talk to us, first, however, about the general intent and the general result of the National Recovery Administration before we come to the Ellenbogen bill proper, what did it do, what was it intended to do, what did it do, and what could it have done if the unfortunate decision of the Supreme Court had not stepped in?

Mr. VINCENT. That is a pretty big order, but I will attempt to give some information on the subject.

May I first have the record show, Mr. Chairman, that I am testifying as an individual and not as an official. If, in the course of my testimony here, I may express opinions I do not want that to stand as an authorized official attitude.

Mr. KELLER. On the other hand, you are perfectly willing freely to give us your personal opinion in view of your experience? Mr. VINCENT. Surely.

Mr. KELLER. Thank you.

Mr. VINCENT. I assume that the particular purpose of the National Recovery Administration, under which codes of fair competition were formulated and administered, is fairly well understood.

I think we may say that among the objects were those of establishing maximum, uniform hours within an industry for the purpose of creating a higher degree of fair competition, and for the purpose of spreading employment to relieve the great pool of unemployment that then existed and still exists to a substantial extent.

Another object was to establish a minimum wage to prevent wage income dropping below a minimum sound standard of living.

Another, of course, was to establish uniform trade practices so that members of industry would be enabled to market their products under more standardized market or trade practices.

There were, in some instances, also a utilization of the act and the provision of codes to temporarily limit or control production where excessive production capacity had tended to demoralize markets by reducing prices below living levels.

I think, for the purpose of what further I have to say, that is enough respecting the major objectives. Of course, the object was, broadly speaking, stabilization.

A part of your question asked, in substance, what the effect of code administration was.

Mr. KELLER. Yes, sir. Before you get to that, may I just interject here a question that has come into my mind?

Mr. VINCENT. Certainly.

Mr. KELLER. I wish, in approaching the subject, you would say when the National Recovery Administration was first formed, what was the attitude of the owners of business at that time toward the law and toward the formation of the codes. Were they for it or were they against it.

Mr. VINCENT. I would not be able to answer that with any more definiteness, perhaps, than the ordinary citizen. I was not in Washington except for a brief period, as an onlooker, during the period of code formulation, so that my information is the same as yours, from the public press. I think the impression I got was that industry welcomed an opportunity to obtain what were called codes of fair competition for the purpose of stabilizing industry. Mr. KELLER. All right, please proceed.

Mr. VINCENT. On the effect of code administration, I would say that some of the objectives were realized in a substantial degree. In other respects, the period of code administration was far too short for any adequate tests of the Government controls which, for the first time, were applied to industry.

The standardization of work hours, that is fixing maximum uniform hours, did have the effect of spreading employment to a degree. It had the effect of eliminating unfair competition to a degree.

In many industries, working time was not uniform, ranging all the way from 40 to 70 hours, for example. Obviously, the result was unfair to those who were disposed to work a reasonable number of hours.

The establishment of minimum wage rates tended to more uniform labor costs and increased the degree of fair competition between members of industry.

The minimum wage rate also operated in many instances, to very substantially increase the rate of pay and the wage income of large numbers of the lower paid groups of workers.

I think it may be said with accuracy that it was the lower paid groups of workers that received the greatest benefits from minimum wage rates. Those in the higher brackets did not gain the same percentage of increase except in exceptional instances.

The time of code administration was too brief to ultimately determine what the effect would have been in the higher wage brackets. Another affect of code provisions and code administration was to standardize trade practices; terms of sale. For instance, as administered, such provisions effected a higher degree of fair competition.

Mr. KELLER. Do I gather from what you have to say here that this is the first time in the 150 years of our political existence, that we have been compelled to bring all of these questions to the fore and undertake to solve them through governmental action?

Mr. VINCENT. I would say it is not the first time there was a need for some degree of regulation or control. Previous regulatory attempts on the part of Congress have had some effect, of course.

We had, beginning nearly a half century ago, the antitrust law designed to curb monopoly, and prevent monopoly prices and concerted action or agreement in restraint of trade. I would say that the law has not realized its objectives.

We have the experience of other regulations, the Clayton Act, and the Federal Trade Commission. Perhaps the most notable instance is the Interstate Commerce Commission, which I think has been a very effective instrumentality of regulation within certain limitations.

The controls provided by the National Industrial Recovery Act were the first instance of the application of controls to the extent of regulating hours of work, minimum wages, trade practices, production control, and eliminating child labor.

Mr. KELLER. Was there any one particular happening, or the ending of any one period that brought this tremendous pressure out at this single time in your judgment? After all, what was it? Why did we have this tremendous barricading of business and industry just at this period?

Mr. VINCENT. There were too many contributing causes for one to assign to any one cause or any one group of causes exclusive influence in causing the collapse which we commonly date in October of 1929.

It is not so difficult to pick out individual contributing factors that were very influential in demoralizing our markets.

I would say that, in the years preceding 1929, we developed technique of production that out ran our development of a technique of distribution. We gave more attention to production than we did to distribution. Mechanical processes of manufacture and other manufacturing aids vastly increased the output per person, reduced production costs, and increased gross and net realizations.

One thing that greatly contributed to the demoralization of our markets was the fact that net profits increased much more rapidly than wage incomes.

Mr. KELLER. That is what I wanted.

Mr. VINCENT. There are several ways, of course, in which industry can keep the markets fed by contributions of purchasing power. The expenditure of interest and dividends, in part going into markets for the most commonly used commodities, but considerable parts of these are, nevertheless, retained for investment.

The most consistent contribution of a large stream of money into the market is by the expenditure of wages and salaries. Productive investments are another. Unless all of these sources of money going into the markets are equal to taking our production, you get an unbalance between production and distribution.

That is what we had in this country, and that is what we now have to a considerable degree.

We must look to a gradual increase of wage and salary and farm income, the kind of money that is largely spent for most commonly used commodities, to support a continuing increase in production.

Mr. KELLER. Do I get this, Mr. Vincent, from what you have said? As I remember it, beginning in 1920 and up to 1935, the 15-year period, the wage increase of the country was 20 percent and, over that same period, the increase of investment, that is interest and dividends, increased 60 percent. I think that is correct, is it not?

Mr. VINCENT. As I remember the data, for about a decade preceding 1930, the increase of industrial wages was only about 13 percent. That does not include, of course, all wages. I am limiting that to industrial wages.

The increase in industrial net profit during that period, if I remember correctly, exceeded 70 percent.

Mr. KELLER. Well, that I am glad to have you bring out. I know that some months ago-3, 4, 5, or 6 months ago-possibly, in the Journal of Economics, a Mr. Krebs, I think, of the University of California, wrote an article on that subject in which he says that, taking the whole country on the earnings and wages-Dividends, I think, was the title of the article-he says of the period from 1920 to 1935 that the wage earnings had increased 20 percent over that 15-year period for the whole country, all wages included, and that the dividends and interest, in other words, profits of industry, had increased 6 percent. Now, you make it still stronger, and I thank you for it. Mr. VINCENT. I am limiting it to a 10-year period preceding January 1, 1930.

Mr. KELLER. It might well have been that.

The thing I want to bring out is this; what we are really driving at economically in this country, especially, is to increase the proportion of income of the men who produce the wealth over the returns

that may result from that as profits of business. Is that not a correct statement of it?

Mr. VINCENT. I think so. To be specific-

Mr. KELLER (interposing). Yes; please be specific.

Mr. VINCENT. I think that we developed a habit-no one industrial unit was responsible for it, but it became a general industrial habit to accumulate very substantial reserves, after meeting fixed charges and making dividend disbursements.

While an individual industry unit may consider it desirable to accumulate surplus sufficient to carry it over a depression period, when that becomes a general practice and you accumulate very large reserves, running into many billions of dollars over what is needed for fixed charges, a reasonable return on investment by way of dividends, and over and above what is needed to take care of depreciation and obsolescence, you have a fund of money that is sterilized, you might say. It is idle. It is taken out of the markets.

That is the inescapable result of taking too large a share of gross income for profit.

Mr. KELLER. Will you give the figures on that if you have them in mind?

Mr. VINCENT. As I remember, by January 1, 1930, something less than 250 of the leading industrial corporations carried reserves exceeding 25 billion dollars. Obviously, that contributed to a strangulation of production.

Mr. RAMSPECK. Mr. Chairman, may I ask Mr. Vincent a question? Mr. KELLER. Certainly.

Mr. RAMSPECK. Was not a great deal of that money used in stockmarket speculation in 1928 and 1929?

Mr. VINCENT. Unquestionably that was the source from which much speculative money was derived to an extent, Congressman, that such a basic credit need as farm credits was very seriously affected by the use of reserves for speculative purposes.

There was a period preceding October 1929 when many of our banks in the interior of the country sent substantial amounts of their loan reserves east for the purpose of getting a play on them in the quick turn-over that was opened up by the speculative market.

Mr. RAMSPECK. Not only a quick turn-over, but the high-cost money rates of interest.

Mr. VINCENT. Exactly.

Mr. RAMSFECK. Attracted it there?

Mr. VINCENT. Exactly.

Mr. MARCANTONIO. Do you say that there has been an increase in production during the past year?

Mr. VINCENT. I think a substantial increase in consumer goods, and obviously some increase, although less, in durable goods.

Mr. MARCANTONIO. And, in the increase in production

Mr. VINCENT (interposing). May I interrupt?

Mr. MARCANTONIO. Yes.

Mr. VINCENT. I think that is due, in a very substantial degree, to the expenditures of the Federal Government.

Mr. MARCANTONIO. And, the increase in production, has there been any accompanying increase in employment?

Mr. VINCENT. Yes; there has been.

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Mr. MARCANTONIO. Now what is the difference between the increase in production and the increase in employment?

Mr. VINCENT. Congressman, I cannot give you the figures on them. Mr. MARCANTONIO. Well, would you say that there is some difference between the two?

Mr. VINCENT. Production has increased more rapidly.

Mr. MARCANTONIO. More rapidly than employment?

Mr. VINCENT. Than reemployment, for a number of reasons. One of the important reasons is that technological improvements in production have continued during recent years, and perhaps there was. an exceptional emphasis laid upon developing new improvements, because of the depressed market conditions, with the result that it does not take the same amount of manpower to produce the same given number of products today that it did a year ago or 5 years ago, and, unfortunately, we are not yet taking steps to correct that outof-balance situation.

Mr. MARCANTONIO. So that, due to a great extent to technological displacements, as production increases and reemployment does not increase accordingly, but retardingly, rather, from the progress of the increase in production, the result is going to be that you are going to have a definite number of unemployed, permanent unemployed?

Mr. VINCENT. Unless we devise means for a wider distribution of employment on the same productive processes and, coincidentally, have a more rapid development of new productive enterprises than we have at the present time.

Mr. MARCANTONIO. And, also, do you not think it is also important that in a distribution of the employment there should be a corresponding increase of wages so as to give a purchasing power to the persons so employed?

Mr. VINCENT, Yes; as a matter of fact

Mr. MARCANTONIO (interposing). Otherwise, it is just a vicious circle.

Mr. VINCENT. As a matter of fact, I think that the development, the extension of domestic markets to the extent of taking an increasing production, depends, to a very substantial degree, upon gradually increasing wage rates and wage income, and farm income and the avoidance of the accumulation of needless surplus reserves.

Mr. KELLER. Now, then, I am going to ask you some questions. I was hoping that Mr. Ellenbogen would get here by the time I started these questions.

Mr. RAMSPECK. Mr. Chairman, I would like to ask Mr. Vincent this: I have a rather firm conviction that about all we get out of the National Recovery Administration we could have gotten with the President's reemployment agreement. What do you think about it?

Mr. VINCENT. I think, for a limited period, that is possibly true, but, as you know, that agreement was voluntary.

Mr. RAMSPECK. Surely.

Mr. VINCENT. It did not have any enforcement provision. Our experience in the code administration was this: We always found a very substantial number-I would say in most instances a substantial majority of members of industry-who were willing to adhere to the limitation upon hours, who were willing to adhere to the wage provisions. We also had a number, however, the percentage varying,