But we can control inflation: by establishing price stabilization in the interests of consumers; by working out an effective tax schedule based on ability to pay and aimed to prevent profiteering by those not now bearing their share of the national sacrifice; by taking steps to promote civilian production not conflicting with defense production; in short, by planning the future course of the defense program instead of letting it drift with run-away prices.

(Whereupon, at 5:20 p. m., a recess was taken until tomorrow, Wednesday, December 17, 1941, at 10 a. m.)

STATEMENT BY TYRE TAYLOR, GENERAL COUNSEL, NATIONAL ASSOCIATION OF RETAIL GROCERS, ON PRICE-CONTROL LEGISLATION, BEFORE THE SENATE COMMITTEE ON BANKING AND CURRENCY. DECEMBER 17, 1941

The National Association of Retail Grocers recognizes the necessity for immediate, effective control of prices if an inflation, disastrous to retailers and consumers alike, is to be averted.

The association does not believe that any control can be effective, particularly in the food field, which does not include wages and the prices of agricultural commodities. The reasons for this may be very simply stated:

1. The largest single element in the cost of food products to the consumer is, of course, the initial cost of the agricultural commodities that go into them. At the present time the farmer receives in the neighborhood of 50 cents out of the consumer's dollar. Obviously prices at the retail level must reflect any material increase in this major item of cost. Otherwise the retailer would be quickly bankrupted and forced out of business. Therefore any price control legislation which does not set a reasonable ceiling over the prices of agricultural commodities appears to this association as dangerously inadequate and

unrealistic.

2. The next largest element in the cost of food products to the consumer is wages. According to Messrs. A. C. Hoffman' and F. V. Waugh, Department of Agriculture economists, "most of the charges for getting food products from the farm to the consumer are made up, either directly or indirectly, of wages.” They continue: "The notion is not infrequently held that exorbitant profits are largely responsible for the width of the spread and that the solution is to force middlemen to disgorge their profits. Unfortunately, however, the matter is not as simple as this. The total marketing spread would not be greatly reduced even by the total elimination of all earnings to capital invested in the food business." 2

In the light of these facts, the case for including wages in any price-control program appears too compelling to require further argument. Obviously, if wages go up, retail prices must go up or again the retailer will be forced to close his doors. And how anyone can assume that wages will not continue to rise in the absence of effective controls this association is unable to imagine. The National Association of Retail Grocers wishes to observe finally that, in its opinion, no necessity exists for a licensing provision in any price-control legislation. As was stated to this committee by another witness:

"We have not yet forgotten our experience with the ill-fated National Industrial Recovery Act. That measure contained a licensing provision which was frankly described by the Administrator of the N. R. A. as a Big Stick to force nonconformists into line. When we consider the other penalties provided in the pending price bills, it is clear we need no additional Big Sticks by way of licensing provision and that it would be much better to rely, first, on the desire of American business to cooperate with the defense program, and, second, with the other penalties provided for."

STATEMENT BY MISS ALMA L. BINZEL, BEAVER DAM, Wis.

The Wisconsin State Conference on Social Legislation represents 175 farm, labor, fraternal, national, and civic organizations with a membership of 200,000. It held a special State conference on the rising cost of living June 15, 1941. One hundred and seventy-eight delegates were present. The memorandum here

1 Now of the Office of Price Administration.

2 See 1940 edition, Yearbook of Agriculture.

with submitted for the consideration of your committee on the price-control bill summarizes the position of the Wisconsin State Conference on Social Legislation. The conference urges immediate action to protect the standards of living of the people.

MEMORANDUM ON PRICE-CONTROL BILL, H. R. 5479

The Wisconsin State Conference on Social Legislation considers that legislation on price control must be immediately acted upon if the living standards of the people are to be protected and inflation avoided.

The Wisconsin State Conference on Social Legislation opposes any type of wage freezing as undemocratic and unnecessary. Between August 1939 and the middle of September 1941 the cost of living of American workers rose 9.6 percent. The wholesale price index, covering 28 basic commodities, shows an increase of 56.8 percent during this same period. The continuing rise in prices has more than wiped out wage increases secured by organized workers during the first half of 1941. Practically all of the substantial price rises have occurred in commodities where wages are no appreciable factor or where there have occurred no considerable wage increases. The prices of commodities as a whole rose in advance of wage rates and the prices which have advanced most are for articles least affected by wage costs. These facts were pointed out in testimony given by Isadore Lubin, Bureau of Labor Statistics, on the hearing of the price-control bill.

The bill, as amended by the House Banking and Currency Committee, actually puts no restraint on rising prices and encourages profiteering and speculation. Under the provision that no ceiling on a farm product could be lower than 110 percent of parity or lower than the price prevailing on October 1, 1941, or lower than the average price in the period from 1919 to 1929, prices would be allowed to soar to new heights. It is estimated that food prices alone would go up 20 to 30 percent. These super-parity provisions will lead to the same kind of speculative excessives that brought ruin to the countryside after World War I. The speculator and the hoarder will profit at the expense of consumer and farmer alike. The elimination of a provision, authorizing the President to license sellers of commodities, eliminates a powerful weapon against speculators and hoarders. The elimination of penalties against convicted violators of the act renders the whole act impossible of any real enforcement. The bill, as amended by the committee, will not only increase living costs but also the cost of lend-lease food exports, as well as the cost of any tank, airplane, and gun in our defense program.

The consumers of our country need price protection. The result of the bill as it stands would be price inflation. The original emergency price-control bill is the bill that will protect the consumer and help to prevent inflation.

Again we repeat that we are opposed to any proposal for wage freezing as injurious to the national welfare and morale of our people. We also ask that in the passing of an effective price-control bill a provision to have adequate representation of labor, small businessmen, and farmers in the administration of the bill be considered.

STATEMENT OF THOMAS J. WALLNER, PRESIDENT, SOUTHERN STATES INDUSTRIAL COUNCIL

The membership of the Southern States Industrial Council is comprised of some 2,300 industrial and manufacturing establishments in the 15 Southern States of Virginia, the Carolinas, Georgia, Florida, Alabama, Louisiana, Mississippi, Texas, Arkansas, Oklahoma, Missouri, Kentucky, West Virginia, and Tennessee.

Its purpose is to protect and advance the legitimate interests of southern industry and to press for equality of treatment under the national policy. It is governed by a board of directors of 45 members, and is nonpartisan and not for profit.

As an organization the council fully recognizes the dangers of an uncontrolled inflation and favors immediate effective measures to avert such a catastrophe now or in the future. Unreasonable price rises not only would have the effect of impairing the resources of the Government in this time of unprecedented emergency, but would strike at the heart of civilian morale by lowering the living standards of every worker. In addition, any serious inflation would amount to a capital levy on every savings bank depositor, and every insurance policy and bondholder in the country. As we see it, there can be no substantial disagree

ment on the fundamental thesis of the administration that effective price controls must be adopted in view of the circumstances now prevailing. It is also equally obvious that the sooner this is done the better. Experience has repeatedly proven that, in this field as in so many others, "an ounce of prevention is worth a pound of cure."

The council believes, however, that effective controls can and must be devised and applied within the framework of our American free enterprise system, and, for this reason, opposes licensing in any form.

We are by no means clear as to how prices can be controlled without at the same time controlling all the major elements of cost that enter into them-as wages and agricultural commodities. In fact, this appears to us impossible. Furthermore, in this time of national crisis we should avoid even the appearance of economic or political favoritism as between different groups of our citizens. At the same time, the council recognizes at least two serious objections to the inclusion of wages in any price-control bill: (1) Judging by the administration's record to date, the tendency would be to grant every demand of labor-however unreasonable for increased wages, thereby defeating the purpose of the act; and (2) the dangers of regimentation inherent in the task of administering any such law are such as to cause many of us to wonder whether the free enterprise system could survive under it.

Weighing all the factors, however, and in view of the gravity of the emergency and the necessity for effective action now, the council believes that a thoroughgoing measure should be adopted essentially along the lines of the Gore (Baruch) bill. Needless to say, it should provide for flexibility of administration with opportunity for industry to be heard, and ceilings should be set high enough to assure maximum production of critical materials.

EMERGENCY PRICE CONTROL ACT

WEDNESDAY, DECEMBER 17, 1941

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met at 10 a. m. pursuant to adjournment on Tuesday, December 16, 1941, in room 301, Senate Office Building, Senator Prentiss M. Brown presiding.

Present: Senators Brown (presiding), Bankhead, Hughes, Herring, Clark of Idaho, Downey, Tobey, Danaher, Taft, and Ball. Senator BROWN. The committee will be in order.

We will hear this morning from Dr. Nystrom.

STATEMENT OF DR. PAUL H. NYSTROM, PROFESSOR OF MARKETING, COLUMBIA UNIVERSITY, AND PRESIDENT, LIMITED PRICE VARIETY STORES ASSOCIATION

Senator BROWN. Will you please give your full name to the reporter, Dr. Nystrom?

Dr. NYSTROM. Mr. Chairman, my name is Paul H. Nystrom. I am professor of marketing at Columbia University, and I am the president of a trade association known as the Limited Price Variety Stores Association.

Senator TAFT. What is that association, Doctor?

Dr. NYSTROM. That is an association that includes in its membership about 60 percent of all the 5-and-10-cent and $1 stores in the United States, and includes as many independent stores as chain stores. We have all the chain stores, and we have about half of the independent stores, the other half being made up of stores so small that we have not been able to reach them. It is unique in that it reaches both chains and independents. It serves the purpose of research and exchange of information primarily, and through the association it is possible for the variety trade to present its viewpoints wherever there may be a proper occasion.

Senator TAFT. By variety stores you mean a large number of stores handling a large number of items?

Dr. NYSTROM. The term "variety trade" is well known in the retail business. It is a kind of trade that offers a wide cross section of all kinds of merchandise that may be sold for 5, 10, 20, and 25 cents and so on up to a dollar.

Senator TAFT. What was your academic training in the field of marketing?