off, thus further reducing purchasing power. This vicious cycle continued to the point where no one was willing or able to spend anything except the hoarders. Then the manufacturers and dealers cried on Uncle Sam's shoulder asking for his help to rectify their own grievous error. You all know the story of what happened. Uncle Sam became a party to collusive price fixing.

During the NRA the municipalities of this country were forced to spend millions of dollars unnecessarily because of this inexcusable suspension of the antitrust laws. This education has formed a pattern which has come down through the years until now we find Uncle Sam trying to undo the great harm which has been inflicted upon the ultimate consumer by winking an eye at collusive and monopolistic practices.

If your honorable committee can do nothing else than to instill the fear of God in manufacturers and their satellites, together with their instructed agents and dealers, by strictly enforcing the Federal laws which were designed to specifically eliminate and prevent monopolistic and collusive practices, it will encourage small, independent business ventures and your work will receive the utmost gratitude of the great masses of American consumers.

STATEMENT OF FRED I. RAYMOND ON BEHALF OF F. I. RAYMOND CO.

Mr. FORISTEL. Identify yourself for the record.

Mr. RAYMOND. Fred I. Raymond, Chicago; owner of F. I. Raymond Co., manufacturers of heating specialties. I am also a registered professional engineer, practicing consulting engineering in connection with the business.

Mr. FORISTEL. You are also the author of a book?

Mr. RAYMOND. Yes; author of a book, The Limitist, which is mentioned later in the statement.

Mr. FORISTEL. You may proceed.

Mr. RAYMOND. In a case like mine, when a person comes before you unknown, I think it is appropriate to give a very brief history in order that you shall understand something of what led to his present line of thought.

My father was an inventor. Back in the last century he invented a windmill without a tail, and it gives me pleasure to see these still around the country. About the turn of the century he started making pulverizers, and organized a little business. His early pulverizers were not successful, so we had hard sledding. We were far from poverty in those days, but my mother did take in boarders to help out, and I can remember wearing stockings with the good foot of one sewed to the good leg of another.

When my father died in 1904, his business was virtually bankrupt, but he had sold two of his latest pulverizers to grind caustic lime, which was essential to the success of new processes for the refining of sugar and oil. These pulverizers were so successful that the business paid my mother about $10,000 the year after father died. On the success which was due to my father, my growing days were carefree. We had cars and a lovely home as the business grew nicely. Maybe I was not born with a silver spoon in my mouth, but I was not long without one.

By 1923 I had graduated from college and was happily installed in the business as chief engineer, where I had made a couple of worth-while improvements to the pulverizers. I like to think that my experience in life up to this point was the ideal of our American enterprise system. Starting as a poor farmer, my father had brought affluence and opportunity on a grand scale to his family and had left a business for his sons to carry on.

But then I was to discover another aspect of our American system. By 1923 the business had grown to the point where it was attractive to Wall Street. The company who was our largest customer came with an offer to buy us out. Along with the offer came the ultimatum that if we would not sell our customer would buy our biggest competitor. This would deprive us of our largest source of sales.

I did not want to sell and advised against it, but the rest of the family saw security and freedom from worry ahead, so the business was sold. Seeing the manipulations of the new owner from the inside, I soon lost faith in its management and resigned within a year.

You may expect that I felt some bitterness in this outcome. It was not so much that I had lost a nice job. I was young, and I had the world before me. Instead it was that I was to be denied the chance to carry on what my father had created, and I'd been taught to think that this was an admirable course of events.

I did have some bitterness, but it was tempered by considerations of what prompted the customer company to buy us out. For one thing, the purchaser explained that he had a competitor who was using pulverizers. If we did not sell to our customer, there was always the probability that we would sell to our customer's competitor, and then our customer would be at a serious disadvantage. Even though I resented his ultimatum, I could not blame him for taking this course in a world where anyone with money could buy anything he wanted. I think you can see how I came to the conclusion then that we would continue to see giants buy up smaller units, not primarily from selfishness or greed, but simply from survival. So long as one giant could grow without end, then all the others must grow to keep pace. I watched the merger era from 1923 to 1929 as evidence of this race.

Soon, I began thinking of remedies. First I looked to the graduated income tax to take money away from the giants so they couldn't buy up the little fellows. But I soon found that the rich man could escape paying high income taxes if he had his corporation use its profits to buy smaller companies instead of taking these profits out of the corporation as dividends. The income tax, instead of preventing mergers, was encouraging them.

Then, I turned to the antitrust laws only to find that the antitrust laws don't in any way prevent two or three companies from growing simultaneously. They only prevent one from growing too much larger than another. The antitrust laws don't prevent size. They only prevent monopoly.

So it was that I finally concluded we must have a limit on size itself if we were ever to prevent this excessive growth which threatens to draw all business under the control of a few giants. And here let me say that ownership is no longer evidence of control. Many times you have seen some great oil company advertise that its products are sold through thousands of independently owned service stations.

Almost without exception, you will find that these so-called independent service stations have had to sign a contract to sell nothing but the products of one single oil company before they could get any oil or gasoline to sell. The station operator may own his land and building. but the company controls what he can sell. This isn't independence as I learned it in grammar school or high school or college.

Returning to the need for a limit on size, I began a search to find a limit that would suit our requirements for mass production and still prevent mergers. Study of the motives involved in merger led me to see that giants buy smaller business units very largely to get new points of distribution. No steel company can successfully make steel in one single plant in New York and compete with plants in California. So the company wants two plants and three plants. If some independent builds a little steel mill at some point remote from any other steel mill and is successful, then a giant wants to buy him out. In fact, each giant must think of buying him out lest another giant shall buy him first.

Not only does the giant want plants in all parts of the country so he can compete with the other giants, but he also wants stores which will sell his goods and none others. So the steel giant buys retail steel companies and all the other giants buy retail steel companies.

I take you through all this just to make the point that it is not greed that produces mergers. Instead it is the lack of limits which drives the giants always on. And the income tax, as I have said, only pushes them harder. You and I would use a million dollars to buy another factory rather than pay Uncle Sam three-quarters of the mil lion in taxes, so we can't blame the giants for doing so.

After all, as I see it, we Americans have made a false God of growth. Too often one man's growth comes only from another's failure.

Now I come to my limit. I see no evil in any single factory or store, no matter what its size may be, because no single factory and no single store can possibly monopolize or even dominate any important field of business in such a large country as the United States. Even small local enterprises in California will be able to undersell the giant in Pittsburgh or Chicago if the giant cannot have a factory or store in California.

So I see no need for a limit on size itself, and I would propose that there shall be no limit to the size of any business organization in any field so long as it has but one single point from which it makes deliveries.

Let me hasten to point out, then, that under this proposal a steel mill could have 100,000 employees in a single plant and $100,000,000 worth of machinery or more, so there would be no interference with the mass production which is essential to low costs. But any company or any person or any group of persons who owned or controlled one such plant would be forbidden to own or control even a button factory or crossroads store in any other part of the country.

But now we come to the question of two or more factories or stores, in other words, the chain. As I see it, the small chain is not objectionable, but the large chain is. In fact, I think the small chain is very necessary in our modern scheme of things. No little grocery store can afford to buy a carload of cornflakes, but a chain of perhaps 100

small stores can. No little grocery store can afford to send buyers to California and Florida to buy oranges, but a chain of 100 small stores can. I hardly think it is necessary to dwell further upon the absolute necessity for small stores to combine into a chain which will have sufficient size to be able to afford all the services that go to give us low retail prices.

I realize that there is some loss in opportunity even in permitting the small chain, but I believe that the public at large will not sacrifice low prices to themselves as individuals as a means of providing opportunity for others. Moreover, I believe the small chain does not destroy opportunity to an extent which seriously impairs opportunity I think it is only the giant chain which stifles opportunity, and I think the giant chain does not give us prices sufficiently lower than the smaller chains to justify the loss of opportunity which they produce.

In short, then, I think we would lose nothing if we should outlaw the giant chain and still permit the smaller chain. This, then, leads to my proposal for a Federal law which will place a total size limit only on chains, and this limit would apply to chains of factories as well as to chains of stores.

I would like to see us limit any business organization with more than one store or factory to a total size of 1,000 employees. I'll say more about this figure of 1,000 later. I use it here only by way of example.

Mr. STEVENSON. Would you limit the number of stores in a chain? Mr. RAYMOND. I will be more specific on that in just a minute. Under such a limit we could have a chain of 100 stores of 10 employees each or 5 stores of 200 employees each. We could have a chain of 1 store of 500 employees and 10 stores of 50. We could have a chain of 5 factories of 200 each. Or we could have a factory of 500 in combination with a chain of 50 stores or 10 each.

We could have all the combinations of small units which man might find economical for low-cost manufacture and distribution through smaller units. But we would have eliminated the present never-ending race for giant size in combination with the chain. The giants could not be chains if they wanted to be giants. The chains could not be giants if they wanted to be chains.

As to the figure of 1.000 employees which I have mentioned just above, I repeat that this figure was used only by way of example. Actually, I do not have a precise figure in mind at this time, but I do have a definite procedure in mind for arriving at the figure to be used. Before Congress would enact such a law as I have proposed, I have in mind that Congress would institute a survey to determine how many business organizations would be required to change their structures with the limit set at various levels. You will note, of course, that if the limit were set at perhaps 1,000,000 employees, then no organization would be above the limit, and so no organization could be required to change its structure even if the law were passed. At the other extreme, if the limit were to be set at one employee, then every organization with business units in more than one locality would be required to change its structure.

I would expect that the survey to be instituted by Congress would reveal a relation something like the following:

The figures used in the above table are taken from thin air and are used only to illustrate the method. It will be noted, however, that if the survey should happen to indicate the relation as shown in this table, then a limit of 1,900 would require only 3,000 reorganizations whereas a limit of 1,800 would require 10,000 reorganizations. In such a case I have in mind that the limit would be set at 1,800.

Similarly, I would expect that the actual survey would show a decided drop-off at some point, and the limit to be used in the final law would be that which is just beyond the drop-off point. Thereby the tasks of compliance and enforcement would be greatly simplified without appreciable loss in effectiveness of the limit.

I cannot attempt a full explanation of the above proposal here, but in order that the proposal may be specific, I attach a printed copy of my proposal for the Commercial Limitations Act, which I ask be included in the committee's record as exhibit A in support of this

statement.

Before closing the statement for the committee record, I would like to make a few notations of some points which will be found in this exhibit A.

Public utilities are exempted in section 4, provided they engage only in the operations which form the bases for their franchises.

The limitation applies to non-profit-business operations as well as to private profit operations (sec. 5a).

The limitation applies to control rather than to ownership (sec. 3). For a fuller explanation of the reasons why this proposed limit on the size of chains is necessary, I refer to my book, The Limitist, published by W. W. Norton & Co., 101 Fifth Avenue, New York 3, in 1947, copy of which I am able to supply without charge upon request from interested persons. I call attention also to a presentation of the proposal from a somewhat different angle at page 407 in the previous report of this committee, dated December 27, 1946, entitled "United States Versus Economic Concentration and Monopoly."

A PROPOSED BILL FOR INTRODUCTION INTO THE CONGRESS OF THE UNITED STATES To protect, encourage, and preserve private enterprise, and to insure freedom of action to individual workers by providing limits to the extent of the operations which any individual, partnership, corporation, or other legal entity may control in trade, commerce, or finance

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled.

TITLE OF THIS ACT

SECTION 1. This Act may be cited as the "Commercial Limitations Act of 1948."