alike so far as intensity of competition is concerned, with very different statistics of size. The general agreement is that size is not a measure of monopoly power.

Yet, the Federal Trade Commission issues a little book full of almost nothing but size statistics and calls it "a study of the extent of concentration of economic power." Critics of big business are hailing this as the first major contribution of its kind since the Temporary National Economic Committee reports of the 1930's. And, misleading as it is, it is the same kind of thing that TNEC did emphasize most at that time.

In such reports, much more is at stake than the business community's peace of mind. I can assure you that as laboratories work out new processes and products, and as management sees the possibilities of doing a bigger and better job at lower cost and selling prices, many businessmen pause with uncertainty about expanding in the face of the confusions of Government hostility toward growing size itself.

We must remind ourselves that each year we have between one and two million youngsters entering the labor market for the first time. This calls for a net increase in job openings of from 500,000 to 1,000,000 per year. Our studies show that it takes eight to nine thousand dollars to create one job. This means a necessary monthly investment in new job-making expansion of over $400,000,000, or about $5,000,000,000 per year.

The point I am making is that dynamic expanding business enterprises are an absolute requisite, just to hold our own against unemployment. Some job-making expansion does and should come from newly created business. But consider the importance of the expansion for which we must look to already established and successful going concerns. It is of vital importance to every community in the United States.

We must do what we can to clear up this business uncertainty, growing out of Government hostility toward growing size as such. Otherwise, we run an unnecessary risk in this matter of keeping up with the employment needs of our growing labor force. The gravity of the risk speaks for itself.

We seem to lack practical criteria, tests or symptoms of inadequate competition. We can meet this need only by realistically analyzing the actual competitiveness of actual market situations.

Then, so far as the size factor itself is concerned, let the chips fall where they may.

I want to talk now about competition, actual market competition, Some people carelessly assume that the only important meaning of "competition" is competition from companies in the same industry. Nothing could be further from the facts.

I think it is of utmost practical significance in an inquiry of this kind to recognize that the important meaning of competition is this: The actual possibility of losing business to somebody else, whether that somebody else is in your own industry or not.

Let me illustrate. The Aluminum Co. of America is in a position to lose business not only to the Reynolds or the Kaiser company, but to the many makers of various nonaluminum products. Many of its customers have a choice of aluminum, or of a number of steel or other metal alloys, or one of the increasingly popular laminated-wood products or plastics.

Take a look at textiles. The range of choice today is almost limitless. At the turn of the century it was very narrow indeed. Today, rayon and nylon and many others are competing with silk and cotton and wool.

"But, after all," somebody says, "is not what you're talking about rather a minor part of the whole story? It is only a small percentage of the aluminum business that can be lost to other metal or wood products or plastics."

The answer is that the small percentage of business lost may be the difference between profit or loss in operation.

Now, this is one of the important points at which sound thinking requires a better understanding of practical realities in the massproduction industries.

The experts talk about break-even points. If you are interested, I would like to come back to that later.

But, to most of us, the essential fact is that in mass-production industries total costs of operation will not go down in proportion to losses of business. If a firm loses 10 percent of its business, for example, its total costs of operation will go down much less than 10 percent and sometimes hardly enough to be noticed. Fixed expenses remain about the same.

What does this mean-what does it mean that profits earned when plants are operating at capacity may be annihilated by a 10- or 15percent decline in volume? The only reasonable answer is that it threatens misfortune for everyone-the employees, who may be reduced to part-time work or dismissed; the investors, who own the business and will receive no return on the risk capital they have ventured. It means a small amount of business to be gained or lost to competition is definitely not a minor but a very vital factor to any company, large or small.

In practice, it is not a question of whether a big business may behave like a monopoly and still hold a large part of its volume. The question rather is whether actual customer freedom of choice is great enough to lose such a seller more volume than he could afford to do without and operate profitably.

The customer's freedom, as I have noted, may be more than just the freedom to substitute one seller for another. For at least some of every seller's customers, it is also the freedom to substitute one kind of product for another.

There can be no question about the importance of intelligently measuring monopoly power, whether it be in business or in labor, or, perhaps, even in Government itself. By the same token, it should be understandable if we are deeply concerned about the dangers of merely measuring size and calling it monopoly power.

We do not want to be negatively critical and talk only about how monopoly power should not be measured. We also are making some concrete suggestions for your consideration, sir.

The problem is a difficult one. The measurement of size or who has how much of any given market is easy. But it is not the measurement that really counts.

What really counts is embodied in two questions:

1. How much volume of business is the firm in position to lose to its competitors?-remembering always the competition which may come from other lines of products, too.

2. Could it afford to lose that volume and stay in business!

You cannot get the answers to these two questions by taking various measurements of size. The answers can never be as precise as statistics of size or of market share. But they do have the all-important virtues of really telling us about the adequacy or inadequacy of actual market competition.

The best answers you can get to these questions form the best practical answers to the basic questions about any business under scrutiny: "How free is it from competition?"

"Has it been getting less or more competitive?"

One of the basic questions before this committee is whether there has been a dangerous trend toward greater and greater concentration of economic power. This will require careful examination in terms of customers' freedom of choice and of substitution.

The story of modern transportation illustrates clearly the increasing freedom to substitute one seller for another. It demonstrates the story of our technological progress and increasing freedom to discard one product and substitute another. Distance is no longer an obstacle. The story of transportation is one of lower and lower cost, greater and greater speed, and better and better handling, whether the products are perishable or not.

Local markets have become district markets; district markets have become regional markets; regional markets have become world markets. And all this has obviously had the effect of giving the customer an ever-widening choice of suppliers.

Certainly, widening the customer's choice does not give sellers the greater freedom from competition which is the essence of monopoly

power.

We are well aware of the scope and tempo of technological progress over the years. But are we really aware of its significance in relation to the competitiveness of our economy? In almost any field you find that technological advancement has brought keener and keener competition.

How many different established brands of radios could you buy in 1930 and how many today? How many different kinds of food, or clothing, or housing, or household appliance, or transportation, or communication, or entertainment and recreation can you buy today as against the number of choices you had back in 1930? Everyone knows that newcomers in each of these fields have greatly increased the competition in every one of them in the last 20 years.

I shall not take your time to read it now, but I believe you will find illuminating an appendix which is attached to this statement. In it we have listed some 50 developments of the last few years, each one of which added a choice of materials that did not previously exist. There are hundreds more.

The record of our technological progress cannot be interpreted in any other way than as giving us a wider and wider range of choices in our buying, an opportunity to vote for one product in a field of many, as against the narrower choices that we used to have.

In the face of these facts, how can we reconcile any suspicion of increasing monopoly power with this widening range of alternative choices for the American consumer?

To have monopoly power, you must have customers who cannot escape you. Customers who cannot escape are customers for whom

there is no substitute for what you sell, no alternative to remaining your customer.

We know the trend has been toward a wider and wider range of customer choice among substitutes and alternatives. That is a trend toward a more and more competitive economy, not one which is less and less so.

I have stressed two facts: First, the customer's steadily increasing choice as to how he spends his every dollar; second, the way in which technological progress is constantly widening the range of alternatives and substitutes.

And it is against the backdrop of these actual realities that I want to talk with you now about a basic structural requirement for keeping an economy competitive; it is freedom of entry into any business.

Inefficiency, above-normal profit margins, unprogressiveness, and general restrictionism are typical monopolistic conditions whose very appearance is an invitation for new competitors to step into any business with a good chance to make a profit.

So long as there is freedom of entry, competitive policies and practices are the established enterprise's best protection against loss of business not only to existing competitors but also to new ones coming into the field.

Nobody seriously questions the logic of free entry for a competitive economy. Nevertheless, there are some who say that it has nothing to do with the charge that competition is losing out to monopoly.

They ask, "How about trying to set up a new aluminum company?" or "How would you like to try starting another du Pont?"

They are thinking that you just can't do it. But the whole subject is much too important for that kind of treatment.

Most of us can remember a time when these skeptics might just as tellingly have asked, "How about starting a new railroad?” They would not even have been talking about the freedom of entry that actually mattered most.

Suppose they had been asked about the possibility of starting up in trucking or bus transportation. Now we know that that was the freedom of entry that was going to make the difference in railroad competition. Today try to talk about the competitiveness of railroading without talking about trucks and busses, to say nothing of water transport, air lines, and, in recent years, transcontinental pipe lines. They are the toughest kind of competition.

What I am saying is not intended to lessen our concern about the dangers of monopoly. What I most earnestly want to stress is the danger of being misled by careless thinking.

The question about Alcoa or du Pont is the same kind of question: Are they now, and are they likely to go on being, exposed to the possibility of losing business not only to other firms already in existence

but to new entrants?

The answers run in terms of all the possible alternatives and substitutes in the customer's range of choice, already wide and growing wider every year.

Reynolds and Kaiser entered the aluminum market as such. But, more important, over the last few years new alloy metals, new plastics, magnesium, and new laminated-wood products have come along in an unbroken procession, freely entering the self-same larger market

in which Alcoa gets and loses business. Now titanium is entering the picture and in a very few years may be the biggest threat of all.

Du Pont is now in competition with literally thousands of firms in the manufacture of chemical and allied products.

That du Pont does only about 8 percent of all this business or that its own product leads the field in so few instances these facts are much less significant to all of us than the fact that 60 percent of all the products du Pont sold in 1948 had not been made in 1928. They first came on the market during the past 20 years.

I notice in the paper that Greenewalt testified to that fact the other day.

As advocates of competitive economy, we recognize the importance of freedom of entry. It cannot be safeguarded and fostered too carefully or too zealously to suit us. But I do believe that much of the alarmist thinking today about monopoly overlooks the realities of the market.

With our kind of all but miraculous technological dynamism, it is the freedom of entry into the new fields that actually has been, still is, and promises to continue being of first importance among the safeguards against lessening competition. So long as venture capital is available to vitalize new enterprises, this will be so.

In this connection, the national chamber has declared in an official policy statement:

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Our general concern for small and new enterprises can best be shown by reconstructing the tax structure so that risk capital will be forthcoming in greater volume; by continued enforcement of the antitrust laws; and by collection and distribution of useful economic data and information, not otherwise available, in a form suitable for use by the smaller enterprises but available to all.

I do not mean to convey the impression that I can testify to the adequate competitiveness of every American industry.

I cannot profess to know the ins and outs of every American industry, nor does any other businessman of my acquaintance. But I recognize that your committee must get down to cases.

As a practical matter, getting down to cases is first of all a problem of singling out the suspects on whom to concentrate.

I have already indicated that, in my view, it is both careless and misguided to let statistics of size or market share serve as the yardstick of suspicion.

The approach I recommend is one that seems to me implicit in our underlying reason for wanting adequate competition.

We want adequate competition for the public service it renders.

(1) We want business to be on its toes to improve its products and lower its costs. We don't want it to be in position to rest on its oars without jeopardizing its own income. Competition makes the difference.

(2) As processes and products are improved, we want the consuming public to benefit by getting more and more of better and better things at lower and lower prices. We don't want the story of our industrial progress to be merely longer and longer profit margins. Competition makes the difference.

(3) We want the kind of situation in which the business enterprise will always find its best prospect of profit in producing and selling