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Mr. GREEN. That is quite correct, Senator.

Senator King. Was it not basically founded upon the concept that a man is entitled to the protection of his genius and his brain, and if, after years of experimentation, he is able to devise some new plan that will materially contribute to advancement and progress, he should be protected for a given time?

Senator O’MAHONEY. Of course. I mean the power was taken away from the States and given to the Federal Government, indicating a desire on the part of the framers to have a uniform rule.

Senator King. For patents? Senator O'MAHONEY. For patents. You may proceed, Mr. Green. Mr. GREEN. Steel is another example of the modern industry in which the enterprise operates on a large scale, in which investments are massed, in which control is centered, and the successful stages of production are highly integrated.

According to the latest estimates, the three largest steel manufacturing corporations employ 45 percent of the total number of steel workers. The two largest steel corporations, the United States Steel Corporation and the Bethlehem Steel Corporation, represent a combined capital which amounts to more than half of the total for all of the steel companies in the country.

Senator OʻMAHONEY. Are those companies operating on an interstate scale?

Mr. GREEN. Yes. That is the point I am going to establish very clearly.

The total capitalization of all steel companies in the United States is more than $4,700,000,000 of which $1,900,000,000 represents the capitalization of the United States Steel Corporation and $600,000,000 of the Bethlehem Steel Corporation. This giant corporate aggregate and others like them extend their control not only to the mining of the raw material but also the mass of transportation and the mechanism of distribution. The successive stages of manufacture are not separable. They cannot be made separable. Remove one stage in its operation and the whole vast machinery would break down and this holds true of every State from the mining of ore to the sale of the finished product to the consumer.

Senator King. If I correctly understand you, Mr. Green, you admit that there might be advantages in activities, such as those you are now describing, of a corporation or an individual mining ore, transporting it to his plant, and then converting the ore into the finished product?

Mr. GREEN. I was not expressing an opinion on that, Senator. I was merely pointing out their ramifications, and endeavoring to draw the deduction that the corporations should be licensed by the Federal Government, as provided in Senator O'Mahoney's bill. I am endeavoring to show that, because of an interstate character, its ramifications, that the time has arrived when the Federal Government should license these great corporations.

Senator KING. And all corporations, as well, if I correctly under

stood you.

Mr. GREEN. Yes.
Senator O'MAHONEY. You may proceed.

121861—37—pt. 1-7

Mr. GREEN. But we need not formulate our policy on the basis of our experience with the largest aggregates. Let us take another steel corporation, the Jones & Laughlin Steel Corporation, to see whether or not its operations take part in the flow of interstate commerce.

This is a corporation chartered under the laws of Pennsylvania. The assets of it and the consolidated companies were valued as of December 31, 1935, at $184,965,130. It employed about 24,000 persons. In a supplementary statement, I submit a summary of official data showing that the ramifications of the Jones & Laughlin Steel Corporation are as broadly extended as the Nation itself. It owns and operates not only iron ore, coal, and limestone mines, lake and river transportation facilities and railroads connecting with the Pennsylvania, New York Central, and Baltimore & Ohio systems, but also maintains and operates fabricating shops and warehouses throughout the Nation having about 75 percent of the products shipped out of the State of Pennsylvania.

Can anyone honestly say that any phase of producing, manufacturing, or distributing iron and steel in the United States is a local operation? Let us now look at the American iron and steel industry as a whole.

In the number of workers employed, the iron and steel industry is the second largest in the United States. In the dollar value of its output, steel works and rolling mills rank third and this is what the value of its output was in three sample years: 1919.

$2, 828, 902, 376 1929.

3, 365, 788, 805 1933.

1, 123, 889,000 This industry which employed 400.000 men in 1929 and employs nearly that number today affects in its operations every phase of our national economy.

At least half a dozen industries are directly dependent on the supply of steel to them for their operations. This is evident from the way in which steel products are distributed to consuming groups. In 1934, nearly 21 percent of steel production was used directly by the automobile industry; 13 percent of such production was used by the railroad industry; 12.7 percent went into the construction industry; 8.7 percent was used in the manufacture of metal containers; about 5 percent was used in the oil, gas and water industries, and 3.7 percent was used in manufacturing machinery; 5.3 percent of this output was shipped in the foreign commerce in the form of exports. The remaining 30 percent of steel production was distributed among a large number of industrial groups.

Steel production requires the tapping of a world-wide market for raw materials that go into its making. The major iron-ore producing areas in the United States are the iron ranges in Minnesota and Michigan in the Lake Superior region and the iron ore deposits of Alabama. The ore from the Lake Superior region is shipped by steamer over the lake route to the Chicago region including Chicago, II.; Gary, Ind.; Indiana Harbor, Ind.; as well as the ports on the southern shore of Lake Erie such as Cleveland, Ohio; Conneaut, Ohio; Lorain, Ohio; Erie, Pa.; and Buffalo, N. Y. Much of the ore from Lake Superior region is also shipped directly or reshipped to Pennsylvania, New York, Ohio, West Virginia, Michigan, Maryland, and other points. In addition to this major flow of iron ore into the production channels of the steel industry, much of the ore is imported from Cuba and from Chile.

Manganese which is an essential element in steel manufacture is mainly imported from Brazil, Russia, and India. Domestic manganese used in steel manufacture is produced in Montana, several other Western States and Virginia, but practically none of it comes from the States in which steel is manufactured.

More than two-thirds of the coal used in steel production is shipped from States other than those in which steel is actually manufactured. In the face of these facts, it is impossible to deny that steel manufacturing is not local but national. There is a constant and continuous flow across State lines of the raw materials, of the semifinished and finished products that directly and vitally affect not only the transportation industries carrying these products, but also the flow of commerce in other metals and products dependent on iron and steel.

Senator O’MAHONEY. Have you compiled any facts to show to what extent the steel companies, through their own subsidiary corporations or affiliated corporations, control the shipment of the raw materials?

Mr. GREEN. Yes; I think we have. I do not know that I have it here. I have a very detailed report on the Jones & Laughlin Steel Corporation.

Senator O’MAHONEY. At your leisure, you might have that checked up and submit it to the committee. Mr. GREEN. I will be glad to do so. (The data referred to will be printed subsequently in the hearings.) Senator OʻMAHONEY. You may proceed, Mr. Green.

Mr. GREEN. Our major industries are concentrated industries. In these industries two or three corporations dominate the entire market; control prices; employ most of the wage earners, and try to impose wage and labor policies upon them.

Consider the figures just made available by the Twentieth Century Fund: In typewriter manufacturing, four largest corporations employ 94.8 percent of the workers in the industry.

Senator O’MAHONEY. That is the manufacture of typewriters? Mr. GREEN. That is the manufacture of typewriters.

In cigarette manufacturing, four largest corporations employ 91.4 percent of the workers.

In automobile manufacturing, three largest corporations employ 63.9 percent of all workers.

Without recounting the details of the report, I will merely cite the fact that in 24 selected representative industries more than 50 percent of all wage earners are employed by the three largest corporations, and that in 36 such industries more than 40 percent of workers are so employed.

Utterly blind to the implications of these developments, spokesmen from some quarters still persist in pleading for utter and complete nonintervention of the Federal Government in the field of commerce regulation whether interstate or otherwise and persists in preaching the doctrine of laissez-faire. They still argue that our economy is capable of self-adjustment because this self-adjustment is supposed to be automatic. Some of them venture so far as to say that some program of voluntary price reduction may be offered as a solution of our economic ills.

These spokesmen seem to overlook our entire experience during the 20's which amply demonstrate that a voluntary program of price cutting in a system of giant corporate and industrial aggregates is entirely out of the question. Their system is still the system of laissez-faire, of the open market. It is the free-price system in which an unrestricted interplay of competitive forces is predominant. They overlook the fact that the price market is no longer free and that our economic life is gradually congealing into a great conglomerate mass from which competition is steadily expelled. In the days of the unrestricted open market, competition produced automatic price adjustments. But as one internationally famous economist puts it “the full flood of competition has been canalized, locked, dammed, and diverted from its natural course." number of instances automatic price adjustments have been gradually destroyed by corporations and replaced with administered prices determined in advance by the management. These prices are not based on day-to-day interplay of supply and demand. They are arrived at by administrative decisions of corporate officers.

We have outstanding examples of administrative determination of industrial prices in such important products as steel, cement, aluminum, agricultural implements, typewriters, and a number of branded products. Although affected by somewhat different circumstances, the prices of automobiles also reflect the administered pricing process resulting from concentration of production rather than the supply and demand in the open market.

The following table illustrates the direct relationship between administered prices and restricted production as contrasted with free prices and sustained production:

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This table is a result of the analysis made by Dr. Gardiner C. Means in the Senate Document No. 13 of the Seventy-fourth Conigress. In this list of major industries, the relation of price level and production is established from 1929 to the spring of 1933. It will be noted that the first five industries represent the effect of administered prices. The 16 percent drop in the wholesale prices of automobiles for example was accompanied by an 80 percent drop of production. During the same period, agricultural commodities on the other hand dropped in price 63 percent, while production was lowered only 6 percent.

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Senator O'MAHONEY. May I interrupt you at this point ?
Mr. GREEN. Certainly.

Senator OʻMAHONEY. That statement of the facts compiled in Senate Document No. 13 rather tends to show that industrially we have an economy of scarcity, while agriculturally we have an economy of plenty.

Mr. GREEN. Exactly. That is the comparison.

Senator OʻMAHONEY. The prices to the agricultural producer tumbled, because he kept his production up. The prices to the industrial producer were maintained at a more or less normal or level point, while the production tumbled.

Mr. GREEN. That is it, exactly. There was no operation at all of the law of supply and demand.

Senator King. You mentioned automobiles, or I would not have referred to them. Is it not a fact that the prices of automobiles have gradually been reduced, and the competition between producers of automobiles has been so fierce that a number of automobile companies have gone into liquidation; that the moment Chrysler announces a reduction in price, there will be a similar reduction by Mr. Ford, General Motors, and other organizations; so that, in reference to automobiles, while the number of employees has increased, the prices to the purchasers have been gradually reduced ?

Mr. GREEN. Yes; perhaps that has been the net result. However, the point I am trying to make is that the difference is shown in this statement prepared by Dr. Means between administered prices and prices fixed by the inexorable operation of the law of supply and demand. So it strikes me that the price level fixed for agricultural products and the price level fixed for steel products are not equable.

Senator NORRIS. Does it not also show the absolute impossibility of the farmer, for instance, meeting conditions like the manufacturer does, because, either for the lack of organization or from the nature of the product, it is just impossible for him to do it?

Mr. GREEN. That is right, Senator.

Senator NORRIS. And he must continue to produce, even though the price goes down.

Mr. GREEN. Yes.
Senator NORRIS. He cannot stop like the manufacturer.

Mr. GREEN. That is just it. His price goes down, and if he wants to buy an automobile he must pay the administered price, which is not fixed by the same law that fixes the price of his product.

Senator NORRIS. He must sell under one law and buy under another.

Mr. GREEN. Exactly.

Senator O'MAHONEY. The farmer in Nevada, or Wyoming, or Utah, when he wants to buy an automobile, pays the fixed price in the town in which he purchases it, a price fixed by the producer in some other State.

Mr. GREEN. Yes,

Senator O'MATIONEY. But when he takes his wheat or other farm products to market, he takes what he can get.

Mr. GREEN. Yes.
Senator O'MAHONEY. He cannot fix the price.
Mr. GREEN. He cannot fix the price.

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