that there were extensive wages in the country which were not sufficient to give a decent standard of living, so they said that the minimum rates of pay should be established which should insure the subsistence of the worker and his family in health and in reasonable comfort. That was the formula they used. I prefer, instead of that aim, to say: To maintain the worker in his family in good health, full efficiency, and well-being, or something of that character. But that is another factor that enters into it.

My judgment is that if a sound, effective price control is placed workers will not become-at least, as they represent labor costs-an inflationary factor, because they cannot. If you attempt to regulate wages as simply one unit of costs, then the costs of a corporation would enter into all those problems of shifting unit costs of production, shifting labor unit costs of production, and declining overhead costs other than labor costs as your total upward rises. And we found from long experience, I think, that the union agreement, the negotiated agreement, is a sound and reasonable way to establish wages which within all the elements of the picture are reasonable.

President Murray in his statement to the House committee pointed out that we were alive to the dangers of inflation, and our people as they go into their collective-bargaining conferences are alive to that, and they will not do things that would, they know, rebound upon

them.

Another point, too, which Mr. Murray made was made in connection with point Í. He pointed out that that British Government in its White Paper on price stabilization set forth the following position:

It is the traditional and well-tried practice of the principal industries to regulate wages through their joint voluntary machinery for wage negotiation. * Since the outbreak of war, the existing joint voluntary machinery for wage negotiations has operated successfully.

This is in Great Britain.

Increases in wage rates have been reasonable; the authority of the unions in day-to-day adjustment of wages and conditions has been maintained; the freedom of opportunity to make claims and to have them discussed has enabled industrial peace to be maintained.

The policy of the Government—

That is the British Government in wartime—

therefore, is to avoid modification of the machinery for wage negotiations and to continue to leave the various voluntary organizations and wage tribunals free to reach their decisions in accordance with their estimate of the relevant facts.

And of course in Great Britain they had a much more serious problem under the inflation because of the limited food and clothing supply.

Senator BROWN. Well, I do not think it is necessary for you to read the statement of Mr. Murray, because we all will read it, of course.

Mr. HETZEL. Yes. Well, he points out in Point II that wage controls would be administratively impossible and sets it forth in some detail.

Senator BROWN. That is the way Mr. Henderson talked also.

Mr. HETZEL. And then the relative situation of profits and costs, which Mr. Henderson went into in great detail.

Senator BROWN. Yes.

Mr. HETZEL. And he pointed out finally a matter which we feel is a very serious danger, that wage controls by their very nature make necessary other controls: that is, keeping a man at his job. You tell a man that he has to work for certain wage, and then he may say to himself, "I don't want to work here. I want to go somewhere else." They might become required to say, "You work at that job.' Then he may say to himself, "I don't want any job." Then you have to say to him, "You work at that job at that rate of pay," and that obviously creates a system of controls we want to avoid.

Senator BROWN. And it is very difficult to do.

Mr. HETZEL. Finally, in this statement Mr. Murray sets forth the Industry Council proposal, which I simply will submit to the committee for its information, to read.

Senator BROWN. Are there any questions?

(There was no response.)

Senator BROWN. Well, thank you. Those two documents that you have handed me may be inserted in the record.

(The documents referred to, being statement of Philip Murray and National Defense and Industry Council program, are as follows:)

NATIONAL DEFENSE AND INDUSTRY COUNCIL PROGRAM

1. INTRODUCTION

With the initiation of our national defense program over a year and a half ago, certain tasks were created for this Nation. From a peacetime economy we were to be directed into an economy of producing primary materials for the defense of those nations struggling against the fascist aggressors. Obviously the first task, and the one of greatest importance, was to produce the necessary quantity of materials within the shortest period of time.

To accomplish this goal it was essential that our existing plant facilities be utilized to the full with adequate provision for any increase in productive facilities that may be necessary, together with a maximum utilization of the available labor supply of the Nation. At the same time, it was also necessary that wherever possible production of civilian goods for our domestic needs be maintained as fully as possible. The effectuation of the national-defense program would necessarily involve severe sacrifices on the part of the American people. However, it is essential that no one segment or group within our Nation be unduly burdened.

To achieve this end it is necessary that our economy be as well ordered as possible in the effort to avoid inflation which would bring in its wake such dire distress for those with fixed incomes, particularly the labor group. Price control, therefore, becomes an essential part of our national-defense program.

The problem of production to meet our national-defense and civilian needs demands extremely careful planning measures on a national scale. Of equal importance is the obvious need of making preparation for the emergency situation which will develop following the termination of the world hostilities.

The effectiveness of our existing national-defense agencies as compared to the program submitted by the C. I. O. to effectuate our national-defense program must be evaluated in light of the following factors:

(a) The need of producing within the shortest period of time a maximum of tanks, guns, airplanes, and other materials required by the nations abroad as well as our own Army and Navy, together with our own domestic civilian demands; (b) The need of planning on a national basis in order to utilize our full available labor supply, together with all of our production facilities and raw materials, and to provide for any necessary expansion; and

(c) The need of preparing adequate and comprehensive plans for maintaining a well-ordered economy for our Nation to meet the economic problems that will arise following the cessation of hostilities abroad.

2. NATIONAL DEFENSE AGENCIES

Duing the past year a most elaborate and ever-changing complex of agencies has been built up to carry on the work of the Federal Government in connection

with national-defense preparations. This enormous mass of agencies has been added on to and around the regular agencies of government, particularly the Army, Navy, Maritime Commission, and the divisions of the National Defense Advisory Commission. So numerous and so changing have been the form and function of these agencies within the past year that it would be impossible to describe them with any detail within the scope of this report.

There follows, however, a brief account of the major defense agencies and the most important changes which have taken place in them in chronological order. War Resources Board.

The first agency established in connection with the present defense program was the War Resources Board appointed by the President in August 1939 to survey the problems in relation to mobilizing industrial resources for the defense of the Nation. The Board was headed by the chairman of the board of directors of the United States Steel Corporation, and his associates were likewise all large industrialists. There was no labor man on the board. This board was dissolved in November 1939, after making a report about which there is no further public information.

Limited National Emergency.

In the interim the next major act in relation to defense was the pronouncement by the President of a state of limited national emergency on September 8, 1939. This was followed in June 1940 by the first of an ever-increasing series of special defense emergency appropriations.

National Defense Advisory Commission.

At the end of May 1940 the President set up the Office for Emergency Management to coordinate the work of the Standing Council of National Defense, which is composed of the Secretaries of War, Navy, Interior, Agriculture, Commerce, and Labor. There was also appointed an Advisory Commission of seven persons to the Council of National Defense. This Commission, although nominally set up simply to advise the President and his Advisory Council, quickly became the actual defense organization. The Commission and its membership were discussed at substantial length in the President's report to the convention last year. Therefore, it is not extensively discussed here.

For a number of reasons the National Defense Advisory Commission failed to meet the need for adequate organization. Its status was never clearly defined, especially in relation to the operating departments such as the Army and the Navy. Actually these departments proceeded largely without reference to the work of the Commission. A constant shifting within the Commission of the various responsibilities and problems took place. This was due in large measure to the fact that the divisions in the Commission were set up on a functional basis. For example, there was the Production Division, the Materials Division, Labor Division, Price Division. Each of the many industries necessary to the defense effort was subject to a number of dfferent bureaus under each of these divisions, in addition to the War and Navy Departments. This functional division of the Government made it impossible for any industry to have its problems treated as a unit.

There were no labor representatives attached in any way to the divisions within the Commission dealing with production, industrial materials, price stabilization, agriculture, or consumers. Only in the Labor Division were men from labor appointed. Most of these were designated not by labor organizations but by the Government.

Although the Commission has dissolved, there is one sole vestige of it remaining in the continuation of the Transportation Division under Commssioner Ralph Budd.

Division of Coordination of National Defense Housing.

In the meantime a number of important additional agencies were set up not directly related to the National Defense Advisory Commission. Among them was the Division of Coordination of National Defense Housing. This office is discussed elsewhere in the report.

Office of Production Management.

By January 1941 the production and organization record of the Defense Commission was so bad that the President appointed a new coordinating agency to be concerned with production problems. This was called the Office of Production Management, established by Executive order on January 7. Its job was to be the

high command of the defense effort, and it was composed of four members, two of whom were attached to the National Defense Advisory Commission, and two Cabinet members, namely Mr. William S. Knudsen, Director General; Mr. Sidney Hillman, Associate Director General; Mr. Frank Knox, Secretary of the Navy; and Mr. Henry Stimson, Secretary of War.

Although the Advisory Commission was never formally abolished, the establishment of the O. P. M. in substance announced the natural death of the Commission. Extensive reorganizations then took place within the old agencies which came under the seven divisions of the Defense Commission. These were regrouped around new functional sections in the O. P. M.

Production Planning Board.

One of the continuing failures both in the Defense Commission and the O. P. M. was the lack of general planning of production. On the one hand, there was no adequate information as to requirements, and on the other no real information as to industrial capacity. In an attempt to meet this lack there was set up on February 20, 1941, a National Defense Production Planning Board. On this Board were appointed nine persons, one of whom was nominated by the C. I. O., Secretary James B. Carey. Organizationally this Board was somewhat indefinitely related to the O. P. M. itself and to the Production Division of the O. P. M. Neither its functions nor its relationship to the defense effort were every clearly defined. It was not provided either with a staff or research facilities. After a month or two of preliminary meetings at which no concrete plans and procedure were agreed upon, the Board ceased to meet, and a number of its members resigned or were appointed to other work.

Although this Board was never formally dissolved, it has ceased to function. Nevertheless no agency has been established to carry out its functions.

Office of Price Administration and Civilian Supply.

Up until April the price-control functions were in a Price Division under the O. P. M. Whatever price control was exercised was carried on largely by exhortation. No specific statute authorizing price control has been passed at the writing of this report. Whatever pressures were asserted to hold prices in line were done under the general emergency powers of the President.

In April 1941 a new and independent agency was established which was directly responsible only to the President. This was called the Office of Price Administration and Civilian Supply and was set up under the directorship of Mr. Leon Henderson. This office took over the functions of price administration previously within the O. P. M. They further took over the work of consumer protection and civilian supply previously operated as another division in the O. P. M. This agency was largely a reorganization and expansion of the division in the O. P. M. which had dealt with these problems.

Conflicts over policy which in part had led to the establishment of the new agency were not diminished but rather intensified by its independent operation. Many problems of industry and production were now subject not only to the numerous agencies of the O. P. M. and of the Army and Navy but also became the subject of independent policy-making under O. P. A. C. S. The intense confusion of policy was aggravated rather than stopped by the establishment of this new agency. Nonetheless, it should be pointed out that the O. P. A. C. S. as an agency devoted itself more vigorously to the expansion of production than ever had the O. P. M. or the regular Government departments.

There were no labor representatives in O. P. A. C. S. nor were the organizations of labor in any way regularly consulted in connection with the agency.

National Defense Mediation Board.

For the period up to March 1941 labor relations in connection with national defense were being divided haphazardly between the regular labor relations agencies of the Government, such as the Conciliation Service in the Department of Labor and certain conciliation-mediation work carried on by representatives of the Labor Division of the O. P. M. On March 19, the National Defense Mediation Board was established and supplemented the work of the other agencies in the mediation field. Although the Board operated in connection with the national-defense machinery for a period, it could accept only cases certified to it by the Secretary of Labor. The work of this Board is discussed more at length in other sections of the report.

Lend-Lease Administration.

On March 11 the President set up, to administer the provisions of the LendLease Act and similar laws which followed it, the Lend-Lease Administration

under the direction of Mr. Harry Hopkins. This added another purchasing and production agency to those already established. The purpose of the agency was, of course, to oversee the manufacture and procurement of all armaments and other materials to be exported under the lend-lease law. No labor representation was provided in connection with this agency.

Office of Civilian Defense.

Up until May 20 when the Office of Civilian Defense was created by Executive order, the enlistment of volunteer civilian assistance and the coordination of the operations of State and local defense councils had been very much neglected. On this date Mayor Fiorello H. LaGuardia was appointed Director of Civilian Defense.

The work of this division has been theoretically divided into three major sections.

1. To work out the relationships between the Federal agency and the State and local civilian defense agencies.

2. To enlist the volunteer participation of the many civilian organizations. 3. To have charge of measures for protecting civil population in case of attack.

No labor representation has been directly provided at this writing in the Office of Civilian Defense. On a few, but by far in the minority, of State and local defense councils there is small labor representation. Such councils are by and large wholly dominated by business groups.

In addition to the administrative work of the Office of Civilian Defense, it is cooperating, in some connection not wholly clear, with a group of volunteer participation committees appointed in each corps area by the President. These committees are supposed to be responsible for enlisting volunteer participation in the national-defense effort in their corps area. On certain of these committees, representatives of the C. I. O. have been placed. The organization and operation of the O. C. D. has not proceeded far enough to determine what its functions will be or what its possible accomplishments are. At the writing of this report it appeared that the agency was not yet successful in enlisting the effective and enthusiastic cooperation of the general body of citizens not directly engaged in defense.

Unlimited National Emergency.

On May 27 the President declared an unlimited national emergency, increasing his powers substantially under a number of already enacted emergency laws. · O. P. M. Reorganization.

A reorganization order on June 24 fundamentally rearranging the work of the O. P. M. is final testimony to the failure of the functional defense organization set up more than a year before. Fundamentally this reorganization wiped out the old basic divisions of price, priority, production, materials, and so forth, and established as the basic administrative unit for the O. P. M. the so-called commodity or industry section. This was an attempt to concentrate on matters relating to each of the major industries within one section. It was in fact a recognition of the position which the C. I. O. took months earlier that organization by industry was essential to an effective defense administration.

These divisions provided substantial improvement over the old operation, giving an opportunity for most of the major problems within each industry relating to defense to be determined within one industry division.

The

The

The establishment of commodity sections, however, did not establish the administrative machinery called for under the C. I. O. industry council plan. commodity divisions of the O. P. M. are operated by Government officials. industry involved is brought in only by advisory committees of management. In one or two cases advisory committees of labor have been set up. However, both of these groups are in a wholly advisory capacity.

A priorities branch has been set up in the Labor Division of the O. P. B. to devote its attention to problems of priority unemployment. This branch has on its staff representatives of labor.

Economic Defense Board.

On July 30 the President created by Executive order an Economic Defense Board to develop and coordinate policies and plans for strengthening the Nation's international economic relations. The chairman of this Board is the Vice President of the United States, with as other members the Secretaries of State, Treasury, War, the Attorney General, the Secretaries of the Navy, Agriculture,