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ings, but forgot to compare our prewar earnings with nonprewar earnings. As I said, they were abnormal.

I propose to represent the Schwarzenbach-Huber Co., the biggest silk manufacturers in the United States, and probably the biggest manufacturers in the world. We have factories in Switzerland and Italy. Our prewar standard was 1.9 per cent. We have tried in 1911 and 1912, and had small earnings in 1913 which put the average to 1.9, without deducting the losses of 1911 and 1912. Now, I have already, last year, worked out a table which I took the privilege to lay before you. Senator Simmons in the Senate has already made use of this table. I ask you to kindly give your attention to a few explanations. You see a line here, X-Y. This line is the normal line, or the minimum earning line. Now, I have read in previous articles of the hearings that you are very anxious to get good authorities for the figures. These tables are taken from Babson, and I have no other authority, but I think Babson is sufficient authority. He is the recognized statistician in the whole United States. I may mention that Bradstreet's charts and Babson's charts agree.

The CHAIRMAN. What are those red marks up there; what is that red space "United States, X-Y"?

Mr. SCHWARZMANN. X-Y is the normal or minimum earning line. The CHAIRMAN. The 1916 red marks and "The United States"; what does that mean?

Mr. SCHWARZMANN. I will just explain it. Now, I have only for the United States, England, and France. You will see that the name is below, of the respective countries, on the chart.

Mr. STERLING. You mean Canada and England?

Mr. SCHWARZMANN. No; the United States, England, and France. The name is below the chart.

Mr. STERLING. Oh, yes.

Mr. SCHWARZMANN. England had an average earning in the prewar period of 13.3 per cent in connection with this chart. The United States has average earnings of the minimum returns on the money invested, which they state as either 5 or 6 per cent.

Now, in order to explain the injustice of taxing in accordance with the prewar earnings, I had to state average earnings for the present time for the war. I took 25 per cent. I may mention that if I take 25 per cent; this is only relative applied to each country the same way. It is not an absolute figure, and therefore, as a statistician, it must be correct.

Now, you see England taxes the two best years out of three years, whereas the United States taxes the three years of prewar earnings. You see now the space above the black field in England is very small. These are the earnings above the prewar earnings-the earnings which are taxed. These earnings are taxed with 80 per cent.

Now, the United States. You see that the field is much larger. I may mention that the black lines-the black fields-are both the line X-Y. The black fields below these lines are just balancing. In other words, we have above all just a minimum reserve. What is above this black line is business prosperity and what is below is business depression.

We have figured out-at least, it has been stated so in the Senate that our present taxes run up to, in the average, about 32 per

cent. In other words, we tax about 32 per cent of this red square, whereas England taxes 80 per cent of the red square. You will easily see that 32 per cent here may nearly reach 80 per cent of England, because England covers with 80 per cent of present excessprofit taxes a much smaller area than the United States covers with only 32 per cent. I have worked it out graphically, to explain it a little bit better. You may see here these are the prewar earnings. The United States has very small prewar earnings-the black field above these black lines-and therefore we take for the United States 25 per cent of present average earnings, too. Therefore they have very large war profits-we call it war profits, although they are not all war profits. They are partly just normal returns, which they were not before, and partly they are war profits.

England has a much smaller area of war profits. Now, here is France, too. Here in England we have very little of war profits left, and a very large area of prewar earnings. I have figured it out in a table. I assume now, at the present, that the average application of the present law is 32 per cent. Also I can not control that. I take as authority the statement in the Senate when the law passed.

Mr. GARNER. You make it 38 per cent here, do you?

Mr. SCHWARZMANN. Yes. I will explain you these figures, after a while. We would assume the prewar earnings not as an exemp-. tion but simply as a reduction. I will explain this afterwards. I compare only England and the United States, for the simple reason because the present law, which after all is not as bad as it has been made by the newspapers, and ridiculed by the newspapers, because this present law has always been compared with England, and all the newspapers now for a whole year cried that you have let off here easily the corporations, and that England taxes 80 per cent. They never took into consideration that the prewar earnings were nore than two and a half times bigger in England than they were in the United States, which is a fact that certainly must be considered. I have tried to approach different papers, but without result, possibly on account of the bad English I speak.

The CHAIRMAN. Do you know what the average profit was on capital invested in Great Britain before the war-whether it was 10 per cent or 12 per cent?

Mr. SCHWARZMANN. I went down to Boston and we tried to check that up. You know, these tables are exactly the Babson tables, and we found you can take just about one little square that you see here for 1 per cent; that is, one little square represents about 1 per cent. The CHAIRMAN. I do not exactly understand that.

Mr. GARNER. He contends, if I understand him, that the prewar profits-that is, profits for 1911, 1912, and 1913-in England were a great deal more on the capital invested than they were in the United States-some two and a half times as much.

Mr. SCHWARZMANN. Yes; two and a half times as much.
Mr. GARNER. That is his contention.

The CHAIRMAN. I know your contention. I want to see about the facts. Take iron and steel in Great Britain. What percentage of profits were they making?

Mr. SCHWARZMANN. Babson takes all the English industries.

The CHAIRMAN. I wanted to see if you investigated this from the standpoint of actual facts and were not taking this from somebody else.

Mr. SCHWARZMANN. Yes.

The CHAIRMAN. Have you investigated how much the profits which the iron and steel industry were making were in Great Britain for the three prewar years?

Mr. SCHWARTZMANN. No; I have not investigated. I took these charts because they were for everything.

The CHAIRMAN. So that you do not know whether they were making 5, 6, or 10 per cent?

Mr. SCHWARZMANN. No; I do not. But these figures were made. up from actual results.

The CHAIRMAN. Yes; he ought to give the figures on the charts. Mr. SCHWARZMANN. I may be able to get all these figures together yet. It was an awfully short time for me to prepare these matters. Mr. GREEN. If I understand correctly, these charts may be, if I may use the term, translated into figures?

Mr. SCHWARZMANN. Yes.

Mr. GREEN. That is very easily done.

Mr. SCHWARZMANN. That is very easily done. They are not specified in figures. That is, I can, of course, find out all steel earnings in England, or what the actual returns were, or other things, or other kinds of returns. That is to be found out. That chart is a composite block of all these facts.

Mr. GARNER. Who is Mr. Babson?

Mr. SCHWARZMANN. Babson is the foremost statistician of the United States.

Mr. GARNER. At the present time?

Mr. SCHWARZMANN. At the present time he holds a Government position in the Bureau of Public Information. He is the chairman of a certain branch.

Mr. GARNER. I wanted to attract your attention to this answer. The whole matter depends upon the figures of Mr. Babson, here. You have depended upon Mr. Babson?

Mr. SCHWARZMANN. Entirely.

Mr. GARNER. Now, the question is as to the accuracy with which Mr. Babson has given the information on this subject.

Mr. SCHWARZMANN. Yes.

Mr. GARNER. You claim that he is the foremost statistician in the United States?

Mr. SCHWARZMANN. Yes.

Mr. GARNER. And he is now holding a Government position? Mr. SCHWARZMANN. Yes.

Mr. GARNER. In the line of his work?

Mr. SCHWARZMANN. In the line of his work; as a return for his accuracy in all his statistical work.

Mr. GARNER. And you say that his reports agree with Bradstreet. Mr. SCHWARZMANN. Agree with Bradstreet's, all in all. I mean there are small differences, but not to amount to anything.

Mr. FAIRCHILD. Babson, I think, is generally recognized as being the foremost statistician of this country.

Hr. GARNER. That is what I was directing the chairman's attention to, that this whole thing is based on the accuracy with which Babson makes his reports.

Mr. FAIRCHILD. This man comes before us this morning, however, to represent the silk industry, and it seems to me that he might confine himself to the particular line of development that he represents. Mr. GREEN. This statement that the gentleman has just been making is to myself quite interesting with respect to the prewar earnings. Mr. GARNER. If his statement is correct, that in England the prewar earnings on capital were two and a half times what they were in America, then I do think it is quite important, if you are going to take England's methods as a basis on which we might levy warprofits taxes, to determine the accuracy of the facts which he has just given us.

The CHAIRMAN. The average percentage of profits in Great Britain in 1911, 1912, and 1913; and then we want to compare them with the average profits of this country. I will state to you that before the Federal Trade Relations Board some time ago charts were shown in several leading industries, which showed in the neighborhood of 11 per cent-iron and steel, rubber, the brewing industry, and several others, and that Dr. Adams and Kramer, the advisory board on the excess-profits tax, thought it would_run up about 12 per cent; that those figures were rather low. They took those figures from the London Economist. Now, it is easy to take the Times, and take the iron and steel industry, or the rubber industry, and different industries, and for those three years ascertain the profits in England from the industries, and then compare them. If Great Britain was making 12 per cent in the iron and steel industry and we were making only 6 per cent, then I know exactly the condition.

Mr. SCHWARZMANN. Yes.

The CHAIRMAN. If Mr. Green is satisfied with the chart and these figures, all right, but I would rather have the figures.

Mr. SCHWARZMANN. Yes.

The CHAIRMAN. You have not gone into the figures?

Mr. SCHWARZMANN. No.

Mr. GREEN. The chairman is mistaken about by being satisfied. The CHAIRMAN. I will take it back, then. What was the percentage of profit in the silk industry in the prewar years, taking the last three years? Mr. SCHWARZMANN. Well, take our concern. We are a corporation of over $8,500,000 invested. We had returns on the average for 1912 and 1913 of 1.9 per cent; not quite 2 per cent.

The CHAIRMAN. Do you know Mr. Jenney of South Manchester? Mr. SCHWARZMANN. I know him very well.

The CHAIRMAN. Do you represent him?

Mr. SCHWARZMANN. I have been asked by the silk industry to represent them, but there is very little at the present time to say for the silk industry.

The CHAIRMAN. I know Mr. Jenney. I know him very well. My recollection is that when he was down before this committee protesting against any reduction in the tariff, he stated that the silk in

dustry had been in a very prosperous condition, and was then in a very prosperous condition.

Mr. SCHWARZMANN. Yes.

The CHAIRMAN. But that if we reduced the tariff he would be ruined; and that was in the latter part of 1913. It was in 1913, so that he evidently had a very successful business in 1911 and 1912. It was more than 1.9 per cent.

Mr. SCHWARZMANN. We had a good business in 1913; but in 1913, especially in New Jersey, in the silk business, and in the northern part of the United States, we had strikes, and the industry in the United States had to bear the brunt of these strikes.

The CHAIRMAN. That was the Paterson strike?

Mr. SCHWARZMANN. Yes; all over New Jersey. Now, I do not believe in any such statement-that an industry is ruined so easily. It will always find its way, and the silk industry will find its way. The CHAIRMAN. What percentage of profit are these companies you are representing making. If we can get at that we will see how it hurts your business. We can take the present standpoint and the prewar standpoint, and see the difference. I understand the concerns you are representing were making 1.9 per cent in the prewar period?

Mr. SCHWARZMANN. No; that is only our concern.

The CHAIRMAN. Your concern?

Mr. SCHWARZMANN. Yes.

The CHAIRMAN. What is your concern? I understood you represented the industry.

Mr. SCHWARZMANN. I have been asked by these others to represent them, but my intention was to talk of the present law; what I think would be wrong; and I thought that was understood this

way.

The CHAIRMAN. What is your particular industry?

Mr. SCHWARZMANN. The silk industry.

The CHAIRMAN. What is your corporation?

Mr. SCHWARZMANN. Schwarzmann, Huber & Co.

The CHAIRMAN. You say the'r percentage of profit was what?

Mr. SCHWARZMANN. 1.9 per cent; not quite 2 per cent.

The CHAIRMAN. 1.9 per cent? Now, say last year-1917-what was their percentage of profit?

- Mr. SCHWARZMANN. I could not tell you exactly the percentage, but I can tell you that we went in our excess-profits tax up to the 35 per cent rate. That means that we had returns from between 20 to 25 per cent.

The CHAIRMAN. I do not think it is too high for that if the other industries are making more.

Mr. SCHWARZMANN. Oh, yes; I should say except for the three years, 1911, 1912, and 1913, we would find that we had returns of about 9 or 10 per cent.

Mr. GARNER. You had that low rate on account of the strikes, is not that it?

Mr. SCHWARZMANN. Yes. Now, there are industries who show that if we take a straight rate there will be these premiums in efficiency. We consider ourselves as an efficient concern. Nevertheless, we had no prewar earnings.

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