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Spain, Sweden, the United Kingdom, the European Economic Community (France, Germany, Italy, Belgium, The Netherlands, and Luxembourg), Canada, and the United States assembled in Paris on March 11, 12, 1964.

"Recognizing the continuing seriousness and urgency of the problems posed by developments in world trade in the products of these industries and

"Recalling that their governments have expressed their intention of safeguarding

these industries and the standard of living of the millions of men and women they employ and

"Being mindful of the fact that in many parts of the world international trade is not conducted on the basis of normal free and fair trade practices and

"Recognizing the need for the orderly development of world trade in the products of the above industries among all countries and

"Desiring to develop an equitable solution of the mutual problems affecting all countries producing or consuming such products. "Therefore unanimously resolve

"That there is a recognized need for an early agreement among governments covering world trade in the products of the industries involved irrespective of the fibers contained in these products.

"That each of the above-mentioned industries request the prompt convening of an international meeting of all governments concerned for the purpose of concluding such an agreement.

"That each of the above-mentioned industries suggest to its government measures that each considers appropriate to achieve this end."

Mr. SALTONSTALL. Mr. President, in 1961, President Kennedy recognized the serious problems posed by imports to our domestic textile manufacturers. In his seven-point textile program, announced on May 2 of that year, he stated that the textile industry "is of vital importance in peacetime and it has direct effect upon our total economy." In point 6 of the proposed program he added:

I have directed the Department of State to arrange for calling an early conference of the principal textile exporting and importing countries. This conference will seek an international understanding which will provide a basis for trade that will avoid undue disruption of established industries. The program, initiated before the passage of the Trade Expansion Act, is outside of the framework of the Kennedy

round of trade negotiations.

I certainly hope that with the encouragement provided by this Paris accord, our Government will take immediate action seeking an international agreement to limit the excessive imports of wool textile products.

Several of my colleagues and I, under the leadership of the Senator from Rhode Island [Mr. PASTORE], have met with President Johnson at the White House, to discuss this issue; and followup conversations concerning this subject again led by the Senator from Rhode Island-were held yesterday with Secretary of State Rusk, Christian Herter, and George Ball, the Under Secretary of State. Shortly, the President's special representative for trade negotiations, Christian Herter, will go to Geneva for the trade negotiations.

I conclude by stating that this is a matter of great importance to all of us

who have constituents in the textile industries. We hope something will come from these conferences, in which we were favorably received by President Johnson, and again, yesterday, by Secretary of State Rusk-who, we hope, is undertaking direct negotiations on this subject.


Mr. DIRKSEN. Mr. President, in the course of the civil rights debate, a great deal has been said about a pending case before the Fair Employment Practices Commission in the State of Illinois. The case is styled: "In the Matter of Leon Myart, complainant, and Motorola, Inc., respondent, Charge No. 63 C-127." Under date of March 16, I received from the executive director of the Illinois the executive director of the Illinois FEPC a letter which sets forth in full the decision and the order of the hearing examiner.

In order to make sure that all the facts in connection with the civil rights bill are before the Senate, I ask unanimous consent that the letter from the executive director of the Illinois Fair Employment Practices Commission and also the decision and the order be printed in the RECORD.

There being no objection, the letter, decision, and order were ordered to be printed in the RECORD, as follows:


Chicago, Ill., March 16, 1964.

The U.S. Senate,

Senate Office Building,
Washington, D.C.

DEAR SENATOR DIRKSEN: Enclosed is a copy of the decision of Hearing Examiner Bryant in the case of Myart v. Motorola, Inc., which

I am forwarding to you for your information since I understand that this decision is being now before the Senate. cited in the debate over the civil rights bill

hearing on this case over which he presided. Mr. Bryant issued this decision following a Motorola, Inc., has appealed this decision and it will now be reviewed by the members of the commission. Following the commission's decision and order on this case either or both parties can seek relief in circut court, according to the provisions of the Illinois

Fair Employment Practices Act.

Please let me know if you desire further information and thank you for your continued interest in fair employment practices.

Sincerely yours,

WALTER J. DUCEY, Executive Director.


NO. 63C-127

Decision and order of hearing examiner

This matter came on for public hearing before the hearing examiner on January 27, 1964, on a complaint issued by the fair employment practices commission on behalf of one Leon Myart pursuant to Illinois Revised Statutes, chapter 48, sections 851-866.

The complaint charges that on July 15, 1963, at Chicago, Ill., the respondent committed an unfair employment practice in that respondent did not hire complainant because of his race.

The com

The complainant is a Negro. plaint alleges that Myart applied at respondent's place of business in Chicago for the position of analyzer and phaser; that complainant was well qualified for the position for which he applied. The qualifications he cited as relating to said position are these: a 19-month course of study-combination general electrical and radio-television technicians course and another electronics shop course of 432 hours.

It appeared upon the hearing that, in common parlance, an analyzer and phaser is a troubleshooter, checking radio, television, and stereophonic sets for faults as they come off the production line and rectifying.

The complaint further states that after the charge was filed with the commission, one of its employees investigated said charges to ascertain the facts relating to said alleged unfair employment practice and that the commission afterward determined that there was substantial evidence that said unfair employment practice had been committed. The complaint further alleges that pursuant to section 8 of the Illinois Fair Employment Practices Act, a conciliation conference was scheduled and duly noticed and that there was a failure to settle or adjust the charge.

Paragraphs four and five of the complaint set forth further satisfaction of jurisdictional and procedural prerequisites leading to the instant hearing. At the public hearing no jurisdictional or procedural questions were raised by the respondent, and the hearing examiner holds that all jurisdictional and procedural requirements were satisfied prior to the public hearing.

The relief sought through the complaint is that respondent be required to offer to the complainant employment as an analyzer and phaser, and that his seniority be computed as starting on the date of his application, to wit: July 15, 1963; that respondent be ordered to pay complainant the wages he would have earned after said date down to the date of the order to be entered pursuant to this complaint, less the amount of his earnings meanwhile; that respondent be ordered to cease and desist from committing the unfair employment practice complained of at any place of respondent's business in the State of Illinois; that respondent cease and desist from denying equal employment opportunity to all qualified applicants; that the respondent be required to promulgate a policy statement of merit employment in accord with the Fair Employment Practices Act of Illinois, and that said policy statement be promulgated to all present employees of the respondent and to all places where future employees are recruited, and that said policy be made known to all future applicants for employment with the respondent company.

At the opening of the hearing on January 27, 1964, counsel for the respondent orally moved for the correction of its legal title, and the correction was accordingly made in the heading of this decision and order. The hearing examiner notes that the respondent failed to avail itself of a conciliation conference scheduled by the commission pursuant to section 8 of the act and that the respondent elected not to file an answer pursuant to section C, subsection 4a, b of the rules and regulations of procedure prescribed by the commission. By subsection 4d, any allegation in the complaint, swer, unless the respondent shall state in which is not denied or admitted in the anthe answer that he is without knowledge or information sufficient to form a belief, shall be admitted. However, by subsection 4g, the hearing examiner is required to hear the matter and make his findings of fact and enter his order upon the testimony at the hearing, notwithstanding respondent's failure to file an answer. This the matter was

heard on complaint and testimony and the exhibits produced in connection therewith.

By section 1 of the act, it is declared to be the public policy of this State that equal employment opportunity without discrimination because of race, color, religion, national origin, or ancestry should be protected by law; and the legislature found, in part, preliminary to its statement of policy that denial of equal employment opportunity because of race, color, religion, national origin, or ancestry, deprives a portion of the population of the State of earnings necessary to maintain a reasonable standard of living, thereby tending to cause resort to public charity.

By article IX of said rules and regulations, they are to be construed to accomplish the purposes of the act and the policies of the commission.

The complainant, to maintain the issue in his behalf, testified first; and he was followed by Walter J. Ducey, executive direc

tor of the commission. The complainant

testified that he attended Forrestville Grade School, Dunbar Vocational High School, evening division, from which he received a certificate setting forth that complainant, on June 7, 1961, had completed a prescribed course of 432 hours in electronics shop (exhibit II; report of proceedings, p. 14); Academy for Adults, which awarded a diploma on June 17, 1960, and setting forth that complainant had satisfactorily completed a general high school course (exhibit I; report of proceedings, p. 15); official transcript of official transcript of complainant's scholastic record in a combination general electrical and radio-television technicians course, dated November 7, 1962, and issued by Coyne Electrical School (exhibit III). This exhibit sets forth that complainant received an average grade of 83.1; that the combined courses included basic electricity and wiring, d.c. power and motor repair, a.c. power and maintenance, industrial electronics, refrigeration and electric appliance repair, basic radio-TV, AM and FM servicing, TV circuits and construction, television service and repair, and TV nd repair, and TV servicing and color circuits. The electrical course was 6 weeks long in each department or 180 hours. That the TV radio electronics course was 7 weeks long or 210 hours. This transcript contained also a remark relating to complainant's industry and cooperation as above average. In addition to these exhibits offered by the complainant as proof of his academic qualifications, he also offered two diplomas which were awarded him by Coyne Electrical School. The one dated May 5, 1961 (exhibit IV), shows satisfactory completion of a resident course of instruction in general electrical technicians course; the other is dated December 7, 1962, and recites that complainant has satisfactorily completed the resident course of instruction prescribed for television-radio electronics technicians course (exhibit V). All of these schools are located in Chicago, Ill., and one is under the supervision of the Chicago Board of Education.

The evidence shows that complainant attended one or more of these schools while he was working at various jobs not related to his training (report of proceedings, pp. 2426). As proof of his experiential qualifications in the field related to that em

ployment for which he applied at respondent's place of business, complainant testified that he worked part time with his brother in the operation of neighborhood radio-TV service over a 3-year period immediately preceding his application with respondent. Here complainant performed general service on radios and televisions (report of proceedings, p. 27). He also worked

at House of Sound which offered a television rental service and kept in stock for this purpose about 30 sets which complainant kept in working order. At both shops, complainant served as trouble

shooter, checking circuits of sets, voltage and resistors; and he read schematic diagrams-localizing faults and balancing voltages of opposite phases, and repairing sets. Complainant's testimony respecting his school attendance and experience substantially supports the allegations of the complaint.

Complainant testified that he was on respondent's premises not more than 15 minutes during the process of his application and his being tested (report of proceedings, p. 69). By his complaint complainant claims that he took and passed the company tests, that white persons were hired during this period but that he was not, and that he believes he was not hired because of his race. At the hearing respondent raised no question regarding the respectability of the schools which the complainant attended, but in seeking to meet the showing made by the complainant, the respondent made a fourpoint attack.

First, respondent showed that complainant failed to write in on respondent's

printed application form the name of one of the schools that complainant attended, namely, Dunbar High School (respondent's exhibit I; report of proceedings, pp. 43, 44), and his radio and television experience (report of proceedings, pp. 47, 65). Complainant testified that he orally informed the interviewer of both of these items (report of proceedings, pp. 65, 70), and showed to the interviewer complainant's certificate from Dunbar (complainant's exhibit II), showing completion of 432 hours' course in electronics. Respondent's employment interviewer, Jerry Hoelscher, testified at one point that he orally asked complainant for further information relating to his experience or training or background not included on his application and that there was none, "to my knowledge," pages 165, 161. Hoelscher further testified that if complainant had informed the interviewer of complainant's training at Dunbar Vocational School he, the interviewer, would have noted that fact in writing on complainant's application form. Under cross-examination, Witness Hoelscher admitted that he asked complainant no question regarding his training in related work (report of proceedings, p. 170).

There is then presented two questions relative to complainant's revelation of his educational and experiential background. The first is whether complainant is to be held responsible for these written omissions, and whether these omissions were decisive to his

being hired; second, there is a disputed question of fact about complainant's oral communication of his educational and experiential background to the interviewer.

Reviewing the reverse side of respondent's exhibit I, the printed application form, the hearing examiner notes that there are four sections separately titled so that complainant's four last places of employment are educed, without regard to whether any of the four were places engaged in any work related to that for which complainant was applying at respondents. The same must be said of the section headed, "List below other special qualifications you have. (Machinery or office equipment)."

In the judgment of the hearing examiner no place on the application form was designed to educe the information respecting complainant's particular experience in the related field of work. Moreover, Hoelscher said this omission was not decisive to complainant's not being hired (report of proceedings, p. 159). On the disputed question whether complainant orally informed the interviewer of the applicant's educational and experiential background, the hearing examiner holds with the complainant. As the trier of the facts, the hearing examiner is the judge of the credibility of the witnesses and of the weight to be given the testimony of each. That complainant would apply for em

ployment as analyzer and phaser in the radio and television field and then suppress information to the interviewer regarding the applicant's education and experience in the field of which he was applying for employment is improbable.

The second point of respondent's attack upon the case made by the complainant at the hearing consisted of a series of 10 questions put to complainant under cross-examination, questions the answers to which respondent claims an analyzer and phaser at Motorola must know, and which are put to every applicant for employment as analyzer and phaser at Motorola, providing the applicant first passes test No. 10. This latter test will be dealt with during consideration in this decision and order of respondent's attack No. 3. These questions were said by respondent to be a test of complainant's knowledge of the work for which he applied at Motorola.

In the judgment of the hearing examiner this test put upon the hearing came too late and cannot now determine the issue of whether complainant was denied equal opportunity of employment at the time he applied.

Respondent's third point of attack was made in connection with the said test No. 10, which was put to the complainant at the time he applied for employment, and it followed his filling out the written application (respondent's exhibit II). This exhibit was said by respondent to be the same test form containing identical questions as the one complainant took at the time of his application. The test form on which complainant indicated his answers was not offered in evidence and the only reason for not doing so was that it had been sent to the respondent's test area. Exhibit II was admitted into evidence for the restricted purpose of showing the type of test that had been put to ployment (report of proceedings, pp. 157, complainant at the time he applied for em169).

It was claimed by the author of this test, who testified at the hearing on behalf of the respondent, that the test is the shortest test of intelligence that has been developed, as far as he knew. It is said to test verbal understanding, understanding of instructions (report of proceedings, p. 209). The witness, Dr. Shurrager, developed a series of tests for the respondent including tests of four different kinds of special relations and ability; and he regularly supplies these tests to respondent for a fee, pages 210, 211. Of respondent's behalf, only witness Hoelscher the greater number of witnesses testifying in attempted to place himself within the area of having direct knowledge of complainant's score on test No. 10, and he testified that the score was 4 and that the passing grade at Motorola is 6, while Dr. Shurrager says that the mean he set was 8. Inasmuch as Mr. Hoelscher was not the person who administered the test to the complainant, his opportunity for knowing the fact about which he testified falls short of legal requirements. No testimony was offered from the administrator who administered the test and graded it. In the absence of the test which complainant took, his answers thereto, and the overlay key for checking the complainant's answers, the hearing examiner is denied sufficient means for holding with the respond

ent that complainant was accorded equal opportunity with all other applicants without regard to the complainant's race.

All of the above-mentioned items were at one time, at least, in the possession and under the control of the respondent; and its failure to produce, after the exercise of reasonable diligence, or its failure sufficiently to explain away its inability to produce, if that were the fact, does not convince the hearing examiner of any eagerness on the respondent's part to disclose all the facts in this case.

The hearing examiner is persuaded therefore, that had respondent produced the test

administrator to testify, the test No. 10 which the complainant took, his test score, and the overlay key from which comparisons with, and checking of complainant's answers might have been made, the showing would have been adverse to the respondent. These missing items were not equally available to the complainant. A reasonably prudent person, under the same or similar circumstances as the respondent, would have produced these missing matters if he believed they were favorable to him, Beery v. Beery, (311 Ill. App. 469). Moreover, the complaint alleges that complainant passed the company tests, the commission investigator testified that when he administered test No. 10 to complainant as part of the investigation about 2 months later, complainant passed with a score of 7, a point above the minimum required by the company (report of proceedings, pp. 121, 122). Dr. Shurrager testified that a person retaking the test might improve his first score, but not appreciably (p. 215), that no special training was required and that there is no real difficulty in administering and scoring test No. 10 (report of proceedings, p. 210). The hearing examiner cannot, in connection with test No. 10, end the discussion here.

Because of the probability otherwise that respondent may continue to use test No. 10, in its employment practice, without revision, if revised it can be, the hearing examiner makes the following observations, though not necessary to the decision and order in this case: Copyrighted as it was in 1949 and used since that time, test No. 10 in the light of today's knowledge, is obsolete. Its norm was derived from standardization on advantaged groups. Studies in inequalities and environmental factors since the publication of test No. 10 have been made with careful equating of such background factors. Dr. Shurrager realizes somewhat the existence of these background variables, but his test No. 10, at the time of complainant's taking it, and at the time of the hearing, had not been revised to meet the acknowledged, current conditions (report of proceedings, pp. 215-218). In the light of current circumstances and the objectives of the spirit as well as the letter of the law, this test does not lend itself to equal opportunity to qualify for the hitherto culturally deprived and the disadvantaged groups, Audrey M. Shuey, "The Testing of Negro Intelligence," J. P. Bell Co., Inc., Lynchburg, Va., 1958. See vii. Until test No. 10 is revised, or appropriately replaced, those persons such as the complainant in this case who apply for employment at respondent's company will be at a competitive disadvantage, Paul A. Norgren et al., "Employing the Negro in American Industry," Industrial Relations Monograph, No. 17, Industrial Relations Counselors, Inc., N.Y., 1959, page 25.

The fourth and final attack which respondent made on the complainant's case was to show the company's general hiring practices. The attempt here was to show that the company accords equal employment opportunity to all without discrimination because of race, color, religion, national origin, or ancestry.

It is noted that the personnel director, at the hearing, was unable to tell approximately the number of Negro analyzers and phasers that were employed by the respondent except within the last 10 days prior to the hearing; and apparently he learned that fact through looking at pictures of a Negro analyzer in the Courier newspaper. The investigator's charge report in evidence indicates that as of August 22, 1963, respondent employed approximately 25 phasers and analyzers, all being persons of the white race (report of proceedings, pp. 233, 234) (complainant's exhibit VI). In this connection, witness Piper testified that Negroes at respondent's have been occupying jobs of technicians and/or analyzers and phasers for at least 3

or 4 years. On this point there is conflict
between two of respondent's own witnesses
and with the investigator's report. In the
light of all the evidence in this case con-
sidered together, the hearing examiner ac-
cepts the finding of the commission inves-
tigator (see report of proceedings, pp. 281,

In the consideration of Mr. Piper's testi-
mony with regard to complainant's arrest
record, the hearing examiner is not able to
say that respondent gave it any weight in
denying employment to the complainant.
Under direct examination, Mr. Piper stated
that had
complainant successfully
passed all other tests usually administered
for the job applied for, he would still have
been denied because of his arrest record (re-
port of proceedings, p. 270). Yet, under
cross-examination, Mr. Piper testified that,
"if we were at a point of seriously consider-
ing the hiring of the applicant, we would
have undertaken an investigation, as we have
done in many cases in the past" (report of
proceedings, p. 272). Then on page 276, wit-
ness Piper testified that in the final analysis
the company would make its decision "based
upon the information which we obtained in
an investigation," which was not made in
this case.

If the Fair Employment Practices Act of
this State is effectually to be implemented,
personnel executives in the industries cov-
ered by the law, have a supreme responsi-
bility to move positively to eradicate unfair
employment practices in every department.
employment practices in every department.
Somehow, general convictions of economic
need and fairness must be acquired, and con-
certed action made to come into play within
each department throughout the plant and
with the administrators of this law. There
is ample modern authority for this position.
The task is one of adapting procedures with-
in a policy framework to fit the requirements
of finding and employing workers heretofore
deprived because of race, color, religion, na-
tional origin or ancestry. Selection tech-
niques may have to be modified at the outset
in the light of experience, education, or atti-
tudes of the group, Francis J. Brown, “Edu-
cational Sociology" 2d edition, Prentice-Hall,
Inc., 1954, pp. 135-138; Paul H. Norgren et
al., "Employing the Negro in American In-
dustry," Industrial Relations Monograph, No.
17; Industrial Relations Counselors, Inc.,
N.Y. 1959, pages 4, 5, 8, 10, 11. The employer
may have to establish in-plant training pro-
grams and employ the heretofore culturally
deprived and disadvantaged persons as learn-
ers, placing them under such supervision
that will enable them to achieve job success.

In order to sustain the complaint in this case the hearing examiner must find that the complainant has proved the complaint by a preponderance of the evidence, SmithHurd Ill. (Ann. Stats. 1963, Ch. 48, Par. 858 (f)). The examiner, if he finds that the evidence in the case, when considered altogether, preponderates in favor of the complainant, then he must find the issue, or issues in favor of the complainant. The hearing examiner so finds, Garlinski v. Chgo. City Ry. Co. ((1930), 257 Ill. App. 414). There is relevant evidence here such that a reasonable mind might accept as adequate to support the conclusion that an unfair employment practice was committed by the respondent against the complainant in the company's denial of employment to the complainant on or about July 15, 1963; that complainant was denied because of his race.

It is therefore ordered as follows:

A. That respondent, Motorola, Inc., cease and desist in the future from committing the unfair employment practice complained of in this complaint at any place of business of the respondent in the State of Illinois and to cease and desist from denying equal employment opportunity to all qualified applicants.

B. That respondent cease and desist from the use of test No. 10 within 30 days from the date of this order; or within such further time as may be extended by the commission upon written request made for good cause shown before the expiration of said 30 days.

C. That if respondent chooses to replace test No. 10, that it adopt a test which shall reflect and equate inequalities and environmental factors among the disadvantaged and culturally deprived groups, and in this connection, it is ordered that respondent inform the commission, in writing, of the company decision within 30 days from the date of this order, or within such further time as may be extended by the commission after written request made for good cause shown before the expiration of said 30 days.

D. That respondent revise its application for employment form to educe specifically the last places of employment, if any, in the related field for which applicant is applying, and in detail, the experience, if any, which applicant claims, whether inside or outside the related industry. That respondent submit to the commission a copy of said revised application for employment form within 30 days from the date of this order, or within such further time as may be extended by the commission after written request made for good cause shown before the expiration of said 30 days.

E. That the respondent, Motorola, Inc., immediately offer to the complainant employment as analyzer and phaser, and that upon such employment assign him to the company's so-called sponsor program at the current rate of pay paid to all other employees working under the sponsor program in the department, under adequate supervision with the end in view of enabling the complainant to achieve job success as an analyzer and phaser.

F. That the respondent's intentions to execute this order in good faith be promulgated to the complainant's supervisor and all other employees in the department.

G. That the respondent report the date of its offer to the complainant in compliance with this order within 7 days from the date hereof to the commission; and to make such further reports to the commission as it may inquire. Enter:

Hearing Examiner.

Dated: February 26, 1964.


I, Robert E. Bryant, hearing examiner in the above-entitled cause, do hereby certify that I have served a copy of the foregoing decision and order upon the complainant and respondent by placing the same in the U.S. mail in an envelope, properly addressed with first-class postage affixed to: Attorney Robert V. Nystrom, 77 West Washington Street, Chicago, Ill., who is attorney of record for the respondent; and Attorney Quentin J. Goodwin, 105 West Adams Street, Chicago, Ill., who is attorney of record for the complainant. This 27th day of February A.D. 1964. ROBERT E. BRYANT, Hearing Examiner.


Mr. PROXMIRE. Mr. President, on February 25, the Joint Economic Committee filed a report entitled "Annual Economic Indicators for the U.S.S.R." This report reveals some fascinating evidences of weaknesses within the Soviet economy. The report, which was prepared by some of the outstanding Soviet experts in the United States, should be

required reading for everyone, but especially for those who have been such loud critics of the effectiveness and efficiency of our own economic system.

This congressional committee report has hit the Soviet Union where it hurts, namely, with facts about its economic failures.

Pravda has howled against the facts established by the Joint Economic Committee's group of experts because those facts showed the inherent weakness of the U.S.S.R.

Pravda practically admits the closeness to the target by the violence of its reaction.

Let me in this statement simply summarize a few of the highlights of this report that reveal Soviet economic weak


It is clear that the growth of the Soviet economy has slowed down severely since 1958. From 1958 to 1962, the average annual rate of growth of gross national product in the U.S.S.R. was only 4.6 percent, as compared with a rate of 6.8 percent between 1950 and 1958. Our own growth rate during the most recent 5-year period, by comparison, was approximately 4.3 percent. This minor difference could certainly be explained by statistical inadequacies. More imporMore important, however, the figures clearly indicate that the rate of growth in the Soviet Union is declining.

In 1962, the latest full year for which independent calculation is possible, the Soviet gross national product increase was only 2.2 percent, the lowest in its recent history. Our own economic growth in the same year was 6.1 percent.

We also have access to forecasts through the rest of this decade. These forecasts have been prepared by a team of experts working full time on the Soviet economy. From 1960 to 1970, these experts expect that the Soviet Union will grow economically between 42 and 5 percent per year. A similar forecast for the United States would be between 3.6 and 4.6 percent per year. Some of our allies have much higher anticipated growth rates than the Soviet Union. Japan's growth is now estimated at 7.2 percent. Italy's at 5.6 percent and France's at 5 percent.

Our own growth rate, of course, has tended to be consistently underestimated by experts, while at the same time, the growth rate for the Soviet Union tends always to be in excess of actual results. The agricultural figures for the Soviet Union most starkly reveal the inefficiency of its system. This weakness highlights the importance of the tremendous job which our own agricultural sector has done and also emphasizes the need for reexamination of our entire policy of trading in agricultural products with the Soviet Union. If they are, in fact, as weak as these figures would indicate, we should be able to obtain major concessions from the Soviet Union in exchange for any agricultural products which we sell to them.

It has been generally agreed, I think, that the agricultural sector of the Soviet economy has been in a period of stagnation for the past 5 years. Between 1958

and 1962, the annual growth in Russian agricultural production was only an imperceptible 0.4 percent yearly.

This sector, furthermore, continues to suffer from a chronic ailment of hidden suffer from a chronic ailment of hidden unemployment. The unemployment. The manpower employed in Soviet agriculture in 1962 was ployed in Soviet agriculture in 1962 was 36.7 million persons. The U.S.S.R. employs on farms roughly seven times as many people as the United States, although the overall population of the U.S.S.R. is only 19 percent larger than


In just one instance, the shortage of animal feed in the Soviet Union in 1963 resulted in, among other things, a wave of distressed slaughtering of hogs and a 40-percent drop in the number of hogs. The country's hog population was reduced in 1 year from 70.0 to 40.7 million. Fifty percent of the hog herds of lion. Fifty percent of the hog herds of the collectivized sector-26 million heads were lost, as against a loss of 18 percent-3 million-in the private sector.

The index of Soviet agricultural production in 1962 was only 2 percentage points above the year 1958.

Other figures also demonstrate the same relative weakness. The annual gains in the total product of the officially favored industrial sector have also declined during the past few years. clined during the past few years. The rate of annual increase in industrial production has fallen off from an average 10 percent up to 1958 to only 7.2 percent in 1962.

The figures on industrial production reveal the relatively very low level of labor productivity in Russia. Industrial labor productivity in Russia. Industrial output per employee in Russia was only in the United States. $3,531 in 1962, compared to over $10,000

These figures, of course, reflect themselves in personal consumption. Per consumption. Per capita consumption is only $486 per year capita consumption is only $486 per year in Russia; nearly $2,000 in the United States.

While the Soviet economy is certainly not free enterprise, we can also judge its relative weakness by failures in investment. The rate of new investment in the Russian economy, which is a major test of growth, has fallen off very sharply. From 1950 to 1958, the average growth of investment was 10.8 percent per year. From 1958 to 1962, it was only 7.7 percent. This decline is due, in large part, to the rising demands by demands by armaments production on demands by armaments production on Soviet scientific, technological, and manSoviet scientific, technological, and managerial resources.

This investment weakness can also be seen by the increases in output associated with rising investment. From 1950 to 1958, an increase of $1 million in output could be obtained by increased investment of $3.3 million. Between 1958 to 1962, however, the millions of dollars of increased output could only be obtained by additional investment of $6.2 million on the average. Thus, the rising investment is less efficient in terms of providing increased output. At the present time, the rate of return on investment in the Soviet Union is probably lower than in any major world power.

Soviet foreign trade reveals another symptom of economic weakness. Soviet trade with the free world has expanded from $1.3 billion to $4 billion between 1955 and 1962. In other words, Russian dependence on trade with the free world has increased threefold in 7 years. This is an indication to me of the increasing dependence which the Soviet economy has on the economies of the free world. These figures represent an admission of weakness in the Russian ability to produce for their own needs.

Soviet imports from the industrial West, in particular, have been rising steadily, revealing a conspicuous increase in the share of machinery and equipment in the total commodities traded. Imports of Western machinery increased from $194.1 million to $596 million between 1958 and 1962. The proportion of machinery to all commodities imported by the Soviet Union increased from 31.2 percent to 47.1 percent in this period.

One must also mention the role of the six satellite nations of Eastern Europe in this trade. These nations, which number together about 100 million inhabitants, are a far more important factor in trade of the free world nations than is the U.S.S.R. In 1962, free world exports to the satellites came to $2.3 billion, as against only $1.8 billion exported to the U.S.S.R.

Mr. President, all this, shows that a leading collectivist society in the world has within itself the seeds of its own failure. A nation cannot direct all of its economic resources by fiat from on high and succeed. Freedom works. Economic dictation does not. Freedom is precisely what the Soviet economy can never have.

We are beginning to see the evidences of this weakness at the present time. It is something that we must be aware of and that we must attempt to exploit. It is also something which we should publicize to all the uncommitted nations of the world who are attempting to judge the relative effectiveness of two different economic systems.

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Mr. PROXMIRE. Mr. President, yesterday Mr. Alan Ruvelson, president of the First Midwest Capital Corp., of Minneapolis, Minn., made an excellent statement before the House Select Committee on Small Business on the operation of the Small Business Investment Act. In his statement he clearly indicated the way in which the act has provided the small independent businessman with a valuable source of capital. He then went on to outline the impact which this support can have on the community, in terms of employment opportunities.

I believe the experience the Midwest has had in this area may be helpful to my colleagues and to other investment companies. Although I do not agree with all of Mr. Ruvelson's remarks, I ask unanimous consent that his statement be printed at this point in the RECORD.

There being no objection, the statement was ordered to be printed in the RECORD, as follows:


May I take the opportunity to thank you, Mr. Chairman, and the members and staff of your committee for the invitation to appear at this hearing. Your letter indicated that you desired a statement outlining the history of First Midwest Capital Corp., its operations and the types of small businesses it has provided with funds. We also noted your solicitation of our views and recommendations relative to the operation of the small business investment program.

Five years have elapsed since March 18, 1959, when First Midwest received one of the 'first two licenses issued under the Small Business Investment Act of 1958. Your chairman, Congressman EVINS, requested that we give testimony to Subcommittee No. 1 of the Select Committee on Small Business at hearings held in Washington on May 12, 1959. In preparing this statement, I had the opportunity to review my remarks made on that occasion and it was a novel experience to evaluate the operations of our SBIC in retrospect rather than in prospect.

First Midwest was originally known as First Midwest Small Business Investment Co. In 1960 we elected to go public and sold a modest number of shares thereby increasing our capitalization to slightly in excess of $1 million and changed our name at that time.

We office in a modern building in the heart of the financial district of Minneapolis. We employ a full-time staff of 4 persons and have a working board of directors. Our board is made up of 13 men from our area who are leaders in their respective fields of industy, commerce, and finance. Our modest size makes it desirable to frequently call on them for counsel and to avail ourselves of their experience and their considerable interest. Although a major bank has a small minority investment, we do not regard our company as bank oriented and our clients maintain a diversity of bank relationships as their interest may dictate.

We have made 17 investments totaling $1,898,100 with an average investment of $111,653. As we have progressed the size of our investment has tended to increase although at present we have several under serious consideration which will be considerably below our investment limit. Our investments in the main have been equity investments rather than term loans. Experience has confirmed our thinking in this regard and we will continue to be primarily an equity oriented SBIC.

Our portfolio has been as varied as the economy of our area. We have invested in a processor of hybrid seed corn (this was the Nation's first SBIC investment), several independent food retailers who are members of a voluntary sponsored group, a drugstore, a servicer of aviation instruments, an oil burner manufacturer, a data processing equipment manufacturer, a manufacturer of store fixtures, a television relay system, a mail order optical lens dispenser, a premium servicing company, a fiberglass fishing rod manufacturer, a manufacturer of insulated plastic houseware items, a land development company, and an automation equipment engineering firm.

Not all have been profitable. Three early investments were written off for a loss of $96,828. However, we have been more fortunate with several others, and our portfolio, in our considered judgment, has a very substantial gain potential. Our credo as risk investors is that exposure to gain entails the possibility of loss. One of our investments which has a public market has given us a translated gain of $88,000 and the big quotation would indicate an additional

gain of $339,500 for the balance of our warrants. It is noteworthy that this investment in which we had the smallest claim on equity, approximately 4 percent, should have been the first to translate so substantially on our debenture purchase of $200,000.

First Midwest has maintained a policy of desiring the management of small business to retain or acquire control through option. The percentage of equity available to First Midwest in our present portfolio ranges from a minimum of 4 percent to a maximum of 35 percent.

Our rates tend to the lower end of the spectrum because of our emphasis on gain potential rather than interest yield. Our effective interest rate varies between 61⁄2 and 72 percent depending on the quality and character of the investment.

Our portfolio is significant in terms of the employment opportunities we have helped to create and maintain. The aggregate volume of sales and services of our client companies for their most recent fiscal year is $18,467,521. More importantly, from the viewpoint of your committee, is their employment which presently totals 1,301. This is important in the predominately agricultural economy of our upper Midwest region.

One of the conclusions we can make on the basis of our brief years of experience is that we are primarily in the "people business." This term is used for want of a better one that could as succinctly epitomize our opportunities and our problems. You requested that we inform your committee as to what happens to the small businessman who must be denied. This would most frequently happen because of the inability of a small business to qualify for a noncollateralized, nonguaranteed equity investment. It has been, and will continue to be, the policy of First Midwest to assist such businesses, which cannot qualify, to locate other more appropriate sources of funds such as secured commercial bank loans, local development companies, SBA, ARA, commercial factors, leasing companies and firms specializing in second mortgages and contracts. We believe such assistance is a matter of courtesy and enlightened self-interest. It might well be that a firm which is presently ineligible will develop into a satisfactory investment in the future.

We have found that a shortage of working capital is usually more symptomatic than causal. The human equation is the most important reason for declining an equity investment. The lack of adequate management assumes critical importance in evaluating a company's future.

Much progress has been made in the 5 brief years by our fledgling industry. The investment division of SBA is developing effective administrators, programs and procedures. We have been fortunate in the degree of interest that Congress and the Small Business Administration has manifested in our development. The new SBA Administrator, Mr. Eugene Foley, and his recently appointed deputy, Mr. Richard Kelley, give every indication of vigorously implementing the intent of Congress which you contemplated when you made possible the inception of the SBIC program.


Much credit for whatever success industry will enjoy will be due not only to the broad concept of the Small business Investment Act of 1958 but also to the several amendments which you have seen fit to pass as a measure of your continuing interest. The signature of President Johnson on S. 298 bodes well for the future and we are hopeful that you will give prompt and favorable consideration to H.R. 583.

That is not to infer that all is perfection, either as regards every licensee's operations or those numerous regulations under which we operate. One of the problems is that of dual supervision. As a public company First Midwest comes under the Investment Act of 1940. As a consequence we frequently

find ourselves working under SEC as well as SBA regulations which are duplicative and sometimes at variance. If this confusion could be resolved, the effect on the SBIC industry would be salutary.

We believe that certain new policies and modifications of present ones on the part of SBA might be of significant help. Regulations should be promulgated or revised whereby equity financing for small situations could be made attractive by recognizing the many difficulties, the considerable opportunities and the economic implications incident to the health of this segment of our business community. Attention should be given to the opportunities presented by a relaxation of the collateral requirements of SBA in its 303 loan program as it applies to loans or investments under a certain size. Another possibility would be a revision of the vendor rule as it applies to SBIC's which have no affiliation with the franchisers or suppliers endeavoring to finance independent owners of franchised operations or voluntary sponsored stores.

Another aid would be a reevaluation of those regulations which mitigate against a prearranged purchase by the small business concern or its principals of the equity acquired by a small business investment company. Presently the SBIC is left with little choice but to elect the route of a higher yield secured term loan or, as an equity oriented company such as ours, tend to emphasize situations in which gain can be translated at the market place. Because of these limited alternatives, only those firms possessing the rare quality of explosive growth, those which would appear attractive as merger or acquisition candidates or those which might merit a public offering appear desirable. Most small businesses will not meet any of these criteria. There are many small firms capable of a satisfactory and rewarding growth if they could but realistically qualify for an infusion of equity funds. A recognition of the economic facts of life would assist immeasurably in making it possible for the SBIC industry to function more effectively for this large segment of our economy.

I would conclude with a quotation from my remarks addressed to your committee nearly 5 years ago, not for the sake of repetition but rather because they were and are what I believe.

"As one who is a member of the small business community, I feel that the era which you initiated with the passage of the Investment Act of 1958 is one of the most significant contributions to the sociological and economic progress of our country. Our Nation has been built largely upon a framework of small enterprise and with the right of that enterprise to grow and become great. May we continue to go forward toward that goal."



Mr. PROXMIRE. Mr. President, a large proportion of American business firms are finding new and attractive markets in foreign countries. It is important that business firms be provided with as much information as possible about the opportunities for investment in foreign countries.

In the March 2 issue of the Journal of Commerce there appeared an excellent article by Robert S. Robin of the law firm of Nelson, Boodell, Foster, Sugrue & Crowley of Chicago entitled "Developing Nations Eager for U.S. Investors."

Mr. Robin's basic point in this article is that the new and expanding nations of the world welcome U.S. private capital

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