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SOURCE: FOREIGN STATISTICAL AND TRADE PUBLICATIONS, FOREIGN SERVICE REPORTS, AISI.
U.S. DEPARTMENT OF COMMERCE, OFFICE OF DOMESTIC COMMERCE, IRON AND STEEL DIVISION

EXHIBIT S-12

[From the New York Herald Tribune, April 24, 1950]

THE WEEK IN FINANCE

(By George Wanders)

AN ECONOMIST LOOKS (TWICE) AT STEEL

50-143-8

From the legislative and administrative halls of Washington an uncommon amount of political eloquence has been poured forth in recent years, respecting Corporate bigness and monopolistic tendencies. The process was resumed last Monday, when Representative Emanuel Celler, Democrat, of New York, opened hearings on the steel industry. The inquiry, which apparently will continue

for some time, is being conducted by Mr. Celler as chairman of the House Judiciary Subcommittee on the Study of Monopoly Power.

The aim is to substantiate, if possible, Mr. Celler's oft-proclaimed thesis that companies should be broken into bits and parts if they have waxed in size and power to a point where they substantially lessen competition within an industry or tend to create a monopoly. To prove that they have arrived at such a level in the steel industry is hardly an easy thing. The economists have been discussing the problem with varying degrees of penetration, but they come up with different answers. Indeed, the same ones seem to have different answers at different times.

The steel companies, like most others, have grown in recent years with a national economy that has expanded threefold on a dollar basis. The largest outfits, however, actually have slipped backward in relative importance within the industry. To the problems posed by this phase must be added many others, such as the need for finding_and_utilizing new ore supplies, which only large aggregates can handle properly. Best use of managerial skills also runs naturally to large units, as does research and development. Economists often prefer to tread softly in an area thick-strewn with conflicting possibilities of the good or harm that might be done by undue meddling.

As his first witness in support of his viewpoint, Representative Celler called upon George J. Stigler, professor of economics at Columbia University. Dr. Stigler conceded to begin with that there is a good deal of competition in the steel industry and a great deal more than in its British counterpart. He maintained, however, that the real question is whether we have enough competition to dispense with the necessity for further social controls, and his answer was decidedly in the negative.

As evidence of the insufficiency of competition he cited the basing point system of pricing, which no longer is being used. Price rigidity was another main complaint, in which emphasis was placed on the infrequency-quite natural-of steel company changes in the intricate structure of extras. Other symptoms of monopoly mentioned were uniformity of bids on Government contracts, price discrimination against foreigners, and an assumed reluctance of rivals or customers to complain of anything done by the leading companies.

On these grounds Dr. Stigler felt convinced that the steel industry "displays important monopolistic tendencies that call for corrective social policy." And the policy which he appeared to favor is dissolution of United States Steel, and probably also Bethlehem and Republic, into a considerable number of independent companies. The conclusions thus reached by the Columbia University economist, and the reasoning by which he reached them, seemed to dominate a good part of the further proceedings of the subcommittee last week.

Since the line of inquiry thus established is of considerable importance, it may be of interest that Dr. Stigler, in a different setting, found not long ago that the problem of competitive trends in the United States does not quite deserve all the attention heaped upon it. In the course of a series of lecures before the London School of Economics, he discussed our long-term competitive history and outlook. These discourses have just been published by Macmillan.

Looking down the aisles of time at the competition-monopoly dispute, Dr. Stigler noted for the benefit of the budding economists in London that absolute size of a firm is irrelevant to the question of competition. This, he said, is not only well know, but well forgotten. United States Steel, he added by way of elaboration, is a giant with sales of $1,486,000,000 in 1946, but it was relatively a much bigger steel company in 1902, when its sales were $422,000,000.

"It is my present judgment," Dr. Stigler concluded, "that competition declined moderately from the Civil War to the end of the nineteenth century, and thereafter increased moderately. There is no obvious evidence for the more popular thesis that competition has been declining steadily (and in many instances, drastically) for a half-century or more. The popular belief, I think, is partly fictional history, partly symptomatic of increasing sensitivity to given departures from perfectly competitive behavior. Unless it can be given a documentation that I do not believe exists, it should be abandoned as an obstacle to clear thinking on social policy."

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EXHIBIT S-14

APRIL 24, 1950.

Hon. WINFIELD K. DENTON,

House of Representatives, Washington, D. C.

MY DEAR CONGRESSMAN: Referring to our discussion of the status of ownership or control of Gunnison Homes, Inc., during the hearing before the House Judiciary Committee Tuesday morning, April 18, I have checked this matter with our records and find the facts appear to be as follows:

The United States Steel Corp. acquired what was stated to be a substantial interest in the Gunnison Housing Corp., New Albany, Ind., in June 1944. The corporation was later renamed Gunnison Homes, Inc. It is stated in the annual report of United States Steel Corp. for 1944 that through the medium of Gunnison "United States Steel expects to further the use of steel in residential construction after the war."

A registration statement filed by United States Steel Corp. on May 2, 1949, shows that the corporation was then the owner of 70 percent of the voting stock of Gunnison Homes, Inc. The annual report of the corporation for 1949 also shows Gunnison Homes, Inc., as a subsidiary of United States Steel. We have received no later information that would indicate any subsequent change in ownership of Gunnison Homes, Inc. Hence, it would appear, as I stated in my testimony before your committee, that Gunnison Homes, Inc., is largely owned and controlled by the United States Steel Corporation.

Sincerely yours,

JAMES M. MEAD, Acting Chairman.

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Recapitulation of Minnesota iron shipments, direct shipping and beneficiated ores by railroads, 1939-44, inclusive, with average 6-year shipments,

also 1945 shipments

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96347-50-ser. 14, pt. 4b-3

1 Starting with year 1937 all ore shipments from Cuyuna Range were as far as practicable, divided on basis of 50 percent to Northern Pacific and 50 percent to Soo Line Railroads, therefore, beneficiated ore shipments would in effect be divided equally between the two carriers. Includes shipments from Fillmore County, 1943, 220,427 tons; 1942, 59,171 tons; 1941, 47 tons.

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