CURRENT PRICE DEVELOPMENTS AND THE PROBLEM OF ECONOMIC STABILIZATION MONDAY, JULY 14, 1947 CONGRESS OF THE UNITED STATES, JOINT COMMITTEE ON THE ECONOMIC REPORT, Washington, D. C. The committee met, pursuant to adjournment, in room 357, Senate Office Building, at 10 a. m., Senator Robert A. Taft (chairman) presiding. Present: Senators Taft (chairman), Flanders, Watkins, Sparkman, O'Mahoney, and Congressman Huber. Also present: Staff members Charles O. Hardy, Fred E. Berquist; and John W. Lehman, clerk. The CHAIRMAN. The committee will come to order. The first witness is Mr. Jerome M. Ney, chairman of the board of the American Retail Federation, Fort Smith, Ark. STATEMENT OF JEROME M. NEY, CHAIRMAN OF THE BOARD OF THE AMERICAN RETAIL FEDERATION, FORT SMITH, ARK. · The CHAIRMAN. I note you have a prepared statement. Do you wish to follow the statement? It would take rather a long time. Mr. NEY. Mr. Chairman, we submitted a complete transcript to our statement. I can handle it in any way you wish. However, there is a part of it I would like to get in verbatim, and if my time runs short, I can summarize the balance, but I would like to have the entire statement go in the record. The CHAIRMAN. Yes; the entire statement will go in the record, but I may interrupt you from time to time to ask you some questions. Mr. NEY. Yes, Mr. Chairman. My name is Jerome M. Ney. I operate several retail stores, the principal one being the Boston Store Dry Goods Co., of Fort Smith, Ark. I am chairman of the board of the American Retail Federation. This organization has offices at 1627 K Street NW., Washington, D. C. The ARF membership includes 20 national retail associations and 33 State councils. A list of these is attached to this statement. Through these constituent groups, ARF represents upward of 500,000 retail stores. I am not presuming to tell you that I speak unreservedly for 33 State and 20 national associations and 500,000 stores. Indeed, I do not know how many of them would endorse what I am going to say. If you should ask me how they stand on a specific tax bill, a tariff schedule or a labor measure, I could get you a reasonably accurate answer within a few days. 65210-47-pt. 1-23 349 In this case I cannot. The subject is too broad. It touches the core of our thinking on economics and political science from every conceivable angle. My appearance here, in a way, represents an effort at self-education with the hope that it may stimulate interest among others in the retail business and contribute to your committee's study of the stabilization problem. What I am saying is based on my economic and political convictions. I have supported these convictions with the best research help I could get. So far as possible, I have checked my conclusions with associates whose business ability and public spirit I have reason to respect. The CHAIRMAN. Mr. Ney. Mr. NEY. Yes, sir. The CHAIRMAN. Would the 500,000 stores you refer to go into the rather small retail store category in size? Mr. NEY. Yes, Senator, they do. For example, the National Retail Hardware Association is a member of the American Retail Federation, and there are quite a number of very small stores in the hardware field. The same is true of many of the members of our 20 national retail associations and the 33 State councils. The CHAIRMAN. How many retail stores are there in the United States? Mr. NEY. According to the 1939 census there were 1,770,355 retail stores. Of these, 560,549 were food stores, not including about 345,000 eating and drinking places and other stores in which food constitutes a relatively small part of volume. The CHAIRMAN. Proceed. Mr. NEY. My view, I am sure, is conventional, sound, distributive theory. In general, it would be accepted by most retailers. This appearance, however, is made without prejudice to the views of many who will disagree in detail. The word "planning" occurs from time to time in this paper. I am not afraid of it. But I want to be understood when I use it. The popular idea of "planning" is that it involves a system of detailed economic restraints, guides, controls, and supports for business. I am against that sort of strait-jacketing of the economy. What I am for is the opposite of that. I simply favor an orderly, integrated handling of the policies and measures, domestic and foreign, necessary to a normal, orderly Government. These policies should be constructed with the idea of creating an atmosphere in which business will be encouraged to do what it should do. It is the function of business to expand steadily and in expanding to pass on to consumers the benefits of greater productivity in the form of higher wages and lower prices. This is the regenerative economic process on which our capitalistic-industrial democracy has grown. The basic interests of American retailers and consumers virtually are identical. Both benefit from a maximum flow of goods at reasonable prices. They suffer alike when some economic maladjustment slows down production. Retailers and consumers have a common stake, then, in the goal of the Employment Act of 1946. That goal is a steady high production. This, in turn, should result as in the past in even better wage standards and in lower prices. There is no reason to become defeatists and accept a reversal in trend as inevitable. The job is to apply our intelligence open-mindedly to planning well-timed stimulations that will result in the creation of more goods in an economy characterized by an always widening productive potential. This is not the sort of thing that just happens. It cannot be done by slogans and phrases. It is an engineering, not a propaganda problem. We must, in peace, strive and work as hard for full production and stabilization as we did in war. We dare not forget that failure to keep the economic flywheel in proper motion makes terrific exertions necessary in order to build up speed again. This is sheer economic waste. A fraction of what we spend in regaining lost speed, applied at the proper time, would give great gains where we record losses. Your committee has a vast opportunity and a heavy responsibility. It is your task to provide the Nation, the individual Members of Congress, and particularly the specialized committees of Congress, with a balanced picture of our national economic needs. Under your guidance legislative actions on specific economic problems must be dovetailed into a well-conceived pattern that fits these broad needs. This the joint committee is in a position to accomplish. The Employment Act also places a heavy responsibility upon every economic group in our Nation to promote the general public interest better than in the past. As individuals and as members of special-interest groups, we compete for bigger shares of the Nation's output. This competition is healthy. It represents one of our basic freedoms. But too often we abuse this freedom, particularly when we compete in that middle ground where politics and economics meet. Too often we fail to appreciate the character of our own basic interest as members of particular groups. Even more often we fail to discern the important relation of our own interest to the broad public interest. We are honored to participate in the forum which this committee provides for examining the broad needs of our economy. In the time allotted I wish: (1) To review the current situation from a retailer's standpoint and suggest some of the problems we see in it. (2) To define a set of economic bench marks for measuring our performance over the next few years. (3) To sketch out a few of the component parts of a peacetime stabilization program for America. The retail industry, like most American industries, has prospered greatly since the end of war. Dollar sales climbed to an all-time peak in 1946. Over-all they have held up quite well since then. First But the total sales figures disguise important developments. of all, most of the increased dollar figures since last June reflect higher prices, not higher physical volume. Physical sales have been turning down sharply in some areas and lines. The continued rise in durables is being offset by declines in soft goods and specialties. Second, dollar sales have been leveling off and in some fields have already declined substantially. In the 12 months preceding April of this year, retailers added 3.2 billion dollars-roughly 45 percent to the value of inventories. Again, much of this increase reflects higher prices, not physical enlargement. The bulk of lower-quality wartime merchandise has been cleaned out. Of particular significance, the rate of retail inventory accumulation has fallen off sharply in recent months. Total retail inventories actually declined slightly between April and May. With few exceptions retail shelves are full today. Unless these inventory purchases are replaced by increased consumer buying, manufacturers' orders, output, and employment will fall. The CHAIRMAN. By increased consumer buying, you mean that it has been increasing and if consumer buying in the next few years stays about the same that will not be sufficient? Mr. NEY. Yes, Mr. Chairman. Consumer purchases in physical volume are falling off, and the increase has been due to dollar increase. The CHAIRMAN. Your estimate is there is a falling off in nondurable goods, but there is an increase in durable goods? Mr. NEY. Yes. However we feel that after consumers have supplied their long-felt wants, we will have a drop in durable goods' purchases too. If we are to sell full American production we will have to have a sustained high consumer demand. The CHAIRMAN. The only thing I questioned was consumer buying. If you kept up the total present consumer buying for the nondurable and durable goods together, is that not enough? Mr. NEY. No. I suspect production of automobiles, washing machines, refrigerators, gas ranges and the like will actually increase in numbers of units as we go along. If that is true, when the present backlog of demand has been filled, we will have to find means of selling this increased production. The CHAIRMAN. We have now reached the point of $178,000,000,000 in income. It seems that there is considerable doubt about increasing consumer buyings. Mr. NEY. In dollars perhaps, but not in units. It is a fact as the price level recedes somewhat, if we maintain the national income in dollars we will have more units to sell. The CHAIRMAN. You will have more units, not more dollars? Mr. NEY. During 1946 retailers repaired, improved, and expanded their facilities considerably. Many new stores were built. But this investment in retail plant seems to be tapering off substantially now. Much of the wartime backlog has been worked off. Equally important, retailers who would still like to expand are discouraged by high con struction costs. Like everyone else, retailers have experienced higher operation costs. But we have also enjoyed the unique experience of operating close to full physical capacity. Thus, despite higher costs, our unit operating costs have held low. This enabled retailers to enjoy exceedingly favorable profits during 1946. If volume holds up, profits in 1947 should be good, though well below 1946. Retailers have been trimming their margins by passing along part of the fruits of high volume to consumers. There is room for |