very low market. The country was in bad condition, so that any . increase in prices would have resulted in selling less automobiles. At the same time the workers had organized and wages were going up. But the industry, in the 6 or 7 years between 1933 and 1940 was able almost to double the wage rate, but hold the actual cost of labor per car at a fixed figure.

In other words, labor per car was held to a certain figure, because we could not raise prices, but wages were increased. Now, that was done not as the result of any sudden inspiration of anyone as to how to get the lower cost. It was done because thousands of men in the plants and in management began to figure out ways to save a penny here and a dime there. And the result was this remarkable performance over a 7-year period.

EFFECT OF INTEGRATION ON SOUTHERN ITALY

Mr. TABER. I wonder about this matter of integration. How you are going to rig things up so that there can be anything for the approximately 25,000,000 people south of Rome? Čertainly, there is no coal there and nothing can come in except at very considerable transportation cost. There is no mineral deposit and the farming is not on a large enough scale to anywhere nearly support the population. Certainly none of the steel plants are going to be taken into that territory.

Mr. HOFFMAN. That is right.

Mr. TABER. I do not know what those people are going to do or how they are going to live. You have got to take that into consideration and work things out; take into consideration their location and the fact that their soil is basically handicapped. I am wondering how you are going to plan on that.

Mr. HOFFMAN. I do not feel qualified to

Mr. TABER. Perhaps you feel that that question ought not to be on the record?

Mr. HOFFMAN. Certainly, it should be. But I would rather have Mr. Zellerbach, if you are interested particularly in Italy, come down here and talk to you about it.

Mr. TABER. I am interested in it because it seems to me a rather difficult question to answer along with your integration program. Mr. HOFFMAN. Yes.

Mr. TABER. I cannot supply the answer. I do not know whether the other fellow can or not.

Mr. HOFFMAN. I do not think he can, either.

Mr. TABER. If there is an answer, I would like to have it.

POPULATION PROBLEM IN ITALY

Mr. HOFFMAN. As one of the Italian Ministers told me: "Our great problem is that our production of bambinos in Italy goes along at a very, very superb rate, a rate higher than we can absorb them in this country, and therefore we must export population."

I do not think there is any easy answer to that problem. I think it is going to take a combination of things. I do believe the lowering of trade barriers will help raise the income of Italy. There is a great demand all through Europe for oranges, lemons, things of that kind,

that cannot be purchased now because they are considered semiluxury goods. If the income were raised from $375 per capita to $500 per capita, which is not beyond reasonable expectation, then you would have a demand for something other than the cheapest kind of food with which to sustain life. So I think Italy would benefit very considerably even by a moderate increase in the per capita income.

I have seen a great many people in California in the last 25 years or 40 years that I have lived there off and on, and I have seen what has happened there in the development of the citrus industry, because of the greater prosperity of the country. In other words, I can remember the time when you got one orange a year and that was in your Christmas stocking. Now you get an orange a day, if you happen to like oranges. I think you would have that opportunity there for greater growth. I would not want to overplay that.

EFFECT OF COMPARTMENTALIZATION IN ITALY AND GERMANY

Here is an economy that has, as I say, because it was compartmentalized, not been able to make full use of its resources, which I think is obvious, and which tended to decrease competition both externally and internally, because of the trade barriers. It was also an economy which, because it was compartmentalized, gave certain nations the opportunity to wage war. You would not have had World War II, in my opinion, if it had not been for the thick and high trade walls behind which Hitler built up completely uneconomic industries.

As we go into this problem in Germany, you will find a number of industries that were built up in Germany regardless of the fact that production was at an exceedingly high cost. It cost more to produce synthetic fuel in Germany, by a substantial margin, than the fuel could have been brought into Germany. The same thing was true of steel. Much of Germany's steel production was built up regardless of the fact that it was totally uneconomic.

The Hermann Goering plant could not possibly operate in competition with any other, because the cost of producing steel was so high in that plant, but the nation was aiming at a self-sufficient economy. There is an absolute battle, a conflict rather, between aiming at selfsupport and aiming at self-sufficiency. The Continent cannot become self-supporting if the 17 nations we are trying to help continue to try to be self-sufficient.

EFFECT OF HIGH BIRTH RATES IN GERMANY AND ITALY

Ger

Mr. TABER. I wonder what you would have to say to this. many built up her birth rate after the First World War just as rapidly as did Italy. The presence of the surplus population, according to the theories of some of the older generation, resulted in their building up a military structure with a very large manpower. It started both of them, some people tell us, on the road toward war.

I understand that the birth rate in Germany is still away up, and in Italy unquestionably it is. You are not going to solve that particular problem without an outlet for both groups. And, frankly, I do not know where you are going to send them. You have got to find a place where you can send them if you are going to relieve that pressure.

Mr. HOFFMAN. That is right.

Mr. TABER. Probably the large immigration over here in the late nineties and early 1900's kept the pressure off long enough so that it delayed the start of the First World War. Of course, it takes an incident, or an agitator, perhaps, to touch off the spark, but unless the line-up is there, it does not come.

Mr. HOFFMAN. That is right. I think there has got to be emigration temporarily out of Germany and out of Italy. Certainly if the birth rate continues as high as it is in both countries, I do not know whether the problem is soluble, if they keep on producing children at the rate at which they are producing them.

But I think all have observed that with returning prosperity the first thing that happens is, of course, that the children with better medical care live longer, and perhaps the problem is somewhat aggravated in that way, but there is a decline in the birth rate with prosperity.

In other words, Park Avenue does not raise as many children per family as they do in the Bronx. And we, in America, as we have seen prosperity come to America, have seen the size of the average family decrease. That is regardless of any other consideration; it just happens.

Mr. ROONEY. Do you mean to intimate that the people on Park Avenue are really better off than the people in the Bronx?

Mr. HOFFMAN. I am simply making the statement, Mr. Congressman, that the people on Park Avenue who we assume are more prosperous than the people in the Bronx, have more money, just do not have as many children per family as the people in the Bronx. I am not drawing any moral from that. I am just making a statement of fact.

Mr. ROONEY. It is conceivable, is it not, that the people in the Bronx would be much happier?

Mr. HOFFMAN. I think they could be. I do not hold any brief for the people on Park Avenue. But I say that prosperity does tend to bring down the size of the families. I have seven children, so I am not arguing for small families.

MEASURES TAKEN AGAINST OVERPOPULATION PROBLEM IN ITALY

Mr. ROONEY. With regard to Italy, since you correctly say one of the chief problems is overpopulation, what if anything does ECA do with regard to that problem? Do you interest yourselves in the matter of colonies for Italy?

Mr. HOFFMAN. Yes, sir.

Mr. ROONEY. What have you done?

can.

Mr. HOFFMAN. We have interested ourselves to the extent that we We do not feel that we have any right to use ECA funds to establish colonies for Italians overseas, except to do a certain amount of experimentation in that direction. But we have tried to be of help in two directions; and one of them is this. Among the objectives of integration of the European economy is the freeing of the movement of people among countries, as well as the freeing of the movement of goods.

You have language barriers that make difficult the movement of people. But there have been quite a few Italians going out of Italy

to France, and I think a few to Great Britain and other countries, where there has been a shortage of workers.

Also the Italians themselves have been carrying out a study there. I think there are two possible outlets for surplus population that may help in the solution of that problem. The first is South America, which still welcomes immigrants to a considerable extent.

I think we are just beginning to realize some of the potentialities of Africa. I think Africa, as a continent, has very great potentialities, and Africa as a continent with an economy complementary to Europe may offer the best hope of a strong and prosperous Europe, because there is lots of land there and there are lots of resources there, if they are brought into play. And if they are, we feel that they may help materially both in the solving of Europe's problems and also as far as the native populations are concerned.

RESETTLEMENT OF ITALIANS IN SOUTH AMERICA

Mr. ROONEY. Is it not a fact that the resettlement of many Italians in South America has proved a dismal failure?

Mr. HOFFMAN. I do not know what you mean by that.

Mr. ROONEY. Do you know the position of the Italian Government on that?

Mr. BISSELL. I believe, Congressman, they have encouraged emigration; encouraged emigration to South America. Certainly the Italian populations in Brazil and in the Argentine have been very successful.

Mr. ROONEY. That is different from what I have been led to understand.

Mr. HOFFMAN. Could we give you a report on that, because, speaking generally, over the last 20 years

Mr. ROONEY. I am recalling to mind a conversation I had a couple of months ago with Mr. de Gasperi in Italy. The testimony here does not jibe with the substance of that conversation.

To get back to the original question, what if anything do you do in a constructive way, what actual steps have you taken with regard to the problem of the overpopulation of Italy? What has ECA done?

Mr. HOFFMAN. I wonder if this would not be much more satisfactory-unless Mr. Bissell feels that he can give the details. Mr. Zellerbach is here in town and he has a particular interest in Italy. He has been there for almost 2 years. Why not have him appear here and he can answer these questions much more fully than I. All I can do is tell you what my general knowledge of the situation is. If you like, we can schedule him to appear here.

INTEGRATION AMONG EUROPEAN NATIONS

May I return to discuss the general situation?
Mr. TABER. Yes.

Mr. HOFFMAN. Then I will go back to this matter of integration and point out that I do feel that if we can break down these barriers and reinstitute competition as a vital force in the economy, and broaden the market, you can then make it possible to reach large-scale, low-cost manufacturing and you can begin on the long hard climb of bringing down costs, which is essential if you are going to have a more prosperous Europe.

There are various factors involved in costs coming down. The underlying factor is the large market you must have, a market large enough so that you can afford to make the investments in large-scale manufacturing. That is why we are putting such emphasis on this matter of bringing down barriers.

Also, as you bring down economic barriers, you do have closer union, and we think that with that closer union will come much greater security for western Europe and much greater security for us; because I repeat, it is only a strong, prosperous western Europe that can be the block that we want to any further advances of communism.

I would like to tell you how we feel about bringing that about and again I want to emphasize that aside from the time that our organization is spending on this, there are no costs involved. In fact, we think there are some actual savings that can come about through any progress that we make toward integration.

We found that as long as we were willing to talk in terms of generalities, everybody was entirely in favor of integration or unification, or whatever you want to call it. A great deal was done by Europe; steps were taken of great importance. The organization of the OEEC was a most significant step. It is the first time in centuries that European countries had ever seated representatives around a common table, to discuss common problems, to lay their economic programs on the table and discuss them in terms of the common

interest.

Mr. TABER. They came pretty near to doing that back in the sixties when they got together and went on the gold standard? Mr. HOFFMAN. Yes, that is right.

Mr. TABER. So that they have to be rather up against it, to do that sort of thing?

Mr. HOFFMAN. That is right.

Mr. TABER. Perhaps some approach such as that might be a solution to some of their problems right now.

ELIMINATION OF RESTRICTIONS ON IMPORTS

Mr. HOFFMAN. I think we are coming, perhaps, close to that kind of a solution. We will tell you about that in just a minute, if we may. But, as I say, I do not want to discount what was accomplished, because a great deal was accomplished through the OEEC. Nevertheless, when it came right down to leveling trade barriers, there was nothing being done. There was not enough being done to make us sure that the trend toward integration would continue after the ECA program terminated. We were trying to find a practical way to speed that up.

The first step, it seemed to us, that was necessary was to agree among ourselves as to what would constitute a sensible first step toward integration. We decided that if the European nations would take as step No. 1 the elimination of quantitative restrictions on imports-which you all understand, I am sure-restrictions which would bar any imports beyond a given quantity; if they would form a payments union which would bring about a convertibility of currencies among the countries; if they would put an end to dual pricing and if they would gradually reduce tariffs, you would then have a logical first step toward the integration of that market.