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Mr. BUTTON. Thank you very much, Mr. Chairman. I would like to join in the remarks about my distinguished colleagues from New York and Missouri, Representative Horton and Representative Hungate, and say it is a great pleasure for me also to be here in Chicago with our chairman for these hearings.

This is my first term as a member of the Small Business Committee and it has been my distinct privilege to be able to serve on this important subcommittee under the active and effective leadership of our able chairman, Representative Kluczynski.

Chairman Kluczynski is one of the most hardworking Members of Congress. He is also one of our most beloved Members, and it has meant a great deal to me to be able to serve under his dedicated leadership.

This committee is dedicated to helping the small businessmen of this Nation deal with the many very difficult problems with which they are faced. In this age of giant corporations and huge complex governmental structures, the needs of the small businessman are all too often ignored or unsatisfactorily dealt with. It is our role and our desire to try to assure us as much as possible that the small businessman has a meaningful voice in this country, a voice that is heard and a voice that is listened to.

This is all the more important today when our small businessmen are facing problems as critical as they have ever been confronted with in our history.

One of the foremost difficulties facing small business, furthermore, is the crime problem. And I believe our hearings today and tomorrow will prove very valuable in our efforts to help do something about this tragic situation.

I would like to comment at this time about one of the points made by my friend and associate from New York, Representative Horton. This subcommittee has been almost unique, I believe, in its willingness to go directly to the people to find out firsthand what their problems are. We have traveled all over the Nation to help deal with the problems and needs of the small businessman. Chairman Kluczynski deserves, in my opinion, a great deal of credit and our highest commendation for his effort. He has been practicing for many years what so many others have just been preaching. He has been taking the Federal Government back to the local level, to the community level, in an attempt to be as responsible as possible to the needs of the people of this community.

I know when this subcommittee came to my home community, the people were greatly pleased at having what they considered an extraordinary opportunity to present their problems firsthand in their own hometown to a congressional committee.

One of their great concerns was an absence of just such a Federal presence at the local level and the findings of our committee were extremely important in our being able to obtain a local SBA office in my Albany-Schenectady area of New York shortly thereafter.

So let me again say it is a great pleasure and a distinct privilege to be here at these hearings which, knowing our chairman, I am sure will be most productive and highly beneficial to the people of Chicago.

Thank you, Mr. Chairman.

Mr. KLUCZYNSKI. Thank you, Mr. Button.

Now, the rules of the Federal court do not allow any television cameras in the courtroom during the hearing. In the House of Representatives, that is one of our strict rules. Cameras are not allowed during the hearings of the House. I am not talking about the Senate, The Senate allows it. But the House of Representatives does not, and I hope that in this reorganization that they will be allowed to have cameras during the hearings.

So at this time the Chair wishes to recess for about 10 minutes, because the press is here and we want to go into a press conference and explain to them the purpose of these hearings.

So if you will bear with us, we will be back in 10 minutes. And no smoking, please; there is a strict rule here in the Federal court about that.

(Short recess.)

Mr. KLUCZYNSKI. We will resume the hearings.

The first witness this morning will be my very good friend Ralph Metcalfe, president pro tem of the board of aldermen, city of Chicago.

And, gentlemen, we will be seeing a lot of the witness after January 4 or 5, because he is replacing a great man, Mr. Dawson. I have known Ralph Metcalfe for a number of years. You may proceed as you wish.

TESTIMONY OF HON. RALPH H. METCALFE, ALDERMAN, THIRD WARD OF THE CITY OF CHICAGO

Mr. METCALFE. Thank you very much, Mr. Chairman, and members of this Select Committee on Small Business of the U.S. House of Representatives.

I am grateful for this opportunity to offer my observations on what I believe to be one of the most urgent problems facing the future of the urban community.

First, I am compelled to open my remarks by stating clearly that in my humble judgment the small businessman, particularly the black entrepreneur, must be awarded a key role in the designing and reshaping of the American city. I make that statement with all due respect for the efficiency and massive purchasing power of the national chainstore. I want to see the small businessman kept alive. I want to see him develop an efficiency and a business acumen that will give him an abiding confidence in himself while winning the respect and patronage of his potential consumers.

To me it is primary that a very large segment of the small business world should be occupied by black men and women. Moreover, I am thoroughly convinced that if the black proprietor is to get his chance for a place in the sun, it will come first as a small businessman, probably in a predominantly black community.

At the same time there is another consideration, a primary consideration, the consuming public. It has been my observation as a longtime resident of an inner city community that every time a neighborhood grocer, druggist, shoe repair shop, drycleaner or clothing store closes its doors, it merely adds another disadvantage to a long list of disadvantages to people who do not have the transportation to

leave their neighborhood with ease. Many of these community businesses may appear insignificant to the passer-by who lives elsewhere, but to the people, particularly the low-income people, these neighborhood shops and stores make life a bit more bearable. In some instances, it is safe to say that they make the difference between the life and death of a sick or hungry child.

It is obvious that each year thousands of these small ventures go out of business. Some of them fail because their owners simply didn't have the business skills or money to keep them going. Others may fail because of land clearance; others go out of business because nearby competition eliminated the necessity of their existence. But there are many, many instances where an inner city enterprise dies an unnatural death. It is to this tragedy that I address myself today.

Even if crime was of a minor consideration, which it is not, the small businessman of the inner city would find himself shackled with the problem of trying to compete with the giant chainstore. And when you add to this the disadvantage of unequal and unfair insurance practices, he is in a day-to-day contest with sudden extinction. Let me stress that I did not use the term "extinction" merely to dramatize a point. Extinction is a very clear and present danger to many small proprietors who are attempting to serve the people of the inner city, particularly if they are attempting to operate in a black neighborhood. There appears to be general agreement, maybe to the point of conspiracy, that regardless of one's insurance claim record, one can be denied casualty insurance protection purely because of location. The usual victims of this type of discrimination are the residents and businessmen of areas in the near poor, low-income, or minority-group neighborhoods. Regardless of your race or color, proximity to the above-mentioned community can result in the automnatic cancellation of any fire, theft, burglary-in fact any casualty insurance protection that you may have enjoyed in the past. This means that minute by minute every small businessman within or near an area redlined by the insurance industry must operate on the brink of destruction.

There are two kinds of forced cancellation; the first is outright, the second method would deny adequate casualty protection by simply boosting the premium rate to astronomical proportions. Force a proprietor to pay double or triple the normal premium, thereby making it impossible for him to operate at a profit, and you have forced him out of business.

Now, one may ask how can the chainstores operate in areas redlined by the insurance companies? The chains have the advantage of citywide insurance coverage. Moreover, the powerful chains can afford another service that would deplete the coffers of even the best managed of small enterprises. They can afford the cost of full-time security personnel, an expense that would absorb the gleanings of the lone businessman.

This meeting of the minds of the insurance industry is not restricted to Chicago. It appears to be nationwide, and I think it would be of interest to this subcommittee to investigate the probability of pricefixing or of a conspiracy taking the form of a gentleman's agreement. One thing is clear: Small business cannot continue to serve the inner city community unless it can receive adequate casualty protec

tion from some source. And by adequate, I include reasonably priced protection. This they do not have and there are no signs on the horizon that indicate a genuine change of heart on the part of the casualty insurance industry.

Therefore, Mr. Chairman, I urge this committee to recommend Federal intervention at the earliest possible moment. The insurance problems of our urban communities have now reached crisis proportions. I would suggest that you weigh the alternative of direct Federal casualty insurance and some kind of meaningful Federal subsidy program.

This recommendation will not meet well with the insurance industry. If there is panic within the insurance industry, as the Wall Street Journal reported last Thursday, I suggest that they witness the panic among those who are left to the mercies of the insurance establishment. I am speaking of the community entrepreneur who is carrying on the struggle to make free enterprise a real, vital and visible way of life to the so-called little people of America.

I know that there will be a hue and cry about Government interference, about so-called Federal dabbling into our capitalistic system. Those were the same old denunciations that were hurled at social security when it was first intoduced. They said the same about medicare; they make the same charges about fair employment practices legislation and more recently fair housing proposals.

But as far as threats to our way of life are concerned, I would rather have our Government step in to save our way of life and to make it possible for the small businessman to thrive than to have the casualty insurance industry destroy that way of life and cause thousands of our citizens to conclude that democracy can't work anymore.

I suggest that the committee examine the FAIR plan, the federally sponsored fire insurance program initiated in 1968. It is quite probable that some of the principles applied there may be improved and projected into a crime insurance program. And in your search for Federal alternatives to the callous attitude of the insurance industry, I certainly hope that you gentlemen will not be deterred by that old bromide which usually points out that casualty insurance does not solve the basic problems that produce crime.

I am aware of the limitations of crime insurance, just as I am aware of the limitations of hurricane, tornado, earthquake, and fire insurance. But I cannot escape the fact that the small businessman needs protection against crime in the big city, just as he needs protection against the destructive forces of nature.

In today's real world, crime, in all its varied forms, is a universal concern to all businessmen, white and black, large and small. And I will be the first to admit that this is not the exclusive problem of the casualty insurance company. City agencies must provide more protection and general services to the neighborhood business community.

Mr. Chairman, I would suggest that this committee recommend additional Federal funds to the urban centers of this Nation in order that they may have the financial capacities to meet some of the grave problems that will determine the survival of the city.

As to crime in low-income communities, the small proprietor is faced with the usual thefts and burglaries faced by most businessmen, but in recent years he has been burdened with another plague the

big city street gang. Here I speak of extortion attended by a threat to both his business and his life. Here again, the neighborhood entrepreneur is at a disadvantage. The big chain may "pay off" in the form of "donations" or outright protection agreements and he may not feel it too much. He may write off his payoff to the gang as a part of his expenditures for security personnel. But the small merchant, already operating on a narrow margin of profit, cannot meet this steady drain of his capital. The new threat of street gang extortion may also lead to his extinction even if he is properly insured.

Therefore, I would suggest that this subcommittee consider the use of Federal law enforcement, particularly in cases where small businesses have made use of loans insured by the Federal Government. And once again, the Federal Government should provide additional funds for local police enforcement in critical communities.

It is my understanding that in the fiscal year of 1970, the Federal Government is expected to spend around $72 million in its fight against organized crime. I certainly hope that a considerable portion of that fund will be earmarked to combat the city street gangs. They too are organized and they are dedicated to crime.

In conclusion, I must stress again the significance of the development of a strong entrepreneurial core in the black communities or our major cities. Seventy-five percent of the black population resides in an urban community. I presume that you are aware of the fierce struggle that now is in process as to how blacks should go about winning their freedom.

There is one school of thought that says democracy cannot work for black people, that the majority race of this country and its establishment is not concerned about democracy working for black people, and, finally, even if they were concerned, it is much too late for the nonwhites to get their share of the economic pie.

I am not convinced that the majority of black people have been won over to that sort of defeatism. I would suggest that the majority of us are still believers, just as I. But despite our convictions, we need more success symbols. It is not good for a black child to grow up in an allblack community and witness its economy controlled entirely by powerful white institutions. There must be more black-owned supermarts, black-owned shopping centers and auto dealerships. He must be able to have his clothes cleaned expertly by a black proprietor.

It is not enough to be served by a black pharmacist in a drugstore owned by a white chain. Does this mean that white businesses should abandon the black community? Certainly not, although the practice of reducing and the creation of discriminatory insurance zones will drive him out, it simply means that if we really mean what we say about the involvement of black people in all facets of American life, we must make it work in the realm of proprietorships as well as on the employment level. Otherwise, we will have made it clear that all that talk about the development of "black capitalism" was just so much campaign oratory.

I am here as a public official who resides in one of the great black communities in one of the world's great cities, and I am deeply concerned, and at times profoundly disturbed, about the future of both my people and the city.

Thank you.

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