Many of the patents require a minimum of technical development and apply to defense production.

The United States Department of Commerce has issued Small Business Aids covering a wide range of administrative problems for different kinds of business. During the last year, 11 additional aids, each covering a single specific subject in the field of management were published and found very wide use. Subjects include: How Small Businesses Can Profit by Using State Employment Services; Regulations and Trade Practices; How Field Warehousing Helps Solve Manufacturers' and Distributors' Credit Problems; Building Effective Store Displays. By the close of the fiscal year 1950, the Government Printing Office reported total sales of over 1,200,000 copies of 44 titles of Establishing and Operating, a series of booklets on as many different types of business.

Shortly after the Korean incident, the first Defense Production Aid was published. To date, 10 such pamphlets have been printed. Prepared exclusively for small manufacturers and primarily for those in the metal industries, the titles indicate their values: How To Sell to the Government; Subcontracting "Pointers" for Small Plants; Better Plant Maintenance Increases Production and Profits; Selection, Care and Maintenance of Abrasive Wheels; Defense Loans for Small Business. These booklets furnish small manufacturers with information they require currently on subjects often entirely new to them.

În addition to the distribution by the Department of Commerce, 645,000 of these aids were reprinted at no expense to the Government, and were distributed widely during the first 6 months of 1951 by trade associations, business editors, large manufacturers and distributors.

SECTION VIII

FINANCE

Characteristically, smaller firms tend to be not only limited in equity capital funds, but also handicapped in their lack of experience in the preparation of the best possible showing of their financial strength.

Traditionally, smaller units have depended upon credit extended from their suppliers and from local banks during periods of peak demand for capital funds. Small firms tend to be good collectors and must necessarily limit their own extension of credit to those customers who can and do make prompt payment against invoices. A lack of familiarity with lender's terms and conditions usually operates to prevent the smaller firm from having the advantage of the financial advice and counsel of local lending institutions.

Traditionally also, limited operations and high rates of taxation operate to prevent the accumulation and retention of surplus earnings in reserve accounts. The smaller concern is, therefore, placed in a position of extreme distress during those periods when he is required to change his material supply, his equipment, or his product. That distress is often accentuated when he is successful in obtaining orders whose volume necessitates the expansion in capital fund investment.

Two separate and distinct avenues of relief to small business are clearly indicated. The first avenue leads to the expansion of financial assistance available from local lenders, from material suppliers, and, more particularly, from buyers who will either make advance payments or partial payment contracts to the smaller unit. The second leads to those financial aids offered by the Government. Specialized assistance is provided by both the field small business specialists of the Department of Commerce and the respective governor's commissions in the matter of not only locating sources of private capital supply but also in the matter of improvement in the borrower's presentation and application.

Specific contributions to local efforts are often made by Federal agencies. A typical instance recently has been the support by many Federal agencies, of an amendment to the Assignment of Claims Act. Corrective legislation now permits local banks to safely extend large sums of working capital to contractors operating in the defense effort.

Federal aids are based on the premise that Government financial aid must be available to give assurance that there will be no loss or delay in production for defense and that encouragement should be given to private investment in additional facilities for defense effort.

In developing the Federal aid program, it has been the accepted policy to make the maximum use of private institutions not only for the purpose of supplying the funds themselves, but for management advice and counsel. It is to be especially noted that the effort to avoid Government competition with private enterprise and to discourage excessive expansion of facilities is to be made avail

able only when it can be clearly demonstrated that existing facilities are inadequate for defense purposes.

Section 301 of the Defense Production Act of 1950-the so-called V-loan program is operated by Federal Reserve banks. Under that program, the procurement agency is required to set aside from appropriated balances sufficient funds to guarantee the loans which it requires for the purpose of its own supply. In practice, guaranties are available only when the guaranteeing agency is able to certify that

(a) The product or service is essential to the national defense;

(b) The material or services cannot be obtained from alternative sources; (c) The contractor is otherwise competent to perform the agreement in question.

Under section 302 of the Defense Production Act of 1950, various Federal agencies are authorized to recommend loans for the expansion of productive capacity. As a matter of practice, financial assistance under this section is extended only to the extent that funds cannot be otherwise obtained on reasonable terms or that other suppliers, privately financed, cannot be located. The provisions of this program require a careful examination into the availability of other potential sources for supply.

Financial assistance in the provision for the supply of equipment and certain raw materials are provided in section 303 of the Defense Act.

In order to entice the supply of additional private funds, and only when the facility expansion is warranted by the absence of open plant facilities, provision is made for an accelerated program of depreciation and a consequent reduction in income tax costs to the borrower.

Field reports indicate that working capital requirements of the smaller units are now being reasonably well supplied by local lending institutions. Administration policies to expand the production of raw material (in which production small business does not usually find itself) while restricting and limiting the expansion of other manufacturing activities, tend to promote the best interests of small business.

However, it must be reported that the severe and perhaps undue delay in the processing for either approval or disapproval of loan and tax certificate applications received from smaller business enterprises has created a real resentment among the applicants. A reconsideration of the policy under which expansion is not encouraged by permissive Federal loans, if that expansion can be effected by the use of private funds, is clearly indicated. That policy tends to bar smaller firms from the field of expansion.

SECTION IX

EMPLOYMENT, WAGES, AND PRICES

Specific problems in the area of employment developed in two general fields with the rapid acceleration of the Defense Procurement Program in 1950:

1. The early concentration of defense spending with a relatively few large companies in highly industrialized sections of the country resulted in an early migration of labor to the higher wages available at those points. In this same period, civilian production was being increased to meet the demands of "scare" buying, so that the early defense production was not affected by shifting workers from civilian production. The net result of this was a build-up of labor forces in the industrial areas. With the current decline in civilian production and the resulting unemployment, there must be a continuing concentration of defense spending in these same areas in carrying out the basic policy of taking the work to the worker. This may lead to a breakdown of the early intent to disperse defense production geographically in the interest of national security.

2. Studies of employment during the period, June-December 1950, show that the small manufacturer in the durable goods field had relatively greater increases in employment than occurred in the larger plants. This was the direct result of the exceptional demand for goods in this field during this period, and the full productive capacities of small as well as large plants were utilized to supply the demand. Beginning early in the year, the high level of production and employment dropped sharply in many plants because of a drop in the civilian market. Wages and employment are parts of the same problem. Where there is competition for the services of the worker, he goes to the best market. Small business generally pays as high a wage as the large plant within the same area. In the controls on wages, special consideration must be given small businesses to permit

them to make such adjustments as may be necessary to maintain their labor force.

In the handling of price controls there seems to have been sufficient flexibility to prevent the working of any undue hardships on small business. The freezing of prices has also tended to freeze profit margins, and if small business has traditionally higher prices than its larger competition, this pricing practice has not been disturbed. One serious dislocation in the area of price has occurred in the prime materials market in cases where the small manufacturer has had to buy from sources other than his regular supplier at higher prices. This higher materials cost is working undue hardship on the small manufacturer, because he traditionally deals with fewer suppliers than does big business. Fair consideration will permit him to adjust prices to maintain necessary margins of profit.

A basic policy relating to the special consideration of small business in the activities of the Office of Price Stabilization has been written but not approved as yet.

In employment problems, small business is being given special assistance through the activities of the Defense Manpower Administration, whose operating arm is the United States Employment Service and its affiliated State employment services of which there are 1,800 local offices. These offices, at the community level and with the community interest a prime consideration in its activity, develop labor market information and provide assistance in the recruitment, selection, and placement of workers. Since big business is generally self-sufficient in its handling of personnel problems, the greater portion of this assistance is in behalf of small business. In problems of management, assistance is given in the area of employment through job analysis, job classification, and other activities necessary for maximum utilization of the manpower force within the plant. Small business is given direct assistance in the training of its workers by existing agencies at the State levels.

Special consideration is given in Selective Service at the community level in the deferment of workers with special skills essential to defense and essential civilian production as determined by analysis of labor requirements at the community level. This is especially helpful to small business.

In the balance of work and worker, interagency regional defense mobilization committees have been organized to specifically study all conditions within the regions as they affect the progress of the defense program. The problem of utilizing the full productive capacity of small businesses within the region will be given continuing consideration in the working of these committees.

Since June 1950, local employment offices have made almost 6 million placements. It is estimated that at least 50 percent of this activity has been in the area of small business.

SECTION X

PUBLIC RELATIONS AND CONCLUSION

A congressional report has emphasized the existence of poor public relations. Public opinion has been built around the theme of "Production for Defense." Industry, particularly in its smaller units, has been encouraged to replace nonessential civilian production with Federal prime contracts.

"Expansion of production" has been expounded through every media and without further definition or establishment of realistic boundary limits.

Those firms having difficulty with material supply have been urged to convert to "production for defense."

Unsatisfactory performance in our efforts to improve information must be reported in the following areas—

1. The coordination of interagency personnel assigned to information work. 2. The indoctrination of intra-agency Office of Information personnel with small-business perspective.

Little or no progress, then, has been made in informing the public along such realistic lines as

1. Deliveries of materials to military services have accounted for only 3 to 8 percent of our national production of those materials during the first half of 1951. Since small business normally produces approximately 40 percent of total product, its capacity cannot be filled by current procurement volume. 2. Time lags due to engineering and scheduling problems make vast differences between contract awards and actual production.

3. Small-business interests, in general, can be no better protected than through the expansion of raw material supply and strict limitation of expan

sion of fabrication and processing facilities. Traditionally, small business finds itself, not in raw material production, but in the areas of use of those raw materials.

4. "Conversion" results in expansion of the industry to which the conversion is made. Desirable conversion, then, must be measured by the policy of wise plant expansion.

5. Typical units of small business are not submarginal, malingering or dependent upon subsidy or dole. Public clamor for improved and increased frankness and honesty from Government must be a matter of first attention.

Popular acceptance of realistics policies can be obtained only by

1. Formulation of the policy on the part of those in highest levels of, authority.

2. Indoctrination of all personnel with policy determination.

3. Clear and consistent public exposures, not only of policies, but of those implementing activities that breathe life into a working program.

4. Full confessions, not only of ambitions, but also of mistakes and errors. The challenge is clearly defined. The realistic problems of small business are recognized and classified. In the public interest, those problems are served by all governmental agencies during both normal and emergency periods of commercial activity. Above all, emergency periods require not only emphasized treatments but smypathetic and thorough understanding.

APPENDIX C

EXECUTIVE ORDERS IMPLEMENTING THE DEFENSE PRODUCTION ACT

EXECUTIVE ORDER 10161

SEPTEMBER 9, 1950.

DELEGATING CERTAIN FUNCTIONS OF THE PRESIDENT UNDER THE DEFENSE PRODUCTION ACT OF 1950

By virtue of the authority vested in me by the Constitution and statutes, including the Defense Production Act of 1950, and as President of the United States and Commander in Chief of the armed forces, it is hereby ordered as follows:

PART I. PRIORITIES AND ALLOCATIONS

SECTION 101. The functions conferred upon the President by Title I of the Defense Production Act of 1950 are hereby delegated as follows:

(a) To the Secretary of the Interior with respect to petroleum, gas, solid fuels, and electric power.

(b) To the Secretary of Agriculture with respect to food, and with respect to the domestic distribution of farm equipment and commercial fertilizer.

(c) To that commissioner of the Interstate Commerce Commission who is responsible for the supervision of the Bureau of Service of the Commission, with respect to domestic transportation, storage, and port facilities, or the use thereof, but excluding air transport, coastwise, intercoastal, and overseas shipping.

(d) To the Secretary of Commerce with respect to all materials and facilities except as provided in paragraphs (a), (b), and (c) of this section 101.

SECTION 102. Each delegate referred to in section 101 of this Executive order shall, in connection with carrying out the priorities and allocations functions delegated to him by such section, (a) receive from appropriate agencies of the Government information relating to the direct and indirect military, other governmental, civilian, and foreign requirements for materials and facilities, (b) review and evaluate such requirements in the light of available materials and facilities, and (c) exercise his priorities and allocations powers in such manner as will in his judgment promote adequate supplies and their proper distribution. SECTION 103. (a) Each delegate referred to in section 101 of this Executive order shall be a claimant before the other such delegates, respectively, in the case of materials and additional facilities deemed by the claimant delegate to be necessary for the provision of an adequate supply of the materials and facilities with respect to which delegation is made to the claimant delegate by the said section 101.

(b) Each delegate under section 101 of this Executive order may, with the approval of the Chairman of the National Security Resources Board, designate agencies and officers of the Government, additional to the claimants referred to in section 103 (a) of this Executive order, to be claimants before such delegate with respect to stated materials and facilities.

PART II. REQUISITIONING

SECTION 201. (a) Except as provided in section 201 (b) of this Executive order, the functions conferred upon the President by Title II of the Defense Production Act of 1950 are hereby delegated to the officers to whom functions are delegated by section 101 of this Executive order, respectively, according to the designations of materials and facilities set forth in paragraphs (a), (b), (c), and (d) of the said section 101.

(b) The functions conferred upon the President by sections 201 (b) and 201 (c) of the Defense Production Act of 1950, exclusive of determinations with respect to the termination of the need for the national defense of any property requisitioned under Title II of the said Act, are hereby delegated to the Administrator of General Services.