Rates of return on total investment (invested and borrowed capital) for each of the principal steel companies 1917 to 1948, inclusive, after provision for Federal and other income taxes Source: Basic data relating to steel prices, Joint Committee on the Economic Report, 81st Cong., 2d sess., table 12, p. 20, U. Ŝ. Government Printing Office, Washington, D. C., 1950. Those rates of return, except possibly for Inland Steel Co. and National Steel Co., are about the same as the rates of returns allowed to be earned by public-utility corporations. Increeases and decreases in annual capacities of steel companies in the United States (based on total steel ingots produced in open health, Bessemer, crucible, and electric furnaces) from Jan. 1, 1945, to Jan. 1, 1950 1 Actual figures not available, and therefore assumed to be the same as for Jan. 1, 1949. Source: Steel Company Reports to American Iron and Steel Institute. It will thus be seen that the steel companies as a whole are not earning inordinate profits. However, this statement does not mean that they could not improve their efficiency or that the public would not benefit from a more competitive price situation. It does show, however, that the rates of return are meager enough that the steel companies are not apt to expand more than is necessary to take care of assured future demand even though from a social viewpoint the country may be better off with a considerable expansion in capacity. The CHAIRMAN. Thank you very much, Dr. Hunter. You have made a very telling contribution and we are deeply appreciative. The meeting will now adjourn and we will meet tomorrow at 2 o'clock, daylight-saving time, when our first witness will be Mr. Louis Bean, economist of the Department of Agriculture, Mr. Ernest Weir, president of the National Steel Corp., who will follow Mr. Bean, and then the third witness will be Prof. Arthur Burns, of Columbia University. The meeting will now adjourn. (Whereupon, at 4:45 o'clock p. m., the subcommittee adjourned to reconvene on Thursday, May 4, 1950, at 2 o'clock p. m., daylight-saving time.) STUDY OF MONOPOLY POWER THURSDAY, MAY 4, 1950 HOUSE OF REPRESENTATIVES, SPECIAL SUCOMMITTEE ON THE STUDY OF MONOPOLY POWER Washington, D. C. The special subcommittee met, pursuant to adjournment, at 2 p. m. in room 346, Old House Office Building, Hon. Emanuel Celler (chairman) presiding. Present: Representatives Celler (chairman), Bryson, Lane, Wilson, Willis, and McCulloch. Also present: Edward H. Levi, counsel to the subcommittee. The CHAIRMAN. This session will come to order. Our first witness this afternoon will be Louis H. Bean, Office of the Secretary, United States Department of Agriculture. Mr. Bean, will you just give your name and qualifications to the stenographer. Mr. BEAN. My name is Louis H. Bean. I am an economist in the Office of the Secretary, Department of Agriculture. I have been connected with the Department of Agriculture ever since 1923. Mr. Chairman, I have a statement here which I will proceed to read if that is the procedure you wish to follow. The CHAIRMAN. Go ahead. STATEMENT OF LOUIS H. BEAN, UNITED STATES DEPARTMENT OF AGRICULTURE, OFFICE OF THE SECRETARY Mr. BEAN. You have asked me to bring before you some of the material contained in my statement, the Dependence of Industrial-Agricultural Prosperity on Steel Requirements for Full Employment, presented nearly 3 years ago-June 19, 1947-to the Steel Subcommittee of the Senate Committee To Study Problems of American Small Business. On that occasion I indicated how intimate is the interdependence between agricultural and industrial prosperity and how large the steel industry's output and capacity would need to be if agriculture and industry were to enjoy prosperity conditions in 1950. In words that apply equally well today, I pointed out that farmers as a group depend primarily upon the domestic market as an outlet for their products. Ordinarily about 85 percent of total cash farm income is derived from the domestic markets and about 15 percent from exports. Consequently, there is a very close relationship between farm income and industrial activity. In prosperity years as well as in years of depression the level of industrial production tends to determine and to limit the volume of industrial goods such as farm equip ment and machinery, automobiles, and tractors, that are available to farmers for use in their production. It also determines and limits the amount of industrial goods and services which the farmers' net income will buy. Conversely, the purchasing power of farmers who constitute a very large part of the domestic market for industrial goods and services and who supply the Nation's food and certain industrial raw materials-helps determine the level of industrial production and employment. Farmers as well as other groups, I then suggested, are vitally interested in the maintenance of full employment. They are aware of the views of certain industrial leaders who expect a postwar depression and have been reluctant to expand industrial capacity. Farmers are therefore not only concerned with efforts to maintain present prosperity but, in case there should be a let-down in business and much employment, they want to be assured that there will be adequate industrial capacity so as to wipe out that unemployment as speedily as possible. Much has happened to agriculture and industry during the past 3 years in the way of production, prices, income, and capacity. But these changes merely emphasize the common interests of agriculture and the rest of the economy-the common need to maintain a full and stable measure of agricultural production and purchasing power and an industrial capacity to provide full employment and a rising national income. Steel and agriculture are basic to our big and growing industrial economy; and a big and growing industrial economy is, of course, basic to agriculture and steel. The agricultural concern with industrial capacity can be illustrated in many obvious ways, but a look at the recent downward trends in farm income and farm prices will suffice. Farm income has fallen considerably from the postwar peak. Cash income from farm marketings that reached a total of 30.5 billion dollars in 1948 is being estimated at 25 billion for 1950, a decline of over 18 percent. Cash income from marketings available to farmers after meeting production costs dropped from 16.5 in 1948 to less than 12 billion estimated for this year, a decline of about 25 percent. This marks a substantial decline in farm buying power, since prices of goods bought by farmers have declined only about 5 percent. While prices of some goods bought by farmers for production and family living have declined slightly, prices of such items as farm machinery and automotive products have actually increased by 15 to 20 percent in the face of declining farm prices. The contrast in these price movements stands out even more sharply in what has happened to wholesale prices of farm products, and to steel mill products that are basic to many of the things farmers buy. At the bottom of the depression of the 1930's, the exchange value of farm products for steel fell as much as 40 percent below that of 1926. At the recent peak in January 1948 the situation was reversed, and farm products exchanged for about 40 percent more. Since January 1948 wholesale prices of farm products have fallen 22 percent while steel-mill products have risen by 20 percent to a new postwar peak, with the result that the buying power of farm products is now 10 percent below that of 1926; and the table that follows supports the figures I have just read. TABLE 1.-Purchasing power of farm products in exchange for steel products at Obviously, both producer and consumer interests are involved in these price contrasts. Steel-mill products tend to sustain the level of prices of industrial goods bought by farmers. They tend at the same time to sustain the official parity level used in determining the level of farm price supports. Farm income and farm buying power from now on will depend more and more on home markets. Net farm income from marketings as a share of the national income improved greatly during World War I but declined in 1921 and remained depressed through most of the 20-year period from 1920 to 1940. It again improved during World War II but has now fallen to a lower level than is generally realized. Judging by the experience with the depressions of 1921, 1932, and 1938, industrial unemployment could again play havoc with farm prosperity. These remarks, Mr. Chairman, are illustrated in a chart that appears as exhibit S-324 in Steel Exhibits, page 681, and I would like to turn to that chart for a moment to make sure that it is understood. In the upper part of the chart is a line that represents the farm population as a share of the total population of the country. It starts with about 35 percent of the total in 1910 and drifts off, for the most part regularly, to about 19 percent in 1949. The straight line the connects 1921 with 1932 is intended to indicate the level of farm population in relation to the total that has characterized the period of business depressions when farm population was not able to move to cities because of the lack of city opportunities. Another feature of the upper line is that, in the period of the 1920's, the rate of decline was somewhat greater than previous years, indicating that, when there is general prosperity, farmers do tend to shift to cities a little more rapidly than usual. Now, if the farmers' share of the national income had followed the farmers' share in the total population, assuming that to be one standard for farm income, then we would observe that, in the period 1910 to 1914, the ratio of farm income-after production expenses-to the national income was approximately 1212 percent, and that is indicated in the lower part of the chart. Assuming that this ratio from then on had drifted downward in relation to the decline in the farm population as a share of the national population, it would have followed the line which is marked "Population Trends," and you see at a glance, therefore, that during the period of World War I farm income rose sharply above |