"The loans of the belligerent countries which were floated in the United States up to the close of 1916 are divided as follows:

"Transportation—Freight, $75,000,000; express, $20,000,000; passenger fares, $60,000,000; seats and berths, $5,000,000; oil by pipe lines, $4,550,000.

"Beverages (liquors and soft drinks), $1,137,600,000; stamp taxes, $32,000,000; tobacco cigars, $61,364,000; cigarettes, $165,240,000; tobacco, 104,000,000; snuff, $9,100,000; papers and tubes, $1,500,000.

"Special Taxes.—Capital stock, $70,000,000; brokers, $1,765,000; theaters, etc., $2,143,000; mail order sales, $5,000,000; bowling alleys, billiard and pool tables, $2,200,000; shooting galleries, $400,000; riding academies, $50,000; business license tax, $10,000,000; manufacturers of tobacco, $69,000; manufacturers of cigars, $850,000; manufacturers of cigarettes, $240,000; use of automobiles and motor cycles, $72,920,000.

"Telegraph and telephone messages, $15,000,000; insurance, $12,000,000; admissions (theaters, circuses, etc.), $100,000,000; club dues, $9,000,000.

"Excise Taxes.—Automobiles, etc., $123,750,000; jewelry, sporting goods, etc., $80,000,000; other taxes on luxuries at 10 percent., $88,760,000; other taxes on luxuries (apparel, etc., above certain prescribed prices), at 20 percent., $181,095,000.

"Gasoline, $40,000,000; yachts and pleasure boats, $1,000,000."

"The income tax law levies on all citizens or residents of the United States a normal tax of 12 percent. upon the amount of income in excess of exemptions, except that on the first $4,000 of the taxable amount the rate shall be 6 percent. The law also increases the surtaxes all along the line. The advances by grades compared with the percentage under the old law are: $5,000 to $7,500 incomes, increased from 1 to 2 percent.; $7,500 to $10,000, from 2 to 3 percent.; $10,000 to $12,500, from 3 to 7 percent.; $12,500 to $15,000, from 4 to 7 percent.; $15,000 to $20,000, from 5 to 10 percent.; $20,000 to $30,000, from 8 to 15 percent.; $30,000 to $40,000, from 8 to 20 percent.; $40,000 to $50,000, from 12 to 25 percent.; $50,000 to $60,000, from 12 to 32 percent.; $60,000 to $70,000, from 17 to 38 percent.; $70,000 to $80,000, from 17 to 42 percent.; $80,000 to $90,000, from 22 to 46 percent.; $90,000 to $100,000, from 22 to 46 percent.; $100,000 to $150,000, from 27 [Pg 3] to 50 percent.; $150,000 to $200,000, from 31 to 50 percent.; $200,000 to $250,000, from 37 to 52 percent.; $250,000 to $300,000, from 42 to 55 percent. The rate continues to increase, but on incomes of over $5,000,000 the increase is only from 63 percent., under former law to 65 percent."

"If the new normal tax in the United States were made uniformly 12 percent.—wiping out the 2 percent. discrimination of the 1917 law—a single man in this country with a salary of $1,500 a year would be called on to pay $60 in income tax, as against an English tax of $101.25. Assuming that the normal tax were raised to 12 percent. and the surtax and excess tax were left as at present, an unmarried American with a salary of $10,000 would pay $1,430.20, while the unmarried Englishman would pay $2,250. If the Englishman derived his $10,000 income from rentals, his tax would be increased to $2,625, while the American tax would be reduced to $1,165—an Irish dividend on effort.

"According to a level where the British surtax becomes effective, take a salary of $20,000. The English normal tax on this would be $6,000 and the surtax $812.50 (figuring $5 to the pound), a total of $6,812.50. At the suggested rate of 12 percent., the American's normal tax would be $2,145.60 (rate applying to $20,000, less $1,000 exemption and $1,120 excess tax); the surtax would be $444 and the excess tax $1,120; a total of $3,709.60. If the American cut non-tax-free coupons for his income instead of working for it, his tax would be reduced to $2,780, making it more than $600, less than one-half the English tax. This, be it remembered, is figuring the American normal tax at the supposititious rate of 12 percent.

"Going abruptly to an income of $1,000,000, the American normal tax at 12 percent., would be $119,880, against an English normal tax of $300,000. The increase in the American normal tax would be $79,960 over present rates. The American surtax at present rates would be $435,300, as against a British surtax of $217,915; total American, $555,180, English, $519,687.50. No account is taken in this computation of any excess tax on the American income. With an income of $3,000,000. the American normal tax at 12 percent. would be $359,880, an increase of $239,960 over present rates. The surtax at present rates would be $1,680,300, a total of $2,040,180, or nearly 70 percent., the rate on the last $1,000,000 being at 75 percent. The corresponding British tax is, normal, $900,000, and surtax $669,685; total, $1,569,685, or nearly 52 percent., the actual maximum rate being 52½ percent. on all excess over $50,000.

"Expressed in tabular form, comparative results from a normal tax of 12 percent., combined with present surtax rates and assuming all income up to $50,000 to be earned income for a single man, would be as follows:

"With additional exemption of $1,000 for heads of families and $200 each for dependent children, the United States figures in the table would be reduced by $120 for the $1,000 exemption and $24 for each child. There are similar deductions to be made in the English figures. Furthermore, for incomes above $50,000, deduction for the excess tax has not been figured exactly in order to avoid long computations. This would slightly reduce the figure on the large incomes. But for demonstrative purposes, the table gives a fairly accurate general comparison of the range of taxes under the proposed English law and a tentative 12 percent. normal rate under our law.

"It will be noticed that the rates would come together just below $750,000. It is in the range between $5,000 and $500,000 incomes that greatest divergence in rates occurs. The British tax takes its largest jump between $10,000 and $15,000, where the surtax begins to operate. The United States gradations are erratic and irregular, showing the haphazard manner in which the steps of the surtax were applied."

"Take the case, for instance, of the salaried employee of a bank or factory who receives $5,000 a year, out of which he pays his house rent and his usual costs of living; contrast him with the case of a farmer who owns his land and obtains the bulk of what he needs, both in food, fuel, and other essentials, for himself and family in [Pg 6] produce or in goods obtained by trade at the neighboring village; the situation becomes clear and shows why it is that the farming class pays only a microscopic proportion of the income tax at the present time."

"An analysis of income tax returns for the fiscal year 1916, recently published, shows that, although farmers are the most numerous class of Americans engaged in gainful occupations, they were at the foot of the list proportionately among income tax payers. Outside of the notorious war profiteers, no element of our population has advantaged so greatly by war as agriculturists; yet in the year of which we speak only one farmer in four hundred paid a farthing's tax upon income. In this respect preachers and teachers showed a higher percentage."

"The men of more moderate income should be required to pay at least a nominal income tax. This is a common country. It belongs to common people. And common people will esteem it a privilege to contribute their mites. One dollar per hundred on a thousand-dollar income would be both reasonable and just."

"We can not in fairness wait until the end of the fiscal year is at hand to apprize our people of the taxes they must pay on their earnings of the present calendar year, whose accountings and expenditures will then be closed.

"We can not get increased taxes unless the country knows what they are to be and practices the necessary economy to make them available. Definiteness, early definiteness, as to what its tasks are to be is absolutely necessary for the successful administration of the treasury....

"The present tax laws are marred, moreover, by inequities which ought to be remedied....

"Only fair, equitably distributed taxation of the widest incidence, drawing chiefly from the sources which would be likely to demoralize credit by their very abundance, can prevent inflation and keep our industrial system free of speculation and waste. [Pg 7]

"We shall naturally turn, therefore, I suppose, to war profits and incomes and luxuries for the additional taxes. But the war profits and incomes upon which the increased taxes will be levied will be the profits and incomes of the calendar year 1918. It would be manifestly unfair to wait until the early months of 1919 to say what they are to be....

"Moreover, taxes of that sort will not be paid until the June of next year, and the treasury must anticipate them....

"In the autumn a much larger sale of long-time bonds must be effected than has yet been attempted....

"And how are investors to approach the purchase of bonds with any sort of confidence or knowledge of their own affairs if they do not know what taxes they are to pay and what economies and adjustments of their business they must effect? I can not assure the country of a successful administration of the treasury in 1918 if the question of further taxation is to be left undecided until 1919."

"We still have a very long way to go before we can attain to President Wilson's standard of individual patriotism. From the outbreak of war to the end of last year the small investor in this country has lent £118,179,000 to the government. Moreover, in the first two months of 1917 as much as £40,000,000 was contributed to war loans in one form or another in the shape of small savings. That result represents a great deal of patriotic saving, and reflects the highest credit on the committee, as well as upon the Montagu committee, which devised so suitable a form of investment as the 15s 6d certificate. But far more is required. During the war loan campaign, war savings certificates brought in £3,000,000 in a single week. That effort was, perhaps, too great to be kept up; but it is hardly satisfactory that, in spite of the hard work of the committee, and an enormous growth in the number of active war savings associations all over the country, the weekly receipts from the 15s 6d certificates have fallen back to the £800,000 to £900,000 level which was reached last December. This relapse may be partially accounted for by the late increase in the cost of living, but there can be no doubt that much more might yet be done by the masses of people of moderate means to whom the small certificates appeal. Nor is there any evidence that the wealthier classes, generally speaking, have done nearly as much, in the matter of war self denial, as they might have done."

"Fifty percent. on the retail price of jewelry, including watches and clocks, except those sold to army officers.

"Twenty percent. on automobiles, trailers and truck units, motor cycles, bicycles automobile, motor cycle, and bicycle tires, and musical instruments.

"A tax on all men's suits selling for more than $30, hats over $4, shirts over $2, pajamas over $2, hosiery over 35 cents, shoes over $5, gloves over $2, underwear over $3, and all neckwear and canes.

"On women's suits over $40, coats over $30, ready-made dresses over $35, skirts over $15, hats over $10, shoes over $6, lingerie over $5, corsets over $5. Dress goods—silk over $1.50 a square yard; cotton over 50 cents a square yard, and wool over $2 per square yard. All furs, boas and fans.

"On children's clothing—on children's suits over $15, cotton dresses over $3, linen dresses over $5, silk and wool dresses over $8, hats $5, shoes $4, and gloves $2.

"On house furnishings, all ornamental lamps and fixtures, all table linen, cutlery and silverware, china and cut glass; all furniture in sets for which $5 or more is paid for each piece; on curtains over $2 per yard, and on tapestries, rugs, and carpets over $5 per square yard.

"On all purses, pocketbooks, handbags, brushes, combs and toilet articles, and all mirrors over $2.

"Ten percent. on the collections from the sales of vending machines.

"Ten percent. on all hotel bills amounting to more than $2.50 per person per day. Also the present 10 percent. tax on cabaret bills is made to apply to the entire restaurant or café bill.

"Ten cents a gallon on all gasoline to be paid by the wholesale dealers.

"Ten percent. tax on wire leases.

"Graduated taxes on soft drinks. Mineral now taxed 1 cent a gallon to pay 16 cents. Chewing gum now taxed 2 percent. of the selling price, to pay 1 cent on each 5-cent package.

"Motion-picture shows and films: abolish the foot tax of ¼ and ½-cent a foot and substitute a tax of 5 percent. on the rentals received by the producer, and double the tax rate on admissions.

"Double the present taxes on alcoholic beverages, tobacco and cigarettes.

"Automobiles—a license tax on passenger automobiles graduated according to horsepower.

"Double club membership dues.

"Household servants, made 25 percent. of the wages of one servant up to 100 percent. of the combined wages of four or more. Female servants, each family exempted from tax on one servant. All additional servants (female) from 10 to 100 percent. on all over four."

"America can not spare ships to bring costly garments and furnishings thousands of miles across the sea. For the war period these articles can be replaced at home with materials that cost less labor and less money. The money spent for domestic goods remains in America and maintains our working population and our business and banking resources.

"We lack a sufficient market for our cotton crop, owing to the lack of ships. Americans should wear more cotton. The money spent upon it maintains the Southern planter and his family. Modern processes give it the appearance of silk. It serves very well as carpets, curtains, hangings, and furniture coverings. It should answer present needs for such fabrics. A heavier tax on imports of these goods is indicated as a means of revenue and war economy.

"Imported wearing apparel of silk pays 60 percent. duty and of wool 44 cents a pound and 60 percent. ad valorem. There is a graduated rate on dress goods of these materials. Despite the tax, America spent [Pg 9] more on imported manufactures of silk in 1917 than ever, the total being nearly $40,000,000. The same was true of woolen goods, amounting to $23,000,000.

"Our imports of woolen carpets and rugs, most of them brought half way round the world from oriental lands, were also larger. They cost us $3,740,000, though America is a large producer of carpets and rugs, fine as well as coarse. These imports paid ten cents a square foot and 40 percent. ad valorem. Evidently, it was not enough.

"We also spent $53,000,000 for imported cotton manufactures, including cloth, laces, curtains, handkerchiefs, veils, and wearing apparel, though America is the world's chief producer of cotton. A higher tariff is indicated as a tax on those who insist on the foreign product.

TAXES ON TOBACCO

"America has a large tobacco industry at home. We import tobacco in vast quantities from every producing land to satisfy the whimsical and varying tastes of connoisseurs. Our own tobacco is discouraged by those who smoke it under the name of Turkish, Egyptian, Cuban, Dutch, Spanish, and other foreign products, and pay a heavy price for the critical taste which their vanity causes them to imagine they possess. Last year these imports of leaf tobacco alone were valued at $26,000,000, or $10,000,000 more than in 1915. The war tax is five cents a pound added to eight cents paid under the internal revenue act, or thirteen cents altogether. There is also a duty of $1.85 to $2.50 a pound. To increase the tax would encourage the industry in Kentucky, Virginia, Pennsylvania, Connecticut, and other states, while saving our resources in ships and keeping our money at home.

"In addition, America spent $7,000,000 for foreign-made cigars and cigarettes last year. These purchases support foreign factories, although our own factories use the same raw material which they import. They have jumped nearly $3,000,000 in two years. Until the war is ended, Americans should be satisfied with cigars 'made in America.' The present war tax ranges from one tenth of a cent to one cent on each cigar, according to value, in addition to a duty of $4.50 a pound and 25 percent. ad valorem. A higher tax would deprive the smoker of nothing but a craving for the foreign label on his cigar box, unless he chose to pay well for it. He can even get a Spanish name on his American-made cigar.

DIAMONDS, LEATHER AND MILLINERY

"America spent $41,000,000 in 1917 to import diamonds, pearls, and other precious stones and imitations, not set. They paid a war tax of only 3 percent. when made into jewelry. America could be content with beauty less adorned to keep this $40,000,000 at home, or those who insist on sending their money to African mine owners and Dutch cutters should pay a larger tax.

"America last year had a tremendous bill for hides and skins of $209,000,000, nearly two and a half times that of 1915. Much of it was for the great necessities of the army. A good proportion of the rest was unnecessary. These imports of raw material are free of duty and there is no war tax on leather goods. Substitutes have been devised for many of them. These should be encouraged by a tax on the unnecessary use of leather in furnishings, decorations, toilet articles, hand bags, trunks, high shoes, belts, hatbands, and many small articles. Substitutes for these will be provided quickly enough if leather is lacking. A heavy tax would help the movement. The tremendous military and other legitimate demands for leather goods will keep the industry in thriving condition without so much waste.

"For imported millinery materials America spent nearly $13,000,000 last year, and we also spent $3,000,000 for mere feathers, tributes to feminine vanity that filled up many ships needed for war use. The greater part of this stuff came 10,000 miles from China and Japan. There are plenty of substitutes that a high war tax would encourage, including those provided by the American hen.

"Our imported glassware, on which there is no war tax, cost nearly $2,000,000. It occupies large space aboard ship, owing to voluminous packing that is necessary. Imported china, porcelain, earthenware, and crockery cost America nearly $6,500,000."

"The steps that have been taken to curtail credits have resulted in greater conservatism, and have had a beneficent effect, which is likely to continue for some time after the present necessity disappears. The business foundation is extremely sound. Figures of resources of savings banks show that the subscriptions to the Liberty Loans have [Pg 10] brought only a trifling decrease in savings deposits. Evidently subscribers are buying bonds with their current income rather than with their savings. In other words, the Liberty Loans represent additions to the savings of the country, and not merely transfers of investments."

"Aggregate railroad earnings and expenses for July of all the important roads in the country are in line with the individual statements of the different roads already published in showing large increases in both gross and net revenues. They also indicate, so far as one month's operating results may be used to generalize from, that the railroads are now on a self-supporting basis, if they are not actually returning a profit to the government on current operation.

"Net operating income of these roads for the month of July (1918) was $137,845,425 as compared with $92,599,620 in the same month of 1917. In a recent statement from the Director-General's office the compensation payable to the railroad companies for the use of their property by the government was estimated at $650,000,000 for the first eight months of the year, or at the rate of $81,250,000 a month. The net operating income of the Class 1 roads as mentioned above exceeds this monthly rental figure by $56,595,000."

"Conditions being pressing, Hamilton, in raising the necessary money, at first did not wait even for the approval of Congress, but went to the Bank of New York, which he had helped to found in 1784—the second bank in the United States and the first in New York City—to raise the first necessary money. At a meeting of the board of directors the new secretary of the treasury asked for a loan of $200,000. It was promptly and unanimously granted, the money to be advanced in five installments of $20,000 each and ten of $10,000 each, at 6 percent. On the following day Hamilton sent to the bank the first bond ever issued by the United States Treasury—a bond of $20,000—on receipt of which the money was paid over, so that the United States Treasury could show $20,000 cash on hand. In The Investor's Magazine, where these facts were recently brought to light, we are further told that the bond then issued is still carefully preserved by the bank which bought it. Quite unlike the now familiar Liberty Bonds of 1917 and 1918, it was executed with an ordinary quill pen, such as was in use in those times, and signed in ink by the secretary. With its seal somewhat yellow with age, the bond is still in an excellent state of preservation."

"Our resources are well up toward $300,000,000,000, or about equal to the combined resources of France, England, and Germany. Our annual production is close to $50,000,000,00, amounts that stagger the imagination. Why it would take ten thousand years to count the dollars representing out our country's resources counting one each second, and working day and night and Sundays."

"We are going to be peculiarly situated in our foreign relations after the war. We have paid off the greater part of what we owe abroad, and we have lent to foreign governments some $7,000,000,000 or $8,000,000,000. Including all loans by the time the war is over, probably there will be annual interest payments coming to us amounting to $400,000,000 or $500,000,000. How are we going to receive our pay? I am not questioning the ability of our debtors to raise this amount from their people. I have no doubt they can do it, but in what manner are they going to make payment to us? They can't pay it in gold; they haven't the gold to do it, and the total production of gold in the world outside of the United States wouldn't be enough to do it. We won't want them to pay it in goods, for that would interfere seriously with our home industries....

"There is only one way out, and that is by extending more credit to them. We will have to capitalize the interest payments and reinvest them abroad. And if we want to sell goods to them we will have to take their bonds and stocks. In short, we will have to play the part that England has played in the past, of steadily increasing our foreign investments."

"The country will be appealed to, with new and striking film arguments, with a great variety of poster slogans, and with a use of the press and the platform such as has never been witnessed before in this country.

"There are to be nineteen days of actual campaign work. The great task of organization and preparation is now going on. Artists have been making posters, writers have been preparing arguments, and printing presses in all parts of the country have been turning out many millions of mottoes, cartoons, and slogans."

"War expenses for July were somewhat less than for June and May, amounting to about $1,482,000,000 as compared with [Pg 12] $1,512,000,000, the record for June, and $1,508,000,000 for May, the Treasury Department announced. The outlay for July, however, was approximately the amount estimated in advance by the treasury, and expenses for August probably will be higher, it was said.

"During July the government's daily outlay was about $48,000,000, an average of $38,000,000 daily was for ordinary expenses of the army, navy, shipping board, and other agencies, and $10,000,000 daily in loans to the Allies. Total ordinary expenditures for the month were about $1,157,000,000 and loans to the Allies $325,000,000.

"Receipts from sale of War Savings Stamps July 3rd passed the half-billion dollar mark, of which $200,000,000 came in this month as a result of the campaign on Thrift Day, June 28th.

"The government now is financing itself mainly through the sale of certificates of indebtedness, in anticipation of the Fourth Liberty Loan. More than $1,600,000,000 came in from this source in July. In addition, the government received $491,000,000 from belated income and excess profits taxes, and $97,000,000 from miscellaneous internal revenue. Customs duties yielded only $14,000,000.

"Payments on the Third Liberty Loan now amount to $3,652,000,000, leaving $524,000,000 to come in from the next installment payment."

"This country is approaching, as England has long ago, the position of being a possessor of great accumulated wealth. One broker after another is really nothing but a family investment agent. That is what it amounts to. There are railroad magnates, bankers, steel kings, copper kings and so on indefinitely. Hundreds of firms in the New York Stock Exchange are nothing but channels for the investment of accumulated wealth and I do not think we realize how much there is of that in this country."

"The thrift machine set up by the Treasury was as follows: 1. small unit government bonds; 2. non-interest-bearing Thrift Stamps; 3. War Savings Stamps—a short-term obligation paying interest at maturity.

"This was the mechanism. What was the power that actuated the machine to such wonderful effect? 1. salesmanship, including every modern device of advertising; 2. distribution: (a) through retail stores; (b) through employers, by partial payments (usually pay-roll deduction).

"From these simple elements was built up a campaign that induced the people to save in a new and unaccustomed way at least twenty times as much as they had ever before saved in the same time. None of the elements was unimportant, but salesmanship, probably, contributed most. The selling campaigns of the Liberty Loans and War Savings Stamps were carried on by the largest and most effective selling organization ever put together, under the direction of the ablest men in the United States, and with an energy and devotion that were unimaginable. This selling force was irresistible. Everybody bought because everybody was asked, or begged, or told, to buy. Under the same stimulus almost anything would have sold.

"SAVING AT THE SOURCE"

"Next in importance to the direct selling effort came distribution. For the first time in the history of finance it has been made easy to save; for the first time the great retail channels of distribution have been thrown open to saving; for the first time millions of wage-earners have learned the value and ease of 'Saving at the Source' by pay-envelope deduction of a dollar or so a week toward a Liberty Bond."

"The greatest thrift lesson in the world is thrift, no matter what its motive. A great many hundred thousand persons in this country have found themselves this year possessed of $100 or more in one piece for the first time in their lives; often without realization of how they got it. Will that lesson last? Will the wage-earner, now that loan drives are over, keep on saving, going weekly to the bank to put in his dollar. The answer to these questions is, unfortunately, 'no.'

"It would be perfectly possible to continue the issue of War Savings Stamps, and there are many advocates of this plan, but it is doubtful if distribution could be permanently maintained on anything like its present scale. Merchants and banks, with rare exceptions, would scarcely continue to handle them, for the cost is not inconsiderable, and there is no compensating commercial gain. In the postoffices alone their continued sale would set up competition with the present postal savings system, which would serve no good purpose and would be highly confusing.

"Can the savings banks successfully undertake this great task? I believe they could. I believe a national savings bank, operating through commercial banks, stores, and employers all over the United States, making its investments through a small compact, very highly paid and very efficient and very stringently supervised board of executives in one city, supporting a vigorous, numerous, and far-flung selling organization, similar in many respects to the industrial life [Pg 16] insurance organizations, could undertake this work and, were it possible to act quickly enough, could keep the thrift movement going without losing the amazing momentum which it has now acquired."

"Money owed to a government by the nations of the world, with whom it is in active commercial competition, is another line of fortifications in defense of the frontier. Let us, then consider our debts and our debtors, and how we both propose to pay. Our long-time loans may be scheduled as follows:

"In addition to the above a series of certificates of indebtedness, designated as TA, bearing interest at four per cent. and maturing July 15, 1919, was issued to a small amount in anticipation of next year's income taxes. The sale proved to be slow, and further issuance was discontinued and a new issue for the same purpose and of a similar maturity bearing interest at 4½% per cent. was substituted. The sale of these securities through the agency of the Federal Reserve Banks is in the nature of a continuous operation, and no totals so far have been announced. [Pg 17]

"The sale of War Savings Stamps and certificates has increased the national debt by $1,257,000,000, or within 400 million of the maximum under the first authorization. A second series, however, amounting to two billion dollars, has been authorized, so that the operation will probably continue into the coming year. The Treasury for the fiscal year 1917—18 estimated receipts of $663,200,000 from this source and about a billion for 1918—19. The first estimate was out of line, owing to the difficulty in getting the plan into smooth operation. Subsequent results have, however, justified the average of expectations.

"The pre-war debt, in the light of recent figures, is almost negligible, and the outstanding certificates in anticipation of taxes and the Fourth Liberty Loan will be redeemed in due course by the flow of funds owing to the Government in taxes and subscription payments. The problem of how to deal with the eighteen-billion-dollar war debt is the vital question. How much of this sum represents a charge on the coming generation and how much an invaluable national asset?

"We have loaned abroad the following items:

"Here, then, are figures totaling nearly half of our war debts that are not only self-supporting but also a double-edged weapon in the international market. In the first place, they represent money spent at home on American goods, from which the American manufacturer has taken his toll of profit; and in the second place, they have put the world in our debt to an extent that will be difficult to pay in the exchange of goods.

"Imports of foreign commodities or even gold will take a decade to halve the debt, for the gold can not be spared, nor do we wish it, and our creditors will find it difficult to increase their exports to a point capable of bringing about a balance in their favor. The imports from Europe are bound to be offset by our own exports, some able economists predicting a balance of a billion dollars in our favor for the next five years. Regardless of the demands to be made upon us from this source, it is probable that the peak-load of expenditure has been reached and the period of readjustment and redemption set in.

"Charging off, then, our loans to the Allies as an asset, let us then consider how we may best meet the bill due the American people. Vague discussions of the creation of a huge sinking fund have been heard, although for some reason or other, in history these operations have not been entirely successful. Fortunately the bulk of our debt has an early callable date, and the Treasury has recently come in for much applause by advocating no more loans unless they be in the nature of a one-to five-year currency. Experience teaches that the full benefit and effect of war taxes are rarely felt until after the war. England, after the Napoleonic wars, came back with a rapidity that astonished the Exchequer itself. Taxes rolled up in such a volume and expenses dropped with demobilization to such an extent that the Government found itself anticipating the callable date in national debts by market purchases, and even then it was found convenient gradually to reduce the scale of taxation.

"Our experience after the Civil War was very similar to England's, and the Treasury's surplus annually accumulated to a point that forced the Government to buy back at high premiums the bonds it was not privileged to call. This was true, though to a lesser degree, with the Spanish war loan.

"It seems as though the two operations of liquidating our own debts and the debt of Europe to the United States dovetailed perfectly into one gradual and stupendous task. While Europe is paying her indebtedness to us without interfering with the development of international trade by the sale of foreign securities in our home market our buyers here must receive the tools to operate with through the redemption and repurchase of their Liberty Bonds. In this half of the deal safety, as usual, lies in the middle course. It is hoped that taxes will be maintained at a level that will infallibly provide funds for fixed redemptions with a sufficient surplus to get a flying start by purchase around the present low levels."

"Of course no nation could permanently tolerate such unfavorable trade balances as those from which the Allies in Europe are now suffering. They can only do so now and keep their exchanges with the United States steady by borrowing immense sums here. But the war itself is not permanent, and the question is merely whether the present state of affairs can be continued long enough to enable all the enemies of the Central Powers to exert their full strength and win a final victory.

"You will no doubt all have noticed that the credits granted Great Britain have been greater than those granted to any other Ally. The reasons are simple, though they are not, I think, generally understood. We have, in the first place, the largest war and munition program of any Ally; in the second place, as I have shown above, we are, with the exception of the United States, the greatest industrial arsenal among the Allies; that necessarily involves large imports. We send a great deal of steel from England to our Allies; we have to replace it by steel from here. We make rifles for Russia; we have to import the steel to make them. We send boots to Russia; we have to import the leather needed. These examples might be multiplied many times. Thirdly, we extend large credits in England to our Allies, some part of which they may use anywhere in the world, and this part may ultimately come back on the sterling exchange in New York. Lastly, it is well known that neutrals who are owed money by England unfortunately find it convenient to utilize the sterling exchange in New York in order to recoup themselves in dollars. But so also do neutrals who are owed money by the other Allies. So long as we maintain the sterling exchange this appears to be inevitable, and the burden of financing both our own and our Allies' trade tends to fall on that exchange. It is by our maintenance of this sterling exchange that the continuance of our Allies' trade is rendered possible. The maintenance of the sterling exchange means the maintenance of the allied exchanges. All these factors together exert an immense influence. If England had had only herself to finance since the beginning of the war, and indeed even if she had only herself to finance now, it is quite possible she would not have needed to borrow at all abroad."

"On the financial side our record is by no means so satisfactory. We have, it is true, poured out money like water, but much of it has been raised by faulty methods, and the amount of it that has been wasted is appalling to consider. In the matter of borrowing, our methods have lately been greatly improved; and the recommendation of the Committee on National Expenditure, that the system of raising money by bank credits should be checked as far as possible, is being brought within the bounds of practical politics by the great success of the War Savings Committee's energetic and ingenious campaign for prompting the sale of National War Bonds. Perhaps also we may claim some small share in that success through the adoption of the principle so long advocated in these columns of a lower rate for money at home combined with special terms for money left here by foreigners. But successful borrowing, direct from the investor, instead of in the shape of money manufactured by banks, is a welcome, but not sufficient, improvement. We have to raise much more money by taxation. We have also to do much more than has yet been done to reduce the wicked waste of public money and support the efforts of the Committee on National Expenditure to husband the resources of the nation. A correspondent in a provincial town in which a Tank has [Pg 20] lately been busy asks: 'Is it not pathetic to see widows and children scraping together their shillings and pennies to help the Government, while we have tens of thousands of pounds being squandered by a profligate Ministry of Munitions!'"

"The enormous rise of prices only makes it represent half that amount in actual purchasing power. Before the war our expenditure was 200 millions. If money had kept the same value, the taxation and other public income for this year would only have been 420 millions, a little more than twice the pre-war level. Would that have seemed so heroic an effort for a patriotic nation? No. It can never be repeated too often that a really rigorous taxation, begun in 1914 and carried on till now, would have left us in a far sounder condition both for conducting the war and for facing the peace finance. The money and the goods are there. We get them. But we get them by crooked and expensive methods of borrowing which inflate prices, oppress the poorer purchasers, put huge war loot into the pockets of contractors and financiers, and fail to restrain expenditure in luxuries."

"With the general suspension of gold payments at the central banks of Europe, except at the Bank of England, the banks are in a position to resist raids upon their gold and to lend their resources, as far as sound banking policy permits, to the struggle of their Governments to maintain national independence. In England, while the bank is still paying gold for notes, the policy of keeping gold in circulation has been abandoned, and the old limit of note issue, which was £5 ($24.40), has been lowered to 10 shillings ($2.44) and £1 ($4.88).

"It is not the purpose of any of the European Powers, however, to carry on the war by issues of paper money. The suspension of gold payments at the banks and the issue of notes for small denominations, which are legal tender in domestic transactions, is for the purpose of husbanding the gold stock against needless runs and keeping it as a guaranty fund of national solvency. It is the course which was adopted by France at the time of the Franco-German War in 1870, but so prudently were the affairs of the Bank of France conducted that the paper never fell more than 2½ per cent. below its value in gold.

"A similar policy of reserve will probably be pursued by the banks of France, Germany, and Russia in the present contest. The Government of France has raised the maximum limit of the note circulation of the bank by nearly $1,000,000,000, but the increase will not be used except as additional currency may be required, owing to the restriction in other forms of credit and the special demand for notes in the districts where the armies are gathered.

"The suspension of specie payments does not convey to the banking community quite the same doleful warning of the unlimited issue of paper and its steady depreciation in gold which were conveyed by specie suspension in the United States in 1861 or by Austria-Hungary and Russia in the desperate contest of the Napoleonic wars. Monetary science is better understood at the present time than in those days."

"To take note circulation alone is obviously misleading, particularly in view of the violent efforts that have been made, especially during the last year, to extend the use of the check, and in other ways to limit as far as possible the use of notes. For what these figures are worth, it may be said that the total note circulation of the country at the end of June (1918), including Reichsbank notes, State Bank notes, Treasury notes, and loan notes, stood at £1,030,000,000, as compared with £109,300,000 on July 23, 1914. Reichbank Reichsbank deposits, again, stood on June 30, at £459,100,000, as compared with £47,600,000 on July 23, 1914, while the deposits of the eight 'great' banks, even at the end of 1917, stood at £800,000,000, as compared with £250,000,000 at the end of 1914, £362,000,000 at the end of 1915, and £500,000,000 at the end of 1916."

"In his comparison of German war finance with ours, the Chancellor, in his Budget speech, made the following points: First, that German war expenditure is now £6,250,000—almost the same as ours—though our expenditure includes items (such as separation allowances) which are not included in the German figures. Second, that the whole amount of the German Votes of Credit (£6,200 millions) has been added to their war debt, 'because their taxation has not covered their peace expenditure in addition to their debt charge.' Third, the total amount of new taxation levied by them since the beginning of the war comes to £365 millions, against our £1,044 millions. Fourth, in a year's time they will have a deficit, comparing the revenue with the expenditure, of £385 millions at least. 'If that were our position,' the Chancellor added, 'I should certainly think that bankruptcy was not far from the British Government.' Fifth, with the exception of the war increment tax, 'scarcely any of the additional revenue has been obtained from the wealthier classes in Germany'."

"One of the departments of the Government at Washington has in its files a report of a German commission on industry after the war. Reading this, one can understand the motive for what at one time looked like pure vandalism. Vandalism it was, by descendants of the Vandals, but it was a deliberate destruction of international competitors, killing the workmen—and workwomen—and destroying plants and machinery for the one purpose of removing competition. A physical injury to a child helped to weaken future competition in the world's trade; and it was upon the power gained thereby that Germany hoped to launch another war for world domination....

"A peace that gives the cold-blooded perpetrators of these crimes an advantage over their victims would not be equitable. If any must suffer, let it be those who are guilty, but don't give them a start ahead of their victims.

"In substance, that point should declare that Germany shall not profit through the wrecking of any Allied industry. Except to admit necessary foodstuffs, the blockade should not be lifted until every Allied country from England to Serbia has been industrially rebuilt. One object of the wholesale murder of civilians was to weaken industrially the enemy countries. The greater proportionate loss of man-power in the Allied countries should be met by restrictions on the entry of raw materials into Germany. Every piece of stolen machinery should be returned before her own industries are allowed to resume."

"Representative papers like the New York Times, Syracuse Post-Standard, Buffalo Express, and Sacramento Bee all insist that while we might or perhaps should claim no war-expenses from Germany, 'we must exact payment,' in the words of the Syracuse daily, 'to the last penny for losses suffered through illegal warfare.' Germany's submarine campaign cost us, according to this paper's figures, 375,000 tons of shipping and 775 civilian lives. If we take the burden of payment for this property and these lives from the guilty shoulders of Germany it would only be to 'pass it on to the innocent shoulders of the American taxpayer,' which, the New York Times declares, would be 'rank injustice'."

"The total area of the war zone is 174,000 square miles, of which the Western theater of the war, in France and Belgium, stretches over an area of 19,500 square miles, and it contains over 3,000 cities, villages, and hamlets, great manufacturing and agricultural districts, of which some have been totally annihilated and some heavily affected. The estimate by the National Foreign Trade Council of the war losses, which unfortunately does not go beyond 1916, is as follows:

"'Destruction of buildings and industrial machinery in Belgium, $1,000,000,000, and in France $700,000,000. The destruction of agricultural buildings and implements, of raw materials, of crops and live stock, has been estimated at a sum of $780,000,000 in Belgium and $680,000,000 in France. Roads were destroyed frequently by the retreating troops and have been seriously damaged by heavy gun fire and excessive use. The losses from destruction of railway bridges, etc., have been estimated in Belgium at $275,000,000 and in France at $300,000,000.

"'In the Eastern theater of the War Germany has been invaded only in eastern Prussia, where the agricultural population has been seriously impaired. Heavy damage was inflicted upon bridges, roads, and governmental property, including railroads. The direct cost to Germany through the loss of agricultural products, of manufacturing [Pg 25] products, as well as in interest on investments abroad, of earnings from shipping and banking houses, and profits of insurance and mercantile houses engaged in business abroad has been enormous'."

"Mr. M. Barriol, the celebrated actuary, gives the following figures as the capital value of man: in the United States, $4,100; in Great Britain, $4,140; in Germany, $3,380; in France, $2,900; in Russia, $2,020; in Austria-Hungary, $2,020 or an average capital value for the five foreign nations of $2,892.

"The number of men already lost is 8,509,000 killed and 7,175,000 permanently wounded, or a total of 15,684,000. Thus society has been impoverished through the death and permanent disability of a part of its productive man-power to the extent of $45,000,000,000.

"The loss of men, measured in terms of the capital value of the workers withdrawn from industry, is offset in some degree by the enhancement of the capital value of the remaining producers.... This loss of man-power is also partly offset by the large contingents of women drawn into industries. In England, out of a female population of 23,000,000, about 6,000,000 were engaged before the outbreak of the war in gainful occupations. Since the war broke out no less than 1,500,000 women have been added to the ranks of wage-earners, an increase of fully 25 per cent. Moreover, about 400,000 women have shifted from non-essential occupations to men's work. In the United States, approximately 1,266,000 women are now engaged in industrial work, either directly or indirectly necessary to carry on the war.

"The physical and moral effects of the war, the moral strain to which the nations have been subjected, the 'shell-shock' which has reacted upon the population at home as well as upon the soliders soldiers on the battlefield, the undernourishment and starvation of children as well as adults, all have resulted in a lowered vitality, the ill effects of which, especially in the countries of the Central Powers, are already seen in an increase of the death rate, in a spread of epidemics and diseases that have taxed the medical resources of all countries.

The lowered vitality of the race, which is still further aggravated by the millions of incapacitated soldiers and the premature and excessive employment of children and women in the industries, will eventually make for a lower standard of efficiency in all human activities, or a retardation of human progress. Authoritative statements are to the effect that in Belgium in the earlier period of the war, the deaths of women and children far outnumbered those of men. Annual deaths among the German civilian population have increased by a million above the normal.

"Besides the loss in actual population there is a loss of potential population. Carefully compiled figures show that by 1919 the population of Germany will be 7,500,000 less than it would have been under ordinary circumstances. The people in Austria in 1919 will be 8 per cent. less in numbers than in the year before the war. Hungary will be still worse off; it will have a population of 9 per cent. lower than in pre-war days."

All the wars of the nineteenth century from the Napoleonic down to the Balkan wars of 1912—1913, show a loss of life of 4,449,300, according to the report, while the known and presumed dead of the World War reached 9,998,771. (See Vol. III, pp. 403-5.) The monetary value of the individuals lost to each country is estimated, the highest value on human life being given to the United States, where each individual's economic worth is placed at $4,720, with England next at $4,140; Germany third, at $3,380; France and Belgium, each $2,900; Austria-Hungary at $2,720, and Russia, Italy, Serbia, Greece, and the other countries at $2,020.

With a loss of more than 4,000,000 the estimate puts Russia in the lead in human economic loss, the total being more than $8,000,000,000; Germany is next with $6,750,000,000; France, $4,800,000,000; England, $3,500,000,000; Austria-Hungary, $3,000,000,000; Italy, $2,384,000,000; Serbia, $1,500,000,000; Turkey, almost $1,000,000,000; Rumania, $800,000,000; Belgium, almost $800,000,000; the United States slightly more than $500,000,000; Bulgaria, a little more than $200,000,000; Greece, $75,000,000; Portugal, $8,300,000, and Japan, $600,000. On this basis the total in human life lost cost the world $33,551,276,280, and the loss to the world in civilian population is placed at an equal figure.

The attempt to determine property losses is the least satisfactory, as it is the most difficult. The destruction and devastation in the invaded areas of Belgium, France, Russian Poland, Serbia, Italy and parts of Austria are probably incapable of exact determination, and it may well be doubted if the exact losses will ever be known.

[Pg 26]

The total property loss on land is put at $29,960,000,000, one-third of which was suffered by France alone, its loss being given as $10,000,000,000, with Belgium next at $7,000,000,000, and the other countries following as follows:

Italy, $2,710,000,000; Serbia, Albania, and Montenegro, $2,000,000,000; The British Empire and Germany, each, $1,750,000,000; Poland, $1,500,000,000; Russia, $1,250,000,000; Rumania, $1,000,000,000, and East Prussia, Austria, and Ukraine together, the same amount.

In the property losses on sea, that is, to shipping and cargo, the report estimates that "the construction cost of the tonnage loss can scarcely be estimated at less than $200 a ton, and the monetary loss involved in the sinking of this 15,398,392 gross tons may, therefore, be placed at about $3,000,000,000." To this is added loss of cargo, which is estimated at $250 a ton, giving a cargo loss of $3,800,000,000, and a total tonnage and cargo loss of $6,800,000,000.

Among the indirect costs of the war, loss of production is placed at $45,000,000,000. In arriving at this figure an average of 20,000,000 men are counted as having been withdrawn from production during the whole period of the war, and their average yearly productive capacity is placed at $500. War relief is another indirect cost which totalled up to $1,000,000,000; and the loss to the neutral nations is given as $1,750,000,000.

With the total direct costs of the war amounting to $186,336,637,097 and the indirect costs to $151,612,542,560, the stupendous total of $337,946,179,657 is reached. Finally, the report says:

"The figures presented in this summary are both incomprehensible and appalling, yet even these do not take into account the effect of the war on life, human vitality, economic well-being, ethics, [Pg 27] morality, or other phases of human relationships and activities which have been disorganized and injured. It is evident from the present disturbances in Europe that the real costs of the war cannot be measured by the direct money outlays of the belligerents during the five years of its duration, but that the very breakdown of modern economic society might be the price exacted."

"It is enough to say that production is reduced almost to a minimum, while consumption is going on at a most extravagant rate. Those who wish to pose as economists without competent knowledge are telling the public that all the evil is due to this, that, and the other thing—such, for example, as inflation, the rise in prices, the enormous loans raised, and several other fads. It is pure moonshine. The world is impoverished, firstly, because so much of the world's manhood is withdrawn from production to consumption; and, secondly, because reduction in production is so serious that very little has been saved either by the belligerents or the neutral countries of Europe, at all events. International trade is really carried on by barter. It is true that money is frequently paid. At the present time money has in some markets to be paid because credit has been injured, and those who possess wealth are not as willing as they used to be to trust to mere credit."

"The inevitable result of extensive note issues by a number of Governments was that prices were irresistibly impelled upwards [Pg 28] in all belligerent countries—apart from any questions of war waste, profiteering, difficulties of transport by sea or land, or shortage of labor. Belligerent countries became extraordinarily good markets in which to sell goods; and a golden harvest was temptingly displayed to neutral nations, in whose favor enormous trade balances rapidly grew up. In large part these balances were met by payment in gold.... But just as gold substitutes in the shape of paper money swelled the currencies and increased prices in the belligerent countries, so also the large quantities of gold coin sent to neutral States in payment for goods supplied to the warring nations swelled the currencies and increased prices in the neutral states themselves. The withdrawal of gold set up a natural tendency for prices to fall in the countries from which it had been exported; but not only was this tendency overcome, but the upward movement of prices was continued by the action of the several Governments in placing still further issues of inconvertible paper money on their respective markets. The net results have been that currencies have been inflated and prices forced up all over the world, that inconvertible paper money is tending more and more to drive out gold from the currencies of the states that issue it, and that the gold so driven out is being absorbed into the currencies of the neutral nations. Between August, 1914, and the date of her own declaration of war, America increased the amount of her gold currency by approximately £200,000,000 sterling. No real benefit has accrued.

"The currencies of the whole world have been artificially inflated to the extent that, under the most favorable circumstances existing in any part of the world, £5 are now needed to do the work in circulation that before the war was accomplished by £3. The loss to people with fixed incomes, the disturbance of trade, the potential labor difficulties are stupendous. And as a result of purchasing war material at excessively high prices, the dead weight of debt incurred by all the countries at war is very much greater than it need have been had currencies been kept within reasonable bounds."

"Mr. Herbert Samuel made a masterly attack upon the vicious system of War Finance, by which no less a sum than £196,170,000 is added to the expenditure by bonuses and increases of wages, which, in their turn, only force prices still higher and raise the cost of living. Lives have been conscripted; incomes have been conscripted; the only thing which has not been conscripted is labor. If the Government had at an early stage of the war had the courage to fix wages, instead of prices, the cost of living would then have been regulated by supply and demand. By fixing prices of commodities, after they had risen to almost famine figures, we have the maximum of loss and inconvenience, high wages, dear food, and a war bill that increases day by day. Despite Mr. Bonar Law's assurance that the bill of the year would not be so high as he expected, we have the fact that we are spending over seven millions a day. The satire of 'the cheap loaf' consists in its cost to the nation at large of £45,000,000 a year. Bonuses to munition workers amount to £40,000,000, bonuses to miners come to £20,000,000, to railway workers £10,000,000, to potato growers £5,000,000. Is this anything else but a system of gigantic corruption? In order that artisans and agriculturists may be kept in good humor with the war, they are bribed with bonsuses bonuses and allowed to buy food at prices which are partially paid by the rest of the community. If ever there was a case of robbing Peter to pay Paul it is here."

"Prior to our entry into the war, when the European nations were buying heavily in the United States, they paid largely in gold for what they bought, and as a result about a billion dollars in gold coin came to this country in the period of two and one-half years. The reason the European nations were able to send us their gold was that they printed paper money for their own use, releasing gold for us. But that gold inflation in this country is one explanation of the general advance in prices of all commodities, although undoubtedly it is not the only explanation; for it must be freely admitted that prices have been affected, first, by scarcity, occasioned by increased demand from Europe for many articles produced by us; second, by reason of the fact that increases in taxes and wages of labor have entered into the cost of production and sale of all articles and account for a share of the increased prices of commodities."

"For let it not for a moment be overlooked that inflation, in its effects, amounts to conscriptive taxation of the masses. It is, indeed, one of the worst and the most unequal forms of taxation, because it taxes men, not upon what they have or earn, but upon what they need or consume. The only difference for the masses between this kind of disguised and concealed taxation and taxes which are levied and collected openly is that in the case of the latter the government gets the revenue, while in the former case it borrows it, and those to whom it is eventually repaid are not those, for the most part, who have been mulcted for it. Inflation therefore produces a situation akin to double taxation in that the great mass of the consuming public is hard hit by the rise of prices induced by the degenerated borrowing policy and later has to be taxed in order to produce the revenue requisite to sustain the interest charge on the debt contracted and to repay the principal. The active business and speculative classes can usually take care of themselves in the midst of the confusion produced by inflation and recoup themselves for their increasing outlays. Indeed inflation frequently makes for an artificial condition of business prosperity. That is why war times are frequently spoken of in terms of enthusiasm by the class of business adventurers. But it is a prosperity that is dear-bought and at the expense of the great body of plain living people. It would be a monstrous wrong if in financing our present war we should pursue methods that would land us in a sea of inflation in which the great body of the American people, who are called upon to contribute the blood of their sons to the war, were made the victims of a careless or iniquitous financial policy."

"Every dollar of gold may become three dollars of Federal Bank credits and each dollar of this may in turn become the basis of eight dollars of credits for the Central Reserve cities, ten dollars for the smaller cities and fifteen dollars for the country banks, which works out to a practical average of ten dollars for all the banks in the Federal Reserve system."

"A great upheaval took place in the world of finance. Credit resources were brought to the fore and nations established on a financial basis of far-reaching importance, but of a kind that had only a secondary place before.

"The war has turned the United States from a debtor to a creditor nation. Formerly we owed abroad something like $4,000,000,000, about three-quarters of which sum we have bought back. Moreover, Europe now owes us about $9,000,000,000—on private account; about $2,000,000,000 in securities; in United States Government obligations over $7,000,000,000. The world is under obligations to us in interest alone of between $400,000,000 and $500,000,000 a year."

"A total appropriation of $7,000,000,000 has been made, $3,000,000,000 by the Act of April 24, 1917, and $4,000,000,000 by the Act of September 24, 1917. Under these authorizations credits have been established in favor of the governments of Great Britain, France, Italy, Russia, Belgium, and Serbia. These loans, up to January 17, 1918, are given in the following table:

"On the basis of the requests being made on the Treasury, it is estimated that credits aggregating approximately $500,000,000 per month will be required to meet the urgent war needs of the foreign governments receiving advances from the United States. At this rate approximately the entire appropriation authorized by Congress will be accredited to our Allies by the close of the present fiscal year (June 30, 1918).

"A significant feature of the loans floated in this country in the last three and a half years has been the fact that many states and municipalities which formerly went to London to sell their securities have recently been financed through the United States. About $150,000,000 of the Canadain Canadian loans went to provinces and municipalities, and many of the South American obligations were contracted for municipal improvements. The neutral nations of Europe have also sought accommodation in the American money market. Loans have been made to the city of Dublin, Ireland, the London Water Board, and the French cities of Paris, Bordeaux, Lyons, and Marseilles."

"Obviously if Great Britain or any other country alone attempted to alter the standard price of gold, and therefore the value of the present sovereign (or its equivalent), the currency would be debased, [Pg 32] instead of being enhanced. It would also in effect amount to a partial repudiation of national debt. A standard ceases to be a standard if one nation can arbitrarily alter it, but surely there can be no argument against the creation of a new standard sanctioned by the whole civilized world for their mutual advantage. If Great Britain and the United States were to proclaim their desire to adopt my scheme it is hardly likely that any country other than the Central Powers would fail to welcome it. Spain, for instance, has increased her gold reserve to about £80,000,000 and greatly enhanced the value of her currency thereby. Would she fail to grasp the happy chance of making this £120,000,000, and would any country continue to part with its gold at £4 per ounce when it could get £6 or £8?"

"The war has brought into the market a vast number of new buyers for ornaments, whose demand in the aggregate is estimated to more than compensate for the falling off in the purchases by the wealthy classes of silver plate. Wages everywhere, not merely in England, but practically all over the world, have advanced, and particularly in Western Europe; moreover, immense numbers of women, and even children, are being employed who were not employed before, and those who were employed before have a larger income, particularly amongst the wage earning classes, than has been the case in this country for many years past."

" ... About half the annual production of silver throughout the world is absorbed by the East, meaning principally India and China. It has to be borne in mind that prices in the East have advanced as well as in Europe and the two Americas, and, consequently, more token money is required there as well as here. Silver is the standard of value, and not token money at all, in China; and in India, while gold is nominally the standard of value, the rupee is the actual coin in which the Indian natives, as distinct from mere government officials, reckon their wealth. Now, as one result of the war, nearly all the governments forbid the export of gold; consequently, India requires a steadily increasing supply of silver, not merely to do the work that silver did before the war, but, in addition, to supply the void created by the prohibition of the export of gold."

The wider black area shows the high and low average prices of the twenty-five industrials included in the fifty, and the white area the corresponding figures for the twenty-five rails. The lines begin at a time when Germany was suffering severely from her failure at Verdun and from losses in men and territory from the great Allied Somme offensive. The subsequent rapid decline (November to February) embraces the period of Bethmann-Hollweg's sensational peace offensive, followed a few weeks later by Germany's intensified submarine warfare. The lowest point of all (December, 1917) was reached after Germany's successful counter-thrust for Cambrai, her "peace offensive" with the Bolsheviki at Brest-Litovsk, and the taking over of our railroads by the government.—Literary Digest, October 19, 1918.

"The lowest quotations for these bond and note issues were reached in 1917, when the cause of the Allies assumed a gloomy appearance. The depression was aggravated by the general decline of the entire securities market in the later part of that year. Some recovery occurred by the end of last year, but the beginning of 1918 saw them still depressed. Last March, April, May and June, when the great [Pg 33] German drives were in progress, they showed little disposition to break, but after the active participation of the American Army in the fighting began and news came that the counter-offensive had assumed a decided and successful phase, an assertion of strength took place in foreign government bonds, carrying quotations 'not only to the highest of the year, but in some instances to the best figures attained since they first made their appearance in the American market.' The following tabulation is presented by Bradstreet's as giving the range of prices for the most prominent bonds and short-term notes of foreign countries during 1917 and 1918, with the quotations for them on August 22nd:

"British issues, as shown above, declined least of all, 'and consequently had less ground to regain in the rise,' Bradstreet's adds:

"The feeling of confidence in England's credit has all along been a factor in connection with its American obligations. This will doubtless be strengthened by the announcement made this week that the United Kingdom secured 5 per cent. notes, due September 1, 1918, will be paid at their maturity on that date. There were originally $250,000,000 of these notes, which were sold in our market in 1916; but the outstanding issue has been reduced to about $180,000,000 by purchases in the market for redemption. French obligations have been one of the chief features of the advance. As will be seen from the above table, the French Republic 5½ per cents., due 1919, have risen 6 points from the low figures of the year. The 6 per cent. notes of the French cities, Paris, Lyons, Bordeaux, and Marseilles, with rises of about 10 points each, are conspicuous examples of the good effects following the checking of the German advance and the counter-offensive launched by the Allies and the American Army. No division of this part of the bond market has, however, shown such a marked improvement as the Russian external or dollar bonds, which though not listed at the Stock Exchange, are dealt in extensively on the New York Curb market'."

"Furthermore, this structure was 'designed so to hold American industry as to frustrate the organization of our resources in case of war.' With two hundred American corporations controlled by the financial and military power in Germany, we had a situation that 'might easily have been fatal in America had it not been discovered in time.' When the war began in 1914 the structure 'had become so large and powerful and was so firmly entrenched in the industrial life of our country that its real commanders in Germany cherished the hope that it would prove the make-weight which would keep America out of the war, or, failing in that, constitute a powerful ally of the German cause in our very midst.'" Mr. Palmer added:

"'During the last twenty-five or thirty years Germany had built up upon American soil a structure reaching into every part of the country and stretching its arms across the seas to fasten upon Porto Rico, the Virgin Islands, Hawaii, and the Philippines. Congress has declared that all these enemy properties shall be managed and administered by the Alien Property Custodian with all the powers of a common law trustee, the proceeds to be distributed after the war in such manner as the Congress may determine. This means that the final disposition of the properties or the funds realized from their sale will be a topic for discussion and a subject for settlement at the council table of the nations at which permanent peace shall be restored to the world.

"'This being so, it seems to me to be an important part of our work to capture the army which Germany skilfully and craftily planted midst the busy wheels of American industry, and to break, never to be again repaired, the industrial and commercial chain which Germany has stretched across the American continent and our insular possessions. I would let Germany understand now that her plan has dismally failed. I would let her understand now that no matter how long she fights, or what sacrifice she makes, or what price she pays, however much territory she may occupy, or whatever worlds she may conquer, there is one place which she will never soil again with the tramp of the marching legions of her industrial army. That is the United States of America. I would divorce utterly and forever all German capital from American industry'."

"The British Government went into the beef business in order to supply the troops at home and overseas with chilled meat. It did so at an average cost of 12 cents per pound. It also supplied all meat of this kind required by the French Army, the Italian Army, the Belgians, and the Serbians. The amount of meat required for the British and French armies was over 50,000 tons per month; for the Italian Army about 10,000 tons per month. These quantities increased proportionately with the additions to the forces. Having created a state monopoly in the importation and control of chilled meat, the Government had to make provisions for domestic supplies outside the Army. The Board of Trade arranged to sell to British firms the surplus meat at market prices. They obtained a small commission, lower than it hitherto received from traders. Sales to speculators were prohibited.

"Wheat was quite as important as sugar and beef, although there was less risk of a world-corner. Wheat was purchased for Government account on somewhat similar lines as beef. One of the largest importing houses was commissioned to do all the purchasing, while the other houses held off, and it was four months before the corn trade, on the selling side, discovered that purchases were made for the state. Naturally the commission which the state paid on such transactions was nominal. The British Government organization bought and shipped wheat, oats, fodder, etc., for Italy. The French Government bought their civil ravitaillement wheat through the Hudson Bay Company. Large purchases were made in Canada on behalf of the Italian Government."

UNITED STATES AS FOOD PRODUCER

"It is hard to realize that the United States was in 1917 much less favorably situated for producing a huge food surplus than it was thirty years before. In the interim industrialism had made huge strides in the land, and a great urban population has risen to eat up a large part of the surplus of food produced by the farms. This change is indicated by a growth of the urban population in the twenty years from 1890 to 1910 from 22,720,223 to 42,625,383, or more than 80 per cent., while rural population during the same period increased from 40,227,491 to 49,348,883, or less than 25 per cent. If the same ratios have been maintained since 1910 urban population has now become one-half of the whole. In terms of food production decidedly more than one-half of our population now produces a very insignificant part of the food which it consumes, for the rural population includes all who live in towns of less than 2,500. The significance of the change is indicated by the following figures of the production, export, and consumption of typical food products. The comparison is between the average of the five-year period ending in 1895 and that ending in 1914. The average production of wheat per year for the former period was 476,678,000 bushels; for the latter 697,459,000 bushels, an increase of 46 per cent. Between these periods domestic consumption increased from 310,107,000 to 588,592,000 bushels, or about 90 per cent., while exports decreased from 166,571,000 to 104,945,000 bushels, or 37 per cent. The average production of corn for the former period was 1,602,171,000 bushels; for the latter 2,752,372,000 bushels, or an increase of 72 per cent. Consumption increased from 1,552,003,000 to 2,790,962,000 bushels, or 79 per cent., while exports decreased from 50,168,000 to 41,509,000 bushels, or 17 per cent. The figures upon sugar, beef, pork, and other staples lead to similar conclusions. The growth of industrial centers has given us an increasingly urban population which has been consuming a larger and larger part of the food surplus."

"Shipments of meats, fats, and dairy products were as follows,

"'Our slaughterable animals at the beginning of the last fiscal year were not appreciably larger in number than the year before, and particularly [Pg 37] in hogs; they were probably less'; so, as Mr. Hoover points out, 'the increase in shipments is due to conservation and the extra weight of animals added by our farmers.' Our shipments of cereal and cereal products have been,

"The total shipment of wheat from our last harvest was about 141,000,000 bushels, with 13,900,000 of rye, a total of 154,900,000 bushels, of prime breadstuffs. Mr. Hoover notes a remarkable achievement in connection with the wheat shipments:

"'Since the urgent request of the Allied Food Controllers early in the year for a further shipment of 75,000,000 bushels from our 1917 wheat than originally planned, we shall have shipped to Europe, or have en route, nearly 85,000,000 bushels. At the time of this request our surplus was already more than exhausted.

"'This accomplishment of our people in this matter stands out even more clearly if we bear in mind that we had available in the fiscal year 1916—17 from net carry over and a surplus over our normal consumption about 200,000,000 bushels of wheat, which we were able to export that year without trenching on our home loaf. This last year, however, owing to the large failure of the 1917 wheat crop we had available from net carry over and production and imports only just about our normal consumption. Therefore, our wheat shipments to Allied destinations represent approximately savings from our own wheat bread.'

"The effort and sacrifice made by our people to do this are more fully appreciated when we consider that last year's wheat crop was a small one and that the corn failed to mature properly. Mr. Hoover concludes his letter with these words of warm appreciation of the people who have made up the army of which he has been the commanding general:

"'I am sure that all the millions of our people, agricultural as well as urban, who have contributed to these results should feel a very definite satisfaction that, in a year of universal food shortages in the northern hemisphere, all of these people, joined together against Germany, have come through into sight of the coming harvest, not only with health and strength fully maintained, but with only temporary periods of hardship. The European Allies have been compelled to sacrifice more than our own people, but we have not failed to load every steamer since the delays of the storm months of last winter.

"'Our contributions to this end could not have been accomplished without effort and sacrifice, and it is a matter for further satisfaction that it has been accomplished voluntarily and individually. It is difficult to distinguish between various sections of our people—the homes, public eating places, food trades, urban or agricultural populations—in assessing credit for these results, but no one will deny the dominant part of the American women'."

"The efforts put forth by the farmers and the agricultural organizations to secure increased production can perhaps best be concretely indicated in terms of planting operations. The size of the harvest may not be the measure of the labors of the farmers. Adverse weather conditions and unusual ravages of insects or plant diseases may partly overcome and neutralize the most exceptional exertions."

"The first year of our participation in the war, 1917, witnessed the Nation's record for acreage planted—283,000,000 of the leading cereals, potatoes, tobacco, and cotton, as against 261,000,000 for the preceding year, 251,000,000 for the year prior to the outbreak of the European war, and 248,000,000 for the five-year average, 1910—14. This is a gain of 22,000,000 over the year preceding our entry into the war and of 35,000,000 over the five-year average indicated. Even this record was exceeded the second year of the war. There was planted in 1918 for the same crops 289,000,000 acres, an increase over the preceding record year of 5,600,000. It is especially noteworthy that, while the acreage planted in wheat in 1917 was slightly less than that for the record year of 1915, it exceeded the five-year average (1910—14) by 7,000,000; that the acreage planted in 1918 exceeded the previous record by 3,500,000; and that the indications are that the acreage planted during the current fall season will considerably exceed that of any preceding fall planting."

"In each of the last two years climatic conditions over considerable sections of the Union were adverse—in 1917 especially for wheat and in 1918 for corn. Notwithstanding this fact, the aggregate yield of the leading cereals in each of these years exceeded that of any preceding year in the Nation's history except 1915. The estimated total for 1917 was 5,796,000,000 bushels and for 1918, 5,638,000,000 bushels, a decrease of approximately 160,000,000 bushels. But the conclusion would be unwarranted that the available supplies for human food or the aggregate nutritive value will be less in 1918 than in 1917. Fortunately, the wheat production [Pg 38] for the current year—918,920,000 bushels—is greatly in excess of that for each of the preceding two years, 650,828,000 in 1917 and 636,318,000 in 1916, and is next to the record wheat crop of the Nation. The estimated corn crop, 2,749,000,000 bushels, exceeds the five-year pre-war average by 17,000,000 bushels, is 3.4 per cent. above the average in quality, and greatly superior to that of 1917. It has been estimated that of the large crop of last year, approximately 900,000,000 bushels were soft. This, of course, was valuable as feed for animals, but less so than corn of normal quality. It should be remembered, in thinking in terms of food nutritional value, that, on the average, only about 12 per cent. of the corn crop is annually consumed by human beings and that not more than 26 per cent. ever leaves the farm. It should be borne in mind also that the stocks of corn on the farms November 1, 1918, were 118,400,000 bushels, as against less than 35,000,000 bushels last year, and 93,340,000 bushels, the average for the preceding five years. It is noteworthy that the quality of each of the four great cereals—barley, wheat, corn, and oats—ranges from 3 to 5.4 per cent., above the average.

"The tables printed below may facilitate the examination of these essential facts:

"It is not usually understood that the chief cause of the enormously high prices of the necessities of life at the present time is their relative scarcity. The supply of necessities in this country has not materially increased, but the demand for them, owing to the requirements of our Allies, has enormously increased. We can prevent a still further soaring of prices only by increased production of necessities—increased production to be accomplished, let it be repeated through a diversion of productive power from the non-essential lines.

"The wealthy have often been urged since the war started to spend lavishly on luxuries and to economize on necessities in order that the necessities will remain for consumption by the poor. This is sheer shortsightedness; for the energy devoted to the production of luxuries for consumption by the wealthy would, if diverted to the production of essentials, give us a [Pg 40] sufficient supply of the necessities of life that all might have them in relative abundance. The result of a policy of spending lavishly on luxuries is an inadequate production of necessities and hence prices so high as to cause real privation among the masses. Those engaged in producing luxuries obviously cannot at the same time be engaged in producing necessities."

"Thus the diversion of productive resources to public ends requires of each of us a voluntary or compulsory rearrangement of individual and household budgets and radical changes in the habits of our lives. We must encourage direct diversion by reducing to a minimum our consumption of articles which can be used by our soldiers. But it is even more important that we give up the consumption of non-essential things in order that the productive energy which they embody be devoted to the accomplishment of the purpose in hand. The amount which we are forced to give up or voluntarily surrender constitutes a surplus over private consumption that measures the extent of our ability to wage war. We are fighting a nation which continues to be willing to reduce private consumption to the barest subsistence minimum. Unless a large surplus is produced we can gain no active participation in war and cannot hope for a victorious peace. The larger the surplus the shorter the war will be, and the nearer we are to victory."

"In 1918, as against 1916, the acreage (England and Wales) under oats is up by 35 per cent.; that under wheat by 38 per cent.; that under barley by 11 per cent.; that under other grain by 69 per cent.; that under potatoes by 50 per cent. The number of allotments (1,300,000) has increased by 140 per cent. The Report of the Food-Production Department ... is as satisfactory as we could wish; the number of acres under cultivation in the United Kingdom has gone up by over four millions in two years, all records being broken.

"This figure ignores the great increase in gardens and allotments, and it is estimated that, on the present scale of consumption, this year's home harvest will be sufficient to feed the population for forty weeks. The supply before the war was only enough to meet a ten weeks' consumption. Breadstuffs are not everything; and even of them one-fifth still has to be provided. But granted that we can keep this rate of production up, and—in spite of the drains of the Army upon our labor—can, with the help of women and prisoners, save what we produce, the wolf has now been driven a considerable distance from the door. With sinkings diminishing and ship-building on the increase, we can, we think, congratulate ourselves on the final failure of the German attempt to starve us out."

"Much of the increased cultivation has been done by women, we are told, and Mr. Prothero, the British Minister of Agriculture, had a cheerful picture to paint when appealing for recruits for 'the Women's Land Army.' As reported by the London Morning Post his speech ran:

"'Today (1918) the acreage under wheat, barley, and oats is the highest ever recorded in the history of our agriculture. That is one of the finest achievements of the war. In the same period the number of allotments has been increased by 800,000, which means something like 800,000 tons of produce raised additionally, a big saving in transport, and an improvement socially and morally. This advance has been effected in spite of the fact that there are 500,000 fewer laborers on the land. It is because of that decrease of labor that the appeal is being made for more women. I do not believe that any assembly of British farmers will hold back men who can possibly be spared when the alternative is our troops being driven back by overwhelming numbers and butchered on the beach by German guns. The promise of the harvest is not yet fulfilled, and there is much to be done. Women's work on the land is a vital necessity. I know the work they are asked to do is hard, bringing with it discomforts, and, comparatively speaking, is poorly paid. Life on the land is not luxurious, but it brings health with it, and the women have the conviction that they are doing something in one of the most important fields to make victory sure.'"

"Considerable alarm has been caused among dog owners by the intimation that stocks of biscuits are practically exhausted. Not only is this the case, but the prospects of more flour being released for their manufacture are also remote unless some action is taken by the government to insure further importations of low-grade flours suitable for the purpose.

"The state of things is undoubtedly acute. Until the food economy campaign set in early last year most households provided enough waste to feed a dog, and where more than one was kept butchers' offals could be had for a few pence. These sources of supply having now vanished, much ingenuity will have to be exercised in order to preserve the family friend and guard from extinction. Blood, steamed until it is of a solid consistency, fish heads, and the heads of poultry offer some alternatives. Rice, oatmeal, and other cereal products may not be used.

"The whole question of dogs is engaging the closest attention of the authorities. Admittedly the problem of reducing the numbers is beset with difficulties, and, whatever is done, it is extremely unlikely the one-dog owner will be disturbed, the government recognizing the sentimental forces involved, to say nothing of the utility value of many breeds."

"The stores and warehouses in the Ukraine are almost emptied. The peasants' stocks are depleted, while the best seed corn has been used to feed cattle or to supply a secret still, which nearly every household possesses.

"The outlook for next harvest is most unpromising. The peasants have plundered the estates, destroyed farm buildings and machinery, and have stolen or slaughtered most of the cattle. No labor is available for cultivation, and there are no facilities for harvesting the next crop, while the sugar industry is confronted with ruin, owing to [Pg 42] the decrease of beet cultivation."

"The index of the Swedish official list of laws, dated October 31, 1916, forbidding exports, mentioned more than 1,100 articles, and even that was expressly called only a help to find the commodity looked for and did not pretend to be a complete index. The result was, of course, that trade, compared to former volumes, decreased very considerably, and the energy as well as the wealth actually earned was turned towards speculation on the local exchange.

"To supply all the people of Scandinavia with the necessities of life was a problem. Law upon law, one governmental decree after the other, tried to regulate the distribution of commodities as well as their prices. The majority of the people were in actual need. Prices soared, and it really did not matter to the ordinary man whether the cause of this rise in the cost of living was a too big circulation of paper currency or a limited supply of goods. What confronted him was the fact itself, not theories, and he realized all too well that he could not make 'both ends meet.' There was, generally speaking, no doubt that under normal circumstances the laws of supply and demand will work satisfactorily to the community and that artificial interference was only harmful. The supply being short, consequently the demand and the consumption must be controlled to secure a fair distribution. Sugar cards, which had been used in Sweden for months, and which were decreed in Denmark to go into force January 1, 1917, were an example of the means employed to control the distribution and to prevent waste to supplies.

"While on the one hand one saw new millionaires permit themselves to indulge in the most senseless luxuries, which incidentally added considerably to the high cost of living under circumstances like these, the less well-to-do actually were without many things formerly considered necessities. Collections of money and foodstuffs were made all over Scandinavia to help the less fortunate through the winter. The poorer population of the cities was especially considered. It was even difficult to get a roof over one's head. Proposals and counter proposals to remedy the evil were forthcoming, but no real remedy seemed to be in sight."

"About 88 per cent. of the relief supplies furnished were sold under contract to the various Governments in the relief areas. For all such sales these Governments gave their special treasury notes in a form approved by the United States Treasury, bearing 5 per cent. interest, due June 30, 1921, to June 30, 1924. It was impossible to obtain reimbursement in cash because the currency in the countries to which these supplies were sent was impossible to convert into foreign exchange, except in comparatively insignificant amounts.

"I give herewith approximate list of the notes of each Government, which we expect to turn over to the United States Treasury.

"The remaining 12 per cent. of the supplies was donated in assistance to private organizations set up in each country under direction of the American Relief Administration for the purpose of furnishing food on a charitable basis to undernourished children. For such supplies it was, of course, impossible to obtain reimbursement. This service has contributed greatly to stabilizing the situation in those countries, aside from the physical benefits to more than 3,000,000 undernourished children, to whom the war threatened serious and permanent injury. Certainly this service is one for which the name of America will always be held in deepest gratitude."

"With the signing of the armistice and the cessation of active fighting, new factors were introduced which affect the food situation. One of these was the step taken to release shipping as rapidly as possible, with the prorable probable result that the agricultural products of the more distant producing countries will again largely appear on the markets of Europe. The channels of trade are being reëstablished and food supplies will be sought wherever they can be secured most cheaply.

"A provision of the armistice required the immediate evacuation by the Germans of a large area in Belgium, France, Alsace-Lorraine, Luxemburg, and other territory. As a result many millions of people have been added to those that must be aided and fed by the Allies, and a [Pg 44] material increase in the amount of foodstuffs to be imported has been made necessary. It may be found, too, that Turkey, Austria, and even Germany will have to draw on outside supplies to meet their needs.

"The demobilization of the European armies will permit men to return to the farms, and it may be expected that under the stimulus of an urgent demand for food an attempt will be made this year to increase food production in all the affected European countries. The devastated regions will be slow in recovering. Much time and labor will be required to construct necessary homes and farm buildings, level the ground, remove obstructions, and in other ways prepare for a resumption of regular agricultural activities. But it must be remembered that as compared with the whole of the countries concerned these areas are small and should not affect the results in any large way.

"In many sections of Europe there is a shortage of horses and other work stock, farm machinery, seeds, and fertilizers. In these localities a normal production should not be expected, but it is evident that under favorable conditions a material increase over the past year will be secured.

CEREAL REQUIREMENTS FOR 1919

"The following table presents estimates of the cereal requirements for 1919 and shows the world balance as deficit or surplus. Figures for the cereals, except rice, represent millions of bushels.

"The figures on import requirements of the Allies and neutrals are those estimated for 1917—18, while the estimated requirements of Germany and Austria are pre-war net imports.

"The rice surplus might be required in the Orient for countries whose crops may have failed.

"The cotton table is based upon normal industrial conditions in all the consuming countries and upon the restoration of the spinning industry in the devastated regions. If conditions do not reach normal, and if the industry is not restored, the consumption of cotton will be substantially less. With practically complete restoration, cotton consumption may well be expected to equal the normal or pre-war times on account of the present shortage of cotton goods in various countries. The economies which the peoples of Europe must practice for some years to come must be considered."

"'from their oppressed populations and set their minds and energies free for the great and hazardous tasks of political reconstruction which now face them on every hand. Hunger does not breed reform; it breeds madness and all the ugly distempers that make an ordered life impossible.

"'For with the fall of the ancient governments which rested like an incubus on the peoples of the Central Empires has come political change not merely, but revolution.'

"Putting this danger into a nutshell, the Wall Street Journal asks whether Central Europe shall have 'bread or Bolshevism?' This strong exponent of a firm social order is of the opinion that 'we must recognize the fact that hunger breeds anarchy, and that the most effective weapon against Bolshevism is a loaf of bread.' Victory has made the Allied peoples, 'through their governments, responsible for world conditions,' in the opinion of this paper as well as of the Montreal Star quoted above, and Food Administrator Hoover declares that 'the specter of famine abroad now haunts the abundance of our tables at home.'"

"Mr. Hoover expects that enough wheat will be brought from those countries to permit reduction of the percentage of substitutes now required in bread, and thus release fodder grain for dairy use. The change, it is said, may take place within three months. But it will not reduce the total of foodstuffs which we must supply. He predicts that 'our load will be increased,' and that there will be a greater demand for economy.

"The available quantities of grain are sufficient. From our great crop of wheat we can spare more than 300,000,000 bushels. Canada, with a yield almost equal to last year's, has a surplus. While our crop of corn shows a decline of 441,000,000 bushels from that of a year ago, it is very near to recent averages and of very good quality. The output of home gardens, increased by one half, is not included in official reports, although its value exceeds $500,000,000. Australia has on hand the surplus of three wheat crops, India is said to have 120,000,000 bushels for shipment, and much can be taken from Argentina. As a [Pg 46] rule, our war partners in Europe increased their crops this year. England gains 30,000,000 bushels of wheat, Italy 24,000,000, and France 35,000,000. But other crops in France are short, and the nutritive value of the entire yield is less than that of last year's harvest. It is well known that the Central Powers have very little food; and no help can come to them from the East. Before the war Russia exported a large surplus of wheat. Many of her people are now starving. So far as can be learned, she has no grain to sell. Bulgaria and Rumania have the smallest crops in fifty years. Germany and Austria can get no grain from the northern neutrals; we are sending wheat to them. There is food enough to supply the wants of our European friends and foes until the next harvest if it can be carefully distributed. But if the plans for helping those who have fought against us, as well as our partners in the war, are carried out, the American people must practice economy and submit to restrictions for some time to come."

"This board is a part of the Food Administration and approved by the President. Its purpose [Pg 47] is to equalize the cost of various sugars and to secure better distribution. It can also coöperate with the Allies in the procurement of sugar for them and in the adjustment of overseas freight rates. Through capital supplied by the President through his special funds, it is enabled, when desirable, to buy up all available sugars at different prices and resell them at one fixed and even rate.

"In other words, it provides a sort of vast storehouse of sugar, which may be doled out where it is most needed, at a price secure from the fluctuations otherwise inevitable in war time."

"It costs more to produce and market some sugars (such as domestic beet sugar and Louisiana cane) than it does others, such as Cuban cane sugar. But that is no reason why the sugar manufacturer, whose production costs are high, should suffer, even to the extent of being forced out of the market. Nor can the country afford to have this happen under present war time shortage of nearby supplies. Consequently, when it becomes necessary, the Sugar Equalization Board through its purchasing powers can insure fair profits to the manufacturers. Then the Board may resell this sugar, so that it reaches the public at a price lower than what the maximum would otherwise be."

"The potato can be grown in almost any temperate zone area, but theretofore nine-tenths of the world's crop of 6,000,000,000 bushels is grown in a half-dozen countries, and almost exclusively in Europe and North America. Germany, Russia, Austria-Hungary, France, Great Britain, and the United States have produced in favorable years about 5,000,000,000 bushels, while the remainder of the world produced only 1,000,000,000. These six countries that produced five-tenths of the world's potato crop have only 450,000,000 peoples, while the potatoless world has a population of over 1,200,000,000, from which it appears that 'fully two-thirds of the population of the world live outside of the area.'

"Germany is by far the largest potato grower of the world, producing about 2,000,000,000 out of a world crop of 6,000,000,000 bushels, using them as a food for man and animals and the production of alcohol for use in her industries, and for the production of heat and power when necessary. Next in line is European Russia, with an annual crop of about 1,000,000,000 bushels; Austria-Hungary, 600,000,000; France, 500,000,000; United States, 450,000,000, and Great Britain, 300,000,000 bushels.

"This new system of turning the potato into a condition in which it can be readily distributed has, quite naturally, developed in the country which has the largest potato production of the world, Germany. Factories for the crushing and drying of the potato and turning the product into flour for man, flakes and cubes for animals, or alcohol for the chemical industry and also as a substitute for petrol, have grown from about a dozen a few years ago to over 400 in 1914 and 840 in 1916, with a capacity to turn into this condensed form more than 1,000,000,000 bushels of potatoes a year. The reduction in weight is about 60 per cent., while the product can be preserved almost indefinitely.

"The value of our own potato crop in the United States last year was approximately $540,000,000 at the place of production, and yet the amount entering international trade was only $4,000,000. Our potato crop averages about 90 bushels per acre, that of European Russia 100 bushels; France 135 bushels; Austria 150 bushels; United Kingdom 124 bushels, and Germany 200 bushels and upward per acre, her large flavorless potato, grown chiefly for alcohol, having reached and sometimes exceeded 500 bushels per acre."

"The question of war-time coal prices offers many angles of interest. Everywhere prices have increased far above pre-war levels. Voluntary agreements on the part of producers and dealers to limit prices and profits have failed without exception. In all the leading coal-consuming countries of the world maximum prices had to be fixed sooner or later by government action. In every case the maximum mine prices are considerably above the average scale of prices obtaining in the years immediately prior to the war. In every country where maximum sales prices at the mines were fixed, liberal allowances were made for wage increases to mine workers. In Great Britain present maximum mine prices approximate 6s. 6d. above the average mine price which obtained during the year ending June 30, 1914. In the United States special mine prices have been fixed for each state, and in many cases also for certain coal fields within a state. The f.o.b. price for bituminous coal in Pennsylvania was in 1913 $1.11 and in 1918, $2.60. Anthracite increased to $4.00 ($4.55 for white ash broken).

"In Germany the total increase in mine prices of the Rhenish-Westphalian Coal Syndicate from the beginning of the war to January, 1917, approximated $1.25 per ton.

"While a certain degree of uniformity is noticeable in the rise in price levels for coal at the mines in the countries where maximum prices have been fixed, an entirely different picture presents itself if we compare the maximum retail coal prices obtaining under government regulations in different sections of the same country. In most countries the national coal controller has established a uniform maximum margin of profit for all retail coal dealers, while local authorities have fixed maximum retail coal prices for their communities. By reason of the fact that in establishing maximum retail consumers' prices allowances had to be made for increased handling expenses, freight rates, middlemen's profits, war taxes, etc., retail coal prices at the present time universally show a very heavy increase over pre-war prices."

"was decreed a holiday for ten weeks on which offices, factories, and stores, except drug and food stores, must use only such fuel as is necessary to prevent damage. The order under which these restrictions were made, according to the Fuel Administration's statement to the press, was 'designed to distribute with absolute impartiality the burden,' and it added that the Fuel Administration 'counts upon the complete patriotic coöperation of every individual, firm, and corporation affected by the order in its enforcement.' We read further that the government aims to carry out its plan without 'undue interference with the ordinary course of business' and earnestly desires to 'prevent entirely any dislocation of industry or labor.'

"Fuel Administrator Garfield hoped to save 30,000,000 tons of coal and to give the railroads a chance to straighten out the transportation tangle in the eastern states, according to a Washington correspondent of the New York [Pg 49] Tribune, who notes that the measures were taken by the President and the government heads 'as a desperate remedy.' The closing down of the greater part of the nation's industries, trades, and business, says the New York Sun, is the 'fruit of the insane, criminal starvation of the railroads by the government for a generation'; yet regardless of what it may cost any individual or group of individuals, the order is to be 'greeted without protest.' A surgeon was more welcome than an undertaker, in the view of this daily, and a disaster of the second degree and a temporary one is better than a disaster of the first degree and a permanent one. If the five-day term clears the railroads and the Monday holidays set the trains running with their former clocklike regularity, the Sun added, we can resume being the 'busiest nation on earth, instead of being an industrial paralytic.' While recognizing that the order struck Utica and all cities in the designated territory 'a staggering blow,' the Utica Press holds that there is really nothing a patriotic city could do about it save to accept the situation with as good grace as possible, and if the result hasten the end all will agree that it was a good investment. The Chicago Herald considered the order 'a tremendous decision' carrying with it a 'tremendous responsibility,' and while the chief industries of the principal part of a nation can not be stopped even for a day without disorganization and loss, still the country is willing to pay the price 'if it is the necessary cost of preventing the suffering of hundreds and thousands, perhaps millions, of individuals and of keeping certain indispensable war and public functions going at their accustomed speed.'"

"The most urgent thing to be done is to send to the American forces abroad and to the Allies the food and war supplies which they [Pg 50] vitally need. War munitions, food, manufactured articles of every description, lie at our Atlantic ports in tens of thousands of tons, while literally hundreds of ships, waiting, loaded with war goods for our men and the Allies, can not take the seas because their bunkers are empty of coal. The coal to send them on their way is waiting behind the congested freight that has jammed all the terminals.

"It is worse than useless to bend our energies to more manufacturing when what we have already manufactured lies at tidewater, congesting terminal facilities, jamming the railroad yards and side tracks for a long distance back into the country. No power on earth can move this freight into the war zone, where it is needed, until we supply the ships with fuel.

"Once the docks are cleared of the valuable freight for which our men and associates in the war now wait in vain, then again our energies and power may be turned to manufacturing, more efficient than ever; so that a steady and uninterrupted stream of vital supplies may be this nation's answer to the Allies' cry for help....

"This is war. Whatever the cost, we must pay it, so that in the face of the enemy there can never be the reproach that we held back from doing our full share. Those ships, laden with our supplies of food for men and food for guns, must have coal and put to sea."

"Fuel economy is being given intensive study in connection with steam plants and industrial uses. An organization is already in existence, provided with engineers and inspectors who will visit every one of the two hundred and fifty thousand steam-producing plants in the country with a view to the improvement both of equipment and firing practice. This is expected to save twenty million tons of coal.

"The economical use of power in factories will be in the hands of organized shop committees. The power loads of the public utilities throughout the country are being studied with a view to readjustments which will result in large saving.

"In many cities the isolated power plants which use an extravagant amount of coal in proportion to the power produced will be urged to obtain more economical power from large producing stations.

"The introduction of 'skip-stop' schedules on all the street railways is expected to save a million tons of coal. The consolidation of ice plants will yield a still larger tonnage. Unnecessary outdoor lighting, including advertising signs and display illumination, will be reduced. Hotels, office buildings, apartment houses, and public buildings are being asked to join in rigid economy of light and heat.

"Every American citizen will be asked to clean his furnace, keep it in repair, and study economical firing. Instructions prepared by the highest authority will be furnished by the Fuel Administration.

"If every one joins in this movement, from the owner of an industrial plant to the householder with his furnace and cook stove, if indoor and outdoor lighting is reduced to the amount absolutely needed, if houses are not overheated, the furnace dampers properly adjusted, and the ashes sifted, it will be possible to save from fifty to seventy-five million tons of coal without serious inconvenience to the American people."

"As an illustration, consider the cotton crop with its millions of bales. Every bale of cotton raised in the country last year amounted to no more than the coal moved in one and one-third days. Or take the wheat crop for comparison. We hear of the immense preparations made during the fall months for moving the wheat crop; yet the weight of America's enormous wheat crop of 1917 is equaled by the coal mined and transported every eight days.

"Every year the miners go into the ground and dig out coal and the railroads ship it for hundreds of miles, dragging back the empty cars, until the amount mined equals two and one-fourth times the earth and rock removed in digging the Panama Canal. It took sixteen years to dig the Panama Canal. Our miners will dig two and one-half Panama Canals this year.

"In the mining of coal we are dealing with a task so gigantic that the wonder is not why we have not increased production to meet the [Pg 51] demand, whatever that might be, but how, with the men and equipment overtaxed by the multiplicity of the demands of the war, we were able to increase the output fifty million tons in 1917, and will be able to add a probable fifty million tons to that high record the present year.

"The wonder is increased when we note that every other coal-producing country now in the war found it impossible to maintain the pre-war production of coal. In every case the output is less now than before the war. In England seven and one-half per cent. less coal was produced the first year of the war than in the previous year and five per cent. less than this reduced output in the following year. America alone has been able to increase its production of coal in addition to meeting the thousands of other increases demanded by war preparation.

"As every one knows, coal mining is very largely a matter of coal transportation. The most difficult task involved in an increase must fall upon the railroads. The wonderful work these railroads are doing is brought into bold relief when we remember that in 1914, when the great war started, the output of bituminous coal in the United States was 423,000,000 tons, and that in 1918 it promises to be nearly 200,000,000 tons greater.

"Apparently, this country today can furnish the steel required if only it can get the necessary coal. The work of the Fuel Administration during many months has been directed toward increasing coal production. These efforts have borne much fruit, miners are approaching one hundred per cent. service, while the railroads are outdoing themselves expediting the movement of coal cars from the mine to the consumer and back again.

"But war's demands mount so rapidly that even with full speed ahead production can not make the pace. A fuel deficit can be averted only by the most intensive conservation. Conservation, economy, savings, sacrifice must fill the gap between the possible increase of production and the greater increase of demand. If every user of coal will join the army of fuel conservationists, realizing that the need for steel to carry on this war is practically unlimited and that every ton saved means an additional five hundred pounds of steel, there is prospect—the figures show it—that the work of the miners will not be in vain. Our increased production, plus conservation, the Fuel Administration believes, can furnish the coal, and hence the steel needed for the war, and still leave none of our people cold."

"Conceive, if you can, what could be accomplished in America in the way of increased productivity and economy if our Federal Government had the authority to make every individual and every company adopt any method or device that had been proved to be economic. No engineer acquainted with the application of the principles of the science of management can doubt that if the universal adoption of those principles could be forced upon producers in general, this nation could increase its productivity fully 25 per cent. That would alone add more than twelve million dollars annually to the national income. But that is not all. The application of the principles of the science of management is only a fraction of the total enginery at our disposal. We have literally countless labor and material-saving machines and appliances that are scarcely used, although many of them are generations old. Does this sound incredible? Certainly not to any engineer who has a wide acquaintance with the literature of engineering.

"Take so simple a thing as the heat insulator for steam pipes and boilers. It has been known to engineers for nearly a century that by encasing boilers and pipes with magnesia or other suitable insulators, practically all heat radiation and conduction losses could be stopped. Furthermore, it has been known to engineers that the saving in fuel thus effected would pay an annual interest of 20 per cent. on the cost of the heat insulator. But go into the basements of steam-heated residences if you want to get a conception of how rarely this knowledge is applied. The landlord may know that heat insulators would earn a big return on their cost, but since they would earn it for the tenant and not for himself, he does not cover the boiler and pipes adequately, if at all. The tenant, even if he knows the economics of heat insulating, will not spend the money for insulators whose use he may not enjoy for more than a year or two before he moves out. For similar reasons very few houses have double windows, although double windows will save fully 15 per cent. of the fuel required to heat the average house. On these matters the Fuel Administration has power to act, and it should act."

"Briefly, the main provisions of the bill are the following: Under the present Finance Act the state takes 80 per cent. of the profits in excess of those made in the two best of the last three pre-war years, or above 9 per cent. of the capital employed. The new scheme deprives owners of these statutory rights. It does away altogether with the percentage standard. Output is made the chief determining factor in the regulation of the profits to be retained by the coal owner. The production of a colliery working under normal conditions during the two pre-war years, which has already been adopted under the Finance Act for the purposes of the Excess Profits Duty, is adopted as the standard output. If that output is maintained in any accounting period under the new bill, the colliery owner will be guaranteed a profit equal to the average profit made in the standard period, whether he makes it or not. If his trading profits in the accounting period are greater than those in the standard period, the treasury will take its 80 per cent. of the difference under the authority of the Finance Act, the Controller will retain 15 per cent. of it in order to create a fund for the compensation of the less fortunate collieries and the administration of his department, and the coal owner will be allowed to retain 5 per cent. of the excess. Thus a colliery company with a profits standard of £50,000 will, if it maintain its standard output, continue to receive £50,000; if such company make, say, £70,000, it will be permitted, generally speaking, to retain only 5 per cent. of the extra £20,000, that is to say, £1,000, plus the statutory £200, or £51,200 in all; but in no case shall the retainable profits exceed five-sixths of the profits standard. In that illustration the scheme is to be seen at its best, and, under the conditions, it is not unreasonable."

"All shoes, both leather and fabric, shall be restricted to black, white, and two colors of tan (the two colors of tan to be dark brown or tan and a medium brown or tan).

"Patent leather shall be black only. These color regulations do not apply to baby shoes made of fabrics.

"Shoe-manufacturers shall not, for the next six months, introduce, purchase, or use any new style lasts. They may replenish to cover wastage or to meet requirements on present lasts now in use in the manufacture of shoes. This is to be effective at once. By new style lasts is meant any lasts which have not actually been used for the manufacture of shoes in the past season.

"The use of leather as a quarter lining in oxfords and low shoes is permitted only when used in skeleton form with fabric. Leather linings will be permitted in evening slippers where uppers are made of fabrics. We advocate the use of full fabric linings for low shoes wherever possible.

"The maximum height of women's shoes, both leather and fabric, shall not exceed eight inches (measured from breast of heel at side to center of top at side of finished shoes), size 4B to be the base measure.

"The maximum height of misses' shoes, size 1½, shall not exceed 6½ inches (measured as above).

"The maximum height of children's shoes, sizes 8½-11, shall not exceed six inches.

"The maximum height of boys' and youths' shoes shall not exceed 5½ inches.

"The maximum height of infants' shoes, sizes 4-8, shall not exceed 5½ inches.

"The maximum height of button shoes for women shall not exceed 6½ inches.

"The maximum height of all women's overgaiters shall not exceed eight inches, measured from breast of heel at side to center of top at side.

"The maximum height of misses' overgaiters shall not exceed 6½ inches (measured as above)."

"Price fixing on leather is still 'in the air.' It is not an easy proposition, in view of the complexity of grades and the variations in quality. The most practicable arrangement would be a series of general price standards, with allowance for deviations. Unlike other commodities, leather trading is a very flexible affair. The trade is confident of fair price maxima in relation to recently fixed hide quotations; possibly, in view of higher labor and other costs, of somewhat more liberal rates than hide prices, which have just been modified upward somewhat.

"Leather prices have been tending upward all round. Heavy sole leather, which did not recede nearly as much as lighter grades in the slump of last winter, are now nearly back to the high point of early last fall. Union sole has advanced four cents since May 1, and for some varieties of leather above No. 9 iron the market is around eighty cents, against sixty-five cents earlier this spring.

"In leather it is a case of all-round conservation, plus intensive effort for maximum output with government aid. Export license-restrictions have just been tightened, and most of what is shipped now goes to England. Neutrals must wait. In nine months to April 1st we exported but 20,342,101 pounds of sole leather, against 84,267,573 a year before. In March we shipped only 490,000 pounds to other countries than England, against 1,945,000 a year earlier. Hardly any is now moving save on British government order.

"Men't Men's shoes of higher quality and price will be affected chiefly by the requirement to carry soles as light as women's wear. This will involve either more frequent buying or more resort to tapping. Cheapest grades of shoes will be least affected, being almost wholly outside the military scope. In fact, some manufacturers of low-priced shoes have lately been enabled to use better material than usual, thanks to army 'leavings.' It is the urgent advice of the Government and tanners that shoe manufacturers promptly conform to the new program and that consumers cheerfully accept it. Meanwhile, experiments are continuing under government direction as to further extension of the use of composition or even of wooden soles to help meet the increased demand and short supply equation in leather."

"Such a bulletin at one stroke does away with all the obscurity which too often veils the price increase which takes place at the hands of the retailer.

"To give an example, it shows at just what price a retailer is able to buy oatmeal and at just what price he is entitled to sell it. If any retailer decides to set upon the food he has for sale a higher price than that which brings him a fair profit, he is labeling himself 'Profiteer.' And thereafter it depends upon the public's own choice whether they shall trade with him or not.

"In accordance with the plans of the Food Administration such a system of fair price lists is now in operation throughout the country. Every week new price lists are prepared so as to cover new fluctuations of cost to the retailer. And these up-to-the-minute fair price lists are given to the newspapers to print so that the consumer may be steadily informed and advised as to what he ought to pay the retailers in his city or town."

"In theory the plan is the simplest imaginable. But it is complicated by the size of this country and by the variety of local food conditions which are bound to affect the price at which the retailer can buy and sell his foodstuffs. It would be utterly impossible to set forth one fair price list which would be fair for every spot in this country at any one time. A grocer in Calais, Maine, may be able to buy potatoes at a lower rate than a grocer in Snohomish, Washington. And the grocers of Red Oak, Iowa, may have to pay a different price from either. Obviously, each locality must determine its own fair price list.

"This is done by establishing in every community or county where fair price lists are to be put out a Price Interpreting Board, consisting of representatives of wholesale grocers, retailers, and consumers. The County Food Administration or his representative should act as chairman of this board. Such boards include representatives of both 'Cash and Carry' stores and 'Credit and Delivery' stores. These boards secure from wholesale representatives the prices charged to the retailer for various staple foods. With this as a basis, plus their knowledge of local conditions, and guided by a schedule of maximum margins submitted to them by the Food Administration at Washington, they determine what is a reasonable profit at which the retailer may sell to the consumer. Thus the retailer does not have a scale of selling prices arbitrarily thrust upon him; he helps determine them himself."

"Survey of the petroleum field shows that the market, when under the control of dominating factors, such as Standard Oil, can be one of huge profits without the device of the high fixed price. No price for the public has been fixed upon petroleum and its products by the government. Unlike the situation in steel, flour, and coal, there has been as yet no government interference with the law of supply and demand except in the instances of government purchases. Under that law large profits may eventuate through the bidding up of prices by anxious buyers. And, moreover, even in the absence of this element, prices may be forced up by spreading false and misleading information concerning the condition of supply and demand. Reports, for instance, have been circulated that the supply of gasoline was endangered for the purpose of maintaining the high price of that product and the heavy profits from it. At different stages of the oil industry different products of petroleum have yielded the heavy profits. Kerosene was once the chief profit producer. Gasoline followed and superseded it as the chief producer of profits. Enormous profits are now being made in fuel oil, with the advantage to the refiner that the high price of that product meets no popular challenge. Gasoline is maintained at its present high price and produces heavy profits for the low cost refiners."

"Similarly, the power of dominant factors in a given industry in maintaining high prices and harvesting unprecedented profits is shown in a survey of the meat packing situation. Five meat packers, Armour, Swift, Morris, Wilson, and Cudahy, and their subsidiary and affiliated companies, have monopolistic control of the meat industry and are reaching for like domination in other products. Their manipulations of the market embrace every device that is useful to them, without regard to law. Their reward, expressed in terms of profit, reveals that four of these concerns have pocketed in 1915, 1916, and 1917, $140,000,000. Comparisons between their present profits and those of the pre-war period are given below. However delicate a definition is framed for 'profiteering,' these packers have preyed upon the people unconscionably. They are soon to come under further governmental regulation approved by Executive order."

"An exposition of the excess profits of four of the big meat packers (Armour, Swift, Morris, Cudahy, omitting Wilson as not comparable) is given in the fact that their aggregate average pre-war profit (1912, 1913, and 1914) was $19,000,000; that in 1915 they earned $17,000,000 excess profits over the pre-war period; in 1916, $36,000,000 more profit than in the pre-war period; and in 1917, $68,000,000 more profit than in the pre-war period. In the three war years from 1915 to [Pg 56] 1917 there their total profits have reached the astounding figure of $140,000,000, of which $121,000,000 represents excess over their pre-war profits.

"These great increases in profits are not due solely to increased volume of business. The sales of these companies in this period increased 150 per cent., much of this increase being due to higher prices rather than to increased volume by weight, but the return of profit increased 400 per cent., or two and one-half times as much as the sales.

"The profit taken by Morris & Co. for the fiscal year ended November 1, 1917, is equal to a rate of 18.6 per cent. on the net worth of the company (capital and surplus) and 263.7 per cent. on the three millions of capital stock outstanding. In the case of the other four companies the earned rate on common capital stock is much lower—from 27 per cent. to 47 per cent.—but the reason for this is that these companies have from time to time declared stock dividends and in other ways capitalized their growing surpluses. Thus Armour in 1916 raised its capital stock from twenty millions to one hundred millions without receiving a dollar more of cash. If Swift, Wilson, Cudahy, and Armour had followed the practice of Morris in not capitalizing their surpluses (accumulated from excessive profits), they too would now show an enormous rate of profit on their original capital."

"In cases where the government fixes a definite margin on profit above costs, as in the case of flour, there is a considerable incentive to a fictitious enhancement of costs through account juggling. This has added to the volume of unusual profits. Increase of cost showing on the producers' books can be accomplished in various ways. The item of depreciation can be padded. Officers' salaries can be increased. Interest on investment can be included in cost. New construction can be recorded as repairs. Fictitious valuations on raw material can be added, and inventories can be manipulated.

"The Federal Trade Commission has been vigilant and untiring in its exclusion of these practices. An instance of this practice was afforded by the Ismert-Hincke Milling Co., of Kansas City, Mo. This company padded its costs by heavily increasing all its officers' salaries and by manipulating the inventory value of flour bags on hand. As evidence of the length to which padding can be carried, it may be added that this company even included in its costs the gift of an automobile which it charged to advertising expenses. This case was heard of by the commission for the Food Administration. The commission recommended revocation of license and the recommendation was followed.

"Payment of extraordinary salaries and in some instances bonuses to executives of corporations have been found by the commission during its investigations."

"In reaching 52.3 per cent. as the amount of increase in the cost of living for the four years' period, the expenditures of 11,000 families were considered. Following is a table in which besides the 52.3 per cent. for all items entering into the family budget, the percentage for rent, clothing, fuel, and light, and sundries are given:

The figures examined prove that there was a fair similarity of increase in the different sections of the country. The advance in rent in the dwelling places of the average wage earner was put down at 15 per cent.

"A general summary is given of changes in the cost of living among industrial workers as presented by the Railroad Wage Commission for the period between December, 1915, and the end of April, [Pg 57] 1918, as follows:

"By the Brotherhood of Locomotive Firemen and Enginemen the advance in living costs between 1914 and 1917 was placed at 43 per cent. Conditions among ship-building workers on the Pacific coast, as arrived at by the United States Shipping Board, indicated that between June, 1916, and February, 1918, living costs had gone up 46 per cent. A table is given which shows relative increase in the cost of food as measured by wholesale and retail prices for the past six years."

"The situation in New York City at the end of the year 1863 is typical of the period. Eggs had then reached 25 cents per dozen, from 15 cents in 1861; cheese, 18 cents from 8 cents; potatoes, $2.25 from $1.50 per bushel, and for all the necessities of life there was an advance ranging from 60 to 75 and in some cases even 100 per cent. Wages, on the other hand, lagged behind; the blacksmith's increase was only from $1.75 to $2 per day, that of common laborers from $1 to $1.25, that of bricklayers from $1.25 to $2, and the average increase in all the trades was about 25 per cent., or less than one-half the increase of prices. The winter of 1863—64 and the ensuing months were accordingly a time of unusual industrial unrest, which increased in severity as the discrepancy between wages and prices continued. The dollar was slowly but surely diminishing in value, and labor engaged in a determined struggle to force wages up, capital to keep them down. The advantage lay with the employing classes, but labor in 1864 recovered much of the ground that had been lost in the two previous years, and the war closed with wages much nearer prices than a year earlier. It was generally agreed at the time that prices during the entire war period advanced approximately 100 per cent. and wages from 50 to 60 per cent."

"The increases for the different items are given as follows:

"'In combining the percentages of increase for the respective items, in order to determine the average increase for the budget as a [Pg 58] whole, food was taken as constituting 43 per cent. of the total family expenditure, rent 18 per cent., clothing 13 per cent., fuel and light 6 per cent., and sundries 20 per cent. Applying the Board's percentages of increase for the respective items to this distribution of the budget, the average increase is 52 per cent. The distribution of budget items just given is an average based on cost of living studies made by several United States Government bureaus and other agencies, covering in all 12,000 families.

"The proportions of these major items of expenditure can be varied within narrow limits, but no reasonable arrangement would cause a wide change in the increase in the total cost of living as given above. For instance, if, instead of this average distribution of the budget, food be allocated as much as 45 per cent., rent and clothing 15 per cent. each, fuel and light 5 per cent., and sundries 20 per cent., the indicated increase in the total cost of living, using the Board's percentages of increase for the respective items, would be 54 per cent."

"Information secured from retail stores in cities well distributed throughout the country indicates increases in prices of the most common articles of wearing apparel, ranging from 50.5 per cent. for women's dollar blouses up to 161 per cent. for men's overalls. Striking increases occurred in the prices of certain yard goods, where advances in cost over 1914 prices amounted, in a number of cases, to more than 100 per cent.

"Men's hosiery, selling for 15 cents in 1914, cost in June, 1918, usually not less than 25 cents, and women's hosiery, selling for 25 cents four years ago, brought 45 cents in June of this year. Knit underwear, the report finds, had increased nearly 100 per cent. Women's shoes of a standard grade increased 88.5 per cent.; men's 69 per cent. Women's kid gloves which in 1914 cost $1 averaged more than $2 in June, 1918.

"The report places the average rise in the total clothing budget since 1914 at 77 per cent. This increase compares with an increase of 51.33 per cent. between 1914 and 1917 for families in the ship building districts of Philadelphia and an increase of 54.21 per cent. among similar families in the ship building district of New York, as reported by the United States Bureau of Labor Statistics. The difference between these increases and the Board's figure of 77 per cent. is largely explained by the difference in the period of time covered; clothing prices have continued to advance since 1917. Further increases in the fall of 1918 were, moreover, clearly indicated by the statements of retail dealers."

"A recent compilation by the National City Bank shows this in practically all imports usually classed as luxuries. That the imports should be less than before the war was quite natural by reason of the fact that many articles of this character originated in European countries, some in countries with which we are now at war, and some with our Allies who are otherwise too busily employed.

"In art works, for example, the value of the imports of 1918 was only about $11,000,000 against $23,000,000 in 1917, and $35,000,000 in the fiscal year 1914. In automobiles the value in 1918 was about $50,000 against nearly $2,000,000 in 1913, and more than $2,000,000 in 1912, while the average value per machine imported in 1918 was less than one-half what it was before the war. Decorated china imported in 1918 was about $3,500,000 in value against practically $8,000,000 in 1914. Of cotton laces imported in 1918 the value was about $10,000,000 against $16,500,000 in 1917, and nearly $34,000,000 in 1914. Of silk laces the 1918 imports were valued at little more than one-half those of 1914. Of cotton plushes and velvets the quantity in 1918 was less than 1,000,000 yards against more than 3,000,000 in 1917, and practically 5,000,000 in 1914. Of ostrich feathers, in 1918 the imports were valued at nearly $1,000,000 against nearly $4,000,000 in 1914 and over $6,000,000 in 1913. In precious stones the total for 1918 was only about $32,000,000 against $47,000,000 in 1917 and $50,000,000 in 1913; while of pearls alone the value in 1918 was less than $2,000,000 against over $8,000,000 in 1917, and more than $10,000,000 in 1916.

"In articles of food usually classed as luxuries there was also a marked fall. Cheese imported in 1918 amounted to about 9,000,000 pounds against 15,000,000 in 1917, and 64,000,000 in 1914. Of currants the imports of 1918 were over 5,000,000 pounds against 25,000,000 in 1916 and 32,000,000 in 1914, and of dates only 6,000,000 pounds in 1918 [Pg 59] against 34,000,000 in 1914; while olives and olive oil showed totals in 1918 of about one-half those of the year before the war."

"What has been successful in Great Britain in economizing supplies has been a widespread appeal to the whole nation to limit its consumption of wheaten bread (4 pounds per week), meat (2½ pounds per week), and sugar (¾ of a pound per week) to a prescribed maximum per person in the household; and to make up the necessary subsistence by the use of substitutes, such as fish, other cereals than wheat, and other vegetables than potatoes, of which the crop throughout all Europe has largely failed. More efficacious still has been the absolute government monopoly of sugar, secured at the very beginning of the war, and the drastic restriction of the total quantity allowed to be issued from store, the aggregate reduction being thus infallibly secured, and the retailers being left to share what sugar they obtained among their customers. It has been found useful, too, to make the wheaten flour go farther by compelling all the millers to include both an increased proportion of bran and a certain proportion of other cereals. More drastic measures are near at hand."

"One of the most curious and interesting psychological facts of the war is the manner in which one man goes to the front and becomes a hero and a preux chevalier, while another, just like him in training and blood and outlook, stays at home and works for spoils, whether in wages or profits, resenting taxation, grumbling about his food, and seeming to think that this war for justice was invented to increase his wealth and comfort."

"There are many evidences that price fixing has come to lodge itself as an unwelcome factor in the program of the Food Administration. Price fixing came to be a fact even while avoided as a theory, and eventually it has become necessary to face it, if not to accept it, even as a theory. What are the evidences that price fixing is essentially involved in the program of the Food Administration? One piece of evidence lies in the fact that when once you have fixed the price of one commodity the condition is bound to be reflected in other commodities. In fixing the price of wheat Congress fixed as well, though not so explicitly, the price of corn, and hogs, and sugar beets. The determining and administering of these prices it left to the Food Administration.

"A further evidence that the Food Administration could not avoid the onus of price fixing lies in the reasons for which the Administration was brought into existence and the services it was created to perform. The Food Administration is a war agency. Its chief purpose is the feeding of warring nations, our own nation and the Allies. All its other activities, its conservation, its stabilization of trade processes, its encouragement of production, are tributary to the one purpose of segregating stocks of food for the effective prosecution of the war. This latter purpose, in fact, takes the Food Administration directly or indirectly into the market.... By Section 14 of the Lever Bill, which became the Food Control Law, the President is authorized from time to time to determine and fix a reasonable guaranteed price for wheat and this section itself fixed the price for the crop of 1918 at not less than $2 per bushel at the principal interior primary markets. Pursuant to this section the President has, by two separate decrees, set the price of 1917 wheat and of the 1918 crop at $2.20 per bushel. Section 11 of the law authorizes the President to purchase and store and sell wheat and flour, meal, beans, and potatoes. Manifestly any purchase so made by the government would in effect fix the price. Aside from these delegations of power no authority is given by the Food Control Law to fix prices. And yet a study of the operations of these provisions as well as a regard for the implications of other functions of the Food Administration carry the conviction that price fixing is a necessary and inescapable corollary of the effective prosecution of the Food Administration program."

"The comparative amounts of food stocks on hand June 1, 1919, as against June 1, 1918, in the case of many important foods, show that the stocks are considerably larger.

"On June 1, 1918, the United States stocks were in demand for feeding the armies of the Allies as well as the civilian population. The fact that stocks of many important foods were much larger on June 1, 1919, while prices were as high or higher, apparently, means that they are being withheld speculatively for a world demand which is not now here but which is expected when hunger-impelled strikes secure higher wages with which higher food prices can be paid.

"The statistics of stocks are from the latest and last issue of the Bureau of Markets 'Food Surveys,' June 27, 1919. We use the quantities reported by identical firms for 1918 and 1919. (Stocks held June 1, 1919, by other firms not reporting for June 1, 1918, increase the actual stocks from 5 or 10 per cent. up to 20 or 25 per cent. over the comparable stocks). The stocks are those in warehouses and cold storage houses and in hands of wholesale dealers. Retail stocks are not reported. The prices are wholesale prices, furnished by the Bureau of Labor Statistics, for the first Tuesday in June.

"The total of dry storage stocks, including those that increased and those that decreased is as follows, all items being reduced to pounds:

"That is the total dry storage stocks reported on June 1, 1919, were 124 per cent. of those on June 1, 1918.

"The total of cold storage items reported in pounds in June, 1919, and June, 1918 (omitting apples in barrels but covering eggs; frozen eggs; butter; cheese, frozen and cured beef; frozen lamb and mutton; [Pg 65] frozen, dry salt and pickled pork; lard; and frozen poultry), was as follows:

"That is, cold storage stocks this June are 100.1 per cent. of those last June.

"None of the above figures include army stores nor the army excess supply which is to be distributed by the War Department under resolution of the House of Representatives.

"The sum of dry storage and cold storage (except apples) for the two periods (combining the figures already given) was as follows:

"That is the total stocks reported on June 1, 1919, were 119 per cent. of those on June 1, 1918.

"This as noted does not include Army supplies.

"Grouping the commodities in four classes:

"(1) Those increasing in stocks and increasing in price.

"(2) Those increasing in stocks and decreasing in price.

"(3) Those decreasing in stocks and increasing in price.

"(4) Those decreasing in stocks and decreasing in price; we have the accompanying significant tables, which indicate that the 'law of supply and demand' is not working.

"During the past decade the sentiment of American labor has crystallized against resort to arms as a means of settlement of disputes between nations. War had come to be considered wasteful economically, socially, and morally. Labor felt that no national advantage gained through force of arms could offset the human life sacrificed, the burden of taxation levied upon successive generations to pay the cost of war, the standards of life set back or destroyed, which had to be rebuilt slowly and with infinite sacrifice. In short, war had come to be looked upon as morally wrong, entirely unnecessary, a calamity that could be avoided and must be avoided if the race was to progress. This feeling was shared to a greater or lesser extent by the workers of all civilized nations, and there was a universal feeling in world labor ranks prior to the outbreak of the European war that this sentiment, shared by many thoughtful people outside the ranks of the wage workers in all civilized nations, was strong enough to prevent any armed conflict which would involve any number of peoples. This sentiment was undoubtedly responsible for the lack of military preparedness, in the sense that Germany prepared, among the other major powers now engaged in the world conflict.

"When the war clouds broke in Europe, American labor was stunned. All its preconceived notions as to the inability of any great nation to wage war upon another nation because the working people would refuse either to fight or produce munitions and supplies of war were shattered when nation after nation quickly mobilized its armies and the organized labor movements of each country, without exception, quickly pledged their men and their resources to the support of their respective governments. But the fact that America itself might be drawn into the world conflict was still foreign to the mind of the American workman. While American labor grieved over the fate which had befallen its kind in Europe no sense of danger to this country was apparent. From the beginning of this Republic it had been our national policy to hold aloof from the quarrels of the Old World. The splendid isolation of thousands of miles of ocean protected us. We had no quarrel with Europe and we asked but to be let alone. We stood upon our rights to protect the people of continental America from invasion or aggression as enunciated by the Monroe Doctrine, and further than that we could not see that the European conflict embroiled us as a nation. Let Europe settle her own family quarrel. We were to remain the one great neutral nation of the earth. When the time came America, untrammeled by participation in the conflict, with no desire for American aggrandizement or [Pg 66] territorial expansion, would be the natural messenger of peace to war-worried Europe."

"Whereas, The entrance of the United States into the World War appears imminent; and

"Whereas, Other countries upon engaging in the conflict permitted a serious breakdown of protective labor regulations with the result, as shown by recent official investigations, of early and unmistakable loss of health, output, and national effectiveness; and

"Whereas, Our own experience has already demonstrated that accidents increase with speeding up and the employment of new workers unaccustomed to their tasks, that over fatigue defeats the object aimed at in lengthening working hours, and that new occupational poisoning has accompanied the recent development of munition manufacture; and

"Whereas, The full strength of our nation is needed as never before and we cannot afford to suffer loss of labor power through accidents, disease, industrial poisoning, and overfatigue; now, therefore, be it.

"Resolved, That the American Association for Labor Legislation, at this critical time, in order to promote the success of our country in war as well as in peace, would sound a warning against the shortsightedness and laxness at first exemplified abroad in these matters, and would urge all public-spirited citizens to coöperate in maintaining, for the protection of those who serve in this time of stress the industries of the nation (who as experience abroad has shown are quite as important to military success as the fighting forces), the following essential minimum requirements:

I. SAFETY

"1. Maintenance of all existing standards of safeguarding machinery and industrial processes for the prevention of accidents.

II. SANITATION

"1. Maintenance of all existing measures for the prevention of occupational diseases.

"2. Immediate agreement upon practicable methods for the prevention of special occupational poisonings incident to making and handling explosives.

III. HOURS

"1. Three-shift system in continuous industries.

"2. In non-continuous industries, maintenance of existing standard working day as basic.

"3. One day's rest in seven for all workers.

IV. WAGES

"1. Equal pay for equal work, without discrimination as to sex.

"2. Maintenance of existing wage rates for basic working day.

"3. Time and one-half for all hours beyond basic working day.

"4. Wage rates to be periodically revised to correspond with variations in the cost of living.

V. CHILD LABOR

"1. Maintenance of all existing special regulations regarding child labor, including minimum wages, maximum hours, prohibition of night work, prohibited employment, and employment certificates.

"2. Determination of specially hazardous employments to be forbidden to children under sixteen.

VI. WOMAN'S WORK

"1. Maintenance of existing special regulations regarding woman's work, including maximum hours, prohibition of night work, prohibited hazardous employments, and prohibited employment immediately before and after childbirth.

VII. SOCIAL INSURANCE

"1. Maintenance of existing standards of workmen's compensation for industrial accidents and diseases.

"2. Extension of workmen's compensation laws to embrace occupational diseases, especially those particularly incident to the manufacture and handling of explosives.

"3. Immediate investigation of the sickness problem among the workers to ascertain the advisability of establishing universal workmen's health insurance.

VIII. LABOR MARKET

"1. Extension of existing systems of public employment bureaus to aid in the intelligent distribution of labor throughout the country.

IX. ADMINISTRATION OF LABOR LAWS

"1. Increased appropriations for enlarged staffs of inspectors to enforce labor legislation.

"2. Representation of employees, employers, and the public on joint councils for coöperating elsewhere with the labor departments in drafting and enforcing necessary regulations to put the [Pg 67] foregoing principles into full effect."

"On this Board were representatives of the War, Navy, and Agriculture Departments, the Shipping Board and the Emergency Fleet Corporation, the War Industries Board, and the Food, Fuel, and Railroad Administrations. Assistant Director Nathan A. Smyth, of the United States Employment Service, was quoted in the New York Globe as saying in part:

"'Today the war industries of the country are short about 500,000 unskilled workers, and the coming requirements of war production necessitate finding between 2,000,000 and 3,000,000 more.

"'Similarly the demand for skilled workers in war industries is greater than the immediately available supply. Before long we will have to take every tool maker and die-sinker in non-war work and put him in war production.'

"The country was divided into thirteen Federal districts, by the regulation of labor for war industries, and each was in charge of a superintendent of the United States Employment Service, while the States within the several districts were in charge of a State director. The labor problem this measure was designed to remedy and control was pictured by Secretary of Labor Wilson, who was quoted in the New York Sun as saying in part:

"'The Government found itself in need of men, and on going out to get them found itself in competition with private industry, which was equally hard pressed. Men who had never drawn more than a common laborer's wages found themselves at a premium in the market, and began to ask and receive extortionate prices, and to rove from place to place seeking still higher prices.

"'Everywhere industry was hampered by what is known as the turnover, or the constant shifting of itinerant labor, in some cases the loss in efficiency running as high as 100 per cent. This is what is perhaps best described as the evil of the individualistic strike—the strike by the man, thousands of him, in different yards and factories all over the country, who is forever throwing down his tools and wandering away on the slightest rumor of higher wages elsewhere, who by his habit of roving never masters the details of any trade, and who in the mass accounts for a greater loss than all the organized strikes and walkouts in the land.'"

"It is easy to be harsh in one's judgment even in the case of the strikes that occur. Why do they strike at all while the war continues? Have they no capacity for self-sacrifice for the country? These questions will be asked by many people whenever war work anywhere is checked in the least degree by workmen dropping their tools.

"On the other hand, let us not be unjust to labor, for in the American Army in France labor is represented by multitudes of youth upon whose gallantry and steadiness all our hopes of victory depend. No class here at home gives 100 per cent. efficiency or commits itself to 100 per cent. of sacrifice in the winning of the war. Why demand it of the wage earners or the labor unions?

"Simply because of its organization and its machinery of leadership, however, labor enjoys an exceptional opportunity to contribute to the winning of the war. This is the first great war in history in which labor has been organized into an economic unit, and that is the [Pg 69] reason for some special war problems today which were never encountered by governments in previous wars. But there can be gains even more than losses to the national strength by reason of this organization, if the opportunity be accepted to promote labor's contribution. This is a task especially for the leadership of organized labor. It is certainly no exaggeration to say that in no way can labor be advantaged after the war so much as by the wholehearted acceptance of its opportunity for loyal service to the nation during the war. Let labor splendidly do its part in bringing victory and its future influence will expand beyond the dreams of its prophets....

"Labor and victory are inseparable; nay more, the one may command the other, and thus it may control the fate of the world."

"A close observation of the experience in foreign countries has shown us the vital necessity for a peace time prearrangement for conversion in all industries. Wars, as now waged, involve every human and material resource of a belligerent nation. Every factory and every man, woman, and child are affected. Every sinew of industry, of transportation, and of finance must be harnessed in the country's service. In England two years and a half ago there were three government arsenals. Today thousands of England's industrial plants are being operated as government factories for the production of war materials, and many other thousands of plants, still under private control, are centering their energies in this same direction.

"We have here in the United States vast resources in manufacturing and producing equipment, but they are unorganized and uneducated for the national service. Our observations of the European War have taught us that it is upon organized industry that we must base every plan of military defense. In the event of trouble with any one of the several first-class powers, between 80 and 90 per cent. of our industrial activity would of necessity be centered upon the making of supplies for the government. We have learned also that from one to two years of time and of conscientious effort are needed to permit any large manufacturing establishment to change over from its usual peace-time commercial line to the quantity production of war materials for which it has had no previous training."

"At this point it should be emphasized that the position of the United States is unique, so far as the allied nations are concerned. England, for instance, at the outbreak of the conflict could import vast quantities of munitions and supplies from other countries. England, therefore, had a fourth alternative, one denied to us because the struggle is now world-wide. All of the materials of war that we furnish must come from the current energy of our own people. We must ourselves produce these ships, munitions, food supplies, and stocks in the coming months. There is no one else to do it for us. In this connection I should like to emphasize with all the power at my command the argument that we cannot by bond issues shift the burdens of this war to future generations. The mere fact that all of us—as represented by the government—borrow from some of us—as represented by bond purchasers—does not change the other essential fact that we, the people within this country, must actually produce practically [Pg 70] practically all the war materials we are to have for use in the war.

"There is also much current discussion of the wonderful gains that may be made through increasing efficiency. It is argued that we should make our patriotic impulses the occasion for the universal introduction of scientific management. It of course goes without saying that we should do all that we possibly can to further the improvement of industrial methods; and doubtless something may be accomplished."

"When on March 4th of the present year the President appointed Bernard M. Baruch Chairman of the War Industries Board and defined his duties he did not, as certain press reports have implied, create an industrial dictator. His action did clear the way for Mr. Baruch's assumption of the duties of a director of industrial war strategy, of an industrial Chief of Staff—for the present position of the War Industries Board in the American Government is comparable in its relation to national industrial policy to nothing so much as the functions of the General Staff of the Army in its jurisdiction over military strategy. After a year of war the direction of industrial policy is placed in single hands, and a central planning board is established for dealing not only with the problems of production and purchase but with the whole attitude of the government toward the mobilization of business resources for the prosecution of the war. Leadership has been focused and an administrative channel opened for the inauguration of a studied and inferentially constructive industrial policy.

"From the present trend of events the War Industries Board promises to become the sole directing agency between the government and industry. Backed by the power of the President to commandeer, to withhold fuel, and in other ways to force the halting into line, it can mold the country's industrial system almost as it will—whether in organizing the nation for war or in directing the lines along which it shall return to normal conditions when peace comes. In a system of government such as ours, where the responsibility for directing the war rests almost exclusively in the hands of the President, and where his power ultimately becomes almost absolute, the Board has been shaped into a very potent instrument.

"Yet powerful as it may become, subject only to the jurisdiction of the President, it is well to remember that in a comprehensive national war plan it cannot stand alone. Its policies must be subject to the administration's general strategy in the war—for instance, to the amount of munitions in comparison with the number of men or the amount of food that it wishes to send abroad at any given time. The munitions program and the conversion of industry to war purposes must be governed by the ultimate end in view. In addition, one of the great factors in production—the labor factor—is being administered by another government agency, and it is obvious that priority in the labor supply must go hand in hand with priority in materials."

"Every man, in the draft age at least, must work or fight.

"This is not alone a war of military maneuvers. It is a deadly contest of industries and mechanics. Germany must not be thought of as merely possessing an army; we must think of her as being an army—an army in which every factory and loom in the Empire is a recognized part in a complete machine running night and day at terrific speed. We must make ourselves the same sort of effective machine.

"We must make vast withdrawals for the Army and immediately close up the ranks of industry behind the gap with an accelerating production of every useful thing in necessary measure. How is this to be done? The answer is plain. The first step toward the solution of the difficulty is to prohibit engagement by able-bodied men in the field of [Pg 73] hurtful employment, idleness, or ineffectual employment, and thus induce and persuade the vast wasted excess into useful fields.

"One of the unanswerable criticisms of the draft has been that it takes men from the farms and from all useful employments and marches them past crowds of idlers and loafers away to the Army. The remedy is simple—to couple the industrial basis with other grounds for exemption and to require that any man pleading exemption on any ground shall show that he is contributing effectively to the industrial welfare of the nation."

"When the whole industry of a nation is mobilized behind the fighting line, it is not merely finished munitions that must be given priority in transportation, but also the materials and fuel for further munitions production. The food supply of the industrial population, as well as that of the army, has a claim to priority. So also have clothing supplies, lumber for housing, and whatever else is essential to working efficiency. In production it would be impossible to fix definite limits upon the application of the priority principle. We can not much longer permit the free flotation of the securities of foreign enterprises, nor even of the less essential domestic enterprises, so long as national loans or issues designed to finance railways or industrial enterprises of prime necessity are to be floated. Modern warfare, in involving the whole national life, has made inevitable a control of business practically coextensive with the economic system.

"The application of the priority principle to transportation and production is quite in accord with plain common sense. It is none the less revolutionary in its social economic implications. What it means is that necessities shall have right of way. If we have excess productive capacity, the unessentials and luxuries may be provided, but not otherwise. And necessities are definable in terms that take account only of physical requirements. There is no room in the definition for class distinction. A new country house may seem a matter of necessity to the man of fortune, but he will persuade no priority board to permit shipment of building materials while cars are needed for coal or wheat. Nor will he persuade them to let him have lumber that could be used for ships or workingmen's camps, or labor that could be employed to advantage in production for more clearly national and democratic needs."

"Under the plan that has been worked out for bringing the manufacturing resources of the country into more effective coöperation with the government, the country is to be divided into twenty industrial regions, with the following cities as centers: Boston, Bridgeport, New York, Philadelphia, Pittsburgh, Rochester, Cleveland, Detroit, Chicago, Cincinnati, Baltimore, Atlanta, Birmingham, Kansas City, St. Louis, Dallas, Milwaukee, St. Paul, Seattle, San Francisco. The following plan for effecting the organization is suggested by the officials in charge:

1. "Organize through Chambers of Commerce and other business associations Industrial Committees with the principal industrial center as headquarters and such subdivisions as are recommended by the business association of each district.
2. "Develop such organization in various classes of industry as well as in area for greatest convenience, to get information of all classes of products in and between regions.
3. "Having established such region and sub-region, through the coöperation of the best business men in each district have a survey of the industries recorded in the hands of the section in Washington of the War Industries Board for information to the various procurement sections of the government.
4. "Each region may have in Washington a representative who through the Resources and Conversion Section of the War Industries Board may keep in direct contact with his region and be available to the governmental procurement divisions or the War Industries Board for prompt action in giving data from his region.

"The detailed form of organization suggested for each region (subject, of course, to modifications as desired to meet the needs of any region) is known as the Cleveland Plan, which has been for some time in operation. Under this plan each region is divided into eight sub-regions, an important industrial city in each sub-region being designated as a center. Each sub-region has a local War Industries Commission which coördinates all industry within its territory. Within each sub-region manufacturing is divided into the following classes: castings, forgings and stampings; machinery and machine products; rubber products; clay products, chemicals, oils, and paints; textiles and clothing, wood and leather; engineering; automotive. Other classifications may of course be added in important lines of industry."

"The Fuel Administration has therefore arranged the following list of preferred industries:

"Wheat flour, one of the prime necessities, 'was at no time during the Civil War above $7.35 per barrel, which is somewhat less than four cents per pound,' while at the present time it is seven cents per pound, 'or close to 100 per cent. higher than the top notch of the '60s.' Lard has already advanced about 100 per cent., while its greatest advance during the Civil War was 75 per cent.

"'The present-day advance in the price of clothing in general has not been proportionate with the advance of foodstuffs, though it has been considerable, especially as to the cheaper grades. Cotton shirts that sold for 48 cents in 1913 are now bringing 90 cents to $1. Cheap hosiery has also about doubled in value. Suits that formerly sold for $15 are now bringing $17, which is about 10 per cent. advance. Cotton goods during the Civil War were exceptionally high, owing to the difficulty of procuring the staple. After the stocks on hand at the beginning of the war were exhausted, New England mills shut down because of inability to get supplies. In 1864 raw cotton ruled at 72 cents per pound, while at one time it touched $1.90. Cotton goods of all kinds were therefore extraordinarily high.'

"The public spirit manifested at present is much more admirable than that displayed in the '60s, as shown by the following first-hand description of life in those days, as compared with what we see on every hand today. Said the New York Independent of June 25, 1864:

"'Who at the North would ever think of war if he had not a friend in the army or did not read the newspapers? Go into Broadway and we will show you what is meant by the word "extravagance." Ask Stewart about the demand for camel's-hair shawls and he will say "monstrous." Ask Tiffany what kind of diamonds and pearls are called for. He will answer "the prodigious, as near hen's-egg size as possible, price no object." What kind of carpetings are now wanted? None but "extra." Brussels and velvets are now used from basement to garret. Ingrains and three-plys won't do at all.

"'Call a moment at a carriage repository. In reply to your first question you will be told, "Never such a demand before, sir." And as for horses, the medium-priced $500 kind are all out of the market. A good pair of fast ones, "all right," will go for $1,000 sooner than a basket of strawberries will sell for four cents. Those a "little extra" will bring $1,500 to $2,000, while the "superb" 2.40 sort will bring any price among the high numbers.'"

"Notwithstanding the great difficulties, I think it is probable that our production is quite as great as before. Measured in money, and [Pg 78] owing to the rise of prices, it would probably be much greater. This is due to the fact that the whole population, practically speaking, has been working, and working intensely. Millions of women who have not worked before are working now. No one is idle. Every acre of land or garden that can be used is being used. Methods of production have been speeded up, labor-saving machinery in industry and agriculture multiplied. In every direction the wheels have been turning faster.

"But, perhaps more important still, the character of our production has entirely changed—almost our entire industry is producing for war purposes. Ordinary civil needs are no longer considered. We have of course to produce what is essential for life, but beyond that all our energies are directed to war production. The government has of necessity compelled the whole of British industry to produce for war and to produce what it is told to produce, because in no other way could our own armies and our Allies have been supplied. No man is free to do what he likes with his labor and capital, with his ships, or with his steel. He has to do what he is told to do. By this means production for war purposes has enormously increased, and civil consumption has enormously decreased, because the goods for the civil population were no longer produced and one cannot buy what isn't there. Instead of gramophones, the gramophone company makes fuses; instead of cloth for ordinary clothes, the woolen factory makes khaki; instead of motor cars, the motor-car maker makes shells.

BRITISH INDUSTRY ON WAR BASIS.

"Apart from selling our liquid capital assets in return for foreign goods, and apart from borrowing from foreign countries for the same purpose, our power to provide our own army and navy with all they want and have any surplus over for our Allies has indeed depended entirely on our extraordinary efforts in production—not in normal production, but in war production—and also on the extent to which we have been able to reduce our civil consumption of all kinds. I put production first because, while economy in consumption is exceedingly important, increased productive capacity devoted to war material, in my opinion, is still more important. Our increased productivity has, as I say, been devoted entirely to war requirements. We have had to turn over our whole industry from a peace to a war basis. We have both voluntarily and compulsorily cut off the production of goods which are unnecessary for war purposes. Many trades have been actually shut down and the labor taken from them and handed over to war industries. Labor itself has been subjected to restrictions which would have been wholly impossible before the war. Labor may not leave its employment without government leave; salaries and wages may not be increased without government approval. Measures for the control of industry which were unheard of and, in fact, absolutely impossible before the war have been imposed upon all industry.

"Fixed prices had been placed on the most important materials; the government now has the absolute control of the use of steel, copper, lead, wool, leather, and other materials for which the war demand is insatiable, and also of all materials manufactured therefrom. No use may be made of most of these materials for any purpose whatever without a certificate being first obtained, no buildings of any kind may be erected without leave of the Ministry of Munitions. The whole of industry may now be said to be directed according to the requirements of the government, its regulation is an enormous task. In the head office of the Ministry of Munitions alone there are more than 10,000 people.

"On the 20th of December, 1915, Mr. Lloyd George, in a speech delivered in the House of Commons, summarized the results of the first six months of his tenure of office. We will take a few points.

"Orders placed before the formation of the department were delivered with an increase of 16 per cent. on previous deliveries. The number of new orders placed increased by 80 per cent.

"The state regulation of the metal market resulted in a saving of from 15 to 20 million pounds sterling.

"The present output of shells for a single week is three times as great as the entire output for May, 1915, which means that the rate of production is twelve times as great.

"The enormous quantity of shells consumed during the offensive of September, 1915, was made good in a month. The time will soon come when a week will suffice.

"The output of machine guns is five times as great; that of hand grenades is increased forty fold.

"The production of heavy artillery has been accelerated, and the heaviest guns of the early days of the war are now among the lightest.

"An explosive factory in the south of England, which on October 15, 1915, started to fill bombs at the rate of 500 a week with a staff of 60, was in March, 1916, turning out 15,000 a week with a staff of 250.

"An entirely new factory which started work at the end of October, 1915, with one filling shed and six girl fillers and an output of 270 a week, was in March, 1916, employing 175 girls and handling 15,000 bombs a week.

"The Ministry of Munitions has built, or is building, housing accommodation for 60,000 workers, and canteens and mess rooms in munition works now give accommodation for 500,000 workers a day.

"All the workmen were assigned either to the works already in existence—which in many cases were short of hands and unable for this reason to fulfill their contracts—or else they were allotted to the new factories.

"But in view of influence wielded by the labor unions, various provisions were inserted in the Munitions Act. They related to the settlement of labor disputes and to the prohibition of strikes and lockouts the grounds for which had not been submitted to the Board of Trade.

"To obviate such disputes, which were generally called forth by the excessive profits accruing to the employers and the demands of the wage-earners, the system of 'controlled establishments' was instituted. Every establishment engaged on munition work was placed, so far as the regulation of profits and salaries was concerned, under direct government control. Any modification in the rate of wages had to be submitted to the Ministry of Munitions, which had power to refer the question to an arbitration board specially set up by the act.

"To complete this rapid survey it must be added that a department was created by the Ministry of Munitions, under the control of an undersecretary, whose special business it was to examine war inventions."

"The first was to take men out of the army and send them to industrial work. This was done with great caution during the winter of [Pg 80] 1914—15. The proportion of the men thus taken increased more and more during the year 1915 and reached its fullest extent in 1916. The specialists in steel work were the first to be taken out of the trenches; these were far from being sufficient, and common workmen were added to them. Then chemists and workmen trained in the manufacture of explosives were recalled; electric engineers were sent back to the hydro-electric plants; miners above thirty-five years of age who belonged to the territorial regiments were sent to the mines; paper-makers and cardboard-makers who could be employed in the preparation of explosives were put to work; cabinet-makers were put to manufacturing rifle stocks; wood-cutters were brought back from the front in order to see that there was no waste in providing the enormous amount of wood needed in the army. All this recalling of mobilized men was effected at first according to the need, and without method. By degrees it became clear that the output would be greater if these soldier-workmen were assigned to the plants or factories where they were working before the war. As it would have been unwise to take too large a number of men out of the fighting units, hundreds of thousands were taken from the auxiliary troops of the interior, men who through lack of physical ability to fight were employed in sedentary tasks. Thus in 1915 and 1916 auxiliaries were swept away to become workmen, foremen, secretaries, bookkeepers, accountants, etc. Finally the administration decided to draw from the oldest classes of men still under the military law. These were called in 1915 and sent to the factories—men born in 1868, either bachelors or married men without children.

"Another draft was made on the civil population. To make up for the absence of male help, women were called upon for a great number of occupations. Along with the women the refugees were to do their part. After a rather long period of unsettled life these refugees took again to regular occupations, some working in the fields as agricultural hands, others in factories. Today it is difficult to find unemployed people among them.

"The alien population for France is also large, considerable numbers of Italians, Spaniards, and Portuguese being employed in the southeastern region. A newer element was provided by natives from French colonies, namely, Morocco and Algeria. Since the war started large numbers of Greeks and Armenians had been imported into France; and during the last two years somethink something like 200,000 Chinamen had been brought to France for unskilled work. The last resource was the enemy itself. There were in France more than 250,000 German prisoners engaged in various work and receiving a salary for it."

"The new War Office represents Germany as a colossal firm which includes all production of every kind and is indifferent to the kind of coat, civil or military, which its employes wear. The new measures are intended to mobilize all effective labor, whereas up to the present we have only mobilized the army and industry. The whole war is becoming more and more a question of labor, and in order to give the army a firm basis for its operations the domestic army must also be mobilized. All the labor, women's as well as men's, must be extracted from the population, so far as possible voluntarily. But if voluntary enlistment does not suffice we shall not be able to avoid the introduction of compulsion."

"German locomotives are running to the Taurus in Asia Minor; we are operating practically all the Serbian railways with German rolling stock; we have thousands of cars in Transylvania and Rumania, to say nothing of other occupied territories. After the transportation problem, we are taking measures to double the production of the auxiliary raw materials and semi-finished products. As one example, we are doubling our efforts for the manufacture of nitres from the nitrogen of the air. Not only of the basic raw materials, coal and iron, but of auxiliary raw materials we have no lack.

"The brains of our chemists and technicians are supplying the missing imports, and will continue to do so. Only when we have accomplished all this will we proceed to the last step of doubling the production of shells and cannon. Such a war is not to be won by looking ahead from month to month, but only by thinking of the distant future. After we have doubled the pyramid, we shall proceed to treble it.

"By spring we shall be going full steam ahead. After that our production will increase from month to month; and we have the labor and raw materials for keeping up the pace indefinitely.

"The male working forces available between the ages of seventeen and sixty, as provided by the Auxiliary Service Law, will cover our requirements into the distant future, but ultimately, aside from the children, aged and sick, every man and woman will be enlisted for home defense, if necessary. The home army will be the whole nation.

"What we are engaging on is not alone the progressive mobilization of all the nation's physical strength and material rsesources resources, but the mobilization of the nation's brains. An army corps of professors, scientists, chemists, engineers, technicians, and other specialists is already working with the Kriegstaat. Our idea is to be eminently scientific and practical—no theorizing. We are working to show results.

"We are coöperating closely with the war industries of Turkey, Bulgaria, and Austria. It means doubling and trebling their [Pg 82] ammunition supply, too.

"The military successes achieved in Rumania, which synchronize with the birth of patriotic auxiliary service, are an advantage that cannot be overestimated. The Danube means everything to us. Last year we had to beg Rumania for her oil and grain and pay our good money for it too. Now we don't need to beg costly favors of Rumania.

"Lloyd George does not scare us. We have, however, not time for busying ourselves with politics; we have more important things to do—supplying Hindenburg with the means of victory."

"So these organizations entered upon a campaign of 'saving' and 'production.' They saved the hides that were being thrown away, collected the discarded boots at the front and repaired them, and took over the task of supplying the underwear for the whole army—mobilizing the village coöperative societies to fill the large orders. And they did much to organize the refugees from the invaded districts for productive work. In a word, these men saw that the war was going to extend into years, and they realized that only foresight and organization of productive resources would make it possible for Russia to withstand economically the burdens of a protracted struggle.

"The attitude of the governmental authorities (the bureaucratic departments) toward the work of these non-bureaucratic, but public, institutions (the Unions of the Municipal and Provincial Councils) was one of suspicion and antagonism, and difficulties were put in their way with the deliberate intent to block their activities. The institutions were suspected of pursuing political aims. Only when it became clear that the ruling group in the bureaucracy was consciously allowing the country to drift into a state of anarchy in order to bring Russia out of the war did these leaders venture to risk revolutionary methods of action.

"The president of the All-Russian Union of Provincial Councils, the Zemstvo, was Prince Lvoff, the first Prime Minister of the new Russia after the revolution of March, 1917. In the monthly reports of the work of the All-Russian Union of Zemstva, Prince Lvoff, repeatedly issued warnings of the impending economic collapse of the country. But neither he nor Kerensky was able to liquidate the heritage received from the old régime in time to stave off the series of economic and financial crises of which the Bolsheviki availed themselves."

"The old régime has seemingly done everything deliberately to destroy and demoralize the trade-industrial apparatus it took years to build up. As a result the usual course of the country's economic life was stopped, and at the same time, through the peculiarly enforced system of regulations, a wide field for all sorts of abuses and speculations was opened. We must frankly acknowledge that from these abuses and speculations a system of oppression grew up which has called forth fully merited reproach, distrust, and hostile feelings towards the representatives of the trade-industrial class.

"At the same time there can be no doubt but that under present circumstances, lacking most of the necessaries of existence, with the factories and mills forced to cut down their production due to lack of raw material and fuel, with the demoralization of the transportation system, and being compelled, despite all these obstacles, to meet the numerous requirements at the front—there is no other way out but government control of private industrial and mercantile enterprises, and the coöperation of the democratic masses of the population in the matter of regulating the trade-industrial life of the country. In addition to fair distribution it should be the task of all the committees, which are to become parts of the Ministry, also to regulate the prices.

"Closely connected with this question there is another one which I personally consider of tremendous importance. I have in mind the question of limiting the profits of all mercantile and industrial establishments. Undoubtedly a properly worked-out solution of this question would have the tendency to check the unwarranted growth of prices that would appease the masses. The normal effect of a decree limiting profits is of tremendous importance, not only in that it would soften the feeling of ill-will towards the trade-industrial class, but also because it would afford the government a new, convincing proof that the commercial and industrial class is ready to make all possible sacrifices for the common good, a proof which would paralyze the voicing of any new demands on the part of the masses.

"Now, these are the main ideas, the fundamental points of view which the trade-industrial class should consider as a starting point in its efforts to win the confidence of the population and to safeguard that important position which it ought to occupy in the life of the country.

"The situation is becoming all the more difficult because of the ever-increasing famine due to the shortage of means of production as well as of all the necessaries of life; this famine will be felt very acutely, not only on account of the lack of these goods, but also because of the overabundance of paper money."

"It has been presupposed that the war will end decisively before the armies engaged are reduced to inappreciable numbers of able-bodied men. It has been presupposed that the return of peace will find British industry based upon the old system of private ownership of capital and haphazard production in response to the effective demand of individuals. It presupposes no change of heart on the part of employers, government or trade unions. But, in view of possible, if not probable dangers, the most urgent stress should be laid upon what is an undoubted palliative, if not a fundamental cure for such prospective economic ills; that is, the strenuous promotion and public encouragement of trade unionism among women. What women, by reason of underlying social and economic causes, are not able to do for themselves, the moral and financial support of the public must do for them, and such support should be regarded not merely as an interference in the old struggle between capital [Pg 84] and labor, but as an attempt to ward off a national danger.

"The root of the evil is the old incompatibility between male and female labor in the skilled and semi-skilled grades of industry. That incompatibility has arisen partly from fallacious theorizing of the 'wages-fund' type, but largely from the fact that the industrial woman, in spite of the uphill and often successful trade union work which has been accomplished, mainly from above, during the past forty years, is regarded by her male colleague as nature's blackleg. And in spite of the short-sighted policy of hostility to women members displayed by a few trade unions, it is fairly clear that it is not the woman trade unionist that the man is afraid of, but the woman blackleg; not the well-paid woman, but the sweated woman. Now there are three ways of dealing with a blackleg: he may be elbowed out of the industrial world altogether; he may be penned up, as women have been penned up, in the lowest and most undesirable grades; or he may be turned into a trade unionist. As far as women are concerned, the first two are closed by national expediency, humanity and justice. The third lies open; and in view of the peculiar economic rocks which loom vaguely ahead of us, it may be said without exaggeration that one woman trade-union leader is worth a hundred welfare workers."

"The number of women employed on the railroads of the United States had been 60,000 at the beginning of the year, and reached approximately 100,000 by October 1st. The greatest number are in the clerical and semi-clerical occupations. Of the 81,000 employed July 1st, 61,000 were working as clerks of all kinds, stenographers, accountants, comptometer operators, etc. In this class appear women ticket sellers and bureau of information clerks, who served the public for the first time; they were found well fitted for this type of work, and special instruction agencies were opened by the [Pg 85] government in various states to train them in the intricacies of tariffs and routes.

"The next largest group of 4,000, it is not surprising to learn, appears in women's time-honored occupation of cleaning. Women have long been cleaning stations, offices, etc., but now they are employed in the yards to clean coaches and Pullmans, both inside and outside; and in the roundhouses, doing the heavier work of wiping locomotives; 800 were so employed. In personal service, including work in dining rooms and kitchens, as matrons and janitresses, 2,000 were found. In the railroad shops, women entered the greatest variety of new occupations. Three thousand were employed, ranging at one end of the scale from common laborers, at the other end of the scale of skilled mechanics earning the machinists' or carmen's rate of pay.

"Many women were employed a year and a half ago, before the railroads were put under Federal control, because they could be obtained for less pay than men. They were, for instance, engaged as common laborers at 20¢. to 22¢. an hour, at a time when men were receiving 28¢. to 30¢. for the same class of labor. With rare exceptions where adjustments are still necessary, the wage orders have absolutely stopped this undercutting of men's wages by women.

"Soon after women began to be largely employed it became apparent that some of their work was neither profitable nor appropriate. The use of women as section laborers, for instance, in a gang of men working along the tracks at a distance from any house or station was judged to be unsuitable. This was also found to be the case where women were employed as truckers in depots and warehouses on account of the extraordinary physical exertion required of them. In view of the wages now paid it was believed possible to secure men and to transfer the women to some class of work suitable to their strength and with proper regard to their health. The railroads were accordingly asked to discontinue their employment in both these positions.

"Comparisons with other industries can probably best be made in respect to the women employed in the shops. They are operating a number of machines such as bolt-threaders, nut-tappers, drill presses, for which no great skill or experience is needed, and which is classed as 'helpers' work,' and rated at the specified pay of 45¢. an hour. They are also employed for highly skilled work. A number have succeeded as electric welders and oxy-acetylene-burners. They have been found well adapted for work on the air-brake equipment and are cleaning, testing, and making minor repairs on triple valves. In some places they are now working in a separate group on the lighter-weight valves, weighing not more than forty pounds. After a period of training they are giving satisfaction without the help of any man operator.

"A remarkably fine type of woman is now to be seen in many of the shops, who enjoys the greater freedom of her work as compared with factory routine, although in many cases the discomfort, the dirt, and exposure are far greater. It remains to be seen whether the women will remain in these jobs to any great extent. The railroads will, of course, recognize the seniority rights of all their employees returning from military service, but as far as the new employees are concerned, women will have the same privileges as other new employees in retaining their positions or being assigned to other jobs. There can be no doubt that in the clerical and semi-clerical positions they have proved their worth, and will to a great extent be retained."

"They are a war factor. His Britannic Majesty's Chinese Labor Corps now behind the battle line in France is almost as large as the total Chinese population in the United States. The French Republic has recruited a force of similar dimensions, bringing Chinese manpower overseas for non-combatant and industrial work. Even teeming Russia, before its tragic collapse, had drawn upon thousands of Chinese for work as far west as the Ural mines. In 1914 there were but 7,000 in this rich country, but a fourfold increase brought the total to 30,000. All told, 200,000 Chinese are 'carrying on' in the war zone, laboring [Pg 86] behind the lines, in munition works and factories, manning ships.

"Though the pages of no White Book say it, the break between the Chinese Republic and Germany was precipitated largely by the Allied drafting of China's manpower. Even in its beginnings, the French and British mobilization of Chinese labor caused a diplomatic battle royal."

"Our project comprises nearly 1,000 miles of railroad construction, but not continuous. France already controls on her lines such facilities that she has been able to support her great military burden and not break. Their local development in the way of sidings and so forth is chiefly in the big towns, and small engines and cars are used. To meet our larger needs, it is necessary to establish terminals outside the towns for the change of engines and for our great storage warehouses. Our great railway construction in France, apart from a few cut-off lines, is in the way of storage yards. We have practically the use of two trunk-line tracks. The French run over them, too, for there is a tremendous civil population to be supported. The French are necessarily supreme, and we simply have the right to run over their railroads subject to their rules.

"The French have an arrangement with their railroads by which a piece of track that is put in for military purposes is paid for by the French Government. If the civil requirements of the railroad grow up to the use of that particular piece of track, then the government is reimbursed by the railroad. We are in the same position toward these railroads as the French Government. At the end of the war the improvements which we make will be surveyed. If they are useful to the railroads our expenditures will be reimbursed. If not, we are at liberty to take up the stuff and clear the ground. Two days ago a semi-official statement was made to the Paris press, reading:

"'Americans, in full agreement with the French authorities, are making every effort to carry out, by their own means, the debarkation of their troops in ports, their provisioning as well as their transportation over our railroads. Sidings, large stations, and establishments of every kind are being constructed by the most modern and expeditious processes. One of the warehouses has an area of about 4,000 acres, and it has a cold-storage plant capable of holding several thousand tons of meat. Aviation training camps and repair shops, considerable in size and with the most improved machinery, are being erected on every side.'"

"The territories which have been under German occupation for four years were the wealthiest part of France. Their area did not exceed six per cent. of the whole country. They paid, however, 25 per cent. of the sum total of our taxes. These territories are now in a state of ruin even worse than we had anticipated. Of cities and villages nothing remains but ruins; 350,000 homes have been destroyed. To build them up again—I am referring to the building proper, without the furnishings—600 million days of work will be necessary, involving, together with building material, an outlay of 10,000,000,000 francs. As regards personal property of every description either destroyed by battle or stolen by the Germans, there stands an additional loss of at least 4,000,000,000 francs. This valuation of lost personal property does not include—as definite figures are lacking as yet—the countless war contributions and fines by the enemy, amounting also to billions. I need hardly say that, in those wealthy lands, no agricultural resources are left. The losses in horses and in cattle, bovine and ovine species, hogs, goats, amount to 1,510,000 head—in agricultural equipment to 454,000 machines or carts—the two items worth together 6,000,000,000 francs.

"As regards industries, the disaster is even more complete. Those districts occupied by the Germans, and whose machinery has been methodically destroyed or taken away by the enemy, were, industrially speaking, the very heart of France, the very backbone of our [Pg 87] production, as shown in the following startling figures: In 1913 the wool output of our invaded regions amounted to 94 per cent. of the total. French production and corresponding figures were: For flax from the spinning mills, 90 per cent.; iron ore, 90 per cent.; pig iron, 83 per cent.; steel, 70 per cent.; sugar, 70 per cent.; cotton, 60 per cent.; coal, 55 per cent.; electric power, 45 per cent. Of all that—plants, machinery, mines—nothing is left. Everything has been carried away or destroyed by the enemy. So complete is the destruction that, in the case of our great coal mines in the north, two years of work will be needed before a single ton of coal can be extracted and ten years before the output is brought back to the figures of 1913.

"All that must be rebuilt, and to carry out that kind of reconstruction only, there will be a need of over 2,000,000 tons of pig iron, nearly 4,000,000 tons of steel—not to mention the replenishing of stocks and of raw materials which must of necessity be supplied to the plants during the first year of resumed activity. If we take into account these different items, we reach as regards industrial needs a total of 25,000,000,000 francs. To resurrect these regions, to reconstruct these factories, raw materials are not now sufficient; we need means of transportation. The enemy has destroyed our railroad tracks, our railroad equipment, and our rolling stock, which, in the first month of the war, in 1914, reduced by 50,000 cars, has undergone the wear and tear of fifty months of war.

"Our merchant fleet, on the other hand, has lost more than a million tons through submarine warfare. Our shipyards during the last four years have not built any ships. For they have produced for us and for our Allies cannon, ammunition, and tanks. Here, again, for this item alone of means of transportation we must figure on an expense of 2,500,000,000 francs. This makes, if I sum up these different items, a need of raw material which represents in cost, at the present rate of prices in France, not less than 50,000,000,000 francs."

Resolved, That Commissioner Willard be requested to call upon the railroads to organize their business so as to lead to the greatest expedition in the movement of freight.

"From the standpoint of the Government three principal reasons are seen for the taking over of the lines:

"The policy of the United States Railroad Administration has been informed and shaped by a desire to accomplish the following purposes, which are named in what I conceive to be the order of their importance:

"First, the winning of the war, which includes the prompt movement of the men and the material that the Government requires. To this everything else must be subordinated.

"Second, the service of the public, which is the purpose for which the railways were built and given the privileges accorded them. This implies the maintenance and improvement of the railroad properties so that adequate transportation facilities will be provided at the lowest cost, the object of the Government being to furnish service rather than to make money.

"Third, the promotion of a spirit of sympathy and a better understanding between the administration of the railways and their two million employees, as well as their one hundred million patrons, which latter class includes every individual in the nation, since transportation has become a prime and universal necessity of [Pg 89] civilized existence.

"Fourth, the application of sound economies, including:

1. The elimination of superfluous expenditures.
2. The payment of a fair and living wage for services rendered and a just and prompt compensation for injuries received.
3. The purchase of material and equipment at the lowest prices consistent with a reasonable, but not an excessive, profit to the producer.
4. The adoption of standardized equipment and the introduction of approved devices that will save life and labor.
5. The routing of freight and passenger traffic with due regard to the fact that a straight line is the shortest distance between two points.
6. The intensive employment of all equipment and a careful record and scientific study of the results obtained, with a view to determining the comparative efficiency secured.

"The development of this policy will, of course, require time. The task to which the Railroad Administration has addressed itself is an immense one. It is as yet too early to judge of the results obtained, but I believe that great progress has been made toward the goal of our ideals."

"Here was, and is, an agency with daily influence on the life of every member of the community, performing a service essential to the nation's life. Yet it has few friends among the people at large; more now than formerly, however, due to the number of those whose pity has been excited at the railroads' plight. The first of the railroads' plagues was the type of management—manipulation, it would better be called—which regarded the properties not as carriers but as media for stock-jobbing operations. Consolidations with the addition of water, and reconsolidations, with still more water, were the order of the day; while those operating the properties danced riotously over their territories waving insolently the flag of 'The Public Be Damned.' Rebates, car-withholding tyrannies, all manner of schemes were worked to aid the favored few, while the purchasing methods honeycombed the organization with rottenness.

"Then came the day for the people to have their say, and one national and forty-eight State commissions began to bedevil the carriers. What the stock-jobbers and the grafters had failed to do the people in their vengeance helped to complete. The public at large, which under intelligent management of the properties would have been the railroads' best friend, had been alienated. As a result we have had the drift into bankruptcy which has been railroad history during the past decade. Instances need not be cited. Each one can supply them from his own neighborhood. Probably the mention of the New Haven will furnish sufficient nausea to carry the right impression.

"And that débâcle we attribute to the banking type of mind, that type of mind that places personal profit ahead of all other considerations. The engineering type of mind, we hold, would have analyzed the purpose of the railroads—would have seen that service to the public at large, and not to any private interest, was the prime object, would have erected that as the railroads' ideal and builded a machine for its attainment."

"Under the terms on which the railways were taken over for the period of the war the Government [Pg 90] guaranteed to the proprietors of the railways that their net revenue should be the same as in 1913, except when the net receipts for the first half of 1914 were less than the first half of 1913; in that case the sum payable was to be reduced in the same proportion. The entire Government traffic—men and freight—was to be carried without any direct charge being made for it or any accounts rendered. This plan was considered satisfactory by both sides. In the majority of cases there had been a reduction of earnings in the first half of 1914 over the previous half-year, and companies were contemplating a still further reduction. The interests of their shareholders being assured, they were able to devote themselves to the work of economical and efficient distribution, quite apart from the usual financial problems. The one weak side of this agreement was that it made no allowance to cover increased interest payments on account of new investments and new capital expenditure since the war began. This point was afterward met by an arrangement that the government should pay interest at 4 per cent. on all new capital invested by the railways since August 4, 1914, on new lines, branches, terminals, equipment, or other facilities put into use since January 1, 1913.

"The conclusion of the financial agreement between the Government and the companies automatically brought about a great economy in the system of railway accounts. The reports of the companies were cut down to a bare minimum, and in many cases even these reduced reports were not sent to the shareholders unless they specially asked for them."

"The preparation of railways for war uses is not confined to the planning of the system itself. It extends to the provision and adaptation of stations, to the duplication of the lines, to the defence of bridges and other structures, to the provision of rolling-stock. Considerable extension may be looked for in all these directions. However important the motor-car and the aeroplane may be in military transport, it is probable that the railways will always be the most satisfactory means of conveying heavy material.

"The railway carriage itself can be adapted for military uses. We have tank cars, cold-storage cars, hospital trains; above all, we have armored trains and truck gun-carriages.

"Railways will perhaps render more effective service than ever in the matter of bringing to the required spot huge guns too heavy to be transported in any other way. These will be fired without leaving the rails. The truck gun-carriage is so arranged as to withstand the recoil; this result is obtained by placing on the ground, once the carriage is stationary, supports which take the load off the wheels. The recoil is transferred to the ground so that the rails do not suffer.

"Whether the object is to organize a supply line, to transfer reinforcements, or to carry heavy material to its destination, it may be of service to provide for the absence of normal lines by laying down rails along the road. Both the Germans and ourselves have done this very frequently. A narrow gauge of sixty centimeters is generally used. A team of skilled sappers takes about three hours to lay down about one kilometer of railway."

"The world's shipping suffered a net loss of 2,632,279 tons from the beginning of the war to April 1, 1918, the greater part of this having occurred since the beginning of the unrestricted submarine warfare which brought America into the war. This loss is partly due to England's having increased her naval building at the expense of merchant tonnage. While naval construction must not be neglected, some building capacity can be turned back to merchant ship-building in case of extreme need. However, in April, 1918, Great Britain and the United States built 40,000 tons more shipping than was lost, and American construction is still rapidly increasing."

"British shipping, still in magnitude far beyond that of any of the Allies, is declining; it is still being sunk faster than it is being replaced. American shipping, on the other hand, is rapidly expanding, and has already turned the scale against the U-boats. The American Army in France as it is reinforced must become more and more dependent upon American ships for transport and supply. Up to the end of July the net loss in British shipping due to enemy action and marine risks since August, 1914, had been 3,851,537 gross tons. During the current year to July 31 we have lost 583,600 gross tons more than we have built. British sea power, the power to use the sea as measured in merchant shipping, is wasting. On the other hand, the net gain since August, 1914, in Allied and neutral shipping—to which the United States have largely contributed—was nearly 1,100,000 tons at the end of June this year, and was showing a very remarkable rate of expansion. Thanks chiefly to the United States, the Allied and neutral monthly gain now more than offsets the British loss. The critical corner has been turned. To those whose eyes look beyond the war, and who already anticipate a great American mercantile marine in competition with depleted British lines, we would point out that after all its losses British merchant shipping still amounts to over 14,000,000 tons gross, and that America's ocean-going tonnage built and completing—exclusive of captures—is as yet little more than 4,000,000. What the relative positions will be a year hence—or two years hence, should the war last so long—we do not venture to predict."

"At San Francisco on July 4th, Mr. Charles M. Schwab, Director-General of the Emergency Fleet Corporation, said to the shipworkers: 'If you stand up to your job, we'll make the Kaiser take his medicine lying down.' Mr. Schwab also ventured the statement that this Fourth of July shows the greatest record of launchings for a single day in the [Pg 94] world's history, and added:

"'Every time we launch a cargo or troopship or tanker we add to the certainty that German submarines can not win this war. Already we have the U-boats on the run, and if we keep up the pace we will have them beaten by next year. And when we achieve this victory it will be you who will deserve the credit.

"'In 1915 all the shipyards in America turned out 215,602 dead-weight tons of shipping. The next year our output jumped to 520,847 tons. In 1917 the hot pace continued until we very nearly doubled the output of the previous year, completing a total of 901,223. I am confident now that if we pull together and every man stays on the job, we will produce more than 3,000,000 dead-weight tons in 1918—the greatest output of any nation in the world in a single year.'

"Premier Lloyd George sent a cable to President Wilson on the launching of the ships, in which he extended 'heartfelt congratulations on this magnificent performance,' and in an Independence-day speech Secretary of the Navy Josephus Daniels said in part:

"'We are launching this day far more tonnage than that of all the American vessels sunk by submarines since the war began. We are launching today more than the Germans sank of the ships of all nations in the last month for which we have the official figures. The recent enemy submarine activities off our coast resulted in the loss of 25,411 dead-weight tons of American shipping. During this same time 130,000 gross tons of shipping were built.

"'To give some idea of the tonnage situation with reference to American shipping, it may be of interest to know that the total tonnage of American vessels lost prior to the entry of the United States into the war was 67,815. The total American tonnage sunk since the entry of the United States into the war is 284,408, or a total of 352,223 tons sunk during the whole period of the European War. As against this loss, the gross tonnage of merchant ships built in the United States since the commencement of the European War is 2,722,563 tons, 1,736,664 gross tons of which have been built since the entry of the United States into the war. In addition to the tonnage thus built 650,000 tons of German shipping have been taken over. This does not include the tonnage acquired of Dutch, Japanese, and other vessels. It will be of further interest to know that today there will be launched in the great shipyards of this country over 400,000 dead-weight tons. These figures are in addition to those previously given.'"

"On top of foreign subsidized competition our people are to be subjected to Government competition at home, and their whole position and prospects rendered uncertain, if not impossible. This new government undertaking can have nothing but a chilling, blighting effect [Pg 96] upon our splendid ship-building and engineering trades, and it will not give us one additional ton of shipping. The government policy—or lack of policy—is such that no one knows what to expect next. There is no certainty. There is no continuity of policy. There is no encouragement. There is no common justice for British enterprise. Whilst Germany, France, Italy and other nations are preparing large subsidization schemes for their shipping and ship-building trades, our government excessively penalizes our industries and enterprises, and gives no hint of any fair dealing in the future. Before the war German subsidized liners were permitted to come into our harbors and take on board British passengers at 'blackleg' rates, and without paying even a due share for the upkeep of our ports and lights. Now our government, whilst paying neutral shipowners—our future rivals—freights up to as much as 500 per cent. above the Bluebook rates paid to our own vessels, is taxing our shipping people up to the eyes—doing all that it can to render it difficult, if not impossible, for our companies to increase their fleets and maintain British supremacy after the war."

"In addition to this, the Shipping Controller has taken steps for the quickening of ship-building. The tonnage built in this country during peace times is, I think, on an average something a little [Pg 97] under 2,000,000. In 1915 the ship-building came to 688,000 tons. In 1916 it was 538,000 tons. In this year a little over a million tons, nearly 1,100,000 tons, will be built in this country and 330,000 tons will be acquired abroad, so that this year the tonnage which we shall acquire will be 1,900,000. This is purely mercantile marine. Bear in mind the condition under which the tonnage is built. It is the fourth year of the war. There is a difficulty in labor and great difficulty in material. You require steel for guns and shells for the Navy, because the ship-building program of the Navy has gone up considerably in the course of the present year. In spite of that fact the ship-building of the country in this year will not be very far from what it was in the days of peace.

"Even now we have not got enough tonnage for all essential purposes. We have got to provide tonnage for France, Italy and Russia, as well as for ourselves, and we need more ships instead of fewer ships. And I am not going to pretend that there will not be at best a rate of diminution of our shipping which will embarrass us in the struggle, and therefore it is essential, not merely that this country should build, but that the only other countries which have a great ship-building capacity should also build. If the United States of America puts forth the whole of her capacity, and I have no doubt, from what I hear, that she is preparing to do it in her own thorough and enterprising way, I have no doubt at all that we shall have sufficient tonnage not merely for this year but for the whole of 1918 and, if necessary, for 1919 as well, because America can expand very considerably her ship-building capacity if the real need ever arises for her to do so."

"From every quarter members with first-hand knowledge of ship-building got up to tell the same story of over-centralization, fussy control, conflicting orders, leading all to the same result—discouragement of masters and men. Mr. Mackinder, speaking for a Glasgow constituency, and Sir Walter Runciman, speaking as a ship-owner—two men whose views on economics are the poles apart—were in agreement here. The fault, they declared, lay, not in the want of patriotism or the inherent vice of the British workman, or even in the lethargy of the British employer, but in the third and predominant member of the ship-building partnership, the British Government. Keeping the direction in its own hands, the Government started with a preconceived theory of the standard ship—a theory that might be of great value to a builder of revolutionary ideas laying the foundations of a prosperity to be enjoyed twenty years hence, but is of considerably less value to a nation that is losing steamers at the rate of fifteen or twenty a week, and wants new steamers now. When the standard ship was first proposed, builders pointed out that in practice each had a standard ship of his own, and they could build most quickly by confining themselves to their own familiar types. Mr. Macnamara told them that they were Solomons, wise after the event, but that is less than fair. They were wise from the beginning, and their predictions have come true."

"If the final peace does not return to us what our enemies have taken and destroyed in the outside world, if it does not restore to us freedom in our work and our spirit of enterprise in the world, then the German people is crippled for an immeasurable period. We demand restoration for all violation of the law and for all acts of destruction. We demand indemnification for all damages done, and we meet the plan of differentiation with the demand for the most-favored-nation treatment and equal rights; the plan of exclusion with the demand for the open door and free seas; and the threat of a blockade of raw materials with the demand for the delivery of raw materials."

"Even if Hindenburg's genius and German bravery won a complete victory on land, even if the English Army fell into our hands to the last man, and France was disarmed and had to submit to Germany's terms, even then England and America could not be compelled to the capitulation that the Pan-German word-heroes prophesy daily. Even then they would blockade our coasts and the war would continue at sea. And even if they could not or would not do that, even if peace was concluded and all the battles ended, they would still have a terrible weapon to use against us. Our domestic economy can not exist permanently without the wheat, the copper, and the cotton from America, the nickel from Canada, the cotton from Egypt and India, the phosphates from the North African coasts, the rubber from the English tropical colonies, Indian jute, and the oilplants of the South Sea Islands.

"There will be a scarcity of all these things after the war and there will be great competition for them. If England and America do not deliver to us these raw materials after the war, then we as conquerors are conquered."

"There is potash in plenty in the great Republic, especially in the alkali lakes of Nebraska and Southern California. Potash is now obtained from the Great Salt Lake in Utah, and from the vast kelp beds of the Pacific coast. American chemists are also extracting potash (by the Cottrell process) from the dust of cement-kilns and blast-furnaces. So the German monopoly will pass, and many others with it. America will produce her own dyes and optical instruments, though I may not linger on the details of this supplanting.

"American genius has long been busy with these things; another year or two will see her wholly independent of German supplies. The potash monopoly—from the mines of Stassfurt in Saxony—was undeniably a problem; there are still richer sources in Alsace, as we all known know Germany's resolve to hold that province through thick and thin. America needs 500,000 tons of potash every year, for the sandy soils of the Atlantic seaboard, and also for the citrus fruits of Florida, the tobacco of Georgia and the Carolinas, the potatoes and garden produce of Maryland."

"Neutral exports of foodstuffs to the Central Powers have declined from last year's corresponding exports in amounts estimated at from 65 to 85 per cent., depending on the neutral, and there has been a decrease in the export of many other important commodities.

"In November, 1917, we became party to Great Britain's tentative agreement with Norway, as a result of which action on our part 1,400,000 tons dead-weight of Norwegian shipping were chartered into the service of the United States and Great Britain for the period of the war. Shortly following, temporary agreements were concluded with Holland and with Sweden. That with Holland gives us the use, for periods up to 90 days, of 450,000 tons dead-weight of her shipping which had [Pg 99] heretofore, for a long period, lain idle. The agreement with Sweden gives us the use for three months of tonnage estimated at 250,000 tons dead-weight which had not theretofore been employed in services useful to us.

"Specific accomplishments of this character are, however, far from constituting a full measure of the results achieved by the War Trade Board. The elimination of enemy advantage from our trade and, to a considerable extent, from that of the world, the securing and conserving of commodities essential to ourselves and those associated with us in the war, the bringing of shipping generally into the services most useful to us—these results can not be accurately stated or appraised at the present time, nor have they been accomplished by any single act or agreement."

"To accomplish these results the War Trade Board, through its Bureau of Imports, has adopted certain regulations in connection with the importation of many of these raw materials, to which it is the duty of every patriotic American citizen to give complete and wholehearted support.

"Organizations have been voluntarily created in many of the trades, such as rubber, wool, jute, tin, etc., to act as consignees when required and to perform other duties in connection with importations, under and by direction of the War Trade Board.

"Every effort will be made to administer these regulations with the slightest possible detriment to legitimate business interests, but when it is considered that the transmittal of a few pounds of rubber or copper to Germany may cost the lives of scores of our men at the front, and that each day's supply of wool, or food, or money to the enemy means another day's war, with its accompanying toll of lives, the very thought of hesitancy or weakness is inconceivable. The policy will be 'safety first' for our soldiers, regardless of every other consideration. Persons and firms in this country, as well as abroad, who before our entrance into the war had little sympathy with the war-time commercial safeguards of the Allies must be taught that these are now matters of the first importance to this country, and violators of present restrictions need expect no favors, regardless of how important such individuals or firms may be in the business world. The time has come when all must realize that the war is not limited to combating the enemy on the battle fields of France, but must be carried into our every-day transactions of life, and that our business practices must be remolded, where necessary, to meet existing conditions.

"It is unnecessary to mention other desirable results which may be obtained by this import control, such as the gathering of trade information or the conservation of tonnage by elimination of non-essentials.

"No anxiety need be felt by importers that there will be any serious restrictions of the importation of necessary articles if the transaction does not involve dealing with an enemy or ally of an enemy, or otherwise giving him aid or comfort."

"It is none too soon to begin the campaign against the importation of German-made goods. Imagine for one moment any American mother giving to her baby toys made by Germany while she thinks of tens of thousands of babies murdered by Germany in this war. Every toy made in Germany and every other piece of goods of every kind will for generations bear a bloody stain which all the waters of all the oceans can never wash out."

"America has fed starving Belgium. We fed and clothed and cared for her suffering people long before we became her proud ally on the battlefields. Thousands of orphaned Belgian and French children have been adopted into American homes. In the days to come are we going to force these children to play with German-made toys? God forbid! American toy manufacturers have stripped us of the last vestige of an excuse for the purchase of toys from the Huns. Our factories are making more toys than we ever imported, and they are not the flimsy jim-cracks we formerly bought from abroad. They are largely exercise toys which develop a child's body, or mechanical or structural toys which train the mind. Before the war we imported eight million dollars' worth of toys from the Central Powers. Who will make our kiddies' toys in the days to come? Once more, Mr. Buyer, it's up to you."

"To direct and indirect re-exportation must be added, finally, smuggling, which has always been a factor in the evasion of blockades. In Switzerland a member of the Commerce Department of the government was recently convicted of this offense and is serving a prison sentence.

"That this aid was precious to the Central Powers and enabled them to stave off starvation and consequent submission can be corroborated in various ways. First, in spite of the enormous volume of imports from the neutrals Germany was on the verge of starvation during the last winter, the economic crisis reaching its critical stage coincidentally with the political crisis in the Reichstag at the beginning of July. The most potent cause of this political upheaval was the economic destitution which cast its melancholy shadow over the whole nation and increased the desperation of people and Reichstag till it exploded in a violent outburst of wrath against the government. Secondly, the general impression of press and people in Germany and Switzerland is that the most sensational part of the speech of Erzberger, which brought the crisis into being, consisted of an exposé proving the futility of the submarine policy and impugning the judgment of the officials responsible for its inauguration, inasmuch as the entrance of the United States into the list of Germany's enemies, which resulted therefrom, was likely to result in a curtailment of the imports obtained through the neutrals, and without a continuance of these imports Germany could not hold out long."

"Of great importance for an estimate of the future of our shipping combines is the progress which the two largest Danish lines—the Forenede, which sails to North America; and the Estasiatisk Kompagni, which, as the name suggests, runs lines to East Asia—have made during the war. The Forenede, for instance, made in 1916, with a stock capital of 30,000,000 crowns, a net profit of no less than 40,000,000 crowns, of which a good 10,500,000 crowns was allotted to the reserve and emergency funds. The collective reserves of this company amounted to more than 26,000,000 crowns at the end of 1916: and its bank credits totaled 44,000,000 crowns.

"The large Dutch shipping firms have likewise made enormous profits. The following table presents their results for 1916 (the Dutch florin, or guilder, is worth $0.402 United States currency at normal exchange):

"The example of the Holland-America Line shows best what enormous progress took place in the inner consolidation of the Dutch firms. The reserve of this company, which in 1913 amounted to 6,600,000 florins, grew to 24,800,000 by the end of 1916—in other words, urpassed surpassed the previous stock capital (which in the meantime had been increased by 15,000,000 florins) by more than double. In addition, the company has available funds amounting in all to 21,700,000 florins. The reserves in the Nederland Company, which have increased in the same period from 6,700,000 to 23,000,000 florins, exceed the capital by 4,000,000 florins. The available funds of the Rotterdamsche Lloyd amounted at the end of 1916 to about 25,000,000 florins, with a share capital of 15,000,000 florins and a ready reserve of 16,000,000 florins.

"But the business successes of the neutral European shipping firms are far surpassed by the earnings of the Japanese overseas lines. Thus the largest Japanese shipping firm, Nippon Yusen Kaisha, that sails from East Asia to all the important shipping markets, had a net profit in the summer half-year 1916 of 19,780,000 yen (the Japanese yen is equivalent to $0.498 United States currency); in the winter half-year 1916—17 actually 22,150,000; in a single fiscal year it earned, therefore, about 42,000,000 yen. The company's capital stock amounted at the end of the fiscal year 1916—17, after a previous increase through the distribution of free shares, to 27,500,000 yen, the net profits of this single company being thus about 15,000,000 yen more than the amount of the capital.

"The company's fleet has grown considerably. The total available reserves amount to nearly 63,000,000 yen. Of ready money the company had at its disposal at the end of March, 1917, 55,300,000 yen."

"The German propagandists have carried on a campaign on the proposition of the Kaiser. It has been the finest selling campaign that I have ever seen. They have organized it. Each man had his territory, his selling territory; each man has his line of samples, and that line of samples was the finest lot of German gold and German 'hot air' that any propaganda has ever produced.

"The Germans have sold Spain on the proposition of German trade and German good-will, because they are giving the Spaniard, as they did in business before the war, what the Spaniard had in mind.

"Germany went into Spain to fill the Spaniard with 'hot air' and to tell him he was the finest aristocrat in the world. And he got it over. And if you had gone, as I have, from one end of Spain to the other and looked into these great warehouses you would have found hundreds of them jammed and packed with copper and oil and cotton, and all the material with which to re-establish a great industry. And today, whenever there is a water-right for sale, whenever there is stock for sale, or whenever anything can be leased, or a factory can be bought, who buys it? The Germans.

[Pg 102]

"They have got the finest industrial secret service in Spain that I have seen in my life. And to what end? All to the great end that when the war is over, in Spain as in Holland and in Switzerland, the wheels of German output will be going.... Germany will put on the goods, as I have seen with my own eyes, 'Made in Spain,' 'Made in Switzerland,' and 'Made in Holland.' Your own goods, machine tools, are going out in the markets of the world now and forevermore in competition with German-made stuff, made by German hands, made by German capital, part with stuff that is marked offensive, in competition with stuff that is marked as I have said it would be marked."

"We had heard of war after the war, and it had been suggested that whatever the terms of peace might be we in England should have no dealings with Germany, that we should boycott them commercially, allow none of our raw materials to go to Germany, that we should form a combination with our Allies, and that together we should cut her off altogether and treat her as though she were a leper. He did not believe in this idea. He was out for peace, and when he said he wanted [Pg 103] peace he meant a lasting peace. He wanted peace founded on sound conditions, which would stand wear and tear and last forever, if possible—at all events, for many, many years, it might be centuries; but a boycott of Germany would not be the way to attain a peace of that kind. That would be a way of carrying on the war, and although it would not be with the weapons we were now using, there would be the same hatred and struggle between one combination of nations and another, and it would leave the world divided and engender seeds of hatred and dissent. In many respects it would be almost as bad as the war at the present time. He did not, therefore, accept that condition of things."

"Germany has occupied a great position in the world. It is not our wish or intention to question or destroy that position for the future, but rather to turn her aside from hopes and schemes of military domination and to see her devote all her strength to the great beneficent tasks of the world.... The economic conditions at the end of the war will be in the highest degree difficult. Owing to the diversion of human effort to warlike pursuits, there must follow a world shortage of raw materials, which will increase the longer the war lasts; and it is inevitable that those countries which have control of the raw materials will desire to help themselves and their friends first."

"Even if Belgium, France, and Italy alone took that course, the whole policy of an economic boycott, or partial boycott, to prevent German expansion or to punish German crimes would fall to the ground. We cannot imprison Germany in an economic strait jacket if her territorial neighbors are willing to trade with her. As a matter of fact before the war the most important and the most expansive portion of German export trade was with the continent of Europe."

"The type of aeroplane for commercial work requires careful consideration and design. In estimating the value of a transport vehicle account must be taken of the respective proportions of the load that are and are not remunerative. A steam motor wagon that was only just able to transport the coke for its own consumption would be useless for transport work. The large quantity of fuel the aeroplane must carry makes this point an important one regarding it. It affects very largely the type of aeroplane that must be chosen for each duty.

"The total lift of a large bombing aeroplane of medium speed is about 20 lbs., while that of a small high-speed scout may not be more than about 8 to 10 lbs. per horse-power. From these lifts have to be deducted the weight per horse-power of the aeroplane structure and engines. These leave a margin of about 11 [Pg 104] pounds per horse-power in the case of the large machine and of only about two to four pounds per horse-power in the case of the smaller and higher speed machine. From these margins have to be deducted the weight per horse-power of the pilot and of the fuel to be carried."

"There must be no possible chance of the wildcat schemes of the early railway days recurring, nor must aircraft or their pilots be below a specified standard. The State must see that projects doomed to failure owing to lack of financial or technical backing are prevented from being placed before the public.

"Regulations must be drawn up which will insure that the machines cannot be used for the public service until they have received a certificate similar to that now issued by Lloyd's for ships. Pilots must not be allowed to fly machines conveying the public or mails, unless they have received a certificate equivalent to that issued to the master of a ship by the Board of Trade before he can take charge.

"The aeroplane will not compete with the telegraph system, cable, or wireless, but will be a useful adjunct conveying written signed statements, important documents, long reports, and descriptive letters in the time of a week-end cable and at a fraction of the cost.

"It will enable the business man to visit his overseas agencies and friends, to discuss matters with them on the spot and examine the requirements of their districts, at the cost of a few days instead of months of travel."

Modern wars are not won by mere numbers. They are not won by mere enthusiasm. They are not won by mere national spirit. They are won by the scientific conduct of war, the scientific application of irresistible force.

—Woodrow Wilson.

To begin immediately a study to determine the most effective flexible organization and mechanism for the securing of all necessary information and for the clarifying, recording, and classifying of such information when secured.

To begin immediately a study as to what media now exist which can aid in the carrying out of the purposes of the council. This study to be [Pg 118] made in three divisions—governmental media in the departments, governmental media outside the departments, and civil media. As this study progresses it is believed that the council can aid materially in the development of such media, and can from time to time define (i.e., delimit and delineate) spheres of activity in which existing organizations may operate intensively without duplication.

To assist in the advance of the physical well being of the people of the nation.

To begin immediately a study of the possibility of the coördination of transportation, communication and surveys.

To continue the work done on the inventory of manufactures, of medical equipment and officers, of supplies, and of resources.

To assist in the development of the "Personal Index" already begun.

To set a fixed date (a date three months after the beginning of action is suggested) on which an inspection may be made of the work accomplished to that date. This inspection to be made through the submitting to the commission of an actual problem by the Departments of War and Navy, with the intent to determine at that time what needed information is or is not available.

To form a temporary organization to put the above proposals or any part of them or additional proposals into effect at the earliest possible date, with the intention of changing from a temporary organization to a permanent organization as the progress of the work makes this possible.

To begin a study of the best methods of expression of the work of the council to the people of the nation.

To scrutinize all legislative action touching national defense.

To do any other thing or take any other action necessary to give effect to the law under which the council and commission are organized.

W. H. Vandervoort, builders of special machine tools, and President of the Moline Automobile Co.

E. A. Deeds, formerly General Manager for the National Cash Register Co., President of the Dayton Engineering Laboratories Co., and interested in many industrial activities.

Frank A. Scott, Warner & Swasey Co., Cleveland, manufacturers of automatic machinery and optical instruments.

Frank Pratt, General Electric Co., Schenectady.

Samuel Vauclain, Baldwin Locomotive Works, Remington and Westinghouse Cos.

John E. Otterson, Vice-President, Winchester Arms Co.