came, it would be only after a struggle under the existing multitude of Government regulations; and a large part of the profit would be taken from him in taxes. He had concluded it wasn't worth the risk. Thus 500-perhaps a thousand-men failed to get jobs. I submit, sir, that it was, more than anything else, the minutiae of Government regulation and regimentation that kept those men out of their jobs. And I believe that throughout the United States incidents like this are happening every day.

Senator BORAH. What kind of business was he going to engage in? Mr. HART. I do not know. It was a manufacturing business of some sort. I did not inquire. Mr. Chairman, too much has been made of the faults and errors of a few in private enterprise-far too little of the marvelous accomplishments of the great majority. Through listening to the propaganda about the few, we have been induced in this country to pass laws that have literally hamstrung the great majority. This pending bill, plausible as may be some of the arguments in its behalf, is certain to be just one more such law. Indeed, with its latent powers of mischief, it would be one of the worst. For to paraphrase John Marshall, the power to license is the power to destroy.

Senator BORAH. When and where did John Marshall say that? Mr. HART. In one of his opinions.

Senator BORAH. I have always understood that he said "The power to tax is the power to destroy."

Mr. HART. Yes; but I said "to paraphrase John Marshall."
Senator BORAH. It is quite a paraphrase.

Mr. HART. I think it is pretty good.

Senator BORAH. It may be, but it has no application to this bill. Mr. HART. I believe that this Senate is the greatest hope of freedom in the United States today. I believe that the sincerity of every man on this committee is as deep as I would claim my own to be. And in this spirit, I urge you gentlemen to lay aside this bill. Or pass it, in order to remedy the evils you have in mind, would be like taking down the fire engine for minor repairs, instead of going to the fire.

The overwhelming problem in America today is to get men back to work. They can work permanently in only one field, and that is private enterprise. Free private enterprise is all that lies between the people and utter chaos. It stands today nonplussed, disheartened, discouraged. The Senate of the United States last summer brought it the encouragement of defeating the Supreme Court bill. Give it the encouragement, I beg you, of withholding this bill also. Senator BORAH. Are you of the opinion that there are some rascals in business?

Mr. HART. Yes.

Senator BORAH. Of course, you think there are comparatively few? Mr. HART. Yes.

Senator BORAH. I am not questioning you on that ground, but there are a good many corporations in this country which have sufficient power to fix prices on practically everything the human family has to use in order to live.

Mr. HART. They may have the legal power, but with competition as it is they do not have the economic power. If they did, the bottom would drop out of their business.

Senator BORAH. I think it dropped out in 1929, for that reason. Mr. HART. It has dropped very recently. Let me give you an instance of what happened in up-State New York last spring. Under the influence of the C. I. O. two successive wage increases of 10 percent were made in a certain industry. From the moment those were made that business, which was doing business on a close margin, had to raise the prices, and its orders began to fall off. Within 6 months they had laid off half the men and the others were working half time. That was in August before the depression started. It never would have raised prices otherwise, because it knew it could not continue if it did. The law of diminishing return is very well understood by businessmen today. If they do not understand it at first, many of them learn by experience.

Senator BORAH. Prof. Paul E. Douglas, of Northwestern University, in testifying before the Committee on Unemployment and Relief, said:

I regard the monopoly fixation of prices as a major cause both of the present recession and of the 1929 depression. There is little doubt about the fact of monopoly control of prices over large areas of business. In a few industries, such as aluminum, one firm controls virtually the entire product and hence is able to set prices more or less by itself.

Then he cites a number of instances. Now, in 1929 we had the situation that you desire to have. The corporations were not being interfered with by the Federal Government. We had no depression. We had comparatively low taxes. Yet at that time there came upon us a crash. Fifty percent of the people of the United States in 1928 and 1929, at the time we were the largest producer of wealth in the world, were living on less than the bare necessities of life. In my opinion, that arose out of the fact that these corporations had power to fix prices which drained away from the people all of their savings which might have made possible a reasonable existence. One-third of our people had nothing to fall back on. They were living on the bare necessities of life. If Professor Douglas is correct, it was by reason of monopolistic power to control prices that caused that situation.

Mr. HART. I do not think I would agree with Professor Douglas. Might I say, in commenting upon what you just said, taking the proportion of people in this country who own their own houses, which I think is about half, and the proportion who own their own farms and 10 or 12 million individuals who are stockholders in corporations, there are in addition some 42 million savings bank depositors.

Senator BORAH. The depositors in the savings banks are people who have incomes of seven or eight thousand dollars a year, not the poor people.

Mr. HART. I have some figures I would be glad to submit to you on that.

Senator BORAH. We can get the figures from the Brookings Institution. They furnished us with some figures. They are always cited as evidence of prosperity of the people.

Mr. HART. There are 42 million of those accounts. There certainly are not 42 milion people with incomes of $38,000 a year.

Senator BORAH. The Brookings Institution furnished figures showing that these savings-banks deposits were made by people with over $8,000 a year.

Mr. HART. The deposits are limited to not more than $5,000.

Senator BORAH. Of course, they did not put in the entire $8,000. Mr. HART. I go into savings banks frequently, and I see very few who look like $8,000 people. Certainly, in the city I come from they are people in the lower walks of life.

Senator BORAH. I have this Brookings matter in the record.
Mr. HART. I will be glad to have it done.

I should like to call your attention to this pamphlet issued by the Department of Commerce on the national income in the United States from 1929 to 1935. There is a chart set forth on page 99 which throws some light on this subject. It shows the proportion of the income paid out by the manufcturing corporations of the country that goes to labor, including with labor the salaries of the white-collared workers and officers. The total proportion of all the income so paid out in 1934 was 84 percent. That amount went to labor, including those getting salaries, leaving 16 percent for interest and dividends and other items that are not included. I think a study of that chart would be interesting.

Senator O'MAHONEY. We will incorporate that into the record. Senator BORAH. Professor Douglas also says:

In other industries, we find one or two companies exercising a dominant control over output with the result that other firms follow their lead in the matter of prices. Agricultural machinery, electrical machinery and equipment, heavy chemicals, cement, and certain branches of the iron and steel industry fall for example within this group. Then there are more loosely organized industries which have their trade associations. Here amidst the haze of cigar smoke, manufacturers and dealers commonly reach understandings about prices, and despite all difficulties of enforcement, tend to fix them at higher levels than would prevail under perfect competition.

I know the defense which is made for both open-price arrangements and the so-called basing-point system. The experience which I had as a member of the Consumers Advisory Board of the N. R. A. convinced me, however, that in the majority of cases the open-price agreements were used as enforcing devices to prevent a given manufacturer from selling at less than a previously agreed price and that if he tried to do so he would be threatened with reprisals. The basingpoint system can also be used as a means of fixing prices and is commonly an evidence of a lack of competition in establishing prices.

Finally, we have a wide variety of trade-marked and branded goods, the retail prices of which are fixed by the manufacturers and on which price-cutting is forbidden, I believe, by over 40 State laws.

I am sorry to say that these tendencies have been increased in the last few years. The farmers of this country became properly 'resentful at the way prices of the goods they bought were boosted by the city monopolies and by the protective tariff while they were forced to sell in a competitive market. Instead, however, of adopting the long-run policy of restoring competition to urban industry and hence reducing the prices of the goods they bought, they sought immediate and short-run relief by asking that the Government extend the monopoly system to agriculture and by a general limitation of output to raise the prices of the goods they sold.

I do not blame the farmers. I think that once you have the monopoly system it was inevitable that these other things would follow. The monopoly system would inevitably bring about the control of other markets.

Mr. HART. Senator, I believe there are some institutions that may be fixing prices, but, having in mind that statement by the National Industrial Conference Board that the average return of the business corporations in 1929 was 5.4 percent, and having in mind that over a

period of 15 years the average return had been only 3 percent, we do not think, sir, that the monopolistic practices that exist would be reflected in that result.

Senator BORAH. If monopolies are fixing prices for 130 million on a particular product, the return might seem small in percentage, but would be tremendous in final result.

Mr. HART. I wonder if that monopoly is so widespread. I think that in certain industries and I know of one particular concern with certain small competitors—that if they started out to fix prices themselves, if the large companies started out to fix prices, what would the little fellows do? They could not afford to fix lower prices, because their costs are higher than those of the big fellows. They might be wiped out. You would not expect them to charge more, unless they had to. Certainly, the natural thing to do is to follow along. You would not forbid that by law?

Senator BORAH. No; but I would forbid the power to fix prices in the first instance by the monopolies, because the small man must come up to those prices.

Mr. HART. I do not think the large manufacturers or concerns are necessarily monopolies. It is the leading factor in the industry.

Senator BORAH. If it has the power to fix those prices and compel the small manufacturer to adopt them, that makes it a practical monopoly.

Mr. HART. I cannot see that. It seems to me it is a natural working out.

Senator BORAH. But suppose a very large corporation engaged in a particular industry fixes the price of its product which it disposes of to the public that it would be in absolute control of the market, and is strong enough to establish a price at which it can afford to sell, that would bring all the small dealers up to that price.

Mr. HART. Is not that a sound- -a defensible exercise of business judgment, having in mind the desirability of the whole country that corporations may remain solvent?

Senator BORAH. That depends on how much power they use in fixing prices.

Mr. HART. That is the power you would forbid.

Senator O'MAHONEY. As I understand you, you judge everything by the results?

Mr. HART. Yes.

Senator O'MAHONEY. Did I correctly understand you to say, before Senator Borah began to interrogate you, that the standards of the individuals living in the United States have been raised, and that there is less poverty than there used to be?

Mr. HART. I intended to say so. I do not know that I did, but I say it now.

Senator O'MAHONEY. I was very much interested in that statement. I find in the figures of the United States Census Bureau, for example, that the proportion of tenant farmers has been steadily increasing during the past 50 years, and that the proportion of persons who are dependent upon jobs rather than upon the land has been steadily increasing. The result is expressed in the figures to which Senator Borah referred from the Brookings Institute. That group made a study of the whole problem in the United States some years

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