If I were to suggest how this committee might approach its problem, I should recommend that each member obtain and read the so-called Ferguson report, which reviewed the decartelization program in Germany.

Army Secretary Royall last year appointed a special committee headed by Commissioner Ferguson of the Federal Trade Commission to go to Germany and study the progress of the breaking up of the cartels and concentration in German industry. That committee was appointed because it was recognized that modern war is industrial, and that the control of modern industrial production is also the control of war. The committee filed a most interesting report. It has been examined by the Department of the Army, and recently Assistant Secretary Tracy S. Voorhees has filed his views on the Ferguson report with the Secretary. Mr. Voorhees pointed out that there were two questions: First, the question of the cartel organization by which German industry sought to dominate the trade of the world in the first instance and by which Hitler, having taken over the organization of industry, sought to dominate the world politically. And secondly, the problem raised by the concentration of control of industry itself. It is pointed out in this report that the iron, coal, and steel industry of the Ruhr is concentrated now. The Department of the Army was faced with this problem: Having broken up the cartels, should they proceed to break up the concentration of economic power in the Ruhr. It was decided not to do that, at least immediately, because it was felt that to break up that concentration of the coal, iron, and steel industry would reduce the ability of Germany to produce and thereby prolong the period our occupation would have to continue, and prolong the period during which United States production would be supporting the German economy.

I suggest a study of this because it will give you the outlines of the picture that faces the whole world. If free people are to fight and overcome the collectivism which results in arbitrary government power, it has got to be done here in the United States, because unless the citizens of the United States, and particularly those of us who happen for a time to be in Congress, realize that modern industry has produced collectivism and that our job is to organize this collectivist economy of ours so as to maintain the power of the people to control it in their individual capacity, we shall have great difficulty in preventing the continued growth of big government.

Now let me give you one or two examples of what I mean. These things come upon us almost unawares.

The Congress of the United States passed the Atomic Energy Act in 1946. It created the Atomic Energy Commission and gave to that Commission, a Government agency, a monopoly over atomic power. Because the judgment of Congress was that atomic energy was too important to trust to private hands, it was concluded that the people must control it through their Government. So we set up this Atomic Energy Commission and set up the Joint Committee on Atomic Energy to watch the Commission.

Then the Commission undertook to carry out its duties of making the atom bomb and developing the peaceful uses of atomic energy.

One of the most striking aspects of this is that the Atomic Energy Commission, which is a Government management organization, in order to build these plants made contracts with private management

organizations. Take the great Hanford plant at Hanford, Wash. A contract was made between the Atomic Energy Commission and the General Electric Co. which is a private management organization. The General Electric Co. under that contract has built the plant. The original construction contract was made during the war with du Pont. Du Pont got out of it because du Pont did not want to be in the limelight making bombs. The du Pont Co. had a surfeit of being called the "merchants of death" so du Pont got out and General Electric stepped in. Now General Electric with its managerial government from the top is making the bombs and managing the plan for the managerial government organization.

That is one type of management that we have in the modern world. Take the case of the oil industry. As members of the Judiciary Committee you will recall the famous antitrust suit many years ago against the Standard Oil Trust, as it was then called. Chief Justice White handed down that decision, and the Standard Oil Co. was broken up. There sprang up in its place almost a dozen other companies each of which is larger than the original Standard Co.

But over in Saudi Arabia and Mesopotamia, we now have four American companies: the Standard of California, the Texas Oil Co.-both operating in Saudi Arabia-the Standard of New Jersey and Socony Vacuum. Through a subsidiary organization, too complicated to describe in detail now, they control the biggest deposit of petroleum in the world, and in controlling it and producing it and managing it, they are in effect partners with Government.

The British Government, the old French Government, and the Dutch all had control of the Near East petroleum before our people went in. The American companies, before they went in, came to Washington and consulted the State Department. The State Department, in effect, through Secretary Hughes, suggested it would be advisable for them to go in because if they did not do so, the control of this foreign source of petroleum would all be in the hands of Britain. But my point is that these great petroleum corporations which sit down at the bargaining table with Government have taken on the aspects of the power of Government.

Do not misunderstand me. They are doing a grand job over there. The Aramco Co., which developed the Saudi Arabian oil, has already produced in Saudi Arabia a very great social advance. Arabians, who before the oil was discovered were just the normal desert nomads, now have steady employment, and this is a statistical fact, the Arabians working for Aramco are 15 pounds heavier on the average than the Arabs were when the company first began its operation.

So I give you these two illustrations to show what I mean by the managerial aspect in government and in business.

Your own experience is such that you know that these managers function in the same way in both government and business. During the war, because modern war is an industrial enterprise, it became necessary for the Government to call upon some of the best industrial managers in the United States. The president of General Electric, Mr. Wilson, was one of the most able and efficient managers of the War Production Board. To win the war we, as a government, had to adopt the managerial policy toward production and industry. To win the peace we are probably doing much the same, because peace like war is a problem of production and of distribution,

Our great dilemma now is to establish the rules under which the American ideal of popular sovereignty in an order of both economic freedom and political freedom can be maintained. Attorney General Clark referred to the fact that the people of Europe turned to Mussolini and Hitler because of the failure of their economic institutions. That is quite true. When the individual citizens of Italy and of Germany were unable to support themselves because the privately managed economy did not give them an opportunity, because cartel organizations and monopolies had built up fences, so to speak, which excluded from opportunity all but those that the monopoly was able to use, Hitler and Mussolini, each in his own way, said to the people, "Give me the power and I will see that you get a job." And so the cartel system, the industrial monopoly system, led directly to the totalitarian system in government.

Now let us not deceive ourselves. Let us not think that such a thing cannot possibly happen here. That would be a great mistake.

What is the cause of communism? The cause of communism is the fact that in the modern world the proletariat has been brought into existence. The proletariat is composed of human beings who do not have economic freedom. And if they do not have economic freedom even in a country like Great Britain, where political freedom, of course, is guaranteed, the pressures rise constantly to create the totalitarian state. So you have the Socialist state in Great Britain as a result of the fact that in the modern world individuals are unable to preserve their opportunity against the huge organizations which are necessary to carry on modern industry.

Personally I do not believe that this question can be solved by antitrust alone. I support antitrust appropriations. I applaud the work that the Department of Justice and the Federal Trade Commission are doing, but it is not sufficient.

I remember one of the first of the large cases that I ever learned anything about was when I was a young man, secretary to Senator Kendrick, back in 1918 or 1919. A great outcry arose then against the packers. Two things resulted from that: One of them was a lawsuit and the other was the Packers and Stockyards Act. President Harding signed the act which gave to the Secretary of Agriculture more power to regiment an industry than was ever given before or since to any official of government. The lawsuit was filed, the case was clear, a consent decree was entered. But when the actual terms of the dissolution were to be carried out, then the fight began. Twenty years and six months elapsed from the date on which the original decree was entered until the matter was finally settled. And now again, Attorney General Clark tells us, we are bringing suit alleging monopolistic practices against the packers.

So I say, Mr. Chairman and gentlemen of the committee, the problem is not in my judgment to be settled by antitrust laws alone. It can only be settled by a recognition of the conditions that exist, of the change which has been brought about in organized economy by modern technological and social developments.

When I was a young man discussions about the problems of labor were always talked of as the problems of labor and capital. Now they are talked about as the problems of labor and management. Why? Because the modern corporation, the corporation which gives character to our modern economy, is managed by a group altogether

different from the owners. You can go through the list of the stockholders of most of the large nationally known corporations, and you will find that more than half of those stockholders own so small a number of shares of stock that they absolutely exercise no control over what is done. They exercise no control over the manner in which the assets of the corporation are used. Although they are nominal owners, they do not exercise the functions of management.

When our Constitution was drawn, when the Congress was set up, there was no such problem as that. Ownership and management resided in the same people, and most business then was individual. It is not individual now. This is to say so far as the character of our economy is concerned the dominant business organization is made up of corporations of the kind that I mention, where the stockholders are content to receive their dividends and hired managers run the business. There is no sense in mentioning individual corporations in order to outline the principle. There is no question of finding a goat. Our purpose is to define the principle and discover the method of organizing economic freedom, so that we shall not have to continue to build up big government.

But I have in mind a particular corporation. The president of it, the last time I checked the figures, owned less than 10 shares, and it was one of the biggest corporations in America. He was an expert manager and employed for his know-how.

Now, we have not recognized, it seems to me, this basic difference between an individual and a corporation. The individual is a natural person; a corporation is an artificial person. But we have tended to give the artificial person the same rights and privileges that the individual has.

The CHAIRMAN. The Supreme Court has recently done that again? Senator O'MAHONEY. I know. But this committee can change the law and put the Supreme Court on the proper path.

Mr. KEATING. We did that with the O'Mahoney bill the other day. Senator O'MAHONEY. We tried to.

Mr. KEATING. We think we are doing that.

Senator O'MAHONEY. That is right. We tried to eliminate the confusion about the use of freight absorption and delivered pricing.

Now there is another O'Mahoney bill that has been before the Congress for about 12 years which would do a lot of good toward the same end. I refer to the bill which I introduced first with Senator Borah, of Idaho, to provide charters for corporations engaged in interstate and foreign commerce.

The CHAIRMAN. That is what you mean when you say we must adopt measures in addition to the antitrust measures?

Senator O'MAHONEY. Yes; that is one of the things. Because unless you define the power and the authority of organizations engaged in commerce, you cannot possibly stop the growth of big government. The CHAIRMAN. Do you care if we ask you questions?

Senator O'MAHONEY. Not at all.

The CHAIRMAN. Does your bill provide that there shall be, say, 49 agencies to issue certificates of incorporation or just one, namely, the Federal Government?

Senator O'MAHONEY. NO. The bill that Senator Borah and I introduced, and which I have introduced in modified form ever since, would recognize the right of the State to create the corporations. But

it would provide the standards of behavior and responsibility which all corporations that engage in commerce amongst the States and with foreign nations should adhere to.

The CHAIRMAN. Did the TNEC committee recommend the adoption of that?

Senator O'MAHONEY. I do not believe I would have aspired to be chairman of the TNEC, I do not believe I would have introduced the resolution creating that committee if I had not had in the back of my mind the desire to obtain such a recommendation. I did. The committee recommended legislation for national standards for national corporations. I must confess to you that all the members were not a unit in that. Many members felt it was not a self-enforcing statute, so to speak. Others felt that it would take power away from the States. But I say to you gentlemen: Far from taking power away from the States, it would restore local self-government, and it would stop the expansion of discretionary boards and commissions.

A moment ago, when the Attorney General was on the stand, Mr. Chairman, you asked him what his opinion might be of allowing business executives to go to the Department of Justice and obtain a sort of advance clearance, a certificate or statement that the pattern they wanted to establish was not a violation of the law.

Now, that, in my judgment, would be a very dangerous thing to do, because it would mean that an appointed official of the Government would be exercising discretionary power to tell business what it could or could not do, and the law would change with the Attorney General, just as the Federal Trade Commission has changed with the personnel who make up the Commission.

Congress writes the Federal Trade Commission Act forbidding unfair and deceptive practices in business. It writes the Clayton Act prohibiting price discriminations of one sort and another. And then it provides for a Federal Trade Commission to enforce the law. Well, the enforcement depends absolutely upon the point of view of the men who constitute the Commission. You take one man off and put another man on, and then to all intents and purposes, without any act of Congress you change the law. The same is true of the Department of Justice.

Mr. DENTON. Is it not true that any law depends upon the officials and the courts?

Senator O'MAHONEY. A great deal does, but that would not be true of a national charter system, because, again I say to you, no corporation can exist except by a grant of power from some government. That is different from the individual. The individual comes into existence without the grant of any government, and the American theory of government is that the mass of the individuals control the Government. It is their agent.

But when you permit the States which have no power whatsoever over interstate and foreign commerce to create the organizations that carry it on, you are creating the dilemma which has resulted in building big business, big government, and big labor.

The CHAIRMAN. Could you tell us, Senator, how your suggestion or your bill would prevent big business from growing bigger or business from growing big?

Senator O'MAHONEY. There it would be a matter of policy to determine what you wanted to do. Personally, I have never said that