Senator KING. That last answer you made I didn't quite understand. Did you take into account in determining these prices the fact that we had changed our dollar?

Dr. LUBIN. I did here, yes, definitely. This is a stable dollar, the 1929 dollar, in terms of the purchasing power of the 1929 dollar.

The CHAIRMAN. Now you are referring to the chart entitled "National Income Lost in Depression"?

Dr. LUBIN. Yes.

Senator KING. Taking into account that the gold dollar had a certain quantity? It has been inflated so that $35 is paid for an ounce of gold.

Dr. LUBIN. This takes into account the purchasing value of the dollar at 1929 prices.

Representative SUMNERS. Dr. Lubin, in using the figures for 1929 as a base, were those prices and incomes and figures for 1929 above normal, considering the general situation?

Dr. LUBIN. Well, of course I wouldn't want to discuss the concept of normal; they were higher relatively than they had been.

Representative SUMNERS. Would you permit a clarifying statement? If as a matter of fact in 1929 prices were stimulated beyond where they ought to be, would it be a structural base upon which to calculate these other changes?

Dr. LUBIN. It doesn't make much difference, Congressman, which year you pick as long as you keep the level constant. In other words, we could have taken 1926 and the result would be the same, or 1923 or 1921. The idea is to convert them all into the price level of a

single year.

Senator KING. Your figures are not based upon the quantity of production, but upon prices.

Dr. LUBIN. This is throwing out all price changes; this is a quantitative and not a value measure.

Senator Borah, in reply to your question, the gross farm income of 1928 was $11,741,000,000; in 1929 it was $11,941,000,000; in 1930 it was $9,800,000,000, so that in 1928 and 1929 they were about on a par. In 1930 the first drop came.

Senator BORAH. The point is, if you permit me, that in 1928 and 1929 the income of agriculture was not sufficient for agriculture to maintain itself.

Dr. LUBIN. Exactly so. In other words, you have what some consider to be a double loss. You have a loss that existed in 1928 and 1929 in the sense, as you say, that there wasn't sufficient income to maintain the whole agricultural population, plus a further loss that took place because of the loss in gross income that arose in later years. Senator KING. I suppose you haven't attempted to determine it probably would be beyond the scope of your activities-the contributing factor to the decline in agriculture resulting from diminution in our foreign market.

Dr. LUBIN. That question, Senator, will probably be discussed later on in the hearings. I am not attempting to explain why these changes occurred. All I am trying to do is to show what actually did happen. Senator KING. Speaking objectively.

Dr. LUBIN. Getting back to this chart,' as I said, the total national income in 1929 was $81,000,000,000. The loss in national income. accumulated over this period of years was $133,000,000,000, which means you have an accumulated loss which was about 164 percent of the 1929 income. However, I want to point one thing out. In 1937 we almost got back to the 1929 level, in terms of physical goods and services.

Senator KING. Is that volume of production or prices?

Dr. LUBIN. This is volume, taking the prices out. If you convert this loss into the amount of goods available to the people of this country, it is equal to a thousand dollars over the last 9 years for every man, woman, and child in the country. In other words, if this amount of income in terms of physical goods had not been lost there would have been available, as a present to every man, woman, and child, if we wanted to give it to them a thousand dollars more than was actually available.

Representative SUMNERS. Would it interrupt you to ask this question, whether or not you have a chart or study that would indicate the relationship between the breaking down of the purchasing power of one group and the general effect upon the whole group for the total? Dr. LUBIN. We do have the relationship between the amount paid out to workers in factories and gross farm income. I haven't brought it with me but there is a chart that has been put out by the Department of Agriculture which shows a very close correlation. The lag is in agriculture; in other words, as pay rolls go down, a decline in agricultural income starts. As pay rolls go up, agricultural income starts going up. The reason is simple. Our primary market for agricultural products is the United States, and since the largest single group in

1 Exhibit No. 13, supra, p. 17.

the United States are wage and salary workers, and since they buy more farm products as their incomes go up because of more work and more income, the farm situation improves.

Representative SUMNERS. Isn't the farmer's economic condition, though, determined perhaps as much by price as by quantity?

Dr. LUBIN. It is, and of course the prices of some of his products are determined in the world markets. On the other hand, prices of other types of commodities, vegetables, milk, and dairy products, and other commodities of that sort, are very little affected by world conditions.

Representative SUMNERS. But the vicinity which produces for agricultural export, may swing to dairy and truck farming and that sort of thing. I don't want to get into any argument about it, but it makes it practically standard. I don't want to lead you too much into that.

Dr. LUBIN. The important thing is that in terms of dollars that are available to farmers they do move up and down with the number of dollars available to wage earners, which gives you some idea of the part the domestic market plays in our economy.

Senator KING. I don't want to interrupt, but isn't it a fact, however, going back for many, many years prior to the discovery of gold, for instance, in California, when there was a great output of gold and precious metals, that prices had gone up and down and there had been radical and material changes in not only the volume of production but in the price of the commodities? So there is no static situation where the wages are the same and the volume of production the same. Dr. LUBIN. No; there isn't. You can, however, throw out those fluctuations in prices and convert your national income, as we have on this chart, into terms of physical units. That is what I have done. Senator KING. Isn't it a fact that the monetary situation, the monetary status, hasn't much to do with prices?

Dr. LUBIN. I am not going to speak as an authority on prices. Senator KING. It is obvious if you have inflation your prices will

go up.

Dr. LUBIN. Yes; that is what inflation is.

Mr. OLIPHANT. I should like to get a little further information on the basis of comparison. You mentioned the fact that you could have eliminated the price factor by choosing any other year. Isn't it true from the standpoint of those primary industries with the largest volume, 1929 is very significant because in that year we came nearest to capacity?

Dr. LUBIN. It was the peak year in terms of using our resources, both human and physical.

Representative SUMNERS. One point I wish you would put in the record, or have somebody put in the record, I believe it is my opinion that historically it is a fact that the prices of agricultural commodities broke first, and when those prices broke, they broke so low that they paralyzed the buying power of the farmers, they just couldn't buy. It was a paralysis of the economic circulatory system, beginning with the paralysis of the buying power of the farmer. seems to me you might at some point, if you will be good enough, put something in of that nature.

It

Dr. LUBIN. As a matter of fact, we have available, have prepared for the committee, a whole series of charts and tables dealing with

what has happened to prices during the last hundred years, and particularly in the period from 1920 to date, and I understand that at a later date, Judge, we shall discuss the whole course of prices. Representative SUMNERS. I hope you will pardon me for anticipating that discussion.

1919 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 1940

FARMERS, UNINCORPORATED BUSINESSES, HOME OWNERS, ETC.

SOURCE: NATIONAL BUREAU OF ECONOMIC RESEARCH

Dr. LUBIN. Now the question was raised by Senator O'Mahoney as to what proportion of our income goes to the different groups.

(The chart referred to was marked "Exhibit No. 13-A" and appears on this page. The statistical data on which this chart is based are included in the appendix on p. 197.)

Dr. LUBIN. You will notice there has been a very marked shift over a period of years in the total portion of the national income that is going to different groups.

The CHAIRMAN. May I interrupt you just to make a suggestion, that when you refer to a new chart, it would be well to identify the chart so that it will appear in the record what particular chart you are referring to.

Senator KING. That is the reason I asked that they be numbered. Dr. LUBIN. This chart shows the monthly income payments from 1929 to date: In other words, indexes of the actual amount paid out

each month to labor, to farmers, businessmen and country merchants; amount paid out in interest; amount paid out as direct relief; and the amount paid out to veterans by the Government. Back in 1929, 66 percent of the total amount went to labor.

(The chart referred to was marked "Exhibit No. 14" and appears on this page. The statistical data on which this chart is based are included in the appendix on p. 198.)

The CHAIRMAN. In other words, this is an analysis of the distribution of income payments during the years from 1929 to 1938 among the various groups?