bulk of it, people of, say, $50,000 a year or better income, maybe 100,000, maybe a few more, but not many more, will be automatically taken away from those people because they won't get the dividend that will result from monopolistic control.

I see nothing startling about the suggestion. I think it is a difficult problem, but it is the most classic American way of getting at it. Do I understand you correctly?

Dr. EZEKIEL. I agree completely with what you said. Really all that we are asking is for these big corporations to act the way that oldfashioned competition was supposed to make them act.

Mr. PIKE. That is one of the central problems in the study that this committee is supposed to make.

Dr. EZEKIEL. I have one little chart here which I wasn't going to introduce in the evidence, which bears on the extent that they act now. This was taken from the Annalist and shows the closeness with which industrial profits and busines activity run together. The fact is that changes in industrial production and changes in business activity run very closely together and practically coincide, but the discussion in the Annalist and everywhere else never emphasizes the fact that on the average a change of 15 points in the level of industrial production has gone along with a change of 100 points in the level of profits.

(Chart from the Annalist of May 9, 1940, entitled "First Quarter Industrial Earnings Show Less Than Usual Decline Relative to Business Activity" was received in evidence, marked "Exhibit No. 2807," and is on file with the committee.)

Dr. EZEKIEL. In other words, on the way up and also on the way down, profits change six times as fast as industrial production and the big corporations when they get into these periods of high activity, for example, if their production goes up to 40 percent, expect to make three times as much profits, and that feeds into this situation. If we could get some system by which automatically, or semiautomatically at least, wages would go up and prices would go down, as you get into these periods of high production and declining per-unit cost, you would bring about the result you mention.

Mr. COMER. Mr. Chairman, may I make just one comment? I think the studies of the Antitrust Division will indicate that when concentration reaches the point that there are only 8 or 10 large concerns dominating in an important industry, it is not to their self-interest. to behave as competitors. They make more money without competing, pricewise, at least. Therefore, there is no chance to get them to act as competitors without breaking them up into smaller units where they will have an interest in competition.

Ďr. EZEKIEL, Right. I would add only a single point to that, that there possibly may be other ways besides breaking them up to get them to behave differently.

Mr. COMER. Possibly.

Senator MEAD. Mr. Chairman, if I may, I would like to ask the doctor a question. I just got in, Doctor, when you were talking on the inequality of the present social-security set-up, whereby it was contributing to the inflationary situation

Dr. EZEKIEL (interposing). The deflationary situation.

Senator MEAD. That is right. Now efforts have been made in the Congress at times to increase the allowance for those in the lower-paid groups, those in the old-age-assistance groups. I can recall one amendment which would increase the Federal contribution from a 50-50

contribution, which it is now, to a two-thirds Federal and one-third State contribution. Other efforts have been made to establish a minimum of $30 per month per aged applicant.

I would like to have your opinion on the efficacy of the proposal to increase the State and Federal allowance for the senior citizens who apply for old-age assistance, and what effect that would have upon the stabilization of our economy. Personally, I believe that the oldage allowance should be raised to at least a minimum of $30 a month per person, perhaps with a minimum of $45 per month for two persons living in the same house or in the same family. As a set-up, perhaps it would affect our economy less if the Federal Government assumed a two-thirds share rather than the entire share, which ultimately will be the case. Nevertheless, I would like to have your opinion as to the effect upon our economy of a requirement on the part of the Federal Government of cooperation of the States in making it a $30 minimum so far as old-age assistance is concerned. What effect would that have upon our economy?

Dr. EZEKIEL. As I have already indicated in the earlier part of my statement, I believe we need to increase very greatly the old-age payments, as well as the other social-security payments, and we need to bring everyone under their coverage. Now, as to the specific way of doing it or the specific amounts that should be appropriated, I don't pretend to be an expert in that field. I do quite agree, however, it would be desirable if the Federal Government would contribute a very much larger share of the total payments, particularly in those States whose sources of revenue are so low they can't possibly provide adequate assistance themselves. I think it is conceivable we might devise a system of graduated State grants-in-aid which would give more to States less able to care for their needs properly and less to States more able to carry the burden.

I quite agree as to the general effect, that larger income to those people, particularly if not backed by sales taxes or something else that would reduce buying power of others, undoubtedly would increase the consuming power of our economy and make it unnecessary to take other steps.

Senator MEAD. And I suppose the greatest good would come from increasing the amount now being paid to those drawing less from the social-security system.

Dr. EZEKIEL. And, of course, as I also pointed out, there are many people disabled and without income because of health disability, other things than old age, which are completely uncovered at the present time, except blindness, and we might extend the same coverage to them we do to old age, the same kind of assistance.

The CHAIRMAN. Thank you very much, Doctor.

Mr. Montgomery, will you be good enough to proceed?

STATEMENT OF DONALD E. MONTGOMERY, DIRECTOR, CONSUMERS' COUNSEL DIVISION, DEPARTMENT OF AGRICULTURE

Mr. MONTGOMERY. Mr. Chairman, members of the committee [reading]:

I am here to make certain recommendations which I believe will suggest ways in which you can promote the welfare of the consumers of this country, and by so doing enlarge the opportunities of our people to build an economy in which the

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principle of monopoly is displaced by the principle of abundance. I appreciate this opportunity of appearing before you, which is given to me, I suppose, because there is no one agency of Government that is recognized as speaking for consumers, and because I am one of those who have had extensive contacts with consumer groups and some experience in dealing with the problems of the consumer. In any event, I wish to make clear at the outset that I am not here representing the Department of Agriculture, in which I am Director of the Consumers' Counsel Division, but am offering you recommendations based upon my own experience and upon consultations over many years with others inside and outside of Government who have concerned themselves with these questions.

It is as consumers that we feel most strongly the impact of concentrated eco. nomic power when it is used to restrict output, to reduce the purchasing power of wages and farm income, and to depress standards of living. One answer to such abuse of power, which we like to think of as the American kind of answer, calls for restoring power to the people so that they may determine their own way of living. We should take great encouragement, I think, to go forward in that direction when we observe the enormous strides that the American people have made in recent years in taking active and effective interest in their own welfare as wage earners, as farmers, and as consumers. There is not time here today to recite to you the evidence of the awakening interest and the growing responsibility which really large numbers of people are showing in their consumer activities. I can assure you, however, that they are working at public problems unselfishly and with great energy and with increasing competence. They are pointing out, I believe, not merely ways in which consumers can help themselves, but ways in which all economic interests together can throw overboard the monopolistic devices by which they now prey upon each other and deny themselves the abundant good living that is waiting for them when they are ready to produce it.

What consumers want is more goods. This they believe they can have and should have. They believe they can have it with security of income and decent working conditions for all who make a useful contribution to that result. Their program for a good living is expressed in a variety of demands, but all of these are subordinate to the requirement that the production of useful goods be maintained at the highest possible level at all times. Only if goods are produced can they be consumed.

Therefore, the protection of consumers calls for the same thing that is required for the protection of the Nation in its defense efforts: maximum production. What we need for defense is top speed and full use of materials and facilities in producing armaments. What we need for the standard of living is full use of all the materials and facilities that are, or can be made, available for the production of civilian goods.

This consumer demand for more seems sensible enough, yet it is a unique demand. I ask you members of the committee to check your own experience, and to say what other groups, what other economic interests, come to you to say that they want help in getting more goods produced. What groups ask you for legislation to help them increase production How many, on the other hand, seek help in making and selling less for more? Agriculture, we know, has been asking help of Government to produce less, trying to fit itself to an industrial economy that by its numerous limitations of output narrows the market for the products of agriculture.

I have brought with me here today a chart, this first one on the easel, on which I have illustrated for 160 statistical series from Government sources, all of them measuring physical volume of output in different lines of industry, and that chart compares the highest physical output of any month in 1940 with the 100 line which is the highest output for that particular line of goods in any one month of the preceding 4 years. In other words, it is drafted on this assumption, or to answer this question.

Assuming that in 1940 we had an urgency to produce at a high level, how well did our best in 1940 compare with what the record of the preceding 4 years shows at least to have been possible? I only went back 4 years because if you go too far you can't tell whether the conditions then and now are comparable.

It shows that in quite a number of the series there, the best in 1940 was lower than the highest month we had made in one of the preceding 4 years, and it shows that the lowest month-which is indicated on the chart by little cross lines which you can just distinguish from where you sit-the lowest month of 1940 in almost all cases was lower than the best we had done in the preceding 4 years.

I said there are 160 series there. In 83 of them, the best of 1940 was lower than the best month of the years 1936 to 1939; and in 72 of them, the best month in 1940 was higher than it had been in the years 1936 to 1939.

I think the chart indicates this, that even in 1940 we certainly had a great national need for getting out the goods; in many lines of goods we weren't doing as well as we had done in some previous month during the earlier 4 years.

Now, of course, in each case there are reasons which the chart doesn't go into, and which I have not attempted to go into, but I think it does indicate that we still have a problem before us of getting and manitaining maximum production all the time.

(The chart entitled "Industrial Output" was received in evidence, marked "Exhibit No. 2808," and appears on p. 459.)

Mr. MONTGOMERY (reading):

I know of one request for Government aid in getting greater production which comes from a labor leader. Philip Murray 2 months ago proposed that the Government set up industry councils whose function would be to assure full use of capacity to produce war materials and consumer goods. Last month he applied his proposal to the steel industry and asserted that almost 6,000,000 tons of steel annually could be added to our present output with the aid of the program which he proposes.

As a matter of fact, I think he said more than 6,000,000 tons could be added. I know he said at least that [reading]:

He has proposed also a program for speeding up the production of the additional housing which is needed.

Philip Murray's proposal, within its limits, is in my opinion the best consumer program that has been suggested since the war began. It doesn't attempt to solve all consumer problems, but it goes to the roots of the most vital oneproduction. I recommend that it receive the committee's most earnest consideration.

For the same reason, I endorse the Assistant Attorney General's recommendations for increased scope to the antitrust laws with which to remove the bottlenecks from the production and distribution of food, housing, household appliances, clothing, farm supplies, and drugs and medicines. I endorse the Federal Trade Commission's recommendations for increased scope to their actions against monopoly.

Consumers also have a stake in the recommendations which Mr. Arnold and the Inter-Departmental Committee have made to abolish the trade barriers that now cut America into little pieces and keep Americans from doing business with each other. There is no use in producing goods if they cannot be distributed. Production will not be forthcoming if the avenues of distribution are blocked. Mr. Arnold's recommendation to give Federal courts equity jurisdiction over State laws and local ordinances which restrict interstate commerce and the Inter-Departmental Committee's proposal of Federal-State cooperation would appear to be not alternative, but complementary, measures for the relief of this situation. Only court injunctions are likely to cope realistically with the problems involved in some kinds of trade barriers, and only a comity between the States and the Federal Government would seem to offer a fruitful way out of other trade-barrier situations.

I endorse also the proposal made by Mr. Thurman Arnold for the repeal of the Miller-Tydings law. Consumers are entitled to full and active competition among manufacturers, among wholesalers, and among retailers of goods, whether these goods be trade-marked or not. If it is argued on behalf of

this legislation that it is necessary to protect against a monopoly of distribution, the remedy lies with the antitrust division or with the Federal Trade Commission. Surely we do not cure one monopoly situation by creating another alongside of it.

Reform of our patent laws will likewise be of great benefit to consumers if such action will assure manufacturers and distributors of greater freedom in putting new products or better methods into use. The great value to consumers of progress by trial and error has been abundantly demonstrated over the last 50 years by the advance in variety, excellence, and cheapness of many kinds of commodities. No type of restraint of trade falls so heavily upon consumers in the long run, or strikes so directly at the heart of our system of enterprise, as a restraint which denies to producers the opportunity to experiment and deprives consumers of the opportunity to choose between the old and the new.

All of these recommendations of others I endorse because they go directly to this question that is of first importance to consumers-maximum possible production of useful goods.

Now I want to make two recommendations of my own which tie to this same major purpose.

First, I recommend that the Congress create a central consumer agency in the Government under the broad prescription that it shall foster, promote, and develop the consumer welfare of the people of the United States. Justification for such action by Congress is found in the fact that although the Government is called upon more and more to control, to regulate, to establish rules of the game, and to make decisions in the economic life of the country, the effect of these proceedings upon the consuming public has not received the attention which it deserves.

The CHAIRMAN. That recommendation is couched in rather general terms, Mr. Montgomery.

Mr. MONTGOMERY. I am going to be much more specific about it in a moment, Mr. Chairman [reading]:

The expanded activities of Government have arisen for the most part to meet the needs of people in their producer capacity-their need for greater income or for greater security of income. Steps in this expanding activity of Government have been taken separately; each has been considered on its own merits as the need for it has arisen. In what manner any one of them, or all of them together, affect the standard of living of the whole population has not been given primary consideration. Such consideration as it receives in legislation and in administration is usually quite broad and generalized. Adequate provisions have not been made to accommodate the administration of programs to the needs of consumers, or from time to time to review their results from this point of view. Government programs benefiting a few producers impose burdens upon many consumers not because that is thought desirable by anyone, but rather as a by-product of the producer purposes which those programs are intended to serve.

Most pressures upon Government are exerted by groups that have something to sell and are concerned with how much they can get for it. On the opposite side are the consumers who have money to spend and are concerned with how much they get for their money. But these consumers cannot individually come to Government to find out where their interest is involved and to speak up for it. They are not sufficiently organized as yet, and for a long time will not be, to have their own pressure groups to safeguard their interest in Washington.

Put it this way: If every economic interest of our people could speak up and be heard in the writing and administration of laws, we would have a 100-percent democracy. On the other hand, if all such pressures were abolished, we would have a zero-percent democracy. What we have actually, with only producer interests speaking up for themselves, is something like a 50-percent democracy. What I propose is that we raise this 50 percent, which we now have, some distance toward the 100 percent that we are all aiming at, by making it a normal and regular function of a governmental agency to do all that it can to speak for consumers who are not yet equipped to speak for themselves.

I believe that the time has arrived in the life of these expanding activities of Government to take specific steps to achieve this better balance in the interest of all the population as consumers. In suggesting somewhat specifically how this

can be done, I have drawn upon the experience of many of us who have tried to work at the job within the present framework of Government and of others outside of Government who have concerned themselves with this problem in their organization work.