ployers," which outlines a program for developing a community climate favorable to economic growth and expansion of job opportunities—a particularly important facet of the problem of attracting industry.

In these programs, the national chamber provides assistance to the local groups which should and must, in the last analysis, take the lead. The technical assistance and advisory functions of the Office of Area Development of the Department of Commerce, no doubt, have helped many communities in ways which will contribute to their permanent revival.

We believe that the office is the logical vehicle for the current technical functions of the Federal Government and any additional activities which might be considered in this field.

In addition, the economic growth of the country makes a substantial contribution to depressed labor areas' problems. At the end of 1954, in what was certainly a mild business downturn, 48 major labor market areas and almost 100 smaller centers were classified as having substantial labor surpluses. A year later, as a result of economic recovery, only 19 major areas and 64 smaller areas remained in this category. When the opportunities for business expansion are greatest, greater opportunity exists for all areas to prosper and to secure new industry.

But the main subject of H. R. 8555 is the issue of special Federal financial aid to areas of persistent and substantial unemployment. This issue raises new questions.

The National Chamber opposes the commitment of Federal financial resources, as proposed in this bill, to the employment problems of a few particular areas.

We specifically express our opposition to the key provision of H. R. 8555, section 107, which provides for loans, participations, and guaranties.

We raise two questions concerning the desirability of loans, participations and guaranties for the construction of industrial plants and related steps.

1. Is there a superseding need for financial assistance from the Federal Government?

(a) There is generally a vast quantity and diversity of local resources available to meet chronic unemployment problems. Local chambers everywhere have played a large role in attracting new industries to communities. Many private organizations devote considerable energy, specifically, toward developing local economies—insurance companies, railroads, public utilities, banks, and leading employers within a community. In many communities, separate industrial development organizations are set up. Local and State Governments often provide assistance and leadership.

(b) Past experience demonstrates that many areas have recovered from economic distress similar to that currently suffered by the depressed labor areas, without financial aid from the Government. Winston-Salem, N. C., had unemployment in excess of 6 percent for 3 full years from May 1952 to May 1955, but is now out of economic difficulty, due to local efforts. Bridgeport, Conn., had substantial unemployment during 1949 and 1950 and would have been eligible for aid under section 102 of these bills; but Bridgeport recovered so

swiftly that, soon, a labor shortage was encountered. Manchester, N. H., suffered from dependence on slumping textile operations in the early 1950's, but since late 1952 has maintained unemployment below 6 percent. The experience is repeated in Toledo, Ohio, Muskegon, Mich., Beaumont, Tex., and a score of smaller market areas, not to mention those which had not come to the attention of the Labor Department in its area classification service.

(c) In Lawrence, Mass., often referred to as a "classic" case of a depressed labor area, the mayor of the city has indicated that credit is not a problem. In fact, in our growing economy, it would be the exception, rather than the rule, for a sound, worthwhile development to be passed up for lack of funds. If a development is not worthwhile and, accordingly, fails to attract local and private funds, it would seem to be questionable as a basis for sound revival for any community.

(d) In the last analysis, the real need is to create the conditions under which employers may grow, profit, and provide increasing job opportunities over a period of years. The committee will appreciate that this presumes proper responsibility of the employer to his employees, and his adequate participation by taxes and otherwise in the life of the community. Unless such an atmosphere prevails, financial resources may be wasted.

This last point we regard as an essential part of any study of the needs of depressed areas.

Prosperity for a community depends on having growing, responsible business enterprises located there, providing jobs for the citizens of the community.

For many communities, their strategic location assures that they will always be attractive locations for certain types of business. However, for many types of communities the problem is somewhat different. Where proximity to raw materials or markets, or some other consideration, is not overriding business plant location, decisions take into consideration many elements, not the least of which is the general economic climate of a community or region.

As Assistant Secretary of Commerce Frederick H. Mueller pointed out before this committee, "Businessmen hesitate to invest their own or other people's money where their venture would be in any way unwelcome. Particularly, to achieve diversification through new industry requires a favorable attitude on the part of the workers, existing employers, and the local administration.”

Earlier, I mentioned Toledo as an example of a community which at one time might have been eligible for Federal aid under section 102 of this bill. One important change in the Toledo picture, between the time when it as in chronic economic difficulty and now, was that the labor relations pattern of years was reversed.

Toledo had a history of bitter labor difficulties. With the cooperation of responsible union leadership, the business community and the local government, more harmonious and productive labor-management relations were achieved. This change played an important part in the recovery of Toledo.

Where an economic climate which discourages business investment exists, provisions of temporary stimulants in the form of Federal loans would never solve the basic problem.

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2. What problems would be raised by financial aid to depressed labor areas?

(a) Federal assistance to depressed labor areas would tend to deprive other areas of potential expansion. Despite the earnest efforts of the authors of H. R. 8555 to insure that employment opportunities will not merely be transferred from one community to another, we do not see how these bills will create new job opportunities that would not have otherwise existed. The jobs would have to be channeled into depressed labor areas from other sections of the country.

The bill does not provide a reason for a plant coming into existence. Plants constructed under this proposal presumably would be utilized by firms which were contemplating expansion anyway, or by new businesses which could not survive and compete without Federal participation in the construction of their plants.

If the Federal loans were provided for facilities which would not otherwise have existed-could not otherwise have survived-such facilities would not be the type which would lay the basis for permanent prosperity for a community. Thus, inevitably, facilities constructed under the provision of this bill, under the pressure of Federal Government help, would take existing industries out of other areas, or prevent other areas from gaining the benefits of expansion.

(b) Financial assistance from the Federal Government would tend to discourage local initiative and determination to solve local problems. Wherever financial aid is extended, under the terms of section 107, there will result, inevitably, in some areas a letdown in efforts to find local resources, and a tendency to bypass private and local capital. We do not believe that recognition of this reality implies any criticism of the quality of people in depressed labor areas. It is simply a fact that if the Federal Government contributed 25 percent of the capital needed for a project, there would cease to be a need for local effort to secure that amount. Any relaxation of local effort for this or any other reason, would do more harm than good to the long-run objective of revival for depressed labor areas. Furthermore, any assumption of responsibility on the part of the Federal Government would inevitably weaken the resourcefulness and mobility of our citizens and dampen the dynamic quality which distinguishes our economy.

(c) There is no way to write a law which would really meet the key problems of specific areas, which vary greatly.

For example, I am particularly interested in the situation in Scranton, Pa. Scranton occupies a strategic place in the Delaware, Lackawana and Western Railroad Co. system. We share with the community a tremendous interest in seeing Scranton economically prosperous.

Here is a community which has done more, perhaps, than any in the country to help itself. Since the end of World War II, the Scranton effort has produced 58 new plants and expansion of 85 others. Of the new plants, 23 were built by the community with a potential peak employment of about 15,000.

This is a tremendous achievement. But, despite this achievement, Scranton still has enough unemployment to qualify easily for aid under the provisions of the bill.

Yet, Scranton's real problem is not financial assistance of this type. The problem which it faces now is attracting 1 or 2 large industries

of the type which would employ several thousand. To do this, Scranton needs a substantial industrial site. The great need is to prepare a large land area for industrial use.

Such a project would be designed for some future time-a nebulous thing, certainly. Scranton would have to spend a considerable amount of money without any assurance at the time the money was spent that, as the provisions of H. R. 9535 require, there would be a "reasonable: assurance of repayment."

If money was provided without the requirement of reasonable assurance of repayment, this program could become a vehicle for superseding local responsibility everywhere. As such, it would bring a weakening, if not a nullification, of local efforts.

(d) A more fundamental question, however, concerns the long-term implications of this bill.

We have in this country a tradition of reliance on local, private, and individual initiative in solving specific economic problems.

The Federal Government is committed to fostering conditions conducive to high levels of employment, under the terms of the employment act. National organizations in the private sphere also perform a useful function.

We, in the national chamber, attempt to do our part. But, ultimately, solutions to local problems must be met on the local level by those who have the knowledge and ability to deal with a particular local situation.

Section 107 of H. R. 8555 runs counter to this tradition, and could ultimately place the Federal Government in the position of guaranteeing to maintain employment at whatever cost, in each community throughout the country. We do not believe this can be done effectively and we do not believe it should be started as a Federal responsibility.. Furthermore, if this program was used to place economic activity in areas which had permitted the economic climate to deteriorate, it could easily become a program of subsidizing an unfavorable economic climate.

May I say to the committee in summary, I desire to underline the seriousness, and the sincerity of purpose, with which the chamber has approached this proposed legislation. The philosophy of the bill is humanitarian as well as one of economic balance. It has been with concern and realism that our own programs of help and encouragement have been fostered. Some might accuse the chamber, because of the position to which I testified, of a lack of recognition, an absence of genuine concern for chronically unemployed. The contrary is emphatically the case.

Within the past two generations, there have been significant changes in the responsibility of Government toward its citizens. But it has nevertheless remained vitally important to maintaining adequate controls at the local level.

We must not discourage the responsibility of the individual for himself and his family, nor the responsibility of his own local community.

It may well be that among the limited, and declining number of depressed areas, there is one which seems to have exhausted its ability to help itself.

We urge, if such a condition obtains, that the Office of Area Development make it a top priority project, present to the local com

munity all of the information at its command, and assist it in aggressively and exhaustively reappraising every local opportunity to solve the problem.

It is our conviction that the dangers of Federal financial subsidy, as proposed in this bill, are so real in their impact upon the future of our people that renewed effort and persistence and determination should be utilized locally with the kinds of affirmative encouragement which we have discussed. It is our conviction that such efforts can be successful, thus making this legislation unnecessary.

That is the end of my prepared statement, Mr. Chairman.

The CHAIRMAN. Mr. Shoemaker, don't you think that unemployment is a major human and economic problem for our Nation and don't you think the dangers from continued unemployment are real, too?

Mr. SHOEMAKER. Of course, we do, sir.

The CHAIRMAN. Well, now, without discussing the provisions of this bill, there is great unemployment in the eastern part of Kentucky. In some of the areas there, 65 percent of the people that were employed are now without employment.

There are no great urban centers there, no chambers of commerce to urge people to come in. Now how would you meet that condition? What would you do to bring back employment in that area? The mines are down. Why are the mines down? Why isn't the coal used to the extent it once was?

Mr. SHOEMAKER. Mr. Chairman, I wonder if we do not have to get a little perspective here by reviewing what has happened in this country historically? We can find areas in the West, in the lumber regions, areas in some of the western mining regions, where communities have actually disappeared, as the economic basis for that community's existence no longer obtains. The history of the country is that there has been a very real migration of people to jobs. It is going on every day, all the time, and I think I have some figures here on population which shows that in the depressed areas, there has been a normal reaction of population decline. It merely shows what has gone on time and time and time again.

Now, we have the greatest of sympathy for these people that have had homes or schools or churches in these little areas, but is it in the best interests of the country to maintain a community at an uneconomic location, where there is no baseline for its existence?

The CHAIRMAN. Is that your remedy, that people leave their homes and seek employment elsewhere? Do you think the people who lived in the mountains of Kentucky, patriotic people, who went out and fought in greater numbers than required, do you think they should be compelled to leave their homes and seek employment elsewhere? Mr. SHOEMAKER. I do not want to be construed as saying that, Mr. Chairman. I am saying there has been a natural tendency for that to occur as a part of our industrial change in the country. With respect to your particular people in Kentucky, I have no doubt but that they are fine citizens. I have no doubt but that there has been some natural migration to jobs out of that area but may I not ask the question as to why these declining number of depressed areas are a Federal responsibility, and is it not fair to ask these people locally, with the help from the Department of Commerce, in its own experience in this