INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER SATURDAY, DECEMBER 3, 1938 UNITED STATES SENATE, TEMPORARY NATIONAL ECONOMIC COMMITTEE, Washington, D. C. The Temporary National Economic Committee met, pursuant to adjournment yesterday, at 10:30 a. m. in the caucus room of the Senate Office Building, Senator Joseph C. O'Mahoney, presiding. Present: Senators O'Mahoney (chairman), King, Borah; Representatives Sumners, Reece, Eicher; Messrs. Lubin, Hinrichs, Douglas, Frank, Patterson, Arnold, Berge, Ferguson, Davis, Oliphant, Peoples, Henderson. Present also: Directors of Studies Dr. Willard Thorp, Commerce; Mr. Hugh B. Cox, Justice; Mr. Willis J. Ballinger, Federal Trade Commission; Mr. Thomas C. Blaisdell, Securities and Exchange Commission; Mr. J. J. O'Connell, Treasury; Miss Aryness Joy, Labor. The CHAIRMAN. The meeting will come to order. Gentlemen, will you take your seats? On Thursday and on Friday, Dr. Lubin, of the Bureau of Labor Statistics, and Dr. Willard Thorp, who has been associated with the Department of Commerce in the studies which have been going on, gave testimony to the committee setting forth the character and changes of our economic system. Today Leon Henderson, executive secretary of the committee, will attempt to pose the questions which are suggested by the testimony of Thursday and Friday. Mr. Henderson will now take the stand. TESTIMONY OF LEON HENDERSON, EXECUTIVE SECRETARY, TEMPORARY NATIONAL ECONOMIC COMMITTEE, WASHINGTON, D. C. Mr. HENDERSON. Senator O'Mahoney The CHAIRMAN (interposing). Won't you first tell us who you are? There may be some people who may be a little bit uncertain. Mr. HENDERSON. Well, I am at present executive secretary of the Temporary National Economic Committee. Immediately prior, I was consulting economist for W. P. A. During the 1936 Presidential election campaign, I was working with the Democratic National Campaign Committee. Prior to that I was economic adviser to the United States Senate Committee on Manufactures. Prior to that I was in various positions with the N. R. A., having been economic adviser to General Johnson, and later to the National Industrial Recovery Board, and a member ex officio of the Industrial Recovery Board, as well as director of the Research and Planning Division of N. R. A. during that period. Before that I was director of the department of remedial loans of the Russell Sage Foundation. The CHAIRMAN. And for this committee you have been acting principally as coordinator of the activities of the various executive departments which are represented on the committee and of the work undertaken by other executive agencies at the request of the committee. Mr. HENDERSON. That is correct, and I think it ought to be said that practically everything which I am covering today is entirely new for the committee, and if there is a responsibility involved, it is mine. THE AMERICAN ECONOMY MR. HENDERSON. In essence, Dr. Lubin has given us a picture of the American economy in terms of its performance, and Dr. Thorp yesterday in very unique terms described the machinery of production and some of the operating difficulties which confront the business man as an agent of production. We are left with a tremendous sense of appreciation for the degree of coordination which still remains in an economic system that could produce $62,000,000,000 of national income this year, and about $70,000,000,000 last year.1 But appreciation gives way to bewilderment and perplexity when we remember losses like $120,000,000,000 of wages and salaries,2 $38,000,000,000 of farm income and $20,000,000,000 of dividends in the last 9 years. These are dollar signs of measurement. In human terms the losses are measured by the millions of unemployed. I ought to emphasize that Dr. Lubin's figures on losses are computed on a very conservative basis, that of 1929. He did not, as he properly might have, allow either for the natural increase in population which we know has taken place since 1929, nor did he give in his computations any consideration to the growth line in the American economy over a long period of years. I want to refer to that growth line because it has been the outstanding measurement of the growth of the American economy. This line here shows what has taken place in the growth of national income. The CHAIRMAN. May I interrupt to ask you to identify the chart for the benefit of the record. Mr. HENDERSON. I am now referring to the chart, "United States National Income," and if we had also the chart showing the growth in industrial production, it would follow, of course, that line, since this is a dollar equivalent of the physical production. If, however, we assume that America was moving up like this, we would assume that by 1938, if the same rate of exports had persisted, if the same adjustment had taken place as was taking place in the most productive part of the 1920's, we would probably be in terms of 1929 dollars at around $94,000,000,000 of national income. Senator KING. Doctor, you do emphasize, do you not, the relation between the United States and other governments, the rest of the world? That is to say, the rest of the world plays an important part in our economic development. 1 See exhibit No. 5. supra, p. 5. Referring to top line of exhibit No. 5, supra, p. 5. Mr. HENDERSON. I hope to come to a part of that before I am through, Senator King. If Dr. Lubin had very properly estimated this as a loss, and it is a very real loss when you come to think in terms of unemployment, he might have estimated, as Dr. L. H. Bean of the Department of Agriculture has estimated, that the loss in national income has been $293,000,000,000 since 1929. The CHAIRMAN. But Mr. Henderson, is there any reason to believe that this expansion which is represented on this chart, "United States National Income," as rising from about $10,000,000,000 in 1890 to 68 or 69 billion dollars in 1920, and 81 billions in 1929, could by any possibility have continued at that rate? Mr. HENDERSON. It depends upon your assumptions, Senator O'Mahoney, If you take the rate of growth that was persistent during the 1920's, it is fantastic to consider the degree to which the national income might have gone. If you translate it in terms of what are the markets for our goods, it is fantastic also. The CHAIRMAN. What I have in mind, and I raise this not in an argumentative way but merely to indicate my own belief that Dr. Lubin's figures were more realistic, is this: 1 Yesterday Dr. Thorp presented a chart showing the first 10 industries in the United States in two separate periods. The second period showed that the motor-car industry had become the first industry in the United States, whereas in the earlier period it wasn't represented among the first 10 at all. Now, I have the notion that a large part of this expansion between 1915 and 1929 was probably due to the expansion of the automobile industry, and we also know that there is a point of saturation in every market, and it is possible that in 1929 that point had come in the automobile industry where it was no longer possible to multiply sales without doing what Dr. Lubin indicated ought to be done, increasing the purchasing power of the lower-income groups. I cite this merely to indicate, as I say, my own belief that the figures of Dr. Lubin were a little more realistic. Mr. HENDERSON. I am afraid that I will have to take a different interpretation of realism in terms of two or three things. First, the dynamics of the capitalistic system of production require that a certain amount of savings be employed in expansion of the producing system, and if that is true, and if consumption keeps pace with that— and I have no doubt as to the possibilities of expansion of consumption-then a moderate rate of growth is not only realistically to be assumed, but it becomes what is even more important, almost necessary. I expect to make some observations on that a little bit later. UNEMPLOYMENT AND THE LABOR SUPPLY Mr. HENDERSON. We have two tests as to performance of the economy, one in dollar signs of national income and one in terms of the number of the unemployed. There are no regular current figures of unemployment in the United States officially maintained. In the course of the work that I have done over a period of time, however, it has been necessary to make an See exhibit No. 70, p. 129. estimate, so I should like, in order to get some measurement in human terms, to insert an unofficial estimate of unemployment which I have made myself. Assuming that in March 1933 the total unemployment had reached 14,317,000, the low point since that time was July of 1937, when there were 7,412,000. By February 1938 the number of unemployed had risen to 11,793,000, and as of October 1938, unemployment was approximately 10,569,000. During this period, one of the things which made difficult the estimating of the unemployed was the number of new persons that were entering the labor force, those who were seeking jobs, in other words. In January 1929, the labor force was estimated to be about 48,000,000. In March of 1933 it was about 50,646,000. By the time we had reached the low point in this movement of July 1937, the labor force was 53,346,000. As of today, it is about 54,230,000. Now, converting the performance of the economy in terms of the reduction of unemployment, taking the high of March 1933, of 14,317,000, and the low of July 1937, of 7,412,000, that would show a net reduction of 6,905,000, but there had been in that time 2,700,000 added to the available working force. Taken together, that meant a net increase in unemployment of about 9,605,000, so that in the forward drive that took place between March of 1933 and July of 1937 about 9,605,000 people found jobs. Senator KING. Including those on relief paid by the Government? Mr. HENDERSON. No. Senator KING. Those given work by the Works Progress? Mr. HENDERSON. No. Senator KING. Or the P. W. A.? Mr. HENDERSON. P. W. A., yes. Dr. LUBIN. Mr. Henderson, on the basis of those figures it is correct to assume that if we had had no depression since 1929, if we had kept going on a perfectly straight line, the number of people who were added to the labor force plus those who were unemployed in 1929 would mean that you would still have had around 8,000,000 people unemployed in the United States at the present time? Mr. OLIPHANT. On the level of production of 1929. The CHAIRMAN. What is the constant rate of expansion of the labor force? Mr. HENDERSON. The estimates vary. A conservative estimate places it at about 30,000 a month, and another nearer 50,000. The CHAIRMAN. That would be 600,000 a year at 50,000. Mr. HENDERSON. And the one of 50,000, I would say, comes closer to corresponding to the estimate of the labor force that you can derive from the Biggers census. The CHAIRMAN. Those estimates are based on census figures? Mr. HENDERSON. They are based upon our experience over a period of time and the census. The CHAIRMAN. Does that represent a net increase? Mr. HENDERSON. Yes. The CHAIRMAN. In other words, when you say the increased available labor supply is 30,000 or 50,000 a month, you are taking into consideration the numbers of persons who by death and illness and all other circumstances are retired from the labor market. Mr. HENDERSON. That is right. The CHAIRMAN. On the basis of these figures would you care to indulge in any prophecy? Mr. HENDERSON. Senator, so far as prophecy is concerned, I might say that I have retired from the field. I am somewhat in the position of the fellow who, the first time up, made a hole in one in golf, and he said, "Why go any further? I've reached perfection." Representative REECE. I am interesed in your estimates of the employables in the country. As I understand, you estimate that there are now 54,000,000. Mr. HENDERSON. That is right. Representative REECE. Out of a population of how many? Representative REECE. The estimate strikes me off-hand as being rather high. Upon what was the estimate based? Mr. HENDERSON. The estimate is based upon the census and then estimates for the intercensal periods, based upon the known number that are coming into the market and other estimates. Mr. OLIPHANT. And includes both men and women? Representative REECE. In connection with the various unemployment censuses, has there been a census made or an estimate made from the standpoint of the number employed at one period as compared to the number employed at another period showing the number who had lost employment, with a view of arriving at the number employed of the unemployed from the standpoint of those who had previously been employed and had later lost their employment? Mr. HENDERSON. Dr. Lubin gave the figures on employment which are calculated each month. Representative REECE. I had in mind that there is a certain number of people who might be classed as unemployed who probably had never been employed. Mr. DAVIS. And who do not want to be employed. Representative REECE. And I fear some of them may not wish to be employed. Mr. HENDERSON. The estimate of the total number in the labor force is made by the National Industrial Conference Board, which, as you probably know, is an employers' organization. Representative REECE. When you have a voluntary unemployment census, it has been my observation that the people who will go to register as unemployed include, especially in the rural sections, a large number of people who may work at periods on the farm, but by registering as unemployed hope to secure positions otherwise. I presume, however, that those in charge have taken account of that. Dr. LUBIN. Congressman, the significant thing is that, if you start out with the assumption that there were a certain number of people unemployed in 1929, about 1,800,000, that doesn't mean that the same 1,800,000 were unemployed all the time. It is the average for the year. It means on the average there were 1,800,000 people out of work. If you add to that 1,800,000 the number of people-or, let's put it this way: If you take the labor supply of 1929 or 1930 as shown by the census and add to it the net increase in the employable population, that is a net figure which takes into consideration not only deaths, retirements, illness, but also takes into consideration the growth in the |