administer such a program in urban areas. It would not be much better to have the Department of Commerce administering it in rural areas. In this connection, Mr. Chairman, I invite the attention of your committee to the provisions of S. 1433 which would establish the sound comprehensive yardstick family farm credit program to buttress and bolster the bill you have before you, including a special comprehensive family-farm development credit title specifically designed for application in the 500 most poverty-stricken farm counties of the Nation. Moreover, this program needs to be conspicuous. It needs to be administered by someone who cannot let it get lost in the labyrinths of some great department. It needs to be so conspicuous that it cannot. be neglected or allowed to fail. This program is much too badly needed and much too full of hope to be treated in routine fashion. I request that this report on the work of our National Planning Association Depressed Areas Subcommittee and the attached legisla tive analysis memorandum called Family Farms are Losing be inserted at this point in my statement. In conclusion, let me reiterate the Farmers Union's wholehearted support of S. 964. We believe that it represents a happy marriage of the welfare of farm people and urban people. We hope that it will be speedily enacted. Thank you very much. Senator CLARK. Without objection, the attachments to your statement may be made a part of the record at this point. (The documents referred to follow :) POLICY STATEMENT BY THE NPA COMMITTEE ON DEPRESSED AREAS 1. Chronic local unemployment is a national problem In the midst of the greatest prosperity we have ever known, many localities have been suffering from chronic unemployment. This unemployment presents a double threat to our way of life. It threatens our internal development, and it threatens our external security. It threatens our internal development because that development has been based on a continually growing domestic market.* If many people, through unemploy ment, are removed from the market as full-scale consumers, our economy will not continue to grow as it might. Moreover, a powerful motive force in our economic growth has been our acceptance of equality of opportunity as a social goal. If opportunity is severly limited in many communities through no fault of the communities themselves, faith in our objectives will be impaired and the motive force which that faith supplies will be correspondingly weakened. Chronic unemployment threatens our external security both because it mars our posture and because it prevents us from realizing our full strength. The leaders of many hundreds of millions of the world's people are hostile to us; one of their central doctrines is that unemployment is inherent in our system; hence any unemployment we experience is a propaganda success for those leaders. But of more tangible importance to our security is the loss of production and income and the dissipation of human effort resulting from our failure to utilize our full economic potential. It increases the costs of Government and the cold war borne by the employed groups. Unemployed people and unused capacity discourage our friends and encourage our foes. Clearly then, chronic unemployment anywhere in our economy is a matter of national concern, especially since local efforts to end this unemployment, even *The development of the United States has also been based upon taking advantage of changes which have resulted in the obsolescence of resources, locations, and personal skills. There is growing resistance to accepting such obsolescence as a price of progress. The program proposed by the committee, by assisting adaptation to change, would remove reistance to progress based upon fears of such obsolescence.-ALFRED C. NEAL. (See footnote 1, p. xii.) when well organized and undertaken wholeheartedly over a considerable period of time, have almost always, as the accompanying report shows, fallen well short of complete success. 2. The Federal Government should assume the responsibility for a vigorous program to remove chronic local unemployment, in collaboration with local and private programs directed toward the same end The most urgent recommendation of this committee is that the Federal Government establish soon some effective program for dealing with chronic local unemployment. Because many of the measures required may be new and because the interest of the public in results will be great, any program adopted should be set up and administered so as to encourage the maximum use of initiative on the part of those conducting it, and the maximum attention to whatever results are achieved. A Federal program should not supersede local programs directed to relieving local unemployment. On the contrary, it should supplement them, and should stimulate even more local effort than is now being directed toward this problem. It should help to call forth private efforts as well, some perhaps on a national scale, from corporations, unions, associations, and others with an interest in the situation. Federal policy should recognize chronic local unemployment as a national responsibility and should mobilize all efforts to its solution. Any program for the execution of such a policy is sure to be varied and adapted to local needs, as the following remarks on the elements of such a program make clear. Because of this complexity we give in the following sections only the elements around which policies may be formed. 3. A positive Federal program for ending chronic local unemployment should undertake new and expanded activities providing for technical assistance, certain kinds of financing, and specific types of tax exemptions which would stimulate the expansion of business enterprises or encourage new businesses suitable for the respective areas The essential preliminary to an attack on chronic local unemployment is a thorough planning study of each area affected. This study is necessary to determine what industries might be encouraged, what regional resources might be used, and what facilities might be developed. Studies of this kind are needed in the beginning of any program and should probably be put on a continuing basis, to turn up new opportunities and to plan for changing conditions.* In the course of these studies special requirements for public works may be uncovered. So some provision for special public works may become a part of any thorough program to relieve chronic unemployment. In any event, overall study and planning from the community point of view is the needed background for any approach to the selection and stimulation of industries that will give the employment desired. The stimulation that can be offered is summed up under the three headings that follow. TECHNICAL ASSISTANCE Technical assistance to explore and encourage new business possibilities is the first type of assistance to be given these communities. Every type of technical skill, from the skill of the geologist to the skill of the travel promoter, can be directed to the determination of new business potentials in depressed areas and to the staffing and establishment of those that seem most promising. Work of this kind has been liberally and successfully financed by the Federal Government in its overseas economic-aid programs. The methods developed there can be appropriately applied to our own country. Existing business firms, especially if they are represented by small units, may be put in a position to employ more people through the provision of technical assistance in the form, for instance, of cost accounting and production studies, industrial design suggestions, and marketing studies. Businesses contemplating branch plants in depressed areas may be stimulated to action by technical assistance directed to labor market studies and studies of the availability of services and facilities. Similar assistance should also be given the "sick industries" to enable them to diagnose their difficulties, consider and plan for their expansion and revotalization. Technical While no program can or should endeavor to push back an inevitable economic or social trend, each of these studies should assume that any affected area with vigorous and Cooperative local leadership has its place in the national economy until a thorough, realistic, and sympathetic exploration establishes the contrary.-LUTHER H. GULICK. assistance need not be limited to the Federal Government. Private organizations, both business and nonprofit, can supply aid of this kind more readily, perhaps, than they can supply any other kind, and they should be encouraged to do so. FINANCING A modern, one-story, general-purpose factory building available for rental or sale at a reasonable price has often served as an inducement to a manufacturer to locate in the area that offers it. The inducement is most often accepted by a manufacturer who is expanding into a new area, is sometimes accepted by an already establish firm that otherwise might expand elsewhere, but is rarely of critical importance to a firm that is just getting started. Throughout the country there are many local funds for building such plants and a number of private or public sources of additional fuids at the State level. It is possible that the Federal Government might enter this field of new-plant financing in depressed areas either through primary loans, through supplementary loans, or through the guaranty of loans made by private agencies.* Public financing of private industry beyond the facilitation of loans secured by land and general-purpose buildings raises serious questions both of principle and of practice. The need of the depressed area may determine the principle to be applied, while the methods for supplying such financing in a satisfactory manner may be conceivably worked out.** What must be recognized here is that he revitalization of old industry and the creation of new industry in the desired places will frequently call for financing that goes far beyond land and buildings, and that is not available in adequate amounts or on acceptable terms from private sources. Such financing has on special occasions been supplied by the Federal Government in its foreign economic aid programs. The Federal Government should earnestly examine the possibilities of supplying such financing under appropriate circumstances at home. TAX ADVANTAGES Relief from taxation may be a powerful inducement to a company to expand its activities and thus to increase employment. A form of tax relief that is popular because it is in effect merely a tax deferment is the permission sometimes granted to defense industries to write off new facilities against current income more rapidly than would normally be allowed. This permission might be given to any industries making new investments in areas of chronic unemployment. Other tax concessions may also be considered. 4. Migration and relief may often be necessary palliatives to chronic local unemployment, but cannot be accepted as solutions to the problem The migration of people from areas afflicted by chronic unemployment to areas where there is a lively demand for labor is going on all the time. It is "nature's way" of solving the depressed area problem. But, like most laissezfaire solutions, it takes a very long time and is painful to those involved in it. To accelerate migration by offering subsidies to those moving would hasten the depreciation of the values of homes and facilities in the depressed areas, and would bring distress to families who gave up their old associations. And many, who for purely economic reasons should move, would refuse to move. So the further destruction of economic and social values that would result from increased migration should not be encouraged until all other measures have failed. Subsidized migration is a last resort, an acknowledgement that the unemployment problem cannot be solved in local terms.* There should be no need for primary financing by the Federal Government. Any community which cannot raise some "seed corn" capital itself is not likely to be able to make good use of Federal loans anyway. Second-mortgage loans or partial guaranties of loans made by private institutions would be sufficient help from the Federal Government.-ALFRED C. NEAL. **In my opinion, it is extremely doubtful whether acceptable solutions can be found to the problems raised by this suggestion.-ARTHUR Moore. Such migration is extremely destructive of private and public investments and of social institutions. Therefore, economically enforced migration on a consderable scale should be regarded as a last resort in any locality. Thus while subsidies for migration or specially Footnote continued on following page. Relief meanwhile is needed by those who cannot find jobs elsewhere or who do not choose to go seek them at the cost of abandoning their homes. This relief may be direct-through the extension of unemployment insurance benefits-or it may be provided in the form of work relief. And any such relief can be sup extended unemployment payments for migrants might be desirable in a few extreme situations, it is more probable that such inducements would hasten the depreciation of homes and facilities and would appeal more to those who ought not to move than to those who might better migrate. Subsidized migration is a last resort and should be considered only after a most careful general economic and industrial regional survey, as suggested above.— LUTHER H. GULICK. Federal discussions and consideration of the problems of distressed areas in the postwar years resulted from union petitions and from the appeals of the political leaders in these areas, particularly textile communities, which sought assistance in obtaining Federal contracts, public works, and other aids for increasing employment in these localities. Imaginative study and planning are necessary to help create new locational advantages for many of the distressed areas. New public facilities and services are often necessary preliminaries to make an area attractive to new industry or accessible to markets or able to serve as a new source of raw material. Distressed areas are often unable to finance these developments from their own revenues. Another approach to the problem of assisting distressed or contracting areas is that of assistance to contracting or stagnant industries by helping them find new markets and new uses for their products or services or otherwise strengthening their competitive position and capacity for growth. Provisions for such activities are contained in the bills adopted by the Senate and the House Banking Committee during the 84th Congress, 2d session.-SOLOMON BARKIN. I cannot agree with the recommendation of the committee that it is the responsibility of the Federal Government to assume a vigorous program to remove chronic local unemployment. 1. Lawrence, Mass., happens to have been tagged with the dubious honor of being the No. 1 depressed area and then No. 1 labor surplus area of the United States. This has been talked about for more than 7 years and yet the Federal Government and the State government, with Democratic and Republican administrations, have failed to help in any way to alleviate the condition. The only exception to the above statement was when the Internal Revenue Service established a branch office employing approximately 500 persons in Lawrence. 2. It is true that areas of chronic unemployment are more than a challenge to charity or to expediency, but the challenge must be met by local interests and local groups. It has been met in that way in Lawrence, which is today a labor shortage area rather than a labor surplus area. Lawrence today has less than 2.000 persons unemployed and the average length of unemployment claims is less than 3 weeks. The Federal Government's programs have not been effective, as is illustrated by an analysis of the privately controlled Massachusetts Business Development Corp. and the Small Business Administration. In 2 years' time the Massachusetts Business Development Corp. has loaned approximately $8 million to business in the Commonwealth with most of it going to small businesses and doing so with a small operating profit. During the same period the Small Business Administration made 32 loans, exclusive of disaster loans, for a total loan of $1,300,000. Private development corporations along the line of the Massachusetts Business Development Corp. and those of the other New England States are a better answer than any Federal assistance. On the question of giving tax advantages, it seems grossly unfair to existing business and industry, and, in certain States such as Massachusetts, any advantage on real-estate taxes is specifically prohibited by law. Lawrence has come back through the help of the people in the city and not through the help of any outside agency of the Federal Government. I am unalterably opposed to the constant demand that the Federal Government step in and take care of any given situation, whether it be chronic unemployment, chronic crop loss, or chronic business loss. No program adopted by the Federal Government will ever be effective without the sincere desire on the part of local interests to see to it that the job of alleviating chronic unemployment or any other chronic difficulty is taken care of on a local basis.-KURTZ M. HANSON. Chronic unemployment has persisted in many localities throughout the United States, even when the American economy as a whole has been very prosperous. Even most energetic local efforts have not succeeded in eliminating the serious distress in these areas of chronic unemployment. Clearly, some further impetus is needed to meet this problem. Only the Federal Government has the resources to initiate an effective program. While the accompanying statement discusses a number of aspects of such a program, I would like to emphasize the following points which I do not feel are adequately covered. 1. There is a definite role for Federal financial assistance. Federal assistance, if properly applied can be used to supplement the efforts of private lenders to induce firms to settle in depressed areas. The statement seems to me to be deficient in considering this aspect of the Federal program. 2. Greater consideration should be given those who suffer most from the unemploymentthe workers themselves-who quickly find that they have exhausted all State unemploy ment insurance benefits. Some type of Federal supplementation may be needed for these workers. 3. While public works are an important part of a Federal program, they should not be instituted as "work relief," but projects should be judged on their own merit to determine whether they would help to improve the economy of an area concerned. Footnote continued on following page. plemented by job retraining services and improved placement services. Work relief can be given either on public works or through the direction of Government procurement contracts to local firms. But even the more useful forms of work relief are no true substitute for unsubsidized employment, which must be the main objective of any program for relieving depressed areas. 5. Areas of chronic unemployment are more than a challenge to charity or to expediency. They offer exceptional opportunities for economic and administrative progress in our society The foregoing brief review of the elements of a program for dealing with areas of chronic unemployment makes it clear that any such program would be confronted with many opportunities and with much uncharted territory. The need for action should be sufficient endorsement of an experimental approach. No one can now tell what new and rewarding activities may be created by the vigorous application of brainpower and money power to areas that now seem forlorn. Many years ago the rise of a Connecticut city was attributed directly to its lack of natural resources. "The prosperity of Waterbury," a historian wrote, "has been due primarily to the poorness of the soil in the country around it." The depressed areas today offer a similar challenge to ingenuity and determination. They may come to be an important part of the endless frontier our dynamic economy is constantly probing. MEMBERS OF THE NPA SPECIAL COMMITTEE ON DEPRESSED AREAS1 H. Christian Sonne (Chairman) president, South Ridge Corp. William Batt, Jr., executive secretary, Toledo Industrial Development Council, Inc. John A. Baker, legislative secretary, National Farmers' Union. Solomon Barkin, director of research, Textile Workers' Union of America. Victor C. Diehm, president, Northeast Pennsylvania Industrial Development 4. The Federal program must be careful that it does not improve employment opportunities in one community at the expense of another. For this reason, loans or any other type of assistance should not be given to any firm which would locate in a depressed area by clos ing down or moving its operation from any other community in the United States.-PETER HENLE. I have a number of reservations with respect to this statement. 1. As written, the statement places too much weight on Federal responsibility and initiative, as distinct from State and local responsibility and initiative. 2. The most important aid the Federal Government can provide is in connection with research and planning of the kind referred to under section 3 of the statement. Such aid might include the services of qualified Government experts as well as grants (preferably on a matching basis) to help finance necessary local studies. 3. The provision of "technical assistance" can likewise be of great value under certain circumstances. However, the Federal effort should not be to supply the technical assistance directly, but rather to mobilize the technical resources of private organizations. 4. The provision of special financial incentives, including tax concessions, to encourage businesses to locate or expand in distressed areas, raises grave problems. There is always a great danger that inducements of this kind can result in the location of industries in areas that will make for permanent high costs. Realistic policies should seek to capitalize on the assets of the community or area, rather than to provide artificial and largely temporary offsets to its liabilities. Only by building on the basis of assets can stable, long-time results be achieved. 5. In many cases, poorly conceived, inadequate, or restrictive management or labor policies are among the most important factors contributing to the creation of distressed areas. Where this is the case, no amount of effort at the economic, financial, or technical level is likely to have more than a palliative effect. This points again to the overriding importance of dealing with distressed-area problems on a local basis and largely through the initiative and responsibility of local groups. 6. None of the foregoing is intended to minimize the seriousness of the distressed-area problem. In dealing with that problem, however, emphasis needs to be kept on the primary responsibility of those closest to the scene of action and those most personally and intimately concerned with the welfare of the area. There is a role for the Federal Government to play, but it is one of encouraging, strengthening, and counseling local efforts, rather than one which will supplant or undermine local responsibility. To my mind, the statement as written inclines much more to the latter direction than to the former.-JAMES C. WORTHY, 1 Footnotes by members of the special committee are identified by name and are indicated by an asterisk in the committee policy statement and in Mr. Miernyk's report. Numerically designated footnotes in the report are by Mr. Miernyk. |