what a number of executives of some of the largest corporations in America have told me confidentially. Though they haven't authorized me to quote them on this matter, I would be willing to state on my honor as a Senator that I have been told that by corporate executives that have some familiarity with this problem.

I would compare the situation that exists with regard to Government patent rights to other situations where the Government interest is involved.

For example, in New Orleans, the Government has an interest in a plant that was used for defense purposes. Private interests also have major stakes in it. So the Government is now in the process of suing in court to condemn all the private interests, because only by buying them out can the Government then put the whole thing up for sale and get back the Government's money.

The Government is gambling; it might not make 5 cents by taking over the undivided interest of all these private concerns in order to make the Government interest a complete unit, in order that it can contract with some corporation for the use of this large plant. It is willing to do that to protect the Government interest.

Then, there is the situation where oil is discovered on land adjacent to a military installation. Although the Government may have no immediate use for such oil, it will lease its land for mineral development in order to prevent all the petroleum under the land comprising the military installation from being drained away by the private interests adjacent thereto.

There are many laws relating to the General Services Administration, many of which you helped to draft and recommend to the Congress, where the Government goes to great extremes to protect some small interest that may involve only a few thousand dollars and to see to it that the taxpayers get a full dollar's worth of return for Government property. Yet we have under discussion today an instance that just grew up like Topsy, wherein a few contractors, gaining a hammerhold on the U.S. Government in World War II, when the research program was less than a billion dollars, are riding herd on a program of $8 or $9 billion magnitude and which will grow even larger.

In my judgment, if it were creating new competition, a more competitive economy, a better price for the public for the products that we are getting, I could see some advantage to it.

But in many cases this enormous investment is merely an investment in creating further industrial concentration in a few enterprises, and there is a trend toward an unnecessarily high price for new products that are developed.

So if I might conclude, the technical and scientific knowledge resulting from research and the ability to use it is a resource as important as and probably more important than the tangible capital and raw materials used in the productive process. If this resource is paid for by the people of the United States, then the results of research should be available to all citizens. This includes inventions and discoveries. This includes new processes and products.

This is not only a problem of equitable treatment, but also a problem of industrial, economic, and scientific progress.

The rapid dissemination of new scientific and technical knowledge is essential to progress. In addition, the Government should promote to the best of its ability the unlimited and universal availability of knowledge, ideas, and inventions.

A private company, when it spends large sums on developing manufacturing know-how, cannot be expected to yield such information to the public without charge. But there is no reason why publicly financed know-how and inventions should not be made available to the public either free or on the most liberal terms. This means that practical application of many of the path-breaking discoveries will not be restricted. In an era in which economic progress depends so much on scientific research, such chronic underemployment of technical knowledge might have, in the long run, an even more deleterious effect on the rate of economic growth than idle capital or unemployed labor.

Mr. Chairman, I have some footnotes that I would like to insert to support some of the statements I have made here.

Senator MCCLELLAN. They may be inserted in the proper place in the record.

Senator Long, thank you very much.

I have asked you some questions, and would probably ask you some more. But I am proceeding in this, sort of feeling my way. I have asked questions that might indicate I had one viewpoint or another. Frankly, I have a rather open mind on this whole issue except that there ought to be a firm and equitable Government policy in all of its agencies.

What you pointed out here in your testimony emphasizes, to me at least, that there may be different opinions, but this is a field, this is a project that needs study and legislative attention.

And so as we proceed with these hearings the Chair will retain substantially an open mind as to the methods and as to the final policy that ought to be resolved by legislation.

But I do want in the course of these hearings to bring out the arguments both for and against anything that appears to be a plausible answer to the problem. And I think you have made a very fine contribution.

You brought to the attention of the committee right in the beginning of these hearings some facts and some ideas with respect to this issue that can well be weighed as the hearings progress and as we develop further testimony along these lines.

I wish to thank you very much.

Senator LONG. Thank you, Mr. Chairman.

Senator MCCLELLAN. Mr. Counsel, will you call the next witness? Mr. WRIGHT. Mrs. Arnow, the lady from the National Science Foundation.

Senator MCCLELLAN. Will you come around, please?

STATEMENT OF KATHRYN ARNOW, NATIONAL SCIENCE
FOUNDATION

Mr. WRIGHT. Would you state your full name?

Mrs. ARNOW. My name is Kathryn Arnow. I am a member of the Office of Special Studies of the National Science Foundation.

Senator MCCLELLAN. Very well, Mrs. Arnow. You may state your position with the Government and how long you have held this position, please.

Mrs. ARNOW. I am a program director in charge of data coordination in the Office of Special Studies of the National Science Foundation.

Senator MCCLELLAN. You are with the National Science Foundation?

Mrs. ARNOW. Yes. I have been a member of the Science Foundation staff since 1954, engaged throughout this time largely in work connected with pulling together national totals derived from our regular survey program of research and development.

And the chart standing on the easel over there is based on the Senator MCCLELLAN. Now, you have prepared a chart, have you? Mrs. ARNOW. Yes, sir.

Senator MCCLELLAN. For this committee at the request of the chief counsel of the committee?

Mrs. ARNOW. Right.

Senator MCCLELLAN. That will show expenditures of the Government in the research field.

Mrs. ARNOW. The chart over there separates the expenditures of the Department of Defense as a Government agency from the expenditures or all other Government agencies.

Senator MCCLELLAN. So that we may get the record straight, the witness presents a chart which she has prepared that will demonstrate the facts and testimony that she will give in this hearing.

This chart, if it is possible to do so, may be inserted in the record at this point, so as we proceed the chart will be before us and we will understand it as we discuss it.

(The chart referred to is as follows:)

SOURCES OF RESEARCH AND DEVELOPMENT FUNDS IN THE UNITED STATES, 1959-60

Senator MCCLELLAN. Now, you may discuss the chart and explain it to us.

Mrs. ARNOW. The chart applies to the year 1959-60, the year in which the Federal Government's total expenditures for research and development were about $8 billion.

Senator MCCLELLAN. You mean the fiscal year 1959–60?

Mrs. ARNOW. This is the fiscal year of 1959–60.

Senator MCCLELLAN. That is the last year in which we have a complete record?

Mrs. ARNOW. Right.

Senator MCCLELLAN. We are now in the process of 1960 and 1961? Mrs. ARNOW. Right. And the $9 billion to which Senator Long referred is for the fiscal year following the one depicted in this chart. But the 1959-60 data are firmer.

Senator MCCLELLAN. This is the last year of which there is a complete record?

Mrs. ARNOW. Right.

The other is an estimate.

Senator MCCLELLAN. The other one is now in process?

Mrs. ARNOW. Yes.

Senator MCCLELLAN. We don't know what the final result will be? Mrs. ARNOW. Exactly.

The major purpose of this chart is to indicate the extent to which the Department of Defense and other Government agencies contract to industry and retain for use within their own laboratories research and development funds. On the first bar representing the Department of Defense, the black portion indicates the intramural use by the Department of Defense of $1.3 billion for research and development. The Department also contracts out $4.4 billion to private contractors.

Senator MCCLELLAN. Are we talking about this first bar?
Mrs. ARNOW. We are, the first bar.

Senator MCCLELLAN. All right.

This is in three colors, this Department of Defense fund used byMrs. ARNOW. The nonprofit organizations such as universities. Senator MCCLELLAN. All right.

But it is in three colors. You have grey at the top.

What does the grey margin represent on this first-what do you call this?

Mrs. ARNOW. It is a bar.

Senator MCCLELLAN. On the first bar, what does the grey at the top indicate?

Mrs. ARNOW. The grey at the top represents the colleges and universities and other nonprofit organizations such as voluntary health agencies.

Senator MCCLELLAN. "NPO", then, on this means nonprofit organizations?

Mrs. ARNOW. Exactly.

Senator MCCLELLAN. And the expenditure by the Defense Department through the nonprofit organizations during that fiscal year amount to, in round numbers, $400 million, that is what this indicates on this chart.

Mrs. ARNOW. Yes.

Senator MCCLELLAN. Then we drop down and we have the black area of this bar. It says, "Department of Defense."

What does that represent?

Mrs. ARNOW. The Department of Defense retained for use intramurally in its own laboratories $1.3 billion.

Senator MCCLELLAN. In other words, this black represents the amount of funds expended by the Department of Defense for research that it expended itself and did not contract out to nonprofit organizations or to profit organizations?

Mrs. ARNOW. Right.

Senator MCCLELLAN. And that amounted to how much?

Mrs. ARNOW. $1.3 billion.

Senator MCCLELLAN. $1.3 billion?

Mrs. ARNOW. Yes.

Senator MCCLELLAN. Now, we have the white of this bar, marked "Industry, Private Contractors."

What does that represent?

Mrs. ARNOW. That represents $4.4 billion contracted out by the Department of Defense to industry for the performance of research and development in industry laboratories.

Senator MCCLELLAN. Then this bar shows all of the Defense Department's funds that it handled for research?

Mrs. ARNOW. Right, to the total of $6.1 billion.

Senator MCCLELLAN. It totaled $6.1 billion that the Defense Department expended or that was expended under its control and direction for research during that fiscal year?

Mrs. ARNOW. Yes.

Senator MCCLELLAN. And the white shows the amount expended by private contractors or through industry, profit-earnings industry? Mrs. ARNOW. Yes.

Senator MCCLELLAN. And the black shows that spent directly by the Department itself, not through any contractors or nonprofit organization, the amount of $1.3 billion.

And the gray shows that expended, that the Defense Department expended through nonprofit organizations such as universities and colleges in the amount of $0.4 billion, which is $400 million? Mrs. ARNOW. Yes, sir.

Senator MCCLELLAN. Very well.

Now, let's go to the next bar and tell us what it represents.

Most of it is black. There is a very small margin of gray at the top. And the identification of the bar is "Industry funds used by"-nonprofit organizations and by industry. Now, explain that

one.

Mrs. ARNOW. This bar represents industry as a source of funds during the period we are discussing, as a source of funds for research and development, regardless of where those funds were spent throughout the economy. However, as you can see, when industry provides funds for research and development, it spends them predominantly, almost entirely in its own laboratories, either on contract or directly within the laboratories of the company furnishing the funds.

A small remaining amount of money is given, under contracts and grants, by industrial organizations to colleges, universities, and research institutes of one sort or another.