Dr. LUBIN. If you start with 1919, you will notice that our physical production rose in 1920, followed by the depression of 1921. It rose again in 1922 and by 1929 we were producing 25 percent more goods than in 1922 and 1923. However, this 25 percent more output soon thereafter declined to 42 percent below where it had been in the 192325 period. By December 1936 however, we had regained virtually all of the loss since 1929 and we were within 3 percent of the peak of 1929. Then followed another decline in physical production during which the actual amount produced fell to approximately the level of 1922 and for 1938 we estimate that the level will run about 86.

As a matter of fact, it is estimated that last month we produced 101 percent of what we did during the 3-year base period, 1923-25. Senator KING. Physical production?

Dr. LUBIN. Physical production.

Now, the question to be answered is: Just where in our economy did these declines occur?

(The chart referred to was marked "Exhibit No. 18" and appears on p. 28. The statistical data on which this chart is based are included in the appendix on. p. 201.)

Dr. LUBIN. I have attempted to break down the output of our factories and our mines in terms of the relative importance to the American economy of so-called durable goods and so-called nondurable goods.

Durable goods, as we define them are any goods that are consumed over a period of years or period of time; in other words, automobiles, refrigerators, locomotives, machinery, buildings and things of that sort. Houses, of course, are the most important of these goods. Some are used directly by consumers, some are used in producing other goods.

I think it is rather important that we note the relative increasing importance of the so-called durable goods in the American economy. You will note that between 1879 and 1929, the importance of durable goods industries which contributed 31 percent of our industrial output in '79, had risen to the point where they were almost half of our output, 44 percent. By 1933, however, their part in the economy had fallen markedly.

I might say for the record, Mr. Chairman, that this is not a chart. based on Government figures. It was prepared by the National Bureau of Economic Research in New York, and made available to us by its director, Dr. Wesley C. Mitchell. I feel they should get credit for the chart.

Here is a chart showing total manufacturing output.

(The chart referred to was marked "Exhibit No. 19" and appears on p. 29. The statistical data on which this chart is based are included in the appendix on p. 202.)

Dr. LUBIN. You will note that nondurable-goods production varied very little throughout this whole period of time. However, every break in this index (total manufacturing) was primarily caused by a break in the durable goods industries.

Compare this break (durable) to that (nondurable), and you can see the importance the break in durable had in this total drop from

1929-32.

Similarly during the rise of the past few years you will note that nondurables remained virtually static while durables went up. They accounted for the major part of the total rise. Apparently the modern

depression is a durable-goods depression; that is, housing and refrigerators and automobiles are among the first things that people apparently stop buying, plus the fact that industries stop investing in new equipment and plant.

If we compare the line of the output of our factories and mines with the line which shows the output of agriculture, we see that farmers don't stop producing when other people stop producing.

(The chart referred to was marked "Exhibit No. 20" and appears on p. 30. The statistical data on which this chart is based are included in the appendix on p. 204.)

Dr. LUBIN. As a matter of fact there has been a steady increase in the total agricultural production, with relatively small declines here and there, seldom amounting to more than 10 percent. There was a drop during the period 1934, 35, '36, but soon another increase occurred. The total output in 1937 was higher than in any previous

year.

Senator KING. This is still volume?

Dr. LUBIN. Yes.

Representative REECE. Is it your intention to explain what causes the demand for goods? For instance, the cause that gives demand for agricultural goods you mentioned, and those that give demand for other commodities.

Dr. LUBIN. I do not intend to explain it today but I think sometime in the course of the hearings that question will be brought into the picture. All I am attempting to do is to show how the economy has failed to produce the goods that we ought to have to maintain our standard of living, and I have attempted to point out the weak spots in the system in terms of factory production, agriculture, and so forth.

Representative REECE. It seems important that agriculture has produced too much and industry has produced too little. In other words, whether the legitimate demand for goods has been over supplied or under supplied.

Dr. LUBIN. I don't know whether one could answer that specifically. The reason agriculture may appear to have produced too much is because other folks are producing too little, or vice versa. I don't know that one can say that at any time too much is produced because there is always a possibility of increasing the standard of living. Of course, there may be a maximum limit to certain types of goods that people will consume, but I don't think we, in the United States, have ever reached that stage, even in cotton, wheat, or any other products; that is on the basis of what we could consume if we were going to maintain what we think of as an American standard of living.

Mr. OLIPHANT. I have a question on this, a further word of explanation on the significance of the chart headed "Federal Reserve Index of Manufacturing Production." Are there particular nondurable goods, the volume of which follow the pattern of the lower one and also particular durable goods which follow the pattern of the other line?

Dr. LUBIN. I am going to break that down in a few minutes into individual commodities so you can see what their course has been. Mr. OLIPHANT. That is, the difference there is a rough and ready difference.

Dr. LUBIN. Yes.

Senator KING. If I may be pardoned, having referred to agricultural production, did you discover in your investigation the fact that the exports of agricultural commodities such as cotton, wheat, corn, beef and lard, and so on, had been reduced during the past 8 or 10 years?

Dr. LUBIN. Very definitely. The Secretary says that Dr. Thorp is going to deal with the export and import problem.

The CHAIRMAN. Have you made a chart showing the per capita production of agricultural commodities?

Dr. LUBIN. We have the figures. I haven't a chart of them. I could put them in the record.

The CHAIRMAN. Don't you think that would be an interesting thing to show in the record?

Dr. LUBIN. Yes; they will be shown in the appendix with figures for "Exhibit No. 20".2

Mr. Oliphant raised the question as to various types of industries and whether their pattern follows the pattern of the manufacturing industries as a whole. Here is the pattern of building construction for the last 20 years; you will note that the peak was in '25, while the peak in manufacturing was in '29.

(The chart referred to was marked "Exhibit No. 21" and appears on p. 32. The statistical data on which this chart is based are included in the appendix on p. 205.