have all usually taken some basis in order to get time to turn around in. The main advantage of a price stop-as, for example, Germany instituted and as England instituted in some cases-is to get a breathing spell; because, pretty generally, all of them have recognized that you cannot maintain the essential function of prices, that is, keeping the production lines going and the prevention of inflation, without a great deal of administration. By that I mean keeping in constant touch with those who are affected either as producers or consumers of the finished product. And in all of these countries there has been set up something akin to what one of our units-for example, our metal unit or our textile unit-does. There is a constant recourse back and forth from the industry and its technicians to the Government group in an attempt to make the necessary adjustments.

The difficulties of price control are in ratio to the distance away from the raw material; that is, the further along the line you go toward the distributing system-wholesale, retail, and down into the last unit that is distributing-the greater the difficulty. And almost all of those countries have, therefore, attempted to get a tight control at the basic commodity line. They have undertaken to keep that beginning-end of the prices pretty much in control. And of course that was undertaken, as I indicated to you yesterday, based on our war measures and these other measures which move very, very quickly to the basic commodities, and particularly to the metals.

Most of the price control regulations have been tied up with the rationing power or priority power, or both. For example, yesterday the O. P. M. took over complete control of all copper. That immediately precipitated the price question. When you take over all silk, you immediately precipitate a scramble, and you have the rationing and price questions.

And might I remark on that, Mr. Chairman, we have a request to fix the price of all silk goods, particularly of silk stockings, which presents just this difficulty I have been talking about. That is quite remote, because it seemed to me that the communities would know how to judge and deal with the profiteers who have been raising the price of silk stockings. There is no doubt that the cost of the silk goods on the shelves of the various retail agencies has not been increased by the stoppage of the flow of silk into this country and, therefore, any rises can pretty generally be characterized as "profiteering," I think you would agree with me. And I hope the communities suffering from these price rises will make that known.

For instance, we found, in the case of retail coal during the strike, that one of the most effective deterrents to the attempt to profiteer and to squeeze higher prices out of that emergency was for some local agency to make known to sellers that they felt advantage was being taken of them. And I hope that is what will be done in connection with silk stockings.

Now, I said that nearly all of these countries have found there is a very close relationship between fiscal and monetary policies, the savings program, the tax program, and the price policy. We have, as you know, kept in very close touch with the Federal Reserve Board and with Secretary Morgenthau and with other agencies, as to the direction of the efforts we have made.

64300-41-pt. 1-8

Now, did you want to ask me some specific questions about any country?

Mr. WILLIAMS. Well, we were talking about Canada, to start on, which is nearer home here. What is their system?

Mr. HENDERSON. Well, Canada has a much broader authority to control prices than is contained in this bill. They have a system of controllers who have the right, in consultation with the Ministry, to set a price and to make it stick. Canada established controllers for the basic commodities and the controller undertakes to arrange for the supplies, to arrange for the expansion of the facilities needed to do the contracting for the Government, and to see that discipline is kept in the distribution and price systems.

We have a special study of the Canadian system, which I would be glad to make available to the committee.

Mr. WILLIAMS. Their system is much along the contemplated procedure here, only, as you suggest, broader?

Mr. HENDERSON. That is correct.

Mr. WILLIAMS. That is based upon legislative authority, I assume. Mr. HENDERSON. That is correct. The Wartime Prices and Trade Board was established September 3, 1939, by Order in Council and was based on powers granted by the War Measures Act of 1914, and they have since been operating under that power.

Mr. WILLIAMS. You have suggested a general pricing system and a selective price system. As I understand this bill, this is the selective price system, is it not, that is contemplated?

Mr. HENDERSON. That is correct.

Mr. WILLIAMS. You would select certain commodities. There is no intention under this bill, is there, to fix a general price ceiling on everything?

Mr. HENDERSON. No. The authority would be there, it seems to me, in case the emergency were of such acuteness as to warrant having a ceiling set for a short period of time, but the contemplation of the bill does run toward the establishment of prices on selected commodities.

Mr. WILLIAMS. Now, in general, what field do you propose to enter? What is the outlook for the future, if this legislation becomes a law, as to what you would be going into? Have you any idea about that? Mr. HENDERSON. You are several jumps ahead of me, Mr. Congressman, because there is a question of who would be appointed to administer it.

Mr. WILLIAMS. I mean the administration of it, whether you were the administrator or somebody else was.

Mr. HENDERSON. Shall we assume that this law were passed, and that I were continued as administrator?

Mr. WILLIAMS. Yes.

Mr. HENDERSON. I think that we would go along in about the same way we have been going, but we would go faster. I think that we would be staffed by that time to take charge of runaway situations at the time that the runaway was beginning to lift its tail, or even in advance, if we saw any indications of it.

On the other hand, I think that there would be no disposition on my part to disturb market situations where the normal free-market process was establishing the price and was not causing difficulty.

One of the big difficulties up to the present time has been securing a trained staff to carry on the administration of our price schedules. The office I now hold was created April 11, and, as you will remember from yesterday's testimony, that was about the time that everybody took it into their heads, as producers, that it was a good time to get a little more for their product, and we have been very busy.

I would gather, Mr. Williams, that if this bill were placed under my administration, we would attempt to make more effective the enforcement of the ceilings already established, or those that will be established on the basic commodities, and I believe that we would approach it from the basic commodity list.

Mr. WILLIAMS. As I understand it, the administration under this bill would be provided with the authority to investigate, would have broad powers to carry on investigations, including the power to call witnesses?

Mr. HENDERSON. That is correct.

Mr. WILLIAMS. And to take the testimony, require the production of documents, and things of that nature?

Mr. HENDERSON. That is correct.

Mr. WILLIAMS. Have you that power now?

Mr. HENDERSON. No. We have access, I would say, to that power, through the Federal Trade Commission and the Tariff Commission, both of which are named specifically in the executive order as members of a Price Administration Committee, and the Congress has made available, through appropriation, a certain small sum of money for us to hire their services, which we are doing.

Mr. WILLIAMS. But it is contemplated, I judge, from the text of this bill, that if this law is enacted, the administrative activities would be distributed among a number of different agencies?

Mr. HENDERSON. Yes, sir.

Mr. WILLIAMS. Have you an idea or in contemplation just who those agencies will be?

Mr. HENDERSON. No; but as I pointed out

Mr. WILLIAMS. How about the Federal Trade Commission?

Mr. HENDERSON. The Federal Trade Commission would, I think, service us; that is, we would turn over to them, as we have done in the furniture case, for example, when furniture prices as announced to become effective in the future were 30 or 40 percent higher, and there was general talk in the trade and in the trade papers that this was the result of increased costs.

We asked the Federal Trade Commission to look into that cost situation for us, and under this bill I think that we would continue to do the same thing. We would also make some of our own inquiries, under this bill.

Mr. WILLIAMS. What, according to your conception of it, is the standard of fixing prices? Have you any definite standard? Mr. HENDERSON. I do not think that there is any single standard. The bill provides a base period, or a jumping-off place, and also that

those charged with its administration shall take into account a number of things, such as the speculative fluctuations, the general increase or decrease in cost of production and of transportation, the general increases and decreases in profits earned by sellers of the commodity during the year ending July 29, 1941.

I think, Mr. Williams, that the general standards which Woodrow Wilson outlined, which I read yesterday,' are quite good standards. They call for a prevailing price which is enough to sustain the industry and to enable it to pay good wages and to make necessary expansions and, in general, to keep up and help the industry; and that has been in the back of our minds pretty largely in the establishment of price schedules up to date.

Mr. WILLIAMS. What relation has cost of production to it?

Mr. HENDERSON. Quite a bit, but I think that the cost of production is usually reflected, particularly in the manufactured commodities, in the price that prevails.

Mr. WILLIAMS. That is perhaps true in the absence of some kind of collusion, or of some special circumstance.

Mr. HENDERSON. That is correct.

Mr. WILLIAMS. If the market were left free and open to operate on a free, competitive basis, that would establish the correct price.

Mr. HENDERSON. I think that for a number of the basic American commodities, those which bulk large in our production, the information available does give a fairly good idea as to what is a fair price.

Mr. WILLIAMS. What are you going to do with the low-cost and the high-cost producers?

Mr. HENDERSON. To put it this way, we have not adopted the bulkline principle, which is to establish a price necessary to bring in a high-cost producer, and allowing that to everybody.

I might say this, that I got out a release last night in connection with the copper price, indicating that as far as some of the marginal mines, the high-cost mines were concerned, we would recommend to Jesse Jones' Metal Reserve Company a price based upon their out-of-pocket cost, plus 1 cent.

It has been our intention to deal with prices on that basis, and I might point out as to a number of those commodities which I outlined yesterday, particularly the important ones, that is the course which we are following.

We are paying about $200 now for mercury, because we have to get it. We are paying a little higher price for some of the metals when they are brought into the country, meanwhile permitting a price satisfactory to the American production.

I think that the World War experiences and the experiences of other countries warrant that.

Mr. WILLIAMS. The bulk-line principle, as I understand it, is the fixing of such a price as would permit the high cost or the marginal producer to make a reasonable profit on what he sells?

Mr. HENDERSON. That is right, and that permitted the low-cost manufacturer to make an inordinate profit.

Mr. WILLIAMS. That is exactly it. Do you think that that is taken care of in an excess-profits tax?

1 See pp. 11-12, supra.