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Mr. Kankin. Well, Mr. Brown, I have not looked over the questions for these other examinations. Do they bear the same proportion to the experience and mental qualifications?

Mr. Brown. Many of them do. It differs with different examinations and different places. Now in a position like postmaster we do consider that experience in the organizing and handling of a business is an important factor.

Mr. Rankin. But you say another thing: If I were to suggest to you and put you on trace of where to find this information, information substantiated, allegations that these post offices were bought and sold before the examination was ever held, and that by some stroke of luck it invariably panned out to fit the sale transaction, would you not think that it would be sufficient to go a little further with your investigation, going on down the line and seeing if there is not some underground connection?

Mr. Brown. Personally I would be glad to if we had the money to do it.

The Chairman. Have you not money enough to conduct investigations in your Bureau?

Mr. Brown. We have to scrape around.

The Chairman. Then you want to take on the added burden of the census.

Mr. Brown. The great bulk would not involve additional expense. A lot would be appointed without examination. . The Chairman. If they were to be appointed without examination, what is the use of turning it over to the Civil Service?

Mr. Brown. We think there is an open door for abuse, which has been used in the past.

The Chairman. To a pretty small extent.

Mr. Brown. It opens the door to politics and personal pressure, which we do not think ought to be involved.

Mr. Lozier. Is there any provision in the civil service law or in the Executive order by which these eligibles are certified to the department in the case of postmasters; for instance, is there any regulation which will permit the Civil Service Commission to recall their certification, if they find that it was based upon false statements in the application, false representation by the applicants, or find facts which, if known to the commission, would have prevented their being certified in the first instance?

Mr. Brown. I believe so. I would like to refresh my memory as to the terms of the Executive order before I say absolutely, but I believe there is no question.

Mr. Lozier. I have in mind a case where such a certification was made by the commission to the Post Office Department, and then when the matter was called to your attention they found the party made false statements. They addressed a communication to the Post Office Department stating that if they had known these facts they would not have certified this name as an eligible, and in this case the Post Office Department passed the buck to the Civil Service Commission by saying "Here is their certificate. We are going to act on it."

The Civil Service Commission tried to recall that appointment, calling attention to the false statements in the application, and the Post Office Department assumed it was a closed incident because they had received a certificate from the Civil Service Commission.

I am wondering if there is any regulation or rule or law by which a case of that kind could be remedied.

Mr. Brown. I think—I do not know—I say I think it is some time since I read the Executive order, but I think we could withdraw the certification.

The Chairman. We will adjourn now until 10.30 o'clock tomorrow morning.

(At 11.45 o'clock a. m. the committee adjourned until to-morrow, Wednesday, January 18, 1928, at 10.30 o'clock a. m.)

House Of Representatives,

Committee on The Census,

Wednesday, January 18, 1928.

The committee this day met at 10.30 o'clock a. m., Hon. E. Hart Fenn (chairman) presiding.

The Chairman. We have before us this morning some gentlemen from the Department of Commerce, who have come in response to an inquiry. I called on the Secretary of Commerce yesterday afternoon in respect to the explanation of the new features in the bill with regard to distribution. If you have read the bill you will find it applies to a census of population, agriculture, manufacture and distribution, and distribution is the new feature of the bill. I thought it would be well for the committee to learn from the department the features of that and the desirability of it.

We will now hear from Mr. Surface.

STATEMENT OF FRANK M. SURFACE, ASSISTANT DIRECTOR, BUREAU OF FOREIGN AND DOMESTIC COMMERCE, IN CHARGE OF DOMESTIC COMMERCE WORK, DEPARTMENT OF COMMERCE

The Chairman. Please state your name and position.

Mr. Surface. Frank M. Surface, Assistant Director of the Bureau of Foreign and Domestic Commerce, in charge of domestic commerce work.

Our bureau is interested in this census of distribution, because we are studving problems of marketing and distribution from the angle of the elimination of waste, and attempting to assist distributors to better their methods in various ways.

Now undoubtedly the matter has been brought to your attention many times that the margin between the cost to the producer and the cost to the consumer is too large. We have a lot of propaganda on that matter. That is undoubtedly true. There is a large margin in there. We have made some rough estimates of it.

The Chairman. You mean the producer, the manufacturer, and the ultimate purchaser.

Mr. Surface. Yes, sir. There is a large margin in there. We have made some estimates to the effect that there is wasted at least eight billions of dollars in unnecessary crosshairs and unnecessary motions in the matter of distributing products in this country. That I think is very conservative, yet it is double our total export trade.

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There are possibilities of reducing some of that. The studies that have been made indicates this waste is due very largely to ignorance, much more to lack of information than it is to questions of profiteering and matters of that kind.

The Chairman. Will you describe it to the committee? As far as I can understand it at the present time this distribution refers, I may say, to the retailer.

Mr. Surface. To the retailer and wholesaler; yes, sir.

The Chairman. And not to the original producer.

Mr. Surface. No, sir.

The Chairman. For agricultural products.

Mr. Surface. It refers to the distribution of all products. As the thing has been worked out, I presume it has been explained to you by the census people.

The Chairman. We have not gone into distribution to any extent. We are going into it.

Mr. Surface. In the experiments that have been tried out, this was an attempt to get at the volume of business done by retailers, the number of retailers in different lines and wholesalers. For instance, we have no information as to what is the volume of the retail trade in this country. There have been some estimates made.

The Chairman. Eight cities were taken as an experiment.

Mr. Surface. A few cities were taken in an experimental way, and that relates to getting information from the wholesaler and retailer, the agencies who are distributing commodities.

Now it is our experience from the studies we have made that the thing we need is to eliminate some of this waste in distribution; and the thing we need to do—that is more information. We have no statistics regarding the volume of trade, or practically no statistics at all on distribution. We have lots of material on production. The census of manufactures every two years takes an inventory of our production activities, but there is not a single commodity you can follow through from the producer to the retader. We lose sight of every commodity once it is produced.

The Chairman. The spread between a bushel of wheat, we will say, from the time it leaves the producer, the farmer, until it gets to the consumer, is very great, is it not?

Mr. Surface. Well, it is rather large.

The Chairman. As I understand it the spread between the wheat and the miller, the seller, the producer of the bushel of wheat and the miller is by no means as great as the spread between the miller and the ultimate consumer.

Mr. Surface. Yes, sir; actually it is larger.

The Chairman. I mean the percentages.

Mr. Surface. Yes; probably in percentages. There is, of course, a lot of labor, and a lot of work performed from the time the wheat goes into the mills until it is milled and baked, but there are many cross hauls in the process of finding distributors, and it passes through many hands, and there are many ways in which there is a loss.

What I am arguing is that we need more information about the processes of distribution, that we have almost no information on it at the present time. We have information on agriculture. We have information on manufacturing, but when it comes down to the things going through the retailers and wholesalers, we have no real information about what is taking place.

The Chairman. The only information you have is for these several cities.

Mr. Surface. Yes. These are samples to see what could be done, and of what use it is going to be.

The Chairman. I want to ask you a question: I see in Baltimore under kinds of business you have many things, among which are bakeries, boots, shoes, building material, candy, confectionery, tobacco, clothing, dairy products, poultry products, drugs, dry goods, notions, florists, and so on down to toys and stationery, soft drinks, ice cream, and plumbing and heating supplies, everything that is conceivable almost in the retail trade, and at the end of it you have miscellaneous, and the number of establishments canvassed in Baltimore was 1,327. You have the persons engaged in this work. These are the experimental figures, but I take it that in the distribution, in your collation of figures in regard to distribution, it will be somewhat similar to those plans.

Mr. Surface. That is a sample.

The Chairman. This was done by the Census Bureau in collaboration with the respective chambers of commerce in the cities mentioned?

Mr. Surface. Yes.

The Chairman. Here is Providence, Syracuse, New York, sample cities that you took. This is prepared in connection with the domestic distribution departments of the chambers of commerce of the United States; Seattle; Atlanta, Ga.; and Kansas City, Mo. They took, as far as they could, the different regions of the country.

Mr. Surface. I think it should be said that these cities each requested the surveys be made in their particular cities and the Chambers of Commerce contributed very largely to the work and to the success of handling the work. In other words there is a demand for this kind of information.

The Chairman. I am sorry to have interrupted you.

Mr. Surface. The thing I wanted to get across to you was that there was a real demand and a real need for this kind of information. It is something we do not have, and there is nothing which fills the gap, and our whole distributive system at the present time is in a state of flux.

We have chain store development, cooperative wholesale buying, hand to mouth buying, and we are trying experiments in this direction and that. We are getting chains of department stores, and it appears we are trying to find out how best to do these things. We have no information to guide these experiments. As a matter of fact it is working in the dark. If we could have real information as to the volume of business and the outlets, through which it passes, it would be of .the greatest assistance to distributors in putting their house in order, in aiding and lowering the margin between producer and consumer.

The Chairman. What would be the special advantage of this knowledge, if obtained?

Mr. Surface. It is always hard to answer that kind of question, Mr. Chairman. It is like the census of manufactures. You say

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what is the advantage of the census of manufactures. To my mind the biggest advantage of that is it gives us fundamental data from which to clarify our thinking about these processes; in other words, we have got measuring sticks in the manufacturing industry that we set up and see where we are going.

Between 1923 and 1925 we increased the value of our production in the manufactures of this country by $2,500,000,000 and we did it with 400,000 less men employed.

Mr. Rankin. How long was that?

Mr. Surface. In two years.

Mr. Rankin. The last two years?

Mr. Surface. 1923 to 1925.

Mr. Rankin. Increased it how much?

Mr. Surface. $2,500,000,000 of output.

Mr. Rankin. What was the reduction in the number of men?

Mr. Surface. Approximately 400,000.

Mrs. Kahn. Does that include the automobile industry?

Mr. Surface. That includes the automobile industry, all manufacturing industries.

Mr. Rankin. Is that due to advancing prices or increase in the volume?

Mr. Surface. There was no significant increase in prices between those two years. It was due to increased efficiency, labor-saving devices, improved management, and various features of that kind, in my opinion, at least. Those are the facts.

Mr. Moorman. Who benefited by that outside of the manufacturers?

Mr. Surface. I can not tell you who benefited by it. The manufacturer is complaining very much because he can not make any money at the present time.

Mr. Derouen. Those experiments inured to the benefit of some business, but did they benefit the ultimate consumer.

Mr. " Surface. Ultimately those things reflect back to the consumer without any question, but immediately it benefits the manufacturer who is able to put in a better device to lower his cost of production. He gets an edge on the other fellow, but ultimately that whole thing reflects back to the consumer.

Mr. Moorman. The $2,500,000,000 you referred to covers what period?

Mr. Surface. Two years.

Mr. Moorman. Does that mean up until this day?

Mr. Surface. No, sir. That was between the last two censuses of manufacturers, between 1923 and 1925.

Mr. Moorman. The effect has not reached the consumer so far, has it?

Mr. Surface. I would not say that. I do not know but what it has.

The Chairman. As a matter of fact, the manufactured cost has not increased the price. As I have understood it has kept level.

Mr. Surface. We have had the phenomenon of a falling price during the last two years since 1925. Prices have been falling. The wholesale price index shows a marked decline.

The Chairman. The magnitude of business has increased.

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