LETTER OF TRANSMITTAL Hon. KENNETH S. WHERRY, Chairman, Special Committee To Study Problems of American Small Business, Washington, D. C. DEAR SENATOR WHERRY: Extensive hearings by the Steel Subcommittee over the past year and a half have shown that disruptions to normal channels of trade, caused by withdrawal of distribution by major steel companies-and increased integration in the steel industry-have left many smaller businesses without sources of supply for steel. In order to show whether the claims of small business at all levels in the industry were substantiated by definite evidence from producing companies' own distribution records, the Steel Subcommittee determined to carry out its own recommendation to secure this information. (See recommendation No. 3, interim report.) The survey, as undertaken, was limited to the most important steel products in relation to the needs of smaller business. It was sent to 14 major steel companies, which most nearly complied with the requirements of the survey, with respect to integration and manufacture of the selected steel products. The survey asked for the distribution of short-supply steel products (1) by geographic areas; (2) to affiliated and to independent steel-consuming companies; and (3) to affiliated warehouses and to independent jobbers and dealers. A complete summary of the statistics submitted by the steel industry is reprinted in the appendix. The subcommittee analyzed this information in the aggregate, so as not to reveal the individual company's information. Without such information, the Senate Small Business Committee could not properly evaluate the claims of small business-nor take effective action to remedy conditions which may threaten the American system of free, competitive enterprise. This is the first time such information has been made available, or published by a congressional committee. The Steel Subcommittee appreciates the cooperation of the participating steel companies in supplying the data from which the analysis has been made, and urgently recommends the report to the attention of the entire steel industry. Very truly yours, EDWARD MARTIN, Chairman, Steel Subcommittee. V CHANGES IN DISTRIBUTION OF STEEL, 1940-47 FEBRUARY 10, 1949.-Ordered to be printed with an illustration Mr. WHERRY (for Mr. MARTIN), from the Special Committee To Study Problems of American Small Business, submitted the following SPECIAL REPORT [Pursuant to S. Res. 20] RECOMMENDATIONS AND CONCLUSIONS If the experience in hot-rolled-steel-sheet distribution is typical of most other steel products covered by the committee's survey-and a rapid and admittedly cursory comparison indicates that it is then the Steel Subcommittee feels that this distribution pattern is alarming. The power to govern the distribution of steel is the power of life and death in the economic world. The way in which it is exercised determines which businesses grow and which do not, which industries expand and which do not, which States and regions prosper and which do not. Yet, despite its overwhelming importance, the power appears to have been exercised, for example, so that the 12 areas which happened to be the major centers of steel production received nearly half as much again as their prewar shipments of hot-rolled-steel sheets, while the amount flowing into the entire remainder of the country stood practically unchanged, rising only 2.7 percent. This means that in these other parts of the country which comprise by far the vast majority of our States and cities, their expanded steelconsuming facilities either had to be closed down or operated at considerably less than their full capacity. It means that in these areas both small and large firms were unable to secure their fair share of postwar market expansion. It means It means a further centralization of productive activities in a few greatly congested industrial centers. Such trends, which have serious economic implications, are also dangerous from a strategic-defense standpoint. The committee recognizes that the managers of private industry have a responsibility to the stockholders of their individual companies to earn a maximum profit. But the committee also recognizes that the managers of industry have a responsibility to the people of the 1 |