walter. May I interrupt at that point? 

Aren't these manufacturers permitted to charge now the same as 
they charged the military forces? 

Mr. Elliott. No, sir. 


Mr. Seidel. I don't know. 

Mr. Elliott. I can help Mr. Seidel to that degree. The military 
forces were given quite different price schedules from civilian under- 
wear. And in the heavy-underwear field, I think there is much to 
be said, but I want to make it clear that the other side of the pic- 
ture needs to be considered. The OPA has a case that it should put. 

When you have a scarcity proposition, you don't cure it by taking 
off all controls. I think Mr. Seidel is ready to agree on that. 

The controls should be used with more discrimination. 

Mr. Seidel. So they won't drive people out of business but let 
them make a profit on a legitimate low-end item. 

Mr. GiFFORD. When we set up the OPA and we were promised 
faithfully by Mr. Henderson at that time — we knew he was to be 
the head of it — that no prices would interfere with production. 

We harped on that, and it has interfered very greatly with pro- 

I am for price control, but the price of price control that allows 
goods to be manufactured 

Mr. WoLVERTON. I would like to get the explanation of Mr. Seidel. 
I realize from what he said that he must be in a position to know 
what he is talking about. 

Mr. GiFFORD. You agree with Mr. Elliott, wouldn't you ? 

Mr. WoLVERTON. Yes. I wish we had more like Dr. Elliott around. 

Mr. Elliott. I will bow out. 

Mr. WoL\'ERTON. The point I had in mind was this: If I under- 
stand your testimony correctly, it would seem that there is a tendency 
to manufacture the higher-priced goods because the profit is more ac- 
ceptable or more certain. 

Now, is that the only explanation that you can give of it? 

I have in mind a picture that appeared in one of the papers this 
morning. I didn't have time to read the article, but I saw a picture of 
an exhibit that was stuck up over in the Senate Office Building where 
there were two women's waists which were alleged to be identically 
the same from the standpoint of quality. One had been manufactured 
by an established company and the price was figured at $1.8614) 
whereas the other was manufactured by a new company and it was in 
a position to charge $6 for an article that the long-established com- 
pany could only charge $1,861/^ on. 

Is that possible under present controls? 

Mr. Seidel. Well, yes, sir. 

Let me take the particular item you are talking about, women's 
blouses, and tell you just how it happened. 

A very reputable large manufacturer of topper blouses for women 
has under the ^lAP plan, the maximum average price plan, a regu- 
lation that tells him that his total production has got to average, and 
I will give the figures from memory but I think they are accurate, 
$1.8714. His total production must average $1. 871/2. 

That manufacturer can produce a blouse for $2.50, which would sell 
to consumers at approximately $3.75 to $3.95, depending on the store, 
but he is not permitted to make that unless to offset his production, he 
produces other blouses for enough below $1,871/4 to make his average 
come to $1.8714. So, he can't make that blouse for $2.50. 

Now, in the particular case you cite, a firm started in New York 
approximately 5 or 6 months ago. It is headed by refugees. They 


have got price ceilings on blouses that are no better than this man 
could make for $2.50, of $G and $10. 

The $10 blouse is now selling in the large retail stores for $17.95. 

The $6 blouse is now selling in the large retail stores for $9.95. 

Blouses as good as either the $9.95 — and there is no difference much » 
between the $9.95 and the $17.95 — intrinsically there is no difference in 
the value, and all you gentlemen can go to the Senate building and see 
these items. 

There is no difference at all between those two blouses, and still the 
consumers are paying $10 for one and $17.95 for the other, and they 
could have one identical to those for $3.95 if it was not for this maxi- 
mum average price thing. 

Mr. WoLVERTON. Is it due to preference being given to a new manu- 
facturer who hasn't established himself in business ? 

Mr. Seidel. I don't think these things on the part of OPA are de- 
liberate. They may be common ordinary mistakes that are made 
because OPA couldn't possibly have the type of personnel that were 
qualified to determine the price of an article that was brought to 

Mr. WoLVERTON. You are familiar with these rules and regulations. 

What is the rule that will permit a new manufacturer to charge the 
prices of $6 or $9 or $17 as against an established concern who is 
limited to $1.87i/2 ? 

Mr. Seidel. Well, these men come into business and somehow they 
get the highest price or a maximum average price allowed them that 
is much higher than the other man. 

Mr. Walter. Just a minute. We asked the same question before 
you got here, Mr. Wolverton, in which you said he got the price be- 
cause he was able to show some manufacturer was making that price. 

Mr. Seidel. That is right on a great many products, but regula- 
tions are a little different in blouses than they are in flatirons or 
furniture. There are thousands of regulations that will vary. 

In the sale of electric irons, for example, a man comes to OPA 

Mr. Walter. I asked you about the same question that Mr. Wolver- 
ton did. 

Mr. Seidel. I wasn't talking about blouses. 

Mr. Wolverton. I am trying to get at the point that a new manu- 
facturer who has never had an established line in the past, does he 
get a preference over the old ? 

Mr. Seidel. Of course he does. 

Mr. MuRDocK. Doesn't that arise out of the law itself, which bases 
prices on an earlier price ? 

Here comes a man who has no historical background, and the law 
perhaps permits him to get an advantage there. 

Mr. SEroEL. Of course it does. That is quite right. Let's take a 
Long Island producer as an example. 

During the average peacetime years 5,000,000 irons approximately 
were sold in this country, and about half of them were sold for prices 
under $3, and the other half were sold at prices over $3. 

In our particular business, our fastest selling price prewar was 
$2.29 for an electric iron. Now the electric iron order of OPA has 
been out about a year, and since it has been out the production of 
electric irons to sell to consumers for less than $3, has been practically 


zero. I think it has been actually zero. I don't think anybody has 
produced any. 

We deal with several of the largest ones, and I know that our 
suppliers have not made one single iron. 

Why is it ? OPA in the case of Nelson Electric Co. in Cleveland — 
and that is a lai-ge one — say to them that they have to make that iron 
at a cost of $1.20, including the excise tax. They do that after looking 
over that company's books, OPA comes to the conclusion that he can 
make it for $1.20. 

Now, the manufacturer says he can't make that iron for $1.20, but 
that he can make it for $1.55, including the excise tax. 

Now, the excise tax is some 10 percent, I think, so his net would 
be $1.40. OPA refused to, consistently — to give the $1.55 and no irons 
are being made. 

Now a man in Bay Shore, Long Island, got out of the Maritime 
Service, went down to OPA, and he w^ent down to WPB and got an 
allocation from WPB and a price from OPA to make irons. 

He had never made irons before excepting in 1923, some time in 1923 
he was connected with somebody that did make electrical appliances, 
but this is a brand new company that he started 

Mr. WoLMiRTON. And had no books. 

Mr. Seidel. He went to OPA and got what is known as an in-line 
price for an iron not as good as the iron that could be made for $1.55, 
but he got an in-line price of $3.40. He has produced over 150,000 
irons at that price. 

That iron is being sold to the housewife at $5.50. 

Now, we took six of his irons and sent them to the Electrical Labora- 
tories in New York for testing because the cord had no underwriters' 
label on it, we wanted to be sure it was good before we sold it. 

Four of the six failed on the test. 

The Electrical Laboratories in their report, which has been made 
available to your committees down here, they said tlie iron was hazard- 
ous and we had better not touch it, and we didn't. 

There is an example of in-line prices. 

Mr. Walter. In line with what? 

Mr. Seidel. With some iron that somebody made somewhere at that 
kind of a price some time before. 

Now the man from Bay Shore said to me, not to me but to one of 
my buyei'S, I want to be factual, "Why does your man keep picking 
on me? There is a fellow' down in Tennessee who makes an iron 
worse than mine and still gets a higher price." 

Now he says, "I know my iron is overpriced, but I am a little fellow. 
I have got to have a high price if I can make it at all." 

OPA was going to have that man in jail in 6 weeks. He is a fraud, 
"We are going to prosecute him for fraud." Tliat is no good either. 

The OPA said he came down here and presented to them a nickel- 
plated iron, and he went down and made a black iron. And they are 
going to prosecute him for fraud. 

We got to checking, and we found that the WPB had asked this 
man to make it black, and the AVPB wrote him a letter, and he took 
the letter to the OPA, and the OPA said that it was all right to make 
it black. 


Mr. Elliott. Isn't it true that under the Georti^e act, so called, 
the Keconversion Act, the WPB doesn't have authority to deny a 
newcomer in a business materials on equal terms, even though in tho 
judgment of the divisional director he may feel that he is not a manu- 
facturer of equal standing and 

Mr, Sridel. Please make it as a statement. 

INIr. Walter. That is a fact. 

Mr. Seidel. I am quite sure it is correct. 

Mr. Wolverton. We see the same thing in other lines. 

Take the question of cigars. You would probably not be able to 
get a person who didn't smoke to agree it was a necessity, but I went 
over to the Union News or one of those stands in the station, and I 
looked the case over and I didn't see a cigar in there that I knew by 

I said, "Why, I don't know any of these cigars by name." He said : 
"Certainly not." I said: "How come?" He said: "They change the 
name and raise the price." 

In other words, a manufacturer starts up a new enterprise, he has 
a new cigar, he gives it a new name, and he gets an additional price. 

That is all to the detriment until you have smoked them, of the 
established lines of cigars held down to regular prices. 

It strikes me there is something wrong wdien a company has estab- 
lished an article that has been generally accepted and its prices are 
controlled, and a new man comes in, whether it is manufacturing 
women's dresses, or blouses, or underwear, or cigars, and because he is 
new he can get a price that tops the established article. 

There is just something that doesn't seem to be right about that. 

Mr. Seidel. May I stay on that for just a minute. 

Let's use, for example, screen cloth: Now, so far as I know, none 
of the people that produce screen cloth are making 16-mesh screen 

Now, a few months ago, not over 6 weeks ago, I guess, I got in 
touch with our largest supplier, and we sent him a good-sized order 
for screen cloth. He wrote back and said : 

In normal times I would appreciate this order a lot, but as of now I am afraid 
I can't do anything about it for this reason. OPA has a price on 16-mesh screen 

that means 16 meshes to the inch each — 

that I can't produce, and if I were to produce under that order, I would lose 
between 20 cents and 40 cents for every 100 square feet that I made. 

Now, I am attempting to get a price from OPA on a new product — 

get this now — 

screen cloth that is 18-mesh one way and 14-mesh the other way. 

Maybe a mosquito could edge in sideways on the new item. 

Are you folks going to continue to countenance a forced cheapen- 
ing of quality and a lot of subterfuge of that kind for the purpose of 
meeting a price ticket? That is all you are talking about. If you 
let them go ahead and let them make the new screen cloth and get a 
higher price, you are going to have a screen cloth that is different from 
before. You are going to pay every bit as much as you would if you 
raised the price to the point it ought to be on the old-type screen cloth, 


and for years and years we have found out that 16-mesh screen cloth 
is right. 

Mr. Walter. You are assuming that he is going to get a higher 
price than for 16 ? 

Mr. Seidel. Yes, sir; and he will because the new item, you see, 
he will get a price that is based on some kind of a compilation of costs. 

INIr. WoL^^ERTON. He has no books on this. 

Mr. Seidel. He has no books on the new cloth, and he will come 
down to OPA and he will make a case, and he probably will get a 

He should get an increase in price if the old price would make him 
lose 20 or 40 cents, and if we want screen cloth, we are going to have 
to raise the price to the manufacturer or we won't have any. 

Nobody is going to make anybody in this country produce goods 
at a loss. They won't do it, and they don't have to do it. 

The only answer to it is give the legitimate manufacturer a fair 
price, put him back into production, and you get goods. 

Let me tell you another. 

Climax Hosiery Mill is a very fine mill. A large supplier of hosiery. 
All during the war from 1942 right straight through until about 
August of this year, tliat mill was entirely devoted to the military. 

Now, he makes men's split-foot hosiery on about half of his machines. 

Now, split-foot hosiery is diiferent from other hosiery in that the 
sole is made separate from the rest. The advantages are that you can 
use a different yarn in the construction of the base of the hose than 
you do in the heel of the hose. 

You can also make it heavier if you want to. You can use softer yarn, 
make it easy on the foot. You can use a white yarn. 

A lot of people like the white because their feet are susceptible 
to dves, et cetera. You can make a heavyweight sole that is more 
durable, and you can't do that in the ordinary hosiery. 

When his Army cut-back came in August of this year, he did exactly 
what we want every manufacturer in this country to do. 

He immediately changed his mill back to making the very same prod- 
uct he made before the war. Identical. Two hundred and forty 
needle mercerized split-foot hose. The kind of hosiery we haven't 
had one pair of for 3 years, and we wanted it and we need it bad, and 
all you people need it. 

Now, he read the regulations before he went back into production, 
and he read Mr. Bowles' statement, et cetera, and he believed every 
word he read. He thought he could fill out a blank and send it to the 
OPA and he would get a price that would give his current cost plus 
prewar profit. And he filed his application and 2 months went by and 
he had made 20,000 dozen hose in his mill, and he hadn't heard a word 
from OPA, so he went to Atlanta and found to his surprise that there 
is no OPA regulation that will give him an increase, none whatsoever. 

That his price is $2.27i/2 a dozen. Two dollars and twenty-seven 
and one-half cents is a cost which was the price he sold that hose in 
1942 before he put his production into the military. His current cost 
is $2.52. 

Now, obviously, he can't possibly make hose at a cost of $2.52, and 
sell it for $2,271/25 ^i^d he stated that that was the case. 

They suggested that he might come to New York, that we might be 
helpful in getting him a price, because we bought a lot of his hosiery. 


- He got to New York, and so I called the OPA to find out if there 
was any possible way that he could get price relief on this. And I 
got ahold of the head of the Hosiery Pricing Unit in the Empire State 
Building, and he assured us that there was no regulation that will 
give him relief, for two reasons. 

He is not in the red. He hasn't done a dime's worth of business 
since quitting doing business for the Army. Also he is over $200,000 
a year. 

I said to the man 

Mr. WoRLEY. What do you mean by "over $200,000 a year?" 

Mr. Seidel. They have a regulation that applies to people that sell 
less than $200,000 a year, and under certain of those regulations he 
might have been entitled to relief. But he is a larger mill. 

1 asked the man in the Empire State Building, just how could he 
expect to continue without correcting that thing, and he said that mill 
will have to do what every other mill is doing, make a new number. 

"Make a new number" — that is directly out of OPA's mouth. Make 
a new number. 

I said: "Surely you are not serious, we don't want that kind of 

He said : "You will have to talk to somebody higher than me to get 
a different answer." 

I got the very same answer from the head of the Hosiery Division 
in Washington. The only thing the man can do is make a new 

"We can't grant an increase on the old number. It is against our 
policy. It wouldn't be holding the line." 

I talked then to Mr. Nye, Deputy Administrator for Price, but 
I got his head attorney, Mr. Stephen Ailes, and after considerable 
study he told me that the man might make out an affidavit to the effect 
that the character of his business has been changed, and then under 
some other regulation, maybe they could consider him for price relief. 

Then he said to me: "If you will write us an amendment to our- 
low-priced goods order to cover this man's situation, we will guar- 
antee you that we will add an amendment in there to cover this man." 

Now, that is the kind of regulations you have down here, inflexible, 
arbitrary, and tliey just don't make sense at all. We don't want a 
forced cheapening of quality. 

Now this man, if he wants to, can do like all of the other hosiery 
mills, mix up a little used nylon into the cotton, and make a new 
number, and he gets a higher price, and you get a different kind of 
hose than 3^ou ought to have. 

Mr. Walter. And probably he will get a higher price than he 
would have if he had the price he thinks he ought to have. 

Mr. Seidel. That is right. 

I haven't said this morning to throw out OPA. I am coming down 
here because I think it is good business to come down here. 

I believe these recommendations I am making. I think I under- 
stand it. You people have to face facts if you want to stop what 
is happening now. You can't believe everything you hear from OPA. 

Mr. Walter. Would you recommend a general regulation that 
would permit the charging of a price that would give to the manu- 
facturer the same margin of profit that he made before OPA? 


Mr. Seidel. Yes, sir; the same percentage margin that he made 
before the war, plus his present permanent costs of operation. 

Now, I am not talking about 

Mr. Walter. That would all be taken into consideration in deter- 
mining his percentage of profit. 

Mr. Seidel. OPA will not allow his current costs. 

Mr. Walter. I am talking about a new regulation under which 
he would be permitted to manufacture at the same percentage of 
profit and that AYould compensate his additional costs of operation. 

Mr. SEmEL. You would have to say to OPA that you require them 
to give this man his current costs plus his prewar margin of profit. 
That is the only way you can word that thing and have it mean what 
it says, no quibbling of words. 

Mr. Elliott. May I ask a question about that ? 

Mr. Walter. Yes. 

Mr. Elliott. That is a very important recommendation and goes 
to the heart of the matter. 

Mr. Seidel. Yes, sir. 

Mr. Elliott. Take the case of fellows who were making a loss be- 
fore the war. 

■^Wouldn't you give them, if you are going to treat them under this 
proj^osal, some sort of thing in which you w^ould say an average over 
a 3- to 5-year period, either of the industry or of the company, which- 
ever was lower ? 

Mr. Seidel. Not "either of the industry or company, whichever was 
lower," because if you had a manufacturer whose profit was higher 
than the industry, you W'Ouldn't want to give him the industry aver- 

Mr. Elliott. If he has an increased volume of sales, there might 
be something in that average. 

A great many of the manufacturers are thinking in those terms. 

Mr. Seidel. I would give him his own profit or the industry, w^iich- 
ever is higher. 

Mr. Elliott. Then, aren't you really writing him a cost-plus propo- 
sition ? 

Mr. Seidel. I wouldn't want to write in a cost-plus proposition. 
I want to make it fair. 

Mr. Elliott. How does your proposition differ from cost-plus? 

A price which in effect says to him : "Now, you can charge up 
to cost-plus previous profits — and given the fact that your volume, your 
production and sales are going up" — and in some lines has gone up — — 

Mr. Seidel. There are a numlDer of ways you could do it. Specify 
a percentage for the people that lost money and let other people use 
their own. 

Or, if anybody operated at a loss, give them whatever you wanted 
to give them, whatever you wanted to, 2 or 3 or 4 percent, whatever 
seemed to be a normal figure. 

Mr. Walter. That man probably operated inefficiently to the ex- 
tent that he would likely price himself out of business. 

Mr. MuRDOCK. I am a novice in physical science and in economic 
science. I just had the gizzard scared out of me yesterday. 

I heard an amateur scientist say that somebody was apt to touch an 
atomic match to the atmosphere and might blow it up and the ocean 
might blow up the same way. 


I went over to the hearing and I heard an expert say that isn't apt 
to happen. 

Mr. Walter. You feel better now? 

Mr. MuRDOCK. Yes ; but we are dealing with the same sort of super- 
dynamite in economic matters as in atomic matters, and I am really 
confused. I just don't know M^hat we can do here. 

Mr. WoLA-ERTON. I am a bit confused. 

Let me put another case to you. 

Mr, Seidel. Yes, sir. 

Mr. WoLVERTON. You have stated that by changing the number or 
the mesh that it would be possible to get some price relief. 

Now, you take by way of illustration a Webster Fancy Tail was 
15 cents when war started and went up to 17 cents later on. Then, it 
went up to 20 cents, and within the last 2 weeks or so it has gone up 
to 22 cents. 

It is the same cigar. 

Now, how do you say that was arranged ? 

Mr. Seidel. I don't know. Perhaps they have granted particular 
price relief to that company. 

Mr. Lynch. Maybe they added a sixteenth of an inch. 

INIr. Wolverton. Maybe they did. It is now 22 cents where it was 
15 cents, and it is an established article. 

Mr. Walter. We had better stop at this point, or you will have me 
referring about administrative absolutism. 

I think we had better adjourn. 

Mr. Wolverton. Then, could I get an answer to my question 
later on ? 

Mr. Walter. Yes. 

Mr. Seidel, we are deeply appreciative of your interest in this 
matter, and for your veiy fine contribution. 

Mr. Seidel. Thank you, sir. 

Mr. Walter. Yes, sir. 

The committee is adjourned. 

(Whereupon, at 12 : 20 p. m., the committee adjourned.) 

99579— 46— pt. 7 14 



House of Representatives, 
Special Committee on Postwar 

Economic Policy and Planning, 

Washington^ D. C, 

The special committee met, pursuant to call, at 10 : 30 a. m., in 
room 1012, New House Office Building, Hon. Francis Walter (chair- 
man pro tempore) presiding. 

Present : Representatives Walter (chairman pro tempore) , Voorhis, 
Gifford, Wolverton, Hope, LeFevre, and Simpson. 

Also present: Marion B. Folsom, staff director; and Edwin B. 
George, consultant. 

Mr. Walter. The meeting will now please come to order. 

Mr. Flanders, I must apologize but other standing committees of 
the House are in session this morning, and unfortunately for the 
committee, we can't have a full attendance. 

Mr. Flanders. That is understandable. 

Mr. Walter. Will you proceed with your statement, please. 

Mr. Flanders. Can you shoot a sitting bird? If so, this bird will 

Mr. Walter. Oh, yes, indeed. 


Mr. Flanders. For the record, I am Ralph E. Flanders, president 
of the Federal Reserve Bank of Boston, president — on leave — of Jones 
& Lamson Machine Co., Springfield, Vt., and chairman of the re- 
search committee of the Committee for Economic Development. 

In the latter capacity, my associates and I have been engaged for 
some months past in a study of the problem of the removal of war- 
time controls, and we published a report on that subject last April. 

We were fortunate enough to foresee some of the problems which 
we are now facing. As a background, I wish to read a few para- 
graphs from that report. 

Mr. Walter. The Judiciary Committee of the Senate yesterday 
afternoon reported the bill extending the War Powers Act for a year. 
The House extended it until June 30. 

Mr. Flanders. Yes, sir. 

Mr. Walter. Excuse me. 



Mr. Flanders. Now, I will read certain quotations: 

As the CED has stated, the objectives are high consumption, high production 
and high employment. 

It is assumed, also, that our objective is to attain these witliin the framework 
of a vigorous and expanding economy in which the great volume of jobs will be 
provided by free private enterprise. 

The committee believes that these objectives will best be served by the ending 
of all wartime controls as soon as the emergency needs for them have ended. 

At the same time, it must be very clear that no control should be removed at a 
time when its removal would jeopardize * * * the successful transition to 
a healthy peacetime economy. 

Adoption of any war-born control as a normal peacetime measure is a question 
to be considered separately and legislated in the light of peacetime conditions ; 
no such control should be allowed to persist just because it is there, or because 
it worked well during the war. 

For some controls the emergency may largely end with victory in Europe 
(VE-day) ; for others with victory over Japan (VJ-day) ; for others, especially 
antiinflation measures, it may extend for a considerable period thereafter. In 
some fields gradual steps will be necessary ; for example, control of materials 
should end selectively as each material is released from war use or becomes 
sufliciently available lor civilian use ; * * *. The objective should be to time 
and coordinate action in such a way that our economy can land on its feet, pre- 
pared to go places. 

The committee endorses the progressive and selective relaxation and ending 
of controls. It rejects two other possible alternatives: («) That all controls 
be removed suddenly with the ending of hostilities; (6) that all controls be 
I'igidly maintained for a given period after the war. Sudden removal might 
open the door to wild price inflation, then steep deflation and heavy unemploy- 
ment. Arbitrary continuation of all controls would retard the attainment of a 
high level of production and employment. 

The objective is a level of prices high enough to induce the required expansion 
of production and employment, and low enough to maintain the necessary con- 
sumption under normal conditions of demand and supply. 

The more nearly that objective can be reached the better. The attaining of 
this objective under price control will depend not simply upon price administra- 
tion, but also upon materials, facilities, and production during the control period. 

* * * on some controls— production controls for example — action must not 
wait beyond (the period of need for war production) if high civilian production 
and employment are to be reached at the earliest possible moment. Other con- 
trols, notably those affecting prices, may have even an increased importance for 
a period after production controls are ended. They will be our chief protection 
against inflationary pressures in the transition period while production is being 
expanded, inventory pipe lines filled, and excess demand induced by wartime 
savings is being worked off. Since it will be wise to remove some controls 
promptly after war production needs are satisfied, there is sure to be a demand 
for the unwise early removal of others which can perhaps serve their greatest 
usefulness after actual fighting has stopped. 

At the end of the transition period as determined by Congress, legislative au- 
thority for the last of the wartime controls should be ended. Action beyond 
that period is a question of the place of controls in a peacetime economy and is 
beyond the purview of this report. 

That is the end of the quoted paragraphs from the earlier report. 

The experience of the 8 months since that report was written has 
on the whole confirmed us in the views we then held. The intervening 
time has only emphasized the difficulties in the situation. 

One fact of great significance which could not have been predicted 
with accuracy last spring and which has only recently become clear is 
that we are already in the early stages of inflation, " Unemployment 
is low, while civilian employment is already at the highest peacetime 
level in our history. 

Inability to satisfy the demand for goods and services remains almost 


Now the figures given out, I believe last night — ^I just got them this 
morning — as to employment and unemployment, show that we have 
52 million people employed, which is far and away the largest we have 
ever had under peacetime conditions. 

And 1,500,000 unemployed, which, I believe, is about the lowest un- 
employment we have ever had in peacetime history. 

Mr. Walter. Doesn't the large number of employed indicate to you 
that a great many people that we felt would be out of employment as 
soon as the war was over are still employed? 

Mr. Flanders. But they are on peacetime work. 

Mr. Walter. Yes. 

At one of our very early meetings, Mr. Baruch, I believe, gave us 
the number of people who were employed only because we were at 
war, people who otherwise would be taking their pensions, the wives 
of servicemen, and so forth. 

The fact that employment is so great indicates to me that those 
people did not do whnt it was predicted they would do. 

Mr. Flanders. A lot of them stayed in. 

Mr. Hope. Don't you think a good deal of the unemployment even 
this small amount, is more or less voluntary? 

Mr. Walter. Voluntary plus the usual unemployment. 

Mr. Hope. Yes ; transition unemployment. 

Mr. WoLVERTON. How are statistics as to those employed and the 
number of unemployed arrived at ? For instance, take the case of an 
elderly man or a woman who has worked during the war period for 
patriotic or other reasons. With the completion of the war they have 
left that employment. Is that housewife or that elderly man con- 
sidered an unemployed person? 

Mr. Flanders. Mr. Myers of our staff, who is sitting here on my 
left, is, I believe, a competent expert on employment and unemploy- 
ment statistics, and I would want to refer that question to him. 

Mr. Myers. The woman who has come in during the war will not 
be counted as either employed or unemployed if she doesn't have a 
job and is not looking for a job. It is only if she reports that she 
is looking for a job that she gets into the figures as either unemployed 
or if she has a job, as emploj^ed. 

Mr. Wolverton. How do you get knowledge of cases such as that 
so that you can determine by millions or have millions the number 
of persons employed or unemployed? 

Mr. Myers. The Census Bureau takes small sample surveys of em- 
ployment and unemployment. The principle is the same as the Gallup 
Poll and Roper Poll. The figures from their sample are then multi- 
plied to give an estimated figure for the total population. That 
method has proved quite accurate in both the private and Govern- 
mental polls. 

Mr. Flanders. It has been far more accurate so far as unemploy- 
ment is concerned, than the old method previously used, which as- 
sumed a figure of those who were in the working force, calculated 
how many of them were employed, and subtracted that from the total 
to get unemployed. 

That method of getting unemployed by residual figuring was very 
crude and inaccurate. 

I think I am right in this. 


Mr. Myers. Yes. 

Mr. WoLVERTON. Could we look at it from the standpoint of the 
number employed at the peak of the war effort and the number who 
are now employed? Would you be able to give any figures on that 

Mr. Myers. I can give them approximately. 

If we exclude the soldiers — they are not in the civilian labor 

Mr. WoLVERTON. When you say "exclude soldiers," I haven't said 
anything about soldiers in the situation that I gave as a basis for our 
figures. I say, take the peak number that were employed during the 
war effort and the number that are presently employed, and what is 
the difference between those two figures, if any, at the present time? 

Mr. Myers. The peak number employed producing goods and 
services during the war effort was somewhat over 54 millions. That 
was for July 1943. July is the seasonal high month of the year. The 
highest employment reached for any November during the war was 
about 52.6 millions. So the figure for this November, approximately 
52 millions, is nearly as high as the peak figures during the war. 

The reason I mentioned soldiers is that as they return from fighting, 
they do f®r the most part enter the labor force, and therefore you have 
to begin to count them in in the peacetime period as you did not have 
to do during the war. 

Mr. WoLVERTON. I don't see where that makes any difference in 
figuring in terms of employment. 

Mr. Flanders. It doesn't in terms of employment. All that amounts 
to is saying that a lot of people have gone permanently out of the 
labor force and they have been more than replaced by soldiers com- 
ing in. 

That puts it briefly. 

Mr. WoLVERTON. I agree with the chairman that if the figures, as 
you have estimated them, anywhere near approach the actual con- 
ditions that exist, it is rather surprising in view of what was esti- 
mated would be the conditions in the postwar period. 

Mr. Walter. I think it was Mr. Baruch that made that estimate. 

Mr. WoLVERTON. I don't remember, but I know we were all more or 
less agreed to that as a possibility. These figures would seem to indi- 
cate that we were all wrong in forming any such estimate. 

Mr. Hope. Before we leave that, I would like to ask Mr. Myers a 

Mr. Walter. All right. 

Mr. Hope. How do you carry these demobilized servicemen with 
reference to your unemployment figure? 

Now, there have been somewhere between 4 and 5 million service- 
men demobilized up to this time. I haven't seen the latest figures. 
How do you carry them? 

Some of them have gone into industry, of course, and they are in- 
cluded, you say. But a lot of them are not quite ready to get back to 
work, and they are unemployed. How do you carry them ? 

Mr. Myers. As you say, the bulk of them are counted as employed 
because they are back to work. A small proportion is unemployed 
because they are looking for a job. Some, probably several hundred 
thousand, have been discharged but are not looking for a job. They 


are taking a well-deserved rest or something of the sort. Those are not 
counted as either employed or miemployed. 

Mr. Hope. Not included in the million and a half unemployed ? 

Mr. Myers. No. Presumptively, most of them will start soon to 
look actively for a job, and when they do they will be reported first 
in the unemployment figures, and then in the employment figures. 
But at the moment they are not in either. 

Mr. GiFFORD. May I ask a question? 

INIr. Walter. Yes. 

Mr. GiFFORD, Do you believe there is ever a time v*'hen 60,000,000 
jobs are needed; 60,000,000 people employed and receiving pay? 

Mr. Flanders. That time has never been. Of course, as popula- 
tion increases, we will aproach it. 

So far as the Committee for Economic Development is concerned, 
w^e have been basing our figures on something around 55,000,000, 
something above and below that. 

Mr. GiFFORD. I take it from a narrow viewpoint, in my community, 
where I know everybody. 

Mr. Flanders. Yes, sir. 

Mr. GiFFORD. The proportion of 60 out of 140, which would be 
the same since the population is around 140,000,000, counting my 
schoolchildren, the wives, the pensioners, there is no such thing as 
60 people of out 140 

Mr. Flanders. This 52,000,000 on that basis, even that looks like 
a pretty high figure, doesn't it ? 

Mr. Walter. Yes. 

Mr. Fr.ANDERS. It is astonishingly large. 

Mr. GiFFORD. I want to make the remark that we had a tremendous 
amount of statistics in my committee when we set up the OPA, the 
room was full of statistics, they are only used when people want 
to talk with exactness of something they know nothing about. 

Mr. Flanders. I think we void that in our estimate o,f the pos- 
sible working force by putting it in brackets. 

Mr. GiFFORD. I am not overpowered by statistics. 

Mr. Flanders. That is fortunate because those of us who are not, 
I think, will live longer than those who are. 

Now, the significance of this very high employment is that it is 
a fundamental factor, that is, a tight labor situation is a fundamental 
factor in making it difficult to control prices. As long as there are 
a lot of people looking for work, it is not easy to step up prices, but 
when the labor market is as tight as it is now, you have one of the 
things that tend to a continued expansion in prices. 

Prices are pressing hard against ceilings. Only the continuation 
of price control since VJ-day has prevented a sharp rise in prices 
in many lines. 

Speaking as an individual, it seems to me that our three main ob- 
jectives for the transition should be : 

1. To expand rapidly to high level production and employment. 

2. To prevent a major rise in the general level of prices. 

3. To eliminate price control. 

It is not particularly difficult to achieve any one of these objectives 
singly, or even to achieve any two in combination. 

But achievement of the three objectives in combination does pre- 
sent a serious difficulty, due to the fact that a demand for goods suf- 


ficiently large to raise output and employment rapidly will very 
probably also operate to raise prices substantially, unless prices are 

The basic dilemma is that the continuance of price control for a time, 
while difficult, is necessary if we are to prevent the present excessive 
demand for goods from working itself off in a sharp rise in prices. 

The necessity follows only in part the pattern of the period follow- 
ing the First World War. At that time scarce materials played a 
larger part in touching off inflation than is probable at the present 

Our present danger is more strongly centered on a progressive pyra- 
miding of wages, costs, prices, and cost of living, which will depress 
real wages, eat away the value of the great savings of the American 
people, and in the end precipitate us into a depression in which the 
real as well as the illusory gains of the previous years will be liquidated. 

Though a businessman myself, I do not have too much confidence 
that my fellows or myself can trust ourselves not to take the easy way 
out. We will find ourselves raising prices in proportion as we raise 
wages, and thus as employers and employees find ourselves conspiring 
together against ourselves as consumers. 

Businessmen who feel confident of their ability to hold the balances 
even under tl)ese conditions and ask for an early liquidation of OPA 
are taking on a heavy responsibility indeed. Personally, I would 
fear to take this responsibility, and believe that continuation of some 
controls for a limited period is necessary. 

The difficulties of extending price control are obvious. The pri- 
mary one is the complication inherent in so administering prices that 
production will be stinudated where necessary, particularly in needed 
marginal capacity, without introducing inflationary pressures. This 
will require a wisdom somewhat above the ordinary human level 
and we may as well resign ourselves to the prospect that this wisdom 
will fall short of perfection at some times and in some cases. 

The other major difficulty is a ps3'chological one. We are weary of 
controls. We long for "normalcy." So strong is this feeling that the 
black market hovers in the background in many areas of attempted 

These difficulties can be minimized, and the task of necessary price 
control brought out of the realm of the impossible into that of the 
difficult but possible. 

One recourse would seem to be an acceleration of the process of 
freeing large groups of goods and services from further administra- 
tion. Eliminate as soon as possible all articles which are not important 
elements in the cost of living, or important materials for industry. 

Furs and jewelry are a case in point. They are not necessary to 
life and liberty, however important to the pursuit of happiness. 

There is also the host of knicknacks and sundries — the dime store 

Cut down to the bone of our economic body and protect that only. 
By so doing, we will simplify the problem of administration and 
eradicate a thousand petty annoyances which plague the public. 

In addition to reducing the area of price control as rapidly as 
practicable, we should also move promptly to speed up its operation 
and adjust it, for the remaining period of its life, to the different con- 


ditions of the transition. This involves improvements in administra- 
tion — a streamlining of price control. 

It also, in my opinion, involves some liberalization of existing 
standards. Even the temporary continuation of price control requires 
the development of standards which do not impede production, which 
do not violate common notions of equity, and which make possible 
the day-by-day administration of these standards in a prompt and 
efficient manner. 

The principal suggestion I would be inclined to make would be that 
where supply is short and could be expanded by moderate price in- 
creases this step should be taken. Let us err a little bit on this side. 

The reason for the suggestion is obvious. Price control is an un- 
natural practice. "Sitting on the lid" does nothing to relieve the 
pressures being generated below. The real way to relieve inflationary 
pressure is to bring production into a practical woi-king balance with 
demand. This is fundamental. But we must sit on the lid while this is 
going on or we will be blown sky high. 

It is my personal hope and belief that price control over many — 
perhaps most — goods and services can be suspended before the expira- 
tion of the present Price Control Act. 

Price control in any area should be extended beyond that date only 
after careful study of the facts then available and on clear demonstra- 
tion of the necessity of such extension. 

On the basis of the facts now available, however — particularly in 
view of the strong inflationary tendencies now apparent — it is not 
clear that all items can safely be removed from price control by next 
June 30. The areas in which some limited further extension of control 
may be necessary include a few raw materials, such as tin and sugar, 
some durable goods such as automobiles and washing machines, and 
especially rents and some building materials. 

I do not think we need to decide now on any such extension. We can 
wait and see. 

But I do not think we should blind ourselves to the possibility that 
some extensions, sharply limited as to the items to be covered and as 
to the period of the extension, may be necessary, particularly if the 
strong inflationary pressures now generating in the economy continue. 

Mr. Walter. Thank you very much, Mr. Flanders. 

Are there any questions ? 

Mr. Hope. I would like to ask a question. 

Mr. Walter. Yes. 

Mr. Hope. You speak about taking off the controls in some fields and 
particularly in the fields of luxurj^ and the dime-store goods and that 
sort of thing. 

Do you think there is any danger that may result in shifts of pro- 
duction from things that we need worse into those fields ? 

Mr. Flanders. There is that danger. Now, the counterbalance to 
that danger is the millions of returning soldiers, and that is the only 
counterbalance. We are in the astonishing situation, as compared to 
what many folks were thinking 6 months ago, that we need those 
fellows to work, instead of having a question as to whether or not they 
can find work. 

This process of shifting is going to relieve vacancies on essential 
production, which will make jobs for those returning soldiers. 


Mr. Hope. That was all I had. 

Mr. VooRHis. I want to follow that very point up a little, because 
in your suggestion that controls be lifted from all except the neces- 
sities of life — I hope that can be done — but I am wondering if in 
keeping controls on the essentials and lifting them on the other items 
together, there isn't some danger of creating a situation of much 
greater prosperity in the nonessentials and greater ability to raise 
wages in those fields. 

For example, that would draw people into those fields and out of 
the fields tliat you are still trying to control. 

Mr. Flanders. There is that danger. You have to weigh that 
danger against the opposing danger of administration of a great 
complicated undertaking, which might get beyond the possibility of 
OPA to administer. 

Mr. VooRHis. Yes. 

Mr. Flanders. You are on the horns of a dilemma and there is no 
simple, easy, obvious way out. It is a tremendous job, and on the 
whole it would be my instinct to simplify it and expect that time would 
begin to remedy some of these unbalances. 

Mr. VooRHis. You would have to have the other thing to ask for, 
which is administration that would err, if necessary, on the side of 
getting increased production. 

Mr. Flanders. Yes. 

Mr. VooRHTS. And if you got too involved an administration, then 
the result that I feared might well take place. 

Mr. Flanders. It might. 

Mr. Hope. I would like to ask another question. 

Mr. Walter. All right. 

Mr. Hope. You spoke about rent as one of the things on which we 
should retain controls, as well as some building materials, and I think 
most people agree that probably the rent controls have been the most 
successful part of price control, but there has been a lot of opposition 
generated, of course, to rent controls. 

This is particularly due to inequities which seem to exist between 
rent on property which had been rented over a period of time on which 
they used a base period — fixed some time in the past — and new con- 
struction, and as the situation exists now, according to my under- 
standing, you can't build new construction and rent it — people won't 

Mr. Flanders. You can build it for sale easier than you can for rent. 

Mr. VooRHis. You can't build it for rent under the present prices 
and stay within the range of prices under the existing system. 

Mr. Flanders. What is your understanding of the relationship 
between rents available for new construction and the cost of that con- 
struction ? 

Mr. Myers. I think the Congressman is completely right. If rents 
were held to existing levels, there would be very little new construction 
for rental purposes. 

But as I recall it, a day or so ago, Mr. Bowles moved to meet that 
difficulty by allowing an increase of, I think, 20 percent in rents 
on newly constructed dwellings for rental. 

Now, whether the 20 percent is sufficient, I don't know, but I would 
think it is wise to create a differential in those cases, and I gather 
that OPA has recently moved to do just that. 


Mr. VooRHis. I think you have to do that. But immediately we 

■will have on our neck in Congress everybody who is renting under 
existing price controls. They will say : '"You have a differential here. 
Here is a man who is offering the same accommodations that we are, 
and yet you are giving him 20 percent more." 

Now, of course, there has been some of that previously in that the 
Government housing has not been under price control. 

You have had right in the same locality a great range in rent, as 
between Government housing and existing privately owned housing, 
and that is, of course, one of the things that is going to make ad- 
ministration very difficult from now on as far as rent control is 

Mr. Flaxders. One expedient which would bring the two into 
balance in time, starting from an initial unbalance, would be the 
establishment of a policy of continuous slow increase in the rent 
ceilings, perhaps 5 percent a year or something of that sort, which 
would continue on until it brought it into balance with new con- 
struction and wiped out the difference. 

Mr. Walter. Should it be brought into balance with new con- 
struction ? 

Mr. Flaxders. We want eventually to bring it into such a balance 
that new construction where needed becomes possible over the whole 
field, over the whole country. In other words, we want to bring 
it eventually into the balance of free competition as between building 
new houses or renting new houses or renting old houses. 

That is the time when your controls of all sorts disappear. Prob- 
ably they should disappear before that, as you begin to approach it. 
But that is what you mean by balance where you have a choice be- 
tween renting a new house or old house, or building a new house or 
what have you. Where you have got to the point of free choice in 
the thing — — 

Mr. Hope. The point that bothers me, Mr. Chairman, perhaps there 
should be a differential between new construction and existing con- 
struction, but there is always going to be a difference of opinion there 
as to how much it should be. 

The controls on rent have been so tight all during the period that 
I am wondering if there won't be so much pressure to take all rent 
controls off that we may do it before it should be done, and that 
demand to take them off is going to be accentuated by the fact that 
there are differences in here. 

The strongest argument I have heard against rent control and the 
hardest one to answer, is that Government housing constructed right 
in the same locality as private housing has carried a higher rental 
all the time, or hasn't had any controls. 

Mr. VcORHis. That isn't quite true that it hasn't had any. 

Mr. Hope. I have been told there was none. 

You could go into one of these Government programs where you 
remodel your house and made apartments out of it and you could 
rent at a higher rate than someone who had to go back to a base period. 

Mr. Walter. As a matter of fact, you had to in many instances be- 
cause of the charges. 

Mr. Hope. That is true; you had to. But those who were renting 
on a figure fixed upon a base at some period in the past insisted they 


had higher charges also, that all of their charges were higher than 
they were previously. 

Mr. VooRHis. What do you mean by Government projects where 
you remodeled j^our house, FHA ? • 

Mr. Hope. There was some program where you could get a Gov- 
ernment loan. The old-type home-owners loan. You could remodel 
your home, and maybe make 3 or 4 apartments out of it and the rates 
you could charge there were very mueh higher than your neighbor 
across the street, who was renting an apartment at the time rent 
controls went into effect. 

Mr. Walter. Why I said the prices were higher was because the 
lending agency fixed an amortization period, and in it they also made 
an allowance for a net return to the owner, and in order to meet 
the payments, plus the return on the investmet, there was in many 
instances, higher rents charged than for similar apartments in that 

Mr, Hope. I don't want to pursue it any further. It is a side issue, 
anyway. But it is a pretty good illustration of the problem of try- 
ing to keep prices controlled where you can't make it universal. 

Mr. GiFFORD. Your constituents will pursue you further. They 
are pursuing me on these building controls. I understand that this 
meeting is held so that you can advise us so we can advise the Con- 
gress. Is that the idea ? What committee are we going to advise as a 
result of this hearing? 

Mr. Walter. I think we are preparing advice for the conferees of 
the Judiciary Committees of the House and Senate when they pass 
on the question of the period for controls, the extension of the powers 
under the Second War Powers Act. 

Mr. GiFFORD. Is that the only thing? 

Mr. FoLsoM. We have in mind asking Congress to take next year in 
regard to extension 

Mr. GiFFORD. You want us to advise Congress to take controls off 
of building industry or something of that sort? 

We are getting good advice, but it is only reasonable. There is no 
reasonableness left. The word ''reasonable" has been taken out. First 
the word "proportional" and now the word "reasonable." 

I am interested in some of these things you say: 

Even the temporary continuation of price control requires the development of 
standards which do not impede production 

I was on the committee going into that, on the committee setting 
up the OPA, and we constantly encouraged those whom we knew 
would carry on. 

Mr. Henderson was our chief witness, with all his statistics, and he 
promised us over and over again that the OPA would not injure pro- 
duction . Now, Mr, Flanders, you know that OPA does hinder pro- 
duction, don't you? 

Mr. Flanders. That is a question that isn't easily answered yes 
or no. 

There is no question but that it hinders production in some areas, 
and there isn't much question but what in others it doesn't. I had 
something to say on that if I can find it. I have got it here. 

This involves improvement in administration — a stream-lining of 
price control. 


It also, in my opinion, involves some liberalization of existing stand- 
ards. Even the temporary continuation of price control requires the 
development of standards which do not impede production, which 
do not violate common notions of equity, and which make possible 
the day -by-day administration of these standards in a prompt and 
ejfficient manner. 

The principal suggestion I would be inclined to make, would be 
that where supply is short and could be expanded by moderate price 
increases, this step should be taken. Let us err a little bit on this 

Mr. GiFFOKD. Could that be put into legislative form ? 

Mr. Flanders. That is your area. 

Mr. GirroRD. It is our area, but Congress is interpreted by bureaus. 
We had to grant them power, and we granted them power, to our 

Mr. Walter, Are there any questions you want to ask, Mr. Folsom? 

Mr. FoLSOM. Mr. George might have some. 

Mr, George. I did have some. Members of the committee have 
asked most of them. However, I have one or two that might be 
useful in supplementing the committee's inquiries. 

Mr, Walter. Proceed. 

Mr. George. Mr. Voorhis raised the question as to what would be 
the consequence of a very extensive exemption of small items. You 
mentioned two things specifically, luxury items and dime-store goods. 

The form in which he put the question was whether or not the 
raising of prices in those areas wouldn't expand the capacity to in- 
crease costs and increase wages and thus give rise to local spirals. 

I was wondering about this additional point: Do you think there 
is any danger of a contagion from those areas ? Is it possible to take 
out a specific area of production and say : "Here we will allow free- 
dom and nowhere else?" 

Mr. Flanders, After all, I think the number of people involved in 
those luxury items is comparatively small. That contagion perhaps is 
a reasonable risk. 

In the dime-store business, I am inclined to believe that competitive 
pressures are perhaps fully as much working at the normal level in that 
sort of stuff as in anything that is being made, and I would be in- 
clined to leave competition as the control in that thing, I doubt with 
the strong competition of these dime stores against these others, I 
doubt if that would get very far. And so, on the whole, I would think 
it is a safe risk to run. 

That is a personal judgment. 

Mr. George. I had this aspect in mind : The borderlines. The dime 
store goes up to the 50-cent store, and the 50-cent store goes up to the 
dollar store, and on up, and actually the lines of all of them overlap 

Now those stores that carry the low-end items — there have to be cal- 
culated risks at some point. I was worried about the low-end items 
being so generally affected as to give rise for a general pressure for 
the release of things that were important to the public. 

Mr. FLANDERS, There is, after all, a point which is not a point, it is 
not a line, but when you get, say, beyond the dollar store, you are in 


the department store area, and below the dollar store you are in this 
area, and if I were administering prices, which God forbid, God for- 
bid, I would feel, well that was a little problem; it wasn't the worst 
problem I had by any means. 

Mr. George. I have only one other question. 

Mr. Walter. Proceed. 

Mr. George. I am asking this because Mr. Flanders is a manufac- 
turer and because he has given so much invaluable time and study to 
the work of the Committee for Economic Development. 

As Mr. Flanders knows, there has been considerable disagreement 
among industrialists as to whether or not the reconversion formula of 
OPA has been sufficiently liberal with respect to allowances of cost 
increases since 1941. For the committee's information, if they are not 
already aware of it, the OPA allows only the increases in legal labor 
costs since that period, meaning from the middle of the brackets that 
obtained before the war to the middle of the brackets at the point at 
which it rests now. 

Industry, on the other hand, has been subject to rising costs through 
other basic actions. For instance, an up-grading from one grade to 
another, such as the crowding of employees within any particular 
gi-ade up to the top of the bracket in which they rest. The issue be- 
comes whether or not those abnormal pressures toward up-grading 
and toward crowding toward the top of brackets, will recede quickly, 
and whether they are justified in allowing only the legal costs. 

Mr. Flanders. I think the basis should be actual costs. Not being 
competent on all these techniques of price control and knowing that 
the staff of CED has been making a study, which study is not CED 
doctrine but nevertheless will be taken into account in establishing 
CED doctrine, I would like to pass that question over to Mr. Howard 
Myers, who has been a member of the staff making the study. 

Mr. Myers. I think the basic difficulty is the determination of 
what are costs, of what costs will be, because in the nature of that 
kind of an industry, they don't yet know what their costs are. 

Mr. George. Because they are returning to production. 

Mr. Myers. So you are forced to some sort of rather arbitrary 

It is obviously extremely important that the reconversion indus- 
tries particularly be put in a position in which they are able to ex- 
pand production rapidly. That is particularly important in that 
area, because they have to increase production frequently from sub- 
stantially zero to very high levels. 

As to whether the existing formula is about right or a little too 
restrictive, I think it is awfully hard to generalize. In some cases 
I am sure it is about right, and in other cases it is not. I should think 
that — I am speaking entirely personally — that a wise approach to it 
would be to set 3'our standards in the first instance as reasonably lib- 
eral standards so that you were sure you were on the right side. 
Then accumulate your cost experience just as rapidly as you can. 
After all, that ought not to take so very many months in most cases. 

As soon as you have some basis of cost experience, then you can 
shift from the reconversion formula to the normal formulas. 

Mr. George. You mean to accept manufacturers' estimates of cur- 
rent costs for the initial price and make it subject to adjustment when 


cost experience is acquired? In which event the price might be ad- 
justed either upward or downward, at the end of an experimental 
period of, say, 6 months or 3 months ? 

Mr. Myers. Not quite. We start with the fact that there are no 
current costs in any real sense for the particular production. That 
is because they are reconverting. 

I would think that the general approach, again speaking entirely 
personally, the general approach used by OPA is about the only type 
of approach you can use where you have no costs. 

Now, whether it is only the so-called legal increases in costs that 
should be admitted, or whether some increase in general overhead 
cost, for example, should be allowed, that is the point at which I find 
it very difficult to generalize. 

I would stress the fact of rapid administrative action to take advan- 
tage of actual cost data as soon as they develop and get the industry 
on a reconverted basis. 

As to the proposal that you raise or lower costs later in case you 
made an error in the early instance, it doesn't seem practicable to have 
a very considerable number of cost decreases. 

Now, if you happen to set the cost too high, I would stay with it. 
If you set it too low, you raise it as soon as you have a basis for judg- 

Mr. Walter. I regret that I am compelled to announce that the 
buzzing 3;ou just heard is a quorum call, and we will have to leave. 

On tomorrow the Deputy Administrator for OPA will testify. I 
understand he is bringing somebody with him, so that all of the ques- 
tions that the committee has asked frequently about OPA prices 
should be answered tomorrow. 

Mr. George. The committee has several times raised the question as 
to what is being done to insure the production of the right kinds of 
goods and the ability of producers to obtain the material needed to 
produce them. I have asked Mr. Maynard of CPA to join Mr. Nye. 

Mr. Walter. Thank you very much. 

The committee is adjourned. 

(Whereupon, at 11 : 30 a. m., the committee adjourned.) 




House of Representatives, 
Special Committee on Postwar 
Economic Policy and Planning, 

Washington^ D. G. 

The special committee met, pursuant to adjournment, at 10 a. m., 
in room 1012, New House Office Building, Hon. Francis Walter (chair- 
man pro tempore) presiding. 

Present: Representatives Walter (chairman pro tempore), Lynch, 
Worley, Gifford, Reece, Wolverton, LsFevre, and Simpson. 

Also present: Marion B. Folsom, director of the committee; and 
Edwin B. George, consultant. 

Mr. Walter. The meeting will come to order. 

During the course of cur s = :eral hearings, Mr. Ney, questions as 
to OPA's pricing policy have arisen that some of the members feel 
you should be called on to answer. As I understand it, that was the 
purpose of asking you to appear this morning. 

Have you any statement you care to make ? 


Mr. Ney. I have no prepared statement, Mr. Chairman. Your 
special consultant, Mr, George, asked me to come up, which I am de- 
lighted to do. 

As I understand it, Mr. George's request, on behalf of the com- 
mittee, was particularly because of a statement by a Mr. Seidel, before 
you last week. Mr. Seidel is comptroller, I think, or something, of 
tlie W. T. Grant Co., a chain of stores with headquarters in New York, 
and is appearing for the National Retail Dry Goods Association. 

Mr. Walter. He challenges the accuracy of some figures given by 
Mr. Bowles. I think that Mr. Bowles stated the retail merchants 
made a profit of 1,346 percent in 1944 in excess of the profit made in 
1939, and that was challenged. Mr. Seidel said it was only 370 per- 
cent. I am wondering which figure is correct. 

Mr. Ney. Well, that is an interesting thing. Let me say that I 
am a retail mercliant myself, and have been for 22 years; I am still 
operating stores in the Southwest, in Arkansas and in Texas, and 
hope to go back to those stores in the not too distant future. 

I left them in July 1942 for a 3-month assignment with OPA 
and have been there ever since. I live on retail store profits and 
expect to for some time. 


99579 — 46— pt. 7 15 


The fif^iire which Mr. Bowles quoted in the chart presentation be- 
fore the Senate Small Business Committee the other day was, I believe, 
1,324 percent, not that that makes much difference. Mr. Bowles 
pointed out very carefully to Senator AVherry that those were not our 
figures, that they were simph^ a result which we obtained by taking 
the published figures of the National Retail Dry Goods Association, 
who have for many years published a complete study on retail store 
operating figures. That study is known as the comptrollers' congress 
figures on operating results of department stores, an excellent study. 

Mr. Bowles was then questioned as to the accuracy of the figures, 
and the National Retail Dry Goods Association sent for Professor 
MacNair of Harvard School of Business, a very competent gentleman, 
who also publishes a report on department store figures and profits, 
and Mr. MacNair came down and testified that the department store 
profits in relation to the average of 1936 to 1939, and not just of the 
year 1939, was 564 percent. We said that our interpretation of the 
figures brought them out at 1,324 percent — obviously one of us was 

The first thing let's do, lot's see if we were talking about the same 
figures. We were. Next thing let's do, is analyze the data itself 
and see if we have each given the same interpretation, and we found 
that Professor MacNair had made his comparison on the basis of 
1939 only, instead of the average of 1936 to 1939. He had failed to 
take into account one or two other facts, which he admitted should 
have been taken into consideration, and finally Professor MacNair 
said it looked like a figure of nearer 8v00 percent would be more correct. 

I said, "With all that wide range, I don't think we ought to take 
the time of the committee with argument on the subject, because 
it is really irrelevant whether profits have increased 800 percent 
or 1,324 percent. 

The committee instructed all of us to get together and go over the 
figures to see if we could reach an agreement on a common figure, 
to brin^r that figure back to the committee, and if there was a dispute, 
each would state his side of it. 

We wanted to make it the same day. It will be extremely interest- 
ing to see the actual figure that comes out, not whether retailers have 
made 8 or 12 times as much as in peacetime, but because every figure 
we present is subject to attack. But on figures which are a straight 
calculation of someone else's figures we try very hard to be accurate. 

We could furnish a copy of that report, Mr. Walter. 

Mr. Walter. I would like very much to have it. 

Mr. George. Wasn't the reason for the difference primarily the 
inclusion by Mr. MacNair and by the controller's congress of income 
from investments as contrasted with the rise in income from opera- 
tions exclusively ? 

Mr. Ney. I think that factor was one of the factors that caused some 
disparity. One side included income from other sources and one did 
not. I don't remember which included it. That was one of the fac- 
tors that caused some disparity. One side included income from other 
sources and one did not. I don't remember which included it. That 
was one of the factors they will attempt to agree on, whether from 
an accountant's standard, it should or should not be included. 

Being in the department store business, I don't like to argue the 
point too much. It certainly is no secret that department store profits 


throughout the war have been at record levels. The reasons are 
clearly understandable. I don't feel too badly about it, that they are 
high, but the reasons for this rise to such heights are interesting. 

yirst of all, retail sales — dollar sales — since 1939, have almost 
doubled. They have increased 185 . percent according to the same 
reports from which I am quoting. Now, it is a well-known fact that 
expenses expressed in percentage to those sales never rise in propor- 
tion to the sales, when a sales increase comes rapidly. 

A great portion of operating expense is fixed, much of which does 
not rise even though sales volume increases. However, we were faced 
with an unprecedented situation, with a sales volume almost doubled 
since 1939, in 5 or years, and due to Government restrictions such 
as on delivery, ODT regulations, the Federal Reserve regulation 
"W" — which sets forth prescribed conditions under which you may 
sell on a credit basis, limiting the time, and thus lessening the ex- 
pense — many other things coupled with the shortage of labor itself, 
where most stores have operated clearly undermanned simply because 
customers have been putting up with poor service. So the cost of 
doing business in a percentage of sales went down from about 33 
percent on the average to about 27i/^ percent for the same group of 

In addition to that, we have been in what is commonly and correctly 
called "a sellers' market." Goods have been scarce. Demand has 
been high. Customers, therefore, have not been as choos3^ A man 
used to come into my store and say he wanted a size 42 double-breasted 
grey suit with a stripe like this one, and he wanted one that had pleats 
or did not have pleats, depending on his preference. If you didn't 
have that suit, he would usually walk out and go to another store until 
he found that suit, and he would usually find it. 

Today he walks in rather apologetically, and he says, "Is there any 
possibility of your having a suit that will fit me? I don't care about 
the color or whether it has pleats, but I have got to have a suit." As 
a consequence, you sell most of the goods you buy at the regular price. 

In the department store business in the past, due to the highly styled 
nature of the merchandise carried probably, you had what we called 
"mark-downs," meaning that if you bought 100 dresses, you sold, let's 
say, 80 or 85 of them at the regular price and the last 15 or 20 you had 
to sell for less. The price might be from 10 percent off down to con- 
siderably below cost. We never cared what the individual garment 
sold for. Our only concern was that when we got through, on the 
whole business, we made a satisfactory profit. 

Our mark-downs have decreased terrifically. So the marjiin. the 
amount we actually get, has increased. 

Mr. Lynch. You say your mark-downs have decreased? 

Mr. Ney. Yes: which means we make more money on what we do 
sell. ^ 

Mr. Lynch. I thought you meant there has been a decrease in the 
particular items that were marked down. 

INIr. Ney. Well, the number of items that we have marked down 
have been decreased, though the dollar sales are higher and also the 
profits are higher. 

Mr. Simpson. "VVliat do you say to a customer when he wants to buy 
white shirts ? 


Mr. Net. I was down in my home in Arkansas about 2 weeks ago 
and I went down to our men's store, and I asked if we had any white 
shirts. They didn't have a one. I asked, "When was the last time 
we had some?" "We had a few dozen yesterday." I asked, "How 
long did they last?" "15 or 20 minutes." "When will we get some 
more in?" '^Probably tomorrow." 

Every day we get in a few white shirts and we get in men's shorts 
also. We get in some all the time, but we don't get anything like the 
quantity we need. 

Mr. Simpson. That makes it necessary for the customer to stand 
there and wait for a shipment? 

Mr. Net. That is almost true. I am sure you have had the same 
experience yourself. Maybe you always wore a striped shirt, but 
maybe that is because you can't get a white one. 

]\Ir. Walter. From counting the noses around here, I find that the 
white shirts outnumber the colored shirts 7 to 6. 

Mr. Net. This is a group of Congressmen. 

Mr. Lynch. Those are prewar. 

JNIr. Ney. I think probably Congressmen can get white shirts. 

I think that is the only relevancy of the subject. I'm sure we have 
more important things to talk about. I think the policy that we have 
arrived at in the past few months, the standards to judge the extent 
to which we will require retail stores to absorb increased cost, is a 
very hot subject. Your mail may be full of letters, particularly Mr. 
Gilford from Massachusetts, from retailers who say they cannot afford 
to absorb these increased costs. 

I would like to say that the standards under which we prescribe 
the maximum amount of absorption which retailers take, are in my 
opinion, pretty liberal, and I would also like to say that so far as I 
can find, and I will take my own business as an example, and I have 
also examined the statements of dozens of other stores I regularly 
look at, and I can find practically no effect on their margins by the 
cost absorption program which we have. 

I know many retailers all over the country intimately, and I have 
acted as adviser for many stores before I came into OPA. I know that 
the great bulk of retailers aren't actually concerned about the amount 
of absorption they have had to stand or even too concerned about the 
amount they will have to stand in the future. 

I think it is a matter of principle with them. 

They feel, and perhaps rightly so, that by raising enough fuss and 
by having their association blast the program and the policy at every 
opportunity, what they might do is to prevent us from going further 
than they think should be done. 

Now, we have no thought that price increases at the manufacturing 
level, which must be absorbed in whole or in part by the retailer or 
wholesaler, will ever have the effect on retail profits of bringing them 
down to anything like base period profits. Retailers say, and with some 
justification, that we are going to have heavier operating expenses now. 
We are going to put back every-day delivery instead of twice a week. 
We are going to have more credit expense, more mark-downs, much 
of the goods we have in stock will have to be sold at reduced prices. 
On future purchases our mark-downs will increase. Our sales will 


When all of those things — long before all those things happen, there 
will be no price control, because those things happen when supply 
and demand come into somewhat of a balance and certainly that is the 
time when price control is not needed. I know the retailers have 
nothing to fear of an adverse effect on their profits in a normal year. 

We didn't seek to make the profit which we did in the last few years. 
We can still make several times what we ever made in a normal peace- 
time year. 

Are there any questions on that before we move on? 

Mr. George. Mr. Ney, as I understand it, the situation at present is 
this : You expressed the opinion that the retailers had not been very 
hard hit by the amount of absorption that they are required to take 
thus far. That is their own view too, isn't it, that the absorption in 
1944, up to 1944, was not very substantial, but that" the increases you 
propose to put into effect, particularly on low-end items, coupled with 
the return of peacetime expense rates, is going to put pressure on them 
that they feel will be a little difficult for them to bear ? 

At what rate do you think the peacetime rates of expenses are re- 
turning ? 

Mr, Net. Expressed in a percentage of sales ? 

Mr. George. Yes. 

Mr.NET. It depends on how volume holds up. (See supplementary 
letter, exhibit 4, p. 2373.) Let's assume — this is a personal assump- 
tion — that 1946 dollar sales in our business will be at least what they 
were in 1944. Now, in 1944 they were about 12 or 13 percent less than 
in 1945. Therefore, we can stand a 12 or 13 percent decrease in sales 
over 1945 figures, and still equal 1944 figures. Now, on the basis of 1944 
figures, it is my opinion that where we are now operating at about 27^ 
percent — we will operate at not to exceed 29 or 29^^ percent. Twenty- 
nine and one-half percent is the Utopian expense rate in the depart- 
ment-store business. I remember that years ago I said if we could get 
it down to 32 percent, we could make more money than we could carry 
home in a shoe box if it was in $10,000 bills. 

Looking at the worst side of it, we go back to 1944 business, in my 
business our expense rate will be 29 to 291/2 percent. We are the 
typical store. I don't happen to be in OPA because I own a typical 
store. Our expense is 27i^ percent, the exact rate of the average in the 
NRDGA study. If we are a typical store, then other stores like us 
can foresee the same type of operation for 1946. 

Mr. George. You are supposing that the peacetime rate of expendi- 
tures is not going to return at rates of speed that will impair retailers? 

Mr. Net. Not unless retail sales turn downward. Your guess is 
probably even better than mine as to whether retail sales will turn 
downward. The relation to national income has a definite bearing. 
Relation of available goods is an important factor. I personally think 
that retail sales are going to hold at high levels for some time. That 
is a personal opinion. 

Mr. Ltnch. Mr. Ney, Mr. Seiclel, when he testified before this com- 
mittee several clays ago, gave me the very distinct impression that it 
was his opinion that despite OPA, through downgrading we have 
had a great inflationary tendency. 

Is that your opinion ? 



Mr. Ney. I should like to talk on that subject. I pointed out to you 
that I am due at the Senate Small Business Committee, and while 
they asked me to be there at 11, I was given to understand you will 
require about an hour of my time. I should like to talk to the very 
point which Mr. Lynch brings up. 

The best measure of the increase in prices that have taken place is 
shown by the BLS Cost of Living Index — issued by the Department of 
Labor. That index shows an increase of some 30 or 31 percent since 
1939. The index however, is made up of several "segments" — food, 
rent, clothing and so on. The clothing segment has increased 48 per- 
cent in the same period. We have consistently stated that while the 
BLS index is prolDably the best available measure of increased prices, 
that in the apparel and clothing and home furnishings field, it un- 
doubtedly does not give full weight to quality deterioration. 

Therefore, we agree with anyone who says that if the BLS state- 
ment shows that clothing and apparel has gone up 48 percent on the 
average, it is probably more, because it doesn't fully measure quality 
deterioration. Now, apparel, and home furnishings, form a very com- 
plex group of items on which to exercise price control. The very 
elements of style which I discussed a few minutes ago, the fact that 
the style factor typically represents a greater portion of the price 
than the intrinsic value, indicates what a problem we have. 

It is basic that when you have a buyers' market, when there is more 
goods than there is money, that every manufacturer strives to improve 
the quality of his garments. He has competition. The only way he 
can sell his goods in volume and profitably, is by making a good article. 
Therefore, in times of a buyers' market, and not necessarily 1933, 
which was a buyers' market deluxe, but in any normal peacetime year 
where there is somewhat of a balance between supply and demand, 
manufacturers strive constantly to improve the quality of their product 
for the price. 

Now, let's contrast that kind of a situation with the one we have 
been operating under since 1942. We have been going through a mar- 
ket where the sellers' market aspect has been continuously increased. 
As I pointed out a few minutes ago, customers have been willing to 
take almost anything. If customers are willing to take almost any- 
thing stores will be less loathe to buy what looks like poor values. It 
is all they can get and their customers have indicated that they will 
take it. 

So, in the sellers' market the incentive for a manufacturer to improve 
the quality of his product disappears and the contrary, the reverse, 
situation arises. The manufacturer faced with increasing costs, which 
are inevitable in times like this, tends to immediately switch to the 
most profitable items he makes. 

Mr. Simpson. Could I ask a question there ? 

Mr. Walter. Yes. 

Mr. Simpson. You say manufacturing cost is increased. How do 
you account for the recommended 2i/2-percent cut in General Motors 
products ; on the new car ? 

Mr. Net. General Motors' automobile price, in fact all automobile 
manufacturers' prices, are determined under the reconversion formula, 
which takes into account, Mr. Simpson, increases in basic wage rates 
that have taken place since 1941, and increases in the legal prices of 


material. That is a reconversion formula, which is entirely different, 
but let me state that General Motors factory prices have not been 
reduced 2 14 percent. 

Mr. Simpson. That was reduced according to the article published 
in the Washington papers. 

Mr. Net. We anticipate, on the basis of the information that Gen- 
eral Motors has furnished to us, that their prices will be on the average 
at 19-12 prices, but the prices at retail will be 21/2 percent less, because 
automobile dealers will have their initial or original margins reduced 
on the average some 2^ percentage points, which will absorb the 
expected increase at the manufacturers' level. 

General Motors, who accounted in 1941 for 47 percent of all cars 
manufactured, will probably not be entitled to any increase. Ford, 
under the same formula, was entitled to a 5.76-percent increase. 

Mr. Simpson. That will put Ford, Chevrolet, and Plymouth, with 
a $50 difference, model for model, that never existed before. 

Mr. Ney. Starting with the 1942 prices where there was a differ- 
ential — and let me point out 1942 prices were considerably higher than 
1941 prices — I am under the impression that as of 1942 there was a 
differential between the makes which you mention. 

Mr. Simpson. I am in the automobile business, and there never has 
been a time in my 30 years' experience when we didn't have Ford, 
Chevrolet, and Plymouth as competitors. There never has been a 
time when there has been a $50 difference between Ford, Chevrolet, 
and Plymouth, model for model. 

Mr. Net. We have always had automobile competitive markets. 

Mr. Simpson. Prices have been practically the same. 

Mr. Net. Yes. 

Mr. Simpson. Chevrolet will probably have a price advantage of 
nearly $50 per model on the recommended prices published in the 
Washington papers. 

Mr. Ney. Yes; if Ford wants to take their increase and if it puts 
their car on comparable models $50 higher than the General ISIotors 
car, then Ford will only do it because they feel that their car will sell 
at $50 more, I presume. 

Mr. Simpson. Anybody's car will sell. 

Mr. Reece. Of course they will sell. It is a sellers' market. 

Mr. Ney. What model do you deal in ? 

Mr. Simpson. Do you think I ought to tell you ? I am a Chevrolet 

Mr. Ney. Do you feel that your Ford competitor in your particular 
city for the next 12 months will be at a particular disadvantage 
because his car will sell for $50 more ? 

Mr. Simpson. Not under present prices, but OPA has created an 
unfair market situation for Ford. 1 feel sorry for Ford and Plym- 
outh dealers. I am a nice competitor. I don't want to take advan- 
tage of them. 

Mr. Ney. I would like to ask you as an automobile dealer, if I may — 
I know I am not here to ask questions 

Mr. Walter. Yes, indeed ; that is all right. 

Mr. Ney. As you know, we had quite a discussion with the Auto- 
mobile Dealers Association. 

Mr. Simpson. I heard something about it. 


Mr. Net. It was mentioned up here on the Hill, I think. Do you 
feel — I am not asking about your own business, but automobile dealers 
generally — do you think with 2i/2 percent less than the customary 
margin — let's say normal margin is 24 percent — with a 211/2 margin, 
with the strong demand that exists for new cars, and considering that 
there probably won't be more than a third enough new cars in 1946 
for the demand, although C. E. Wilson of General Motors told me 
the other day that he thinks the country will produce 4i/2 million pas- 
senger cars in 194(), but that won't match the demand which has been 
built up for the past 4 years— do you feel that the average car dealer 
will do better in 1946 than in 1941 if the industry makes 4i/^ million 
cars ? 

Mr. Simpson. In tlie first place, 1942 Ford, Chevrolet, and Plym- 
outh used cars under the warranty prices are $142 more than the 
new 1946 price, if this price goes through. 

Mr. Net. That is correct. 

ISIr. Simpson. Now, certainly, as an automobile dealer or as a Mem- 
ber of Congress or grocery merchant, I have never seen a used article 
sell for more than a new one. On that basis, I have got two or three 
suits I would like to sell. 

Mr. Ney. Didn't they last yenv, Mr. Simpson? With the few re- 
maining cars, even there your dealers were permitted to add on an 
escalator eacli month for several months, which built the prices — 
wei-en't their prices 

Mr. Simpson. There were carrying charges on new 1942 automo- 
biles that car dealers had. 

There never was a time when a second-hand article from an eco- 
nomic standpoint should sell for more than a new one. It doesn't 
make sense. 

Mr. Net. Unless new cars are rationed, I agree with that. If 

Mr. Simpson. Should they still be rationed if there is a reason? 

Mr. Ney. We have some doubts on that. 

Mr. Simpson. I am not particularly in favor of rationing anything. 

Mr. Ney. Of course not. But my question, Mr. Simpson, it is 
entirely possible that the used-car ceilings should be revised. 

Mr. Simpson. If we gave $500 for a used car in 1939 or 1940, and 
then due to volume, you sold that used car for $100, which brought 
the average profit down to about 11 14 percent net, do you feel that 
because of that same situation that you should continue to do that? 

In other words, it was bad business, and now that the war is over, 
we should do it again because you have about the same amount of 
profit? I don't feel that way. 

Mr. Ney. My question was simply, automobile dealers on the aver- 
age, in normal peacetime years, dicl make some kind of a profit. It 
wasn't very large according to the figures I have seen, but my ques- 
tion was. Don't you think that in 1946, taking all the factors into 
consideration, the profits of practically every dealer in the country 
will be considerably more? 

Mr. Simpson. Just like your own business. 

Mr. Ney. It is a sellers' market. 

Mr. Reece. I am not an automobile dealer, unfortunately, but in 
following up Mr. Ney's discussion with you, the observations that I 


have made in my conversations and in my relationships with the 
dealers, and of course we all have very extensive contact with the 
dealers because there are a oreat many of them and they are in the 
main men of fine type — now the apprehension of the dealers down home 
is that under this new set-up the volume is going to be small. Their 
overhead goes on. They have to retain tiieir salesmen since they 
can't let their salesmen go, and in anticipation of the coming on to 
tlie market of new cars, there is going to be a slowing up of the han- 
dling of second-hand cars and likewise in the repair business, due to 
two things: First, the shortage of repair parts, and second, the lack 
of disposition of spending extensive sums on old cars in anticipation 
of the new ones. 

That is resulting in more apprehension on the part of the dealers 
according to my observation than has existed at any time since the 
period when the controls were first imposed, and they did not know 
what the future held for them. But I don't think there is a dealer 
in my area who is anticipating doing as well this year in 1946 as he 
did in 1941, and for that matter, he is approaching 194G with greater 
apprehension than he approached 1943, 1944, or 1945. 

Mr. Net. Mr. Simpson is an automobile dealer, and being also a 
Congressman, has a much broader view. I understand his idea is that 
being a sellers' market, if a reasonable number of cars are produced, 
4^ million cars, which is a good production estimate for 1946, 1 under- 
stand Mr. Simpson to say that it being a sellers' market he felt the 
average car dealer would do better than he did in the past. 

Mr. Simpson. He will certainly do as well if he gets the cars. But 
why cut the price of an automobile 2i/^ percent and still have the 
dealer absorb it? 

Mr. Ney. The Si/o percentage points which the automobile dealers 
are required to absorb is merely a continuation of the very same cost- 
absorption policy which we outlined before. 

Mr. Simpson. But the recommended prices in the Washington 
papers, one line of automobiles are having a reduction in prices of 2i/2 
percent and still I suppose that dealers will have to absorb that. 

Mr. Ney. I would like to discuss that. We were faced with one of 
two choices, neither of which was very good. We very seldom have 
good choices to choose from. We had the situation in automobiles and 
in refrigerators and some other major appliance items where the 
amount of increase the individual manufacturer would get would vary. 

It would vary for several reasons. One reason it would vary would 
be because some dealers advanced their prices a great deal more be- 
tween 1941 and 1942 than other dealers did. 

Mr. Simpson. The dealers or manufacturers? 

Mr. Ney. I mean that manufacturers advanced their prices more 
than their competitors did. For example, in the refrigerator busi- 
ness — I happen to have a major appliance store — practically the only 
major appliance manufacturer who didn't increase his prices between 
1941 and 1942 was General Motors, the Frigidaire. 

Now, in order to put them on a par with Westinghouse and General 
Electric, and Norge, and all the rest, they were entitled to an in- 
crease, and the other manufacturers were not entitled to an increase. 
The amount of increase to Frigidaire Division of General Motors was 
something like 12 percent. If you give them 12 percent increase, it 


was really ;in increase over 1941 price, and bronglit them up as though 
they had advanced their prices as the rest of them did. 

Mr. SiMrsoN. Don't you think competition will take care of that? 

Mr. Ney. When we gave this 12-percent increase to General Motors, 
we were faced with the situation where if we required Frigidaire ap- 
pliance distributors — I don't happen to carry Frigidaire — to absorb 
that increase, Frigidaire dealers would have been penalized over all 
other dealers by taking an extremely large reduction in mark-up, 
whereas I, as a Westinghouse distributor, would have had no absorp- 

We tliought that the better alternative to that was to level the in- 
crease throughout the industry. In addition to Frigidaire, General 
Electric got it on just two models, Frigidaire on the whole line, and 
then all appliance dealers took a reduction of 1 percentage point. 

The Frigidaire dealer in my town would have been in a bad posi- 
tion if we had required him to absorb that Frigidaire increase, and I 
get h}\ a Westinghouse dealer, scot free in a sellers' market, where I 
am going to make a lot more money than I did in 1941. 

We did the' same thing in the automobile business. Perhaps the 
committee doesn't like the alternative we selected, but we thought it 
was a reasonable one to select. 

Mr. Simpson. I want to ask one more question. What do you think 
will happen, as an electric-refrigerator dealer, what do you think will 
happen when the new models come out and the customer drives to the 
sales room with a used car and the price has been cut to the dealer? He 
would normally give $500 for an automobile and what will he do ? He 
will just cut that used car down to $425 or $450. So where have you 
saved anything? 

Mr. Ney. I pointed out that I am not an automobile dealer. I am 
familiar with the trade-in problem in the appliance business. We 
have a trade-in business. It is a type of business I know something 
about, I think, and we have already experienced — we have a couple of 
samples of our Westinghouse refrigerators, just like you probably 
have some samples of your cars, and we are taking orders. 

The minute we put them on our floor, our customers came in and 
registered. "We want a box just as soon as we can get it." Where they 
used to want 3 years to pay for it and no down pa5^ment and they had 
an old $5 ice box to trade for $50, and usually got it, now they have 
nothing to trade in. Now they want to pay cash or put it on the regu- 
lar charge account. We ask them, "Do you have a trade-in?" And 
they will say, "No, you won't have to take any trade-in." It isn't a 
question of our having to take in. We have a big demand for used 
refrigerators. We are not going to require you to trade in a box to get 
a new one, but if you have one, we will be very glad to take it off your 
hands. We will take it off your hands and give you a fair price. 

We will sell it after reconditioning it, at a profit. We are in the 
peculiar situation of looking for trade ins. 

Mr. Simpson. If your discount is cut and you gave a man $25 for 
a used refrigerator under normal conditions, won't you cut him down 
to $15 ? 

Mr. Ney. He would go out and sell it himself first. 

Mr. WoRLEY. Don't you give preference to a fellow who has a used 
box to trade in on a new one ? 


Mr. Net. No. As a practical matter, we don't. We simply let our 
customers come in and re^^ister in order, and we make them sign the 
register themselves and they see their number, 122, and they know 
they are number 122, and we give them a slip which says, "You are 
number 122," and we don't care whether they want to pay cash or 
charge it, whether they have been a good customer or not. We want 
to build up some good, postwar consumer relations. 

If they want to trade in a box we will give them a fair price. 

Mr. Walter. I think the committee would be interested in know- 
ing how you arrive at the price you have allowed new manufacturers 
in lines in competition with existing lines. 

Mr, Ney. You are talking now not about reconversion commodities, 
but apparel and the house furnishing items and the toys and miscel- 
laneous housewares, et cetera, particularly those items that Mr. Seidel 
has talked on and shown in the NRDGA exhibit around town. 

Mr. Ltncii. The low-priced articles. 

Mr. Walter. Yes. 

Mr. Net. Well, I should like very much to spend a few minutes on 
that. The constant statement has been made by the proponents of 
this exhibit of the National Retail Dry Goods Association, that we 
have discriminated in favor of the new manufacturer. 1 have been 
a life-long member of the association and very active before I came 
into the Government, and expect to be very active when I get out. 

I think trade associations have a very definite function and I am 
for them. I think their functions have been a little abused during 
the war. After all, the executives are paid people and have to justify 
their jobs. 

Mr. Worlet. Are there any "little" members in that association? 

Ml'. Net. Yes ; I think they have about G,000 members. It includes 
some small stores. 

Mr. Reece. Since we were discussing this automobile dealers' sit- 
uation a while ago, I am myself, not quite satisfied with the record 
as it now appears to be left. 

I understand from the conclusions that you drew from this over-all 
discussion that the dealers in 1946 are facing the year with greater 
profit prospects than they enjoyed in 1941. 

Mr. Ney. Yes. 

Mr. Reece. And that you used what Mr. Simpson said to support 
that view, and I didn't get that conclusion from what he said, myself. 

I would like to have that clarified, if it doesn't take too long. It is 
in this question of dealer percentage profit. The dealers are in the 
same position that other buyers are in. 

As you said, this is a sellers' market — and from the standpoint of 
automobile manufacturers it is a sellers' market. The dealer is not 
in a position to force a favorable trade, a favorable concession from 
the manufacturers. They are in a position to say, "If you don't want 
the dealership, I have another man here who will take it in anticipa- 
tion of the future." 

He might be in position to withstand a loss for a period of time. 

My observation of dealers and my relationships with the dealers 
at home are that they are not facing 1946 with as favorable a prospect 
as they faced 1941, or enjoyed in 1941, and that is really what I want 
to know. 


Mr. Net. If I misquoted Mr. Simpson, I am sorry. Did I misquote 

I understood liim to say that in view of being a sellers' market — I 
would be glad to express my own opinion — 

Mr. Walter. Yes, please. 

Mr. Simpson. If a dealer sold 100 automobiles in 1941 and his gross 
profit was $200 a car, he would have $20,000 gross profit. Is that 

Mr. Net. Yes, sir. 

Mr. Simpson. He didn't do that because he had the old trade-in 
bug, and the NADA figures show that he averaged about lli/^ percent 
gross in place of 24 percent. 

Now, call it just about half of that, or $10,000, which would be his 
profit for 1941. Now, if he sells the same number of cars in 1946 and 
has his full gross profit, whv naturally he is going to show more profit 
for 1946. 

But going bnck to 1943, 1944, and 1945, when he didn't have any cars 
and his average is still poor — I don't think that because an automobile 
dealer might have a good year in 191() that his average will be any- 
where near that for the period of time there have been no automobiles 
to sell. He shouldn't be penalized because he might have a good year 
in 1946 any more than a farmer should be penalized if he has a good 
crop year and his crops sell for less. 

Mr. Net. In 1943 and 1944 when he had practically no cars, only 
what he had on hand, he made more money than he made in 1941 
when he did have cars? 

Mr. Simpson. I said that if he didn't make anything on new auto- 
mobiles — this average dealer in 1943, 1944, and 1945, because he didn't 
have any cars — he had to pay more attention to his shop and his parts 
and things of that kind to keep his door open. 

I am saying that even if you make a full gross profit of 24 percent 
on 100 automobiles in 1946, considering that department of your 
business of new-car sales, your average would still be poor. 

Mr. Walter. May I ask a question? What bearing would the in- 
crease in the repair business have on his gross profit? 

Mr. Simpson. When the average retail automobile dealer had plenty 
of cars, he didn't particularly care as long as he broke even in his shop. 
He had his profit from new-car sales. 

]Mr. Walter. But then he revamped his business? 

Mr. Simpson. He had to. 

Mr. Walter. Would his profit out of repair work be sufficient so 
that the average would be about the same ? 

Mr. Simpson. No, sir; they had to revamp their parts and service 
departments in order to break even on their business. They had to 
do it. 

Mr. Net. Your example, which I think is a very good one and an 
accurate one, indicates that 1946 will be an excellent year, but that 
the dealer is entitled to an excellent year because he has had three 
poor years. I don't challenge that statement. I think he will have an 
excellent year and I think it is good that he will. He will have to 
spend a lot of money. 

Mr. Simpson. About twice in the last decade an automobile dealer 
has had a chance to make a little more than his average profit. In 


other words, get himself in a good cash position. Once was during 
the other war, and now it should be in the offing in this war. In other 
words, nobody that I have talked to feels that because of the fact that 
there is an unprecedented demand for automobiles for the simple 
reason that they have gone off the market — it is a replacement market — 
that they should be penalized and put back to averages. 

Mr. Reece. But, Sid, supposing another difficulty. I am glad to 
see all this optimism about the number of cars you are going to get 
in 1946 — that is not universal optimism — but suppose the difficulties 
in steel and in the automobile manufacturing business and otherwise 
along the line should continue during a good part of 1946 so as to 
restrict the output of automobiles, then what position are the dealers 
going to be in? 

Mr. Simpson". The same position as he was during the war. 

Mr. Ney. Well, in 1942, 1943, in 1944, also, and practically 1945, 
there were no cars manufactured. We know that some cars are going 
to be manufactured in 1946 and Mr. Wilson, whom I think is one of 
the soundest men in the automobile business, says that he thinks that 
there are going to be 4I/2 million passenger cars produced in 1946, and 
he says it publicly, so I can quote him; 4i/^ million cars, he says, 
will be about 10 percent more than manufactured in 1941, talking 
about passenger cars only, 

I said, "Will General Motors maintain a 10-percent increase, too?" 
He said, "No. The industry will maintain a 10-percent increase but 
not General Motors, because in 1941 vve were working at capacity 
and made 47 percent of the cars that were made in this country. 
We have the same facilities now and we can't make any more cars 
until we get more plant facilities. We are not going to have them 
until the last quarter." Therefore, I think tliat General Motors is 
going to produce about the same number of cars they produced in 
1941, which would be less than 47 percent of the total, if the industry 
produces 10 percent more than they did in 1941. 

He said, "You have got some smaller dealers — let's take Hudson 
for instance — who produced maybe 80,000 cars in 1941." I happened 
to talk to their president the other day. His goal is 100,000 cars. 
Another small one, Nash and Willys-Overland, produced relatively 
few cars. They expect to double what they produced in 1941. 

Mr. Reece. Aside from the labor question, do the large companies 
like General Motors have the facilities installed to resume their normal 
production by the first of the year? 

Mr. Net. I can again only quote Mr. Wilson and Mr. Barrett, the 
head of Hudson ]\Iotors, the only tAvo I have talked to personally. 

They expected the rate of production by the first of the year would 
be up to about 250,000 cars a month, an annual rate of 3,000,000. 
They expect that monthly rate to increase so that in the last quarter 
the industry would be producing at the rate of 500,000 cars a month, 
an annual rate of 6,000,000. 

Those fellows are pretty smart manufacturers. I assume that when 
they gave the War Production Board last October, the rate of produc- 
tion that they expected to meet in 1946 by quarters that they were cagey 
enough to take into consideration all the factors, availability of ma- 
terial and labor. I don't want to make the dogmatic statement that if 


the labor situation were settled today, that they would meet that 
schedule. That should come from them. 

My conferences with them have been extremely encouraging. If 
labor can get settled, we will start grinding out cars in this country. 
Not enough to meet the demand. When we get up to a 500,000 monthly 
rate, it will be something the country has never seen. We are going to 
have a strong sellers' market. Dealers will keep making money. I am 
going to try to keep making money, too. 

I think that the car dealer will too — say a period for the next 2, 3, 
or 4 years — far in excess of what he ever made before. And if it serves 
to compensate him for the lean years, I will be glad to see it. 

Mr. Lynch. The time of the witness is pretty nearly up. I would 
like to have the question answered that was propounded before. 

Mr. Ney. If we can talk to Congressmen who have been automobile 
dealers, we will be glad to do it, because other Congressmen will ask 
them their opinions. 

Mr. Simpson. If you will ask somebody in Mr. Bowles' office for 
an answer to my letter which I wrote asking for an explanation of 
the new prices, I will appreciate it. That was written after reading 
about them in the papers. 

Mr. Ney. That was about 4 weeks ago. 
Mr. Simpson. I have never had an answer to that letter. 
Mr. Ney. Let me say in conclusion that the Price Department gets 
over 100,000 letters a month and we try to answer them. It is no 
secret that every piece of congressional mail comes down with a great 
big sticker and that congressional mail gets answered. If it takes us 
4 weeks to answer Mr. Simpson's letter, God help the public. 

Mr. GiFFORD. I have a letter here. It says here about your agency, 
that it is not doing a job, that your unrealistic, theoretical, and in- 
equitable approaches to pricing problems are not merely restricting, 
but literally throttling industrial activities throughout the Nation. 

That is by the special committee. They indict you very much. Now, 
are we trying to offset that? Are you trying to, or what? 

Mr. Ney. I am just a guest of the committee. I will be glad to 
answer any indictment or if you wish, give you grounds for another 

Mr. GiFFORD. You are a what ? 

Mr. Ney. I am a guest, or if you prefer, a bureaucrat that has been 
requested to come here. 

Mr. GiFFORD. If j^ou are a guest, I want to treat you as a guest. 
ISIr. Walter. We have wandered far afield. Let's get around to 
this question. 

INIr. Ney. The question of giving prices to new manufacturers is 
one of the most complex things that we ever had to meet. Let me 
state unequivocally that we have never had any desire to give new 
manufacturers prices which would be discriminatory to the old manu- 
facturers. We have never had any desire to give old manufacturers 
prices on their new products which would provide an added incen- 
tive to produce the new ones. 

Let's see the mechanics that have been set up. Let me say that 
had the act provided or had we been given sufficient authority to 
prohibit any new manufacturers from coming into this field, our 
problem would have been simplified very greatly. Had the authority 


been provided for us to prohibit manufacturing of new items — ^but 
we don't have that authority. I am neither talking for nor against 
it, I am just stating the facts — our problem would have been simpler. 

In the absence of that, new manufacturers have been able to come 
into the field in a short market where everything will sell, and old 
manufacturers have been permitted to go into new items, and we have 
spent years trying to get the pricing of the new items down to the 
best system we could. Here is how we do it. 

Let's assume that this new manufacturer wants to make a table 
just like this one. Or he wants to make a small table like this one 
over here. He has located somewhere, and has access to lumber, and 
he has access to labor, and he wants to become a furniture manufac- 
turer and he has never been a furniture manufacturer and perhaps 
never a manufacturer at all. 

He makes up a sample of the item he wants to make, say that table 
over there, and he sends it in to us and he says, "I want to make this 
table and I would like to have a price of about $40 on it. Give me a 

Now, our technique is to price that manufacturer in line with the 
prices that the existing manufacturer had when price control started, 
but the objective is not too easy to accomplish because that table, pre- 
price control, could have ranged in manufacturers' price from $15 
to $25. 

Now, the manufacturer who .'^ot $15 for the table in all probability 
was a large, low-cost, very efficient manufacturer. Perhaps he made 
them in large quantities and sold them in carload lots to large buyers. 

Because of his method of operation, he probably had no selling 
expense. He had no advertising, perhaps. He was a volume pro- 
ducer and he was satisfied to operate, pre-price control, on a large 
volume and sipall margin. So his price was $15. 

Here is another manufactui-er who makes the same table out of the 
same wood, with the same finish, and to all practical purposes it is 
the same table. This manufacturer has a dinerent type of distribu- 
tion. He doesn't sell in carload lots. He sells 24 to 48 or 50 at a time. 
He sends salesmen around the country. He wants Nation-wide dis- 
tribution. He does do advertising. He has a smaller volume and he 
wants a larger unit profit. The price he has been getting, let's assume, 
instead of $15, is $20. 

Now, let's move up to a very small manufacturer, a local manu- 
facturer. This small manufacturer sells two and three at a time to 
small stores of all kinds. He pays more, historically, for his lumber. 
He has less efficient labor, he is a less efficient manager, his manufac- 
turing cost is higher, his volume is small, and he gets $25. 

I would be glad to submit to the committee hundreds of examples 
like that. 

Now, in comes a new manufacturer who wants a price on the same 
thing. We want to price him in line. Question — with whom shall we 
price him in line? Shall we price him in line with the very large 
fellow over here making tables for $15 ? It wouldn't even cover the 
cost of this new little fellow. Shall we price him here in the middle? 
If we do, it will probably cover his costs, but it won't give him any 
profit, and the screams his Congressman will hear will be loud and 


If we price him up here, we are probably pricing him in line with 
the same type of operator that he is, but if we put him here, the low 
fellow says, "You are discriminatory." 

"We try to exercise our judgment. We keep a complete file on every 
price application we ever had. Thousands and thousands of items 
that have been sent to us for pricing. We spend hours looking for 
the comparable item, selecting it point by point, material, specifica- 
tions, finish, methods of manufacturing, and then we trj^ to price him 
in line with the type of producer which he is, and when we do, Mr. 
Seiclel comes down and shows a scooter here and another scooter here 
and says, "You are discriminatory against this manufacturer." 

We have got human beings down there who spend hours day and 
night pricing this merchandise. They are probably the most expert 
people in that field. They have priced more items than anyone else 
in this country. We do make mistakes, but most of them have not 
been mistakes, and we have exhibits from the NRDGA, exhibits which 
proved definitely that the prices we give are in the main, completely 

My. Lynch. Did you check those irons ? 

Mr. Ney. We are getting a complete report on the whole thing, 
which we will be glad to submit to 3'ou. Not only the case they quote 
but tlie whole case on electric irons, which is an item which millions 
of housewives need and should be able to buy. We have had applica- 
tions from dozens of new manufacturers, and we have priced them. 

Mr. Walter. It was INIr. Seidel's contention that permitting the 
new manufacturer to get a higher price on an inferior iron prevented 
the old manufacturer from getting sufficient materials for his product. 

Mr. Ney. I can't disagree that if the $15 manufacturer could get 
all the material he could use that the people of the country would 
have more tables for a lower price. However, we have got to take 
bona fide ap])lications and process them and price them in line in our 
judgment with their competitors, and by that you just can't price a 
new automobile manufacturer in line with General Motors, because 
he can't make them for the same price. We haven't had but about one 
application on new automobiles. 

I am talking about the hundreds of small items that come to us. 
Now, the other charge is the fact that we are driving these old estab- 
lished manufacturers out of business. 

Mr. Walter. You are driving them out of the market is the con- 
tention. Then there is something else, that they are resorting to a 
subterfuge of changing a type of article in order to get a new price, 
a better price. 

Mr. Ney. That has been done in many cases. There is no question 
about it, and had we had no price control, we would have had the same 
thing, only worse. 

In the apparel field we have a different effect in addition to the 
one I have described — on the items of apparel and clothing that are 
covered by the general maximum price regulation and we have at- 
tempted to get as many of them into specific price regulations as 
we can. Next week one is coming out on shirts, shorts, and pajamas. 

Mr. WoLVERTON. Now that the witness is in the apparel field, could 
we have him make his explanation on the basis of the case that we 


had before us the other day, which was the exhibit over in the Senate 
Office Building of a woman's waist that the established manufacturer 
was given a price of $1,871/2 and the new manufacturer $6 for a 
comparable waist ? 

Mr. Ney. I would be glad to. It so happens that we have not been 
able to secure the name of the blouse manufacturer from N. E. D. G. 
^, — but I can tell you how they were supposed to price. I can't 
tell you the facts because they have refused to give us the names — 
the day the exhibit was shown down here, we wired Mr. Hahn, general 
manager of the association, and Mr. Bowles requested, that as soon as 
the exhibit had sensed its purpose in the House and in the Senate, 
and that every one in the Congress that wanted to see it had had a 
chance to examine it thoroughly, that it be sent down to our office with 
a list of manufacturers. 

Mr. Bowles stated that we price scores of thousands of items, that 
we have undoubtedly made some mistakes, but we don't believe that the 
mistakes are so glaring as the exhibit would have us believe. We 
would go into it very thoroughly and check every item in the exhibit 
and make availaole to the Congress and to the public generally a com- 
plete report on every item, admitting where we were wrong fairly 
and squarely. 

Mr. Hahn reilied that the association and the people who cooperated 
in compiling he exhibit had promised the manufacturers that they 
would not divdge their names. We felt that the old manufacturers 
who have bee: forced to drop production because of our inequitable 
pricing shoul. not hesitate to furnish their names. The answer Avas, 
''we have agi^ed not to furnish any names." And then we said, "on 
the new man facturers, these horror stories that you are showing here, 
you say the are legal prices. On the basis of one or two that we 
have been ale to find the names of, we say in the main they are not. 
Retailers gaerally ought to be interested in furnishing us the names. 
If they are^gal prices, the association has nothing to fear, and if they 
are illegal rices, we expect the cooperation of industry." Again Mr. 
Hahn refred. 

Mr. Seiel appeared at the Senate Small Business Committee and 
made som charges. I brought to the attention of the chairman that 
we had rt been able to secure the names. Senator Murray stated 
that if tli association did not see fit to furnish the names, he didn't 
see how )PA could check it, and if OP A wasn't given a chance to 
check it.he evidence wasn't conclusive. 

Mr. Sdel said they couldn't do it. We again wired Mr. Hahn, call- 
ing attetion to the fact that the Chairman of the Senate Small Busi- 
ness C«^mittee had requested them. Mr. Hahn said that he would 
furnislit to a congressional committee. The Senate Small Business 
Commtee had wired for the names of the manufacturers. We are 
waitir for them. In the meantime, they have furnished us with the 
]iame;>f one or tAvo of them. I have some ; not the blouse one, 

Th' showed in this exhibit that this old-line manufacturer of a 
scoot — you know what a scooter is, a toy scooter for boys and girls — 
had 'en forced to discontinue production, had applied to OPA for 
pricrelief on several occasions and had been turned down cold and 
hadeen forced to drop the production. 

99579 — 46— pt. 7 16 


We were furnished the name by the committee yesterday at 5 p. m. 
We called the manufacturer in Chicago. The manufacturer of this 
scooter said on the first conversation that — 

Our company is in full production on this line of scooters. We are producing 
them at 1942 prices, and we are not using the 14-peroent price adjustment for 
toys which we were allowed about 30 days ago, although we may have to use a 
portion of it in January. 

It was just so inconsistent with the exhibit that I asked our man to 
call again. I knew I was coming up here today. I said, "Maybe it 
isn't the same company." So our man said, "Do you know of any 
other toy manufacturing plant under the name of Hamilton Steel 
Co.?" "There is a plant in Cleveland, Ohio, bu-;\they are not toy 
manufacturers." (This name was furnished us by 1l\e committee.) 

"Is there a Hamilton Steel Co. in Indiana thai you know of?" 
Because the connnittee says Hamilton Steel Co. of Indiana. His an- 
swer was, "If there is, T don't know anything abo^ it." "Do you 
know whether or not the scooter on display in the NIDGA exhibit is 
your scooter?" "I know nothing about the display iat all." "How 
many scooters have you produced this year?" "By Uie end of this 
year we will have produced 250,000 scooters." "Have pu at any time 
applied to us for a price increase?" "No, we are projucing at 1942 
levels, but I am sure that we will have to use some of ^he 14-percent 
adjustment after the first of the year." 

Now, let me give you another exa^npie. They showed ^p-iir of liien's 
shorts, which is closer to the hearts of all of us than wohen's blouses, 
men's undershorts. I am not sure that is a good analc)t3\ I would 
like to say that we would probably rather have a pair oijthem. 

Mr. Walter. That was not literal. 

Mr. Ney. I think I was completely wrong there. Here \^s the story, 
and in this elaborate booklet, which they published an^ circulated 
around the country entitled "The Consumer Suffers." 

Mr. WoRLEY. Who published that? 

Mr. Ney. NRDGA. They have an actual example hei^of men's 
shorts. For example, men's wear, they say the OPA ebects the 
established manufacturer to market fine printed sanfori|ed cloth 
shorts at $3.55 a dozen. We expect him to do it. 

In the testimony Mr. Seidel said this manufacturer, a ^ry fine 
manufacturer, an old line manufacturer, has applied to OPA \fr relief 
on several occasions, and been turned down cold. Had to stopnaking 
them, went out of business. Well, I was sitting over there irg, semi- 
comatose state — I had been listening for several hours. I salt "Isn't 
there a ticket on that pair of shorts?" He said, "Yes." I said.'What 
does it say?" "It says, 'Fruit of the Loom.' " 

I happen to know something about this case. I said, "Ever^gtate- 
ment you have made is absolutely incorrect in the. case of these s^rts." 

I would be glad to furnish the complete record to the comittee 
before which we were testifying. The facts are that the exQsive 
license for the manufacture of men's shorts with Fruit of the gom 
cloth is in the hands of a company known as the Union UnderweaCo., 
of Frankfort, Ky., with headquarters in New York City. This .in- 
pany is the largest manufacturer of men's shorts in America, ""jey 
make only popular priced shorts, retailing today from 39 centto 
55 cents, with a few at 69 cents. They have been in business fo^Q 


years. They make the same shorts today at the same price they made 
them in 1942. 

Mr. WoLVERTON. Do they make the same number? 
Mr. Net. They make more today than in 1942, and the president 
of the company testified before the Senate Small Business Committee 
the other day, and they are making a total of men's shorts and under- 
shirts of a half million pair a week. In those three price ranges, of 
which some half million pair a month, that would be about one-fourth 
of them, are at 39 cents. 

Mr. Hahn heard of my questions to Mr. Seidel and in a letter to Mr. 
Bowles he said, "Maybe that is true, but I would like to know who 
gets them." So, the committee chairman asked, "Who do you sell those 
to?" "I sell their, to 10,000 stores in 48 States." "Are they the same 
customers you sotd in 1942?" "We sell every customer in 1942 who 
asked for them, md that is every customer now in business." "What 
types of stores co you sell, just large stores?" "We sell from Sears 
Koebuck and J. 0. Penney down to the small country stores." Is your 
business protitaHe?" He said, "Very profitable." "Is it profitable to- 
day ? " "I am Will satisfied with my profit. Without OPA regulations, 
I could make a great deal more. My 39 cent shorts could sell for 69 
cents. If I coud make 3 million pairs instead of a half million pairs, 
I could sell thm just as easily. I am a medium to low-priced manu- 
facturer, and hat is where I want to be, and when this sellers' market 
IS over, my sbrts are going to be right where they are today." 

You hear tiat kind of stuff and it just shows — I don't select the 
samples, it if just the ones we have gotten the names on. When the 
names are frnished to us, we are going to give you a complete re- 
port on eacland every item. 
Mr. Wal-er. Yes. 

Mr. Net One more example. By the way, some of these samples 
they are sowing are getting pretty shopworn. They hired pretty 
girls, and 4ey put on quite a show demonstrating them. 
Mr. WcLET. We missed that. 

Mr. Nr. He showed a sample of toy blocks, like our kids used 
to play -uth, mine still do, and he said, "Here is a fine old manu- 
facturer ^p in Albany, N. Y., I believe, who makes a swell block." 
And I ci tell you gentlemen it is a swell block, and he says, "This 
manufaturer has had to stop making them, has applied to OPA 
for pric relief, and been turned down, and he is not going to apply 
to OPi^for price relief either because he doesn't want to have any- 
thing tdo with them." Here are the facts. 

We died this old established manufacturer. He said, "We have 
not mfiufactured these blocks since 1942 because of the shortage 
of poi^erosa pine, which we use in the manufacture of these blocks. 
We h'en't been able to get ponderosa pine, and you know what the 
situaon is there. We expect to obtain some pine and we will re- 
surae)roduction. If it is necessary for us to come and see you about 
an austment at the time, we will do so." 

Wsaid, "What are you making now?" They said, "We are mak- 
ing heckers and dominoes." We said, "At what prices?" They 
saif"1942 prices." "Same items?" "Of course. We only make one 
quity." "How are you doing?" "We are doing all right." 
'lat is that item. 


Then they showed another item the other daj^j-not women's blouses, 
women's rayon panties, and the price on the panties. This little 
merchant from Richmond, Va., a good friend of mine, this Mr. 
McCargo, said, "Here is a pair of panties which I got and had to 
pay $10 a dozen." I was asked whether they were worth $10 a dozen. 
I was sitting at the end of the table. I said, "I don't have to come 
up there to answer that. They are not worth $10 a dozen. He said, 
"I would like to have j'ou examine them." Then I said, "They are a 
piece of trash." He said, "How do you give prices of $10 for a piece 
of trash like that?" 

I said, "We don't give a price like that. I nevei^ saw them before. 
We couldn't under any condition give a price of $10 a dozen on that 
pair of panties." 

Well, he SEiys, ''Mr. McCargo, did you buy theSe panties?" He 
says, "Yes, sir!" "You personally?" "Yes, sir." \ 

"How long have you been in business?" "Thirty--ipur years." Do 
vou know values ?" "Yes, sir." "What do you think tW are worth ?" 
He said, "About $4.50 per dozen." He said, "Is that r^^ht, Mr. Ney?" 
I said, "That is about right." "AVell, how does this manufacturer 
get a price of $10';" I said, "Now, wait a minute. Ho hasn't said 
he bought from a manufacturer." "AVhere did you bii- them?" He 
said, "From the Ginnt, Ltd." "Where are they locked on lower 
Broadway about the 400 block of Broadway?" H6 said, "Yes. 
464." "Are they jobbers?" He said, "Yes." "How loW have they 
been in business?" "This is the first time I ever boughtfrom them.^" 
"Have you ever heard of these people?" "I think they W new job- 
bers." "Did 3'ou ask them whether that was their ceiling pi\?e ?" "No." 
"Well, how can you afford anything that is so obviously o"^r-priced?" 
"We have got to have these panties, and besides I amfeure OPA 
gave that price." \ 

We will have it checked within 48 hours if we can locai the guy. 
Here is probably what happened. The chances are he is a n\v jobber. 
I think that is right. The chances are he is a very small jober. The 
chances are tliat he is buying the goods fi-om anotlier jobbeland not 
from a manufacturer. So we have got at least two wholes* profits 
in there, and I don't think either of them are legal margns, and 
there is no way, even under our general maximum price reg^ations, 
which God knows are loose enough, that he could price them e\\ semi- 
legally at anything like $10 a dozen. 

The preliminar}?^ report is as follows: They refused to allw our 
investigator to see records, and it seems that they have no ficing 
records at all. They started business late in 1943. We intend \ take 
appropriate action to compel them to bring their records into co-t. 

I think we can demonstrate beyond a doubt that he couldn'iBven 
with a lead pencil, justify a price of $10. 

Mr. Walter. Thiis man in Richmond was buying black market 

Mr. Net. Let's say he was doing it innocently. When the f actare 
brought out, some of these horror stories just don't hold water. I ai't 
answer about the blouses. We will be glad to get that one too, an^H 
we need is the name of the manufacturer. 

Mr. WoRLET. Do you suppose the action initiated today by le 
Attorney General's office will be of any help to you ? 


Mr. Ney. That was a very gratifying thing in the paper this morn- 
ing. Mr. Tom Clark announced today that there is going to be a 
concerted drive on black marketeers in the clothing and textile 
industry. It is long overdue. 

Mr. WoRLEY. Mr. Seidel made a point the other day to the effect 
that the inventory of his company has decreased. 1 believe their 
inventory is about a third now of what it was in 1941 and 1942. What 
causes that ^ Is that generally true ? 

Mr. Ney. I don't think Federal Reserve figures on any industries of 
retail and wholesale outlets will show that inventories are down any- 
thing like 66% percent. They have started to decline. The answer 
is simply that we are all selling more goods than we are able to buy 
and if you keep on, you sell out of inventory. 

Mr. WoRLEY. You don't have any corresponding increase in pro- 
duction. Of course, his point is that the price you allow a Mississippi 
manufacturer, which was his illustration, discourages or prevents pro- 
duction. Apparently you don't agree with that. 

Mr. Ney. I certainly want to see the case. I think there are sev- 
eral factors that cause either a loss in existing production or prevent 
existing production from expanding. I think that one of those fac- 
tors is lack of material, and incidentally, that isn't an unusual factor, 
particularly in cotton goods. 

And they have been faced with this situation, where during the 
war the Army took a large proportion of all cotton woven goods, 
which ordinarily go into shorts, pajamas, et cetera. 

During that time civilians got less cotton than in many years, 
coupled with the desire for much more than they ever had before. 

So materials, metals, or fabrics, have been short in relation to civil- 
ian demand, even though total production exceeded all prewar years, 
total cotton woven goods ])roduction, and Mr. Maynard can verify 
this, I think total production of woven cotton goods in 1943 went up 
to something like 11 billion yards. 

Mr. George. A little over. 

Mr. Ney. In 1945, my latest report indicates there will be a little 
below 9 billion yards. 

Mr. George. A little below that yet. 

Mr. Ney. Now, materials have caused loss of production. 

Now then, there is another thing, labor. We know, for example, 
that the chief contributory cause to the loss of production in the cotton 
textile mills is the loss of labor. You follow their production line and 
compare it with the labor employment, and it is parallel. Cotton 
mills generally have been, on a pretty low wage scale. There have been 
a lot of high wages paid around this country — and they lost them to 
defense plants and the armed forces. They have brought in less 
efficient labor. 

Mr. Simpson. Does the fact that the English textile mills have 
closed down make any difference? 

Mr. Ney. Did they close? 

Mr. Simpson. Yes. 

Mr. Ney. I am not familiar with the fact that they are closed 

_Mr. George. I can't answer that. 

Mr. WoRLEY. They have been producing textile machinery. 


Mr. Simpson. I was under the impression that maybe it was cotton 
workers in Enghxnd in the mills, that they closed them down during 
the war. 

Mr. Net. I don't know the answer to that one. 

Mr. Walter. They produced all of their own uniforms. 

Mr. Simpson. I am mistaken then. 

Mr. Ney. Materials have been short, labor has been short. We have 
a situation where as labor comes back, production improves. 

Now, we have got a third reason for prevention of expansion of 
production : the inability to obtain parts. Take this medicine cabinet 
which the NEDGA showed purely as a price problem. We wrote to 
the manufacturer. The manufacturer said, "No; we have no price 
problem as yet. We are not manufacturing large quantities because 
we haven't been able to obtain the necessary parts. When we get 
them, we will get back into full production; and, if we have a price 
problem, we will get in touch with you." 

The one I put last shouldn't perhaps be last, and that is price. 
Surely there are cases without a question where if our standards had 
permitted us to say to a group of manufacturers, "Look, let's make a 
trade with you. How much will you take to start making this item?" 
I think maybe we could make a deal on that. But we don't have that 
kind of standards. We were instructed by the Congress to hold prices 
and to give price increases under certain standards which we have 
developed and submitted exhaustively to congressional committees. 

Many efforts have been made to put on a cost-plus. It is all right 
in some forms, but in others we think it would be the contributing 
cause to the loss of control of price. We can't say to a group of manu- 
facturers, "We need that item. Let's make a deal. Your present 
price is $9 a dozen. What will vou take?" "Well, we will take $18 
a dozen." "Well, $18 is too much. How about $16 ?" 

This is Government and we are a price-control agency; and while 
it is a good practical approach, and I tend to be a practicalist rather 
than a theorist, I can assure you that I just know you can't operate 
price control in that way. 

So we had to operate under standards, and I don't deny for a 
moment that there have been times in some fields, in some price lines, 
where the production of this particular item has either been dropped 
or diminished because of the fact that the manufacturer of those 
items had the opportunity to make something else which was more 

I want the record to show very clearly that that has happened. If 
we had no price control, it would have happened, too. 

Mr. George. Are there many instances that came to your knowledge 
where the manufacturer had to take a loss in items important to the 

Mr. Net. During the war there was a policy evolved by Fred 
Vinson, who was then Economic Stabilization Administrator, now 
Secretary of the Treasury, which was worked out with the various 
agencies and known as the Vinson formula. 

Now, the procedure was that when, in the judgment of the supply 
agency, the production of an item was essential to the war effort or 
civilian economy, the supply agency — in those days the WPB — 
should direct the manufacturer to produce not less than a stated quan- 
tity of those items ; and if, in complying with that directive, the manu- 


facturer was forced to produce that item at a loss, the OPA should 
then entertain an application for price relief from that manufacturer. 

The price relief was given in order to give those manufacturers 
total cost on the item which they were directed to produce unless 
the profits of the individual company were less than twice as much as 
they were in the period 1936-39, in which case we were instructed to 
give cost plus 2 percent. That was during the war, and the directive 
was used by WPB — Mr. Maynard knows it very well — with varying 
degrees of success. 

It is true that manufacturers are extremely reluctant to produce an 
item at total cost or cost plus 2, if he can produce something else 
without a directive at cost plus 20. 

Mr. WoRLEY. What is the answer to that ? 

Mr. Ney. That is human nature. 

Mr. George. What is the solution? 

Mr. Reece. There is one commodity that came to my attention, and 
that is hardwood flooring. The Appalachian area is quite a hardwood 
flooring area, and this ties in closely to this housing problem that I 
thought the committee should give it some attention. I was wonder- 
ing if you expected to bring JVIr. Peterson or anyone from the Hard- 
wood Division, from the Lumber Division, before the committee to 

Mr. Ney. Which has to do with the price increase on hardwood 
flooring '^ 

Mr. Reece. Yes. 

Mr. Ney. I have spent some time on lumber figures. I can't an- 
swer on hardwood flooring. If you want a particular question 

Mr. Reece. It is only this : The hardwood flooring people in my 
area in the main are closed down, and they say it is due to the fact 
that they now sustain a loss on each carload of lumber shipped, a loss 
running up to $200 a carload, and they just can't continue to operate. 

These manufacturers produce only a high-grade hardwood flooring. 
Therefore they have to have first-grade lumber. There are some floor- 
types of manufacturers who possibly produce some hardwood floor- 
ing, but they produce other goods also, and a great many of the lumber 
dealers will grade their lumber 1, 2, and 3, and sell it all to the manu- 

Mr. Ney. Yes. 

Mr. Reece. Now, these high-grade hardwood flooring manufac- 
turers are not in a position to buy lumber on that basis. They have 
too great a loss. They have nothing they can use the grade 2 or 3 
lumber for. 

Some of them I know are closed down only because — a gentleman 
who is in tlie business, who served with great distinction in the Navy 
in the Pacific, receiving numerous awards and was a volunteer, talked 
with me about the problem, and he said that he lost about $200 on each 
carload of lumber that he shipped. 

Mr. Ney. Actually lost $200 ? 

Mr. Reece. Yes, sir. 

Mr. Ney. If this is an item of general interest, we will be glad to get 
a complete statement. If it is an item of interest to Mr. Reece, we 
will have a report for him in the morning. 

Mr. Reece. It is very difficult for construction people in that area 
to get hardwood flooring, although we are in the center of the industry. 


Johnson City, where I live, is a very hirge hardwood-flooring produc- 
ing center. 

Mr. Net. I regret that I can't answer the question. I will be glad 
to have the information for you tomorrow morning. 

Mr. Reece. I was merely raising the question because of its general 

Mr. WoRLEY. A moment ago when I asked you what the answer 
was, you said, "Human nature." I meant to ask, what is the solution ? 

Mr. Ney. To manufacturers concentrating on more profitable lines? 

Mr. AVoRLEY. Yes. 

Mr. Ney. I suppose that there are various schools of thought on that. 
One school of thought says — and that is the school of thought of the 
National Retail Dry Goods Association 

Mr. Worley. You disagree with that ? 

Mr. Ney. Yes; as a Government official, and as a private citizen. I 
don't question the right to present their views. This group seems to 
feel that the solution to the problem, the panacea for all these ills, is 
simply to permit manufacturers to take current costs plus a fair mar- 
gin of profit. 

Mr. Reece. If you will permit an interjection — this hardwood-floor- 
ing manufacturer in talking to me and telling me his difficulties, said 
this, "It would not do in industry to remove all controls." I mean in 
that particular industry, he recognized that, but it is onlya question of 
getting a regulation that would permit them to give the people the 
production which was needed. 

Mr. Ney. May I speak off the record ? 

Mr. Walter. Yes. 

(Discussion, off the record.) 

Mr. WAL'n:R. The committee is adjourned. 

(Whereupon, at 12 o'clock the committee adjourned.) 


fbiday, december 14, 1945 

House of Representatimss, 
Special Committee on Postwar 
Economic Policy and Planning, 

Washington^ D. C. 

The special committee met, pursuant to adjourmnent at 10 : 30 a. m., 
in room 1012, New House Office Building, Hon. Eugene Worley 
(chairman pro tempore) presiding. 

Present : Eepresentatives Worley (chairman pro tempore) , Gifford, 
Reece, LeFevre, and Simpson. 

Also present: Edwin B. George, consultant to the committee. 

Mr. Worley. The committee will be in order. 

I understand Mr. Donald Montgomery, chairman of the cost-of- 
living committee of the CIO was originally scheduled to appear be- 
fore the committee this morning to testify on the removal of wartime 
restrictions and controls. However, information has been provided 
us to the effect that Mr. Montgomery is at the present time engaged 
in some negotiations with General Motors, which prevented his ap- 

In his place we have Mr. Leo Goodman, secretary of the cost-of- 
living committee of the CIO, here with us today. We would be glad 
to have your opinion, both personal and official, as to what you think 
Congress should do in removing wartime controls. 

Mr. GiFi'ORD. Wliat do you mean by "official?" 

Mr. Worley. I assume you spe,ak for the committee officially. 

Mr. Goodman. I have a prepared statement. 

Mr. Worley. Is it very long ? 

Mr. Goodman. I have tried to make it short and will cut it in the 
appropriate places. 

Mr. Gifford. Has that been submitted to the officials, the head of 
the CIO? 

Mr. Goodman. That is right. 

Mr. Worley. If it is very long you could insert it at this point in 
the record, and then give us the highlights. 

Mr. Goodman. I have just given the reporter a copy and would like 
to get into it, so that if there are any questions 

Mr. Worley. Will you proceed, please. 

Mr. Goodman. The CIO is very glad to have this chance to appear 
before your committee to urge the maintenance of price control and 
to point out some of the things that must be done if price control is 
to be of maximum service to this country. 





Mr. Goodman. It is generally known that labor is very much con- 
cerned about price control. It is not generally known that the CIO 
has had a committee working on price control since the middle of 
June 1943. 

This committee, of which I have the privilege of being secretary, 
consists of six representatives of CIO international unions. 

In the last SV-j years, we have participated in frequent discussions 
of OPA price and rationing policies, and have studied carefully the 
regulations issued by OPA. 

We have approached the problem of effective price control with the 
idea in mind that this agency has two responsibilities to the people 
of America : 

1. To hold down the cost of living. 

2. To maintain those price and cost relationships which will be 
conducive to prosperity and full employment when the war and the 
reconversion period are over. 


We have observed the clamor from business and industry groups 
against price control as such, and against specific actions taken by 
OPA. Most of these groups have declared that OPA regulations 
were hampering or wrecking business because they either limit profits 
drastically, or eliminate them altogether. There may have been some 
few instances where OPA regulations were unnecessarily severe on 
business. But in most cases, the reports of industry earnings which are 
issued by goveriunental agencies, as well as by private research organi- 
zations, completely refute these charges. 

The figures show that under price control there has been very gen- 
erous profits both for big and little business, and for practically every 
type of business operation. 

I am at a loss to know how much time to give to these figures in this 
statement because they have been presented to Congress on so many 
occasions, and they have been publicized widely. However, they are 
actually not common knowledge, primarily because of the determina- 
tion of business groups to discredit the figures and to becloud the 

Last June, the CIO discussed these figures with the Banking and 
Currency Committees of both the House and the Senate. At about the 
same time, Mr. Bowles released some of these figures to the public and 
commented as follows : 

* * * average profits, industry by industry, range from earnings, by a bare 
handful, only slightly in excess of industries prewar profits to earnings 10 and 
12 times what was realized by the industries before the war. 

For corporations of all sizes in all fields. Department of Commerce studies 
show profits before taxes in 1943 were about 2V> times greater than in prewar 
1939. Even after the payment of high wartime taxes, 1943 earnings were more 
than double earnings after taxes in 1039. 

In 1944, profits before taxes continued to rise above the record-breaking 19^ 
level. And earnings after taxes in 1944 were about the same as in 1943, despite 
the increased tax rates. 

I want to emphasize that these high profits have prevailed in in- 
dustry after industry which have, nevertheless, appeared before OPA 


and before Congress to shed the bitter tears of poverty and plead for 
even higher protits. 

Now that the war is over, the story has changed a little bit. The 
plea for price increases is being made now, not so much on the basis 
that present prices are too low for present costs. Instead, industries 
are arguing that prices must be increased to anticipate cost increases 
which may take place in the future. 

An example of this kind of an increase is the one currently being 
made for shoes at the manufacturing level. A survey made by OPA 
in response to a request by shoe manufacturers showed that the 1945 
rate of profit on civilian shoe sales is 8.16 percent. The rate of profit 
which would be needed in 1946 to satisfy the industry earnings stand- 
ard would be only 2.9 percent. Nevertheless, OPA has already an- 
nounced tliat tlie shoe industry will be given u price increase, around 
the first of the year, of 4.5 percent. 

This increase to an admittedly highly profitable industry was 
made because the industry may make certain changes in styling in the 
months ahead and may incur certain costs in making those changes, 
and these costs may reduce profits below the prewar profits earned 
by the manufacturers as a group. 

The industry people have advanced, as another argument in favor 
of this price increase, the fact that they are now going to be able to 
resume the use of the higher-quality materials which were denied 
them during the war. These higher-quality materials cost more, 
they contend, and therefore the piice should be raised now that they 
are again available. 

The fact that the higher-quality materials are available is absolutely 
no guaranty that they will be used. The deterioration in shoe quality 
during the war has been notorious. 

I see no reason for assuming that the shoe industi-y will hasten to 
replace the low-quality materials with higher-quulity materials with- 
out some pressure from Government. Where this pressure is to come 
from, I am unable to see. 

However, the whole argument over the cost of materials falls of 
its own weight when it is remembered that OPA raised the ceiling on 
shoes when the industry began substituting the low-quality materials 
on the grounds that they were more expensive than the usual ma- 
terials used by the industry. 

It seems queer price control to raise the ceiling when the industry 
goes to wartime matei'ials, and to raise it again when the industry 
returns to its original materials. 

Business Week of December 8, 1945, reports that manufacturers of 
low-priced shoes felt "glum" about the 4.5 percent increase that OPA 
has announced because they feel they need a 10 percent increase in- 
stead of the 4.5 percent given them. 


the magazine continues — 

privately they admit they have cause for satisfaction. 

It cannot be that OPA doesn't know these things about this price 
action. As a matter of fact, representatives of the CIO spread these 
facts before the OPA price people, and the decision to make the in- 
crease was made in full knowledge of the facts. 

Why then was the increase made ? 


I am not in the confidence of the OPA, so I cannot tell why the in- 
crease was actual]}^ made. However, it is told about the industry 
threatened to come up here "on the Hill" and get 15-percent increase in 
prices if OPA didn't agree to a "reasonable" increase on its own 

Perhaps I should emphasize that I have selected this price action 
only as an example to indicate the kind of pricing being done cur- 
rently. It is not the only one being made today, nor is it typical 
of OPA's procedures at this time. 

One of the most effective ways of increasing profits has been to lower 
the quality of the commodity sold at the same, or even higher, prices. 
This practice may be called quality deterioration or up-grading, 
depending on the circumstances in which it occurs. 

It could manifest itself in the sale of lower-quality goods at each 
of the current price lines, while the price tags remained unchanged, 
or, as happened so dramatically in clothing, it could manifest itself 
in the complete disappearance of the low end price tags, while the 
quality of the goods sold at the remaining price levels became lower 
and lower. 

Since neither OPA nor the "WPB ever set real quality specifications, 
the manufacturers and sellers both have had a practically free hand 
in this respect. 

It must be pointed out that OPA did try to regulate prices on the 
basis of quality standards in a number of fields, until Congress ordered 
OPA to stop it. In the food industry, the result was that consumers 
paid grade A prices for large quantities of canned foods which were 
undoubtedly of grade B or even grade C quality. 

That this was bound to happen with the Army buying practically 
all the high-quality pack was clear even at the time Congress forbade 
the use of grade labeling. 

Canned good.s were not the only foods in which the up-grading took 
place. Butter and meat were other foods which were sold at top 
prices regardless of whether the sales were actually top quality. The 
cost to the consumer was undoubtedly terrific. The windfall to the 
packers and sellers was undoubtedly also very large. 

In clothing, the disappearance from the market of the low-end items 
from each line has been very dramatic, and very expensive to the 

In women's dresses, for example, the $1.59 house dress early disap- 
peared fi'om the market. Or perhaps it would be better to say that 
the $1.59 price tag disappeared and that the dress stayed on the 
market bearing a $2.75 price tag instead. 

Who was to know the difference, or be able to prove that the dif- 
ference existed ? After all, there was no standard by which to meas- 
ure the quality of either price line. 

Month after month during 1943 and 1944 the BLS reported that 
clothing prices were going up, at least in part because of the com- 
plete disappearance of the low-cost items. 

Perusal of the BLS monthly reports show warnings on — 

June 19ff3. — Cotton underwear, pajamas. 

July 19Jf3. — Women's percale house dresses, men's business sliirts, cliambi'ay 
work shirts. 

September 1943. — ^Women's fur-trimmed coats, women's wool coats, children's 


January 19^. — Cotton and rayon dresses, girdles. 

February 194'f. — Men's work shoes, men's and women's felt hats, women's rayon 
underwear, girdles. 

March JO/fJf. — Work clothes, men's felt hats, men's shirts, men's shorts, men's 
pajamas, women's underwear, women's cotton night clothes. 

April 1944. — Women's inexpensive rayon dresses, girdles, women's percale 
dresses, men's and women's felt hats, business shirts. 

May i^^//.— Girdles. 

August 1944. — Fur-trimmed coats, untrimmed sport coats. 

September 1944. — Children's clothes, underwear, house dresses. 

October I944. — Women's cotton house dresses. 

November 1944- — Cotton house dresses. 

An OPA statement made in February 1945 stated that five-sixths 
of the increase in clothing prices was due to the disappearance of 
these low-end price tags. 

As an example of what this could mean in just one item, I quote 
from a trade publication for shoe distributors, Hides and Leather 
Shoes, which reported on April 15, 1944, that — 

Footwear quality has declined under wartime pressure by an average of 29.4 
percent, according to 440 shoe distributors who set the percentage of decline 
at levels varying from 5 to 77 percent. 

The influence of this situation, profitwise, can be seen in the fol- 
lowing figures : 

The cotton-textile industry earned $28,000,000 per year before the 
war; at the beginning of 1945, the industry was earning profits at 
the rate of $365,000,000 per year. 

The shoe industry earned 4.8 percent on sales before the war; dur- 
ing the first half of 1945 the industry was earning 8.1 percent on 
sales of civilian shoes. (Figures derived from sample study by OPA 
of firms making over one-half of all shoes.) 

The apparel industry reported to OPA that between 1936-39 and 
1944 sales increased 65 percent. Profits, however, increased 282 per- 

Over the same period of time, retail sales of apparel went up 93 
percent by OPA's figures. The increase in profits on these sales, 
by OPA's conservative figures, was 360 percent. 

This disappearance of low-end lines, and deterioration in quality 
so that high prices were charged for lower quality than usual, with 
consequent penalty to the consumer and profit to industry, has taken 
place in practically all fields under price control. Not only must 
this situation be taken into account when analyzing the complaints 
of manufacturers and sellers; I urge that this committee give posi- 
tive consideration to making recommendations for plugging this tre- 
mendous leak in the price-control clam. 


Just as we have advised with the OPA about policies during the 
war, we have made efforts to consult with OPA officials each time a 
change in the war situation has required a rethinking of price-control 
policies. Each time the program has been redeveloped, we have 
pointed out and argued against the inflationary aspects of the policies 
being adopted. 


Time and time again, we have repeated President Roosevelt's ad- 
monition that the way to hold the line was to hold it, not to find rea- 
sons for raising things a little here and a little more there. 

The latest of these price-control developments is the decontrol 
program. This is the program, outlined in a directive issued by 
Economic Stabilizer, AVill H. Davis, on July 13, 1945, for removing 
ceilings from items now under price control. 

Incidentally, we first learned about the proposed decontrol program 
by reading the Journal of Commerce, not from the OPA. 

It is noteworthy that consultation by OPA with the groups which 
benefit from its price increases has been fulsome, while consultation 
with the representatives of those who have to pay the price increases 
hf*<^ been haphazard and infrequent. 

On July 27, 1945, after studying OPA's decontrol proposal and the 
directive issued by the OES, labor protested both the announcement of 
a decontrol plan at that time, and the specific provisions of the plan 
which had been developed. 

We pointed out that publication of a decontrol plan at that time 
would encourage all the anti price control forces in the country to press 
for the end of price control on specific items as well as for the end of 
price control in general. 

We pointed out. too^that the directive would permit the decontrol 
of items which are significant in the cost of living if, at the time of 
exemption, these items were selling below ceiling prices. However, 
if these prices did later rise, ceilings would be restored only with difii- 
culty, and at levels higher than those of the previous ceilings. 

Under the plan, also, exemption is permitted for items which were 
not regarded as significant in the cost of living even if a future price 
increase was regarded as possible. However, no practicable definition 
was given to indicate which commodities, or how many of them taken 
together, significantly effect the cost of living. 

Later events showed how sound our position actually was. How- 
ever, immediate confirmation came in the form of the expressed 
opinions of OPA's own field people. 

For example, on August 14, 1945, a price executive operating in the 
outlying possessions wrote to the national office as follows : 

A large number of merchants here have started licking their chops in anticipa- 
tion of the widely-heralded intention of the national oflSce to exempt a considera- 
ble number of so-called luxury goods from price control. We have thought the 
problem through very carefully for the past month, as I indicated in my last 
progress report, and have come up with at least a dozen arguments both pro and 
con for local exemptions. After considering all these arguments and after 
obtaining the best possible sample of community sentiment, I have decided as a 
matter of general policy that we will not fall into line as a matter of course 
with the exemption orders to be issued by the national office for the mainland. 
Atomic bombs and Moscow notwithstanding, this area is and will remain a tre- 
mendous inflationary bubble for a long time. After 3 years of listening to us 
talk about holding the line the community has become almost convinced of the 
salutary effect of our actions here and expects us to continue to hold the famous 
line so long as the need is evident. 

The opinion expressed in this statement, and the description of the 
inflationary tendencies inherent in the situation, apply to Hawaii. 

However, experience and opinions of other price executives showed 
that the same tendencies existed in this country as well. 


For example, in August of 1945, the San Francisco office of OPA 
commented as follows : 

We have recently learned that decontrol actions are of two types — avowed 
and concealed. The avowed actions are, of covu'se, the exemptions and suspen- 
sions. There are also, however, actions in otlier forms, which look like regular 
price actions, but are in fact actuated by a decontrol motive. The outstanding 
example to date is the automatic pricing formula under reconversion for manu- 
facturers having a volume — annually of — under $50,000. It was a relief to us to 
learn recently that this action was a concealed exemption, and was taken for 
valid reasons with full knowledge that this would be its effect. One practical 
problem emerges, however. It is apparent that some orders and amendments will 
in the future be Issued on a liberal basis with the real intention of effecting 
exemptions ; others will be formulated under ordinary price control standards. 
It is vitally important for the field to know which is which, as we should ob- 
viously take a different approach when we are administering a "we don't really 
care" ceiling rather than a ceiling intended to effect tight-price control. If the 
national office is scrupulous in giving us these explanations, it will be possible 
for us in the field to appreciate and evaluate national policy correctly. Otherwise, 
these looser pricing actions, which may be genuinely motivated by sound policy 
considerations, will look like more surrender in the face of pressure. 

It is easy to recognize at this point the vital importance of price control in 
the future, particularly in such fields as food, clothing, consumer durable goods, 
consumer services, building materials, and construction services. We must 
also be prepared to face greater difficulties as a result of the removal of other 
controls which formerly helped us. As rationing dwindles, it becomes that 
much harder to hold the price line. The same is true of controls being dropped 
by other agencies such as WLB, WPB, ODT, and WMC. It is obvious that 
it will not be sufficient to relieve the pressures by decontrol in less essential 
fields ; we shall also have to do a better job affirmatively in the fields which 

Now, as to direct operation of decontrol. 

In August, food still needed price control ; the public still wanted 
it. However, OPA was already in the decontrol business. The effects 
of its decontrol orders began to be felt immediately. 

For example, on August 1, 1945, one of the price executives out in 
the field reported to Washington as follows : 

The suspension of ceiling on several fresh vegetables items resulted in in- 
creased prices and widespread consumer complaints. This was particularly 
true of snap beans, where prices advanced from a community ceiling of 17 cents 
to as high as 60 cents per pound. Lack of demand and increased supplies have 
now reduced this item to a price range of 19-35 cents per pound. Lack of more 
specific control on tomatoes continues to bring in consumer complaints against 
40-43 cents per pound prices. 

The administrative burden of decontrol and its effect on prices is 
serious. The effect of the decontrol policy, which may or may not 
have been anticipated by OPA, is best described in the words of the 
Deputy Administrator for Price, Mr. Jerome Ney : 

In recent weeks much time has been spent in discussing the advisability of 
taking decontrol action in specific instances upon principles going beyond the 
provisions of Directive 68. As a result a heavy work-load has develcpsd in a 
number of the branches and this work-load threatens to continue and even in- 
crease to the point where it may interfere seriously with day-to-day work to 
the detriment of over-all price control and to the disadvantage of industry in 


I have already shown the direct results of this policy as far as snap 
beans are concerned. You may recall that after the removal of ceil- 
ings the price of beans went from 17 to 60 cents per pound. Even 


after an increase in supply, the price, although it declined, remained 
higher than the previous ceiling, with some people still being required 
to pay more than two times the previous ceiling price. 

In the case of citrus fruits, OPA removed ceilings on November 19; 
the following day prices began to jump. OPA's field offices reported 
increases ranging as high a.- ) percei. -n the same qualities and 
sizes. For instance, the Chicago regional office announced that — 

Large California oranges long held to the OPA ceiling of $5.28 were sold for 
$9.95 per case on the first day following sus^pensiou of ceiling prices, by today 
were down to $8.20. 

Spokane, Wash., reported on November 27 that Texas pink grape- 
fruit had gone up 58 percent ; in Seattle increases ranged to 68 percent. 
Similar increases were reported from all over the country on all citrus 

On November 28 OPA turned down labor's request to reinstitute the 
price ceilings, preferring to "watch the prices" for another week. 

At the end of that week, that is, on December 5, OPA was suffi- 
ciently impressed with the seriousness of the situation to recommend 
to the Office of Stabilization Administration tliat the ceilings be 

The Department of Agriculture and the citrus growers objected to 
this action, so it v>'as decided to postpone again the decision another 

The result is that citrus fruits remain without price control during 
the pre-Christmas buying season, the period during which control was 
most needed and the people will pay a large sum of money because of 
the Government's eagerness to remove economic controls. 

The newspapers told the story of what happened to the price of 
coconut when price ceilings were removed. This item sold before the 
war, according to newspaper reports, for $15 per thousand pounds; 
during the war the ceiling was maintained at $65 per thousand pounds. 
Recently the ceiling was removed and the price shot to well over $200 
per thousand pounds. Candy manufacturers have found themselves 
unable to buy an item which is very important in their business. At 
the same time the people who held stocks of coconuts at the time of 
decontrol have cleared up some very tidy windfalls. 

Some of you may recall what happened to the price of Alaskan seal 
fur when, on August 15, 19-15, OPA removed the price ceilings. The 
price had been held at a ceiling of approximately $45 per skin ; when 
the ceiling was removed prices shot up. Recently, sales were being 
made at $110 per skin. 

I have dwelt at length on the decontrol problem because even after 
all that has already happened, there seems to be no inclination to 
greater catttion. 

Even the strictures of Mr. Ney, which I quoted above are confined to 
decontrols beyond the provision of the decontrol directive, No. 68. 
Decontrol under the terms of the directive proceed as before even 
though it has been under these terms that so much damage has already 
been done. 

I could go on with many other examples to show what the effect 
of the removal of price ceilings has been. I think that the case is 
already clear. 


I. think that one would be hard put to find the words to describe 
adequately the irresponsibility, the sheer economic criminality in- 
volved in the proposals now being put forth and actually before Con- 
gress at this time, that pric^e coiitrol be abolished in toto, or that the 
decontrol program of OPA be e'xtende;;,l;,^'tthis time. 


In the field of reconversion prices, as well as in its going price 
control program, OPA has proceeded as though the poverty claims of 
industry were correct, and its own knowledge of the situation could 
not be relied on. 

The Labor Policy Committee of the OPA entered into the discus- 
sion of reconversion pricing in July of 1944. In September of 1944, 
after some discussion with the OPA of the reconversion price policy 
that it was already drafting, the CIO Cost-of-Living Committee 
recommended to OPA that reconversion prices be set at no higher 
than the 1941-42 level. We declared that it was the responsibility of 
OPA in this tremendously important area to protect the standard of 
living of the American people against further increases in the cost of 
living, and to provide a postwar price level conducive to full employ- 

We urged that increases from these 1941-42 prices be permitted only 
after a manufacturer had operated under his old price for a period 
long enough so that reliable operating data could be obtained. Of 
course, our recommendations provided for exceptions to this policy 
where circumstances clearly required an immediate price increase. 

We believed then, as we believe now, that industry would be well 
protected by the 1941-42 price level, by the reserves amassed during the 
war, and by tax and other governmental guaranties against hardship 
during the reconversion period. 

We believe that after reconversion is over, the profits that would 
have resulted from production at 1942 prices, especially as they would 
be effected by operation at high levels of output and incrased produc- 
tivity, would have been at least ample for industry. They might even 
be so great as to threaten the stability of the entire Nation. 

The recommendations we made on OPA reconversion pricing were 
not adopted. 

However, since we made those recommendations, reports have been 
issued by the War Production Board, the Department of Commerce, 
and the Office of War Mobilization which have at various points sup- 
ported the validity of our position. President Truman evidenced the 
same kind of thinking which we had done when he suggested that 
industry make voluntary wage increases and then wait 6 months 
before asking for consideration from OPA of price relief. 

OPA, too, has since admitted the validity of our position by point- 
ing out, in its press release of November 18, 1945, that its reconversion 
policy is based on the 1941 levels of production, and that 1946 levels 
should provide the opportunity for higher profits than those which 
prevailed in 1941. 

Let me point out that even 1941 profits were higher than the prewar 
profits which OPA is required by law to protect. 

99579—46 — pt. 7 17 


A recent study of 2,085 manufacturing companies made by OP A 
showed that their profits were 2,7 times as high in 1941 as in 1936-39. 

In spite of this high profit situation, arising out of postwar produc- 
tion prospects at even prewar prices, OPA has made price increases 
for the manufacturers of practically every reconversion commodity. 

Washing machine manufacturers have been given a price increase 
of 7.7 percent. 

Vacuum cleaner manufacturers have been given a price increase of 
5.5 percent. 

Lawn mower manufacturers have been given a price increase of 17 
percent. < 

Metal toy manufacturers have been given a price increase of 14 

Radio set manufacturers have been given a price increase of 12 

Radio parts manufacturers have been given price increases which 
will bring in approximately $100,000,000 per year. 

Fractional liorsepower motor manufacturers may raise prices 9 

Automobile manufacturers are being treated on an individual basis. 
Two of them have already received their increase factors : Ford, for 
whom increases will average about 6 percent, and Studebaker, for 
whom they run around 12 ]jercent. 

However, there is already evidence to show that manufacturers 
who receive no increase factors, or whose factors may be low, will 
reap their windfalls through price increases for specification changes, 
rather than through admitted reconversion increases. 

In all of these reconversion industries, production will be far 
higher than it was in 1941. The profits of these higher prices plus 
those resulting from increased levels of output, and from increases 
in productivity which will soon be felt, will yield profits so high that 
depression and unemployment are inevitable in the near future. 

Most of the industi'ies involved complain to the world in general 
and to Congress in particular that OPA is "ruining them." If there 
is any validity to that charge, it is that OPA's generosity in making 
price increases, rather than its ungenerosity in refusing them, may 
ruin American industry. 


A. Secrecy of negotiations 

It has been our position that fewer of these harmful increases would 
be made if OPA were required to reveal to the public the facts on 
which the decision to make a price increase is arrived at. 

Labor's repeated requests for public information have been just 
as repeatedly denied by OPA. Labor has been told that individual 
firms would feel aggi-ieved if OPA revealed its data to its com- 

And then we have been told that there would be objections from 
an industry as a whole when we have asked for data which did 
not reveal facts about individual firms. 

So the negotiations between OPA and the industry asking for 
a price increase is carried on in secrecy, with no chance for the public 
to get the real facts. 



B. Insu-fjicienGy of data 

This extreme solicitude for those wanting price increases has been 
shown by OPA in many other ways. Let me cite an example. 

In the case of radio parts, price increases ranging from 9.5 percent 
through 26.3 percent were made after OPA had had the following 
experience with the parts manufacturers (the quote is from OPA's 
press release of October 11, 1945) : 

Despite repeated requests by the Office of Price Administration for the eub- 
mission of cost data for use in computing the increase factors for radio parts, 
and despite assurances of representatives of the industry that such cost data 
would be supplied, cost data were not submitted to OPA as promised, OPA said. 

As I pointed out above, the price increases — made after this refusal 
by the manufacturers to supply data — are expected to yield the man- 
ufacturers approximately $100,000,000 per year. 

In our discussions with OPA, we have been told repeatedly of cases 
where OPA's accountants had to be sent from the Washington office 
to go over the books of an individual firm in order to get the data 
upon which a price increase was to be based. 

C. Unverified data 

OPA's decisions involve the transfer of large sums of money from 
the pockets of the buying public into the treasuries of the sellers. The 
business which is asking for an increase might be expected to prove its 
case up to the hilt, before the regulatory agency, even if not before 
the public as we have asked. 

Quite the reverse is true. Figures submitted by manufacturers who 
are asking for price increases are accepted by OPA without further 
review or verification. 

How many millions of dollars have been added to industry prices in 
this manner cannot be estimated. I do not know, however, that the 
automobile increases are being made on exactly this basis. 

Frequently, however, the decision to make a price increase seems to 
be made with no relationship to wliat the figures show about the profits 
of the manufacturer. Let me quote from a series of OPA truck price 
increases, made during 1944 and 1945. 





Oct. 18,1944 
May 5,1945 

Nov. 3,1945 
May 11,1945 

16 percent. - 

9 percent - 

6, 11, and 23 


27 percent- 

"It appears that the applicant's over-all profit 

Chrysler Corp 

Diamond T Motor 

Car Co. 
General Motors 


position is unfavorable." 

"The applicant's current over-all profits have a 
normal relationship to its over-all profits dur- 
ing the base period, 1936-39." 

"It appears that the applicant's over-all profits 
position is very favorable." 

"No description in OPA's statement of consider- 
tion as to what the profit situation was." 

D. Net worth adjustments 

A type of statistical legerdemain which underlies all OPA's price 
determination is known as the adjustment for increases in net worth. 
That is, in judging the fairness of a particular price, OPA inspects 
the return on the net worth of the industry which results from that 
price, as compared with the return on net worth earned by that in- 
dustry before the war. 


If the net worth of an industry has increased during the war, a 
price increase may have to be made in order to protect the rate of 

However, the net worth increases which have taken place have in 
large measure been the result of the accunuUation by industry of 
large cash and bond holdings. These have resulted from large profits 
earned by an industry and becomes part of the new base; and the 
reason fen- additional price increases which contribute further to the 
profits of the industry. 

E. General rescue 

In presenting to Congress and to congressional committees their 
allegations about OPA's pricing cruelties, industry i)ressure groups 
generally have omitted any reference to the special price increasing 
mechanism which OPA has provided for those individual firms or 
groups of firms whicli are not satisfied with the specific regulations 

Among these special mechanisms there is one referred to in OPA 
as the genei'al rescue regulation. This regulation provides relief 
whenever a current price threatens to put any manufacturer out of 
business. Such a manufacturer may ai)ply to the OPA regional and 
district offices for a pi'ice increase, which will assure him of recovery 
of the total cost of producing an item. 

In our judgment the regulation is so loosely drawn as to remove 
from under price control the ])roducts of any manufacturer who feelr. 
that his activities are not significant enough to invite careful OPA 
review of his pricing methods. It removes a large share of the eco- 
nomic pressure on an ineilicient manufacturer to become more efficient. 
It underwrites a ])lant which is producing at less than capacity, when 
capacity production might be necessary for economic production. 

It provides for price control on the basis of self-regulation with 
only the most perfunctory and "rubber stamp" type of review by 
OPA. It is a surrender to a kind of price control which OPA had re- 
sisted in the past as being inflationary, and as price escallation rather 
than price control. 


In summary, we have seen for a period of 3 or 4 years the price- 
control agency, which was set up to hold the price line, yield again 
and again to pressure for price increases from industries and business 
groups which could show no economic justification whatsoever for 
the price increase. The evidence for this lack of need for price in- 
creases is contained in the financial statistics of every governmental 
agency which collects such figures. 

These increases were made at the expense of consumers who were 
caught by war shortages, and by the necessity of adjusting to other 
wartime conditions. They are made at the expense of the veterans and 
of every other group in the national economy whose living depends 
on full employment and prosperity, rather than unemployment and 

We have often congratulated ourselves on the fact that the cost 
of living in this war has risen less than during World War I. There 
may be some cause for satisfaction in this comparison. However, 


this is indeed a weak test of the effectiveness of this crucial economic 
operation. We had as much right to expect victory on the economic 
front as on the military front. We have the right to test the in- 
creases in the cost of living by the necessity there may have been for 
making them. The evidence shows that the people of this country 
could have been saved billions of dollars in their own purchases and 
in the expenditures of the Government if price increases had been 
made only on the basis of need. 

We are conscious of the fact that OPA made some of these in- 
creases only as the result of great outside pressure. We are conscious, 
too, that the pressures often came from individual Congressmen and 
groups of Congressmen, and that OPA at times yielded reluctantly 
because it could not stand up to the pressure exerted on it. • It is 
neither our duty nor our responsibility to apportion the blame for 
pressure-made price increases as between OPA and some Congress- 
men. This conniiittee is in a far better position than we are to do 
that job. 

We do request, however, that this committee use its influence on 
behalf of price control, conceived in the terms in which price control 
was originally adopted; that is, the protection of the consumer, the 
protection of the economy of the Nation as a whole, the protection of 
Government expenditures. 

While OPA cannot undo much of the harm that has been done, 
M'e insist that OPA be permitted and required to maintain its specific 
price controls until there is clear evidence that price control is no 
longer needed, and to administer its price controls until there is clear 
evidence that price control is no longer needed., and to administer 
its price controls on the basis of protection for the country as a whole 
instead of a segment thereof, and prevent further damage to the 
consumer and to the Nation as a whole. 

Mr. WoRLEY. In your statement you say records show that through 
price control there lias been very generous profit to both big and little 
business and for practically every type of business operation. Do 
you have any figures to substantiate that? 

Mr. Goodman. Yes, I have a number of different types of profit 
data, but one of the things that is most startling, one of the groups 
that have been most profitable, have been the retail trades. 

Mr. WoRLEY. Where do those figures come from? 

Mr. Goodman. From a variety of sources, including the informa- 
tion put out by the National Retail Association. 

Mr. George. Dry goods? 

Mr. Goodman. Yes, National Retail Dry Goods Association, and 
a series of studies published by a number of the universities. 

Mr. Reece. Do you have them in some condensed form or have 
limited illustrations, which could be included in the record? 

Mr. Goodman. Yes, I do; the kind of source material I use, for 
example, those two studies of the Harvard School of Business Ad- 

Mr. George. Mr. MacNair's? 

Mr. Goodman. Yes, sir. 

Mr. Worley. We are trying to establish first if 3^our figures are 
accurate and reliable. 

The committee has had any number of different sets of figures pre- 
sented to it, and the side presenting one set will say that they are alDso- 


lutely accurate, and then later on another witness on the other side of 
the fence will attack those figures. 

It is difficult for us to determine exactly what is correct. 

Mr. Goodman. I understand the problem of the committee, and as a 
result, in this particular material, I will quote to you only, at this 
moment, from the National Ketail Dry Goods Association. 

Mr. GiFFORD. Will you select those that are favorable to you or 
will you give us the whole picture ? 

Mr. Goodman. I will be glad to put the entire volume in. 

The reason workers need wage increases are shown here — I have 
"basic data in margins" showing, an index of gross margin, salaries, 
expenses, index of profits to sales ratio, index of sales volume, and 
index of dollar profits for the department and specialty stores, in the 
aggregate and by size of store. 

I am sorry to say, gentlemen, but the figures show — and tliese are 
the industries' own figures — that the department stores — and I am 
taking the extreme case, department stores doing over $10,000,000 
business a year — have had a profit increase from the base of 1936 to 
1939 of 100 percent to 2,508 percent. 

Mr. WoRLEY. Gross profits before taxes ? 

Mr. Goodman. Gross profits. 

Mr. Gifford. Does that take in grocery stores ? 

Mr. Goodman. No; it iis the department stores doing a volume of 
$10,000,000 sales or more. 

Mr. Gifford. I think your figures may be right, but how about 
your retail stores, such as grocery stores? 

Mr. Goodman. I will be glad to go into that. 

Mr. Reece. I notice this pamphlet by Professor MacNair, by his 
department, has this reference in it : 

The net gain before Federal taxes and income and excess profits rose to a 
record high of 12.3 for department stores and 10.4 and one-half for specialty 

Mr. Goodman. For every dollar that you spent in the department 
stores, the stores have ended up having 12.3 cents gross profits. 

Mr. Gifford. Gross? 

Mr. Goodman. Yes, sir. 

Mr. Simpson. That is not any too much, is it ? 

Mr. Goodman. The prewar figure starts at 1.5 cents. 

Mr. LeFevre. Why don't we get these down on a net profit basis 
because of the taxes ? 

Mr. Goodman. At the moment I am discussing the percentage on 

Mr. Reece. This is an observation I intended to make, Mr. Chair- 
man, which seems to me a rather important consideration in connec- 
tion with this problem. Let us have a discussion of profits and the 
effect thereon of the operation of controls at the present time, and a 
discussion of the attitude of yourself and your organization with 
reference to the desirability, or contrarywise, of relaxation of con- 
trols as soon as the emergency conditions will permit, also what is 
your view of reverting to prewar considerations to regulate the ques- 
tion of ]H-ofit and other phases of distribution? 

Mr. Gifford. Might I add to that ? You don't mind my suggestion. 

I was just looking over one of my largest industrial firm's reports. 


They made money, but their inventory is quite exhausted, and they 
say to get that inventory back a<2;ain it is going to cost them mightily 
and wipe out all their profits. Their inventories are low all around. 

Mr. Goodman. I made reference to the question you raised, but I 
will be glad to submit for the record^ a completed policy that was 
worked out by our committee and approved by the CIO as a recom- 
mendation on reconversion pricing policy. 

We submitted this to the OPA : Our recommendations were not 
accejoted, and as a result, in our opinion, many of the problems that 
have occurred since in the whole process of reconversion pricing have 
failed and I cite instances in our statement where they have failed and 
failed seriously. 

Mr. Reece. I think it might be desirable to have this go in the 
record, but I am not yet sure, Mr. Goodman, that this deals with the 
phase of the problem that I had in mind, which seemed to me to be 
rather important. We all recognize that we have been and are no-v^ 
confronted to a certain extent with the necessity of some type of con- 
trol, but in a reasonably short period of time the war emergency is 
going to pass. As to whether we drift into another emergency is 
another matter. 

Now, is it the attitude of your organization that controls should be 
projected on indefinitely into the future? 

Mr. Goodman. No. 

Mr. WoRLEY. Your first point is that almost everybody has made 

Mr. Goodman. That is right. 

Mr. WoRLEY. I think we can agree on that. Now, what is your 
next point? 

Mr. Goodman. We developed the point that some of the controls 
are not being properly administered at this point or maintained in 
the present emergency — and to go on and cite cases of that — we feel, 
and I think I can say for our group as a whole, I know we have adopted 
the statement to this effect: 

That we don't want controls for the sake of controls, and as soon 
as the situation permits, and production has reached an adequate 
level, we feel that price controls should be eliminated. 

Mr. George. Have you any tests of adequacy that are defined? 

Mr. Goodman. We have them in that statement there. 

Mr. WoRLEY. If there is no objection to inserting in the record this 
statement, we will insert it at this point. 

(The statement referred to is as follows:) 

CIO CosT-OF-LiviNG Committee 


Price policy 
Responsibility of OPA 

The responsibility of OPA in reconversion pricing is — 

A. To protect the standard of living of the American people against 
'further increase in the cost of living, and 

B. To provide a postwar price level which is conducive to full employment. 
It is not the responsibility of OPA to bring about the resumption of production. 

The major inducement to the resumption of production exists in the desire oa 
the part of most manufacturers to get into the race for postwar markets. 


The critical issue is whether OPA will live up to this responsibility or whether 
it will attempt to induce production by guaranteeing profits through cost-plus 
price increases. 

Our basic recommendations 

It is recommend that the following principles be adopted for pricing products 
which have been out of production during the war and are again to be produced 
for civilian use. 

1. The last price ceiling in effect prior to conversion (1941 or 1942) should 
be the price ceiling upon rec^onversion. 

2. Exceptions to this rule in the form of higher than 1941-42 ceilings should 
be granted only — 

(a) After a period of experience with operations under the 1941-42 ceil- 
ing; this period shall be 3 or more months, depending on the accounting 
period employed by tlie petitioner; 

(6) Or, only as a self-terminating exception usually of no more than 
3 months' duration from 1941-42 ceiling ; 

(p) And, with the burden of proof resting upon the seller to justify the 
exception ; any renewal of the exception, if granted, shall be on the basis pf 
• new and complete proof that a new exception is necessai-y ; 

id) And, when such proofs establisli the existence of extraordinary and 
apparently permanent shifts fi-oni pre-war production conditions, rather than 
temporary abnormalities incident to the transitijon from war to peace pro- 

3. Public relations on reconversion issues and policies should be given equal 
emphasis with the operating program, to the end that policies may be both 
formulated and executed under the influence of wid(>spread public understanding 
and interest, in contrast to the predominantly CiOrjporate and mercantile influ- 
ences under which wartime stabilization has operated. 

4. In acting on itetitions for exceptions from the 1941-42 price level, the guid- 
ing principle should be to establish that relationship between the price level and 
the wage level which is consistent with maximum outi)ut and full employment 
on a long-time basis. 

5. Exceptions granted vmder such a program must, as far as practical, assume 
a high level ^of production and should fully retiect actual and probable increases 
in labor prod\ictivity. In no case should OPA set a i^rice which, at capacity 
production, would bring more than the margin of profit eai'ned in the last pre- 
war year 1939. Where more than one article is being manufactured in a plant, 
the profit determination shall be based on the over-all operation, including civilian 
and war production. 

6. Petitions from members of the same industry should be considered to- 
gether wherever possible and a price should be set that is "generally fair and 
equitable." The determination should take into account any information which 
may be available on the extent to which the petitioner is making use of techno- 
logical developments in the industi-y. 

7. In no case should a petition for an increase from either one firm or a group 
of firms receive consideration while there is reason to believe that production 
is being restricted for the purjwse of exerting pressure for higher prices. Such 
policy on the part of OPA toward manufacturers on strike would be in har- 
mony with the unqualified refusal of the War Labor Board to consider wage 
grievance while labor is on strike. - 

8. All wage rate data submitted by a petitioner should be checked by OPA 
against reports obtained from the War Labor Board, including reports of wage 
rate increases during recent years. The stability of these wage rates under 
union contracts should also be examined. 

Implications for full employment 

The most serious aspects of OPA's pricing policy is its effect on postwar em- 
ployment. If full employment is to be achieved, our vastly increased plant 
capacity must be fully utilized. This utilization will depend on the relation- 
ship between the price level and the general wage level. While we do not have 
the facilities to make a formal determination of this point, it is our belief that 
the 1941-2 price level was so high in relation to wages— even to 1944 rates — as 
to carry the assurance of widespread imemployment when the war is over. 

To maintain a full employment economy, therefore, prices will have to be 
maintained or lowered while wage rates are held or raised. 

A more extensive discussion of these issues is attached. 


Reconversion priciug 

The purpose to be served by regulating prices of peacetime products as they 
come back into production is to guide tlie price structure through alternating 
periods of deflation and inflation pressures so that stability may eventually be 
achieved under conditions conducive to ctipJi<^ity ijroduction and full employ- 

This ultimate objective is stated by the Administrator in the release of August 
17, as follows : 

"Our pricing policies should encourage the fullest possible production of goods 
and services at the lovi^est possible prices to the consumer. Unless American 
industry produces to the limit of its powers, there will be an increased danger 
of depression and eventual collapse. * * « Everything possible must be 
done to encourage complete use of our productive facilities so that we maintain 
a level of output far above that of 1940. 

"Our pricing policies will be based on this a.ssumption." 

On the road toward that ultimate ob.iective are immediate problems which 
call for the adoption of iTiterim pricing policies. Those policies should guard 
against both deflation and inflation which alternately may beset the national 
economy during its transition from all-out war demands to all-out peace pos- 

But stating the ultimate objective and formulating interim policies are not 
the whole task confronting us. In addition we must recognize, and undertake 
to solve, the intricate, dynamic and politically supercharged question of what 
effect interim policies, while meeting interim problems, will have upon the pros- 
pect or possibility of achieving the ultimate objective. It is quite as pos- 
sible, and a deal more likely, that we shall emerge into peacetime stability with 
the old patterns of scarcity firmly shackled upon us. 

The test of each interim policy cannot be solely that it appears to meet interim 
problems in a satisfactory manner. It must be tested also against the influence 
it may exert towards a full-employment future or toward a return to prewar 

This element in reconversion policy is emphasized in the recommendations 
which follow. 

Recommendation in brief 

It is reconunended that the following principles be adopted for pricing prod- 
ucts which have been out of production during the war and are again to be 
produced for civilian use. 

1. The last price ceiling in effect prior to conversion (1941 or 11142) shall be the 
price ceiling upon reconversion. 

2. Exceptions to this rule in the form of higher than 1941-42 ceilings shall 
be granted only — 

(a) After a period of experience with operations under the 1941-42 
ceilings ; 

(b) Or, only as a temporary, self-terminating exception from the 1941-42 
ceiling ; 

(c) And with the burden of proof resting upon the seller to justify the 
exception ; 

(d) And when such proofs establish the existence of extraordinary and 
apparently permanent shifts from prewar production conditions, rather 
than temporary abnormalities incident to the transition from war to peace 

3. Public relations on reconversion issues and policies shall be given equal 
emphasis with the operating program, to the end that policies may be both 
formulated and executed under the influence of widespread public understanding 
and, interest, in contrast to the predominantly corporate and mercantile influ- 
ence under which wartime stabilization has operated. 

The 1941-42 base 

In terms of the ultimate objective of capacity production and full enn)loy- 
ment, the 1941-^2 ceilings are too high, rather than too low. A sizable defla- 
tionary gap between savings and investment probably will result unless lower 
prices and higher wage rates become the pattern of total conversion to peace 
production. It is clear, however, that OPA cannot now propose a price level 
below the last existent ceilings for these products. But certainly it should not 
propose a higher one. Although it cannot now move decisively toward the 


ultimate objective, certainly it should not move in any degree away from it. 
The 1941^2 price level will not power the economy toward permanent prosperity, 
but it may serve as anchor to check further drift toward disaster. 

Adoption of the 1941-42 level now as the norm for reconversion prices, rather 
than some day later on, is the only practicable way of tying to it at all. To say 
that OPA can set higher prices now and roll back later may seem to provide con- 
venient escape from a present dileruma, but is wholly theoretical. Politics 
would not permit, and OPA's limited manpower cannot undertake, any general 
roll-back in prices. Nor could the tangled web of cost-price relationships be 
sufficiently unraveled to implement such a roll-back by regulation. 

But of controlling importance is the dynamic effect of a roll-up now and a roll- 
back later. Nicely planned and neatly executed, such a scheme might stimulate 
confidence when deflation threatens and dampens enthusiasm when inflation im- 
pends. But experience has shown that OPA price controls lack the refinements 
of nice planning and neat execution. They are a battleground, not a precision 
tool. OPA may risk the initial roll-up, but it will never risk the deflation dan- 
gers of a roll-back. 

There is, on the other hand, an element of practicality in adopting the 1941-42 
level as the rule for reconversion. Price relationships among industries and 
among competitors are of importance to industry. The 1941-42 ceilings were 
derived largely from established relationships. Though doubtless altered con- 
siderably from prewar conditions, they were more normal than any that will 
residt from raising price ceilings one by one in response to demands of indi- 
vidual companies and industries. 

Exceptions from the 19^1-42 base 

No rule can have effective practical application unless it can be departed from. 
It ceases, however, to be a rule unless the departures from it are (1) strictly 
formulated and (2) consistent with it. The following suggestions meet these 

(a) Delayed exceptions. — Since few, if any. of the reconverted industries will 
know in advance of production what their costs, sales, and profits will be, it is 
desirable to permit no ceiling above the 1941-42 figure until experience of 3 to 6 
months at least has been accumulated as a basis of determining what exception, 
if any, needs to be made in a particular instance. Provision for recouping losses 
incurred during the delay period might be included in the exception regulations. 

(&) Temporary exceptions. — Situations may arise, however, in which imme- 
diate exceptions are imperative. Such demands will be most pressing, perhaps, 
from those industries whose competition is so well under control as to enable them 
to carry out their threats to shut down and live on tax refunds rather than 
produce at prices below their demand. 

Demands backed by such management strikes should, of course, receive no 
consideration. But legitimate demands for immediate exceptions will arise. 

Therefore, when exceptions cannot be delayed for 3 to 6 months, exceptions 
on a temporary basis should be granted. Such regulations should be absolutely 
self-terminating, and usually of no more than 3 months' duration. The exceptions 
should cease at the end of the period without further action by OPA. New proofs 
by the company or industry should be required if a new exception for a succeed- 
ing period is to be granted. 

(c) Burden of proof. — Unless the right to an exception must be affirmatively 
established by the seller, OPA will find itself in the position of being called upon 
to justify the 1941^2 ceilings. In that event the exception becomes the rule and 
the rule the exception. Justification for the 1941-42 rule should not depend upon 
any specific proof of cost-price-profit relationships, but in the necessity of check- 
ing any trend toward unemployment and underproduction 

Nor does the rule assume that we ignore cost-price-profit relationships in any 
industry: it assumed only what happens to be the fact, that for the most part 
we don't know what those relationships will turn out to be. 

Therefore it is recommended that no exception be granted in any case except 
upon affirmative showing by the industry, or company of the necessity for it. 

(d) Nature of proofs. — It should not be enough to prove simply that anticipated 
costs and prices will not pay out or permit rpsumption of production. Save in 
exceptional cases any prediction as to how costs and profits will turn out is 
largely conjectural . Nor will they be subject to realistic audit by OPA. either 
before or after production takes place, because there is no possibility that OPA 
will have suflicient manpower. Therefore exceptions from the 1941^2 rule 
should be granted only proof that the industry or company requesting it will 


be operating under extraordinary circumstances other than the temporary dis- 
locations due to reconversion. 

For example, a showing that volume of output is not only temporarily, but 
permanently, curtailed by contraction of the prewar markets might be grounds for 
exception. Radical change in the type of market to be used could justify an ex- 
ception also. Or there may be industries which can prove that no increase in 
productivity per worker has occurred since prewar, or can occur in the future. 

Change-over of an industry from sweated labor to an organized basis might 
justify an exception, though the assumption that higher wage rates mean higher 
unit labor costs requires specific proof in each instance. Abnormally high costs 
or inefficiency of a particular company might call for an exception if alternative 
sources of producing the same commodity are not available. 

These are examples only. The rule for granting exceptions, generally speak- 
ing, should be that the burden of proof of extraordinary deviation from the pre- 
vailing conditions of the transition period must be sustained by the applicant com- 
pany or industry. 

The critical issue 

The critical central issue of the reconversion pricing problem arises from the 
proposal widely advanced by industry and seriously considered by OPA that the 
initial step toward a workable peacetime price level shall be the adoption of cost- 
plus, profit-insuring pricing formulas. Although the ultimate objective of capacity 
production calls for rigorous exploitation of every efficiency obtainable through 
advancing technology, the proposal is that we start in that direction by instituting 
a system which guarantees costs, or at least recognizes a claim by industry to a 
guaranty that costs shall be recovered. Such a beginning would move us away 
from our goal, rather than toward it. 

The fallacy in this approach is that industry itself, save in extraordinary 
monopoly situations, cannot establish its prices for future production with any 
certainty of recovering costs. Forward pricing is always guesswork, because cost 
and volume and sales realization can only be estimated. In making that guess 
every manufacturer must hope for a volume of sales higher than he can be sure 
of. Any company which scales its prices only to a volume of business that is 
assured is either a monopoly or is about to price itself out of the market. 

Moreover the guesswork in forward pricing is not merely a process of addition. 
The manufacturer does not guess his various costs, add them up, add a profit, 
and arrive at a price. Rather, he hopes for a given volume of sales, guesses 
the price that will move such volume, and then sets about tightening up his oper- 
ations so as to bring costs in line with this price. 

Now OPA must perform the guesswork of forward pricing. It cannot escape 
the risk or the responsibility of that task by transforming the guess into a guar- 
anty. Cost-plus formulas may guarantee profits, but they cannot guarantee prac- 
ticable forward pricing nor will they shape industrial policy in the direction of 
full employment. They are impi-acticable, and they tend toward scarcity not 

Cost-plus pricing may be an excusable, though graft-ridden, expedient in war- 
time; it is sure-fire disaster in pricing for peacetime. 

OPA must approach reconversion pricing in the knowledge that it is a guess- 
work, not a guarantee, process. To ignore that is to assure disaster. Even 
to recognize it is not to assure success. 

Forward pricing performed by OPA differs from the normal business process 
in two important respects. These differences create special dangers. 

In the first place, OPA will price the new products under conditions of re- 
stricted volume and unlimited demand, comparatively speaking. Therein lies 
the temptation to set prices which, while not too high to choke off consumption 
today, will become frozen into the cost-price structure of industry, and will 
generate a peacetime price level that prevents capacity production and full 

More precisely, the danger is that OPA by adding up estimated costs and 
profits to arrive at prices will not only ignore the cost-cutting potentialities of 
increased productivity and high volume, but will reward delay or indifference 
on the part of industry in exploiting those factors. The elementary economic 
principle that in an expanding economy prices place limits to costs is in danger 
of being replaced by the fallacy that production takes place and expends only 
when prices are set to cover predetermined costs. 

The Administrator's August 25 speech in San Francisco suggests that this 
critical issue has not been fully thought through. On page 5 of the release 


rost-plns pricing is proposed as a protection asainst deflation. The assiunijtion 
at this point is that prices and costs are tied together by fixed differentials. 
On tlie following page. h(nvever, the elements of increased produftivity and of 
high volume are inti'odneed. hut as though they confirmed the pi-eeeding analysis 
whereas in fact tliey contradict it. The resulting policy appears to be that, 
where productivity gains are known, costs will be transmitted into prices with 
that fact in mind, but where productivity changes are not known prices will be 
set on the basis of cost-plus. 

The critical issue arises precisely from tlie fact th;it OPA does not know and 
industry does not know that prodncitivity can be achieved. The only thing 
certain with i-espect to it is that under cost-plus pricing the possibilities of 
productivity will not be fidly explored. These dynamic factors in the pricing 
process are never precisely known, but they nuist be anticipated and allowed 
for if disaster is to be avoided. A private business which ignores them goes to 
the wall. OPA, ignoring them, may i)aralyze the Nation's economy. 

The second element of danger in the OPA task is that its acts are official; 
they are conunands which are supposed to be obeyed. This exposes it to Ihe 
fear of its own responsibilities. It will, therefore, tend to make its price 
guesses too high rather than too low, because it knows that repercussions from 
business against a too-low price will be immediate and forceful, whereas 
repercussions due from an unemployed labor force will come long after its 
too-high prices have been set. probably after OPA itself has vanished from the 

Another element of danger is that OPA must act upon such data as industry 
makes available to it. These may be far less reliable than the data upon which 
industry has at hand and would use for its own price determinations. Industry 
will not too greatly extend itself to help OPA carry through to success. OPA 
will not have resources for overcoming inadequacies in data available to it. 

To sum up, the critical issue is whether the OPA can persuade industry to 
weather the squeeze of temporary high costs, indvuown productivity and low 
volume during the interim pericnl ;it the 1941-42 price level, with only few and 
temporary exceptions from that rule. If it can persuade industry to accept 
that level, it will stimulate productivity and hasten the trend toward capacity 
operation. If however, it must assure inunediate profits, it will necessarily 
inaugurate a price level that si^ells far less than full employment for the long 
pull, which it will not be able to roll back, and which will be deflated only when 
shaken out of the price structure by a catastrophic recession leading perhaps 
to a major depression. 

Public rchitiotifi 

The chances that OPA can administer this transition to a workable peace- 
time price level will dei>end as much up<jn its public relatit^ns officers as upon 
its businessmen, economists and industry advisers. 

The overwhelming preponderance of short-sighted, self-defeating views on 
prices and profits in the business world at the moment leave only one hope that 
OPA can avoid failure in the delicate ahead of it. That hope is that the 
stake held by every person in the United States in this question be made known 
to them more forcefully, simply and dramatically than has been accomplished 
on any OPA questions to date. Only against a background of public opinion 
made acutely aware of how largely the future pro.sijerity of the nation is right 
now being decided can there be any chance whatever that OPA will escape less 
than total rout at the hands of powerful groups seeking inunediate profits. 

One element in such a program is gold-fish-bowl operation. The decisions 
OPA is making are not private transactions. Ncn- are they wholly technical de- 
cisions. Every one of them touches the whole public intimately, and every 
one of them can be described in terms of the everyday experiences of everybody. 

Behind such a public relations policy, to give it substance, there must be an 
operating policy if participation by all interested parties. Labor advisory com- 
mittees should be full participants. The recommendations, facts and argu- 
ments of both industry and labor advisory committees sh<mld come together in 
open session before the ofl3cials charged with determining reconversion prices. 

Another element is the duty of OI'A, as a Government agency, to champion 
the cause cf citizens against the unjustified demands of private interests. When 
OPA is under pressure to wield unjustifiable gratuities, it does not have a choice 
to fight srch demands secretly within its conference rooms. It is obliged to 
report and describe these demands officially. To keep silent with i-espect to 
them is to conspire in them. 


Another element is accuracy as to issues. For example, the essential issue 
as to postwar prosperity is that prices be held down and wage rates be held 
up to the full extent made possible by capacity production and output per worker. 
For further example, the issue involvetl in 1941-42 prices is that they are too 
high to permit stability at present wage rates. Higher wage rates will be re- 
quired to support volume output if the 1941-42 price level is restored. Ref- 
erences, therefore, to wages and prices as though they necessarily advance and 
decline together, or that any decline from war prices means reduced wages, 
confuse these issues and feed prejudices that are already too well nourished by 
the daily press. Recent repeated assurances by OPA that positively it will 
not i)ut prices at levels that will force wages down have this misleading elfect, 
and further prepare the public to believe that every increase in price allowed 
by OPA is attributable to high wage rates. 

Finally, if OPA undertakes to deal realistically with the critical issue con- 
fronting it, it will have to make quite clear that it is not pricing to guarantee 
profits but is pricing temporarily to weather the pransition period hoping to come 
out eventually at a full-employment price level. It can show how reasonable 
this is if it takes pains to relate the many cushions and safeguards available to 
capital during this period. It can describe the operation of the tax law to pay 
profits back to corporations, the cash loans available from the Treasury, as well 
as the enormous cash resources of most industries today. It can point out that 
industry profits at 1941—42 prices were high enough to permit some absorption 
of increased costs since that period. It can observe and translate the terms 
in which Government-owned plants and machinery are turned over to private 
industry. And it can undertake to write into its regulations, and to explain to 
the public, provisions for letting a manufacturer recoup from an adjusted price 
ceiling, losses sustained under the figure originally set. In short, the insurance 
provided and to be provided to invested capital is so extraordinarily generous 
tbat public support fnr the reconversion pricing pi'ogram herein proposed can be 
anticipated, provided the public is made privy to the problem and a party to the 
solution of it. 

Mr. WoRLEY. Your position is the same as most everyone else. We 
are all for sound price controls until production meets demand, which 
will remove the inflationary dangers. Is that correct? 

Mr. Goodman. Yes. 

Mr. WoRLEY. How do you propose that those tests of adequacy be 
applied^ What are your tests as to whether these controls can be 
removed ? 

Mr. Goodman: AVe object to the way thej- have been applied itp to 
this point. 

Mr. WoRLEY. By the OPA? 

Mr. Goodman. By the OPA and by the OES. 

Mr. WoRLEY. Why do you object ? 

Mr. Goodman. I have a section here entitled ''Decontrols" which 
I would like to 

Mr. WoRLEY. Can you g^ive us briefly your objections? 

Mr. Goodman. Yes. I objected to the decontrol program that was 
announced by the Economic Stabilizer, Mr. Davis, as far back as last 
July, because of the failure to set adequate determinants as to when 
particular controls should be removed. 

I have a whole series of cases here that I would like to discuss 
with you. 

Mr. WoRLEY. What is generally conmion to all of them ? 

Mr. Goodman. That as soon as the impression got abroad that con- 
trols can be removed if enough pressure were applied, there were 
a whole series of pressure campaigns put on OPA and the OES, some 
Members of Congress, that resulted in the removal of controls, or 


removal of governmental policy, and the end result was an immediate 
jump in prices. 

I would like to give you one. There is a great deal of talk here 
about strikes and labor's unreasonable demands. I would like to 
give you one that is an example, to me, of the most stupid application 
of a decontrol policy that has resulted to business, loss to workers, 
and loss to the consumer. 

It is one that you all may have heard about, but I have the details 
here if I can glance through quickly and find it. It relates to a simple 
thing — coconuts. 

Mr. GirroRD. Patman threw them all over the room the other day. 

]Mr. Goodman. I am affiliated with the union that works in the 
candy-making industry. 

Mr. WoRLEY. Will you give us the illustration? 

Mr. Goodman. The newspapers told the story of what happened 
to the price of coconut when price ceilings were removed. This item 
sold before the war, according to newspaper reports, for $15 per thou- 
sand pounds; during the war the ceiling was maintained at $65 per 
thousand pounds. Recently the ceiling was removed and the price 
shot to well over $200 per thousand pounds. And I go on to say — 
and I think tliis is a mild understatement : Candy manufacturers have 
found themselves unable to buy an item which is very important to 
their business. 

Mr. WoRLEY. Do you suppose those ceilings were removed as a 
result of pressure ? 

Mr. Goodman. I don't happen to know the circumstances in that 
particular case. 

Mr. AVoRLEY. But you disagree with the wisdom of that action ? 

Mr. Goodman. That is right. 

JNIr. WoRLEY. Is that an isolated case? 

Mr. Goodman. That is one of many. 

Mr. George. Have you examined all the cases in which OPA has 
lifted the ceilings ? 

Mr. Goodman. All of them ? No, sir. 

Mr. George. Any large number? 

Mr. Goodman. Yes, sir. 

Mr. George. What caused you to examine them, the ones that were 
suspects, or at random? 

Mr. Goodman. We took the position when the decontrol policy was 
being considered that there was a lack of adequate standards of de- 
termining which item should be decontrolled, and as a result we fol- 
lowed many of them that came to our attention for one reason or 
another, and went into the details of a few — it is impossible to go 
into too many activities, but I assume you know the case of citrus 

Mr. George. The point I was trying to bring out was the one that 
came to your attention would be likely to be the one that gave trouble. 
I was just curious about the over-all record. 

Mr, Goodman. Not necessarily;. I can't say as an individual or for 
our committee of six people that we have been able to follow all of the 
things that have gone on in OPA. It is impossible to more than pick 
up a few highlights or things that you think illustrate a principle. 

Mr. George. My point is simply that it seems quite important that 


there ought to be an over-all record of what happened to prices after 
controls were eliminated on different situations and different kinds of 

Mr. Goodman. I have a discussion of a few of them here. If you 
care, I would be glad to give you additional items. 

For example, there is the story of Alaskan seal furs. On August 
15, 1945, OPA removed the ceiling. The price had been held at a 
ceiling of approximately $45 per skin. When the ceiling was removed, 
prices shot up. Recently, sales were being made at $110 per skin. 

Mr. WoRLEY. Those are luxury items. 

Mr. Goodman. I would be glad to discuss some necessities. We are 
going into the Christmas season and citrus fruits are practically a 
necessity during Christmas, the Christmas season — oranges and grape- 

Mr. WoRLEY. Also turkeys and chickens, and another committee, for 
your information, has had Mr. Bowles before it — the Committee on 
Agriculture — in a discussion regarding ceilings on all sorts of fowl. 
He says he will not do it until production reaches demand, so prices 
won't pyramid. 

Has that been your experience with OPA ? 

Mr. Goodman. He has done it where Members of Congress or other 
groups have pressured him into removing controls. 

Mr. WoRLEY. I don't know how much more pressure could be applied 
to him than was a])plied on that occasion. 

Mr. Goodman. I am not interested in learning the techniques of how 
to get him to decontrol things, particularly items that shouldn't be. 

(Discussion was had outside the record.) 

Mr. Gifford. Do you find any that you didn't criticize? 

Mr. Goodman. I like very much his accepting the industry recom- 
mendations in reducing the price of nylon stockings, and praised him 
very highly. 

Mr. Gifford. In general, you want him to keep controls? 

Mr. Goodman. Only those controls that are necessary. 

Mr. Gifford. But they are all necessary to your mind, practically? 

Mr. Goodman. Price control of the necessities of life, at the moment, 
I think are necessary because there is a shortage of every single item — 
rent, housing, clothing and foods. 

Mr. Gifford. Coconuts and citrus fruits? 

Mr. Goodman. Yes, coconuts and citrus fruits and — if I may say — 
shoes, Mr. Gifford. 

Mr. Gifford. What should not be controlled ? 

Mr. Goodman. We have a surplus at the moment, I think, of good 
will and a surplus of good intentions. In my opinion, there is not an 
adequate amount of control of greed that exists. 

Mr. Gifford. Haven't I heard that hell itself was paved with good 
intentions ? 

Mr. WoRLEY. Pardon me for interrupting. That buzzer signifies a 
quorum call, and all Members are wanted on the floor of the House. 

I am sorry that our hearing has been interrupted but we hope to con- 
tinue at a later date. Thank you very much, Mr. Goodman, for your 
kindness in appearing before the committee. 

(Discussion off the record.) 

Mr. WoRLEY. The committee is adjourned. 

(Whereupon, at 11 : 15 a. m., the committee adjourned.) 




House of Representatives, 
Special Committee on Postwah Economic Policy 

AND Planning, 
Wa.shhifffo7i,D. C, 

The special committee met, pursuant to call, at 10 : 30 a. m. in room 
1304, New House Office Building, Hon. Orville Zinnnerman presiding. 

Present : Representatives Zinmierman (presiding), Murdock, 
Worley, Gifford, Welch, Wolverton, Hope, Wolcott, and Simpson. 

Mr. Zimmerman. The committee will be in order. 

Our chairman, Mr. Colmer, advised me he would be unavoidably 
detained today but he is verv ajixious that the witnesses scheduled to 
testify today have the opportunity of appearing and presenting in- 
formation which they would like to leave with this committee for their 

He has asked nie to act as chairman this morning. Mr. Cooper, the 
ranking member on tlie committee, is tied up also with the Ways and 
Means Committee and he cannot be here. 

Mr. Gifford. He wasn't thei'e when I left. I was in the Ways and 
Means Committee and he wasn't there. Probably he is on Pearl 

Mr. Zimmerman. Maybe it is Pearl Harbor. 

Mr. Warne, will you come forward and let us have your statement? 


Mr. Zimmerman. Mr. Warne, do you have a written statement you 
would like to present? 

Mr. Warne. I do, indeed. 

Mr. Zimmerman. Would you like to make a statement before the 

Mr. Warne. Indeed. 

Mr. Zimmerman. Very well. You may proceed and we will let you 
make your statement and then anyone who desires to ask questions may 
do so. 

Mr. Warne. This statement is submitted on behalf of 14 organiza- 
tions and is signed by the executives of those groups. 

Perhaps at the outset, in order to establish the organizations re- 
l^resented, I might read the roster. 

Mr. Zimmerman. I think that might be very helpful. 


99579—46 — pt. 7 18 


Mr. Warne (reading) : 

American Association of University Women, Kathryn McHale, general 

American Home Economics Association, Lelia Massey, executive secretary. 

Consumers Union of the United States, Inc., for which I signed as president 

League of Women Shoppers, Inc., Katherine Armatage, chairman. 

National Consumers League, Elizabeth S. Magee, general secretary. 

National Council of Catholic Women, Ruth Craven, executive secretary. 

National Council of Jewish Women, Mrs. Joseph M. Welt, president. 

National Council of Negro Women, Mary McLeod Bethuue, president. 

Non-Partisan Council on Public Affairs of the A. K. A. Sorority, Thomassina 
Johnson, legislative representative. 

National Women's Trade Union League, Elisabeth Christman, secretary- 

Potomac Cooperative Federation, Helmuth F. Kern, executive secretary. 

National Federation of Settlements, Mildred Gutwillig, chairman, consumer 
interest committee. 

National League of Women Voters, Anna Lord Strauss, president. 

General Federation of Women's Clubs, Mrs. La Fell Dickinson, president. 

These groups present to your committee a statement on the immediate need 
for extension oi' price and rent controls'. 

This joint statement is submitted on behalf of American consumers, 
who believe that immediate renewal by the Congress of the price and 
rent-control legislation which expires on Jime 30 is an essential pre- 
requisite for the Nation's successfid transition to higher level post- 
war employment, production and national income. Our country is 
faced with the imminent threat of a run-away price and rent inflation, 
unless Congress serves notice that the line will be held by continuing 
price control until at least June 30, 1947, and rent control until at 
least June 30, 1948. 

President Truman has warned the Congress and the Nation that 
pent-up inflationary pressures have reached the critical explosion 
point. Wherever there are no controls, major inflationary price ad- 
vances have taken place. The prices of uncontrolled urban real estate 
liave risen more than 50 percent since the beginning of the war. In 
the absence of adequate controls on speculation industrial stock prices 
have more than doubled since the spring of 1942. 

Five months after VJ-day, the overriding economic fact is that for 
a considerable period to come, we face a sellers' market in consumer 
durable goods, clothing, and housing. Cumulative shortages will not 
be overcome even at high levels of production ^or a couple of years 
in consumer durables, and in housing the shortage may continue for 
a decade. In the face of such major and acute shortages, record- 
breaking demand will precipitate an inflationary explosion unless 
prices are held down until the supply of scarce goods comes into ap- 
proximate balance with postwar demand. 

The Nation's experience after World War I underscores the pressing 
need for renewing and maintaining price and rent controls. Although 
the pent-up demand at that time was much less than today, an infla- 
tionary price advance was generated after World War I when the 
Government dropped all controls after the armistice. The cost of 
living soared and reached a peak 108 percent above the prewar level. 
The purchasing power of the dollar dropped to 40 cents, as 43 per- 
cent of the general price inflation and 91 percent of the rise in rents 
came after World War I was over. 

The American people have not forgotten the World War I infla- 
tion which ended in an economic crash and an acute depression. By 


1920 industrial production fell 40 percent in one year, farm prices 
dropped 50 percent and the prices of manufactured goods declined 45 
percent. The American people are determined that they will not again 
suffer the disastrous consequences of a postwar inflationary boom-and- 
bust cycle. That is why they support the President's appeal for the 
continuation of price and rent controls to keep the lid on speculative 
price advances. 

We cannot afford to forget that the inflationary threat today is far 
more dangerous than it was back in 1919. The pent-up demand for 
civilian goods has been conservatively but incompletely estimated at 
$50,000,000,000, chiefly for consumer durables and housing. Every- 
where on the price front, ceilings are at the cracking point. Without 
price and rent controls, the fuse would be set for the worst inflation- 
ary explosion in our history. 

More than that, unless price and rent controls are renewed as soon 
as possible the country will be threatened with another sellers' strike 
that will cripple reconversion. 

Last ,f all — and I am sure some meml:)ers of the committee will ap- 
preciate this — some manufacturers and businessmen held back goods 
irom the market because they wanted to make windfall profits this 
year after the repeal of the excess-profits tax. Unless Congress im- 
mediately makes clear that price and rent controls will be renewed, 
there is grave danger that many manufacturers, buildings and other 
businessmen will curb production and construction and hold back 
goods in anticipation of higher prices after the end of price control. 

Your committee which has been studying postwar economic policy 
should consider the threat to the Nation, if a sellers' strike should 
develop in the next few months just when the largest possible expan- 
sion of civilian production is needed. This potential danger illustrates 
Jiow the transition to the peacetime economy with high levels of em- 
ployment and production necessarily must be safeguarded by price 
and rent controls. 

In fact, reconversion was hampered and inflationary pressures were 
increased when essential controls were dropped by the Government 
after VJ-day. These mistakes led to hoarding of scarce materials, to 
the sellers' strike, and to sharp intensification of the housing shortage. 
The fact is that it was not the retention of wartime controls but their 
premature abolition that slowed down reconversion. If controls had 
not been removed prematurely, there would have been no basis for the 
rsellers' strike. 

The renewal and extension of price and rent controls will safeguard, 
not harm reconversion. If businessmen and consumers know that the 
lid will be kept down on inflationary price increases, they can plan 
their operations and expenditures for 1946 and 1947. The business- 
man will know that it will pay him to get capacity operations going as 
•quickly as possible in a sellers' market where he can sell everything 
he can turn out. And the consumer will purchase what he needs and 
not scramble for everything in sight because the value of the dollar 
is going down from week to week. 

It is generally agreed that the most effective defense against infla- 
tion is capacity production. But maximum output will not be 
attained if it will be more profitable for businessmen to hoard stocks 
of materials and products, because they will receive higher prices and 
imake bigger profits further along the inflationary spiral. Business 


and industry are guaranteed markets for all they can produce in the 
next several years — if prices do not ^et out of control. With capacity 
operations, they will make the greatest profits they have ever earned. 
And high-level production will graduall}' ease and dissipate the infla- 
tionary pressures that were generated during the war. At some safe 
point in this process the inflationary threat will have been defeated and 
price controls can be abolished. 

The issue, therefore, is not the abolition of jjrice and rent controls. 
No one proposes that they be continued indefinitely. The real issue is 
to avoid inflation, and that cannot be done without the continuation of 
price and rent controls. What has happened since VJ-day shows that 
we would be courting economic disaster if these controls were abol- 
ished before we were certain that the inflation threat has been defi- 
nitely overcome. It will be inc()m[)arably better for the economic wel- 
fare of the Nation if the controls are removed G months after they are 
no longer needed than 6 months too soon, when there may still be 
danger that inflation will get out of hand. 

This conclusion becomes inescapable when we examine the situation 
in food where the supply picture is better than in any other group 
of commodities or goods. Prices are pressing very hard against 
ceilings even in those foods where su])plies are relatively ample. For 
exam})le. last November OPA lifted the ceilings on fi-esh citrus fruits 
in response to appeals from the industry. Within a week or so, re- 
tail prices doubled in many connnunities. Here was a laboratory 
test proving that in the absence of a ceiling, the price of a commodity 
ill relatively good supply will have an inflationary rise because of the 
abu rmal conditions that now prevail in the economy. 

A\'hat was true of citrus fruits would also apply to consumer dur- 
ables, to clothing, to housing, to most foods. Current price ceilings 
are actually a floor below which prices do not fall, no matter what 
the available supply. Consequently, the elimination of ceilings would 
pave the way for major price increases of 25 percent, 50 percent, and 
100 percent in a year. What we would have for all practical purposes 
would be the price conditions of a national black market, with constant 
upbidding of prices and the whole speculative, inflationary process 
legitimized by the ending of price and rent controls. 

In the face of this threat to our future, with the prospect of having 
the peace undermined by a catastrophic depression in 1 or 2 years, 
theoretical arguments against price and rent controls cannot be taken 
seriously. It is not a question of being for or against price and rent 
control. The lineup is actually for or against inflation. On the one 
hand, we have the overwhelming majority of our citizens against in- 
flation and for price and rent controls. 

And may I just interpolate that you have represented on the roster 
of groups signing this statement a very considerable national coverage. 

On the other hand, there are a small number of selfish interests 
willing to gamble with the economic health of the Nation by playing 
around with what they call a small dose of inflation. But inflation 
cannot be taken in controlled doses. Once price and rent controls 
are abolished prematurely, there will be a galloping inflation with dis- 
aster as its inevitable end. 

Because of their critical importance, it is essential that Congress 
reject all efforts to emasculate price and rent controls through amend- 


ments. Consumers are especially concerned over the drive to cripple 
or abolish OPA's cost-absorption principle. OPA is applyino; this 
policy in line with the President's Executive Order 9599 which di- 
rected the Price Administrator "so far as reasonable, practicable, and 
necessary" to see to it that unavoidable manufacturinpi: price increases 
do not cause price increases at later levels of distribution. 

Without the principle of cost absorption, we would have price 
control in name only. Substantial price increases would take place 
in the cost of food, clothing, reconversion goods, and dozens of other 
cost-ofdiving items. Even worse, abolition of cost absorption would 
pyramid price increases throughout the economy, as one increase 
after the other would be passed along to subsequent economic levels, 
thus putting the inflationary spiral into motion, whether we con- 
tinued to have a price control law on the statute books or not. 

A cost-plus formula as a substitute for cost absorption would 
simply mean a formula for legalized inflation.. Price control re- 
quires holding down prices. When some unavoidable manufactur- 
ing increases can be absoi-bed, they must be absorbed in whole or in 
part as an integral part of the price-control program. But you can- 
not have price control unless there is partial or complete absorption 
of cost increases at some level of economic activity, so that the full 
impact is not felt by the consumer in the form of ever-higher in- 
flationary retail price increases. 

We believe your committee in its deliberations on postwar economic 
policy should recommend to the House of Representatives that it 
renew the price and rent-control legislation as soon as possible. This 
legislation by stabilizing the economy during the transition back 
to peacetime production will help us construct a solid foundation for 
postwar prosperity. 

We believe that the price-control provisions should be extended 
until at least June 80, 1947. That will give business and industry 
about a year and a half in which to take the edge off the current 
abnormal demand. Along with renewal of the price control pro- 
visions, it is essential that the Second War Powers Act be renewed 
until at least June 80, 1947. This act is the basis for the Govern- 
ment's priority and inventory controls. Without these controls, 
hoarding of scarce materials will block the channels of distribution, 
with consequent pressure on the entire })rice structure. 

We believe that the rent-control provisions should be renewed until 
at least June 30, 1948. Housing is our most critical shortage and 
the present crisis will not be overcome in the next 2 years. Renewal 
of rent controls until at least June 80, 1948, will reassure our people 
that there will be no rent inflation. It will also stimulate housing 
construction if builders realize that they cannot sit out rent control 
in the hope that it will be ended in 6 or 12 monhs. 

If rent control is to be effective, we must have ceilings on the prices 
of new and old housing. We already have a major inflation in real 
estate prices. Unless it is checked at once by congressional action, 
spiralling housing prices will exert such pressure on the rest of the 
economy that the whole reconversion stabilization program will break 

Finally, we believe that the consumer food subsidy program must 
be continued until at least June 80, 1947, Instead of declining after 


VJ-day, food prices today are at their maximum ceiling levels. If the- 
consumer food subsidy program is not continued, the cost of food to- 
the average family will go up about 10 percent after July 1, thus 
raising the over-all cost of living by 4 percent. These increases would 
be only the beginning of a spiral of price rises, and consumers as after 
World War I would face the prospect of retail food prices skyrocket- 
ing to a peak more than 125 percent above the prewar level. With the 
consumer subsidy program this inflationary danger could be blocked 
until food demand and price levels were stabilized. 

We have presented our views to your committee because we believe 
that immediate action along the lines we have indicated is a necessary 
prerequisite for a successful postwar economic policy. No postwar- 
economic program will succeed if it is not based on meeting and curb- 
ing the inflationary threat now. Your committee can render a great 
service to the future welfare of the Nation by requesting the House- 
of Representatives and its appropriate committees to consider the ur- 
gent need for immediate extension of price and rent controls, the Sec- 
ond War Powers Act and the consumer food subsidy program, and 
the enactment of legislation for imposing ceilings on the prices of 
new and old housing. 

Mr. Zimmerman. Mr. Warne, that was a very direct and compre- 
hensive statement on this very comprehensive subject. There is one 
thing that I want to ask you about. You spoke of absorption of price 
increases. You feel the present policy of the OPA should be contin- 
ued ? By that do you mean that the retailer, for example, of clothing 
and food should absorb this increase wherever it is granted along the 
line ? Is that what you mean ? 

Mr. Warne. I wouldn't put it in quite such an unqualified way. 

Mr. Zimmerman. I just wanted to know. I would like you to ex- 
plain to this committee what you mean by the absorption plan, the 
application of this plan. 

Mr. Warne. Let's take, for example, automobiles. 

Mr. Zimmerman. All right. 

Mr. Warne. As I understand it, the margin at the retailing level,. 
the local agency level, was something like 25 percent. 

Mr. Zimmerman. That is right. 

Mr. Warne. That 25 percent in the prewar period included a great 
deal of shoe leather, a great deal of energy on the part of salesmen. 

Likewise, they had very heavy losses on turn-ins of old cars. 

Today I suppose the great problem of any agency is not that of 
finding prospective customers, but that of holding them in line while 
they sign up for new cars. Their cost situation is quite different from 
their cost situation in the prewar period. 

And I think the same generalization should apply to the bulk of 
retail lines where the inventory turn-over is so rapid as compared to 
prewar and the problem of extensive salesmanship no longer exists. 

Now, coming to cost absorption. If due to high cost at earlier levels 
the car comes through to the retailer at a little higher figure than 
formerly, I see nothing sacred in the maintenance of the traditional 
prewar 25 percent retail margin, let us say, in the cost of motor cars. 
I think there is enough leeway there so that that might very well 
be absorbed. «- 


Now, in some cases the absorption cannot be complete, but my un- 
derstanding of Mr. Truman's position in Executive Order 9588 and 
that of Chester Bowles is that the Price Control Act seeks to give 
general equity on prices and that equity is interpreted as not inter- 
fering with the granting of a reasonable level of profits to a given 
industry or trade. 

Mr. Zimmerman. Unless there is due regard for fair equities and an 
honest effort made to adjust these margins on an equitable basis, aren't 
we going to have a lot of injustices and serious consequences? 

Take the merchant in our country towns. His rent has gone up,, 
his help has gone up. You don't mean he is to sit there and absorb 
the increased cost of goods and at the same time pay the increased 
cost of operating expenses, do you ? Where will that lellow land ? 

Mr. Warne. I think the test should be whether the profit position 
in a retail field is impaired as compared to prewar standards. If it is 
not, the cost absorption should go forward. My understanding is 
that retailing has been and remains today in a particularly good posi- 
tion, that the great volume of sales has caused the lowering of per 
unit overhead to the point where we really don't need to shed too many 
tears for the typical retailer. 

Mr. Zimmerman. If you got some of the letters I get from some of 
my constituents, you might get a little different picture. They can't 
afford to exchange dollars and carry on their business. That isn't 
what they want. 

Mr. Warne. When you look forward to the great flow of commodi- 
ties which were choked off during that war period, that will flow 
through these retail channels in coming months, the prevalent aggre- 
gate of net profits, I think, will be at a very high level. 

Mr. Zimmerman. I had a letter only yesterday from a very enter- 
prising merchant down in my section of Missouri saying, "I can't buy 
an overall for my farmers. There is not one to be bought anywhere.. 
They come in and ask for work clothes ; they can't get them, they can't 
buy a work shirt, they can't buy a cotton glove, and during the rainy 
and snow season we couldn't buy a rubber boot." 

These commodities that this merchant sells to make a profit are not 
available. What is this fellow going to do if he has to absorb all the 
way along and his source of income is continually diminishing? 

It looks to me like it is a serious problem with some of these boys. 

Mr. Warne. With reference to the difficult clothing problem of the 
hour, I might inject this: First, that there is evidence of a sellers'" 
strike in that field that is choking the flow of goods to the consumers. 

Mr. Zimmerman. About the sellers' strike, you referred to that a 
while ago. Do you mean by the manufacturer or by the wholesaler or 
by whom ? 

Mr. Warne. Typically it is either on the manufacturing or whole- 
saling level — an attempt to hold back supplies feeling a better price 
might later be secured. 

Mr. Zimmerman. What facts have you to show that strike is going 
on, or is that a general accusation ? 

We hear these things charged, but is there any factual foundation 
for it? 

Mr. Warne. I think our information came from the trade papers 
and likewise 


Mr, Zimmerman. You don't base your information on newspapers, 
do 3'^ou ? 

Mr. Warne. No; but I think the trade papers give certain clear 
indications. Likewise, Mr. Bowles has fairly recently issued an article 
in Collier's called Crisis in Clothing;, in which he alludes to the strenu- 
ous fight of the clothing groups to break current ceilings. They are 
using a series of weapons including the hoarding of supplies. This is 
temporarily, I think, holding up the whole flow of clothing through to 
the retailer. 

So, to go back to your principal point, your small retailer may 
temporarily find that his shelves are pretty biidly depleted, but the 
answer to that is not to take the lid off and say, "Let's have high cloth- 
ing prices without ceilings — $10 sliirts, $20 shirts." The answer is a 
tighter control on the converter level, and a clear statement on the part 
of Congress that price controls are going to continue. Then you will 
get your flow of goods through. 

Might I just inject this, Mr. Chairman? We have here two repre- 
sentatives of the organizations backing this statement. Would it be 
possible for me to be fortified by their j^resence on the stand so that 
any questions could be directed to them as well as to me? 

Mr. Zimmerman. Maybe we could hear them a little bit later. 

Mr. Warne. As you wish, sir. 

Mr. ZiMMERjkiAN. Have you any questions, Mr. Gilford? 

Mr. GiFFoRD, I have a lot of them but I won't take the time. I 
U'ant to congratulate you, Mr. Warne. You seem to be surrounded 
by women. 

Mr. Warne. I am. 

Mr. GiFFORD. I have a close friend named Warne, the closest friend 
I have. I want to take a word of comfort to him from another Warne. 

He owns a large building. He has it rented and there were certain 
repairs to be made and they said it would cost $5,000. He has already 
spent $15,000 and will spend $3,000 more. He already rented it based 
on the $5,000 estimate. 

He visited the premises and found the bricklayers had gone up to 
$3 an hour, $24 a day. They are limited to 500 bricks a day. One 
was the foreman, and as he reported to me, he couldn't do much more 
than smoke cigarettes. 

That is a serious situation for him. 

You would like to have a ceiling on those rents, an arbitrary amount. 
I believe in ceilings but I think they should be of such a nature that 
they would increase productivity. 

Shall I tell him you approve of ceilings? 

Mr. Warne. As I understand, Mr. Bowles has allowed ceilings on 
new housing and housing improvements to be about 20 percent above 
the level prevaleilt on comparable existing old housing, so that there 
is in there a genuine incentive for people to build for rent. 

Mr. GiFFORD. I heard about the 20-percent advance. Twenty per- 
cent advance on what previous month? 

Mr. Warne. Compared with the level of old housing of comparable 

Mr. GiFFORD. Who determines that? 

Mr. Warne. That I suppose will be done by the district rent offices 
of OPA. 


Mr. GiFFORD. Which can't do anything unless they come back here. 

Mr. Warne. I think it will be done — that is a decentralized propo- 

Mr. GiFFORD. Does that apply in defense areas as well as other areas? 

Mr. Warne. That applies as do all the rent controls now wherever 

Mr. GiFFORD. I want control of rents if they are reasonable and 
riglit. I want a ceiling but I don't want to hinder production one bit. 
I was on the committee that set up OPA. And I recall the promises 
made and the instructions given by the committee of which I was a 
member. And I want to see those promises lived up to. 

Now, you are trying to tell us that vast amounts of goods are held 
and they won't sell because they want to take advantage of the higher 
price. There is some of that, undoubtedly, of course. 

Mr. Warne. With reference to that production point of yours,, 
here is perhaps the most graphic illustration I could use. After the 
last war we had no price controls. 

Mr. GiFFORD. I know you say that. 

Mr. Warne. And sucli commodities as copper were sold specula- 
tively, one person selling to another and he selling to another, and so 
on. The tendency was not for the finished article to come through to 
the consumer, but for the raw materials to be batted around from one 
person to another without price control, production actually suffered. 

Mr. GiFFORD. We all remember tliat. But your terrible time came 
in 1926 and 1929—10 years after the war. 

Mr. Warne. Your first crisis came in the summer of 1920 and the 
great drop in prices in that first down-swing was 1920 and 1921. 

Mr. GiFFORD. That is 3 years after the war. K-eniember? 

Mr. Warne. Two to 21/2 years. 

Mr. GiFFORD. I can't remember such a terrible time as that in 1920 
and 1921. But I remember the terrible times of 1929. 

Mr. Warne. The collapse, for example, in 1920 was 40 percent in 
1 year in industrial production. 

Mr. GiFFORD. My memory isn't too good, but tliere are two or three 
other things I want to say. 

Our mail, as the chairman said, is largely from producers planning 
to produce and they can't produce and absorb these extra expenses. 
Do you have any recommendation as to labor costs ? 

Mr. Warne. This group addressed itself to the issue of price and 
rent controls in tliis statement. We did not reach out into other equally 
pressing problems of labor, public finance, and debt. We are only 
.discussing this more narrow issue, although I am sure all the groups 
represented realize the importance of the other problems. 

Mr. GiFFORD. One direct question. Has the OPA caused scarcities 
by their actions ? In naming prices under which they will not produce^ 
have they already caused scarcities ? 

Mr. Warne. I have not been aware that the OPA has been nig- 
gardly in setting prices. On the contrary, I should think that from 
the experience of the past 2 or 3 years, if anything the OPA has 
dealt exceedingly generously with agriculture and business judg- 
ing from the prevalent levels of farm prices and likewise the preva- 
lent levels of profit. 


Mr. GiFFORD. Some of the fruit people don't say that, when they 
took the prices off. 

But the claim in the letters I receive from people who manufac- 
ture goods is that the OPA has created a great many scarcities and 
that scarcities bring about inflation. But they continue to create 

Do these girls enjoy all these nylon stockings being sent to Brazil 
and getting a high price and the girls here can't get them ? They go 
where the market is. What should be done about that? Is there any 
recommendation here? 

Mr. Warne. I have a statement from the OPA that suggests that 
export prices today, as well as import prices, are under control. 

I can't, of course, indicate the precise destination of nylons, but 
I would want to check that as a fact before I could be sure that is 
the case. We do have export price control. 

Mr. GiFFORD. Which organization here would you check it with? 

Mr. Warne. I should presume that you would have somewhere 
in the State Department or the Department of Commerce groups 
that are still in charge of export controls and export statistics. 

Mr. GiFTORD. Wouldn't that arouse your women members to real 
action to prevent it? Have you no recommendation to make to us? 

Mr. Warne. I should be happy, with your permission, to have 
Mrs. Somers of the League of Women Shoppers address herself to 
that. We would like to hear her testimony on the subject of nylons. 

Mr. GiFFORD. I bet she would be mad about it. 

I would like to ask a lot of questions, but I won't take the time. 
But I remember the promises made and I want to see them fulfilled. 

Even in your housing business, the lumbermen said ceilings would 
prevent action. They won't build. Of course they won't build unless 
they see a way to make a little profit. 

Mr. Warne. Isn't it clear today that the bottleneck in building is 
not the absence of a desire to build, but it lies in the fact that we 
can't turn out sufficient building materials? 

Mr. GiFFORD. Your namesake Warne that I am going to report to 
tonight had all the materials and all the labor. But as far as he 
was concerned, he had no control. 

But on other items, these girls here — they love to pay subsidies in 
the way of taxes in order to keep the price of nylons down. 

Mr. Warne. The subsidy issue is not a question of an isolated cent 
or two. It is a question of approximately a 10-percent item in the 
family food budget when you come to milk and similar items. If 
that percentage is added to the consumer price after the 1st of July, 
it will start the spiral upward. 

Mr. GiFFORD. You favor the Government paying subsidies rather 
than charging a cent more or 2 cents more for milk ? 

Mr. Warne. Yes. 

Mr. GiFFORD. And hold it there. But shouldn't you prefer that 
the people who drink the milk should pay the 3 cents ? Why subsidize 
and let other people pay ? 

Mr. Warne. The explanation is this. We are seeking to "hold the 
line" at a point so as not to increase the cost of living and so that this 
increased cost of living will not trip off rising costs elsewhere, bring- 
ing us to an even higher level of cost and price. 


The injection of the subsidy was necessary all through most of the 
war. I think continuation is justified by the same arguments that 
caused its original adoption by the Congress 

Mr. GirroRD. I understand. They prefer to pay a subsidy rather 
than to pay for the milk, and the farmers hate the word "subsidy." 
They would rather have the price in the milk. I am well acquainted 
with the farmer. 

Mr. Warne. I am not sure the farmers do want the abolition of the 

Mr. GiFFORD. That has been under the control of the Government 
inspectors, and so forth. His books have to be opened. I hate to 
think that we are being asked to continue this subsidy business. 

Mr. Welch. Mr. Warne, you referred to the housing shortage in 
this country. 

Mr. Warne. Yes. 

Mr. Welch. How can we meet the demand for houses and at the 
same time continue shipping our lumber, both finished and unfinished, 
out of the country where it is sold at a greater profit ? 

Mr. Warne. My understanding is again that the OPA price regu- 
lations do apply to exports and that an export price is not allowed 
to get out of line with the domestic price on lumber or any other 

I have heard that allegation with reference to lumber and a good 
many other articles, but I never have seen verification on that point 
and I would suggest again that I think the facts of the situation should 
be established. 

Mr. Zimmerman. Mr. Wolverton, have you any questions ? 

Mr. Wolverton. Not at this time. 

Mr. Zimmerman. Mr. Murdock ? 

Mr. Murdock. Mr. Chairman, I want to follow in the wake of my 
good friend from Massachusetts and congratulate the witness on the 
splendid backing he has and also inquire how he gets that splendid 
backing, and I want to say also very seriously that I think the witness 
has done well to explain that he is not trying to cover the whole of 
this complicated field. I notice that he hedged a bit when questions 
about the cost of labor and foreign trade were brought in. 

But I do want to say that these are component parts of a very 
■complex economic matter and it, of course, is the duty of this com- 
mittee to take into consideration all those complex parts so that you and 
the good ladies with you and all these organizations will direct your 
attention to one thing, and that is "Hold the line against inflation." 

I want to say that I am absolutely with you in that respect. How- 
ever, I am thinking of some other phases that have been hinted at here. 
I think I heard the statement made that Chester Bowles was the most 
popular man in America, but from what I have heard on the floor 
of the House and seen in the Congressional Record he is the most 
abused man and the most accused man in public life. 

I am back of Chester Bowles 100 percent but 1 have nagged him, 
I have written him, I have phoned him, I have gone down to see him 
until I am almost ashamed to look Chester Bowles in the face. 

Now, why have I done that ? Because of some of the very things 
that have been mentioned here. 


For instance, tlie price of milk. I would like to refer to that for a 
minute. Mention was made, also, about the price of citrus. I have 
a relative who owns a citrus grove and that relative is very much 
interested in the price of citrus. Now% I understand it is an absolute 
fact that one kind of citrus was selling at $4 a box and when the 
ceiling was taken off the price rose to $16 a box. That is a "laboratory 
fact." They had to reimpose ceiling prices and that was done. My 
relative, who is a farmer, did not get the increased price, but I could 
not have justified it if he had. 

Now, I also have a friend who is a dairyman. I got the most scorch- 
ing letter that 1 have ever seen put on paper without burning the 
paper, from a dairyman- in my State a few days ago about the very 
thing the Congressman from ISIassachusetts was mentioning. 

Yes. I do feel that farmers object to the word "subsidy." They don't 
like the word "subsidy." I don't blame them nnich. And yet, sup- 
pose we had not had sul)sidies. I think every dairy in the country 
would have gone out of business. 

But what are we going to have then? What would the dairyman 
have? They say "A free play of the law of supply and demand." 
They say, of course, "The right price in the market place." Without 
control and under free play of supply and demand, I don't believe 
that that price would l)e merely 1 or '2 cents more per quart than it is 
now. I believe that price might eventually double or treble the present 
price if all controls are removed, and I don't want to see that happen. 
Some would pay $1 per quart for milk for babies. 

Mr. GiFFORD. I don't want to see that either. 

JVIr. MuKiKX'K. Why have I nagged Chester Bowlas so much? Well, 
sometimes about rents and sometimes to be a little more liberal in 
regard to subsidies here if we must have subsidies, and sometimes not 
to be too hasty about ceilings. I have found him to be reasonable. 

I am confessing right here in public, going down in the public 
records, that I was one from the cotton States who interviewed Chester 
Bowles a few days ago when it was suggested a ceiling price be put 
on cotton. One fellow present used his shirt as an illustration. It 
was a better shirt than mine. He said, "This shirt cost me $5." It 
was a prewar shirt. I think, he couldn't get the shirt at all now. He 
said. "It cost 15 cents or more merely to have it laundered once, and 
yet the raw cotton that is in this shirt brought the farmer that pro- 
duced it less than 7 cents." 

I would like the ladies to think of this. That is why I am put- 
ting it in the record. The cotton in the shirt brought the farmer 
who produced it, toiled all summer, took the hazards of climate and 
the season, and failure of crops, and the hazards of the boll weevil 
and the pink boll worm — the cotton in that shirt brought the farmer 
7 cents. 

It cost him twice that amount to have it laundered once. Then 
when he goes to the store, if he can get it at all, it costs him $5, 

Now^, representing cotton farmers, I don't want cotton farmers to 
have to be stopped at this level or, if they are, I want some cost ab- 
sorption some place along the line so that if the cotton should double 
in price as far as the farmer is concerned, the shirt won't cost $10 to 
the consumer. 

Mr. Chairman, I am not reading these folks a curtain lecture but 
merely explaining because I want them to see all sides of this thing. 


Mr. Zimmerman. Pardon me. Why not give the facts about 
how much the farmer gets for the flour that goes into a loaf of bread? 

Mr. MuRDOCK. That is a good illustration. 

Mr. Zimmerman. A lot of people believe the farmers in the country- 
are the ones who are responsible for the high cost of food and living. 

Mr. GiFFORD. A farmer gets 3 cents for his watermelon and I pay 
90 cents. It has been so for years. 

Mr. Zimmerman. I think there has been a lot of misunderstanding 
about the relation of farm prices to the cost of living and a lot of our 
consuming public need a little education along that line. 

Mr. MuRDOCK. May I give this little illustration concerning the 
dairyman? I have a dairyman friend, a man of considerable means — 
that is, he used to be. ^Vlien I was home last time I phoned him 
and said, "When can I see you?" I wanted to see him on another 
matter. He said, "Not before 10 o'clock tonight." 

I went to meet that man at 10 o'clock and I found him just coming 
in from his field from his farm work and I asked him about his 
dairy and he said, "I have some complaint about this subsidy busi- 

"Isn't the subsidy on milk enough?" I asked, and he said, "No, 
it'is not enough and it is not paid often enough. We get our pay 
•checks quarterly instead of every month." 

He said, "I could get a lot more for my milk if there was no ceil- 
ing on it." 

I could see right off that the man could not buy milking machines, 
could not get labor, and he was paying $27 a ton for alfalfa hay. I 
could see right off that the small amount of subsidy he was getting 
was not covering that difference in cost and yet, what alternative? 

If you take off the subsidy he will send his cows to the butcher and 
go out of busness. Some have already done that. 

Mr. Zimmerman. Or let the price go up. 

Mr, MuRDOCK. Or let the price go up. How much would it go up? 
If you had no controls, I believe the American people would pay 
.50, 60, or 75 cents, possibly a dollar, a quart for milk for their babies. 
That is what we want to avoid. 

I beg your pardon, Mr. Chairman, for taking all this time, but I 
wanted to read that into the record. 

Mr. Zimmerman. I am glad you took the opportunity to do so. 

Have 3^ou other witnesses, Mr. Warne? 

Mr. Warne. Miss Edith Hyslop of the American Association of 
University Women and Mrs. Laura Somers of the League of Women 


Mrs. Somers. I have no prepared statement, I had not expected to 
rtestify when I came here, 

Mr. Zimmerman. Tell me something about your organization and 
who you are. 

Mrs. SoMERS, I will be glad to. We are always glad to give publicity 
ito it. 


The League of Women Shoppers is a national organization devoted 
to the protection and improvement of the American standard of liv- 
ing. Our organization is made up largely of housewives, middle- 
class housewives like myself. 

We are not economic experts for the most part, but we do feel that 
in a democracy every citizen, whether housewife, professional woman, 
or whatever hei- capacity, should try to keep herself informed and 
make her opinions felt insofar as she can. 

I want to talk not only for our own members but for the thousands 
of women we meet every day in the stores, wheeling baby carriages, 
in the busses, and so on. 

Most of these women probably couldn't tell you how price control 
operates. I am sure they could not tell you the technicalities of the 
aclministrative procedures or of the legislation. But they clo under- 
stand clearly the relationship between price control and their house- 
hold budgets. 

To every woman who has to make her income go for food, housing, 
and clothing for herself and her family, Mr. Bowles is somebody who 
is protecting her and her family from a terrible fate, who is trying to 
do the thing most important to her at the moment. And this, I be- 
lieve, is why Mr. Bowles is probably one of the most popular men in 
America today. She knows of her own experience or from what she 
has heard, that prices soared after the last war. She has seen what 
hai)pened in this war lefore j^rice controls were est:i})lished, and knows 
what happened recently when certain price controls were removed. 

She does not need to know how the economic forces operate in order 
to r.chieve these i-esults. Her husband is just back from the war and 
it will be some time before he finds a job; or he is on a pension; or he 
has a fixed Government salary; or he is making not too large a salary 
in industry. She knows that if prices rise this income will not permit a 
decent st andard for herself and her family. His salary will not spread 
any thinner than it has already been spread. 

A lot of these women have said to me, many of them with children 
and husbands who have been in the service — "what am I going to do 
if my rent or food bill goes up ? I don't have a penny over and above 
what I have to spend for my living expenses each week." I don't 
know the answer. 

Certain questions have been raised while Mr. Warne was on the 
stand and I would like to go in to a few of them, if I may. First, I 
want to say I really sympathize with each and every one of you Con- 
gressmen. I realize you are probably deluged with complaints from 
individual constituents, and some of these are undoubtedly justifiable 

The price-control machinery may not be perfect. I don't know of 
any administrative agency that has done a. 100 percent job. But we 
feel that is sufficient flexibility within the legislation as it has been 
passed by Congress, and with the administrative procedures of OPA 
to permit of rectification for most of these grievances. 

Without price control a number of businessmen and farmers might 
blissfully prosper for a limited period, but at the end of the spree you 
will have 140,000,000 people who will have no redress, no appeal from 
the misery that would engulf them. 


We cannot toy with the idea of weakening the price-control struc- 
ture. And there are many other ways of making it ineffectual besides 
abolishing it. We are totally against any procedures that would 
weaken it. 

We feel prices have already gone too high. We regret that they 
have been permitted to go as high as they have. 

Now, I would like to say this about nylons. I know that nylons 
in this country could be sold at almost any price so great is the desire 
of most women for that product. 

I regret to say that although our American women are a wonderful 
lot they either have not been schooled sufficiently in economics or 
they have not been sufliciently schooled in the true morality of thinking 
about your neighbor. They would go out and pay any price for it, no 
matter what happens to the general economy. They will buy nylons 
as fast as they can afford to buy them. 

I read in the paper that nylons in Argentina are selling for $15 a 
pair. I don't know anything about the export controls. I don't know 
whether nylons are going from this country there or whether they are 
going into legitimate or illegitimate channels. 

I know I received one pair of nylons at Christmas, the first I had 
had for years, and they had a price tag "OPA ceiling $1.20." That is 
what was paid for that pair of nylons. So long as price controls 
mean that I can get one pair at $1.20, and that my neighbor can prob- 
ably do the same, and that in Argentina the women are paying $15 
and probably more in the black market, I am grateful indeed for price 
control. That is what price control means to me. 

When they took the price controls off citrus fruits I saw Temple 
oranges which had been selling for 10 cents a pound, selling for 27 
cents. I didn't buy them. As soon as the OPA prices were reinstated, 
the Temple oranges were again 10 cents a pound. 

I know price control was not intended as a social-service measure 
to help individuals. It has a much larger purpose. But I simply 
wanted to take this opportunity to tell you gentlemen what price 
control means to the average woman and how keenly and how deeply 
desirous we are of having Congress continue to protect us from the 
ravages of high prices which in the language of the economist would 
mean inflation. 

So far as rent controls goes, we know how supply and demand 
would have operated in Washington if we had not had our controls. 
I think it is a great pity that controls were not placed on the resale of 
houses because many people have written us saying, "We rented the 
house at $60 a month and now the thing has been sold. The owner is 
taking possession. We can't rent and we have to buy a place in which 
to live." They bought houses which were far above their income 
levels. They had to buy houses at fantastic prices in order to have a 
place to live. 

I think it is a great pity price ceilings were not put on commercial 
rents a long time ago also. I come from a long line of small business- 
men. I feel sorry for the small businessman who is forced to pay 
exorbitant rents. The temptation to exceed ceiling prices in order to 
make up the difference must be strong indeed. 

Mr. Zimmerman. I know of some very glaring examples of how 
small businessmen have been imposed upon and I will go a little fur- 


ther and say robbed by oreedy landlords. A typical example is in my 
own hotel, a dru^ store. They are now forced to pay a terrifically 
high rate to continue that little drug store as compared to what they 
paid before the war. 

Mr. GiFFORD. Do you call me a greedy landlord? I rented a house 
and they told me I could not evict the tenants for 6 months. But the 
tenants got out of there on their own accord in December — they were 
transfen-ed — and I sold it quick. I sold it for less than it cost me. 
Many landlords are in the same position that I am. You can't evict 
the tenants in less than (5 months. A soldier boy wanted to buy it 
and he couldn't put the tenants out. 

I want OPA also, but I want a reasonable one and don't want the 

Mrs. SoMERS. I think that our production record during the war 
years with all the OPA controls has been a remarkably high one. 

Mr. GiFFoHD. I never argue with you women, 

Mrs. So.AiKHs. Our organization has felt it is not the OPA prices 
that are creating scarcities at all, and that higher prices will not nec- 
essarily make for greater production. The lumber industry, I be- 
lieve, has had five price increases, probably well justified and needed 
price increases, but I understand their production generally has 
fallen off. 

I am just a housewife speaking for housewives, but these are the 
facts as I understand them. 

As far as cost absorption is concerned, if anybody can work out a 
jneans whereby prices and the cost of living can be kept down while 
manufacturers and the middlemen and the retailers receive all the 
increases they want, I would be delighted to consider that program. 
I think it would be very sad, however, for retailers alone to have to 
absorb all ])rice increases. That, of course, is not how "cost absorp- 
tion" works. 

As I understand it. the price increases are spread around among 
the various levels throughout the particular industries. 

And I agree with Mr. Warne that selling costs and other expenses 
have been pared down considerably, thus further enabling the busi- 
nessmen all up and down the line to absorb its price increases. 

I have heard that the farmer has said he does not like the "subsidy"; 
that he is sensitive about it. It is too bad we can't think of a more 
attractive label. But a subsidy is not something new in our history. 
Many industries have long been subsidized and will continue to be 
subsidized for a long time to come. I am thinking particularly of 
shipping and air transportation. 

If I could see any way that a farmer could get what he wants for 
his milk and still the price of milk could be kept down so the family 
that wanted the milk could buy it 

INIr. Zimmerman. Do you believe in the right to strike? 

Mrs. SoMERS. The right to strike is recognized by our Government. 
^o question about that. 

Mr. Zimmerman. What would you say about the farmers' right td 
strike about the milk situation? 

JMrs. SoMERs. I should think there would be no instrument or any 
way by which they could be stopped. I would not attempt to dictate 
to them. It is their right to make up their minds. 


Mr. Zimmerman. When the people working in the automobile or 
steel industry want more money, they just strike. 

Mrs. SoMERS. Yes. 

Mr. Zimmerman. If the farmers decide to strike on the milk prop- 
osition, you would say that would be all right? 

Mrs. SoMERS. I say it is up to the farmer to use whatever weapons 
he has if he feels the situation demands it. 

Mr. Zimmerman. Do you think they would have the right to strike 
and let the babies starve ? 

Mrs. SoMERS. I say there is nothing in the law to prevent them 
and if they decide to strike and the situation is sufficiently urgent they 
may do whatever they please. 

Mr. Zimmerman. I am asking about their moral right. 

Mrs. Somers. Moral rights are rather a delicate subject. 

Mr. Zimmerman. Haven't you some babies? 

Mrs. SoMERS. Yes, indeed ; a child 7^/^ years old. 

Mr. Zimmerman. What would you think about it if the farmer 
would strike and you couldn't get milk for your baby? 

Mrs. Somers. I say the farmers have a right to strike. As an Ameri- 
can who believes in adhering to the Constitution and all the laws of 
the land, I say they have a right to do whatever they want within 
that framework. 

But I say that raising the price of milk rather than continuing the 
subsidy means that the persons who can least afford to pay an in- 
creased price for those essential products are the ones who are going 
to be penalized the most. 

The rest of us have to meet subsidies through taxation but that is 
a cheaper and for more equitable way of meeting the bill than it would 
be to remove the subsidies and pay increased prices. 

In addition, each price is not in a separte pigeonhole with no rela- 
tion to any other price. The structure is a delicately interrelated one, 
and when one price goes up and another goes up, before long all prices 
must go up and if you allow the basic necessities to skyrocket we have 
no right to ask that all prices in the country should not go up. 

I believe, sirs, that about covers the things I had in mind. 

Mr. Zimmerman. We certainly dp appreciate your statement. 

Is there another witness ? 


Miss Hyslop. I have nothing to add to the testimony of Mr. Warne 
and Mrs. Somers unless, of course, you wish to ask me questions. 

I would like, however, to tell you about the organization which I 
represent and the length of time we have been studying consumer 

Mr. Zimmerman. Will you tell us something about yourself and 
your association? 

Miss Hyslop. The American Association of University Women has 
a membership of more than 80,000 women in 933 communities through- 
out the country. 

Consumer problems have been a part of our study program since 
1935 and we have therefore been consistent supporters of price control, 

99579— 46— pt. 7 19 


which Mrs. Somers has covered so well from the point of view of 
women shoppers. I have nothing to add to that. You must realize 
I am sure that price control has been the very heart of our consumer 
interest since the enactment of the Emergency Price Control Act. 

I would like to give one specific illustration of the work that our 
groups do on this subject and then if you have time and wish to ask 
any questions I will be glad to answer them. 

Our branch in Milwaukee, Wis., became particularly interested in 
the housing problem and they undertook, in cooperation with other 
groups, to go out and investigate these very questions you have raised. 
The Milwaukee people did a survey in their own area, and on the 
basis of this survey, Mrs. Genevive B. Hambley, social studies chair- 
man, Wisconsin Division. A. A. U. W., was able to send us material 
we used in testifying on H. R. 4761, a bill to place price ceilings on 
old and new houses. 

I want to tell you about this specifically because I do not feel that 
we have any right to come before you without bringing you something 
of our own experience. 

Mrs. Hambley sent us examples of inflation in housing distributed 
over a range of price levels. I should like to submit for the record 
a quotation from Mrs. Hambley's letter covering those examples. (See 
exhibit 5, p. 2374.) This study does not represent a vague nebulous 
interest nor, at the other extreme, does it represent a consumer inter- 
est only. It represents the interest of people 

Mr. Zimmerman. When I was home I was amazed at the awful 
scramble in a little town of 7.000 people, of people to buy houses and 
they were paying almost double the normal value of these houses in 
order to get a place in which to live. 

And I had trouble myself keeping someone from buying my home 
while I was up here, and they knew I wasn't living in it very much. 
They felt like I ought to sell it. They were paying outlandish prices 
to get a house, and it was the only way the veteran or anyone else 
could get a house, and they had to move somewhere. 

I want to say I appreciate the problem of housing. At this time I 
think you ladies are doing a fine job in giving that subject a lot of 
study and consideration. 

Miss Hyslop. I should like to state my agreement with Mrs. Somers 

when she said that there are specific inequities in price control at 

present which have to be taken care of. We in A. A. U. W. are not 

unsympathetic to that, because some of our members and some of their 

families suffer from such inequities. I want to say one thing about the 

composition of our membership. I think that they are essentially 

what 5^ou would call middle-income professional and business people. 

Mr. Zimmerman. Let me say on this subject that your committee has 

appeared before the Agriculture Committee many times and we know 

the fine work you ladies are doing. Particularly the Agriculture 

Committee is already familiar with the fine work you are doing, and 

you have very constructive programs. We are going to agree with 

whatever you were going to say about them. 

Miss Hyslop. Thank you. 

Mr. Zimmerman. You are doing great work. 


Miss Hyslop. In summary, I should like to emphasize the impor- 
tance of price control to middle-income professional and business peo- 
ple — especially those with fixed salaries — and to say again that we do 
understand the problems of specific individuals and specific groups 
and that we would like to see legislation carried out with provision for 
regulation of inequities. Nevertheless, in representing the fixed- 
income group, we feel we must have a strong price-control program 
until the period of reconversion has been completed. 

Mr. Zimmerman, I hate price control, but I am convinced that we 
can't afford to let the specter of inflation hover over this country in 
the immediate months to follow, I feel that way about it. We can't 
afford to run the risk of having wide inflation. 

Mr. MuRDocK. May I give this young woman evidence that the age 
of miracles is not past? I have had many letters and telegrams from 
real-estate dealers. I ran on to one during the Christmas season who 
said he was in favor of rent control and in favor of ceiling prices on 

Miss Hyslop. I realize that. We hear that from some of our own 

Mr. Zimmerman, Thank you for your statement, Miss Hyslop. We 
wish we had more time. 

Do you have any other witnesses ? 

Mr. Warne. That is the roster. 

Mr. Zimmerman. Our time is up, and we will have to adjourn. 

Mr, WoLVERTON. I suggest, Mr. Chairman, in view of the fact our 
time is limited and we must be on the floor to vote on important legis- 
lation, that if any of these folks have additional testimony, or any of 
those who have come to testify and we are not able to hear them, their 
remarks should be placed in the record. 

Mr. Zimmeioian. That may be done, or if anyone has a written pre- 
pared statement, they may insert that in the record. That will give all 
of you a chance to present your case as you would like to have it 

We are sorr}^ we have no more time. We appreciate your presence 
here today. 

Mrs, Thompson. On behalf of the American Home Economics Asso- 
ciation, I wish to present a written statement. 

Mr. Zimmerman. That may be inserted in the record. 

(The statement referred to follows :) 

Statement of the American Home Economics Association to the Colmeb 
committee on january 31, 1946, presented by margaret d. thompson, 

The American Home Economics Association recommends that price controls 
be extended until June 30, 1947, and rent controls until June 30, 1948, to forestall 

We recommend that extension periods be not for less than a year. The present 
6-month extension periods tend to encourage withholding by producers and over- 
buying by consumers — each expecting a jump in prices, as the end of price 
control is never far off. 

We disapprove the addition of crippling amendments, such as elimination of 
cost-absorption principle. 

Maintenance of necessary rent controls, especially if supplemented by effective 
home sales price controls, will help to prevent a catastrophic housing situation 
in which this association, with its interest in the home and family life, is deeply 


The American Home Economics Association is particularly concerned in sta- 
bility of consumer prices, including housing costs; because its members are 
leaders in promoting planned saving and spending by families — not only for their 
own happier home life but also as the basis of a sound national economy. 

Mr. Zimmerman. At this time the meeting is adjourned. 
(Whereupon, at 12 : 05 p. m., the special committee adjourned.) 
(The following was submitted for the record:) 

Exhibit 1 

War Production Board. 
' Wmhington 25, D. C. May 10, 19J^5. 
Hon. William M. Colmeb, 

Chairman, Special Committee on Postwar Policy and Planning. 
House of Representatives. 
Dbiae Me. Ch.airman : In response to your request for a statement on Maritime 
Commission construction for foreign accounts, I have had a report prepared and 
enclose a copy of it for the use of your committee. 

The ships which are now being made available for the World War shipping 
pool will. I understand, be owned by the foreign governments for whose account 
they are being consti'ucted. Nevertlieless, their construction is a part of the war 
shipping program which is the only reason for alloting the steel at this time. 
Their postwar utility to their owner cannot, in my judgment, be considered as 
affecting the determination to build them now for the present war shipping 

I trust that this information will be satisfactory to you. 
Sincerely yours. 

J. A. Krug, Chairman. 

Maritime Commission Construction foe Foreign Accounts 

The maritime program includes 130 ships being built for the Dutch and 
British Governments which are said to be for the World War shipping pool. 
Of the 86 cargo vessels, 30 are for the Dutch and 56 for the British. The 44 
tankers are for the British. 

The attached table shows the distribution of this construction by Govern- 
ment account, building yard, type of ship, total ships per yard, and schedule by 
quarters for 1945 and total for 1946. 

The 30 Dutch cargo vessels were not included in the maritime program at 
the time of the first steel review of March 25. Although no steel was included 
for their construction in second quarter maritime allotments, a general hold- 
the-line policy was adopted providing for the reapplication of steel in the case 
of slippage to other new programs that might come along. The maritime 
program now shows 20 private coastal cargoes at Albina. Portland, Oreg., to 
be delivered in the last three quarters of 1945, and 10 private cargos at Sun, 
Chester, Pa., 3 to be delivered in the fourth quarter 1945 and 7 in 1946. 

Approximately 13,000 tons of steel, squeezed out of second quarter Maritime 
Commission allotments, will be rolled for these ships in May and .Tune. The 
Maritime Commission requirement for the third quarter 1945 includes approxi- 
mately 18,600 tons of carbon steel for these ships. 

With the exception of two N3-S-A2 delivered by Avondale during the first 
quarter and two Cl-M-AVl, scheduled for delivery at Consolidated in the 
fourth quarter, all British cargo vessels will be delivered during the second 
and third quarters of this year. Approximately 75,OC)0 tons of steel are required 
for the 30 Cl-M-AVl, most of which will come out of second quarter allot- 
ments. All steel has gone out ("approximately 50,000 tons) for the British N3's. 

Of the 44 British tankers, 20 Tl-M-BT2's are scheduled for delivery during 
the second and third quarters. All steel (approximately 40,000 tons) has gone 
out for these ships. The 24 Tl-M-BKl's are scheduled for delivery in the 
fourth quarter. For these tankers, 4,000 tons of plate are coming out of the 
second quarter and 11,000 tons of steel out of the third quarter maritime 


Ships for foreign account in the Maritime Commission program 


Type of ship 




Government account 











Sun Shipbuilding and Dry- 
dock, Chester, Pa. 

Albina Engineering & Ma- 
chhie, Portland, Oreg. 

Private cargo 













Total, Dutch 

Private coastal cargo.. 














Consolidated Steel, Los An- 

Avondale Marine Ways, 
Westwego, La. 

Ingalls, Decatur, Ala 

McCloskey, Tampa, Fla 

C 1-M-A VI cargo 

N3-S-A2 coastal cargo. 





Total, British 



Total, Dutch 


and British 


Avondale Marine Ways, 

Westwego, La. 
United Consolidated Pipe, 

Los Angeles. 
New England, Portland, 

J. A. Jones, Panama City, Fla. 

Todd, Houston, Tex 

Tl-M-BKl tankers... 



T1-M-BT2 coastal 







Total British 


Total Dutch 


and British 
cargo and 

Prepared by Military Subcommittee, Production Readjustment Committee, Apr. 27, 1945. 

Exhibit 2 

Pboposals fob Teipaetitej Planning in the Shipbuilding Industby on 
Reconvebsion-Postwab Employment Peoblems 

(The Industrial Union of Marine and Shipbuilding Workers of America, CIO, 

John Green, president ) 


It has been generally recognized by various committees studying the postwar 
economic policy of the United States, that the basis of our future national pros- 
perity will be our foreign trade. 

The House Special Committee on Postwar Economic Policy and Planning has 
submitted its sixth report to Congress on the problems of foreign trade. This 
report can be summarized as follows: 

"In the postwar period, our private foreign investments, with proper encourage- 
ment, might amount to as much as $2,000,000,000 per year. To encourage the 
free flow of investment funds abroad, the committee recommends the following 
measures : 

"(1) The proposed International Bank for Reconstruction and Development 
should be established as an operating agency as soon as practicable. This bank, 


with its power to make loans and guarantee private loans for broad development 
projects, and to spread the risks of such loans among the participating nations, 
would assist materially in reconstruction and in industrialization of under- 
developed regions. 

"(2) The resources of the Export-Import Bank should be increased. With an 
increase of its lending power — this is of particular interest to the United States — 
the American lending agency could make many developmental loans which would 
be beneficial to our international position and would in no sense compete either 
with the proposed International Bank or with private lending agencies. 

"(3) The restrictions which the Johnson Act places upon our lending activities 
should be removed. 

"(4) A clear understanding concerning settlement of len^-lease obligations 
should be reached promptly after the war. 

"Our postwar international monetary system must be free of restrictive con- 
trols. With this aim in view, the committee makes the following recommenda- 
tions : 

"(1) Exchange rates between countries should be stabilized, by agreement, at 
levels which, as far as possible, will create a balanced condition in each country's 
postwar foreign-exchange market. 

"(2) To enable the participating nations to maintain these exchange rates in 
the face of temporary deficits in their foreign-exchange markets, an international 
reserve of foreign currencies should be established and each country should be 
permitted, subject to proper safeguards, to purchase foreign currencies from this 

"(3) In cases where changes in the par values of certain currencies become 
necessary, these changes should be made cooperatively, through an international 
agency established for the purpose, rather than by arbitrary unilateral action. 

"As a means of relaxing restrictions upon trade throughout the world, the com- 
mittee believes that an international conference should be called as soon as 
practicable, to establish a general policy of reducing barriers. The immediate 
establishment of such a policy would be of enormous assistance to businessmen 
both at home and abroad in making postwar plans. The conference should con- 
sider not only reduction of tariffs, but also such trade controls as import quotas, 
export subsidies, exchange controls, and other forms of state interference with 
the movement of goods between countries. 

"The policy of relaxing trade barriers can be further promoted by an extension 
of the reciprocal trade agreements act, which is due to expire June 12, 1945. 
Reciprocal agreements have been useful in expanding world markets both for our 
own products and for the goods of other nations, and the committee believes that 
the method should be continued. At the same time, consideration should be given 
to proposals to increase the authority of our negotiators to reduce tariff rates on 
particular commodities. 

"The removal of direct trade controls may present special problems for indus- 
tries which suffer from chronic excess capacity. For these industries, commodity 
agreements to allocate export quotas among, countries have been suggested. The 
committee believes that, except as temporary measures, such agreements are 
economically unsound. Moreover, even temporary agreements should have ade- 
quate safeguards against monopolistic abuse, and should provide for representa- 
tion of importing countries as well as exporting countries. 

"Buffer stock plans, which have been suggested for stabilizing raw material and 
agi^cultural prices, present so many problems that the committee believes they 
should not be recommended without further study. 

"The policy of removing governmental restrictions upon trade between nations 
is also applicable to trade restrictions created by private agreements. Private 
agreements in restraint of international trade have the same undesirable conse- 
quences as governmental trade barriers. The committee believes, therefore, that 
such private restrictions should be eliminated by the following measures : 

"(1) Certain business practices, such as the fixing of prices in world markets, 
division of markets, allocation of export quotas, etc., should be forbidden by 
international convention. 

"(2) Nonrestrictive private agreements for such purposes as disseminating 
technical information, establishing quality standards, etc., should be registered 
with an international organization. This organization would be charged with 
the responsibility of examining all private agreements to insure that none of them 
involves the restrictive practices outlawed by international convention. 

"In addition to the commercial policies recommended in this report, certain 
changes in administrative procedure will provide material assistance to exporters 
and importers, particularly small operators. Coordination of the foreign-market 
information which the government provides traders, simplification of customs 


regulations, provision of additional foreign-trade zones, and termination, as soou 
as practicable, of emergency wartime controls would all provide substantial assist- 
ance to small businessmen." 

It is interesting to note that the Industrial Union of Marine and Shipbuilding 
Workers of America in its tenth national convention in Atlantic City in Septem-. 
ber of 1944, stated the following : 

"Our industry must be interested in unlimited and unrestricted free trade. 
There must be a no-tariff policy agreed upon by every country in the world. A 
free movement of goods will mean increased trade and shipping. With free 
trade the various countries of the world can develop their own particular indus- 
tries and resources, specializing, and not aiming at complete self-sufficiency. 
Specialization of the energies of a people spells a large volume of international 
trade and shipping. Self-sufficiency spells a low volume of international trade 
and shipping. In the former case the shipbuilding industry can thrive, prosper, 
and expand. In the latter case, the shipbuilding industry can only barely exist, 
face depression, and be restricted. 

"In much the same way, the shipbuilding industry must encourage a sound 
monetary policy which will offer both stability and room for expansion and 
flexibility in case of emergency. It must encourage the poorer countries to 
industrialize and to trade. It must guard against depression possibilities. 

"It is to the interests of the union and the industry that a shipping and ship- 
building conference be called, to allocate shipping and shipbuilding quotas to the 
various countries, and to investigate the possibilities of trade expansion. 

"The position of the union can thus be stated. A world that restricts trade 
needs no shipping. In such a world, the shipbuilding industry will perish. A 
world that encourages and expands trade needs shipping, and in such a world 
shipbuilding can and will flourish, prosper, and expand. 

"When this happens, the shipbuilding worker will be assured of being able 
to make a decent living." 

We believe that the problem of the postwar shipbuilding industry is allied to 
that of the postwar merchant fleet and foreign trade. Even the House special 
committee agrees that the maintenance of a shipbuilding industry in the times of 
peace is to be in the interest of national security. The committee also recognizes 
that a well managed fleet can substantially contribute to the improvement of our 
commercial relations with other nations. 

In view of the importance of this program the union thinks it necessary to 
propose the creation of a tripartite committee of Government labor and manage- 
ment to consider postwar planning for this industry. 

In 1941 under the leadership of Franklin D. Roosevelt the first experiment in 
the stabilization of an industry was started by the creation of the Shipbuilding 
Stabilization Committee. This experiment was given the fullest endorsement 
and the unqualified support of our union. We now believe that the time has 
come for this committee not only to consider the stabilization of the industry 
but the future of the industry. If this committee cannot assume this respon- 
sibility it should be reconstituted in such fashion that it can assume such 
responsibilities. Moreover, the union believes it imperative that a representa- 
tive of the State Department be delegated to assist whatever committee be 
formed to link the problems of the industry with the foreign policy of the United 

The problems of the shipbuilding and repair industry cannot be considered out- 
side the general frame of our postwar foreign policy. They can also not be 
considered outside the general frame of the tripartite organization of the in- 
dustry itself. 

For example : The committee on postwar planning must consider a salient fact 
in the building of a merchant marine— the Japanese merchant fleet was the largest 
fleet in Pacific trade. After the conclusion of the present war with Japan this 
fleet will be nonexistent. The American Government will have to develop a fleet 
suitable for Pacific trade in order to allow this trade and the required rehabilita- 
tion of China to continue. 

The passenger fleet of the world has been almost completely decimated. More- 
over, the maintenance of large passenger vessels is a military necessity for the 
merchant marine. The country best able to build such vessels at maximum ef- 
ficiency is the United States. 

Most of the merchant marine of Europe is now deep in the Atlantic Ocean, or 
is in unfit condition for future merchant trade due to the exigencies of war 
transport. Previous maritime nations will not be satisfied to use our slow 


liberty ships, even at a discount. These nations might have their own national 
economy and new merchant fleet. 

Can Holland build vessels in its shipyards when there are no more shipyards 
in the country and when it will talje Holland 10 years to repair internal damages 

The merchant marine of the United States, itself, will need further construction 
of different types of vessels to meet the postwar requirements of domestic and 
foreign trade. We have been neglecting the building of ships suitable for deep 
sea oil carrying, shallow draft vessels necessary for river navigation, refrigerated 
vessels necessary for Central and South American trade, fishing craft for the New- 
foundland and Alaskan banks, the Great Lakes transport barge fleet, tugboats, 
and our general passenger service. 

The United States Government has an investment in permanent shipbuilding 
factilities and installations of almost a billion and one-half dollars ($250,000,000 
in lUMSWA yards alone) . and productive utilization of these facilities will re- 
turn to the Government its investment. Furthermore, as a Capozelli subcom- 
mittee on shipyards profits has shown, a major share of these inventions rests 
with companies, new in the shipbuilding industry, who will leave the industry 
at the cessation of the war, with huge profits and no investment responsibilities. 

The Government also has an investment in housing in and around the shipyard 
areas, which will become useless if there is no shipbuilding. 


These two major interests of the Government in shipbuilding make it impera- 
tive that the Government adopt the following program : 

The Government must completely rehabilitate and modernize its Navy. For 
reasons of security alone, we should never again allow the naval building stag- 
nation prevalent after the first World War. An adequate and modern Navy 
is necessary insurance that this country will not again be placed at the mercy 
of the forces of Fascism. 

Wo must take full advantage of the technological improvements that have 
been discovered during this war — and make sure that our vessels are corrected 

lUMSWA is not here proposing an armaments race against the world — but 
until the time the nations are sufficiently liberal to allow an international police 
force, the United Nations will be guarateeing the peace on this earth. 

Here we must introduce the topic of the recent cut-back in proposed naval 
shipbuilding. The lUMSWA believes that the effect of this cut-back on our post- 
war Navy will be disastrous. We must for our own protection have the most 
effective Navy we can possibly build. A good many of these cut-back vessels 
wei*e experimenral. yet we must remember that battleship — which was ripped 
to pieces, after the sinking of the Prince of Wales in Singapore, and rebuilt — was 
an experiment which had never seen the outside of a blueprint. If the new 
watertight hull design had not been introduced, we would have lost our fleet 
in the beginning of the war. In like fashion the present fleet, unless continuous 
experiment is made, will be obsolete in the next 5 years. 

Therefore, we think it important that the naval building program be allowed 
to be continued on an experimental basis. , 


The postwar health of the shipbuilding and ship repair industry is dependent 
upon tlie continuous employment of skilled craftsmen in well established modern 
shipyards. The union believes that the problem of continuous employment 
is the most important problem for the benefit of the worker in this period. 

Therefore, the union will propose to the Shipbuilding Stabilization Committee 
that a technical subcommittee of Government, management and labor be set 
up to consider the question of the guaranteed annual wage. 

The principle of the guaranteed annual wage was first brought to the atten- 
tion of the Uniteil States Government in the matter df the steel industry and 
the United Steelworkers of America case before the National War Labor Board. 
The National War Labor Board, in its decision on the steel case on November 
25, 1944. stated that "in the present state of the country's information on the 
stibject (Of guaranteed annual wages) the Board is not prepared in this case 
or in other dispute cases to impose such guarantees by I'l-der."' although such 
plans worked out by collective bargaining would be approved. The Board, 
however, recommended to the President in a separate rei)ort : 

"(1) That the whole qtaestion of guaranteed wage plans, and the possibility of 
their future development in American industries as an aid in the stabilization 


of employment and the regularization of production, should now be compre- 
hensively studied on a national scale; (2) that such study should be conducted 
by a special appointed commission charged with the duty of examining into the 
experience which industry and labor have thus far had with these plans, and 
reporting the facts for tlie benefit of the country, together with recommendations 
regarding any further steps in this direction which may seem practical and 
desirable; (3) that such a body would be best able to perform its nationally im- 
portant tasks if created independently of the War Labor Board by the President ; 
and (4) that the President appoint a commission for these purposes." 

(Voted unanimously.) 

Thereupon, the President of the United States, in conformity with the recom- 
mendation of the National War Labor Board appointed a special committee to 
study the matter of the guaranteed annual wage. The Chairman of the Advisory 
Committee to the President on the Guaranteed Annual Wage is the former gov- 
ernor of South Carolina, Max Gardner. The CIO member of this Advisory Com- 
mittee, is Philip Murray ; the AFL member on this Committee is William Green. 

The Advisory Conmiittee met and established a Technical Advisory Committee 
to represent it. 

This Committee will not specifically be able to survey application of specific 
guaranteed annual wage plans to any single industry. Management and labor 
are the only groups which can formulate workable and concrete applications of 
the principle of the guaranteed annual wage to a particular industry. 

The shipbuilding industry, because of its wartime growth and because of peace- 
time contraction, also because of its division into two component types of indus- 
try, building, and repair, presents a diflScult and unique problem in any con- 
sideration of guaranteed annual wage. The Government agency presently set 
up in a form to amass data for any consideration of the guaranteed annual wage 
in this industry is the Shipbuilding Stabilization Division of the War Production 
Board or the Committee itself, inasmuch as it includes representation of the 
procurement agencies. 

The problem of the guai'anteed annual wage for our industry cannot be solved 
yard by yard. Because of the existence of large chains within the industry, such 
as Bethlehem and Todd, and also because of the existence of stabilization within 
the industry, any single discussion of the annual wage with an individual employer 
would serve to unstabilize the industry. 

One of the main postwar problems of our industry, which has been recognized 
by Congi'ess and by the procui'ement agencies, is the problem of keeping a force 
of skilled shipyard workers on the job. This union believes that the application 
of a guaranteed annual wage to the shipbuilding industry will definitely solve 
this problem. Naturally, other necessary committant solutions will present 
themselves at the same time and these should also be considered by any subcom- 
mittee at the time that the guaranteed annual wage is being studied. 

The Shipbuilding Stabilization Committee is too cumbersome a body to un- 
dertake as a full committee the study of the guaranteed annual wage. A solu- 
tion of this would be for the Committee to establish a technical subcommittee un- 
der the guidance of a Committee member as chairman, to study the guaranteed 
annual wage. This technical subcommittee should be in the fullest sense of the 
word a working committee — one that will be able to devote a good portion of 
its time to assembling data and issuing a proliminary report. This working com- 
mittee should not only study the previous application of the guaranteed annual 
wage in other industry, in order to present alternative plans which might be 
applicable to our industry, but should also study projected data on employment, 
wages, pay rolls, etc., in order that the full committee will be able to determine the 
applicability of any alternative group of plans to the industry. 

The technical advisory committee will probably not have to institute any new 
surveys. Data is available in the files of the Shipbuilding Stabilization Division 
of the Bureau of Labor Statistics, and of the procurement agencies, which should 
be sufficient, together with the information advanced by covered yards in our 
industry, to compile a workable collection of fractual information on which the 
Committee can base any of its decisions. . 

Naturally, the technical subcommittee should not be responsible for the for- 
mulation of a definite plan. This should be left either to collective bargaining 
between labor and industry, or to the full committee. 

There is no doubt that if the Shipbuilding Stabilization Committee should ac- 
tually be willing to undertake a study of this question, something could be worked 
out, which althought probably not perfect, would be as good for the industry as 
stabilization was in 1941. However, I must point out that this problem is one 
which cannot be worked out if either party is already conditioned. It must be ap- 
proached with an open mind on the part of industry. Industry must be willing 


to try a new departure and to consider such new departure in the light of plain 
factual information, without any of its accustomed pi'ejudices. 


In addition to the above suggestions we must have a regular scheduling of 
work on a tripartite basis. Labor must know where work is going. It has been 
successfully proven by the employment crisis on the Pacific coast that workers 
will not leave their established homes, families and do not want to lose estab- 
lished seniority in order to take short employment at liigher wages. They are 
willing to take a chance in the community where they are already located. 

We did not believe that this postwar development of the shipbuilding industry 
must be allocated in such fashion that we will not hit the constantly I'ecurrent 
crisis, we have been facing during all of our war production. 

We must keep a skilled nucleus of shipyard workers in the shipbuilding in- 
dustry. This nucleus must have continuous employment or otherwise, in a time 
of maximum production in order consumer goods industry, we will have a loss 
of trained workers from this industry as we had after the F'irst World War. This 
cannot be allowed to happen again. 

At the beginning of the national emergency the officers of this union proposed 
to the procurement agencies a tripartite discussion of the allocation of contracts: 
so that labor, facilities, and materials would be used in a regulated and orderly 
fashion. This proposal, although received with enthusiasm, was never put into 

Now that we are faced with a contraction of the industry at a time of crisis, 
the lack of orderly allocation is beginning to make itself felt, particularly on the 
west coast. The repair yards and construction yards of the Pacilic are swamped 
with work and the workers in the shipyards where production is now being cur- 
tailed will not go to the west coast. 

A nuich more detailed allocation of contracts and planned construction of nec- 
essary facilities would have obviated this crisis. 

In 1 month the Navy has taken a number of contracts away from one shipyard 
and given them to three other yards on the basis of urgency. We are not saying 
that this was not necessary at the time, but the point we are making is why did 
it ever become necessary? The peculiar part of the entire situation is that the 
yai-d from whicli contracts were removed is cutting down its employment and 
that the yards to which the contracts were given will have to rehire more work. 
Obviously, either tlie contracts should never have been given to the original yard, , 
or it should not have been allowed to curtail employment. 

The entire allocation of contracts after the war will decide the future of our 
industr.v. Shipyard labor and its leadership has proven itself intelligent enough 
to recognize the exigencies of production and the requirement for a skilled 
nucleus. We know very well each particular yard's economic or noneconomic 
operation. Many times we have been ones to force action. Why then should we 
not be repi-esented upon any group which will decide the future of contracts in 
our industry? 

Exhibit 3 
SrMMARY OF Union Proposals Outlined to Roblrt Nathan 

1. The basis of our future national pi'osperity will be our foreign trade. Our 
industry must be interested in unlimited and unrestricted free trade, since the 
free movement of goods will mean increased shipping. The countries of the 
world should be encouraged to sijecialize in their own particular industries and 
resources, rather than aiming at complete self-sufhciency, in order that the ship- 
building industr.v can thrive. 

2. The shipbuilding industi-y must encourage a soimd monetary policy which 
will offer both stability and room for expansion, and flexibility in case of emer- 

3. A shipping and shipbuilding conference should be called to allocate shipping 
and shipbuilding quotas to the various countries, and to investigate the possi- 
bilities of trade expansion. 

4. Maintenance of the shipbuilding industry in peacetime is in the interest 
of national security, and a well-managed fleet can contribute to the improve- 
ment of our commercial relations with other nations. 

5. The union proposes the creation of a tripartite committee of Government, 
labor, and management to consider postwar planning for this industry. 

6. Such a committee for the stabilization of the industry was set up under 
Roosevelt's leadership, the Shipbuilding Stabilization Committee, which should 


now consider the future of the industry. If it cannot assume this reseponsibility, 
it should be reconstituted. 

7. A representative of the State Department should be delegated to assist the 
committee and link the problems of the industry with the foreign policy of the 
United States. 

8. The Government itself has two major interests in shipbuilding, its invest- 
ments in permanent shipbuilding facilities and in housing in and around the 
shipyard areas. Only the productive utilization of these facilities will return 
to the Government its investment. The Government should therefore adopt the 
following program : 

(a) Completely rehabilitate and modernize its Navy, for reasons of security. 

(b) Take advantage of technological improvements discovered during the 
war, and make sure our vessels are corrected accordingly. 

9. Postwar shipbuilding and ship repair is dependent upon the continuous em- 
ployment of skilled craftsmen in well-established modern shipyards. Therefore 
the union will propose to the Shipbuilding Stabilization Committee that a 
technical subcommittee of Government, management, and labor be set up to 
consider the question of the guaranteed annual wage. The committee set up by 
the President for such a study will not siJecifically be able to survey the applica- 
tion of this plan to any single industry, and the shipbuilding industry, because of 
its division into building and repair, presents further difficult and unique prob- 
lems in any consideration of the guaranteed annual wage. 

10. The Shipbuilding Stabilization Committee is itself too cumbersome a body 
to undertake as a full committee this study, and therefore a technical subcom- 
mittee should be set up to make a complete survey of plans in other industrial, 
employment data, wages, etc., so that the full committee will be able to determine 
the applicability of any alternative group of plans to the industry. 

11. The technical subcommittee should not be responsible for the formulation 
of a definite plan. This should be left either to collective bargining between labor 
and industry, or to the full committee. 

12. Shipyard labor and its leadership should be represented on any group which 
will decide the future of contracts in our industry. At the beginning of the 
national emergency the union proposed to the procurement agencies a tripartite 
discussion of the allocation of contracts, so that labor, facilities and materials 
would be used in a regulated and orderly fashion. This was never put into 
practice, and the lack of orderly allocation is beginning to make itself felt, par- 
ticularly on the west coast. 

Exhibit 4 

"^ Office of Price Administration, 

Washington, D. C, December 14, I945. 
Mr. Edwin B. Geoege, 

Consultant to Special Committee of the House on 

Postwar Economic Policy and Planning, Washington, D. C. 

Dear Me. Geoege : On looking back over my testimony before the Colmer com- 
mittee Thusday morning, I believe that you and I were talking at cross pui'poses 
on the question you asked me concerning the rate at which retailing expenses 
were ilkely to increase. As I recall my testimony, I expressed the opinion that 
the rate of expense would not rise appreciably iDecause of sustained volume, 
whereas you were inquiring how rapidly I expected gross expenditures to increase. 
It is true that if present volumes are merely maintained, the economies deriving 
from volume will likewise experience little change and will provide no new 
cushion for absorbing any price increases we find it necessary to grant to 
manufacturers. As I stated at the hearing, I recognized that some types of 
retail expenditures which dropped otf drastically during the war can now be 
expected to revive. Additional sales help, restoration of delivery service, rein- 
statement of advertising budgets and credit services, are among them. To the 
extent that stores return to old rates of expenditure on these and similar operat- 
ing items, assuming unchanged volume and prices, expense rates may well 
increase in comparison with 1944 profit results. And I did say that we were 
assuming in my store that in 1946, if 1944 volume persisted, our expense rate 
would be 29.5, which is two points above what it was in 1944. The point that 
I was making was that the rate of recovery in such outlays would not be rapid, 
that they would not for a long time return to prewar levels, and that when they 
do, price control will be over. 

In the meantime retailers have throughout the war been free of the impair- 
ments of profit that normally result from clearance sales and mark-downs. These 
practices will also be revived in time, but again I do not think it will happen 


soon on any substantial scale. If I am right in these assumptions, the spread 
between initial mark-up and over-all expense rate of retail establishments will 
for some months at least remain substantially above prewar levels and will to 
that extent make it possible for them to absorb the moderate increases in cost 
of goods that we expect to allow. 

The point that I want to make clear for the record is that a mere retention of 
present volume could not prevent gradually increasing expense rates from affect- 
ing profits. The viewpoint on which I wish to stand, however, is that as long 
as we are in a strong seller's market, that effect will not be important, certainly 
not on a scale entitling us to abandon the principle that retailers should share 
with manufacturers and wholesalers the small amount of new cost absorption 
that will be necessary under our present procedures. 
Sincerely yours, 

Jerome M. Ney, 
Deputy Administrator for Price. 

Exhibit 5 
ExcEBPTs From a Letter on Infi^tion in the Housing Makicet in 


Mrs. Genevieve B. Hambley, social studies chairman, Wisconsin division, 
American Association of University Women, in a letter to Edith Hyslop of the 
national staff, A. A. U. W., on December 11, 1945, furnished the following examples 
of the need in Milwaukee for H. R. 4761, a bill to place price ceilings on old 
and new houses. She says of these examples, "All the sources are very reliable. 
I left out those which would be hard to verify." 

"From OPA : A small frame house bought from builder about four years 
ago, poorly located, no garage, cost $5,500, sold last week at $9,500; another 
small bungalow, cost $4,000 about 4 years ago, sold at $10,000 ; another 4-room 
prefabricated house, very small, bought at $5,500 3 years ago, sold within the 
month for $8,700. Examples such as these could be given indefinitely accord- 
ing to OPA. 

"From the FHA Milwaukee area office : Construction costs are up 36 percent. 
A great many, a very great many, of the applications for veterans' loans on 
existing homes are turned down due to the fact that the price asked is too far 
out of line with the value. 

"From an alderman : A great number of war-housing units built under the 
$6,000 ceiling in his ward have been resold since the ceilings were taken off 
for $7,500 to $9,000. 

"Two examples given me by a progressive real estate broker : A 4-room 
frame house bought at $4,400 new from the builder 4 years ago sold in June 
for $6,800. In our blighted area, a broker acting as a purchaser paid $3,500 
for a house and sold it the next day as an agent for $4,700. 

"From a newspaper editor: A house bought a year ago at $6,500 sold last 
month at $10,000. 

"Milwaukee is having a terrific time like all other cities trying to house its 
veterans. The veteran who is coming back and being absorbed into industry 
at beginners' rates of pay — many of them were too young to have had experi- 
ence before — are getting minimum wages. At Allis-Chalmers, the largest plant 
in Wisconsin, these wages are 62 plus 12 cents an hour (the 12 cents is the 
bonus). They have been working a 40-hour week. When they are forced to 
buy a home to get any place to live it is impossible for them to get a home 
in any relation to their income. There is no such thing as a house for rent. 
They and the people who are forced to vacate are certainly being victimized. 

"I think the bill is too generous in its allowance now but it is a means of 
preventing speculative reselling which is fast approaching a national scandal." 

Mrs. Hamblev is chairman of the Joint Action Committee for Better Housing 
in Milwaukee which is composed of the following groups : Wisconsin Division 
of the American Association of University Women, Milwaiikee County League 
of Women Voters, Milwaukee Woman's Club, Council of Churches, Milwaukee 
County Council of Church AVomen. Milwaukee Urban League, Wisconsin State 
Conference of Soctal Legislation, National Order of St. Luke, Booker T. Wash- 
ington YMCA, YWCA, National Association for Advancement of Colored People, 
Upper 3rd Street Commercial Association, Wisconsin Home Economics Asso- 
ciation, National Council of Jewish Women. Milwaukee County Industrial Union, 
CIO, Milwaukee Women's Service Club, Interracial Federation. 




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