Senator O'MAHONEY. The hearings are closed. (Whereupon, at 3:30 p. m., on Thursday, Mar. 24, 1925, the hearings were closed.) SUPPLEMENTARY REMARKS OF CATHARINE CURTIS, NATIONAL DIRECTOR, WOMEN INVESTORS IN AMERICA, INC., NEW YORK CITY, N. Y. In accordance with the privilege extended me by Senator O'Mahoney on the occasion of my appearance before the Senate Judiciary subcommittee on March 22, I herewith submit, for the information and guidance of the committee, additional data in relation to the question of Federal licensing of industry. In my remarks before this committee on the above date, I said, in speaking for the organization which I represent, "We urge you to name a capable nonpartisan fact-finding committee to study these various laws and their effect upon our industrial and economic life in order to determine what ones (acts of Congress) are retarding the economic machinery, then repeal them" (p. 776, typewritten transcript of the hearings). I wish to point out that, in the course of the hearings conducted by this committee since January of 1937, certain studies of alleged "bigness" have been referred to repeatedly as authoritative proof of that "bigness" and the need for its control by the Federal Government. We believe, from an examination of these cited authorities, that they have been given too ready an acceptance without proper study and analysis. We are convinced that they contain certain statistical and other vagaries, some of which we herewith set forth, which raise considerable doubt as to their reliability, and possibly establish that they no longer can be accepted as completely factual and authoritative and therefore should not be considered as establishing proof of either bigness or monopoly. We further contend that, in view of this, for the Congress now to take any action along the lines contemplated in this proposed legislation without proper impartial research and study on its part, would be to perpetarate a gross injustice on the investors of the Nation. In my remarks before the committee I referred to certain statements made to the committee on March 10 by Mr. Willis J. Ballinger when he appeared as a witness favoring such action as this measure contemplates. I wish now to call your attention to two additional statements of this witness: 1. "Five percent of retail establishments do 45 percent of retail business". (p. 297, typewritten transcript of the hearings). We believe this statement to be entirely misleading, in the light of additional facts, as an index of monopoly. According to figures of the United States Department of Commerce, this 5 percent quoted by Mr. Ballinger represents more than 77,000 stores. We cannot accept that business in the hands of 77,000 concerns is a monopoly. 2. "In meat packing, two companies have 50 percent of United States production" (p. 229, typewritten transcript of the hearings). We contend that the above statement cannot be considered as even technically correct. Official data prepared for the proposed N. R. A. meat-packing codes reveals that it took the handlings of all the big packing companies to encompass 50 percent of the total slaughter. This witness follows the procedure of other witnesses in seeking to support his claim of commercial bigness by citing the book the Modern Corporation and Private Property, written by A. A. Berle, Jr., and Gardiner Means and published in 1932. Wherever the cry of monopoly is raised today, one usually hears this book cited as authoritative proof of alleged monopoly. After a study of it, and other available accepted date, we cannot accept it as authoritative, nor do we believe the committee should so consider it. The most widely cited quotation from this book is that "49 percent of all corporate wealth is controlled by the 200 largest corporations." A study of the statistics advanced by the authors in support of this statement reveals that 1. It is based upon the gross assets of these companies which is rather misleading and involves a tremendous amount of duplication. Apparently deriving their figures from income-tax reports, the authors failed to avoid the double counting of gross assets listed in the returns of the companies selected, together with those of subsidiary companies. Squeezing out of these watered figures by eliminating this duplication would reduce the quoted figures considerably. 121861-38-pt. 4—27 2. Prof. W. L. Crum, of Harvard University, in discussing this book in an article in the American Economic Review for March 1934 (pp. 70 to 77), further points out that the authors, in selecting the alleged 200 largest corporations, did not consider only commercial corporations. They included railroads and other public utilities, all of which have been under extreme Federal and other public regulation for many years. Professor Crum states that, if these noncommercial corporations are removed from the list quoted by the authors, it reduces this alleged control of corporate wealth from 49 to 30 percent. Hence the statement of the authors as to 200 corporations controlling 49 percent of corporate wealth cannot be accepted as applying to commercial corporations, which this bill seeks to control. We believe that if the "water" of duplicated assets and of noncommerical corporations was squeezed out of these figures, it would reduce them to about 15 percent, or a figure comparable to that now admitted as representing Government owned or controlled operations in the utilities field. In addition, no consideration is given to the fact that millions of stockholders own the assets of these corporations. These authors, as cited by various witnesses, also contend that the "big corporations" have grown more rapidly than the medium-sized ones. Again we contend that more widely accepted statistics prove to the contrary. An examination of the data used by the authors to support this contention reveals 1. In computing "gross assets" of large corporations, they used valuations of a period when, as everyone knows, prices of all stocks and bonds were in the process of great inflation. 2. In "estimating" the "gross assets" of medium-sized corporations, they use their own specially designed system, which considers neither values during an inflated period nor securities held by the medium-sized corporations in other companies. In other words, it seems apparent that they underestimate the growth of the medium-sized and compare this result with their overestimate of the "giants.” In considering the income of the alleged "giants," these authors again employ methods we do not believe should be accepted as factual or authoritative: 1. Basing the income estimates upon the decade of the twenties, they do not use the same list of "giants" throughout the entire period. There is always a mortality among the large corporations as well as among others. 2. Large corporations do not always continue to go "up hill" in income. The records show that many went "down hill." Inspection of this work shows the authors weeded out those companies with declining incomes during the period, substituting in their place companies whose incomes were rising. We believe this tends to develop a distorted and nonfactual picture and the conclusion reached by such methods should not be accepted as authoritative. Another "authority" cited by proponents of this legislation is How Profitable Is Big Business? published in 1937 by the Twentieth Century Fund. This publication also refers to the Berle-Means book, and is advanced by proponents as proof of the reliability of the latter publication. This A careful study of this Twentieth Century Fund publication reveals that it also fails to consider this vitally important fact, to wit, that the rate of mortality among the large concerns has been greater than that of the rank and file. fact which both Berle and Means and the Twentieth Century Fund disregarded is based upon statistics relative to business provided by Dun & Bradstreet, and we believe establishes the unreliability of the Berle-Means statement that industrial concentration is increasing and on the way to gobbling up all industry. Reference has been repeatedly made by proponents of this bill to the fact that banking is under Federal control, and that many of the fears now being raised by opponents of this legislation were raised 74 years ago by opponents of Federal control of banking. I wish to reiterate my statement made before the committee, to wit, that Federal control of banking has aided, not retarded, monopoly in that field. In addition to the reference to Mr. Balligner's statement previously made by me (p. 769, typewritten transcript of the hearings), I call attention to the testimony of Mr. John P. Frey of the American Federation of Labor before another subcommittee of the Senate Judiciary Committee on January 27 and again on January 31, 1933, during hearings on the wages-and-hours bill. I refer to his remarks as recorded in the printed record of those hearings on pages 439 to 452 as additional proof that Federal control in the banking field has aided, not retarded, monopoly. As additional proof of this contention, I also refer the committee to another publication of the Twentieth Century Fund, to wit, Big Business, Its Growth, and Its Place, also published in 1937—but preceding the one now cited by proponents of this measure as sustaining the Berle-Means book. Attention is called to the following paragraphs from this publication: "During the next 11 years, 1921-31, inclusive, there were 5,094 bank mergers involving 9,538 banks. As a result, 5,137 institutions ceased to exist. But instead of an increase in the number of new small banks to offset this tendency toward concentration-as during the first two decades of the century-8,036 banks were permanently closed subsequent to failure and only about 3,000 new ones were established. This net decline of more than 5,000, plus the decrease of 5,094 banks through merger and consolidation, accounts for about 10,000 of the decrease of approximately 10,500 banks between early 1921 and the end of 1931" (p. 86). "In number they remained insignificant, but their share of the total assets of all national banks rose from slightly more than one-fourth to not much less than one-half" (p. 89). I believe that after considering all these facts it must be admitted the fears of former legislators, cited by Senator O'Mahoney on page 743 of the typewritten transcript of these hearings, were well-founded. Indeed, there are many who will admit that the New England hillsides have lost their farms as the Senator from Vermont prophesied, and if Representative Brooks were alive today, he undoubtedly would see evidence of the banking concentration he feared would be produced by the National Bank Act of 1864. I do not deem it necessary to review present-day legislation that has added to this concentration of Federal control during the past few years. I believe that members of this committee are only too familiar with it. Suffice it to say that Government records reveal the sharpest decrease in the number of banks in our history occurred during the year 1933. In speaking of estimated national wealth, ex-Senator Smith W. Brookhart said: "By the way, Senator, while I think of it, when 1932 came around, it was time for the Government or the Census Bureau to again estimate the national wealth, and they did not do it. They cut it out, because it looked so awfully bad that they did not want it done" (pp. 828-29, typewritten transcript of the hearings). We wish to call attention to reports of the Bureau of the Census, United States Department of Commerce, beginning with the report for the year 1933 and for ensuing years. Examination of those reports reveals: 1. The census of national wealth for the year 1932, was started early in that year. 2. Work on that particular census was dropped late in 1933. He further stated, "I think this committee ought to have the Census Bureau estimate that wealth for 1932, and then they will be ready again in 1942. It is important for you to have that information" (p. 829, id.). We are in complete accord with his recommendation, that the 1932 census should be completed. However, his statement as to the dropping of this work "because it looked so awfully bad they did not want it done,' causes deep concern. May this be taken as proof of a newly instituted and heretofore unrevealed Government practice the deliberate suppression of statistical data and information by the Government because it looks "so awfully bad?" It would seem that the statement of this witness should arouse great interest in the minds of the entire Senate and result in an immediate investigation to determine whether this and other suppressions of fact actually is being carried out. In closing our remarks, I wish again to refer to Senator Brookhart's testimony by calling particular attention to the chart of Col. Leonard P. Ayres which he submitted for the information of the committee. Senator Brookhart called attention to the fact the greatest and most prolonged depression ever experienced by this country, is graphically set forth on the Colonel Ayres chart covering the years 1930-37. We offer this portion of Colonel Ayres' chart as conclusive evidence that the prolongation of this depression encompasses the years during which there has been more Government legislation passed which has provided for more investigation, intimation, regulation, and control of and more competition with industry by Government than at any other period during our entire history. All of this, we contend, has acted as brakes upon the normal functioning of our capitalistic system-the repression of the normal laws of that system and the resultant extension of the depressed period as noted in the chart. History establishes that new industries have led us out of past depressions. How can new industries be developed if businessmen are forced to give more and more of their time in defending their activities against Government attack— in settling disputes-in analyzing recently passed or newly considered legislation relating to them-and in paying more and more taxes to Government for use in its steadily increasing nonproductive activities? Three important facts are essential in promoting industrial development. They are (1) inventive genius, (2) mechanical ability, and (3) surplus capital. As yet, no legislative means has been discovered to abolish the first and second of these. But we do feel that the third is being seriously affected by present-day legislative and governmental activities. Neither inventive genius nor mechanical ability can, of themselves, bring a new industry into life without the assistance of surplus capital. That surplus capital is the result of the savings of the people and the "excess profits" of industry. We believe this committee is familiar with laws recently passed that limit the possibility of creating new industries from the "excess profits" of industry. In addition to all this, how can new industries obtain finance if the investors of the country continue their unwillingness to invest their savings in new enterprise because of fear and realization of the existing chaotic situation? Remove the brakes from our capitalistic system and it will once more function efficiently for our people as it has in the past. To do this, we again recommend: Investigate the acts of Congress and Government to uncover those brakesthen remove them. APPENDIX FEDERAL TRADE COMMISSION, Mr. DONALD MORGAN, United States Capitol, Washington, D. C. DEAR MR. MORGAN: Attached are the charts requested by Senator Warren G. Austin of all corporations in the United States with assets of $50,000,000 or more taken from Poor's and Moody's, industrials, railroads, public utilities, and fiscal corporations, 1937. I note in the remarks of Senator Austin, when I was before the committee, that he requested the names of all corporations with assets or capitalization of $50,000,000 or more. I stated in my remarks that corporations with assets of $50,000,000 or more were regarded by Burley and Means as small corporations, as corporations go in the United States. I assumed, therefore, that a report on all corporations with assets, as distinguished from capitalization, of $50,000,000 or more will be satisfactory to the Senator. Sincerely yours, WILLIS J. BAllinger, Economic Adviser to the Commission. 767 |