ously, if the number of census products produced by each of the 50 companies are added together, it is found that these companies manufactured 4,085 products (not all different). Forty-three percent of this number, or 1,758 products, were items in which the companies individually manufactured less than 5 percent of the total value of the product. Further, 58 percent of all the products were items in which each company's output amounted to 10 percent or less of the total. In the upper concentration range there were 59 products for which the output of individual companies accounted for 95 to 100 percent of the total. Furthermore, about one-fifth of the total number of products were those for which the output of individual companies accounted for more than 25 percent of the total. While the above figures apply to all of the products of the 50 companies taken together, the same generalizations hold for each of the companies considered separately. At the extremes, one company manufactured no product in which it accounted for as little as 5 percent of the United States total, while 80 to 85 percent of the products of another company fell in the "less than 5 percent" concentration class. In the first case the company manufactured only 10 products and in the latter case the company manufactured 42 products. About onehalf of the products of one-half of the companies were manufactured under conditions such that the output of these particular products was less than 5 percent of the United States total. Approximately 60 percent of the products of half of the companies had concentration percentages of 10 percent or less. Although the majority of the number of products manufactured by these 50 companies were products with low concentration percentages, the greatest portion of the aggregate value of the output of these companies was derived from products with higher concentration percentages. While 43 percent of the total number of products were those in which the individual company output was 5 percent or less of the United States total, the value of these products made up only 6.3 percent of the total value of products of the companies. The relative number and value of products were quite similar in the next two concentration classes, 5.1 to 10.0 and 10.1 to 15.0 percent, but for products with concentration percentages above 15 percent the value greatly exceeded the number. In fact, only one-third of the number of products fell in this range, 15.1 to 100.0 percent, but these products accounted for more than two-thirds of the total value of all the products. In general, then, those products in which the company proportion of the domestic total was low were the relatively less important products valuewise, while the most important products were those in which the output of individual companies represented an important portion of the United States total. A picture of the relationship between the number and value of products manufactured by each company which accounted for specified percentages of the United States total is shown in chart XI. Relation between the importance of each product to each company and the importance of each product in the domestic total.-In order that the interrelation between the importance of a product to the company and its importance in the United States might be made to stand out more sharply, it was necessary to set up certain arbitrary limits by which "importance" could be measured. In the study upon which this COMPANY S PAO AU AS 1 UR J AW AR A AI HO AN AE AA AV Q V AX AQ AB Z DW AG AT AH AL M E AF AK AP 8 AD AM F C G T XNKLY AC AJ DD-40-62 CHART XI.-Percentage distribution of the number and value of products of each of the largest 50 manufacturing companies by United States concentration classes, 1937. section is based, products representing 5 percent or less of the company's total value of products were considered unimportant to the company, and products with a concentration percentage of 10 percent or less were considered unimportant in the total domestic production of those products. These limits, of course, were quite arbitrary. The decision of just what percentage of the total should be selected to divide the important from the unimportant could not be made on the basis of any hard and fast criteria but was subject in each case to particular and unique conditions of production surrounding each product. One company's output of a product may have constituted 10 percent of the total production of that product and yet have been relatively unimportant, if there were a number of other concerns each producing an equal or larger portion of the total, while another company may have been manufacturing 10 percent of the total of a product and have been a dominant factor in the field if the balance of the output was accounted for by a large number of producers whose individual contributions to the total were very small. The same general sort of reasoning applies, of course, to the selection of 5 percent of the company's total as a breaking point. More than half the products manufactured by the largest 50 companies were items which were relatively unimportant to the individual companies and were also items in which each company's output_was relatively unimportant in the United States total. Of the products which were important valuewise to the companies (218 out of the total of 4,085), approximately three-fourths were also products in which the individual company's output represented an important share of the total domestic output. Of the products which were unimportant valuewise to the companies (3,867 out of the total of 4,085), about 40 percent were important in the total. There were 42 products in which the individual company output accounted for the entire domestic production, and in every case these products were unimportant to the companies. The role of the largest 50 manufacturing companies as leading producers. A further indication of the market position of these corporations is afforded by an examination of the number of instances in which they were "leading producers" of their products. In the first part of this section, the total value output of 1,807 census products accounted for by the leading 4 producers of each of those products was presented. From this material it was possible to express in terms of another measure the importance or significance of the largest 50 companies in the whole picture of manufacturing. Two lines of investigation were pursued: (1) The significance of the largest 50 companies (as a group) among all the leading producers of these analyzed products, and (2) the frequency with which each company appeared as a leading producer of its analyzed products. Of the 1,807 census products analyzed, there were 3,752 different companies which appeared as either the largest or the second largest producer of most of the product. Among these companies were 47 of the largest 50 companies in the United States.2* 24 In selecting the products to be included in Part V of Temporary National Economic Committee Monograph No. 27, the products classified in approximately two-thirds of the census industries were not analyzed. Two of the 50 companies had all of their operations confined to these omitted industries, while the remaining company produced as by-products small quantities of 6 of the analyzed products. 300282-41-6 Though numbering only 1 percent of all the leaders, these 47 companies accounted for 11.8 percent of all the appearances and 18.2 percent of all the appearances in first place. Further, they accounted for 13.1 percent of all the appearances in products with concentration ratios greater than 75 percent, and 21.3 percent of all the first-place appearances among these products with high concentration ratios. Not all of the analyzed products were manufactured by the largest 50 companies and not all of the products of the largest 50 companies were included. Specifically, only 40 percent of all the products made by these 50 companies were included in the products analyzed in the earlier study. One of the largest 50 companies appeared as a leading producer of only one product, while another of the companies appeared as a leading producer of 99 different analyzed products. In general, however, these large companies appeared among the leaders in a number of different products. Approximately one-half of the companies appeared as a leading producer of 10 or more products. Half of the companies not only appeared a number of times, but their appearances represented more than half of their opportunities for appearance. That is to say, they appeared as a leading producer of more than half of the products which they manufactured and which were also analyzed for concentration. Furthermore, a majority of the companies had more than 60 percent of their appearances in first and second place. Thus, they were either the largest or the second largest producer of most of the products in which they led at all. Finally, a majority of their appearances were in products with concentration ratios greater than 75 percent. CHAPTER III MANAGED INDUSTRIAL PRICES1 The behavior of prices is of primary importance in our system of free enterprise. In the absence of any authoritarian controls of production or consumption, it is the price structure-the interrelationships of thousands and thousands of prices that prevail in the communitywhich determines how much shall be spent and for what, who shall have things and how much, and what shall be produced and by whom. Prices guide human beings "to make and accept myriads of decisionsabout the way in which they shall spend their income, what they shall do for a living, how they shall invest their savings, and how much they shall produce." 2 From day to day the behavior of prices exercises a far-reaching influence upon the rate of business activity and the level of production and employment. In the long run, prices play a major role in determining how our human and material resources are expended, where production shall be increased and where reduced, which industries shall grow and which shall decline. In a large sense, therefore, it is the price system-or more accurately the system of prices-that is in good part responsible for the way in which the economy works, for its success or failure in achieving and maintaining a satisfactory level of employment and of production, in providing an adequate living standard for the population, and for its ability rapidly and effectively to meet the demands of a grave national emergency. This responsibility must in turn be shared by those business executives who are in a position to influence appreciably the prices of individual products which they buy or sell. For the prices of a vast range of industrial commodities and even of some agricultural products are controlled to a material extent by the policy decisions of business executives acting individually or in convert. Unlike such products as wheat, over whose price no individual buyer or seller can exert any appreciable influence, the prices of such commodities as steel, aluminum, automobiles, cigarettes, and bread are all subject to a substantial degree of control by a limited number of executives in a few large companies. This is probably inevitable in any economy characterized by large-scale production and concentration of economic power. It is inevitable, too, that the price policy decisions of businessmen are primarily directed toward improving the position of their individual 1 This chapter was written by Saul Nelson, senior industrial economist, Bureau of Labor Statistics, Department of Labor, following which it was criticized by Theodore J. Kreps, professor of business economics, Graduate School of Business, Stanford University, and Corwin D. Edwards, economic consultant, Department of Justice. Much of the material is based upon Temporary National Economic Committee hearings and monographs, especially Temporary National Economic Committee Monograph No. 1, Price Behavior and Business Policy, and Temporary National Economic Committee Monograph No. 5, Industrial Wage Rates, Labor Costs, and Price Policies. Economic Problems in a Changing World, edited by Willard L. Thorp, Farrar & Rinehart, New York, 1939, p. 240. |