No Monopoly On Trouble


By LEON HENDERSON, Administrator of the Office of Price Administration

Before the American Association of Advertising Agencies and the Association of National Advertisers, Hot Springs, Va.

November 13, 1941

Vital Speeches of the Day, Vol. VIII, pp. 109-112.

YOU gentlemen are assembled here, I am advised, to consider what you can do to preserve your business. I am here to discuss that subject with you because, as I see it, it is part of my job to help you if I can. However, the fundamental consideration with all of us is the preservation of our democracy and all of its free institutions. So at the beginning, I would emphasize my considered opinion that what we might call the institution of advertising is threatened with no special or extraordinary peril which is not shared by other economic and social organisms in this country.

In fact, I hope we are unanimous in the conclusion that the Nazi assault upon personal and economic liberties is so real and so vicious that our first and most immediate job is to organize our energies and resources to effectively repel that threat. And those of us in government must never permit ourselves to be diverted by any group or groups from this main purpose. Without privilege or discrimination we must all move together. Those policies or issues which provoke controversy in time of peace must be forgotten if they stand in the way of the job ahead.

Time does not permit any administrator in the defense program to tolerate unnecessary innovation or experimentation in the social or economic field. At least, I can speak for myself and the jobs to which I have been assigned. I repeat to you that as great and difficult as your problems are in the field of advertising, as far as I am aware there are no dangers ahead for your business that are not common in varying degrees to other and different types of enterprise. And by danger I mean Hitler's attack upon your liberties and mine.

No Monopoly on Trouble

In other words, gentlemen, you have no monopoly on trouble. And the text you have selected in your prospectus for this meeting: "Awake, arise, or be forever fallen"—applies with equal significance to every business enterprise in this country and to each individual citizen as well.

I am certain you recognize the universal application of your theme song to the problems we as a people face. And at the risk of stating the obvious, I wish to express the confident hope that your deliberations here not only will result in a sound appraisal of the problems you face as business men, but that in addition you will evolve some useful formulae that will make your institution and its brilliant technics of even greater service to the nation as a whole in this time of crisis.

Now I think I am vaguely aware of some of the things that are bothering you. And for my own part I wish to enter a "general demurrer" on one of the principal counts. Some of your trade publications and other sources have ascribed to me a point of view about advertising. The clear inference has been that I am a charter member of some little cell of conspirators whose main purpose in life is to alter, reform or perhaps destroy advertising as we know it. I appreciate that those who want to believe such under-the-bedtime stories would remain unconvinced by my simple denial. And my private opinions about the economic utility of advertising may be irrelevant anyway. However, the fact is that I have never had the opportunity or the occasions to give sufficient research or investigation to advertising to come up with any really informed opinion about it.

Assumes Advertising Is Useful

I have always assumed and I now assume that advertising performs a useful economic function. I have in a general way subscribed to the accepted view that use of advertising and its many devices of "crying one's wares" is the cheapest and most efficient method of selling. If this were not so, I am quite certain that the tremendous sums expended each year in this field would not be repeated. You members of the Association of National Advertisers don't spend money just because you are attracted by the dynamic personalities of account executives. I am aware of the statistical and psychological tests you employ to measure results of your advertising expenditures. And if these tests weren't proof of results you would undoubtedly spend your money in other ways of ringing the doorbells of the nation's consumers.

It's not my job—and for this I am grateful—to undertake to police the abuses of false and misleading advertising. I know I am correct in the assumption that you all subscribe to proper regulation which undertakes to suppress and punish the outlaw and the faker. Our office has already expressed its opposition to "scare" advertising and advertising which emphasizes scarcity. Nor is it my duty to give attention to the possible use of the apparatus of advertising in fostering or extending practices in restraint of trade. These tasks are intrusted to others and I have enough to do without attempting to usurp somebody else's job. I understand that sometimes you have rather vigorous differences with those who are administering the statutes to which I have referred. That you would have such differences is not unnatural and I am not here to explain, to defend the policies of coordinate colleagues in government. They can and do speak for themselves.

However, I wish to make one thing clear at the risk of a further invasion of the privacy of my personal economic views. If I have a point of view about advertising it is that under the sort of expanding economy I would like to see there should be more of it. That is, more of the right kind.

I disclaim any responsibility for whatever public skepticism there may be about advertising. I have the general impression that some second-raters may have crawled under the tent of the top-flight performers, imitated your technics and deceived the consumer. But this is merely a personal hunch and has nothing to do with my job. I mention it only for the reason that I gather from some of your trade publications that I am expected to say something unpleasant.

Favors Greater Production

The truth is that I have for many years advocated a greatly expanded productive economy. This, of course, involves a vastly accelerated production and distribution of consumer's goods. If, as you believe and as I assume, advertising is the cheapest and most efficient selling method, then under more normal circumstances the increased use of proper advertising should accompany the expanding economy which I have always advocated and which I hope will follow this war.

Unfortunately, the "more normal circumstances" to which I have referred do not now exist and our problems must be weighed in the light of extraordinary conditions, some of which I shall discuss later. However, I wish to emphasize at this point that I am somewhat bewildered by the attitudes that assume I am hostile to advertising because some of your problems happen to come within the scope of the job I am trying to do. I think if time permitted an individual interchange of views, most of you would find that we are in the same corner and that our areas of agreement would be overwhelmingly greater than our points of difference.

The objective of the Office of Price Administration is to prevent unwarranted price increases. The purpose of the Civilian Allocation Division is to assure the most equitable distribution and the maximum supply of goods for civilian consumption without sacrifice of defense requirements. I have responsibilities in these closely related fields. And it will be my purpose as it has been in the past to discharge those responsibilities in a manner which will maintain the maximum of free choice and judgments by all groups which may be affected.

You don't expect me to tell you that advertising is not going to suffer in this defense program. I wouldn't try to kid professionals. But I can tell you with all conviction that I regard it as part of my job to do what I can to

maintain the maximum of civilian activity in our economy consistent with the basic requirements of defense. And I ask you to believe me when I say that since the question has been raised—frankly, it never occurred to me until recently—I consider that advertising is included in the category of important civilian activity.

Has No "Secret Designs"

I say this with full recognition that no one can say with certainty whether "advertising" is a business, a practice or a state of mind. However, what seems to be concerning some of the advertising profession are my motives. Again let me say for myself—and this goes for my entire organization— that there exist no secret or subtle designs with respect to advertising or any other legitimate business practice. Having said this, I hope I shall not find it necessary to reiterate such an obvious statement of fact. I accept the apologies of those who may be responsible for making me feel that it is essential to disavow a destructive intent.

Some hard-bitten skeptics may feel that what I have said up to this point is taking refuge in vague generalities. I shall try to be more specific. There is a statement in the prospectus of this meeting that "there has been talk of curbing advertising as a means of controlling inflation and restricting it as a means of controlling production." I cannot deny that as a statement of fact, because, as all of you know, Washington abounds with "talk" on every subject, and perhaps there is no conceivable proposal that has not been the basis of "talk" in Washington.

All I can say about this one is that I have not been a party to any such conversations. And if "curbing advertising" as a means of controlling inflation and production had been seriously considered I think I would know about it. Furthermore, I would not want the job of attempting to prevent inflation or limiting civilian production if "curbing advertising" was my only tool. Even if all advertising expenditures were taken into account, according to your industry figures, only 2 per cent of the value of all manufacturing products is involved.

Doubts It Is Major Problem

It is therefore apparent to me that of all the headaches and nightmares that I can visualize in the future, the question of what to do about advertising is unlikely to confront me as a major problem. It has been our experience so far in the price ceilings we have fixed that advertising has not even been considered as a major cost element. Usually questions of labor costs, transportation, raw materials and other items are fully analyzed and appraised, but so far selling and distributing costs have not been urged as a compelling reason for opposing a price ceiling.

If some industry whose prices were under consideration did urge increased advertising costs as the basis of challenging a particular price ceiling, we would of course be required to go into the question. But I stand on the statement which I made in my testimony before the House Banking and Currency Committee that our policy would be as a matter of course to take normal selling and advertising costs into account. I stated further then I had no secret reservations about that statement. I repeat it now.

However, it may have been that some of you gentlemen or perhaps it was somebody else who did not accept in full faith my statement of that policy or perhaps it was to make assurance doubly sure that there was written into the price-control bill as reported out by the House Banking and Currency Committee the proviso that the powers granted—and I quote: "Shall not be used or made to operate to compel

changes in the business practices or cost practices or methods, means or aids to distribution established in any industry, except to prevent circumvention or evasion of any ceiling established under this act." This language was designed to take care of advertising and I so interpret it.

The fact that I have stated to you that I have no designs or evil intentions about advertising and the further fact that it will be an affirmative policy of my office to take into account normal advertising costs will, I hope, give you whatever assurance you seek on that score. It does not mean that any of your real problems are solved. I have no way of appraising the immediate future of advertising in a seller's market, with a limited supply of consumers' goods. It would appear that you have enough real and vital problems without having to create any imaginary difficulties. And if any secret intentions on my part or any concealed policies of my office have been included among your worries, I ask that you eliminate them at once.

"Going Is Getting Tougher"

As director of the Civilian Supply Division I am supposed to distribute as best I can the materials that the defense program doesn't require. The going is getting tougher. As we shift from the priorities system to an allocations plan it is hoped that a smoother flow of residual materials will go to non-defense industries. Yet we all recognize terrific shortages are going to continue until the job of licking Hitler is finished. None can escape the impact of the increasing utilization of materials and productive capacity for armaments.

It is my hope that you in the advertising profession will accelerate your efforts in helping the country understand not only the necessity for adjustments but to devise methods of easing the shock. Much has been done in the field of substitution for consumers' goods for which defense needs have created a shortage. I have been impressed by advertising copy and radio announcements which emphasize conservation and other helpful methods of bridging the gap. I am certain that your ingenuity and talents will continue to develop new schemes that will be of real assistance to consumers and manufacturers during the difficult days ahead.

I know you are interested in our present views and information about the paper situation. According to present data the supplies of newsprint and book paper appear adequate for the next year in spite of the fact that defense activities are consuming about 20 per cent of the nation's output. As many of you know, there was a substantial increase in the wood pulp price over a year ago. At the present time our information is that there is not a wood pulp mill in the country that will hold together that is not operating at capacity.

Unfortunately uninformed reports of a great paper shortage have tended to create a tight delivery situation on many kinds of paper and it is our information there exists rather extensive hoarding by some users. This condition has tended to magnify whatever shortage may exist and were it not for this fear it is our belief that supplies of paper at this time would be fairly adequate for practically all users.

With respect to future prices, we do not propose to sanction any further increases as long as costs and profits remain at their present satisfactory level. While modesty would forbid me from making the obvious comment that we have done a good job in this field, I can assure you that without present controls on prices on wood pulp, waste paper and other paper products would be much above current levels. Moreover, if prices had been permitted to rise, hoarding would probably have been much greater than it is today, with a resulting decrease in paper available to consumers.

Prepared for Trouble

We don't delude ourselves that there is no trouble ahead in the paper field. We anticipate it and are getting set to handle it. It will interest you to know that in the paper and paper products section of the price division a separate printing paper unit is being established. This particular unit will be staffed by men of outstanding experience in the production of printing papers—men who are thoroughly familiar with the manufacturing costs. It will be the duty of this unit to scrutinize closely all current prices of printing papers and to observe price trends for the purpose of recommending action whenever these prices seem unjustifiably high.

There is likewise being established a distributor's unit with personnel of jobber or wholesaler experience which will be selected for their knowledge of distribution costs. This unit will follow distributor prices in the same way the other unit examine manufacturers' prices. Together these units will watch closely the printing paper price situation from the beginning of manufacture until the time the product is sold to the printer or the publisher.

Recommendations will be made and action will be taken whenever prices seem out of line. I invite printers and publishers to immediately register complaints with us regarding further price increases which occur in the printing papers field. This type of cooperation is essential if we are going to do the job with which we are charged. Such information or complaints should, of course, be specific and contain all the necessary details upon which to base further inquiry.

Another aspect of our job which I am certain is of great interest to you concerns the 1942 production of automobiles. As you know, the Civilian Supply Division of O. P. M. has directed the curtailment of production in 1942 to approximately 50 per cent of the 1941 models. According to the statistics of your industry the expenditure for national advertising by the automobile industry in 1940 was about $69,000,000. This, I am advised, represented more than 16 per cent of all national advertising expenditures in the four principal media of newspapers, magazines, radio and farm journals.

Naturally you are concerned as to whether a 50 per cent cut in production is going to result in corresponding reduction in national advertising expenditures. I wish I could tell you, but I can't because I don't know. All I can say is that our only concern and duty is to make sure that the production schedules are adhered to and that a reasonable price ismaintained.

Problem for Advertiser

Within those boundaries, the questions of advertising expenditures, as I see it, is a matter resting exclusively within the control of the advertiser. The Office of Price Administration has no official policy on this question and does not intend to have one except that he will decline to make any decision or recommendation as to the extent of advertising expenditures.

I regard this as a matter within the area of free choice upon the part of manufacturers and the only way we could possibly come into the picture is in the extremely unlikely event that manufacturers urged advertising costs as a reason for an increase in prices of the product. Then under the pending legislative proposal, our consideration of the matter would be limited to the question as to whether this device was being used to circumvent or evade any ceiling established under the act.

I am quite convinced that you have an important duty to perform in the crisis which confronts us all. You know more about how you can effectively perform that duty than I could possibly know. I am frank in saying because of the difficult jobs that have been assigned to me—I need your support. All of our problems are too real, too vital for us to engage in fighting fantasy and abstractions. Let us bury men of straw and unite in the recognition that we have a common enemy that is real and threatening. He is called Hitler. To lick him we must submerge our prejudices and overlook petty annoyances and irritations. And we must do more than that—we must be prepared to make sacrifices and adjustments for the common cause; and no one can predict with any certainty the real extent of those sacrifices.

So far as advertising is concerned, I repeat that it must survive as a thriving dynamic force. Not only does it deserve to continue because of its contributions to our way of life but it has a job to do now. And I can visualize an even greater use of the technique when peace comes and a vast surplus of men, materials and productive capacity calls for the vision and leadership to translate these resources from production for war to production for peace. When that time comes it is my judgment that if we are intelligent and resourceful, new and vast horizons will open for us all. Our job now is to hasten that day.