B. Price system and price policies. Patterns. Changes from competitive assumptions. Effect on general level of trade, and on demand for specific products. On long-time profits, consumption. Maintenance of prices versus maintenance of employment. Patterns and standards of desirability in rigid and flexible prices. The problem of balance.

C. Effect of governmental policies.

1. Specific policies; as named by resolution.

(a) Taxation: Burden on industries, relation to expansion and lack of new investment. As stimulus to activity.

(b) Patents, pools, specific abuses. Place in competitive enterprise. Litigation: Costs, duration, effect on small enterpriser. Delays in granting procedure. Division of ownership: Individuals and corporations. Utilization and suppression. As stimulus to activity. Key patents. Place in technological displacement.

(c) Adjustment of purchasing power to 1926 price level.

2. Government policies not specifically named by resolution.

(a) Compensatory fiscal policies.

(b) Governmental intervention; corporations, loan agencies, etc.

(c) Foreign trade, reciprocal trade agreements.

(d) Agricultural program.

(e) Housing.

(f) Governmental regulation. Lessons to be drawn from experience of Interstate Commerce Commission, Coal Commission, Securities and Exchange Commission, Federal Power Commission, Maritime Commission, Labor Board, Wage and Hour, Walsh-Healey, Federal Communications, etc.

Social security.

Results of other legislative committee studies: Munitions, holding companies, etc.

D. Bureau of Industrial Economics.

E. Socially and economically harmful competition.

F. Improvement of antitrust policy and procedure.

1. Codification of law as to restraints of trade, etc.

2. Procedural study: Investigation, enforcement, adjudicative processes.

3. Studies of foreign experience, relations of government and business abroad. G. National standards for corporations.

H. Mergers, interlocking relationships, industrial, utility and bank holding companies, investment trusts.

I. Insurance companies. Organization, practices, importance in economy, investment policies, etc.

J. Corporate practices. Existing forms of business organization, trade associations, alternative forms.

K. Distribution. Marketing laws.

L. Credit mechanisms for small enterprises.

Consumer credit. Labor Depreciation and cost accounting. Debt

M. Over-all economic data and special studies. racketeering. Break-even points.

growth.

Mr. HENDERSON. I would like to emphasize, in putting that in, Mr. Chairman, that I think it is highly desirable, because it will let people know the kinds of things that we are interested in.

In these statements by Dr. Lubin, Dr. Thorp, and myself, we have attempted to survey the situation in which the Nation finds itself today in terms of those fundamentals which are at once the objective of any system of economic organization and the test of its success. We have tried to show the relationship between these fundamentals and the simple essentials of everyday life. Necessarily, the problems and the significant facts have been presented in broad and general terms. There are notable omissions of discussion related to necessary adjuncts to the productive system, such as transportation, communications, financial institutions, and so forth.

But, in order that we may devise workable solutions of production and distribution problems on the basis of the facts, we must at all times bear in mind that the American economy is a vast and complex organic growth; that each industry, and, for that matter, each business

enterprise within an industry, is likewise an organic growth; and that, in consequence, to deal with national problems intelligently, we must approach them in much the same way as medical science approaches the problems of the human body, and not of original sin.

Naturally, any attempt at a full description of the anatomy of all American industries within the compass of these hearings is out of the question. The intention, therefore, is to present by reports and hearings a series of typical situations, drawn from different industries, and illustrating different problems.

The underlying connection among these varied situations will be their significance as living instances of the complicated and dynamic process which constitutes American industry. For their value as representative examples, naturally the research staff must take full responsibility.

The CHAIRMAN. Are there any questions to be asked? The committee, when it does stand in recess, will recess until 10:30 o'clock on Monday morning.

Are there any announcements that it is desirable for the chairman to make at this time? If there are no announcements to be made, the committee will stand in recess until Monday morning at 10:30 o'clock.

(Whereupon, at 12:35 p. m., an adjournment was taken until Monday, December 5, 1938, at 10:30 a. m.)

124491-39-pt. 1-13

APPENDIX

EXHIBIT No. 1

[S. Doc. No. 173, 75th Cong., 3d sess.]

MESSAGE FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING RECOMMENDATIONS RELATIVE TO THE STRENGTHENING AND ENFORCEMENT OF ANTITRUST LAWS

To the Congress of the United States:

Unhappy events abroad have retaught us two simple truths about the liberty of a democratic people.

The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism-ownership of government by an individual, by a group, or by any other controlling private power.

The second truth is that the liberty of a democracy is not safe if its business system does not provide employment and produce and distribute goods in such a way as to sustain an acceptable standard of living.

Both lessons hit home.

Among us today a concentration of private power without equal in history is growing.

This concentration is seriously impairing the economic effectiveness of private enterprise as a way of providing employment for labor and capital and as a way of assuring a more equitable distribution of income and earnings among the people of the Nation as a whole.

I. THE GROWING CONCENTRATION OF ECONOMIC POWER

Statistics of the Bureau of Internal Revenue reveal the following amazing figures for 1935:

"Ownership of corporate assets: Of all corporations reporting from every part of the Nation, one-tenth of 1 percent of them owned 52 percent of the assets of all of them.

"And to clinch the point: Of all corporations reporting, less than 5 percent of them owned 87 percent of all the assets of all of them.

"Income and profits of corporations: Of all the corporations reporting from every part of the country, one-tenth of 1 percent of them earned 50 percent of the net income of all of them.

"And to clinch the point: Of all the manufacturing corporations reporting, less than 4 percent of them earned 84 percent of all the net profits of all of them." The statistical history of modern times proves that in times of depression concentration of business speeds up. Bigger business then has larger opportunity to grow still bigger at the expense of smaller competitors who are weakened by financial adversity.

The danger of this centralization in a handful of huge corporations is not reduced or eliminated, as is sometimes urged, by the wide public distribution of their securities. The mere number of security holders gives little clue to the size of their individual holdings or to their actual ability to have a voice in the management. In fact, the concentration of stock ownership of corporations in the hands of a tiny minority of the population matches the concentration of corporate assets.

The year 1929 was a banner year for distribution of stock ownership.

But in that year three-tenths of 1 percent of our population received 78 percent of the dividends reported by individuals. This has roughly the same effect as if, out of every 300 persons in our population, 1 person received 78 cents out of every dollar of corporate dividends while the other 299 persons divided up the other 22 cents between them.

The effect of this concentration is reflected in the distribution of national income. A recent study by the National Resources Committee shows that in 1935-36"Forty-seven percent of all American families and single individuals living alone had incomes of less than $1,000 for the year; and at the other end of the ladder a little less than 1% percent of the Nation's families received incomes which in dollars and cents reached the same total as the incomes of the 47 percent at the bottom."

Furthermore, to drive the point home, the Bureau of Internal Revenue reports that estate tax returns in 1936 show that

"Thirty-three percent of the property which was passed by inheritence was found in only 4 percent of all the reporting estates. (And the figures of concentration would be far more impressive, if we included all the smaller estates which, under the law, do not have to report.)"

We believe in a way of living in which political democracy and free private enterprises for profit should serve and protect each other-to insure a maximum of human liberty not for a few but for all.

It has been well said that, "The freest government, if it could exist, would not be long acceptable if the tendency of the laws were to create a rapid accumulation of property in few hands, and to render the great mass of the population dependent and penniless."

Today many Americans ask the uneasy question: Is the vociferation that our liberties are in danger justified by the facts?

Today's answer on the part of average men and women in every part of the country is far more accurate than it would have been in 1929 for the very simple reason that during the past 9 years we have been doing a lot of common-sense thinking. Their answer is that if there is that danger it comes from that concentrated private economic power which is struggling so hard to master our democratic government. It will not come, as some (by no means all) of the possessors of that private power would make the people believe from our democratic government itself.

II. FINANCIAL CONTROL OVER INDUSTRY

Even these statistics I have cited do not measure the actual degree of concentration of control over American industry.

Close financial control, through interlocking spheres of influence over channels of investment, and through the use of financial devices like holding companies and strategic minority interests, creates close control of the business policies of enterprises which masquerade as independent units.

That heavy hand of integrated financial and management control lies upon large and strategic areas of American industry. The small-business man is unfortunately being driven into a less and less independent position in American life. You and I must admit that.

Private enterprise is ceasing to be free enterprise and is becoming a cluster of private collectivisms; masking itself as a system of free enterprise after the American model, it is in fact becoming a concealed cartel system after the European model.

We all want efficient industrial growth and the advantages of mass production. No one suggests that we return to the hand loom or hand forge. A series of processes involved in turning out a given manufactured product may well require one or more huge mass-production plants. Modern efficiency may call for this. But modern efficient mass production is not furthered by a central control which destroys competition between industrial plants each capable of efficient mass production while operating as separate units. Industrial efficiency does not have to mean industrial empire building.

And industrial empire building, unfortunately, has evolved into banker control of industry. We oppose that.

Such control does not offer safety for the investing public. Investment judgment requires the disinterested appraisal of other people's management. It becomes blurred and distorted if it is combined with the conflicting duty of controlling the management it is supposed to judge.

Interlocking financial controls have taken from American business much of its traditional virility, independence, adaptability, and daring-without compensating advantages. They have not given the stability they promised.

Business enterprise needs new vitality and the flexibility that comes from the diversified efforts, independent judgments and vibrant energies of thousands upon thousands of independent businessmen.