We have a tremendous backlog of experience in law and regulation, eginning with World War I, that we can draw upon. We must raw upon our past experiences as we peer into the future. It will ot be perfect and may not solve the entire situation, but if we draw n that as we try to move ahead, I think we can do the right thing. Senator BENNETT. I see Mr. DiSalle back there. I know he is njoying this discussion because he is outside of it. I am one of hose who believes that both OPA and OPS demonstrated by their peration, the simple truth that you can't control the economy, and the so-called backlog of experience is experience in failure rather han experience in success. Mr. MULTER. I am not such a pessimist that, despite the past ailures, I should think we cannot gain some knowledge from past experience and move ahead successfully. Senator BENNETT. I don't want to prolong the discussion. The CHAIRMAN. Thank you very much Congressman. We stand recessed now until 10 o'clock in the morning, at which time we will start hearing the administration witnesses. The first witness will be Mr. Flemming and his staff. Mr. Flemming is the Acting Director of the Office of Defense Mobilization. Then we will continue as ong as necessary to hear all of the administration witnesses on the different phases of the legislation until we finish, which we hope will possibly be Tuesday of next week, at which time we will start writing up some sort of legislation or deciding that we don't want to do it. (Whereupon, at 11:45 a. m., the committee recessed, to reconvene at 10 a. m. March 25, 1953.) (The following statements and letters were received for insertion in the record:) AMERICAN ASSOCIATION OF ADVERTISING AGENCIES, INC., Hon. HOMER E. CAPEHART, Chairman, Committee on Banking and Currency, United States Senate, Senate Office Building, Washington, D. C. DEAR SENATOR CAPEHART: We are following with deep interest the provisions of bills S. 753 and S. 1081 to grant standby controls to the President. We should like to register our view that bill S. 1081, apart from its general merits, is in need of correction. S. 1081 contains no provision to exempt the prices, rentals or rates charged by the country's communication and advertising media. The exemption reads as follows in the existing law: "The authority conferred by this title, shall not be exercised with respect to the following: prices, or rentals for materials furnished for publication by any press association or feature service, books, magazines, motion pictures, periodicals, or newspapers, other than as waste or scrap; or rates charged by any person in the business of operating or publishing a newspaper, periodical, or magazine, or operating a radio broadcasting or television station, a motion picture or other theater enterprise, or outdoor advertising facilities." A similar exemption is contained in bill S. 753. If your committee is giving serious consideration to bill S. 1081, we believe you will want to see that it contains the same exemption for media. This would be consistent with the present law; it would be in keeping with the historic policy on such controls, a policy which has worked beneficially in the past; and it would continue to safeguard the free existence of communication media, so essential to the country's welfare. Very sincerely, FREDERIC R. GAMBLE, President. STATEMENT OF THE AMERICAN COTTON MANUFACTURERS INSTITUTE, INC. The American Cotton Manufacturers Institute, Inc.. whose membership represents approximately 85 percent of the Nation's cotton spindles, after a careful appraisal of the subject based upon practical experience, is opposed to any type of direct standby controls. The experiences we have had as a result of operating our industry under a price and wage-control program taught us many lessons, one of which is particularly applicable to the subject of standby control authority. During the course of the recent price-control program, our industry underwent a serious depression which meant layoffs and short time for many thousands of our employees, and depressed conditions among other thousands who supply and service our manufacturing plants. We had demonstrated clearly and beyond any question that the power of our production was a complete answer to inflation in our industry. Our products were selling far under ceiling prices. During this period when we needed more than ever the market confidence and the stability which comes from normal marketing procedures, we found ourselves faced daily with rumors of new controls, of rollbacks, of new regulations and other actions by the price-control agency. The result was a complete distortion and disruption of all normal buying and selling practices in our industry; production was forced down alarmingly; the industry's earnings suffered the most severe decline of any American industry; values of our products dropped to depression levels. The economic loss to the Nation which resulted from this tampering with our marketing procedures was very great-and unnecessary. The point which we make here is that it was not the effect of price controls which did us such grave damage; rather, it was the constant rumor and uncertainty involved in the continuing possibility of new actions under the price control authority. One of the clearest lessons in the history of this and many other countries is that in a competitive enterprise economy the operation of our price mechanism is so very delicate that any artificial influences, or the threat of such, can set off a chain reaction of unanticipated situations and circumstances which works havoc with our whole economic process. We believe that the authority for taking such action is too great for any one individual, regardless of the confidence that individual may enjoy. We contend that such authority should rest in the collective judgment of the men who make up the United States Congress, a body which has demonstrated that in an emergency it can act with speed, force, and decision. Therefore, based upon firm convictions generated by practical experience, we recommend: (1) That no standby legislation of any sort be enacted; rather, that the Congress retain for itself the power to impose price and wage controls. (2) That all provisions of the present Defense Production Act be allowed to expire as scheduled in the act, with one exception-the right of the executive branch of the Government to allocate for defense purposes those strategic materials found in short supply. AMERICAN NEWSPAPER PUBLISHERS ASSOCIATION, Hon. HOMER E. CAPEHART, United States Senate, Washington, D. C. DEAR SENATOR CAPEHART: You are very kind to write me so fully in your letter of March 9 about certain provisions in bill S. 753 and bill S. 1081. By now you have received my letter of March 6 pointing out that the exemption from price controls for media, as in the present law, does appear in your bill S. 753 but not in bill S. 1081. I have the feeling that the provisions of bill S. 1081 are being pressed rather than bill S. 753 and I think this is borne out by the dispatches from Washington which quote you as saying that President Eisenhower would be willing to accept the standby control provisions as in bill S. 1081. It is my thinking that the same exemption ought to be carried in whatever bill is passed by the Senate providing for standby controls. It is not sufficient, as I see it, to freeze everything for 90 days including the power of the President to freeze advertising and circulation rates of all kinds of media as well as radio. Such power in the hands of a President is too much because in a period of 90 days if he were so disposed he could bring about a situation through control media that freedom to act would be perilous by the Congress after 90 days. Please understand that I am not making any personal comment with respect - General Eisenhower as President. I am talking about the Office of President the United States irrespective of who may occupy that place in the future. It more power over media than any good man should want and than any other nd of man should have. Therefore, I hope you will insist that any bill reported by the Senate Banking nd Currency Committee carries the language in the present law or its equivalent hich reads as follows: "The authority conferred by this title, shall not be exercised with respect to e following: prices or rentals for materials furnished for publication by any ress association or feature service, books, magazines, motion pictures, periodicals, newspapers, other than as waste or scrap; or rates charged by any person in the usiness of operating or publishing a newspaper, periodical, or magazine, or perating a radio broadcasting or television station, a motion picture or other heater enterprise, or outdoor advertising facilities." Up to now I have not communicated with the various members of the Senate Banking and Currency Committee and I would thank you to let me know as to hether I should express my views to them individually by letter. I hope very much that you will let this statement from me appear in the record of the hearing n lieu of my personal appearance as a witness. You have always been most kind to consider my views and I thank you very nuch. With regards. Sincerely yours, CRANSTON WILLIAMS, Chicago 5, Ill., March 9, 1953. ASSOCIATED MASTER BARBERS AND BEAUTICIANS OF AMERICA, Hon. HOMER E. CAPEHART, Chairman, Committee on Banking and Currency, DEAR SENATor: You will recall my visiting with you in the summer of 1951 during the time that hearings were being conducted on the bill to extend the Defense Production Act. My interest at that time of course was to eliminate the price-ceiling regulations which applied to barbers and beauticians. You were most kind in supporting the views of barbers and beauticians at that time and wrote into the law a specific exemption for barbers and beauticians from price ceilings. This exemption appears in section 402 (e) (vii) of the Defense Production Act of 1951 and excludes prices charged and wages paid for services performed by barbers and beauticians. We are hearing considerable about the possibility of standby controls being enacted by the present Congress. We are most hopeful that the Congress will see fit to include the exemption for barbers and beauticians in any standby-controls law that may be enacted. Extending kindest personal regards, I am T. C. MACDUFFEE, General President. INDEPENDENT LIVESTOCK MARKETING ASSOCIATION, Senator HOMER CAPEHART, Chairman, Senate Banking Committee, Columbus 8, Ohio, February 12, 1953. Senate Office Building, Washington, D. C. DEAR SENATOR CAPEHART: Note proposals and bill introduced by you for hearings beginning February 23 to provide for standby controls after April 30, 1953. After careful consideration and much discussion the membership of our association definitely oppose standby controls. We feel the economy of our country will be much better as we go into the future months, without the threats and fears of control imposition being retained as you propose. We are unqualifiedly opposed to controls on prices and wages and especially so with the management of OPS as employed the past several years. Such controls and the human inability to reasonably well administer them gave us much worse circumstances, as we see it, than had controls not been employed. We believe the welfare of all our people much better without any semblance of general price and wage controls. Should it be found absolutely essential to have some restrictions of strategic war materials in extremely short supply or otherwise necessitating some protective action for procurement, we believe these should be cared for by specially indicating and qualifying. Even, if so, then we think a very definite date-not too far aheadshould be designated for their termination. Then upon study and review, if found adequate in supply and need, such controls would automatically be dropped. If some are found necessary to continue, do so for another reasonably short period We are opposed to continuance of general control measures. We are opposed to continuance of controls on emergency materials except that a definite termination date-not too far distant-is established. In any event, we oppose any control measure without a date of termination. Historically we are a free-enterprise, business-functioning people. No such control or other legislation, without date of expiration appears on our statutes. We sincerely believe this position is sound We request that our views and position on standby controls be made known to all members of the Senate Banking Committee. Thanks for consideration of our viewpoint on this matter. Very truly yours, INDEPENDENT LIVESTOCK MARKETING R. Q. SMITH, Secretary. IN BRIEF-STANDBY CONTROLS By F. A. Harper, the Foundation for Economic Education, Inc., Irvington-on Hudson, N. Y. EDITOR'S NOTE Dr. F. A. Harper, author of Gaining the Free Market, Inflation, and other articles and books, is a member of the foundation staff. STANDBY CONTROLS It was a cold winter's night, and our child was seriously ill with virus pneumonia. His temperature had soared to 1041⁄2°, and he was fitfully sleepless. What the doctor prescribed by telephone happened to be in our medicine cabinet. So, in a moment's time, we were able to apply the treatment. My wife and I were mighty glad that we had provided a standby supply of medicine. Such an experience is common to many of us, I suspect. It has been used to illustrate the purpose of standby governmental controls over wages and pricesincluding rents now being proposed to replace active controls when the present law expires. What position should one take on this issue? Should it be thought of as a standby economic first-aid kit, like the medicine cabinet in one's home, ready for quick use in the event of a possible emergency? Or is there a catch somewhere, so that the analogy is not the parallel that it seems? Essentially, the question is this: Is the medicine any good for curing the illness? If it is, then it should be in the first-aid kit, unless it is too expensive or deteriorates too quickly. If, on the other hand, the medicine fails to cure, or even aggravates the illness, the expense is foolish and it would be the height of folly to rely upon it in an emergency. So we shall explore the question: Are wage and price controls effective medicine for the illness? Does the bottle contain a potent remedy, or is it filled with the false potions of quackery? A doctor diagnoses illness from his knowledge of a healthy body and how it functions. The economic doctors must do likewise. So our first step is to study the anatomy of a healthy trading economy. THE ANATOMY OF TRADE Ours is a Nation of 158 million persons. I ike any other giant and complicated machine, its operation can best be seen by focusing our attention on its small. integral, and essential working parts, so that we may clearly observe how they relate to one another. So let's start with Jones, a pioneer in the primeval forest. He hunts and fishes and grows some crops in his little clearing. He tames a few animals and uses them for toil or to provide food. Then along comes Smith to be Jones' neighbor. He, too, hunts and fishes and farms. But Jones is the better hunter, and Smith is the better farmer. As they follow their respective abilities, Jones comes to acquire an abundance of furs, but is short of corn for his meal. Smith has a goodly supply of corn, but is short of furs. So one cold day in winter, Jones-warm in his furs, but hungry-wanders over to see Smith, who is well-fed but shivering in his cave. Jones proposes to trade some furs for some corn. The two men may higgle and haggle over the terms of the trade. The margin for bargaining may appear to be wide in this instance, in contrast to real life in our complex economy. No alternative market exists for the product each has in surplus, except to keep it himself. But on closer scrutiny, we find that each has an effective bargaining tool against the other: Each knows that the other realizes the advantage of making a trade, as compared with keeping his surplus product. Each knows that there is little sense in driving so hard a bargain that it kills off a trade. Each realizes the absurdity of continuing to suffer for want of what the other has for trade. So we may assume that a trade will somehow be arranged between them. Now, what terms of the trade between Jones and Smith might be called fair and just? The question of a just price presumes certain antecedent questions: Says who? In whose judgment? By what right to speak? Justice always presumes a judge with some principle by which to judge. Who is to be the judge, and what is the principle involved? Would it be fair to make Jones the sole judge, empowered to force upon Smith whatever terms of trade he shall dictate? Hardly; for to do so is to deny Smith all rights to ownership of the corn he has labored to produce. It would allow Jones to confiscate Smith's property. Would it be fair to make Smith the sole judge? No-and for the same reason. THE HISTORICAL CONCEPT Historically, the concept of a just price dictated by a disinterested third party has usually been offered as the solution of this seeming dilemma. This concept has persisted in the affairs of man since earliest times since ancient man first congregated into groups of 3 or more, thus making it possible for 1 person to interject himself into the economic affairs of 2 other persons. Let us say that the third party in this instance is Joe Doakes, a new and distant neighbor. Joe seems to be qualified to render justice since he is disinterested, impartial, unprejudiced, and objective. He might be called the public representative. Shall it be left to Joe to decide what is a fair price? Joe's presumed qualifications for judging what price is fair-being disinterested, and all that are precisely the reasons why he is not really qualified at all. He has not one iota of right to speak as an owner because he has done nothing to produce either the furs or the corn. He has no relevant information except what he might obtain from Jones and Smith. They alone can know their own wants and whether, at each specified price, they should keep what they have produced or exchange it. At best, Joe knows less about it than does either Jones or Smith. Bluntly and in simple terms, Joe is unqualified for the job of determining a fair price; and furthermore, it is none of his business. To empower him to throw the bargain this way or that is to grant him the equivalent of ownership of both products; and by the test of who has produced them and who owns them under private property, he deserves no such right. At best, he is an interloper; at worst, he is an outright racketeer, holding a power by which he can demand a bribe from either or both parties. What is wrong with this theory of an impartial judge determining what price is fair? Why is this any different from a judge in a court of law who presides, let us say, in a civil suit concerning an alleged violation of contract? Such a civil suit involves an impasse of conflict, in which one or the other side must lose by a judgment of guilty or not guilty. A judgment is rendered based on the evidence: Was there a contract? Was it valid? Were the terms violated by the actions of the person? What were its terms? Yet none of these conditions exist in the instance of Jones' and Smith's trade. There is no impasse which must be resolved against one party of the other; each may keep his property and maintain his status the same as it was before they 30216-53-pt. 2-25 |