In certain respects bill S. 1417 is at variance with these principles. In item 3 we set forth the principle that the control should be exercised by public agencies for the common welfare rather than in accord with the principle of so-called "self-government in industry.", The program provided by this bill for the control of prices and output, the Board believes, places authority with the private interest of the industry instead of reserving that authority to a public agency. The agencies established by this bill are to be semiprivate in their composition. The National Bituminous Coal Commission is to have 3 members out of 5 who have no financial interest in the mining, transportation, or sale of coal, oil, or gas. One of the other two members will represent producers and one member will represent employees. Thus the governing body is to have only a bare majority whose experience and point of view are free from a special interest in the industry.

Below the Commission is to be a code authority known as the "National Coal Producers Board." This code authority will consist entirely of producers and representatives of workers in the industry. It will contain no public representation. District boards subordinate to this code authority are to be composed in the same way.

None of these bodies is to contain any representation of consumers. Although labor relations are to be dealt with by a separate Bituminous Coal Labor Board, the interest of workers in the programs of market control to be carried on by the Coal Commission and the code authority has been recognized by providing labor representation on both bodies. This representation seems to us logical and desirable. However, we believe that control of prices and output is of as much interest to those who use coal as to the workers in coal mines; yet no provision is made to recognize the interest of buyers. Indeed, although the various sections of the bill which provide for appeal against various decisions state repeatedly that if producers are aggrieved they may carry their case to the Commission and that "parties in interest" shall be heard, at only one point is there any specific mention of consumers as parties in interest. This mention occurs, not in connection with the appeal of the decisions concerning prices, allocation of output, or permission for new mines to be opened, but in connection with a matter in which consumers have much less direct interest-namely, the question of whether individual coal producers shall be expelled from membership in the code and thereby deprived of their drawback on taxes.

The powers to be exercised by the agencies established in this bill are of such character that unless consumers as well as producers are represented, control is vested in the industry. The code authority is given power by the code to determine standard maximum tonnage which may be allotted to the various districts, and periodically to make actual allotments up to such a percentage of this tonnage as it thinks wise. The district subdivisions of the code authority are empowered to make similar allocations to individual mines. We should like to point out that the whole initiative in the control of production is thereby placed in the hands of bodies which contain neither public nor consumer representation. Although the Coal Commission is given a power of review, this power is distinctly limited. Complaints by district boards and individual producers may be heard and may lead to an increase in quotas for the complainants. The Commission's

approval is required for the transfer of quotas from one mine to another and for the opening of abandoned mines. However, any more general control of the system of allocation is provided for only in the case of failure or refusal of the industry boards to make the allocations. There is no provision for the initiation of complaints by the consumers of coal.

If output is to be allotted even the fullest powers of review are not sufficient to protect the consumers' interest. The principle set forth by point 3 of our statement would require that the allocation should be undertaken by public rather than private agencies. In this bill not only are private agencies to be entrusted with the power, but public review of their actions would seem to be inadequate to meet our objective of "control for the common welfare."

The common welfare does not seem more adequately protected by the provisions for the control of prices. True, the power to control minimum prices is to rest in the National Bituminous Coal Commission, but these minimum prices must be based upon average cost of production, exclusive of allowance for depreciation or depletion. The discretion of the Commission is seriously limited by this formula. Moreover, district subdivisions of the code authority for the industry are empowered to submit a list of maximum prices for the Commission's approval or modification. The principle to be used by the Commission is apparently to be that such prices shall not be less than (but may be more than) would provide a fair return upon investment. The submission of maximum prices by an industry group can hardly be more than a guess as to what the traffic will bear, unless the Commission is prepared to undertake an active review of these maxima. If it were undertaken, the Commission would have the problem of trying to determine the investment in the many mines of a far-flung industry and the duty of permitting a return upon that investment in spite of the fact that these mines represent producing capacity about double what the country needs.

Furthermore, the Commission may adopt rules whereby district boards or marketing agencies "May provide for fair competitive prices and practices in such markets." Apparently the Commission's discretion in setting up such rules is absolute; and the members of the industry are free from control by the antitrust laws if they are permitted to fix prices under these rules. A striking aspect of the plan is that the only provision for the hearing of grievances against the operation of agreements of this character is one which permits district boards or marketing agencies or code members, but not consumers, to protest. Such a program might conceivably lead to collusive price fixing by the members of the industry at any figure up to the maximum proposed by the members of the industry and approved by the Commission. This would not, in the Consumers Advisory Board's definition of that phrase, lead to "control for the common welfare.

The third part of the bill also deals with a point made in our statement, namely, that "A principal purpose of such control should be the conservation of natural resources." This is the part of the bill that provides for the establishment of a national bituminous coal reserve. But here the bill goes far beyond the objective we set in our statement. In buying or condemning lands, the Commission is required to give due consideration to "the value of machinery and equipment that may be in use in the mining of such lands." In this

provision, the bill may authorize the conservation not only of the Nation's coal resources, but also of the investments of mine operators who have equipment they can neither operate profitably nor sell to any one except the Government.

There is one further discrepancy between the position taken by the Consumers' Advisory Board in the quoted statement and the provisions of this bill. The Board has stated that "Any set of output restrictions should be accompanied by a tax which will appropriate for public use the increase in the industry's income attributable to these restrictions." Under the provisions of this bill the money for the purchase of lands and the rehabilitation of miners is to be raised by a tax of 10 cents a ton upon the annual bituminous coal output. This tax will, of course, be passed on to the consumer in the price of coal. Indeed, it seems probable that the effect of price fixing, allocation of production, and the withdrawal of certain coal property into a national reserve will be to raise the price of coal and the profits of coal mines. If so, it would seem in the public interest to ask the operators who are beneficiaries of such a program to bear its costs. It is very probable that the increased price of coal will in itself provide a new burden for the consumer, even if an additional burden of taxation is not added. Therefore, it would seem to use wise to levy a special tax upon coal-mining profits and to make this tax the first source of revenue for the administration of the bill. If the proceeds of such a tax should prove inadequate to finance the program one might then consider whether there would be justification for a tax upon the consumers of the product.

We have tried to point out wherein the machinery of the bill does not meet the specifications set forth in the statement of the Consumers' Advisory Board which already appears upon your record. First, the bill neither provides for consumer representation nor reserves the control of prices and output to public rather than private agencies. Indeed, spokesmen for the consumer now have more voice in the operation of the bituminous-coal code under the National Industrial Recovery Act than is provided in the proposed bill. Second, a considerable portion of the bill's effect might be to conserve even the unwise and excessive investments of coal operators, perhaps at some sacrifice to the conservation of the natural and human resources of the industry. Third, the bill makes no provision for recovery of the excess profits which it may incidentally create, but instead provides for a tax upon consumption.

Although the statement of the Consumers' Advisory Board which has already been read into your record means that the Board is in sympathy with a program of conservation in the coal industry to be undertaken by Federal control, it should not be used as an unqualified endorsement of the provisions of this bill. For this reason the Consumers' Advisory Board is grateful for the opportunity to make its position clear.

Senator NEELY. Mr. Lewis the committee is ready to hear you.

STATEMENT OF JOHN L. LEWIS, PRESIDENT UNITED MINE WORKERS OF AMERICA

Mr. LEWIS. Mr. Chairman and members of the committee, I appear for the United Mine Workers of America and the proponents of the bill in refutation of some of the criticisms that have been revealed

against the proposed legislation by witnesses, and in affirmation of the principles set forth in this proposed enactment.

I think the most impressive point developed by the hearings is the evidence of an evolutionary group within the industry and the recognition of cooperation and stabilization.

There is a marked contrast between the atmosphere of this hearing and the one which was held 3 years ago by the Senate Committee on Interstate and Foreign Commerce, which hearing was held at the beginning of 1932, when the Davis-Kelly bill was submitted. This spirit evident among operators at the present time, which, to a very large degree, is cooperative in the search for a solution of the problem of the coal industry, was lacking among the operators at that time.

Cooperation and stabilization were then deemed impossible by the industry on its capital and operating side. Only a scattered few among the operators appeared before the committee in support of the Davis-Kelly bill. That situation is contrasted by the appearance before this committee of some outstanding operators of the bituminous-coal industry and recognized leaders of that industry.

Heretofore the whole industry was still dominated by a fear of large railroad, utility, and industrial buyers, railroads especially. At the present time many operators have demonstrated their desire to become free from the rather sinister influence of the railroads and the utilities, and are exercising their natural prerogative of citizens and exercising their natural rights to defend their investments, and are appearing courageously before this committee asking for the enactment of legislation to protect their investments and to enable them to pay a living wage to their workers.

The Senators may recall that the investigation of the railroad fuel question by the Senate Committee on Interstate and Foreign Commerce in 1928 revealed what to the public and to the Congress was an astonishing fact; and that is that almost without exception over a period of 5 years the railroads were buying the entire locomotive fuel supply for the railroad system of America at a price substantially below the actual cost of production to the coal operator who sold the railroads the coal.

The railroads at that time were producing, purchasing, and consuming substantially one-third of the total bituminous output of the country's mines. Evidence is on file with this committee to the effect that they paid for that production from a minimum of 5 cents a ton below cost to a maximum, in one instance, of $1.30 a ton below the actual cost per ton.

In other words, the railroads for a great number of years have systematically and methodically been using their vast purchasing power, crystallized to an enormous degree, to prey upon the coal industry and to purchase their locomotive fuel from the industry, playing one operator against another, one field against another, and at a price actually below the cost of production.

Certain railroads have shifted their tonnage purchases from one field to another until they have brought the operators of the first field to their knees and compelled them to accept the prices which the railroads wanted to pay.

They have shifted their buying from one State to another for the same purpose. They have wrecked the coal companies. They have compelled obedience to the railroads' wishes, insofar as the buying of fuel coal is concerned.

All of these things are matters of record for the 5-year period up to and including 1928 in the files of this committee.

Since that time the railroads have continued the same policy, insofar as it was practicable, expedient, or possible. Up to the enactment of the National Industrial Recovery Act the railroads were following the same policy, and had beaten down the price of coal to a point where it was absurd. Contracts were made as low as $1.15 a ton, $1 a ton, 90 cents a ton, 85 cents a ton, 75 cents a ton, and in one instance the New York, New Haven & Hartford had a contract in northern West Virginia for as low as 5%1⁄2 cents a ton.

The operator fulfilling that contract, or contracts of a similar nature, was simply unable to pay his mine workers anything that corresponded with a living wage. He was unable to pay his power bills. He was unable to pay his supply bills. Inevitably he was drifting into a receivership and eventual dissolution of the assets of his company.

In northern West Virginia, where many railroads were buying fuel coal prior to the enactment of the Industrial Recovery Act, the price per ton paid to the mine workers who mined the coal and loaded it into the mine cars was as low as 22.5 cents a ton. That is about four times less than it would cost in Washington to wheel a ton of coal from the curbstone to a cellar, if you had to hire a man with a wheelbarrow to wheel that in, because it would cost $1 at least.

Yet those men were compelled to pay for their own explosives, buy their own tools, keep their own lights going, and take care of the wear and tear of their mining clothing for 22.5 cents per ton, due to the fact that the railroads and the utilities and the steel companies had raided the coal industry.

When the Recovery Act was enacted in June 1933, when hope for the rescue and revival of profitable operation was at its lowest ebb, its enactment almost at once made possible a 65 percent stabilization of costs through the fact that the miner workers in the mining industry were able under section 7 (a) to join a union of their choice and collective bargaining became an assured fact in the industry.

The code also developed advantageous effects in the way of stability and brought the industry in general from insolvency to profit.

Prior to 1933 many of the major coal operators of the country were either in a receivership or had been sold in bankruptcy, or were facing complete insolvency. The number of substantial coal operators that were paying a minimum wage and paying a return on their investment could be counted almost on the fingers of both hands. The companies which had dissipated their assets and destroyed themselves trying to continue in business comprised almost the whole industry.

I have in mind one of the largest companies that had a 7 or 8 years' record of continuous business of substantial proportions, which depleted their coal reserves, built up an indebtedness, and left them without hope for the future.

Coal operators who have observed the code as to prices and collective-bargaining features have been able since 1933, when the code became effective, to sell their coal at a price, if they did sell it at the code price, that would cover the cost of production, that would pay a decent wage to labor, and in some instances yield them a return on their investment. The code and collective bargaining in the industry brought about that condition.

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