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competition and the maintenance of fair labor standards is through voluntary cooperation, encouraged by sympathetic Federal administrative action and under rational Federal regulation.
It may be said that those who criticize the pending proposal assume a negative attitude. They have no constructive suggestion to meet the existing situation. On the contrary, we beg to submit that the practical possibilities of voluntary cooperation in particular industries through trade groups and generally have been given little or no opportunity for practical expression.
By the decision in the Appalachian Coal case, a common selling agency, representing a cooperative endeavor to remedy evils, to which this bill is in part directed, was unanimously sustained. The plan presented covered not merely a coal-bearing area in several States but in eight broad districts. The plan was not theoretical but practical and is now in actual operation.
Second. The legitimate trade association is a practical instrumentality for developing, through the cooperation of its members, a sound body of merchant law which becomes evidence of the custom of the trade in establishing what may be properly termed the common law of the industry. The Federal Trade Commission, an independent administrative body, has in the past and can much more efficiently in the future, becomes the means through which what is permissible and economically justified in the preservation of a free competitive system can be promoted through voluntary cooperation, with the public interest adequately safeguarded.
“The industries of the country are too many and diverse," said Mr. Justice Cardozo in his concurring opinion in the Schechter case, “to make it possible for Congress in respect of matters such as these to legislate directly with adequate appreciation of varying conditions. *
When the task which is set before one is that of cleaning house, it is prudent as well as usual to take counsel of the dwellers."
Third. Our British and Canadian brethren have relied upon the development of trade custom and practice for their merchant law. They believe in selfpolicing by the trade. With our larger area and more complicated competitive system, we need not merely the preventative but the promotive practice of government. The Trade Commission may discharge an important function in this regard, if trade groups through trade practice conferences and the presentation of trade agreements may have determined in their inception what may or may not be approved as fair competitive practices. The Government thus becomes not a mere prosecutor but a traffic officer anticipating the misuse of the commercial highway and aiding its legitimate users.
Fourth. The interstate compact is capable of practical use in dealing with special competitive conditions and regional and labor problems.
These are all methods that are in conformity with our fundamental political conceptions and practices. These would employ to a larger extent what President Wilson termed the greatest of all forces—"the spontaneous cooperation of a free people.” Moreover, the stimulation of voluntary cooperation, with adequate safeguards for the public interest, avoids the rigidity which inevitably accompanies the restrictions of centralized compulsion.
Finally, we minimize the already dangerous tendency to centripetal control. The intensive nationalization of power is the most serious threat to the preservation of local self-government:
“Not only would this be intolerable and alien to the idea of free selfgovernment” said Elihu Root in his Princeton Lectures on Constitutional Essentials"but it would be beyond the power of a central government to do directly, Decentralization would be made necessary by the mass of government business to be transacted, and so our separate localities would come to be governed by delegated authority--by proconsuls authorized from Washington to execute the will of the great majority of the whole people. No one can doubt that this also would lead by its different route to the separation of our Union.”
This is illustrated in the pending bill by the variety of details of obviously local police included in the alleged attempt to regulate commerce. The prevailing tendency to diminish local self-government was never more apparent than in the terms of this bill, where the whole detailed operation of mining and employment relations is sought to be attached as a tail to the commerce kite. No one has emphasized the danger of this policy more forcibly than the President of the United States when, as Governor of New York, he declared (Mar. 2, 1930)
“To bring about government by oligarchy masquerading as democracy it is fundamentally essential that practically all authority and control be centralized in our National Government. The individual sovereignty of our States must
first be destroyed, except in mere minor matters of legislation. We are safe from the danger of any such departure from the principles on which this country was founded just so long as the individual home rule of the States is scrupulously preserved and fought for whenever they seem in danger."
For the reasons enumerated and many others presented to this committee, we submit that the pending bill, H. R. 8479, is invalid in law and unwise in policy. Respectfully submitted.
NATIONAL ASSOCIATION OF MANUFACTURERS,
STATEMENT ON ECONOMIC ASPECTS BY NOEL SARGENT, ECONOMIST The National Association of Manufacturers represents the largest group of consumers of bituminous coal (39 percent in 1929 and 35 percent in 1932), and has, therefore, a direct interest in the pending bill, H. R. 8479, to regulate and control the bituminous coal industry and resources of the United States. This bill according to the statement of purpose in section 1 seeks to accomplish the following results:
(1) Securing to the public constant and ample supplies of coal at reasonable prices;
(2) Conserving bituminous coal deposits by (a) controlled production, and (b) economic mining and marketing;
(3) Securing to owners and producers a fair return upon investment;
The statement that the public is entitled "to constant and ample supplies of coal” must be designed primarily to benefit the consumers of bituminous coal. As the principal consumers of such coal, we believe that regulation, such as proposed in this bill, is not necessary to assure “constant and ample supplies.”
The question then arises as to whether such supplies are now available at reasonable prices. If this bill is designed as either a Government or private price-fixing and price-increasing plan, it should be so stated specifically. There can be no logical justification for Government fixing or control of the price of bituminous coal, unless such price control is necessary to the conservation of this natural resoruce, which I shall subsequently demonstrate to be coutrary to the facts.
It is furthermore stated that the bituminous industry is to be regulated because the general welfare of the Nation so requires. This immediately raises the question as to whether the Federal Government has any power under which it can regulate industries because the general welfare demands it. If this can be done it may well mean that Congress can at any time arbitrarily declare any industry to be similarly vital to the general welfare and proceed to regulate every detail of its production and distribution, even though the Constitution of the United States confers no direct power upon the Federal Government to regulate production, and even though the United States Supreme Court has many times decided that control of production is exclusively a State matter.
Let us now proceed to the question as to whether regulation such as proposed in this bill is actually necessary to the “conservation of bituminous coal deposits in the United States.” So far as I have been able to ascertain, coal mining is treated as a business affected with a public interest only in Germany, although by agreement national regulations of certain kinds also exist in England. Bituminous coal is obviously not a necessary of life”, thus possibly justifying special public control, under police power which may exist, since domestic consumers may use gas, electricity, anthracite, coal, or oil, and since industrial consumers also have available other sources of heat and power. The declining importance of coal as a fuel has been expressly recognized by the United States Supreme Court, which said in 1933 (Appalachian Coals v. U. S., 288 U. S. 344):
“Coal has been losing markets to oil, nautral gas, and water power, and has also been losing ground due to greater efficiency in the use of coal. The change has been more rapid during the last few years by reason of the development of both oil and gas fields."
Since bituminous coal is not a "necessary of life”, it is impossible to justify indirect efforts at production control under the guise of control over transportation and rates.
But it is alleged by the President of the United Mine Workers that soft coal “deposits are exhaustible, and at the present rate of misuse, added to the criminal waste in recovery under our present mining methods, we will reach that state of depletion before many years. (Hearings before Senate Interstate Commerce Committee, Dec. 14, 1928, p. 42.)
It may be admitted that exhaustible natural resources which are also (a) necessaries of life or (b) necessary to industrial production may properly from an economic standpoint be subjected to Federal governmental control when such exhaustion will, otherwise, be unduly hastened. (That this may be legally done is, however, denied by many eminent constitutional attorneys; see statements by A. M. Belcher before Senate Interstate Commerce Committee, 1928 hearings, p. 158.) Bituminous coal is, at present, while not a “necessary of life” very widely used in industrial production. It should be noted, however, that the use of electric power in industrial plants is growing rapidly and will, doubtless, grow at an even more rapid pace during the next two decades; oil is being increasingly used for railroad and steamship fuel.
As to the alleged danger of exhaustion of the bituminous coal supplies the following facts are presented:
(a) The normal annual production of bituminous coal is about 500,000,000 tons (ranging from 416,000,000 in 1921 to 579,000,000 in 1918; down to 0,000,000 in 1932).
(6) “Greater efficiency in the use of fuel and competition of other sources of power" have brought about a great "change in demand” for bituminous coal since 1918 (Coal in 1926, U. S. Bureau of Mines, p. 444). Bituminous coal has declined in relative standing as a source of energy, contributing 70 percent of all energy in 1913, 60 percent in 1929, and only 45 percent in 1932 (Coal, Bureau of Mines, 1934, p. 378).
(c) January 1, 1919, there remained in the United States 3,535,690,990,000 tons of unmined bituminous coal; since the beginning of mining in this country only 16,624,000,000 tons of bituminous coal, or less than one-half of 1 percent of the remaining unmined coal, had been mined to the end of 1932. (Ibid., p. 379; Report of United States Coal Commission, published in 1925, pt. 1, p. 188.) These unmined reserves do not include 660,000,000,000 tons at depths of 3,000 to 6,000 feet (Ibid., pt. 3, pp. 1850, 1851). Three-fourths of the reserve supply can probably be mined at depths of not over 1,000 feet (considered the maximum mining depth in the United States now, though coal is mined at 3,000 f et in Europe), but only about 10 percent of the reserves are considered of high rank (letter of Mar. 20, 1929 from U. S. Geological Survey). Assuming (1) that 744 percent of the reserves are both available with processes and methods now in use and are of high rank and (2) that we have an annual consumption rate of 500,000,000 tons—then, we now have in this country a bituminous supply which will last until 2449 A. D.-514 years from now. Exhaustible?-Yes! Emergency?-No!
(d) We may expect further conservation of bituminous coal (which may offset new demands that would arise) as coal operators are able to lessen the present avoidable loss of nearly 20 percent, or 100,000,000 tons in normal years, which occurs (Coal Commission Rept., pt. 3, p. 1857).
Prof. W. T. Thom, Jr., of the geological department of Princeton University, well points out the pessimistic folly of those advocating legislative control as an urgent necessity to conserve vital fuel supplies, declaring:
The world situation as regards coal warrants thrift but no fear of shortage" (Petroleum and Coal, 1929, p. 216).
He further observes:
“Our coal reserves appear to be large enough to last, with due economy of use, for a thousand years or more that is to say, far beyond the range of valid prediction. The world's reserves of oil practically available by methods now in use, although of scant size when viewed from a broad national or humanistic standpoint, appear to be so capable of multiplication (insofar as practical effect is concerned) by economies of use, by improvements in methods of discovery and production, and by the use of supplementary sources of energy, that the situation is one calling for sound judgment and careful planning for the future, rather than for pessimism and alarm. Increased recoveries of gasoline from natural gas and of motor fuel from coke-oven operations, the artificial conversion of coal into liquid fuel products and the possible conversion of natural gases into gasoline, together with the revolutionary reduction in the quantities of coal required for major power purposes, and equally great prospective economies in the use of oil products, all go to assure us that if the public actively interests itself in the
support of science, and if scientists really devote themselves to the pursuit of knowledge for humanity's sake, we will never be destitute of the necessities of life, although we likewise may never escape from the necessity of earning our living” (ibid., p. 215).
And President Lewis of the United Mine Workers admitted much when he urged (New York Times June 10, 1929) “A tariff on the import of foreignproduced petroleum oil” in order to help provide "employment for many thousands of now idle men in the coal-producing industry”, since the “free importation of cheap oil" has had “a depressing effect upon American-produced coal
Consumption of many millions of tons of coal has been displaced by the use of oil produced in the United States." Mr. Lewis admits a decline of 20 percent in bituminous coal production due to oil competition, yet still urges that the coal supply is in danger of imminent exhaustion—the two positions simply don't jibe. The United States Superme Court in the Appalachian Coal case said that the supply of coal is “virtually inexhaustible.”
It must be admitted that if the supply of bituminous coal were monopolized a case might be made which would justify a considerable measure of governmental control and regulation. But such monopolization does not exist; indeed, its absence is one of the very arguments of those who demand governmental regulation to curb the competition which exists. In 1920 there were 12,122 "producers” of bituminous coal, who operated 14,766 mines, which had an output of nearly 569,000,000 tons. The four largest producers” had only 7 percent of the total output; the 189 largest producers, those with an output of 500,000 tons or more, produced only 48 percent of the total output. În 1932 mines producing over 500,000 tons mined only 18 percent of the total output. Such à condition is far from a monopoly and however it may react on the profits of the producers certainly inures to the benefit of the consumers.
In an economic sense bituminous coal-
(c) Is not in danger of imminent “exhaustion" which justifies regulation of “natural resources.
(d) Is not subjeet to monopolistic ownership control to an extent which menaces public fuel supply or transportation, whether by artificial and monopolistic stoppage or price control.
Apparently recognizing the legal impossibility of directly controlling production, this bill provides, through the medium of a special tax on coal production, with x 99-percent rebate being given to producers accepting Federal control of production, that practically every detail of such production will be controlled by the Federal Government.
In establishing the district boards to regulate production, it provides that the employee member of each such district board shall be "selected by the national organization of employees", even though such national organization may only have a small minority of members in the particular district.
We respectfully suggest to your committee that consideration of the record warrants the belief that there is far less risk of monopoly and public hardship under our present system of coal production and distribution than there might be as the result of practically turning over all bituminous coal labor relations, as this bill would do, to a single "national organization of employees.” Senators must recall that both President Wilson and President Harding denounced the United Mine Workers for its autocratic efforts to hold up both the Government and people of the United States. This bill if adopted would permit them to do so again.
It is further provided that the district boards and the coal producers who accept the Coal Code, in order to secure the 99-percent rebate, "shall accept and be subject to the jurisdiction of the Commission to approve or to fix minimum and maximum prices.”. There is nothing to prevent the Federal Commission's fixing coal prices so high as to be unreasonable to purchasers of coal.
The bill is furthermore defective because, while it provides that coal producers may protest against prices fixed by the district boards or Commission, there is no provision in the bill specifically providing that consumers of coal may initiate proceedings before the Commission to have existing maximum prices modified. The patrons of the industry should be accorded specific protection.
Moreover, this bill by establishing minimum coal prices as “the weighted average" cost free on board for all mines in a district, can arbitrarily prevent more efficient producers with lower producing costs from selling their coal at a price fair to them and to their customers. We note that in a brief prepared on a similar coal-control bill the president of the United Mine Workers declared: “The price itself may not be fixed; that is, the minimum price" (1928 Senate committee hearings, p. 46).
There can be no question that this bill would increase the cost of bituminous coal to both domestic and industrial consumers in the following ways:
(1) Direct increase of from 3.21 cents to 8.7 cents per ton, due to tax levied in title II of the bill.
(2) A small increase, due to tax rebate established in title I.
(3) By apparently providing in part II of title I that minimum prices for each grade of coal shall include all "factors”, the costs of some grades might be further increased. It has been customary for mines to produce standard grades of coal; in the mining of such coal there is necessarily also produced much slack or inferior coal for which there is no demand at prices paid for other grades. It has therefore been customary to sell this slack coal, which would otherwise be wasted, at less than its production cost, thus reducing the overhead costs of the mine. This bill might result in either increasing the cost of these inferior grades of coal, or in preventing their sale and thus further increasing the selling price of standard grades of coal.
(4) By virtually establishing a labor monopoly the bill would result in continual wage agitation and wage increases without regard to their economic justification.
We find, moreover, that in attempting to establish and control labor relations in bituminous-coal mines, it is declared that employees shall be freed from the "interference, restraint, or coercion of employers, or their agents.'
We have no objection to such a provision but respectfully suggest the advisability of including therein equal prohibitions against coercion of employees from any source.
We question, moreover, whether there is any valid legal or economic argument to support the provision that hours of labor agreed upon by more than two-thirds of the production and a majority of the mine workers belonging to a national union (perhaps a small minority of all workers in the district) shall be binding upon other producers and mine workers, without regard to other geographical, physical, or labor-supply factors.
We question the economic wisdom and legal justification for providing, in effect, that wage agreements must be negotiated between producers and mine workers "belonging to a recognized national association of mine workers”, since the employment relation is fundamentally a local relationship between employers and employees, which may best be regulated by the parties most directly concerned.
For these and other considerations, both of law and economics, we oppose the pending bill and respectfully urge that it be not reported from this committee. Respectfully submitted.
NOEL SARGENT, Economist, National Association of Manufacturers.
STATEMENT OF O. H. WILCOX, EMPLOYEES' MUTUAL BENEFIT
Mr. Wilcox. I am 0. H. Wilcox, executive secretary of the Employees' Mutual Benefit Association, an organization of the 2,500 employees of the West Kentucky Coal Co., the largest coal producer in western Kentucky. These 2,500 employees represent approximately 10,000 native-born American citizens, many of whom still live in the same house where they were born, and many more of whom still live in at least the same community. These employees on September 1, 1918, started an employees' organization, and during the past 17 years have never experienced the sadness, suffering, or sorrow consequent to labor disputes, strikes, or lockouts. Their conditions are inferior to none, their hours are in conformity to the requests of the N. R. A., and their wages are now, as they have always been, as good as the best in the competitive field and, at this time, considerably better than the wage now being paid through oral agree