INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER

TUESDAY, MARCH 11, 1941

UNITED STATES SENATE,

TEMPORARY NATIONAL ECONOMIC COMMITTEE,

Washington, D. C.

The committee met at 10:15 a. m., pursuant to adjournment on Friday, March 7, 1941, in the caucus room, Senate Office Building, Hon. Thurman W. Arnold presiding.

Present: Thurman W. Arnold, Assistant Attorney General, Department of Justice (acting chairman); Senator James M. Mead, New York; Representative B. Carroll Reece, Tennessee; Wayne C. Taylor, Under Secretary of Commerce; Garland S. Ferguson, Commissioner, Federal Trade Commission; Ewin L. Davis, Commissioner, Federal Trade Commission; Sumner T. Pike, Commissioner, Securities and Exchange Commission; Joseph J. O'Connell, Jr., Special Assistant to General Counsel, Department of the Treasury; A. Ford Hinrichs, chief economist, Bureau of Labor Statistics, Department of Labor; M. Joseph Meehan, Department of Commerce; H. Dewey Anderson, executive secretary of the committee.

Acting Chairman ARNOLD. The committee will please come to order. Dr. ANDERSON. I have here the final statement of the chairman concerning the operation of the T. N. E. C. and his recommendations for the control of the concentration of economic power in the United States.

Acting Chairman ARNOLD. Dr. Anderson, I think that inasmuch as the chairman is unfortunately unable to be here on account of illness, it would not be courteous to him to discuss his recommendations in his absence, and therefore I suggest that the statement be introduced in the record and we postpone discussion of the recommendations until such time as he is able to be present.

(The statement of Chairman O'Mahoney follows:)

FINAL STATEMENT OF SENATOR JOSEPH C. O'MAHONEY, CHAIRMAN OF THE TEMPORARY NATIONAL ECONOMIC COMMITTEE AT THE CLOSING PUBLIC SESSION TO CONSIDER RECOMMENDATIONS

In making this final statement to the Temporary National Economic Committee after almost two years and nine months of cooperation with its legislative and executive members and the persons who have composed its staff, I am glad to be able to say, without reservation of any kind, that the purpose of every person associated with its work has been the preservation of the democratic system. No member of this committee and no person in any way affiliated with

it has ever made any suggestion to the chairman or to the committee the purpose of which was to do other than strengthen our traditional economic and political order.

President Roosevelt, in his message of April 29, 1938, recommending that this study be undertaken, asserted in plain words that he was offering "a program to preserve private enterprise for profit by keeping it free enough to be able to utilize all our resources of capital and labor at a profit." This purpose has been reasserted in one way or another by every person who has submitted a recommendation to this committee. I refer to it now because I feel that it is important to close the public sessions of this committee with the same declaration of faith in the traditional institutions of our country with which the study began.

Whatever recommendations may finally issue from the Temporary National Economic Committee they will be recommendations which, in the judgment of their authors and of the committee, will contribute to the preservation of both political and economic freedom as we have always understood those ideals in America. This was clearly set forth in the preliminary report of this committee wherein it was asserted that: "Everyone seems to agree that a prosperous economy depends not only upon the production and distribution of goods and services, but also upon the free participation of all in the work of producing and distributing them and in the profits of the whole activity."

FAITH IN FREE ENTERPRISE

I believe therefore that our final report should begin with a definite and unequivocal declaration of our faith in free enterprise, a declaration that we do not seek a formula for the establishment of an allpowerful government but one by which to preserve opportunity for all the people. We seek the formula by which we may enable the people to increase production and to distribute goods and services more equitably and effectively than ever before. We seek to foster and encourage private business. We are opposed to all arbitrary control of the economic activity of free men, just as we are opposed to all arbitrary control of their thought or speech, and we oppose such control whether it is exercised by private or public authority.

The unalienable rights of life, liberty, and the pursuit of happiness, the preservation of which was described in the Declaration of Independence as the primary reason why governments are instituted among men, belong to people and may not be taken away from people by any institution which man creates. This principle we must recognize as the cornerstone of our economic as well as of our political structure, for without it all freedom is endangered.

We must make it clear, therefore, if the work of this committee is to be successful, that we have no purpose of trying to cure the evils which have resulted from private restriction of individual opportunity by setting up any system of public restriction to take its place. The recommendations which we shall make will be designed not only to keep government free and responsive to the people, but to keep business free also. Our efforts are directed toward the maintenance of the traditional American system which regards the opportunity to labor and to possess the fruits of labor as an essential and inseparable element of the democratic system.

The experience which the Nation is undergoing now in Washington in its reorganization of industrial effort for defense is conclusive evidence, it seems to me, that disagreement with respect to fundamental objectives is practically nonexistent in the United States. It is of course true that there are among our people a negligible number of persons who believe in Communism, an equally negligible number who believe in the so-called Fascist theory and although the spokesmen for these foreign philosophies make themselves heard from time to time, there is not a sufficient following in either camp to give the slightest concern to the overwhelming majority of Americans who believe in democratic principles.

The danger to democracy does not proceed from the propaganda of those who believe in the authoritarian state, but from our own failure to comprehend the causes of economic instability and to proceed immediately to democratic remedies.

There is altogether too much disposition upon the part of men who are engaged in business to look with fear and suspicion upon the spokesmen of government and too much disposition upon the part of some spokesmen in government to denounce and criticize the acts and omissions of business executives. The truth is that the American standards of business ethics and of political ethics are much higher today than at any time in history and we shall not find the way out of our predicament by criticism of one another or by searching out and condemning one another's economic and political sins. The way out lies along the road of tolerance and cooperation. Certainly the manner in which every element of society is now uniting for purposes of defense is an indication of what we can do by uniting for the purposes of peace and prosperity.

COOPERATION AND PRODUCTION FOR PEACE

If we can forget differences of background, affiliation, status and point of view in order to prepare for war, certainly we should be willing to make the same cooperative effort to establish the firm basis of a prosperous peace. It is obvious that we could not make any effective defense preparation without complete coordination through the one agency to which we all owe allegiance. That agency obviously is the Government and its coordinating power must be used in the same loyal and patriotic manner if we are effectively to prepare for peace.

Every observer realizes and acknowledges that the activity in which we are now so feverishly engaged is necessarily temporary and will terminate when the demand for the materials and munitions of war comes to an end. There is no solution of the economic problem in production for war. Everyone sees on the horizon a problem of the utmost magnitude when suddenly, in the eventual era of peace, the huge defense plants which are now expanding are closed and the workers thrown out of employment. The President is very wisely making plans now for public works of one kind or another to be undertaken when that day comes, but certainly the experience of the last ten years demonstrates clearly that we need more than a government program. We need a program which will set free for productive enterprise the unimagined energies of the most progressive people which ever inhabited this globe.

Before that task can be accomplished, however, we must first discover the underlying causes of the economic maladjustment with

which we have been struggling and to mitigate which, because there was no other alternative, the Government at Washington has been compelled to engage upon a program of deficit-spending which arouses the fears even of those who authorize it.

Everyone acknowledges that in America industrial progress of a most remarkable character has been accomplished. The American standard of living exceeds that of any other nation or of any other era. The rank and file of the people of this country enjoy luxuries which were denied to the wealthiest and most powerful only a few years ago. Yet while this is true, it is also clear, upon the other hand, that the standard of living today is much more unstable than it was in the time of our grandfathers. A much larger proportion of the people of our time are dependent for their livelihood upon conditions, agencies, and tools over which they have no control than at any time in our history.

In the beginning our commercial and industrial system, like our political system, was essentially local in almost all its aspects. The means of livelihood, the instruments of production and distribution were all readily commended by each community. So far as commerce was concerned, the functions of the National Government were directed chiefly to that which was carried on with foreign nations. With the passing years, however, local and State boundaries began to mean less and less so far as business was concerned and as this change took place the powers of the National Government began to grow. As Congressman Sumners has pointed out to this committee on several occasions during the hearings, the history of our political system is the history of revolt from arbitrary central authority and the withdrawal from the king of the power to control the lives and property of individual citizens. As he has pointed out, our generation has seen a complete reversal of this trend. Local authority has been losing its effectiveness and during the past fifty years we have witnessed the steady aggrandizement of the power and authority of the central government.

Certainly this did not come about because the people of America wanted to surrender local powers to Washington. It came about solely because people in every community found themselves dealing with new economic agencies to cope with which their traditional local governments were inadequate. Year by year business became increasingly national in scope and the new organizations by which this national business was carried on became steadily more important in the every day existence of all people in all States and in all localities.

The modern industrial system produced geographical concentration of productive enterprise before it produced the concentration of economic power and wealth which this committee has been studying. As all observers know, when manufacturing was moved from the home to the factory a new era began. It was a natural and in most aspects a wholly desirable development. It was the very development which has provided the present generation with all the marvelous tools which make available the amazing convenience and luxuries in which we take so much pride, but it almost completely robbed commerce of its local aspect and made it a national phenomenon with wholly national effects and national significance. Geographical boundaries have lost most of their importance so far as commerce is concerned.

The inevitable result has been the expansion of national law. Throughout the long period during which this change has been taking place, Congress was reluctant to impose national regulations in the place of local regulations and it made changes but slowly. This generation needs no instruction to understand that commerce among the states is the most important element of our modern economic activity, but the Congress which confronted this problem for the first time more than fifty years ago thought of interstate commerce in terms of railroad transportation only and when it set up the Interstate Commerce Commission it had no thought of "interfering with private enterprise", as the phrase goes, except with respect to the railroads. That Commission was set up to regulate the railroads only because the railroad industry had grown to such an extent and had expanded so far beyond the powers of the states to regulate in the public interest that Congress had no other recourse. From that day to this there has been a steady growth of the government establishment at Washington, but let no one make the mistake of assuming that this growth has taken place because "politicians" have wanted to take business over. It has grown solely because commerce must be regulated by government in the public interest and because in this country there is no agency except the federal government which is capable of such regulation. The duty of regulating national commerce was imposed on Congress when the Constitution was adopted. It is a power which has been exercised throughout the history of our Government and its expansion is solely the result of the growth of business and not the result of the desire of Government to throttle private enterprise.

But private enterprise is threatened indeed, it has been undermined to an appalling degree not by Government and not so much by business itself, for all the monopolistic practices which have so frequently been condemned, but by a general failure to comprehend the change that has taken place and a failure properly to coordinate Government and business in their relation to people. This failure, it has seemed to me, is principally due to the fact that we seem not to realize that modern business is no longer the activity of individuals, but is the activity of organizations of individuals and we have permitted these organizations to grow so large that people are actually helpless before them. We have persisted in treating these organizations as though they were clothed with natural human rights instead of having only the rights which the people, acting through their Government, see fit to bestow upon them. It will be impossible even to begin the task of adjusting Government to business until we realize that the modern business organization has grown to such proportions that neither the people, as individuals, nor through their local governments are able to cope with it. Local business, little business, private enterprise and local government, even the government of the states themselves, are in truth and in fact submerged by modern business organizations.

CORPORATIONS GREATER THAN STATES

Let me present here a table which compares the total assessed valuation of all the property in each of the states of the Federal Union as of 1937 with the total reported assets of the thirty "billion dollar" corporations of 1935.