1922. It is improbable that we shall have any considerable merchandise balance in our favor. There has been a continued movement against us in the current items of "invisible" exchange. There has also been a much smaller movement in the export of capital. There has been a continued import of gold despite this situation. The explanation of the latter possibly lies in the fact that there has been a large export of our currency which is being held and used abroad, and there are some evidences that many countries in Europe have been increasing their open balances in the United States and their investments in American securities, resulting at least partially from “a flight of capital" from the fluctuating currencies abroad to our gold securities.

This subject has become of so much importance in comprehensive understanding of our internationl trade and financial relations that it is proposed hereafter to make the surveys within the first 60 days after the end of the calendar year and incorporate them as part of the regular statistical service of the department.

Unemployment Due to the Business Cycle.

It was the view of the members of the Unemployment Conference, which was held during the previous fiscal year under my chairmanship, that certain suggestions for controlling extremes of the business cycle so as to lessen the losses due to recurrent periods of unemployment were worthy of serious consideration, and that in any event a thorough study of the business phenomena of booms and slumps would serve to advance public knowledge and stimulate thought toward constructive solution. Accordingly I appointed the following committee to undertake an investigation and report: Owen D. Young, chairman of the board, General Electric Co., Chairman; Joseph H. Defrees, former president of U. S. Chamber of Commerce; Mary Van Kleeck, Russell Sage Foundation; Matthew Woll, vice president, American Federation of Labor; Clarence M. Wooley, president, American Radiator Co.; Edward Eyre Hunt, secretary of the President's Conference on Unemployment, Secretary.

An exhaustive investigation was undertaken with the assistance of appropriations toward its cost from the Carnegie Foundation and with services contributed to the committee by the Department of Commerce, the National Bureau of Economic Research, The Russell Sage Foundation, The Federated American Engineering Societies, the United States Chamber of Commerce, the American Federation of Labor, the American Statisti

cal Association, the American Economic Association, the Bureau of Railway Economics, and a number of others.

The committee has prepared a constructive report after consideration of the facts and views developed. The report represents a definite advance in economic thought and offers practical constructive suggestions that should make for progress.

Broadly, the business cycle is a constant recurrence of irregularly separated booms and slumps. The general conclusion of the committee is that as the slumps are in the main due to the wastes, extravagance, speculation, inflation, overexpansion, and inefficiency in production developed during the booms, the strategic point of attack, therefore, is the reduction of these evils, mainly through the provision for such current economic information as will show the signs of danger and through its more general understanding and use by producers, distributors, and banks, inducing more constructive and safer policies. Furthermore, the committee has developed some constructive suggestions as to the deferment of public work and construction work of large public-service corporations until periods of depression and unemployment. Such deferment, while in the nature of relief from evils already created, would tend, both by the subtraction of these works from production at the peak of the boom and by their addition to production in the valley of depression, toward the more even progress of business itself.

The report does not suggest panaceas or economic revolution, but seeks to drive home the facts that the enlargement of judgment in individual business men as to the trend of business and the consequent widened vision as to approaching dangers will greatly contribute to stability, and that the necessary information upon which such judgment can be based must be systematically recruited and distributed.

The investigation shows that many firms have pursued such policies and have come through the recent period of business disaster with success and stability, and that ignorance of determinable facts accounts for the disasters to many others.

Two specific recommendations directly affect action by the Government. The first of these is that Government construction should be so regulated that it may be deferred in times of intense private construction and expedited in times of unemployment. The effect would be not only to secure more economical construction for the Government but also to stabilize the construction industries and to considerably mitigate unemployment in periods of depression.

The second recommendation is that the Government's statistical services on production, stocks, and consumption of commodities should be vigorously expanded so as to furnish the basic material from which the commercial public may judge the ebb and flow of economic currents.

The whole problem belongs to a vast category of issues which we must as a Nation confront in the elimination of waste if we are to maintain and increase our high standards of living. No waste is greater than unemployment, no suffering is keener or more freighted with despair than that due to the inability of those who wish to work to get jobs.

The report has created a very large amount of interest and discussion throughout the country. The committee informs me of favorable editorial comment noted in over 800 journals, and favorable discussion amongst economic and commercial bodies is still in progress. The public is indeed indebted to the committee and the large group of its coworkers in the conduct of an investigation resulting in so much constructive thought. Seasonal Operation in the Construction Industries.

The department undertook toward the close of the fiscal year a survey of seasonal operation in the construction industries, in cooperation with a strong committee from the industry, for the purpose of determining how nearly it is possible to eliminate the dull seasons which are characteristic of construction activities.

This

Previous surveys indicate that most construction activities are concentrated in 7 to 10 months of the year, and that contractors' organizations and equipment men, architects, engineers, building material producers, and others connected with construction must usually remain idle for similar periods, idle time represents waste and direct losses to the construction industries, the workers, and the public. The construction industries affect practically all other industries and all classes of our population.

The present survey covers seasonal construction by regions and kinds of structural work, to determine the dates of the beginning and ending of the normal building season for various types of work, such as road building, dwellings, apartments, and business houses.

It also covers seasonal production in building materials, to determine how far this is due to seasonal building operations and trade customs and how far to climatic conditions.

The survey includes an examination of successful devices for lengthening the construction season, in the hope that through

an examination of the facts and proposed remedies it will be possible to suggest sound solutions and obtain general cooperation in carrying them out.

Investigation into Foreign Raw Material Sources.

There are a number of necessary raw materials for the supply of which we are predominantly dependent on imports from foreign countries. Possibly as a result of the war, but more particularly during the past 18 months, there has been a growing tendency for producers of these commodities to combine in control of prices as against the American market. This is particularly the case in nitrates, tanning extracts, quinine, rubber, sisal, tin, cork, mercury, tungsten, and various minor minerals.

The effect of these price combinations in the consequent higher cost to American consumers presents a most serious problem. While we are vigorous in the control of price combinations in respect to our own industries, we are of course powerless to reach these foreign combinations through our antitrust laws.

Under authority of Congress, an exhaustive examination of such combinations was undertaken by the department before the close of the fiscal year to determine-first, the character and extent of the combinations themselves; second, whether alternative sources for these raw materials can be stimulated and therefore natural competition induced; third, what relief can be obtained by stimulation of synthetic or substitute materials within our own borders; and fourth, what protective or retaliatory legislation can be undertaken.

It is as yet too early to speak of the results of these investigations; but one effect has already been of the most practical value, and that is that the notice given of the interest of the American Government in these transactions has in definite cases resulted in stemming the tide of advancing prices and has induced more moderation and consideration on the part of such foreign combinations.

Investigation of Foreign Competition and Foreign Markets in Agricultural Products.

Under authority of Congress, an exhaustive investigation was begun toward the close of the fiscal year into present and probable future foreign competition in export markets for agricultural products, and into the trends in demands for such products in foreign markets. An advisory committee, representing the farm organizations and trades, was formed at the initiation of the investigation.

Part IV.-LEGISLATION NEEDED.

The organic act includes the requirement that recommendations be made of legislation to promote the effective performance of the department in fostering and developing commerce and industry. Many steps are needed for better administration and the public welfare in revision of legislation that has not kept pace with our national growth in matters directly connected with the departmental activities.

Further Reorganization of the Department of Commerce.

The Department of Commerce was created "to foster, promote, and develop the domestic and foreign commerce, mining, manufacture, shipping, and fishing industries, and the transportation facilities." Excluding all of the semijudicial functions of the Government respecting these matters, and excluding the Shipping Board, there are still a large number of functions of the import designated in the organic act which are administered outside the department. They lie in seven different departments and independent agencies of such widely divergent major purposes as the War and Navy. There is inevitable overlap, duplication, and lack of concentration of purpose. In the interest of economy, efficiency of administration, and better service to the public, all the functions of the Government of the character enumerated in the organic act should be at once concentrated in three different groups, (a) industry, (b) trade, and (c) navigation, and each should be under an assistant secretary. Whether each of these groups is brought into this department is secondary to the necessity for the grouping itself in order to obtain concentration of purpose and elimination of overlap. Such a grouping is in the main recommended in the report to Congress on Reorganization of the Federal departments, submitted by President Harding during the last session. Direct savings of upward of $1,000,000 per annum in administration could be made under a regrouping of this character, and many times this amount given to the American people in increased values and service. Fisheries Conservation.

To prevent further depletion of the Alaskan fisheries, I earnestly recommend that legislative ratification be given to the Alaska fisheries reservations which have been established and