st half of the year even before the impact of the Korean aggression. other words, there was an upward movement in that very important gment of the economy even before Korea. Senator FLANDERS. I think that is worthy of note, because the sugstion is so often made that we went into the Korean war in order to event a depression. We were already coming out. That is, you ar from radical sources that remark made over and over again. et, we were on our way out before the Korean thing struck. Mr. KEYSERLING. I think so. I think that one of the greatest pontial areas for the development of our strength in other parts of the ee world would be much more information than they are not getting I answer to just that line of propaganda, because it is very much ed by the Russians and others, and it is even used by some antiussian and free economists and others in some of these countries, ho really think that the nature of the American economy is depreson-ridden, as it was at some times in the past. But I think the facts e enormously significant for our own strength and the strength of e free world. By 1951, the second half of 1951, the producers' durable goods and uipment investment figure was up to $29 billion at an annual rate. he average for the year as a whole was about 27, 27, and 29 for the ro halves of the year. The contemplation for 1952 is that this type of investment can be timated somewhere in the neighborhood of a $26 to $28 billion nual rate in the first half of the year and something like $24 to $26 llion in the second, maintaining a very high level of investment in at sector. And this is very important as to our capacity to bear the burden f defense, and very important as to the ultimate implications for he inflationary burden and also for when we will arrive at a stage here, with leveling off of the burden in some places and expansion f output in others, the budgetary problem will be more manageable iter on than it seems to be over the next year. Senator FLANDERS. Is there any significance to the different shading f that top sector for 1949-that is darker than in the other. Mr. KEYSERLING. That indicates a negative change in inventories; 1 other words, in 1949 you had a disaccumulation or decumulation of ventories, just as in 1944. That is the significance of that. Representative PATMAN. How much was from earnings of cororations? Mr. KEYSERLING. That I could not answer from this chart. I could upply that for you. Representative PATMAN. Do you have that information in any hart? Mr. KEYSERLING. I do not believe it is in a chart. I do not think so. Ve could easily supply it for you. Representative PATMAN. Will you supply it for the record at this oint? Mr. KEYSERLING. Certainly, I will. (The information to be furnished is as follows:) Net change in nonfarm inventories The CHAIRMAN. Would you state again what the different segments mean? Mr. KEYSERLING. The black one is the residential nonfarm construction, housing. The next one is the other new construction. That would include the construction of a theater, the construction of a building of some kind or other. The white is producers' durable equipment, which is your tools, broadly speaking, tools of production. And the segment with diagonal lines is changes in business inventory. The CHAIRMAN. Have you any answer to the question as to whether or not the expenditures and investments which are made in expanding plant capacity are so great that if the national-security program were stopped there would be no outlet, no market outlet for the production of which such plants would be capable of producing? Mr. KEYSERLING. May I ask my colleague, Mr. Clark, to discuss that either now or when he comes on, because at your suggestion we had a certain division of the "spoils" here. I have my views on that subject, which I think are well known to the committee. I think that the record of what happened after 1944 indicates that our business system has the capacity to beat the swords back into plowshares. If we had not, we would be sunk, because we have the productive power. And, if we ever do not learn how to use it, we will be sunk in any event. However, Mr. Clark is going to cover that. The CHAIRMAN. We will have Mr. Clark do that then. Representative PATMAN. I would like this broken down a little more, the gross private domestic investment, not only the amount of this from earnings of corporations, but where else it came from. Mr. KEYSERLING. Well, that, I believe, we have in our published materials. At least, we did in previous years, as to the sources and uses of funds. Representative PATMAN. That is right. Mr. KEYSERLING. Which shows which part of the investment comes from internal financing, and what part comes from borrowings. Representative PATMAN. Yes, and what type of borrowings. Mr. KEYSERLING. We have had charts on that in the reports in the past. I believe there is a chart in there this year, but if there is not it is certainly shown in the tabular column materials. There are a lot on page 203. Mr. CLARK. On page 203 of the Economic Report. Representative PATMAN. Thank you very much. Mr. KEYSERLING. I am sure that you will find that it does supply the information. If not, we will be glad to supplement that. The CHAIRMAN. Would you care to have that inserted? The CHAIRMAN. Very well, the table on page 203, table B-37, will be inserted in the record. (Table B–37, p. 203 of the Economic Report, is as follows:) TABLE B-37.-Sources and uses of corporate funds, 1947-511 * Estimates based on incomplete data; by Council of Economic Advisers. Less than $50 million. Source: Department of Commerce estimates based on Securities and Exchange Commission and other financial data (except as noted). Representative PATMAN. Also, chart 23 on page 83. The CHAIRMAN. It may be difficult for us to get that chart on that page, because it is a diagram; but, if possible, we will. Mr. KEYSERLING. This chart, which is a blow-up of one of the charts in the Economic Report, shows in terms of basic capacity certain vital sectors of the economy, what this growth of the industrial mobilization base means, showing it for steel, aluminum, petroleum, and electric power, and contrasting the pre-World War II situation with the 1950 situation and with the 1952 situation. All of these programs are in very short run to a degree of inflationary, and thus reveal the complexity of the problem, because any program which absorbs manpower and resources before it translates them into the production of goods is a strain upon resources and adds to inflationary pressures. But these programs are a calculated balance, trying to SOURCES AND USES OF CORPORATE FUNDS From 1950 to 1951, there was a large increase in corporate outlays for plant and equipment and inventories. External financing was more important in the past year than in 1950. PROFITS ESTIMATES FOR THIRD AND FOURTH QUARTERS 1951 BY COUNCIL OF ECONOMIC ADVISERS. SOURCE: DEPARTMENT OF COMMERCE ESTIMATES BASED ON SECURITIES AND EXCHANGE solve the longer-run problem effectively at the cost of some shortrun strain. As you will see in the Economic Report itself, some of the programs of expansion have really been terrific, which is the word for them. Some people think they have been too great. I do not think so, but there is a division of opinion on that. In any event, these programs reflect an enormous accomplishment on the part of the business community, which is itself doing a job that in large part was Government-financed during World War II. There have been some stimuli through tax amortizations and the like, but they have been a small fractional part of the investment cost, contrasted with the public construction of such facilities during World War II. The CHAIRMAN. Are you saying that the evidence before the economic advisers indicate that private capital is doing a larger propor SOURCES: AMERICAN IRON AND STEEL INSTITUTE, FEDERAL POWER COMMISSION, AND tion of the industrial expansion now than it did during World War II? Mr. KEYSERLING. Enormously larger-really almost incomparably larger enormously larger. The CHAIRMAN. How much larger? Mr. KEYSERLING. You get it a little bit from the first chart, gross national product, which shows that tiny white segment, contrasted with the larger white segments in 1950 and 1951. To get exactly how much larger, you would have to contrast not only the proportion but also the actual figures. We could give you that contrast. The CHAIRMAN. I think it would be very interesting. Mr. KEYSERLING. Almost incomparably larger, if anything can be incomparable, but enormously large. We will furnish the informa tion. |