1929 which, to my mind, was entirely too high and did not represent the full benefit that we should have achieved with our glorious technology.

I would like to present as a basic chart, Wholesale Prices From 1800 to 1940 [chart 1]. Those three high peaks represent wars; those precipitous declines represent the course of prices in this country following the ending of hostilities [indicating].

CHART 2

PRICES, 1939-41 COMPARED WITH 1914-16

July 1914-100 World War Period: Aug. 1939 100 Present Period

We have it in our power at the present time to decide whether or not we shall go to these heights and risk what happened to the people of this country with the abrupt decline which has followed every war in our history. That is what you gentlemen are called upon to consider, as I see it, in this bill.

I should like to show now the course of wholesale prices in the same number of months in the last war compared with the same number of months which have elapsed since the war broke out abroad in August 1939 [chart 2]. The dotted line shows that prices stayed comparatively unaffected for several months and then as the spending

CHART 3

COMMODITY PRICES AND COST OF LIVING

1926 100

got into the stream of consumption, as the demand of the Allies for material was greatly expedited, there was a precipitous rise [indicating]. The solid line shows the course of prices at the outbreak of hostilities in 1939 [indicating]. There was a sudden upturn which reflected what the community thought would happen in the way of dislocations and special demands; then we had a reasonably level period for a short time.

The real significance lies in what began to happen about February of this year and I want to call attention to the fact that history seems to be repeating itself in the course of these prices.

I would like you to keep in mind that beginning about the middle of 1940, with the establishment of the National Defense Advisory Commission, the Government began to try to influence certain prices, particularly prices of metals which were so heavily needed in the munitions production. Despite those efforts, however, despite the fact we have established schedules for a number of the basic products-probably we are influencing at least 20 percent of the economy today in some way or another-there is a strong upward tilt. And that strong upward tilt is one of the most compelling reasons for coming before you and asking for the enactment of a bill to enable this country to have price control.

I will not spend much time on chart 3 [exhibiting]; it shows what has happened from 1935 to 1941. There was a dip in commodity prices in 1937, with which most of you are familiar [indicating]. Certain students, myself included, believe that this precipitous rise in 1939 was responsible for the cessation of the upward movement of our recovery, and you are familiar with what happened in this period as far as unemployment is concerned. This line (889 Commodities, B. L. S.) shows what happened after the outbreak of the war, and shows that we are standing at 89 at the last report, and the next report of the Bureau of Labor Statistics will show we have crossed the 90 line. But, again, importance lies in the rate at which prices are going forward.

The dotted line shows the movement of 28 basic commodities, those most important to the American economy; those that are more volatile. Those 28 basic commodities have risen 50 percent since the outbreak of the war and they are proceeding at a more rapid rate. At a later time, I would like to discuss some of those individual items that go to make up the 28 basic commodities and to give you an indication as to what has happened. But, at this point, I want to say that in those 28 are several of the metals that have had only a small rise-only a small rise-because of the nature of the undertakings between the Government and the producers to restrain the prices. And if we had not gotten acceptance of the idea of holding the prices of those commodities in check, this line [indicating] would have been away up here now. In other words, instead of having 12cent copper, we probably would have had 17- or 18-cent copper.

Chart 4 shows industrial production and wholesale prices. There is a definite relationship between the stability of prices and the relationship of one price with another, one group of prices to another, and the rate of production. There has never been a period in American industrial history when production was going ahead on a healthy

1 See pp. 19-26, infra.

1916, production increased 20 percent. Following our entry into the preceding. In the last war, in the first 2 years, between 1914 and basis that prices were not in better balance than in the period just

war, there was only three-tenths of a percent increase the first year, and in the next year, there was a decline in production.2

Now, keep in mind that despite all of the buying from abroad, despite all the earnest effort of the War Industries Board to accelerate production, we did not get an increase in physical production during our war period, and, prior to that, we had gotten only 20 percent.

I want to call attention to what has happened since the outbreak of the war in Europe in 1939. At that time the index of production stood somewhere around 105. The latest report is about 160. In other words, there has been, roughly, an increase in production of 50 or 55 points since then. That period is one in which the price level did not move at an alarming rate, but I think there is something to the contention that there is a definite relationship between increasing

CHART 5

WHOLESALE PRICES

FARM, FOODS AND ALL COMMODITIES

1926-100

UNITED STATES BUREAU OF LABOR STATISTIC

1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941

INDEX

120

production and maintaining the stability of prices, and I think the manufacturers would be among the first to say that. In the last war after the establishment of price control, there was a canvass by the United States Chamber of Commerce and one of the great emphases was placed on the necessity of manufacturers having a stable price level as the basis for their calculations and plans for going forward in production, and I urge this on you for serious consideration.

Chart 5 shows wholesale prices of farm products, foods, and all commodities [exhibiting]. You will notice-particularly members from agricultural States-the enormous decline of prices of farm products compared with the already very heavy decline in all other prices during the recent depression, and you will notice they tended to come together upon some sort of a working balance as we approached the heights of production in 1937; then, when there was a decline, agricultural prices went deeper and went faster in their decline.

2 See also chart 24, p. 41.