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J — : CLASS OF SERVICE TERN < dAis I a fl-ae s ulrt T l g a o Cbe e e r m r alg a uls is d r m nes t e fre caatr i ierd hrce s n dctd b a sial iae y utbe s m o a o e o pe y b l b v r re i g t e ades n n h drs* f SYMBOLS D » Dy Lte L a etr N = i h Lte L N g t etr LC=Deferred Cable NLT=Cable Ngt L t ih e e tr A» M. W I L L I A M S PRESIDENT -igiëïon i ti dt ln o tlgas a d d ytetterateSTANDABDTÎME a pit o oii. .ntm^hw n ie ie ie n eerm n a t on f rgn CD129 DL PD=CHICAGO HON MARINER (201 ILL 26 Ship Radiogram rcf i ^ ct pit o dsiai kkt ME a l ott ÎÎmeI^ s f W S n) l etnt M 52?Q ECCLES= GOVERNOR FEDERAL RESERVE SYSTEM WASHDD =WOULD YOU PLEASS SEND ME DATA ON WHICH YOU BASED YOUR STATEMENT THAT THE COST OF LIVING WOULD RISE TEN PERCENT* WOULD DEEPLY APPRECIATE =EDW A GNEIL IT* PRESIDENT REGARDS^ AMERICAN FARM BUREAU FEDERATION*^)5 THE COMPANY WILL APPRECIATE SUGGESTIONS FROM ITS PATRONS CONCERNING ITS SERVICE March 1, I9I46. Dear Ed: The press accounts of xay testimony on the extension of price control were based upon a misinterprotation of some "off the cuff1* remarks I made in response to a question asked by Representative Patman. I did not predict that the cost of living would increase 10 per oent as a result of the new wage-price policy, nor do I have any data upon which to base such a prediction. What I did say was that there was a possibility of the rise reaching a maximum of I4O per cent over the prewar level, and if it were held to this we would have done a fairly good job, all things considered. I understand that the official figure used by OPA for the amount of inflation so far is 35 P e r oent, so if we should reaoh a high of I O per 4 cent that would be 7 sore points. Chester Bowles estimated that a further rise might be 5 P Q r oent, so if there is any difference in our guesses — and they necessarily have to be guesses — it amounts to an insignifioant matter of 2 point». Just for your information, I am quoting exaotly what I did say in answer to Wright Patman*s question: "Well, of course, there is a good deal of argument as to what our inflation has been. Measured by the increase in the cost of living, I think the Office of Price Administration figures that it is about 30 per cent inflated. Which is as good a job as any country has done. I think maybe Canada has done, if anything, a little better job than we have. But with other oountries, there has been a greater inflation than that. I would expeot that with the increased wages and prices on your new wage-price polioy, that we will get some further increase. It is estimated that there is a possibility of it reaohing as high as a maximum of J4O per oent. I would think, if the oost of living oan be held to 1*0 per oent above the prewar level, that we will have done a fairly good job considering the size of this public financing that has been undertaken." With best regards. Sincerely yours, Mr. Edward A. O'Heil, President, American Farm Bureau Föderation, 58 East Washington Street, Chioago 2, Illinois. G E N E R A L 58 O F F I C E S LEGISLATIVE MUNSEY E. WASHINGTON ST. ÇHICAGQ, TELEPHONE DEARBORN C H I C A G O 2 , ILL. 1633 March 5, 1946 Hon. Marriner S. Eccles, Chairman, Board of Governors, Federal Reserve System, Washington, D. C. My dear Marriner: Thanks for your letter of March 1, explaining the press interpretation of your statement made before the Banking and Currency Committee. I read your statement with deep interest and want to commend you highly for it* ?Jhile T may have some disagreement on some of the points, I think it is vital that we maintain price control; along with it we must have monetary control*, tax control, budget control. I thought you would be interested in some data I had my economic department get up on food subsidies the other day. I am enclosing a copy of same. With best regards, I am CH "Tl Enclosure DEPARTMENT BUILDING WASHINGTON, ILL. \T vmiY»Q D. C. American Farm Bureau Federation Department of Information 58 E. Washington St., Chicago February 25, 194-6 STATEMENT PRESENTED BY EDWARD A, O'NEAL, PRESIDENT, AMERICAN FiiRM BUREAU FEDERATION TO THE ADVISORY BOARD, OFFICE OF WAR MOBILIZATION AND RECONVERSION FEBRUARY 4, 1946 INFLATIONARY FACTORS Inflation cannot be controlled by simply trying to control the cost of living index without any regard to the many other factors, including wages, productivity of labor, taxation, and methods of government finance• From 1939 through 1945 the national income increased from approximately 71 to 157 billion dollars• This is an increase of over 86 billion dollars. Of this increase in the national income, 73 per cent went for wages and salaries, a little over nine per cent to farm operators, and the remaining 18 per cent went to other proprietors and for interest, rents, and profits. It can clearly be seen that most of the increase in our national income went into the pockets of the wage earners. In 1945 the factory worker was able to buy more food for an hour's work than at any time in our history. In 1914 an hour's wages in the manufacturing industries bought three and one-half loaves of bread. By 1939 this had increased to nearly eight leaves of bread for an hour's work, and by 1945 one hour of factory wages would buy nearly twelve loaves of bread. The same is true for most other agricultural products. An hour's wages in the manufacturing industries in 1945 bought over six and one-half quarts of milk, compared to above five quarts in 1939> and two and one-half quarts in 1914. Almost without exception an hour's wages in the manufacturing industries had more purchasing power in terms of food during the war than it had prior to the war. More bread, more butter, more milk, more pork chops, more bacon, more coffee, more sugar, more cans of corn, and more roast beef could be purchased for an hour's work than during the pre-war period. The final effect of increased wages upon prices will be determined by what happens to the efficiency of labor. According to data published by the Bureau of Labor Statistics, from 1939 to 1944 "the average output per man hour in 23 civilian industries increased by only 6.3 per cent, while labor costs per unit of product increased nearly 40 per cent. (These figures are based upon a simple, unweighted average of the reports for the various industries.) Nine of these 23 industries experienced a decrease in the output per man hour of labor. This decrease averaged 8.4 per cent. These same nine industries had an increase of over 52 per cent in the labor cost per unit of product. Eight of these 23 industries had an increase in the output per man hour of over 10 per cent. The increase in the unit labor cost in these eight industries averaged only about 20 per cent. It is thus apparent that change in labor efficiency is a very important factor in determining the effect of wages upon costs. There are many factors in addition to farm prices and v/age rates that affect inflation. The Federal debt has increased to gigantic proportions during the war. Currency in circulation has increased from seven to over 28 billion dollars. Bank deposits have increased from about 58 billion dollars in 1939 to over 141 billion dollars in 1945. Cumulative savings by the public have increased by 100 billion dollars. All these are imnortant factors to be taken into consideration by controlling inflation. DISTRIBUTION OF INCREASE IN NATIONAL INCOME FROM 1939 TO 1945 Increase from 1939 1945 1939 to 1945 (Billions of dollars) Percent of increase going to various shares (Percent) Total national income 70.8 157.0 86.2 100.0 Total compensation of employees Salaries and wages Supplements Net income of proprietors Agriculture Nonagricultural Interest and net rents Net corporate profits Dividends Savings 48.1 44*2 3.9 11.1 4-3 6.8 7.4 4.2 3.8 111.0 107.9 3.1 24.8 12.3 12.5 11.9 9.3 62.9 63.7 -.3 13.7 8.0 5.7 4.5 5.1 .5 4.6 73.0 73.9 -.9 15.9 9.3 6.6 5.2 5.9 .6 5.3 A.3 5.0 Source: »Survey of Current Business," September 194-5, United States Department of Commerce. Agriculture proprietors—9.5% Nonagricultural proprietors 6.6% Interest and net rents—5.2% Net corporate profits—5«9$ DISTRIBUTION OF INCREASE IN NATIONAL INCOME FSOM 1939 TO 1945 (National income increased from 70.8 billion dollars in 19S9 to 157 billion dollars in 1945, a rise of 86.2 billion dollars.) American Farm Bureau Federation Chicago, Illinois - 1/29/46. (Average hourly earnings in all manufacturing industries divided by the retail prices for the respective foods.) 1914'19'24'29'54'39'44'45 19.14,19«24,29'34'59'44'45 1914'19'24'29'S4'S9'44'45 1914'19'24'29'34'39'44'45 1914,19»24,29'34,39'44,45 1914,19,24,29'34»39'44,45 American Farm Bureau Federation Chicago, Illinois - 1/29/46. CHANGES IN AMOUNT OF FOOD THAT ONE HOUR'S ¡SAGES WOULD BUI, 1914-4-5* Pork Eggs' Suear Coffee chops Bacon Bread Butter Milk (Loaves)(Lb.) (Qt.) (Doz.) (Lb.), (Lb.) (Lb.) (Lb.) 19 14 1919 1924 1929 1934 1939 1944 1945** 3.5 4.8 6.1 6.4 6.4 7.9 11.6 11.7 .6 .7 1.0 1.0 1.7 1.9 2.0 2.1 2.5 3.1 4.1 3.9 4.Ö 5.1 6.5 6.6 .6 .8 1.1 1.1 1.6 1.9 1.9 1.8 3.8 4.2 6.1 8.8 9.7 11.7 15.0 15-4 .8 1.1 1.3. 1.2 2.0 2.8 3.4 3.4 1.0 1.1 1.8 1.5 2.1 2.1 2.7 2.8 .8 .9 1.4 1.3 1.8 2.0 2.5 2.5 Chuck roast Corn Oranges (Lb.) (Cans) (Dos.) 1.3 1.8 2.5 1.8 3.0 2.7 3.5 3.7 — 2.5 3.4 3.6 4.6 6.0 7.0 7.0 —. .9 1.2 1.3 1.6 2.3 2.2 2.1 * Average hourly earnings in all manufacturing industries divided by the retail prices of the respective foods. ** Average of first ten months. Source: Calculated from data of the Bureau of Labor Statistics, United States Department of Labor. In 1945 the factory worker was able to buy more food for an hour's work than at any time in our history. In 1914 an hour's wages in the manufacturing industries bought three and one-half loaves of bread. By 1929 the purchasing power of wages had increased to nearly eight loaves of bread for an hour's work, and by 1945 one hour of factory wages would buy nearly twelve loaves of bread. The same is true for most other agricultural products. An hourfs wages in the manufacturing industries in 1945 bought over six and one-half quarts of milk, compared to about five quarts in 19399 and two and one-half quarts in 1914» Almost without exception an hour's wages in the manufacturing industries had more purchasing power in terms of food, during the war than it had prior to the war. In 1945 more bread, more butter, more milk, more pork chops, more bacon, more coffee, more sugar, and more roast beef could be purchased for an hour's work than during the pre-war period. American Farm Bureau Federation Chicago, Illinois - 1/29/46. RELATION OF OUTPUT PEE MAN HOUR TO UNIT LABOR COST IN CIVILIAN INDUSTRIES Percentage increase or decrease from 1939 to 19LL in: Output per mayi ho^P* . Upjt labpr post* (Percent) (Percent) Average of 9 industries with a decrease in output per man hour Average of 6 industries with an increase of 10 percent or less in output per man hour Average of 8 industries v?ith an increase of over 10 percent in output per man hour -8.4 /52.5 /6.0 A7.4 /20.1 /6.3 Average of 23 industries /23.1 /39.9 ^Simple, unweighted averages of the various industries classified by percent increase or decrease in output per man hour, 1 4 4 over 1939. 9-Source: Basic data from "Productivity and Unit Labor Cost in Selected Manufacturing Industries, 1939-44," May 1945, Bureau of Labor Statistics, United States Department of Labor. UNIT LABOR COST OUTPUT PER MAN HOUR 9 industries with a decrease in output per man hour -8.' Llq m 6.0$ 6 industries with an increase of 10 percent or less in output per man hour 8 industries with increase of over 10 percent in output per man hour an •o i JJ-10 0 10 20 Decrease or increase from 1939 to 1944 50 American Fara Bureau Federation Chicago, Illinois - 1/29/46 20.1% JL -L JL X 10 20 50 40 50 Increase from 1939 to 1944 60 CHANGE IN OUTPUT PER KAN HOUR M D UNIT LABOR COST IN CIVILIAN INDUSTRIES FROM 1939 TO 1944 Industry Flour and other grain mill products Cement Chewing and smoking tobacco Newspaper and periodical printing and publishing Paper and pulp group Cane-sugar refining Non-ferrous metals Lumber and timber products Fish (canning) Cotton goods Meat packing and slaughtering Boots and shoes Fertilizers Confectionery Cigars Bread ana other bakery products Cigarettes Paints and varnishes Leather Woolens Fruits and vegetables (canning) Rayons Ice cream Percentage increase or decrease from 1939 to 1944 in: Output per man hour Unit labor cost (Percent) (Percent) -16.0 -15.5 -14.9 /68*7 /52.2 /51.7 -12.5 -7.3 -4.0 -3.4 -1.0 - .7 / .3 /2.3 /5.2 /9#0 /9.3 /10.0 /11.2 /12.6 /14.1 /U.2 /16.9 /24,6 Al.5 /49.4 /35.9 /52.3 /3B.2 /52.6 /69.7 /51.5 /61.2 /32.7 /47*8 /58*4 /36.0 /4S.2 /22.9 /18.4 /17.2 /27.9 /39-9 /41«9 - .3 -6.9 Source: Basic data from "Productivity and Unit Labor Cost in Selected Manufacturing Industries, 1929-44," May 1945, Bureau of Labor Statistics, United States Department of Labor. American Farm Bureau Federation Chicago, Illinois - 1/29/46. EXTENT OF THE INFLATIONARÏ FORGE NOW ACCUMULATED 1939 figure Billions Accumulated savings by the public Liquid assets, personal and business Currency in circulation Feceral debt $65 66 7 46 Current figure Billions* Percentage increase 1165 194 28 267 154 194 300 480 •^Involving some interpolations to bring published figures up to date. Source: "The Crisis of the Free Market," F. A. Harper, National Industrial Conference Board, Studies in Business Economics, Number Two, December 1945. UNITED STATES GOVERNMENT SURPLUS OR DEFICIT AND TOTAL GROSS DEBT, FISCAL ÏEARS, 1930-4-6 ?ear 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 United States government surplus or deficit Total (Millions of dollars) 738 -462 -2,529 -1,784 -2,895 -3,210 -4,550 -3,148 -1,384 -3,542 1940 1941 1942 1943 1944 1945 1946 -3,611 -5,103 -19,598 -55,897 -49,595 -53,948 -41,275* «•Estimated as of June 30, 1946. Source: Reports of the Secretary of the Treasury. American Farm Bureau Federation Chicago, Illinois - 1/29/46. gross debt 16,185 16,801 19,487 22,539 27,053 28,701 33,779 36,425 37,165 40,440 42,968 48,961 72,422 136,696 201,003 258,682 292,300* TOTAL BANK DEPOSITS AND TOTAL CURRENCY IN CIRCULATION, DECEMBER 1939-NOVEMBER 1945 Total bank deposits Total currency in (adjusted) circulation (Millions of dollars) December 1939 194-0 " 19U " 1942 " 1943 1944 " November 1945* 57,698 63,436 68,616 85,755 103,975 127,483 141,600 7,598 8,732 11,160 15,410 20,449 25,307 28,211 ^Preliminary. Source: "Federal Reserve Bulletin, January 1946* CONSUMER EXPENDITURES FOR GOODS AND SERVICES, 1939-45 1939 1940 1941 1942 1943 1944 (Billions of dollars) 1945* Total (current dollars) 61.7 65.7 74.6 81.9 90.9 97.6 100.8 Durable goods Nondurable goods Sèrvices 6.4 32.6 22.7 7.4 34.4 23.9 9.1 40.1 25.4 6.3 47.9 27.6 6.6 55.1 29.3 6.7 60.0 30.9 8.0 61.0 31.8 Total (1939 dollars) 61.7 64.9 69.7 68.8* 70.8* 73.6* •«•Preliminary, subject to revision. Source: "Survey of Current Business," December 1944, July and September 1945, United States Department of Commerce. American Farm Bureau Federation Chicago, Illinois - 1/29/46. March JU, 19^6. Mr. Edw. j . O'Neal, President, i American Farm Bureau Federation, 58 E. Washington street, Chicago, Illinois. Dear Ed: The material attached to your letter of March 5 is very interesting and 1 am sure it will give a better idea of the relationship that exists at the present time between prices of agricultural commodities and income of various groups. I was wondering if your charts would be a little more complete if they contained one showing how the increased wages of labor resulted in an increased consumption of agricultural commodities, particularly meat, poultry and dairy products, citrus fruits, etc. we must not lose sight of the fact that our main objective is to prevent inflation and the interests of individual groups must be subordinated to this overall project. From previous experience and from studies which are being made at the present time, I am convinced that the farmers, over the long-time pull, have far more to lose from an inflation followed by deflation than almost any other group, therefore, I think you should, and I am sure you will be very active in getting the price control legislation continued for another year. with kind regards, Sincerely yours, KME:ET:b BOARD OF GOVERNORS FEDERAL RESERVE SYSTEM Office C o r r e s p o n d e n c e Mr. Thurston From Date ^ v t . i m Subject; Letter from Edw. A. 0!Neal Mr. Evans The material attached to Ed O'Neal's letter to the Chairman, dated March presents an argument to the effect that present prices of farm products are a lighter burden on the wages of labor now than they were in preceding years. The charts, I think, would be a little more complete if they contained one showing how the increased wages of labor resulted in an increased consumption of agricultural commodities with particular reference to meat, poultry and dairy products, citrus fruits, etc. In good times the demand for these particular products is very brisk but when wages decline the demand is not very great because the people quit buying them. If I were answering the letter, I would probably write something like this: "Dear Ed: "The .material attached to your letter of March 5 is very interesting and I am sure it will give a better idea of the relationship that exists at the present time between prices of agricultural commodities and income of various groups. I was wondering if your charts would be a little more complete if they contained one showing how the increased wages of labor resulted in an increased consumption of agricultural commodities, particularly meat, poultry and dairy products, citrus fruits, etc. We must not lose sight of the fact that our main objective is to prevent inflation and the interests of individual groups must be subordinated to this over-all project. From previous experience and from studies vfhich are being made at the present time, I am convinced that the farmers, over the long-time pull, have far more to lose from an inflation followed by deflation than almost any other group. Therefore, I think you should, and I am sure you will, be very activ§ in getting the price control legislation continued for z _
