Senator GORE. Have you the same output per workman over there as you have here?

Mr. WOOLLEY. We do now. Before we had technological improvements or the substitution of mechanical for muscle, the man-hour output was 6 units a day of 10 hours. It is now 16 a day of 8 hours. The CHAIRMAN. In other words, three times what it was?

Mr. WOOLLEY. The volume has gone up enormously, becasue more people can buy the product. Our prices to-day are down to the prices of 1899.

Senator BARBOUR. May I ask the witness a question, Mr. Chairman?

The CHAIRMAN. Certainly.

Senator BARBOUR. I am not familiar with the competitive situation, Mr. Woolley, and have no wish to question you on that, but assuming that you were accorded some measure of relief suggested by this bill, what would the effect be, in your opinion, relative to your competitors if they were not accorded the same relief?

Mr. WOOLLEY. In our particular case we have plenty of money. We would not apply for any loans. But I know some of our competitors would, and we would be glad to see them get it.

Senator BARBOUR. If thev got this relief, what objection would there be on vour part as a competitor to their getting it? Mr. WOOLLEY. None whatsoever.

The CHAIRMAN. You spoke about the cost of the product bearing a pretty definite relation to the wage scale, if I understood you correctly. Did vou say that the cost of the product has a definite relation to the wage scale?

Mr. WOOLLEY. Yes, sir.

The CHAIRMAN. Would that be another way of saying that commodity prices are quite largely dependent upon the wage scale, that as it goes up or down they are reflected?

Mr. WOOLLEY. I assume indirectly that if there are enough men employed on a given wage scale so that they can live normally and buy commodities according to their normal requirements, there would be a greater consumption of commodities.

The CHAIRMAN. I was thinking of the production costs of the commodities produced, whether it is not a fact that the price of them was pretty much a reflection of the wage scale?

Mr. WOOLLEY. Very largely, of course.

The CHAIRMAN. You also spoke about the 5-day week and said that when the men were put on the 5-day week, on piece work, they had a better output than before.

Mr. WOOLLEY. Yes, sir.

The CHAIRMAN. It can not result in the reduction of production then, can it?

Mr. WOOLLEY. It can in many industries.

The CHAIRMAN. But in the one you had reference to it did not? Mr. WOOLLEY. No, sir. But it did this, Senator; It brought the cost down to such a low level in reducing our selling price that it opened up a larger market, and when they get to building normally I think we will do a larger business.

The CHAIRMAN. You think that in the long run it will have that effect?

Mr. WOOLLEY. Yes, because it makes our product available to the working people in the larger area of our population.

Senator GORE. You spoke of piece work. You changed to that from the time system?

Mr. WOOLLEY. Yes, sir.

Senator GORE. And it has proven more satisfactory?

Mr. WOOLLEY. Yes, sir.

Senator GORE. The more they turn out the more they are paid? Mr. WOOLLEY. Yes, sir.

The CHAIRMAN. You made the suggestion here that the railways be permitted to make loans from the Government to buy their own bonds.

Mr. WOOLLEY. Yes, sir.

The CHAIRMAN. I have been thinking about that since you made that statement. First, there would be a rising market in the bonds

would there not?
Mr. WOOLLEY. Yes.

The CHAIRMAN. And the second effect would be that the Government would be holding those other railway bonds as security, would they not?

Mr. WOOLLEY. If the railroads succeeded in buying many bonds, if the bond market were to be restored to an approximate approach to fair value, I think you would see this whole panic, the whole complexion of public psychology, change from suspicion and hopelessness and despair to confidence and hope, and I think you would see a complete readjustment of the basic economic conditions of the country. Senator GORE. Some of these farm-loan bonds have been down to 80 cents on the dollar and perhaps less. Would you think it would be a good idea to advance money to those lands banks to buy in those bonds and then let the reduced price paid on the bonds, retiring the bonds, be reflected back?

Mr. WOOLLEY. I am not familiar with that subject, Senator. Senator GORE. It is the same principle. It might be a little more urgent, even, than the railroads.

The CHAIRMAN. If Government money were used to buy a considerable percentage of railway bonds, it would be an indirect way of acquiring railroad property, if carried very far?

Mr. WOOLLEY. If the Government were to loan a million dollars to X Railway and X Railway bought $3,000,000 of its own bonds for $1,000,000, it would reduce operating expenses; it would enable it to pay back that million dollars in due course of time to the Govern

ment

The CHAIRMAN. If things worked out well; but if they did not work out, it would be Government money invested in railway bonds? Mr. WOOLLEY. It would be Government money invested in railway credit.

The CHAIRMAN. I have always been of the opinion that Government ownership of railroads would not come from the socialists, but from the owners of the railroads.

Senator GORE. If the railway did not pay the money back, the Government might wake up and find the railway sitting in its lap. In answer to Senator Fletcher you said that France had stabilized the franc at 20 per cent of its former value?

Mr. WOOLLEY. Yes, sir.

Senator GORE. Do you think that is one reason that France has at least appeared to be enjoying prosperity while the other countries have not?

Mr. WOOLLEY. Yes; it took the money away from the people who lived on their interest on government bonds.

Senator GORE. She has cut her burden of debt down about fourfifths?

Mr. WOOLLEY. About one-fifth of what it was before.

Senator GORE. Do you think that would be a good idea here?

Mr. WOOLLEY. No, sir.

Senator GORE. Do you think the principle would work in France and not here?

Mr. WOOLLEY. Conditions are so different. France had lost six millions of her workers by death and casualty in the war, and a large part of her territory and property was utterly destroyed. (Witness excused.)

STATEMENT OF SEWELL AVERY, REPRESENTING MONTGOMERY WARD & CO. AND UNITED STATES GYPSUM CO., CHICAGO, ILL.

The CHAIRMAN. Give your name, address, and business for the record, please.

Mr. AVERY. Sewell Avery, Chicago; representing Montgomery Ward & Co. and United States Gypsum Co.

The CHAIRMAN. You may proceed in your own way, unless some one interrupts you. We will try not to interrupt you very much, because of the lateness of the hour.

Mr. AVERY. I am conveying, Senator, the sentiment of the very recently organized banking and industrial committee which is on the order of the Young committee, in Chicago. We have had two brief sessions, and are only in a formative state. At the last meeting, on Friday, the subject of the Barbour bill and this general situation was before the committee. They approached the subject on the basis that not merely the lack of confidence, but the abject fear that exists in this country has such a bearing on our situation as to be in itself the cause for many of our difficulties.

In the spirit, then, of approaching this subject with the idea of considering loans to industry as an extreme measure and a temporary one, with the idea of regaining confidence, the committee reached the conclusion that it favored some such action where the restrictions and limitations would naturally be put upon it. It did not undertake to formulate a definite plan, and no statement has been made. Mr. Woolley's statement, in my understanding, includes and expresses the sentiment of our committee.

I make that as my own observation rather than the observation of the committee, which has not seen his statement.

The comments which have been made on the various problems involved in this situation seem to be much in keeping with my own ideas and that of other members of our committee. The introduction of Government in business or Government loaning to private industry is not only a thing toward which they would not normally lean, but against which they would vigorously fight. The consideration, we take it, by this committee is the thought that our extremity is so great and the need of stopping this depression so great, that extraordinary measures are under consideration.

I think, sir, that that is all I have to say.

Senator FLETCHER. May I ask, Mr. Avery, if you have no objection to answering, about the status of your business now, the percentage, I mean, as compared with previous years?

Mr. AVERY. It is in a deplorably unsatisfactory condition, Senator. I am interested in a sense in three businesses. I know something about one of them. That happens to be the gypsum business, which is associated with four or five industries in the building line. That is, our name does not quite cover the extent of our work. We suffer in consistency with the building industry in general. We may be operating at 20 per cent, Senator. We are undergoing a very severe time.

Senator FLETCHER. What is the cause of that-lack of purchasing power in the public?

Mr. AVERY. To describe the causes of this situation is rather beyond my capacity. I am unfortunate in having no friends that seem able to explain it clearly to me. One obvious thing is that we have gone through a new era of construction. Following the war we were well behind in general building. We lacked accommodations of homes and we started immediately to make that up. The promise of the business which had by governmental requirement been stopped, as you know, had made an accumulation of additional importance. When these demands for construction came along it was impossible at first to get sufficient railroad cars to deliver things that were wanted; and that was itself a great hamper to the industry and it multiplied the appearance, at least, of the obvious need.

At the same time it was quite difficult to get labor, and the price of it was higher. The recognition of the shortage of both transportation of materials and the labor to produce them was well known, and we entered into a time when the country generally was led to understand the need of getting construction and not being particular about the economies that had formerly obtained. We became very familiar with the cost-plus contract and the rents of buildings, the ease with which they could be rented and the readiness with which they were sold before completion was brought into the general picture; the automobile having given us greater territory for building that could be reached within a short time, that is reachable in a few hours.

We got into the real-estate business. The banks actually sent men out to solicit loans. The moment the houses were two-thirds finished, up far enough so that their general dimension, location, and size and accommodations might be seen, they would be sold at a great profit. The result was an increased demand and a public consciousness of a need for new building, and that was taken advantage of by every one associated in the industry from the top to the bottom, including real estate.

At the same time, we are undergoing a change in our architectural standards. The old, flat, unattractive American house, which is, I suppose, an emanation from the lumber out of which we build it, has not won internationally a high position in an architectural respect. Our magazines have for many years tried to teach our people better appearance in that line. That was heightened very largely by the bringing in of our movies. The public were taught in 5-cent theaters unconsciously standards of architecture, and while it served merely as a background, the people unquestionably became conscious of a new ideal.

Mr. Woolley's effort in improving the convenience of the house, the bath room, its availability, its attractiveness, and all the other mechanical things that have been supplied by electricity came in to help to multiply the demand for more in the home.

In addition to that, there sprang up magazines of an entirely new order. We had The House and Garden, House Beautiful, Town in the Country, and the agricultural magazines themselves took on color and design and line and attractiveness, and so there was a new standard. Beyond that and in addition to that, the industries themselves having built largely and having a good deal of capacity in bringing in new equipment, joined in newspaper advertisements, and it was not uncommon to find a full page in almost every newspaper advertising material, although material really did not lend itself to advertising at all before that.

That was followed by a new appreciation of standards in the house, from the standpoint of decoration and the use of color, and throughout the country we had schools for the training of interior decorators, and shops by the thousands were scattered all over. There was a change in appearance and interior charm

Senator FLETCHER. Did not that result in a tremendous amount of building?

Mr. AVERY. Overproduction; a tremendous amount of building, a tremendous amount of investment in buildings and building materials.

The CHAIRMAN. Do you trace the result of that largely to the ease of the credit situation that was developed?

Mr. AVERY. I think it extended quite beyond that, because after the well-established construction industry were themselves quite able to supply all that was needed, the easy money, the profit that had been made in the general filed, brought in the stockbroker and the bond seller, and that brought into the industry already well supplied a fringe group badly planned, badly located, and badly invested, and, worse than that, badly managed, that was added on, in my opinion, to an already ample and well-operated productive capacity in general building, so that that brought something that I think we are now suffering from.

The CHAIRMAN. Did the easy terms of payment that were held out as an inducement result in people taking on properties who were not financially able to take them on and thereby encouraging building? Mr. AVERY. I think part of that of course is the easy credit. It has a very sound foundation, I am sure, if used soundly.

The CHAIRMAN. Did the ease of credit, coupled with the strongarm salesmanship, result in so much business that the earnings of the people would not match it? Is that it?

Mr. AVERY. I imagine that must have been so in many cases.
Senator FLETCHER. How long did that last?

I

Mr. AVERY. I believe it was in October, 1929, that it stopped. The peak of the building, as Mr. Woolley has said, was in 1925. believe those people who were active in business were sufficiently alert to the condition to recognize it and make some preparation. We distinctly were. We issued statements to the stockholders for four years pointing out the inevitable result and that if it were continued, the difficulties that would come from the violation of the laws of supply and demand.