UNEMPLOYMENT RELIEF SATURDAY, JUNE 11, 1932 UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met at 10.30 o'clock a. m., pursuant to call, in the Interstate Commerce Committee room, Capitol, Senator Peter Norbeck presiding. Present: Senators Norbeck (chairman), Brookhart, Goldsborough, Couzens, Townsend, Blaine, Fletcher, Wagner, Barkley, and Bulkley. The CHAIRMAN. The committee will come to order. We will hear Mr. George H. Houston. STATEMENT OF GEORGE H. HOUSTON, PRESIDENT BALDWIN LOCOMOTIVE WORKS, PHILADELPHIA, PA. The CHAIRMAN. Mr. Houston is here in the interest of a certain section of the Barbour bill, as I understand it, and he may proceed in his own way to state his case. The understanding was that each of two witnesses here would require half an hour. The other witness is Mr. Muir, who will follow Mr. Houston. Will you state your name, address, and occupation for the record, please? Mr. HOUSTON. My name is George H. Houston; I am president of the Baldwin Locomotive Works, Philadelphia, Pa. The Secretary of the Treasury presented a memorandum in his testimony to this committee some days ago in which the source of unemployment was discussed and in which it was endeavored to show that the greater part of the unemployment existing in the United States to-day arises from the practical cessation of capital goods production. This memorandum defined capital goods as those products of industry that enter into the facilities for industrial production, transportation, power generation and transmission, together with materials for building construction, commercial and residential. In that discussion the Secretary did not mention the origin of the memorandum, because it had come to him through channels that did not leave him entirely free to state that I had prepared it; but he asked me to appear to-day and give you any additional information with regard to it that would be of interest to you. Senator COUZENS. What do I understand your position is? 119 Mr. HOUSTON. President of the Baldwin Locomotive Works, and chairman of the Philadelphia Banking and Industrial Committee of the Third Federal Reserve District which has been organized to cooperate with the Federal Reserve Bank in that district. I first wish to present a schedule of the products entering into the item of machinery in this memorandum, which are given at $7,043.000,000 total output for the year 1929. These products include agricultural implements, $258,000,000; cash registers, adding machines, and similar equipment, $110,000,000; electrical equipment, apparatus, and supplies, $2,301,000,000; engines, turbines, tractors, and water wheels, $457,000,000; foundry and machine shop equipment, not classified elsewhere, $2,791,000,000; gas machines, gas meters, water and other liquid meters, $41,000,000; machine tool accessories, $144,000,000; machine tools, $245,000,000; pumps, $164,000,000; refrigerators, mechanical, $162,000,000; scales and balances, $30,000,000; sewing machines and attachments, $45,000,000; textile machinery and parts, $122,000,000; typewriters and parts, $62,000,000; washing machines, ringers, driers, and ironing machines for household use, $82,000,000; windmills and windmill towers, $9,000,000. It will be noticed that some of these might be classified as consumption goods, but most of them are of the class that I have mentioned as going directly into the facilities of production, distribution, and housing. These figures were taken from the statistical abstract of the United States Department of Commerce, pages 835 and 836. I am just presenting the statement to verify those figures. (The statement referred to, headed "Value of Machinery Products of all United States Factories, Year 1929," as reported by the Bureau of the Census was marked Exhibit 1, see appendix page 203.) Mr. HOUSTON. I also wish to present a schedule of construction contracts, mentioned in the memorandum, in the sum of $5,751,000,000, constituted as follows: Residential, $1,916,000,000; commercial, $929,000,000; factories, $546,000,000; public works and utilities, $1,459,000,000; educational, $328,000,000; hospitals and institutions, $152,000,000; public buildings, $121,000,000; religious and memorial, $106,000,000; social and recreational, $140,000,000. These figures are also taken from the Statistical Abstract, 1931, of the Department of Commerce, pages 835-836. The other figures of capital goods production are self-evident and are taken from the Bureau of the Census Reports. (The statement referred to, headed "Construction Contracts Awarded in 37 States as reported by the F. W. Dodge Corporation," was marked" Exhibt No. 2," see appendix page 203.) Mr. HOUSTON. I next wish to present for your consideration a chart of the index of factory employment in the United States from 1919 to date. It will show the market reduction in employment as compared with the normal. I think it was in terms, Mr. Chairman, of about 70 per cent of normal shortly after the turn of the year. It is now below that. In my studies of the source of unemployment Senator BROOKHART. How do you obtain that normal? Mr. HOUSTON. Those are all established by the Federal Reserve Bank of New York from their own statistics, and I am not prepared to tell you at this moment, although I can get it if you wish it, the origin of that normal; but you will note that the normal line from 1923 through 1928 very closely bisects the line of actual employment. Senator FLETCHER. What is the normal-100? Mr. HOUSTON. One hundred; and it is now down to about 70 per cent of normal. (The chart showing index of factory employment in the United States, referred to and submitted by the witness, was marked “Exhibit No. 3." Mr. HOUSTON. In my study of the unemployment situation I am continually impressed with the fact that certain types of consumption goods show very little reduction in volume Senator FLETCHER. You might mention those types. Mr. HOUSTON. I have mentioned them in this paper, giving 10 or 15 examples and showing the percentage of normal at which the latest records of the Federal Reserve Bank of New York show them now to be operating; and I have here charts of the Federal reserve bank showing the history of these commodities back to the beginning of 1919. I have one here for wholesale grocery sales which are now 105 per cent of normal. It dropped to a low of 88 in the latter part of 1931, and then after the first of the year moved up above normal again. I have called to your attention the very uniform movement of those commodities. (The chart referred to and submitted by the witness, showing wholesale grocery sales in the second Federal reserve district, was marked "Exhibit No. 4." Mr. HOUSTON. The next chart that I would like to present is that for livestock slaughtered. Senator BULKLEY. Did you say that these are all Standard Statistics? Mr. HOUSTON. No, sir; Federal Reserve of New York. Senator FLETCHER. If they are going in, they had better be marked. The CHAIRMAN. You would like to have these in the record, would you not? Mr. HOUSTON. Yes sir; I think it would be well to do so. This chart for livestock shows a ratio of 90 per cent of normal. I am reflecting the latest percentages when I say present. They are some weeks behind at the present moment, but they indicate clearly the trend. (The chart referred to and submitted by the witness, showing index of composite livestock slaughtered, was marked "Exhibit No. 5." Mr. HOUSTON. I would next like to submit a chart showing farm produce, shown to be 97 per cent of normal. Senator COUZENS. What year do you constitute as normal? Mr. HOUSTON. As established by the Federal reserve bank. Here [indicating] is the normal line, and this [indicating] is the fact. You can see how accurately the actual volume was bisected by the normal line. Senator COUZENS. Yes; but what year did that normal take place? Mr. HOUSTON. I am not prepared to define the normal. I have accepted the Federal reserve definition of normal. Senator COUZENS. But they have not stated what year that took place? Mr. HOUSTON. No. I do not think it was established at any one year; I think it is a moving normal. Senator FLETCHER. You mean to say, the price level of agricultural products now Mr. HOUSTON. This has not to do with prices; it has to do with volume. In some of these commodities it has to do with prices. I am not prepared to say which they are, but all of these are expressed in percentages. I was dealing with the volume of business now being carried on in the United States. Senator BROOKHART. About 95 per cent of volume and about 30 per cent of price? Mr. HOUSTON. Yes, sir. Senator BROOKHART. That is, in agriculture, I mean. (The chart showing index of farm produce, referred to and submitted by the witness, was marked "Exhibit No. 6.") Mr. HOUSTON. Here [exhibiting] is a chart of wholesale trade, showing a present volume of 81 per cent. Senator COUZENS. Is that all consumptive articles? Mr. HOUSTON. There is practically no wholesale trade so defined in capital goods, because they do not go through the wholesale channels. Senator COUZENS. They are probably all necessities of life? Senator BULKLEY. It states on the chart, "Grocery, drug, hardware, silk goods, cotton goods." (The chart referred to and submitted by the witness, showing index of wholesale trade, was marked " Exhibit No. 7.") Mr. HOUSTON. The next is a chart of consumption of wheat flour, shown at present to be 82 per cent of normal. Senator BROOKHART. If it were normal there would be no surplus wheat at all? Mr. HOUSTON. I am not prepared to go into that or to answer that. I do not know. (The chart referred to and submitted by the witness, showing index of wheat flour production, was marked "Exhibit No. 8.") Mr. HOUSTON. The next chart shows newsprint paper at 89 per cent of normal. (The chart referred to and submitted by the witness, showing production of newsprint paper, was marked " Exhibit No. 9.") Mr. HOUSTON. The next chart shows tobacco, at 77 per cent. (The chart referred to and submitted by the witness, showing index of tobacco products, was marked "Exhibit No. 10.") Mr. HOUSTON. The next chart shows gasoline consumption, 72 per cent, and the next chart shows petroleum refining products 67 per cent. (The chart referred to and submitted by the witness, showing gasoline consumption, domestic demand, was marked "Exhibit No. 11.") (The chart referred to and submitted by the witness showing index of petroleum refining products, was marked "Exhibit No. 12.") Mr. HOUSTON. The next chart shows sole leather at 82 per cent. (The chart referred to, showing index of sole leather production, was marked "Exhibit No. 13.") Mr. HOUSTON. The next chart is a composite index showing distribution to consumers, showing department store sales, chain store sales and other chains, automobile registrations, mail orders, advertising, gasoline consumption. Those are used solely as a general indication of the volume of movement to the consumer. That is at 77 per cent. (The chart referred to and submitted by the witness, showing distributor to consumer, was marked "Exhibit No. 14.") Mr. HOUSTON. The next chart shows the consumption of textiles, made up of cotton consumption, wool mill, and silk, at a volume of 75 per cent. (The chart referred to and submitted by the witness, showing index of consumption of textiles, was marked "Exhibit No. 15.") Mr. HOUSTON. The next chart shows mail-order sales, a value of 59 per cent. (The chart referred to and submitted by the witness, showing index of volume of mail-order sales, was marked "Exhibit No. 16.") Mr. HOUSTON. The next shows hosiery production, at a present volume of 73 per cent. (The chart referred to and submitted by the witness, showing hosiery production, was marked "Exhibit No. 17.") Mr. HOUSTON. The next chart shows chain store grocery sales at a volume of 72 per cent. (The chart referred to and submitted by the witness, showing chain store grocery sales, was marked "Exhibit No. 18.") Mr. HOUSTON. These charts show, I believe quite clearly, the movement of commodities into consumption. I am of the opinion that it is impracticable to increase production of these commodities faster than consumption increases. In my statement, which the secretary read to you, I expressed the opinion that to do so would merely increase the existing inventories and further depress prices. I also called attention to the fact that employment could be stimulated only by increase in demand for consumption goods which we have discussed, by increase in public works, or by increase in the production of capital goods by private enterprise, and have argued for the stimulation of demand for capital goods by private enterprise, believing that in this resource we have the greatest possible opportunity for stimulating further employment. I showed that these capital goods are produced in normal times in very large volume. In 1929 I estimated this volume at fifteen billions of dollars. It is very difficult to get these over-all figures, in that the statistics for capital goods have been so built up as not to |