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Albert Gates

Congressional Sideshow Reveals Profit Grab-bag

(February 1942)

From Labor Action, Vol. 6 No. 7, 16 February 1942, pp. 1 & 2.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The attempt of the Vinson Naval Affairs Committee to smear the labor movement and center public attention upon it, by appending to its report on profits accruing from Navy Department war contracts, the charge that the labor organizations were also profiteering through war contracts, received, an unexpected setback when it heard the testimony of J.E. Barnes, Washington lobbyist for the Todd Shipyards.

Barnes’ testimony was extremely outspoken in revealing the “unconscionable profits” gained by his company. The important aspect of the whole affair is the manner in which the big business press concealed the details, for aside from a few, the large metropolitan papery remained discreetly silent about it all or referred to the remarks made by this lobbyist in the most general terms. Immediately; after the Vinson report was made known, the press, and the companies mentioned, objected to it on the ground that the report might tend to create false impressions as to the extent of profits made on naval contracts. They asked the committee to wait a longer period (no doubt, the end of the war) before determining how much profit would actually be realized. But the cat was already out of the bag.

Mr. Barnes took the stand for the purpose of “correcting a statement” contained in the Truman committee report on his company’s profits. But his testimony revealed the following facts:

How did this occur? Barnes stated that the Navy “voluntarily” offered contracts to Todd Shipyards based on rates established during the height of the economic crisis and that under such rates the company made profits up to 62 per cent on individual contracts! The company, according to PM, “charged the Navy all wage costs, plus 40 per cent to cover overhead, plus commissions on machinery and materials, plus 10 per cent of the total for profit.”

In face of the current congressional investigations, the company returned $4,000,000 of their profit. But the excuse given was that they believed their profits to be “outrageous.” The subsequent revision in their contracts limiting profits to 10 per cent still leaves the company with enormous profits, as we stated above, of $15,000,000 to $20,000,000.

But Barnes added: “With our low capitalization, if we only made 1 per cent profit we’d be profiteers.”

Barnes went on to say: “We made big profits. There is no denying it. We paid about $4,000,000 back to the Navy because we were taking such big profits.”

Then followed a question by Republican Senator Brewster of Maine, which appeared only in the New York Daily Mirror. Brewster asked Barnes: “Would you use the word unconscionable?”

I think so,” Barnes replied. Brewster, apparently surprised at the frankness and implication of the reply, remarked: “This information is shocking when a Navy Department spokesman testified that he did not think unreasonable profits were being made.”

Barnes also testified that in the last war his company tried three times to reduce its profits, but were told by Chairman Hurley, of the Shipping Board: “Shut up. What do you care?”

No wonder the reactionary Senator Byrd, completely upset by the results of this investigation, remarked: “That’s an astonishing situation.”

Actually there is nothing astonishing about the Todd affair. The same general facts apply to all companies that have been handed juicy contracts by the big business minded brass hats of the Navy and War Departments. And that’s the story of the whole war program: Big business is enriching itself on the war. It demands sacrifices only from the workers.

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