every instance official investigation has cleared the Soviet Government of the charge of propaganda in foreign countries. Senator GORE. You mean in other countries? Miss VAN KLEECK. And in our own. Our own fish commission undertook to investigate the one charge against any representative of the Government of Moscow, namely, the Amtorg, and failed to find evidence in any way supporting the charge that the Amtorg was guilty of disseminating propaganda in this country. Another famous case is the Arcos, which is a similar organization in England, and which was "raided," if you will. Its offices were in the hands, for several days at least, of the very competent investigating agencies of the British police. They used all the instruments needed to open strong boxes, but they discovered not one bit of evidence.

On the contrary, it has been the policy of the government of the U. S. S. R. to enter into such relationships as are defined in the pact of Paris, and to maintain the agreement in every particular.

Incidentally, of course, it is not Moscow, nor the Third International which endangers our institutions, but the shaking of confidence in the capitalistic system, through the failure to manage wisely its banks and its financial institutions, and through the spread of unemployment. Whatever dangers we have can be met only by our undertaking a thorough-going program of our own in accordance with sound economic principles.

The following table with the succeeding comments gives more in detail the trends in trade between the United States and the Soviet Union since 1923, as compared with the average for the four years. preceding the war.

(The table referred to is here printed in the record as follows:) Balance of Soviet-American trade for the years 1923-1931

Share of the U. S. S. R. in exports and imports of the United States
[In thousands of dollars]

American-Soviet trade increased in volume each year from 1925 to 1930. During this period the Soviet Union purchased $5 in American goods for every dollars' worth of Soviet products sold here. For the six years ending with 1931 the favorable American trade balance in this business was nearly $400,000,000. Most of the American exports to the Soviet Union were sold on credits and there were no delays or defaults on payments.

The peak was reached in this trade in 1930. In 1930, according to the Department of Commerce, American exports to the Soviet Union amounted to $114,400,000. The Soviet Union was America's sixth best foreign customer. It was the leading foreign customer for American agricultural machinery and the second-best customer for American industrial machinery. This was quite a contrast with the situation before the war, when Russia had been a negligible customer and the average annual American exports to that country were about $24,000,000.

In 1930, the United States furnished 25 per cent of the total imports of the Soviet Union. In 1932 it furnished only 41⁄2 per cent of these imports.

În 1932, the Department of Commerce reported about $12,600,000 for American exports to the Soviet Union, as compared with $114,400,000 in 1930.

The Soviet Union imports machinery and equipment from Germany, England and Italy, as well as from the United States. Soviet customs figures for 1932, recently published in this country by the American-Russian Chamber of Commerce, show that as compared with 1930 imports from the United States decreased 88 per cent, while imports from Germany, England, and Italy increased 30 per

cent.

The figures for imports from the four countries for the two years are as follows:

Purchases from the United States decreased from $136,162,000 in 1930, to $16,466,000 in 1932. These are soviet figures of customs entry, and are not exactly identical with our Department of Commerce figures, because there is a lapse of time between export from us and arrival in the Soviet Union, and so forth. But the relative percentages are similar.

The drop of 88 per cent in American exports to the Soviet Union in two years, as compared with a gain of nearly 30 per cent in exports to that country by America's business rivals is the result of conditions implicit in our situation of diplomatic nonintercourse. American manufacturers and exporters, under such conditions, can not successfully compete for such a broad market against foreign competitors who are backed by the usual facilities and protections furnished by Government agents on the spot. Under the present abnormal conditions of American-Soviet trade the establishment of adequate trade credits is impossible. In Germany, England, and Italy the Governments went out of their way to establish a suitable credit base, even going to the extent of guaranteeing from 60 to 70 per cent of the credits extended by their own manufacturers. They got the trade that we were losing.

The logic of events may be expected to lead very soon to recognition of the Union of Soviet Socialist Republics. This step is logical and therefore inevitable on three grounds: (1) As a part of the policy of economic cooperation essential to our national life; (2) as a step forward in leadership in international economic cooperation which we can not neglect without danger to our own civilization; (3) as a safeguard of world peace which is jeopardized by economic insecurity and by international antagonisms arising out of the collapse in world trade.

The Far Eastern situation makes it imperative that it should be without delay. There is a tremendous amount of information available. No further information is needed to enable us to make up our minds on this subject.

The CHAIRMAN. Thank you.

Senator GORE. I infer, Miss Van Kleeck, that you do not attach as much importance to balancing the Budget as some of the other witnesses?

Miss VAN KLEECK. I think balancing the Budget is always essential, both in the Government and in private life. What I am troubled about is the possibility of balancing the Budget with a decreasing national income.

Senator GORE. That is what I want to come to. Would you balance the Budget by decreasing expenditures, or by increasing taxes? Miss VAN KLEECK. If I may answer that question by going back of it, I would look toward

Senator GORE. We are standing face to face with that question, and we have to make a choice.

Miss VAN KLEECK. I would balance the Budget, in the first place, by allowing a longer time than a year for balancing it, which I assume is possible. I would balance the Budget by a very carefully worked out procedure of taxation. We certainly need more sound taxation policies. The income tax certainly appears to be a sound method; and I would maintain Government services which are needed. Now is the time for a thoroughgoing study of Government services, but not for curtailing those things which are imperative.

Senator GORE. Those things that are imperative you would spare. You would limit your curtailment.

Miss VAN KLEECK. I would limit expenditures for armaments. Senator GORE. That is the point I wanted to bring you to, Miss Van Kleeck. You would use the pruning knife on other departments than the Department of Labor?

Miss VAN KLEECK. Yes. I would maintain the Department of Labor and some other departments.

Senator GORE. In other words, you would spare the one department in which you are interested, and would pare others that you are not interested in. That brings us to this point, Miss Van Kleeck, so that you may see our difficulty

Miss VAN KLEECK. May I interrupt to say

Senator GORE. Just a minute. I want to give you this: The Senate struck out a $19,000,000 subsidy-and I will say graft-for air mail contracts. The air mail concerns that were affected lobbied and got it back in. At least, it went back in. You can not cut down anybody's expenditures, because they are concerned in those, and they come here and lobby and protest. I respect your principles in regard to labor and I say this, Mr. Chairman, as a basis for another question

Miss VAN KLEECK. May I answer what you say, before you ask me another question? May I answer the first one?

Senator GORE. I thought you had.

Miss VAN KLEECK. May I just say, with reference to this decision to cut down or not to cut down because somebody lobbies for it, that it is high time, of course, that we had a fundamental principle for the working out of our Budgets in the National Government, so that those services of the National Government would be maintained which bear directly upon the standards of living of our people; and that those services should be discontinued which represent destructive forces, or graft, or incompetence in the Government. I think it is high time that it was no longer a matter of who has the greatest power to persuade Congress, but it should be a matter of the principles upon which Congress and the National Government act.

The CHAIRMAN. There is no department of the Government but what comes up to the Appropriations Committee and asks for increases the Labor Department, and all of them.

Miss VAN KLEECK. I should think decision would be very difficult. unless we have a national policy, clearly declared.

The CHAIRMAN. That is what we try to do.

Senator GORE. The friends of this aviation subsidy insist that it is indispensable to national defense. There is always an excuse, whether there is a reason or not.

I agree pretty well with your philosophy against restricting production, and in favor of the use, and even the increase, of our productive capacity until every legitimate human need is satisfied, and every legitimate human want is supplied. I think we ought to attempt that before we go into reverse. For that reason I could not agree with your proposition to cut down the days in the week or the hours in the day until that becomes at least indispensable. You want labor to have a larger share in the joint output of labor and capital. I think you are right about that, in the main. I agree with you in the philosophy of high wages, but I do not see how you can cut down the days and hours and expect labor still to have a larger share in the joint output, which you think is indispensable-and I think it is, too. Miss VAN KLEECK. Is not that simply a matter of technological development and the production of a surplus, which is well recognized in all industries? There are two ways to cut down a surplus; one is to attempt to do it by "cartels" and international or national agreements. The industries of rubber, sugar, and others have come up against stone walls and have not been able to do it. Another way is to plan production, and to get the hours of work down to the point where our machines will not run away with us. We can not keep them going too long without piling up goods which can not be sold, with the results that we have to-day.

Senator GORE. That is the point I was coming to. You statedand correctly-that labor's share in the total output of capital and labor is a smaller percentage than it used to be. That was part of your statement.

Miss VAN KLEECK. Yes.

Senator GORE. I believe you also stated that labor's share in the value added to the product is less than it used to be. The increased output of labor and capital, this enormous increase, is mainly due to the increase in machinery, mechanization, and technology, is it

not?

Miss VAN KLEECK. Not wholly.

Senator GORE. I didn't say wholly. I said mainly. Is not that true, that the increased mechanization, the increased use of machinery and mass production account for the major part of the increased product of labor and capital combined?

Miss VAN KLEECK. That, with other elements.

Senator GORE. Is it not indispensable, then, that a larger share of the joint product of capital and labor must go to capital, in order to induce it to enter these enterprises?

Miss VAN KLEECK. I think that the industries to-day do not need more capital for equipment. They need purchasers, from whom comes the money with which to run industry.

Let us define what we mean by labor. By "labor," we do not mean simply the industrial workers gainfully employed in this country. I think the percentage of men gainfully employed is something over 90 per cent. What I am talking about is earnings from salaries or wages, as distinct from interest or returns on capital, and I am discussing it not in the least from a social or ethical standpoint, but from the standpoint of the problem of planning production, and balancing production with purchasing power. And when technological development produces goods with such rapidity, if in this revolution from steam to electricity we do not put enough money into purchasing power to buy the increased production, the capital