CONTENTS Page Nourse, Edwin G., vice president, Brookings Institution_. Carpenter, H. L., chairman, Small Business Division, Post-war Plan- MOBILIZATION AND DEMOBILIZATION PROBLEMS TUESDAY, MAY 2, 1944 UNITED STATES SENATE, WAR CONTRACTS SUBCOMMITTEE OF THE Washington, D. C. The subcommittee met, pursuant to recess, at 10:30 a. m., in room 318, Senate Office Building, Senator James E. Murray (chairman) presiding. Present: Senator Murray (chairman). Also present: Congressmen Kefauver and Gwynne; B. M. Gross, staff director of the subcommittee; Kurt Borchardt, counsel to the subcommittee. Senator MURRAY. The hearing will come to order. Before we start the hearing, I wish to say that at noon today I shall have the privilege of formally reporting S. 1718, the contracttermination bill, to the Senate on behalf of the Military Affairs Committee, which last week voted unanimously to report the measure favorably with the recommendation that it be acted upon expeditiously. Naturally, contract termination is only one phase of the broad economic problems that face our economy. It is the intention of Senator George and his committee, and myself and my committee, to press forward toward action in the near future on the broader problems of post-war adjustment as covered in S. 1730 and S. 1823. On this point, I should like to insert into the record the statement made jointly on April 28 by Senator George and myself. I would like to have that appear in the record at this point. (The statement referred to is as follows:) JOINT STATEMENT BY SENATOR WALTER F. GEORGE, CHAIRMAN, SENATE SPECIAL COMMITTEE ON POST-WAR ECONOMIC POLICY AND PLANNING, AND SENATOR JAMES E. MURRAY. CHAIRMAN, WAR CONTRACTS SUBCOMMITTEE, SENATE COMMITTEE ON MILITARY AFFAIRS It is our mutual conviction that broad legislation to help achieve full employment after the war must be enacted by the present session of Congress. This is essential if our country is to be fully prepared for peace. It is also essential if our Congress is to discharge its proper functions as a policy-making body and assure a full return to democratic governmental processes in the postIt is our considered judgment that the following legislation should be enacted during the present session : war era. I. A BROAD POST-WAR ADJUSTMENT BILL Two bills of this type are now before the Senate Military Affairs Committee: S. 1730 (George-Murray) and S. 1823 (Kilgore). We are now studying a number of revisions that have been suggested during the recent hearings before the Military Affairs Subcommittee. It is hoped that this over-all legislation can be reported to the floor of the Senate in the very near future. The contemplated over-all legislation includes provisions setting forth specific Congressional policies on cut-backs in war production and on the resumption of civil.an production. The recent hearings have revealed a state of confusion on these questions that can be corrected only by legislative action. Other hearings and investigations of the War Contracts Subcommittee have uncovered the fact that there is still a large amount of waste and extravagance under war contracts, particularly cost-plus-fee contracts. This is a problem of fundamental importance to our plans for post-war employment. Curtailing wasteful practices in war production will lower the cost of the war, reduce our debt burden, lead toward more efficiency in conversion to peace and help us achieve the low price levels that are essential to the development of our post-war markets. Although a separate measure on this subject is now before the subcommittee,1 consideration is being given to achieving the purposes of this resolution through an appropriate section in the general bill. The problems of surplus war property and the demobilization of veterans and war workers may also be dealt with in the legislation now being studied. The revised over-all legislation will also spell out in detail the planning functions of the top war mobilization and post-war adjustment agency. This will be done without duplicating or displacing the planning activities of established Federal agencies and without detracting in any fashion from the planning functions of the Congress. Serious consideration will also be given to appropriate representation in an advisory capacity, for industry, labor, agriculture, and the public. IL. UNEMPLOYMENT COMPENSATION On April 12, 1944, the Honorable James F. Byrnes, Director of War Mobilization, stressed the necessity for legislation providing Federal assistance to the State unemployment compersation system. We heartily concur in Justice Byrnes' proposal and will shortly submit a jointly sponsored bill embodying this recommendation. In the Senate, the bill will be referred to the Finance Committee, where the Chairman will immediately appoint a subcommittee to work toward prompt reporting of the measure to the floor. III. CONTRACT TERMINATION The pending contract termination legislation meets with general approval and should not be delayed any longer. S. 1718 as amended, which is now to be reported out of the Military Affairs Committee, should be passed promptly by the Senate and the House. Senator MURRAY. During the past few weeks, we have received testimony from businessmen, labor leaders, and the heads of many executive agencies. Today and tomorrow we shall hear from two outstanding economists who will present their views on the basic economic issues involved in achieving full employment in the transition and post-war periods, as well as on the specific legislative questions now before this committee. Mr. Nourse, of the Brookings Institution, will be the first witness this morning. You may state your full name, Dr. Nourse. STATEMENT OF EDWIN G. NOURSE, VICE PRESIDENT, BROOKINGS INSTITUTION Mr. NOURSE. My name is Edwin G. Nourse. Senator MURRAY. And your connection? Mr. NOURSE. I am vice president of Brookings Institution, but I am not making any pronouncement on behalf of the institution this morning, but rather presenting my own views, some of which, however, are related to things that we have dealt with in publications. 1 S. J. Res. 80, to prohibit the use of the cost-plus-fixed-fee system of contracting in connection with war contracts, introduced by Senator Homer Ferguson of Michigan. Shall I proceed with my statement? Senator MURRAY. You may proceed with your statement. Mr. NOURSE. Your committee has been considering a wide range of situations related to problems of demobilization, termination of war contracts, and the disposal of war-created plant and surplus materials. Specific action as to many detailed steps in this reconversion process has been urged upon you by persons having strong individual or group interests in some particular decision or policy of the Government agency that will handle these affairs. At this juncture, if I understand the thinking that prompted Senator Murray to extend to me an invitation to appear this morning, it seemed worth while to back away from this detailed picture to get a more general perspective on the broad issues which are involved in the several alternative courses of action which might be taken in the next few months or years. What is in fact a sound answer to any one of the concrete questions with which your committee has been grappling comes back, in the last analysis, to what are the fundamental operative principles according to which a system of private capitalism can be continued in successful operation in a democratic country. Of course, if we were contemplating the abandonment of private enterprise and the setting up of a system of state socialism, communism, or fascism, we would need to make extensive exploratory studies of the principles according to which any one of those different types of economic machine would operate. That we leave to others. But we should recognize that there is a very real danger in the attempt made by some well-meaning people to mix principles applicable to different economic systems, without realizing the inconsistencies between them, and the continual frictions and partial break-downs that are bound to result from jumbling together structural and operating arrangements which are designed for different types of economy. I have been deeply concerned for some time back to examine the Working requirements of a system of democratic free enterprise under private capitalism with a view to discovering why the system has creaked and groaned as it has and suffered from partial stoppages. Or, from the other side, I have asked what changes in business philosophy or current policy and practice would be necessary if, returning to a system of private capitalism after the war, we are to demonstrate its capacity for high efficiency, smooth operation, and well-sustained prosperity? Senator MURRAY. During the depression period, many economists of the country pointed out that our economic system had completely broken down, that it had failed to supply a livelihood for nearly a third of the population, and any system that fails to accomplish that couldn't expect to endure in this country; that some way must be found to bring about widespread employment in this country, or otherwise the people would not be interested in voting for and sustaining a system which was so defective nad deficient. Mr. NOURSE. It seems to me that that is a practical situation with which we are confronted. My position has been that the system did not break down from inherent possibilities of its successful functioning, but that in many regards it was not as well handled, it was not handled in full understanding of its own inherent requirements. |