oy M4 286 537 8 AGRICULTURAL RELIEF HEARINGS BEFORR THE COMMITTEE ON AGRICULTURE HOUSE OF REPRESENTATIVES SEVENTIETH CONGRESS FIRST SESSION FEBRUARY 16. 17, AND 20, 1928 Serial E—Part 6 UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON | OR COMMITTEE ON AGRICULTURE House oF REPRESENTATIVES SEVENTIETH CONGRESS, FIRST SESSION GILBERT N. HAUGEN, Iowa, Chairman FRED S. PURNELL, Indiana. JAMES B. ASWELL, Louisiana. T. S. WILLIAMS, Illinois. D. H. KINCHELOE, Kentucky. C. J. THOMPSON, Ohio. MARVIN JONES, Texas. JOHN C. KETCHAM, Michigan. F. B. SWANK, Oklahoma. THOMAS HALL, North Dakota. H. P. FULMER, South Carolina. HARCOURT J. PRATT, New York. THOS. L. RUBEY, Missouri. FRANKLIN W. FORT, New Jersey. THOS. A. DOYLE, 1linois. FRANKLIN MENGES, Pennsylvania. JOHN McSWEENEY, Ohio. AUGUST H. ANDRESEN, Minnesota. CHARLES ADKINS, Illinois, JOHN D. CLARKE, New York. CLIFFORD R. HOPE, Kansas. VICTOR 8S. K. HOUSTON, Hawaii. L. A. DARNELL, Clerk H)H1TMO DVVITVIAT TYME TOL YOYI'DYV T1242 Cog) 13 FAR CUNTLNTS Statement of — Dr. B. W. Kilgore___. Mr. Xenophon Caverno.. Letter—Grain Exchange Commiute Mr. George Shiblev "h LL 429 471 452 496 AGRICULTURAL RELIEF iE House oF REPRESENTATIVES, COMMITTEE ON AGRICULTURE, Thursday, February 16, 1928. The committee met, pursuant to adjournment, at 10 o’clock a. m., Hon. Gilbert N. Haugen (chairman) presiding. Present: Representatives Haugen (chairman), Purnell, Williams, Ketcham, Hall, Fort, Menges, Andresen, Adkins, Clarke, Hope, Aswell, Kincheloe, Swank, Fulmer, and Doyle. The CraIrMAN. The committee will kindly come to order. Doctor Kilgore, we will hear you this morning. STATEMENT OF DR. B. W. KILGORE—Concluded Mr. KirLGore. Mr. Chairman, in the statements which I have made on two previous days before the committee I have made a defense of the cooperatives, especially the cotton cooperatives, mainly in response to certain questions from members of the committee. In what I have said in defense of the cooperatives I would not have you think that I want to make you believe that they have not made mistakes. They have made mistakes. They have run up against many difficulties. They have been in many serious situations. But in the five to six years that the cotton cooperatives have been operating they gained a great deal of experience. The trying times they have had, in the last three years particularly, have perhaps helped them more than anything else in bringing down their operations to an economical and efficient basis, and without this experience they possibly would not have come to this point in their operations as soon as they have. The thought I want to bring to you is that they have found their way to efficient and practical operations, and that they are in position, with this legislation which we are advocating for handling the surplus, to come back and to gradually grow to fill the place that is expected of them, and which we believe they will fill. In order to do that, I think, and we think as cotton cooperatives in common with the cooperatives of the other crops, that this surplus-control legislation is necessary, so that the burden of carrying the surplus will be evenly distributed over all the producers, and when that is done the members of the cooperatives will be at least on an equal basis with the nonmembers and they will have certain advantages which nonmembers do not have, in the way, as I stated the other day, of getting a quality price for grade and staple or other quality products, and they will have the benefit of the combined bargaining power that goes with groups of producers and which does not go with the individual producer. - The final thought I want to bring to this committee is the matter of stability in prices for different commodities and stability in prices for all farm commodities. 430 . AGRICULTURAL RELIEF I do not know just whether I should go along with that in the absence of Mr. Fort or not, as he expressed the desire to continue his questions. The CrAIRMAN. Are you through with your remarks? Mr. Kingore. No; I am not, Mr. Chairman. I was just putting that matter before the committee. The CuatrMAN. My understanding is that Mr. Fort will be here in a few minutes. Mr. KiLcore. Then, I will take up the more general aspects of the question of stability. Stability, I think I may say, is the national problem. In industry it has been reasonably achieved, and it is stability in agriculture that we are seeking to achieve in this legislation. Now, since these hearings have been going on I have clipped, mainly from the Washington papers, two statements regarding the prevention of waste in oil and the adjustment of production to consumption, so as to prevent waste and to prevent ruinous prices. In the matter of rubber, the Secretary of Commerce just a few days ago appeared before a committee in support of a bill, and I wish to read just a portion of the statement in the press about this (reading): The American consumer of tires has lost millions of dollars annually as a result of the British rubber monopoly, Secretary Hoover yesterday told the House Judiciary Committee, in indorsing a bill to permit the formation of American trade associations to make collective purchases of raw material controlled by foreign nations. The British Government, it would appear, worked out a rather effective measure for stabilizing and getting a better price for rubber. In Cuba the legislature has passed a measure for a restriction of sugar production and the control of export of sugar to other countries in such a way that they believe it will bring about a better and a stabilized price for sugar. Mr. Kercaam. Right in that connection, Doctor Kilgore, before you leave sugar. Were you going to remark further about it? Mr. KiLcore. It was not my purpose to discuss these different measures as to their merits, to explain them or to criticize or to commend, but merely to call attention to them from the standpoint of the efforts that are being made to stabilize industry and these certain agricultural products that I am referring to. Mr. Kercuam. The reason I injected that was because of the fact that Mr. Yoakum made reference yesterday to the attitude of the sugar-producing countries in the same direction you have just been mentioning, and I wondered if you had given that any study at all, and if so, if you could give the committee the benefit of the conclusion you had reached upon that whole proposition. Mr. KiLGore. I would prefer not to go into a discussion of the merits of it, because I do not understand it sufficiently well; and, as I stated, I was merely calling attention to these measures to show the importance that is attached to this subject in general: that is, stability in all lines. . In the case of steel, where one half of the production of this country is manufactured by one corporation and a very large proportion of it by just a small number of other corporations, through this large control in manufacturing and handling and through trade associations AGRICULTURAL RELIEF 431 steel is no longer ‘prince or pauper” as Andrew Carnegie used to say about it; but steel is always a prince. In the case of coffee we know that the Brazilian Government has made certain efforts through a very definite plan they have to stabilize the price of coffee. The criticism which has been made of it in this country is some evidence of its effectiveness. I am not going further with that than to say that the equalization fee principle is involved in the Coffee Control Institute, as it is called, by the levying of a fee of about 55 or 56 cents on each bag to cover the expense of the institute in handling the coffee situation. Mr. ANDRESEN. Doctor, when you used the term “stabilized prices,” did you mean to bring prices up to a higher level and then stabilize them? Mr. KILGORE. Yes, sir; if I did not say that I meant to say a better price and then stabilization. Mr. Apkins. I think this distinction should be noted. It is true that a very large percentage of the sugar plantations of Cuba are owned and controlled by the sugar refineries in this country, and that a large porportion of the production of coffee is confined to another country, making a little different proposition than here. Mr. KiLGorE. Somewhat more advantageous than cotton is, and yet we are not in a very different position; we are in a somewhat similar position as regards cotton. Now, more specifically I wish to call your attention to two statements in regard to the manufacture of cotton goods. In the New York Times of January 15, is this press statement (reading): New Bedford, Mass., January 13.—The New Bedford Mercury to-morrow will say that radical curtailment of production has been adopted as the definite policy of the fine-goods section of the cotton industry, and will be put into effect at once by fine cotton cloth mills in New England and in the South. The expectation is that nearly every fine-goods mill in the United States will join in the movement which aims to eliminate the surplus production that has been glutting the market and demoralizing values throughout distributing channels. The plan adopted proposes to limit all fine-goods plants to an output of not more than 80 per cent of normal for the period extending from the present to October 1, 1928. Several New Bedford plants have been curtailing more than 20 per cent for weeks, due to adverse market conditions. The move has been under consideration for some time, both producers and distributers of fine cotton goods urging a substantial curtailment of output as the only hope of stabilizing market and employment conditions in the industry. Efforts have been made to get the Fine Cotton Goods Exchange, the headquarters of which are located in New Bedford, to act as the leader of the movement. In response to these suggestions, the exchange took up the question, and its action at a meeting to-day is outlined in the following statement made by Andrew Raeburn, former Secretary of the exchange, and now its president: ‘““At a largely attended meeting of the Fine Cotton Goods Exchange, held in New Bedford to-day, the members concluded unanimously to adopt the policy of instituting in their individual establishments a curtailment of production; this curtailment to amount to not less than 20 per cent. to start immediatelv and to be continued until October 1, 1928.” Members of the exchange produce more than two-thirds of the fine cotton goods of the country, but the curtailment will embrace a much larger proportion of the industry. Many other mills have already signified their intention of conforming to whatever curtailment policy the exchange adopted. The method of curtailment is to be left to each individual plant, with the understanding that contracts at present on the books are to be fulfilled. Each mill will determine independently whether to run full time with one-fifth of its equipment shut down, or to operate all equipment on short time. Approximately 125.000 to 150.000 fine-goods looms will be affected. AGRICULTURAL RELIEF Now, that was from New England. This statement more recently comes from a North Carolina paper and has a date line of Gastonia, N. C., January 28 [reading]: MILL CURTAILING HELD NECESSARY—ORDERLY CONFORMANCE TO LAW OF SUPPLY AND DEMAND, SAYS WALKER HINES Gastonia, January 28.—The present curtailment program being carried out in various branches of the textile industry are orderly steps on the part of mill men in conforming to the-law of supply and demand, Walker D. Hines, of New York, president of the Cotton Textile Institute, explained in an address to-day to 100 or more combed yarn manufacturers of Gaston and surrounding counties. The curtailments, Mr. Hines said, were initiated to ward off what might possibly develop into a much more serious situation than obtains at present, indicating nothing more, he said, than an organized and intelligent effort on the part of the manufacturers to cope with conditions in the most effective manner. Pointing out that a slight overproduction had been in effect in the industry, Mr. Hines declared that respective mill owners had their choice of bringing their production in line with demand by acting promptly in an orderly manner, or of adopting disorderly and much more drastic and injurious methods of action. The Textile Institute head asserted that failure to keep production in line with demand would result in an overhanging surplus which would break prices to a point below the cost of production. This situation which mill men are seeking to avoid, would, he pointed out, lead to a very dangerous instability and seriously injure the best interest of the mill owners, their employees and customers. Mr. KiNncHELOE. Are you reading that to get it in the record? Mr. KiLGoRE. Yes. Mr. KincueLoE. What is the idea of encumbering the record in that way? I would like to get your ideas, but I am not caring about what these other fellows said. Mr. Kinore. I have just two or, three lines to read, and I will cover that if I may. [Concludes reading:] The Textile Institute head asserted that failure to keep production in line with demand would result in an overhanging surplus which would break prices to points below the cost of production. This situation which mill men are seeking, to avoid, would, he pointed out, lead to a very dangerous instability and seriously injure the best interest of the mill owners, their employees and customers. In presenting this, Mr. Kincheloe, I was calling attention to the movement reasonably successfully carried out already of bringing about stability in prices of the various industries, whereas 1t 1s proposed in this bill to bring about stability to agriculture. In 1922, 1923, and 1924 cotton brought good prices. During that time, cattle, hogs, corn and wheat brought disastrously low prices. As a consequence there were some seventeen million acres of land in the main cotton States that went from these other crops, because of ruinously low prices, largely into cotton. Eight to ten million acres of that land was in Texas and had previously been in corn and wheat and devoted to grazing in the production of beef cattle mainly. The instability there in the low prices for these other products caused a transfer to cotton, and this increase in the acreage of cotton brought about the overproduction in 1925 and 1926, and we had a swing there during that brief period from cattle, hogs and corn and wheat to cotton; and now that cattle are bringing better prices the swing 1s back to cattle and other crops. Crops compete with each other for the use of land. As one crop is more profitable than other crops it takes land from other crops, and mn this way we have a shift from year to year or in very brief periods AGRICULTURAL RELIEF 433 of years from one crop to another crop in an effort to avoid losses and to find profits. This continuous shift can not bring about stability or better prices for agriculture. Now, I stated the other day that I was not specially interested in a bill that would be only a cotton bill, as somebody suggested that one of the loan bills would be; that it would be effective for cotton, but would not work on the other crops. I stated I would not be interested in a mere cotton bill, even though it brought temporary relief for a year or so; that such relief could only be temporary, because if cotton by reason of a bill of that kind should have its price increased and stabilized reasonably, it would not last, because that better price for cotton would cause acreages in wheat and corn and other crops to go into cotton, and cotton would thus break down because of a special measure that would operate only for cotton. In the report just given out from the Department of Agriculture it was stated there was a large increase in the dairy industry in the Nation, and particularly in the South, during the last few years. In my State it was stated to have been 20 per cent for the last year. This competition of crops for acreage, because of the better prices, to the dairy industry has brought about a substantial increase in the dairy industry in the South during the last few years—it has to the dairy industry throughout the Nation. A gentleman said to me just the other day that the dairy industry of Minnesota doubled from 1906 to 1920 and that it doubled again from 1920 to 1927. The South has been a market for much of the dairy products of the dairy States of the mid-west. With the increase of dairy production in the South it means that these dairy products from the more largely dairy States are going to have to find a market somewhere else, either in the big cities of New England or else go to the export trade; and we are going to find the dairy industry in the same difficult position as a large industry that cotton, wheat, hogs, and cattle have been in in the last few years. Mr. MENGgEs. May I ask vou a question? Mr. KiLcore. Yes; Mr. Menges. Mr. MEeNGEs. You are largely in the milk-producing business; you are not making butter or cheese, are you? Mr. Kincore. We make a lot of butter. Our butter production and our creameries are expanding in the South, and we are making some cheese. Our cheese industry is not large; but our butter industry is considerable and is increasing. Mr. MENGES. Are not the climatic conditions with you such as to interfere with the proper production of cheese or even butter? Mr. KiLgore. You must bear in mind we have a wonderful mountain country in the Carolinas, Virginia, Georgia, and Tennessee. Mr. MENGES. I mean more particularly does not the temperature interfere with the successful operation of cheese and even butter making? Mr. KiLcorEe. In that mountain country we have a cool climate, with wonderful grass for hay and for grazing, and just the conditions that are fit for the cheese industry. It has not grown'large, but it has made a start and is growing. The butter end of it has grown considerably and that can be handled in anv section of the South. 134 AGRICULTURAL RELIEF Mr. Menges. Was this land you are talking about now in the higher elevations of the Appalachian Mountains used for cotton before you went into the dairy business? Mr. Kingore. No; that would be the cheese-making area. But the creameries are in the lower areas that do grow cotton; and dairies are taking the place of other farming industries. Mr. MenGes. Then you are raising the crops there to feed your herds? Mr. KiLcorE. More largely than we have been, but not to the extent that would be most profitable to us. But we are gradually coming to grow the feeds with which to feed our dairy and other cattle. Mr. Menges. Will that industry be developed sufficiently by and by to feed your cottonseed meal? Mr. Kivcore. Well, not all of it; we can still spare you some in New England. Mr. Menges. I am not from New England. We largely raise our own feeds. Mr. KiLGcore. The more we develop the dairy industry or other livestock industry the more cottonseed meal we will use ourselves. For at the price 1t brings it is perhaps the most valuable concentrate on the market, particularly for dairy and beef production. The thought I wanted to bring to this committee, Mr. Chairman, in regard to that is that we are having to shift from one crop to another, within very brief periods, and a measure which would stabilize one crop and not another would not be permanent, and it would not be effective. We are for the McNary-Haugen bill, which we believe would operate effectively with all of the staple crops, and it would bring about an adjustment of prices and acreages between the different crops. So that there would not be those wide and ruinous swings from one crop to another within very brief periods of time. We want, and for that reason we advocate, this as the most comprehensive and effective measure which has been presented to Congress for bringing about this stabilization in production, because it would bring about, we believe, a relative stabilization in prices between wheat and corn and cotton, tobacco, cattle, and dairy products; and without that sort of interstabilization between crops we can not have the stability in agriculture that has been brought about reasonably in the different lines of industry. Just as a side thought, I want to say that the milk producers and handlers, particularly of fluid milk, are accustomed to the use of the principle of the McNary-Haugen bill. I operate myself a small milk, ice cream, and creamery plant. We have one price for fluid milk that goes to the regular trade, and for the surplus which can not be distributed in that way there is a lower price for its use for buttermilk or ice cream, and for butter and other products. The principle of the MeN ary-Haugen bill is in practice there. We do not have to have that enacted into law that we may use it, because we only have a small territory where we can work out the matter through agreement and operate. The same is true in a great many of the milk and. creamery plants in the big cities and throughout the country. They use the principle of the MeN ary-Haugen bill. aay. Mra, Do you have cooperative control of prices of those AGRICULTURAL RELIEF Mr. KiLcore. Indirectly, we do. Mr. Mexces. How? Mr. KiLcore. By having one price for milk for distribution to the trade that uses whole milk, and another price or prices for the milk that is used for other purposes or for making other products. } Mr. AsweLL. The extra price they have for the fluid milk you sell helps to average up the price of the stuff you have to sell at the lower prices? Mr. KILGORE. Yes, sir. : Mr. AsweLL. You have not told yet how you pay the equilization fee. I do not see anything like that in the McNary-Haugen bill. Do you have to pay a fee? Mr. KiLcore. We do not pay a fee. Mr. AsweLL. Then the McNary-Haugen bill without the equilization fee would answer your purpose? Mr. KiLGorE. As we do not have an export business, or cover a very large territory, the collection of a fee is not necessary—I am afraid the gentleman just has not thought through his bill as fairly as he might do.. Mr. AsweLL. Oh, yes; I have. Mr. KiLgore. We are providing, so to speak, a domestic price for our main product that we can consume or sell to our main trade, and we are providing a foreign price, so to speak, somewhat lower, as you would have in the tariff-protected products for the other products trade, which is entirely the principle of the McNary-Haugen bill. Mr. Fort. Are you through, Doctor? Mr. KiLgore. I had come just about, Mr. Fort, to the point where we left off. We might begin now. Mr. Fort. I am sorry I did not understand you were to have been on this morning or I would have made my arrangements differently. Mr. KiLGore. I purposely, as I stated to the committee, did not continue where we left off, so that you might continue your questions. Mr. Fort. Do you want to make a further statement on the points where we left off, or shall I go ahead? Mr. KiLGore. I shall be very glad to have you go ahead and I will follow you. Mr. Fort. Just to get the picture as to where we were, Doctor, you and I had some little question and answer as to the price basis that the board would operate under the equalization fee bill and under the loan bill. Mr. KiLGORE. Yes; precisely. Mr. Fort. We agreed that the identical board would operate in either bill. Now, we also, of course, agree as to the fact that the only limitation in the specific provisions of the Crisp bill, instructs the board to operate, if it operates at all, when prices are below or, except for its intervention, may fall below the cost of production with a reasonable profit to efficient producers. Would you fix a higher point than that at which purchasers of a commodity should begin under the Haugen bill? Mr. Kircore. It is rather difficult to determine—I think it would be rather difficult for the board to determine at what price it would begin to buy and thus stabilize the price of cotton under the term “efficient, producer 135 136 AGRICULTURAL RELIEF Mr. Fort. I agree with you on that, but it would also be difficult for the board to determine anything of that sort under the Haugen bill. It would be just as difficult under one bill as the other, would it not? Mr. Kivcore. Well, I think it might; and I am wondering if we could not simplify the situation by this—that is, possibly this is what is in your mind; this is what is in my mind. I stated that my thought about the loan bills was that the board would begin to operate at a lower point—— Mr. Fort. I know you did. Mr. KiLGorE (continuing). Than they would under the McN ary-Haugen bill. I am wondering if the thought that you have is— would not the board begin to operate more nearly at the cost of production price, say, with cotton, under the McNary-Haugen bill than it would under the loan bill. Mr. Fort. No; I am not wondering that. I ask you this specific question—I will put it this way. Would you favor operations under the Haugen bill if you were on the board, beginning purchases above a price which you believed to be the cost of production plus a reasonable profit to efficient producers? Mr. KiLgorE. I do not think the board under the McNary-Haugen bill would begin to operate above the cost of production, but at some point under the cost of production. Mr. Fort. Then the power exists under the Crisp bill to begin operations just where you think that the Haugen bill board would begin operating, does it not? Mr. Kincore. I think that might be possible. Mr. Fort. I am just asking you. The power is there. Mr. KirLgore. I think under the particular provision that you are speaking of; yes. But if we go to the other two provisions—— Mr. Fort. All right. We will come to those later. We are talking purchases only now. Mr. KiLGorE. Yes; but the provision I am referring to is for purchasing, too. Mr. Fort. Well, I am coming to that one later. I say that the same power is in the board to buy at the same price that you think would be proper to buy under the Haugen bill. Mr. KiLgorg. I think the power would be there: but I do not think they would do it. Mr. Fort. That is another question. We are coming to that later. However, we are operating with the same individuals on the board, are we not, and presumably with the same amount of a revolving fund, are we not? Mr. KiLgorE. Yes, sir. Mr. Fort. If the board did use this identical revolving fund for purchases at the same point that it utilized the revolving fund under the Haugen bill, wherein would there be any difference to the producer? Mr. KiLcore. The first year’s operations I think there would not be any difference. But if in that first year there had been losses of money which the Crisp or the loan bill says must be handled so that there will not be losses but that there will be profits. Mr. Fort. It does not say must; it says every effort must be used to prevent losses. AGRICULTURAL RELIEF Mr. KiLcore. Then I think it is possible they{might not operate but one year. Mr. Fort. So that the only difference to the producer, then, between the two plans, in so far as the price he will receive, is that you think that under a second year they might not operate under the Crisp bill and they would under the Haugen bill. Mr. KILGORE. Yes, sir. They would have a guaranty in the equalization fee for taking care of any losses and for keeping the revolving fund loan intact, which they would not have in the loan bills. Mr. Fort. How much of the revolving fund do you think would be needed in the case of cotton even in the worst year—even in 1926, we will say? Mr. KiLcore. Well, at 12 cents a pound, which was the average price for cotton in 1926, a bale of cotton would have been worth $60 and a million bales of cotton would have cost $60,000,000. Mr. Fort. Of which $48,000,000 could have been borrowed at 41% per cent from banks. So that they would have used $12,000,000 out of your revolving fund, would they not? Mr. KiLgore. Sixty millions would have bought a million bales of cotton outright, and $90,000,000 would have bought a million and a half bales outright, or 3,000,000 bales at 50 per cent. I think 3,000,000 bales perhaps is the maximum that anybody thought of as likely to have been taken off of the market in the crop of 1926. Mr. Fort. Then any such quantity as that would have been necessary to purchase only in a 19,000,000-bale crop year? Mr. KiLGore. Such an one and under such conditions as we had in 1926. Mr. Fort. Now, then, with the Government advancing the margin and the balance being borrowable from the banks as the margins are put up, it would only take, say, 25 per cent of the total cost of 3,000,000 bales out of the revolving fund, would it not—75 per cent parbvied from the banks and 25 per cent advanced from the revolving fund. Mr. KiLGork. I think you are putting your bank loans entirely too high, if you will pardon me. Mr. Fort. How high do your banks loan you now? Mr. KiLcore. From 60 to 65 per cent. Mr. Fort. Yes; but they have no such assurance as this bill offers with an organization in good standing to stabilize the price. Mr. KiLcore. They might do that, but the maximum under the intermediate credit acts is 75 per cent; you can not go beyond that. Mr. Fort. Let us take it in round figures 6624 per cent. Mr. KiLcore. All right. Mr. Fort. Three million bales on your figures would cost $180,-000,000, of which a third, or $60,000,000, would be borrowed from the revolving fund and $120,000,000 would be borrowed from the banks. In buying 3,000,000 bales of cotton at $60 a bale, do you think the corporation would have any losses? Mr. Kirgore. Of course, if we take the 1926 experience, which is behind us and which we can see and know about, no. But if we were attempting to stabilize the price at 16 or 17 cents, assuming 18 cents to be the cost of production instead of 12 cents, there would be a much narrower margin, a greater possibility of loss. 437 138 AGRICULTURAL RELIEF Mr. Fort. I am taking your own figure of 12 cents. Now, then, buying 3,000,000 bales of cotton in any year in the history of the United States at 12 cents—any year since 1900, certainly, when money got to anything like its present value—would there be any possibility of loss on any of our past history? Mr. KiLcore. I could not answer that offhand. Mr. Fort. Do you think so? Mr. KiLcore. I think you would have to take the actual experience—what actually happened in the market in that time—and run through it to determine. If I would say yes or no, I would be merely guessing. I would say, if we were to take our 1926 experience, will say we would not have a loss; there would be a gain. Mr. Fort. And that is the biggest crop you ever had? Mr. Kincork. That is our biggest crop. Mr. Fort. Then apparently we do not have to face the picture of a possible loss on the 12-cent price. Now, you said— Mr. KiLcore. Under those conditions—— Mr. Fort. Now, we have no history to indicate that we would have to face a loss on 12-cent cotton. Mr. KiLcore. Oh, yes; if vou were going back far enough there would be. Mr. Fort. I said 1900. Mr. KiLcore. And in any case it depends on business conditions, when we take it. Mr. Fort. I do not mean you might have had a loss within a year. At what prices would you say it would be risky to stabilize it so as not to have a loss? Mr. KiLcorE. I would not want to say that. Mr. Fort. You said a moment ago at 16 or 17 cents you might have trouble. Do you want to name that or any higher price as the point at which it would be risky? Mr. Kircore. With the cost of production estimated at 18 cents, then 16 or 17 cents would be much more risky than 12 cents, and I think under the equalization fee bill, where there would be a guarantee that loss as could be met, you could take that risk of 16 or 17 cents, which the board might not want to do under the loan bill. | Mr. Fort. Then would it be your idea that the board operating under the Haugen bill in 1926 would have held the price at 16 or 17 cents, but under the Crisp bill it would have only held it at 12 cents; is that your theory? Mr. KiLcore. That is what is running in my mind, and yet I have got hindsight rather than foresight on the 1926 crop, and I know what happened. Mr. Fort. Let us go back where it was foresight. Did you not say to me, Doctor, in December, 1926, that the stabilization of cotton at even 15 cents a pound, when it was then 12, would result in such overproduction of cotton as to ruin the cotton industry? Mr. KiLgore. I do not know whether I did or not. Mr. Fort. That is my recollection. Mr. KiLaore. I would not say that now. Mr. Fort. In view of hindsight? Mr. KiLGoRE. In view of hindsight. Mr. Fort. But if the farmers do raise a 19,000,000 bale crop, do you think they ought to have the price stabilized at a profitable basis? AGRICULTURAL RELIEF 439 Mr. KiLcore. I think it should be stabilized just as nearly the cost of production as possible, so they would not have to sustain ruinous {osses, and yet not sufficiently high, Mr. Fort, to cause too much increased production. Mr. Fort. Do you think if they stabilized it at cost of production they should stabilize it at the cost of production per pound of a 19,000,000-bale crop. Mr. KiLcore. Let us call it 18,000,000; we have never had a 19,000,000-bale crop. Mr. Fort. Eighteen million? Mr. KiLGorE. State your question again. Mr. Fort. say, if they were to stabilize it at the cost of production should they stabilize it at the cost of production per pound for an 18,000,000-bale crop? Mr. KiLGore. I do not know what the board would do. Mr. Fort. No; but should they? I am asking that. Mr. KiLcore. My own thought is, no; if they produced that much it should be below the cost of production. Mr. Fort. If the cost of production of an efficient producer, the man who really produces cotton at what it is worth, the economical value—— Mr. KinGore. You are bringing in a definition of “efficient producer’ that we might not agree on, you know. But if we say average cost of average production I think we could talk with something pretty definite in mind. Mr. Fort. Under your view in the Haugen bill we would stabilize below the cost of production of the high-cost producer? Mr. KiLGoreg. Prices would naturally be stabilized below the cost of production for the high-cost producer. Mr. Fort. Then it really comes down to the question as to whether the cost of an efficient producer is the fair average cost to the producer, or whether the cost of the high-cost producer is to be used as a guide in order for us to decide whether this Crisp bill definition is too high for a stabilization bill. Mr. KiLeore. I say, I do not know what you mean by efficient producer; what your term would include. But if you will use the term average cost of average production, we can arrive at what that is. Mr. Forr. I agree with you it is a very definite formula. Mr. KiLGore. Average cost of average production is reasonably definite, and that would take in the average man, not only the highcost man or the low-cost man, but the average fellow. Mr. Fort. And such a definition as that would be your definition as to what the Haugen bill should operate at—the average cost of average production; in other words, the price that would not bring in the marginal land producer and would hold production somewhere within the bounds where there is a real economic demand for the crop; that is your idea of it? Mr. KiLGore. Yes. Mr. Fort. Well, it has been my impression, from talking with Judge Crisp, that that was his idea. It may be that the language does not exactly fit in with your view. Now, another question, doctor: Assuming we did stabilize at 16 and 17 cents. That could not be done on a 16.000,000 or 18.000.000 bale crop, could it? $40 AGRICULTURAL RELIEF Mr. KiLgore. Why, I think so. ; Mr. Fort. And, again, you would have to buy how many million bales to do it? Mr. KicoreE. Well, I estimate 3,000,000 bales as the maximum for an 18,000,000-bale crop such as 1926, our biggest crop, under such conditions. Mr. Fort. Three million bales at 16 cents? Mr. Kincore. I do not know; I say that is the maximum general estimate. Mr. Fort. Sixteen-cent cotton is $80 a bale, is it not? Mr. KiLcorE. Yes, sir. Mr. Fort. That is a total of $240,000,000; that is $80,000,000 from the revolving fund and the balance from the bank. Now, of that $80,000,000 how much do you contemplate might be lost in buying 3,000,000 bales of cotton at 16 cents from any experience you have had in the market? Mr. Kircore. I do not know; I would not want to guess. Mr. Fort. Have you had any experience to make you think any of it would be lost? Mr. Kincore. If it is stabilized too near the cost of production there is a chance to lose, but a greater chance under the loan bill than under the equilization fee. Mr. Fort. Would there be much loss, do you think? We have got to figure this thing in terms of prospects. We have got to guess, admit. From your knowledge of the business would there be any oss? Mr. KiLcore. I think the chances are with cotton stabilized at xe cents, with an 18.000.000-bale crop there would have been some 0SSs. Mr. Fort. How much—3 or 4 cents a pound? 1 Mz Kincore. I would be guessing purely, and I.do not want to o that. Mr. Fort. Somebody has got to guess. Mr. KiLcore. I know it. Mr. Fort. The board has got to guess if we do not. Let us do some guessing first. Mr. Kircore. There is this to be considered, if it costs 114 to 2 cents a pound to carry cotton a year, if you bought it at 17 cents and sold it at 18 cents after you had carried it a year, then you would have a loss. You would have to absorb 114 to 2 cents per pound on the cotton, or $7.50 to $10 a bale? Mr. Fort. Yes. Mr. Kincore. Now, if you carry that one or two years, then you would have to get a considerable increase above the cost of production price, or the purchase price, in order not to sustain a loss. Mr. Forr. What I am trying to get at, Doctor, is I am trying to figure how serious you think the losses to the Government might be under the Crisp bill? ~ Mr. KiLGorE. I think the way it operates if we take the sections in there where it says that they shall buy only when they do buy so as to sell and not to sustain a loss but to make profits—I think if y ou operate that way under the Crisp bill that you would buy down = ow that you would not have effective stabilization for the man who needed it most. and you likely would not sustain anv losses. AGRICULTURAL RELIEF 441 Mr. Fort. And if they did operate at a 16 or 17 cent price on an 18,000,000-bale crop, how much in dollars and cents do you think we would be asking the Government to assume as a possible loss? Mr. KiLGorE. You are asking me an impossible question. Mr. Fort. Do you think it would run over $50,000,000? Mr. KiLGore. I just would not want to guess about it, and not because I do not want to answer your question. Mr. Fort. The board has got to get at it under the Haugen bill? Mr. KiLGorE. Yes; and they have got a protection in the equalization fee to make good any losses, and they can afford to make a more liberal guess in the interest of the producer than you can possibly make with the loan bill. That is the only thing I want—— Mr. Fort. You have got to guess either way. Mr. KiLcore. Yes; until you get experience in operation. Mr. Fort. Exactly, Doctor. But what I am trying to get at is you say the Crisp bill will fail because of first year’s losses—that is, the first year’s guess; and it is the first year’s guess under the Haugen bill, either way. Now, you are as well posted on this general subject as any man who has appeared before this committee on cotton. Your guess should be as good as the board’s guess, and I am asking you to make it. Mr. KirLcore. M+ operated under the 10-Mr. Fort. It would Haugen bill? Mr. KinLcore. Yes; we can assume that for the purpose of discussion. But, under thie loan bill, if they did sustain a loss they might not operate any more. Mr. Fort. I know you did say that, and I am trying to see whether this loss is going to be big enough in your judgment. Mr. Kincore. I think the chances are it would. Mr. Fort. Then, what do you mean, $20,000,000, $30,000.000, or $40,000,000 it might be? Mr. KiLcore. I would not want to figure the amount. Mr. Fort. I do not think $10,000.000 would stop Congress from appropriating. Mr. KiLGcore. I do not think se. Mr. Fort. 1 do not think $20,000,000 would stop Congress. Mr. Kivcore. But it would not take much of a decline to run costs and losses up to $40,000,000 or $50,000,000. But let me remind you of this: We are talking about cotton where there is a greater possibility of operating under a loan bill. If you take wheat or the tariff-protected products, then we know we are facing tremendous losses. » Mr. Fort. We appreciate your position there. But we are talking about cotton. You are the cotton expert. Mr. KiLgore. May I just state this over—you were not here a bit ago? I stated—and I stated it as the result of my honest thought— that a mere cotton bill that might be effective for cotton and not for other crops would be merely effective temporarily with cotton. Mr. Fort. I agree with you. Mr. KiLcore. Because of the fact that any measure that does not interstabilize between the different agricultural commodities is not going to be permanent. R6160—28—SEKR E. PT 8— 142 AGRICULTURAL RELIEF Mr. Fort. I heard you say that. Mr. KiLcore. Therefore, I would say that in the case of cotton the chances of operation under the loan bill are greater than these others. The losses might not be very great, but then what would such a bill do for the other commodities? Mr. Fort. I am asking you, Doctor, as a cotton expert, as I believe you to be, and I should ask the same questions as to wheat or the same line of questioning to a wheat man—now, then, you might run up $30,000,000, or $40,000,000 or even $50,000,000 as possible loss? Mr. KiLGorE. It is a mere guess, and I am not trying to figure it out; it might. Mr. Fort. If that is the possibility, we are figuring the difference at the same price under either bill. That is the only case in which you think there is that much possibility of loss. If there is that much possible loss under the Crisp bill, there would be that much possible loss under the Haugen bill. If that is true, then what would your equalization fee have to be on cotton? Mr. Kincore. Well, an equalization fee of $5 a bale on an 18,000,000-bale crop would be $90,000,000. Mr. Fort. That 1s a cent a pound? Mr. Kircore. That would be a cent a pound. Mr. Fort. And you figure then that that would be entirely adequate at that price? Mr. KiLcore. I do not know what the board would do. I would not imagine under conditions we have had that they would levy an equalization fee in excess of $5. I would think it would likely be considerably less than that. Mr. Fort. You feel second, that the equalization fee under the Haugen bill will help the cooperative associations? Mr. Kirgore. I think it will help them, not by any compulsion in forcing farmers into cooperative associations, but it will help them because it will make conditions even, and possible for them to go into cooperative associations and get as good prices or better through cooperative associations than the man on the outside gets, and without the disadvantages they have been under in the past, which have tended to offset the advantages of cooperative marketing. Mr. Fort. Do they not now get better prices through the cooperatives than on the outside? Mr. KiLcore. Three of the five years, when we had around a normal production, they got more. But during these two surplus years they have gotten less. And there is where our difficulty has come. Until we run into these surplus years we got along nicely and we had a growth in membership and in volume of business that was very satisfactory. Mr. Fort. Now, are your cooperative associations strong enough % Jinedis this stabilization problem for the Government under either Mr. KiLgore. I think so. I believe they would under the McNary-Haugen bill; just what they would do under the loan bill, I do not venture to say. Mr. Fort. Do you think they are strong enough? You think they are sufficiently representative of the croo to be able to handle it? Mr. KiLcore. I think so. Mr. Fort. At 6 per cent? AGRICULTURAL RELIEF 143 Mr. KiLcore. Yes; I think they can handle it. Mr. Fort. How? By uniting or by handling it in a separate organization? Mr. KiLGore. I do not know just what they would do. I should say they would work together; they would operate together a subsidiary or stabilization corporation, and not have separate organizations. Mr. Fort. Then we get back again to the same kind of a theory that the Crisp ** ' has « ‘he organization of this thing through the cooperatives. Mr. KiLcore. They are both the same. Mr. Fort. And the cooperatives, you think, under the Haugen bill at least have sufficient strength and ability to manage the stabilization? Mr. KiLGoRrE. Yes, sir. Mr. Forr. Generally speaking, the farmers in and out of the cooperatives know what the prices are for cotton on the cotton exchanges, do they not? Mr. KiLcorE. Generally speaking; yes. Mr. Fort. They would get net for their cotton on any given day that they sold it under the equalization bill, if cotton was selling at 18 cents in New Orleans and the equalization fee was a cent a pound, they would pick up the paper the next day and they would see that cotton sold at 18 cents, but they got 17 cents for theirs, would they not? Mr. KiLcore. There would be no difference in what the cooperative and the noncooperative producer got. The equalization fee is to be collected on the transportation or sale, and would be reflected in the price that would be actually paid to the farmers, but it would not necessarily be deducted from a New Orleans price. Mr. Fort. Why not? Mr. KiLGorE. I mean it would be deducted by the buyer or carrier ; the farmer would not pay it directly. Mr. Fort. Say the equalization fee was a cent and cotton was selling in New Orleans to-day at 18 cents and the farmer delivered his cotton to the merchant or transportation company, he would get 17 cents, would he not? Would not that be the situation. whether he was a cooperative mem ber or noncooperative? Mr. KiLGore. They would both be entirely on the same basis. The equalization fee there would probably be collected on the transportation, and it would not show itself in the price any more than the tariff shows itself in the price of goods Mr. Fort. In trying to bring it down to dollars and cents, cotton is selling to-day in New Orleans at 18 cents, for example. N ow, you are a farmer in Louisiana, and you have got a bale of cotton and you are selling that bale to-day to the merchant as actual spot cotton. He will pay you on a 17-cent basis, will he not? Mr. KiLcore. I think you may have that entirely wrong. I think the price that would be paid the farmer would not show the equalization fee any more than the tariff that goes into goods is seen by the man who purchases the goods. It is a part of the price. Mr. Fort. How would it be done then? Mr. KiLGorE. You know how the tariff is tacked onto the price of goods. You do not say 10 cents plus a 10-cent tariff, but you say 20 cents. 144 AGRICULTURAL RELIEF Mr. Fort. Let us get into the mechanics of this operation, doctor. You are going to collect the equalization fee on the transportation or sale, are you not? Mr. KiLcoRrRE. Yes, sir. Mr. Fort. All right. That means when it reaches New Orleans, it having been transported, the fee has already been paid on it, has it not, when the actual cotton reaches there—the fee has been paid before it gets to New Orleans, has it not? Mr. Kircore. That might be part of the transaction at New Orleans. Mr. Fort. So the price in New Orleans will be the price with the fee paid? Mr. KiLcore. New Orleans would be allowing for the fee in the price it would pay, just as the merchant or the cooperative would do. Mr. Fort. The 18-cent price on the New Orleans exchange, therefore, for spot cotton will be the price after the payment of the fee, would it not? Mr. KiLgore. Yes; if the fee is included in the price quoted. Mr. Fort. So that the price the merchant would pay on the same day in the country would be 17 cents. Mr. Kincore. On the other hand, I do not think there need be a particle of difference in the relationship between the merchant’s price and the quoted New Orleans price because of the equalization fee; they might be relatively the same as now. : Mr. Fort. Would there not be an equalization fee in there? Mr. KiLgore. Certainly it would be in there, but it would be something you would not see. Mr. Fort. Why would it be something you would not see? Is the merchant going to pay 18 cents to the farmer if the price is 18 cents for cotton on the cotton exchange? Is he going to give the farmer 18 cents, and then pay the 1 cent fee out of his own pocket? Mr. KiLcore. He is going to count it with the price he has paid, in establishing his selling price. Of course, the farmer’s price will have the fee taken into consideration. : Mr. Fort. It will be 17 cents if the fee is 1 cent, will it not? Mr. KimLgore. I do not think necessarily so. For example, the basis of New Orleans quotations might not include the fee. Mr. WiLniams. Mr. Fort, would not the fee be just the same as transportation charges? Mr. Fort. It would come out. That is the point I am trying to get at. But if the New Orleans Cotton Exchange price is 18 cents and the equalization fee is a cent and the transportation is one-tenth of a cent a pound, what is the merchant going to pay the farmer that day? Mr. Cuarke. Why do you not answer the question. Mr. Kilgore, and be frank? Mr. KiLcore. I do not know whether I just follow the question as stated—whether I ought to make that admission or not. But I am perfectly willing for Mr. Fort to ask his question and follow his line through. Mr. Fort. Let us assume these points, Doctor: The equilization fee is 1 cent. Mr. KiLcore. Yes. Mr. Fort. The transportation charges are one-half cent. * That is a cent and a half, is it not? AGRICULTURAL RELIEF 145 Mr. KiLGorE. Yes, sir. Mr. Fort. Now, then, the New Orleans Cotton Exchange price for spot cotton to-day is 18 cents. What will the merchant who buys the cotton from the farmer pay him to-day in cents? Mr. KiLGore. I am not sure that I am right clear on the New Orleans quotation, Mr. Fort. You would be right if the New Orleans quotation included the fee. Mr. Fort. Put it your own way. When the price in New Orleans is 18 cents for spot cotton, and your equalization fee— - Mr. KiLGore. I reckon you are right; it depends on how the New Orleans quotations are based. Mr. Forr (continuing). How much is the farmer going to get? Mr. Kivcore. I reckon you are right. Mr. Fort. He is going to get the price less the equalization fee? Mr. KiLcore. I am not trying to avoid you question. Mr. Fort. He is going to get 16 or 1614 cents. Now, that is where you think he is going to feel the equalization fee, is it not? Mr. KiLcore. Yes, sir. Mr. Fort. Do you think that is going to make for friendly feeling between the merchants and the form -~re Mr. KiLgore. I think it will dene... handled. Mr. WiLLiams. The farmer does not fall out because he has to pay freight on the stuff to market. Mr. KiLcore. No. Mr. WiLLiams. I do not want to interrupt your line of questioning. Of course, this fee will be paid, but it will be paid just like transportation and the other charges, and the terminal market price will be less all these other charges. So it will not change the present marketing conditions a particle. Mr. Fort. I appreciate that, and I was trying to get the doctor to say it. To get back where we were a minute or two ago, we were figuring on a stabilized price under either bill? Mr. KiLcorEe. Yes, sir. Mr. ForT (continuing). At approximate production cost to the average producer, and we have assumed that that average production cost is 17 cents, we will say. Then on the sample transaction we have been using, putting the equalization fee at one cent and one-half cent cost of transportation, and so much for storage, handling, and profit to the merchant. On 17-cent stabilization under the Haugen bill plan, the farmer is going to get 1514 cents net, is he not, the first year? Mr. KiLgore. The freight and those items are carried in the prices of cotton now. Mr. Fort. I appreciate that. I am bringing it down to cents and nothing else. He is going to get 1514 cents on 17-cent price the first year. Mr. KiLcore. I do not see any use of bringing freight and those things into a consideration of this kind, because it is there now. Mr. Fort. Well, we will say—— Mr. KiLgore. It would not be any different. Mr. Fort. Now, he would be getting 1614 cents; and then he would zet 1514, just the difference of 1 cent, plus perhaps some accounting very much on the way it is 146 AGRICULTURAL RELIEF charges the merchant would have to add to the fee for equalization. Now, under the Crisp bill plan, if they stabilize at this same 17-cent price the first year, the farmer is going to get 1614 cents instead of 1514 cents? Mr. KiLcore. Yes. Mr. Fort. Do you think the difference between their getting 1514 cents and 1614 cents will stop production—hold down production? Mr. KiLcorE. I do not think that will hold down production just in itself, without other.factors that come in there, and which I want to discuss. Mr. Fort. Then, if it will not operate for that purpose, then the only difference in your equalization fee proposal the first year is that the farmer gets a cent a pound less the first year under the equalization fee bill than he would under the Crisp bill? Mr. KiLcore. Yes, under the terms of your illustration. Mr. Fort. But you feel that the proposal is permanent under the equalization fee and might fall down the second year under the—— Mr. KiLgore. I think it might. Mr. Fort (continuing). Because of the fact that under either bill. the board might operate to take substantial losses? Mr. KiLcore. Under the equalization fee; yes. Mr. Fort. It will only take substantial losses if the economic value of cotton is less than the price at which they stabilize, will it not? Mr. KiLcore. Except for carrying charges, yes. Mr. Fort. And that economic value of cotton has got to be less than the price they stabilize for quite a few years before they will take any losses, is it not? Mr. KiLcore. It is pretty hard for me to follow you, just what you are driving at. Mr. Fort. It is a simple question. Mr. WirLiams. He wants you to make his case for him, Doctor. [Laughter.] Mr. KirLcore. I just wanted to ask him if that was the final question he had. Mr. Fort. I do not want to keep you all day, Doctor. You and I could argue over this problem for several weeks. But I am. going to: stop there, if you want to. Mr. KinGore. That is just as you like. But you raised the question a bit ago that if there were a considerable loss—I do not remember just the figure you had in mind—possibly $50,000,000—-in: the operation of cotton, that Congress would not hesitate to make a reappropriation to take care of that loss under a loan bill. Was that my understanding of your thought there? Mr. Fort. I do not know that I said at $50,000,000. But I personally think that if the plan works, if any plan works to produce the desired result with assistance to the farmers. that Congress will not stop there. Mr. KiLcore. I am wondering if in the loan bills you would go far enough to say that they would absorb losses in case they were incurred, or that if you did not want to put it that way that automatically the revolving fund would be kept up to the amount designated in the bill, $300,000,000 or $400,000,000. Mr. Fort. The loans bill do say that the Government absorbs the loss to the extent exactly as in the Haugen bill, that it charges the osses against profits of future operations. AGRICULTURAL RELIEF 117 Mr. KiLGore. In case there are future operations. Mr. Fort. It says that specifically. Mr. KILGORE. Suppose you do not have profits in future operations? Mr. Fort. I would say under either bill if it did not produce profits in any year’s operations, the plan will not last. It is economically unsound either way, if it does not operate at a profit sometimes. Mr. KiLGoreg. I think that is precisely the weakness of the loan bills. If they are operated at a loss, then they would be merely temporary measures, and with the tariff-protected products there would be certain losses, and they would be almost surely temporary measures, while with the equalization fee there to take care of any losses, to insure the permanency of the revolving fund, that that would be a permanent measure. I think there is a big difference. Mr. Fort. Because you think the equalization fee proposal is an operation in contemplation of permanently recurring losses? Mr. Kingore. I think it would be there to insure that sort of operation; it would insure permanency in the bill and continue its operation. Mr. Fort. But, in operation, to incur permanently recurring losses? ar KiLGore. If they occurred, ability would be there to meet them. Mr. Fort. If they are not recurring annually, if there are years of profit, either plan would work equally well, would it not? Mr. KiLGore. Yes; if there were any provision in the loan bills to meet carrying charges. But we do not believe that will be so: in fact, we know—— Mr. Forr. I think there is the point, Doctor, where you and I have the greatest difference of opinion. I do not believe that you can work any plan in permanent anticipation of losses and ultimately expect to work a profit out for anybody. Mr. KiLGoRE (continuing). What I mean to say is that if the farmer, because of the payment of the equalization fee was able to get a better price for his entire production, then he would be willing to sustain losses on his surplus if necessary. Mr. Fort. Eventually, the equalization fee would use up the profits? Mr. KiLGore. I wonder if we would agree on this: We say we have agreed to disagree on the other—that under the MceNary-Haugen bill with the equalization fee, because it would take care of any losses, that there would likely be a stabilization of the price at a higher level than there would be under the loan bill? Mr. Fort. No; I do not think we do agree on that, not if the Haugen bill is going to be operated intelligently. Mr. KiLcore. I think there would be a stabilization of prices under the McNary-Haugen bill, with the equilization fee, at a higher level than would be possible under the mere loan bills, because you would have a fund there that the growers would pay to absorb the losses, and for that reason they would stabilize at a higher price. Mr. Fort. Then, Doctor, I asked you the other day, I want to come back to it again: If you think they are going to stabilize at a higher price under the Haugen bill, what happens to the argument that the equilization fee will check production? $48 AGRICULTURAL RELIEF Mr. KiLgore. Precisely—— Mr. Fort. What happens to it? Mr. KiLGorE. Precisely this way: With the loan bill you would have the possible price on the crop that is going to be produced next year as the deterrent on production. Let us grant we have operated one year. We have a surplus on hand. The farmer does not own that surplus. The deterrent there would be the lower price that he would get if he went on and produced a larger crop next year under the loan bill. That would be the one deterrent—the loss on a bigger crop if he produced it. With the equalization fee he would have that same possible loss on the larger crop that he produces; he would have a loss on the surplus that was taken out of the previous crop and which he owns, because of having bought it through his equalization fee or guaranteed any losses through his equalization fee—he would have that additional deterrent—and then he would have the possibility of another and larger equalization fee. So under the loan bill you would have one deterrent on production; under the equalization fee you would have three deterrents on production. Let me follow this just a little bit further. It was stated here the other day by a member of the committee that the experience in his section, where piece-meal work was given out at a higher price to speed up production during the war, that it did not result in increased production or increased hours. But the increase in the price that they got for labor caused the laborers to work fewer days or hours. By the increased price or lifting up of the price of their labor they got sufficient for taking care of their standards of living by that elevated price. Now and then in the South we run up with this matter in this way. When we get a low price we will have to plant more cotton— in order to get sufficient money to take care of a standard of living. A few years ago—not very far back—laborers worked 12 hours a day. When they were paid more per hour they reduced their hours down to 10. Then to 8, as the Government in the case of railroad labor did. Labor got more per hour and as a whole when it came down to 10 hours and then to 8 hours, than it did for 12 hours. Labor does not work more hours with higher prices. Some think now, and some industries think that labor ought to work 6 hours a day so that they will have enough to take care of their standards of living and not produce too much. The thought I am coming to is just this. With the higher prices for labor, the stabilization of labor at increased prices takes care of their needs for a living standard. They have not gone on ‘and increased their hours of labor and their production. because they got higher prices. Let me apply this here in two other thoughts: In 1913, 1914, and 1915, just before the war, the average production of wheat was 893,000,000 bushels. It brought an average of 90 cents. During the five years just following—1916, 1917, 1918, 1919, and 1920—wheat brought $1.84, or twice as much as it did in the three previous years. The average production was 779,000,000 bushels, or a hundred mil-Hon Bustuls less under the higher price than it was under the low AGRICULTURAL RELIEF Mr. Fort. The same thing is not true of acreage, which is the test of production, not the yield. Mr. KiLcore. I will come to that in just a minute. In the five years just following the war, the price of wheat went down and there was a production in round numbers of 800,000,000 bushels of wheat. In other words, we have two cases where a lower price brought higher production than a bigger price. There is something in the matter of stabilizing a price sufficiently high to give a reasonable standard of living. The more nearly you stabilize a price up to a cost that will give people a reasonably standard of living, the less tendency there is going to be on their part to go ahead and over produce. I think that is economical; it is practical. It has operated in labor. In a measure we know that acreage follows price. Then, if we want to put it in a Jogical statement, we would have to say that a high price is followed by increased acreage; a low price by a decreased acreage. Then a stabilized price would be followed by stabilized acreage. That is not unreasonable and it is right in line with what has happened with labor; it has reduced its hours as its pay has increased. It has gotten enough with fewer hours of labor to take care of its standard of living. I think stabilization under the MecNary-Haugen bill would be at a higher level than under the loan bills, with a producers’ guarantee to take care of any loss on the surplus. And with such higher price stabilization as would give the producers enough to take care of a reasonable standard of living, there would not be the tendency to overproduce that there is in wide savings in prices or with prices stabilized at lower levels. Mr. Fort. In other words, you and I agree, Doctor, that stabilization is the cure. I have not any quarrel with you on that. Mr. KiLcorE. Yes. Mr. Fort. What I want to ask you is this—-Mr. KiLcore. Let me state just this thought, so as to finish ny thought on that: That under the McNary-Haugen bill, from my analysis of it, there would be a stabilization at a higher level than there would be under the loan bills, for the reasons I have already given. There would be an equalization fee there to protect it, and with that stabilization up where it would give the producers of wheat, cotton, tobacco, peanuts, corn, and all those products sufficient returns for a reasonable standard of living. There would not be the incentive to overproduce in order to get enouch to take care of that standard of living. Mr. Fort. Doctor, I agree with vou entirely on stabilization. I think you will agree with me on one other thing, that stabilization implies some control at both ends of the price; in other words, that vour whole plan will be upset by too high a price as well as too low. Mr. Kincorg. I think so. We think that has got to be felt out and that is experience the board has got to get. Mr. Fort. Thdt would be the board’s business, in your judgment, to carry some of the commodity with a view of preventing a rise In price in a subsequent year, would it not? Mr. KiLcore. A surplus would be carried as long as necessary. Mr. Fort. It would be used to hold prices down? Se. KirLcore. It would have that effect when sold back in the market. 149 450 . AGRICULTURAL RELIEF Mr. Fort. Do you find anything in the Haugen bill that contemplates that use of it? Mr. Kircore. I think the use of the surplus there in holding down the price; that is, putting it back on the market at a price so as to keep it within reasonable levels, would operate around the same way, perhaps exactly the same way, under the two bills, the loan bill and the McNary-Haugen bill, with this exception: That you would have the ownership of the surplus in the hands of the grower under the MecNary-Haugen plan, and therefore it would be a greater deterrent on production than you would under the loan bill, where there was no such ownership. Mr. Fort. Do you feel, Doctor, however, even though he knows the surplus has been held for him at a hundred cents on the dollar— that price less an equilization fee; do you think he will feel—the average farmer out in your country, back in the hills of Mississippi, Arkansas, or South Carolina is going to feel that he owns three bales of the surplus? Mr. KiLcore. I think so, sir. Mr. Fort. You do? | Mr. Kincore. I think the farmer is the only man who has an interest—— Mr. Fort. I did not say that. Do you think he is going to feel he owns it after he delivers it? 5 My Krmncore. I think with proper information that will go out, e will. Mr. Fort. I have some faith in a lot of farmers, but I have ny doubts as to their knowing that, after they have sold. Mr. KiLcorg. I think they will know it; that the cooperatives, subsidiaries, or stabilization corporations handling the surplus are going to let the growers know they own it and that if they produce another big crop they will have the loss on the present crop, and the surplus both. Mr. Kercram. If I got your statement correctly, you said this, that you thought that the surplus that we carry over from one year to the next might be used possibly to keep the price down in the succeeding year. That was what you stated, was it not? Mr. KiLGcoRE. Yes. Mr. Kercaam. I am wondering if you have ever thought this thing through: With the tremendous share of our population on the other side, interested in a low price rather than a high price, have you ever thought of the danger of this being a sort of a sword that would cut the other way, and that it might be used by the people on the other side who are interested from the consumers’ standpoint on stabilizing the price at a lower level than stabilizing the price at a higher level? Mr. KiLeore. I take it this board is going to operate fairly toward the consumer, and yet it is going to operate reasonably in the interest of the producers, and that that will be used to stabilize the price as high up as necessary to give the producer a satisfactory return. a fair price. Mr. Kercaam. Do you not see this danger: For instance, if you 20 out to the farmers and say, “Now, gentlemen, we are asking you by make this sonirihgon for the purpose of stabilizing this price.” the sural pose, > ter those men have made their contributions, that plus would be carried over and all these penalties imposed for AGRICULTURAL RELIEF 451 higher production, and then this board should actually stabilize the price downward in line with the suggestion a little awhile ago, do you think that would suit the folks very well who had made a contribution? In other words, they are interested in stabilization, that they want stabilization up; they do not want any stabilization downwards when they are going to be assessed for it. Mr. KiLgore. I do not think it could be any worse than it has been. Any stabilization would be better than the ruinous conditions that have existed in the past, and this board would stabilize the price so that it would be on the average better than it has been, so we would get a fair and reasonable price. I think it could be worked out. Mr. Kercuam. The danger as I see it, Doctor Kilgore, is setting up a Government instrumentality that is supposed to act for the farmers in stabilizing the price upwards, whereas the popular view would naturally be interested in something very much on the other side of the proposition. Mr. KiLcore. I can appreciate that. Mr. KercHaM. There is no control over the appointment of the board. Is it not pretty fair to presume that by and by the consumers will awake to the possibilities and say ‘that is a thing that works one way; let us get around and work it on the other side’ ? Mr. KiLcore. But you remember that a representative of labor has appeared before this committee and has expressed the attitude of labor as in favor of giving the farmer a fair price. Mr. Fort. That is before they have paid out. I want to make in that connection the only personal statement I have asked the privilege of making in this record for some time: That I personally am entirely in sympathy with the aspirations of the farmer for a higher price average on his commodities; that I have believed, and do believe, that in many cases commodities are selling below where they should sell; and that I have so stated to my constituents, who are purely consumers, and have told them that I expected to support in Congress—repeatedly told them—Ilegislation that I believe will increase the cost of living. And I have yet to have a protest from any consumer against the occurrence of an enhanced price of commodities if that price is necessary to produce a fair living to the American farmer, and if that price be not made greater by speculative or other manipulations that do not go to the benefit of the American farmer. My opposition to the McNary-Haugen type of legislation, which I believe to be approved by my constituents, is that I do not believe that the full benefits, or any substantial part of the benefit of any price enhancement, will be translated into the pockets of the farmer under that type of legislation; that I do not believe it to be constitutional, and therefore I am certain that in the second year, which is the one that Doctor Kilgore is worrying over, the whole machinery will fall apart through the intervention of the courts, and leave established an organization carrying a large part of the surplus, which would have to be dumped to the wrecking of the market of the farmer in the succeeding year. Therefore, since I can not see that the plan will benefit the farmer, and that such increases as it produces will only result in penalizing the consumer in the first year, with ultimate Jlfmage to the farmer, I can not vote for any such type of legisation. 152 AGRICULTURAL RELIEF The CuairMaN. The aim of the equalization plan} is to equalize the price of the commodity, is it not? Mr. KILGORE. Yes. The CuarrMAN. That whatever the loss under the equalization plan would be compensated by the average price. Suppose a million bales are taken off the market under the two plans. That would be $180,000,000. Under the equalization plan, the equalization fee would be assessed upon the producers; and under the other plan it would have to come out of the Treasury. So it is just a question whether the Treasury has to pay the loss or the producers are to pay their proportionate share of the loss. If you stabilize the price as you say or advance the price, say, 214 cents, the profit would be $12.50, or 214 cents a pound. That would be the gain. While some might go up to 17 cents, the average price would only be 15 cents. They would receive the average price. Under the other plan $180,000,000 would be taken out of the Treasury and it is gone. True, some would get a higher price while on the high level. Mr. ANDRESEN. At this time, as long as we are going to have a hearing to-morrow, I would like to ask unanimous consent that Mr. Sydney Anderson be permitted to go on Monday morning. (Thereupon, informal discussion took place.) The CHAIRMAN. Without objection, Mr. Sydney Anderson will follow Judge Caverno. The committee will now stand at recess until to-morrow morning at 10 o’clock. (Thereupon, at 12 o’clock m., the committee adjourned to meet to-morrow. Friday, February 17, 1928, at 10 o’clock a. m.) A APA SA Strap ms House oF REPRESENTATIVES, COMMITTEE ON AGRICULTURE, Friday, February 17, 1928. The committee met at 10 o’clock a. m., Hon. Gilbert N. Haugen (chairman) presiding. The CrairMAN. The committee will kindly come to order. On yesterday I stated we received a letter from the grain exchange committee. On looking over the letter, I see that it is submitted on behalf of a number of grain exchanges. It has been requested that this letter be read to the committee and without objection, the clerk will read it. (The clerk read as follows?) FEBRUARY 16. 1928. Hon. GiLBErT N., HAUGEN, Chairman Committee on Agriculture, Washington, D. C. My Dear Sir: It is the understanding of the grain exchange committee, representing the grain exchanges of the United States listed below, that the Agricultural Committee of Congress is now discussing various types of bills for the relief of the farmers. . The committee feels that the grain exchanges whom it represents are sincerely and urgently desirous of bettering the farmers’ condition by means of every practicable action, as we realize the dependence of the grain trade upon the prosperity of the farmer. This committee is, therefore, more than willing to cooperate in the enactment of any measure which will untilmatelv result in bettering the condition of agricultural producers. AGRICULTURAL RELIEF 453 It is the belief of the grain trade that no one legislative measure will completely remedy the situation which exists to-day in agriculture. It is our belief, however, that a program of diversification of crops would greatly aid the farmer in his difficulties and that this could be helped by proper tariff protection on these agricultural commodities which we now import into this country, thereby permitting a reduction of acreage on grains which are producing a surplus. The grain exchanges have also gone on record as opposing any further reclamation schemes, the object of which is to accomplish an extension of agricultural area, and we believe that aggressive opposition to such projects on the part of your committee would be effective aid to agriculture. The condition of the farmer has improved to some extent recently and the grain trade feels that this is a matter on which the farmer should be highly complimented, noting the fact that the improvement has largely been due to his own intelligent efforts in crop diversification and more efficient production. We believe that the continuation of such efforts, combined with the remedies suggested above, constitute logical and effective means of ultimate improvement. The exchanges wish to go on record against any of the type of revolving fund bills now before your committee, believing that such legislation would aggravate present difficulties by increasing production and that they would, in the long run, prove to be detrimental to the farmer. The exchanges further wish to protest against any tvpe of legislation that places the Government, either directly or indirectly, in the grain business. ... The grain trade will be very glad to jhave representative and well-posted members appear before your body and elaborate our views fully, if you so desire. May we close with a renewal of our expression of urgent interest in the agricultural problems and the offer of our service in helping to find an intelligent solution? Repsectfully submitted. Grain ExcHANGE COMMITTEE, ~. W. LonspaALE, Chairman. SieBEL C. Harris, Secretary. (Submitted on behalf of Minneapolis Chamber of Commerce, Kansas City Board of Trade, Omaha Grain Exchange, St. Louis Merchants Exchange, Buffalo Corn Exchange, Milwaukee Chamber of Commerce, Toledo Produce Exchange, New York Produce Exchange, Baltimore Chamber of Commerce. Boston Grain and Flour Exchange, and Duluth Board of Trade.) Mr. KincuELoE. Mr. Chairman, I have to attend another committee this morning, but before I leave I should like to know whether it is contemplated to close the hearings to-day on this farm legislation. Mr. ANprESEN. Mr. Kincheloe, I am about to make a motion, if you will withhold your request for a moment. Mr. KincHELOE. I have nothing to withhold. I am just asking for information. I should like to know before I leave whether the hearings on this farm legislation will be closed to-day. Mr. ANDRESEN. Mr. Chairman, last Tuesday I stated that I was going to make a motion to-day to terminate these hearings. Before making that motion I wish to inquire of the chairman if the various farm organizations that have appeared here before our committee haye advised that they have reached an agreement on farm legisation. The Cuairman. No; that is, if you are speaking of understand that all of them have agreed except the Mr. ANDRESEN (interposing). Except the grange? The CrAIRMAN. Yes. Mr. ANpRESEN. Then, Mr. Chairman, I wish to move at this time that the committee conclude its hearings on Tuesday, February 21, at noon, and go into executive session for the purpose of considering farm legislation, on Thursday morning, the 23d of February. (After informal discussion.) Mr. ANDRESEN. In view of the fact that there are several witnesses. as well as Members of Coneress. who desire to be heard on 154 AGRICULTURAL RELIEF the subject of farm legislation, I will withdraw my motion at this time and will renew it on Tuesday, February 21, in an effort to fix a definite date for closing of the hearings. The CualRMAN. We will hear Mr. Caverno. STATEMENT OF XENOPHON CAVERNO, REPRESENTING THE MISSOURI COTTON GROWERS’ COOPERATIVE ASSOCIATION Mr. CaveErNo. My name is Xenophon Caverno. I live on a farm in southeast Missouri, in that narrow belt where cotton, corn, wheat, and livestock overlap. Before telling you the organizations that I represent, I want to tell you, before Doctor Aswell asks me, that I represent nobody except myself. Mr. AswerL. I am glad that you said that. Mr. Caverno. Now, having told you that, I will give you my high-sounding titles. I am president of the Missouri Cotton Growers’ Cooperative Association. 1 have all the honors of a president without any of the emoluments. Our cotton counties in Missouri border on Arkansas and we market through the Arkansas Association. Mr. AsweLL. How much cotton do you grow in a year? Mr. Caverno. How much do I grow? Mr. AsweLL. How much is grown in that area? Mr. CaveErNo. Gentlemen, I want to answer the questions that 1 can answer best. The doctor has in his office the statistics of every cotton county in the United States. I do not carry around figures in my head. It will not do much good to ask me about figures. I want to answer those questions or bring up those things which out of my experience may be of some benefit to you. As a president of the Missouri Cotton Growers’ Cooperative Association I am also a member of the executive committee of the American Cotton Growers’ Exchange, and for five years I have sat there with a business man’s training and a farmer’s experience and watched those men struggle to meet the situation with which they are confronted. I have every reason for favoring coopera tive marketing or the efforts of my colleagues in that venture. I have sat there with a critical mind, as critical as you men would have, and I would hate to read to you some of the things that I have in my files at home, or some which I have in this brief case. I am afraid they would be misused in regard to my opinions on the success or failure of cooperative marketing. But I want to tell you that no man can be more critical of them than I have been, and I have had no responsibility ; they have carried the burden and I have had none. I have not had to make good to anybody. I have just been in a position to criticize and I have been as critical as you men would be. I was appointed a member of the executive committee of the North Central States agricultural conference at Des Moines. of which Mr. George Peek was chairman. So that I have had the contacts with all the cotton associations and practically all of the corn associations. Now, with that highsounding set of titles, I want to tell you. that. {represent nobedy:but miyselfiiorsa ots o1odd duds ost odd Yo weiv al vazananA 14 ito basod ad 01 atienh odw sza1oa0’) to sada fl oa law 2a 2oses0 AGRICULTURAL RELIEF 455 I want to say this, that I approach this whole matter in the spirit of the man who woke up in the night and heard a burglar in the house. He said, “What do you want?” The burglar said, “Money.” He said, “Well, just wait a minute. If there is any in the house, would just like to help find it.” I will be perfectly frank and tell you that I believe that the equalization fee is the most practical, almost the essential thing to solve this problem, as I see it, but I want to tell you what my experience has been and why I see it that way, and that is all. Heaven knows that a controversial proposition like that we want to get away from, if we can. I want to say that the most searching criticism of the equalization fee that I have heard has not occurred in this room. It has occurred in the conferences of the farmers’ associations themselves. Twenty years ago I was in partnership with the late Senator McKinley in a public-service corporation in Illinois. I sold out my interest at that time and I took my ill-gotten gains and invested them in three things—a daily newspaper, a manufacturing plant in which 1 was previously interested, and a tract of swamp land in southeast Missouri. This brought me this experience for a good many years. I oscillated from my office in New York back to my prosperous manufacturing city in the State of Illinois, and then to my timber patch in southeast Missouri. I worked in that swamp land, with the original timber standing on it, for 10 years. I went through the kind of pioneering which Senator Reed thinks we are going through now, every man being an individual and able to take care of himself. Ilived in 10 years down there what the Nation has gone through in 150 years. I started in logging with cattle and kept a pack of coon hounds. I watched that place grow out of the swamp. 1 was able to meet the situation. I went down there and gloried in the hardships of pioneering and I cleared the land. I remember coming in one day and saying to my folks, “I do not know who will own this land 1,000 years from now, but I cleared it.” I took some pride in having made a scar on the face of the earth that would last, and it gave me some sense of accomplishment. It was only when I got up to the point where I began to raise farm crops and market them after my experience in the business world, that my sense of manhood was violated, and I felt as much strangled by forces over which I had no control as the men in that famous statue Liaocoon—the snakes were all around me, and I could not get away from them. : I want to talk to you about the practical working of the Haugen bill. I will say this: I will turn in for any bill—and I know what it means to support a bill of this kind which is as liable as it is to a veto—I will go as far as any human in making modifications that will leave anything for the farmer. I do not want to say right now what bill T was for. It was either Mr. Kincheloe or else Mr. Kincheloe told-tha story, of someoCongressman:whoshegard hie constituents. had ehanged: their’ opinioniand hesseid, ‘{Theylican fot lehangd any Tqstd? than Baan oiAnd J milikals Gongrbsoman ind thed. ds) to 2uidauye I 456 AGRICULTURAL RELIEF Mr. AswiLL. Are you willing to change your views about the equalization fee? Mr. CaveERrNO. Yes, sir; if I can find something that will do the work. Mr. AsweLL. Do you think that the equalization fee is likely to become a law if it is passed? Mor. Caverno. I do not know, Doctor. I will take that up a little later, if I have the time. Mr. WiLLiams. Something was said by Chester Gray in his testimony to the effect that they had in mind offering some amendments with reference to the equalization fee that he thought would meet the objections of the President. Mr. Caverno. If you will allow me, I will take that up a little later on. Mr. WirLiams. I have been listening and hoping that that matter would be presented before the close of the hearings because I think that is probably the most important thing that should be discussed before the committee. Mr. CaverNo. I have just a few minutes for the laying of an economic foundation here and then I will talk on the practical workings of this type of legislation, as I see it, and the practical workings of other types of legislation, and make a comparison. I may be wrong, but I have got a pretty definite machinery in mind. I am an engineer, and I have got to make a blue print—I make a blue print of a business system. I make a blue print of everything I have to figure out. It has got to be on paper, and in all this discussion when people have talked pro and con, I have tried to work it into a practical working machine. It seems to me that the group or the commodity has now become the unit in civilization; that up to this time the problem of civilization has been the adjustment between human beings. But we have grown up into groups now so that the problem of civilization is the adjustment between groups and commodities. : As an illustration of that, I raise wheat, but my bushel of wheat does not reflect me at all. It is absorbed. My versonality does not come Into it. ~ Let me illustrate that. I have down here as a memorandum, “Interstate origin; price graphs, pushball.” Now, where does that come in? The trouble with the farmers to-day is that they are meeting a system of marketing organized under interstate commerce, not only our interstate commerce law. but an interstate commerce system. When I came away from here, I left some wheat in my bin and some corn in my crib. If I had made a graph of the prices on the grain-room wall, it would have been going up and down, and I have had no part in it. I can not have any part in it. Those prices are fixed without my effort and without the effort of any farmer. Everybody knows that every motion is a resultant of its component parts, and that is where the pushball comes in. A pushball goes just where the strongest pressure is. It makes a path across the ground according to who is strongest on both sides. 0 In the making of that graph on my grain-room wall, that represents e price of my wheat in the bin. I have no part in it. Nobody is pushing on that ball to make that graph run on a higher plane. AGRICULTURAL RELIEF Mr. Fort. Will you permit a question there? I am interested in your suggestion. Mr. CAvERNO. Yes, sir. Mr. Fort. If you were to sell the wheat that you have in your bin, it would have a part in determining the price, would it not? Mr. CaveErno. When I sell my wheat, I have no part in fixing the rice. P Mr. Fort. You have a part to the extent of determining, since you are able to carry it, when it shall be sold. Mr. CaAvERNO. Yes, sir. Mr. Fort. And therefor you have that much to say about the price, have you not? Mr. Caverno. There are always enough farmers who have not any say to put enough of the crop on the market so that mine is immaterial. Mr. Fort. May I just finish my line of questioning, since that thought has been brought up? Your wheat is withheld and the withholding of such other wheat as is withheld affects the price, does it not? Mr. Caverno. It has a certain effect on the price, but it is an effect in which my effort has no part. Mr. Fort. Your effort to withhold it has a part. Mr. Caverno. I can not make any conscious effort in that. I am not willing to admit that the law of supply and demand—and I will take that up a little later—dictates a price in which favor to the farmer or the necessities of the case are a component factor. Mr. Fort. Not a complete factor, I agree with you. Mr. Caverno. Not a component factor, as I see it, because, Mr. Fort, I have got grain, I have got cotton, and I have got the livestock and I am helpless. Mr. Fort. But if you all withheld, it would have an effect on the price, would it not? Mr. Cavervo. If all men were working with a unit purpose; yes. But nothing has been more definitely settled than that. Mr. Yoakum made the statement that 80 per cent of a commodity would control the price, but they have organized tobacco to the extent of 80 per cent—one of those cooperatives—and their morale was shaken by the fact that their neighbors stood around on the side lines and Jingled their money in their pockets while they were carrying the load. I realize how perilous it 1s to read anything to the committee. I know how easily they go to sleep, but I want to state that—— Mr. AsweLL. Have: you ever seen anybody in this committee asleep? I want to put that into the record. Mr. Caverno. Doctor, you are just the one man I did not want to get into a fight with. I like to meet Doctor Aswell in his office, instead of on the committee. Mr. AsweLL. Before you start reading your statement, you have raised a question in my mind. You talked a good deal about having been such a loyal Republican. Are you still a good, loyal Republican? Mr. Caverno. I knew I was going to meet that, Doctor. I will take that up after I read this statement. Mr. AsweLL. You said that you had been, but you did not say how you stand now. 86160—28——8ER E. PT 6—— 157 458 AGRICULTURAL RELIEF Mr. Caverno. I will tell you a story about that. I graduated from the University of Wisconsin in 1890, and when we get out of college we write down our opinions. I had forgotten all about that. In 10 years I went back there and I found that I had written this: I am a Republican and a Congregationalist subject to change in the next world. Mr. AsweLL. In the next world? Mr. CaverNo. Subject to change in the next world. It shows originally I was a pretty hidebound Republican. One can not live in the South and meet their problems without having his party allegiance jarred at least, and I want to say that almost any man on this committee, if he had been born and brought up in the South, would have been a Democrat. “Some one has said that no question can be argued to a correct an final conclusion without beginning with an agreement on a theory of the universe. 1 do not wish to go quite so far back as that to reach common ground with this committee in presenting the conclusions I have drawn from a long and intimate study of the problems involved in so-called “farm relief legislation.” I am forced by my own mind to begin with this thesis, that the characteristic feature of our present civilization and its problems as distinguished from all preceding civilization lies in the understanding, manipulation, and use of natural forces—physics, chemistry, engineering—but that in the very conquest of these forces man has created other forces—social and economic—more intricate, more powerful, more dominant in the welfare of our people and our Nation. The supreme problem of to-day is the understanding, manipulation, and use of these social and economic forces, what I should call the chemistry of human relationships. [Let me put this into the simplest language possible. Some years ago my small daughter said to me, “Papa, what is there left for man to discover and invent? He has explored all of the earth, and has invented railroads and steamships, telegraph, telephones, submarines, automobiles, airships, and radios. What is there left for him to do that can create such wonderful changes?” A man does not like to be put to confusion by a child, especially his own. The best I could do was to say: “Perhaps he will learn to use these things wisely.” I thought at the time that perhaps I was making a lame “getaway’’ from an embarassing situation, but the longer 1 have thought of that answer, the more respect I have had for myself. I am addressing a subdivision of a political body, a lineal descendant of the First Congress. I am also addressing a committee of the board of directors of the greatest business corporation. the greatest economic force, the world has ever known. You have not willed this, no Congress has willed this. You may sven deny the allegation. but the facts and the figures are against you. For the first 100 years the issues in American politics were largely theoretical and political, concerned with the rights of man as against the power of kings and potentates. Economic forces were at play in our political structure, but in no case did they threaten popular sovereignty except perhaps in the issue of slavery, and in this, the economic issue was cloaked under a political doctrine. “We fight AGRICULTURAL RELIEF 159 for a constitutional principle.” We were in an expanding era, and before every family lay the opportunity to go out into a free world of unlimited opportunity. Pioneering and freedom have their spiritual rewards that make poverty and privation not only tolerable, but attractive. To-day we are in a contracting era and children are born into an owned and controlled world. It was in my boyhood that Commodore Vanderbilt made his famous challenge, “The public be damned.” He did this from behind a corporation breastworks, created and designed and erected under permit of this same damned public. Slowly and reluctantly the people gathered and accepted the challenge. I saw the Constitution rocked to its foundations as the interstate commerce law and the antitrust law were forged to insure popular sovereignty, to establish the fact that the Government of the people was greater than any power or agency which might be created under its jurisdiction. I am not charging sinister motives in all of this growth of industrial power. The conquests of American capitalism constitute one of the most admirable and wonderful chapters in human history. But the ability of certain individuals to juggle such wonderful results from coal and oil and iron or steel, and even from whiskey and aluminum does not constitute a valid claim to such power over the life, liberty, and happiness of millions of supposedly sovereign citizens. Mere size is not in itself objectionable, but it carries with it destructive and oppressive possibilities which demand a regulating power. Slowly and inevitably, in order to maintain sovereignty over the social and economic forces created under its protection, Congress has been forced against its will and the traditions and the desires of our people to establish a multitude of executive boards not only for regulation, but also for adjustment and finally assistance. It is a far hark back from the original interstate commerce law to the Esch-Cummins law, from the original Federal reserve law to the McFadden branch banking law, from the original designs of the Federal Trade Commission to its present functions. I believe Mr. Kincheloe said that there were 96 of these boards, which means that there were at least 96 groups in the Nation powerful enough to need regulation or demand assistance. Both the groups and the boards represent organized power which means that there are at least 192 varieties of forces organized and recognized by this Government with which the unorganized third of our people, living on or farms, have to make their adjustments. You may wish to abolish boards rather than create them, but you will not do it and the farmers have a right to demand and do demand that you create one more board for them, as powerful as their need demands, as helpful to them as they themselves are helpful to our ation. We are not asking for a political remedy. Steadily and stealthily the real power of government has been transferred from the political to the economic world, and in this supergovernment the farmer has no vote except throuch vou. 160 AGRICULTURAL RELIEF I have come as a farmer to the only power that can put me on the American level of earning and living. This is an artificial level, created by you, and as an individual I can not reach it unless you devise a means by which each commodity that I share in raising can act as a freely bargaining unit in determining its real value to the other great units that constitute the modern capitalistic States. The economic unit is the group or commodity, not the individual. The economic behavior of wheat and cotton depends not at all on the individual who raised them. If the stockholders of the United States Steel Corporation should receive their dividends in rails and billets and other products and sell them in competition with each other, it would furnish a fair parallel to our agricultural anarchy. I saw the statement the other day from a British banker that the dollar had superseded gold as the ruler of the world, and also this comment from a Washington paper: What then shall be said of American big business which rules the dollar? Is that all, or has the farmer a higher court of equity to which he can appeal for protection from destruction by the great economic forces by which he is being slowly crushed? If there is such a court of appeals, it is the Congress of the United States. Now, gentlemen, with that in mind—and I want to say parenthetically here, Mr. Ketcham, that your questions have always been constructive. You have always talked here as a friend of the farmer. I did not mean to bring this up at this time, but you see from that point of view, that I work down toward the idea of centralization, to meet a centralized world, and I can not see that we can meet it with the dispersion type, which simply gives the farmer a little more for his products, as in the export debenture plan. It is not because I want to be for one or another, it is because I believe we have got to meet a condition of concentratoin, and we have got to meet it with concentration also. Mr. Kercuam. I think you have approached one phase of this more openly and more frankly than any other witness who has appeared in behalf of the McNary-Haugen Lill. If I understand your viewpoint correctly, it is this: That we Lave come to the time when we can no longer expect the individual units, the 6,000,000 farmers, to unite themselves and therefore, if you could have your way about it, you believe that we ought to set up a board somewhat similar in its powers and possibilities, say, to the Federal Reserve Board and other great boards that have been set up in connection with other lines of business? Mr. CavEerno. You will see from what I have said that that is the working of my mind—not that I wish it. I have made this statement frequently. I could talk two hours to any farmers’ meeting on any daily paper that was ever published. I picked up this morning a Washington paper and found this: Coal strike inquiry is voted by the Senate. : Coal—even it with its possibilities of i nelplossly 10 the Senate, p concentration has appealed Mr. AswerLL. Have they started t..eir investigation? N Mr. Caverno. They will investicate, just exactly as you are mmvesticatine here. AGRICULTURAL RELIEF 161 Mr. Kercuam. If you will just permit, I should like to just follow up my question. Mr. CaveErNo. May I cite one other? Legislation drawn to stop oil output waste made public. And let me predict to you that before you get through with it, you will find that the oil people will be using a “conservation fee.’ We know how their ‘lubrication fee’” has been used. But they will have to come in with a conservation fee to save themselves, and so will the coal people. They all have to recognize a unity, not one which they wish to make. Mr. Kercaam. If I understand your idea, fundamentally you approach this whole question with the thought that all the attempts at cooperative marketing and organization have been destroyed— at least have fallen short in themselves—by reason of rivalries and jealousies and confusion of interests here and there among the farmers themselves—that a tremendous group organization in the United States is hardly to be expected outside of something of a governmental agency set up? Mr. CaverNo. You did that with the railroads. Let me illustrate that. I live alongside the Frisco Railroad. It runs through my farm. (Reads from clipping:) Frisco right of way will be beautified. Now, Mr. Yoakum here can tell you something about how the Frisco Railroad went into the hands of a receiver, because he was president of it when it did. Frisco stock, you will find, is away above par now and paying 7 per cent dividends on the capital stock. Who did that? They were in bakruptcy, when my land was worth something and now they are putting tulips on their right of wv -=' ¥ =n not cut the weeds from my side of the fence, unless uw my bare hands—that has been done by legislation. Mr. Fort. Right on the subject of the Frisco reorganization, I know some people who were wiped out and lost all they had in that property before the present reorganization which cut down the capital stock and the bonds tremendously. Mr. Cavervo. Exactly. Mr. Fort. Before they were able to pay 7 per cent. Mr. Caverno. Exactly. Mr. Fort. They went through that deflation. Mr. Caverno. Exactly, but the Government could not allow that anarchy in railroads to exist and it gave them the helpful legislation of the Cummins-Esch law. I do not know what I should have done, but I think I should have voted for the Cummins-Esch law. You can not bankrupt your railroads; you can not have that anarchy, and you have got to give us that same centralized direction. Mr. Kercuam. I appreciate your fair mindedness on this subject. Have you ever given thought to the fact that to-day agriculture represents approximately 29 per cent of the people: Granted that the board is set up, granted that it works as you hope it will work, and as I believe you expect it will work, have you ever given any thought to what the other 71 per cent of the people might do when they, discover the possibilities in any kind of an orcanization of that sort? 162 AGRICULTURAL RELIEF Mr. CaveErno. What did the 99 per cent—say 90 per cent—I do not know how many security holders there are—that are outside of the railroad ownership—what did they do? What would I do? Would I vote to put the railroads into bankruptcy? No. They have been given by this Government a chance to keep out of bankruptecy. I do not want to tear that thing to pieces. I do not believe that you can avoid concentration and centralization. There has been a growth in the world from the simple to the complex. I do not believe you can help it. But the point of it is that practically everybody has their organization, and we are left out, and when you see people in an organized world losing thirty billions of value in five or six years, and people who are working on the most basic production that there 1s, the greatest value—so great that if we could have fair trading and some one man could be appointed selling agent for all the farmers of the world, in one year he would come back with the whole world. Why is it that the people who raise practically all the food are actually hungry and the people who raise the raw material for clothing have not enough clothing on their backs? Is there not something wrong with an adjustment, that they can not save enough out of it to feed and clothe themselves? Mr. FuLMER. Is it not a fact that the folks who seem to worry about the 70 per cent of the people outside of the farmer group do not seem to worry very much about the 90 per cent of the people that are outside of the railroad group? Mr. Caverno. I think you are right. Mr. KercEam. That remark is unfair, but 1 do not think Mr. Fulmer intended it so. This is the point that I had in mind. 1 am putting these questions squarely to you from the standpoint of the farmer himself. If this great controlling agency is put up, which practically takes over the farmer's business with 71 per cent of the people in the United States on the other side, can you not see that the very thing that has been set up for their help might turn around and run the other way? That was my idea. You are twisting my remarks wholly unfairly. » Mr. Funmer. In all the hearings before this committee, I find that a lot of the members of this committee and principally of the opposition, are worrying about the consumer and the other part of the 70 per cent not in the farmer group. Congress has passed legislation in the interest of every other group, outside of the fellow that is feeding and clothing the world. Mr. Kercuam. My remark was not directed to that. My remark was directed to the welfare of the farmers themselves, provided that 70 per cent of the people find out how this thing works and turn it around the other way. ) Mr. Caverno. Mr. Ketcham, I would rather take my chances with the farm board with human hearts and some brains in their heads, appointed by Calvin Coolidge, than 1 would with the present anarchy. Mr. Fort. You have used the railroads as an illustration. The first intervention with the railroad and the first board, following out Mr. Ketcham’s thought, was appointed in the early nineties? CAVERN. Mr. Fort, I have got only 30 minutes yet. r. Fort. I was just going to ask you a question. The first board was aopointed for the railroads in the early nineties. The Esch- AGRICULTURAL RELIEF 163 Cummins law was passed in 1922 and 1923. There ‘was a. period, was there not, where following Mr. Ketcham’s thought, the consumers of the railroads’ services did force the railroads into bankruptcy, so that after 30 years’ operation under the first commission jt. was necessary to reverse the attitude and change the law and create a new law that gave the railroads a chance to live. Mr. Caverno. That is what I have said. I said these boards were appointed for regulation and driven to assistance; and, men, I can not help but believe that that has got to happen to every great industry of our country. There is either going to be an autocracy outside of the Government or a certain amount of autocracy in it, and it ought to be reduced to the lowest terms and limited to direction as much as possible. Let me state one thing here in regard to what Mr. Ketcham has referred to. He has a different picture from what I have in regard to how this is going to work, and I hope that I can get around to talk about the practical workings of this bill. But I want to say, as I see this, every bushel of grain and every bale of cotton might go under the McNary-Haugen bill into the very same freight cars, the very same elevators, through the very same hand, without any cooperative associations, and make the bill effective. Some will say I have been turning down the cooperative associations. I have not. I think they have been a necessary good; and, anyway, I did not propose to solve this through the cooperative associations; I proposed to solve this through the national industrial conference board. I went to men like Herbert Hoover in an endeavor to have this thing solved without getting into the House. Mr. Apkins. You do not think the farmers are uneasy, do you, or believe they have got to operate at a loss right along to keep the other 70 per cent of the people off their backs. Mr. Caver~o. I wish you members of the committee could take time to read the little letters here of men who have been putting in 25 cents and up in Mr. Hirth’s organization. I have nothing to do with it. He asked me to receive contributions and turn them over to our little office up here # the Investment Building, where we are trying to meet the chamber of commerce, and the United milling interests represented by Mr. Anderson here. Mr. AswerLr. What do you do with that money? Mr. CaverNo. Doctor, I knew you would ask that. Mr. AsweLL. It is a good question, if you knew I would ask it. Mr. Caverno. We try to have study made by experts. Ifyou know Chester Davis—I call myself proud to know him. Mr. Davis is employed and these 25-cent subscriptions go to help that little office, which is the most expert economic service the farmers of the United States ever had. To prove my contention that this is an economic problem, I want you to compare those little letters with what appears in this book [laying printed volume of committee hearings on the table], and that is the report of the Reed Investigating Committee on senatorial campaign expenditures, to prove that economics is at the bottom of politics. See what was collected in the Pennsylvania campaign. Was it worth it for political office? It was not. It was because of the economic factors. One of the Mellons, I think, who said in an interview, it was worth $5,000,000 to control the Republican organization in the State of Tinois 164 AGRICULTURAL RELIEF Mr. Wirriams. No. Mr. Caverno. I mean Pennsylvania. You have another shirt to wash. Mr. Wirniams. I have not any shirt to wash. There was not a dollar improperly spent in a primary in Illinois, and we have a spectacle of a State that has more population than six States operating as one. Mr. Caverno. I have lived there most of my life, and I know the problem. Keep that out of the record about the “shirt to wash.” Tt has no place in the record. Mr. WiLLiams. You need not keep out what I said, because the State of Illinois has been outraged. Mr. CaverNo. It does simply mean that that little bunch of letters represent our economic handicap as compared with those great sums of money that were spent there. I am not saying there was a cent spent improperly in the State of Pennyslvnia. I am presenting that volume of expenditures. I tell you that that was for economic influence through Congress, and there is a challenge to that little bunch of letters. Mr. CLARKE. Are you going to get to the working portions of the bill? Mr. Cavervo. I will get to it now, and I will approach it from the standpoint of the Republican politician. Mr. Fort. I object to that. I happen to be a Republican, but I do not think this is a partisan question in any sense whatever, or ever has been. Mr. Caverxo. Mr. Fort, I simply want to bring up what the Western farmer who has always been a supporter of the Republican Party and the tariff——-Mr. Fort. That has nothing to do with it. Mr. WiLLiams. You recognize that the five Republican States of Ohio, Illinois, Indiana, Michigan, and Wisconsin, produce practically one-third of all the manufactured goods in the United States. Mr. Caverno. Exactly. Mr. WiLriams. Then why do ®pu talk about the industrial East? New England produces less than 10 per cent of the manufactured goods. If you want to commence by. striking down industries, you should commence striking down those in your own country. Mr. CaverNo. I want to give you the psychology of the Western farmer who has always—— Mr. Fort. We have had a great deal of testimony here about things that have nothing to do with the bill, and I think politics is one of them. You have now stated that you favor a board and favor an organization of the farmers and some means to reduce production, in your references to the oil tax, etc.—— Mr. Caverno. No; I did not state that yet, Mr. Fort. I just used that as an illustration of how inevitably great interests, and farming among them, would be driven to this centralization to protect themselves from their own competition. . i. Fort. By a tax to decrease production? That is what you Mr. CaverNo. Oh, no. Mr. Fort. In the oil industry? AGRICULTURAL RELIEF 465 Mr. Caverno. Oh, just to bring them together, is what I was referring to there. I did not have that feature that you mention in mind at all. Mr. AsweLL. You do believe that, do you not? Mr. CaveErNo. A tax to decrease production? No, I do not know that I do. Mr. Fort. Not as applied to oil? Mr. CaveErNo. I do not know. I just simply brought that up to show how inevitably these big combinations, which would be supposed to protect themselves are coming to need the same kind of help which we unorganized farmers have, that is all. Mr. Fort. When you get to the actual workings of the bill, will you tell how it is going to accomplish the purpose? Mr. Caverno. I will. But I want to say this, that anybody who has supported the Republican Party and the protective tariff all his life as a farmer and found himself in difficulties would naturally think of the tariff as a refuge; and I do not think the remedy is in the tariff. I think this disparity would be approximately the same no matter where the tariff duties in this country were levied. We are not simply strangled by the tariff, we are strangled by our own helplessness. But I do say this, just as soon as the western farmer who had always supported the system found himself pinched his natural inclination was to think of the tariff; and they did not want to abolish the tariff, but to get under it, a protection for all. And I mention this simply because as a cotton man I had to meet that situation when I came down South. These Northern men were clamoring to get under the tariff. We could not get under the tariff. They told the farmer they would give him a tariff on wheat—we will just use wheat as an illustration. It did not work—a lot of farmers thought it would work—and then they said, “We will raise the tariff on wheat,” and they did raise the tariff on wheat to a point where it was 42 cents a bushel. That was done by the Tariff Commission, and was supposed to represent the difference under the American tariff system of the cost of production abroad and in this country. And let me remind you gentlemen that that difference is not only what the farmer is supposed to get, but what in justice the consumer is supposed to pay. Is not that so? And that has always been lost sight of here and has not been brought out as the other side, that the people would revolt. In justice they should pay that, because it 1s only putting the farmer on the level with them, and I believe the American people are willing to do that. Mr. WiLniams. Mr. Caverno, I do not know any one is claiming that the tariff is effectual in the matter of price of products abroad: it is in the American market? Mr. Caverno. Exactly. Mr. WiLLiams. It operates as to agriculture exactly the same as it does as to manufactured articles, providing the producers of agriculture could organize, control their production and effectively manage the sales end of it? Mr. CaverNo. I wish I had not been quite so generous giving up my time. Here is a report by Judge Gary of the United States Steel Corporation, and the last report he made, in which he shows in the export business they had a very small return on the Atlantic seaboard. but 166 AGRICULTURAL RELIEF they made it up in the West. And I saw in yesterday’s paper it was stated that the United States Steel Corporation may build factories in Canada. Those men have a chance to get around the way we do not. [ am not going to argue on the reduction of the tariff, but I am simply giving the psychology of the farmer and what I consider the practical way by which he can get partial practical tariff benefits. When the farmer found that a 42-cent tariff was not coming to him— they did not know how it was going to work—then some bright genius, I do not know who he was, said, ““ We have devised a way by which the farmer can get not the 42 cents which you say he is entitled to, but some figure between nothing and 42 cents, according to the size of his surplus.” And right before him every year is the visible evidence of what damage he is getting from overproduction, if you call it overproduction, and I can not get away from the fact that we have no overproduction. Good Lord! must we have hunger in order that people may live? Here is the practical way that that would work as I see it. Take the tariff on wheat, figuring 42 cents and 27 cents; that is, 15 cents equalization fee, and 200,000,000 bushels of export of the 800,000,000 bushel crop of wheat. Every bushel of wheat might go through the very same channels it goes through now, and the farmer would get approximately, under present conditions, 27 cents tariff. Is he entitled to it or is he not? Mr. Apkins. Let me interrupt you right there. I do not want to interfere with your statement, but here is a thing that I want to get in, and you are covering the ground, so that is about all I care to do. The question has been raised a good many times in this committee, asking the individual where there was, for instance, 18,000,000 bales of cotton or 900,000,000 bushels of wheat, how much the equalization fee would be—asking the witness to state that. Now, the agency that is carrying our so-called surplus at the present time, the speculator, for instance, he gets all the information from available sources as to the world crop conditions and domestic conditions, consumption and probable demand, before he makes his purchase. He keeps that picture in mind when he makes the purchase, and when he is feeding it back on the market. The point I wanted to raise is that no man coming before this committee—I do not care how good an expert he is—could make a guess on what the equalization fee would be, unless he had that picture before him; and I take it.that our board, if 1t is established—it is provided in the bill that it is to have the advantage of all public agencies and private agencies it may enlist to get that picture, before it declares the equalization fee, and with that picture in mind then they can make a guess. Mr. Caverno. Better than that, Mr. Adkins, if you will go over to the Department of Agriculture—and this is basic in my argument— you will find this, that they have developed formulas over there, with various factors in them, empirical factors, whereby for the last 25 years they could have calculated what the price was going to be, and Mr. Jardine has a bill based on scientific principles of price foregastr and they can come very close to that, and I should put a Under a Worsing tnt, Joy in regard to wheat, if it is possible. aot 49 co © 2 erican tariff system, which says that the farmer should . and he will get that instead of 15, 16, or 25 cents, if you AGRICULTURAL RELIEF 467 can construct the machinery to doit. Thatis a challenge to Members of Congress and the members who are under the protective-tariff stem. In. AsweLL. I have not been able to hear any one make that clear. Mr. Caverno. I think that is perfectly plain. Mr. AsweLL. Show us how the fee will give him that result. Mr. CaveErno. It is so much simpler in wheat than cotton. Mr. AsweELL. You are not talking about cotton; you are talking about wheat. Mr. Caverno. If I should go out as an individual and buy 200,000,000 bushels of wheat and sell it abroad and put the country on an import basis, wheat would go up 42 cents a bushel, and it would not constitute dumping on a foreign market, because that same wheat would go abroad. Mr. Apkins. Just as it does now? Mr. Caverno. Just exactly. That wheat would go abroad. 1 paid for it. I took the 200,000,000 bushels and paid for it, and that 1s the result Mr. AsweLL. You have not shown us how the fee would do that. Mr. Caverno. It would furnish the money to buy that 200,000,000 bushels, and every raiser of wheat would have to prorate. Mr. AsweLL. Does the producer pay a fee, or would the industry? Mr. Caverxo. I am not talking of agriculture. Mr. AsweLL. You say you want to put agriculture on an equality? Mr. Caver~o. I do not need to on the same method. You make your money in the cotton market and I make mine by raising cotton. We might be on an equality as to spending money. That is exactly where the trouble is. It requires a different method for cotton than wheat, and they are all different from industry. Mr. Apxins. Just one more question, I want to ask you: Outside of three proposals, debenture, insurance fee, and the equilazation fee, in all these proposals that are made for the relief of agriculture, have not the farmers themselves, through the cooperatives, got authority of law to proceed now? Mr. Caverno. Oh, yes; we do not need a Federal charter. Mr. Apxixs. As a matter of fact, if they can not provide a means to take care of these losses, they would not attempt to operate under these schemes? Mr. Caverno. No. Now, just what I want to leave with you gentlemen is, there is the working machinery, as you can see, by which the wheat grower can get partial tanfl protection. Senator Borah said the other day it was an inverse tariff law—the export debenture plan is an inverse tariff law. Senator Borah has not read the law. It is a partial tariff protection, the best you can do under the circumstances with this scheme, and I will ditch that scheme any minute that some better method is shown that will give the farmer a larger proportion of the 42 cents tariff. Every day the farmer can look at the market and see what the foreign price is and see what the American price is, and he knows whether his production is penalizing him or not. Mr. KeTcEAM. Just a short time ago you said, in your judgment, that under the present arrangement that we had all the machinery necessary for the farmers to do this thing, provided they wanted to; that is, through the cooperatives and everything of that sort. 168 AGRICULTURAL RELIEF Mr. Cavervo. If they would all chip in. Mr. KercaaM. Yes, if they would all chip in. Then follows this question: They are conscious of their situation and they know they could do it. The very fact is they have not done it. Now, will you please answer this question: Supposing we set up a machine that compels them to, whether they want to or not, do you think they are going to like it? Mr. Caverno. I do not think they will ever know. We do pay more because of the protective tariff in general, and we do not discriminate. We do not see there is ‘‘so much tariff and so much teakettle,” and, Mr. Ketcham, I can not take the time to illustrate that. I think you see the picture, so that I can say to you that not only will it not be visible, but if it were it would be acceptable, because the figures would be so plain. Mr. AsweLL. Do you mean to say the farmer would not know he was paying the equilization fee? “Mr. Caverno. He would know if I would tell him. He ought to know. Mr. AsweLL. Did you not say he would not know? Mr. Caverno. No, I said he would not divide the thing up in that way. And when he knows he is getting more for his crop, and the equilization fee is less than what he gets in the appreciated value of his crop, I can not imagine a farmer would kick about it. That is just a question of visualizing a system of machinery for working this bill, which I think I have well mn mind which would make it perfectly plain to the farmer. The result is he would be getting 27 cents under present conditions, and he would know the difference between 42 and 26 or 25 cents, whatever it was. He would see the figures in the newspapers, and he would know what he got and what his equalization fee was, and it would be the difference between what he got above foreign cost and 42 cents. Mr. Apkins. This equalization fee is the fly in the ointment. Mr. Caverno. I know it. Mr. Apkins. The farmers know this, that when they started the cooperatives locally that their competitors bid more than the commodity was worth? Mr. CaverNo. Yes. Mr. Apgins. In those days we provided a straight penalty that where you go and sell to get the extra price you pay the penalty into your own company. That was the “fly in the ointment’ in the beginning of this. They went out and said, “Take your penalty out.” “All right; you go along.” We knew we could not exist unless we had thatin. After we had gone along to such a point where the farmers became educated to the fact that they were serving their own interests—they did not go into the courts, because it made them too unpopular with the farmers. When we start this scheme of control, the same agencies we are competing with will come in and do uncommercial acts as they did then, to create losses, and if we have no way of meeting them the whole thing will go to pieces; and if the fee is taken out you will have to hamden this 1dea of surplus control, in my judgment. Ir. Caverno. No; I will not say that. Somebody may suggest something else, but so far they have not. May I invite this to your attention, all of you? Senator McNary has been very close to the AGRICULTURAL RELIEF 4169 administration, and during the summer we had conferences with Senator McNary. On the Ist of December we came back, and we had a conference with Senator McNary and he said, “I want legislation, if I can get anything that is beneficial to the American farmer and abandon the equalization fee, I will do it.”” We left him with that understanding on the Ist of December, and afterwards Senator McNary introduced a bill with the equalization fee in it. I am not speaking for Senator McNary, but that means just this, that after getting all the suggestions he could get from everybody, he figured that the bill with the equalization fee in it, vetoed, would be just as valuable as any bill that the same people would allow to be passed. You can draw any other conclusion from Senator McNary’s acts that you desire. Mr. AswerLL. What would be the value of a bill vetoed? Mr. Caverno. Doctor, I will say this, that you have proposed a bill that would help cotton and would not help anybody else, and, being a cotton farmer, if you will pass that bill I will go home and put my whole farm in cotton. Mr. AsweLr. My bill will help cotton and rice and tobacco and everything. Mr. Apkins. Tobacco men do not say that. Mr. Caverno. Gentlemen, the main thing I have got here you can not have to-day, and I am sorry I can not give it to you, and that is the way the bill would work practically in cotton. I think I have given you the practical working of it in wheat—not the simplest in the world, but just under our tariff system, to meet and to give the farmers an opportunity of the tariff protection which the President, the Tariff Commission, and this Congress have said he was entitled to. You can not give it all to him under this system, but you can give him a part. Mr. KincueLok. Do you not think these proposed bills work easier on wheat than anything else? Mr. Caverno. I do not see how wheat would get anything out of any of your bills except the McNary-Haugen bill. Mr. KincaeELoE. How about the debenture plan? Mr. CavernNo. Oh, yes. But I object to it because of the fact that it is a dispersion and not a concentration bill. - Mr. WiLLiams. I understood you to say Doctor Aswell’s bill will work as to cotton. Mr. Caverno. It will help to a certain extent. Mr. WiLriams. You know that Doctor Aswell’s bill is the same as the McNary-Haugen bill with the equalization fee eliminated and operating under the revolving fund? Mr. AsweLL. With the insurance plan added. Mr. Caverno. With the insurance plan. Mr. Wirriams. Do you think that will work as to cotton? Mr. Caverno. Yes; but it will not work as well as the McNary-Haugen bill. Mr. KincreELoE. How long do you think it will work as to cotton? Mr. Caver~o. No; the doctor is right, Mr. Kincheloe. He and I can make money out of his bill, but we are going to skin the little fellow at the bottom. Mr. AsweLr. We make money for him by our corporation. Mr. Caverno. No, sir; we are going to start in low and bid high, and we are going to skin the little fellow at the bottom. 470 AGRICULTURAL RELIEF Mr. KincaELOE. If you both have a bill that will work for cotton and it is not going to cost the Treasury anything, I would like to look into that. Mr. Caverno. There is a bill there. Mr. KincreLoE. If you talk about the McNary-Haugen bill going to help cotton and not costing the Treasury anything, I do not agree with you. Mr. Caverno. I think it could be done; Mr. Kincheloe. Mr. KincuELOE. And it would not cost the Treasury anything? Mr. CaveErNo. Not costing the Treasury anything and bringing a larger price for the whole cotton crop to the South. But it would be still at the expense of the little fellow at the bottom. Mr. KincueLoE. What do you mean by the “little fellow”? Mr. Caverno. The fellow who actually raises the cotton. Mr. KincHELOE. It is not going to help the little grower. Mr. Cavervo. The doctor and T will get a rake-off down below. Mr. AsweLL. You may; I do not. Mr. KiNcEELOE. I understood you to say that the Aswell bill, or the McNary-Haugen bill with the elimination of the equilization fee, would help cotton and it would not cost the Treasury anything. Mr. Caverno. It would help, but would not help as much the little fellow who needs help. Mr. KincaeLoE. Then you amended that remark by saying 1t twould not help the little fellow”? Mr. CaverNo. It would not raise the general price level as high as the McNary-Haugen bill, but any strong bidder who would go in on the market would help everybody. Mr. Fort. Would it help raise the price for everybody? Mr. Caverno. No. Mr. Fort. Then you ought to change that statement, because if we raise the price of cotton the little fellow will be helped as much as the big fellow. Mr. Caverno. I have not time, of course, to go into that. May [ ask if you are going to hold a meeting to-morrow? Mr. KiNcHELOE. 1t would not provide any appropriation out of the general fund at all? Mr. Caverno. I would like to show you the practical workings under cotton. (After informal discussion.) The CHAIRMAN. Without objection the committee will stand adjourned until next Monday morning at 10 o’clock. (Thereupon, at 11.55 o'clock a. m., the committee adjourned to meet Monday. February 20, 1928. at 10 o’clock a. m.) J ———— HousE OF FE EPRESENTATIVES, CoMMITI EE ON AGRICULTURE, Monday, February 20, 1928. The committee met, pursuant to adjournment, at 10 o’clock a. m., Hon. Gilbert N. Haugen (chairman) presiding. Present: Representatives Haugen (chairman), Williams, Ketcham, fall, Fort, Menges, Andresen, Adkins, Clarke, Aswell, Kincheloe Jones, and McSweeney. The CuarrmaN. The committee will kindly come to order and Mr. Caverno will resume his statement. AGRICULTURAL RELIEF STATEMENT OF XENOPHON CAVERNO—Resumed 171 Mr. AsweLL. Mr. Caverno, when you were on the stand on Friday, you said toward the end of your statement, referring to Senator McNary—I am reading from the record—‘We had a conference last summer and again in December,” you left him with the understanding that he would not introduce a bill with the fee in it; and then you went on, you said you did not speak for the Senator, but you knew what he meant, that a bill with a fee in it vetoed “would be just as valuable as any bill that the same people would allow to be passed.” Did you mean that? Mr. CaverNo. Senator McNary told our group last December that if he could find any other bill, proposed by the administration or anybody else, that would give the farmer a measure of relief, and if it did not contain the equilization fee he wanted to serve notice on us that he would feel obliged to support that measure. And then I said when Senator McNary introduced a bill with the equalization fee in it—this is what I intended to get across—that it meant that he had not had anything proposed to him that would benefit the farmer any more than the McNary-Haugen bill with the equalization fee in it, vetoed. Mr. AsweLL. But then you followed that up—— Mr. Caverno. I distinctly said I did not speak for Senator McNary. Mr. AsweLL. You followed that up with this statement addressed to me “I will say this, that you have proposed a bill that would help cotton and would not help anybody else, and, being a cotton farmer, if you will pass that bill I will go home and put my whole farm in cotton.” You said that would help cotton and be such a good bill that you would go into the cotton business wholeheartedly. Do you think that is better than a vetoed bill? Mr. Caverno. Oh, yes; Senator McNary was not speaking about cotton. Mr. AsweLL. Well, but you said at that time that this bill was such a good cotton bill that you wolud go home and put your whole farm in cotton? Mr. Caverno. Well, Doctor, you know just about what I meant. Mr. AsweLL. No; I want to know what you meant. Mr. Cavervo. I will not go home and put my whole farm into cotton. But I simply wanted to bring out that that kind of a bill would help cotton but it would not help northern crops; and I do not think it would help cotton very much. Mr. AsweLL. You said you would go home and put your w ole farm in cotton. Mr. Caverno. I tried to see that thing fairly, and I took occasion to drop into Mr. Ketcham’s office Saturday and ask him if he could figure out how the northern crop.would be helped by the Aswell bill. I wanted to go to a man interested in northern crops and see if IT was reading this bill straight. If any of you gentlemen can explain to me how the Aswell bill will help wheat or any of the northern crops I shall be glad to learn, because I do not see it now. Mr. WirLiams. Will it not work exactly the same way with the equilization fee, up until such time as the revolving fund is exhausted? In other words, it will work exactly the same for at least two vears. 472 AGRICULTURAL RELIEF Mr. CaVERNO. Yes, sir. Mr. Harr. But then when you reach the point where you do not have any more money, what would it do then? Mr. Wireiams. It would probably be all right for two years. Mr. AsweLL. By that time the elections will be over and you fellows will know whether the bill will work or not. Mr. Fort. Why do you not say, if the conventions were over with? Mr. AsweLL. I am not through with this. I want to ask you another question. I have not read it from any notes I made, but [ am reading it just as you dictated it to the shorthand reporter. There is scme doubt about your understanding of my bill. 1 do not intend to pass my bill. I am trying to trim down the Haugen bill to meet my ideas. If I had sufficient votes, I would not think of taking the bill away from Mr. Haugen, because 1t would kill him. The CraIRMAN. You need not be concerned about looking after this bill at all. [Laughter.] Mr. AsweLL. There were several questions asked. You made several extravagant statements, but you made an honest to God statement at one time. But some of these gentlemen began to question you about it. Mr. Williams wanted to know something about it, and you repeated it would work with the insurance plan added, and then Mr. Kincheloe wanted to know how long it would work, and you said, “The doctor is right” [referring to me], Mr. Kincheloe. “He and I can make money out of this bill but we are going to skin the little fellow.” And I want you to explain how about skinning the little fellow. Mr. CaviErNo. May I explain that? Mr. AsweLL. I can not let that go unchallenged. Mr. Caverno. I will accept your challenge and: try to explain it. I would like to begin where I left off and say a few more words in regard to the wheat marketing problem. Mr. AswiLL. Let us see how my bill would skin the little fellow before we start any more testimony on this committee. You evidently do not get the point of the bill. If the board were to find that the price of cotton to be, say, 17 cents a pound before the season begins, and the board would announce, “We will buy a million bales of cotton at 20 cents a pound,” do you think the price would rise to 20 cents then immediately—the world price—say a million or five million out of the number of bales you wanted to buy at 3 cents a pound higher, do you think cotton would go up? Mr. CavErNo. Somewhat; yes. Mr. AsweLL. Would not that help the little fellow? Mr. CavERNO. Yes, sir. Mr. AsweLL. How would it skin the little fellow? Mr. Caverno. Suppose they set the price so high that they had cotton left on their hands. What would happen then? Mr. AsweLL. The little fellow would get the same high prices. Mr. Caverno. All right. What happens to your system if they keep buying above the market price? Mr. Aswern. When it gets above the board will sell and stabilize the price. I will not let 1t go into the record that my bill will skin the Tile fellow. You are thinking about the Chicago Grain Corpo-. Mr. Caverno. I am not thinking in marketing terms; I am thinkng in terms of actual facts. AGRICULTURAL RELIEF Mr. Aswern. I am a little fellow, too, and I do not want to be skinned by you or anybody else. Mr. Cavervo. If you will go over to the Department of Agriculture you will find out they have worked out some empirical formulae by which they can forecast the trend of prices. Mr. AsweLL. Some of them are very empirical. Mr. Caverno. If those formulae had been applied to cotton crops during the last 25 years they would have been able to forecast the trend of prices. Mr. Anderson spoke about the old system of trial and error. It is important in modern scientific management that you get as far away from the method of trial and error as you can and adopt a scientific basis. But there would have to be some trial and error adjustments in finding out what the maximum price of cotton is under the law of supply and demand. Mr. AsweLL. That would not be the same for any two years. Mr. CaverNo. I would go as far as possible in using scientific formulae to forecast the trend of prices, and that will give you a price curve to work on. I am trying to answer your question. Mr. AsweLL. I do not want to take up your time. I am asking the question. The CHAIRMAN. Ask him a question and give him a chance to answer. Mr. Caverno. I am trying to answer your question directly; I have no other object. Mr. AsweLL. Well, hurry on to it. Mr. Caverno. The board having that as a basis probable price would buy cotton at that price or above; try to peg the cotton at that price or above. Look at the conditions they have to meet. Here is a probable price; the best that they can get. If they have got to buy and sell again without any protection, they dare not go above that probable price; in fact, they dare not go up to it. They have got to allow an ‘equalization fee’’ below that probable price to protect them in their operations—that is, under Mr. Crisp’s bill, as I see it; that is how they would operate. They would operate as high as they dared to go toward that curve, but they would have to protect themselves from a loss. Here is an article in the Journal of Agricultural Economics on the subject of the elasticity of the law of supply and demand. The figures on crops show that there is no direct response of production to price, even in industry. Let me put it another way. There is a tendency for consumption to increase with a decrease in price and for production to increase with a decrease in price. There is not an immediate response in production to a higher price or a lower price. That gives the board a chance—this brings in the matter of overproduction—to raise the price without necessarily causing overproduction. Mr. KiNcHELOE. You say that in the increase in price there is no tendency for increased production. Mr. Caverno. There 1s a tendency, Mr. Kincheloe, but you will notice by the figures left here by Mr. Stone and the figures on the wheat crop given last year in the reply by Mr. Dickinson to the President’s veto, that acreage in any crop has not responded in a good many years to the price of the year before; in other words, 86160—28—8ER E. PT 8—— 173 474 - AGRICULTURAL RELIEF there are varying factors in there, and that is so in industry where the response is much more direct, and it is true of farming generally. Coming back now to the operations of the board: Under the Aswell bill, without any equalization fee, as I see it, the board would be compelled to protect itself against buying at a price which would not dispose of the whole crop. Now, what is the evidence of overproduction? What is the evidence of too high a price? You have got a surplus left on your hands. Suppose you set a price that is high enough to step up production. Mr. AsweLL. Doctor, my bill does not make any such proposal as that. Mr. CavErNo. Wait a minute. Mr. AsweLL. The board proceeds to buy as soon as cotton reaches a certain price. Mr. CavErNO. You can not know in advance whether a certain price would cause an accumulating surplus or not. We admit that farm prices are on too low a basis; we want to peg the price as high as we can. You want to peg it as high as you dare. If this board is taking on cotton, it has got to dispose of it again, and if it gets the price too high it would have a surplus left on its hands. Mr. AsweLL. You are making a fight on my bill, but it does not make any such proposal. Mr. Caverno. Now, taking the practical problem of the board, it is going to set a price which it thinks is the highest: price which it can give and still dispose of its cotton, which may cause an accumulating surplus and a loss in the operation. Mr. AsweLL. Would not that happen probably if you had the fee just the same? Mr. Caverno. Under your bill you want to peg the price up as high as you can get it without causing an accumulating surplus, which would show that you had pegged it too high, and the accumulated surplus is the only evidence that you have got the price as high as it will go. Suppose you peg the price and sell all of your cotton. Do you know whether you could get a cent more or not? No, you do not; and you do not know until you have an accumulated surplus. Under the equalization fee you can peg the price as high as you think it will go and a little higher, and then out of every pound you take a little deposit and create a fund to hold the surplus if you peg the price above the law of supply and demand price and accumulate a surplus. Have I made that clear? Mr. AsweLL. No; you have not touched my question at all. The little fellow is still left in a hole. Mr. Caverno. Mr. Kincheloe, could you understand that? Mr. AsweLL. You do not explain skinning the little fellow. Mr. KiNcHELOE. There are two things in your statement which I do not understand. If this bill would help cotton I do not see why it would not help everybody. I have not seen where you have definitely explained where the little fellow would be skinned under the doctor’s bill. Mr. Caverno. Just exactly this—— Mr. Apkins. I am interested in the little feliow, too. sod Bpwarios Let the witness finish his answer, if he can AGRICULTURAL RELIEF 475 Mr. CaveErNo. We are working with cotton on an entirely different basis from what we would in the northern crops. In cotton we are not trying to get under the tariff. We have got to influence the world price with our manipulation. In wheat you are working with two definite and distinct things; you have got the Liverpool price and the tariff of 42 cents. Mr. KincHELOE. Has not wheat got a world price as well as cotton? Mr. Caverno. Mr. Kincheloe, we have a 42-cent duty on wheat. Mr. KincEELOE. Do not the American wheat growers sell at the same price you get in Liverpool? Mr. Caverno. Well, that is exactly what I was trying to explain as a foundation, but Doctor Aswell would not let me. Mr. AswerLL. I am willing for you to have all day. But, Doctor, you are a kind of philosopher. You are talking about agricultural economics and all that bunk. We have heard that for five years before this committee, and we are tired of it. What I want to do is to be able to meet the situation in a way that will help the little cotton farmer. Suppose, now, the price 1s too low. The board will say, “We will buy the cotton at this price, and when it goes up to a certain price we will sell; and we will never have a surplus and we will not lose on it.”” I am facing the facts, not any agricultural economics or any theoretical philosophy on any world conditions. This is a fact we must face now or not at all. Mr. CaverNo. You will never have a suplus; and if you never have a surplus you will never know that you are getting the maximum price, under the law of supply and demand. Mr. AsweLL. As long as we get the price we are not concerned about that. Mr. CavernNo. You have sold your cotton and you do not know whether you might have got a cent more. Mr. AsweLL. I do not want a cent more if I fix the price at a fair price for cotton when it is 17 cents, and this board pays 20 cents. If we get that we do not want any more; we are not speculating; we are not gambling. Mr. CavERrNO. You are working under a different theory than I am. Mr. AsweLL. Evidently. Mr. Caverno. I am working to let you get as high a price for the product as you can’ get under the law of supply and demand. Mr. AswerLL. That will settle it. Mr. CaviErnNo. You do not know what the highest price is. Mr. AsweLL. We are not going to wait and gamble on the high price. We will say cotton at 20 cents is a fair price. and we will buy it at 20. : Mr. CavernNo. Why do you say that is a fair price? Mr. AsweLL. Because we know it is a fair price from our knowledge of the cotton market, and we know about world conditions and the supply and demand. Say this is 17 cents, and we will give these little fellows 20 cents a pound, and if it goes higher than that we will sell and we will keep it stabilized, and if we find there is a world shortage we will raise the price 24 cents or 30 cents, as the case may be. Mr. CaverNo. The doctor is going to make guesswork of something [ am going to demonstrate by absolute proven facts; in other words, I am going to do the very thing in advance which I would have done if I had known how the crop was going to come out. 476 AGRICULTURAL RELIEF Mr. Apkins. How about the little fellow getting skinned. Ihave a lot of them in my country, and I am kind of interested in him. This bill without a fee—— Mr. CaveErNo. Are you talking about corn or about cotton? Mr. Apkins. It does not make any difference. Mr. Caverno. It does to me. I want to explain that corn proposition. } Mr. Apxins. Well, take cotton or corn either way. This board will go to operating on a commodity when the price is too low; it will not operate unless it is. If you are going to depend on getting merchandise to maintain this business you have got to buy and sell at a profit. You proceed to operate when the little fellow has to sell, when the price is low, do you not; and if this theory of taking this off the market does raise the price, when you dispose of this and sell it at this higher price it has been stabilized, too? Who has been skinned? The fellow who has to sell, is it not? And that is the only way you can operate. Mr. AsweLL. Let me say one mere thing, and I will quit. This bill, if you will analyze it, proposes a minimum price for cotton. [ gave the example of 20 cents as the minimum price. We are going to hold it and keep buying as long as it is below 20, and when it gets to 20 we are going to sell. But the minimum price will be 20 cents. Mr. CaverNo. That is absolutely ignoring the law of supply and demand. I never thought, gentlemen, I would be in a position where I would have to get up and defend the law of supply and demand. I have seen people bow down and kow-tow on this, but I want to say I can not let it go without some consideration. I was amazed at Mr. Yoakum ignoring the law of supply and demand. I am too hidebound on the law of supply and demand to admit as arbitrary a price-fixing scheme as you have got. Mr. KincaeLoe. How do you mean Mr. Yoakum ignored the law of supply and demand? Mr. AsweLL. I would like to know that myself. Mr. CavierNo. Because he said if they had 80 per cent of a crop they could fix the price. Mr. KincHELOE. They can absolutely fix it. There is not a cooperative in America, if national in scope, which controlled 80 per cent of the crop, which could not only fix the price, but they would not need Congress or anybody else to help them do it. But the cooperatives have all failed because they have not had enough of the crop to give them control, and because it is local in scope and not national, as Mr. Yoakum has said. Mr. CaverNo. Those tobacco cooperatives are local. Mr. KiNncHELOE. Is not that cooperative local? Mr. CavErNo. I mean in Burley tobacco one locality dominates the crop. It is not raised in any great quantities anywhere else. Mr. KiNncHELOE. Listen. What you are talking about was not what Mr, Yoakum was talking about. Mr. Yoakum said that if you could ave a national cooperative association that had 80 per cent of the basic commodity in it—he named 14 of them—that you could absolutely control the price, and you can. Sh. Caverno. Ido not think so; because if you get it up to a point where people would refuse to use at the high price, then you would have a surplus which would fall back on your hinds, AGRICULTURAL RELIEF 477 Mr. KincHELOE. You go on the theory that they would put on a prohibitive price. That is not what they want, but a reasonable price. If the American farmer could get even a reasonable price he could afford to sell and would not need any legislation to help him, but you can’t do it without Federal assistance. Mr. Caverno. He may not be able to get a reasonable price. It depends on whether he was able to sell his product at a reasonable rice. P Mr. KincHELOE. If the Yoakum plan was carried out it would be Just exactly the same plan as the United States Steel Corporation’s plan and the railroad’s plan and the same as any other big business’ plan, because the whole commodity is in one concern, controlled by one concern, and they feed the market gradually, and they get control of production and control of the.market, and therefore control the price. Mr. Fort. I want to follow out Mr. Adkins’s question and your answer to it. He assumes that the organization under Doctor Aswell’s bill is going to buy from the necessitous producer when he has to sell and buy at a low price and make a profit out of his cotton, for example. Mr. CaveErvo. ™ Mr. Fort. Ne agree with that? Mr. Caverno. No, Doctor Aswell’s bill, as he is stating it now, would fix an arbitrary price. Then he is in danger of doing one or two things. He is in danger of fixing a price which would cause an accumulated surplus, or, on the other hand, he is in danger of fixing a price which is not as high as he might have. Mr. Fort. Does not that same danger exist under the Haugen bill? Mr. Caverno. Mr. Fort, I am trying to get to your question and I am trying to show how I could make an experiment that would show what that maximum law-of-supply-and-demand price was. Mr. Fort. Is there not a danger that you may miss it? Mr. Caverno. No, because you have trial and error. You carry science to the limit; and then by trial and error you check for error, but on the top side of the price instead of the bottom, you collect too much and pay it back again, but you have found out the maximum price under the law of supply and demand. Mr. Fort. But you do not pay back the equalization fee to the farmers? Mr. Caverno. I can not pay it back. You give him the equalization fee to hold the surplus. Mr. Fort. But he does not get back the profit, if you make a profit -not, the man who has put it in. Mr. Caverno. He puts in his pocket a profit that is measured by the maximum supply and demand price—a profit that the maximum price would bring without the accumulated surplus. He has got it in his pocket. Mr. Fort. Less the equalization fee? Mr. Caverno. Yes; he has got to take out a little of that to carry the surplus. He has made an experiment te find out what the maximum supply-and-demand price was. Mr. Fort. In a way your theory would operate like this gentleman who was here from Illinois, except that he would require the 478. AGRICULTURAL RELIEF farmer to carry a fixed percentage of his crop in his own bins instead of selling it? Mr. CaveERNO. Yes; In a Ineasure it would be the same thing, only it would take it off the general channels of trade and would not depend on Tom, Dick, and Harry in the country. Mr. Fort. He does not carry it; your organization carries it if you take it out of his bin? Mr. CaverNo. I am not figuring that any organization is required; I am not figuring basically that you will need a cooperative association for this transaction. Myr. Fort. Who is going to buy it? Mr. Caverno. Anybody could contract, other agencies can contract. Mr. Fort. The board contracts with somebody to buy? Mr. CaverNo. The board finances somebody to buy. Mr. Fort. Then the moment the board buys it, it is out of the farmer’s bin. Mr. Caverno. But he has put up the equalization fee and that is sufficient to buy back the surplus. Mr. Fort. If he does not grow the same crop he gets no benefit. Mr. Caverno. That is so. You can not get every adjustment to fit every farmer in the country. Mr. Fort. Another thing, to get back to where I started with Mr. Adkin’s question: We have heard it from three or four witnesses— you said it the other day— : Mr. CaverNo. What I am talking about is cotton only, not the northern crops. Mr. Fort. Well, take cotton. The statement has been made by three or four witnesses—and I do not know that you have put it in these exact words—that any of these so-called loaning bills proposed to buy from the necessitous farmer at a low price and make a profit out of him. Do you believe that that is true? Mr. CaverNo. Yes; under the Jardine bill, as he presented it to the cotton growers last summer, that is exactly what he said. Mr. Fort. I have never seen the Jardine bill, and I do not know what you mean. Mr. CaverNo. Mr. Jardine has a farm-relief plan, and he sent Mr. Englund down to the American Cotton Growers’ Exchange to explain at. Mr. Fort. That is the Englund plan, you mean? Mr. CavERNO. It is the Jardine plan published in the Washington Star July 21, 1927. That is the first time 1 ever saw the plan to buy in accordance with that scientific curve of probable prices. And 1 think, by the way, that if the equalization fee were added. that would be a fine bill. Mr. Fort. Take Judge Crisp’s bill—you are familiar with Judge Crisp’s bill? Mr. CaverNo. Yes. Mr. Fort. The argument has been made against it, that that type of legislation proposes to buy from the necessitous farmer at a low price in order to make a profit. tar. Cavgany Let me put it another way: The board would not bill th ezn Oprations in buying at as high a price under the Crisp ey would under the McNary-Haugen bill, because under the AGRICULTURAL RELIEF 479 MecNary-Haugen bill they have a fund to correct any mistake that they made by setting the price too high. Mr. Fort. Let us assume that under either bill the board’s operations begin at 17 cents and run up to 20 cents. Mr. CaverNo. Mr. Fort, there are other people who are more familiar with the details of marketing than I am. I come before you simply to make a statement in reagrd to the general plan which could be worked with the equalization fee, in order to obtain the maximum law of supply-and-demand price. Mr. Fort. We do not seem to be able to get anybody here that can talk the practical side. I thought you were a practical cotton man. Mr. Cavervo. I think I am talking the most practical thing in the world when I'lav the framework on which the board might work. Mr. Fort. Let me ass vou just one question: We will assume that the maximum law of suppiy-and-demand price is 20 cents on cotton, as a maximum? Mr. Caverxo. Yes, sir; that is the most that the crop would have been disposed of without accumulating any surplus. Mr. Fort. Now, then, your farmer who sells at 20 cents is therefore getting, under present conditions, if h» sets 20 cents, the maximun: price? Mr. CaveErRNO. You mean buying at that Mr. Fort. Without any legislation? Mr. Caver~o. Yes; the crop just disposed of without any surplus or a small enough surplus to show that the price was as hich as it would go. You have accumulated some surplus. Mr. Fort. I am not talking of a buying organization; I am talking about existing conditions where we have no machinery at all. The man who to-day gets 20 cents—assuming that to be the maximum supply-and-demand price—he is getting all he can get under this legislation, is he not? Mr. Caverno. If we know what the maximum law-of-supplyand-demand price was. Mr. Fort. Just answer a question or two, please. There is a maximum supply-and-demand price, and I am assuming that some men get it. We know some do get it; somebody sells at the top. There has to be a seller there as well as a buyer. Under an equalization fee bill, the man who now sells at the top will have to contribute his equalization fee, and will therefore get less net than he now ets. will he not? Mr. Caver~o. That is, assuming that you have been able arbitrarily to peg the price at the maximum supply-and-demand price. Mr. Fort. Not to peg it. I am speaking of the occasional seller. Mr. Caverno. Oh, yes; occasional seller. Mr. Fort. Who to-day gets the maximum price without the equalization fee bill? Would he get net less under that bill than he now gets? Mr. Caverno. Yes. Mr. Fort. For whose benefit does he contribute that less net? Mr. Caverno. Mr. Fort, I stated the other day when you were not here that I was basing my whole argument on the fact of the unity of the crop, and the fact that every man now practically was a stockholder in the crop. > . 480. AGRICULTURAL RELIEF Mr. Fort. But the man who is financially able to carry gets the better price than the one who is not. 3. Mr. Caverno. But he has nothing to say about fixing the price. Mr. Fort. But he has his own judgment to use. Mr. Caverno. If you want to talk as an individual. Mr. ForT. I am not trying to talk individualism; I am not going that far. But I am saying under the present conditions some men do get a better price for their cotton than they would under the equalization fee. * Mr. Caverno. Do you believe in cooperative marketing? Mr. Fert. Yes. Mr. CaverNo. The theory on which they work is that the man gets the average price, not the maximum or minimum. Mr. Fort. I believe in that, because organization is necessary and therefore I am not talking individualism. Mr. Caverno. I believe all of the cotton growers have got to come under the same basis of taking the average price and try to raise the price of the whole commodity. Mr. Fort. Then you are laboring under the idea that this is trying to force everybody into the cooperatives? Mr. Caverno. Not at all. Mr. Fort. Or into a compulsory organization? Mr. CaverNo. Not any organization at all. I made the statement here the other day, and I make it again, that under this bill every bale of cotton and every bushel of wheat might go through the present channels without cooperative associations, and the bill would work, under the direction of the board, and would raise the general level of prices of the farmer. Mr. Fort. Then you do not think it would strengthen the coopsratives? Mr. CaverNo. Most certainly I do. I want to put this down, I do. If that bill is passed it will give the cooperatives many advantages they do not have now. They are being broken right now by the fact that there is an uncontrollable surplus; in other words, they are carrying the other fellow’s load. It would not give inherently any advantage, except what they might work out in the way of a more economical marketing system, and they should live or die according to their ability to establish a more efficient system of marketing. They are willing to meet that test. Mr. Fort. But the man who to-day is getting a satisfactory price through ability to hold and carry his own stuff would be no better off, would he? Mr. CaverNo. That is not the question. Mr. Fort. Would he? I am asking that as a question. _ Mr. Caver~o. 1 will say this, there are individuals who will be just as well off without the bill as with it. Mr. Fort. I am not saying I am against any legislation, Mr. Caverno; but I am speaking of the equalization fee bill. par: Gayunmne. There is one other point I want to bring up to you ere: A large crop is like a river in flood—you have the matter of reservoiring and the flood channel and you have the matter of additional outlets. The 1925 cotton crop, early in September, was selling at my station at 26 cents a pound. It had such a drop when the estimate came up from 14,000,000 to 16.000.000 bales that the total AGRICULTURAL RELIEF crop sold for $300,000,000 less than the 14,000,000-bale crop would have sold for. Mr. Fort. It should, should it not? Mr. Caverno. No. Mr. Fort. How much did this 2,000,000 bales additional—from 14,000,000 to 16,000,000—how much economic difference was there? Mr. Caverno. Under no circumstances is 16,000,000 bales worth less by $300,000,000 than 14,000,000. It may not bring it, but it is worth it. Mr. Fort. You are correct. I misunderstood you. Mr. Caverno. Let us look at that. There are a million bales of cotton which might have been used in place of jute bagging. It is not used ordinarily because of the fact that the price of cotton is too high. But there are 2,000,000 bales of cotton which brought $300,000,000 less than nothing. Mr. Fort. Because of inability to carry? Mer. CavernNo. Because of inability to carry; yes. Now, suppose that verybody who produced a bale of cotton had ‘chipped’ in to a fund by which the board or people under the direction of the board, could have bought 2,000,000 bales of low-grade cotton and sold it for 1 cent, 2 cents, 3 cents, 4 cents, or 5 cents, or whatever it would bring in an ordinary noncompetitive market. If they had burned that 2,000,000 bales of cotton in the public squares of the South the price would have come up on the balance of the crop $300,000,000. Mr. Fort. Possibly. Mr. Caverno. Not possibly but certainly. Merely holding it off of the market would not produce that result, but converting it into jute bagging would. There are bills before Congress to put a tariff on jute and jute fabrics. I do not think that is the best way to meet this situation. I think that should be left so that the surplus of the cotton crop, the low grades, could be used to compete with jute whenever that operation would make the total crop worth the most; in other words, in the case of the 1925 crop there are $300,000,000 to be added on the 14,000,000 bales as soon as we can get rid of the 2,000,000 bales. Mr. Fort. Then you believe that Government money or money raised under the Government machinery should be used to compete with the jute industry? Mr. Caverno. Well, they dammed steel out of the American market and I do not know why they should not dam jute out of it. Mr. Fort. I am not talking tariff. You want to process cotton? Mr. Caverno. Jute is a foreign product. Mr. Fort. And you want to process cotton? Mr. CaverNo. Jute is a foreign product. We have treated every foreign industry as not under our protective system. Mr. Fort. I am talking about processing. Do you want t process under your bill? Mr. CaveErno. Process what? Mr. Fort. Why, cotton. Mr. Caverno. Why, sure, we want to process it. You mean the board? Mr. Fort. Yes. 181 482. AGRICULTURAL RELIEF Mr. Caverno. No; we could arrange with manufacturers to make cotton bagging—they ave equipped for it now—on their jute machinery and would dispose of part of the surplus just exactly as you would wheat by export. Mr. KincHELOE. That is not contemplated under this bill? Mr. CaverNo. It can be done under this bill. Mr. KINCHELOE. You mean give the board the right to take raw material and manufacture it? Mr. CaviErno. The board would have in that case 2,000,000 bales of cotton on their hands. They have a right to dispose of it in the way which would make the maximum price of the whole crop, and distribute the cost of raising the price of the whole crop over the whole crop. Mr. KincuELOE. You mean it is contemplated in this bill that there might be some surplus cotton and the board has the power to say some manufacturer down there—take this surplus and contract with them and guarantee them against any loss, and whatever loss there is to pay out of the equalization fee to manufacture that stuff and take it off the market; is that contemplated in this bill? Mr. Caverno. No. Mr. KincaeLok. That is what I thought. Mr. Fort. I thought you just said it was. Mr. KincuELOE. That is what you said it was awhile ago. Mr. CavERNO. It is contemplated in my idea of it. It is one of the possible operations under the bill. Mr. Fort. Is it permissible under the bill? Mr. CaverNoO. I think so. Is it permissible to sell the surplus of wheat products under the provisions of this McNary-Haugen bill at a lower price? Is that permitted in the bill? Mr. Fort. Which bill? Mr. Caverno. In this bill. Mr. KincHELOE. Which bill are you talking about? Mr. Caverno. The McNary-Haugen bill. Mr. Fort. Yes; I think that is what it contemplates doing. Mr. CavERNO. But in cotton it gives an opportunity to sell the surplus not in a different geographical market, but in an ordinarily noncompetitive economic market at a lower price. That was brought out by Congressman Brand of Ohio in a speech on the floor of the House last year. I am not introducing that idea here for the first time. Mr. Brand explained that on the floor. _ Mr. Kincaeroe. I want to ask you one question that has been in my mind some time. Mr. Caver~o. Mr. Kincheloe, may I say ore word? The things which I see as possible in this hill are not inherently necessary in the operations of the bill. Some of my colleagues here might differ from me very radically in regard to this. I am trying simply to tell you how I see the bill might operate for the benefit of the producing ass. Mr. Kixcueror. Under section 7 of this bill it empowers this board or some other agency, whenever there is a surplus above the Tequirements of the country, to go out in the market and buy this surplus nd take it off the market, and do the best it can to dispose 2 1t. : et us take a concrete example—I am asking this for informa-1on, because it has bothered me a ood deal under the readine of this AGRICULTURAL RELIEF 483 bill: On the average we raise about 800,000,000 bushels of wheat in this country. Suppose the board finds the domestic consumption to be 600,000,000, and we have therefore got 200,600,000 surplus, and they say, this cooperative or marketing agency, “You gentlemen oo out and buy this 200,000,000 bushels of wheat and take it off the market and store it, or whatever is best to do with it.” Of course, it will be up to that cooperative or that corporation to buy that 200,000,000 bushels of wheat as cheaply as they can in order to keep down the equalization fee as small as possible. Mr. CaverNo. They would have to take it at whatever the market level happened to be. Mr. KiNncHELOE. I say, on the market level. Mr. CaverNo. Not on the market level. Mr. KincHELOE. Wheat is always sold on the world’s price. Mr. Cavervo. If I could have begun where I wanted to and not been interrupted by Doctor Aswell— Mr. KincHELOE. I am getting down to this: I am asking you, do you not think it is the natural thing for this cooperative or this corporation knowing that we need 600,000,000 bushels of wheat for our home consumption, and we have got 800,000,000 bushels in the country, and therefore we are going to take 200,000,000 bushels off the market, that they would go out and buy as cheap as they could? Mr. CaverNo. They should not if they were trying to operate under the intentions of the bill. Mr. KincHELOE. What should they do? Mr. CaverNo. That is not regular business; this is inverse business. The object is not to get stuff away from the producer as cheap as you can, but to give them as much as you can. Mr. KincHELOE. Of course, the price would be lower when they bought it before they take 200,000,000 bushels off of the market than it would afterwards, would it not? Mr. Caverno. I do not see that it operates that way at all. Mr. KincHELOE. Would not the purpose of this bill be in taking 200,000,000 bushels off of the market to increase the domestic price? Mr. Caver~o. Let me give you an illustration—— Mr. KincHELOE. I am not caring anything about your illustration. The point I am trying to make is that these corporations would go out and buy at whatever the market price is. It is the hope of this bill that after you take the 200,000,000 bushel surplus off that that Poni increase the domestic price at least to the extent of the tanff wall. Mr. Caveryo. You would not have to take 200,000.000 bushels off to increase the domestic price. The minute an agency went onto the market with as much money as necessary and said, “We are going to take it off; we are going to take the export wheat in this country off the market and put the Nation on an import basis,” that minute the price in this country would increase. Mr. KincHELOE. You deal in psychology, and I am trying to deal in facts. Mr. Caver~o. I am dealing in business facts. Mr. KincHELOE. I know that if you take 200,000,000 bushels surplus off the market, with the ability to hold it, that is going to increase the domestic price for the balance of the 600,000,000. I do not think for vou to sav that vou are going to do it it would increase AGRICULTURAL RELIEF the price of the 600,000,000 bushels. I do not think there is anything in that psychology or legerdemain, that would ipso facto raise it; 1 am not that optimistic. You have not answered my question. The point I am talking about and what is bothering me is, from whom are they going to buy that 200,000,000 bushels of wheat. They will buy it from the farmer who produced it, will they not? Mr. Caverno. No. Mr. KiNcHELOE. Where will they get it? : Mr. Caverno. The wheat will come off the market and go into export through the channels of trade. Let me illustrate that. Mr. KincreLOE. You are fuller of theory than anybody I know of. I am trying to get down to facts. I thinkI know how they would get that wheat. I think it would come from the fields of the farmer who raised it. I do not care what agency it comes through. They would pay the world’s price to them, would they not—the market price? Mr. Caverno. Not under the Haugen bill. Mr. KincaeLoe. What would they pay the farmer for the surplus? Mr. Caverno. They would pay him 26 cents above the world or Liverpool price to the man on the farm. Mr. KincaeLoE. Under the circumstances, I say. Mr. CaverNo. Yes; under the circumstances—the 800,000,000-bushel crop and the 200,000,000-bushel surplus. Mr. Kercuam. If the world price was a dollar; that would mean they would pay $1.26? Mr. CaverNo. Yes. The Liverpool price on any farm is known. You understand what I mean about that. That means that the Liverpool price on my farm is the Liverpool price less what it costs to get it there. Therefore, every man has a Liverpool price on his own farm. The board would start in with unlimited power to buy up wheat and would actually take the wheat off the market at the vg price. This is the Liverpool price on this table [illusrating]. Mr. KincHELOE. Let us put it at a dollar. Mr. Caverno. All right. Here is 42 cents which is tariff duty, and the board is going to take enough of this wheat off the market to put it on an import basis, which would be $1.42. Mr. KincHELOE. Right. Mr. Caverno. All right. How are they going to do it? They are zoing to take part of that 42 cents and finance the loss on exporting 200,000,000 bushels, and take the other part of it to be the increased price on the American market. There would be two American prices. Wheat will flow in from the farm at $1.27 basis. That is what the farmer will get. Mr. KinceHLOE. How do you know he will? That is what I want to get at. Mr. Caverno. Because it is necessary to go and buy the wheat. | Mr. KincueLoE. You said 26 cents awhile ago and now you say 27.. I want to know how you get either one of those. tT: Caverno. We are using 15 cents for the equalization fee and a means 26 cents by taking it from 42 cents. the fob? INCHELOE. How do you know it will take 15 cents to finance Mr. Caverno. Well, we will suppose ’ your agencies have actuall zone to work and bought 200.000.000 bushels and sent. it nbroad. 484 AGRICULTURAL RELIEF 485 and that the wheat has got to come in over the tariff wall. That will increase the American price to the consumer on that account 42 cents. Mr. KincHELOE. That is fundamental; I can see that. Mr. Caverno. Forty-two cents is not only the price it would bring, but it represents the artificial scale of American living, which makes it just for the people earning and living on that level to pay. Mr. KincHELOE. You have not told me why you are going to pay $1.26 for the 200,000,000 bushels surplus when they take it off the market. Mr. CaveErNo. Every man who sells a bushel of wheat knows when this operation is carried on he is going to have 15 cents taken out of the 42. Mr. KincHELOE. How do you know he is going to know that 15 cents is going to be taken off? Mr. CavernNo. That is what the board is going to do. Mr. KincEELOE. How do you know it is going to be that much? Mr. CaverNo. I say under our present crop and our present export. Mr. KiNcHELOE. I am putting it on the basis of 800,000,000 bushels. Mr. Caverno. Exactly. Mr. KincaHELOE. How do your arrive at the 15 cents? Mr. CaverNo. Because it takes that to finance it. Mr. KincBELOE. How do you know it does? Mr. CavernNo. Because everybody is using these figures. Mr. KincHELOE. I am not talking about everybody’s theories; I am talking about facts. Of course, there is more theory around this table than anywhere in the world. Take your lead pencil and figure how much loss there would be in buying 200,000,000 bushels at 42 cents above the world price. I do not think there is anybody living who could tell within 4 or 5 cents a bushel what this equalization fee is going to be. I think there are a thousand elements that enter into that, and when anybody comes around and tells me in advance how it is going to be, I would like to have them demonstrate it. A moment ago you said 26 cents, and I have not found out how you are going to get 26 cents. Here is what I have in my mind. I am going to state my own position, I can not get it from you. I imagine when this board goes to buy 200,000,000 bushels surplus and take it off the market they are going to buy at the world price. Mr. CaverNo. They are not; if they do, the bill fails. ; Mr. KiNncHELOE. Then there is not anything in this bill that says they are not going to buy at the world price. Mr. Caverno. Did you not vote for the McNary-Haugen bill? Mr. KINCHELOE. Yes. Mr. Caverno. Then what were you voting for? That is the very purpose of the bill. Mr. KiNcHELOE. Perhaps I was not voting for anything, but I was hoping it might benefit the farmer. Mr. Caverno. I thought vou knew what the McNary-Haugen bill was for. Mr. KiNcHELOE. I am trying to get some information from you, and I am frank to say I have not got any at all. If you will tell me how and under what provision of this bill this board is going to pay $1.26 a bushel for that wheat, for the 200,000,000 bushels it is going to take off the market, and that the farmer is going to pay 15 cents a 486 AGRICULTURAL RELIEF bushel on account of the equalization fee. If you take that position, that is exactly what I want to know. I want to know how you arrive at that? Mr. Caverno. All right. Myr. KincHELOE. You have not answered my questions. You have said everybody around here; you do not mean those not members of the committee. Mr. CaverNo. Around the table. Mr. KincueLoEk. I said, How do you know it is 26 cents and how do you know it is 15 cents? And you said everybody who has come around the table said so. Mr. Caverno. Those were the figures that were on the blackboard the last two sessions of Congress. Mr. KiNcEELOE. Who made those figures? Mr. Caverno. Anybody can make them. You can make them. Mr. KINCHELOE. I can make figures, and anybody can make them. The chairman has been saying he would get $1.50. The CrarMaN. I could tell the gentleman just exactly what that would be. It does not require any pencil at all. You can figure it out yourself. Just a minute and I will tell you. MT. KiNcHELOE. Let me ask the chairman a question. The CuarMaN. Ten and a half cents a bushel is what it would be. [t does not require a sharp pencil to figure that out. Mr. KINCHELOE. It may be clear to the chairman; I guess it is; I am not saying it is not. What do you say that this board is going to pay for the 200,000,000 surplus they are going to take off the market from the 800,000,000 bushels? The CralrMAN. They are going to pay exactly what he stated— the world price plus the tariff. Mr. KincEELOE. Then, if the world price is a dollar they are going to pay $1.42 a bushel? The CratrMAN. They are going to pay $1 plus 42 cents tariff, and freight 8 cents, total $1.50. Mr. KincHELOE. The witness has said they are going to pay $1.26 and you say they are going to pay $1.42. So I was just wondering what the fact was. The CramrMaN. Assuming the world price to be a dollar and the tariff 42 cents, and assuming the freight at our port of entry is 8 cents, the price would be established at $1.50, the board would pay the established price. Mr. KincaeLok. Then you do not agree with the witness that you are going to pay $1.26, but that you are going to pay $1.50? The CHAIRMAN. You mean $1.42. That all depends on the world market price. Mr. KincHELOE. It depends on a thousand things. That is what we were talking about. Mr. CaverNo. It depends upon but two things. Mr. KincHeLok. I will give it up. I am not getting the answer [ would like to have. Mr. Cavervo. It depends hinos— duty 8 hs wold ri upon only two things—the amount of Mr. KincHELOE. You said it did not depend on anything. Y UN | > g. ou said 16 w ould be £1.26. I asked you why you knew that, and you said est of those coming around the table said =o. AGRICULTURAL RELIEF 187 Mr. CavernNo. If you will give me a chance, I will tell you. Mr. KincHELOE. I have spent all the time I want to on this. Mr. Caverno. Mr. Kincheloe, will you listen to this explanation? Mr. KincHELOE. No, I am through. I tried to get you to tell me something awhile ago, but I did not get any information. So I do not think we ought to take any more time of the committee. Mr. CaviErno. All right, gentlemen. Shall I quit now? The CHAIRMAN. You may proceed. There have been so many questions. I understood you also wanted to discuss the wheat plan. Mr. Caverno. I wanted to discuss the very thing Mr. Kincheloe has been stopping me on. Mr. KiNncHELOE. I am not going to stop you any more. You go ahead. Mr. Caverno. I made this note the other day, that the equalization fee is not a tax; it is not a fee; it is simply a figure. Let us see what happens in actual trade. The price of wheat as it flows off the farm—if you will omit freight, and I am doing this {or simnplicity—I figure the Liverpool price at a dollar, and I fizure thie tariff at 42 cents. You have got to finance out of 800,000,006 bushels the loss on marketing the 200,000,000 bushels; and everybody has figured under those circumstances that 15 cents would do it, on a bushel. That would mean that the wheat would flow ofl the farms at $1.27 basis. It would come along from the farmer, and there would be a step-up transformer that would step up three-fourths of the crop to the American level of $1.42 cents per bushel. Two hundred million bushels of that has got to be stepped down to the Liverpool price. The farmer has nothing to do with the equalization fee. That is a paper transaction between the exporters and the people under the board who would accumulate this wheat— maybe export it themselves. The value on the market at the farmer’s price under those circumstances would be $1.27. The people would consume in this country on the basis of $1.42 per bushel, and the whole crop would finance the raising to the $1.42 basis by the equalization fee which was paid to the exporter. Mr. AsweLL. Who would actually pay it? Mr. Caverno. It would be paid under the direction of the board, the man who exports the wheat. Mr. AsweLL. Would not the producer actually pay it? Would it not be deducted from his price? Mr. Caverno. No. Mr. AsweLL. Where would it come from? Mr. Caverno. Just suppose you take a farmer and give him a stick and cut 200 notches in it, and let him mark off the Liverpool price of a dollar, and mark off the tariff of 42 cents, and the Tariff Commission says that is the price he ought to get; under this operation he could only get $1.27. Do you think he is going to look at that 15 cents in the equalization fee instead of the 27 cents in his pocket? Mr. AsweLL. Does he not actually pay it? Mr. CavErNo. No; he gets 26 cents more. Mr. AswerL. In the many years that I have been on this committee listening to this line of testimony you are the first witness who has dared to say that, and I think you are entirely wrong. Mr. Caverno.- He gets 15 cents less than the price to the American consuiner. 488 AGRICULTURAL RELIEF Mr. AswreLL. Then he pays it, if he gets less. Mr. Caverno. He gets 27 cents more than the world price, and that is the 15 cents less than the world price plus the tariff. But he gets 27 cents and fails to get the 15 cents; that is all. Mr. AxprESEN. How is that going to cut down production if he does not have to pay it? Mr. CaverNo. It will have a tendency to cut down production, because right before him is the proposition that if he does not raise a surplus he will get this 15 cents—that is, he will get the Liverpool price plus the 42 cents instead of 27 cents. Every day he knows that, and it is more visible on wheat than on cotton. The increased price for cotton is not so visible, because you have only the world price to peg to. With wheat you have a world price at the bottom and 42 cents duty, and so you can show every man just what he is gaining and just what he is losing. I want to make this statement in regard to the operations in cotton: That it gives the board the opportunity to raise the price of cotton by disposing of surpluses in whatever market they can, geographically or otherwise, so that the total price of the crop to the producer will be the maximum possible under the law of supply and demand. And with the use of the equilization fee they could actually make an experiment under the process of trial and error to find out exactly what that is. It enables them to put the price up to the point where they know that they have exceeded the maximum law of supply and demand price, because they have accumulated a surplus, and then save themselves from a loss on that surplus by having taken out an equalization fee large enough to finance it. Mr. Fort. Then by carrying that surplus they will have to have a lower price next year to take off the surplus of the old cotton. Mr. Caverno. it depends on the next year’s crop. But I think, Mr. Fort, you will see what I am driving at in the experiment to demonstrate what the maximum price under the law of supply and demand is without accumulating a surplus. Mr. AsweLL. Does Mr. Fort agree that the producer does not pay the fee? Mr. Fort. Of course, he does not, any more than the manufacturer of automobiles pays the 3 per cent tax on automobiles; he ndds it to the price. Mr. Caverno. Then he pays the fee, but he has a larger price so that his net is greater. Mr. Fort. Oh, that may be. But that does not make him pay the fee. The farmer does not pay the fee if he gets a larger net price. Mr. Caverno. Yes; he gets a larger net price, but if he gets too much then he has to take the excess out of the fee, leaving him with the maximum net price that he could get under the law of supply and demand. Mr. Fort. He has already got his net price; he has been paid. Mr. CaverNo. You are assuming a cotton operation now? Mr. CORT. Yes. Mr. Caverno. You are assuming the board has pegged the price higher than the consumer will absorb it. and thorefors accumulated a surplus? Mr. Fort. Yes. AGRICULTURAL RELIEF 189 Mr. CaveErNo. The farmer has paid his share in the surplus and got a price above the supply-and-demand price. : Mr. Fort. He does not get either profit or loss out of that operation until he is through. Mr. CaverNo. No; he puts up a deposit. Mr. Fort. But he does not get it back under this legislation. Mr. Caverno. No; but he has received by the operation of the board a certain advance in price, because they have pegged it high and only part of that has been taken out of the equalization fee to protect the transaction. Mr. Fort. Your idea is he ought to get the surplus at no profit and use the equalization fee to finance the transaction? Mr. CaAvERNO. After receiving a price more than the market justifies he gives back part of his excess, or at least deposits a part of the excess to protect that surplus. Mr. Fort. Under the loan bills it is proposed to lend the money and have that accumulated surplus carried by a corporation owned by the farmers, and in that way he actually carries it. Mr. Caverno. Yes; but if it is owned by the farmers, the other man on the outside has got the advantage of the high price and the man on the inside of the corporation 1s just like the cooperative carrying the surplus. It simply means that under the equalization fee every man carries that part of the surplus which he himself produces. Mr. Fort. He does not carry it when he has sold it; that is absurd; that is pure theory. Mr. Caverno. He carries it when he puts up his equalization fee. Mr. Fort. He puts up the cost for somebody else to carry it. Mr. Caverno. I can sell my cotton on the one hand at an increased price and buy a share in the surplus with my equalization fee on the other. Mr. Fort. Just a minute, Mr. Caverno. You say he is going to carry it. Suppose this board operates through cooperatives in cotton and advances them the money raised by the equalization fee to buy the cotton with. Now, they bry _.? Mr. CaveErNo. Yes. Mr. Fort. The board advances the money and the cooperatives buy it; who is carrying that surplus then? Mr. Caverno. It does not make any difference. Mr. Fort. Who is carrying it? Mr. CaverNo. Who is carrying the surplus? Whoever puts up the money. . Mr. Fort. Why? If the cooperative has bought it and owns it, with the money? Mr. CavErNO. You mean the cooperative bought it with its own money? : Mr. Fort. No; borrowed money—borrowed from the equalization ee. Mr. Caverno. If they are not able to get enough out of the transaction to pay the money back, the man who advances the money is going to lose it. _ Mr. Fort. If they are able to do it and make a little profit, who 1s paying it. Who 1s doing it then? 86160—28-—SER E. PT 6——5 490 AGRICULTURAL RELIEF Mr. Caverno. Have they ever thought how the maximum law of supply and demand price can be determined? : Mr. Fort. I am not asking you that. I am asking you who is to carry it. You say the farmer 1s to carry it. If the cooperative has bought it with this borrowed money, who is carrying it? Mr. CaverNo. 1 say, when the farmer has paid the equalization fee—all those equalization fees put together carry the surplus then for every farmer. ’ Mr. Fort. He has contributed the fund to carry it, but he is not carrying it? Mr. Caverno. He actually owns it. Mr. Fort. The farmer gets no profit on the operation. If the cooperatives make a profit, who gets the profit? Mr. CaverNo. There would not be any profit on the operation. Mr. Fort. Why not? Mr. CaverNoO. The design of the operation should be not to make rofit. Nr. Fort. There is going to be some profit, or some depreciation, is there not? Mr. CaveErno. Not if this bill works right. Mr. Fort. You mean they are going to work it so they are going to get exactly the same amount in dollars and cents for 16,000,000 bales of cotton if they buy that much as they paid for it? Mr. CaverNo. I was not figuring on buying; I was figuring on what the farmers were going to get. Mr. Fort. I am asking you this question: Whoever buys the cotton, how are they going to work it, if you know? Mr. CaveErNo. There would be no profit or loss if it works ideally Mr. Fort. Ideally, but are they going to work it practically? Mr. Caverno. They are; yes. Mr. Fort. Practically? Mr. CaveErNo. Yes. If they make a profit they have paid too low a price. Mr. Fort. I do not think the millenium is here. Mr. CaveErNo. That is not the millenium; that is a perfectly feasible business transaction. Mr. Fort. That they should just break even in buying two or three million bales of cotton? Mr. Caverno. If they should get the price too high they could correct the difference from a fund which they have already collected. Mr. Forr. Please listen to what I ask you. I asked you if the cooperatives, with the money out of the equalization fee, bought 2,000,000 bales of cotton and subsequently sold it, who gets the profit on that operation, if they make a profit? Mr. Caverno. It is not designed that the cooperative—— Mr. Fort. If they do make a profit, who gets it. Mr. Caverno. If anybody makes a profit, they make a profit. Mr. Fort. Who? The cooperative, does it not? Mr. CaveErNo. Yes. Mr. Fort. All right. Then, the individual farmer, who is not carrying, the surplus—— r. CAvERNoO. If they make a profit the i f somebody. Who do they make it out of? y make it out o a Fort. They make it out of the farmer and with his own 38 AGRICULTURAL RELIEF 491 Mr. CaverNo. It is not designed that they should make anything out of the farmer. It is inverse business; 1t is to try to raise the price and not make any money out of it. Mr. Fort. Is it the purpose to raise the price and make a profit? Mr. Caverno. No, it is a check against a loss. Mr. Fort. He is carrying the surplus and yet you say the profit does not go to him. Mr. CaverNo. The profit would go to him in the shape of a decreased equalization fee next year. Mr. Fort. Not all of it? Mr. CaveErNo. No; but over a term of years you will have that. Mr. Fort. The cooperatives are going to make some profit or else they are not going to handle it. Mr. CaverNo. In this transaction, no. Mr. Fort. Do you think they are going to handle it for love? Mr. CaveErnNo. Whoever is going to handle it is going to be protected from losses, costs, and charges in the transaction. Mr. Fort. Do you know about the animal side of this bill? Mr. Caverno. There are men who know more about that than I do. Mr. Fort. Do you think they are going to make contracts with the packers and not give them any profit? Mr. Caverno. I think they will have a normal profit in business transactions. Mr. Fort. Is the farmer then going to have to carry these hogs through his contribution? Mr. CavernNo. He pays the losses, costs, and charges in this transaction, but he does not pay all the packer’s profit. Mr. Fort. Nobody has ever said it paid all of it. They will make more, but they will make some out of the equalization fee. Mr. CaverNo. This veto message says the equalization fee guarantees total profit to the packers. Mr. Fort. I do not think it does. I have read that veto message several times. Mr. Caverno. It guarantees them—— Mr. Fort. It guarantees them an assured price: that is very different from total profit. Mr. Caverno. That is not what that says. Mr. Fort. Read it, will you? Mr. Caverno. All right; I will look it up afterwards. Mr. KincaELOE. Did you have anything to do with formulating this bill? Mr. CavErNoO. I sat in on the conferences. Mr. KincuELOE. Under former bills if there is any money left by reason of the farmers paying too much fee or by reason of profit in the transaction, then it is provided that that profit is prorated back 19.0 fartaer in proportion. I wondered why that was left out of this ball. Mr. Caverno. The difficulty of prorating back—— Mr. KincaeLoe. That is a question of bookkeeping. Mr. CaverNo. The farmer shifting around trying to make all these little payments—the idea is to leave it in the fund to reduce the equalization fee and pay it back that way. Mr. Jones. In the beginning you would have to make it a little more than necessary in order to be sure to have enouch? 492 AGRICULTURAL RELIEF Mr. Caverno. Yes. The bill fails of its purpose unless it raises the price more than the equalization fee. But in taking the cotton crop like the year 1925, where 16,000,000 bales of cotton sold for $300,000,000 less than 14,000,000 bales, certainly a board which would have financed the taking care of that surplus could have increased enormously the amount that the cotton grower received. Mr. Jongs. We have had a good deal of discussion ‘about wheat. There is a considerable amount of wheat grown in my section, and I was wondering how you arrived at this equalization’ fee. You have been talking about the amount of it. We have an 800,000,000 bushel crop as a rule and export approximately 200,000,000. The fee that is levied to take care of any losses on the exportation, in the discussions that have been going around the table have not, it seems to me, taken into consideration the 80,000,000 bushels of wheat which the department figures show that this country uses for feed. Mr. CaveErNo. You mean in processed wheat? Mr. JonEs. Some in dried and some in mixed form. It is fed in the form of mixed bran, it is fed in the form of wheat mixed with other feeds, it is fed some as straight wheat, fed to chickens and fed to livestock. Mr. CaverNo. That wheat is just exactly in the same class as the rest that stays in the domestic market. Mr. Jones. The farmer feeds it himself largely, the feed I am talking about. Mr. CavERNO. You mean made out of his own wheat? Mr. Jones. He uses the wheat on the farm, feeds it to chickens, mixes it and feeds it to hogs—we have fed it on my father’s farm many times, soaked the pure wheat in water and fed it to the hogs. Then there are some eighty-odd millions used for seed. Has that been figured out in taking care of this? Mr. CAVERNO. Yes. Mr. Jones. And then, of course, the farmer uses his normal percentage of the flour which, of course, he would not get advantage of. because it would be offset by the increased value of the flour. Mr. Caverno. That would not be taken into account. Mr. Jones. You think all of these things would be taken into consideration in figuring this offset? Mr. CAVERNO. Yes, sir; they have been. Mr. Jonks. That would take practically another 2,000,000 bushels; that would leave about 600,000,000 bushels with which to pay the the 200,000,000 bushels losses. Mr. Caverno. That which is fed the livestock straight and reserved for seed does not come into the transaction at all. 6 Mr. Jones. I was wondering if you had eliminated that in your gures. Mr. Caverno. That has been eliminated. Mr. Jones. And you still claim that 12 cents to be sufficient. Mr. KincHELOE. You put it at 15, one year in and one year out. Mr. Jones. Fifteen cents would pay for that? Mr. Caverno. The farmer's price will be $1.27 on the Liverpool price of a dollar. Mr. KiNcHELOE. The chairman said wou'd it be $1.50. Mr. Caverno. He took the freight into consideration and I did not. When it gets to the processor the price jumps up to the American AGRICULTURAL RELIEF 493 level, 15 cents above. There are 200,000,000 bushels exportable surplus, and it takes 15 cents a bushel on the whole crop and makes a generous margin for the equalization fee. Mr. Jones. You have to leave this 15 cents off of nearly 2,000.000 bushels. You have done that? Mr. CAvERNO. Yes. Mr. Jones. I was trying to get accurate information. Mr. CaveErNo. Based on 200,000,000 export and 800,000,000 crop. The larger the crop the larger the export surplus and the larger the equalization fee. Mr. JoNEs. And the more that goes into these items I have enumerated the larger the fee would have to be. Mr. CaveErNo. Yes; that is taken out. But you are paying for wheat to the farmer on the basis of $1.27, and he fails to get that 15 cents because he is raising an export surplus. Mr. Jones. To pay this 200,000,000 loss or failure to get the increase on the world price it would be necessary to make up a deficit of 42 cents under the American price? Mr. CaveErNoO. Yes. Mr. Jones. That would be some $84,000,000 involved in the failure to reach the domestic price. Mr. Caverno. You will find that figures out right. Mr. Jones. I am wondering if 15 cents a bushel on 600,000,000 bushels would only be $90,000,000, and the question of whether this 1s sufficient would depend upon how much of the total crop goes into items of seed, feed, and other farm uses. fdr. Caverno. I know that was winnowed out on the floor of the ouse. Mr. Jones. These figures in wheat were not discussed, were they? Mr. Caverno. Oh, yes; they have been taken into consideration. Mr. Jones. I did not know whether you had taken them into consideration in your figures or not. Mr. CaverNo. Whatever the amount of the equalization fee is, the farmer gets that much less than the Liverpool price, plus 42. Mr. Jones. And you are sure all these things were taken into consideration in arriving at the 15 cents? Mr. Caverno. Yes; with the equalization fee of 15 cents a bushel, the farmer would still be getting 27 cents a bushel on the part of the crop he puts on the market above Liverpool price. The crop flows from the farm on the $1.27 level. It is stepped up to the American level of $1.42, and the 200,000,000 bushels stepped down to the foreign level, and the whole crop pays the loss on the surplus exported. Mr. KincHELOE. Figuring your way, Mr. Jones, they would also pay the equalization fee on the 200,000,000 bushels fed? Mr. Jones. They would collect on that but not on these other items I mentioned. Mr. KincHELOE. I am like you, so far as arriving at the 15 cents a bushel is concerned, there is not anybody on earth who knows what it is going to be from one year to another. Mr. Caverno. That depends on the proportion of the exportable surplus. Mr. KincHELOE. It depends on the expense of operating. Mr. Caverno. You, yourself, volunteered—— Mr. Kincueroe. I did, for information: I wanted to get your PINION. 194. AGRICULTURAL. RELIEF Mr. Aswern. May I ask another question about cotton? I am interested in this cotton bagging question. We have a bill here before the committee on that. If there was a surplus of 2,000,000 bales of cotton under the Haugen bill, with your fee in it, could the board take that 2,000,000 bales, select the lower grade and sell it at a price so low that it would be a substitute for jute bagging, and then pay the loss out of the equalization fee? Would that be practicable? That would work out, would it? Mr. Caverno. They would do just exactly the same as with wheat. Taking that 1925 crop, there are 2,000,000 bales of cotton on top of 14,000,000 bales, making 16,000,000 bales and selling for $300,000,000 less than the 14,000,000 bales would have sold for. If that 2,000,000 bales of cotton had been burned or dumped into the Atlantic Ocean the balance of the crop would have brought $300,000,000 more. Mr. AsweLL. You may have to sell your 2,000,000 bales so low—— Mr. CaverNo. If you gave it away it would raise the price of the crop $300,000,000. Mr. AsweLL. Those people who owned it, how would they get anything out of it, the 2,000,000 bales? Mr. CavERNO. It is purely a question—— Mr. AsweLn. Then, according to your statement, 1 understand your board would find it good business to take 2,000,000 bales and give it away? Mr. CavirNo. It would have brought $300,000,000 more that way. Mr. AswerLL. I am thinking about the little fellow who owns some of the 2,000,000 bales. Mr. Caverno. The whole crop would come onto the market at a higher level. : Mr. KincHeLOE. Then, if this bill becomes a law you will not need those other bills. Mr. AsweLL. I am thinking about this little fellow. Mr. CaveErNo. He has got the market price for his cotton in his pocket. If that 2,000,000 bales were actually destroyed it would raise the price of the balance of the crop $300,000,000. Therefore, every penny you get for that 2,000,000 bales cuts down on the amount of the equalization fee. The equalization fee would have to finance the whole of it if we gave it away. Mr. AsweLL. Who would be owning that 2,000,000 bales at the time it was given away or used for bagging? Mr. Caverno. It would be owned by the equalization fee, and whatever they got from the jute manufacturer would be put in the equalization fund and cut down on the equalization fee, and every man would receive the market price for his cotton. I should say it would be the duty of the board to operate with every crop as long as agriculture is below par in a way which would bring the maximum price for the crop and most equally distributed to all those who raise it. That is one of the operations they could perform which would bring about that result. It is an indictment of our marketing system that we have no way In meet a situation like that in which 16,000,000 bales of cotton sold for $300,000,000 less than 14,000,000 would have sold for. There is lost $300,000,000 to the South and 2,000,000 bales of cotton, and one-half of that loss went out of the United State of America. AGRICULTURAL RELIEF Mr. JoNEs. More than half of that. Mr. CaverNo. Yes; more than half of that. Think of losing out of the South $3,000,000,000 because we could not handle 2,000,000 bales of cotton. Mr. AsweLL. We could handle it with my bill as well as the Haugen bill, in fact, better and it is a lot more simple. Mr. CaverNo. Yes; but it would not bring the same result. Mr. CLARKE. Does that finish your statement? Mr. CaverNo. One thing more. I spoke about having a centralized board to protect the interests of the farmers. I have here the figures on cotton freights in the South—Doctor Aswell, I want you to get this: Do you know that you can send a car of glass bottles from New Orelans to New York for one-half what you can a car of cotton? If the board is powerful enough—— Mr. AsweLL. That is for the Interstate Commerce Commission. Mr. CaverNo. Exactly. You made out that the cooperatives have not done very much. They have spent $20,000 in a fight for lower freight rates for the benfit of all cotton growers. Mr. AsweLL. I do not accept that statement. I did not say that the cooperatives are not doing very much. I said they were being destroyed by the overhead expenses, and I still say that; and the McNary-Haugen bill will put the cooperatives out of business; you will not have any cooperatives left. Mr. Caverno. It costs to ship from Hot Springs, Ark., to St. Louis, a car of mineral water, 92 cents, and it costs to ship a car of cotton from Hot Springs, Ark., to St. Louis, $337.50. Mr. AsweLL. How much difference is there in weight? Mr. CaverNo. One of them is 24,000 pounds, the mineral water; and the other 37,500 pounds. Mr. AsweLL. You mean $92.40? Mr. CaveErNo. I mean $92.40 as against $337 for cotton. Mr. JoxNEs. There must be a big demand for bottles in St. Louis and New York. Mr. AsweLL. That information does not have anything to do with the Haugen bill or the equaliaztion fee. Mr. Caverno. It has to do with the board protecting the interests of agriculture. Mr. AsweLL. That might be it exactly. That was provided for in Mr. Yoakum’s plan. Mr. CaverNo. But you can not get these northern men to agree upon a bill that will give something to cotton and will not give anvthing to them. The CralrMAN. Have you concluded your remarks? Mr. Caverno. I think I might as well. The CrarMAN. It is up to you. Mr. Caverno. If Doctor Aswell will put the equalization bee in his bill it will be a satisfactory bill. Mr. AsweLL. Would that be satisfactory to the President or to you? Mr. Caverno. I am not the White House spokesman. The CrairMAN. Without objection, the committee will stand in recess until 10 o’clock to-morrow morning. (Thereupon, at 11.45 o’clock a. m. the committee adjourned to meet to-morrow, Tuesday, February 21, 1928, at 10 o’clock, a. m.) 196 ‘AGRICULTURAL RELIEF WORLD-WIDE INDUSTRIAL CRISIS AND THE WAY OUT IN 1928 [A statement by George Shibley, director of the Research Institute of Washington, D. C.; member of United States Supreme Court Bar] Mr. Chairman and gentlemen of the committee, I am an independent economist, operating as the Research Institute of Washington, D. C. I am supplying my own funds. This I have been doing for 44 years, engaged in constructive researches. My biography is in “ Who's Who in America.” My purpose in presenting this statement is to place before you a description of the world-wide industrial crisis and the way out. To-day not only are the farmers in this Republic in distress, but this has existed for now the eighth consecutive year. While nature has been bountiful our National Government has been such as to injure the farming population, a third of the entire population; and all of the consumers of the products of the mines and of the factories have been taxed for the treasuries of the organized business interests. You, gentlemen of this committee, are familiar with this chain causation. (See accompanying table.) COMPARISON OF AGRICULTURISTS’ AND BUSINESS FIRMS’ PRICES The following index numbers are of the prices of 30 farm products and of the nonagricultural products, also the relative index numbers describe the relationship between the two. The base is 100, the average for the five years August 1909, to July, 1914. 910... - Y___ | 30 farm oroducts N onagricultural products x 0 10¢ ¢ 16 10 . 3 hy 0% .QG, Relative yurchasing power of farmers’ wroducets ¢ te 97 107 105 L mE Be mm mR ..¢ (March)... 1927 (September)... 30 farm products “16 Nonagricultural products 2. 16% 16¢ 171 162 165 161 Relative purchasing power of farmers’ nraoducts 85 69 74 79 83 89 85 82 92 In 1917 the drop in the business men’s prices in relation to farm products was when the liberal government during the World War took direct control of price regulation (food control act) and held the wholesale prices at the levels decided apon. . } After the close of the war the outlook was for falling prices—a falling price level and heavy losses by the business interests—and President Wilson by proclamation from time to time removed the governmental control of prices. Then unex: pectedly the Federal Reserve Board changed its policy of deflation to inflation, February, 1919; and other countries did likewise to increase profits in business and thus supply employment for the armies about to be disbanded. And the organized business interests were by the Government permitted to violate the antitrust law and shove up their prices in 1919. (See the relative index.) This condition continued year after year. After five years of severe losses to the agriculturists there was an approach to a restored equilibrium of prices, as pledged by the party in power, but then the National Supreme Court on June 1, 1925, by a vote of 6 to 3—with Chief Justice Taft in the minority—changed the national economic policy by validating an extreme form of the trade association of the organized business interests, and again disaster came back to the farmers in an extreme form, and to all consumers. (See the relative index.) It resulted in political revolution at the polls the next year, 1926. Ce. For May, 1921, the average for farm products was down to about two-thirds of the average for business men’s producte—the ruination of the farmers. Gradu- AGRICULTURAL RELIEF 497 ally during four years the farmers’ price level approached the business men’s price level until the Supreme Court’s decision in 1925, followed by the concerted raising of prices by the business interests plus other unfavorable events for the farmers, and their injuries affected most of the other groups, accompanied by the peaceful revolution at the polls in the party in power, 1926. In 1927 the slackening of demand for nonagricultural products was accompanied by price-cutting and the relative index number was up to 92 against last October—a new industrial epoch is here, a period of intense competition. The relative index number is published monthly in The Agricultural Situation by the United States Department of Agriculture. But you have not found in print nor has it been placed before you in these hearings an accurate description of the world-wide industrial crisis, nor have you been told the way out. An obscurity exists as to man’s future here on earth, accompanied by intense suffering by a considerable portion of the peoples of earth. However, an advance is again taking place and I am setting forth to you the real explanation of the causation of the existing world-wide industrial crisis, and I am describing the way out this year. III. EicHTH YEAR OF CONSERVATIVE GOVERNMENT The real explanation of the world-wide industrial crisis is that for now the eighth consecutive year in this Republic there has existed conservative Government—the Harding and Coolidge administrations, in connection with conservative majorities in both Houses. But there has existed an obscurity, as I have said. and all is doubtless for the best in the long run. THE PEOPLE'S PEACEFUL REVOLUTION. 1926 In 1925-26 under the leadership of the Iowa Bankers’ Association, there came about at the polls in the 1926 primary election within the Republican Party the people’s peaceful revolution. The vast economic losses to the growers of the staple farm articles—wheat, cotton, corn, and the products of corn, the fattened livestock—had extended to the other groups surrounding them, causing widespread demand for agricultural relief and resulting in the defeat of a few Congressmen for renomination—the Congressmen who had been standing with President Coolidge. Notably Representative Tincher, of Kansas, did not attempt to enter a contest for renomination. The incoming Congress, the existing Seventieth Congress, is pledged to agricultural relief, faced by another contest at the oncoming primary election for renomination. You, gentlemen of this House Committee on Agriculture, are taking testimony as to the most feasible form for agricultural relief. I proceed to present a picture of the world-wide industrial effects of the reactionarv economic policy of our seven vears of conservative Government. IV. OrcganizeD Business INTERESTS IN CoMMAND. 1921-1027 The organized business interests have been in command in this country during 1921 to 1927, inclusive, represented in the Government by officeholders who have been applying the ideals of the said business interests. Organized labor, however, is a balance of power industrially and politically, and their leaders have stood for the Watson-Parker railway law, of 1926, and got it. Wages and the conditions for the millions of railway workers are now fixed by agreement between the railway capitalists and the said workers without any veto power in the Government. Thus the Government has divested itself of power to protect the public from extortionately high wages among the few who are the leaders among the railway workers. And following the enactment of the new law there came a 714 per cent raise in wages for the railway leaders, at a time when the farmers were and are being robbed and nearly all of the ine dustrial groups are clamoring for the farmers’ relief. Further details of the existing system in which the organized business interests have been in comand, 1921-1927, are as follows: 2. During those years there have existed the trade associations, one in each channel of trade. and the Government did not hold the members of these trade 108 AGRICULTURAL ‘RELIEF associations within the restrictions provided for in the antitrust law. But during the last half of 1927 there came an intense competition between the business firms, resulting in new forms of business combinations, in connection with lower profits on the average, and in some industries selling below cost. Thus a new industrial epoch is in existence. The relative index number as between 30 farm products and the business interests has risen from 82 in March, 1927, to 92 in October, and a continuation at about that level. (See preceding table.) The number of private monopolies has lessened greatly. The prevailing condition is intense competition accompanied by eries for relief. 3. Beginning in January, 1928, another deflation was placed in operation by the Government commission, the Federal Reserve Board. In January there were sold by the reserve banks, by order of the reserve board, something like $180,-000,000 of Government securities, thus deflating to that extent the combined bank credit and money in use. (Weekly reports of the Federal reserve banks.) This was quickly followed by the raising of the bank rate, one after another in 10 of the 12 districts. President Coolidge has two representatives on that commission, who are the balance of power. They are deflating and thereby increasing the purchasing power of debts—inside favoritism for the creditor class, and against the business interests. Thus President Coolidge is doube-crossing the interests who selected im The crying need is either that President Coolidge shall reverse the deflation policy, or that Congress shall enact the Strong bill, instructing the Government commission to operate in the direction of stability, which should be the 1926 price level, 4. In 1922 the revision of the tariff on imports was by the application of a new principle—the differences between this country’s prices in 1922 and the prices abroad. This was in place of the protective tariff principle of allowing for the differences in the cost of production. In this country in 1922 there were monopoly prices (see preceding paragraph) and the 1922 tariff revision is on that basis, namely, the differences between this country’s prices in 1922 and the prices abroad. (Minority report in the Senate.) This monopoly tariff has been continued year after year, but with a recent vote in the Senate for revision, the McMaster resolution, 56 to 37, counting the pairs. 5. On June 1, 1925, our National Supreme Court by vote of 6 to 3 validated an extreme form of the trade association—the reporting to a common center in each of a few industries, the quantity of production and distribution, accompanied by concerted action among the producers in the industry to not overproduce and to hold up prices. (Cement case and Maple Flooring case.) This validation by our Supreme Court was followed by the almost immediate application of the new system to the other industries, from the Atlantic to the Pacific and from the Great Lakes to the Gulf, resulting in higher relative prices for the business interests, and lower relative prices for the farmers. (See the chart of relative prices supplied by the United States Department of Agriculture.) We have described five ways in which the dominant conservative Government has been operating, and four of these five ways of operation have been in behalf of the organized business interests, with the fifth method in behalf of the creditor class, and to the vast injury of all the other citizens. V., WORLD-WIDE IISASTER The results from the above-described operations as a whole in our vast Republic, were injuries in the nature of world-wide disaster except for the few citizens who constitute our business interests, plus benefit temporarily to our woge people after there was started the widespread building program of 1922, including automobiles. The disaster has come to— ] 1. Our farming population. Their injuries have been the worst as to the stap 2 farm products having prices at an international level: Wheat, cotton, corn, an the products of corn, namely, livestock. } ‘oh 2. Our consumers in general have been greatly injured by the relatively hig post of living. . 3. And disaster came also to the peoples in the other countries of earth, whose markets were invaded by our business interests by dumping abroad some of the surplus in this country from underconsumption. Following are the statistics by our Department of Commerce: A. The exports by the United States for the calendar year 1926 were 45 per cent greater than in 1913, quantitatively, while Europe's exports were 20 per AGRICULTURAL RELIEF 499 cent less, and the rest of the world’s exports were only about equal to their prewar volume. (P. 22, 1927 report of Secretary of Commerce.) B. A supplemental report in the Department of Commerce is that for the first nine months of 1927 the exports of the United States increased 3 per cent in value, amounting quantitatively to some 10 per cent increase, or a 50 per cent increase over 1913. (U.S. Department of Commerce reports, Dec. 26, 1927, pp. 772-773.) Loans to Europe by this country helped to supplv purchasing power for Europe in this country. THE EVIDENCE Thus the evidence is unimpeachable as to the disaster to the peoples abroad from the return of conservative government in the United States. INDUSTRIAL CRISIS The thickly populated countries in Europe have been borrowing capital in this country to keep going, to keep from an industrial breakdown and widespread starvation that would have been accompanied by the coming into power of the Communists, and worse and worse conditions that would have been accompanied, doubtless, by the usual orgy of wholesale executions of the propertied class. INTERNATIONAL COOPERATION FOR RELIEF October, 1926, there was issued an international warning. A statement was issued signed by prominent bankers in many lands urgently calling upon the nations of earth to recognize an acute industrial crisis, world-wide, caused, they said, “by the impoverishment of Europe’ from the loss of international trade. Next the League of Nations called the International Economic Conference to meet during May, 1927. It met at the international capital, Geneva. Two months before the assembling of the delegates to that economic conference there was published in London and in New York two editions of a book, The Road to Prosperity, by Sir George Paish, banker, London, who had helped to put forth the widely signed statement. In this book there are brought together much of the data on which the bankers had relied, the substance being ‘‘the impoverishment of Europe’ as the result of loss of international trade. Sir George Paish goes somewhat into detail in his book, and the conclusion he reaches is that Europe’s impoverishment is such that if its loss of trade shall continue ‘‘the consequences will be more disastrous than the failure to avert the political danger of 1914.” (P. 157.) PRESENT-DAY WORLD-WIDE CRISIS In other words, since the coming in of conservative government in the United States, March 4, 1921, there has existed relatively high prices by the organized business interests, accompanied by underconsumption and the dumping abroad of part of the surplus. This dumping has been at whatever prices would get the trade, thereby taking trade which normally should have gone to other countries, s0 as to supply them with raw materials and food. Paish does not trace it directly to the United States, lacking the data which we are supplying, in support of the aforesaid economic principle, are the relative index numbers of the United States Department of Agriculture, charted. THE BACKGROUND MORE IN DETAIL. The economic background more in detail is that since the opening of the Wrold War, in 1914, the United States has been in a position where her exports have exceeded her imvorts to the extent of something like $22.000.000.000—a fabulous sum. This has come in two periods: I. From the autumn of 1915 for nearly five years there was a rapid rise in our price level, with huge profits to the business interests. The people cried out against the high cost of living; and because of the relatively high prices to the consumers they were obliged to skimp in their pruchases, and cut down in the extent of their living quarters. That was the proper way to figth a hard-fought war. The United States exported its surplus from this underconsumption, thereby helping to win the World War. And in 1919 and 1920 our large exports helped the rest of the world to recover from the losses in the war. 500 AGRICULTURAL RELIEF 2. In the autumn of 1920 came our collapse of prices and vast numbers of unemployed and part-time employment. Thus our people’s purchasing power was greatly cut down—an increase in underconsumption. More goods were dumped abroad. For 18 months our disorganization increased. Business was stimulated by the Government commission, the Federal Reserve Board, by inflating the quantity of bank credit and money is use. (Hearings on stabilization of price level before the House Committee on Banking, 1926-27.) Also the tariff on imports was raised, on the basis of maintaining the privatemonopoly prices and excessive profits (see above, paragraph 4). For now the eighth consecutive year there have existed in our land the relatively high prices of the qrganized business interests, the outcome of reaction to conservative Government. THE PEOPLE'S PEACEFUL REVOLUTION, 1926 Then in 1926 there came at the Republican primaries the people’s peaceful revolution, as is set forth near the opening of this statement. The incoming Congress, the present one, is pledged to agricultural relief, and you, gentlemen of this committee, are taking testimony as to just what is the best and most available road to agricultural relief. A WORLD-WIDE ISSUER But the issue is world-wide, as I have pointed out.. And the causes of the economic distress are clearly understood. The shortcomings in arriving at the necessary remedies in this Congress and in the public mind are as follows: VI. SHORTCOMINGS BY FARMER LEADERS The farmer leaders have not been asking for the needed remedies. In 1922 [ issued a book in inexpensive form and distributed copies with the farmer leaders urging that the relatively low prices to the farmers be corrected by demanding the ending of private-monopoly prices of the organized business interests, operating through conservative Government. (Restoration of equal rights and prosperity by means of the new progressivism.) Months afterward I appeared before the Senate and the House committees on agricultural relief. AN OBSCURITY AS TO MAN'S FUTURE The explanation of the failure by the farmer leaders to demand the ending of the private-monopoly prices of the organized business interests has been the obscurity as to man’s future. For nearly 14 years beginning with the outbreak of the World War there has existed a hell on earth, years of sorrow, but now the clouds are lifting. This statement points the wav out industrially. VII. Ter Way Our In the year 1912 in this country there came a people’s peaceful revolution at the polls, followed by the beginning of reconstruction, commencing with the worst privileges; the privileges which were resulting in the bankers’ trust in Wall Street and the privileges to the business interests from the monopoly tariff. The remedies for these two sets of privileges were unexpected middle courses. The opposing political parties had each been partly right and partly wrong, and when the people came into power in place of the rule of the few there opened up an unexpected middle course, as follows: o. A muddle course.—The incoming liberal government, a progressive government, installed a protective tariff, in place of the business men’s monopoly tariff; and The incoming progressive government installed the Federal reserve system, in place of the bankers’ trust in Wall Street. This new Federal reserve system consists of unified control of the supply of bank credit and of money by Government supervision, through the Government commission the Federal Reserve Board; in combination with self-regulation by some of the banks, by majority rule in each of the 12 districts. Itisa system of industrial democracy, a new institution on our planet, paralleling political government. , The general application of this industrial democracy is to restore equal rights in industry—freedom. civil liberty, regulated competition. AGRICULTURAL RELIEF 501 The outcome.—The outcome is to be an unprecedented prosperity, with everybody delighted. In place of the existing world-wide industrial crisis and tendency to a second chaos, there opens up a fairy land, the forthcoming new age of peace and justice on earth. In biblical language, the coming of God’s kingdom on earth. In political science, the coming of liberal government in the new age. VIII. HisToRICAL SEQUENCE OF INDUSTRIAL DEMOCRACY I proceed to outline the historical sequence of the coming of the above-described industrial democracy. A. Federal Reserve System (See above) B. Queensland, 1922 In the State of Queensland, Commonwealth of Australia, in 1922, the labor government, consisting mainly of representatives of the agriculturists, started in on a new program: I. They abolished the senate, and they established the agricultural council, to consist wholly of direct representatives of the agriculturists, cooperating with parliamentary government. 2. There were started unified systems of cooperative marketing of agricultural products (monopolies) under the joint management of direct representatives of the agriculturists and of the minister of agriculture’s representative, for the public’s protection. 3. Aiding in the development of improved methods are the local branches of the cooperative associations in Queensland. In some instances an association handles several products. This unified cooperative marketing svstem of Queensland is highly developed in its details, both as to the system of organization and of supervision. There is supervision by the agriculturists’ representative and also by the Government's representative, so as to prevent mistakes of ignorance and of avarice. One of the outcomes is that by means of uniformity in accounting the association members ascertain the comparative efficiency of their managers. (Queensland Statutes, 1926, codifications entitled Primary Producers’ Organization; Primarv Producers’ Pools; and see dried fruit marketing act, 1923, 1925.) The manifest benefits to the agriculturists from this system of self-regulation by majority rule, in connection with Government supervision, is that marketing is done at cost, in an orderly manner, with unified price fixing by experts representing the producers, in connection with supervision by the Government's representative. Exporting is through a single office, at reduced rates for transportation because of ability to contract for the carriage of all of the crop. and to apportion the time for deliveries. Thus in the State of Queensland the primary producers of the main products have shut out the wholesale business interests. The remaining business interests are fighting as best they can the movement for eliminating useless expense, but they are helpless in Queensland. For one thing they have named the new system compulsory cooperative marketing. And that word compulsory is the name that is being used abroad including the United States. But here the news of this epoch-making event did not reach the public for nearly five years, during which time the farmers were suffering drom dreadful losses. Not until February 1927, in the Agricultural Economic Literature, United States Department of Agriculture, did a description appear in this country, and then as compulsory cooperative marketing. And the next month the bulletin continued the news. February 10, 1927, on the floor of the Congress in the closing debate in the House on the bill for agricultural relief, Representative Haugen placed in the Record a brief description of some of the features of the system of self-regulation and unified cooperative marketing abroad but without any proposed change in the bill. No change was being asked for by the farmer leaders. During the five years that the agriculturists in the United States were completely in the dark as to the merits of this improved system, their leaders and the progressive Senators and Congressmen were considering in session after session, bills for agricultural relief along lines: 1. That would raise prices to consumers, and therefore has met with an effective opposition. 2. That raised constitutional difficulties. 502. AGRICULTURAL RELIEF 3. The plan for agricultural relief has not included the ending of the unfair features of the business men’s trade association, one in each channel of trade, and the Government’s setting aside of the antitrust law. } The explanation of why an adequate relief for the agriculturists has not been secured in seven long years is that humanity have been suffering from a hell on earth: the coming down of the piled-up evil forces from wrongdoing in the past. There exists a moral universe, including free-will mankind, who reap as they sow. Lincoln described it in his second inaugural address. He explained the underlying cause of the Civil War—the wrongs committed by this people, and I am explaining the underlying cause of the World War and of the ensuing world-wide class war, not yet ended. But beginning in 1924 in Europe and in this country an advance was started, augmented in 1926 in this country by the nomination and election of an equal-rights congress, which now is in session, and I am proposing a workable plan for agricultural relief and relief for impoverished Europe. Returning to a description of the new institution of Industrial Democracy, in 1922 the pattern for the Queensland system was mainly original: the setting up of the agricultural council and the ending of the senate, along with unified cooperative marketing. However, the later codification of 1926 in Queensland shows that power has been taken from the agricultural council and placed with the minister of agriculture, the actual operations being conducted by the unified cooperative marketing associations, in each of which there is a representative of the minister of agriculture, who is responsible to the legislative assembly, which represents the public. In no other country has the agricultural council been imitated. It has become almost useless. In the United States there is no need for the proposed Federal Farm Board, provided the Secretary of Agriculture becomes the head of the Federal agricultural commission, as called for in the system I am proposing. In Queensland the farm products that are being handled in the new system include dairy products, meat, dried fruit, wheat, corn, cotton, peanuts, canary seed, arrowroot, millet, and eggs. By administrative order additional products are being added. The consumers in the home market are protected by appropriate regulations, including the issuance of rules by the state-wide boards of cooperative marketing, and on each board there is a representative of the minister of agriculture, whose action or failure to act can be brought up in the legislative assembly for consideration and vote. Also in each community there are the local producers’ associations, and for the State the agricultural council. Patterns that have been used in constructing and applying this Queensland system must have been the Federal reserve act of the United States, also the Brazilian coffee system, and the Yucatan sisal system. As to coffee in Brazil there is restriction of acreage, and that profits shall not be excessive, as that would cause too large an acreage. By international conference and agreement in the near future the correct amount of world acreage for the various products of the soil are to be arrived at.. We now are living in a new era: The possibilities of industrial democracy, parallel to political government. It is an unexpected middle course between communism and the private enterprise of a ruling few. In 1922 I explained the change in a book and also before the Senate and House Committees on Agriculture. but the time for relief had not yet come. _ The State of Queensland, of the Australian Commonwealth, is noted also for its 1922 act for unemployment insurance; and for its 1924 act for training apprentices; also its arbitration acts as to employers and employees. In 1924 the head of the Queensland government in his statement in the message by the Viceroy said that the unemployment insurance system “is now accepted as one of the most practical attempts made in Australia in recent years.” . In brief, in Queensland the business interests are not the ruling power—there is an equal-rights government, with new ideas in legislation and administration for the general welfare. But the monopolization of the marketing of a product is not a necessary element. The main thing is self-regulation in combination with government supervision, to apply only to the extent that shall be found helpful. Our Republic is 80 vast in area that the monopolization of marketing of a product need not apply Soaps as found to be desirable. Under national law the district will be ob ll State, so as to apply in interstate commerce, as the basis of hahions on ation; Zn State law will apply for state-wide regulation or for a AGRICULTURAL RELIEF C. NEW ZEALAND, 1922 503 The self-same year that the Queensland progressive government made its big start in industrial democracy, 1922, in neighboring New Zealand its progressive government installed the system as to meat—the meat control act, for unified cooperative marketing of meat, at cost. (Statutes of New Zealand, 1922.) There was put to a mail vote of the producers the question as to whether the system should be placed in operation, with decision by a majority of the votes cast. The next year, 1923, there was added the dairy produce export control act. Again a mail vote by the producers decided whether or not they would come into the system. In 1924 in New Zealand for the second time the system was extended, this time as to honey and fruit (apples and pears), and again by referendum vote. This for New Zealand. D. COMMONWEALTH OF AUSTRALIA, 1024 In the State of Queensland almost immediately after the founding of the agricultural council it called an interstate conference of the farmers of Australia to consider the founding of nation-wide industrial democracy. Soon after the adjournment of that conference the National Government of Australia installed the Dairy-Produce Control Board for the nation, the Dried Fruit Board for the nation; and the Australian Meat Council. (Commonwealth Acts, 1924.) Each is a unified system—a monopoly. The dairv-products svstem was installed as a result of a referendum vote by the producers, by mail. ~The driedfruit system was installed with power in the Governor General (the Government) to discontinue it after the first year. The meat-products system was not put to a vote. The packers were placed in the system, under the joint control of a majority vote in the Australian meat council, said majority consisting of primary producers, in connection with a veto power and power of initiative in the Government’s representative on the council. Each system is self-supporting from levies made bv the organization. This principle applies in all lands. E. UNION OF SOUTH AFRICA, 1925 The next year after Australia had made the start in industrial democracy, the Union of South Africa did likewise. By the fruit-export control act of 1925 there was established the fruit-export control board, with provision that— “From and after the commencement of this act no person shall export or ship fruit from the Union save under contract or other arrangement made by, through, or with the consent of the Fruit Growers’ Cooperative Exchange of South Africa, Limited (hereinafter called the exchange), and approved and authorized bv the board.” (Sec. 5.) A decision by the exchange can be appealed to the board, all the members of which are appointed by the Government—the equivalent of a commission in the United States, except that the minister is responsible to the two houses of Parliament. An added feature in South Africa is that— “The board may, with the approval of the minister, take such steps as it may deem expedient and practicable to equalize the rates of freight payable by exporters of fruit from any port of the Union during a particular period and to make all necessary arrangements for the payment of-such rates by exporters.” (Sec. 2.) At each port other than where the board is located it may appoint a committee of not more than three persons. Jntorceniens is provided for by establishing a penalty for breach of any reguation. Another act.—Also, by the agricultural industries advancement act, 1925, 50 per cent of certain kinds of producers may petition the minister, who is authorized to levy on all producers of the product a percentage on the sales. for one or more of the following purposes: ‘““(a) Experiment, investigation, research, or instruction; “(b) The construction or acquisition of buildings or other structures or works and the acquisition of land, livestock, machinery, implements, and equipment necessary to any of the purposes mentioned in paragraph (a); ““(¢) The advertisement and the more advantageous sales of the products: 504 "AGRICULTURAL RELIEF t(d) Any matter incidental to any of the purposes mentioned in paragraphs a), (b), and (c) of this section; and ““(¢) Any other means by which the minister is of opinion that it is in the public interests that the growth or production of the product will or should be promoted and encouraged; “Provided, That the minister has obtained the concurrence of the occupiers of factories or the cooperative societies or companies or the combination of cooperative societies or companies. on whose application the levy has been made, as to such means.” An additional provision is made for grading throughout the Union, to become effective whenever the producers of 50 per cent of a product have come into the system. (Sec. 10.) "Still another act.—By a lengthy diamond control act, 1925, there is established the Union Diamond Board of South Africa, with provision for limiting the quantity of diamonds to be disposed of by producers, and that the government may fix the minimum prices for diamonds. These several national boards are wholly named by the government. ¥. BRITISH COLUMBIA, 1927 In the Province of British Columbia, Dominion of Canada, on March 5, 1927, the following act was passed to its third reading and was approved: “An act respecting the marketing of fruit and other produce.” There is established by the act the ‘Interior Tree-Fruit and Vegetable Committee of Directions” called the interior committee, “with the exclusive power to control and regulate, under this act, the marketing of all tree-fruit and vegetables (including tomatoes and melons) being grown or produced within the the following boundaries,” etc., excepting “the marketing of any product for the purpose only of its being canned, preserved, evaporated, or otherwise changed from its natural state by any process of manufacture or treatment.” (Sec. 4.) The interior committee consists of three members, two appointed by the British Columbia Fruit Growers and Shippers Federation, and one member appointed by the minister of agriculture. This system above described may also be designated as self-regulation in fruit growing and distribution, in connection with Government supervision. It is industrial democracy, a new institution among mankind, parallel to political government. The marketing of fruit is at cost, and in an orderly manner to prevent glutting the market, with the shippers relieved of care and anxiety, and with no losses, probably, from the unsupervised commission merchants. It is a sensible, rational method. The recent international conference of last Magy, 1927, approved whatever method lessens the cost of production and distribution. Rationalization is the name. Everyone is benefited. The general idea of lessening the costs to the public is part of the new-age system. It is taking the place of the old-age system, that was built up by the ruling few, for their own posal benefit. That mechanism in industry is now outgrown and is about to be rebuilt on the basis of equal rights in private enterprise—regulated competition, civil liberty, freedom. GC GERMANY'S INDUSTRIAL DEMOCRACY In Germany by act of March 13, 1919, the coal industry was regulated effectively—a system of self-regulation by the citizens most vitally interested, in connection with Government supervision for the public’s protection. None of the industrial groups are dominating. National welfare is supreme in Germany's coal industry. Thus in Germany under stress of industrial conditions there came about the reign of law and order in the coal industry—s system of industrial democracy. It is equal rights in private enterprise. It is regulated competition, freedom, civil liberty. . This German system in the coal industry is described in Germany’s Industrial Revival, by Sir Philip Dawson, M. P., page 140; 1925. H. SumMARY As TO INDUSTRIAL DEMOCRACY The foregoing is an outline of the rapid spread of the new institution of industrial democracy. It is self-regulation of industry by the citizens most vitally interested, in combination with protection for the minority and the public by AGRICULTURAL RELIEF 505 Government supervision. The outcome is equal rights in private enterprise, a svstem of industrial democracy, parallel to political government. There can be made effective in industry a code of business ethics—a new idea; also there can be established and maintained a real equilibrium of prices—another new idea. I. ProgGraM FOR INDUSTRIAL DEMOCRACY IN THE UNITED STATES, 1928 In these United States there is in session the new Congress that is pledged to agricultural relief, and you members of this committee who are considering agricultural relief are invited to weigh the following program in three main parts for relief of the world-wide industrial crisis: 1. The plan is for an act of Congress that shall instruct the Government commission, the Federal Reserve Board, to aim to stabilize the price level. In 1925, at the opening of the Sixty-ninth Congress, I went to Representative James G. Strong, of Kansas, a leading Republican member of the Committee on Banking and Currency, and he introduced a bill for the stabilization of the price level. [ was the first witness at the hearings on the bill. There are 1,100 pages of testimony indexed. The plan for stabilization of the price level is feasible, and this present Congress, will, I believe, enact that the Federal Reserve Board shall aim at stability in the price level. As the law is being construed at present the Federal Reserve Board is authorized to deflate or inflate at will, and without limit. Our program as a whole is for the stabilization of the price level, accompanied by an industrial democracy, as follows: 2-3. I have two bills for consideration by this committee, Exhibits A and B. Exhibit A is for the Federal trade system, to include the commission on equilibrium of prices. A fuller description is: ‘“A bill to found the Federal trade system, for the nation-wide self-regulation of competition in trade in interstate and foreign commerce, under Government supervision except agriculture, and to include the founding of the commission on equilibrium of prices.” The second and supplemental bill, Exhibit B, is for the Federal agricultural system. A fuller description is: “A bill to found the Federal agricultural system, for nation-wide self-regulation of competition in agriculture in interstate and foreign commerce, under Government supervision, to include the orderly marketing of crops, and the possible limitation of acreage, plus an export bounty if necessary, thus to aid in maintaining an equilibrium of prices between the vocations, also to promote the development of cooperative associations in wholesale and retail distribution in interstate and foreign commerce, for the maintenance of competitive prices, thus to lower the cost of living.” The above described mechanism should be applied by liberal government— government aiming to maintain equal rights. More in detail the things to be achieved by this industrial democracy are: A. There is to be maintained an equilibrium between the prices charged in the various industries, including agriculture, so that the incomes of the various groups will purchase the output running at full speed. B. To attain this unprecedented prosperity there must be corrected the underconsumption of products in this country resulting from concentrated wealth. By means of a graduated income tax by the National Government this can be achieved. A precedent was in the World War when the business interests in this country which were receiving excessive profits were bv our National Government taxed 80 per cent, as a surtax. More in detail: In 1924 less than 1 per cent of our people who paid Federal income tax paid 78 per cent.’ - (Release of National Industrial Conference Board.) Nearly all of these very large incomes were reinvested, necessarily. This in place of being very largely consumed as will be the case when in this new age of universal suffrage and liberal government the aim shall be to apply intelligence, to the end that our industries may run full-handed continuously, or nearly so, and that Europe shall receive back her fair share of the exports to Latin America and the other parts of earth. That is the problem that is faced by our present-day equal-rights Congress, pledged to agricultural relief. The actual situation is that there is to be ended the world-wide industrial erisis. At present our exports are so large as the result of too high prices in this country by our organized business interests, plus underconsumption in this country because of concentrated wealth, that our dumping of products abroad has taken from the peoples of Europe a considerable part of their foreign trade and they are borrowing capital from us to keep going. R6160—28—SKR E. PT A— - 500 ‘AGRICULTURAL RELIEF They are on the verge of a breakdown unless our equal-rights Congress, or the one to be nominated and elected this year, shall remedy our underconsumption. The countries of Europe are planning to combine against us industrially and politically, but they are comparatively helpless to get back their fair share of the trade with Latin America and other lands. The only possible remedy is that the United States shall enact laws for the new institution, industrial democracy, in combination with ending our underconsumption from concentrated wealth. These two remedies will enable our people to receive their fair share of the output from our industries, including agriculture. The alternative.—The alternative to industrial democracy and the unprecedented prosperity is the fast apprcaching world-wide breakdown in industry, to be accompanied by universal conscription by our Congress—the complete ending of civil liberty and the confiscation of all property. In Europe would come the universal uprising of the masses for communism, in connection with an extreme form of class war and the killing of the more-developed families. This is in line with the prediction stated above by Sir George Paish. C. To attain the unprecedented prosperity in this country and in all lands, there must function the proposed commission on equilibrium of prices. The prices for products from the soil are still to be fixed by the relation between the supply and the demand; with the prices for the products from the mines and factories to be adjusted to the prices of the products from the soil, month by month. This is to be calculated by the experts in the employ of the commis-~ sion on equilibrium of prices. Intelligence is to be applied in the fixing of prices, in place of unregulated competition, dominated by the priviligists, the organized bigasss interests, a system of anarchism—the absence of the reign of law and order. D. The attainment of equitable prices in the several industries will be feasible provided the mammoth organizations of the wage people will consent to lay aside the strike. This was done here in the United States during the World War. Equitable adjustment of wages by the National Wage Board were made from time to time, together with allowing the wage people to organize. E. Part of the contract with organized labor should include an up-to-date form of profit sharing, similar to the system in the Dutchess Bleachery, at Wappingers Falls, New York State. Thus the present-day wage people in the factories and mines are to become partners with the capitalists—partners in the management as well as in the profits, and gradually pay off the capitalists from the earnings of the corporations. By this form of partnership the output can be increased some 30 per cent per hour per worker, plus an equal increase from running full handed. Hours can be reduced to eight universally, and everyone can be supplied with an equitable portion of the Nation’s income provided he or she does his part. A wholly new system of an unprecedented output can readily be attained. Equal rights are to be strictly applied, thus to prevent underconsumption. Social justice is to prevail. F. Among the forthcoming competing business interests, to consist of the larger part of the breadwinners of our population, the system of self-regulation by majority rule and Government supervision will extend to whatever degree of regulation shall be found beneficial to the producers and the public; that is, the ethics of doing business are to be made enforceable, as well as be decided by majority vote. For example, before a competing store or manufacturing plant can be opened there will first have to be secured a license, and the executive will have to be shown that the application of the additional capital and labor will benefit the public. But the established firms will be undergoing a thoroughgoing regulation in behalf of the public, which is not the case at present. To-day unregulated competition is relied on to bring the needed service to the public, and this system is now fleecing the public by secret cooperation among the Sompotitons by means of the trade associations and territorial trade alliances. a next Shap is » apply industrial democracy, by means of liberal government. Su) 3s 4 e lime 0 development. And because the public will be protected, as hed at the competitors will be protected from senseless injuries, intelligence there e Spled. In the past it used to be that railroads could be paralleled, pores 7 sacdling the public with worse than useless original costs, but when there Ain ¢ Lovernment commission to regulate the public utilities then part o e regulation was to protect the public from the senseless paralleling of ratroads. Now the new system of Government regulation is to be applied to all ou 0 : Uiinass for the mutual protection of all concerned. The existence of on esen ‘a ives 9 each industry on each national board will insure self-protection. zation and equity will be combined. The maintenance of equal rights AGRICULTURAL RELIEF 507 will become the law of laws, thus to bring about equitable distribution—the prevention of underconsumption. Everyone will be benefited. Civilization is to take on added attractions. For example, the present-day intense competition between the business units in each industry, with a few exceptions, is forcing a considerable proportion to sell below cost; whereas the application by Congress of the proposed Federal trade system will forthwith result in regulated competition, in the interest of all concerned. While excessive profits will be prevented there will also come stabilization for the capital invested. Among our farmers the installation of the Federal agricultural system will result in regulated acreage for the staple crops, with similar systems throughout the countries of earth. A new high level of precision will be brought ahout in agricultural production and distribution. Among the various improvements each large vield in a crop that is capable of being partly carried over will be thus handled by the use of the equalization fee, contributed by all who receive the benefit of the higher price, naturally. In fact, whatever the field of endeavor that the majority in an industry shall decide should be financed by the industry for its welfare, will be thus financed. In South Africa in the ostrich-feather industry this cooperative system for an entire industry is being applied, as I have set forth. In this country the advertising of raisins to increase the con. sumption is going to be paid for by all of the growers, in place of the existing system in which there is no way to collect from all who are benefiting by the advertising. IX. StmMMARY AND CONCLUSION o To INDUSTRIAL DEMOCRACY IN UNITED TATES The foregoing presentation shows: 1. Industrial democracy is a new institution, parallel to political government. 2. The application of this industrial democracy to this Nation’s industries, including agriculture, will benefit everyone. 3. The explanation of why there has been the delay in publicity for the new institution, industrial democracy, is evidently connected with some good purpose. At any rate now that publicity for it has come the duty of statesmen is to study it. You who are members of this House Committee on Agriculture are judges as to its merits, and I suggest that vou invite the various experts in industry and in Government to supply you with their views of my two bills. 4. The points of superiority of industrial democracy over the Haugen bill include the following: A. The relief needed is for the world-wide industrial crisis. The enactment of the Haugen bill would increase the evil conditions. B. The needed remedy, which we are proposing is self-regulation by industries by majority rule by the citizens most vitally interested, with protection of the minority and the public by Government supervision by liberal Government. The outcome will be regulated competition in the new age, a system of civil liberty, freedom. It will be a return to the basic principle of our Republic. The foregoing and much more 1 am setting forth in a volume of 300 large pages, about to be issued, the title being World-Wide Industrial Crisis and the Way Out in 1928. wa publisher is The New Age Press, Washington, D. C., 101 Second Street Later I hope to present to this committee the substance of the reviews. X: GENERAL SUMMARY As a whole, the general summary is that our proposed industrial remedies for the world-wide industrial crisis are: 1. The stabilization of the price level. This will end the business cvcle of good times and hard times. Continuously good times are to exist. 2. The stabilization of individual prices—the maintaining of an equilibrium of prices. The prices to be charged in each industry, including agriculture, are to be such that the products can be distributed with an output at full speed, or nearly so. 3. The ending of underconsumption from concentrated wealth. The time has come when either the underconsumption from this concentrated wealth is to be brought about intelligently or there is to come a world-wide wreckage. 508 AGRICULTURAL RELIEF 4. The extension of profit sharing. In the mines, factories, and in agriculture the system of ‘working on shares’ is to be extended in place of paying wages. The change is to include participation in the management by the workpeople— a system of capital-labor partnership (copartnership). (Wages will still be paid to some extent,) The increase in output from this source alone will be something like 30 per cent per hour per worker. Hours of labor will be reduced to eight or less universally; and present-day luxuries among the masses will become necessities, along with the complete ending of child labor, with increased schooling for the children, and women will again become home makers more largely. 5. The ending of our*monopoly tariff by restoring the protective tariff. This policy was recently voted in the Senate—adoption of the McMaster resolution by a vote of 56 to 37, counting the pairs. 6. There will be ended the power trust. As the railroads and the other public utilities, such as waterworks, have been brought under control by the people through their Government, so the supplving of electricity will be brought under control. The vote in the Senate which refused to permit the Senate to investigate the electrical power companies admitted that concealment of essential facts are being sought; plus the starting of a Nation-wide movement to defeat the renomination and reelection of the representatives of the power trust. 7. To achieve the above-described remedies in the people’s behalf for the nomination and election of Representatives and Senators who stand for equal rights. This Congress is pledged to equal rights, and just ahead is another primary election and then in the autumn the general election. The "alternative—The alternative to equal rights is world-wide wreckage. Humanity is at the crossroads; and our present Congress. isan equal-rights Congress! Exuaisit A FEpERAL TRADE SysTEM, IncLupiNGgG CoMMISSION ON EQUILIBRIUM oF PRICES A BILL To found the Federal trade system, for the nation-wide self-regulation of competition in trade in interstate and foreign commerce, except agriculture, and to include the founding of the commission on equilibrium of prices Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled: DECLARATION OF PURPOSE—COMMISSION ON EQUILIBRIUM OF PRICES Section 1. (a) To provide remedies for the unduly low net incomes for the agricultural population, now in the eighth consecutive year, and to provide remedies for the underconsumption of products from factories, mines, and farms, there shall be gauged an equilibrium of prices in interstate commerce. It will be nation-wide self-regulation of competition industry in interstate commerce, in connection with protection of the public by Government supervision. (b) Each year in July, and from time to time thereafter during the rest of the 12 months, there shall be calculated an equilibrium of the wholesale prices for the nation; that is, an equilibrium between the various groups of producers of commodities, especially as between the commodities which can be multiplied indefinitely, and the output from the soil and the water. (¢) The prices of the products of the soil and of the water are to be gauged by the law of supply and demand, in connection with unified cooperative marketing, also the possible use of crop insurance—a bounty in lean years, and in fat years an opposite system, in combined use year after year. (d) The wholesale prices at the mines and factories can be adjusted to the prices of the products of the soil and of the water. ] (e) The decision as to the relative prices at wholesale for interstate and foreign trade shall be by the commission on equilibrium of prices, the membership to consist of the Secretaries of Agriculture, Commerce, and Labor, also the chairmen of the Senate and House Committees on Agriculture, Interstate Commerce, and Labor, to serve in three sections—as representatives of the President, Senate, and House, decision to be in the agreement of two sections. Each House may instruct its committees. (f) The methods for regulating competition in the privately owned commerce oetween the States and in foreign trade are principally to be nation-wide self- AGRICULTURAL RELIEF 500 regulation within each industry by the citizens most vitally affected, with a veto power in the National Government, and power of initiative, for the equal protection of all. The origin of this plan is the Federal reserve act, to be improved upon; also later applications of this industrial democracy have been made in other countries. (g) The forthcoming system for the restoration of equal rights in the channels of trade shall supplement the nation’s antitrust laws, statutory and case law. (kh) There is need, also for the stabilization of the price level, as a basis for the stabilization of individual prices. () An improved agricultural system is provided for in a separate act. FEDERAL TRADE SYSTEM Sec. 2. There is hereby established the Federal trade system to consist of nation-wide self-regulation in interstate and foreign commerce (except as to agricultural products) by the citizens most vitally interested, by means of Federal trade boards and banking, to take the place of trade associations in interstate commerce, and be subject to supervision by the reconstructed Federal Trade Commission, with its policies to be subject to the approval of the policydetermining branch of the National Government. FEDERAL TRADE COMMISSION Sec. 3. The existing Federal Trade Commission shall become part of the Department of Commerce. The said commission shall consist of the Secretary of Commerce, who is the representative of the President, and be aided by eight assistant commissioners, to hold office at the will of the Secretary of Commerce; and each decision as to public policy, as distinguished from the decision of a question of fact, shall be subject to the approval of the policv-determining branch of the National Government. APPROVAL BY CONGRESS Sec. 4. (a) Each decision by the Federal Trade Commission as to public policy shall be subject to the approval by the people’s elected Representatives who by the Constitution are clothed with jurisdiction to decide the questions of national policy. To them shall be mailed a copy of each decision by the Federal Trade Commission, and upon request by a committee of either House of Congress, or the written request of 25 per cent of the Members of either House, or a request by the President, a decision by the Federal Trade Commission as to national policy shall be taken up promptly by Congress and be put to a yea and nay vote, the issue to be, ‘Does the Congress sustain the decision by the commission?” The action taken by Congress shall be placed before the President for an expression of judgment, and in case of disapproval of the action taken by Congress the issue shall be returned to Congress for the procedure provided for a vetoed measure. (bh) This right by Congress to call for a vote shall exist during the 40 days of the session of the two Houses following the date of the mailing of the copies of the decision by the commission.! (c) Until the expiration of the time for a request for a vote by Congress, the verdict by the commission shall not be enforced except in an emergencv, to be described bv the commission APPEAL TO THE JUDICIAL DEPARTMENT Sec. 5. To the extent that the decisions by the Federal Trade Commission are by the Constitution appealable to the judicial department, the commission shall prescribe the details whereby an appeal to the said department may be taken; and may include such other lines of decisions as in its judgment should be appealable to the Federal courts. 1 The above proposal is the system in use in the British Parliament for the ratification of the rules framed by the administrative departments, supplemental to the statutes. By means of this procedure the sovereignty of the people's representatives in the legislative department is maintained, and always the ones who frame an administrative rule have in mind the possible objectors in Parliament, who can secure a vote. Each year in Britain the bulk of these administrative rules that are almost wholly adopted by implied acceptance, exceeds the number of pages of statutes. Here in the United States it is high time that the legislative department shall insist on its dominancy—the ending of trickery in behalf of the busines: interests. 510 AGRICULTURAL RELIEF FEDERAL TRADE BOARDS AND THE COMMISSION Sec. 6. (a) For the nation-wide self-regulation by majority rule of the citizens most vitally interested in the competitive industries except agriculture, subject to Government supervision for the public’s protection, there shall be founded Federal jrade boards, to the extent that a product or service enters into interstate or foreign commerce. (b) There shall be included the j urisdictions covered by the trade associations in interstate commerce as they existed October 1, 1927, and hereafter it shall be unlawful for a trade association to operate in two or more States. (¢) The jurisdiction of the boards may be rearranged at any time. (d) The Federal trade boards shall be coordinated into federations or other forms for cooperation, so as to enable the boards to equitably and inexpensively Solve Io problems which may arise, such as the relations between manufacturer, wholesaler, and retailer. we Each Federal trade board may provide districts, each to be in two or more ates. (f) The Federal Trade Commission shall establish the trade boards and maintain them, using its judgment, and report annually to Congress. (9) The Federal Trade Commission shall possess power to veto proposed action by a board, and power to initiate policies. (h) For each regulation that is installed by the commission it shall mail a copy to each Member of the two Houses of Congress and the President, and the regulation shall be subject to the approval of Congress, as specified in section 4; also each regulation shall be published in the United States Daily, or be referred to; and each year the legislative reference division in the Library of Congress shall publish a collection of statutory rules and orders. Sec. 7. (a) In applying nation-wide self-regulation in industry other than agriculture and in connection with interstate and foreign trade, by the will of the majority of the citizens who are most vitally affected, on the basis of equal rights to all citizens, thereby to prescribe the nation-wide plane of competition and methods of distribution, there may be included: (1) Profit sharing as between capital and the workers; (2) a minimum wage and maximum hours; together with (3) other factory or mining regulations such as a combination of cooperative marketing and private marketing in a product; and (4) to regulate the voluntary organizations, such as wage workers and employers, by requiring the filing with the board of the agreements which take place within the voluntary organizations and pertaining to one or more elements in production or distribution. Such parts of a regulation as the Federal trade board accepts without a public hearing shall become operative in 40 days after filing: Provided, That the power of the Federal trade board shall be limited to regulations affecting interstate or foreign commerce until such time as a constitutional amendment shall authorize the use of nation-wide regulations in indusbry regardless of State lines. (b) Emergency—In an emergency, which shall be described in a regulation by a voluntary organization, the regulation may be placed in operation subject to the approval of the appropriate Federal board. {(¢) Procedure.—A regulation by private interests that has been approved b a Federal board may be disapproved. Wherever a regulation by private ion ests 18 not approved promptly by unanimous vote of the Federal board, there ob b © hi date for Dublie hearing, and all of the parties shall be notified, and (d) Plenary powers.—Each Federal trade board is authorized to install further details for securing notice to it of regulations by private interests affecting y : aah St reson mt hort be pep eal id mi bain ] ns judgment be helpful in installing and maining Se rights in interstate and foreign commerce. he te ol opprar License —(a) The Federal Trade Commission shall specify trade, or in a er ne or iiorsane god fort a th E | [ e or foreign trade, shall be AL shall have applied for and received a Federal license from the appro-5) Back Ped oan, either a trade or an agricultural board. each State except Virginia, ove Vhesiped {7 he Jssuiad oi on offic located in which sha i +! i) ' of a A] Jou be supplied from the National Lh claware. the citizens engaged in the i an oor trade organization, because it shall be National Govers ant fou hoe faogilanem, shall not be dependent upon the ES shall provide its own funds by taxation of culated. on the basis of the volume of business. AGRICULTURAL RELIEF 511 (b) At the start in each line of supervision, the organization may borrow funds to the extent of the anticipated 12 months’ income; and later may borrow to the extent of the previous 12 months’ income for each line of supervision. Sec. 10, REPORTS.—A series of reports shall be issued by each Federal trade organization and by the Federal Trade Commission, to include sheets for temporary use, promptly issued, and be sold to the public at cost of paper, press work, and binding, plus 25 per cent. Sec. 11. INVESTIGATIONS —(a) Each Federal trade organization shall from time to time investigate such parts of the industrial and trade activities as it is regulating, and the said organizations shall keep informed as to the manner and methods whereby the same is being conducted, and is authorized to obtain information that will enable it to perform its duties. (b) A representative of the organization, properly authorized, shall, by each person, firm, or corporation that is being regulated, be given access to the books and other sources of information concerning the subject matter being investigated. The representative may make a copv of such parts as are deemed relevant. All information received shall be held in strict confidence until released by order of the organization, and it shall retain in confidence the trade secrets and methods of operation except as publicity is provided by law. Sec. 12. WirNEssEs.—(a) Each Federal trade organization may call witnesses, either to testify or to produce documentary evidence relating to any matter under investigation. The request to attend as a witness may be signed by a member of the executive staff or by its examiner, who also may administer oaths and affirmations, examine witnesses and receive evidence. (b) Such attendance of witnesses may be required from any place in the Nation at any designated place of hearing, and testimony may be taken by deposition, by order of a member of the executive staff or by an examiner, before anyone having power to administer oaths. Any person may be compelled to appear and depose and produce documentary evidence in the same manner as in other proceedings. (c) Witnesses summoned before an organization or before an examiner or for the taking of deposition, shall be paid the same fees and mileage that are paid to witnesses in the State circuit court. (d) No person shall be excused from attending and testifying or from producing documentary evidence on the ground or for the reason that the testimony or evidence, documentary or otherwise, required of him may tend to criminate him or subject him to a penalty or forfeiture: Provided, That no natural person shall be prosecuted or subjected to penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he may testify, or produce evidence, documentary or otherwise, before the organization or examiner or in making deposition, except for perjury while testifying. (Substance of section 9, Federal Trade Commission act.) {¢) For compelling witnesses to appear and testify the organization and the examiner are herewith clothed with the same power with which the United States District Courts are invested. Sec. 13. To Conxpuct ResearcHEs.—Each Federal trade organization shall investigate and report on such subjects concerning its industry as may be assigned to it by Congress or by either House, or by the President, and shall act promptly. SEC. 14. INTERVENTION.—Any person, firm, or other organization may make application to be heard in connection with a proceeding before a Federal trade organization, or ask to be accorded the right to appear to question a witness, and upon good cause being shown, to be reduced to writing and filed, may bv the presiding officer be allowed to intervene. SEC. 15. The eight assistant commissioners to the Federal Trade Commissioner shall receive a salary of $—<—— per annum, payable monthly, by the United States. The commissioner and the assistant commissioners shall be reimbursed for actual traveling expenses, including hotel bill while away from home, incurred in the discharge of official duties. SEC. 16. AssisTanNTs.—(a) Each year the commission shall appoint a chairman and a secretary, each to serve until his successor qualifies. The salary of the secretary shall be $——— a year, payable monthly, by the United States. (b) The commission is authorized to employ such ofher assistants as its duties require and for which funds have been appropriated by Congress. The commission shall enact a rule as to the extent which an assistant or member of a board and employees of a board may be pecuniarily interested in an industrv which he is helping to regulate. (c) The merit system shall be applied within the commission and each board except (1) as to the secretary of the commission and a clerk to each assictant 512 AGRICULTURAL RELIEF commissioner; and (2) the secretary of each board and a clerk to each board member. (d) The Federal Trade Commission and each Federal trade board shall each name one of their number to cooperate with the United States Civil Service Commission in formulating the examinations for the eligible list. A graded system of salaries and promotions shall be adopted. Sc. 17. EMpLoYEEs.— The employees of the existing Federal Trade Commission shall be transferred to and become the employees of the enlarged commission, at their present grades and salaries. All records, papers, and property of the existing commission shall become the records, paper, and property of the enlarged commission; and all of the unexpended funds and appropriations for the use and maintenance of the existing commission shall become the funds and the appropriations available to be by the enlarged commission in the exercise of its powers conferred by law. Sec. 18. FurTHER DETAILS.—(a) The principal office of the Federal Trade Commission shall be at the national capital, but it may meet at any other place within the Nation and exercise all of its powers, and may act through a representative in any part of the Nation. (b) The commission shall possess a seal with the words, Federal Trade Commission, and on it an emblem. This seal shall be judicially noticed. (¢) Each board shall possess a seal, which shall be judicially noticed." (d) All of the expenses of the commission and of each board, said expenses to include all necessary expenses of transportation, shall be evidenced by itemized vouchers approved by the commission or board. Sec. 19. AssistanTs.—(a) Each year the commission shall appoint a secretary to serve until his successor qualifies. The salary of the secretary shall be $—— a year, payable monthly by the United States. (b) The commission is authorized to employ such other assistants as its duties require and for which funds have been appropriated by Congress. The commission shall enact a rule as to the extent which an assistant, including the assistant a may be pecuniarily interested in industry which he is helping to regulate. (¢) The merit system shall be applied within the commission and the Federal trade organizations except as to the secretary, and a clerk for each assistant commissioner, and to such of the officers of the Federal trade organizations as may be specified by the commissioner of the trade organization. _(d) The Federal Trade Commission shall name one of the assistant commissioners to cooperate with the United States Civil Service Commission in formulating the examinations in the legible list, including the employees, for both the Federal Trade Commission and the Federal trade organizations. A graded system of salaries and promotions shall be adopted. Sec. 20. AppITIONAL PROCEDURE.—(a) Service of papers.—The service of complaints by the Federal Trade Commission and by the Federal trade organizations, and other notices by them, may be by whoever they may authorize. (b) Service may be either (1) by delivering a copy thereof to the person served, or to a member of a partnership to be served, or to the president, secretary, or other executive officer or director of the corporation to be served; or ©) by leaving a copy thereof at the principal office or place of business. The verified return by the person so serving said complaint, order, or other process setting forth the manner of said service shall be proof of the same, and the return post-office receipt for said complaint, order, or other process registered and mailed as aforesaid shall be proof of the service of the same. Fe Agus —tng regulations to be issued by the commission, and by each ye rade organization, shall include those for the gathering and compiling of fniormation covering such parts of the field as may be deemed helpful, and shall Ie ol © 2 System of uniform accounting, also uniform revorts. and be verified (d) Cooperation by Government depa issi ment departments.—Upon request by the commission 3 by a Federal trade organization to any department or bureau of the National ent, i shall supply a copy or other form of documentary evidence in its Te the Foveriast by the Secretary of Commerce to any department or commission or Federal trade a a ueinls and employees to pie the President. av direct, subject to appeal to Sec. 21. LAW ENFORCEMENT—DAMA organizati - GEs.—(a) Any person, firm, or other organ ion vo sell suffer pecuniary loss because of the violation of this act ued by the commission or bv a Federal trade organization AGRICULTURAL RELIEF 513 may sue the wrongdoer in any United States court of competent jurisdiction and shall recover twice the amount of such pecuniary loss, together with costs, including a reasonable attorney’s fee. (b) A certified copy of the findings by the commission or by a Federal trade organization shall be admitted as evidence. Sec. 22. LAW ENFORCEMENT—SPECIAL ORDERS.—(a) The Federal Trade Commission and any Federal trade organization may issue a complaint against a person, firm, or other organization, stating that claim has been made that he or they are violating a law or regulation the enforcement of which is confided to the said organization. At the hearing if the claim is substantiated the said organization may issue a special order against the wrongdoer enjoining hin from doing the things which are declared to be unlawful. (b) Where the commission or a Federal trade organization by its own initiative issues a complaint, no suit by any person, firm, or other organization for damages shall lie for acts done before the issuance of the said complaint. Sec. 23. PENavLTIES.—(a) Any person who shall neglect or refuse to attend and testify, or to answer any lawful inquiry, or to produce documentary evidence, if in his power to do so, in obedience to the request and lawful requirements of the commission or of a Federal trade organization, shall be guilty of an offense, and upon conviction thereof under the procedure provided in this act shall be punished by a fine of not less than $500 nor more than $5,000, or by imprisonment for not more than one year, or by fine and imprisonment. (b) Any person who shall willfully make or cause to be made any false entry or statement of fact in a report required to be made under this act, or who shall willfully make or cause to be made any false entry in any account, record, or memorandum kept by any corporation, firm, or person, subject to this act, or who shall neglect or fail to make or cause to be made full, true, and correct entries in such accounts, records, or memorandum of all facts and transactions appertaining to the business of the corporation, firm, or person, or who shall willfully remove out of the jurisdiction of the commission or Federal trade organization, or willfully shall mutilate, alter, or by any other means falsify any documentary evidence of such corporation, firm, or person, or who shall willfully refuse to submit to the commission or other organization, or to any of their authorized agents for the purpose of inspection and taking copy, any documentary evidence of such corporation, firm, or person, in his possession, or within his control, shall be deemed guilty of an offense against the nation, and shall be subject, upon conviction thereof under the procedure provided in this act, to a fine of not less than $500 nor more than $5,000, or to imprisonment for a term of not more than three years, or to both such fine and imprisonment. (c) If any corporation, firm, or person required by this act to file an annual or special report shall fail to do so within the time fixed by the commission or board, national trade organization, and such failure shall continue for 30 days after notice of such default, the corporation, firm, or person shall forfeit to the United States the sum of $50 for each and every day of the continuance or failure, which forfeiture shall be payable to the Federal Treasury and shall be recoverable in a civil suit in the name of the Government, and be brought in the United States district court in the State where the corporation, firm, or person is doing business. The duty of the Federal prosecuting attorneys shall be to prosecute for the recovery of forfeitures. The cost and expenses of such prosecution shall be paid out of the appropriation for the expenses of district courts. (d) Any officer or employee of the commission or national trade organization who shall make public any information obtained by the commission or national trade organization without its authorization, unless directed to do so by a court, shall be deemed guilty of a misdemeanor, and upon conviction thereof in a Federal court shall be punished by a fine of not exceeding $5,000 or by imprisonment not exceeding one year, or by fine and imprisoninent. (e) If any corporation, firm or person who is being regulated shall willfully fail to obey a regulation lawfully in force, he shall be deemed guilty of an offense against the people, and shall be subject upon conviction thereof under the procedure of this act, to a fine of not less than $50 nor more than $5.000. or to both such fine and imprisonment. Sec. 24. DEFINITIONS.—(a) As used in this act the term “interstate commerce’ means commerce between the States, or between a State and a Territory, or between any State and the District of Columbia, or between the District of Columbia and any Territory. (b) The term ‘‘documentary evidence’ means all documents, papers and eorrespondence in existence at and after the passage of this act. 514 AGRICULTURAL RELIEF CONSTRUCTION Sec. 25. For the carrying out of the declaration of purpose, there isjherewith granted all of the necessary powers. SEPARABILITY OF PROVISIONS Sec. 26. If any provision of this act is declared unconstitutional or the applicability thereof in any respect shall be held invalid, the validity of the remainder of the act and the applicability to other parts shall not be affected thereby. SHORT TITLE Sec. 27. This act may be cited as ‘“ The Federal trade act.” ELEMENTS IN FOREGOING BILL 1. Industrial democracy, a new institution: The foregoing bill provides: for self-regulation in trade among the business firms, subject to a veto power and power of initiative in the Government’s legislative department for the protection of the public. (Secs. 1-8.) The methods of self-regulation are stated at sections 2-14 of the trade bill and sections 1-15 of the agricultural bill. The result of the system is to be regulated competition in industry, including agriculture, to include the limitation of acreage in the various crops in this country (sec. 7) and abroad. Also in mining and in the factories the self-regulation and Government supervision will attain an equilibrium of incomes, so that each industrial group, including agriculture, can purchase its fair share of the full-time output of the other groups. Such is to be the outcome of an intelligent regulation, here and abroad, the new system being industrial democracy, parallel to political democracy. It is to be a middle course between the unworkable communism and the old-age rule of the few. The middle course is to be equal rights in private enterprise, an outcome from regulated competition. It will be civil liberty, freedom. It will end the dreadful underconsumption. Everyone will be benefited. 2. The legislative department: In the proposed system the legislative department of the National Government is to retain a veto power as to the policies proposed by the Government commissions (sec. 4 in the trade bill and sec. 3 in the agricultural bill). No longer are the Federal judges, appointed for life, to possess a veto power as to economic policies, a system that was installed in Government commissions in this country after the voters had lost the power to rule by the installation of machine-rule party government (p. —). But now in the new age of universal suffrage a reconstruction in government and industry is taking place. It is to end the economic underconsumnption, so that factories. mines, and farms may run full-handed. 3. The administrative department: In the proposed system there is restored to the President a responsibility for the proper administration of the executive departments, by providing that in each Government commission its decisions shall be by the President's appointee in the department—the Secretary of Agriculture in the agricultural field. This is the policy that is being advocated by President Coolidge. The existing independent commissions for the decision of policies as well as the decision of questions of fact was invented in Illinois to defeat the granger uprising at the polls in the 1870's. There was defeated the rule of the people (p. —). Now there is to be restored an effective system of representative government, in connection with regulated competition, to result in an unprecedented prosperity. 4. The judicial department: In the proposed bills the judicial department of the National Government is to receive the judicial function (secs. 5 of the trade bill and 4 of the agricultural bill). The Federal judges, appointed for life, should not be vested with legislative power to veto economic policies. 5. Summary of the bills: The foregoing suggestions for two bills in Congress are the application of the principles of industrial democracy, that are in the Federal reserve system, with improvements. y 6. Yurines needs: Further needs are (1) for the passage of a bill for stabilizalon of the price level (p. 29) as a basis on which to stabilize the individual prices; (2) various other developments are to be brought about in connection with industrial democracy, so as to restore equal rights in private enterprise and end the underconsumption. ’ AGRICULTURAL RELIEF 515 ExHIiBIT B FEDERAL AGRICULTURAL SYSTEM A BILL To found the Federal agricultural system, for nation-wide self-regulation of competition in agriculture in interstate and foreign commerce, under Government supervision, to include the orderly marketing of crops, and the possible limitation of acreage, plus an export bounty if necessary, thus to aid in maintaining an equilibrium of prices between the vocations, also to promote the development of cooperative association in wholesale and retail trade in interstate and foreign commerce, for the maintenance of competitive prices, and to lower the cost of living. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled: FEDERAL AGRICULTURAL SYSTEM SecTioN 1. In combination with the Federal trade system and commission on equilibrium of prices there is founded the nation-wide self-regulatory Federal agricultural system hereinafter provided, which shall operate under the supervision of the Federal agricultural commission, subject to the approval of the policydetermining branch of the National Government. FEDERAL AGRICULTURAL COMMISSION Sec. 2. There is established the Federal agricultural commission within the Department of Agriculture. The said commission shall consist of the Secretary of Agriculture, who is the representative of the President, who is responsible to the citizens, the sovereign power. The said commissioner shall be aided by three ms commissioners, to be appointed by the commissioner and hold office at is will. APPROVAL BY CONGRESS Sec. 3 (a) Each decision by the Federal agricultural commission as to public policy, as distinguished from the ascertainment of a fact, shall be subject to the approval by the people's elected Representatives, who by the Constitution are clothed with jurisdiction to decide the questions of national policy. To them shall be mailed a copy of each decision by the Federal Trade Commission, and upon request by a committee of cither House of Congress, or the written request of 25 per cent of the Members of either House, or a request by the President, a decision by the Federal agricultural commission as to national policy shall be taken up promptly by Congress and be put to a yea and a nay vote, the issue to be, ‘Does the Congress sustain the decision by the commission?” The action taken by Congress shall be placed before the President for an expression of judgment, and in case of disapproval of the action taken by Congress the issue shall be returned to Congress for the procedure provided for a vetoed measure. (b) This right by Congress to call for a vote shall exist during the 40 days of the session of the two Houses following the date of the mailing of the copies of the decision by the commission. (c) Until the expiration of the time for a request for a vote by Congress, the verdict by the commission shall not be enforced except in an emergency, to be described bv the commission APPEAL TO THE JUDICIAL DEPARTMENT Sec. 4. To the extent that ‘the decisions by the Federal agricultural commission are by the Constitution appealable to the Judicial Department, the commission shall prescribe the details whereby an appeal to the said department may be taken; and may include such other lines of decisions as in its judgement should be appealable to the Federal courts. FEDERAL AGRICULTURAL BOARDS AND THE COMMISSION Sec. 5. (a) For the nation-wide self-regulation by majority rule of the citizens most vitally interested in agriculture, subject to Government supervision for the public’s protection, there shall be founded Federal agricultural boards, to the extent that a product or service enters into interstate or foreign commerce. (b) There shall be included the jurisdictions covered by cooperative marketing associations in interstate commerce as they existed October 1, 1927. {¢) The jurisdictions of the boards may be rearranged at anv time. 516 AGRICULTURAL RELIEF (d) The Federal agricultural boards shall be coordinated into federations or other forms for cooperation, so as to enable the boards to equitably and inexpensively solve the problems which may arise, such as the relations between producers and manufacturers. (¢) Each Federal agricultural board may provide districts, each to be in two or more States. (f) The Federal agricultural commission shall establish the agricultural boards and maintain them, using its judgment, and report annually to Congress. (9) The Federal agricultural commission shall possess power to veto proposed action by a board, and power to initiate policies. (h) For each regulation that is installed by the commission it shall mail a copy to each Member of the two Houses of Congress and the President, and the regulation shall be subject to the approval of Congress, as specified in section 3; also each regulation shall be published in the United States Daily, or be referred to. SEc. 6. (a) In applying nation-wide self-regulation in agriculture and in connection with interstate and foreign trade, by the will of the majority of the citizens who are most vitally affected, on the basis of equal rights to all citizens, thereby to prescribe nation-wide planes of competition and methods of distribution, there may be included: (1) Profit-sharing as between capital and the workers; (2) A minimum wage and maximum hours; together with (3) Other regulations, such as a combination of cooperative marketing and private marketing in a product; and (4) To regulate the voluntary organizations, such as wage workers and employers, by requiring the filing with the board of the agreements which take place within the voluntary organizations and pertaining to one or more elements in production or distribution. Such parts of a regulation as the Federal agricultural board accepts without a public hearing shall become operative in 40 days after filing: Provided, That the power of the Federal agricultural board shall be limited to regulations affecting interstate or foreign commerce until such time as a constitutional amendment shall authorize the use of nation-wide regulations in agriculture regardless of State lines. (b) Emergency.—In an emergency, which shall be described in a regulation by a voluntary organization, the regulation may be placed in operation subject to the approval of the appropriate Federal board. i (c) Procedure.—A regulation by private interests that has been approved by a Federal board may be disapproved. Wherever a regulation by private interests is not approved promptly by unanimous vote of the Federal board, there shall bs % Auika dos public hearing, and all of the parties shall be notified. and public notice shall be given. (d) Plenary powers.—Each Federal agricultural board is authorized to install further details for securing notice to it of regulations by private interests affecting interstate or foreign commerce; and each Federal agricultural board is directed to install such further regulations as may in its judgment be helpful in installing and maintaining equal rights in interstate and foreign commerce. - ) Sec. 7. FurTHER PowERrs.—(a) To regulate properly the Nation’s production and distribution as called for in the Federal trade act, section 1, the Federal agricultural boards and the Federal Agricultural Commission shall use their utmost powers, and are directed to do whatever is reasonably required, to include: (b) Authority to collect an equalization fee to provide for the cooperative carrying over of a surplus, while the cost of stimulating the export of surplus abroad for the maintenance of the prescribed equilibrium between the vocations should be by means of an export bounty, payable by the Nation. {c) The acreage in any crop may be limited and be apportioned on the basis of the acreage of the preceding year, with a right in each grower to exchange or sell his acreage right. An affirmation or oath may be called for, the penaltv for falsity to be as hereinafter prescribed. (d) For the maintenance of the equilibrium of prices in interstate commerce ig the crop year 1927-28, as decided upon by the national board on equilibrium > : Dies) the AGEL al commission is directed to provide the necessary export Y On agrien tural products by drawing upon the United States Treasury to the extent of $250,000,000. The said amount is hereby authorized to be appropriated by the Secretary of the Treasury as needed. y Co due or the lowering of the cost of living and to help raise prices to the pro trade board p oted by the Federal agricultural boards, and Federal il Gar0s, nd by the Federal Trade Commission and the Federal agricultural in en, V hus! of cooperative wholesale .and retail marketing in gn commerce, to include the right to buy and sell. AGRICULTURAL RELIEF 517 (f/) The Federal trade and agricultural systems shall aid in maintaining for the cooperative organizations an equal right in trade, as contrasted with the business organizations. (9) The Federal agricultural system shall frame ideal systems for use by the various wholesale and retail cooperatives, including uniform accounting. (h) Competition between the distribution by the cooperatives and the business organizations is hereby declared an established policy. Sec. 8. FEDERAL LiceEnse.—A Federal license shall be taken out by each Federal agricultural organization, in accordance with the provisions in the Federal trade act. Sec. 9. Funps.—Each Federal agricultural organization shall provide its own funds, and in accordance with the provisions in the Federal trade act, section 10. Sec. 10. AprprroPRIATION.—For the expenses of the Federal agricultural commission until the beginning of the fiscal year in 1928 there is hereby appropriated out of the moneys in the United States Treasury, the sum of $ . Sec. 11. RerorTts.— Reports shall be issued in the Federal agricultural system, and in accordance with the provisions in the Federal trade system unity act, section 11. Sec. 12. INvEsTIGATIONS. Each Federal agricultural organization shall from time to time investigate such parts of the Nation’s activities as it is regulating, and the said organizations shall keep informed as to the manner and the methods whereby the same is being conducted, and is authorized to obtain information that will enable it to perform its duties. (b) A representative of the organization, properly authorized, shall, by each person, firm or corporation that is being regulated, be given access to the books and other sources of information concerning the subject matter being investigated. The representative may make a copy of such parts as are deemed relevant. All information received shall be held in strict confidence until released by order of the organization; and it shall retain in confidence the trade secrets and methods of operation except as publicity is provided by law. Sec. 13. WirnNessEs.—(a) The agricultural parliament and each of its branches may call witnesses, either to testify or to produce documantary evidence relating to any matter under investigation. The request to attend as a witness may be signed by a member of the executive staff or by its examiner, who also may administer oaths and affirmations, examine witnesses and receive evidence. (b) Such attendance of witnesses may be required from any place in the Nation at any designated place of hearing, and testimony may be taken by deposition, by order of a member of the executive staff or by an examiner, before any one having power to adminster oaths. Any person may be compelled to appear and depose and produce documentary evidence in the same manner as in other proceedings. (¢) Witnesses summoned before an organization or before an examiner or for the taking of deposition, shall be paid the same fees and mileage that are paid to witnesses in the State circuit court. (d) No person shall be excused from attending and testifying or from producing documentary evidence on the ground or for the reason that the testimony or evidence, documentary or otherwise, required of him may tend to criminate him or subject him to a penalty or forfeiture: Provided, That no natural person shall be prosecuted or subjected to penalty or forfeiture for or on account of any transaction, matter, or thing concerning which may testify, or produce evidence, documentary or otherwise, before the organization or examiner or in making deposition, except for perjury while testifying. (e) For compelling witnesses to appear and testify the organization and the examiner are herewith clothed with the same power which the United States district judges are invested. Sec. 14. To Conpuct REsEARCHES.—Each agricultural organization provided for in this act shall investigate and report on such subjects concerning its industry as may be assigned it by Congress or by either house. or by the President. and shall act promptly. Sec. 15. INTERVENTION.—Any person, firm, or other organization may make application to be heard in connection with a proceeding before the Federal Agricultural commission or an agricultural organization provided for in this act, or ask to be accorded the right to appear to question a witness, and upon good cause being shown, to be reduced to writing and filed, may by the presiding officer be allowed to intervene. Sec. 16. ExisTiING REGULATORY POWER IN AGRICULTURE.—(a) The existing regulatory power of the Federal Department of Agriculture shall be exercised through the Federal agricultural commission created bv this act. 518 AGRICULTURAL RELIEF (b) All records and papers in connection with the existing regulatory power of the Federal Department of Agriculture shall be transferred to and become the records and papers of the Federal agricultural commission. Sec. 17. Fortaer Derains.—(a) The principal office of the Federal agricultural commission shall be at the National Capital, but it may meet at any other place within the Nation and exercise all of its powers, and may act through a representative in any part of the. Nation. (b) The commission shall possess a seal with the words, Federal agricultural commission, and on it an emblem. This seal shall be judicially noticed. (¢) Each board shall possess a seal, which shall be judically noted. (d) All of the expenses of the commission and of each organization in the home rule section of the Federal agricultural system, said expenses to include all necessary transportation, shall be evidenced by itemized vouchers approved by the appropriate organization. Sec. 18. Assistants.—(a) Each year the commission shall appoint a secretary to serve until his successor qualifies. The salary of the secretary shall be $— a year, payable monthly. (b) The commission is authorized to employ such other assistants as its duties require and for which funds have been appropriated. The commission shall enact a rule as to the extent which an assistant, including the assistant commissioners, may be pecuniarily interested in an industry which he is helping to regulate. {¢) The merit system shall be applied within the commission and the Federal agricultural organizations except as to the secretary, and a clerk for each assistant commissioner, and to such of the officers of the Federal agricultural organizations as may be specified by the commissioner of agriculture. (d) The Federal agricultural commission shall name one of the assistant commissioners to cooperate with the United States Civil Service Commissioners in formulating the examinations in the eligible list, including the employees, for both the agricultural commission and the Federal agricultural organizations. A graded system of salaries and promotions shall be adopted. Ske. 22. ADDITIONAL PROCEDURE. —(a) Service of papers—The service of complaints by the Federal agricultural commission and by the Federal agricultural organizations, and other notices by them, may be by whoever they may authorize. (b) Service may be either (1) by delivering a copy . thereof to the person served, or to a member of a partnership to be served, or to the president, secretary, or other executive officer or director of the corporation to be served; or (2) by leaving a copy thereof at the principal office or place of business of such person, partnership, or corporation; or (3) by registering and mailing a copy thereof addressed to each person, partnership, or corporation at its principal office or place of business. The verified return by the person so serving said complaint, order, or other process setting forth the manner of said service shall be proof of the same, and the return post-office receipt for said complaint, order, or other process registered and mailed as aforesaid shall be proof of the service of the same. {(¢) Regulations.—The regulations to be issued by the commission, and by each Federal agricultural organization, shall include those for the gathering and compiling of information covering such parts of the field as may be deemed helpful, and shall include a system of uniform accounting, also uniform revorts. to be verified under oath. id) Cooperation by Government departments.— Upon request by the commission or by a Federal agricultural organization to any department or bureau of the National Government, it shall supply a copy or other form of documentary evidence in its possession. Upon request by the Secretary of Agriculture to any department or bureau of the Government it shall detail such officials and employees to the commission or Federal agricultural organization as he mav direct. subject to appeal to the President. Sec. 23. Law EnrorcEMENT—DAMAGES.—(a) Any person, firm, or other organization who shall suffer pecuniary loss because of the violation of this act x of a regulation issued by the commission or by a Federal agricultural organiza-Lon ow, sue the wrongdoer in any United States court of competent jurisdiction and shall recover twice the amount of such pecuniary loss. together with costs, including a reasonable attorney’s fee. in ®) A certified copy of the findings by the commission or by a Federal agricul of the rps ion i be admitted as evidence; as also shall be a certified copy of its examiners or other he agr! cultura parliament or any of its branches or any AGRICULTURAL RELIEF 519 Sec. 24. LAW ENFORCEMENT—SPECIAL ORDERs.—(a) The Federal agricultural commission and any Federal agricultural organization may issue complaint against a person, firm, or other organization, stating that claim has been made that he or they are violating a law or regulation the enforcement of which is confided to the said organization. At the hearing if the claim is substantiated the said organization may issue a special order against the wrongdoer enjoining him from doing the things which are declared to be unlawful. b) Where the commission or any of the other organizations above described of its own initiative issues, a complaint, no suit by any person, firm, or other organization for damages will lie for acts done before the issuance of the said complaint. SEc. 25. PENALTIES.—(a) Any person who shall neglect or refuse to attend and testify, or to answer any lawful inquiry, or to produce documentary evidence, if in his power to do so, in obedience to the request and lawful requirements of the commission or of a Federal agricultural organization, shall be guilty of an offense and upon conviction thereof under the procedure provided in this act, shall be punished by a fine of not less than $50 nor more than $5,000, or by imprisonment for not more than one year, or by both such fine and imprisonment. (b) Any person who shall willfully make, or cause to be made, and false entry or statement of fact in a report required to be made under this act; or who shall willfully make or cause to be made, any false entry in any account, record, or memorandum kept by the corporation, firm or person subject to this act; or who shall willfully neglect or fail to make, or cause to be made, full, true, and correct entries in such accounts, records, or memorandum of all facts and transactions appertaining to the business of the corporation, firm, or person; or who shall willfully remove out of the jurisdiction of the commission or other organization, or willfully shall mutilate, alter, or by any other means falsif y any documentary evidence of such corporation, firm, or person; or who shall willfully refuse to submit to the commission or other organization or to any of their authorized agents for the purpose of inspection and taking copy, any documentary evidence of such corporation, firm, or person, in his possession, or within his control, shall be deemed guilty of an offense against the Nation, and shall be subject, upon conviction thereof under the procedure in this act, to a fine of not less than $50 nor more than $5,000, or to imprisonment for a term of not more than three years, or to both such fine and imprisonment. (c) If any corporation, firm, or person required by this act to file an annual or special report shall fail to do so within the time fixed by the commission or other organization, and such failure shall continue for 30 days after notice of such default, the corporation, firm, or person shall forfeit to the United States the sum of $50 for each and every day of the continuance or failure, which forfeiture shall be payable to the Federal Treasury and shall be recoverable in a civil suit in the name of the Government, and be brought in the United States District Court in the State where the corporation, firm, or person is doing business. The duty of the Federal prosecuting attorneys shall be to prosecute for the recovery of forfeitures. The cost and expenses of such prosecution shall be paid out of the appropriation for the expenses of district courts. (d) Any officer or employee of the commission or of a Federal agricultural organization who shall make public any information obtained by the commission or other organization without its authorization, unless directed to do so by a court, shall be deemed guilty of a misdemeanor, and upon conviction thereof in a Federal court shall be punished by a fine not exceeding $5,000 or by imprisonment not exceeding one year, or by both fine and imprisonment. ¢) If any cooperative organization that is being regulated by this act shall willfully fail to obey a regulation lawfully in force, it shall be guilty of an offense against the people, and shall be subject upon conviction thereof under the procedure of this act to a fine of not less than $50 nor more than $5,000, or by imprisonment of its chief executive officer not exceeding one vear, or by both fine and imprisonment. J) If any person shall willfully swear falsely or affirm falsely in connection with the administration of this act, he shall be guilty of an offense against the people, and shall be subject upon conviction thereof under the procedure of this act,-to a fine of not less than $500 nor more than $5,000, or by imprisonment not exceeding one vear. or by both fine and imprisonment DEFINITIONS Sec. 26. As used in this act— (1) The term ‘agricultural products’ include the products of farmers, planters, ranchers, dairymen. and nut and fruit growers. 520 AGRICULTURAL RELIEF (2) The term ‘food products” include groceries, meats, and all else that is food. (3) The term ‘“‘interstate commerce” means commerce between the States, or between a State and a Territory, or between any State and the District of Columbia, or between the District of Columbia and any Territory. (4) The term “documentary evidence” means all documents, papers, and correspondence in existence at and after the passage of this act. SEPARABILITY OF PROVISIONS Sec. 27. If any provision of this act shall be declared unconstitutional or the applicability thereof in any respect shall be held invalid, the validity of the remainder of the act and the applicability to other parts shall not be affected thereby. Sec. 28. This act may be cited as the “Federal agricultural act.” ELEMENTS IN FOREGOING BILL The elements in the foregoing bill are similar to the elements in the Federal trade bill, described above. SHORT TITLE AGRICULTURAL RELIEF C. NEW ZEALAND, 1922 503 The self-same year that the Queensland progressive government made its big start in industrial democracy, 1922, in neighboring New Zealand its progressive government installed the system as to meat—the meat control act, for unified cooperative marketing of meat, at cost. (Statutes of New Zealand, 1922.) There was put to a mail vote of the producers the question as to whether the system should be placed in operation, with decision by a majority of the votes cast. The next year, 1923, there was added the dairy produce export control act. Again a mail vote by the producers decided whether or not they would come into the system. In 1924 in New Zealand for the second time the system was extended, this time as to honey and fruit (apples and pears), and again by referendum vote. This for New Zealand. D. COMMONWEALTH OF AUSTRALIA, 1924 In the State of Queensland almost immediately after the founding of the agricultural council it called an interstate conference of the farmers of Australia to consider the founding of nation-wide industrial democracy. Soon after the adjournment of that conference the National Government of Australia installed the Dairy-Produce Control Board for the nation, the Dried Fruit Board for the nation; and the Australian Meat Council. (Commonwealth Acts, 1924.) Each is a unified system—a monopoly. The dairy-products system was installed as a result of a referendum vote by the producers, by mail. The driedfruit system was installed with power in the Governor General (the Government) to discontinue it after the first year. The meat-products system was not put to a vote. The packers were placed in the system, under the joint control of a majority vote in the Australian meat council, said majority consisting of primary producers, in connection with a veto power and power of initiative in the Government’s representative on the council. Each system is self-supporting from levies made by the organization. This principle applies in all lands. E. UNION OF SOUTH AFRICA, 1925 The next year after Australia had made the start in industrial democracy, the Union of South Africa did likewise. By the fruit-export control act of 1925 there was established the fruit-export control board, with provision that— “From and after the commencement of this act no person shall export or ship fruit from the Union save under contract or other arrangement made by, through, or with the consent of the Fruit Growers’ Cooperative Exchange of South Africa, Limited (hereinafter called the exchange), and approved and authorized bv the board.” (See. 5.) A decision by the exchange can be appealed to the board, all the members of which are appointed by the Government—the equivalent of a commission in the United States, except that the minister is responsible to the two houses of Parliament. An added feature in South Africa is that— “The board may, with the approval of the minister, take such steps as it may deem expedient and practicable to equalize the rates of freight payable by exporters of fruit from any port of the Union during a particular period and to make all necessary arrangements for the payment of-such rates by exporters.” (Sec. 2.) At each port other than where the board is located it may appoint a committee of not more than three persons. : Enforcement is provided for by establishing a penalty for breach of any reguation. Another act.—Also, by the agricultural industries advancement act, 1925, 50 per cent of certain kinds of producers may petition the minister, who is authorized to levy on all producers of the product a percentage on the sales, for one or more of the following purposes: ““(a) Experiment, investigation, research, or instruction; ““(b) The construction or acquisition of buildings or other structures or works and the acquisition of land, livestock, machinery, implements, and equipment necessary to any of the purposes mentioned in paragraph (a); “(c) The advertisement and the more advantageous sales of the products: [23 oo o Oo x0 < w © £ [oa TK od B © oO } ~~ <C ~ m ~ oO -— [=oN o ™ o DN o o -— [ 2b 3 fh as La | C53 - -— ¥ © pom ~ 5 3 r «J » 0) L E £0 a 3 N a " oN O I <5 5 =