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Title: Harper's Pictorial Library of the World War, Volume XII

Editor: W. Lloyd Bevan

Author of introduction, etc.: Irving Fisher

Editor: Hugo Christian Martin Wendel

Release date: November 17, 2013 [eBook #44213]

Language: English

Credits: Produced by Juliet Sutherland, Martin Mayer and the Online
Distributed Proofreading Team at http://www.pgdp.net

*** START OF THE PROJECT GUTENBERG EBOOK HARPER'S PICTORIAL LIBRARY OF THE WORLD WAR, VOLUME XII ***

Transcriber's Note:

Words marked with a dotted underline are changes made by the transcriber. To view the published words, mouse-over the underlined words. There is a table of all words changed by the transcriber at the end of the book. The cover image was created by the transcriber and is placed in the public domain.

[Pg i]

HARPER'S PICTORIAL LIBRARY OF THE WORLD WAR

In Twelve Volumes
Profusely Illustrated

VOLUME XII

THE GREAT RESULTS OF THE WAR

Economics and Finance, The Peace Treaty, The League of Nations. Index

[Pg ii]

Painting by Frank Stick A Soldier of the Soil

Painting by Frank Stick

A Soldier of the Soil

Click for a larger image.

[Pg iii]

HARPER'S PICTORIAL LIBRARY OF THE WORLD WAR

In Twelve Volumes
Profusely Illustrated

FOREWORD BY CHARLES W. ELIOT, PhD.
President Emeritus, Harvard University

VOLUME XII

The Great Results of the War

Economics and Finance, The Treaty of Versailles and League of Nations——Index

WITH INTRODUCTION BY PROFESSOR IRVING FISHER, YALE UNIVERSITY

Edited by

DR. W. L. BEVAN, KENYON COLLEGE

and

DR. HUGO C. M. WENDEL, NEW YORK UNIVERSITY

GENERAL EDITORIAL BOARD

Prof. Albert Bushnell Hart,
Harvard University

Gen. Douglas MacArthur, U.S.A.,
Chief of Staff, 42nd Division

Admiral Albert Gleaves,
U.S. Navy

Prof. W. O. Stevens,
U.S. Naval Academy, Annapolis

Gen. Ulysses G. McAlexander,
U.S. Army

John Grier Hibben,
President of Princeton University

J. B. W. Gardiner,
Military Expert, New York Times

Commander C. C. Gill, U.S.N.,
Lecturer at Annapolis and aide to Admiral Gleaves

Henry Noble MacCracken,
President of Vassar College

Prof. E. R. A. Seligman,
Columbia University

Dr. Theodore F. Jones,
Professor of History, New York University

Carl Snyder

Prof. John Spencer Bassett,
Professor of History, Smith College

Major C. A. King, Jr.,
History Department, West Point

Harper & Brothers Publishers

NEW YORK AND LONDON

Established 1817

[Pg iv]


[Pg v]

CONTENTS OF VOLUME XII
PAGE
Introduction Professor Irving Fishervii
PART I
I. Economic Results of the War1
II. Wartime Food and Price Problems34
III. Industry and Labor in Wartime65
IV. Government Control87
V. The Money Cost of the War, Edwin R. A. Seligman105
VI. American Business in the War, Grosvenor B. Clarkson115
VII. The Liberty Loan Army, Guy Emerson126
VIII. Food and the War, Vernon Kellogg135
IX. The High Cost of Living, Director of the Council of National Defense142
PART II
I. The Peace Conference at Work, Thomas W. Lamont149
II. Wilson's Fourteen Points163
III. How the Peace Treaty Was Signed165
IV. The Peace Treaty—Its Meaning to America, George W. Wickersham170

THE TREATY OF VERSAILLES AND THE COVENANT OF THE LEAGUE OF NATIONS

Preamble179
Part I. The Covenant of the League of Nations182
Part II. Boundaries of Germany186
Part III. Political Clauses for Europe188
Part IV. German Rights and Interests Outside Germany206
Part V. Military, Naval, and Aerial Clauses209
Part VI. Prisoners of War and Graves216
Part VII. Penalties217
Part VIII. Reparation217
Part IX. Financial Clauses226
Part X. Economic Clauses229
Part XI. Aerial Navigation246
Part XII. Ports, Waterways, and Railways247
Part XIII. Labor255
Part XIV. Guarantees261
Part XV. Miscellaneous Provisions262
Rejection of the Peace Treaty264
The Reservations Which Failed269
Peace by Congressional Enactment Fails271
The Map of Europe Remade279
Our Part in Winning the War280
Index
Text291
Illustrations363
I. Portraits363
II. General368
Maps383

ILLUSTRATIONS IN THIS VOLUME

A Soldier of the SoilFrontispiece
Price Movements of the United States and England from the Earliest Index Numbers Through the First Years of the World Warviii
Trend of Prices Before and After the Great Wars of Historyix
William McAdooxi
Money and the Price Levelxii
John Pierpont Morganxiv
President Wilson and Rear Admiral Grayson Passing the Palace of the King in Brusselsxvii
Women Munition Workers in the International Fuse and Arms Works3
Poster for Boy Scouts Who Worked for the Victory Loan7
Dropping the First Bomb10
A Poster Used During the Fourth Liberty Loan Campaign14
Detroit—City of Automobiles17
A Woman Doing Road Construction Work20
A Woman Operating a Multiple Spindle Drill in an English Shell Factory23
Launching the Quistconck at Hog Island26
Ship-building at Camden, N. J.30
Diagram Showing the Effect of the War on the Prices of Stocks33
Centres of Live Stock Production Throughout the World36
Members of "The Women's Land Army" in England41
A Map Issued by the Food Administration to Show Food Conditions in Europe After the Signing of the Armistice43
A Food Riot in Sweden46
Harry A. Garfield49
Drying Fruit and Vegetables to Save Tin and Glass52
"Back on the Farm"54
The Nations and Their Wheat Supply59
A Municipal Canning Station61
In the Heart of the Bethlehem Steel Plant67
Forging Armor Plate70
Building Howitzers73
Guns and Armaments for United States and Her Allies74
Plowing by Night76
A War Time Warning81
Women Workers in America84
Samuel P. Gompers87
Walker D. Hines90
Building a Steel Ship in Seattle, Washington93
Hog Island Ship-building Yards94
Launching the City of Portland on the Columbia River, near Portland, Oregon96
Examining Cargoes for Contraband99
An Antidote for the Submarine Pest102
The Awkward Squad104
The Economic Conference in Paris106
Lord Reading110
While the Men Fought, Those Left Behind Bought Bonds112
French School Children Waiting to Welcome General Pétain114
United States Council of National Defense and Its Advisory Commission117
Bernard M. Baruch119
Daniel Willard122
John D. Ryan125
A Poster Used During the Fourth Liberty Loan Campaign128
A Poster for the Third Liberty Loan Campaign131
Victory Way at Night133
The Battle Scene at Home137
A Community Conference on Food-Saving140
Will There Be Enough to Go Around?144
Women Doing Night Farming147
The Ore Market—Cleveland148
David Lloyd George151
President Poincaré With the Swiss President, M. Gustave Ador, Driving to the Peace Conference in Paris154
Where the Peace Treaty Was Signed157
Awaiting the Decision of the German Peace Delegates.160
The George Washington162
Paris Crowds Greeting President Wilson164
Henry White167
Count von Brockdorff-Rantzau169
Victoria Hall at Geneva172
William Howard Taft176
Woodrow Wilson, President of the United States181
President and Mrs. Wilson Waving Good Bye187
President Wilson's Welcome in Paris193
Sir Eric Drummond202
Lord Robert Cecil207
Berlin Demonstrations Against The Peace Treaty214
German Press Representatives in Versailles220
Dreadnoughts Welcoming President Wilson Home227
M. Stephen Pichon233
Henry Cabot Lodge239
America's Peace Capitol in Paris245
The White Flags That Meant Defeat for the German Cause and Marked the Beginning of the End of the War251
Paris in War Time258
Senator Philander C. Knox of Pennsylvania274
Male Population Registered and Not Registered281
Comparative Losses of Merchant Shipping During the War282
Production of Training Planes and Engines to the End of Each Month286
Number of Battle Aeroplanes in Each Army at the Date of the Armistice287
Our Flag in Alsace288
Secretary of War Baker Drawing Registration Numbers289

[Pg vii]


INTRODUCTION
By PROFESSOR IRVING FISHER

Department of Political Economy, Yale University

In various ways, as this volume shows, the war has profoundly affected our economic and political life. War has ever been a disturber and innovator, always leaving after it a different world from that which existed previous to it. On account of our tremendously complex economic organization—the specialization of industry among nations, and the network of commerce—war today causes more profound changes than ever before. There can not be a human being in the world today whose life is not altered by the war through which we have just passed.

In trying, now that the war is over, to stop drifting, and to think our way out of the bent (or broken) remains of the ante bellum life, the world is confronted by a maze of problems and a still greater maze of proffered solutions.

Many of these proposals are, unfortunately, of the nature of treatment directed not at fundamental conditions, but merely at symptoms. We should be past the stage, in our social science, as we are in medicine, where we treat symptoms without a thorough diagnosis of the fundamental causes.

And yet it is just this thorough diagnosis that we lack.

What, then, are the changes brought about by the war which most deeply affect "the body politic," and by meeting which the most far reaching improvements can be made?

HIGH COST OF LIVING A VITAL QUESTION

I can not take up, or even touch on, all of them; but to one of them I wish to call especial attention—the High Cost of Living or, more generally, the high level of prices, which is the most striking economic effect of the war throughout the world. It is, as I see it, hard to over-emphasize the need for attacking this problem of the price level as a preliminary to attacking the other economic problems which the war has left us.

We need only glance at a newspaper today, or step into a corner grocery, or fall into conversation with our neighbor in the train to have this topic come out as foremost in interest. It is, I believe, responsible for much more of our present uncertainty and confusion than is usually realized. In its ramifications it is chiefly this phase of the war's effects which, as I suggested above, touches every one of us at every point of our lives. A member of the Federal Reserve Board has called the price level problem the central economic problem of reconstruction.

Professor William Graham Sumner, who has inspired so many to the scientific study of social conditions, used to say: "In taking up the study of any social situation, divide your study into four questions—(1) What is it? (2) Why is it? (3) What of it? (4) What are you going to do about it?"

Let us follow this outline, and look first at the facts of the case; secondly at their causes; thirdly at the evils involved; and lastly at the remedies.

MEASURING CHANGES IN PRICES

We now possess a device for measuring the average change in prices. This is what is known as an "index number."

Thus, if one commodity has risen 4 per cent. since last month and another, 10 per cent., the average rise of the two is midway between the sum of 4 per cent., and 10 per cent., or 7 per cent. It is

4 + 10          
————  =  7
2    

If we call the price level of the two articles last month 100 per cent., then 107 per cent. is the "index number" for the prices of the two articles this month. The same principle, of course, applies to any number of commodities.

[Pg viii]

The index number of the United States Bureau of Labor Statistics, the best index number we have, shows an average price level in 1918 of 196 for wholesale prices and 168 for retail prices of food on the basis of 100 per cent. for 1913, the year before the war; showing that wholesale prices, on the average, almost exactly doubled. The latest index number for wholesale prices (May, 1919) is 206, and for retail (July, 1919), 190.

A look at the history of prices shows the interesting fact that, while prices have sometimes fallen, they have generally risen. The high cost of living has been for centuries a source of complaint. In the 16th century, people objected to the price of wheat, which was three to ten times what it cost during the preceding 300 years.

WORTHLESS PAPER MONEY

Where, through ignorance of monetary science, irredeemable paper money was used, prices have sometimes gone up quite "out of sight." This was the case with the famous assignats of the French Revolution, and the "Continental" paper money of our own Revolution. After the Revolution a barber in Philadelphia is said to have covered the walls of his shop with continental paper money, calling it the cheapest wallpaper he could get! Jokes were also heard of a housewife taking a market-basket full of this "money" to the butcher's shop and bringing home the meat in her purse! This money became a hissing and a byword; and, even to this day, one of the favorite expressions for worthlessness is "not worth a Continental." We see the same situation repeated again today with Russian paper money.

But our first scientific measurement of price movements began with 1782, the beginning of Jevons' index number of wholesale prices in England.

COMMENTS ON FIGURE 1

Figure 1 shows the course of prices in England from that date, and also, for comparison, that in the U.S.

Figure 1 - Price Movements of the United States and England

Figure 1 - Price Movements of the United States and England from the Earliest Index Numbers Through the First Years of the World War

Showing, in general, a close similarity. England was on a paper basis, 1801—1820; and the United States, 1862—78. The dotted lines for these periods show the prices as translated back into gold.

The conspicuous feature of these curves is their great irregularity. Practically never are they for any length of time at all horizontal. Sometimes, even in time of peace, a variation of over 10 per cent. is shown in one year. The curve for the U. S. shows, at the time of the Civil War, a very considerable rise (especially as measured in terms of paper), followed by a decline beginning in 1873 and continuing to 1896. The fall in the first part of this period was accentuated by the return from a paper to a gold standard. From an index number of 100 in 1873, the index number dropped to 51 in 1896. This decline resulted politically in the famous Bryan "Free Silver" campaign.

[Pg ix]

Figure 2 - Trend of Prices Before and After the Great Wars of History

Figure 2 - Trend of Prices Before and After the Great Wars of History

[Pg x]

Since that time, however, the course of prices has been steadily upward. Between 1896 and the outbreak of the war, the index number of the U. S. rose about 50 per cent. Substantially the same increase took place in Canada, while in the United Kingdom there was a rise of 35 per cent. This rise before the war amounted, in the United States, to about one-fifth of one per cent. per month. During the war, however, the rise amounted in this country to 1½ per cent. per month, and abroad to much more—in Germany and Austria to 3 per cent. per month, and in Russia, apparently, to 4 or 5 per cent. per month. In the light of the excitement caused up to 1914 by the comparatively moderate increase in this country, we can better understand the Russian economic unrest when a far steeper ascent of prices got under way.

The total effect can be summed up as follows: between 1914, before the war, and November, 1918, the price level in this country (as indicated by the United States Bureau of Labor Statistics retail food index number) rose 79 per cent.; that in England (according to the Statist index number), 133 per cent.; that in France, approximately 140 per cent.; that in western Europe probably at least three-fold; and in Russia perhaps ten or twenty-fold.

The price level of the United States today is over three-fold that of 1896. Expressing the same fact in terms of the purchasing power of money, our dollar of today is worth only 30 cents of the money in 1896, so that as contrasted with the dollar of 1896 our dollar literally "looks like thirty cents."

COMMENTS ON FIGURE 2

Now it is a common belief, and one which seems to be borne out by the present situation, that war raises prices whereas peace lowers them. The matter is, however, not so simple. Each case must be considered on its own merits. Figure 2 shows price curves for the various wars.

In general prices have risen during wars. But there has not been any such uniformity of movement after wars. Moreover in most cases the price disturbances both during and after the wars had scarcely anything to do with the coming and going of the war. In only four of the cases on the chart is the rise of prices during the war really and clearly due to the war. In the Napoleonic Wars, the war of 1812, the Civil War, and the World War the rise of prices during the war was largely due to war inflation.

As to the after effects on prices there are likewise only four clear cases. The fall of paper prices relatively to gold after the Napoleonic Wars, and the Civil War was, in each case, clearly due to resumption of specie payments. The fall of prices in the United States after the War of 1812 was doubtless due in large measure to the resumption of foreign trade. In one case there was a rise of prices as an aftermath; the war of 1871, which gave Germany a billion dollars of indemnity, created inflation in Germany and prices rose there between 1871 and 1873 faster than in any other country. This doubtless accentuated the crash in the crisis of 1873.

In the other cases in the diagram the many instances of rise of prices after the wars were due primarily at least, to other causes, although the cessation of war and the undue optimism and spirit of speculation which often follow may, in several instances, have contributed to the boom period and the crisis which so often came a few years later, viz., that of 1857 after the Crimean War, that of 1866 after the Civil War, as well as that of 1873 just mentioned.

The only safe generalizations seem to be the following two: The first is that in so far as a war has been costly, i. e., has strained the economic resources of the belligerents, there has been recourse to inflation in some form and prices have risen. Besides the examples in the chart are those of the French Revolution, the American Colonial wars, the American Revolution and many others. The second generalization is that after a costly war the price level is affected up or down by the fiscal policy of the governments concerned.

HIGH PRICES NOT DUE TO SCARCITY

Most cherish the belief that high war prices today represent war scarcity. In the case of some countries like Belgium and some commodities like paper this is true and in such cases scarcity serves as a partial explanation of high prices. But in the case of most countries and most commodities there has been no general scarcity. The almost universal rise of prices cannot be ascribed to scarcity. Prices have risen of many goods not affected by the war or in countries remotest from the war.

[Pg xi]

William McAdoo Secretary of the Treasury during the World War and Director-General of the Railroads.

Copyright by Underwood & Underwood

William McAdoo

Secretary of the Treasury during the World War and Director-General of the Railroads.

As Mr. O. P. Austin, statistician of the National City Bank, has said:

"Raw silk, for example, for which the war made no special demand and which was produced on the side of the globe opposite that in which the hostilities were occurring, advanced from $3.00 per pound in the country of production in 1913 to $4.50 per pound in 1917, and over $6.00 per pound in the closing months of the war. Manila hemp, also produced on the opposite side of the globe and not a war requirement, advanced in the country of production from $180 per ton in 1915 to $437 per ton in 1918. Goat skins, from China, India, Mexico and South America, advanced from 25 cents per pound in 1914 to over 50 cents per pound in 1918; and yet goat skins were in no sense a special requirement of the war. Sisal grass produced in Yucatan advanced from $100 per ton in 1914 at the place of production to nearly $400 per ton in 1918; and Egyptian cotton, a high-priced product and thus not used for war purposes, jumped from 14 cents per pound in Egypt in 1914 to 35 cents per pound in 1918. Even the product of the diamond mines of South Africa advanced from 60 to 100 per cent. in price per karat when compared with prices existing in the opening months of the war.

"The prices are in all cases those in the markets of the country in which the articles were produced and in most cases at points on the globe far distant from that in which the war was being waged. They are the product of countries having plentiful supply of cheap labor and upon which there has been no demand for men for service in the war. The advance in the prices quoted is in no sense due to the high cost of ocean transportation since they are those demanded and obtained in the markets of the country of production.

"Why is it that the product of the labor of women and children who care for silk worms in China and Japan, of the Filipino laborer who produces the Manila hemp, the Egyptian fellah who grows the high grade cotton, the native workman in the diamond mines of South Africa, the Mexican peon in the sisal field of Yucatan, the Chinese coolie in the tin mines of Malay, or the goatherd on the plains of China, India, Mexico or South America has doubled in price during the war period?"

Mr. Austin goes on to show that the scarcity or "increased demand" for war goods has been greatly exaggerated. It is true that some 40 million men were at one time fighting in the war. But this is less than 2½ per cent. of the world's population and it must not be forgotten that these 40 million were also consumers before the war. Their withdrawal from industry did not really create a vacuum of even 1 per cent. of the world's productive power; as women, boys and old men took their places and others worked harder than in peace time.

In addition to the 40 million soldiers, some 150 million people have been required to work on "war work" at home but they have simply been "switched" from other forms of production which have been correspondingly reduced. War supplies were demanded but these also largely "switched" the demand from former and industrial uses. Lord D'Abernon found that in England those objects of luxury "which would seem to be influenced not at all or only very remotely and to a very small degree by increased cost of labor and materials," such as old books, prints and coins, had, nevertheless, advanced, roughly speaking 50 per cent., during the war. Thus "scarcity" and especial "war demands" do not go far toward explaining the high price level even in Europe and not at all, I believe, in this country.

[Pg xii]

In the United States while certain things have become scarce, including certain foods, the general mass of goods has been actually increased as a consequence of war.

The raw materials used in the United States in 1918 were 16 per cent. more than in 1913 and 2 per cent. more than in 1917. The physical volume of trade is estimated variously to be in 1918 from 22 per cent. to 41 per cent. above that in 1913 and 8 per cent. above that in 1917.

President Wilson, in his address to Congress, August 8, 1919, on the high cost of living, gave other impressive examples as to foods, especially eggs, frozen fowls, creamery butter, salt beef, and canned corn, showing that scarcity is not the cause of high prices.

HIGH PRICES DUE TO MONETARY CAUSES

The truth is that the chief causes of the rise of prices in war time are monetary causes.

It is almost invariably true that the great price movements of history are chiefly monetary. This is shown, in the first place by the fact that countries of like monetary standards have like price movements. Thus—to consider gold-standard countries—there has usually been a remarkable family resemblance between the curves representing the rise and fall of the index numbers of the United States, Canada, England, France, Belgium, Holland, Scandinavia, Germany, Austria and Italy. Again, the price movements in silver countries show a strong likeness, as in India and China between 1873 and 1893.

On the other hand, we find a great contrast between gold and silver countries or between any countries which have different monetary standards. In the World War the data are still too meager to enable us to express all the relations in exact figures, but we may arrange the different countries in the approximate order in which their prices have risen. The order of the nations corresponds, in general, with the order in which the currency in those nations has been inflated by paper as well as with the order in which their monetary units have depreciated in the foreign exchange markets.

This order—of ascending prices and of inflated currency—is as follows, beginning with the least rise and inflation: India, Australia, New Zealand, United States, Canada, Japan, Sweden, Switzerland, Denmark, Italy, Holland, England, Norway, France, Germany, Austria and Russia.

Figure 3. - Money and the Price Level

Figure 3. - Money and the Price Level

Showing a correspondence between the quantity of money and the level of prices. Since the middle of 1915, when the quantity of money in the United States began to be greatly affected by the war, the correspondence has been close, changes in the price level seeming usually to follow changes in the quantity of money one to three months later.

The ups and downs of prices correspond with the ups and downs of the money supply. Throughout all history this has been so. For this general statement there is sufficient evidence even where we lack the index numbers [Pg xiii] by which to make accurate measurements. Whenever there have been new discoveries of gold and rapid outpourings from mines, prices have gone up with corresponding rapidity. This was observed in the 16th century, after great quantities of the precious metals had been brought to Europe from the Americas; and again in the 19th century, after the Californian and Australian gold finds of the fifties; and still again, in the same century after the South African, Alaskan and Cripple Creek mining of the nineties.

Likewise when other causes than mining, such as paper money issues, produce violent changes in the quantity or quality of money, violent changes in the price level usually follow.

COMMENTS ON FIGURE 3

The World War furnishes important examples of this. In the United States the curve for the quantity of money in circulation and the curve for the index number of prices run continuously parallel, the price curve following the money curve after a lag of one to three months. It was in August, 1915, that the quantity of money in the United States began its rapid increase. One month later prices began to shoot upward, keeping almost exact pace with the quantity of money. In February, 1916, money suddenly stopped increasing, and two or three months later prices stopped likewise. As figure 3 shows, similar striking correspondences have continued to occur with an average lag between the money cause and the price effect of apparently about one and three-quarters months.

On the whole, the money in circulation in the United States rose from three and one-third billions in 1913 to five and a half billions in 1918, and bank deposits from thirteen to twenty-five billions, both approximately corresponding to the rise in prices.

Taking a world-wide view, the money in circulation in the world outside of Russia has increased during the war from fifteen billions to forty-five billions and the bank deposits in fifteen principal countries from twenty-seven billions to seventy-five billions. That is both money and deposits have trebled; and prices, on the average have perhaps trebled also.

The Bolsheviki are a law unto themselves. They have issued eighty billion dollars of paper money, or more than in all the rest of the world put together. Consequently prices in Russia have doubtless reached the sky, though no exact measure of them, since the Bolshevist régime, is at hand.

The increase of over thirty billions in the money of the world (outside of Russia) is as Austin says "more, in its face value, than all the gold and all the silver turned out by all the mines of all the world in 427 years since the discovery of America."

The conclusion toward which the foregoing and other arguments lead is that, in this war as in general in the past, the great outstanding disturber of the price level has always been money. If this is the case, how fruitless, except as treatments of symptoms, are price-fixing, or campaigns aimed at profiteers! The cry of profiteering may hinder a real solution of the difficulty by diverting attention from the real issue and fanning and giving up an object to the spirit of revolt. Money is so much an accepted convenience in practice that it has become a great stumbling block in theory. Since we talk always in terms of money and live in a money atmosphere, as it were, we become as unconscious of it as we do of the air we breathe.

ASSOCIATE EVILS OF HIGH PRICES

We have now considered the cost of living situation under the two questions "What is it?" and "Why is it?"

The third question, "What of it?"—i. e., what are the evils connected with it—is more easily answered today, when it comes home to all of us, that it might have been 10 years ago.

If, for each one of us, the rise of income were to keep up exactly with the rise in cost of living, then the high cost of living would have no terrors; it would be merely on paper. But no such perfect adjustment ever occurs or can occur. Outstanding contracts and understandings in terms of money make this out of the question. The salaried men and the wage earners suffer—that is, the cost is borne by those with relatively "fixed" incomes.

The truth is, the war was largely paid for, not by taxes or loans but by the High Cost of Living. The result is that the effort to avoid [Pg xiv] discontent of tax payers has created or rather aggravated the discontent over high prices. Every rise in the cost of living brings new recruits to the labor malcontents who feel victimized by society and have come to hate society. They cite, in their indictment, the high price of necessities and the high profits of certain great corporations both of which they attribute, not to the aberrations of our monetary yardstick but to deliberate plundering by "profiteers" or a social system of "exploitation." They grow continually more suspicious and nurse an imaginary grudge against the world. We are being threatened by more quack remedies—revolutionary socialism, syndicalism, and Bolshevism. Radicalism rides on the wave of high prices.

As a matter of fact, the real wages in 1918, that is, their purchasing power, were only 80 per cent. of the real wages of 1913. That is, while the retail prices of food advanced 68 per cent., wages in money advanced only 30 per cent. The real wages of 1913 were in turn less than in earlier years.

Lord D'Abernon, in a recent speech in the House of Lords said: "I am convinced and cannot state too strongly my belief that 80 per cent. of our present industrial troubles and our Bolshevism which is so great a menace to Europe are due to this enormous displacement in the value of money." In fact, before the war, rising costs of living were manufacturing socialists all over the world, including Germany, and the German Government may have weighed, as one of the expected dynastic advantages of war, the suppression of the growing internal class struggle which this high cost of living was bringing on apace.

MANY SUGGESTED REMEDIES INADEQUATE

We are now ready for the question, "What can be done about it?" So far as the past is concerned, comparatively little. Bygones must largely be bygones. So far as wages and salaries are concerned, the remedy must be to raise them rather than to lower the high cost of living. While some kinds of work have had excessive wages during the war, this has not been true in general, public opinion to the contrary notwithstanding. I quite agree with Mr. Gompers that the wage level should not be lowered even if it could be. On the contrary it should be raised to catch up with prices, just as was done after the Civil War. But in regard to contracts little relief for past injuries can be expected. We would best use the past as a lesson for the future. That is what I understand by "reconstruction."

John Pierpont Morgan

John Pierpont Morgan

The banking house of Morgan was closely identified with international finance throughout the World War.

Many impracticable plans have been proposed. Secretary Redfield undertook to stabilize prices by arbitrarily fixing them. He failed, necessarily. We might as well try to fix the sea level by pressing on the ocean. The same, as I stated above, is true of a campaign against profiteers though proposed by so high an authority as President Wilson.

PROPOSED REMEDY

The plan I shall here outline has received the approval of a large number of leading economists, business men, and organizations, [Pg xv] including President Hadley of Yale; a committee of economists appointed to consider the purchasing power of money in relation to the war; Frank A. Vanderlip, president of the National City Bank of New York; George Foster Peabody, Federal Reserve banker of New York; John Perrin, Federal Reserve Agent of San Francisco; Henry L. Higginson, the veteran banker of Boston; Roger W. Babson, statistician; John Hays Hammond, mining engineer; John V. Farwell, of Chicago; Leo S. Rowe, Assistant Secretary of the Treasury: United States Senator, Robert L. Owen, one of the authors of the Federal Reserve Act; Ex-Senator Shafroth; the late Senator Newlands; Sir David Barbour, one of the originators of the Indian gold exchange standard; the Society of Polish Engineers; the New England Purchasing Agents' Association; and a few Chambers of Commerce.

WANTED—A STANDARDIZED DOLLAR

Our dollar is now simply a fixed weight of gold—a unit of weight, masquerading as a unit of value. It is almost as absurd to define a unit of value, or general purchasing power, in terms of weight as to define a unit of length in terms of weight. What good does it do us to be assured that our dollar weighs just as much as ever? We want a dollar which will always buy the same aggregate quantity of bread, butter, beef, bacon, beans, sugar, clothing, fuel, and the other essential things that we spend it for. What is needed is to stabilize or standardize the dollar just as we have already standardized the yardstick, the pound weight, the bushel basket, the pint cup, the horsepower, the volt, and, indeed, all the units of commerce except the dollar.

Money today has two great functions. It is a medium of exchange and it is a standard of value. Gold was chosen because it was a good medium, not because it was a good standard. And so, because our ancestors found a good medium of exchange, we now find ourselves saddled with a bad standard of value!

The problem before us is to retain gold as a good medium and yet to make it into a good standard; not to abandon the gold standard but to rectify it; not to rid ourselves of the gold dollar but to make it conform in purchasing power to the composite or goods-dollar. The method of rectifying the gold standard consists in suitably varying the weight of the gold dollar. The gold dollar is now fixed in weight and therefore variable in purchasing power. What we need is a gold dollar fixed in purchasing power and therefore variable in weight. I do not think that any sane man, whether or not he accepts the theory of money which I accept, will deny that the weight of gold in a dollar has a great deal to do with its purchasing power. More gold will buy more goods. Therefore more gold than 25.8 grains will, barring counteracting causes, buy more goods than 25.8 grains itself will buy. If today the dollar, instead of being 25.8 grains or about one-twentieth of an ounce of gold, were an ounce or a pound or a ton of gold it would surely buy more than it does now, which is the same thing as saying that the price level would be lower than it is now.

A Mexican gold dollar weighs about half as much as ours and has less purchasing power. If Mexico should adopt the same dollar that we have and that Canada has, no one could doubt that its purchasing power would rise—that is, the price level in Mexico would fall. Since, then, the heavier or the lighter the gold dollar is the more or the less is its purchasing power, it follows that, if we add new grains of gold to the dollar just fast enough to compensate for the loss in the purchasing power of each grain, or vice versa take away gold to compensate for a gain, we shall have a fully "compensated dollar," a stationary instead of fluctuating dollar, when judged by its purchasing power.

But how, it will be asked, is it possible, in practice, to change the weight of the gold dollar? The feat is certainly not impossible, for it has often been accomplished. We ourselves have changed the weight of our gold dollar twice—once in 1834, when the gold in the dollar was reduced 7 per cent., and again in 1837, when it was increased one-tenth of 1 per cent. If we can change it once or twice a century, we can change it once or twice a month!

HOW GOLD CIRCULATES

In actual fact, gold now circulates almost entirely through "yellowbacks," or gold certificates. The gold itself, often not [Pg xvi] in the form of coins at all but of "bar gold," lies in the government vaults. The abolition of gold coin would make no material change in the present situation.

If gold thus circulated only in the form of paper representatives it would evidently be possible to vary at will the weight of the gold dollar without any such annoyance or complication as would arise from the existence of coins. The government would simply vary the quantity of gold bullion which it would exchange for a paper dollar—the quantity it would give or take at a given time. As readily as a grocer can vary the amount of sugar he will give for a dollar, the government could vary the amount of gold it would give for a dollar.

CRITERION OF STANDARDIZATION

But, it will now be asked, what criterion is to guide the government in making these changes in the dollar's weight? Am I proposing that some government official should be authorized to mark the dollar up or down according to his own caprice? Most certainly not. A definite and simple criterion for the required adjustments is at hand—the now familiar "index number" of prices.

If, for instance, the index number is found to be 1 per cent. above the ideal par, this fact will indicate that the purchasing power of the dollar has gone down; and this fact will be the signal and authorization for an increase of 1 per cent. in the weight of the gold dollar. What is thereby added to the purchasing power of the gold dollar will be automatically registered in the purchasing power of its circulating certificate. If the correction is not enough, or if it is too much, the index number next month will tell the story.

Absolutely perfect correction is impossible, but any imperfection will continue to reappear and so cannot escape ultimate correction. Suppose, for instance, that next month the index number is found to remain unchanged at 101. Then the dollar is at once loaded an additional 1 per cent. And if, next month, the index number is, let us say, 100½ (that is, one half of 1 per cent above par) this one-half of 1 per cent. will call for a third addition to the dollar's weight, this time of one-half of one per cent. And so, as long as the index number persists in staying even a little above par, the dollar will continue to be loaded each month, until, if necessary, it weighs an ounce—or a ton, for that matter. But, of course, long before it can become so heavy, the additional weight will become sufficient; so that the index number will be pushed back to par—that is, the circulating certificate will have its purchasing power restored. Or suppose the index number falls below par, say 1 per cent. below. This fact will indicate that the purchasing power of the dollar has gone up. Accordingly, the gold dollar will be reduced in weight 1 per cent., and each month that the index number remains below par the now too heavy dollar will be unloaded and the purchasing power of the certificate brought down to par.

Thus by ballast thrown overboard or taken on, our dollar is kept from drifting far from the proper level. The result is that the price level would oscillate only slightly. Instead of there being any great price convulsions, such as we find throughout history, the index number would run, say 101, 100½, 101, 100, 102, 101½, 100, 98, 99, 99, 99½, 100, etc., seldom getting off the line more than 1 or 2 per cent.

A PROBLEM CALLING FOR URGENT ACTION

With the question now before us, it is evident that the problem of our monetary standards has much more than theoretical significance. It is a practical problem, and, I submit, the most pressing which the war has left us. I do not offer the solution described above as the only answer to the problem. It is, however, a working basis, a starting point, from which we may be able to work out a better plan. Some scientifically sound plan is essential, or we shall be the victims of quack remedies.

Finally, now is the time to take up the matter. Public interest is now focused on the cost of living and is very largely educated to the fact that the high prices have a monetary basis. Furthermore, the world is looking to us, as never before, for leadership. It is our golden opportunity to set world standards. If we adopt a stable standard of value, it seems certain that other nations, as fast as they [Pg xvii] can straighten out their affairs, resume specie payments, and secure again stable pars of exchange, will follow our example.

Let us, then, who realize the situation, act upon our knowledge; and secure a boon for all future generations, a true standard for contracts, a stabilized dollar.

President Wilson and Rear Admiral Grayson

Copyright by Underwood & Underwood

President Wilson and Rear Admiral Grayson Passing the Palace of the King in Brussels

Click for a larger image.

[Pg xviii]

The Great Results of the War

[Pg 1]


The Great Results of the War
PART I
I—ECONOMIC RESULTS OF THE WAR

Striking Changes Made by the European Conflict Upon the Economic Life of the Great Nations

The paramount position of War Finance was brought vividly and continuously before the whole people of the United States by the Liberty Loan campaigns. This lesson was an old one though it was enforced by all the improved methods of modern publicity. To Napoleon Bonaparte is attributed the statement that three things are necessary to wage a successful war: money, more money, and still more money.

FINDING THE MONEY FOR WAR

It has been well said that:

"Perhaps the greatest surprise of the war to most people, even to those who had studied political economy, has been the enormous expenditure of money which a nation can incur, and the length of time which it can go on fighting without complete exhaustion. This should not have been in reality a surprise to anyone who had studied past history, for all experience shows that lack of money itself has never prevented a nation from continuing to fight, if it were determined to fight. The financial condition of Revolutionary France at the commencement of Napoleon's career was wretched in the extreme, yet France went on fighting for nearly twenty years after that. The Balkan States can hardly be said ever to have had great financial resources, and yet they fought, one after the other, two severe wars, and are now fighting a third still more severe and prolonged. The Boers in South Africa found no difficulty in fighting the British Empire for three years with practically no financial resources. The Mexicans recently managed to fight one another for a good many years in the same way. Lastly, the Southern states in our own Civil War fought for years a desperate and losing fight and were ultimately beaten to the ground, not so much by a lack of money, as by an actual lack of things to live on and fight with. In fact, all history proves, and this war proves over again, that if what the Germans call 'the will to fight' exists lack of money will never stop a nation's fighting, provided it possesses or can obtain its absolutely minimum requirements of food, clothing, and munitions of war. It was Bismarck who said: 'If you will give me a printing press, I will find you the money.' In finding the money required for an exhausting war a nation is driven to all sorts of desperate financial expedients which may very seriously affect its economic life, but if a nation wants to continue fighting and can produce, or be induced to produce, the things that are absolutely necessary for life and warfare, the government will get hold of those things somehow. If it cannot get them in any other way, ultimately it will take them."

STRONG POSITION OF UNITED STATES

When the war opened England was in the strongest position of any of the Allies. She was the greatest creditor nation in the world. That is, she was able to purchase goods from foreign countries on easier terms than her associates. Russia and Italy were debtor nations and had to borrow even before the war in order to balance their foreign accounts. So these members of the Entente had to be assisted in making purchases abroad. England was able for a long time to keep up her exchange rate in New York. This was done by the shipment of gold and by inducing the holders of American securities in England to sell or lend such securities to their government.

England was forced to act as the agent of other Powers who were fighting with her. Until the United States came in, it was the greatest industrial arsenal among the Allies. Large imports were naturally a feature of this policy. The United States soon began to feel the result of the changes in international credit. Exports almost doubled between 1912 and 1917, the figures being in millions, $2,399,000,000 and $6,231,000,000, respectively.

Another side of the United States trade account to the world is indicated by the following classified list of loans to January, 1917: [Pg 2]

"Between August 1, 1914, and December 31, 1916, the loans raised in the United States by foreign countries were estimated to reach $2,325,900,000, of which $175,000,000 had been repaid. The net indebtedness on January 1, 1917, was therefore $2,150,900,000. The loans may be classified geographically as follows:


Europe$1,893,400,000
Canada270,500,000
Latin America157,000,000
China5,000,000
———————
Total foreign loans$2,325,900,000
Less amount paid,175,000,000
———————
Net foreign indebtedness$2,150,900,000

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

Great Britain$908,400,000
France695,000,000
Russia160,000,000
Germany45,000,000 [1]
Canada270,500,000
————————
  Total$2,078,900,000 [2]

[1]Estimated.

[2] Nearly $1,900,000,000 of this constituted war loans.

NEW PACE IN WAR FINANCE

A new pace in war finance was set by the United States when it became a belligerent. It had to provide for an increase of taxation ascending from the point of $3,000,000,000 in 1917 to over $8,000,000,000 in 1918. The largest source of estimated revenue was from taxes on excess profits, including war profits of $3,100,000,000, and the next was from taxes on incomes, $1,482,186,000 from individuals, and $828,000,000 from corporations. The New York Journal of Commerce shows by the following table the difference between the old and the new system of taxation. Exemptions under the new law were the same as under the old: $1,000 for single persons and $2,000 for married, $200 additional allowed for each dependent child under eighteen years of age:

IncomesTax Under
OldNew
LawLaw
$2,500$10$30
3,0002060
3,5003090
4,00040120
4,50060150
5,00080180
5,500105220
6,000130260
6,500155330
7,000180400
7,500205470
8,000235545
8,500265620
9,000295695
9,500325770
10,000355845
12,5005301,320
15,0007301,795
20,0001,1802,895
25,0001,7804,240
30,0002,3805,595
35,0002,9807,195
40,0003,5808,795
45,0004,38010,645
50,0005,18012,495
55,0005,98014,695
60,0006,78016,895
70,0008,88021,895
80,00010,98027,295
100,00016,18039,095
150,00031,68070,095
200,00049,180101,095
300,00092,680165,095
500,000192,680207,095
1,000,000475,180647,095
5,000,0003,140,1803,527,095

The following estimated yield from other sources is given by the same authority:

"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."

Women Munition Workers in the International Fuse and Arms Works.

Copyright by International Film Service

Women Munition Workers in the International Fuse and Arms Works

Before entering the war, the United States was the great arsenal of the Allies. After our entry, production of munitions increased, while the man power in the industry diminished through enlistments and the draft. Women took up the work and showed surprising ability.

Click for a larger image.

MEANING OF NEW TAXATION

According to a calculation published in the New York World the war revenue bill imposed a war tax of $80 on every man, woman and child in the United States, or approximately $400 for each family. The amount expected to be derived from each item is given in the following table:

Individual income tax$1,482,186,000
Corporation income tax894,000,000
Excess and war profits3,200,000,000
Estate tax110,000,000
Transportation164,550,000
Telegraph and telephone16,000,000
Insurance12,000,000
Admissions100,000,000
Club dues9,000,000
Excise, luxury, and semi-luxury518,305,000
Beverages1,137,600,000
Stamp taxes—chiefly documentary32,000,000
Tobacco and products341,204,000
Special business and automobile-user's Taxes 165,607,000
———————
Total$8,182,452,000

With the operation of this tax the people of the United States found it no longer possible to speak in terms of opprobrium of the tax-ridden people of Europe. The American income tax has a higher rate on large incomes than that provided for under the English system. A man in the United States with an income of $5,000,000 is taxed nearly 50 [Pg 4] percent., more than in England. The New York Tribune published tables printed below comparing the income tax rates of the United States with those existing in France and in Great Britain.

INCOME TAX COMPARISON

A compilation made for the Wall Street Journal shows that the United States income tax even with the increases made in 1918 was still far lower than the English income tax:

"The great bulk, numerically, of incomes taxed in 1917 was in the field reached by the lowering of the exemption in the 1917 law.... It is a fact, however, that no one of these new taxpayers was called on to contribute more than $40 to the government, as the rate was only 2 percent., while all other incomes paid a basic normal tax of 4 percent. The lowest rate for normal tax in Great Britain is 2 shillings and 3 pence on the pound, or 11¼ percent., and the exemption is only $600. The basic normal tax under the new English law is 6 shillings on the pound, or 30 percent., on all incomes over $25,000.

"Actual rate, allowing for deductions, normal tax, and surtaxes, based on taxes on incomes of heads of families. Persons with no dependents pay more; those with more than one pay less. $2,000 is exempted for heads of families, $1,000 for bachelors. Below $4,000, 6 per cent. is the normal tax; above, 12 per cent. Surtaxes begin at $5,000."
————— United States————— United KingdomFrance
Old LawNew Law Rate (per cent.)
IncomeAmountRate (per cent.)AmountRate (per cent.)UnearnedEarnedRate (per cent.)
$2,500$10.40$301.20 11.258.441.25
3,00020.67602.00 14.8411.871.67
3,50030.86902.57 16.2412.962.07
4,000461.001203.00 18.1614.532.44
4,500601.331503.33 18.7515.002.86
5,000801.601803.60 18.7515.003.20
5,5001051.912204.00 22.5018.753.48
6,0001302.162604.33 22.5018.753.71
6,5001552.38330 5.0822.5018.753.90
7,0001802.57400 5.7122.5018.754.07
7,5002052.73470 6.2722.5018.754.21
8,0002352.93545 6.8126.2522.504.34
8,5002653.12620 7.2926.2522.504.53
9,0002953.28695 7.7226.2522.504.69
9,5003253.427708.11 26.2522.504.84
10,0003553.55845 8.4526.2522.504.98
12,5005304.241,320 10.5630.0026.255.53
15,0007304.871,795 11.9732.0832.086.07
20,0001,1805.902,895 14.4834.0634.066.99
25,0001,7807.124,245 16.9835.7535.757.84
30,0002,3807.935,595 18.6537.2937.298.41
35,0002,9808.517,195 20.5638.7538.758.99
40,0003,5808.958,795 21.9939.8439.849.43
45,0004,3809.7310,645 23.6640.9740.979.77
50,0005,18010.3612,495 24.9941.8841.8810.05
55,0005,98010.8714,695 26.7242.8442.8410.27
60,0006,78011.3016,895 28.1643.6543.6510.45
70,0008,88012.6921,895 31.2644.9144.9110.75
80,00010,98013.7227,295 34.1245.8645.8610.96
100,00016,18016.1839,095 39.1047.1947.1911.27
150,00031,68021.1270,095 46.7348.9648.9611.68
200,00049,18024.59101,095 50.5549.8449.8411.89
300,00092,68030.89165,095 55.0350.7350.7312.09
500,000192,68038.54297,095 59.4251.4451.4412.25
1,000,000475,18047.52647,095 64.7151.9751.9712.38
5,000,0003,140,00062.80 3,527,09570.5452.3952.3912.48

[Pg 5]

"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:


IncomeU.S. Tax Per Cent.British Tax Per Cent.
$1,500$60.00 4.00$101.25 6.75
3,000240.00 8.00375.00 12.50
5,000480.00 9.60750.00 15.00
7,500789.40 10.521,406.25 18.75
10,0001,430.20 14.302,250.00 22.50
15,0002,534.80 16.904,812.50 32.08
20,0003,709.60 18.556,812.50 34.06
30,0006,336.00 21.1211,187.50 37.29
40,0008,956.00 22.3915,937.50 39.84
50,00011,855.20 23.7120,937.50 40.18
75,00018,605.20 24.8134,062.50 45.42
100,00026,855.20 26.8047,187.50 47.19
150,00046,355.20 30.9073,437.50 48.96
250,00092,355.20 36.94125,937.50 50.37
500,000235,355.20 47.07257,187.50 51.44
700,000359,355.20 51.33362,187.50 51.74
750,000390,355.20 52.05388,437.50 51.79
1,000,000557,855.20 55.78519,687.50 51.97
3,000,0002,042,855.20 68.091,569,687.50 52.32
10,000,0007,292,855.20 72.935,244,687.50 52.45

"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."

ATTITUDE TOWARD WAR TAX BILL

The passing of the war tax bill was not altogether easy sailing; there was plenty of criticism from the press throughout the country. Republican editors and congressmen wondered why the bill did not contain a tax on cotton, and one Pennsylvania congressman thought that the tax levy should be at the rate of three dollars a bale. Senator Smoot of Utah attacked the bill as a bunglesome measure.

The New York Jourial Journal of Commerce called attention to the discrimination between those whose income is in the form of services or property and those who get it in cash:

"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."

And the Democratic New York World agreed that the farmer "is not carrying his share of the load of war taxation," and observes:

"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."

There was some demand for extending the income tax downwards to cover smaller incomes, for example, we find the Council Bluffs' Nonpareil contending:

"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."

CRITICISM OF THE TAX

The attitude of the New York press is indicated by the Evening Sun and the Times. The New York Evening Sun (Rep.) said the committee "left so many rough edges upon their work." In the opinion of this newspaper, Mr. Kitchin "has given us a measure of class-taxation highly accentuated, and yet has failed to suit the McAdoo group, the most clear-minded adherents of the conscription-of-wealth idea. He has produced a confused series of taxes beyond the practical power of the ordinary busy citizen to master or comprehend, but has not combined these into a harmonious system." The morning Sun even went so far as to remark that "nothing that the Senate could do could make the Kitchin measure worse than it is." Yet it by no means criticized all the features of the bill. It objected to the proposed taxes on oil producers as discouraging the production of oil, and styled the plan to tax distributed corporation earnings at twelve percent. and undistributed earnings at eighteen percent. "simply a fool tax," which "will help to lock the wheels of every great industry in this country."

The foundation mistake of the bill, in the opinion of the New York Times (Ind. Dem.) was the "attempt to assess taxes upon the smallest possible number of persons and businesses, leaving a great majority of the people free from a levy direct or indirect." The Times thought that this policy was dictated by the desire "to leave the mass of voters free from grounds of complaint against the party in power." It insisted that there should be a consumption tax levying "upon the breakfast table and upon the purchases of a great mass of people." Such necessities as tea, coffee, cocoa, sugar, should bear a tax, in the opinion of this and other newspapers. The number of those taxed was also kept comparatively small by the retention of the old income exemption limits, namely, $1,000 for bachelors and $2,000 for married men, with the normal tax rate placed at only six percent. on incomes up to $5,000.

WILSON'S TAX PROGRAM

An outline of what was expected from the people of the country as a financial contribution was given by Mr. Wilson in his May (1918) address to Congress, when he decided to ask its members to remain in Washington and prepare a new revenue bill. Mr. Wilson's call for immediate action in behalf of both the public and the Treasury Department was a summons to a universal duty in language which, it is remarked, "was never before used in a tax speech." He said in part:

"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]

Poster for Boy Scouts Who Worked for the Victory Loan

Poster for Boy Scouts Who Worked for the Victory Loan

"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."

Mr. Wilson's appeal for the practice of personal economy met with widespread approval in England, as it did in the United States. The Economist considered that his manifesto to the American people on this subject was among the greatest documents that the war has produced. National self-sacrifice had gone far, but not far enough. To attain Mr. Wilson's standard of individual patriotism much was still needed, the Economist says:

"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."

LUXURY TAXES

When it came to a question of taxing luxuries, the difficulty was to decide what was a luxury. The situation perplexed Congress, for we find one congressman in Pennsylvania who held that collar buttons and cuff buttons were a necessity, while a representative from Texas asserted that Texas could get along without either collar buttons and cuff buttons and still be patriotic. A congressman from Oklahoma thought that all kinds of buttons could be done away with, adding, "Before I came to Congress I could use nails for my suspenders." Congressman from [Pg 8] agricultural states considered that automobiles and gasoline were not luxuries but were really necessities, especially for farmers.

Many newspapers opposed anything like a luxury tax. We find the New York Times advising the imposition of taxes on tea, sugar, coffee and cocoa. These are good revenue producers but few politicians care to interfere with the free breakfast table. The Wall Street Journal approved of luxury taxes because they would be a means of enforcing thrift. The Treasury's plan for imposing these taxes may be gathered from the following condensed summary:

"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.

TAXES OF MANUFACTURER OR PRODUCER

"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."

LUXURIES IMPORTED

Heavy taxes on luxuries were anticipated but until these taxes were considered it was hardly realized how much of the consumption in America was concerned with articles that could be considered luxuries; for example, the country imported $6,000,000 worth of foreign cigarette papers. Pictures, statuary and other works of art were brought into the country to the extent of $17,000,000. Over $2,000,000 worth of ivory was imported every year; over $2,000,000 worth of mother-of-pearl and more than $2,500,000 worth of bulbs and roots. Higher taxes were urged by the financial experts, so we see a writer in Financial America emphasizing the connection between the importation of luxuries and the need of shipping:

"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."

BEARING THE BURDEN

In spite of the enormous cost of war operations, roseate views were taken of the ability of the country to surmount the unusual difficulties. Unprecedented taxes were being paid, heavy subscriptions to the Liberty Loans were being collected and yet the business of the country seemed to show a high degree of prosperity. This optimistic outlook marks the following comment found in a circular published by the First National Bank in Boston, after it had called attention to the small number of failures reported throughout the country for August, 1918. No such low record had been reached since July, 1901:

"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."

It was prophesied that in spite of the enormous financial obligations assumed by the United States normal conditions would soon be restored. History shows, the circular goes on to say, that financial recovery from devastation has been prompt and complete. Even the railway conditions at this time were viewed optimistically. Such a competent authority as the Wall Street Journal did not anticipate the financial troubles that soon overtook railway administration under government control. It thought that, by the end of the year, the existing debits on current operations would probably be wiped out:

"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."

THE FIRST GOVERNMENT LOAN, 1789

Although called by other names, the United States has had issues of Liberty Bonds on several occasions during a period of one hundred and twenty-nine years, notably in the first years of the Republic and in the Civil War. The first was floated in 1789, the year when the Federal Government was established. Alexander Hamilton was Secretary of the Treasury and on him devolved the duty of raising funds for the government.

"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."

Dropping the First Bomb

Richards in the Phila. North American

Dropping the First Bomb

POPULARITY OF THE LIBERTY LOANS

America's financial reputation stood at a fairly high level after the close of the Civil War. An era of unexampled production ensued [Pg 11] for more than five decades, yet there were many timorous souls who were frightened at the thought of the United States being called upon to bear the burden of the colossal loans. The surprising feature of the Liberty Loans was the elasticity of the subscriptions. The subscribers for the first three loans numbered respectively 4,500,000, 10,020,000, 17,000,000; in every case the records show over subscription. A graphic statement of the nation's riches was presented by S. L. Frazier in the Northwestern Banker, Des Moines, October, 1918:

"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."

The New York Tribune remarked, "If any learned professor of economics had predicted that on top of ten billions of government loans in one year a fourth Liberty Loan would reach nearly seven billions we know what we all would have thought."

HOW EUROPE WILL PAY US BACK

An official in the National City Bank of New York, Mr. G. E. Roberts, is quoted by the New York Times as saying that the wealth-producing equipment of the country had become greater than ever during the war. He did not believe either that there would be any difficulty of the United States being paid back for the money it had loaned foreign governments.

"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."

While the great sums subscribed for the Fourth Loan by banks, corporations, and individuals had a spectacular interest, observed the New York World, it was the plain people who made the loan a conspicuous success, and the twenty-one million subscribers mean in effect the purchase of a new Liberty Bond by "every American family."

THE LOAN PERIODS

There were very good reasons on the part of the government for selecting the definite periods at which the Liberty Loans were to be issued. There were also very good reasons derived from experience by which the government was guided in preparing for the loans. Prior to the fourth loan Secretary McAdoo believed that it could be made to reach fully one-fourth of the population of the country. Preparation for it was made through publicity on a scale hitherto unprecedented. The Washington correspondent of the New York Journal of Commerce, writing on July 31, 1918, said:

"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."

He added interesting data as to outstanding treasury certificates and war expenses. The time chosen for the loan was probably as good, it thought, as could have been selected, inasmuch as it would fall just after the bulk of the crops had been harvested and when much of them had been sold at good figures.

"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."

Included in the Third Loan subscription total is $17,917,750 subscribed by the United States Treasury. War Savings Stamps subscriptions totalled $879,330,000 up to November 20, 1918.

THE LIBERTY LOANS—BY FEDERAL RESERVE DISTRICTS
 
FIRST LOAN
(June, 1917—
3½ Per Cent.)
SECOND LOAN
(Oct., 1917—
4 Per Cent.)
THIRD LOAN
(1918—
4¼ Per Cent.)
FOURTH LOAN
(1918—
4¼ Per Cent.)
Boston$332,447,600$476,950,050$354,537,250$632,221,850
New York1,186,788,4001,550,453,4501,115,243,6502,044,778,000
Philadelphia232,309,250380,350,250361,963,500598,763,650
Cleveland286,148,700486,106,800405,051,150702,059,800
Richmond109,737,100201,212,500186,259,050352,688,200
Atlanta57,878,55090,695,750137,649,450213,885,200
Chicago357,195,950585,853,350608,878,600969,209,000
St. Louis86,134,700184,280,750199,835,900296,388,550
Minneapolis70,255,500140,932,650180,892,100241,028,300
Kansas City91,758,850150,125,750204,092,800294,646,450
Dallas48,948,35077,899,850116,220,650145,944,450
San Francisco175,623,900292,671,150287,975,000459,000,000
 Total subscriptions$3,035,226,850$4,617,532,300$4,176,516,850$6,989,047,000
Total quotas$2,000,000,000$3,000,000,000$3,000,000,000$6,000,000,000
Total allotments2,000,000,0003,808,766,1504,176,516,8506,989,047,000
Total number of subscribers4,500,00010,020,00017,000,00021,000,000

NEW YORK CITY SUBSCRIPTIONS
 
Manhattan$960,417,050$1,095,189,000$702,577,750$1,353,449,550
Bronx404,7001,015,5005,112,3505,751,800
Brooklyn30,312,00044,424,20052,427,600100,469,650
Queens2,202,6004,136,15010,137,35017,331,900
Richmond679,6001,373,7003,386,8005,075,750
 Total city subscriptions$994,015,950$1,146,139,150$773,641,859$1,482,078,650

[Pg 13]

THE INDIVIDUAL INVESTOR

Some curious facts were brought out in the effort of the Liberty Campaign propaganda to reach the individual investor. In the large cities the organization was remarkably successful. In the smaller communities it was a greater difficulty. In a suburb or a small town everybody knows everybody else and the Liberty Loan Committee had hard work in getting subscribers. Mr. A. W. Atwood of Princeton thinks that the occupational and vocational classification of possible investors was not tried. Widows and maiden ladies who had inherited $50,000 or $75,000 were not reached. Some of them who were patriotic came forward of their own accord. The little town of Kircunkson in New York State exceeded its quota many times and there was an item in the papers about it. The success of the Liberty Loan in that town was due to the fact that it contained a large sanitarium patronized by millionaires. Yet there were no banks in the town and if their banking resources were used as a basis their quota would have been very small indeed.

As to the assignment of quotas Mr. Atwood makes the point that it was sometimes based on population, sometimes based on the amount of bank resources. He thought that in small places it would be better to post up a list of those who had subscribed and he even thought that if the country made the effort it could ultimately raise a loan of $100,000,000,000, his reason being the following:

"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."

LIBERTY LOANS AND THRIFT

One of the best methods of testing the influence of Liberty Loan activities on the thrift of the country is used by Bradstreet's in its examination of the annual report of the United States League of Building and Loan Associations. These Associations, be it remembered, are not patronized by capitalists but almost wholly by wage earners. During the past fifteen years the membership of building and loan associations has increased 150 percent. and since the war broke in 1914, the number of members has extended 52 percent. The latest report shows a gain in assets of 30 percent. over the amount indicated in 1914. The following tables taken from Bradstreet's give detailed items of the financial situation of these important organizations:

The following table gives membership and total assets of building and loan associations for a fifteen-year period:

MembershipAssets
1902—031,530,707$577,228,014
1903—041,566,700579,556,112
1904—051,631,046600,342,586
1905—061,642,127629,344,257
1906—071,699,714673,129,198
1907—081,839,119731,508,446
1908—091,920,257784,175,753
1909—102,016,651856,332,719
1910—112,169,893931,867,175
1911—122,332,8291,030,687,031
1912—132,518,4421,136,949,465
1914—153,103,9351,357,707,900
1915—163,334,8991,484,205,875
1916—173,568,3421,696,707,041
1917—183,838,6121,769,142,175

The following table shows total membership and total assets for States in which accurate statistics are compiled by state supervisors. The data for other States are consolidated under the heading, "Other States," and the figures given are estimated:

1917—18
MembersAssetsIncrease
Pennsylvania677,911$324,265,393$25,438,326
Ohio767,100321,741,52951,188,940
New Jersey329,063168,215,91313,088,951
Massachusetts247,725126,695,03713,389,130
Illinois246,800113,528,5258,050,122
New York199,57186,072,8296,442,948
Indiana202,40978,112,9175,818,661
Nebraska101,92954,545,6306,627,783
California42,22735,928,4473,134,429
Michigan69,04135,659,3604,279,888
Kentucky62,84627,085,2821,272,372
Missouri56,11626,770,1443,226,311
Kansas66,44226,000,1672,446,058
Louisiana47,79325,911,9281,362,683
Dist. Columbia37,07522,399,995255,115
Wisconsin50,61219,887,3683,013,526
North Carolina37,40017,608,0001,703,230
Washington46,31814,444,1772,366,450
Arkansas21,05310,583,447409,439
Iowa[3]33,0359,638,852........
Minnesota22,0208,979,642626,537
West Virginia21,5008,119,131369,564
Colorado[3]10,2006,688,983........
Maine14,9596,671,239233,961
Oklahoma18,1426,554,1752,354,175
Rhode Island11,4995,938,436577,906
Connecticut14,9004,869,748610,423
South Dakota5,8573,603,83689,286
N. Hampshire8,5543,336,072322,812
Tennessee5,1663,207,754[4]112,865
North Dakota5,7852,837,11890,308
Texas7,1562,314,927372,489
Montana4,2391,849,935209,906
New Mexico3,5451,469,27672,660
Vermont749287,79152,079
Other States341,875157,319,17210,975,756
——————————————
Total3,838,612$1,769,142,175$170,514,039

[3]Reports issued biennially; figures of 1916 used.

[4]Decrease.

[Pg 14]

A Poster Used During the Fourth Liberty Loan Campaign

A Poster Used During the Fourth Liberty Loan Campaign

Click for a larger image.

[Pg 15]

THE THRIFT HABIT

Such was the success of the Liberty Loan campaign in appealing to all classes of private investors, that it became an interesting speculation whether the popular thrift habit would survive war conditions. It was the general belief in finanical financial centers that the habit of saving had been promoted. Perhaps no better illustration of the thrift habit could be presented than returns made by the savings banks of Boston in October, 1918. At that date these banks had $321,000,000 against $319,000,000 at the same date in 1917, the previous banner total for the end of a banking year. It was estimated by Mr. Ingalls Kimball, the New York Times annalist, that twenty million separate individuals were saving by the method of subscribing to the Liberty Loans, and, as more than $800,000,000 worth of War Saving stamps had been sold, it was probable that nearly half the population of the country was saving money in one of these new ways. As to the method of continuing to encourage thrift, Mr. Kimball pointed out the value of the experience derived from the Liberty Bond Campaign:

"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."

Mr. Kimball questioned whether or not we are to lose the benefit of the great lesson of thrift and whether some plan could be devised to make us keep on saving. No problem of reconstruction seemed to him more important than this, "yet in no one of the announced conferences on reconstruction do I find mention of it." He then goes on to say:

"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."

SPENDING THE MONEY

For a period of twenty-five months, from April, 1917, through April, 1919, the United States spent for war purposes more than $1,000,000 an hour. All sorts of comparisons are used to make this figure seizable by the imagination. For example, the whole sum, nearly $22,000,000,000, was twenty times the whole of the pre-war debt. Indeed, it was nearly large enough to pay the entire cost of our Government from 1791 up to the outbreak of the European War. In addition to the actual war cost of our own Government Congress paid to various associated governments the sum of $8,850,000,000. As to how this enormous sum of money was spent, two-thirds of the amount practically was spent upon the Army, and the rate of expenditure for the Army was constantly advancing period by period. Even after the termination of hostilities there was a very high daily average owing to the building of ships for the Emergency Fleet Corporation, the construction and operation of naval vessels, food, clothing, pay and transportation of the Army. The Quartermaster's Department had the largest proportion of expenditure.

The amount spent about equals the value of all the gold produced in the whole world from the discovery of America up to the outbreak of the European War. The pay for the Army during the period of warfare was larger than the combined salaries of all of the public school principals and teachers in the United States for five years, from 1912 to 1916. Some of the money spent represents permanent assets. At the end of the war there were large stocks of clothing on hand and large supplies of standardized trucks. There were thousands of Liberty motors and service planes that were available for other uses. Engineer, signal and medical equipment still continued to have a value, but if the race for militarism is maintained it is hard to see how the quantities of war munitions can fail to escape the scrap heap in a few years' time.

Comparing the individual estimates of war expenditure, it is noteworthy that the Austro-Hungarian Empire spent almost as much as the United States. Of all the powers Germany spent the largest sum, $39,000,000,000—one billion more than England.

MONEY LOANED TO ASSOCIATE NATIONS

The following is quoted from the Annalist for December, 1918:

"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:

First Loan$2,000,000,000
Second Loan3,808,766,000
Third Loan4,170,019,650
Fourth Loan6,989,047,000
————————
$16,967,832,650

"The totals of each of the above loans have changed substantially since allotment, through conversions with a correspondingly increasing charge on the service. However, the gross amount is substantially unchanged. Of the old loans the Treasury statement of March 31 showed the following totals:

Consol. 2's of 1930$599,724,050
4's of 1925118,489,900
Panama Canal 2's, 190648,954,180
Panama Canal 2's, 19085,947,400
Panama Canal 3's, 191150,000,000
Conversion 3's, 1946—728,894,500
Postal Savings 2½'s, 1931—710,758,560
Postal Savings 2½'s, 1938302,140,000
———————
$1,184,908,590

"The short-term loans in the shape of certificates of indebtedness and War Savings Stamps at the present writing are as follows:

4½% certificates, Series E$639,493,000
4½% certificates, Series 4F625,216,500
4½% certificates, Series 4G614,069,000
———————
$1,878,778,500

"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]

Detroit—City of Automobiles

Detroit—City of Automobiles

Many thousands of standardized trucks were made in Detroit during the war rush, the automobile having proved to the be indispensable to be the fighting forces overseas.

Click for a larger image.

[Pg 18]

"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?

WHAT IS OWED THE AMERICAN PEOPLE.

"We have loaned abroad the following items:

Great Britain$3,745,000,000
France2,445,000,000
Italy1,160,000,000
Russia325,000,000
Belgium183,520,000
Greece15,790,000
Cuba15,000,000
Serbia12,000,000
Rumania6,666,666
Liberia5,000,000
Czechoslovak Republic7,000,000
———————
[5]$7,919,976,666

[5]Increased to $9,646,419,494 by October, 1919.

"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."

FINANCIAL STATUS OF ENGLAND IN 1914

One year before the war England's position in regard to the balance of trade was most favorable. Her imports were valued at $3,210,000,000 and her exports at $2,560,000,000. But it was usually estimated that foreign countries owed England about $1,610,000,000 annually for interest on capital lent for shipping freights and for banking insurance and other commissions. The total amount owed her, therefore was $4,170,000,000 as against $3,210,000,000 which she owed for her imports. She had therefore a favorable balance of about $960,000,000 which was lent abroad. [Pg 19] The war brought an enormous decrease in tonnage, and the excess of imports over exports attained the figure of $1,950,000,000 a year.

Exceptional measures had to be taken to maintain the exchange rates with the United States from whom the chief purchases were made. Large amounts of gold were exported, but by June, 1915, there was a collapse in American exchange. Drastic measures were used to induce the holders of American securities in England to sell or lend those securities to the Government. In this way exchange was kept up practically to the gold point. This question of exchange and the position of England as the director of the financial campaign of the Allies is illustrated from an address given by Mr. R. H. Brand to the American Bankers Association, in September, 1917:

"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."

LOSS IN PRODUCTIVE POWER

The extent of the withdrawal of productive power can only be judged by figures. Of the 7,500,000 men serving in the British Army, 4,530,000 were contributed by Great Britain, 900,000 by the British dominions and colonies; and the remaining 1,000,000 by India and the various British African dependencies. Production went on to a remarkable degree, but this production was largely for war purposes. It was secured by recruiting female labor to an unheard of extent in the munition factories. According to the London Economist, the financial side of the British administration was anything but satisfactory. It speaks of waste and faulty methods:

"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!'"

A Woman Doing Road Construction Work

Copyright Underwood & Underwood

A Woman Doing Road Construction Work

Of the 7,500,000 men serving in the British Army, 4,530,000 were contributed by Great Britain. Yet production was speeded up by recruiting and training the labor of women.

Click for a larger image.

EQUALIZING LOANS AND TAXATION

A thorny problem of all war finance is how to equalize as far as possible the amount of money furnished by taxation with the amounts borrowed. The proportion indicated in the last English war budget of 1918 was that between £842,000,000 raised by taxes and 2,000,000,000 sterling by fresh borrowing. Besides, war experience shows that the parliamentary estimates in each year were always far below the amount spent. In 1917 in Great Britain the shortage was upwards of £400,000,000. According to the London Economist, no effective steps were taken to stop the profligate extravagance by which public money was poured out through the sieves of the war spending departments into the pockets of innumerable manufacturers, middlemen and traders, not to mention the ever growing sums allocated to the privy purses of countless new bodies of officials. Each year, it says, there is a new debt charge of some £120,000,000 and each year there is a constant rise of prices in wages that enhances the cost of governmental goods and services.

The amount raised by taxation, £842,000,000, seems enormously large, but as the London Nation states:

"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."

[Pg 21]

GERMANY'S ECONOMIC PREPARATION FOR WAR

There is much evidence to show that long before the war began financial preparations were made in Germany for the great struggle. For a considerable period prior to 1914, Germany and Russia had been engaged in a contest to accumulate a gold supply. Russia, it is known, had begun to withdraw the large balances which she kept in German, French and English banks. In Germany the story was circulated that in 1913 the Kaiser inquired of the governor of the Imperial Bank if the German banks were equipped for war. Being told that they were not ready he is said to have replied: "When I ask that question again I want a different answer." The Imperial Bank of Germany became an active bidder at the London gold auctions for the gold which arrived weekly from South Africa, and its activity along these lines was shown by the increasing of the German gold reserve in the bank vaults from $184,000,000 on December 31, 1912, to $336,000,000, the amount it stood at a month before the war began. In addition, the Imperial Bank collected for the Government a sum of about thirty million dollars to be added to the same amount said to be stored in the vaults of the Julius Thurm at Spandau, and to be used as a war chest. Other European countries were increasing their gold supplies, so it was not surprising that the New York markets were called upon to export eighty-four million dollars of gold for six months before the outbreak of the war. The entire gold production of the world during the eighteen months ending on June 30, 1914, was approximately $705,000,000. Of this amount, about two million dollars was required for the arts, and one hundred and fifty million dollars went to British India. This left about $350,000,000 to be applied to monetary uses and the whole of this amount was absorbed by the four great central banks of Germany, France, Russia and Austria-Hungary.

In order to resist raids on the German gold reserve a policy of note issuing was adopted. The situation, as forecast by Mr. C. A. Conant in September, 1914, in the New York Times, can be gathered from the following extract:

"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."

GERMAN WAR FINANCE

Among all the belligerent powers Germany occupied the unique position of using the war as an excuse for not publishing national accounts. The sole guide to her expenditure must be looked for in the credit votes passed by the Reichstag. Using this method, it is estimated that Germany spent about $30,000,000 a day. To cover this expenditure there was a regular plan of national loan—in March and September. This was the method followed in all the four years of the war. During the intervening six months there was an issue of Treasury bills. The German people were, apparently, schooled to these [Pg 22] regular demands with commendable promptness, but the Imperial Government adopted a policy of inflation in the hope that a speedy victory would bring fruits in the shape of an indemnity, and so the German people would avoid being called upon to bear war burdens. Taxation was introduced only reluctantly and at a later period, and merely for the purpose of meeting so-called normal civil expenditure and interest on war debt. The plan followed was to spare the middle classes as far as possible from additional taxation charges.

THE LOAN BUREAU SCHEME

The war loans have been, on paper, most successful. For example, the seventh loan of September, 1917, yielded $3,000,000,000; the eighth loan nearly $4,000,000,000. There was a large amount of ready money in the country and besides this all stocks of raw material have been realized. Large as the loans have been they have not been able to keep pace with the increase of expenditure. Out of the total amount of $30,000,000,000 about $20,000,000,000 have been covered by long-term loans. Of course, owing to the peculiar situation of Germany in relation to her allies, which were dependent upon her financial support, these loans have been raised by the German people themselves. The German Loan Bureaus were criticized at the beginning of the war, and German figures show that only about ten percent. of the national loans were involved in the Loan Bureau scheme. These Loan Bureaus, it was announced, would continue after the declaration of peace. According to the London Economist, Germany followed an easy and sure policy of war finance, although the same authority does not hesitate to use the terms "complete financial ruin" in connection with German post-war finance.

The whole subject of German inflation is difficult to analyze. The Economist works out a post-war expenditure of $5,000,000,000 a year against a revenue of a billion and a half. Its estimate of German inflation is contained in the following passage:

"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 this connection it is interesting to give a summary of Germany's war expenses as reported in the London Economist:

"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'."

GERMAN WAR PROFITS

An extraordinary list of the gigantic war profits collected by Germany was drawn up by A. Cheraband, the well known French critic. He estimated that in three years Germany had spent $322.50 per head, France $444.00, Great Britain $559.75. He presents a list of war profits made by Germany. The "booty" he divided into movable and immovable property. In the former category he includes the 212,000 square miles of territory that had fallen into German clutches, and this he values at $32,000,000,000, which, he says, is a conservative estimate. Turning to the movable booty, he classifies it as follows:

  1. "Capture of 'Human Material.'—This consists of the 46,000,000 Allied subjects from whom the Germans obtain free labor. [Pg 23]
  2. "Capture of War Material.—Guns, rifles, munitions, vehicles, locomotives, railway trucks, and thousands of miles of railway. The Belgian railway system alone is worth nearly $600,000,000.
  3. "Capture of Foodstuffs.—Everywhere the Germans have stolen horses, cattle, corn, potatoes, sugar, alcohol, foodstuffs of every kind, and crops grown by the forced labor drawn from the 46,000,000 Allied subjects whom they have enslaved.
  4. "Theft of Raw Materials.—Throughout the occupied territories the Germans have appropriated coal, petroleum, iron, copper, bronze, zinc, lead, etc., either in the mines or from private individuals; textile materials, such as woolen and cotton. In the towns of northern France alone the Germans stole $110,000,000 worth of wool.
  5. "Theft of Industrial Plant.—On a methodical plan throughout the occupied territories, the motors, engines, machine-tools, steam and electric hammers, steel-rolling mills, looms, models, and industrial plant of all kinds have been carried off to Germany.
  6. "Thefts of Furniture.—The way in which furniture and household goods were stolen and carried off is confessed by implication in the following advertisement published in the Kölnische Zeitung at the beginning of April, 1917:
    "'Furniture moved from the zones of military operations in all directions by Rettenmayer at Wiesbaden.'
    "It is impossible to estimate the money value of the goods thus removed.
    "Seizure of Works of Art.—The works of art collected for centuries in museums, churches, and by private individuals in Poland, Italy, Belgium, and France have been carried off by the Germans.
  7. "War Levies.—Scores of millions in money have been secured by the Germans in the form of requisitions, fines, war levies, war taxes, and forced loans.
  8. "Thefts of Coin, Jewels, and Securities.—In the occupied regions, and especially wherever they have been obliged to evacuate those regions, as, for instance, at Noyon, the Germans have emptied, by order, the safes and strong boxes of private persons and of banks and have carried off securities, jewels, and silver. In September and October, 1917, they seized at one stroke the deposits of Allied subjects in the Belgian banks amounting to $120,000,000.
    "In view of the high prices of foodstuffs, coal, metals, petroleum, war materials and machines, it is clear that the booty thus secured by the Germans during the last three years in the occupied territories is certainly worth several billion dollars."
A Woman     Operating a Multiple Spindle Drill in an English Shell Factory.

Photo by James M. Beck

A Woman Operating a Multiple Spindle Drill in an English Shell Factory

"Since the war broke out," said M. Barriol, a French celebrated actuary, "no less than 1,500,000 women have been added to the ranks of wage earners in England, an increase of fully 25 per cent."

GERMAN MONEY INDEMNITY

It became commonplace after Germany's defeat was evident that her war cost must include the cost of the destruction she had caused her enemies. To estimate this was no easy matter. The attitude of the Germans on the subject was indicated by their constantly expressed hope that trade would recommence as usual and that they would be able to start economic relations in a favorable position. So we find the Cologne Chamber of Commerce beginning to prepare for peace by adopting a resolution expressing the hope that the destruction of French and Belgian industries would allow the rapid recovery of German power.

[Pg 24]

The Wall Street Journal used this statement as a guide to the Allied Powers for measuring the kind of indemnity that would be imposed upon 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."

The soft plan of dealing with Germany's war cost was championed by Secretary Daniels. The Springfield Republican and the New Republic seemed to agree with the Manchester Guardian that Germany ought to to to be helped rather than punished, that the main thing was to set her on her feet again.

"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'."

FORECASTING THE TOTAL COST OF WAR

It is interesting also to note an attempt made by one of the expert statiticians statisticians attached to the Guaranty Trust Company of New York to estimate the total cost of the war at the close of the four-year period. The five main Allies possessed, before the war, $406,000,000,000 for national work, a sum nearly four times as great as the national wealth of the two Central Powers. In four years the seven leading belligerents had spent $134,000,000,000. The only way to grasp the meaning of this enormous sum is to contrast the cost of the World War with all former wars. The total cost of wars that had taken place since the American Revolution was $23,000,000,000; the World War costs therefore, are six times greater. In these figures, staggering as they are, it was comparatively easy to figure out the costs, debts and interests of actual war expenditures. Much more complicated is the problem of estimating the property value destroyed through military operations on land and sea:

LOSS FROM DESTRUCTION OF PROPERTY

"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'."

ECONOMIC LOSS OF MAN-POWER

The same expert goes on to figure out the economic value of the loss of human life:

"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.

EFFECTS ON POPULATION

"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."

CARNEGIE ENDOWMENT'S ESTIMATES

The Carnegie Endowment for International Peace made public in November, 1919, an elaborate report on the cost of the World War in human life and in property and the consequent economic losses. The chief conclusions derived from this intensive study of all the conditions may be summarized as follows:

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.

Launching the Quistconck at Hog Island

Copyright by Central News Service

Launching the Quistconck at Hog Island

According to the report of the Carnegie Endowment the cargo loss at sea was $3,800,000,000, the total tonnage and cargo loss being $6,800,000,000. To offset the Allied loss in shipping, ship-building in the United States was rushed at topmost speed.

Click for a larger image.

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."

THE WAR AS A PRODUCT OF HIGH PRICES

All of the great wars in European history have been followed by periods of increased production and economic expansion. Experts are convinced that the World War will prove no exception to the world's previous experience. Wars have been the principal influence that have determined the course of commodities and prices. In the Napoleonic Wars the index number rose seventy-two points in twenty years, but during the four years between 1914 and 1918 there was a rise of one hundred and eight points in four and a half years, a movement which Edgar Crammond, widely known British expert in economic and financial affairs, declared to be a movement to which there was no precedent in point of rapidity or magnitude. In an address outlined in the New York Journal of Commerce this authority estimated the direct cost of the war to the Allies as being roughly $145,000,000,000. The Central Powers had spent about $60,000,000,000. The total cost in dollars he estimated at $260,000,000,000. The upheaval caused by the war was manifested, according to the same authority, in the rise of the cost of living and in the universal increase of wages. Other economic consequences will be more gradually unfolded. Prospects of fall in the price of commodities and wages as the result of peace, he thinks, will be arrested for two reasons: First, the vast increase in the amount of paper money; second, the huge amount of public debts to the belligerents. He saw an additional psychological cause in the attitude of the laboring classes to maintain wages at a higher level than before the war and to improve the standard of living.

Reduced production is sufficient to account for all the economic disturbances that were produced during the war, according to the London Statist, which says:

"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."

QUESTIONS OF INFLATION

The enormous advance of prices in England was synchronous with the issue of currency notes to an excess of £700,000,000 beyond the gold reserve. High officials in British administration ascribed this rise to the increased consuming capacity. According to the British Board of Trade a sovereign could purchase no more during the war time than eleven shillings would just before the war started. A writer in the Fortnightly Review, Mr. W. F. Ford, quotes Jevons' remark in his classical book on money in explanation of the phenomenon. "A number of bankers all trying to issue additional notes resemble a number of merchants offering to sell corn for future delivery, and the value of gold will be affected as the price of corn certainly is. We are too much inclined to look upon the value of gold as a fixed datum line in commerce, but in reality it is a very variable thing." Substitute today the word Government for bankers and one can see the reason for the upward rise in prices. This rise would take place apart from any questions of war waste, profiteering, difficulties of transport by sea or land or shortage of labor. All the countries involved have followed the same policy of inflation. The operation is depicted in the following passage:

"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."

CURRENCY EXPANSION IN GREAT BRITAIN

In Great Britain £200,000,000 worth of new paper currency was placed in circulation and there was a considerable expansion in the use of banknotes, silver and copper coinage. Proposals were made that the famous English Bank Act should be repealed and that excess issues of banknotes should be made legal on the payment of a tax. But apart from these theories of involving the banking system there was a good deal of adverse criticism.

"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."

AMERICA'S EXPERIENCE WITH INFLATION

Protests against war inflation were not confined to British specialists in finance. What is inflation? As used by the more careful writers on the subject today, it is taken to signify the increase of bank credits not represented by any immediate addition to current wealth. For example, if the Government borrows by an issue of bonds, such bonds taken by the banks, and payment for them made in the form of bank credit which is at once transferred to individuals who have furnished labor or supplies, it is evident that there has been a net addition to the purchasing power of the community not represented by any corresponding addition to wealth whether of a saleable or available form. Mr. Delano, a member of the Federal Reserve Board, said that the war had produced a world inflation the like of which had never occurred before—"The usual symptoms of such methods of inflation are the disappearance of metallic money and the general advance in the prices of commodities." He gives the following illustration of what has taken place in this [Pg 29] process of inflation:

"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."

CIVIL WAR INFLATION.

The United States had large experience with inflation during the Civil War. Some $500,000,000 were in this way added to the cost of the war which might have been avoided. A plain statement of the real incidents of inflation is given by Mr. A. C. Miller of the Federal Reserve Board in his Financial Mobilization for War, in the following passage:

"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."

INFLATION ILLUSTRATED.

One of the ways in which inflation was caused in the United States during the war period was the plan adopted by the banks of financing the loan directly by means of bank credits to the buyers. According to Mr. Carl Snyder the banking officials roughly agree that on the first Liberty Loan for $2,000,000,000 the banks may have loaned somewhere near half the total and on the second loan even more. Of course, this means a heavy expansion of bank credit. Economists are generally agreed that the flooding of the country with paper money brings about an enormous rise in prices. They differ chiefly in regard to the degree of inflation. The most accepted statement of inflation is that prices vary directly as the volume of the actual currency employed and its rate of turn over or velocity, and inversely with the volume of trade. The effect of bank credits is exactly that of an excessive issue of notes; that is, if they are expanded more rapidly than the actual volume of business there is a rise in prices, that is to say there is inflation.

The situation of the country during the war in regard to business was put plainly by Mr. Snyder in the following words: "Railroads cannot haul any more goods. The government is already stepping in to shut down on shipments on certain lines of industry. We can not get any more coal unless labor is drafted from other industries, and as a whole we cannot get any more labor as is evident from the fantastic wages that are now being paid. In a word, production and therefore the actual volume of exchange is practically at the limit and has been for a year or more. No expansion of bank credits can put this production any higher. It follows, therefore, as a practical fact that any expansion of bank loans now means inflation—to all practical intents dollar [Pg 30] for dollar." Because of the introduction of a billion dollars worth of gold into the country, prices have risen nearly one hundred percent. The expansion of bank credits increases the cost of living and the cost of the war will be doubled.

Some bankers estimated that if the war lasted the expansion of bank loans might reach $50,000,000,000. The progress of these loans was encouraged by the cutting of the required metallic reserve under the new Federal Reserve system and the system of book credits with the Federal Reserve banks allowed to the banks that are members of the system. The following is Mr. Snyder's description of the way the inflation was encouraged.

"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."

He then went on to speak of the possibilities of this inflation and uttered a warning of the danger, because the only obstacle in the way was the good sense and conservatism of the American banks. Some authorities hold that a war cannot be fought without inflation. Mr. Snyder thought that the United States with large ante-war income could and should have tried the experiment. People want easy money and flush times. If credit were contracted there would be tight money and a high interest rate. Mr. McAdoo and the Administration at Washington feel highly elated when they roll up five billion of statistics, half of which are merely bank rolls. It seems not to matter that all this may add two or three billion to the already swollen credit currency and that the millions of poor people, small investors and life insurance holders who cannot expand their income in any adequate way must pay the piper. These are the millions who rarely have any voice in national affairs, and all the more so because they are for the most part ignorant. It seems an idle consequence that we may spend perhaps ten long weary years of hard times, of falling prices, declining business and sharp distress, paying for the orgy of inflated prices, waste and extravagance in which we are now indulging.

Ship-building at Camden, N. J.

Photo by Paul Thompson

Ship-building at Camden, N.J.

One of the financial effects of the war was the transformation of the United States from a debtor to a creditor nation. Immense private fortunes were made. In no industry was there a greater boom than in ship-building.

CREDIT EXPANSION

The wide expansion of credit can be studied by making a comparison of the gold holdings of the leading nations. For example, in 1914 just before the outbreak of the war, the amount of cash held by all the banks of the United States was estimated at about $1,639,000,000. Of [Pg 31] this amount about $913,000,000 was in the form of gold or gold certificates. Upon this basis there rested a structure of credit amounting to $21,351,000,000. In other words the gold basis of the country's deposit credits amounted to 4.27 percent.

In 1916 the cash held was $1,911,000,000; about $1,140,000,000 was in gold; and on this basis there rested a credit structure of $28,250,000,000.

UNITED STATES A CREDITOR NATION

One of the financial effects of the war was the transformation of the United States from a debtor to a creditor nation. The reconstruction period in finance is certain to bring about a situation described by a writer in the Wall Street Journal as one of the most interesting developments known in financial history. Financial waste in emergency measures was a superficial side of America's part in the World War. But this writer considers that what happened during the war was not altogether financial waste:

"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."

After the United States took an active part in the war large credits and loans were made in behalf of other countries as the following excerpt shows:

"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:

CountryLoans and CreditsLoansBalances Under
Agreed UponMadeEstablished Credits
Great Britain$2,045,000,000$1,985,000,000$311,070,250 60,000,000
France1,285,000,0001,225,000,00050,000,000 60,000,000
Italy500,000,000450,000,00050,000,000
Russia325,000,000187,729,750137,270,250
Belgium77,400,00075,400,0002,000,000
Serbia6,000,0004,200,0001,800,000
Totals$4,238,400,000$3,927,329,750$311,070,250

"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."

DISAPPEARANCE OF GOLD CURRENCY

During the war gold almost ceased to be currency in all the Allied countries. The Central Powers at the end of the struggle had comparatively little. Of the total gold production the United States produced about twenty-five percent., while the British Empire produced nearly sixty-four. A writer in the Edinburgh Review proposed to take the opportunity of creating a standard price for gold. For example, if the standard price of gold were reduced to half, the prices of all commodities would come down in sympathy. We must take advantage of the fact that we are working with a paper currency, and all authorities agree that financial stability is only secured by the backing of as much gold as possible against paper securities and emergencies.

The plan involved an increase of the standard price. The success of the scheme depends upon the concordant will of the United States and Great Britain to adopt it as the following article suggests:

"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?"

WAR'S EFFECT ON SILVER

Along with all other commodities, that cinderella of finance—silver—had a share in the general rise in prices. One of the reasons is the enormous falling off of silver production in Mexico, where one-third of the total world supply is produced; another is the great demand for silver. Prior to the war, the use of silver plate by the wealthy classes had largely fallen off; but the war, because of the rise in wages, brought about a largely increased demand for silver to be used in ornaments:

"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."

The use of silver in coinage, too, was notably increased. Gold disappeared in countries where gold coins were used; paper money and silver token money took its place. Another reason for the advance in silver is connected with the demand for the metal in eastern countries. According to the London Statist:

" ... 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."

STOCK EXCHANGE WAR

The accompanying diagram showing how military operations in Europe affected the average prices of fifty stocks, half industrial and half railway, was published in the New York Times Annalist:

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.

A further indication of how military operations reacted on Stock Exchange quotations was shown in the decided improvement that took place since the end of July, 1918, after the Germans were pushed back in their drive towards Paris. The most direct way of measuring this influence is to take the quotations for the bonds and notes of the Allied Governments dealt in at the New York Stock Exchange since 1915:

"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:

/——1917——\/——1918——\Aug.
HighLowHighLow22
Am. For. Sec. 5s.1919977/8909894½97½
Anglo-French 5s.192095817/89588¼94¾
Canada 5s.19261008995907/892
Canada 5s.1931100¼87½94887/8923/8
Fr. Republic 5½s.191910191½9994987/8
U. Kingdom 5s.1918985/895½10097997/8
U. Kingdom 5½s.1919987/893¼99¼95¼98¾
U. King. 5½s, new19191019/1695¼100995/8
U. Kingdom 5½s.192198½84½95¾915/8953/8
French Cities
Paris 6s.1921967/873½921/8815/8917/8
Bordeaux 6s.1919967/87495½84947/8
Lyons 6s.1919967/87495½8494¾
Marseilles 6s.1919967/87495½8494¾
Russian Govern.[6]
External 6½%98¾4564½3361
External 5½%1921985/83660½34½57

[6]Curb market quotations.

Diagram Showing the Effect of the War on the Prices of Stocks

Diagram Showing the Effect of the War on the Prices of Stocks

(See explanation on page 32)

"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'."

GERMAN PROPERTY IN AMERICA

Until the United States entered the war with Germany it had never been realized that an enormous share of the economic wealth of the country was under German [Pg 34] control. Attorney-General Palmer, in an address at Detroit, estimated this share to be about two billion dollars in money value, with an economic and political value far greater:

"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'."


II—WARTIME FOOD AND PRICE PROBLEMS
Intricacies of a Perplexing and Critical Situation Which Taxed the Ingenuity of Statesmen of All the Belligerents

Europe was financially plunged into anarchy in August, 1914. All the exchanges were demoralized, checks were not cashed, the five-pound note became a worthless scrap of paper. The only thing that counted was gold and goods. Prices advanced to prohibited levels. England, in danger of a food famine, set up a Food Control Committee. Then the discovery was made that the country was short of sugar. This shortage was due to the fact that the war broke out when supplies from Cuba and elsewhere were stopping and when the German imports had not begun. Sugar was bought to the value of $86,000,000 from every country which had it to sell. When the sugar merchants began to put the price up, purchasing was stopped for the time. Later the Government managed to secure the quantity required, because it became the only sugar importer. It also supplied the French Government with sugar at cost price. Any further difficulties with the sugar supply were due to freight shortage. By this system sugar was cheaper in England than in any other belligerent country and the Exchequer took in $34,000,000 in the way of taxes, after raising the rate from 45¢ per hundred weight to $3.36 per hundred weight.

In its control of the meat situation, the Government put itself in a dominating position by seizing all steamers that had refrigerating space. Enormous quantities of canned meats were imported from the United States from the American packing firms, but the Government practically created a state monopoly in frozen meat. This product was distributed by it to all the other belligerents, except Russia. The purchase of wheat was entrusted to a large importing house, which acted as an agent of the Government. For supplying the fish market, a service of fishing boats was maintained and a deal with Norway was made by which the whole Norwegian fish supply was secured:

[Pg 35]

"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."

THE FOOD CONTROLLER

No policy of laissez-faire for handling the food situation was possible. The need of direction was paramount and required administrative talent of a high order. Fortunately the United States met this demand.

The work of Herbert M. Hoover was one of the main factors in securing the Allied victory. This was recognized by as conservative an organ of public opinion as the London Economist, which speaks of him as an unimpeachable authority and as the organizer of the Allied victory. His experience is a tribute to the wonderful readiness and self-sacrifice shown by the Americans in the matter of food consumption and to the untiring and increasing success of our fleet in combating the submarine.

How much success in the war depended upon food supplies may be gauged from the panicky feeling prevailing in Government quarters in England when it was reported in the winter of 1917—18, that the American wheat surplus had been used up. Lord Rhonda, the British Food Controller, cabled to Mr. Hoover—"We are beaten, the war is over." Then began the era in the United States of wheatless days and war bread. The result of this period of national abstinence enabled the exportation to Europe of about 150,000,000 bushels of wheat. A British member of the Allied Food Commission said it was very remarkable to see a whole [Pg 36] nation denying itself of all wheat products, "not because it was short but because it wanted to assist." This rationing was accomplished with very little exercise of authority, and the peril of the defeat of the Allies by famine was averted.

Centres of Live Stock Production Throughout the World

Centres of Live Stock Production Throughout the World

AMERICA'S CONTRIBUTION IN FOOD TO THE ALLIES

Mr. Hoover in a letter to President Wilson stated that the total value of American food shipments to Allied countries for their armies, for the civilian population, Belgium relief and Red Cross, amounted to about $1,400,000,000 for the fiscal year, 1918:

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

Pounds.
Fiscal year, 1916—172,166,500,000
Fiscal year, 1917—183,011,100,000
Increase844,600,000

"'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,

Bushels.
Fiscal year, 1916—17259,900,000
Fiscal year, 1917—18340,800,000
Increase80,900,000

"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'."

AGRICULTURE AND THE WAR

The significance of the strides made in agricultural productivity by which Mr. Hoover's food campaign was made possible and successful is brought out in the report of the Secretary of Agriculture for 1918:

"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."

ACREAGE UNDER CULTIVATION

"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."

YIELDS OF PRINCIPLE CEREALS

"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:

 

ACREAGE OF CROPS IN THE UNITED STATES.

[Figures refer to planted acreage.]
Crop1918,
subject to revision
1917,
subject to revision
19161914 Annual average 1910—1914.
CEREALS
Corn113,835,000119,755,000 105,296,000103,435,000 105,240,000
Wheat64,659,00059,045,000 56,810,00054,661,000 52,452,000
Oats44,475,00043,572,000 41,527,00038,442,000 38,014,000
Barley9,108,0008,835,000 7,757,0007,565,000 7,593,000
Rye6,119,0004,480,000 3,474,0002,733,000 2,562,000
Buckwheat1,045,0001,006,000 828,000792,000 826,000
Rice1,120,400964,000 869,000694,000 733,000
Kafirs5,114,0005,153,000 3,944,000
 Total245,475,400 242,810,000220,505,000 [7]208,322,000 [7]207,420,000
VEGETABLES
Potatoes4,113,0004,390,000 3,565,0003,711,000 3,686,000
Sweet Potatoes959,000953,000 774,000603,000 611,000
 Total5,072,000 5,343,0004,339,000 4,314,0004,297,000
Tobacco1,452,9001,447,000 1,413,0001,224,000 1,209,000
Cotton37,073,00033,841,000 34,985,00036,832,000 35,330,000
 Grand Total.289,073,300 283,441,000261,242,000 [7]250,692,000 [7]248,256,000

[7]Excluding kafirs.

NEED OF FOOD CONSERVATION

Statistics have not yet been published as to the comparative food production before the war and during the war years. Statistics of this kind would go a long way towards settling the question whether high prices were due to currency inflation or due to a scarcity of food. It must be remembered that the arguments on both sides are expressed very dogmatically. Take, for example, the following passage from an address by Mr. Moulton: "The food problem," he says, "goes much deeper than conserving the use of an existing stock of foodstuffs. The real food problem is how to secure a supply of food large enough to meet the continuous requirements of this nation and our Allies. This is more a question of production than of consumption. That is to say, conservation in consumption is less important than large production. There is no possible escape from a substantial shortage of the necessities of life."

[Pg 39]

 

PRODUCTION IN THE UNITED STATES

[Figures are in round thousands; i. e., 000 omitted.]
Crops 1918
(unrevised estimate November 1918).
1917,
Subject to revision.
1916 1914Annual average 1910—1914
CEREALS
Cornbush2,749,198 3,159,4942,566,927 2,672,8042,732,457
Wheatdo918,920 650,828636,318 891,017728,225
Oatsdo1,535,297 1,587,2861,251,837 1,141,0601,157,961
Barleydo236,505208,975 182,309194,953 186,208
Ryedo76,68760,145 8,86242,77937,568
Buckwheatdo18,37017,460 11,66216,88117,022
Ricedo41,91836,278 40,86123,64924,378
Kafirsdo61,18275,866 53,858
Totaldo5,638,077 5,796,3324,792,634 4,983,1434,883,819
VEGETABLES
Potatoesbush390,101 442,536286,953 409,921360,772
Sweet potatoesdo88,114 87,14170,955 56,57457,117
Beans(commercial)do17,802 14,96710,715 11,585
Onions, fall commercial cropdo13,438 12,3097,833 [8]
Cabbage (commercial)tons565 475252 [8]
FRUITS
Peachesbush40,18545,066 37,50554,10943,752
Pearsdo10,34213,281 11,87412,08611,184
Applesdo197,360174,608 204,582253,200 197,898
Cranberries, 3 Statesbbls374 255471644
MISCELLANEOUS
Flaxseedbush14,6468,473 14,29613,74918,353
Sugar beetstons6,5495,980 6,2285,5855,391
Tobaccolbs1,266,686 1,196,4511,153,278 1,034,679991,958
All haytons86,25494,930 110,99288,68681,640
Cottonbales11,81811,302 11,45016,13514,259
Sorghum sirupgalls.29,757 34,17513,668
Peanutsbush52,61756,104 35,324
Broom corn, 5 Statestons52 5239
Clover seedbush1,2481,439 1,706
[8]no estimate

The same point of view is expressed in the following extract:

"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."

In a war of attrition, physical deterioration of the masses of society in consequence of inadequate nourishment was certain to result in a serious decline in national morale, and this was a decided factor in the final outcome of the struggle. Food and other physical necessities would win the war. Mr. F. A. Vanderlip used the same argument for economies:

"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."

GREAT BRITAIN'S FOOD DANGER

Under the long régime of free trade Great Britain depended upon other countries for its food supply. To offset the submarine campaign earnest appeals were made to make England self-supporting in this respect. The appeals were answered and were given enthusiastic popular support. What strides were made in England's agriculture since the war began can be seen from a paragraph in the London New Statesman:

"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."

ACREAGE INCREASE DUE TO WOMEN'S LABOR

"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.'"

EVIDENCES OF FOOD SHORTAGE

One of the by-products of the food situation in England was the suffering occasioned by the scanty food supply on the canine population of the island. The London Times of June, 1918, [Pg 41] contained the following pathetic paragraph:

"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."

Members of "The Women's Land Army" in England

Copyright by Underwood & Underwood

Members of "The Women's Land Army" in England

Girls weeding frames in which cauliflower plants were set out to be ready for market in the early spring.

Click for a larger image.

But while English dogs were threatened with starvation, dogs of Germany were having a still worse time. Numerous cable paragraphs were published giving the price of dog flesh in various German cities.

Indeed, from all over Germany, at the closing period of the war, the hope of drawing upon Russian food supplies was seen to be illusory. There was much talk of getting food from the Ukraine, but this was probably used to keep up popular morale. The situation in the Ukraine did not encourage German hopes. This was frankly admitted by the Frankfort Zeitung:

"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."

FOOD CONTROL FOR NEUTRALS

It is interesting to study the effect of the war on the food situation of the neutral powers. In Scandinavia, there was at first a panicky feeling of a world-wide catastrophe; then there came the realization of an unparalleled chance for making profit. The international shortage of tonnage made freight rates soar. Shipping shares became attractive. Then came the submarine sinkings, and the refusal of the Allies to allow goods to be imported into Scandinavia for the sole purpose of selling them to the Central Powers. Imports fell off rapidly. Everything which could be sold had been sold in the beginning of the war. The next step was the placing of an embargo on exports by the Scandinavian governments:

"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."

FEEDING EUROPE'S STARVING MILLIONS

A preliminary accounting was rendered on December 1, 1919, by Herbert C. Hoover, covering the $100,000,000 fund appropriated by Congress for the relief of starving Europeans. From Mr. Hoover's report it appears that in payment for relief supplied to eight European countries Mr. Hoover decided to accept their notes bearing 5% interest. Mr. Hoover's report stated:

"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.

POLAND THE BIGGEST DEBTOR

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

Poland$57,000,000
Czechoslovakia6,750,000
Armenia10,000,000
Russia.5,000,000
Esthonia2,300,000
Latvia3,000,000
Lithuania700,000
Finland4,000,000
——————
Total$88,750,000

"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."

[Pg 43]

FOOD CONDITIONS AFTER THE ARMISTICE

It is impossible in words to show what the food conditions were in Europe after the armistice was signed. The United States Food Administration issued a statement that there were 420,000,000 people in Europe with food supplies sufficient to last only until next harvest for a small proportion of them. Some countries had to be supplied at once; others, it was believed, could help themselves temporarily, provided they could be given guarantees of food for the future. Many countries were devastated, undernourished and stripped bare of food and agricultural equipment because of enemy occupation. A graphic picture of the situation was presented by the Food Administration in the Hunger Map of Europe.

A Map Issued by the Food Administration to Show Food Conditions in Europe After the Signing of the Armistice.

A Map Issued by the Food Administration to Show Food Conditions in Europe After the Signing of the Armistice.

NEW FACTORS AFTER NOVEMBER, 1918

An official survey of how cessation of active fighting introduced new factors in the food situation is presented in a publication of the Agricultural Department, July, 1919.

"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.

Note.—Estimates of European crop and live-stock production, consumption, and stocks on hand, surplus or deficiency, are based on incomplete data, which are subject to change as more complete data become available.
Import RequirementsWheatRyeBarleyOatsCornRice, Hulled
EUROPEMillion pounds
Allies52525501502201,945
Neutrals12440303878302
64965801882982,247
Germany68149332438
Austria-Hungary11215183
Total Europe72865221933452,868
Other countries7,411
Grand total10,279
Surplus (estimated):
Canada1005075
Argentina18590
Australia210
India18,000
Other countries (pre-war)7,400
Total, except United States49550759025,400
Net deficit23365179118255
UNITED STATES, 1918
Production917892501,5382,5831,123
Consumption640321301,2542,730816
Surplus27757120284307
Deficit147
WORLD
Surplus4416614,428
Deficit859402

[Pg 45]

"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.

Note.—The figures are based on pre-war averages, 1909—1913, which may be considerably changed by post-war conditions.
MISCELLANEOUS CROP REQUIREMENTS,
1919.
Import requirements of—Cotton
(50 pounds bales).
Tobacco
(million pounds).
Flaxseed
(million bushels).
EUROPE
Allies, including Japan8,058,00034021.6
Neutrals720,0001507.9
Germany and Austria-Hungary (pre-war boundaries)2,932,00035515.7
Other countries1,200,0017
Total requirements13,010,0001,02245.2
SURPLUS (ESTIMATED)
Countries, except United States, recently reported (1918)2,680,00040
Average, 1900—1913, for other surplus countries500,00650[9]5.7
Total, except United States3,180,00065040
UNITED STATES
Production, 191811,700,001,34014.7
Consumption6,600,00072026.7
Surplus5,100,000620
Deficit12
WORLD
Surplus148
Deficit4,730,00017.2
[9]Russia

"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."

CENTRAL EUROPE IN DIRE WANT

News from Europe showed everywhere acute suffering from lack of food; even in France the country districts were badly off. A member of the Federal Food Administration reported that bread was practically the only food that anyone could afford. President Wilson referred to this subject in the address with which he accompanied his announcement of the terms signed by Germany. He definitely took a stand in favor of provisioning the country, explaining that by use of the idle tonnage of the Central Empires it ought presently to be possible to lift the fear of utter misery,

"'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.'"

TO PREVENT FAMINE IN GERMANY

Both in England and in France there was official recognition of the need of preventing famine conditions in Germany. It was believed that large imports of wheat could be brought from Australia and India. The Times (London) said:

"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."

A Food Riot in Sweden

Copyright Underwood & Underwood

A Food Riot in Sweden

News from Europe immediately following the armistice showed everywhere acute suffering from lack of food. A member of the Federal Food Administration reported that bread was practically the only food that anyone could afford.

Click for a larger image.

SUGAR DISTRIBUTION

Among the multiform activities of the American Food Administration, the distribution of sugar was most difficult. America had to supply sugar to the Allies and retain enough for the use of its own people. The matter of the feeling of personal self-sacrifice was difficult enough but there was the further question of how to organize and allocate distribution. The government had to decide the amount to be distributed to sugar-using industries. These industries had to be classified. For the manufacture of soft drinks it was decided to allow only one-half of the sugar used in normal times. Bakers were given a 70 percent. allotment and hotels were permitted three pounds of sugar to every ninety meals served, including cooking.

The sugar resources of the country, both cane and beet-root, were regulated by the so-called Sugar Equalization Board. The operation of this body was explained officially in the Literary Digest:

"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."

KEEPING DOWN THE PRICE

What might happen without this Sugar Equalization Board is illustrated by the Civil War, when sugar, because of speculation, went as high as thirty-five cents a pound. And at that time there was no world shortage of sugar. If there were no sort of sugar control today, it may readily be believed that the consumer might have to pay sugar prices soaring far above those Civil War levels.

"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."

POTATO ECONOMY

In order to remedy the generally inadequate food supply, it became necessary to treat such a standard food as the potato according to newly devised methods by which it could be stored for permanent use and widely distributed. In a lecture in Economics given to a class of the National City Bank, it was stated that, since the war began, it was found practicable so to preserve the potato by grinding and drying as to transform it from a local and perishable commodity to one which could be produced in almost unlimited quantities and distributed to any part of the world:

"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."

FUEL CONTROL

The coal industry was the one basic war industry. Food and munitions were dependent upon the coal supply. It is not necessary to elaborate this argument; it is patent to every one. The following table gives a view of the coal production of the most important countries: [Pg 48]

COAL PRODUCTION IN THE LEADING COAL-PRODUCING COUNTRIES OF THE WORLD
Country19131914191519161917
United States570,048,125513,525,477531,619,487585,372,568621,409,629
Great Britain287,698,617265,664,393253,206,081256,348,351248,473,119
Germany278,627,497245,482,135235,082,000
Austria-Hungary59,647,95730,896,38828,558,719
France40,843,61829,786,50519,908,00021,477,00028,960,000
Russia35,500,67427,820,63213,622,40013,266,760
Belgium22,847,00015,930,000
Japan21,315,96221,293,41920,490,74722,901,580
India18,163,85617,103,93217,254,309
China15,432,20018,000,000
Canada15,012,17813,637,52913,267,02314,483,39514,015,588
Spain4,731,6474,424,4394,686,7535,588,594
Holland2,064,6082,333,0002,656,000

THE COAL SHORTAGE

A rapid advance in coal prices was inevitable under war conditions of unceasing demand and diminishing supply. Says Mr. William Notz in an article in the Journal of Political Economy, June, 1918:

"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."

FUEL CONSERVATION MEASURES

American Fuel Control had to grapple drastically with a situation of shortage so dangerous that a catastrophe might have been precipitated at any moment. Fuel Administrator Garfield issued orders for coal conservation of a most startling and unusual character. Factories east of the Mississippi were ordered shut down for five days beginning January 18, 1918. Monday, furthermore,

"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.'

SHUT-DOWN OF INDUSTRY TO SAVE COAL

"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.'"

Harry A. Garfield

Copyright by Underwood & Underwood

Harry A. Garfield

As Fuel Administrator during the war he issued orders for coal conservation of a most startling character. Factories east of the Mississippi were ordered shut down for five days beginning January 18, 1918. Monday was decreed a holiday for ten weeks "on which offices, factories and stores must use only such fuel as is necessary to prevent damage."

Click for a larger image.

THE GOVERNMENT'S EXPLANATION

From Fuel Administrator Garfield's explanation of the necessity of the order the following passage is taken:

"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."

GARFIELD'S PLAN FOR FUEL ECONOMY, 1918—19

After the trying experiences of the winter of 1918, the Fuel Administration began to prepare in the following summer for another prospective shortage in coal supply. Fortunately the following winter was remarkably mild throughout the country. But the plans outlined by the Fuel Administration are more than useful as a matter of record. They may be used as a model under other conditions of fuel shortage. The following passage from the Fuel Administration Bulletin illustrates the plan of campaign:

"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."

DIFFICULTIES OF FUEL CONTROL

Some conception of the difficulties involved in the work of fuel control was set forth officially in a paper published by the Fuel Administration called Fuel Problems in War Time. The production of coal, it pointed out, stands on a different basis from that of any other major industry of the country. The differences are illustrated in the following paragraphs:

"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.

COAL AND THE STEEL SUPPLY

"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."

SIDE ISSUES OF FUEL CONTROL

Economizing coal involved all kinds of unexpected side issues. As an illustration of the far extended reach of the Fuel Administration there was the example of the skip-stop plan in street railway traffic enforced by the Federal administration. A writer in the Chicago Engineering and Contracting Journal suggested, September 4, 1918, that the Government should adopt and extend the policy of compelling individuals and corporations to use economic methods and machines:

"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."

FUEL CONTROL IN GREAT BRITAIN

Coal mining was always one of the most significant elements in British trade. Before the war 270,000,000 tons of coal were produced in [Pg 52] the mines of Great Britain. Parliamentary legislation of a most radical character dealing with the ownership and operation of coal mines was passed. The main provision of this legislation was described in the following passage from the London Morning Post:

"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."

Drying Fruit and Vegetables

Photo by P. Thompso

Drying Fruit and Vegetables to Save Tin and Glass

Conservation became a great watchword during the World War. Mr. F. P. Lund of the U. S. Department of Agriculture showed women how tin and glass could be saved by drying fruit instead of canning it.

Click for a larger image.

[Pg 53]

OTHER FORMS OF CONSERVATION

The War Industries Board worked out a program for clothing conservation that showed a positive genius for detail. The most technical directions were issued regarding clothing. Double breasted coats, for example, were eliminated and the Board urged the wearing of sack suits only. Even the complicated subject of handling women's attire had no terrors for the experts employed by the Board. The characteristic features of its order can be judged by the following extract from the directions published on this subject:

"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)."

LEATHER CONSERVATION

Germany was not the only country prepared to employ substitutes. When the National Army in the United States was organized the Wall Street Journal predicted that on account of the large consumption of leather for military purposes, the civilian population would be obliged to have thinner soles and probably to use leather substitutes:

"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."

[Pg 54]

FAIR PRICE LISTS

"Back on the Farm"

Photo by P. Thompson

"Back on the Farm"

The number of slaughterable animals decreased in the United States and in Europe during the war. The shortage of fats was helped by the production of more animals, increasing the weight of those slaughtered, and by changed methods of cooking, including the substitution of vegetable oils for butter.

Click for a larger image.

One of the plans to prevent the discontent arising from food speculation promoted by retailers and profiteers, was the preparation of fair price lists to protect the consumer. Every week new price lists were prepared so as to cover new fluctuation of cost to the retailer. These lists were given to the newspapers so that the consumer might be steadily informed and advised as to what he ought to pay the retailers in his city or town. It was shown how the patriotic retailer gained by the protection that this list offorded afforded him against the danger of unpatriotic profiteering. The United States Food Administration explained in a public statement the significance of the fair price lists. "They were nothing more," it said, "than bulletins to inform the public of the prices the retailer has to pay for certain foods, and the price he has to sell them to the consumer.

"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."

[Pg 55]

HOW FAIR PRICE LISTS ARE MADE UP

"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."

PROFITEERING

The natural and inevitable results of war on living conditions with food shortage and high prices were an unfamiliar factor in American experience for two generations. The artificial product of war time industry, "profiteering," was hard to be evoluted and caused resentment against those responsible for the practice. To deal with profiteers was no easy matter. How can profiteering be discriminated from legitimate profit-taking? How, too, can its existence be proved, for high fixed prices are not always an evidence of profiteering methods. The complexities of the various trade practices lumped together under the term profiteering are illustrated in the pamphlet on Profiteering, issued by W. B. Colver, Chairman of the Federal Trade Commission, in the form of a letter submitted on request to the U.S. Senate:

"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."

PROFITEERING IN THE MEAT INDUSTRY

"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."

PROFITEERING IN THE MEAT INDUSTRY

Some further details on the methods of securing huge profits in the meat packing industry are given in the following:

"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."

JUGGLING OF ACCOUNTS—HUGE SALARIES

Mr. Colver gives information supported by trustworthy data on other devious and subtle types of profiteering practices:

"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."

WAR COST OF LIVING

A complete synopsis of the cost of living situation in the United States, during the four pears' years' period July, 1914, to June, 1918, was issued by the National Industrial Conference Board after a country-wide survey. The basis taken was that of family budgets divided under five heads: food, shelter, clothing, fuel and light, and sundries. The average increase for the period was shown to be between 50 and 55 per cent. The most marked advance was in clothing, 77 per cent. But the food advance of 62 per cent. was really more important because food represented 43 per cent. of the average expenditure, while clothing represented only 13 per cent. Wholesale prices, the report pointed out, are not to be relied upon in estimating the cost of living, because many articles enter only indirectly into the family budget. Often, too, wholesale prices are not reflected in retail prices until months later. The estimates given by the Board were based upon the expenditures of eleven thousand families:

"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:

Budget ItemPer Cent. Distribution of Family ExpenditurePer Cent. Inc. in Cost Dur'g War Period to June, 1918Per Cent. Increase as Related to Total Budget
All items.100.0..52.3
Food43.16226.7
Rent17.7152.7
Clothing13.27710.2
Fuel and light5.6452.5
Sundries20.45010.2

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:

Per Cent.
For families with incomes up to $60043
For families with incomes from $600 to $1,00041
For families with incomes from $1,000 to $2,00040

"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."

Year and MonthRelative Wholesale Price ofRelative Retail Price of Food
Farm ProductsFood, Etc.
1913
Average for year100100100
January979998
April979698
July101101100
October103102104
1914
Average for year103103102
January101102104
April1039597
July104103102
October103107105
1915
Average for year105104101
January102106103
April10710599
July108104100
October105104103
1916
Average for year122126114
January108114107
April114117109
July118121111
October136140121
1917
Average for year188177146
January147150128
April180182145
July198180146
October207183157
1918
January208188160
April217179154

CIVIL WAR COST OF LIVING

The Civil War years of the United States were always remembered as the era of high prices. Yet it is interesting to know that the increase in living cost after the United States had been in war one year was greater than the increases in the fourth year of the Civil War. During the Civil War prices rose from 100 to 117 per cent., but necessities were relatively cheaper than at present because the currency was depreciated. In January, 1864, gold was at a premium of 52 per cent.

Emerson David Fite, assistant professor of history in Yale University, describes "Social and Industrial Conditions During the Civil War" as follows:

"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."

WHERE THE COST OF LIVES WEIGHED THE MOST

The rapid rise in the cost of living was much more severely felt by the classes of the population dependent upon small or less rigid incomes. In many industries wages increased faster than everage average living expenses. Figures published by the New York Labor Bureau show that the sum distributed in wages to industrial workers was substantially doubled in the four years of warfare. Investigation conducted by the National Industrial Board of Boston showed that there had been an increase of 50 to 55 per cent. in the budget of the average wage earner from July, 1914, to June, 1918.

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

Food62%
Rent15%
Clothing77%
Fuel and light45%
Sundries50%
Average increase (depending on apportionment of these respective items in the family budget)50% to 55%

In explanation of these figures the report goes on to say:

"'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."

All articles of food, we are told, show a considerable increase in price since 1914, exceptional advances being recorded in the case of flour, lard, and cornmeal. The item of rent, says the report, "showed such wide variation that no general average applicable to all sections of the country could be reached," but the 15 per cent. estimate "is apparently ample to cover the increase in wage-earners' rents in New York, Chicago, Philadelphia, Boston, and St. Louis, which alone include several millions of the country's industrial population." Of the increase in clothing prices we read:

INCREASED COST FOR WEARING APPAREL

"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."

WAR PRICES AND LUXURY IMPORTS

In spite of the contention that war-time conditions led to an increased standard of luxurious living, statistics of imports indicated a rapid fall in articles of luxury brought into the country. In the fiscal year, 1918, there was a material decline compared with the preceding year and a marked decline when compared with the year before the war:

"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."

The Nations and Their Wheat Supply

The Nations and Their Wheat Supply

Under the Lever Bill, which became the Food Control Law after the United States declared war, the President was authorized to fix a reasonable guaranteed price for wheat.

GOOD EFFECTS OF PRICE CONTROL

It became accepted on all sides that price control was the one method to correct the inequalities of war conditions. It was necessary to prevent the poorer classes in the population from having an inadequate consumption of wealth. There was the political side, too. Price control had an effect on the morale of large strata of the population. It acted as a bulwark against the rising tide of discontent and internal dissension incident to warfare on a democratic scale. Mr. Sydney Webb, a well known English student of labor problems, conceded that the British government had by its system of price control been fairly successful in staving off any general fall in the standard of life in its people. How the system worked is summarized by him in the following passage:

"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."

STAY-AT-HOMES WHO MADE MONEY

The important effort, as seen by the Economist, was to back up the armies at the front by a policy of self-sacrifce sacrifice at home, and it spoke in drastice drastic terms of the constant evidence of profiteering among certain classes in England. The contrast in the attitudes of those at the front and those active in business life is set forth in the following words:

"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."

PRICE CONTROL IN UNITED STATES

Although price control is a measure disapproved of by economists, experience has shown that for certain products, such as wheat [Pg 60] and flour, it produced good results. In the case of bituminous coal, Professor Anderson of Harvard said that it had probably done much harm and little good, because the cut in price was too drastic. One good feature of the price control system was the ability to apply it to draft labor from non-essential industries to the production of munitions and necessities of life. It was possible to do this by refusing coal, copper, steel and freight cars to the non-essential industries. How the Food Administration came to be a general price fixing body is explained in the following article by a member of the Food Administration:

WHEAT AT $2.20 A BUSHEL

"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."

PRICE LEVEL, NOVEMBER, 1918

With the close of military operations there was noted a slight decline in commodity prices; how far the downward tendency would reach was considered a moot point. The apparent zenith point in prices was attained in July, 1918, but Bradstreet's prudently thought it unwise to indulge in any prophecies regarding low prices. The increased demand for food products among the stricken peoples of Europe would, it was believed, prevent any considerable fall in prices. There was not much to encourage consumers in the study of the index numbers of food commodities. The writer in Bradstreet's shows a wide range of price movements in the following table, in which are given the index numbers based on the prices per pound of ninety-six articles:

1912191319141915191619171918
January8.94939.49358.88579.143110.916313.727717.9636
February8.95789.45928.86199.662111.141513.942718.0776
March8.90199.40528.83209.619711.376014.136018.0732
April9.09789.29768.75629.775311.759814.576918.4656
May9.26969.13948.62249.797811.748515.120818.9133
June9.10179.07218.62209.742811.688715.468019.0091
July9.11198.95228.65669.869811.529416.068019.1849
August9.15959.01158.70879.821311.441416.398519.1162
August 159.8495
September9.21579.10069.75729.803411.780316.644119.0485
October9.45159.15269.24169.977412.069916.913519.0167
November9.47819.22528.862010.376812.799217.070118.9110
December9.54629.22909.035410.647313.662817.5966

[Pg 61]

The groups that make up the index number are as follows:

Nov. 1, 1917Sept. 1, 1918Oct. 1, 1918Nov. 1, 1918
Breadstuffs$0.2105$0.2077$0.2026$0.1999
Live stock.6785.7400.7100.6960
Provisions4.02854.32644.53594.5889
Fruits.4288.3725.3725.3725
Hides and leather2.39002.21502.21502.2050
Textiles5.11795.87425.75545.7029
Metals1.14771.42331.36621.3062
Coal and coke.0101.0119.0120.0120
Oils.90841.31851.31211.2734
Naval stores.0956.1295.1255.1348
Building materials.1448.2047.2047.2046
Chemicals and drugs1.42611.51531.52531.5278
Miscellaneous.4832.7095.6795.6870
Total$17.0701$19.0485$19.0167$18.9110
A Municipal Canning Station

Photo by P. Thompson

A Municipal Canning Station

In city establishments like the one shown above, food that would otherwise go to waste in the markets was saved, and women were instructed in the best methods of putting up fruits and vegetables for winter use.

Click for a larger image.

FOOD CONDITIONS AND PRICE LEVEL, 1919

A clear summary of the food situation and price conditions in the half-year succeeding the armistice is to be found in the Federal Commission's Memorandum on food stocks and wholesale prices, June, 1919:

"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.

[Pg 62]

COMMODITIES INCREASING IN STOCKS AND IN PRICE
(Wholesale Prices)
CommodityUnit of quantity QuantityUnit of PricePrice
June, 1919June, 1918Per cent increase 1919 over 1918 June 1919June 1918
WheatBushel41,955,167 15,286,331174.5 Dollars per bu.2.51 2.20
2.462.17
Wheat flourBarrel 3,942,2053,236,671 21.8Dollars per bbl. 12 - 12.209.80
11.50 - 11.809.95
Canned salmonPound99,203,544 82,616,58220.1 Dollars per doz. No. 2 cans2.70 - 2.75 2.70
Canned cornPound 81,233,02342,352,994 91.8Dollars per doz. No. 2 cans 1.70
1.75-(Mch)1.75
Fresh eggsCase 5,975,8175,441,560 9.8Cents per doz. 40 - 40½29
30¾
Butter (creamery)Pound29,190,222 12,749,055129.0 Cents per lb.53 41
Salt BeefPound 25,701,13824,962,881 3.0Dollars per bbl. 35.0032.00
36.0034.00
Frozen fowlsPound10,962,670 2,749,077298.8 Cents per lb.37½ 34½
COMMODITIES INCREASING IN STOCKS AND DECREASING IN PRICE.
(Wholesale Prices.)
CommodityUnit of quantity QuantityUnit of PricePrice
June, 1919June, 1918Percent increaseJune 1919 June 1918
BarleyBushel16,399,396 7,916,073107.2 Dollars per bu.1.19 - 1.27 1.21 - 1.26
RyeBushel11,613,127 3,355,349246.1 Dollars per bu.1.53½ 1.73
Buckwheat FlourPound18,053,230 5,523,850226.8 Dollars per cwt5.00(Apr) 5.75 6.25(Apr)
Canned TomatoesPound179,101,286 88,531,024102.3 Dollars per doz. No. 3 cans2.05 (Dec'18) 2.30

[Pg 63]

COMMODITIES DECREASING IN STOCKS AND IN PRICE.
(Wholesale Prices)
CommodityUnit of quantity QuantityUnit of PricePrice
June, 1919June, 1918Percent increase June 1919June 1918
OatsBushel37,827,343 41,763,5559.4 Cents per bu.69 73½
Corn MealPound34,231,066 117,674,91870.9 Dollars per cwt3.90 4.25
BeansBushel4,252,451 4,408,6863.5 Dollars per cwt7.75 - 8.00 12.25 - 12.50
Rice (Blue Rose) (Honduras)Pound 75,134,92080,727,516 6.9Cents per lb. 6 - 77/88.5 - 8.9
91/8 [10] [11] 8½ - 95/8

[10]First week JUNE.

[11]Increase in price.

COMMODITIES DECREASING IN STOCKS AND INCREASING IN PRICE.
(Wholesale Prices)
CommodityUnit of quantity QuantityUnit of PricePrice
June, 1919June, 1918Percent increase June 1919June 1918
CornBushel13,260,910 27,883,36152.4 Dollars per bu.1.76 - 1.77 1.50 - 1.55
SugarPound207,622,237 217,632,3654.6 Cents per lb.8.82 7.30
Cheese (American)Pound10,174,502 15,875,23635.9 Cents per lb.31 21½
Dry Salt PorkPound395,940,437 488,344,83818.9 Dollars per bbl.58.00 - 58.50 48-50
LardPound81,275,392 106,649,58823.8 Cents per lb.33.80 - 34.30 24.15 - 24.25

[Pg 64]

The following data, taken from the Monthly Labor Review of July 1919, give a survey of the retail prices of food in the United States:

AVERAGE RETAIL PRICES AND PER CENT OF INCREASE OR DECREASE IN THE UNITED STATES
MAY 15 OF EACH SPECIFIED YEAR COMPARED WITH MAY 15, 1913
ArticleUnit Average retail prices, May 15— Per cent of increase (+) or decrease (-) May 15 of each specified year compared with May 15, 1913.
19131914191519161917 191819191914191519161917 19181919
Cts.Cts. Cts.Cts. Cts.Cts. Cts.
Sirloin steakPound25.7 25.925.727.8 32.240.044.4 +1 [16]+8 +25+56+73
Round steakdo22.3 23.323.025.0 29.638.041.6 +4+3+12 +33+70+87
Rib roastdo19.9 20.119.921.6 25.731.835.2 +1 [16]+9 +29+60+77
Chuck roastdo16.1 17.016.317.5 21.827.829.7 +6+1+9 +35+73+84
Plate beefdo12.1 12.512.313.1 16.621.922.5 +3+2+8 +37+81+86
Pork chopsdo20.9 22.220.922.9 30.636.743.0 +6 [16]+10 +46+76+106
Bacondo27.0 26.726.428.4 41.650.556.7 -1-2+5 +54+ 87+110
Hamdo26.8 26.825.631.8 38.845.654.6 [16] -5+19+45 + 70+104
Lambdo19.4 19.821.723.2 29.736.839.6 +2+12+20 +53+ 90+104
Hensdo22.2 22.721.524.1 29.337.943.5 +2-3+9 +32+71+96
Salmon, canneddo 19.820.025.7 29.631.9
Milk, freshquart8.8 8.98.78.8 10.513.214.9 +1-1 [16] +1950+69
Milk, evaporated (unsweetened) [12] 15.1
ButterPound35.9 32.734.737.0 46.551.067.9 93+3 +30+42+89
Oleomargarinedo 40.4
Nut margarinedo 35.3
Cheesedo23.5 24.833.833.4 42.2
Larddo15.8 15.615.120.1 27.832.938.8 -14+27 +76+108+146
Criscodo 33.9
Eggs, strictly freshDozen26.3 26.626.328.1 39.842.453.1 +1 [16] +7+51+61 +102
BreadPound [13]5.6 6.27.27.0 9.69.89.8 +11+29+25 +71+75+75
FlourPound3.3 3.34.53.9 8.76.67.5 [16] +36+18+164 +100+127
Corn mealdo3.0 3.13.33.3 5.47.06.2 +3+10+10 + 80+133+107
Rolled oatsPound 8.4
Corn flakes [14]- 14.1
Cream of wheat [15] 25.1
RicePound9.1 9.110.512.3 13.4
Macaronido 19.0
Beans, navydo 7.69.419.1 17.812.0
Potatoesdo1.6 1.91.62.5 6.12.23.3 +19 [16] +56+281+38 +106
Onionsdo4.3 5.18.65.6 10.7
Cabbagedo 9.6
Beans, bakedNo. 2 can. 17.5
Corn, canneddo 19.1
Peas, canneddo 19.0
Tomatoes, canneddo 15.8
Sugar, granulatedPound5.4 5.06.88.5 10.09.110.6 -7+26+57 +85+69+96
Teado54.6 54.655.763.8 69.8
Coffeedo27.9 29.930.230.1 40.5
Prunesdo13.7 13.315.316.5 23.2
Raisinsdo12.5 12.614.415.1 16.3
BananasDozen 38.8
Orangesdo 54.1
All articles combined +1+3 +13+56+64 +91

[12]15-16 ounce can.

[13]Baked weight.

[14]8-ounce package.

[15]28-ounce package.

[16]No change in price.

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

June 1, 19197,875,280,040
June 1, 19186,336,763,505

"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:

June 1, 19191,671,777,990
June 1, 19181,669,826,166

"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:

June 1, 19199,547,058,030 pounds
June 1, 19188,006,589,671 pounds

"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.


III—INDUSTRY AND LABOR IN WARTIME
Unprecedented Conditions and Developments Due to the World War and How They Were Met

The issue of the great world conflict between autocracy and democracy rested largely in the hands of the laboring classes behind the lines. Mr. William B. Wilson, Secretary of Labor, placed vividly before the public in one of his official statements the views of American labor at the outbreak of the war:

"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."

SAFEGUARDS FOR WORKINGMEN

From the moment of the declaration of war the general loyalty of the laboring classes throughout the United States was apparent. This attitude of loyalty found a ready response in the immediately declared intention of the Government to safeguard the interests of the workingmen. Congress announced its attitude toward standards of legal protection for workers. It was printed verbatim in Labor Laws in War Time, 201, p. 1, as follows:

"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."

ORGANIZING LABOR FOR WAR WORK

Supplying the man power for industrial action during the war was a really more complicated task than drafting men for military service. In the earlier period of American participation labor was distributed more or less according to the law of supply and demand. The unequal distribution of workers became a grave problem. To meet this the United States Employment Service of the Department of Labor took over the supply of war industries with common labor, and all independent recruiting of labor by manufacturers having a pay roll of more than a hundred men was discontinued.

In the Heart of the Bethlehem Steel Plant

In the Heart of the Bethlehem Steel Plant

H. E. Coffin, Chairman on Industrial Preparedness of the Council of National Defence, described the conflict as a war of munitions, of factories, of producing powers, of sweating men and women workers. In the plant sketched above, 26,000 men toiled and sweated during the war to make munitions for our troops overseas.

Click for a larger image.

[Pg 68]

"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.'"

INFLUENCE OF WAR CONDITIONS

In the United States under war conditions labor unrest did not reach the intense form manifested in England. Nevertheless a great many strikes were reported. Surprise was expressed that the labor adjustment machinery of the War Department and of the Navy Department was not appealed to. Besides there was the National War Labor Board to take up mediation. Investigations in Bridgeport, Connecticut, showed an increase of earnings of 81 per cent. against an increase of living prices of 61 per cent. Yet at one time the Press reported strikes in over 350 machine shops in New Jersey—nearly all engaged in necessary war work—as well as trouble in many shipyards. Of course there was the explanation of foreign propaganda or a tendency toward industrial Bolshevism. Such explanations failed to account for the fact that American workmen as a whole were patriotic.

Attention was called, on the other hand, to the warm tribute given by the Federal Fuel Administrator to the bituminous coal miners who had brought production past the 13 million ton mark in the second week in July, 1917, and the exceptional efforts of diligent and patriotic workers in the shipyard. A portion of the press emphasized the unreasonableness of striking while the laboring people enjoyed, during war time, immunity from service and immunity from the pressure of competition for wages. The Springfield Republican protested against applying to the workingmen exaggerated standards of economic rectitude.

"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."

INDUSTRIAL MEANING OF WAR

Mr. H. E. Coffin, Chairman of the Committee on Industrial Preparedness, described the European War in its last analysis as a war of munitions, a war of factories, of producing powers, of sweating men and women workers. When the United States entered the war there were four main things required of its government and its people, viz., ships, munitions and materials of war, food and soldiers. It can be seen that three out of these four factors are matters that belong to the economic history of the war. Fortunately for our Government, it had the experience of foreign countries to learn from, and learning was an essential part of war preparation in spite of the resources in hand in the United States; as Mr. Coffin said:

"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."

In certain respects the position of the United States was unique, not only because of its resources but because it was to a certain extent self-dependent as a belligerent. England was able for some time to import large quantities of munitions and supplies from other countries. In the case of the United States when it entered the war, munition and food supplies had to come from its own resources. Practically all of the war materials had to be ultimately produced in the United States. Many observers were optimistic because they had a sanguine opinion of the efficiency presented by American industrial democracy. But efficiency alone could not win the war. There were certain limitations to the sphere of efficiency. This was pointed out by Mr. H. G. Moulton in an address on "Industrial Conscription," delivered before the Western Economic Society, at Chicago, in 1917:

"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."

Forging Armor Plate

Forging Armor Plate

"Every man, in the draft age at least, must work or fight," said General Crowder. And the workers were just as important a factor in winning the war as the fighters. In the gigantic machine sketched above, ingots of sixty and seventy tons were pressed into plates of any size and thickness for use on our super dreadnoughts.

Click for a larger image.

[Pg 71]

LABOR DISLOCATION

It is estimated that about 35,000,000 men, women and children in the United States do the country's work: dig its coal, raise its crops, run its trains, build its roads, make its powder, turn out its munitions. There was an increase each year of a million man-power through immigration. The result of the war was that this source of supply was cut off. What was the economic significance of this cutting off of immigration? The immigrant was almost the only source of what we call day labor—the men who do the building and repairing of railroads, the mending of streets and roads, mining, and the rough work of steel mills and other factories. Along with the cessation of immigration came the withdrawal from labor power of two million men who were drawn into the Army. These men, incidentally, became large consumers of goods rather than normal producers of wealth. Some estimates were made that the United States Government was using for war purposes about one-half of the entire productive capacity of the country. These figures enable one to gauge the industrial dislocation caused by the war. In matters affecting the members of what might be called the labor army, which still kept up the work of production, the Government laid great emphasis on the need of securing industrial peace.

A Mediation Commission was appointed by the President to deal with conditions of labor unrest. This Commission made a report early in 1918, in which it spoke of the lack of knowledge on the part of Capital as to Labor's feelings and needs and on the part of Labor as to problems of management. The program outlined by the Commission was as follows:

  1. "Modern large scale industry has effectually destroyed the personal relation between employer and employee—the knowledge and coöperation that come from personal contact. It is therefore no longer possible to conduct industry by dealing with employees as individuals. Some form of collective relationship between management and men is indispensable. The recognition of this principle by the government should form an accepted part of the labor policy of the nation.
  2. "Law, in business as elsewhere, depends for its vitality upon steady employment. Instead of waiting for adjustment after grievances come to the surface there is needed the establishment of continuous administrative machinery for the orderly disposition of industrial issues and the avoidance of an atmosphere of contention and the waste of disturbances.
  3. "The eight-hour day is an established policy of the country; experience has proved justification of the principle also in war times. Provision must of course be made for longer hours in case of emergencies. Labor will readily meet this requirement if its misuse is guarded against by appropriate overtime payments.
  4. "Unified direction of the labor administration of the United States for the period of the war should be established. At present there is an unrelated number of separate committees, boards, agencies, and departments having fragmentary and conflicting jurisdiction over the labor problems raised by the war. A single-headed administration is needed, with full power to determine and establish the necessary administrative structure.
  5. "When assured of sound labor conditions and effective means for the just redress of grievances that may arise, Labor in its turn should surrender all practices which tend to restrict maximum efficiency.
  6. "Uncorrected evils are the great provocative to extremist propaganda, and their correction would be in itself the best counter-propaganda. But there is need for more affirmative education. There has been too little publicity of an educative sort in regard to Labor's relation to the war. The purposes of the government and the methods by which it is pursuing them should be brought home to the fuller understanding of Labor. Labor has most at stake in this war, and it will eagerly devote its all if only it be treated with confidence and understanding, subject neither to indulgence nor neglect, but dealt with as a part of the citizenship of the state."

ADVISORY LABOR COUNCIL

In order to prevent lack of coördination in the government's handling of the labor situation an advisory council was created to help the Secretary of Labor to organize the new war work. The field of this advisory council is indicated in a series of memoranda presented to him in January, 1917.

  1. "An Adjustment Service which will have to do with the adjustment of industrial disputes according to policies and principles arrived at through the deliberations of the War Labor Conference Board.
  2. "A Condition of Labor Service which will have charge of the administration of conditions of labor within business plants. [Pg 72]
  3. "An Information and Education Service which will devote itself to the establishment of sound sentiment among both employers and employees and to the establishment in individual plants of the local machinery (e.g., employment management) and policies necessary for the successful operation of a National Labor Program.
  4. "A Woman in Industry Service which will meet the problems connected with the more rapid introduction of women into industry as a result of war conditions.
  5. "A Training and Dilution Service which will administer such training and dilution policies as may be agreed upon.
  6. "A Housing and Transportation of Workers Service whose duty it will be to provide the housing facilities to meet the nation's needs.
  7. "A Personnel Service whose duties it shall be to assemble and classify information concerning appropriate candidates for positions in the war-labor administration and make recommendations for appointment.
  8. "A Division for the Investigation of Special Problems which would be a part of the Secretary's office force and would conduct investigations in the placing of contracts, in priority of labor demand, in powers of the Department, in problems of reconstruction, and would assist in formulating the national labor policy.
  9. "An Investigation and Inspection Service to provide the field force of examiners and inspectors required by the other services."

After various stages of experience the War Industries Board secured something more than an advisory position. This was done only after a year of warfare. The final situation was explained by Mr. C. M. Hitchcock in the Journal of Political Economy, June, 1918:

"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."

WORK OR FIGHT

Military men were as keen as business men in realizing the industrial factor as a powerful contributory cause in winning the war. General Crowder's famous "work or fight" alternative was a sufficient witness of this fact. He said:

"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."

Building Howitzers

Building Howitzers

A nine-mile howitzer nearly ready for transportation. Beyond are seen heavy armorplate turrets in the making. The small and large manufacturers were given equal opportunity to obtain war business.

Click for a larger image.

Industrial preparation for war was guided by the principle of priority. This is an old principle, but it began to be applied in unheard-of ways. When an army is to be moved all means of transport in sight are [Pg 74] commandeered. When an army is to be fed, civilians protest in vain against the seizure of stores. These practices were always features in the history of warfare.

A novel factor in priority as applied during the present war was the breadth of its scope.

"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."

WAR SUPPLIES

The United States, following the experience of other belligerents, adopted the policy of decentralization in the production of war supplies. A plan was worked out under which the small and large manufacturer were given equal opportunity to obtain war business:

"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."

Such regional divisions were but one factor in industrial administration. Government needs and labor shortage made imperative the regulation of manufactures by the priority system.

Guns and Armaments for United States and Her Allies

Guns and Armaments for United States and Her Allies

Interior of one of the Bethlehem Steel Company's mills—among the largest plants in the world for the production of munitions during the War.

Click for a larger image.

[Pg 75]

THE PRIORITY SYSTEM

The actual working of the priority system is shown in the following general classification of industry for the purpose of priority treatment:

But the perplexity of applying this system to such a question as fuel administration is shown in the following list taken from one of the trade publications of the Administration for April, 1918:

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

CIVIL WAR CONDITIONS

During the war period labor was much better off than during the Civil War epoch. The New York World presented the following [Pg 76] table from the Merchants' Magazine of December, 1864, showing the rise of prices during the Civil War era:

18621864
Copper, 100 lbs$22.00 @ $25.00$41.00 @ $42.00
Coal, ton4.50 @ 5.009.00 @ 10.00
Iron, pig21.00 @ 25.0048.00 @ 49.00
Lead, 100 lbs6.50 @ 6.7511.75 @ 12.00
Nails, 100 lbs3.25 @ 3.756.00 @ 6.25
Ashes, pot bbl5.50 @ 5.758.75 @ 8.87
Dry cod, cwt3.37 @ 4.256.50 @ 7.00
Flour, bbl4.50 @ 5.607.30 @ 7.35
Corn, 100 bush58.50 @ 60.00131.00 @ 134.00
Hay, 100 lbs.80 @ .851.35 @ 1.40
Wheat, bush1.30 @ 1.451.63 @ 1.65
Hemp, cwt10.00 @ 11.2514.00 @ 16.12
Barley, bush.85 @ 1.001.35 @ 1.50
Oats, bush.37 @ .39.90 @ .91
Hops, 100 lbs14.00 @ 20.0026.00 @ 33.00
Clover seed, 100 lbs7.50 @ 7.7512.50 @ 13.50
Lime, bbl.60 @ .651.25 @ 1.35
Oil, whale, gal.25 @ .35.58 @ .60
Oil, coal, gal.48 @ .571.10 @ 1.12
Pork, bbl13.25 @ 13.7521.75 @ 23.50
Beef, bbl5.50 @ 8.0010.00 @ 15.00
Lard, 100 lbs7.50 @ 8.2513.59 @ 14.00
Whisky, 100 gals25.00 @ 25.5089.00 @ 91.00
Tallow, 100 lbs8.75 @ 9.0012.62 @ 12.75
Whalebone, 100 lbs68.00 @ 70.00150.00 @ 155.00
Wool, fleece, 100 lbs52.00 @ 53.0078.00 @ 82.00
Wool, pl'd, 100 lbs44.00 @ 45.0070.00 @ 75.00
Butter, 100 lbs16.00 @ 21.0036.00 @ 37.00
Cheese, 100 lbs5.00 @ 7.0015.00 @ 18.00

"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.'

Plowing by Night

Copyright Underwood & Underwood

Plowing by Night

The number of men drawn from Great Britain into the army and navy during the war was about 5,000,000. This meant extraordinary efforts of production were necessary on the part of those who were left behind. By means of a motor tractor and an acetylene gas generator, the owner of the farm shown above was able to run day and night shifts.

Click for a larger image.

[Pg 77]

"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.'"

GREAT BRITAIN'S PRODUCTIVE POWER

To appreciate what industrial mobilization meant in England the best method is to start with the figures on national production taken from the British census of 1907, the last accesible accessible for the peace period:

In 1907 the British people are estimated to have produced goods to the total amount of, roughly$10,000,000,000
The nation consumed during that year in personal consumption7,050,000,000
It spent on capital purposes at home:
(a) On betterment of its national plant950,000,000
(b) On maintenance of its national plant900,000,000
It used up goods to the value of (in keeping up and probably increasing its stocks of material on hand)325,000,000
It exported goods in the form of loans to foreign countries of about500,000,000

By 1914 the British Empire had probably advanced its income to at least $12,500,000,000; and the surplus of goods which it had to export as loans to foreign countries seems to have increased from about $500,000,000 to $1,000,000,000. What happened in war-time? First of all there was an unprecedented manufacture of munitions and war supplies. This production was needed not only for Great Britain, but also for her Allies. Seven-tenths of what was produced in Great Britain in the year 1907 was immediately used up in the form of personal consumption by its population; accordingly war industrial activities meant either that British production must be increased or British comsumpton consumption reduced, or that more goods must be bought from foreign countries through the sale of British liquid capital assets.

First of all, consumption was cut down; in detail, this was accomplished in the following ways: 1. By cutting down all normal additions to England's national plant, i. e., by building no more houses, factories, railways, roads, etc., except for purely war purposes. This expenditure in 1907 amounted to about $950,000,000. 2. By cutting down and ceasing as far as possible to spend money on the maintenance of this national plant, except the minimum required to keep it running. This expenditure in 1907 amounted to $900,000,000. 3. Most important of all, by cutting down civil personal expenditure. This was so far the largest item of consumption that it was here that the most important savings were made.

A WHOLE POPULATION AT WORK

In England the total number of "occupied males" between the ages of 18 and 44, i. e., roughly, the conscription age was, in 1911, 7,200,000. The number of men from the United Kingdom in the Army and Navy amounted to over 5,000,000; therefore, out of every seven of these men, on the average five were soldiers or sailors. These men were lost from the productive capacity of the nation. It is obvious that if English production remained the same, or increased, it must have been the result of extraordinary efforts on the part of the small percentage of occupied males of fighting age left, on the part of all the other males occupied or formerly occupied, and on the part of all females.

Mr. R. H. Brand, in discussing the situation in 1918, said:

"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.

Mr. R. H. Brand, who is responsible for these statements and used them in an address to the American Bankers' Association, showed how these regulations had resulted in a decline of British imports from peace conditions of 55,000,000 tons annually to war conditions of 20,000,000 tons. The imports were nearly all foodstuffs. England exported large amounts of munitions and supplies to her Allies. In the year 1916 alone we supplied them with 9,000,000 pairs of boots, 100,000,000 sand bags, 40,000,000 yards of jute, millions of socks and blankets, and in addition several thousand tons of leather; also cloth, foodstuffs of every kind, portable houses, tools, hospital equipment and so on.

LABOR POWER IN ENGLAND

Mr. Lloyd George became the man naturally selected to be Prime Minister because of his success in directing one of the chief war industries—the work of munitions. In May, 1915, when he was made head of the newly created Department of Munitions, the problem before him was no easy one. The Central Empires were able to turn out 250,000 shells a day, while the British rate of production was 2,500 high-explosive shells a day, and 13,000 shrapnel shells. Lloyd George selected a large technical staff; the work was decentralized as much as possible, and special committees were formed for the purpose of organizing the work in each district. The question of raw [Pg 79] materials had to be handled and this was not always easy because there were unscrupulous suppliers trying to make a corner in their goods. New machinery had to be made for the manufacture of large shells; all the big machine works were taken under direct control by the Government. Old factories had to be equipped and altered and twenty-six large plants had to be created. To provide the labor power, workmen were recruited by voluntary methods. A hundred thousand were in this way got together by July, 1915, most of whom were experts in machinery and ship-building. The result is pictured in the following extract by a French expert, Jules Destrée:

"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."

INDUSTRIAL DISLOCATION IN FRANCE

When war was declared in 1914, the result in France was a complete disorganization. It must be remembered that workingmen from the age of 19 to 45 were called to the colors. This meant that the labor supply was reduced by about three-fourths. The revival of trade was very slow until the beginning of 1915. When it began to be realized that the war would be a long one, and when the consumption of ammunition and war materials was beyond all previous records, the Government was forced to prepare a program for industrial warfare. It was a hard task because much of industrial France was under enemy occupation. Munition work had to be undertaken in neighborhoods largely agricultural. Everything was lacking: labor, coal, raw material and transportation. As it became evident that the stoppage of industrial work was a serious mistake, an attempt was made to revive industries not connected with munitions, such as paper manufacture, glove and silk making. The operations undertaken by the Government are described in the following passage from M. R. Blanchard's article in the North American Review (1917):

"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."

Germany's industrial mobilization was picturesquely described by the head of the General Electric Co., Dr. Walter Rathenau, who was appointed at the beginning of the war to superintend the supplying of the German War Office with raw materials. He told the officials at the War Office that Germany was provided with more war materials only for a limited number of months. Accurate statistics were prepared in a short time on the power of production in various German industries. Then all the raw material was put where it could be commandeered. The flow of products was restricted, so that the raw material and also half manufactured products could be automatically diverted to articles needed by the Army. New methods were discovered and developed. Where former technical means were insufficient substitutes had to be found. Where it was prescribed that this or that article was to be made out of copper or aluminum, it was permitted to make it out of something else. All the laboring power of the country, including men from 16 to 60, were enrolled and controlled from the central organization called the War Office, described by General Gröner as follows:

"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."

THE GERMAN NATION IN ARMS

Sixteen months after this war organization was effected, General Ludendorff said that when the great spring offensive of 1918 opened the Germans were superior to the Allies in every form of war supplies. There was a speeding up all round; the output of shells and cannon was double. This meant the doubling of the coal and iron production, and could be done only by increasing the workers necessary to double the [Pg 81] output of basic war materials. Adequate food had to be supplied to the workers; there was what is known as the Hindenburg "Fat Fund" to which contributions were sent in from German peasantry and agriculturists. General Gröner, the head of the German War Office, outlined optimistically the future of German war industrial production as quoted in the New York Times of December 14, 1916:

A War Time Warning

Photo by P. Thompson

A War Time Warning

Dairy production among the Allies decreased 30 per cent. during the war. The lard supply was also decreased. Kitchen economy in fats was never more important. Fats were so scarce in Germany during the latter part of 1917 that a "Hindenburg Fat Fund" was organized to which contributions were sent in from German peasantry and agriculturists.

Click for a larger image.

"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."

RUSSIA'S INDUSTRIAL MOBILIZATION

In Russia industrial mobilization was badly managed. Cattle were taken to the front in herds. Often driven on foot, they were slaughtered on the spot where the meat was needed for the soldiers. The hides were thrown aside to rot. As a result of this wasting of hides, the supply of leather for military uses and for shoes for both the Army and the civilian population was soon utterly inadequate. Horses were requisitioned in the most unintelligent way, the result being that agricultural production decreased and with the lack of transportation facilities the Army horses could not be supplied with food. They died by the tens of thousands.

Gross mismanagement marked the war handling of the Russian railway system. The rolling stock was allowed to deteriorate. Locomotives and cars were put aside permanently when they needed slight repairs. They could not be repaired because the railway machine shops had been converted into munition factories. There was an appalling shortage of manufactured goods for the civilian population, because the entire output of many manufacturing concerns was taken over for the Army. It was almost impossible to get clothing, boots and articles of wearing apparel. So great was the dearth of cloth at the end of the third year of the war that one was struck by the contrast beween between the lines in front of the bakeries formed in the early morning hours and the groups of women gathered at eight in the evening before the shops which sold cloth to stand all through the night in line for the opening of the shop in the morning.

A bright spot in Russian war administration was the work of the Municipal and Provincial Councils. The members of these bodies did valiant service in preventing the growing disorganization of the economic life of their country. Their activities are described by Prof. Harper of Chicago University, an actual eye witness of Russian conditions during the war, in the following passage:

"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."

FOREBODINGS OF RUSSIA'S COLLAPSE

But it was not only foreign observers who were able to detect the prevailing rottenness in Russia's economic status. The following passage from an address made by A. I. Konovalov, a member of the Moscow Stock Exchange, shows that Russian business men were keenly alive to [Pg 83] the dangers of the situation as early as April, 1917:

"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."

LABOR TRADITIONS UPSET

All kinds of economic theories and all varieties of economic experiences have been overturned by the abnormal industrialism of the war. The world really passed into a terra incognita. Even the firmest foundations of trade unionism have been shaken. There was no more firmly established fact before the war than the inability of women to secure a level of wages equal to that of the male wage earner. Such theories have passed to the limbo of forgotten things. Prejudice and tradition have given away before the actual test of facts. Women have taken the place of men called away to war service in practically all the fields of industrial activity. Apart from theory, biological and otherwise, it is now seen that the old exclusion of women from skilled industry was largely the result of trade union regulation. But the woman war-worker was found in fields untouched by trade unionism. There was the woman bank clerk as well as the woman engineer.

There was much discussion, mostly pessimistic, as to what would happen if the woman labor supply should permanently take the place of man labor after the war was over. The best solution was thought to be the placing of the woman worker under a régime of trade unionism. How far such prognostications went is illustrated in the following quotation from Miss Mary Stocks in the London Athenaeum.

"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."

Women Workers in America

Copyright Underwood & Underwood

Women Workers in America

A field of winter lettuce, with the cloches, or glass bells, which made it possible during the war to raise plants in cold weather.

Click for a larger image.

WOMEN WORKERS IN AMERICA

As a result of the labor dislocation due to the operation of the American Draft Law, a large number of women were employed in railway work. The experience of the United States Railroad Administration in the matter of women employes was summarized in a paper read by Miss Pauline Goldmark, manager of the women's service section of the Railroad Administration, at a conference at the Academy of Political Science, in 1918:

"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.

WORK UNSUITABLE FOR 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."

ALIEN LABOR FOR WAR PURPOSES

The man in the fighting line was only one factor in the prosecution of warlike operations. The success of strategy and tactics was dependent upon the organization of the man in the labor line not only at home but also in the territory behind the miles of trenches in France. For this purpose Chinese labor was drafted by both the British and the French Government. Large numbers of British ships sailed with crews practically consisting of Chinese sailors. The sentiment in favor of Chinese exclusion had to give way before imperative needs for labor power. There were tens of thousands of Chinamen in the service of the Allies. In the Sunset Magazine, Mr. G. C. Hodges calls attention to the fact that the break between the Chinese Republic and Germany was precipitated largely by the Allied drafting of China's manpower. Even in its beginnings he says, the French and British mobilization of Chinese labor caused a diplomatic battle royal. The significance of Chinese labor behind the battle front is described in the following words:

"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."

ECONOMIC VALUE OF AMERICAN ARMY TO FRENCH INDUSTRY

Permanent economic improvements were one result of the presence in France of the American Expeditionary Force. An industrial movement was created that will probably continue long after the war is over. In various French seaports, docks had to be constructed to handle the enormous tonnage of supplies needed for the American troops. A letter in the New York Journal of Commerce gives a picture of the transformation in the transport system in France made in order to handle with speed and certainty the various supplies on which the American Army depended:

"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.'"

FRENCH INDUSTRIAL EXHAUSTION

A realistic picture of the industrial exhaustion of France at the close of the war was given by M. Tardieu, General Commissioner for Franco-American war affairs. The war expenses of 120,000,000,000 francs was only a fractional part of the whole loss. Another 50,000,000,000 would have to be raised to secure raw material destroyed during the war. M. Tardieu presented in detail the various items indicating to what extent France had suffered economic disability and paralysis:

"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.

Samuel P. Gompers

Copyright Underwood & Underwood

Samuel P. Gompers

President of the American Federation of Labor.

THE WORK OF REBUILDING

"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."


IV—GOVERNMENT CONTROL
Wartime Nationalization of Railways and Shipping—Ship-building at High Speed—Trade Licensing, Etc.

On April 5, 1917, the day before war was declared, Franklin K. Lane, Secretary of the Interior, introduced and had passed by the Council of National Defense the following resolution:

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.

Acting in accordance with this resolution, the principal railroad executives of the country met in Washington on April 11, 1917, and resolved that during the war they would coördinate their operations in a continental railway system, merging during such period all their merely individual and competitive activities in the effort to produce a maximum of national transportation efficiency. The direction of the continental railway system [Pg 88] thus organized was placed by the railroads in the hands of the executive committee of the Special Committee on National Defense of the American Railway Association. This executive committee was also known as the Railroads' War Board.

Under this resolution the railroads of the United States continued to be operated under private ownership and private management until December 28, 1917.

On that date President Wilson, exercising his war-time prerogative, took control of the railways of the country and appointed W. G. McAdoo Director General.

2. Congress in January passed a railroad-control bill.

3. On April 11, 1918, President Wilson issued a proclamation taking over for the Government the property of coastwise shipping lines.

4. On May 24th, Director General McAdoo placed in charge of each railroad property a federal manager whose duty it was to report to the regional director.

5. On June 29th, the Railroad Administration relinquished from federal control nearly 2,000 short-line railroads whose control by the Administration was regarded as not "needful or desirable."

During the first six months after the United States entered the war statistics showed that the railways not only handled far more traffic than in any earlier six months of their history but also as much as in any entire year prior to 1907. It will be remembered that the years 1906 and 1907 marked the climax of a long period of rapid increase of railroad business which resulted in the longest and most acute congestion of traffic and shortage that had ever been known prior to the war period. The grounds offered by the Government for taking over the railway systems during the war might be explained as the resultant of the findings of the Interstate Commerce Commission on December 5th, in which it was stated that the claim of the roads for higher rates could not be granted.

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

  1. "The avoidance of obstructions to transportation due to the routing and division of freight, intended to give a fair share to each line in a given territory.
  2. "The abolition of preferences to given shippers and kinds of freight, and the centralization of control over priority in shipment.
  3. "The practical termination of rate controversies and labor discussions as between private individuals and the placing of the roads on a semi-military basis.

"The railroads themselves have received the announcement of the President's action with much greater equanimity than could have been expected. They undoubtedly see in the step the following advantages:

  1. "Assurance of a moderate if not generous income in a period of great uncertainty and difficulty, during which they have been caught between the upper and nether millstones of fixed rates and advancing costs and wages.
  2. "Termination of the danger that threatened them from the continually maturing obligations which ordinarily they would have little trouble in refinancing, but which, under existing conditions, can scarcely be provided for on any basis.
  3. "Provision of means for betterment and improvement at a time when such provision can be had practically only through government orders designed to place such requirements ahead of those of private concerns."

OBJECTS OF GOVERNMENT CONTROL

This experiment in government control was discussed and explained by the Director General after six months' experience in the following statement issued by him on June 15, 1918:

"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."

GOVERNMENT CONTROL CRITICISED

The defects of the Government administration of the railways have been the subject of both criticism and apology. A diagnosis published by the Engineering News Record of New York states that the whole difficulty is ascribed to the employment of bankers in high places of railway management. Railroads, it was asserted, cannot be run by men of the banking type of mind. The article continues:

"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."

BRITISH RAILWAY MANAGEMENT

Like American railways the railway system of Great Britain was under private control prior to the war, but the experiment of Government direction began to be applied as soon as the war was declared. Government control did not mean Government ownership. The lines remained the property of the companies. They retained the management of their own concerns subject to the instructions of an executive committee appointed by the Government and the whole machinery of administration went on as before. At the beginning the sole purpose was to facilitate the movement of troops, but as the war developed the scope of the railway executive committee became greatly extended. Working in coöperation with the acting chairman were twelve general managers of leading British lines. Under the central body were groups of committees, each made up of railway experts. The War Office and the Director General of Transport were in touch with the Central Committee. A writer in the Railway Age Gazette for December, 1917, explains the arrangements as follows:

"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."

RAILWAY NATIONALIZATION IN CANADA

A definite proposal to nationalize the railway systems of the Dominion of Canada was made during the war. Canada has nearly one-sixth of the railway mileage of the United States, although it has less than one-fourteenth of the population. Canada has three trans-continental systems. There is sufficient trade in the Dominion for two good systems. A royal commission appointed to inquire into the subject reported that the net returns of the railways were so low as to prove that more railways had been built than could be justified on commercial grounds. Large subsidies had been granted by the Government. In the case of the Grand Trunk Pacific this public subsidy amounted to nearly two-thirds of the total investment; in the case of the Canadian Northern to nearly three-quarters. The Canadian Pacific was reported as the strongest railway in Canada, economically built and well managed. The other companies, such as the Canadian Northern and the Grand Trunk Pacific, were facing heavy annual deficits.

Walker D. Hines

Copyright Underwood & Underwood

Walker D. Hines

He succeeded William McAdoo as Director-General of Railroads after the signing of the armistice.

The commissioners recommended heroic measures. They did not consider that operation by a Minister directly responsible to Parliament would be in the public interest. It would not secure better service nor lower rates. What the commissioners did recommend was to transfer the three companies to a new body, a board of trustees to be incorporated as the Dominion Railway Company and that the Canadian Northern, the Canadian Pacific and the Grand Trunk Pacific be transferred to this body. The Government-owned Intercolonial and Transcontinental Railways stretching from Halifax to Winnipeg were to be transferred to the Dominion Company. Under the scheme worked out by the commission, the Government would assume responsibility to the Dominion Railway Company for the interest on existing securities of the transferred companies. As to the composition of the board of [Pg 91] trustees, the commissioner recommended that they be five; three railway members, one member selected on the ground of business and financial experience and one as especially possessing the confidence of the railway employees. The commissioners laid stress on the importance of the board being non-political, permanent and self-perpetuating, and in this connection pointed to the experience of the Australian state railways.

FRENCH RAILWAYS IN WARTIME

The great strain on a country's railway system caused by war was illustrated by the French mobilization. Four thousand seven hundred and fifty trains were required. After mobilization was over the Army still had a permanent need of railways for two purposes: for its communications in the rear, and for its movements from place to place. To bring supplies to one Army corps trainloads aggregating 200 tons a day were required.

Mr. G. Blanchon in New Warfare explained the situation as follows:

"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."

AMERICA'S SHIPPING PREPARATION

The two great means of transport—railways and ships—furnished in this war the greatest examples of modified state socialism which America had yet seen. As to the general way in which they were controlled these two services show a fairly close family resemblance, though the forms of organization were technically quite different. The larger railroads and the larger ships were taken possession of by the Government and were operated by the same people, in general, who operated them before, but under orders of the Railroad Administration and the Shipping Board respectively. New ships and new railroad equipment were built on plans made under federal direction, and in both cases the output was being largely standardized. The heads of the Shipping Board and the Emergency Fleet Corporation were men drawn from private business, while the regional directors of the railroad regions and the federal managers of the separate roads were railroad men, usually managing their own roads, under the government's direction. Thus in both cases private enterprise furnished the traditions and training of the personnel that made this experiment in socialism.

Besides the points of likeness there were differences between the two services. In the case of ship-building, the industry was virtually re-created, so great was the expansion and the revolution in methods. In the case of railroads the emphasis was, as has been seen, on the task of utilizing an existing and limited plant to its utmost capacity for war purposes.

WAR'S EFFECT ON SHIPPING

The following table, taken from a pamphlet distributed by the Emergency Fleet Corporation six months before the conclusion of the war, gives a perspicuous view of the shipping situation at the opening of military operations in the United States:

[Pg 92]

THE WAR AND WORLD SHIPPING

Gross Tons
World's shipping (except German and Austrian) August 1, 191442,574,537
Additional ships built, August, 1914—December 31, 19176,621,003
German and Austrian interned ships available for use of Allies875,000
————
Total50,070,540
Losses since 1914.
Due to ordinary causes.1,600,000
Due to mines, raiders and submarines:
Allies8,900,119 [17]
Norway1,031,778
Other neutrals400,000
Total11,931,897
————
Balance actual tonnage available38,138,643
Net decrease since 19144,435,894
Add 2 tons constantly required to maintain each man in France (1,500,000 men × 2)3,000,000
Shortage for merchant traffic, at least7,435,894

[17]To October, 1917.

Another table gives a view of the rates between the building and sinking of ships among the Allied, neutral, and British nations from the beginning of the war to April, 1918:

"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."

AMERICA'S SHIP-BUILDING PROGRAM

American ship-building was planned on grandiose lines, partly to make good the losses by submarine, partly to provide transportation for American troops to Europe, and partly for propaganda purposes in friendly and in enemy countries. The American program was an ambitious one. Inflated figures were offered for popular consumption and undoubtedly they were consumed and had their influence in securing a successful close to the struggle. While reports were coming from Great Britain telling of constant labor troubles on the Clyde and other ship-building localities, every item of news from Washington spoke of the marvelous achievements of American ship-building. One message read after eight months of the war had passed: "For the first time in history America has outdistanced England in her ship-building output."

Foreign critics called attention to the fact that American figures of ship-building (1918) had a different basis of valuation from those of other countries. In one case there were vessels completed and entered for service, and in another there were vessels launched. The situation is presented by the London Economist:

"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."

THE FOURTH OF JULY SPLASH

Reports of the Shipping Board's activity led to expectations of an unprecedented number of ships to be launched, fitted and ready for transport and trade purposes [Pg 93] within a very short interval. Much enthusiasm was created by the Fourth of July splash, 1918, when, according to the New York Tribune, in twelve hours steel and wooden ships hit the water in clouds of smoke and spray, at the rate of one every seven minutes. The era of Mr. Jefferson Brick had undoubtedly returned, for the Tribune went on to expatiate in poetical exuberance that the shores of "Puget Sound, San Francisco Bay, Columbia river, the Gulf of Mexico, the Delaware, Chesapeake Bay, New York Bay, and all the coast of New England and the Great Lakes were laved by the backwash of the great ships of the Liberty Fleet rushing to their proper element." The Bureau of Navigation estimated that by the end of June, 1918, 1,622 ships of 1,430,793 gross tons would be launched—more than double the output of German yards in times of peace. One article refers to the actual event as follows:

Building a Steel Ship in Seattle, Washington

Copyright by Charles Phillip Norton

Building a Steel Ship in Seattle, Washington

American ship-building during the war was planned on a gigantic scale to make good the losses by submarines and to provide transportation for American troops to Europe. The West Lianga, shown above, an 8,800-ton cargo carrier was launched within 55 working days and delivered, ready for cargo, in 67 days.

Click for a larger image.

AMERICAN LOSSES—NEW TONNAGE BUILT

"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.'"

A SHIP-BUILDING CAPACITY OF OVER 1,500,000 TONS A YEAR

The war program of the Shipping Board implied a multiplication by three of existing outputs. This increased output signified the possibility of labor difficulties, and in order to prevent these an agreement was reached between representatives of the labor unions, the Navy Department, the Shipping Board and the Emergency Fleet Corporation, to the effect that all disputes concerning wages, hours or conditions in shipyards in ship-building plants should be determined by a committee of three, one representing the corporation, one nominated by the President and the third selected by Mr. Samuel Gompers. When this agreement was entered into the United States reported a ship-building capacity of over one and one-half million gross tons a year. Two years previously the ship-building capacity was only five hundred thousand tons, but according to the London Economist, a rate of four million gross tons a year would have to be supplied if the American Army was to have sufficient means of transport.

When this forecast was made on both sides of the Atlantic, it was realized that so far as the marine situation was concerned the war had become simply a question of ship-building against the submarine. Military operations intervened to prevent a full test of our ship-building strength, but there was full confidence in the United States that American ship-building would by increased production make the German submarine program an inconsiderable factor in the question of terminating the war.

TRANSPORTING THE AMERICAN ARMY

When there came a demand for an increase of man-power to be sent to the battle front few appreciated what this effort meant in its effect on increased shipping activities. Half a million American soldiers crossed the Atlantic in the first thirteen months of the war, after our entrance into the war, and a million and a half in the last six months of the war. The shipment across the Atlantic was at first anything but rapid. There were only a few American and British troop ships chartered directly from their owners. Then the former German liners were brought into service and with this addition embarkations greatly increased.

Hog Island Ship-building Yards

Hog Island Ship-building Yards

The expenditure of millions of dollars and the labor of thousands of workmen transformed in a short time a tract of marsh lands near Philadelphia into one of the greatest ship yards in the world.

Click for a larger image.

[Pg 95]

Early in 1918 increased shipping facilities were arranged for with the British Government. The results of this arrangement became visible in the growth of troop movements for March, 1918. Then there came the great German drive; after this every ship that could be secured was pressed into service. More British troop ships were used. Accordingly, in May, 1918, more than twice as many men were carried as in April. The June record was greater than that of May and before the first of July one million had been embarked. During the summer the number carried was more than 10,000 men per day. This record has only been excelled by the achievement in bringing back the same men to the shores of the United States. [18]

[18] For complete official figures of the troop movement overseas, see Volume IV.

In addition to the transatlantic fleet there was an American cross-channel fleet carrying men and cargo from England to France. This fleet consisted of more than a third of a million tons by the end of 1918. One-fourth of these vessels were Swedish or Norwegian, while the rest were American. This fleet comprised large numbers of small wood and steel vessels built by the Emergency Fleet Corporation at the yards of the Great Lakes and along the coast.

ACCELERATED SHIPPING

The Emergency Fleet Corporation turned over nearly a million tons of new ships for military purposes, and besides Scandinavian and Japanese tonnage was chartered. By doing this and by taking over lake steamers the large tonnage figures were secured, but it must be remembered that the Allies were largely concerned in the American troop movement. Of every 100 men who went over, 49 went in British ships, 45 in American, three in Italian, two in French and one in Russian shipping under British control. Moreover, a way was found to increase the loading of transports by as much as 50 per cent.

The duration of the voyage round trip was considerably decreased. In the spring of 1917 the average turn around for troop ships was 52 days. Some of the fast ships averaged under 30. The Leviathan, for example, landed the equivalent of a German division in France each month. Most of the cargo ships were American and these ships carried thousands of articles of the most varied sort. Nearly one-half of all the cargoes consisted of food and clothing. Then came the engineering and ordnance supplies. A large number of locomotives were shipped, set up on their own wheels so that they could be unloaded on the tracks in France and run off in a few hours under their own steam. These locomotives were of the hundred-ton type. Shipments of this type had never been made before. When the armistice was signed the Army was prepared to ship these set-up locomotives at the rate of 200 a month. The actual record shows that 1,791 were sent to France on transports.

Nearly 27,000 standard-gauge freight cars were shipped abroad, and motor trucks to the number of 47,000; rails and fittings were sent to France aggregating in all 423,000 tons. Moreover, the Army shipped nearly 70,000 horses and mules. The increase in the shipping of cargo from the United States was consistently maintained from the start of the war, and at its cessation it was undergoing marked acceleration.

BRITISH SHIP-BUILDING

Ship-building in England was taken over by the government early in the war. This plan was described by many as an example of a blundering surrender to Socialism and a concession to bureaucratic tendencies. These critics pointed to the fact that in 1914 British shipping tonnage had reached the figure of 19 million tons, an increase of over 10 millions in 15 years; and this was done in spite of subsidized competition from abroad and lack of reasonable encouragement at home. The policy of government interference was regarded as simply a method of discouraging English initiative in this industry. A writer in the London Outlook, Mr. E. T. Good, described the project in a most unfavorable light:

"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."

Launching the City of Portland on the Columbia River

Copyright by Underwood & Underwood

Launching the City of Portland on the Columbia River, near Portland, Oregon

Most of the cargo ships that carried supplies to our troops after we entered the war were American owned, and carried thousands of articles of the most varied sort. The City of Portland, shown above, was a three hundred foot wooden motor vessel.

Click for a larger image.

It must be remembered that Great Britain's shipping problem was a matter of extreme complexity. There were first of all the submarine sinkings. There was the lack of labour for ship-building. There was, besides, the fact that the tonnage available for ordinary imports was considerably lessened by the commandeering of merchant ships for the carriage of government material. The following statement of the problem was presented by the British Premier himself in August, 1917:

"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."

BRITISH BUREAUCRATIC METHODS

On the whole it must be allowed that after the results were published there was a great disappointment, particularly as the government had put forth roseate plans for ship-building on a large scale. At the beginning of the war there were 16 million tons gross of steamers of more than 600 tons each. A large part of this total was used in the service of the Navy; and the balance, available for the carriage of food, materials and exports, was lost during the submarine campaign. The government seemed to show no ability to replace it. Sometimes it is contended that the responsibility was to be charged up to the labor organizations. According to the Economist the situation was due to bureaucratic methods of control.

In a debate in Parliament the whole subject was ventilated:

"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."

TRADE POLICY AS A WAR WEAPON

The building of ships under Government supervision and control was only one side of Allied war shipping administration. Seaborne trade was rigidly directed as a potent arm in bringing Germany's war power to ruin. The industrial and economic effect of the marine blockade was fully conceded by a number of German and Austrian newspapers.

The Frankfurter Zeitung said:

"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."

[Pg 98]

A true picture of the situation is given in the following passage from the Vienna Arbeiter Zeitung:

"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."

GERMANY'S POTASH BOYCOTT

Before we entered the war Germany viewed with great concern the effect of the economic weight of the United States if added to the side of her antagonists. She felt that if this country remained neutral she could depend on us for raw materials. To be sure, German ingenuity had produced ten thousand substitutes, due to the skill of German chemists, ranging from bacteria fats to synthetic rubber. But even the War Office in Berlin was under no illusion on this point. "We need copper and no stripping of palace roofs, no raiding of door knockers or kitchen pans can make up for the deficiency." Even the vision of economic self-sufficiency in Central Europe had rifts in it. Raw material was so important that, in the boot and shoe industry 1,400 factories in the German Empire were amalgamated into 300. In the silk industry the spools were reduced from 45,000 to 2,500. Out of 1,700 spinning and weaving mills, only 70 were running at high pressure.

The plan, as outlined by German experts, to force the United States to supply raw material was to cut off potash exports and certain manufactured goods. "If America will sell us no cotton," was the threat of the Berlin Deutsche-Zeitung, "she shall get no potash—the indispensable fertilizer in which we have a world monopoly. If she withholds her oil and grain, then she shall get no dyes, no drugs, no glassware or optical instruments." But as a writer in the London Outlook stated, this threat could not be made an effective instrument of trade control:

"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."

SHUTTING OFF GERMAN TRADE

Pessimistic anticipations of German statesmen regarding the curtailing of German trade were realized when the War Trade Board in the United States began to deal with the question of American exports to neutrals. The report of the Board, published in 1918, contains the following passage:

"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."

Examining Cargoes for Contraband

Examining Cargoes for Contraband

An inspector is using the X-ray on a bale of cotton, it having been found that smuggling of every conceivable sort was being carried by German agents.

THE TRADE LICENSE SYSTEM

The United States trade license system was extremely effective in cutting off the business of firms whose controlling motive was the advancement of German commercial interests. It was largely directed against preventing pro-German firms in neutral countries from engaging in the re-exportation process, a familiar practice in the earlier part of the war. The policy of the War Trade Board is indicated in the March (1918) issue of the War Trade Journal:

"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."

THE ANTI-GERMAN TOY EPISODE

An example of the intense popular indignation against encouraging trade with Germany was furnished when a Dutch boat arrived in New York in 1918, laden with 400 cases of toys made in Germany. The ship that carried them had been guaranteed against submarines by the [Pg 100] German Government. Its arrival in America brought about a storm of indignation strong enough to remind many editors of the famous Boston Tea-Party. One of the consignees of the cargo refused to accept delivery of his share; the Manufacturers Record of Baltimore offered him its congratulations:

"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."

Patriotic organizations passed resolutions on the subject. American feeling as to German merchandise was well shown through the publication of an editorial in the Hardware Age against American use of German toys. The paper received 4,000 letters on the subject and over 250,000 reprints of the editorial were sent out, all on request. On the subject of German toys, it said, among other things:

"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."

SMUGGLING FROM NEUTRAL COUNTRIES

Considerable aid was afforded to Germany by her trade with neutral countries. First, there was a good deal of direct re-exportation of materials imported from abroad. Then there was an exportation of domestic products, and the filling up of this deficit by importation from abroad, mainly from the United States. Mr. J. L. Moore of Harvard University, thought that smuggling deserved to be added to the source of German supply from the outside, and he mentioned the fact that a member of the Commerce Department of the Swiss Government was convicted of this offense and served a prison sentence. His exposition of how neutrals aided Germany is given in the following passage from the New York Times:

"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."

SURPRISING INCREASE OF NEUTRAL SHIPPING

The shutting off of the German commercial fleet from trade and the employment of Allied shipping under government contract offered an exceptional opportunity to small neutral countries to advance their shipping business. This opportunity was eagerly seized. Norway reported the establishment in 1915 of no fewer than 488 shipping firms. This was followed in 1916 by an increase of 459. Some of these Norwegian firms paid dividends as high as 400 per cent. Statistics from Sweden also show a significant expansion. Swedish firms of inconsiderable [Pg 101] capitalization before the war became important companies, able to undertake transatlantic trade on a large scale. It seems likely that these Swedish transatlantic lines will constitute a formidable competitor to the old established German companies—now that the war is over.

Corroborative evidence on the shipping situation in neutral powers is found in the following passage taken from the New York Journal of Commerce:

"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):

Shipping FirmStock Capital, FlorinsNet Profits, FlorinsReserve and Emergency Funds, Florins
Holland-Amer. Line12,000,00026,500,00010,200,000
Stoomvaart Mij. Nederland19,000,00018,600,0008,800,000
Kon. Nederl. Stoomboot Mij15,050,00019,000,0007,800,000
Rotterdamsche Lloyd15,000,00015,100,00012,600,000
Kon. Holland Lloyd10,000,00010,900,0002,000,000

"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."

GERMANS AT WORK IN SPAIN

Germany's astuteness in dealing with neutral countries was especially marked in Spain. The country was filled with German propaganda and there were skeleton German trade organizations ready to begin functioning at a moment's notice. The extent to which this propaganda was carried on was described by a correspondent of the Saturday Evening Post, Mr. I. F. Marcosson, in an address to the National Machine Tool Builders' Association at Atlantic City:

"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."

An Antidote for the Submarine Pest

Photo by Paul Thompson

An Antidote for the Submarine Pest

Quantity production of eighty-foot motor boats in a shipyard at Bayonne, N. J., for use as scouts and submarine hunters.

Click for a larger image.

NO ECONOMIC BOYCOTT AFTER THE WAR

The official leaders of the Allied Governments soon found that the scheme to start an economic war after peace had been negotiatd negotiated had no very strong support. President Wilson took a hand in subjecting the Paris resolutions advocating this economic war to unfavorable criticism. The British Trades Union by a large majority showed their disapproval of them. The London Economist also disapproved of the program of a vindictive trade policy after the war, though it thought that an economic boycott might be used as a threat to force Germany to make peace. Lord Robert Cecil took the ground that it would not be wise to attempt an economic war. The labor point of view was that an economic war was bound to produce another outbreak of militarism. The Speaker of the British House of Commons, who always occupies a non-partisan position, in an address at Carlisle on war aims, showed no sympathy with the proposal:

"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."

In explaining England's position as to war aims the Premier, Lloyd George, made the following observations:

"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."

AN IMPOSSIBLE PROGRAM

In the emotional atmosphere of the war period some astonishing economic propositions were accepted as if they were axiomatic truths. Notably was this the case in the discussion of Germany's program of peaceful penetration in the economic sphere. It was undoubtedly linked up with schemes of military aggression. There was wide discussion of the methods to be used to guard against Germany's commercial policy. Sometimes these proposals indicated the desire that those who opposed Germany should take a leaf from her dog-in-the-manger policy. Strange conceptions of international trade that suggest the mercantilism of the seventeenth and eighteenth centuries were revived in order to guard against any attempt on the part of Germany to secure a privileged industrial position after the war. As early as 1916 there was the famous proposal of an anti-German economic league contemplated in the Paris resolutions of that date. In Great Britain the supporters of this policy also actively advocated a system of imperial preference by which special advantages would be given to countries within the bounds of the British Empire. The result of upholding any double-barreled policy of this type is described by the Edinburgh Review as impossible of realization.

"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."

COMMERCIAL AVIATION

A great advance in aeroplane development was one of the most spectacular results of war activity. The military side of this development must be discussed in another place, but the fact that aeroplanes had to be constructed substantial enough to carry a large amount of explosives naturally brought up the whole question of the commercial side of aeroplane employment. Although the aeroplane has been developed to a remarkable extent for war purposes, it must not be taken for granted that every type of aeroplane has its use for peace. In the military machine regard has been paid rather to gun positions, bomb carrying capacity and performance than to economy in operation and large cargo space, which are the essential peace requirements. This aspect of the problem was discussed by F. Handley-Page in an article in the Fortnightly Review.

"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."

According to this expert's opinion there is little probability of using for commercial purposes the small high-powered aeroplane. But if large machines are used with a speed limit of 100 miles an hour and fitted with twin engines, Mr. Page thinks that such machines will have economic possibilities. Countries now far distant from one another can be brought close together. For example Australia will be within a week of London, and he thinks that passengers can be carried at the rate of about six cents a mile. If air transport is to be systematized he is in favor of strict state regulation:

"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."

The Awkward Squad

Copyright International Film Service

The Awkward Squad

"Left, right—one, two, three, four," was the slogan heard throughout the National Army cantonments, such as this at Camp Dodge, Des Moines, Ia., during the first days in teaching the recruits one of the first lessons of the soldier; how to keep step.

Click for a larger image.

[Pg 105]


V—THE MONEY COST OF THE WAR
Over $210,000,000,000 Spent by the Belligerents—How This Stupendous Sum Was Raised—What the War Cost Uncle Sam

By EDWIN R. A. SELIGMAN

Professor of Political Economy and Finance in Columbia University

The cost of a war may mean several different things. It may mean, in the first place, the actual money cost, or expenditure in dollars and cents, directly involved in prosecuting the war. Or, secondly, it may mean the war cost, both direct and indirect, from the economic point of view. The real cost of a war from this latter point of view may mean either actual loss of lives and property or the diminution of the annual social production. The wealth of a country measured in its social income may be reduced either by the actual loss of territory, as in Germany; by the impairment of its natural resources like the coal mines and forests, as in France; by the reduction of labor power, due to the wounded workmen or the results of starvation or privation, as in many countries of Europe; or by the loss of economic efficiency due to a reduction of the standard of life or to a changed attitude toward habits of work. The real costs of war, although often incalculable, are none the less of profound significance.

The actual money costs or expenditures of government for war include not only the actual outlays for military and naval purposes, but also the whole range of expenditures incurred in industrial life to prepare the wherewithal for the Army and Navy; and they also comprise the sums devoted to the maintenance of the families of the soldiers. All these items are far greater in modern times than they used to be. It is a far cry from the meeting of two savage tribes armed only with bows and arrows or javelins, to the modern 16-inch guns, the dreadnoughts, the airplanes, the submarines, the poison gas and the innumerable technical adjuncts of modern warfare. The consequence is that the money costs of the World War have far transcended those of all previous conflicts.

The attempt to present in figures the costs of the war meets with several difficulties. In the first place the question arises as to the period at which we ought to stop. In one sense the war ceased when the armistice was declared. In another sense the war did not actually stop until the peace was declared—in this case a matter of many months additional. But even when peace was declared the war expenses were by no means over. The process of demobilization is a slow one: moreover it is necessary to continue for some time the policing of the conquered countries; and finally comes the question of the pensions to the wounded soldiers or to the families of the dead. It will be seen, therefore, how impossible it is to state with any accuracy at the present time the costs of the war, when those are still being incurred. Furthermore, the figures ordinarily given contain additional inaccuracies. The richer countries make loans to the poorer countries and these expenditures are consequently counted twice in the total,—a procedure legitimate only on the assumption that the loans will not be repaid. Again, in a country like the United States, which has substituted an insurance system for the pension system, the nominal expenditures appear smaller than is really the case, because of the receipt of vast insurance premiums which will ultimately all be expended again. Finally the figures make no allowances for the change in the price level or the alteration in the value of money. In a great war like the present, prices have risen: in some countries they have doubled, in some countries they have more than tripled, for reasons which it is needless to discuss here. What appears, therefore, to be a great and increasing outlay from year to year may be in reality due in part, at least, to this cause.

After making all allowances for these difficulties we may proceed to state some of the facts as to the actual outlays of various countries.

[Pg 106]

THE COST OF THE WAR DAY BY DAY

In all the belligerent countries it naturally took some time for them to get into their stride. This is especially true of Great Britain. The figures of the average daily expenditures, as given by the Chancellor of the Exchequer, amounted to almost $10,000,000 in the opening months of the war and reached a maximum of almost $36,000,000 by 1918. These figures, however, are not exact because they include all of the expenditures. The real war expenditures may be arrived at by deducting in each case the amount of the expenditures in the last year of peace, ending March 31, 1914. Making these corrections, it appears that the average daily war expenditures in England rose from about $9,500,000 during the first eight months of the war to about $33,500,000 in 1918, then slowly receding in 1919. In France the average daily expenditures were naturally somewhat less, rising from about $8,500,000 during the first three months of the war to over $21,000,000 during 1917, the last full year of the war. In Germany the daily expenses were approximately the same as in Great Britain, rising from about $13,000,000 in the first nine months of the war to $34,500,000 during the last six months of 1918. In the case of both Germany and France, it is not known whether the figures comprise the total expenditures or only the pure war expenditures. In the former event the daily expenditures of Germany would be a little less than those of Great Britain; in the latter, they would be a little more. In Italy and Austria-Hungary the daily expenditures were naturally smaller, amounting at the maximum to about $10,500,000 and $20,000,000 respectively. In Russia the daily expenditures rose in 1916 to about $20,000,000 and in 1917, just prior to the October revolution, nominally to $47,000,000. But, owing to the great depreciation of the ruble, the actual expenditures were much less.

OUR WAR EXPENSES MONTH BY MONTH

When the United States entered the war the scale of its operations became so stupendous that its daily war expenditures soon far exceeded those of any other belligerent. In the second month of the war the average daily expenditures for pure war purposes were $15,000,000 and little over a year later they had risen to almost $50,000,000. By the end of 1918, the daily average war expenditures reached the staggering figure of $64,500,000.

The Economic Conference in Paris

The Economic Conference in Paris

Mr. Bonar Law talking with M. Clementel (Minister of Commerce) and M. Doumergue (Colonies) in the garden of the foreign ministry.

If, now, we attempt to present the statistics of the total cost of the war we must be mindful of the difficulties mentioned above. The figures are not entirely accurate, and cannot be made entirely accurate for the following reasons: In the first place, the last date in the official return differs from country to country. They are, however, all subsequent to the armistice, with the exception of Russia, [Pg 107] where we have no trustworthy figures after the advent of Bolshevism. In the second place, we do not know, except in the case of the United States and Great Britain, whether the figures comprise the total expenditures or only the purely war expenditures. Even making allowance for these differences it will be seen that the total war expenditures amount to over $232,000,000,000. In Japan and some of the minor belligerents, there were virtually no war expenses. Inasmuch, however, as most of the countries will continue to have expenses attributable to the war for some little time in the future, it is probable that the total war expenditures will amount, by the end of 1920, to almost $236,000,000,000. From this must, however, be deducted the sums counted twice, because advanced to their allies by the United States, Great Britain, France and Germany. Making allowance for this, it is safe to say that the total net war expenditures will be about $210,000,000,000.

WAR EXPENDITURES OF ALL BELLIGERENTS
In Millions
From entrance into warTo
Great BritainAugust 4, 1914March 31, 1919£ 8,601$41,887
AustraliaAugust 4, 1914March 31, 1919£ 2911,461
Canada (inc. Newfoundland)August 4, 1914August 31, 19191,545
New ZealandAugust 4, 1914March 31, 1919£ 76365
South AfricaAugust 4, 1914March 31, 1919£ 33243
IndiaAugust 4, 1914March 31, 1919£ 119584
———
British Empire$46,083
FranceAugust 3, 1914March 31, 1919fr 169,000$32,617
RussiaAugust 1, 1914October 31, 1917ru 51,50026,522
ItalyMay 23, 1915October 31, 1918li 81,01615,636
BelgiumAugust 2, 1914October 31, 1918fr 5,9001,387
RumaniaAugust 27, 1916October 31, 1918907
SerbiaJuly 28, 1914October 31, 1918635
United StatesApril 15, 1917June 30, 191932,261
————
Entente Powers$156,050
GermanyAugust 1, 1914October 31, 1919mk 204,26848,616
Austria-HungaryJuly 28, 1914October 31, 1919kr 119,50424,858
TurkeyNovember 3, 1914October .., 19191,802
BulgariaOctober 4, 1915October .., 1919732
———
Central Powers$76,008
Total(In Millions)$232,058

HOW MONEY FOR WAR WAS RAISED

The question now arises as to the steps taken by the various countries to meet these stupendous outlays. Of the older expedients, such as war treasures, or the sale of public property there was naturally no question. In only one country, viz., Germany, was there a war treasure; but this was so small as to be well-nigh negligible. The only two available resources were accordingly taxation and borrowing.

When we compare these two expedients, we are struck not only by the great difference in the theories of war finance followed by the various countries, but also by the diversity in the economic conditions which largely influenced the choice. In a general way, it may be said that all countries were compelled to rely to an overwhelming extent on public loans, but that Great Britain and the United States raised a far greater share by taxation than did other countries. Italy was able to raise by new taxation only just about enough to pay the interest on the new loans; Germany accomplished this only in part; while France was not in a position to defray any of her war expenditures from additional taxation. The same is true of the other belligerents, with the exception of the British colonies.

[Pg 108]

Proceeding now to take up this matter in detail, we shall first attempt to set forth the facts as to war taxation.

UNITED STATES
Monthly Expenditures exclusive of the principal of the public debt and of postal expenditures Monthly War Expenditures [19] Average Daily War Expenditures
Million $Million $Million $
April 6—30, 1917279219 8.0
May, 1917527467 15.0
June, 1917410350 11.7
———— ——
Total April 6—June 30, 19171,216 1,156
 
July 1917662602 19.4
August 1917757697 22.5
September 1917746686 22.9
October 1917944884 29.5
November 1917986926 30.9
December 19171,1051,045 33.7
January 19181,0901,030 33.2
February 19181,012952 34.
March 19181,1561,096 35.9
April 19181,2151,155 38.5
May 19181,5081,448 46.7
June 19181,5121,452 48.4
———— ——
Total for fiscal year, 191812,697 11,977
 
July 19181,6081,548 49.9
August 19181,8051,745 56.8
September 19181,5571,497 49.9
October 19181,6651,605 51.8
November 19181,9351,875 62.5
December 19182,0612,001 64.5
January 19191,9621,902 61.4
February 19191,1891,129 40.
March 19191,3791,319 42.5
April 19191,4291,369 45.6
May 19191,1121,052 33.9
June 1919809749 24.9
———— ——
Total for fiscal year, 191918,505 17,785
 
Total April 6, 1914 to June 30, 191932,428 30,918

[19] Obtained by deducting 11/12 of the annual (peace) expenditures for 1915—1916 exclusive of postal expenditures, i. e. 11/12 of $1,008—287 millions—60 millions. Secretary Glass in his letter of July 9, 1919 to the Chairman of the Committee of Ways and Means excludes postal expenditures in the first column, but fails to exclude them when making the deduction for peace expenditures. He consequently arrives at the figure of 30,177 billions as the cost of the war; making allowance for this fact, and using the final corrected figures, we reach the figure of $32,261,000,000 as the cost of the war to June 30, 1919.

[Pg 109]

WAR TAXATION IN OTHER COUNTRIES

Great Britain, as the wealthiest country at the outbreak of the war, endeavored to raise as much as possible from taxation. From year to year, as the expenses mounted up, more and more demands were made upon the taxpayer. But the expenditures for the war were so enormous that it soon turned out to be impracticable, even with the best of will, to secure more than a comparatively small proportion of the total cost from taxation. The figures usually advanced by the various Chancellors of the Exchequer and repeated parrot-like by most commentators take the proportion that total taxes bear to total expenditures. This method of calculation, as will be seen from the table, shows that almost a quarter of the total expenditures, or to be more exact, 24.9 per cent., was derived from taxes. These figures, however, err doubly. In the first place the significant problem is to ascertain the war expenditures, not simply the total expenditures. These can naturally be obtained only by deducting from the annual total expenditures the sums equal to the peace expenditures, i. e., the expenditures for the last full year of peace. In the second place, what is significant is not the total taxes, but the war taxes; that is, the proceeds of the additional taxes raised during the war. These again can be obtained only by deducting from the total tax revenue the proceeds of the taxes during the last full year of peace. If then we endeavor to ascertain how much of the war expenditures were met by war taxes—and this is really the important problem—we find that, immense as were the burdens resting upon the British taxpayer, the percentage of war expenditures raised by war taxes is much smaller than is usually stated. As a matter of fact, in the first year of war only a little over 7 per cent. of the total war expenditures were raised from taxes. With every succeeding year the percentage increased until the last year of war, 1918—19, a little over one-quarter of the war expenditures were met from war taxes. For the entire five years the proportion of war taxes to war expenditures was slightly over 17 per cent.

In the other belligerent countries the showing was by no means so good. France struggled under a double difficulty. In the first place France was invaded at the very outset of the war, and the territory occupied, although relatively small in extent, represented the richest and the most industrially developed part of the country. This operated largely to reduce the ordinary revenues. In the second place the resultant economic confusion, as well as the general political situation, made it very difficult to impose any new taxes at all. The consequence was that for the first three years of the war, the tax revenues of France did not even suffice to defray the ordinary peace expenditures.

After a little while, indeed, France found it possible to levy some war taxes; but these were exceedingly slight compared with what had been accomplished in Great Britain. The result is that the new war taxes of France were only just about sufficient to make up the deficit on the ordinary peace budget—a deficit caused chiefly by the devastation of the occupied territory. In France, therefore, we may say that as a result no part of the expenditures was met by war taxes.

In Italy the situation was a little better. Italy had not been invaded and its financial situation was not so desperate as that of France. Moreover, Italy entered the war somewhat later and did not have to endure a strain for so long a time. Italy consequently proceeded as soon as possible to levy new war taxes; but as Italy had always been relatively overtaxed, as compared with Great Britain, it was not feasible to do as much. As a result, the war taxes levied by Italy were just about sufficient to pay the interest on the war loans. While Italy, therefore, did better than France, she also was not able to defray any of the war expenditures proper out of war taxation.

The condition of Russia soon became worse than that of France and Italy, and even before the October revolution, Russia was able to put very little reliance upon revenues from war taxation.

Among the Central Powers the situation was much the same, but for a different reason. Germany at the outset of the war had so confidently counted upon victory and upon huge indemnities that it resolved to defray its war expenses entirely from loans. It must, however, be observed that in Germany a not insignificant part of the war expenses were met by the separate states; and in these various states a considerable increase of taxation was provided for at once. As the war proceeded and the hopes of a speedy and complete victory gradually faded away, Germany began to change her policy and decided, especially from 1916 on, to impose more and more taxes. The result was that by the end of the war Germany had done a little better than France.

OUR WAR TAXES COMPARED WITH WAR EXPENDITURES

We come finally to the experience of the United States. When the United States entered the war it was confronted by two rival theories [Pg 110] of public finances. One was to the effect that the war expenses should be defrayed entirely by war loans, as had been the case in the early years of the Civil War and as was true of many of the belligerents during this war. The other theory was that the war expenditures ought to be defrayed entirely out of war taxes. This was equally extreme and perilous as the former theory, and labored under the additional disadvantage of being impossible of achievement. The President went so far as to adopt the fifty-fifty theory, namely, that half of the war expenditures ought to be defrayed from taxation.

The prodigious profits made during the beginning years of the European war and the resulting prosperity throughout the country enabled Congress to levy taxes far higher than had before been attempted in our history. Even with an immense addition to taxation, however, the proportion of war expenses derived from war taxes was relatively small. Here, again, we must observe the same caution as in the case of the British figures. We must not compare total expenditures with total taxes, but war expenditures with war taxes. War expenditures are easily ascertained by deducting for each year the amount of the expenditures for the last year of peace, the year ending June 30, 1916. In the case of war taxes, however, it is more exact to deduct from the total revenues the tax revenues for the year ending June 30, 1915. For during the year 1915—16 a number of taxes were already levied in preparation for our possible entrance into the war.

As a matter of fact, during the first quarter of war ending June 30, 1917, the proportion of war expenditures derived from war taxes was less than one-third or 30 per cent. If we exclude loans to Allies on the assumption that they will all be repaid some day, the showing is somewhat better—as two-thirds of the expenditures of that period consisted of such loans.

As soon, however, as we struck our full gait the situation was less satisfactory. The proportion of war expenditures derived from war taxes during the year 1917—18 was less than one-quarter or more exactly only 24.8 per cent. and if we again exclude loans to Allies, only 30 per cent. In the last year of the war the showing was still less favorable. If we take the expenditures for the entire period of our participation in the war the figures are respectively 21.7 per cent. and 27 per cent. For the entire period of our participation in the war, less than one-fourth (or exactly 23.3 per cent.) of the war expenditures were paid out of war taxes. And if the loans to Allies are again excluded the proportion is still under one third, or more exactly 32.5 per cent.

Lord Reading

Copyright Underwood & Underwood

Lord Reading

President of the Anglo-French loan mission to the United States in 1915, and special envoy of the British Government to the United States in 1917.

This compares favorably even with the British figures. But it conclusively shows how impossible it is even with the best of will, to raise more than a relatively small part of war expenses from war taxes; especially during the early period of a war.

CHARACTER OF WAR TAXATION

The next point of interest is that of the character of the war taxes imposed by the various countries. Here again we notice a very [Pg 111] great difference. In all of the European belligerents on the continent, at least as much additional revenue was raised from direct, as from indirect, taxation. In France about as much new revenue came from indirect taxation or taxes on consumption as from direct taxation or taxes on wealth.

The situation is still less satisfactory in the other continental countries.

In England, on the other hand, a different path was pursued from the beginning. While it is true that a considerable increase of revenue was derived from indirect taxes like customs and excise, the chief reliance was placed on the increase of the income tax, on a new war profits tax and finally, although to a minor degree, on an increase in the inheritance tax.

When we come, however, to the situation in the United States we find the democratic movement so strong that the overwhelming proportion of the new tax revenue was derived from direct taxation on wealth rather than from indirect taxation on consumption. In the great Revenue Act of 1917 over 79 per cent. of the new tax revenue came from direct taxation, principally the income tax and the excess profits tax. In the second great Revenue Act of 1918, the proportions were still more favorable, the amount ascribable to direct taxation in 1919 being almost 81 per cent.

UNITED STATES
Internal Revenue Receipts
In millions of dollars
Year ending June 301918Per Cent.1919Per Cent.
Income and profits taxes2,8392,596[20]
Munition manufacturers tax13
Estate tax4782
Corporate capital stock tax2529
————
Total taxes on wealth2,92479.12,70770.5
Distilled spirits318365
Fermented liquors126118
Tobacco158206
Stamp taxes1937
Transportation71234
Insurance615
Excise taxes3778
Soft drinks27
Admissions2651
Miscellaneous822
————
Total taxes on consumption, transactions and commodities77120.91,13329.5
Total3,695....3,840....

[20] As the new taxes are payable in instalments, about 2 millions of the 1919 tax will not be received until the fiscal year 1920. Making allowance for this the proportion of taxes on wealth really ascribable to the year 1919 rises to 80.6 per cent.

With the impossibility of securing more than a comparatively small proportion of the war expenditures from taxation, it accordingly became necessary to resort to borrowing. This was consequently done by every country on a gigantic scale; although here again the fiscal and economic conditions in the various countries were so different that they employed quite diverse expedients.

Great Britain provided at the outset of the war for immediate needs by the selling of short time securities, principally Treasury Bills. Before long these had amounted to such a sum that it became necessary to issue long time bonds. Accordingly, subscriptions were invited to the first war loan, which was issued on March 1, 1915, followed by the second war loan on June 1, 1915. These bore interest at the rate of 3½ and 4½ per cent. and the amount issued was $1,703,000,000 and $2,883,000,000 respectively. On February, 1916, a continuous issue of War Savings Certificates was inaugurated. On April 15, 1917, the third war loan was issued at 4 per cent., followed on June 1, by the issue of 5 per cent. bonds. Of these $4,811,000,000 were issued.

Beginning on October 2, 1917, a continuous issue of 4 and 5 per cent. National War Bonds was made, the difference in the rate of interest being due to the tax exemption. The temporary and short time paper was gradually funded into these bonds. In the meantime the Anglo-French loan of $500,000,000, of which England had one-half, had been contracted in the United States; and with the entrance of the United States into the war on April 6, 1917, continually larger sums were borrowed from the American Government. During the period of the war the British debt rose from £650,000,000 to £7,643,000,000 or from $3,115,000,000 to $37,221,000,000. It is expected that $250,000,000 will be borrowed during the year 1919—20, so that in all probability the debt of Great Britain at the end of 1920 will amount to almost £8,000,000,000, or $38,500,000,000, meaning that the war debt probably will amount to about £7,500,000,000, or $35,000,000,000.

France was in a far less favorable situation than England at the outset of the war. The total debt of France at the close of 1913 amounted to fr. 32,594,000,000, or $6,291,000,000, and the ordinary budget had closed with a large deficit. So that it had been necessary to issue a loan during the spring [Pg 112] and summer of 1914. When the war suddenly broke out, precipitating an economical and financial crash, it became practically impossible to issue another loan. The government was therefore compelled to rely upon advances from the Banque de France, which was permitted correspondingly to increase its notes issue. It was not until November, 1915, that France saw her way to issue her first war loan of 5 per cent. bonds. This was followed on August 6, 1916, by the second war loan, also of 5 per cent. bonds, on December 15, 1917, by the third war loan of 4 per cent. bonds, and on Dec. 15, 1918, by the fourth war loan, also at 4 per cent. The first war loan issued at 88 yielded $1,894,000,000; the second, at 83.75, yielded $1,981,000,000; the third at 68.60 yielded $2,914,000,000 and the fourth at 70.8 yielded $5,382,000,000. Meanwhile National Defense Bonds were issued continuously from February 25, 1915, and foreign loans had been contracted in England, in the United States and in Japan. The result was that at the close of the year 1918 the French debt amounted to fr. 167,469,000,000 or $32,322,000,000. This meant that the debt due to the war amounted to fr. 134,875,000,000 or $26,031,000,000. It is expected, however, that a considerable sum will still have to be borrowed during the year 1919, thus bringing the total French debt to 27 or 28 billions of dollars.

While the Men Fought, Those Left Behind Bought Bonds

Courtesy McClure's Magazine

While the Men Fought, Those Left Behind Bought Bonds

Not all brave hearts beat under khaki during the war. More than $20,000,000,000 was raised by the four Liberty Loans and the Fifth Victory Loan. Among those who bought bonds were hundreds of thousands of wives and children of the men at the front.

Click for a larger image.

[Pg 113]

Russia was the first of the Entente Powers to issue public loans. On September 14, 1914, it issued a 5 per cent. loan at 94, yielding $259,000,000. This was followed at regular intervals by six more loans prior to the revolution of 1917. After the revolution there was considerable confusion which, of course, was much accentuated by the advent of Bolshevism. The consequence was that the public debt of Russia, which amounted for July, 1914, to $4,623,000,000, increased by the time of the October revolution in 1917 to 49,288 millions of rubles or 25,383 millions of dollars. This would mean a war debt of almost twenty-one billions of dollars. As a matter of fact of course it is very uncertain whether the debt will ever be redeemed at these figures.

The debt of Italy before it entered the war amounted to lire 13,636,000,000 or $2,621,000,000. Italy started at once with a so-called mobilization loan followed by its first war loan in July, 1915, and successive war loans on the first of January of each of the following years. The result was that on October 31, 1918, the total debt amounted to lire 63,093,000,000 or $12,177,000,000. By the end of May, 1919, the debt had grown to 77,763,000,000 lire or $15,009,000,000 leaving as the war debt lire 64,127,000,000 or $12,388,000,000.

Of the Central Powers, Germany started at once on October 1, 1914, to issue a war loan at 5 per cent., having from the outset decided to rely upon comparatively long time bonds rather than upon temporary or short time securities as was the case in England and in France. There followed in regular succession eight war loans bearing 4½ and 5½ per cent. interest. As a result, the debt of Germany, which before the war amounted to Mk. 4,732,000,000 increased on October 31, 1919, to Mk. 204,000,000,000 or $48,552,000,000; the war debt proper in Germany would therefore amount to $47,426,000,000.

TOTAL WAR DEBT, UNITED STATES

When the United States entered the war it depended, for the time being, on temporary war certificates. But at the beginning of June, 1917, Liberty Loans were issued in continually greater dimensions. In the table below the details of the four Liberty Loans and the Fifth Victory Loan are given, showing that over $20,000,000,000 were raised from bonds alone. To these is to be added the unfunded loans. It appears that the total net debt of the United States, which in April, 1917, was $1,190,000,000, increased by June 30, 1919, to $24,232,000,000, making a war debt of $23,042,000,000. Inasmuch, however, as somewhat over a billion dollars from the Victory Loan will be paid in the course of the year 1919—20, and as still more will have to be borrowed temporarily, the total war debt of the United States by the end of 1920 will amount to over $25,000,000,000, including the nine billions advanced to the Allies.

UNITED STATES
In Millions
Debt Less
Cash in
Treasury
Annual
Interest
Charge
April 5, 1917$1,189$23
June 30, 19171,90984
June 30, 191810,924466
June 30, 191924,233619
DEBT ON JUNE 30, 1919
Bonds
Pre-war bonds833
War loans
First Liberty Loan$1,985
Second Liberty Loan3,566
Third Liberty Loan3,959
Fourth Liberty Loan6,795
Victory Loan (notes)3,46820,455
Treasury Certificates3,634
Old debt on which interest increased2
Non-interest bearing debt236
———
Total gross debt25,485
Cash on hand1,252
———
Net debt(In Millions) $24,233

The other belligerents need not be treated separately. The total pre-war debt, including Japan, whose debt was increased only by the money raised to loan to Great Britain and France, amounted to almost $28,000,000,000. The debt at the close of the war amounted to over $224,000,000,000, making the net war debt somewhat over $196,000,000,000. When we compare this with the total cost of the war, which, as we have seen, will amount to about $210,000,000,000, it appears that almost the entire cost of the war will have been defrayed from loans, the difference of well-nigh $15,000,000,000 [Pg 114] derived from taxation being due almost entirely to the efforts of Great Britain and the United States respectively.

PUBLIC DEBT OF THE BELLIGERENTS
000,000 omitted
Before the warAfter the warWar debt
Great BritainAug. 4, 1914£650 = $3,165Mar. 31, 1919£7,643[21]= $37,221$34,056
AustraliaAug. 4, 191497 = 472Jan. 31, 1919[22]336 = 1,6341,162
Canada.Aug. 4, 1914332Mar. 31, 19191,5841,250
New ZealandAug. 4, 1914100 = 487Mar. 31, 1919170 = 828341
South AfricaAug. 4, 1914126 = 614Mar. 31, 1919175 = 846332
British Empire$5,070$42,213$37,143
FranceJuly Empirefr. 32,594 = $6,291Dec. 31, 1918fr. 167,459 = 32,32226,031
RussiaJuly 1914ru. 8,800 = 4,623Jan. 1, 1918ru. 49,288 = 25,38320,760
ItalyMay 1915li. 13,636 = 2,621Oct. 31, 1918li. 77,763 = 15,00912,388
BelgiumAug. 2, 1914fr. 3,743 = 722Apr. 30, 1919fr. 9,787 = 1,8881,166
RumaniaAug. 1916292Oct. 31, 19181,020728
SerbiaJuly 1914271Oct. 31, 1918730459
JapanJuly 1914yen 2,494 = 1,190July 31, 1918yen 2,530 = 1,26518
United StatesApr. 5, 19171,190June 30, 191924,23223,042
Entente Powers$22,327144,062121,735
GermanyAug. 1, 1914mk. 4,732 = $1,126Dec. 31, 1918mk. 204,000 = $48,35247,426
Austria-HungaryAug. 1, 19143,726Oct. 31, 1918kr. 137,858 = 25,58424,858[23]
TurkeyNov. 1914LT 112 = 485Oct. 31, 1918LT 455 = 2,0021,517
BulgariaOct. 4, 1915219Oct. 31, 1918974755
Central Powers$5,556$80,112743,556 74,556
TotalIn Millions $27,883In Millions $224,174196,291

[21] Counting on repayments of one half of the loans to the Allies (£816 millions).

[22] Not including the debts of the separate states.

[23] Obtained by considering the debt of the new Austria as representing 70 per cent of the debt of all the states which constituted the old empire.

French School Children Waiting to Welcome General Pétain

French School Children Waiting to Welcome General Pétain

Click for a larger image.

[Pg 115]


VI—AMERICAN BUSINESS IN THE WAR
Voluntary Coöperation of Experts and Loyal Support of Labor Put Our Industries on a War Basis

By GROSVENOR B. CLARKSON

Director of the U. S. Council of National Defense and of Its Advisory Commission

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.

War today means that for every man on the fighting line there must be approximately ten men—and women—behind him in the factories, mills, and mines of the nation that enters the conflict. It is an enterprise to which military men alone have ceased to be called, for it enlists the specialists of every industry and every science from the fighting line clear back to the last line of defense.

When the American Marines were thrown into the battle line at the Marne, a French general officer rode up to headquarters.

"How deep is your front?" he asked.

"From here to San Francisco," was the reply; and in that statement lay the story of America's industrial and economic mobilization for war.

For America the actual arena of the war was 3,000 miles oversea, and into this arena the Government of the United States threw 2,000,000 of the most superb troops that the drama of warfare has known; and, what is more, got them there on time to make possible the final smashing blow. The organization, transportation, and clocklike delivery at the eleventh hour of these irresistible citizen armies of the great Republic of the western world is an epic in itself.

But here at home there were armies too. They were created without mandates; they were welded into cohesive form by suggestion rather than by order; they were galvanized from beginning to end by the mighty force of voluntary coöperation; and they went into the home stretch with a power which nothing could have stopped. These were the armies of production—production mainly, it is true, of guns and steel plates and soldiers' shoes; but production as well of energy, of thought that made the sword a flaming thing, of optimism to offset the stupid pessimism of people who criticized but had nothing tangible to contribute, of the immortal spirit of "carry on," of, above all, unification.

In all of this endeavor, in all of this uprooting of the static national life of peace time, the business man of America reached his apotheosis and surprised even himself in his ability to merge his heart and nerves and brain into the national interest in the most emergent hour of the country's history.

In effect, America went into the war unprepared. The will to war was a dormant thing throughout the nation. The country was swollen with material success almost to the point expressed in Lincoln's phrase: "A fat hound won't hunt." The evolution of the Government of the United States, enjoying profound peace for more than half a century, except for the minor military operations of the Spanish-American conflict, into a great war-making machine in mercilessly short time was a task to challenge the ability of even the most resourceful nation of the earth.

There, broadly stated, was the national picture in the spring of 1917. War came, and almost with every day grew the need for increased participation on America's part.

COUNCIL OF NATIONAL DEFENSE

The only federal agency in existence on April 7, 1917, capable of the elasticity to mobilize industry, labor, and science for the national defense was the United States Council of National Defense. This body, composed of the Secretaries of War, Navy, Interior, Agriculture, Commerce, and Labor, had providentially been created by Congress [Pg 116] eight months before. It was charged by Congress with "the coördination of industries and resources for the national security and welfare" and "the creation of relations which will render possible in time of need the immediate concentration and utilization of the resources of the nation." With it was to act an advisory commission of seven men, each to have expert knowledge of some special industry, public utility, or the development of some natural resource.

The Council was further charged with the following particular duties:

  1. To supervise and direct investigations and make recommendations to the President and the heads of Executive Departments as to:
    1. The location of railroads with reference to the frontier of the United States, so as to render possible expeditious concentration of troops and supplies to points of defense.
    2. The coördination of military, industrial, and commercial purposes in the location of extensive highways and branch lines of railroads.
    3. The utilization of waterways.
    4. The mobilization of military and naval resources for defense.
    5. The increase of domestic production of articles and materials essential to the support of the armies and of the people during the interruption of foreign commerce.
    6. The development of sea-going transportation.
    7. Data as to amounts, location, methods and means of production and availability of military supplies.
    8. The giving of information to producers and manufacturers as to the class of supplies needed by the military and other services of the Government, the requirements relating thereto, and the creation of relations which will render possible in time of need the immediate concentration and utilization of the resources of the nation.
  2. To report to the President or to the heads of Executive Departments upon special inquiries or subjects appropriate thereto.
  3. To submit an annual report to Congress, through the President, giving as full a statement of the activities of the Council and the agencies subordinate to it as is consistent with the public interest, including an itemized account of the expenditures made by the Council or authorized by it, in as full detail as the public interest will permit, providing, however, that when deemed proper the President may authorize, in amounts stipulated by him, unvouchered expenditures and report the gross so authorized not itemized.

PERSONNEL OF THE COUNCIL

Save for preliminary meetings late in the winter of 1916, the Council and Advisory Commission did not get under way to any appreciable degree until February, 1917, when both bodies began to meet separately and jointly with the primary purpose of taking the national balance, chiefly with regard to industrial resources. The permanent organization of both bodies was made on March 3, 1917.

The Council of National Defense was composed as follows:

Secretary of WarNewton D. Baker, Chairman.
Secretary of the NavyJosephus Daniels.
Secretary of the InteriorFranklin K. Lane.
Secretary of AgricultureDavid F. Houston.
Secretary of CommerceWilliam C. Redfield.
Secretary of LaborWilliam B. Wilson.

The members of the Advisory Commission were:

Transportation and Communication:
Daniel Willard, Chairman, President of the Baltimore and Ohio Railroad.
Munitions and Manufacturing, including Standardization and Industrial Relations:
Howard E. Coffin, Vice-President of the Hudson Motor Car Company.
Supplies, including Food and Clothing:
Julius Rosenwald, President of Sears, Roebuck & Company.
Raw Materials, Minerals and Metals:
Bernard M. Baruch, financier.
Engineering and Education:
Doctor Hollis Godfrey, President of the Drexel Institute.
Labor, including Conservation of Health and Welfare of Workers:
Samuel Gompers, President of the American Federation of Labor.
Medicine and Surgery, including General Sanitation:
Doctor Franklin Martin, Secretary-General of the American College of Surgeons.

The Director of the Council and the Advisory Commission during the greater part of the war was Walter S. Gifford, now Vice-President of the American Telephone and Telegraph Company, a most capable organizer, who with the writer had been closely associated with Howard Coffin [Pg 117] in a pioneer industrial preparedness movement inaugurated in the spring of 1916 to examine into the capacity of industrial plants for military purposes. This was an entirely volunteer movement of business men and industrial engineers under the Naval Consulting Board of the United States, acting with the full approval of the President and the War and Navy Departments. Mr. Coffin's Committee on Industrial Preparedness did a remarkable job in a very short space of time, and the creation of the Council of National Defense was the logical sequence of the Committee's work, its records being turned over to the Council. The writer was the Secretary of the Council and the Advisory Commission throughout until the early summer of 1918, when he became Acting Director, succeeding Mr. Gifford shortly after the signing of the armistice.

United States Council of National Defense and Its Advisory Commission

Copyright by Harris & Ewing

United States Council of National Defense and Its Advisory Commission

Seated, left to right: David F. Houston, Secretary of Agriculture; Josephus Daniels, Secretary of the Navy; Newton D. Baker, Secretary of War; Franklin K. Lane, Secretary of the Interior; William B. Wilson, Secretary of Labor.
Standing, left to right: Grosvenor B. Clarkson, Secretary, later Director, of both Council and Advisory Commission; Julius Rosenwald, Bernard M. Baruch, Daniel Willard, Chairman of the Advisory Commission; Dr. Franklin Martin, Dr. Hollis Godfrey, Howard E. Coffin and Walter S. Gifford, Director of the Council and Advisory Commission.

Click for a larger image.

PROPOSALS OF THE ADVISORY COMMITTEE

Although the Council and Advisory Commission did not, as has been stated, make permanent organization until March 3, 1917, the Advisory Commission on December 7, 1916, determined on the following proposals of action:

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.

PRE-WAR ACTIVITIES

At this time there was consideration of plans to enroll labor in an industrial reserve, and the question of mobilization of American railroads for military purposes was seriously discussed against future need. At the same time Commissioner Baruch stated that he had been making a study of the steel and metal industries in connection with the national defense, and wished for authority to consult further with the leaders in those trades. The Director was asked to establish relations in the interest of the national defense with civic organizations, patriotic associations, and chambers of commerce.

At a meeting on February 12, 1917, plans were discussed to call a series of conferences with the leading men in each industry fundamental to the defense of the country in the event of war, and at the same meeting a plan was laid down and afterwards agreed upon to split the Advisory Commission up into seven separate committees as detailed above, the Chairman of each committee to be given power to select the members of his committee from either governmental or civil life, or both.

At a meeting on February 14, 1917, E. S. Stettinius, who, acting for J. P. Morgan and Company, was the purchasing agent of the Allies at that time, was called before the Council to confer with it on the manufacture of munitions. In the same way during this early period men of the authority and standing of Herbert Hoover, Admiral Peary, and General Kuhn, who had closely studied the German armies, were called into consultation by the Council, Mr. Hoover of course, discussing the mobilization, distribution, and conservation of food supplies, and Admiral Peary the development of the aeroplane and seaplane for modern war.

On February 15th the Advisory Commission, further to progress its work then already under way, requested detailed lists of materials, with specifications and detailed dimensioned blueprints covering all equipment needed for a force of 1,000,000 men and for the assumed force of the Navy and Marine Corps with its numbers increased to emergency strength. It also called for estimates of reasonable accuracy covering the maintenance of a force of the size mentioned in the field during each ninety days of active service. The information was desired in order that approximations might be made as to the amounts of both manufactured and raw material for which it would be necessary to draw upon the resources of the country. The Advisory Commission later furnished estimates of its own.

On March 3rd Chairman Willard of the Advisory Commission read to the Council a list of men nominated by the Commission to compose a munitions standards board. It is highly significant to detail the names of these men with their occupations, for they were typical of the cream of American industry [Pg 119] which from that time on was enlisted in the Government's interest:

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.

The Council duly approved these nominations.

Bernard M. Baruch

Copyright Underwood & Underwood

Bernard M. Baruch

Known as the "Eye of Industry," because his task was to see that the raw materials were brought to the factories and the finished products shipped overseas.

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MEN OF VISION

It is impossible here to give more than a few instances such as the foregoing of the way in which the Council and Commission, with remarkable vision and perhaps even more remarkable disregard of precedent when precedent got in the way of the national welfare, made history in these pre-war days. Fully to tell the story of this period would pack a large volume. I quote from a recent partisan criticism directed by an American Congressman, as chairman of a congressional committee to investigate war expenditures, against the Advisory Commission particularly, which he characterized as the "secret government of the United States" during this vital space of time:

[Pg 120]

It appears from the minutes of the advisory commission and the council, which were kept separately, that practically all of the measures which were afterwards considered as war measures, were initiated by this advisory commission, adopted by the council, and afterwards acted upon by Congress. In many cases, a considerable period before the actual declaration of war with Germany this advisory commission was discussing matters which were thought to be new legislation, conceived by reason of the necessities of war. For instance, on March 3rd, over a month before the War declaration, the advisory commission indorsed to the Council of National Defense a daylight-saving scheme, and recommended a Federal censorship of the press. The question of Federal censorship of the press was further discussed on March 24th, two weeks before the declaration of war.

On February 15th, about two months before the declaration of war, Commissioners Coffin and Gompers made a report as to the exclusion of labor from military service, and the draft was discussed; the draft was also discussed on other occasions before anyone in this country, except this advisory commission and those who were closely affiliated with the administration, knew that a declaration of war was to be made later. At a meeting, on February 15th, this same commission of seven men (none of whom had any official authority except as advisors), recommended that Herbert Hoover be employed by the Government in connection with food control. It was generally understood, as appears from the minutes, that Mr. Hoover was to be in control of this matter, although war was two months in the future.

The advisory commission first met on December 6, 1916. Almost the first thing the commission did was to take up the matter of arranging an easy method of communication between the manufacturers and the Government. On February 12th, for example, Secretary Lane offered a resolution to the advisory commission suggesting to them to call a series of conferences of the leading men in various industries, so the industries might organize and be able to do business with the council through one man. In several meetings, long before the war was declared, this advisory commission of seven men met with the representatives of the manufacturing industries and formed an organization of them for selling supplies to the Government, which organization was well perfected before the war was declared. This method consisted of having the representatives of the various businesses, producing goods which the Government would have to buy, form themselves into committees so that they might be able to sell to the Government the goods direct, which their industries produced. In almost every meeting that this advisory commission had before the declaration of war, they discussed and recommended to the council (which consisted of six Cabinet members) these plans for fixing prices and selling to the Government. When war was declared on April 6th, this machinery began to move, headed by the advisory commission of these minutes, the active Government of the seven men, who were, in effect, as shown by United States, so far as the purchase of supplies was concerned. So far as I can observe, there was not an act of the so-called war legislation afterward enacted that had not before the actual declaration of war been discussed and settled upon by this advisory commission.

It should be said, of course, that no member of this Council organization ever sold commodities to himself. But that is another story.

MEN OF EXPERIENCE

I could not complete even a skeleton outline of the period in question without certain other references.

Further to emphasize the quality of the business men being called to Washington by the Council and Advisory Commission, I quote part of a letter to Chairman Willard of the Commission from Commissioner Baruch of March 23, 1917:

Mr. Daniel Willard,
Chairman, Advisory Commission, Council of
National Defense, Washington, D. C.

Dear Sir:

In pursuance of the authority given me and in order to be prepared to meet the requests made of the advisory commission, I have appointed the following committees. As the necessity arises and the advisability becomes apparent, I shall add from time to time other members to these committees, always bearing in mind keeping them down to such a size that they will be workable. It has been my endeavor to appoint on these committees men of proved ability and undoubted integrity.

Leather.—Walter C. Garritt, U. S. Leather Co., Boston, Mass.; George F. Johnson, Endicott, N. Y.; Theodore P. Haight, American Hide & Leather Co., New York City.

Rubber.—A. Marks, Diamond Rubber Co., Akron, Ohio; Fred Hood, Hood Rubber Co., Watertown, Mass.; Stuart Hotchkiss, General Rubber Co., New York City.

Steel.—E. H. Gary, President, American Iron & Steel Institute, New York.

Wool.—J. F. Brown, Boston, Mass.; Sigmund Silberson, Chicago, Ill.; Joseph R. Grundy, Bristol, Pa.; F. J. Hagenbarth, President, National Association of Wool Growers, Salt Lake City, Utah.

[Pg 121]

Nickel.—Ambrose Monell, President, International Nickel Co., New York.

Oil.—I have asked Mr. A. C. Bedford, president of the Standard Oil Co., to serve on the committee, but I shall probably add another from the Middle West, whose name I have not yet determined upon, and Mr. Ed. L. Doheny, of Los Angeles, Calif.

Zinc.—I have in the process of formation a committee representing the zinc trade. There are certain difficulties in the way of trade jealousies which we have to smooth away. The same thing is occurring in other lines, but it will be adjusted, and I shall report on them from time to time.

Coal.—I have been in consultation with the producers of coal, both bituminous and anthracite, and am now studying that situation as to the best method of covering coal.

Spruce Wood.—I have also under consideration, but have come to no conclusion, the employment through a committee of those best fitted for obtaining the manufacture of aeroplanes for the Government the proper amount of spruce wood which seems to be needed.

LABOR PLEDGES SUPPORT

It will be long before the writer forgets the dramatic meeting of the Advisory Commission as early as March 3, 1917, when Commissioner Gompers reported that he had called an executive council meeting of the American Federation of Labor for March 9, 1917, for the purpose of considering the attitude of labor toward the preparedness plans of the government. The labor leader spoke with great emotion. He referred to England's difficulty in the first year of the war in enlisting the services of the working people. He went on to say that in England unity was then lacking between government and labor and that the same situation, if not properly handled before hand, could arise in this country in even more acute form, largely because of the racial diversity of our working classes. He concluded by stating that he was now bending his efforts to mobilizing good will in this direction, saying: [24] "I want the workingmen to do their part if war comes to America." He forecasted the meeting in Washington on March 12, 1917, of the officers of the National and International Trade Unions of America, and said: "I am expecting a definite response of support from every trade union in America." There is no doubt in the writer's mind that Samuel Gompers kept the faith throughout.

[24] I took Mr. Gompers' words verbatim.

On April 6, 1917, the Council and Advisory Commission approved a declaration of the attitude of American labor toward the war presented by Mr. Gompers' Committee on Labor of the Advisory Commission. This action was directed toward the maintenance of existing standards of employment, and provided, among other things, that the Council should issue a statement to employers and employees in industrial plants and transportation systems advising that neither employers nor employees should endeavor to take advantage of the country's necessities to change existing standards; and providing further that when economic or other emergencies might arise requiring changes of standards, the same should be made only after such proposed changes were investigated and approved by the Council. It likewise provided that the Council urge upon the legislatures of the States, as well as upon all administrative agencies charged with the enforcement of labor and health laws, the great duty of rigorously maintaining the existing safeguards as to the health and welfare of workers, and that no departure from such standards in State laws and State rulings affecting labor should be taken without a declaration of the Council that such departure was essential for the effective pursuit of the national defense.

MERGING THE RAILROADS

On April 7, 1917, the Council directed Chairman Willard of the Advisory Commission to call upon the railroads so to organize their business as to lead to the greatest expedition in the movement of freight and troops. The response of the railroads was literally splendid. Their executives came to Washington, conferred with Mr. Willard, and passed the following resolution:

Resolved, That the railroads of the United States, acting through their chief executive officers here and now assembled and stirred by a high sense of their opportunity to be of the greatest service to their country in the present national crisis, do hereby pledge themselves, with the Government of the United States, with the governments of the several States, and one with another, that during the present war they will coördinate their operations in a continental railway system, merging during such period all their merely individual and [Pg 122] competitive activities in the effort to produce a maximum of national transportation efficiency. To this end they hereby agree to create an organization which shall have general authority to formulate in detail and from time to time a policy of operation of all or any of the railways, which policy, when and as announced by such temporary organization, shall be accepted and earnestly made effective by the several managements of the individual railroad companies here represented.

COÖPERATING COMMITTEES

The first of July, 1917, found the Council and Advisory Commission directing the operation of the following boards and committees:

Aircraft Production Board.

Committee on Coal Production.

Commercial Economy Board.

Woman's Committee.

General Munitions Board with its sub-committees on Army Vehicles, Armored Cars, Emergency Construction and Contracts, Optical Glass, Storage Facilities, Machine Guns, Priority, and Accounting.

Munitions Standards Board with its sub-committees on Gauges and Dies, Army and Navy Artillery, Fuses and Detonators, Small Arms and Munitions, Optical Instruments, and Army and Navy Projectiles.

Section on Coöperation with States.

Committee on Inland Waterways.

Committee on Telegraphs and Telephones.

Committee on Railroad Transportation, with which acted an executive committee made up of leading railroad presidents and six departmental committees composed likewise of railroad executives and paralleling the military departments over the country, and sub-committees on Express, Car Service, Military Equipment Standards, Military Transportation Accounting, Military Passenger Tariffs, Military Freight Tariffs, and Materials and Supplies.

Committees on Cars and Locomotives, with their personnel made up of the high executives of such concerns as the Baldwin Locomotive Works, the Pullman Company, and the American Locomotive Company.

Committee on Electric Railroad Transportation, composed of electric railway presidents.

Committee on Gas and Electric Service.

Committee on Automotive Transport.

Committee on Supplies, with its sub-committees on Cotton Goods, Woolen Manufacturers, Shoe and Leather Industries, Knit Goods, Leather Equipment, Mattresses and Pillows, and Canned Goods.

Committee on Raw Materials, with its sub-committees, popularly known at the time as the "A to Z" committees, on Alcohol, Aluminum, Asbestos, Magnesia and Roofing, Brass, Cement, Chemicals, Acids, Alkalis, Electrochemicals, Fertilizers, Miscellaneous Chemicals, Coal-Tar Products, Pyrites, Sulphur.

Sub-Committees on Copper, Lead, Lumber, Mica, Nickel, Steel Products, with sub-committees on Alloys, Sheet Steel, Pig Tin, Steel Distribution, Scrap Iron, Pig Iron, Iron Ore, and Lake Transportation, Tubular Products, Tin Plate, Wire Rope, Wire Products, and Cold Rolled and Cold Drawn Steel.

Sub-Committee on Oil, Rubber, Wool, and Zinc.

Committee on Engineering and Education, with its sub-committees on General Engineering, Production Engineering, Universities and Colleges, Secondary and Normal Schools, and Construction Engineering.

Committee on Labor, with its sub-committees on Mediation and Conciliation, Wages and Hours, Women in Industry, Welfare Work, Sanitation with twelve subdivisions, Vocational Education with nine subdivisions, Information and Statistics, Cost of Living and Domestic Economy.

General Medical Board, with a long and active list of sub-committees.

Daniel Willard

Copyright by Underwood & Underwood

Daniel Willard

President of the Baltimore and Ohio Railroad. He was chairman of transportation and communication in the Council of National Defense.

SERVICE OF EXPERTS

On these boards and committees sat, almost without exception, the American leaders of industry, science, and labor. Scattered [Pg 123] through the list one finds such names as:

Rear Admiral David W. Taylor, one of the world's leading naval constructors.

F. S. Peabody, the great coal operator.

James J. Storrow, of Lee, Higginson & Co., of Boston.

A. W. Shaw, publisher of the System magazine, who, as Chairman of the Commercial Economy Board, preached with remarkable success the gospel of conservation in business.

Dr. Anna Howard Shaw, who for her labors as Chairman of the Woman's Committee received the Distinguished Service Medal.

Frank A. Scott, on whom was bestowed the same distinction for his leadership of the General Munitions Board.

W. A. Starrett, constructing architect of New York, to whom in great measure is due the credit for the building of the cantonments in an incredibly short space of time.

Samuel Vauclain, President of the Baldwin Locomotive Works, whose contribution in the matter of Army and Navy artillery was monumental.

Theodore Vail, President of the American Telephone & Telegraph Company, who brought the wire communication men of the country to a common center in the national interest.

Charles Clifton, President of the National Automobile Chamber of Commerce.

Gen. George H. Harries, the famous electric railway operator.

Samuel Insull, President of the Commonwealth Edison Co., of Chicago.

Charles Eisenman, who, as active head of the Council's Committee on Supplies, procured for the Government $800,000,000 of supplies in 200 days at an overhead cost of but $20,000, involving the handling of 45,000 contracts, and who justly received the Distinguished Service Medal.

A. F. Bemis, President of the National Association of Cotton Manufacturers.

John P. Woods, the eminent woolen manufacturer.

J. F. McElwain, of the McElwain Shoe Company.

Lincoln Cromwell, of Wm. Iselin & Co., New York.

Arthur V. Davis, President of the Aluminum Co. of America.

Thomas F. Manville, President of H. W. Johns-Manville Co.

Charles F. Brooker, President of the American Brass Company.

John E. Morron, President of the Atlas Portland Cement Company.

John D. Ryan, President of the Anaconda Copper Company.

R. L. Agassiz, President of the Calumet & Hecla Mining Company.

W. A. Clark, President of the United Verde Copper Company.

Murry M. Guggenheim.

R. H. Downman, President of the National Lumber Manufacturers' Association.

Ambrose Monell, President of the International Nickel Company.

The great steel executives. Gary, Farrell, Burden, Dinkey, King, Grace, Schwab, Topping, Dalton, and Clarke

Bedford, Davison, Doheney, Lufkin, Markham, Sinclair, Van Dyke, Muir, James, and Guffy, in whose hands lay almost the entire oil output of America.

Stuart Hotchkiss, President of the General Rubber Company.

F. J. Hagenbarth, President of the National Association of Wool Growers.

The Presidents of the leading zinc companies.

Then when we come to Engineering and Education:

Dr. Henry E. Crampton, of Columbia University.

Charles A. Stone, of Stone and Webster.

The heads of the great engineering societies.

The presidents of Harvard, Johns Hopkins, and other famous universities and colleges.

Among labor leaders such persons as:

Warren S. Stone, Grand Chief of the Brotherhood of Locomotive Engineers.

James W. Sullivan, Matthew Woll, and Frank Morrison; all high in the American Federation of Labor.

Such well-known men as:

V. Everit Macy, Benjamin Ide Wheeler, John H. Finley, August Belmont, E. T. Stotesbury and Charles G. Dawes, afterwards a brilliant figure as a General in France.

Such nationally and internationally known physicians as:

General Gorgas, Dr. William H. Welch, of Johns Hopkins, the Mayos, Dr., afterwards Brigadier-General Finney, Dr. George E. Brewer, Dr. George W. Crile, Dr. Simon Flexner, and Dr. Theodore Janeway.

Dr. George E. Hale, Chairman of the National Research Council, which was and is the Council's Department of Science and Research.

Thomas A. Edison, President of the Naval Consulting Board, which was and is the Council's Board of Inventions.

The activities of these men and their hundreds of colleagues, nearly all dollar-a-year workers and men whose time could not be bought, as a rule, in days of peace, reached out and touched almost every town and village in almost every part of the United States. They were moved and [Pg 124] stimulated by the philosophy of voluntary coöperation, which was first and in a very daring way thrust into the consciousness of the nation by the Council of National Defense. It was the policy that won the war. One distinct benefit which the Government received from calling the industrial intelligence of the country to its aid was the breadth of view which industrial leaders possess. Their habit of mind to survey the field as a whole, to take a bird's-eye view of the problem to be solved, enabled the Government agencies to obtain a proper comprehension of the task of building the war machine. The country will probably never know the debt that it owes to these men and their like who came to Washington and bent their backs throughout the hot Southern summer during a series of endeavors in which absolutely no paths were charted.

NON-PARTISAN REPRESENTATION

It has been asked why a coalition government was not formed to wage the war. That very thing was in effect done by the Council, though we were all too busy to point it out at the time. A majority of the Advisory Commission was made up of Republicans. Certainly Republicans were in the huge preponderance in the Committee and Boards of the Council and Advisory Commission. Speaking as one who was not affiliated with the politics of the Administration of Woodrow Wilson, the writer never perceived a trace of political flavor in the organization and operation of the Council from first to last. Never did the six Democratic cabinet officers forming the Council itself so much as inquire into the politics of the hundreds of business men and experts nominated to them for appointment. It was an amazing demonstration of non-partisanship in a national crisis. The Council was an organization of specialists from beginning to end, and the work was everywhere carried forward on the most impersonal basis. The writer attributes this state of affairs to the breadth of view, and the very genuine passion for national service, of Secretary of War Baker, Chairman of the Council.

It should be plainly stated that, utilizing in the main dollar-a-year experts, the Council made the preliminary mobilization of industry to July 1, 1917, at the grotesquely small sum of $127,000. To May 1, 1919, its total expenditures, including the operation of the war industries for nearly a year, amounted to but $1,500,000, and this comprehended the expenditure of $225,000 for the erection of a building. I doubt if there is anything in governmental or commercial history to match those figures, squared with results. The savings of the Council and Advisory Commission to the Government and the people mounted literally into the billions, as careful analysis of pre-war and war-time prices on certain commodities will demonstrate. It was made possible by the Council's course in commandeering to its side the business men of the United States.

SOME RESULTS OF COÖPERATION

One of the practical results of voluntary coöperation was the agreement made by Mr. Baruch and Mr. Ryan with the largest copper producers of the country to furnish the Navy 20,000,000 pounds of copper and the Army 25,510,000 pounds at 162/3¢. a pound when the market price was 35¢. a pound. This meant saving to the Government close to $10,000,000. The copper men made this offer notwithstanding their increased cost for labor, materials, etc., because, as they said: "We believe it to be our duty to furnish the requirements of the Government in preparing the nation for war with no more profit than we receive from our regular production in normal times."

In the same way the steel makers of the country, represented in the Steel Institute, agreed to furnish steel to the Government at the basic price of 2.9¢. per pound as compared with the then market price of from 5¢. to 7¢. a pound. This represented an approximate saving to the Government of $18,000,000.

THE FIELD DIVISION

The tremendous effort of the Council to mobilize and coalesce into a fluid and powerful whole the industrial, economic and scientific forces, was supplemented and to a great extent made possible by the Council's Section on Coöperation with States, later known as the Field Division. Through this [Pg 125] subordinate body was created, guided and coördinated the 185,000 units of the state, county, community and municipal councils of defense, which literally unified the citizenship of America for war. If production was to win the war, it was elementary that the civilian morale must be brought to the highest pitch of coöperation and efficiency—and it was accomplished. In this vital task a noble part was played by the Woman's Committee of the Council, which in the most thorough-going and swift manner brought the services of the women of the country to the Government. The director of this committee, Miss Hannah J. Patterson, received the Distinguished Service Medal.

WAR INDUSTRIES BOARD

On August 1, 1917, the Council, with its fortunate power to create subordinate bodies, brought into being the War Industries Board, of which the first Chairman was Frank A. Scott, and of which some of the other members up to the end of the war were:

Robert S. Brookings.

Brigadier-General Hugh S. Johnson.

Rear Admiral F. F. Fletcher.

Hugh Frayne, of the American Federation of Labor.

George N. Peek, a prominent Middle Western manufacturer.

J. L. Replogle, who became the very efficient Director of Steel Supply.

L. L. Summers, an expert on explosives.

Alexander Legge, General Manager of the International Harvester Company.

And Judge Edwin B. Parker.

Mr. Brookings was later placed in charge of price fixing and Judge Parker in charge of priorities. The War Industries Board undoubtedly accomplished a much better centralization of effort than was possible in the hurried organization of the early days, when the imperative need was to increase the sources of supply and get production going until the executive departments of the Government could get into their full stride. Mr. Scott was succeeded as Chairman of the War Industries by Daniel Willard, who in turn was succeeded by B. M. Baruch, who, in his leadership of this vital and powerful agency, duplicated the success that Mr. Willard had made as Chairman of the pioneer Advisory Commission.

CANTONMENT CONSTRUCTION

In indicating even an outline statement of the American industrial and economic effort in the war, the writer feels helpless to paint the picture within the space of a few thousand words. It simply cannot be done. But to visualize what the measure of the task was, let one thing be cited:

John D. Ryan

Copyright Underwood & Underwood

John D. Ryan

President of the Anaconda Copper Company. He was made chairman of the Aircraft Production Board after we entered the war.

At our entrance into the war there were one colonel and four men to build the cantonments. The job involved the expenditure of $150,000,000 in about three months. The largest year's work on the Panama Canal amounted to but some $50,000,000. The situation was heart-breaking. On hearing of it Frank Scott, then Chairman of the General Munitions Board, called up the Secretary of War and said that something had to be done, with which the Secretary instantly agreed. The result was that the Colonel, afterwards Brigadier-General Littell, had a civilian organization built around him by the Council of National [Pg 126] Defense, notably by W. A. Starrett, later himself a colonel in the Army, which functioned until the Army was in shape to carry on the job alone. The building of the cantonments was the greatest job of the ages. Incidentally it should be stated that the average profit to the contractors was less than three per cent.

MEN LITTLE KNOWN

The writer likewise feels great reluctance in mentioning, as he has mentioned, only a few of the men who waged the industrial side of the war. Many business men little known to the country gave up their businesses and came to Washington and did superhuman things—did them in an impersonal, selfless way that was nothing less than stirring. Many of them remain unknown to this day, and their chief reward must lie in the satisfaction that they drew to their own souls by what they did, which is, of course, the greatest satisfaction of all in such situations as war-time Washington exemplified.

It has not even been possible to touch on the work of business men in such great war agencies as the Food and Fuel Administration, the War Trade Board, the Shipping Board, the Aircraft Production Board, the Office of the Alien Property Custodian, the War Finance Corporation, and those divisions of the War Department which called highly qualified civilians to their aid. It would seem better to emphasize the initial effort, when the Council, through force of circumstances, became the great administrative laboratory for the examination, organization, and, at the proper time, allocation of totally new and untried phases of Federal action related to the prosecution of the war. It was in effect a fecund mother, which, it is not the slightest exaggeration to say, gave birth to and propelled the war machine which in the closing days of the conflict oversea overseas was reaching to the peak of its load, and which in fact dealt the death blow to the Imperial German Government. It made, in truth, its fair share of mistakes, but some day its part in sending out the trumpet call to the business and labor and scientific leaders of America to join in the national defense will be fully told. Then there will be perceived in clear and true light the extent to which peace-loving American civilians offered all they had and all they were to the Government of the United States so that decency might again be paramount upon the face of the earth.


VII—THE LIBERTY LOAN ARMY
Mobilizing Americans at Home to Pay for the War—A National Effort Which Yielded $24,065,810,350

By GUY EMERSON

Vice-President of the National Bank of Commerce, formerly Director of Publicity, Government Loan Organization

Our Army was our first line in the war against Germany. Our second line of offense and defense was the Navy, and behind both stood another line without which neither the Army nor the Navy could have "carried on." This third force was the greatest unit ever marshalled in the history of this or any other country—the Liberty Loan Army. Before a man in the United States uniform entered a trench, before the first depth bomb had been dropped on a U-boat, this Army, which finally carried a roster of 22,777,680 names, had entered the war.

Think of it! One person in every five in the immense population was in the war!

True, their contribution to the eventual triumph of our arms was measured in dollars while that of the men at the front or on the seas was in lives or limbs. Yet it is a fact that dollars were as powerful relatively as men in bringing the Boche to bay.

Various causes have been given to account for the startlingly sudden collapse of the Kaiser's army. Some say that the Allies' superior military strategy brought it to its knees. Others contend that success against the U-boats broke it down. Both are partly right, for [Pg 127] each helped to undermine the German morale. But however great the contribution of both was, it is safe to say that the front presented by the Liberty Loan Army was a vital factor. The belated German consciousness that the United States as a whole was in the war, as tangibly represented in the strength of the Liberty Loan Army, helped to shatter the Germans' will to victory. As much as the men in khaki or in blue, this gigantic unit bore in upon his mind as an unyielding opponent. He understood the futility of trying to defeat a people that enlisted against him to the number of 22,777,680 at home, 4,000,000 in the field and 300,000 on the water.

THE SPIRIT BEHIND THE DOLLAR

There is another angle to this important element of morale. In inverse ratio to the weakening of the spirit of the Germans against this resistless body there came a daily strengthening of the morale of our own men and those of the Allies through this manifestation at home. Where there are two opposing wills to victory in the field, the one that has the greater backing at home is certain to overwhelm the other.

It was not the dollar that won the war, it was the spirit behind the dollar. Before Prince Max asked for the armistice he had learned that $9,978,835,800 had been subscribed in this country toward his defeat. It is natural to assume that this fact did not impress him so much as the related fact that millions of persons had participated in the subscription.

Up to the end of the Fourth Loan, which coincided with the negotiations for the Armistice, $16,971,909,050 had been paid in and this helped to save life to an extent that we can only imagine. It was the confident expectation when the Americans halted the German onslaught at Château-Thierry that the end of the war would come in the following spring. None dared to hope that it would come before Christmas. When the crash came in November, even the Allied commanders were bewildered by its suddenness. Had the war been prolonged to the spring of 1919, it is certain that we would have paid a large toll in lives. Some have estimated that 100,000 more of our young men would have been sacrificed. That the war did not drag along for six months more may be ascribed in part to the effect that the demonstrated loyalty of the Liberty Loan Army had upon German morale. We know that the Germans fed lies to their own troops and dropped pamphlets with these same falsehoods into our own trenches. They tried to convince their own and our men that the Loans had no support.

MOBILIZING THE LIBERTY LOAN ARMY

When at 11 o'clock on November 11, 1918, peace dawned upon a war-sick world we had 2,000,000 men in Europe, and as many more on this side putting themselves in readiness to go across. On the seas we had close to 300,000 men. This tremendous force was welded into form in the nineteen months we were in the war. Yet within a few months after our entrance into the war there were more than this total in the Liberty Loan Army. The list of subscribers to the First Liberty Loan which closed two months after our entry had 4,500,000 names.

And this number remained for the duration of the war, giving every penny they could spare, mortgaging their property, committing themselves to personal privations. When the Second Loan books were totalled in November the number had increased to 9,500,000, and it leaped to 17,000,000 in the Third. In the Fourth—the last loan of war-time—it had grown to 22,777,680 and in the Fifth which closed six months after the armistice, it finished with 12,000,000 names.

As in the Army, where organization is half the battle, it was through organization of the enthusiasm and the deep fervor of the American people that success came in this big venture. We had to create a state of mind, we had to educate the American public in finance—which in itself appeared an insuperable task—we had to marshal resources on a scale such as never before had been attempted, and we had to map out a sales campaign that would comprehend millions of persons. There were no precedents to go by; the example set in Europe could not have application in the United States because of temperamental and financial differences; the flotation of the loans in the Civil War afforded no practicable working basis. It was pioneering, and this fact was made clear in the first conference held in Washington when Secretary of the Treasury William G. McAdoo called together the financial leaders of the country.

[Pg 128]

A Poster Used During the Fourth Liberty Loan Campaign

A Poster Used During the Fourth Liberty Loan Campaign

Click for a larger image.

[Pg 129]

Only three weeks were allowed to prepare for the First Loan Drive. As soon as we had decided to get into the war, this decision carried with it the determination to go in to the limit of our resources. The Secretary of the Treasury informed the bankers that the first issue would be for $2,000,000,000 and this would be merely the forerunner of a succession of loans in larger amounts. The bonds were to be put on the market at three and a half percent. and the campaigns were to be conducted according to the territories of the Federal Reserve districts, twelve in all.

"It is quite likely," said the Secretary of the Treasury, "that we could induce a group of men to take up this loan but that would compromise the country before the world. We must sell to the public in such numbers that there shall exist no doubt among our enemies that our people are back of the Government as a unit in this war."

The men whom he addressed were all recognized as organizers, all had been identified with big business. However, few of them had had the general contact with the public so essential to popularizing the loan. They knew how to sell, but not in small denominations or to millions of purchasers. In an abstract sense they realized the value of advertising and newspaper publicity, but not one of them had the remotest idea of how the ideal of Secretary McAdoo could be realized.

ORGANIZING THE FIRST DRIVE

It was at this point that their resourcefulness came into play. Their first move was the right one; they engaged specialists to undertake the tasks of which they knew little. They addressed themselves to the public through men skilled in establishing such contacts as are given through advertising, publicity, and canvassing. In the brief time allotted to them, they barely had time to surround themselves with this trained talent.

Verily, it was shooting in the dark, a process of hit and miss. Some one said that the campaign in the First Loan was planned as we went along, and that is literally true. The patriotism was there—that was an unquestionable fact; the problem was to make it manifest itself in sacrifice of savings and earnings. The work of the whole three weeks was experimental and the country was the laboratory. Let it be said that the alchemy of patriotism transmuted the hearts and minds of the public into pure gold. Once the people were informed of their duty toward the United States they rallied instantly.

Newspapers turned over their columns, advertisers offered their precious space—and it was precious in those days of paper shortage; stores and banks opened booths for sales, public speakers cancelled every other engagement that they might participate, factories strove to enlist every person in their employment as purchasers, clubs responded in whole memberships, women's committees were formed for the acceleration of interest, churches consecrated themselves to the project, trade unions abandoned all differences with employers and allied themselves unselfishly, writers pleaded for a chance to exercise their influence, foreign language groups demanded opportunity to prove their Americanism, actors, singers, and lecturers begged for a place in the campaign.

Wholeheartedly and with utter disregard of personal sacrifice this vast aggregation committed itself to the task. The initial momentum gave the drive the force of an avalanche that swept everything else aside. There came times during this first drive when the issue seemed in doubt, but this was due more to an excess of enthusiasm than to a lack of support. When the totals were in, it was realized that these misgivings were due to the physical inability of the tabulators to keep abreast of the tide of subscriptions. The subscriptions went to $3,035,226,850.

It had been said that the first campaign in its directive agencies was largely hit and miss. When it was over the strikes were recorded and the misses eliminated for the preliminary work of the Second Loan which was to follow in October. Out of the mass was evolved a system of methods that served as the groundwork of the real organization. The [Pg 130] results afforded a working basis that would have carried a dozen loans through, granting that the people remained faithful to their patriotism.

THE APPEAL

Let it be admitted that in the first loan there was no defined appeal. We were in the war and in to win, that was sufficient. It was foreseen that the psychology of the public must have a central theme for the next loan to which it must respond. The Second campaign began on October 1, 1917, after the embarkation of the nucleus of the vast army that eventually was to overwhelm the foe. None of them yet had been called into action. The keynote of this drive was the education of the people on the meaning of a German victory. We had before us the ghastly stories of what the Germans had done in Belgium and in France; we had to throw ourselves into the conflict to keep our own homes safe.

The eyes of all Europe, our Allies and our enemies, were upon us. It was clear that by the results at home we would be judged, as we had not yet had the opportunity to show ourselves in the field. For four weeks and a day the campaign went on, this time for $3,000,000,000. The appeal which touched the heartstrings of all persons served a double purpose. Not only did it carry the message of the Loan, but it knit closer the sentiment of the whole American people to the purposes of the war. Through its constant reiteration it had the effect of a prayer and like a prayer gained added meaning with deeper thought.

Thought was compelled through its manifold repetitions. All the functions of life were linked with it, all the recreations, all the relaxations embodied it in part. It formed the backbone of conversation, it became a part of every daily activity. It assailed the eye at every turn, it smote the ear constantly, it crashed into consciousnesses in every conceivable form. Through a strange paradox it linked a fear and a hope. It embraced the whole gamut of emotions.

GROWING RESPONSE

Again there was a resounding response. In the First Loan the subscriptions were limited to the actual amount of the issue, but in the Second all subscriptions were accepted. The number of those who took bonds was increased more than 100 percent.—it reached 9,500,000, to be exact, and the $3,000,000,000 issue went to $3,808,766,150.

So it was in the Third, which was put before the public on the anniversary of our entrance into the war. At this time our men had gone into the trenches which in itself made the war our own in its most serious meaning. This was intensified throughout the land by the operation of the Selective Service Act. The draft had entered almost every home; many of those who had qualified in the first call were at that time in France. Casualty lists were beginning to appear in the newspapers.

It needed only this fact—the fact in itself was its own appeal—to bring out the finest in our people. All previous sentiment faded ito into insignificance compared with the solemnity of the actual participation. The resources that we had been led to believe had been plumbed to their depths were now revealed to us as inexhaustible. Giving seemed to be the poorest means of showing how the country was touched; the people gave as if in despair because this was all they might do.

The campaign had been for $3,000,000,000 and it brought in returns of $4,170,069,650 from 17,000,000 men, women and children in the United States; men, who regretted that this was all they might give to their country's need; women, who offered with each dollar a passionate prayer that it might help the men now matching themselves against the foe, and children, who realized with joy that they were becoming part of the world's greatest war.

FOURTH LIBERTY LOAN

Before the Fourth Loan the Rolls of Honor in the daily newspapers were carrying a lengthening list of those who had paid the supreme sacrifice. In the training camps more and more hundreds of thousands of drafted men were preparing themselves to take their places on the line; the sea lanes were crowded with troopships, each bearing the best of our country away. There had been a depressing period when Ludendorff's men seemed to carry everything before them, when the coast ports of France seemed menaced, but before the bugle called the non-combatants at home to attention again our boys had turned the tide at Château-Thierry and now were in full cry after the fugitive enemy.

[Pg 131]

A Poster for the Third Liberty Loan Campaign

A Poster for the Third Liberty Loan Campaign

Click for a larger image.

[Pg 132]

On September 27, 1918, the call for the Fourth Loan came and it seemed at the time as if it had been postponed too long because the foe was crumbling. President Wilson sounded the tocsin in the Metropolitan Opera House in New York City. This time the appeal was to drive home the finishing blows, to demonstrate to the crumbling empire of the Hohenzollerns that here was a people undivided and unafraid.

The campaign was carried through in a veritable ecstacy ecstasy of delight. Where before there had been the spirit to give in order to wage the war to any length, here was the spirit to bring the end swiftly and splendidly, to crown the triumphs of our arms abroad with another triumph at home. In truth, the prospect of impending triumph at first almost defeated the need of a campaign. The enthusiasm during the period of the drive transcended everything ever seen in this country before. The result reflected it: In an issue of $6,000,000,000 there was an oversubscription of $933,073,250 and the total number was the 22,777,680 which will stand as the high mark of Americanism for many generations to come.

AROUSING THE HALF-HEARTED

It has been set forth here that all appeals were based on arousing the emotions of the people. This was necessary because, had the offerings gone before the public solely on their practical value as investments, the results would have been considered abroad as another demonstration of our sordidness. Had the people of the United States been sordid, it is certain that they might have obtained better investment values. That they were not touched by selfish instincts is further proved by the fact that all through the drives the bonds of the previous issues had been quoted below par, due to the machinations of a group that never could be lifted above self-interest. The public, in full realization of this apparent depreciation, fought it out and showed their utter contempt for the manipulators by subscribing in greater force and for greater amounts to each subsequent issue.

It has been said before that the feeling of the public toward the war was made clear in the First Loan. It became the problem of the Second and the succeeding drives to organize enthusiasm so that through contagion the more resistant types might be affected. This compelled an organization of psychology. Back of each demonstration there were stage managers. These managers of psychology worked upon the public through the newspapers, through advertising, through "stunts," and generated a force of example which affected the whole community in which they were expressed.

For instance, a parade always has the effect of stirring people; feelings deep-hidden cannot be well concealed when, in war-time, marching men stride past. Unconsciously there comes to the mind of people the question: "What will become of these fine boys when they reach France?" There is the wish to help them, and the means to help them has been before their eyes for days in the Liberty Loan publicity. That is what is meant by stage management.

Through all the Loans it was necessary to manipulate the emotions first, to bring to the consciousness of the people in the news reports the facts and purposes of the loans; secondly, to carry the "urge" to them through the advertising; and thirdly to work upon their feelings through spectacles, meetings, aeroplane flights, sham battles, motion pictures of actual warfare, and like accelerants. It was necessary to infect them in the mass so that as individuals they might infect others with the fever to buy bonds.

All this work had to be carried through and was carried through with brilliant success in the four war-time loans. The Army, the Navy, the stage women's committees, police organizations, Boy Scouts, foreign language groups, all played a part. When the call came for the Fifth Loan, practically everything that had been done before had to be scrapped. It was all part of the war equipment and would help little in getting over another loan when people were striving with every fiber to get away from the thought and the sacrifices of the war.

[Pg 133]

"FINISH THE JOB"

We had to deal, then, with a people who were beginning to adjust themselves to peace, who were consoling themselves with the thought that they had done their part and should not be called upon again. It looked like a hopeless prospect from the vista presented at the close of the Fourth campaign to expect the same response for a peace campaign. The one optimistic fact that stood out was that the people had proved their patriotism, and such patriotism never dies. The Fifth Loan based its appeal solely upon patriotism's one expression in peace, duty.

Victory Way at Night

Victory Way at Night

During the Victory Loan Drive, Park Avenue, just above the Grand Central Station, was shut off and devoted to propaganda for the drive. The photograph shows a pyramid of captured German helmets.

Click for a larger image.

"Finish the Job" was the slogan of the Fifth Loan. The country was told that the war was not ended until its debts were paid, that we should feel gratitude in the lives spared by its sudden end. The Liberty Loan workers had to create a new state of mind, to begin a new education—for this time the issue was in Victory notes instead of bonds—and to arouse the people to new emotions through spectacles, parades and other features. It may be mentioned here that the greatest parade of the entire war was held in New York in this Fifth Loan, when the different branches of the army showed in procession the [Pg 134] men and weapons they had employed to win victory.

The call was for $4,500,000,000 and the answer was subscribed in notes by 12,000,000 persons, who paid in $5,249,908,300.

WAR SAVINGS CAMPAIGN

In between the drives there was a lesser drive constantly carried on among people who were not able to participate in bond buying. This was the War Savings campaign which was a part of the Government Loan enterprise. Newsboys, bootblacks, shop-girls, clerks and others who had been unable to participate in the Loan drives or who wanted to prove again their devotion to their country answered this appeal. In these savings there was collected for the country up to the date of the armistice $932,339,000 and the number of persons hoarding in small sums was far beyond a million.

 
LIBERTY LOAN FIGURES
Entire Country
QuotaAm't SubscribedAllottedNo. of Subscribers
First Loan$2,000,000,000 $3,035,226,850$2,000,000,000 4,500,000
Second Loan3,000,000,000 4,617,532,3003,808,766,150 9,500,000
Third Loan3,000,000,000 4,170,069,6504,170,069,650 17,000,000
Fourth Loan6,000,000,000 6,993,073,2506,993,073,250 22,777,680
Fifth Loan4,500,000,000 5,249,908,3004,500,000,000 12,000,000
—————— —————— —————— —————
Totals18,500,000,000 $24,065,810,350$21,471,909,050 65,777,680
Federal Reserve District of New York
First Loan$600,000,000 $1,191,992,100$617,831,650 978,959
Second Loan900,000,000 1,550,453,5001,164,366,950 2,259,151
Third Loan900,000,000 1,115,243,6501,115,243,650 3,046,929
Fourth Loan1,800,000,000 2,044,901,7502,044,901,750 3,604,101
Fifth Loan1,350,000,000 1,762,684,9001,318,098,450 2,484,532
—————— —————— —————— —————
Totals$5,550,000,000 $7,665,275,900$6,260,442,450 12,373,672

BENEFITS DERIVED FROM LOAN CAMPAIGNS

The benefits derived from the Loan campaigns were many. Prominent among them was the growth of thrift among the American people. The growth of this habit will be an important factor in the future greatness of this country.

A lasting monument to the war spirit of those who had to stay at home is the fact that more than a million persons, men, women and children, were engaged actively in the promotion of the five loans. In other words, one person in every hundred in the United States was a part of the organization, and each induced twenty other persons in that hundred to buy bonds. This colossal force did not work in haphazard fashion nor scatter its energy but acted under a definite plan of campaign in which each had an assigned part and in which each worked according to a method that would avoid duplication or extra expense.

The five campaigns which united such an aggregation of workers and which produced such remarkable results were carried forward with a minimum of expense. Never before in the history of finance had such widespread exploitation been accomplished at so low a cost. Of the million workers all but a small nucleus were volunteers; the resources of the country were thrown open to the organizers with unexampled prodigality, mediums of flotation in a veritable flood being contributed without cost to the officers in the Liberty Loan Army.

A single purpose animated the whole nation. Party lines, race prejudice, creed distinctions, [Pg 135] social barriers, all were wiped out in these loan drives. The whole country formed itself into an All-American team that rushed onward irresistibly. The closest approximation to a common brotherhood had been achieved. War, with its terrible losses, with its impairment of lusty young men, with its heartbreaks and agonies, surely had not been waged in vain when it brought about such a unity.

The United States in waging the war for democracy had won that democracy for herself at home.


VIII—FOOD AND THE WAR
How Scientific Control and Voluntary Food-Saving Kept Belgium from Starving and Enabled the Allies to Avert Famine

By VERNON KELLOGG

Member of the Commission for the Relief of Belgium

America was made familiar with a slogan during 1917 and 1918 which declared that "Food Will Win the War." The European Allies became familiar from the very beginning of the war with the fact that without much more food than they could count on from their own resources they could not hope to win the war. And it became equally obvious to Germany and her associates that if their normal food resources were materially impaired they also could not hope to win the war.

So there arose almost from the beginning of the great military struggle an equally great struggle to get food and to keep food from being got. The Allies, devoting their manpower to fighting and munitions-making, saw their farms doomed to neglect and their food reduction doomed to lessen. And they began their call on America for food in such quantities as America had never dreamed of exporting before. In the last years before the war we had been sending about five million tons of foodstuffs a year to Europe. In 1918 we sent over fourteen million tons. Also the Allies began trying, by their blockade, to prevent the Central Empires from adding to their own inevitably lessened native production by importations from without.

On the other hand, Germany and her associates began to husband carefully their internal food supplies by instituting a rigid, or would-be rigid, control of internal marketing and consumption, and to collect from any outside sources still accessible to them, such as the contiguous neutral lands, whatever food was possible. Also they had strong hopes of preventing, by their submarine warfare, the provisioning of the Allies from America and other overseas sources.

Thus, from the beginning of the war, and all through its long course, food supply and food control were of the most vital importance. If our epigrammatic slogan, "Food Will Win the War," was, like most epigrams, not literally true, it was, nevertheless, literally true that there was always possible to either side the loss of the war through lack of food, and it is literally true that the food victory of the Allies was a great element in the final war victory. Germany's military defeat was partly due to food defeat, and if a military decision had not been reached in the fall of 1918, Germany would have lost the war in the spring of 1919 anyway from lack of food and raw materials.

ECONOMIC SELF-SUFFICIENCY

The great struggle for food supply and food control involved so many and such complex undertakings that it is hopeless to attempt a detailed account of it in any space short of a huge volume. Yet the very limitations of the present discussion may have its advantages in compelling us to concentrate our attention on the most important aspects of the struggle and to try to sum up the most important results of it. Some of these at least should not be forgotten, for they have a bearing on the peace-time food problem as well [Pg 136] as the war-time one. Fortunately the war-time food situation has developed in us a national and an individual food consciousness that will certainly not disappear in this generation at least.

The first important lesson that has been learned is that it is of great value to a nation to be able to provide in its own land its own necessary food supply. For although in times of peace and usual harvests international food exchanges enable a country, such as England or Belgium, highly industrialized and of large population in proportion to area, to make up without much difficulty its deficit as between production and consumption, the moment the great emergency arrives there is the utmost danger for its people. The history of the "relief of Belgium" during the war will illustrate this.

$600,000,000 WORTH OF FOOD SUPPLIED

This little country, famous through all past history as a battleground and now famous for all future time for its heroic and pathetic rôle in the World War, found itself at the very beginning of the war faced with a food problem that seemed at first insoluble, and which, if not solved, meant starvation for its people. It is a country highly industrialized, and with an agriculture which, though more highly developed as to method than that of almost any other country, was yet capable of providing but little more than a third of the food necessary to its people. It depended for its very life on a steady inflow of food from outside sources. But with its invasion and occupation by the Germans this inflow was immediately and completely shut off. Belgium was enclosed in a ring of steel. What food it possessed inside this ring disappeared rapidly.

The terrible situation was met in a way of which Americans may be proud. For the Commission for the Relief of Belgium, which was the agency that solved Belgium's great problem, was an American organization with a staff composed chiefly of young Americans, most of them from American colleges and universities, headed by an American, Herbert Hoover, of great organizing and diplomatic genius, and with the large heart of a world philanthropist. In the four and a half years from November 1, 1914, to May 1, 1919, which was the period of activity of the Commission, Belgium depended upon it for the supplying of three-fourths of the food of its people, over seven million in number. This amounted to about one million tons a year. In addition, the Commission supplied the food through practically all this period for the maintenance of the nearly two million unfortunate people in the German-occupied area of France. This amounted to a total of about one million tons. The total value of the food supplied to Belgium and occupied France was about six hundred million dollars, which was provided by the Governments of Belgium, France, England, and America, and the private charity of the world.

THE FOOD PRODUCTION OF GERMANY

For another impressive war-time food problem—which did not have the same solution as Belgium's—let us take that of Germany. In peace times the Germans produce about 80 percent. of the total food annually consumed by them. But their tremendous military effort necessarily entailed some reduction in their capacity for food production, although they also made a tremendous effort to stimulate and direct into most effective channels the native production of food.

Although it is true, as already stated, that Germany normally produces about 80 percent. of her food needs, making it seem possible for the nation to meet the blockade emergency by repressing consumption by 10 per cent. and increasing production by 10 per cent. this does not mean that they normally produce 80 per cent. of each kind of food consumed by them. As a matter of fact, they produce more than their total needs of certain kinds of food, as sugar, for example, and less than 80 per cent. of certain other kinds. And while there is a possibility of substituting, within certain limits, one kind of food for another, so that a shortage of wheat might be made up by an abundance of rye, or a shortage of bread-grains in general be made up, in some degree, by increasing the ration of potatoes, if they are available, this substitution cannot go to the extent of substituting pure carbo-hydrate or starchy foods like potatoes, which simply produce heat or energy for the body, for the protein foods like meat, fish, eggs and dairy [Pg 137] products which produce not only energy but new tissues. A child must have protein food in order to grow; an adult must have it in order to replace the tissues worn out by daily work. Also, there are certain peculiar and so far little understood elements, called vitamines, found only in certain kinds of food, notably fats, milk and the green vegetables, which are essential to the proper metabolism of the body.

The Battle Scene at Home

Photo by P. Thompson

The Battle Scene at Home

During the war the Allies called on the United States for food in far greater quantities than we had ever dreamed of exporting. For example, in the last years before the war we had been sending yearly to Europe about five million tons of food. In 1918 alone we shipped more than fourteen million tons of foodstuffs overseas.

Click for a larger image.

GERMANY'S FOOD PROBLEM

Now in the light of these needs for proper feeding, and in the light of the special conditions produced by the war, what was Germany's food problem through the war? It was that of attempting to increase production when the men and work animals had been sent to the fighting lines, of repressing consumption when both men in the army and the men in the war factories had to be well fed in order to fight well and work well, of attempting to get in food from outside the country when a blockade was steadily closing the borders ever and ever more tightly, and finally, of trying to get the people to modify their food habits in the way of accepting substitutes and using strange new semi-artificial foods in place of the familiar staples.

In 1916 the potato crop of Germany was a failure—but the turnip crop was enormous. So turnips were substituted largely for potatoes, and for many other kinds of food as well. Even marmalade and coffee substitutes were made from them, and turnip meal was mixed in the already too coarse and too much mixed flour. The Germans will never forget that terrible kohl-rüben zeit, or turnip time, of late 1916 and early 1917. And it was just after this time that the effects of Germany's [Pg 138] great food difficulties began to show in a really serious way; they began to undermine the strength and health of the people. Those diseases like tuberculosis, which can rest in incipient or suppressed form for years without becoming serious as long as the body is well nourished, began to develop rapidly and dangerously. The birth rate decreased and the death rate increased. The physical and mental and moral tone of the whole nation dropped.

THE SUGAR SHORTAGE

Belgium and Germany illustrate a special food situation created by the war, namely, one in which a country, which relied on outside sources for a greater or lesser part of its food needs, had access to these sources suddenly and almost completely shut off. But grave food problems also confronted the countries which were not blockaded in so specific a way. England and France, with full access to all the great food-producing lands overseas (except to the extent that the submarines reduced this freedom of access), nevertheless had food problems hardly less serious than those of the more strictly blockaded countries. Their difficulties arose primarily from the fact that there was only so much shipping in the world and that the war conditions created suddenly a need for much more shipping than existed. The transference of large numbers of troops with their necessary equipment and munitions from the distant colonies to the European seat of fighting, and of other numbers from the mother countries to extra-European battlegrounds, made great demands on the shipping available to these nations. At the same time, the reduction of their native production increased largely their needs of food importations.

Take, for example, the case of the sugar supply for England and France. England is accustomed to use about 2,000,000 tons of sugar a year but she does not produce, at home, a single ton. She had relied before the war chiefly on importations from Germany and Austria with some little from Belgium and France. But with the outbreak of the war, she could get none from the Central Empires, and none from Belgium, while France, instead of being able to export sugar, suddenly found herself with her principal sugar-producing region invaded by the Germans and able to produce hardly a third of her former output. In fact, France herself was suddenly placed in the position of needing to import nearly two-thirds of the supply needed for her own consumption. So England and France had to turn to Cuba, the nearest great sugar-producing country, and ask for large quantities of her output. But the United States has always depended on Cuba for a large part of its own needs. Consequently there was a sugar problem for our own country as well as for England and France long before we entered the war.

The situation was serious; the demands on Cuba were much larger than she could meet, although she was able under this stimulation of demand to increase materially her sugar crop in the years following the first of the war. One way of meeting this problem, which was promptly resorted to, was to cut down the consumption of sugar in the countries involved. In England and France sugar was strictly rationed; and in America the people were called on to limit their use of sugar by voluntary agreement. England cut her sugar allowance per capita from about seven and a half pounds a month to two, and France from nearly four to one. In America we reduced our per capita consumption by legally restricting the making of soft drinks and candy and by the voluntary restriction of the home use of sugar by about one-half. All this lessened the demand on Cuba, and also the demand on shipping.

NATIONAL TASTES IN FOOD

In this discussion of the war-time sugar problem one may be struck by the fact, as noted, that the people of France were normally accustomed to eat much less sugar than the people of England, indeed only about one-half as much. This introduces a subject of importance in any general discussion of the world food problem. It is that of the varying food habits of different peoples, even peoples living under very similar climatic and general physical conditions. For example, the people of Germany are accustomed to eat twice as many potatoes as the people of England, who in turn use more than three times as many as the people of Italy. On the other [Pg 139] hand, England uses twice as much sugar as Germany, although she produces no sugar and Germany produces much sugar. The Italians eat only a third as much meat as the English and the French only half as much. But the English eat only two-thirds as much bread as the French.

These differences in food use, established by long custom, have to be taken into account in all considerations of the world's food supply. They are differences which cannot be easily or quickly changed, even under circumstances which such great emergencies as war may produce. For example, we in America are accustomed to eat corn as food in the form of green corn, corn meal, corn flakes, etc. And in Italy one of the great national dishes is polenta (corn meal cooked in a certain way). But when the Commission for the Relief of Belgium tried to introduce corn as human food in Belgium, because of the large amount that could be obtained from America when wheat and rye were scarce, it met with great opposition and but little success. To the Belgians, corn is food for animals.

SCIENTIFIC CONTROL OF FOOD

An important point brought out by the war-time food problem is that of the "scientific" make-up of the personal ration. Not only are the national food habits of a people often difficult to understand from a point of view of taste, but they are often of such a character as to lead to a most uneconomical use of food. The exigencies of a world food shortage and a shortage of shipping for food transport have made it necessary for food ministries and relief organizations to give careful consideration to the most economical selection of foods for import and distribution, both from the point of view of economy of space and weight and lack of deterioration during shipping and storage, and from that of concentrated nutritional values and proper balancing of the ration.

Food provides energy for bodily work and maintenance. It is the fuel for the human machine. Scientific students of nutrition measure the amount of energy thus provided, or the amount needed by the body, in units termed calories. Physiologists have determined by experiment the different amounts of calories produced by different kinds of foods and the varying amounts needed by men at rest, at light work, at hard work, by women and by children. By analyzing the make-up of a given population as to proportions of men, women and children, and of work done by them, it is possible to express the total food needs of the population in calories and to arrange for the most economical provision of the total calories necessary.

But the simple provision of the total sum of calories may by no means satisfy the real food needs of the population. For example, all the calories might be provided by potatoes alone, or grains alone, or meat or fats alone. But the population would starve under such circumstances. Food provides not merely the energy for the body, but the substances from which the body adds new tissue to itself during growth and reproduces its constantly breaking down tissues during all of life. Now while all kinds of food produce energy in greater or less quantity, only certain kinds are the source of new tissues. Hence there must be in the personal or national ration a sufficient proportion of the tissue-producing foods, the protein carriers, as well as a sufficient amount of the more strictly energy-producing foods, such as the fats and carbohydrates. And there is necessary, too, in any ration capable of maintaining the body in properly healthy condition, the presence in it, in very small quantities, of certain food substances called vitamines which have an important regulatory effect on the functioning of the body. These substances occur only in certain kinds of food.

All these things had to be taken into account in the war-time handling of food. So important was a proper knowledge of scientific food use and application of this knowledge, in connection with the efforts of the various countries to feed themselves most economically and to best effect in the light of their possibilities in the way of food supply, that every country concerned called on its scientific men to advise and help control the obtaining and distribution of its national food supply. For example, America and the Allies (England, France, Belgium and Italy) established an Inter-Allied Scientific Food Commission composed of experts who met at various times at London, [Pg 140] Paris, and Rome, and on whose advice the determination, both as to kind and quantity, of the necessary importations of food from overseas to England, France, Belgium and Italy was largely made. Thus the war has done more to popularize the scientific knowledge of food, and to put into practice a scientific control of food-use than all the efforts of colleges and scientific societies and food reform apostles for years and years before. Calories, proteins, carbohydrates, fats and vitamines have been taken out of the dictionary and put into the kitchen.

A Community Conference on Food-Saving

Photo by P. Thompson

A Community Conference on Food-Saving

The importance of work of this kind increased after the signing of the armistice, because the Poles, the Belgians, and other peoples whom we could not reach during the war needed every pound of food we could spare.

Click for a larger image.

GOVERNMENT REGULATIONS

America's special relation to the world's war food problem was primarily that of a provider of the Allies, but in order to insure that this provision should be sufficient to keep the Allied soldiers and war workers up to full fighting and working strength and their families in full health, it was necessary for America to stimulate its own production, repress considerably its consumption and cut out all possible waste in food handling. To do this there was needed some form of governmental food control and a nation-wide voluntary effort of the people. Each of the Allied countries had established governmental food control early in the war under the direction of a "food controller" either attached to an already existing government department of agriculture or commerce, or acting as an independent food minister.

On the actual entrance of America into the war in 1917, governmental food control was vested in a "United States Food Administration" with powers given it by Congress to control all exports of food and all food-handling by millers, manufacturers, jobbers, [Pg 141] wholesalers, and large retail dealers. But no retail dealer doing a business of less than $100,000 a year, nor any farmer or farmers' coöperative association came under the Food Administration's control. Thus the American food administration differed from that of most European countries in that it had no authority to fix the prices at which the actual producers should sell their products or the small retailers should charge the consumers.

But, indirectly, it was able to do, and did, a good deal in this direction. By its direct control of exports, and of the millers, manufacturers and large dealers, it was able to cut out a great part of the middleman profits, and reduce wholesale prices for most staple foodstuffs, especially that most important one, flour. By publicity of prices and by indirect pressure through the wholesaler it was also able to restrain the further sky-rocketing of retail prices.

NATION-WIDE FOOD SAVING

But if the Food Administration was limited in what it could effect by legal authority, there was no limit to what it could do by calling on the voluntary action of the people of the country, except by the possible refusal of the people to help. So there was set in movement a nation-wide propaganda for food-production and food-saving which resulted in the voluntary acceptance of wheatless and meatless days, voluntarily modified hotel and restaurant and dining-car meals, and the adoption of household pledges, taken by more than 12,000,000 American homes, to follow the Food Administration's suggestions for food-saving. All this, and the many other things which the Food Administration asked the people to do, and which the people did, resulted in accomplishing a very necessary thing. It enabled America not only to meet all those ever-increasing absolutely imperative calls of the Allies for food for their armies and people through 1917 and 1918, but to supply its own army and people sufficiently well to carry on the war effectively. The more food sunk by submarines, or prevented from coming to Europe from distant food sources, as Australia and Argentine and India, the more we provided by saving and increasing our production.

A few figures will illustrate the actual results of the call for food conservation. We entered the crop year of 1917 (July 1, 1917, to July 1, 1918), with a wheat supply which gave us only about 20,000,000 bushels available for export. By December 1, 1917, our surplus had gone overseas and an additional 36,000,000 bushels had been shipped to the Allies. In January we learned of the further imperative need of the Allies of 75,000,000 bushels. We responded by sending 85,000,000 bushels between the first of the year and the advent of the new crop. When the crop year ended we had sent in all about 136,000,000 bushels of wheat to Europe. We were assisted in these operations by the importation of 28,000,000 bushels of wheat from Australia and the Argentine to supplement our domestic supply, but the outstanding fact was the saving in our domestic consumption, most of which was accomplished in the six-months' period from January 1 to July 1, 1918.

AMERICAN RELIEF ADMINISTRATION

But the cessation of the war did not produce food for the war-ravaged countries of Europe. The newly liberated peoples of Central and Eastern Europe found themselves, at the time of the Armistice, facing a period of starvation until their 1918 harvest could come in. Something to save these peoples had to be done quickly and on a large scale. The situation was met by the establishment of a new American governmental organization called the American Relief Administration which, with Mr. Hoover as director-general, worked in connection with the Inter-Allied Supreme Economic Council. Representatives of the A. R. A. were sent at once into all the countries crying for help to find out the exact food situation, and to arrange with the respective governments for the immediate beginning of the importation and distribution of staple foodstuffs. Programs for a food supply sufficient to last until the 1919 harvest were determined on a basis of minimum necessity, and provision for sufficient shipping and rail transportation was arranged by international agreement.

Modern war has thrown the spotlight on food. It has partly realized that famous prophecy of the Polish economist, Jean Bloch, who wrote, twenty years ago: "That is the [Pg 142] future of war, not fighting, but famine." In the World War of 1914—18 there was fighting on a scale never before reached, but there was also famine, as never before dreamed of.


IX THE HIGH COST OF LIVING
A Study of the Extraordinary Conditions Subsequent to the Armistice

By THE DIRECTOR OF THE COUNCIL OF NATIONAL DEFENSE

On August 9, 1919, Grosvenor B. Clarkson, Director of the Council of National defense, submitted to the Secretary of War, a report entitled "An Analysis of the High Cost of Living Problem." This report was the result of much careful study and investigation. It is non-academic in form and by omitting details presents a "panoramic view of the problem." It laid chief stress upon conditions since the armistice.

In the report the problem of the high cost of living is viewed as a permanent one. It was, in other words, not peculiar to past war conditions. Careful investigation by the Council has resulted in the following analysis of the problem.

THE ESSENCE OF THE HIGH COST OF LIVING SITUATION

"1. The only complaints of the high cost of living which have justification are those which are based upon inability of the present income to maintain previous or reasonable standards of living at present prices—such well-founded complaints mean that increase of income has not kept pace with increased cost of living, and therefore imply enforced reduction in standards of living.

AMERICA'S PRODUCTIVE CAPACITY

"2. America's industrial and economic achievements during the war, notwithstanding depleted man power and diversion of productive effort to war purposes, demonstrate the ample ability of the Nation to sustain its population according to a standard of living equal to or above standards of living which obtained previous to or during the war.

"3. The fundamental basis for the maintenance of national standards of living is adequate production, economical distribution, and fair apportionment among the various economic groups which constitute our society. With the exception of agricultural activity, production since the armistice has shown evidence of curtailment, and has in general been abnormally low. Normal consumption can not continue unless an adequate rate of production is maintained.

FOOD SITUATION AND READJUSTMENT

"4. Food production and the facilities for food production were improved rather than injured during the war. Moreover, the program with respect to food production since the signing of the armistice has been one of vigorous expansion of the means of providing raw food products. The actual consumption of wheat, as shown by the Grain Corporation's report of May 25, 1919, had for the previous ten months averaged 37,700,000 bushels per month, as against 39,000,000 bushels for the previous twelve months. This does not necessarily imply reduced consumption of cereals.

"The number of cattle slaughtered in the period January to May, 1919, was 3,803,000, as against 4,204,000 for the corresponding period of 1918, though the national reserve of cattle on farms had increased during the war. The swine slaughtered January to May increased from 18,260,000 in 1918 to 20,500,000 in 1919.

CLOTHING SITUATION

"5. The production of civilian cloths and clothing suffered some reduction during the war, and has suffered heavy curtailment for many months since the signing of the armistice.

"Boot and shoe production for civilian use was unfavorably affected by the war and has likewise undergone extreme curtailment since the signing of the armistice.

HOUSING PROBLEM

"6. Housing facilities developed acute shortage through curtailment of building during the war and, due to curtailment, for many months following the armistice, of the production of building material and of building construction, housing is still far below normal. Rents continue to rise.

PROVISION OF NEW CAPITAL

"7. The first half of 1919 shows diminished production of raw materials and subnormal construction of new capital, and thus indicates failure to utilize an adequate proportion of our productive forces in the preliminary processes of provision to meet future requirements. In fact, due to business uncertainty and hesitation and tendencies to disagreement between productive groups, retailers, wholesalers, manufacturers, labor, etc., there ensued after the armistice a disuse of a large proportion of America's productive [Pg 143] capacity. Unless this slump in production is atoned for by consistent future activity, and unless production is constantly maintained on an adequate scale, reduced standards of living will become inescapable, regardless of prices, whether they rise or fall.

"8. The very fact that prices of finished commodities, consumption goods, so called, have risen to an extent out of proportion to the rise in prices of raw materials and perhaps out of proportion to the rise in general wages, indicates that production and distribution carried on under these conditions is, in general, yielding profits abnormally high."

In corroboration of the preceding analysis, the report cites statistical data gathered from various sources. The relation of currency and credit to prices is admirably epitomized in the following extract:

CURRENCY AND CREDIT

"The manner in which the volume of circulating credit and currency is related to the war-time rise in prices is about as follows:

"The outbreak of the war brought to America urgent government orders for munitions and supplies. Inasmuch as the belligerent governments could not brook delay they were obliged to pay the increased prices which American producers found it possible to demand, and thus the wave of war prices was started in America. When America entered the war it required, in order to perform its part, almost boundless quantities of equipment and man power. Producers naturally took advantage of the extremely urgent character of these demands in order to increase their prices, and, as a natural sequence, wages began to advance. These increased prices and wages of course necessitated larger expenditures by the government.

"Increased prices also necessitate the employment of larger funds in the conduct of a business. A larger volume of credit is required at higher prices to take care of bills for raw materials, and more money is necessary to meet increased payrolls. As a consequence, therefore, of increased prices, business men required increased credit if they were to avoid curtailment of operations and reduced production. Due to higher prices, therefore, the banks were under the necessity of meeting the business demand for expansion of credit."

INFLATION

The inflation process is described as follows:

"In pre-war times every dollar finding its way to the market was supposedly the counterpart of some commodity or part of a commodity also appearing in the market. Funds expended for the purchase of food, clothing, and for the payment of rentals were assumed to have been earned by some productive contribution to the general supply of commodities. With the outbreak of war there began to appear in the market, funds derived from wages, profits, etc., which had been paid out in connection with nonproductive activities of war, and which therefore implied no corresponding contribution to the market supply of commodities. The producers of, and the dealers in, the decreased quantity of commodities brought to market increased the prices of these commodities to the point where they might absorb all the purchase money that became available. These increased prices and wages have required increased circulating medium. This requirement has been met primarily by increased credit and the increased use of bank checks as an instrument of payment. As to the currency situation, the total money in the United States in 1900 amounted to $2,340,000,000. According to a statement issued by Governor W. P. G. Harding, of the Federal Reserve Board, the amount of money in circulation has varied during the last five years as follows:

"This shows an increase during our war period of $7.28 per capita. The amount of money in the Treasury and in Federal Reserve Banks is not in circulation, and is, therefore not included in the figures quoted from Governor Harding's statement.

"In regard to the part played by national credit in meeting the situation growing out of the extraordinary requirements of the government and the rise in prices which the urgency of demands made possible, it is to be noted that government bonds had to be sold to pay for a large proportion of the goods which war activities were consuming. In consequence the national debt up to August 1, 1919, had been increased by $24,518,000,000, or approximately $230 per capita. Of course, government bonds are always good security for bank credit."

FOOD SUPPLY—WHEAT, CORN AND SUGAR

Despite the fact that we sent large shipments of food to our Allies, our supply at the close of the war was not seriously diminished. The 1919 crop, while not expected to be large, was amply sufficient to prevent a real shortage. This is supported by the following extract from Mr. Clarkson's report:

"The wheat crop for 1918 amounted to 917,000,000 bushels, as compared to an average for [Pg 144] 1910—14 of 728,000,000 bushels; and the probable harvest in 1919 is 1,236,000,000 bushels. Our supply of wheat in elevators, mills, etc., on May 9, 1919, was 96,000,000 bushels, as against 34,000,000 bushels the year before. Our flour mills, whose capacity is estimated at something like double their usual output, were milling week by week during 1919 considerably more flour than the year before. They produced for the week ending May 9, 1919, for example, 2,553,000 barrels as against 1,569,000 barrels for the corresponding week of 1918. Notwithstanding large exports, our wheat supply is obviously adequate. In 1918, a record year, we exported 21,000,000 barrels of flour. In 1915 our wheat exports reached their maximum—206,000,000 bushels.

Will There Be Enough to Go Around?

McCutcheon in the Chicago Tribune

Will There Be Enough to Go Around?

"The corn crop of 1918 was likewise sufficient. The supply of corn on hand on May 1, 1919, was 23,000,000 bushels, as compared with 16,000,000 bushels May 1, 1918, and 7,000,000 bushels on May 1 of both 1917 and 1913. Though the 1919 corn crop is not expected to be unusually large, there is no prospect of real shortage. And the situation with respect to the other cereals is generally very good.

"The sugar industry of the United States passed through the period of the war with a tendency to increased production, notwithstanding shipping difficulties. Though present stocks are somewhat low in the United States, our exports during 1919 have been unusually large. The future is normally provided for."

THE MEAT SUPPLY

The meat situation is described as follows:

"America emerged from the war producing meat at a rate far above pre-war figures, and yet possessing in reserve a larger number of animals on the farms than we had before the heavy war drafts upon our supplies began. The number of cattle slaughtered in 1918 was 11,000,000, as compared with 6,978,000 in 1913. Swine slaughtered were 41,214,000 in 1918 and 34,163,000 in 1913. The cattle slaughtered in 1919, January—May, were 3,803,000, as against 4,204,000, January—May, 1918. The swine slaughtered January—May, 1919, made an increase over the 1918 record, the figures being 20,500,000 for the present year, as against 18,260,000 for the corresponding interval last year. Although exports of hams and shoulders for 1918 approximately doubled previous records, amounting to 518,000,000 pounds, as against 172,000,000 pounds for 1913, and exports have continued large during 1919, there is no doubt that our productive capacity is vastly more than ample to meet our requirements."

HIGH PRICE OF FOOD

In view of the apparent abundance of food it is interesting to know the reason for the high price of foodstuffs. The Council of National Defense is of the opinion that the probability that the production of garden products in war gardens had fallen far below that of 1918, when, it is estimated, to have reached the value of $525,000,000, would not [Pg 145] account for the high prices. Exportation and storage had not depleted our stock sufficiently to affect prices abnormally. In regard to the question of exports the report gives the following illuminating figures:

"Present food prices are not to be accounted for largely on the basis of heavy exports. Exports of beef, canned, fresh, and pickled, for example, have been less for 1919 than in the previous year, the quantity amounting to 23,499,000 pounds in May, 1919, as compared with 82,787,000 pounds in May, 1918. The May figures for exports of hog products show 125,937,000 pounds in 1919, as against 201,279,000 pounds in May, 1918. The monthly exports of beef and pork show a declining tendency during the first five months of 1919, contrary to the tendency in 1918, the total amounting to 1,090,000,000 pounds in 1919, as against 1,122,000,000 pounds for the corresponding period of 1918—less than the amount of all meats in cold storage on July 1, 1919, which was 1,336,000,000 pounds."

Concerning storage the same report states that:

"Even the fact that the report of goods in cold storage shows an increase of over 9 per cent. in the quantity of all meats held on July 1, 1919 (1,336,000,000 pounds), as compared with the figures for July 1, 1918, is, though very important, not a matter of significance for any considerable period of time. Storage poultry July 1, 1919, was 48,895,704 pounds, or 181 per cent. above last year; cheese, about 25 per cent.; butter, about 75 per cent.; and eggs, about 25 per cent. above July 1 last year. There was a decrease of frozen fish of about 13 per cent. from last year. Taken in connection with the evidence of relatively abundant reserves of live animals and large crops for the current year, it would seem that some relief from high prices of food should be possible."

WHY FOOD PRICES WERE HIGH

The explanation of the post-war high prices of food is given as follows:

"It is true that food is, by comparison, plentiful. But it is also true that money or other circulating medium is unprecedently plentiful. The fact that food prices are relatively high and that the prices of chemicals, metals, lumber, etc., are relatively low, though their supply is relatively small, may be due to a concentration of purchasing power upon food, and the general direction of the flow of currency toward the purchase of immediate consumables. Some relatively minor luxuries such as jewelry (and perhaps automobiles should also be included here as the semi-luxury of greater magnitude) find favor with purchasers, but the main trend of purchase seems to bear toward demand for the necessities of life now in a finished state or nearly so, with a relatively weaker tendency toward demand of capital goods. If the supply, and also the production, of raw materials has been relatively small, and if the prices at which they have exchanged have also been relatively low, it seems obvious that the proportionate amount of currency and credit engaged in their purchase must be abnormally small, thus accounting for the ability of the producers and purveyors of food to demand abnormally high prices regardless of the relative plentifulness of their goods."

CONDITIONS FAVORABLE TO PROFITEERING

"The conditions just described are highly favorable to both speculative profiteering and wasteful distribution, through the intervention of supernumerary middlemen and caterers. In fact, the statistics published by the New York Industrial Relations Commission seem to indicate an unusually large increase of persons engaging in certain kinds of salesmanship after the armistice. It should, however, be remembered that even though it may smack of profiteering to produce a very large crop and sell it at abnormally high prices, this is a kind of profiteering which deserves unstinted praise as compared with that other species of profiteering which deliberately reduces output in the expectation that the extortionate prices which the reduced product will command may more than make up to the producer or speculator for the portion of production withheld or the percentage of hoarded goods condemned to spoil and be lost to the nation."

OTHER COMMODITIES

The price of commodities other than foodstuffs was influenced in 1919 by the inadequacy of supply and the curtailment of production. This was especially true of woolens, as stated by the Council:

"The most obvious explanation of the high prices of woolens is the glaring fact of the extreme reduction in output which ensued after the signing of the armistice and the completion of Army orders, which practically ended in January, 1919.

"The war came to an end with the supply of civilian woolens unprecedentedly low. The total quantity of wool available for civilian fabrics between April and November, 1918, was probably somewhere in the neighborhood of 75,000,000 pounds, an amount perhaps a little more than sufficient to meet the demands of normal manufacture for civilian consumption for one and one-half months.


[Pg 146]

"In consequence of the general situation the total consumption of wool in manufacture during first five months of the year 1919 amounted to but little more than one-half the amount consumed during the corresponding months of the previous year. The proportion of looms, 50-inch reed space and over, idle increased from 21 per cent. in November, 1918, to 52 per cent. idle in February, 1919, and these looms were still 39 per cent. idle in May, 1919. Of worsted spindles, 27 per cent. were reported idle in December, 1918, and 52 per cent. idle in March, 1919, and 26 per cent. were still idle in May. In the meantime an extraordinary number of textile workers were condemned to idleness, their productive capacity perishing day by day and week by week, while the deficiency in the supply of clothing was developing to such a point that it became possible for the wholesale index number of the prices of cloths and clothing to rise to 250 in June."

The production of cotton and cotton goods also was far below normal. To quote again from the report:

"When the war ended the world's cotton supply was understood to be below normal. The supplies of cotton goods were also reported low. The acreage planted to cotton was in 1919 approximately 9 per cent. less than for 1918. The present prospects are that the cotton crop will be small, and published articles are appearing expressing gratification over the prospectively large commercial returns which the cotton producers may be able to command because of the high prices which may be had for the reduced cotton output. The forecast of the cotton crop for 1919 is 10,900,000 bales—about 10 per cent. below that of recent years and but little over two-thirds as large as the record crop of 1914."

"OUTPUT AND MORE OUTPUT" ABANDONED

"In regard to cotton manufacture, it may be recorded that the situation is less unsatisfactory than as regards wool manufacture. In this industry, as in most of our industries, the economic watchword of war-time, which was 'Output, and more output' (the necessary condition of full prosperity in peace, as well as of success during war), was not heard after the armistice. There soon developed, on the contrary, groundless doubts about future demand, and hints of unhealthy fears of 'overproduction.'

"Notwithstanding the release of labor, if it were needed, by demobilization, and notwithstanding adequate supplies of raw cotton to meet the season's requirements and the lack of any important difficulties in the way of reconversion to peace-time products, and with low supplies of finished goods in stock, the cotton industry kept more spindles idle during the first five months of 1919 than were idle during the corresponding period for 1918. The amount of cotton consumed in the United States during the nine months ending with April, 1919, was approximately 12 per cent. less than for the corresponding nine months of 1918. The prices of cloths and clothing, as above mentioned, show in June, 1919, an increase of 150 per cent. over 1913 prices."

The boot and show shoe industry showed a marked decline after the signing of the armistice. This, too, was borne out by the investigations of the Council.

"The production of boots and shoes for the first quarter of 1919 was reported as about 60 per cent. below the production for the last quarter of 1918. Plants were partially closed and in some cases it is reported that machinery was returned to the Shoe Machinery Co. All in all, there were 75,000,000 less pairs of shoes produced in the first quarter of 1919 than in the last quarter of 1918.

"The census report shows a reduction of more than 25 per cent. in the output of civilian men's shoes in the quarter ending with March, 1919, as compared with production in the quarter ending with December, 1918, and nearly 25 per cent. reduction as compared with the quarter ending with September, 1918. The reduction in output of women's shoes amounted to approximately 30 and 25 per cent., respectively, in comprising corresponding periods. The reduction in the output of shoes for youths, boys and misses was even more marked."

COAL AND IRON

What has been said of the production of cotton and woolen goods applied equally to the mining of coal and to the output of iron and steel. During the war we increased our coal production. In 1918 it amounted to "685,000,000 short tons, almost 50 per cent. of the world's estimated output for that year. Production for 1913 was 571,000,000 short tons." The coal situation since the armistice is stated as follows:

"Coal, the source of a vast proportion of our industrial power as well as our chief source of heat and light, is a commodity the production of which is itself an index of our economic life. Coal output since the armistice has been greatly reduced, the weekly production of anthracite for the first half of 1919 being from 1,200,000 to 1,800,000 net tons, as against 1,800,000 net tons to 3,000,000 net tons for the corresponding period of 1918. Bituminous production was 9,147,000 net tons for a typical week in 1919, as against 12,491,000 net tons for the corresponding week in 1918. Coke production for the week ending June 28, 1919, amounted to only 287,000 net tons, as compared with 627,000 net tons for the [Pg 147] week ending June 29, 1918. The total amount of coal produced up to July 5, 1919, was 261,000,000 long tons, as compared with 364,000,000 long tons for the corresponding period of 1918."

The production of iron and steel which was greatly stimulated by the war was allowed to decline as soon as the concentrated effort of the nation to win the war was abandoned. The resulting condition is succinctly described by the Council:

"The record of our after-war steel and iron output furnishes us with another warning that we have been neglecting to keep pace with the established American rate of industrial improvement and expansion and foresighted preparation for future requirements and progress.

"The iron and steel business was considerably stimulated by war-time requirements. There was a governmental agency whose business it was to forsee the war needs and to place orders so that those productive forces which are wrapped up in the steel industry might be utilized to capacity. The steel industry's activity has, however, since the armistice greatly declined. Pig-iron production for April, 1919, was 82,607 tons per day, as against 109,607 tons in April, 1918. Birmingham properties are reported to have been working in April, 1919, at about 50 per cent. of the 1918 production. For the period January to May, 1919, pig-iron production was only 2,114,000 tons, as against 3,446,000 tons during the same period in 1918. Steel-ingot production fell in the spring of 1919 to lower figures than had been reached in more than two years. In fact, a regular decline in production was in evidence after December, 1918.

"The figures representing the unfilled orders of the United States Steel Corporation at the end of May, 1919, were smaller than they had been since 1915."

Women Doing Night Farming

Copyright Underwood & Underwood

Women Doing Night Farming

Girls running a tractor plow and harrow at Farmingdale, Long Island.

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RECOMMENDATIONS

The Council summarized its findings and recommends remedial measures as follows:

"The findings of the Reconstruction Research Division Council of National Defense, indicate that the high cost of living is primarily due to curtailment in the production of nearly all commodities except raw food products, to hoarding of storage food products, to profiteering, conscious and unconscious, and to inflation of circulating credit. The findings indicate that the situation may be most advantageously met by:

"1. Stimulated production. [Pg 148]

"2. Some readjustment of incomes to the basis of higher price levels.

"3. The repression of hoarding and profiteering.

"4. Improvement and standardization of methods and facilities for distributing and marketing goods.

"5. The perfecting of means of keeping the nation frequently, promptly, and adequately informed regarding probable national requirements and of current production and stocks of the more important commodities.

"The findings emphasize the fact that high standards of living can not be maintained upon a basis of reduced production, regardless of whether price levels be high or low."

The Ore Market—Cleveland

The Ore Market—Cleveland

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[Pg 149]


PART II

I—THE PEACE CONFERENCE AT WORK
A Vivid Account from the Inside of the Machinery Which Produced the Peace Treaty. How the Crises with Japan, Italy and Belgium Were Averted

By THOMAS W. LAMONT

Financial and Economic Adviser at Paris to the American Commission to Negotiate Peace

When we finally gain an historic perspective of the work of the Peace Conference we shall realize that, instead of being unduly delayed, it was accomplished in an astonishingly brief period. The Treaty of Vienna, back in 1815, took eleven months, and the factors to be dealt with were nothing like so numerous nor so complex. The Paris Conference occupied only about six months, and the earlier weeks were largely given over to questions relating to the renewal of the Armistice, rather than to the actual framing of the Peace Treaty. The Treaty text itself—aside from the League of Nations Covenant—was whipped through in a little over three months; for the active work of the Commissions which were to draft the various chapters did not get under way until February 1st; and the Treaty was presented to the German delegates at Versailles on May 7th.

COVENANTS "OPENLY ARRIVED AT"

No adequate history of the Peace Conference can be written until years have elapsed—until it is possible, as it is not now possible, to make public a multitude of intimate details. Hundreds of important documents were woven into the completed text of the Treaty. Such documents must eventually be made available to the chroniclers of history, who must finally have access to the official records, so that in course of time they can acquaint the world with the details of those momentous conferences which were held among the Chiefs of State, where the ultimate decisions settling every important question were made. There have been complaints that the covenants of the Treaty were not as President Wilson had promised, "openly arrived at." In point of fact, as far as lay within the bounds of possibility, the covenants of the Treaty were "openly arrived at," inasmuch as their essence was made public just as soon as an understanding upon them had been reached, and in many cases, long before the final agreement. Nothing was held back which the public had any legitimate interest in knowing. It would, of course, have been quite out of the question for the Chiefs of State to discuss in public all the highly delicate and complex situations which were bound to, and which did, arise at Paris. Every man of strong character and powerful conviction has a view of his own upon any given subject, and naturally maintains that view with vigor and tenacity—even at times, if he be bitterly opposed—with acrimony.

To take a familiar instance, it is an open secret that M. Clemenceau's first solution of the question of the Saar Basin did not at all suit President Wilson. Not unnaturally, M. Clemenceau simply wanted in effect to annex the Saar Basin, on the grounds that the Germans had destroyed the coal mines of Northern France. Mr. Wilson was in entire accord—to this extent, that France should, until her coal mines had been repaired, enjoy the entire output of the Saar coal fields; but to have France permanently annex the Basin was contrary to his profoundest convictions, as expressed in the well-known Fourteen Points.

In the course of the discussion between M. Clemenceau and Mr. Wilson, their ideas at the start being so divergent, vigorous views were undoubtedly expressed; quite possibly tart language was used, at any rate by the French Premier, who was feeling all [Pg 150] the distress of German frightfulness and war weariness. But to what possible good end could the detail of such intimate conversations have been made public? I allude to the possible conversations on the Saar Basin not as an historical fact, but as an example of what might have taken place, and very likely did take place; and if such temporary disagreements existed on that question, undoubtedly, among so many Chiefs of State as were gathered together at Paris, they existed on others. But in all cases amicable and cordial agreements were finally reached.

Whenever agreements were even in sight, the press was informed; so that, when the Treaty of Peace and the summary of it finally came out, there were no surprises for the public. Every covenant, every clause, had been already foreshadowed and accurately pictured.

THE "BIG THREE"

Naturally, the question is often asked: Who were the peacemakers at Paris? Were they two or three powerful Chiefs of State? The answer is both "Yes" and "No." The final decision on every important matter lay in the hands of the so-called Big Four, and after Premier Orlando's defection and return to Italy, it narrowed down to the Big Triumvirate, Messrs. Wilson, Lloyd George, and Clemenceau. Yet while they made the final decisions, these were almost invariably based upon reports and opinions expressed to this trio, or to the quartet, by their advisers and experts. The actual text of the Treaty was, of course, written by the technicians, and there is hardly a phrase in the whole of it that can claim as its original author any one of the Chiefs of State. In every true sense, then, the Treaty of Peace has been the product, not of three men, not even of three-score, nor of three hundred, but of thousands; for quite aside from the official delegations at Paris, which comprised several hundred persons, we must remember that the data and the various suggested solutions on most of the questions had been canvassed at home for each delegation by large groups of office and technical experts.

Of course it sounds well to say that the Treaty was written by three men: the picture of those few Chiefs of State sitting in conference day after day is dramatic in the extreme. That is, I must confess, the picture which comes back oftenest to my mind. I see them today, as I saw them for months at Paris, sitting in that large but cosy salon in the house allotted to President Wilson on the Place des États Unis; for, by common consent, it was there that the Supreme Council finally held all its meetings. It is in that theatre, with the three or four Chiefs of State taking the leading rôles, that we saw the other characters in the great drama moving slowly on the stage, playing their parts, and then disappearing into the wings. Today it might be Paderewski, pleading with all his earnestness and sincerity, to have Danzig allotted to the sovereignty of Poland. To-morrow it might be Hymans, the Belgian Secretary for Foreign Affairs, begging that there should be a prompt realization of those pledges to Belgium, which Belgium felt had been made by all the Allies; or it might even be word brought by special aeroplane from the King of the Belgians at Brussels, with fresh and important instructions to his delegation in the matter of Reparation. Or it might be a group of the representatives of those newer nationalities, Czechoslovakia, Rumania, Jugoslavia, arguing some burning question of boundary rights. Or it might be the British shipping experts, maintaining that the captured German ships should be restored to the various Allies upon a basis dividing the ships pro rata to the losses sustained by submarines, and contending against the American claim that the United States should have all the German ships finding lodgment in American harbors. Or it might be Herbert Hoover, that brilliant American, come to describe to the Big Four starvation conditions in Vienna, and to emphasize his belief that, enemy or no enemy, those conditions must be relieved or Bolshevism would march into Austria and directly on west until it reached France—and beyond.

THE PLACE OF MEETING

The stage for this world drama was originally set at the Ministry of War, behind the Chamber of Deputies and across the Seine; and here Premier Clemenceau—who, [Pg 151] it will be remembered, was Minister of War as well as President of the Council of French Ministers—was the presiding genius. But eventually, as the result of an interesting trend of circumstances, the all important conferences took place at President Wilson's house.

David Lloyd George

Copyright Walter Adams & Sons

David Lloyd George

Ray Standard Baker, who attended the Peace Conference, wrote in his book, "What Wilson Did at Paris": "Lloyd George personally was one of the most charming and amiable figures at Paris, full of Celtic quicksilver, a torrential talker in the conference, but no one was ever quite sure, having heard him express an unalterable determination on one day, that he would not be unalterably determined some other way the day following."

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The original theatre of operations at the War Ministry had been so large, and there was such an enormous chorus brought into [Pg 152] play, that progress was interminably slow. There were usually present all five of the plenipotentiaries of each of the five great powers, including Japan, and very frequently Marshal Foch as well. His presence automatically commanded the attendance of the chief military experts of the other delegates. With the innumerable secretaries who had to attend the plenipotentiaries, with the interpreters and whatnot, the Supreme Council came to look like a legislative chamber, in the midst of which sat Clemenceau, presiding with his usual incisiveness. At such meetings progress could be made only upon rather formal matters which had been threshed out beforehand. When it came to a point of great delicacy, where the discussions could be only on a most intimate basis, it became quite impossible to "carry on." Nobody would feel like speaking out in meeting and calling the other fellow names—as was necessary at times in order to clear the atmosphere—if there were half a hundred other people around, to hear those names, and promptly to babble them to an expectant throng outside.

So finally the Supreme Council was boiled down to the four Chiefs of State, including Japan's representative on any questions not strictly confined to Western Europe; and the small Council began to meet alternately at Clemenceau's office in the War Ministry, at Mr. Lloyd George's house, and at Mr. Wilson's, which was just around the corner from the British Premier's. Then in March, shortly after President Wilson's second coming from the United States, he fell ill with the grippe. After a rather severe attack he was able to get on his feet again and to do business, but was warned by his vigilant friend and physician, Admiral Grayson, to keep within doors for a time. Mr. Lloyd George, M. Clemenceau, and Signor Orlando were glad to accommodate themselves to Mr. Wilson's necessities, and formed the habit of meeting regularly at his house. His large salon was much better adapted for these conferences than the room at Mr. Lloyd George's. So there it was they met during all the final weeks of the Conference, leading up to the very end.

A DESCRIPTION OF THE COUNCIL CHAMBER

In the middle of the salon, facing the row of windows looking out upon the Place, was a large yet most inviting fireplace. On the left of this, a little removed from it, President Wilson usually ensconced himself on a small sofa, where he made room for some one member of his delegation, whom, for the particular subject under discussion, he desired to have most available. On the other side of the fireplace sat Mr. Lloyd George in a rather high, old-fashioned chair of carved Italian maple, and at his left sat his experts. Opposite the fireplace, to the right of it, and about half-way across the room, sat M. Clemenceau, with such of his Ministers as he needed, and then between him and President Wilson was Signor Orlando with the Italians. This made a semi-circle around the fireplace, and whenever Viscount Chinda of the Japanese delegation was present, the circle was usually enlarged so as to give him a seat in the middle of it. Behind this first semi-circle was a second one, made up of secretaries and various technical experts, but the conference was always a limited one, and was not allowed to grow so large as to become unwieldy.

Directly in front of the fireplace, almost scorching his coat-tails, sat Professor Mantou, the official interpreter for the Big Four. Mantou is a Frenchman, Professor of French in the University of London, so he had a perfect mastery of both French and English, with a good working knowledge of Italian. Mantou was quite an extraordinary character, and the most vivid interpreter I have ever heard, or rather seen; for at times he entered into the spirit of the discussions more vigorously than the original actors. M. Clemenceau, for instance, might make a quiet, moderate statement, in French, of course; and when it became Mantou's time to interpret it into English, he would enliven and embellish it with his own unique gestures.

The Secretary of the Council was Sir Maurice Hankey, a British Army officer of great skill and tact, who had a marvelous aptitude for keeping everything straight, [Pg 153] for taking perfectly adequate, and yet not too voluminous minutes, for seeing that no topic was left in the air without further reference, and in the last analysis, for holding the Chiefs of State with their noses to the grindstone. He knew French and Italian well, and was a distinct asset to the Council. I note that, in the honors and money-grants disbursed by Parliament to Marshal Haig, Admiral Beatty and others, Hankey received £25,000. Everybody who worked with him at Paris will be glad of this just recognition. I have described this Council Chamber in the President's house rather minutely because, as I have said, it formed the stage for all of the momentous decisions which went to make up the final peace settlement. At these conferences there was no formal presiding officer, but to President Wilson was usually accorded the courtesy of acting as moderator.

HOW THE TREATY WAS COMPOUNDED

What, then, is the Treaty? The answer is that it is a human document, a compound of all the qualities possessed by human beings at their best—and at their worst. People might expect a Treaty of Peace to be a formal, legal, mechanical sort of document; and undoubtedly an effort was made by some of the drafting lawyers, who bound all the different clauses together, to throw the Treaty into the mold of formality. But all the same, it is a compound quivering with human passion—virtue, entreaty, fear, sometimes rage, and above all, I believe, justice.

The reason fear enters into the Treaty must be manifest. Take, for instance, the case of France. France had lived under the German menace for half a century. Finally the sword of Damocles had fallen, and almost one-sixth of beautiful France had been laid waste. Her farms, her factories, her villages, had been destroyed; her women ravished and led captive; her children made homeless; her men folk killed. Do we realize that almost 60 per cent. of all the French soldiers under thirty-one years of age were killed in the war? Is it any wonder France could not believe that the German menace was gone forever, and that the world would never again allow German autocracy to overwhelm her? She could not believe it, and for that reason she felt it essential that the terms of the Treaty should be so severe as to leave Germany stripped for generations of any power to wage aggression against beautiful France. If her Allies pointed out that to cripple Germany economically was to make it impossible for Germany to repair the frightful damage she had wrought in France, France would in effect reply that this might be so, but never again could she endure such a menace as had threatened her eastern border for the previous half century. If certain of the Treaty clauses appear to some minds as unduly severe, it must be remembered that the Allies, little more than France, could bear the thought of letting Germany off so easily that within a few years she might again prepare for war.

There was fear, too, on the part of those new nations, which had been largely split off from the effete and outworn Austro-Hungarian Empire, that in some way their ancient oppressors would once more gain sway over them. And, every nation, great and small, was overshadowed with the constant terror of Bolshevism,—that dread specter which seemed to be stalking, with long strides, from eastern Europe west towards the Atlantic. Unless peace were hastened that evil might overtake all the Allies. Such apprehensions as these, far more than imperial ambition or greed, were factors in the Treaty decisions. Judgments that might take many months in the ripening could not with safety be awaited.

THE PROTECTION DEMANDED BY FRANCE

France, I say, was thoroughly shocked at the frightful fate which had come upon so great a portion of her land and population. She seemed to have real fear that out of the ground, or from the sky, or from the waters of the earth, at the waving of the devil's wand, there would spring into being a fresh German army, ready to overwhelm her. It was this fear that led France to ask for a special Treaty by which England and America would pledge themselves to come to her aid in case of Germany's unprovoked attack [Pg 154] against her. Those Americans who object to this have no conception of the real terror in France which led her to entreat her two most powerful Allies to make such a special treaty with her. France maintained, and with some reason, that during the formative period of the League of Nations, before it might become an effective instrument, if she did not have the psychological and practical protection of England and America, she must look to her own defense, and the only real defense she could conceive was to make the Rhine her eastern boundary. This suggestion of Marshal Foch, based upon sound military concept, was rejected by President Wilson and Mr. Lloyd George on the theory that it would mean the annexation of German territory, would change Germany's ancient boundary line of the Rhine, and inevitably lead to future trouble.

President Poincaré With the Swiss President, M. Gustave Ador

Copyright Underwood & Underwood

President Poincaré With the Swiss President, M. Gustave Ador, Driving to the Peace Conference in Paris.

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"Very well," in effect answered M. Clemenceau, "we see your point, but if you will not allow us to fix this natural boundary for defense, then we must beg you to guarantee us by treaty your coöperation against German aggression. That coöperation you will never be called upon to render with military force, because if Germany knows you are pledged to come to our defense, that very fact will act as a complete deterrent to any aggression."

This was the sound reasoning which led President Wilson and Mr. Lloyd George to agree to submit respectively to Congress and Parliament this special French Treaty; this is the reasoning which ought to lead Congress, as it has led Parliament, to ratify the French Treaty promptly. My belief is that after five years, this special Treaty will be abrogated by mutual consent, because by that time the League of Nations will be built up into such an effective instrument for the prevention of future wars, any special treaties will be deemed unnecessary.

THE LEAGUE OF NATIONS COVENANT

If, in the foregoing paragraphs, I have given some idea as to how the Treaty of [Pg 155] Peace was compounded, how it was made up of a mixture of virtue, selfishness, fear and justice, then perhaps I can proceed to describe briefly how the document was actually evolved. First, then, we deal with the drafting of the League of Nations Covenant:

The world has come to regard President Wilson as the special promoter and sponsor for the League of Nations. It is perfectly true that Mr. Wilson went to Paris with a fixed determination, above all else, to bring about some definite arrangement which would tend to prevent future wars. It is also true, however, that English statesmen had, for an even longer time than President Wilson, been giving this same subject earnest thought and study. Some of the more enlightened French statesmen, like Leon Bourgeois, had also been sketching out plans for a League of Free Nations. In England Viscount Grey of Falloden, England's really great Minister of Foreign Affairs for almost a decade prior to the war, the man who did everything that human intelligence and wisdom could devise to prevent the war, and now happily named as British Ambassador to the United States, had long worked for a League of Nations. Lord Robert Cecil, a worthy son of a noble father, was another British statesman who had given his mind to the same subject. General Smuts of South Africa, recently made Premier in succession to the late General Botha, was another. So that President Wilson, Colonel House, and the other delegates, upon their arrival in Paris, found themselves in a not uncongenial atmosphere. To be sure, on the part of Clemenceau and of course of the militarists, there was great scepticism. Nevertheless the French joined in, and early in January the Covenant for the League of Nations began to evolve. It was built up step by step, President Wilson taking a most active part in the work.

Finally the Covenant was adopted in a preliminary way and made public late in February. It was subject to amendment, and those who drafted the document welcomed amendments and urged that they be offered. An especial effort was made to secure suggestions from various Republican statesmen. No amendments, so far as I have been able to learn, were offered by any of the Republican Senators, but ex-President Taft suggested certain changes, some of which were adopted. President Lowell of Harvard contributed one or two which were taken over almost verbatim. Ex-Senator Elihu Root also made valuable suggestions, some of which were utilized in the final drafting of the Covenant, made public early in April.

ESSENCE AND SPIRIT OF THE LEAGUE

Roughly, as the situation developed, the purpose of the League of Nations became two-fold. The initial purpose, of course, was to set up the machinery for a body, representative of the nations, keeping in such close contact and guided by such general principles as would tend to make it impossible for one nation to begin war upon another. Elsewhere in this volume ex-Attorney General Wickersham has described in detail the clauses of the Covenant; but even in this brief allusion it is proper to set down the essence and spirit of the League. It is this: No two peoples, if they come to know each other and each other's motives sufficiently well, and if by certain machinery they are maintained in close personal and ideal contact, can conceivably fly at each other's throats. Now no machinery can be devised that will absolutely prevent war, but a carrying out of the spirit and principles set forth in the present Covenant ought to make war well-nigh impossible. The machinery that was thus set up at Paris was deemed at the time to be of course imperfect and subject to constant improvement.

The second purpose of the League was to act as the binder, and in a way, the administrative force of the present existing Treaty. That is to say, we found as time went on there were many situations so complex that human wisdom could not devise an immediate formula for their solution. Hence, it became necessary for the Peace Conference to establish certain machinery which, if necessary, should function over a series of years, and thus work out permanently the problems involved. Therefore, [Pg 156] as it fell out, there were established under the Treaty, almost a score of Commissions, most of them to act under the general supervision of a League of Nations. Here, then, is another great function that the League of Nations is immediately called upon to fulfil.

WORK OF THE COMMISSIONS

With the Covenant of the League of Nations more or less complete, the next business of the Conference was the setting up of the Treaty proper. The method for this work was roughly as follows: About the first of February there was appointed a large number of special Commissions, made up of members of the various delegations. These Commissions, which were each to treat of separate topics, having arrived at a solution of the special subject, were then to draft their reports in such language that they could readily be embodied in the final Treaty of Peace itself. Thus, for instance, there was appointed a Commission on Reparations, a Commission on Economic Phases of the Treaty, a Commission on Finance, a Commission on Boundaries, a Commission on Military and Naval Armament, a Commission on German Colonies, a Commission on the Saar Basin Coal Fields, a Commission on Inland Waterways, and so on to the number of perhaps twenty. These Commissions immediately organized, and if the subject were particularly complex and many-sided, resolved themselves into sub-commissions. These sub-commissions in turn organized, each with its chairman and vice-chairman, its secretariat, and its interpreters, together with experts called into attendance.

DELAYS TO THE TREATY

The sittings of all these Commissions began, as I say, about February 1st, and at that time the plan was that the work of the Commissions should be concluded in the form of a report to the Supreme Council six weeks later, or about March 15th. The plan, further, was for the Supreme Council to pass upon these various reports, amend them if need be, and then have them drafted in such form as together would go to make up the Treaty, which, under this scheme, would be presented to the Germans on or about April 1st. The Germans would presumably sign within a fortnight, and we should all be going home about April 15th. As a matter of fact, the Germans signed the Treaty at Versailles at three o'clock on the afternoon of June 28th, two and one-half months later than the time originally planned.

This delay was, however, not at all unreasonable, if one stops to consider the number of questions involved, their magnitude, and the difficulty of dealing with them promptly. In the first place, each Commission was supposed to present the Supreme Council a unanimous report. The Council had ruled that the Commissions should not report by majority vote, for if in any given instance the majority overruled the minority, the minority might have such bitter complaint that there would be left in the situation the seed for future trouble. Therefore the Council determined that in the case of divergence of opinion in the same Commission, the two or more groups in the Commission should make separate reports to the Council, each having its own day in court. The Council would act as judges of the last resort, and no delegation would go away feeling that it had not had ample opportunity to present its case. Inevitable and sharp differences of opinion did arise, so that at least half the reports, I should say, as presented to the Big Four had to be thrashed out there in considerable detail.

The second handicap to rapid progress, of course, lay in the composition of the various Commissions. Each of the large five powers had to be represented on each Commission, and in most instances smaller powers also demanded representation. On some of the important Commissions the larger powers had two or more delegates sitting. Owing to the fact that Paris was full of influenza, each delegate had to have his alternate so as to keep the ball rolling. When they first met these delegates were not well acquainted with each other. They did not know how to get along together. It took weeks for them to shake down, [Pg 157] so as to understand each other's methods and points of view; so as to be prepared to make the necessary give and take, certain meetings of views which are always essential where people are gathered from the four corners of the earth with a single aim, but with vastly different ideas for attaining it.

Where the Peace Treaty Was Signed

Copyright by Underwood & Underwood

Where the Peace Treaty Was Signed

This was the table and chair at which the delegates sat and signed the peace document.

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POLITICS AT THE CONFERENCE

Still another difficulty was the question of politics which could not be eliminated. It is easy enough to say, "cut out politics," but in any international gathering it is never possible to do it. I must say right here, however, that—as it seemed to me—the American delegation well-nigh attained that ideal, and be it to President Wilson's credit, I never once saw him throughout the length of the conference, "play" politics. But some of the other delegations naturally felt that at home there was a "list'ning senate" to applaud or to condemn, and many of these delegates, being members of their respective parliaments or ministries, naturally had their ear to the ground for the effect that their course at Paris was producing. Then if, at the sittings of a Commission, one delegate made a particularly eloquent speech, his fellow delegate might feel it incumbent upon him to make another equally long. Some of the delegates deemed it their duty to make an extended speech every day and seemed to feel that they were lacking in patriotism if they failed each morning to cover several pages of the record with their views.

THE DIFFICULTY OF LANGUAGE

Then the final difficulty, uniting with the other troubles to prevent rapid progress, was that of language. The Paris Conference was, of course, a regular Tower of Babel. There were two official languages—French and English. Each delegation used the language with which its delegates were most familiar, and every word uttered by those delegates had to be translated into the vernacular of the others. Not only did this interpretation consume a vast amount of time, but of course it frequently proved most unsatisfactory. Both the English and [Pg 158] French languages are so idiomatic that the finer shades of meaning can never be well transmuted from one to the other. Hence, frequent and sometimes serious mistakes arose. For instance, a Serbian delegate who knew not a word of English would misunderstand something said by the British delegate, poorly translated into French. As the Serbian delegate's knowledge of French was also very limited he could not readily understand. So he would fly into a towering rage, and for an hour a heated argument would volley back and forth. Perhaps, at the end of that time, some cool-headed delegate (frequently an American), would point out that neither of the honorable delegates had any conception of what the other had said, and at bottom their views were precisely similar. Each of the competitors would then listen to reason, the situation would clear up, and things move on more happily.

I use here as an example a Serbian delegate, not that the Serbian delegates were more prone to passion than anybody else. We were all fighting like mad to make peace. We realized that though fundamentally we all had the same aim, yet as to methods our views were so divergent, that when we entered into conference at ten o'clock in the morning we should probably have one continuous struggle, with interludes for luncheon and dinner, until perhaps late in the evening. These struggles never ceased altogether, but as we got to know one another better, they of course let up materially, and we got on amicably and effectively.

THE COMMISSION ON REPARATIONS

No sketch of the Peace Conference, even one as cursory and superficial as this, could give any idea of the picture without a more detailed reference to the workings of some particular Commission that played an important part in the building up of the Peace Treaty. Hence I may be permitted to mention the Commission on Reparations. All things considered, this was perhaps the most important Commission at work.

The original Commission on Reparations was divided into three sub-commissions. Commission Number One was to determine upon what principles reparation should be demanded from Germany, that is to say, what items of damage should be included. In addition to physical damage inflicted by Germany upon the Allies, by reason of her aggression on land or sea, and from the air, should the cost of pensions for dead French soldiers be claimed? Was the entire cost of the war as waged by England, for instance, to be included as a charge against Germany? In other words, just what categories should be adopted in order to define Germany's liability?

This Commission Number One sat for weeks, and it was only towards the very end that it succeeded in establishing the categories. At the start there was a sharp divergence of opinion among the various delegations. The American delegation pointed out that under President Wilson's Fourteen Points costs of war would have to be excluded. The British delegation maintained otherwise. The French thought the costs of war ought to be included, but deemed the matter academic, inasmuch as Germany could never pay the total war costs. And so the argument ran.

Sub-commission Number Two on reparations had for its object to determine what Germany's capacity to pay was, and what the proper method of payment should be. Sub-commission Number Three was to devise sanctions or guarantees by which the Allies should be assured of receiving the payments finally determined upon.

For weeks I was active upon Sub-commission Number Two, and in fact was charged with the duty of drawing up the initial report covering the question of Germany's capacity to pay. Early in the deliberations of this Sub-commission it became apparent that its work was of momentous import, for whatever the Sub-commission determined as Germany's capacity to pay, undoubtedly that sum would be fixed as what Germany should be obligated to pay. Theoretically, as the French had pointed out, it did not make a great difference what categories of damage were included, because Germany would probably be unable to pay even the extent of material damage she had wrought. It [Pg 159] was equally evident that she would be compelled by the Allies to pay to the utmost extent of her capacity. Therefore Sub-commission Number Two was in effect, naming the amount of the German "indemnity."

AN ESTIMATE OF GERMANY'S CAPACITY TO PAY

This knowledge rendered the work of the delegates on Sub-commission Number Two considerably more difficult. To estimate Germany's capacity to pay over a series of years was by no means a purely scientific matter. No banker, or economist, or financier, whatever his experience, could look far enough into the future to be able to say what Germany could or could not pay, in ten, twenty, or thirty years. The initial estimate made by one of the delegations, as representing Germany's capacity to pay, was one thousand million of francs. Another estimate was twenty-four billion sterling, about one hundred twenty billion of dollars. Now Germany's entire wealth was estimated at not over eighty billion dollars, so it was inconceivable how it could be possible, even over a series of years, for Germany to pick up her entire commonwealth and transfer it to the Allies. Most of Germany's property consists of the soil, railroads, factories, dwellings, and none of those things can be transported, none can be made available for the payment of reparation. Hence the question arose as to how much liquid wealth Germany could export year after year and still maintain her own economic life. This was the estimate upon which the British, French and American delegations wrangled pleasantly for weeks. Whenever we reached too tense a point, tea and toast was served, with jam to sweeten the atmosphere a bit, and then we would start afresh.

As a matter of fact, as we encouraged newspaper reporters to surmise, we had nearly arrived upon a basis of agreement for demanding a fixed sum from Germany. That sum would not have exceeded forty or forty-five billion dollars, with interest added. The American delegation believed it to be far sounder economically to name a fixed sum and thus limit Germany's liability, so that all nations could address themselves to a definite end and arrange their fiscal and taxation policies accordingly. But both Mr. Lloyd George and M. Clemenceau urged that public opinion in both their countries would not acquiesce in any sum that fell far below previous expectations; that, therefore, inasmuch as it was difficult anyway to arrive at once upon the exact amount of damage caused, it would be wiser to leave the amount of reparation open, to be determined by a commission which should examine into the damage sustained, and fix the total amount within two years. America's material interest in the question was so limited that President Wilson finally did not oppose Mr. Lloyd George's and M. Clemenceau's judgment. This, in brief, is the history of the Reparation clauses in the Treaty. As I have already said, if we realize that in almost every one of the other chapters similar complex courses of procedure had to be followed, we shall not be surprised at the time which the Treaty took for drafting.

THE ITALIAN CRISIS

The world is already familiar with the several crises which arose during the course of the Peace Conference. The so-called Fiume crisis, when the Italian delegation walked out and returned to Rome, was regarded as the most serious. I am not sure it was, although it was generally so considered. I believe most of Italy's warmest friends maintain that her action in going home was a mistake. The question of putting Fiume under Italian sovereignty was not covered nor even touched upon in the Treaty of London. In face, the question of Fiume arose long after the Peace Conference was under way. Signor Orlando, the Italian Premier, was accused of fostering Italian feeling on Fiume and of fanning it into flame. I believe there is no truth in this. At any rate, if the Italians had been wise, they would have prevented the matter of Fiume from becoming such a cause celèbre. I think that by judicious work they could have prevented it. Then, too, probably the difficulty would have been lessened if President Wilson's statement to the Italian people had previously met Signor Orlando's approval. Mr. Wilson made his statement [Pg 160] with the best will in the world, with the intent to allay and not inflame Italian public opinion. It should have been possible to coördinate his idealism with Signor Orlando's position.

Later on the Italian delegation returned to Paris, realizing that the question of Fiume, which was formerly an Austrian port, did not bear one way or another upon the Treaty with Germany. But the Italians had lost a certain tactical position which was important to them, and in my judgment the move cost Italy much more than the whole question of Fiume amounted to.

Awaiting the Decision of the German Peace Delegates.

Copyright Underwood & Underwood

Awaiting the Decision of the German Peace Delegates.

President Clemenceau is shown standing. Next to him from right to left are: President Wilson, Secretary of State Robert Lansing, Commissioner Henry White, Colonel House, Gen. Tasker H. Bliss, Stephen Pichon, French Minister of Foreign Affairs; Louis Klotz, French Minister of Finance, and André Tardieu, French High Commissioner. From Clemenceau, left to right: Premier Lloyd George, Bonar Law and A. J. Balfour.

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THE QUESTION OF SHANTUNG

The Shantung crisis was another serious one. It was so realized at the time by the conferees at Paris. The Japanese delegation considered that it had already suffered one or two rebuffs. Their clause to embody race equality in the League of Nations Covenant had not been accepted. They, as the leading Far Eastern Power, were being urged to take an active part in the organization and development of the League of Nations, yet they could see nothing for Japan in the idea except a chance to help the other fellow. It was at this time that the Treaty clause was being drafted covering the disposition of German rights in the Far East, including those on the Shantung Peninsula. It will be remembered that at the outbreak of the war Germany, by reason of treaty rights with China, had possession of Kiauchau, upon the neck of the Shantung Peninsula. Back in 1916, at a time when the war was going badly, after Japan had driven the Germans out of the Far East and had prevented German submarines from getting a base there to prey upon British troop ships from Australia, Japan had demanded from [Pg 161] England and France that she become the inheritor of whatever rights Germany had in Shantung. England and France readily granted this request, as America probably would have done if she had been in the war at the time. Later on, according to the record, China confirmed Japan in these rights.

President Wilson's idea, however, was "China for Chinamen"; therefore Shantung should be turned over to China. This was a proper point of view. It was a great pity that it could not be made to prevail. The difficulty, however, was two-fold: first, the agreement which I have just cited between England and France on one hand, and Japan on the other; second, Japan's statement to President Wilson that if he began his League of Nations by forcing England and France to break a solemn agreement with Japan, then Japan would have no use for such a faithless confederation and would promptly withdraw. At the same time, however, Japan reiterated that her inheritance of Shantung was largely a formal matter, and that if the Allies gave her that recognition, she would feel in honor bound to withdraw from Shantung in the near future. This statement, made repeatedly by the Japanese delegates to President Wilson, finally led him to refrain from forcing Great Britain and France to break their agreement, as he might perhaps otherwise have done. The climax, of course, came when Japan gave her ultimatum and said that unless she had her rights she would retire from the Conference.

DEMANDS OF BELGIUM

Then came the third and last crisis—the Belgians threatened to withdraw and go home. They had, as they claimed, been promised by their Allies, as well as by their enemies, including specifically Germany, that their country, trampled over and devastated in order to defend France and England from attack, was to be fully restored and reimbursed for its expenditures. Early in the Conference Colonel House projected a plan to Mr. Balfour of the British delegation and Mr. Klotz of the French delegation, granting Belgium a priority of $500,000,000 on the German reparation, this sum being sufficient to set Belgium well on her way to recovery. There was, however, great delay in getting the final assent to this priority. The American delegation worked hard to bring it about and to push the plan on every occasion, but it still hung fire.

The Belgian delegation, finally becoming alarmed, insisted on formally taking up the question with the Council of Four. The Belgian delegation, under the leadership of Mr. Hymans, Minister of Foreign Affairs, made two chief demands, one for the priority already mentioned, and one for reimbursement for what the war had cost her. To this latter item there was vigorous objection on the ground that it was inadmissible to provide for Belgium's "costs of war" and not for those of England, France, Italy and the other Allies. As a compromise to meet the situation, a formula was finally proposed in a phrase to the effect that Germany was to be obligated especially "to reimburse Belgium for all the sums borrowed by Belgium from the Allies as a necessary consequence of the violation of the Treaty of 1839." Inasmuch as all such sums borrowed by Belgium were used for the prosecution of the war, this phrase was simply a euphemism for granting to Belgium the war costs which she had demanded. But it was finally agreed to on all hands, and the crisis was averted.

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The George Washington

Copyright by Press Illustrating Service

The George Washington

It was on this ship that President and Mrs. Wilson made their two trips across the Atlantic and back during the Peace Conference.

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THE TREATY PRESENTED TO THE GERMANS AT VERSAILLES

The Treaty in its final form was presented to the Germans at Versailles May 7th. The Germans were hoping they would be permitted to discuss certain phases of the Treaty in person with the Allied delegates, and in fact repeatedly requested the opportunity. Some of us believed such conversations might be advantageous if they were held; not between the chiefs of the Allied states and the heads of the German delegation, but between technical experts on both sides. Mr. Wilson favored this view, as tending to enlighten the Germans on certain phases of the Treaty, which from their written communications it was evident they did not understand. We thought that some weeks of delay might possibly be averted by sitting around the table with the Germans, distasteful as that task might be, and holding a kind of miniature peace conference. This suggestion, however, was strongly opposed by M. Clemenceau, although it was favored by some of his ministers. In fact, some of the latter, as well as many of the British, were for a time convinced that the terms of the Treaty were such that Germany would never sign them. Again and again Clemenceau was urged to give way on this point, but he sturdily opposed the view and declared positively that he knew the German character; that the only way to secure a German signature to the Treaty was to insist upon purely formal and written communications. Clemenceau had his way, and then began the laying of a good many wagers as to whether the Germans would sign. This was after the original German delegation, or at least the chiefs of it, had returned to Berlin and declared that they would not come back again to Versailles. My own opinion was, that after making as great a kick as possible the Germans would undoubtedly sign. The logic of the situation was all for their signing, the reasoning being this: If the Treaty were a just Treaty, then they ought to sign any way; if it were an unjust Treaty, then, even if signed, it [Pg 163] would eventually fall of its own weight, and the Germans would run no risk in signing it. I felt that the German psychology of the situation would be acute enough to see these points and to lead to a signature.

GERMANY SIGNS THE TREATY

This proved to be the case, and on Saturday, the 21st of June, after questionings and misgivings, we finally got the word that the Germans were to sign. I shall never forget the moment that the news came. Some of us were in session with the Council of Four at the President's house. Mr. Wilson sat on the right of the fireplace, Mr. Lloyd George on the left, and M. Clemenceau in the middle. Mr. Orlando was in Italy but his foreign minister, Baron Sonnino, was there in his place. The afternoon was a tense one, for the time was growing short and the Germans had, as I say, not yet signified their intention of signing the treaty. In the mind of every one of us there lurked the question as to the terrible steps that would have to be taken in the event the Germans refused to sign. Late in the afternoon an orderly slipped into the room and whispered into M. Clemenceau's ear. He struggled to his feet, marched up to President Wilson and Mr. Lloyd George, and, drawing himself up, said in solemn tones, "I have the honor to announce to you that the Germans will sign the treaty."

And then a moment later the cannon boomed forth to the expectant populace the news that the Germans would sign, and M. Clemenceau, turning to me, breathed: "Ah, that is the sound that I have been waiting to hear for forty-eight years."


II—WILSON'S FOURTEEN POINTS
An Attempt to Raise International Morality to the Level of Private Morality

On January 8, 1918, President Wilson outlined the fourteen points on the basis of which the Allies should make peace. This program was the startling climax of a whole series of peace proposals which had kept coming from both camps of belligerents, from neutrals, Socialists, and the Pope. It is without doubt one of the greatest and most inspiring State documents in the history of the world. It struck a vital and telling blow at the basic causes of modern wars. For that reason it electrified into complete unity the masses of the Allied countries. Liberal, radical and pacifist opponents of the war rallied around it as the last great hope of civilization. Its most important effect was to give a democratic basis to the weary and disillusioned masses of the Central Powers who were longing for peace. It was on the basis of the fourteen points that the enemy surrendered.

THE WILSON PROGRAM

We entered this war because violations of right had occurred which touched us to the quick and made the life of our own people impossible unless they were corrected and the world secured once for all against their recurrence. What we demand in this war, therefore, is nothing peculiar to ourselves. It is that the world be made fit and safe to live in; and particularly that it be made safe for every peace-loving nation which, like our own, wishes to live its own life, determine its own institutions, be assured of justice and fair dealings by the other peoples of the world, as against force and selfish aggression. All the peoples of the world are in effect partners in this interest and for our own part we see very clearly that unless justice be done to others it will not be done to us. The programme of the world's peace, therefore, is our programme, and that programme, the only possible programme, as we see it, is this:

I. Open covenants of peace, openly arrived at, after which there shall be no private international understandings of any kind, but diplomacy shall proceed always frankly and in the public view.

II. Absolute freedom of navigation upon the seas, outside territorial waters, alike in peace and in war, except as the seas may be closed in whole or in part by international action for the enforcement of international covenants.

III. The removal, as far as possible, of all economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance.

[Pg 164]

IV. Adequate guarantees given and taken that national armaments will be reduced to the lowest point consistent with domestic safety.

V. A free, open minded, and absolutely impartial adjustment of all colonial claims, based upon a strict observance of the principle that in determining all such questions of sovereignty the interests of the populations concerned must have equal weight with the equitable claims of the government whose title is to be determined.

Paris Crowds Greeting President Wilson

Copyright by Underwood & Underwood

Paris Crowds Greeting President Wilson

A general holiday was declared to welcome the President of the United States. This photograph was taken in the Place dé la Concorde.

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VI. The evacuation of Russian territory and such a settlement of all questions affecting Russia as will secure the best and freest coöperation of the other nations of the world in obtaining for her an unhampered and unembarrassed opportunity for the independent determination of her own political development and national policy and assure her of a sincere welcome into the society of free nations under institutions of her own choosing; and, more than a welcome, assistance also of every kind that she may need and may herself desire. The treatment accorded Russia by her sister nations in the months to come will be the acid test of their good will, of their comprehension of her needs as distinguished from their own interests, and of their intelligent and unselfish sympathy.

VII. Belgium, the whole world will agree, must be evacuated and restored, without any attempt to limit the sovereignty which she enjoys in common with all other free nations. No other single act will serve as this will serve to restore confidence among the nations in the laws which they have themselves set and demanded for the government of their relations with one another. Without this healing act the whole structure and validity of international law is forever impaired.

VIII. All French territory should be freed and the invaded portions restored, and the wrong done France by Prussia in 1871 in the matter of Alsace-Lorraine, which has unsettled the peace of the world for nearly fifty years, should be righted, in order that peace may once more be made secure in the interest of all.

IX. A readjustment of the frontiers of Italy should be effected along clearly recognizable lines of nationality.

X. The peoples of Austria-Hungary, whose place among the nations we wish to see safeguarded and assured, should be accorded the freest opportunity of autonomous development.

XI. Rumania, Serbia and Montenegro should be evacuated; occupied territories restored; Serbia accorded free and secure access to the sea, and the relations of the several Balkan States to one another determined by friendly counsel along historically established lines of allegiance and nationality, and international guarantees of the political and economic independence and territorial integrity of the several Balkan States should be entered into.

[Pg 165]

XII. The Turkish portions of the present Ottoman Empire should be assured a secure sovereignty, but the other nationalities which are now under Turkish rule should be assured an undoubted security of life and an absolutely unmolested opportunity of autonomous development, and the Dardanelles should be permanently opened as a free passage to the ships and commerce of all nations under international guarantees.

XIII. An independent Polish State should be erected which should include the territories inhabited by indisputably Polish population, which should be assured a free and secure access to the sea and whose political and economic independence and territorial integrity should be guaranteed by international covenant.

XIV. A general association of nations must be formed under specific covenants for the purpose of affording mutual guarantees of political independence and territorial integrity to great and small States alike.


III—HOW THE PEACE TREATY WAS SIGNED
A Description of the Historic Ceremony in the Hall of Mirrors at the Palace of Versailles, June 8, 1919

(Reprinted from the New York Times.)

No nobler and more eloquent setting could have been found for this greatest of all modern events, the signing of the Peace of Versailles, after five years of terrific struggle on whose outcome the fate of the whole world had hung, than the palace of the greatest of French Kings on the hillcrest of the Paris suburb that gave its name to the treaty. To reach it, says the correspondent of The New York Times, the plenipotentiaries and distinguished guests from all parts of the world motored to Versailles that day, and drove down the magnificent tree-lined Avenue du Château, then across the huge square—the famous Place d'Armes of Versailles—and up through the gates and over the cobblestones of the Court of Honor to the entrance, where officers of the Republican Guard, whose creation dates back to the French Revolution, in picturesque uniform, were drawn up to receive them.

All day the crowd had been gathering. It was a cloudy day; not till noon did the sky clear. By noon eleven regiments of French cavalry and infantry had taken position along the approaches to the palace, while within the court on either side solid lines of infantry in horizon blue were drawn up at attention.

Hours before the time set for the ceremony an endless stream of automobiles began moving out of Paris up the cannon-lined hill of the Champs Elysées, past the massive Arc de Triomphe, bulking somberly against the leaden sky, and out through the Bois de Boulogne. This whole thoroughfare was kept clear by pickets, dragoons, and mounted gendarmes. In the meantime thousands of Parisians were packing regular and special trains on all the lines leading to Versailles, and contending with residents of the town for places in the vast park where the famous fountains would rise in white fleur-de-lis to mark the end of the ceremony.

A MEMORABLE SCENE

Past the line of gendarmes thrown across the approaches to the square reserved for ticket holders, the crowd surged in a compact and irresistible wave, while hundreds of the more fortunate ones took up positions in the high windows of every wing of the palace. Up the broad boulevard of the Avenue de Paris the endless chain of motor cars rolled between rows of French soldiers; and a guard of honor at the end of the big court presented arms to the plenipotentiaries and delegates as they drove through to the entrance, which for the Allied delegates only was by the marble stairway to the "Queen's Apartments" and the Hall of Peace, giving access to the Hall of Mirrors. A separate route of entry was prescribed for the Germans, an arrangement which angered and disconcerted them when they discovered it, through the park and up the marble stairway through the ground floor.

The delegates and plenipotentiaries began to arrive shortly after 2 p. m., their automobiles rolling between double lines of infantry with bayonets fixed—it was estimated that there were 20,000 soldiers altogether guarding the route—that held back the cheering throngs. [Pg 166] The scene from the Court of Honor was impressive. The Place d'Armes was a lake of white faces, dappled everywhere by the bright colors of flags and fringed with the horizon blue of troops whose bayonets flamed silverly as the sun emerged for a moment from behind heavy clouds. At least a dozen airplanes wheeled and curvetted above.

Up that triumphal passage, leading for a full quarter of a mile from the wings of the palace to the entrance to the Hall of Mirrors, representatives of the victorious nations passed in flag-decked limousines—hundreds, one after another, without intermission, for fifty minutes. Just inside the golden gates, which were flung wide, they passed the big bronze statue of Louis XIV., the "Sun-King," on horseback, flanked by statues of the Princes and Governors, Admirals and Generals who had made Louis the Grand Monarque of France. And on the façade of the twin, temple-like structures on either side of the great statue they could read as they passed an inscription symbolic of the historic ceremony just about to occur: "To All the Glories of France."

NOTABILITIES ARRIVE

One of the earliest to arrive was Marshal Foch, amid a torrent of cheering, which burst out even louder a few moments later when the massive head of Premier Clemenceau was seen through the windows of a French military car. To these and other leaders, including President Wilson, General Pershing, and Premier Lloyd George, the troops drawn up all around the courtyard presented arms. After Clemenceau the unique procession continued, diplomats, soldiers, Princes of India in gorgeous turbans and swarthy faces, dapper Japanese in immaculate Western dress, Admirals, aviators, Arabs; one caught a glimpse of the bright colors of French, British, and Colonial uniforms. British Tommies and American doughboys also dashed up on crowded camions, representing the blood and sweat of the hard-fought victory; they got an enthusiastic reception. It was 2:45 when Mr. Balfour, bowing and smiling, heralded the arrival of the British delegates. Mr. Lloyd George was just behind him, for once wearing the conventional high hat instead of his usual felt. At 2:50 came President Wilson in a black limousine with his flag, a white eagle on a dark blue ground; he received a hearty welcome.

By 3 o'clock the last contingent had arrived, and the broad ribbon road stretched empty between the lines of troops from the gates of the palace courtyard. The Germans had already entered; to avoid any unpleasant incident they had been quietly conveyed from their lodgings at the Hotel des Reservoirs Annex through the park.

THE SCENE INSIDE

The final scene in the great drama was enacted in the magnificent Hall of Mirrors. Versailles contains no more splendid chamber than this royal hall, whose three hundred mirrors gleam from every wall, whose vaulted and frescoed ceiling looms dark and high, in whose vastness the footfalls of the passer re-echo over marble floors and die away reverberatingly. It was no mere matter of convenience or accident that the Germans were brought to sign the Peace Treaty in this hall. For this same hall, which saw the German peace delegates of 1919, representing a beaten and prostrate Germany, affix their signatures to the Allied terms of peace, had witnessed in the year 1871 a very different ceremony. It was in the Hall of Mirrors that the German Empire was born. Forty-nine years ago, on a January morning, while the forts of beleaguered Paris were firing their last defiant shots, in that mirror-gleaming hall was inaugurated the reign of that German Empire the virtual end of which, so far as the concept held by its originators is concerned, was signalized in Versailles in the same spot on Saturday, June 28. And in 1871 President Thiers had signed there the crushing terms of defeat imposed by a victorious and ruthless Germany.

In anticipation of the present ceremony carpets had been laid and the ornamental table, with its eighteenth century gilt and bronze decorations, had been placed in position on the daïs where the plenipotentiaries were seated. Fronting the chair of M. Clemenceau was placed a small table, on which the diplomatic instruments were laid. It was to this table that each representative was called, in alphabetical order by countries, to sign his name to the treaty and affix to it his Governmental [Pg 167] seal. The four hundred or more invited guests were given places in the left wing of the Hall of Mirrors, while the right wing was occupied by about the same number of press representatives. Sixty seats were allotted to the French press alone. Besides the military guards outside the palace, the grand stairway up which the delegates came to enter the hall was controlled by the Republican Guards in their most brilliant gala uniform.

THE PEACE TABLE

The peace table—a huge hollow rectangle with its open side facing the windows in the hall—was spread with tawny yellow coverings blending with the rich browns, blues, and yellows of the antique hangings and rugs; these, and the mellow tints of the historical paintings, depicting scenes from France's ancient wars, in the arched roof of the long hall, lent bright dashes of color to an otherwise austere scene. Against the sombre background also stood out the brilliant uniforms of a few French guards, in red plumed silver helmets and red, white, and blue uniforms, and a group of Allied Generals, including General Pershing, who wore the scarlet sash of the Legion of Honor.

But all the diplomats and members of the parties who attended the ceremony of signing wore conventional civilian clothes. All gold lace and pageantry was eschewed, the fanciful garb of the Middle Ages was completely absent as representative of traditions and practices sternly condemned in the great bound treaty-volume of Japanese paper, covered with seals and printed in French and English, which was signed by twenty-seven nations that afternoon.

As a contrast with the Franco-German peace session of 1871, held in the same hall, there were present some grizzled French veterans of the Franco-Prussian war. They took the place of the Prussian guardsmen of the previous ceremony, and gazed with a species of grim satisfaction at the disciples of Bismarck, who sat this time in the seats of the lowly, while the white marble statue of Minerva looked stonily on.

ENTRANCE OF CHIEF ACTORS

The ceremony of signing was marked only by three minor incidents: a protest by the German delegation at the eleventh hour over the provision of separate entrance, the filing of a document of protest by General Jan Smuts of the South African delegation, and the deliberate absence of the Chinese delegates from the ceremony, due to dissatisfaction over the concessions granted to Japan in Shantung.

Henry White

Copyright Underwood & Underwood

Henry White

Former Ambassador to France and Italy and one of the United States delegates to the Peace Conference.

The treaty was deposited on the table at 2:10 p.m. by William Martin of the French Foreign Office; it was inclosed in a stamped leather case, and bulked large. Because of the size of the volume and the fragile seals it bore, the plan to present it for signing to Premier Clemenceau, President Wilson, and Premier Lloyd George had been given up. A box of old-fashioned goose quills, sharpened by the expert pen pointer of the French Foreign Office, was placed on each of the three tables for the use of plenipotentiaries who desired to observe the conventional formalities.

Secretary Lansing, meanwhile, had been the first of the American delegation to arrive in the palace—at 1:45 p.m. Premier Clemenceau [Pg 168] entered at 2:20. Three detachments each consisting of fifteen private soldiers—from the American, British, and French forces—just before 3 o'clock and took their places in the embrasures of the windows overlooking the château park, a few feet from Marshal Foch, who was seated with the French delegation at the peace table. Marshal Foch was present only as a spectator, and did not participate in the signing. These forty-five soldiers of the three main belligerent nations were present as the real "artisans of peace" and stood within the inclosure reserved for plenipotentiaries and high officials of the conference as a visible sign of their rôle in bringing into being a new Europe. These men had been selected from those who bore honorable wounds. Premier Clemenceau stepped up to the poilus of the French detachment and shook the hand of each, expressing his pleasure at seeing them, and his regrets for the suffering they had endured for France.

PRESIDENT WILSON ENTERS

Delegates of the minor powers made their way with difficulty through the crowd to their places at the table. Officers and civilians lined the walls and filled the aisles. President Wilson entered the Hall of Mirrors at 2:50. All the Allied delegates were then seated, except the Chinese representatives, who were conspicuous by their absence. The difficulty of seeing well militated against demonstrations on the arrival of prominent statesmen. The crowd refused to be seated and thronged toward the center of the hall, which is so long that a good view was impossible from any distance, even with the aid of opera glasses. German correspondents were ushered into the hall just before 3 o'clock and took standing room in a window at the rear of the correspondents' section.

At 3 o'clock a hush fell over the hall. There were a few moments of disorder while the officials and the crowd took their places. At 3:07 the German delegates, Dr. Hermann Müller, German Secretary for Foreign Affairs, and Dr. Johannes Bell, Colonial Secretary, were shown into the hall; with heads held high they took their seats. The other delegates remained seated, according to a prearranged plan reminiscent of the discourtesy displayed by von Brockdorff-Rantzau, who at the ceremony of delivery of the peace treaty on May 7th, had refused to rise to read his address to the Allied delegates. The seats of the German delegates touched elbows with the Japanese on the right and the Brazilians on the left. They were thus on the side nearest the entrance, and the program required them to depart by a separate exit before the other delegates at the close of the ceremony. Delegates from Ecuador, Peru, and Liberia faced them across the narrow table.

THE GERMANS SIGN

M. Clemenceau, as President of the Peace Conference, opened the ceremony. Rising, he made the following brief address, amid dead silence:

"The session is open. The allied and associated powers on one side and the German Reich on the other side have come to an agreement on the conditions of peace. The text has been completed, drafted, and the President of the Conference has stated in writing that the text that is about to be signed now is identical with the 200 copies that have been delivered to the German delegation. The signatures will be given now, and they amount to a solemn undertaking faithfully and loyally to execute the conditions embodied by this treaty of peace. I now invite the delegates of the German Reich to sign the treaty.'

There was a tense pause for a moment. Then in response to M. Clemenceau's bidding the German delegates rose without a word, and, escorted by William Martin, master of ceremonies, moved to the signatory table, where they placed upon the treaty the sign-manuals which German Government leaders had declared over and over again, with emphasis and anger, would never be appended to this treaty. They also signed a protocol covering changes in the documents, and the Polish undertaking. All three documents were similarly signed by the Allied delegates who followed.

WILSON SIGNS NEXT

When the German delegates regained their seats after signing, President Wilson immediately rose and, followed by the other American plenipotentiaries, moved around the sides of the horseshoe to the signature tables. It was thus President Wilson, and not M. Clemenceau, who was first of the Allied delegates to sign. This, however, was purely what may [Pg 169] be called an alphabetical honor, in accordance with which the nations were named in the prologue to the treaty. Premier Lloyd George, with the British delegation, came next. The British dominions followed. M. Clemenceau with the French delegates, was next in line; then came Baron Saionji and the other Japanese delegates, and they in turn were followed by the representatives of the smaller powers.

Count von Brockdorff-Rantzau

Copyright Underwood & Underwood

Count von Brockdorff-Rantzau

Foreign Minister of Germany and President of the German Peace delegates.

During the attaching of the signatures of the great powers and the Germans a battery of moving picture cameras clicked away so audibly that they could be heard above the general noise and disorder of the throng. The close of the ceremony came so quickly and quietly that it was scarcely noticed until it was all over. M. Clemenceau arose almost unremarked, and in a voice half lost amid the confusion and the hum of conversation which had sprung up while the minor powers were signing declared the conference closed, and asked the Allied and associated delegates to remain in their seats for a few moments—this to permit the German plenipotentiaries to leave the building before the general exodus.

THE GERMANS DEPART

None arose as the Germans filed out, accompanied by their suite of secretaries and interpreters, just as all the plenipotentiaries had kept their seats when Dr. Müller and Dr. Bell entered. The Germans went forth evidently suffering strong emotion. Outside an unsympathetic crowd jammed close to the cars which took them away. There was no aggression, but the sentiment of the throng was unmistakable.

Meanwhile the great guns that announced the closing of the ceremony were booming, and their concussion shook the old palace of Versailles to its foundations. Amid confusion the assembly dispersed, and the most momentous ceremony of the epoch was at an end.

The great war which for five long years had shaken Europe and the world was formally ended at last. It was a war which had cost the belligerents over $200,000,000,000; which had caused the deaths of 8,000,000 human beings, and which had left the world a post-war burden of debt amounting to $135,000,000,000. It was a war which had changed the whole face of Europe, which had brought many new nations into existence, which had revolutionized the organization of all national and international life. It was a war which had brought the world the consciousness of its common obligation to unite against all war. The booming of the great guns of Versailles seemed to proclaim a new epoch.

[Pg 170]


IV—THE PEACE TREATY—ITS MEANING TO AMERICA
America's "Place in the Sun" Due to Her Efforts to Secure a Just Peace

By GEORGE W. WICKERSHAM

Formerly Attorney-General of the United States.

"The cause of our entrance into the great war," declares Dr. David Jayne Hill in a recent essay, "being the violation by the German Imperial Government of our legal rights as a nation, our object in the war was to make our rights respected. The one clear duty of the treaty-making power in concluding peace with Germany, therefore, is to secure this result." [25]

[25] "Americanizing the Treaty."—North American Review, August, 1919.

In these words, one of the most distinguished and accomplished of the opponents of the treaty of Paris reveals the profound abyss which separates those who oppose from those who are urging the approval of the Treaty of Versailles. Dr. Hill, perhaps unconsciously, gives expression to a sordid, narrow, selfish view of the issues of the war, which would transmute into the most elemental act of self-defense one of the greatest crusades of high idealism ever conducted by any people in the history of nations. If, in fact, the cause of our participation in the war was merely to repel attacks upon our legal rights as a nation, then indeed, that end being attained, and the aggressor reduced to impotence for the future, we may return within our own borders, withdraw unto ourselves, disclaim all responsibility for the condition of the world elsewhere and plunge into the selfish exploitation of our national resources, "the world forgetting, by the world forgot." It is a strange perversion of the facts of recent history that leads to such a conception of America's responsibility for the future of civilization.

There were undoubtedly, as Mr. Wilson said, "violations of right which touched us to the quick." Was it merely violations of our own national rights that roused this peace-loving nation to array itself for battle; that sent two million of our young men across three thousand miles of ocean to take their places beside the heroes of Verdun and the Marne, the veterans of Cambrai and Arras, Ypres and the Somme; infused the weary defenders of civilization with new courage; converted their defense into an irresistible offensive which shattered the greatest military machine of history, overthrew the Kaiser and his government, and brought the German nation to its knees? No! It was not the German attacks upon our rights as a nation; it was the German challenge of the whole basis of modern Christian civilization. It was her cynical disclaimer of the binding character of treaties; her inhuman method of warfare; her brutal cruelties of non-combatant men, women and children; her ruthless destruction of monuments of art—the possessions of not merely one nation, but of the entire world of men and women in every land who love beauty and revere art. It was the growing conviction that a government which ordered the sinking of the Lusitania and the Sussex; that destroyed the priceless literary treasures of Louvain; that separated families in Belgium and France, and deported great companies of men to work in German munition factories; that ruthlessly cut up by the roots the fruit trees and shrubs of the occupied regions of France; that sought to destroy not merely the men, but the souls of nations, so that its own horrid philosophy of Force might reign over them—that such a government must no longer exist; that its pestilential influence was more noxious than tuberculosis or the bubonic plague.

THE BASIS OF PEACE

Therefore, the Youth of America joyously leaped to arms and crowded overseas in the greatest of all crusades, insuring victory and promising the opening of a new and better epoch of human history. It was the recognition of human kinship; the perception of human brotherhood, that inspired them to the great endeavor. Our proud sense of American nationality took on a deeper and holier [Pg 171] significance as we joined forces with the older peoples in defense of the great principles of human right which had been formulated by our fathers and upon which was reared the American State. We were no less Americans that we had accepted a common responsibility with Great Britain, France and Italy for the preservation of the ideals of human freedom for which Washington fought and Lincoln died. Nay! better Americans, as we realized that the war was being fought in defense of those principles upon which our own institutions were founded and by which we had become the great, strong, free nation we are.

And as the hideous carnage went on, and we saw a whole generation of the youth of the free nations of Europe butchered because the German people had become so obsessed with their own sense of superiority that they were determined to rule the world and impose upon all other peoples subservience to their Moloch-like gospel of efficiency, another feeling began to struggle for expression in Europe and America alike—a determination that all wars of aggression must cease; that disputes between nations must be settled like those between individuals, by peaceful arbitration or conciliation; that the causes of war must be examined and, so far as possible, removed, and that no such war as this ever again should desolate the earth. This was the meaning of the phrase one came to hear on many lips, that it was "a war against war." How could such a result be attained? Obviously, only by the continued association in peace of those powers whose close coöperation in war was compelling the overthrow of German militarism, and the widening of that association to include all the other nations who should accept its program and give an earnest of adherence to its ideals. There was also the hope that some time—when they should have offered up that ancient sacrifice, "an humble and a contrite heart"—even the German people, enfranchised and regenerated, might be admitted into the society of Free Peoples and with new significance become entitled to be called a civilized nation.

These were the principles that underlay Mr. Wilson's program of peace—the fourteen points of January 8, 1918, and subsequent addresses; the only definite formulation of the basis of peace which was laid before the world, a program concerning which the American Congress expressed no definite criticism and for which it offered no substitute; a program which was accepted by Allies and opponents alike, and which constituted the Chart by which the Conference of Paris was required to endeavor to formulate the terms of the Treaty of Peace.

The work of that Conference now has been submitted to the judgment of mankind. It was accepted by the new government of Germany with a wry face, as the judgment of the victors naturally would be taken by the vanquished. It has been ratified by the Parliament of Great Britain, by Italy, by France and by Japan. It has been for weeks under debate in the Senate of the United States. Daily efforts have been made to create a partisan political issue over it, and to visit upon it party resentment against the past actions of the President. [26]

[26] This article by Mr. Wickersham was prepared prior to the Senate deadlock and the rejection of the Treaty with the Lodge reservations.

Dr. Hill again sums up the case against the treaty—the final basis which the confused gropings after some means of making it unpopular with the people finally have evolved—in these words:

"The League of Nations, as proposed, includes not only obligations not related to the reasons for engaging in the war, but also obligations opposed to the traditions, the time-honored policies, and even the constitutional provisions of the United States. It commits the whole future policy of this country to the decisions of an international body in which it would have only a single voice; it permits that body to intrude its judgments, and thereby its policies into a sphere hitherto regarded as exclusively American, and, in addition, it demands that the territories held by each of the members of the League under this treaty shall receive the permanent protection of the United States as integral parts of the Nations that now claim them."

Is it true? What is the real meaning of the Peace Treaty and its effect upon the people of the United States? The answer to these questions, and indeed to most of the criticism of the Covenant, is conclusively met by a reading of the treaty. But first let us turn for a moment to the fourteen points of Mr. Wilson's address of January 8, 1918. The basis of the territorial readjustment of Europe which he then proposed, was the giving [Pg 172] of national expression to racial aspiration. Alien imperial rule such as that of Austria over Hungary and Bohemia, and that of Germany, Austria or Russia over Poland, was to end, and the Poles, the Croats, Serbs, Hungarians, Bohemians, and the Czechoslavs and Jugoslavs each were to be allowed national existence, with the right of self-determination. Whatever may now be thought of the wisdom of this theory, it was accepted by all of the Allies, who thereby were committed to a responsibility for the protection, certainly in the early years of their existence, of the new nations they united to call into being. Recognizing this fact, the fourteenth of the Wilson points provided for the creation of an Association of the Allied Nations to protect the work of their arms. Aside from that practical purpose, the League of Nations was recognized by many in every land as furnishing the only practicable machinery for the removal of causes of war and the prevention of new assaults upon civilization, such as that which Germany had launched in August, 1914.

Victoria Hall at Geneva

Copyright Underwood & Underwood

Victoria Hall at Geneva

Selected by the Council of the Powers as the meeting place of the League of Nations.

Click for a larger image.

The first Chapter of the Peace Treaty, therefore, is a Covenant or Compact forming a League of Nations, whose purpose, as expressed in the Preamble, is "to promote international coöperation and to achieve international peace and security." Worthy objects, these: how are they to be attained? The Preamble answers,

"by the acceptance of obligations not to resort to war, by the prescription of open, just and honorable relations between nations, by the firm establishment of the understandings of international law as to actual rule of conduct among governments, and by the maintenance of justice and a scrupulous respect for all treaty obligations in the dealings of organized peoples with one another."

Are not these methods such as America has made her own? Have we not in many treaties accepted obligations not to make war until all [Pg 173] peaceful methods of settling disputes shall have been exhausted; have we not striven to make the principles of international law rules for the government of nations; and was not one of the main points in the indictment of Germany on which we prosecuted the war against her that she had flouted the sanctity of treaties and made them mere scraps of paper?

The objects of the League therefore, as set forth in the Covenant, are expressive only of policies and principles to which the United States has given a consistent and unbroken adherence from the days of the Jay Treaty to the present hour. How are these objects proposed to be attained in the text of the Covenant? What is there in its provisions to justify the frantic abuse that has been heaped upon it by its opponents and to sustain the final accusation that it is "un-American?"

MACHINERY OF THE LEAGUE

First, as to the Machinery of the League. There is an Assembly of its members to which each Sovereign State may send delegates. There is an Assembly of its members to which each nation necessarily has one vote. In the United States Senate, Rhode Island and New York have equal representation, despite disparity in wealth and population. The principle of sovereignty requires this recognition of equality. But the powers of the Assembly are restricted to voting upon the admission of new members to the League, the addition of members to the Council, the disposition of international disputes which may be referred to it by the Council under Article XV, and the general consideration at its meetings of "any matter within the sphere of action of the League or affecting the peace of the world." This general authority only can embrace the right of discussion, save in very exceptional cases, as by Article V, "decisions at any meeting of the Assembly or of the Council shall require the agreement of all the members of the League represented at the meeting."

The actual governing body of the League is the Council, which is to consist of representatives of the five greater powers,—the United States, Great Britain, France, Italy and Japan, together with representatives of four other members of the League selected by the Assembly from time to time. These numbers may be increased, but only by the unanimous vote of the Council, approved by a majority of the Assembly.

As noted above, save in the very few expressly expected cases, the Council can reach decisions only by unanimous vote. What are to be its functions? They need not be enumerated in detail here. Briefly, they deal with the reduction of armaments, the control by governments of the private manufacture of munitions and implements of war, the consideration of any war or threat of war—"of any circumstance whatever affecting international relations which threatens to disturb either the peace or the good understanding between nations upon which peace depends." They require the formulation and submission to the members of the League for adoption of plans for the establishment of a permanent Court of International Justice. They empower the Council to endeavor to effect a settlement of any international dispute which shall not be submitted to arbitration by the parties; to investigate, consider and report upon any such dispute, and to publish its conclusions.

The parties to the League solemnly covenant and agree that if any dispute shall arise between them likely to lead to a rupture they will submit it either to arbitration or inquiry by the Council, and that in no case will they resort to war until three months after the award by the arbitrators or the report by the Council. They agree also to carry out in good faith any award that may be rendered, and not to make war against any member of the League that complies therewith. If a report by the Council is unanimously agreed to by its members, other than the representatives of the disputants, the members agree not to go to war with any party to the dispute which complies with the recommendations of the report.

OBJECTIONS TO THE PLAN

It is objected by some that the decision of questions between nations by these provisions is left to a body of delegates composing the Council who are not bound to decide according to rules of international law, but may reach conclusions merely as political expediency. This seems a strained interpretation. [Pg 174] The members of the League agree to submit either (1) to arbitration or (2) to investigation by the Council, every dispute which may arise between them likely to lead to a rupture and in no case to resort to war until three months after the award by arbitrators or the report by the Council. They declare (by Article XIII)

"Disputes as to the interpretation of a treaty, as to any question of international law, as to the existence of any fact which, if established, would constitute a breach of any international obligation, or as to the extent and nature of the reparation to be made for any such breach," to be among those which are generally suitable for submission to arbitration. Disputes of the character thus enumerated are what are known as justiciable, i. e., subject to be decided by a Court by the application of the recognized principles of international law.

Mr. Root recommended that such disputes should be required to be arbitrated. The Conference at Paris, like those at the two Hague Conferences, would not agree to that. But in view of the declaration just quoted, any power which should bring before the Council a dispute of the character mentioned, but which it was unwilling to submit to arbitration, would have the burden of showing convincing reason for such attitude.

When the first draft of the Covenant was before the country, American critics objected that it would compel the United States to submit to arbitration on inquiry by the Council purely domestic questions such as tariff, immigration and coastwise traffic. To meet this objection, there was inserted in Art. XV the following paragraph:

"If the dispute between the parties is claimed by one of them, and is found by the Council to arise out of a matter which by international law is solely within the domestic jurisdiction of that party, the Council shall so report, and shall make no recommendation as to its settlement."

To this it is objected that the determination of the question whether or not a matter of dispute is by the rules of international law solely with the domestic jurisdiction of a member is left to the Council and not to the member. Surely, it requires no explanation to demonstrate, that if a member State may oust the Council of jurisdiction to inquire into a given dispute which threatens the peace of the world merely by itself asserting that it arises out of a matter within its exclusive domestic jurisdiction, a very imperfect means of averting war will have been provided, and the League Covenant will hardly have more efficacy than the second Hague Convention. Remember too, that the reports of the Council must be unanimous, and the unreasonableness of the objection to the provisions cited will appear.

MEANS TO PREVENT WAR

Articles XI to XVI constitute the heart of the Covenant, the most effective means ever formulated to prevent war. The agreements of the nations not to resort to war until the processes of arbitration or inquiry are exhausted, are buttressed by the provision that should any member violate these agreements it shall ipso facto be deemed to have committed an act of war against all the other members of the League, entailing as a consequence commercial boycott, expulsion and the application of armed force, if the members shall so determine. The employment of force in this case, as in every other contemplated by the Covenant, is not left to the decision of Council or Assembly. They can only recommend. The member States agree not to go to war. There is nowhere in the document any provision compelling them to go to war. Even where one State in violation of its Covenant threatens the peace of the world, the utmost the Council can do is

"To recommend to the several governments concerned what effective military or naval forces the members of the League shall severally contribute to the armaments of forces to be used to protect the covenants of the League."

Much heated objection has been directed against Article X, which reads as follows:

"The members of the League undertake to respect and preserve as against external aggression the territorial integrity and existing political independence of all members of the League. In case of any such aggression or in case of any threat or danger of such aggression, the Council shall advise upon the means by which this obligation shall be fulfilled.'

Again, it is left to the determination of each State what force it shall employ to enforce this provision. As a matter of fact, this article adds little, if anything, to the provisions of Article XI, which declares that "Any war [Pg 175] or threat of war ... is hereby declared a matter of concern to the whole League, and the League shall take any action that may be deemed wise and effectual to safeguard the peace of nations." Any external aggression against the territorial integrity or political independence of a member of the League would amount to a war or threat of war, and would invoke action under Article XI, if not under Article X. But the guaranty of Article X [Pg 176] is very necessary as affording a moral protection to the new nations brought into being through the peace Conference. The United States of America, whose President formulated the principles of peace to which these Nations owe their existence, can not afford to shirk responsibility for their protection. The Covenant abolishes the evil of secret treaties between the nations composing the League, while preserving the effectiveness of existing treaties of arbitration.

William Howard Taft

Copyright Harris & Ewing

William Howard Taft

An earnest supporter of the President and his administration throughout the war, though of the opposite party.

Click for a larger image.

THE MONROE DOCTRINE

To meet the objection that the Covenant would deprive us of the Monroe Doctrine—a national policy adopted by the United States as its own and maintained for its own protection—Article XXI of the amended Covenant provides that—

"Nothing in this Covenant shall be deemed to affect the validity of international engagements such as treaties of arbitration or regional understandings like the Monroe Doctrine for securing the maintenance of peace."

The phrase "regional understanding," as applied to the Monroe Doctrine, is not a happy one. But the article certainly excludes the Monroe Doctrine from modification or effect by the treaty. It secures from every one of the thirty-two original members and the thirteen other states which shall be invited to join the League, a recognition of the existence of the Monroe Doctrine and an agreement that it is not to be affected by anything contained in the Covenant. Certainly that is not an un-American result to accomplish, and when one reads Dr. Hill's statement that the Covenant "does not embody our traditional American ideals," one wonders in what museum of forgotten lore the learned doctor has found those "traditional ideals" preserved. Dr. Hill's so-called ideals conflict with the expression in this great treaty of the peculiarly American ideal of averting war by providing peaceful methods of settling disputes among nations, with the express recognition by all the other nations of the doctrine that "was proclaimed in 1823 to prevent America from becoming a theater for the intrigues of European absolutism," and with the official commentary of the Delegates of Great Britain which says that—

"At first a principle of American foreign policy, it (Monroe Doctrine) has become an international understanding, and it is not illegitimate for the people of the United States to ask that the Covenant should recognize this fact."

GERMAN COLONIES

One of the most difficult problems presented to the Peace Conference was the disposition of the former colonies of Germany in Asia, Africa and Australasia, and of the communities formerly belonging to the Turkish Empire. It was recognized that the victors in the war shared a common responsibility for the just and wise treatment of these peoples, who were utterly unable to stand alone. The method adopted declared all of them to be wards of the League of Nations and provided that they should be governed by Mandatory Powers willing to undertake the task and appointed by the League under charters framed by the Council. These Powers would be answerable to the League for the right exercise of their powers, and subject to inspection and report. A great deal of impassioned rhetoric has been expended over these provisions, upon the false assumption that thereby the United States was committed to a responsibility for the government of remote regions of the earth. The Covenant commits us to nothing. Our participation in the war has entailed upon us a common responsibility with our Allies for the protection and wise government of these communities. We no more can escape that responsibility with honor than we could after the Spanish War escape responsibility for the Philippine Islands.

But it is for the American Congress to determine the extent of recognition of our duty and the means by which we shall discharge it.

In the case of the Philippine Islands, the United States set for the world a great moral example in the government of colonies, not in its own interest, but for the benefit and exclusively in the interest of the inhabitants of possessions which fell into our hands as a consequence of the war with Spain. The principle thus proclaimed and practiced has been followed in the case of the colonies and territories which the World War has left at the disposition of the Allied and Associated [Pg 177] Nations. This principle, in the words of the Covenant, is "that the well-being and development of such peoples form a sacred trust of civilization." The best method yet devised for giving practicable effect to this principle undoubtedly is,

"That the tutelage of such peoples be intrusted to advanced nations who, by reason of their resources, their experience or their geographical position, can best undertake this responsibility, and who are willing to accept it, and that this tutelage should be exercised by them as mandatories on behalf of the League."

This is the American attitude toward undeveloped peoples. To remove these provisions from the Peace Treaty would be to de-Americanize the Treaty.

MISCELLANEOUS PROVISIONS

The Covenant brings within the cognizance of the League the regulation of international relations affecting (1) efforts to secure and maintain fair and humane conditions of labor for men, women and children—a subject elaborated and provided for in great detail in Part XIII of the Peace Treaty; (2) the execution of international agreements with regard to traffic in women and children, and in opium and other dangerous drugs; (3) the trade in arms and ammunition with the countries in which the control of this traffic is necessary in the common interest; (4) the prevention and control of disease.

The members of the League further agree (1)

"To make provision to secure and maintain freedom of communication and of transit and equitable treatment for the commerce of all members of the League,"

and (2)

"to encourage and promote the establishment and coöperation of duly authorized voluntary national Red Cross organizations having as purposes improvement of health, the prevention of disease and the mitigation of suffering throughout the world."

All these are subjects customarily dealt with in international agreements. These provisions are designed to bring into coördination with the League and make more effective all provisions concerning such matters.

The framers of this great program recognized that it was, necessarily, an experiment, and that experience doubtless would develop defects and suggest needed changes. Provision is therefor made for amendments which should take effect when ratified by the members of the League whose representatives compose the Council, and by a majority of the members whose representatives compose the Assembly. But, preserving the theory that the League is to be an alliance of Sovereign Powers, it also is provided that no member shall be bound against his will by any such amendment. It may dissent, and thereby cease to be a member of the League.

Finally, any member may, at will, after two years' notice, withdraw from the League,

"provided that all its international obligations and all its obligations under this Covenant shall have been fulfilled at the time of its withdrawal."

No jurisdiction is vested in any organ of the League to determine whether or not in any instance this condition has been complied with. It is conceivable that pending some arbitration or inquiry by the Council, the application of a commercial boycott or other disciplinary process for violation of a provision of the Covenant, the offending power should seek to escape the jurisdiction of the League, by exercising the right of withdrawal. The period of notice probably is too long to allow of this, and yet the slow process of international procedure might require more than two years to reach a conclusion. Does it not seem fair that before a nation should withdraw from this great association it should be required to fulfil its obligations under the treaty?

PROBABILITY OF WAR MINIMIZED

The treaty of peace with Germany deals with many questions of vital import to European nations, but with which America has but little direct concern. Part I, the Covenant, is the section which touches us most nearly. It is the part which embodies the idealism of our people, and through which we are enabled to discharge the responsibilities we assumed by formulating for friend and foe the conditions of peace. Human nature changes but little from century to century, but the highest and purest aspirations of the human heart find expression from age to age with greater force and with wider acceptance. Doubtless, in the future, the passions of man [Pg 178] will again flare up in bloody wars, but the creation of an adequate machinery for discussion and cooling reflection, must tend to minimize the probabilities of war. The spirits of millions of slaughtered youth who sleep in the fields of France and Flanders call out to us, for whom they died, to consecrate their sacrifice by a new and greater endeavor to safeguard the future peace of the world.

The conferees of Paris have formulated a measure for this purpose. It is not perfect. Experience may develop even greater imperfections than study has revealed. But it contains much of hope and promise. It is practical; it is subject to amendment. It commits no one irrevocably to its provisions. It is instinct with American idealism. It is in accord with the best American traditions. Washington, Lincoln, McKinley, and Roosevelt—each has contributed to the establishment of some of its main provisions. No partisan, no provincial prejudice should be permitted to influence or control the judgment of our people concerning it.


When Peace Came to Verdun

It was 10:45 on the morning of November 11th in Verdun. The Germans had thrown a barrage over the little French city, now immortal; and shells were falling, plowing up the earth that had been turned over and over, ground to powder by four years of artillery fire. Would the Germans stop at 11 o'clock? Reason said "yes." Everyone in Verdun knew that at that hour the armistice would go into effect.

It was 10:50. The guns continued bellowing. A feeling deeper than reason came over those in the city that the Germans would not stop. Verdun had lived through four years of fire, smoke, thunder, blood, and ruin. Sometimes for days there would be a lull, but the guns were never quiet long. The Germans never forgave the "they-shall-not-pass" spirit that had hurled them back just as the prize—this military key to the West front—seemed within their grasp.

It was 10:55. Men were crouching between buildings. They kept coming—doughboys, Morrocans, English soldiers, more doughboys. Even the general and his aids began to look anxious.

"Then," says B. C. Edworthy in Association Men, "as suddenly as though God himself had dropped a wet blanket over the crackling flames of hell and at one blow had extinguished them all, the firing ceased. There was an instant's pause, in which it seemed as though the world had come to an end. Then from the forty bells, high in the still untouched towers of that old cathedral at Verdun, which had witnessed the most heroic sacrifice of life and love save that on Calvary alone, pealed forth as did the voices over the Bethlehem hills those silver tones that once again were saying, 'Peace on Earth.' The men were joyously and deliriously leaping about, yelling and shouting and singing and kissing one another. Slowly those heavy cathedral doors opened and in rushed about six hundred of the Allied soldiers."

There were Mohammedans, Catholics, Jews, and Protestants. They pressed forward into the choir space, the roofs above them open to heaven. A simple impromptu service of thanksgiving followed. An English soldier led the Doxology, and all who knew the hymn joined in. Six hundred worshipers knelt, each soldier praying according to his faith. Mohammedans bowed to the stones, Catholics crossed themselves, Jews and Protestants with moving lips bent their heads or lifted their faces to heaven. Dr. Oscar E. Maurer, of New Haven, Conn., led the Lord's Prayer. As the strange congregation rose, the Americans began "My Country 'tis of Thee," the English joining in with "God Save the King."

There could be only one closing hymn in that battered shell of Verdun Cathedral. Now, as though it had been arranged, the French pushed forward and began the "Marseillaise." It was the singing of the soul of a nation, a soul redeemed:

Allons, enfants de la patrie
Le jour de gloire est arrivé

Peace had come to Verdun, deliverance to France, safety to the world. With the last words of the national hymn of France, the service was finished, and the worshipers turned and reverently left the building.

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THE TREATY OF VERSAILLES AND THE COVENANT OF THE LEAGUE OF NATIONS

(Signed June 28, 1919, Rejected by the United States, November 19, 1919 and Again Rejected, with the Lodge Reservations, March 19, 1920)

The preamble contains the names of the plenipotentiaries that took part in the negotiations and signed the treaty, with a few exceptions: Dr. Hermann Müller and Dr. Johannes Bell were substituted for Brockdorff-Rantzau and his associates, China's delegates refused to sign on account of the Shantung concessions to Japan, and Italy was represented by a new commission headed by Signor Tittoni, the new Foreign Minister.

The text here reproduced is the revised edition of the treaty distributed in French and English among the delegates at the time of the signing. The copy actually signed is deposited in the archives of the Republic of France in Paris.

PREAMBLE

The United States of America, the British Empire, France, Italy, and Japan, these powers being described in the present treaty as the principal Allied and Associated Powers; Belgium, Bolivia, Brazil, China, Cuba, Ecuador, Greece, Guatemala, Haiti, the Hedjaz, Honduras, Liberia, Nicaragua, Panama, Peru, Poland, Portugal, Rumania, the Serb-Croat-Slovene State; Siam, Czechoslovakia, and Uruguay, these powers constituting with the principal powers mentioned above the Allied and Associated Powers of the one part; and Germany, of the other part: Bearing in mind that on the request of the Imperial German Government an armistice was granted on Nov. 11, 1918, to Germany by the principal Allied and Associated Powers in order that a treaty of peace might be concluded with her, and the Allied and Associated Powers being equally desirous that the war in which they were successively involved directly or indirectly, and which originated in the declaration of war by Austria-Hungary on July 28, 1914, against Serbia; the declaration of war by Germany against Russia on Aug. 1, 1914, and against France on Aug. 3, 1914, and in the invasion of Belgium, should be replaced by a firm, just, and durable peace;

For this purpose the high contracting parties represented as follows:

THE PRESIDENT OF THE UNITED STATES OF AMERICA, by:

The Honorable Woodrow Wilson, President of the United States, acting in his own name and by his own proper authority;

The Honorable Robert Lansing, Secretary of State;

The Honorable Henry White, formerly Ambassador Extraordinary and Plenipotentiary of the United States at Rome and Paris;

The Honorable Edward M. House;

General Tasker H. Bliss, Military Representative of the United States on the Supreme War Council;

HIS MAJESTY THE KING OF THE UNITED KINGDOM OF GREAT BRITAIN AND IRELAND AND OF THE BRITISH DOMINIONS BEYOND THE SEAS, EMPEROR OF INDIA, by:

The Right Honorable David Lloyd George, M. P., First Lord of his Treasury and Prime Minister;

The Right Honorable Andrew Bonar Law, M. P., his Lord Privy Seal;

The Right Honorable Viscount Milner, G. C. B., G. C. M. G., his Secretary of State for the Colonies;

The Right Honorable Arthur James Balfour, O. M., M. P., his Secretary of State for Foreign Affairs;

The Right Honorable George Nicoll Barnes, M. P., Minister without portfolio; and

FOR THE DOMINION OF CANADA, by:

The Right Honorable Sir George Eulas Foster, G. C. M. G., Minister of Trade and Commerce;

The Right Honorable Charles Joseph Doherty, Minister of Justice;

FOR THE COMMONWEALTH OF AUSTRALIA, by:

The Right Honorable William Morris Hughes, Attorney General and Prime Minister;

The Right Honorable Sir Joseph Cook, G. C. M. G., Minister for the Navy;

FOR THE DOMINION OF SOUTH AFRICA, by:

General the Right Honorable Louis Botha, Prime Minister;

Lieut. General the Right Honorable Jan Christiaan Smuts, K. C., Minister of Defense;

FOR THE DOMINION OF NEW ZEALAND, by:

The Right Honorable William Ferguson Massey, Minister of Labor and Prime Minister;

FOR INDIA, by:

The Right Honorable Edwin Samuel Montagu, M. P., his Secretary of State for India;

Major General his Highness Maharaja Sir Ganga Singh Bahadur, Maharaja of Bikanir, G. C. S. I., G. C. I. E., G. C. V. O., K. C. B., A. D. C.;

THE PRESIDENT OF THE FRENCH REPUBLIC, by:

Mr. Georges Clemenceau, President of the Council, Minister of War;

Mr. Pichon, Minister of Foreign Affairs;

Mr. L. L. Klotz, Minister of Finance;

Mr. André Tardieu, Commissary General for Franco-American Military Affairs;

Mr. Jules Cambon, Ambassador of France;

HIS MAJESTY THE KING OF ITALY, [27]by:

Mr. V. E. Orlando, President of the Council of Ministers;

[27] On account of the overthrow of the Orlando Ministry and the formation of the Nitti Ministry, the treaty was signed by a delegation headed by Signor Tittoni, the New Foreign Minister.

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Baron S. Sonnino, Minister of Foreign Affairs;

Mr. S. Crespi, Deputy, Minister of Supplies;

Marquis G. Imperiali, Senator of the Kingdom, Ambassador of his Majesty the King of Italy at London;

Mr. S. Barzilai, Deputy, formerly Minister;

HIS MAJESTY THE EMPEROR OF JAPAN, by:

Marquis Saionji, formerly President of the Council of Ministers;

Baron Makino, formerly Minister of Foreign Affairs, member of the Diplomatic Council;

Viscount Chinda, Ambassador Extraordinary and Plenipotentiary of H. M. the Emperor of Japan at London;

Mr. K. Matsui, Ambassador Extraordinary and Plenipotentiary of H. M. the Emperor of Japan at Paris;

Mr. H. Ijuin, Ambassador Extraordinary and Plenipotentiary of H. M. the Emperor of Japan at Rome;

HIS MAJESTY THE KING OF THE BELGIANS, by:

Mr. Hymans, Minister of Foreign Affairs, Minister of State;

Mr. Van Den Heuvel, Envoy Extraordinary and Minister Plenipotentiary of H. M. the King of the Belgians, Minister of State;

Mr. Vandervelde, Minister of Justice, Minister of State;

THE PRESIDENT OF THE REPUBLIC OF BOLIVIA, by:

Mr. Ismael Montes, Envoy Extraordinary and Minister Plenipotentiary of Bolivia at Paris;

THE PRESIDENT OF THE REPUBLIC OF BRAZIL, by:

Mr. Epitacio Pessoa, formerly Minister of State, formerly member of the Supreme Court of Justice, Federal Senator;

Mr. Pandiá Calogeras, Deputy, formerly Minister of Finance;

Mr. Raul Ferdnandes;

THE PRESIDENT OF THE CHINESE REPUBLIC, [28]by;

Mr. Lou Tseng-Tsiang, Minister of Foreign Affairs;

Mr. Chengting Thomas Wang, formerly Minister of Agriculture and Commerce;

[28] Refused to sign on account of Shantung concessions to Japan.

THE PRESIDENT OF THE CUBAN REPUBLIC, by:

Mr. Antonio Sanchez de Bustamante, Dean of The Faculty of Law in the University of Havana, President of the Cuban Society of International Law;

THE PRESIDENT OF THE REPUBLIC OF ECUADOR, by:

Mr. Enrique Dorn y de Alsua, Envoy Extraordinary and Minister Plenipotentiary of Ecuador at Paris;

HIS MAJESTY THE KING OF THE HELLENES, by:

Mr. Eleftherios Venizelos, President of the Council of Ministers;

Mr. Nicolas Politis, Minister of Foreign Affairs;

THE PRESIDENT OF THE REPUBLIC OF GUATEMALA, by:

Mr. Joaquin Mendez, formerly Minister of State for Public Works and Public Instruction, Envoy Extraordinary and Minister Plenipotentiary of Guatemala at Washington, Envoy Extraordinary and Minister Plenipotentiary on Special Mission at Paris;

THE PRESIDENT OF THE REPUBLIC OF HAITI, by:

Mr. Tertullien Guilbaud, Envoy Extraordinary and Minister Plenipotentiary of Haiti at Paris;

HIS MAJESTY THE KING OF THE HEDJAZ, by:

Mr. Rustem Haidar;

Mr. Abdul Hadi Aouni;

THE PRESIDENT OF THE REPUBLIC OF HONDURAS, by:

Dr. Policarpe Bonilla, on special mission to Washington, formerly President of the Republic of Honduras, Envoy Extraordinary and Minister Plenipotentiary;

THE PRESIDENT OF THE REPUBLIC OF LIBERIA, by:

The Honorable C. D. B. King, Secretary of State;

THE PRESIDENT OF THE REPUBLIC OF NICARAGUA, by:

Mr. Salvador Chamorro, President of the Chamber of Deputies;

THE PRESIDENT OF THE REPUBLIC OF PANAMA, by:

Mr. Antonio Burgos, Envoy Extraordinary and Minister Plenipotentiary of Panama at Madrid;

THE PRESIDENT OF THE REPUBLIC OF PERU, by:

Mr. Carlos G. Candamo, Envoy Extraordinary and Minister Plenipotentiary of Peru at Paris;

THE PRESIDENT OF THE POLISH REPUBLIC, by:

Mr. Roman Dmowski, President of the Polish National Committee;

Mr. Ignace Paderewski, President of the Council of Ministers, Minister of Foreign Affairs;

THE PRESIDENT OF THE PORTUGESE REPUBLIC, by:

Dr. Affonso Costa, formerly President of the Council of Ministers;

Mr. Augusto Soares, formerly Minister of Foreign Affairs;

HIS MAJESTY THE KING OF RUMANIA, by:

Mr. Jean J. C. Bratiano, President of the Council of Ministers, Minister of Foreign Affairs;

General Constantin Coanda, Corps Commander, A. D. C. to the King, formerly President of the Council of Ministers;

HIS MAJESTY THE KING OF THE SERBS, THE CROATS, AND THE SLOVENES, by:

Mr. N. P. Pachitch, formerly President of the Council of Ministers;

Mr. Ante Trumbic, Minister of Foreign Affairs; Mr. Milenko R. Vesnitch, Envoy Extraordinary and Minister Plenipotentiary of H. M. the King of the Serbs, the Croats, and the Slovenes at Paris;

HIS MAJESTY THE KING OF SIAM, by:

Prince Charoon, Envoy Extraordinary and Minister Plenipotentiary of H. M. the King of Siam at Paris;

Prince Traidos Prabandhu, Under Secretary of State for Foreign Affairs;

THE PRESIDENT OF THE CZECHO-SLOVAK REPUBLIC, by:

Mr. Charles Kramar, President of the Council of Ministers;

Mr. Edouard Benes, Minister of Foreign Affairs;

THE PRESIDENT OF THE REPUBLIC OF URUGUAY, by:

Mr. Juan Antonio Buero, Minister of Industry, formerly Minister of Foreign Affairs;

[Pg 181]

Woodrow Wilson

Woodrow Wilson, President of the United States On January 8, 1918, President Wilson outlined the fourteen points on the basis of which the Allies should make peace.

Click for a larger image.

[Pg 182]

GERMANY, [29]by;

Count Brockdorff-Rantzau, Minister for Foreign Affairs of the Empire;

[29] Treaty Signed by Dr. Hermann Müller, Minister for Foreign Affairs of the Empire, and Dr. Johannes Bell, Minister of the Empire.

Dr. Landsberg, Minister of Justice of the Empire;

Mr. Giesberts, Minister of Posts of the Empire;

Oberbürgermeister Leinert, President of the Prussian National Assembly;

Dr. Schücking;

Dr. Karl Melchior; Acting in the name of the German Empire and of each and every component State.

WHO having communicated their full powers found in good and due form HAVE AGREED AS FOLLOWS:

From the coming into force of the present treaty the state of war will terminate. From that moment and subject to the provisions of this treaty official relations with Germany and with any of the German States will be resumed by the Allied and Associated Powers.


PART I
The Covenant of the League of Nations

The high contracting parties, in order to promote international coöperation and to achieve international peace and security by the acceptance of obligations not to resort to war, by the prescription of open, just, and honorable relations between nations, by the firm establishment of the understandings of international law as the actual rule of conduct among Governments, and by the maintenance of justice and a scrupulous respect for all treaty obligations in the dealings of organized peoples with one another, agree to this covenant of the League of Nations.

ARTICLE 1.—The original members of the League of Nations shall be those of the signatories which are named in the annex to this covenant and also such of those other States named in the annex as shall accede without reservation to this covenant. Such accession shall be effected by a declaration deposited with the secretariat within two months of the coming into force of the covenant. Notice thereof shall be sent to all other members of the League.

Any fully self-governing State, dominion, or colony not named in the annex may become a member of the League if its admission is agreed to by two-thirds of the assembly, provided that it shall give effective guarantees of its sincere intention to observe its international obligations, and shall accept such regulations as may be prescribed by the League in regard to its military, naval and air forces and armaments.

Any member of the League may, after two years' notice of its intention so to do, withdraw from the League, provided that all its international obligations and all its obligations under this covenant shall have been fulfilled at the time of its withdrawal.

ARTICLE 2.—The action of the League under this covenant shall be effected through the instrumentality of an assembly and of a council, with a permanent secretariat.

ARTICLE 3.—The assembly shall consist of representatives of the members of the League.

The assembly shall meet at stated intervals and from time to time as occasion may require at the seat of the League or at such other place as may be decided upon.

The assembly may deal at its meetings with any matter within the sphere of action of the League or affecting the peace of the world.

At meetings of the assembly each member of the League shall have one vote, and may have not more than three representatives.

ARTICLE 4.—The council shall consist of representatives of the principal Allied and Associated Powers, together with representatives of four other members of the League. These four members of the League shall be selected by the assembly from time to time in its discretion. Until the appointment of the representatives of the four members of the League first selected by the assembly, representatives of Belgium, Brazil, Spain, and Greece shall be members of the council.

With the approval of the majority of the assembly, the council may name additional members of the League whose representatives shall always be members of the council; the council with like approval may increase the number of members of the League to be selected by the assembly for representation on the council.

The council shall meet from time to time as occasion may require, and at least once a year, at the seat of the League, or at such other place as may be decided upon.

The council may deal at its meetings with any matter within the sphere of action of the League or affecting the peace of the world.

Any member of the League not represented on the council shall be invited to send a representative to sit as a member at any meeting of the council during the consideration of matters specially affecting the interests of that member of the League.

At meetings of the council, each member of the League represented on the council shall have one vote, and may have not more than one representative.

ARTICLE 5.—Except where otherwise expressly provided in this covenant or by the terms of the present treaty, decisions at any meeting of the assembly or of the council shall require the agreement of all the members of the League represented at the meeting.

All matters of procedure at meetings of the assembly or of the council, including the appointment of committees to investigate particular matters, shall be regulated by the assembly or by the council and may be decided by a majority of the members of the League represented at the meeting.

The first meeting of the assembly and the first meeting of the council shall be summoned by the President of the United States of America.

ARTICLE 6.—The permanent secretariat shall be established at the seat of the League. The secretariat shall comprise a Secretary General and such secretaries and staff as may be required.

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The first Secretary General shall be the person named in the annex; thereafter the Secretary General shall be appointed by the council with the approval of the majority of the assembly.

The secretaries and staff of the secretariat shall be appointed by the Secretary General with the approval of the council.

The Secretary General shall act in that capacity at all meetings of the assembly and of the council.

The expenses of the secretariat shall be borne by the members of the League in accordance with the apportionment of the expenses of the International Bureau of the Universal Postal Union.

ARTICLE 7.—The seat of the League is established at Geneva.

The council may at any time decide that the seat of the League shall be established elsewhere.

All positions under or in connection with the League, including the secretariat, shall be open equally to men and women.

Representatives of the members of the League and officials of the League when engaged on the business of the League shall enjoy diplomatic privileges and immunities.

The buildings and other property occupied by the League or its officials or by representatives attending its meetings shall be inviolable.

ARTICLE 8.—The members of the League recognize that the maintenance of peace requires the reduction of national armaments to the lowest point consistent with national safety and the enforcement by common action of international obligations.

The council, taking account of the geographical situation and circumstances of each State, shall formulate plans for such reduction for the consideration and action of several Governments.

Such plans shall be subject to reconsideration and revision at least every ten years.

After these plans shall have been adopted by the several Governments, the limits of armaments therein fixed shall not be exceeded without the concurrence of the council.

The members of the League agree that the manufacture by private enterprise of munitions and implements of war is open to grave objections. The council shall advise how the evil effects attendant upon such manufacture can be prevented, due regard being had to the necessities of those members of the League which are not able to manufacture the munitions and implements of war necessary for their safety.

The members of the League undertake to interchange full and frank information as to the scale of their armaments, their military and naval programs and the condition of such of their industries as are adaptable to warlike purposes.

ARTICLE 9.—A permanent commission shall be constituted to advise the council on the execution of the provisions of Articles 1 and 8 and on military and naval questions generally.

ARTICLE 10.—The members of the League undertake to respect and preserve as against external aggression the territorial integrity and existing political independence of all members of the League. In case of any such aggression or in case of any threat or danger of such aggression the council shall advise upon the means by which this obligation shall be fulfilled.

ARTICLE 11.—Any war or threat of war, whether immediately affecting any of the members of the League or not, is hereby declared a matter of concern to the whole League, and the League shall take any action that may be deemed wise and effectual to safeguard the peace of nations. In case any such emergency should arise the Secretary General shall on the request of any member of the League forthwith summon a meeting of the council.

It is also declared to be the friendly right of each member of the League to bring to the attention of the assembly or of the council any circumstance whatever affecting international relations which threatens to disturb international peace or the good understanding between nations upon which peace depends.

ARTICLE 12.—The members of the League agree that if there should arise between them any dispute likely to lead to a rupture, they will submit the matter either to arbitration or to inquiry by the council, and they agree in no case to resort to war until three months after the award by the arbitrators or the report by the council.

In any case under this article the award of the arbitrators shall be made within a reasonable time, and the report of the council shall be made within six months after the submission of the dispute.

ARTICLE 13.—The members of the League agree that whenever any dispute shall arise between them which they recognize to be suitable for submission to arbitration and which cannot be satisfactorily settled by diplomacy, they will submit the whole subject-matter to arbitration.

Disputes as to the interpretation of a treaty, as to any question of international law, as to the existence of any fact which if established would constitute a breach of any international obligation, or as to the extent and nature of the reparation to be made for any such breach, are declared to be among those which are generally suitable for submission to arbitration.

For the consideration of any such dispute the Court of Arbitration to which the case is referred shall be the court agreed on by the parties to the dispute or stipulated in any convention existing between them.

The members of the League agree that they will carry out in full good faith any award that may be rendered, and that they will not resort to war against a member of the League which complies therewith. In the event of any failure to carry out such an award, the council shall propose what steps should be taken to give effect thereto.

ARTICLE 14.—The council shall formulate and submit to the members of the League for adoption plans for the establishment of a Permanent Court of International Justice.

The court shall be competent to hear and determine any dispute of an international character which the parties thereto submit to it. The court may also give an advisory opinion upon any dispute or question referred to it by the council or by the assembly.

ARTICLE 15.—If there should arise between members of the League any dispute likely to lead to a rupture, which is not submitted to arbitration in accordance with Article 13, the members of the League agree that they will submit the matter to the council. Any party to the dispute may effect such submission by giving notice of the existence of the dispute to the Secretary General, who will make all necessary arrangements for a full investigation and consideration thereof.

For this purpose the parties to the dispute will communicate to the Secretary General, as promptly as possible, statements of their case with all the relevant facts and papers, and the [Pg 184] council may forthwith direct the publication thereof.

The council shall endeavor to effect a settlement of the dispute, and if such efforts are successful, a statement shall be made public giving such facts and explanations regarding the dispute and the terms of settlement thereof as the council may deem appropriate.

If the dispute is not thus settled, the council either unanimously or by a majority vote shall make and publish a report containing a statement of the facts of the dispute and the recommendations which are deemed just and proper in regard thereto.

Any member of the League represented on the council may make public a statement of the facts of the dispute and of its conclusions regarding the same.

If a report by the council is unanimously agreed to by the members thereof other than the representatives of one or more of the parties to the dispute, the members of the League agree that they will not go to war with any party to the dispute which complies with the recommendations of the report.

If the council fails to reach a report which is unanimously agreed to by the members thereof, other than the representatives of one or more of the parties to the dispute, the members of the League reserve to themselves the right to take such action as they shall consider necessary for the maintenance of right and justice.

If the dispute between the parties is claimed by one of them, and is found by the council to arise out of a matter which by international law is solely within the domestic jurisdiction of that party, the council shall so report, and shall make no recommendation as to its settlement.

The council may in any case under this article refer the dispute to the assembly. The dispute shall be so referred at the request of either party to the dispute, provided that such request be made within fourteen days after the submission of the dispute to the council.

In any case referred to the assembly all the provisions of this article and of Article 12 relating to the action and powers of the council shall apply to the action and powers of the assembly, provided that a report made by the assembly, if concurred in by the representatives of those members of the League represented on the council and of a majority of the other members of the League, exclusive in each case of the representatives of the parties to the dispute, shall have the same force as a report by the council concurred in by all the members thereof other than the representatives of one or more of the parties to the dispute.

ARTICLE 16.—Should any member of the League resort to war in disregard of its covenants under Articles 12, 13, or 15, it shall ipso facto be deemed to have committed an act of war against all other members of the League, which hereby undertake immediately to subject it to the severance of all trade or financial relations, the prohibition of all intercourse between their nationals and the nationals of the covenant-breaking State and the prevention of all financial, commercial, or personal intercourse between the nationals of the covenant-breaking State and the nationals of any other State, whether a member of the League or not.

It shall be the duty of the council in such case to recommend to the several Governments concerned what effective military, naval or air force the members of the League shall severally contribute to the armed forces to be used to protect the covenants of the League.

The members of the League agree, further, that they will mutually support one another in the financial and economic measures which are taken under this article, in order to minimize the loss and inconvenience resulting from the above measures, and that they will mutually support one another in resisting any special measures aimed at one of their number by the covenant-breaking State, and that they will take the necessary steps to afford passage through their territory to the forces of any of the members of the League which are coöperating to protect the covenants of the League.

Any member of the League which has violated any covenant of the League may be declared to be no longer a member of the League by a vote of the council concurred in by the representatives of all the other members of the League represented thereon.

ARTICLE 17.—In the event of a dispute between a member of the League and a State which is not a mmber membermember of the League, or between States not members of the League, the State or States not members of the League shall be invited to accept the obligations of membership in the League for the purposes of such dispute, upon such conditions as the council may deem just. If such invitation is accepted, the provisions of Articles 12 to 16 inclusive shall be applied with such modifications as may be deemed necessary by the council.

Upon such invitation being given the council shall immediately institute an inquiry into the circumstances of the dispute and recommend such action as may seem best and most effectual in the circumstances.

If a State so invited shall refuse to accept the obligations of membership in the League for the purposes of such dispute, and shall resort to war against a member of the League, the provisions of Article 16 shall be applicable as against the State taking such action.

If both parties to the dispute when so invited refuse to accept the obligations of membership in the League for the purposes of such dispute, the council may take such measures and make such recommendations as will prevent hostilities and will result in the settlement of the dispute.

ARTICLE 18.—Every treaty or international engagement entered into hereafter by any member of the League shall be forthwith registered with the secretariat and shall as soon as possible be published by it. No such treaty or international engagement shall be binding until so registered.

ARTICLE 19.—The assembly may from time to time advise the reconsideration by members of the League of treaties which have become inapplicable and the consideration of international conditions whose continuance might endanger the peace of the world.

ARTICLE 20.—The members of the League severally agree that this covenant is accepted as abrogating all obligations or understandings inter se which are inconsistent with the terms thereof, and solemnly undertake that they will not hereafter enter into any engagements inconsistent with the terms thereof.

In case any member of the League shall, before becoming a member of the League, have undertaken any obligations inconsistent with the terms of this covenant, it shall be the duty of such member to take immediate steps to procure its release from such obligations.

ARTICLE 21.—Nothing in this covenant shall be deemed to affect the validity of international engagements, such as treaties of arbitration or [Pg 185] regional understandings like the Monroe Doctrine, for securing the maintenance of peace.

ARTICLE 22.—To those colonies and territories which as a consequence of the late war have ceased to be under the sovereignty of the States which formerly governed them and which are inhabited by peoples not yet able to stand by themselves under the strenuous conditions of the modern world, there should be applied the principle that the well-being and development of such peoples form a sacred trust of civilization and that securities for the performance of this trust should be embodied in this covenant.

The best method of giving practical effect to this principle is that the tutelage of such peoples should be intrusted to advanced nations who by reason of their resources, their experience or their geographical position can best undertake this responsibility, and who are willing to accept it, and that this tutelage should be exercised by them as mandatories on behalf of the League.

The character of the mandate must differ according to the stage of development of the people, the geographical situation of the territory, its economic conditions and other similar circumstances.

Certain communities formerly belonging to the Turkish Empire have reached a stage of development where their existence as independent nations can be provisionally recognized subject to rendering of administrative advice and assistance by a mandatory until such time as they are able to stand alone. The wishes of these communities must be a principal consideration in the selection of the mandatory.

Other peoples, especially those of Central Africa, are at such a stage that the mandatory must be responsible for the administration of the territory under conditions which will guarantee freedom of conscience and religion, subject only to the maintenance of public order and morals, the prohibition of abuses such as the slave trade, the arms traffic and the liquor traffic, and the prevention of the establishment of fortifications or military and naval bases and of military training of the natives for other than police purposes and the defense of territory, and will also secure equal opportunities for the trade and commerce of other members of the League.

There are territories such as Southwest Africa and certain of the South Pacific Islands, which, owing to the sparseness of their population or their small size, or their remoteness from the centers of civilization; or their geographical contiguity to the territory of the mandatory, and other circumstances, can be best administered under the laws of the mandatory as integral portions of its territory, subject to the safeguards above mentioned in the interests of the indigenous population.

In every case of mandate the mandatory shall render to the council an annual report in reference to the territory committed to its charge.

The degree of authority, control, or administration to be exercised by the mandatory shall, if not previously agreed upon by the members of the League, be explicitly defined in each case by the council.

A permanent commission shall be constituted to receive and examine the annual reports of the mandatories and to advise the council on all matters relating to the observance of the mandates.

ARTICLE 23.—Subject to and in accordance with the provisions of international conventions existing or hereafter to be agreed upon, the members of the League:

  1. will endeavor to secure and maintain fair and humane conditions of labor for men, women and children, both in their own countries and in all countries to which their commercial and industrial relations extend, and for that purpose will establish and maintain the necessary international organizations;
  2. undertake to secure just treatment of the native inhabitants of territories under their control;
  3. will intrust the League with the general supervision over the execution of agreements with regard to the traffic in women and children and the traffic in opium and other dangerous drugs;
  4. will intrust the League with the general supervision of the trade in arms and ammunition with the countries in which the control of this traffic is necessary in the common interest;
  5. will make provision to secure and maintain freedom of communications and of transit and equitable treatment for the commerce of all members of the League. In this connection the special necessities of the regions devastated during the war of 1914—1918 shall be borne in mind;
  6. will endeavor to take steps in matters of international concern for the prevention and control of disease.

ARTICLE 24.—There shall be placed under the direction of the League all international bureaus already established by general treaties if the parties to such treaties consent. All such international bureaus and all commissions for the regulation of matters of international interest hereafter constituted shall be placed under the direction of the League.

In all matters of international interest which are regulated by general conventions but which are not placed under the control of international bureaus or commissions, the secretariat of the League shall, subject to the consent of the council and if desired by the parties, collect and distribute all relevant information and shall render any other assistance which may be necessary or desirable.

The council may include as part of the expenses of the secretariat the expenses of any bureau or commission which is placed under the direction of the League.

ARTICLE 25.—The members of the League agree to encourage and promote the establishment and co-operation of duly authorized voluntary national Red Cross organizations having as purposes the improvement of health, the prevention of disease, and the mitigation of suffering throughout the world.

ARTICLE 26.—Amendments to this covenant will take effect when ratified by the members of the League whose representatives compose the council and by a majority of the members of the League whose representatives compose the assembly.

No such amendment shall bind any member of the League which signifies its dissent therefrom, but in that case it shall cease to be a member of the League.

[Pg 186]

ANNEX

I. Original members of the League of Nations signatories of the treaty of peace.

States invited to accede to the covenant.

[30]Refused to sign.

II. First Secretary General of the League of Nations. The Honorable Sir James Eric Drummond, K. C. M. G., C. B.


PART II.
Boundaries of Germany

ARTICLE 27.—The boundaries of Germany will be determined as follows:

  1. With Belgium: From the point common to the three frontiers of Belgium, Holland, and Germany, and in a southerly direction; the northeastern boundary of the former territory of neutral Moresnet, then the eastern boundary of the Kreis of Eupen, then the frontier between Belgium and the Kreis of Montjoie, then the northeastern and eastern boundary of the Kreis of Malmédy to its junction with the frontier of Luxemburg.

  2. With Luxemburg: The frontier of the 3d August, 1914, to its junction with the frontier of France of the 18th July, 1870.

  3. With France: The frontier of the 18th July, 1870, from Luxemburg to Switzerland, with the reservations made in Article 48 of Section 4 (Sarre Basin) of Part III.

  4. With Switzerland: The present frontier.

  5. With Austria: The frontier of the 3d August, 1914, from Switzerland to Czechoslovakia is hereinafter defined.

  6. With Czechoslovakia: The frontier of the 3d August, 1914, between Germany and Austria from its junction with the old administrative boundary separating Bohemia and the Province of Upper Austria to the point north of the salient of the old Province of Austrian Silesia situated at about eight kilometers east of Neustadt.

  7. With Poland: From the point defined above to a point to be fixed on the ground about 2 kilometers east of Lorzendorf: the frontier as it will be fixed in accordance with Article 88 of the present treaty; thence in a northerly direction to the point where the administrative boundary of Posnania crosses the river Bartsch; a line to be fixed on the ground leaving the following places in Poland: Skorischau, Reichthal, Trembatschau, Kunzendorf, Schleise, Gross Kosel, Schreibersdorf, Rippin, Fürstlich-Niefken, Pawelau, Tscheschen, Konradau, Johannisdorf, Modzenowe, Bogdaj, and in Germany: Lorzendorf, Kaulwitz, Glausche, Dalbersdorf, Reesewitz, Stradam, Gross Wartenberg Kraschen, Neu Mittelwalde, Domaslawitz, Wodelsdorf, Tscheschen Hammer; thence the boundary of Posnania northwestward to the point where it cuts the Rawitsch-Herrnstadt railway; thence to the point where the administrative boundary of Posnania cuts the Reisen-Tschirnau road: a line to be fixed on the ground passing west of Triebusch and Gabel and east of Saborwitz; thence the administrative boundary of Posnania to its junction with the eastern boundary of the Kreis of Fraustadt;

    Thence in a northwesterly direction to a point to be chosen on the road between the villages of Unruhstadt and Kophitz: a line to be fixed on the ground passing west of Geyersdorf, Brenno, Fehlen, Altkloster, Klebel, and east of Ulbersdorf, Buchwald, Ilgen, Weine, Lupitze, Schwenten; thence in a northerly direction to the northernmost point of Lake Chlop: a line to be fixed on the ground following the median line of the lakes; the town and the station of Bentschen, however, (including the junction of the lines Schwiebus-Bentschen and Züllichau-Bentschen,) remaining in Polish territory;

    Thence in a northeasterly direction to the point of junction of the boundaries of the Kreise of Schwerin, Birnbaum, and Meseritz: a line to be fixed on the ground passing east of Betsche; thence in a northerly direction the boundary separating the Kreise of Schwerin and Birnbaum, then in an easterly direction the northern boundary of Posnania and to the point where it cuts the river Netze; thence upstream to its confluence with the Küddow: the course of the Netze; thence upstream to a point to be chosen about 6 kilometers southeast of Schneidemühl; the course of the Küddow;

    Thence northeastward to the most southern point of the re-entrant of the northern boundary of Posnania about 5 kilometers west of Stahren: a line to be fixed on the ground leaving the Schneidemühl-Konitz railway in this area entirely in German territory; thence the boundary of Posnania northeastward to the point of the salient it makes about 15 kilometers east of Flatow; thence northeastward to the point where the river Kamionka meets the southern boundary of the Kreis of Konitz about 3 kilometers northeast of Grunau: a line to be fixed on the ground leaving the following places to Poland: Jasdrowo, Gr. Lutau, Kl. Lutau and Wittkau, and to Germany: Gr. Butzig, Cziskowo, Battow, Böch, and Grunau;

    Thence in a northerly direction the boundary between the Kreise of Konitz and Schlochau to [Pg 187] the point where this boundary cuts the river Brahe; thence to a point on the boundary of Pomerania 15 kilometers east of Rummelsburg: a line to be fixed on the ground leaving the following localities in Poland: Konarzin, Kelpin, Adl. Briesen, and in Germany: Sampohl, Neuguth, Steinfort, and Gr. Peterkau; then the boundary of Pomerania in an easterly direction to its junction with the boundary between the Kreis of Konitz and Schlochau;

    President and Mrs. Wilson Waving Good Bye

    Copyright Press Illustrating Service

    President and Mrs. Wilson Waving Good Bye

    This picture was taken as they were starting out for their first trip to the Peace Conference.

    Click for a larger image.

    Thence northward the boundary between Pomerania and West Prussia to the point on the river Rheda about 3 kilometers northwest of Gohra, where that river is joined by a tributary from the northwest; thence to a point to be selected in the bend of the Piasnitz River about 1½ kilometers northwest of Warschkau: a line to be fixed on the ground; thence this river downstream, then the median line of Lake Zarnowitz, then the old boundary of West Prussia to the Baltic Sea.

  8. With Denmark: The frontier as it will be fixed in accordance with Articles 109 and 110 of Part III., Section XII., (Schleswig.)

ARTICLE 28.—The boundaries of East Prussia, with the reservations made in Section IX. (East Prussia) of Part III. will be determined as follows:

From a point on the coast of the Baltic Sea about 1½ kilometers north of Pröbbernau Church in a direction of about 159 degrees east from true north: A line to be fixed on the ground for about 2 kilometers, thence in a straight line to the light at the bend of the Elbinger Channel in approximately latitude 54.19½ north, longitude 19.26 east of Greenwich;

Thence to the easternmost mouth of the Nogat River at a bearing of approximately 209 degrees east from true north; [Pg 188] hence up the course of the Nogat River to the point where the latter leaves the Vistula, (Weichsel;)

Thence up the principal channel of navigation of the Vistula, then the southern boundary of the Kreis of Marienwerder, then that of the Kreis of Rosenberg, eastward to the point where it meets the old boundary of East Prussia;

Thence the old boundary between East and West Prussia, then the boundary between the Kreise of Osterode and Neidenburg, then the course of the River Skoppau down stream, then the course of the Neide up stream to a point situated about 5 kilometers west of Bialutten, being the nearest point to the old frontier of Russia, thence in an easterly direction to a point immediately south of the intersection of the road Neidenburg-Mlava with the old frontier of Russia;

A line to be fixed on the ground passing north of Bialutten;

Thence the old frontier of Russia to a point east of Schmalleningken, then the principal channel of navigation of the Niemen (Memel) down stream, then the Skierwieth arm of the delta to the Kurisches Haff;

Thence a straight line to the point where the eastern shore of the Kurische Nehrung meets the administrative boundary about 4 kilometers southwest of Nidden;

Thence this administrative boundary to the western shore of the Kurische Nehrung.

ARTICLE 29.—The boundaries as described above are drawn in red on a one-in-a-million map which is annexed to the present treaty. (Map No. 1.)

In the case of any discrepancies between the text of the treaty and this map or any other map which may be annexed, the text will be final.

ARTICLE 30.—In the case of boundaries which are defined by a waterway, the terms "course" and "channel" used in the present treaty signify: in the case of non-navigable rivers, the median line of the waterway or of its principal arm, and in the case of navigable rivers the median line of the principal channel of navigation. It will rest with the boundary commissions provided by the present treaty to specify in each case whether the frontier line shall follow any changes of the course or channel which may take place or whether it shall be definitely fixed by the position of the course or channel at the time when the present treaty comes into force.


PART III
Political Clauses for Europe

SECTION I.—Belgium

ARTICLE 31.—Germany, recognizing that the treaties of April 19, 1839, which established the status of Belgium before the war, no longer conform to the requirements of the situation, consents to the abrogation of the said treaties and undertakes immediately to recognize and to observe whatever conventions may be entered into by the principal allied and associated powers, or by any of them in concert with the Governments of Belgium and of the Netherlands, to replace the said treaties of 1839. If her formal adhesion should be required to such conventions or to any of their stipulations, Germany undertakes immediately to give it.

ARTICLE 32.—Germany recognizes the full sovereignty of Belgium over the whole of the contested territory of Moresnet, (called Moresnet Neutre.)

ARTICLE 33.—Germany renounces in favor of Belgium all rights and title over the territory of Prussian Moresnet situated on the west of the road from Liége to Aix-la-Chapelle: the road will belong to Belgium where it bounds this territory.

ARTICLE 34.—Germany renounces in favor of Belgium all rights and title over the territory comprising the whole of the Kreise of Eupen and of Malmédy.

During the six months after the coming into force of this treaty, registers will be opened by the Belgian authorities at Eupen and Malmédy in which the inhabitants of the above territory will be entitled to record in writing a desire to see the whole or part of it remain under German sovereignty.

The results of this public expression of opinion will be communicated by the Belgian Government to the League of Nations, and Belgium undertakes to accept the decision of the League.

ARTICLE 35.—A commission of seven persons, five of whom will be appointed by the principal allied and associated powers, one by Germany and one by Belgium, will be set up fifteen days after the coming into force of the present treaty to settle on the spot the new frontier line between Belgium and Germany, taking into account the economic factors and the means of communication.

Decisions will be taken by a majority and will be binding on the parties concerned.

ARTICLE 36.—When the transfer of the sovereignty over the territories referred to above has become definitive, German nationals habitually resident in the territories will definitively acquire Belgian nationality ipso facto, and will lose their German nationality.

Nevertheless German nationals who become resident in the territories after the 1st August, 1914, shall not obtain Belgian nationality without a permit from the Belgian Government.

ARTICLE 37.—Within the two years following the definitive transfer of the sovereignty over the territories assigned to Belgium under the present treaty, German nationals over 18 years of age habitually resident in those territories will be entitled to opt for German nationality.

Option by a husband will cover his wife, and option by parents will cover their children under 18 years of age.

Persons who have exercised the above right to opt must within the ensuing twelve months transfer their place of residence to Germany.

They will be entitled to retain their immovable property in the territories acquired by Belgium. They may carry with them their movable property of every description. No export or import duties may be imposed upon them in connection with the removal of such property. [Pg 189]

ARTICLE 38.—The German Government will hand over without delay to the Belgian Government the archives, registers, plans, title deeds and documents of every kind concerning the civil, military, financial, judicial or other administrations in the territory transferred to Belgian sovereignty.

The German Government will likewise restore to the Belgian Government the archives and documents of every kind carried off during the war by the German authorities from the Belgian public administrations, in particular from the Ministry of Foreign Affairs at Brussels.

ARTICLE 39.—The proportion and nature of the financial liabilities of Germany and of Prussia which Belgium will have to bear on account of the territories ceded to her shall be fixed in conformity with Articles 254 and 256 of Part IX. (financial clauses) of the present treaty.

SECTION II.—Luxemburg

ARTICLE 40.—With regard to the Grand Duchy of Luxemburg, Germany renounces the benefit of all the provisions inserted in her favor in the treaties of Feb. 8, 1842; April 2, 1847; Oct. 20—25, 1865; Aug. 18, 1866; Feb. 21 and May 11, 1867; May 10, 1871; June 11, 1872, and Nov. 11, 1902, and in all conventions consequent upon such treaties.

Germany recognizes that the Grand Duchy of Luxemburg ceased to form part of the German Zollverein as from January 1, 1919; renounces all right to the exploitation of the railways, adheres to the termination of the régime of neutrality of the Grand Duchy, and accepts in advance all international arrangements which may be concluded by the Allied and Associated Powers relating to the Grand Duchy.

ARTICLE 41.—Germany undertakes to grant to the Grand Duchy of Luxemburg, when a demand to that effect is made to her by the principal Allied and Associated Powers, the rights and advantages stipulated in favor of such powers or their nationals in the present treaty, with regard to economic questions, to questions relative to transport and to aerial navigation.

SECTION III.—Left Bank of the Rhine

ARTICLE 42.—Germany is forbidden to maintain or construct any fortifications either on the left bank of the Rhine or on the right bank to the west of a line drawn fifty kilometers to the east of the Rhine.

ARTICLE 43.—In the area defined above the maintenance and the assembly of armed forces either permanently or temporarily, and military maneuvers of any kind, as well as the upkeep of all permanent works for mobilization, are in the same way forbidden.

ARTICLE 44.—In case Germany violates in any manner the provisions of Article 42 and 43 she shall be regarded as committing a hostile act against the powers signatory of the present treaty and as calculated to disturb the peace of the world.

SECTION IV.—Sarre Basin

ARTICLE 45.—As compensation for the destruction of the coal mines in the North of France and as part payment toward the total reparation due from Germany for the damage resulting from the war, Germany cedes to France in full and absolute possession, with exclusive rights of exploitation, unincumbered and free from all debts and charges of any kind, the coal mines situated in the Sarre Basin as defined in Article 48.

ARTICLE 46.—In order to assure the rights and welfare of the population and to guarantee to France complete freedom in working the mines, Germany agrees to the provisions of Chapters 1 and 2 of the annex hereto.

ARTICLE 47.—In order to make in due time permanent provision for the government of the Sarre Basin in accordance with the wishes of the population, France and Germany agree to the provisions of Chapter 3 of the annex hereto.

ARTICLE 48.—The boundaries of the territory of the Sarre Basin, as dealt with in the present stipulations, will be fixed as follows:

On the south and southwest: By the frontier of France as fixed by the present treaty.

On the northwest and north: By a line following the northern administrative boundary of the Kreise of Merzig from the point where it leaves the French frontier to the point where it meets the administrative boundary, separating the commune of Saarhölzbach from the commune of Britten; following this communal boundary southward and reaching the administrative boundary of the Canton of Merzig so as to include in the territory of the Sarre Basin the Canton of Mettlach, with the exception of the commune of Britten: following successively the northern administrative limits of the Cantons of Merzig and Haustadt, which are incorporated in the aforesaid Sarre Basin, then successively the administrative boundaries separating the Kreise of Saare Louis, Ottweiler, and Saint-wendel from the Kreise of Merzig, Treves, (Trier.) and the principality of Birkenfeld as far as a point situated about 500 meters north of the village of Furschweiler, (viz.: The highest point of the Metzelberg.)

On the northeast and east: From the last point defined above to a point about 3½ kilometers east-northeast of Saint Wendel:

A line to be fixed on the ground passing east of Furschweiler, west of Roschberg, east of points 418, 329, (south of Roschberg,) west of Leitersweiler, northeast of point 46'4, and following the line of the crest southward to its junction with the administrative boundary of the Kreis of Kusel;

Thence in a southerly direction the boundary of the Kreis of Kusel, then the boundary of the Kreis of Homburg toward the south-southeast to a point situated about 1,000 meters west of Dunzweiler;

Thence to a point about one kilometer south of Hornbach: a line to be fixed on the ground passing through point 424, (about 1,000 meters southeast of Dunzweiler,) point 363, (Fuchsberg,) point 322, (southwest of Waldmohr,) then east of Jagersburg and Erbach, then encircling Homburg, passing through the points 361, (about 2½ kilometers northeast by east of that town,) 342, (about 2 kilometers southeast of that town,) 347, (Schreinersberg,) 356, 350, (about 1½ kilometers southeast of Schwarzenbach,) then passing east of Einöd, southeast of points 322 and 333, about 2 kilometers east of Webenheim, about 2 kilometers east of Mimbach, passing east of the plateau which is traversed by the road from Mimbach to Böckweiler, (so as to include this road in the territory of the Sarre Basin,) passing immediately north of the junction of the roads from Böckweiler and Altheim, situated about 2 kilometers north of Altheim, then passing south of Ringweilderhof and north of point 322, rejoining the frontier of France at the angle which it makes about 1 kilometer south of Hornbach, (see Map No. 2, scale 1-100,000, annexed to the present treaty.)

A commission composed of five members, one appointed by France, one by Germany, and three by the Council of the League of Nations, which will select nationals of other powers, [Pg 190] will be constituted within fifteen days from the coming into force of the present treaty, to trace on the spot the frontier line described above. In those parts of the preceding line which do not coincide with administration boundaries, the commission will endeavor to keep to the line indicated, while taking into consideration, so far as is possible local economic interests and existing communal boundaries.

The decisions of this commission will be taken by a majority and will be binding on the parties concerned.

ARTICLE 49.—Germany renounces in favor of the League of Nations, in the capacity of trustee, the government of the territory defined above.

At the end of fifteen years from the coming into force of the present treaty the inhabitants of the said territory shall be called upon to indicate the sovereignty under which they desire to be placed.

ARTICLE 50.—The stipulations under which the cession of the mines in the Sarre Basin shall be carried out, together with the measures intended to guarantee the rights and the well-being of the inhabitants and the government of the territory, as well as the conditions in accordance with which the plebiscite hereinbefore provided for is to be made, are laid down in the annex hereto. This annex shall be considered as an integral part of the present treaty, and Germany declares her adherence to it.

ANNEX

In accordance with the provisions of Articles 45 to 50 of the present treaty, the stipulations under which the cession by Germany to France of the mines of the Sarre Basin will be effected, as well as the measures intended to insure respect for the rights and well-being of the population and the government of the territory, and the conditions in which the inhabitants will be called upon to indicate the sovereignty under which they may wish to be placed, have been laid down as follows:

CHAPTER 1.—CESSION AND EXPLOITATION OF MINING PROPERTY

  1. From the date of the coming into force of the present treaty, all the deposits of coal situated within the Sarre Basin, as defined in Article 48 of the said treaty, become the complete and absolute property of the French State.

    The French State will have the right of working or not working the said mines or of transferring to a third party the right of working them, without having to obtain any previous authorization or to fulfill any formalities.

    The French State may always require that the German mining laws and regulations referred to below shall be applied in order to insure the determination of its rights.

  2. The right of ownership of the French State will apply not only to the deposits which are free, and for which concessions have not yet been granted, but also to the deposits for which concessions have already been granted, whoever may be the present proprietors, irrespective of whether they belong to the Prussian State, to the Bavarian State, to other States or bodies, to companies or to individuals, whether they have been worked or not, or whether a right of exploitation distinct from the right of the owners of the surface of the soil has or has not been recognized.

  3. As far as concerns the mines which are being worked, the transfer of the ownership to the French State will apply to all the accessories and subsidiaries of the said mines, in particular to their plant and equipment both on and below the surface, to their extracting machinery, their plants for transforming coal into electric power, coke and by-products, their workshops, means of communication, electric lines, plant for catching and distributing water, land, buildings, such as offices, managers', employes', and workmen's dwellings, schools, hospitals, and dispensaries, their stocks and supplies of every description, their archives and plans, and in general everything which those who own or exploit the mines possess or enjoy for the purpose of exploiting the mines and their accessories and subsidiaries.

    The transfer will apply also to the debts owing for products delivered before the entry into possession by the French State, and after the signature of the present treaty, and to deposits of money made by customers, whose rights will be guaranteed by the French State.

  4. The French State will acquire the property free and clear of all debts and charges. Nevertheless the rights acquired, or in course of being acquired, by the employes of the mines and their accessories and subsidiaries at the date of the coming into force of the present treaty, in connection with pensions for old age or disability, will not be affected. In return, Germany must pay over to the French State a sum representing the actuarial amounts to which the said employes are entitled.

  5. The value of the property thus ceded to the French State will be determined by the Reparation Commission referred to in Article 233 of Part VIII. (Reparations) of the present treaty.

    This value shall be credited to Germany in part payment of the amount due for reparation.

    It will be for Germany to indemnify the proprietors or parties concerned, whoever they may be.

  6. No tariff shall be established on the German railways and canals which may directly or indirectly discriminate to the prejudice of the transport of the personnel or products of the mines and their accessories or subsidiaries, or of the material necessary to their exploitation. Such transport shall enjoy all the rights and privileges which any international railway conventions may guarantee to similar products of French origin.

  7. The equipment and personnel necessary to insure the dispatch and transport of the products of the mines and their accessories and subsidiaries, as well as the carriage of workmen and employes, will be provided by the local railway administration of the basin.

  8. No obstacle shall be placed in the way of such improvements of railways or waterways as the French State may judge necessary to assure the dispatch and transport of the products of the mines and their accessories and subsidiaries, such as double trackage, enlargement of stations, and construction of yards and appurtenances.

    The distribution of expenses will, in the event of disagreement, be submitted to arbitration.

    The French State may also establish any new means of communication, such as roads, electric lines, and telephone connections, which it may consider necessary for the exploitation of the mines.

    It may exploit freely and without any restrictions the means of communication of which it may become the owner, particularly those connecting the mines and their accessories and [Pg 191] subsidiaries with the means of communication situated in French territory.

  9. The French State shall always be entitled to demand the application of the German mining laws and regulations in force on the 11th of November, 1918, excepting provisions adopted exclusively in view of the state of war, with a view to the acquisition of such land as it may judge necessary for the exploitation of the mines and their accessories and subsidiaries.

    The payment for damage caused to immovable property by the working of the said mines and their accessories and subsidiaries shall be made in accordance with the German mining laws and regulations above referred to.

  10. Every person whom the French State may substitute for itself as regards the whole or part of its rights to the exploitation of the mines and their accessories and subsidiaries shall enjoy the benefit of the privileges provided in this annex.

  11. The mines and other immovable property which become the property of the French State may never be made the subject of measures of forfeiture, forced sale, expropriation or requisition, nor of any other measure affecting the right of property.

    The personnel and the plant connected with the exploitation of these mines or their accessories and subsidiaries, as well as the product extracted from the mines or manufactured in their accessories and subsidiaries, may not at any time be made the subject of any measures of requisition.

  12. The exploitation of the mines and their accessories and subsidiaries, which become the property of the French State, will continue, subject to the provisions of Paragraph 23 below, to be subject to the régime established by the German laws and regulations in force on the 11th November, 1918, excepting provisions adopted exclusively in view of the state of war.

    The rights of the workmen shall be similarly maintained, subject to the provisions of the said Paragraph 23, as established on the 11th November, 1918, by the German laws and regulations above referred to. No impediment shall be placed in the way of the introduction or employment in the mines and their accessories and subsidiaries of workmen from without the basin.

    The employes and workmen of French nationality shall have the right to belong to French labor unions.

  13. The amount contributed by the mines and their accessories and subsidiaries, either to the local budget of the territory of the Sarre Basin or to the communal funds, shall be fixed with due regard to the ratio of the value of the mines to the total taxable wealth of the basin.

  14. The French State shall always have the right of establishing and maintaining, as incidental to the mines, primary or technical schools for its employes and their children, and of causing instruction therein to be given in the French language, in accordance with such curriculum and by such teachers as it may select.

    It shall also have the right to establish and maintain hospitals, dispensaries, workmen's houses and gardens, and other charitable and social institutions.

  15. The French State shall enjoy complete liberty with respect to the distribution, dispatch and sale prices of the products of the mines and their accessories and subsidiaries.

    Nevertheless, whatever may be the total product of the mines, the French Government undertakes that the requirements of local consumption for industrial and domestic purposes shall always be satisfied in the proportion existing in 1913 between the amount consumed locally and the total output of the Sarre Basin.

    CHAPTER II.—GOVERNMENT OF THE TERRITORY OF THE SARRE BASIN

  16. The government of the territory of the Sarre Basin shall be intrusted to a commission representing the League of Nations. This commission shall sit in the territory of the Sarre Basin.

  17. The Governing Commission provided for by Paragraph 16 shall consist of five members chosen by the Council of the League of Nations, and will include one citizen of France, one native inhabitant of the Sarre Basin not a citizen of France, and three members belonging to three countries other than France or Germany.

    The members of the Governing Commission shall be appointed for one year and may be reappointed. They can be removed by the Council of the League of Nations, which will provide for their replacement. The members of the Governing Commission will be entitled to a salary which will be fixed by the Council of the League of Nations, and charged on the local revenues.

  18. The Chairman of the Governing Commission shall be appointed for one year from among the members of the commission by the Council of the League of Nations and may be reappointed. The Chairman will act as the executive of the commission.

  19. Within the territory of the Sarre Basin the Governing Commission shall have all the powers of government hitherto belonging to the German Empire, Prussia or Bavaria, including the appointment and dismissal of officials, and the creation of such administrative and representative bodies as it may deem necessary. It shall have full powers to administer and operate the railways, canals, and the different public services.

    Its decisions shall be taken by a majority.

  20. Germany will place at the disposal of the Governing Commission all official documents and archives under the control of Germany, of any German State, or of any local authority, which relate to the territory of the Sarre Basin or to the rights of the inhabitants thereof.

  21. It will be the duty of the Governing Commission to insure, by such means and under such conditions as it may deem suitable, the protection abroad of the interests of the inhabitants of the territory of the Sarre Basin.

  22. The Governing Commission shall have the full right of user of all property, other than mines belonging, both in public and in private domain, to the Imperial German Government, or the Government of any German State, in the territory of the Sarre Basin.

    As regards the railways, an equitable apportionment of rolling stock shall be made by a mixed commission on which the government of the territory of the Sarre Basin and the German railways will be represented.

    Persons, goods, vessels, carriages, wagons, and mails, coming from or going to the Sarre Basin, shall enjoy all the rights and privileges relating to transit and transport which are specified in the provisions of Part XII. (ports, waterways, railways) of the present treaty.

  23. The laws and regulations in force n Nov. 11, 1918, in the territory of the Sarre Basin, (except those enacted in consequence of the state of war,) shall continue to apply. If, [Pg 192] for general reasons or to bring these laws and regulations into accord with the provisions of the present treaty, it is necessary to introduce modifications, these shall be decided on, and put into effect by the Governing Commission, after consultation with the elected representatives of the inhabitants in such a manner as the commission may determine. No modification may be made in the legal régime for the exploitation of the mines, provided for in Paragraph 12, without the French State being previously consulted, unless such modification results from a general regulation respecting labor adopted by the League of Nations.

    In fixing the conditions and hours of labor for men, women, and children, the Governing Commission is to take into consideration the wishes expressed by the local labor organizations, as well as the principles adopted by the League of Nations.

  24. Subject to the provisions of Paragraph 4, no rights of the inhabitants of the Sarre Basin acquired or in process of acquisition at the date of the coming into force of this treaty, in respect of any insurance system of Germany, or in respect of any pension of any kind, are affected by any of the provisions of the present treaty.

    Germany and the Government of the territory of the Saare Basin will preserve and continue all the aforesaid rights.

  25. The civil and criminal courts existing in the territory of the Sarre Basin shall continue.

    A civil and criminal court will be established by the Governing Commission to hear appeals from the decisions of the said courts, and to decide matters for which these courts are not competent.

    The Governing Commission will be responsible for settling the organization and jurisdiction of the said court.

    Justice will be rendered in the name of the Governing Commission.

  26. The Governing Commission will alone have the power of levying taxes and dues in the territory of the Sarre Basin.

    These taxes and dues will be exclusively applied to the needs of the territory.

    The fiscal system existing on Nov. 11, 1918, will be maintained as far as possible, and no new tax except customs duties may be imposed without previously consulting the elected representatives of the inhabitants.

  27. The present stipulations will not affect the existing nationality of the inhabitants of the territory of the Sarre Basin. No hindrance shall be placed in the way of those who wish to acquire a different nationality, but in such case the acquisition of the new nationality will involve the loss of any other.

  28. Under the control of the Governing Commission the inhabitants will retain their local assemblies, their religious liberties, their schools, and their language. The right of voting will not be exercised for any assemblies other than the local assemblies, and will belong to every inhabitant over the age of 20 years without distinction of sex.

  29. Any of the inhabitants of the Sarre Basin who may desire to leave the territory will have full liberty to retain in it their immovable property or to sell it at fair prices and to remove their movable property free of any charge.

  30. There will be no military service, whether compulsory or voluntary, in the territory of the Sarre Basin, and the construction of fortifications therein is forbidden. Only a local gendarmerie for the maintenance of order may be established. It will be the duty of the Governing Commission to provide in all cases for the protection of persons and property in the Sarre Basin.

  31. The territory of the Sarre Basin as defined by Article 48 of the present treaty shall be subjected to the French customs régime. The receipts from the customs duties on goods intended for local consumption shall be included in the budget of the said territory after deduction of all costs of collection. No export tax shall be imposed upon metallurgical products or coal exported from the said territory to Germany, nor upon German exports for the use of the industries of the territory of the Sarre Basin. Natural or manufactured products originating in the basin in transit over German territory and similarly German products in transit over the territory of the basin shall be free of all customs duties.

    Products which both originate in and pass from the basin into Germany shall be free of import duties for a period of five years from the date of the coming into force of the present treaty, and during the same period articles imported from Germany into the territory of the basin for local consumption shall likewise be free of import duties.

    During these five years the French Government reserves to itself the right of limiting to the annual average of the quantities imported into Alsace-Lorraine and France in the years 1911 to 1913 the quantities which may be sent into France of all articles coming from the basin, which include raw materials and semi-manufactured goods imported duty free from Germany. Such average shall be determined after reference to all available official information and statistics.

  32. No prohibition or restriction shall be imposed upon the circulation of French money in the territory of the Sarre Basin. The French State shall have the right to use French money in all purchases, payments, and contracts connected with the exploitation of the mines or their accessories and subsidiaries.

  33. The Governing Commission shall have power to decide all questions arising from the interpretation of the preceding provisions. France and Germany agree that any dispute involving a difference of opinion as to the interpretation of the said provisions shall in the same way be submitted to the Governing Commission, and the decision of a majority of the commission shall be binding on both countries.

    CHAPTER III.—PLEBISCITE

  34. At the termination of a period of fifteen years from the coming into force of the present treaty, the population of the territory of the Sarre Basin will be called upon to indicate their desires in the following manner:

    A vote will take place, by communes or districts, on the three following alternatives: (a) Maintenance of the régime established by the present treaty and by this annex; (b) union with France; (c) union with Germany.

    All persons without distinction of sex, more than 20 years old at the date of the voting, resident in the territory at the date of the signature of the present treaty, will have the right to vote.

    The other conditions, methods, and the date of the voting shall be fixed by the Council of the League of Nations in such a way as to secure the liberty, secrecy, and trustworthiness of the voting.

  35. The League of Nations shall decide on the sovereignty under which the territory is to be placed, taking into account the wishes of the inhabitants as expressed by the voting. [Pg 193]

    1. If, for the whole or part of the territory, the League of Nations decides in favor of the maintenance of the régime established by the present treaty and this annex, Germany hereby agrees to make such renunciation of her sovereignty in favor of the League of Nations as the latter shall deem necessary. It will be the duty of the League of Nations to take appropriate steps to adapt the régime definitely adopted to the permanent welfare of the territory and the general interests.

    2. If for the whole or part of the territory the League of Nations decides in favor of union with France, Germany hereby agrees to cede to France in accordance with the decision of the League of Nations all rights and title over the territory specified by the League.

    3. If for the whole or part of the territory the League of Nations decides in favor of union with Germany, it will be the duty of the League of Nations to cause the German Government to be re-established in the government of the territory specified by the League.

      President Wilson's Welcome in Paris

      Copyright Underwood & Underwood

      President Wilson's Welcome in Paris

      A general view of the Place de l'Etoile, showing the President's carriage, passing the triumphant arch on its way to the Murat Castle, where President Wilson established his home during his stay in the French Capitol.

      Click for a larger image.

  36. If the League of Nations decides in favor of the union of the whole or part of the territory of the Sarre Basin with Germany, France's rights of ownership in the mines situated in such part of the territory will be repurchased by Germany in their entirety at a price payable in gold. The price to be paid will be fixed by three experts, one nominated by Germany, one by France, and one, who shall be neither a Frenchman nor a German, by the Council of the League of Nations. The decision of the experts will be given by a majority.

    The obligation of Germany to make such payment shall be taken into account by the Reparation Commission, and for the purpose of this payment Germany may create a prior charge upon her assets or revenues upon such detailed terms as shall be agreed to by the Reparation Commission.

    If, nevertheless, Germany after a period of one year from the date on which the payment becomes due shall not have effected the said payment, the Reparation Commission shall do so in accordance with such instructions as may be given by the League of Nations, and, if necessary, by liquidating that part of the mines which is in question.

  37. If, in consequence of the repurchase provided for in Paragraph 36, the ownership of the mines or any part of them is transferred to Germany, the French State and French nationals shall have the right to purchase such amount of coal of the Sarre Basin as their industrial and domestic needs are found at that time to require. An equitable arrangement regarding [Pg 194] amounts of coal, duration of contract, and prices will be fixed in due time by the Council of the League of Nations.

  38. It is understood that France and Germany may, by special agreements concluded before the time fixed for the payment of the price for the repurchase of the mines, modify the provisions of Paragraphs 36 and 37.

  39. The Council of the League of Nations shall make such provisions as may be necessary for the establishment of the régime which is to take effect after the decisions of the League of Nations mentioned in Paragraph 35 have become operative, including an equitable apportionment of any obligations of the Government of the territory of the Sarre Basin arising from loans raised by the commission or from other causes.

    From the coming into force of the new régime, the powers of the Governing Commission will terminate, except in the case provided for in Paragraph 35. (a)

  40. In all matters dealt with in the present annex, the decisions of the Council of the League of Nations will be taken by a majority.

SECTION V.—Alsace-Lorraine

The high contracting powers, recognizing the moral obligation to redress the wrong done by Germany in 1871, both to the rights of France and to the wishes of the population of Alsace and Lorraine, which were separated from their country in spite of solemn protests of their representatives of the Assembly of Bordeaux, agree upon the following articles:

ARTICLE 51.—The territories which were ceded to Germany in accordance with the preliminaries of peace signed at Versailles on the 26th February, 1871, and the treaty of Frankfort on the 10th May, 1871, are restored to French sovereignty as from the date of the armistice of the 11th November, 1918.

The provisions of the treaties establishing the delimination of the frontiers before 1871 shall be restored.

ARTICLE 52.—The German Government shall hand over without delay to the French Government all archives, registers, plans, titles, and documents of every kind concerning the civil, military, financial, judicial, or other administrations of the territories restored to French sovereignty. If any of these documents, archives, registers, titles, or plans have been misplaced, they will be restored by the German Government on the demand of the French Government.

ARTICLE 53.—Separate agreements shall be made between France and Germany dealing with the interests of the inhabitants of the territories referred to in Article 51, particularly as regards their civil rights, their business and the exercise of their professions, it being understood that Germany undertakes as from the present date to recognize and accept the regulations laid down in the annex hereto regarding the nationality of the inhabitants or natives of the said territories, not to claim at any time or in any place whatsoever as German nationals those who shall have been declared on any ground to be French, to receive all others in her territory, and to conform, as regards the property of German nationals in the territories indicated in Article 51, with the provisions of Article 297, and the Annex to Section 4 of Part X. (economic clauses) of the present treaty.

Those German nationals who without acquiring French nationality shall receive permission from the French Government to reside in the said territories shall not be subjected to the provisions of the said article.

ARTICLE 54.—Those persons who have regained French nationality in virtue of Paragraph 1 of the annex hereto, will be held to be Alsace-Lorrainers for the purposes of the present section.

The persons referred to in Paragraph 2 of the said annex will, from the day on which they have claimed French nationality, be held to be Alsace-Lorrainers with retroactive effect as from the 11th November, 1918. From those whose application is rejected, the privilege will terminate at the date of the refusal.

Such juridical persons will also have the status of Alsace-Lorrainers as have been recognized as possessing this quality, whether by the French administrative authorities or by a judicial decision.

ARTICLE 55.—The territories referred to in Article 51 shall return to France, free and quit of all public debts under the conditions laid down in Article 255 of Part IX. (financial clauses) of the present treaty.

ARTICLE 56.—In conformity with the provisions of Article 256 of Part IX. (financial clauses) of the present treaty, France shall enter into possession of all property and estate within the territories referred to in Article 51, which belong to the German Empire or German States, without any payment or credit on this account to any of the States ceding the territories.

This provision applies to all movable or immovable property of public or private domain, together with all rights whatsoever belonging to the German Empire or the German States or to their administrative areas.

Crown property and the property of the former Emperor or other German sovereigns shall be assimilated to property of the public domain.

ARTICLE 57.—Germany shall not take any action, either by means of stamping or by any other legal or administrative measures not applying equally to the rest of her territory, which may be to the detriment of the legal value or redeemability of German monetary instruments or moneys which at the date of the signature of the present treaty are legally current, and at that date are in the possession of the French Government.

ARTICLE 58.—A special convention will determine the conditions for repayment in marks of the exceptional war expenditure advanced during the course of the war by Alsace-Lorraine or by public bodies in Alsace-Lorraine on account of the empire in accordance with German law, such as payment to the families of persons mobilized, requisitions, billeting of troops, and assistance to persons who have been expelled. In fixing the amount of these sums Germany shall be credited with that portion which Alsace-Lorraine would have contributed to the empire to meet the expenses resulting from these payments, this contribution being calculated according to the proportion of the imperial revenue derived from Alsace-Lorraine in 1913.

ARTICLE 59.—The French Government will collect for its own account the imperial taxes, duties, and dues of every kind leviable in the territories referred to in Article 51 and not collected at the time of the armistice of the 11th November, 1918.

ARTICLE 60.—The German Government shall without delay restore to Alsace-Lorrainers, (individuals, juridical persons, and public institutions,) all property, rights, and interests belonging to them on the 11th November, 1918, in so far as these are situated in German territory. [Pg 195]

ARTICLE 61.—The German Government undertakes to continue and complete without delay the execution of the financial clauses regarding Alsace-Lorraine contained in the armistice conventions.

ARTICLE 62.—The German Government undertakes to bear the expense of all civil and military pensions which had been earned in Alsace-Lorraine on the date of the 11th November, 1918, and the maintenance of which was a charge on the budget of the German Empire.

The German Government shall furnish each year the funds necessary for the payment in francs, at the average rate of exchange for that year, of the sums in marks to which persons resident in Alsace-Lorraine would have been entitled if Alsace-Lorraine had remained under German jurisdiction.

ARTICLE 63.—For the purposes of the obligation assumed by Germany in Part VIII. (reparations) of the present treaty to give compensation for damages caused to the civil populations of the Allied and Associated countries in the form of lines, the inhabitants of the territories referred to in Article 51 shall be assimilated to the above mentioned populations.

ARTICLE 64.—The regulations concerning the control of the Rhine and of the Moselle are laid down in Part XII. (ports, waterways, and railways) of the present treaty.

ARTICLE 65.—Within a period of three weeks after the coming into force of the present treaty the Port of Strasbourg and the Port of Kehl shall be constituted, for a period of seven years, a single unit from the point of view of exploitation.

The administration of this single unit will be carried on by a manager named by the Central Rhine Commission, which shall also have power to remove him. He shall be of French nationality. He will reside in Strasbourg and will be subject to the supervision of the Central Rhine Commission.

There will be established in the two ports free zones in conformity with Part XII. (ports, waterways, and railways) of the present treaty.

A special convention between France and Germany, which shall be submitted to the approval of the Central Rhine Commission, will fix the details of this organization, particularly as regards finance.

It is understood that for the purpose of the present article the Port of Kehl includes the whole of the area necessary for the movements of the port and the trains which serve it, including the harbor, quays and railroads, platforms, cranes, sheds and warehouses, silos, elevators and hydro-electric plants, which make up the equipment of the port.

The German Government undertakes to carry out all measures which shall be required of it in order to assure that all the making up and switching of trains arriving at or departing from Kehl, whether for the right bank or the left bank of the Rhine, shall be carried on in the best conditions possible.

All property rights shall be safeguarded. In particular, the administration of the ports shall not prejudice any property rights of the French or Baden railroads.

Equality of treatment as respects traffic shall be assured in both ports to the nationals, vessels, and goods of every country.

In case at the end of the sixth year France shall consider that the progress made in the improvement of the Port of Strasbourg still requires a prolongation of this temporary régime, she may ask for such prolongation from the Central Rhine Commission, which may grant an extension for a period not exceeding three years.

Throughout the whole period of any such extension the free zones above provided for shall be maintained.

Pending appointment of the first manager by the Central Rhine Commission, a provisional manager, who shall be of French nationality, may be appointed by the principal Allied and Associated Powers, subject to the foregoing provisions.

For all purposes of the present article the Central Rhine Commission will decide by a majority of votes.

ARTICLE 66.—The railway and other bridges across the Rhine now existing within the limits of Alsace-Lorraine shall, as to all their parts and their whole length, be the property of the French State, which shall insure their upkeep.

ARTICLE 67.—The French Government is substituted in all the rights of the German Empire over all the railways which were administered by the Imperial Railway Administration, and which are actually working or under construction.

The same shall apply to the rights of the empire with regard to railway and tramway concessions within the territories referred to in Article 51.

This substitution shall not entail any payment on the part of the French State.

The frontier railway stations shall be established by a subsequent agreement, it being stipulated in advance that on the Rhine frontier they shall be situated on the right bank.

ARTICLE 68.—In accordance with the provisions of Article 268 of Chapter 1. of Section I. of Part X. (economic clause) of the present treaty, for a period of five years from the coming into force of the present treaty, natural or manufactured products originating in and coming from the territories referred to in Article 51 shall, on importation into German customs territory, be exempt from all customs duty. The French Government shall fix each year, by decree communicated to the German Government, the nature and amount of the products which shall enjoy this exemption.

The amount of each product which may be thus sent annually into Germany shall not exceed the average of the amounts sent annually in the years 1911—1913.

Further, during the period of five years above mentioned, the German Government shall allow the free export from Germany and the free reimportation into Germany, exempt from all customs duties and other charges (including internal charges), of yarns, tissues, and other textile materials or textile products of any kind, and in any condition, sent from Germany into the territories referred to in Article 51, to be subjected there to any finishing process, such as bleaching, dyeing, printing, mercerization, gassing, twisting, or dressing.

ARTICLE 69.—During a period of ten years from the coming into force of the present treaty, central electric supply works situated in German territory, and formerly furnishing electric power to the territories referred to in Article 51, or to any establishment the working of which passes permanently or temporarily from Germany to France, shall be required to continue such supply up to the amount of consumption corresponding to the undertakings and contracts current on the 11th November, 1918.

Such supply shall be furnished according to the contracts in force and at a rate which shall not be higher than that paid to the said works by German nationals. [Pg 196]

ARTICLE 70.—It is understood that the French Government preserves its right to prohibit in the future in the territories referred to in Article 51 all new German participation:

  1. In the management or exploitation of the public domain and of public services, such as railways, navigable waterways, water works, gas works, electric power, &c.

  2. In the ownership of mines and quarries of every kind and in enterprises connected therewith;

  3. In metallurgical establishments, even though their working may not be connected with that of any mine.

ARTICLE 71.—As regards the territories referred to in Article 51, Germany renounces on behalf of herself and her nationals as from the 11th November, 1918, all rights under the law of the 25th May, 1910, regarding the trade in potash salts and generally under any stipulations for the intervention of German organizations in the working of the potash mines. Similarly she renounces on behalf of herself and her nationals all rights under any agreements, stipulations or laws, which may exist to her benefit with regard to other products of the aforesaid territories.

ARTICLE 72.—The settlement of the questions relating to debts contracted before the 11th November, 1918, between the German Empire and the German States or their nationals residing in Germany on the one part, and Alsace-Lorrainers residing in Alsace-Lorraine on the other part, shall be effected in accordance with the provisions of Section III. of Part X. (economic clauses) of the present treaty, the expression "before the war" therein being replaced by the expression "before the 11th November, 1918." The rate of exchange applicable in the case of such settlement shall be the average rate quoted on the Geneva Exchange during the month preceding the 11th November, 1918. There may be established in the territories referred to in Article 51, for the settlement of the aforesaid debts under the conditions laid down in Section III. of Part X (economic clauses) of the present treaty, a special clearing office, it being understood that this office shall be regarded as a "central office" under the provisions of Paragraph 1 of the annex to the said section.

ARTICLE 73.—The private property rights and interests of Alsace-Lorrainers in Germany will be regulated by the stipulations of Section IV. of Part X. (economic clauses) of the present treaty.

ARTICLE 74.—The French Government reserves the right to retain and liquidate all the property, rights and interests which German nationals or societies controlled by Germany possessed in the territories referred to in Article 51 on Nov. 11, 1918, subject to the conditions laid down in the last paragraph of Article 53 above.

Germany will directly compensate its nationals who may have been dispossessed by the aforesaid liquidations.

The product of these liquidations shall be applied in accordance with the stipulations of Sections III. and IV. of Part X. (economic clauses) of the present treaty.

ARTICLE 75.—Notwithstanding the stipulations of Section V. of Part X. (economic clauses) of the present treaty, all contracts made before the date of the promulgation in Alsace-Lorraine of the French decree of 30th November, 1918, between Alsace-Lorrainers (whether individuals or juridical persons) or others resident in Alsace-Lorraine on the one part, and the German Empire or German States and their nationals resident in Germany on the other part, the execution of which has been suspended by the armistice or by subsequent French legislation, shall be maintained.

Nevertheless, any contract of which the French Government shall notify the cancellation to Germany in the general interest within a period of six months from the date of the coming into force of the present treaty shall be annulled except in respect of any debt or other pecuniary obligation arising out of any act done or money paid thereunder before the 11th November, 1918. If this dissolution would cause one of the parties substantial prejudice, equitable compensation, calculated solely on the capital employed without taking account of loss of profits, shall be accorded to the prejudiced party.

With regard to prescriptions, limitations, and forfeitures in Alsace-Lorraine, the provisions of Articles 300 and 301 of Section V., Part X. (economic clauses) shall be applied, with the substitution for the expression "outbreak of war" of the expression "11th November, 1918," and for the expression "duration of the war" of the expression "period from the 11th November, 1918, to date of the coming into force of the present treaty."

ARTICLE 76.—Questions concerning rights in industrial, literary, or artistic property of Alsace-Lorrainers shall be regulated in accordance with the general stipulations of Section VII. of Part X. (economic clauses) of the present treaty, it being understood that Alsace-Lorrainers holding rights of this nature under German legislation will preserve full and entire enjoyment of those rights on German territory.

ARTICLE 77.—The German Government undertakes to pay over to the French Government such proportion of all reserves accumulated by the empire or by public or private bodies dependent upon it, for the purposes of disability and old age insurance, as would fall to the disability and old age insurance fund at Strasbourg.

The same shall apply in respect of the capital and reserves accumulated in Germany falling legitimately to other serial insurance funds, to miners' superannuation funds, to the fund of the railways of Alsace-Lorraine, to other superannuation organizations established for the benefit of the personnel of public administrations and institutions operating in Alsace-Lorraine, and also in respect of the capital and reserves due by the insurance fund of private employes at Berlin by reason of engagements entered into for the benefit of insured persons of that category resident in Alsace-Lorraine.

A special convention shall determine the conditions and procedure of these transfers.

ARTICLE 78.—With regard to the execution of judgments, orders and prosecutions, the following rules shall be applied:

  1. All civil and commercial judgments which shall have been given since Aug. 3, 1914, by the courts of Alsace-Lorraine between Alsace-Lorrainers, or between Alsace-Lorrainers and foreigners, or between foreigners, and which shall not have been appealed from before the 11th November, 1918, shall be regarded as final and capable of being fully executed.

    When the judgment has been given between Alsace-Lorrainers and Germans, or between Alsace-Lorrainers and subjects of the allies of Germany, it shall only be capable of execution after the issue of an exequatur by the corresponding new tribunal in the restored territory referred to in Article 51.

  2. All judgments given by German courts since the 3d August, 1914, against Alsace-Lorrainers for political crimes or misdemeanors shall be regarded as null and void.

    [Pg 197]

  3. All sentences passed since the 11th November, 1918, by the Imperial Court of Leipzig on Appeals against the decisions of the courts of Alsace-Lorraine shall be regarded as null and void and shall be so pronounced. The papers in regard to the cases in which such sentences have been given shall be returned to the courts of Alsace-Lorraine concerned.

    All appeals to the Imperial Court against decisions of the courts of Alsace-Lorraine shall be suspended. In the cases referred to above, the papers shall be returned under the aforesaid conditions for transfer without delay to the French Cour de Cassation which shall be competent to decide them.

  4. All prosecutions of Alsace-Lorraine for offenses committed during the period between the 11th November, 1918, and the coming into force of the present treaty will be conducted under German law except in so far as this has been modified by decrees duly published on the spot by the French authorities.

    All other questions as to competence, procedure or administration of justice, shall be determined by a special convention between France and Germany.

ARTICLE 79.—The stipulations as to nationality contained in the annex hereto shall be considered as of equal force with the provisions of the present section.

All other questions concerning Alsace-Lorraine which are not regulated by the present section and the annex thereto, or by the general provisions of the present treaty, will form the subject of further conventions between France and Germany.

ANNEX

  1. As from the 11th November, 1918, the following persons are ipso facto reinstated in French nationality:

  2. Within the period of one year from the coming into force of the present treaty, persons included in any of the following categories may claim French nationality:

  3. Subject to the provisions of Paragraph 2, Germans born or domiciled in Alsace-Lorraine shall not acquire French nationality by reason of the restoration of Alsace-Lorraine to France, even though they may have the status of citizens of Alsace-Lorraine.

    They may acquire French nationality only by naturalization, on condition of having been domiciled in Alsace-Lorraine from a date previous to the 3d August, 1914, and of submitting proof of unbroken residence within the restored territory for a period of three years from the 11th November, 1918.

    France will be solely responsible for their diplomatic and consular protection from the date of their application for French naturalization.

  4. The French Government shall determine the procedure by which reinstatement in French nationality as of right shall be effected, and the conditions under which decisions shall be given upon claims to such nationality and applications for naturalization, as provided by the present annex.

SECTION VI.—Austria

ARTICLE 80.—Germany acknowledges and will respect strictly the independence of Austria. Within the frontiers which may be fixed by a treaty between that State and the principal Allied and Associated Powers she agrees that this independence shall be inalienable, except with the consent of the Council of the League of Nations.

SECTION VII.—Czechoslovak State

ARTICLE 81.—Germany, in conformity with the action already taken by the Allied and Associated Powers, recognizes the complete independence of the Czechoslovak State, which will include the autonomous territory of the Ruthenians to the south of the Carpathians. Germany hereby recognizes the frontier of this State as determined by the principal Allied and Associated Powers and the other interested States.

ARTICLE 82.—The old frontier as it existed on Aug. 3, 1914, between Austria-Hungary and the German Empire will constitute the frontier between Germany and the Czechoslovak State.

ARTICLE 83.—Germany renounces in favor of the Czechoslovak State all rights and title over the portion of Silesian territory defined as follows:

Starting from a point about 2 kilometers southeast of Katscher, on the boundary between the Circles (Kreise) of Loebschütz and Ratibor: the boundary between the two Kreise; then, the former boundary between Germany and Austria-Hungary up to a point on the Oder immediately to the south of the Ratibor-Oderberg railway; thence, toward the northwest and up to a point about 2 kilometers to the southeast of Katscher: a line to be fixed on the spot passing to the west of Kranowitz. [Pg 198] A commission composed of seven members, five nominated by the Principal Allied and Associated Powers, one by Poland, and one by the Czechoslovak State, will be appointed fifteen days after the coming into force of the present treaty to trace on the spot the frontier line between Poland and the Czechoslovak State.

The decisions of this commission will be taken by a majority and shall be binding on the parties concerned.

Germany hereby agrees to renounce in favor of the Czechoslovak State all rights and title over the part of the Kreise of Loebschütz comprised within the following boundaries in case after the determination of the frontier between Germany and Poland the said part of that circle should become isolated from Germany: from the southeastern extremity of the salient of the former Austrian frontier at about 5 kilometers to the west of Loebschütz southward and up to a point of junction with the boundary between the Kreise of Loebschütz and Ratibor: the former frontier between Germany and Austria-Hungary; then, northward, the administrative boundary between the Kreise of Loebschütz and Ratibor up to a point situated about 2 kilometers to the southeast of Katscher; thence, northwestward and up to the starting point of this definition: a line to be fixed on the spot passing to the east of Katscher.

ARTICLE 84.—German nationals habitually resident in any of the territories recognized as forming part of the Czechoslovak State will obtain Czechoslovak nationality ipso facto and lose their German nationality.

ARTICLE 85.—Within a period of two years from the coming into force of the present treaty German nationals over 18 years of age habitually resident in any of the territories recognized as forming part of the Czechoslovak State will be entitled to opt for German nationality. Czechoslovaks who are habitually resident in Germany will have a similar right to opt for Czechoslovak nationality.

Option by a husband will cover his wife, and option by parents will cover their children under 18 years of age. Persons who have exercised the above right to opt must within the succeeding twelve months transfer their place of residence to the State for which they have opted. They will be entitled to retain their landed property in the territory of the other State where they had place of residence before exercising the right to opt. They may carry with them their movable property of every description. No export or import duties may be imposed upon them in connection with the removal of such property. Within the same period Czechoslovaks who are German nationals and are in a foreign country will be entitled, in the absence of any provisions to the contrary in the foreign law, and if they have not acquired the foreign nationality, to obtain Czechoslovak nationality and lose their German nationality by complying with the requirements laid down by the Czechoslovak State.

ARTICLE 86.—The Czechoslovak State accepts and agrees to embody in a treaty with the principal Allied and Associated Powers such provisions as may be deemed necessary by the said powers to protect the interests of inhabitants of that State who differ from the majority of the population in race, language or religion.

The Czechoslovak State further accepts and agrees to embody in a treaty with the said powers such provisions as they may deem necessary to protect freedom of transit and equitable treatment of the commerce of other nations.

The proportion and nature of the financial obligations of Germany and Prussia, which the Czechoslovak State will have to assume on account of the Silesian territory placed under its sovereignty will be determined in accordance with Article 254 of Part IX. (financial clauses) of the present treaty.

Subsequent agreements will decide all questions not decided by the present treaty which may arise in consequence of the cession of the said territory.

SECTION VIII.—Poland

ARTICLE 87.—Germany, in conformity with the action already taken by the Allied and Associated Powers, recognizes the complete independence of Poland and renounces in her favor all rights and title over the territory bounded by the Baltic Sea; the eastern frontier of Germany as laid down in Article 27 of Part II. (boundaries of Germany) of the present treaty, up to a point situated about two kilometers to the east of the Lorzendorf, then a line to the acute angle which the northern boundary of Upper Silesia makes about three kilometers northwest of Simmenau, then to where the boundary of Upper Silesia has its meeting point with the old frontier between Germany and Russia, then this frontier to the point where it crosses the course of the Niemen, and then the northern frontier of East Prussia, as laid down in Article 28, Part II. aforesaid.

The terms of this article do not, however, apply to the territories of East Prussia and the free city of Danzig, as defined in Article 28, of Part II. (boundaries of Germany,) and in Article 100 of Section XI. (Danzig) of this part.

The boundaries of Poland not laid down in the present treaty will be subsequently determined by the principal Allied and Associated Powers. A commission consisting of seven members, five of whom shall be nominated by the principal Allied and Associated Powers, one by Germany, and one by Poland, shall be constituted fifteen days after the coming into force of the present treaty to delimit on the spot the frontier line between Poland and Germany. The decision of the commission will be taken by a majority of votes and shall be binding upon the parties concerned.

ARTICLE 88.—In the portion of Upper Silesia included within the boundaries described below the inhabitants will be called upon to indicate by a vote whether they wish to be attached to Germany or to Poland:

Starting from the northern point of the salient of the old province of Austrian Silesia, situated about eight kilometers east of Neustadt, the former frontier between Germany and Austria, to its junction with the boundary between the Kreise of Loebschütz and Ratibor; thence in a northerly direction to a point about two kilometers southeast of Katscher; the boundary between the Kreise of Loebschütz and Ratibor; thence in a southeasterly direction to a point on the course of the Oder immediately south of the Ratibor-Oderberg railway: a line to be fixed on the ground passing south of Karanowitz;

Thence the old boundary between Germany and Austria, thence the old boundary between Germany and Russia to its junction with the administrative boundary between Posnania and Upper Silesia; thence this administrative boundary to its junction with the administrative boundary between Upper and Middle Silesia; thence westward to the point where the administrative boundary turns in an acute angle to [Pg 199] the southwest about three kilometers northwest of Simmenau;

The boundary between Upper and Middle Silesia; thence in a westerly direction to a point to be fixed on the ground about two kilometers east of Orzendorf: a line to be fixed on the ground passing north of Kein Hennersdorf; thence southward to the point where the boundary between Upper and Middle Silesia cuts the Stadtel-Karlsruhe road: a line to be fixed on the ground passing west of Hennersdorf, Polkowitz, Noldau, Steamersdorf and Dammer, and east of Strehlitz, Nassadel, Eckersdorf, Schwirz, and Stadtel; thence the boundary between Upper and Middle Silesia to its junction with the eastern boundary of the Kreise of Falkenberg; thence the eastern boundary of the Kreis of Falkenberg to the point of the salient which is three kilometers east of Puschine; thence to the northern point of the salient of the old province of Austrian Silesia, situated about eight kilometers east of Neustadt: a line to be fixed on the ground, passing east of Zulls.

The régime under which this plebiscite will be taken and given effect to is laid down in the annex hereto.

The Polish and German Governments hereby respectively bind themselves to conduct no prosecutions on any part of their territory and to take no exceptional proceedings for any political action performed in Upper Silesia during the period of the régime laid down in the annex hereto, and up to the settlement of the final status of the country Germany hereby renounces in favor of Poland all rights and title over the portion of Upper Silesia lying beyond the frontier line fixed by the principal Allied and Associated Powers as this result of the plebiscite.

ANNEX

  1. Within fifteen days from the coming into force of the present treaty the German troops and such officials as may be designated by the commission set up under the provisions of Paragraph 2 shall evacuate the plebiscite area. Up to the moment of the completion of the evacuation they shall refrain from any form of requisitioning in money or in kind and from all acts likely to prejudice the material interest of the country.

    Within the same period the workmen's and soldiers' councils which have been constituted in this area shall be dissolved. Members of such councils who are natives of another region and are exercising their functions at the date of the coming into force of the present treaty, or who have gone out of office since the 1st March, 1919, shall be evacuated.

    All military and semi-military unions formed in the said area by the inhabitants of the district shall be immediately disbanded. All members of such military organizations who are not domiciled in the said area shall be required to leave it.

  2. The plebiscite area shall be immediately placed under the authority of an international commission of four members to be designated by the following powers: The United States of America, France, the British Empire, and Italy. It shall be occupied by troops belonging to the Allied andAsociated> Associated Powers, and the German Government undertakes to give facilities for the transference of troops to Upper Silesia.

  3. The commission shall enjoy all the powers exercised by the German or by the Prussian Government; except those of legislation or taxation. It shall also be substituted for the Government of the Province and the Regierungsbezirk.

    It shall be within the competence of the commission to interpret the powers hereby conferred upon it, and to determine to what extent it shall exercise them and to what extent they shall be left in the hands of the existing authorities.

    Changes in the existing laws and the existing taxation shall only be brought into force with the consent of the commission.

    The commission will maintain order with the help of the troops which will be at its disposal and to the extent which it may deem necessary by means of gendarmerie recruited among the inhabitants of the country. The commission shall provide immediately for the replacement of the evacuated German officials, and, if occasion arises, shall itself order the evacuation of such authorities and proceed to the replacement of such local authorities as may be required. It shall take all steps which it thinks proper to insure the freedom, fairness, and secrecy of the vote. In particular, it shall have the right to order the expulsion of any person who may in any way have attempted to distort the result of the plebiscite by methods of corruption or intimidation.

    The commission shall have full power to settle all questions arising from the execution of the present clauses. It shall be assisted by technical advisers, chosen by it from among the local populations. The decision of the commission shall be taken by a majority vote.

  4. The vote shall take place at such date as may be determined by the principal Allied and Associated Powers, but not sooner than six months or later than eighteen months after the establishment of the commission in the area.

    The right to vote shall be given to all persons, without distinction of sex, who:

    1. Have completed their twentieth year on the 1st of January of the year in which the plebiscite takes place;

    2. Were born in the plebiscite area or have been domiciled there since a date to be determined by the commission, which shall not be subsequent to January 1, 1919, or who have been expelled by the German authorities and have not retained their domicile there.

      Persons convicted of political offenses shall not exercise their right of voting. Every person will vote in the commune where he is domiciled, or in which he was born, if he has not retained his domicile in the area.

      The result of the vote will be determined by the communes according to the majority of votes in each commune.

  5. On the conclusion of the voting the number of votes cast in each commune will be communicated by the commission to the principal Allied and Associated Powers with a full report as to the taking of the vote and a recommendation as to the line which ought to be adopted as the frontier of Germany in Upper Silesia. In this recommendation regard will be paid to the wishes of the inhabitants, as shown by the vote, and to the geographical and economic conditions of the locality.

  6. As soon as the frontier has been fixed by the principal Allied and Associated Powers the German authorities will be notified by the International Commission that they are free to take over the administration of the territory which it is recognized should be German; the said authorities must proceed to do so within one month of such notification and in the manner prescribed by the commission. Within the same period and in the manner prescribed by the commission, the Polish Government must [Pg 200] proceed to take over the administration of the territory which it is recognized should be Polish.

    When the administration of the territory has been provided for by the German and Polish authorities respectively the powers of the commission will terminate.

    The cost of the Army of Occupation and expenditure by the commission, whether in discharge of its own functions or in the administration of the territory, will be a charge on the area.

ARTICLE 89.—Poland undertakes to accord freedom of transit to persons, goods, vessels, carriages, wagons, and mails in transit between East Prussia and the rest of Germany over Polish territory, including territorial waters, and to treat them at least as favorably as the persons, goods, vessels, carriages, wagons, and mails, respectively, of Polish or of any other most-favored nationality, origin, importation starting point, or ownership, as regards facilities, restrictions, and all other matters.

Goods in transit shall be exempt from all customs or other similar duties.

Freedom of transit will extend to telegraphic and telephonic services under the conditions laid down by the conventions referred to in Article 98.

ARTICLE 90.—Poland undertakes to permit, for a period of fifteen years, the exportation to Germany of the products of the mines in any part of Poland in accordance with the present treaty. Such export shall be subject to duties or other charges or restrictions on exportation.

Poland agrees to take such steps as may be necessary to secure that such products shall be available for sale to purchasers in Germany on terms as favorable as are applicable to like products sold under similar conditions to purchasers in Poland or in any other country.

ARTICLE 91.—German nationals habitually resident in territories recognized as forming part of Poland will acquire Polish nationality ipso facto and will lose their German nationality. German nationals, however, or their descendants who became resident in these territories after January 1, 1908, will not acquire Polish nationality without a special authorization from the Polish State.

Within a period of two years after the coming into force of the present treaty, German nationals over 18 years of age, habitually resident in any of the territories recognized as forming part of Poland, will be entitled to opt for German nationality. Poles who are German nationals over 18 years of age, and habitually resident in Germany, will have a similar right to opt for Polish nationality. Option by a husband will cover his wife and option by parents will cover their children under 18 years of age. Persons who have exercised the above right to opt must within the succeeding twelve months transfer their place of residence to the State for which they have opted. They will be entitled to retain their immovable property in the territory of the other State, where they had their place of residence before exercising the right to opt. They may carry with them their movable property of every description. No export or import duties or charges may be imposed upon them in connection with the removal of such property.

Within the same period Poles who are German nationals and are in a foreign country will be entitled, in the absence of any provisions to the contrary in the foreign law, and if they have not acquired foreign nationality, to obtain Polish nationality and to lose their German nationality by complying with the requirements laid down by the Polish State.

In this portion of Upper Silesia submitted to a plebiscite the provisions of this article should only come into force as from the definite attribution of the territory.

ARTICLE 92.—The proportion and the nature of the financial liabilities of Germany and Prussia to be borne by Poland will be determined in accordance with Article 254 of Part IX. (financial clauses) of the present treaty. There shall be excluded from the share of such financial liabilities assumed by Poland that portion of the debt which, according to the finding of the Reparation Commission referred to in the above mentioned article, arises from measures adopted by the German and Prussian Governments with a view to German colonization in Poland. In fixing under Article 256 of the present treaty the value of the property and possessions belonging to the German Empire and to the German states which pass to Poland, with the territory transferred above, the Reparation Commission shall exclude from the valuation buildings, forests, and other State property which belonged to the former kingdom of Poland; Poland shall acquire these properties free of all costs and charges.

In all the German territory transferred in accordance with the present treaty and recognized as forming definitely a part of Poland, the property rights and interests of German nationals shall not be liquidated under Article 297 by the Polish Government except in accordance with the following provisions:

1. The proceeds of the liquidation shall be paid direct to the owner;

2. If, on his application, the mixed arbitral tribunal provided for by the Section 6 of Part X. (economic clauses) of the present treaty, or an arbitrator appointed by that tribunal, is satisfied that the conditions of the sale or measures taken by the Polish Government outside of its general legislation were unfairly prejudicial to the price obtained, they shall have discretion to award to the owner equitable compensation to be paid by the Polish Government.

Further agreements will regulate all questions arising out of the cession of the above territory, which are not regulated by the present treaty.

ARTICLE 93.—Poland accepts and agrees to embody in a treaty with the principal Allied and Associated Powers such provisions as may be deemed necessary by the said powers to protect the interests of inhabitants of Poland who differ from the majority of the population in race, language or religion.

Poland further accepts and agrees to embody in a treaty with the said powers such provisions as they may deem necessary to protect freedom of transit and equitable treatment of the commerce of other nations.

SECTION IX.—East Prussia.

ARTICLE 94.—In the area between the southern frontier of East Prussia, as described in Article 28 of Part II. (frontiers of Germany) of the present treaty, and the line described below, the inhabitants will be called upon to indicate by a vote the State to which they wish to belong:

The western and northern boundary of Regierungsbezirk Allenstein to its junction with the boundary between the Kreise of Oletsko and Angerburg, thence, the northern boundary of the Kreise of Oletsko to its junction with the old frontier of East Prussia.

ARTICLE 95.—The German troops and authorities will be withdrawn from the area defined above within a period not exceeding fifteen days after the coming into force of the present [Pg 201] treaty. Until the evacuation is completed they will abstain from all requisitions in money or in kind and from all measures injurious to the economic interests of the country.

On the expiration of the above-mentioned period the said area will be placed under the authority of an International Commission of five members appointed by the principal Allied and Associated Powers. This commission will have general powers of administration and, in particular, will be charged with the duty of arranging for the vote, and of taking such measures as it may deem necessary to insure its freedom, fairness, and secrecy. The commission will have all necessary authority to decide any questions to which the execution of these provisions may give rise. The commission will make such arrangements as may be necessary for assistance in the exercise of its functions by officials chosen by itself from the local population; its decisions will be taken by a majority.

Every person, irrespective of sex, will be entitled to vote who:

(a) Is 20 years of age at the date of the coming into force of the present treaty, and

(b) Was born within the area where the vote will take place, or has been habitually resident there from a date to be fixed by the commission.

Every person will vote in the commune where he is habitually resident or, if not habitually resident in the area, in the commune where he was born.

The result of the vote will be determined by commune, (Gemeinde,) according to the majority of the votes in each commune.

On the conclusion of the voting the number of votes cast in each commune will be communicated by the commission to the principal Allied and Associated Powers with a full report as to the taking of the vote and a recommendation as to the line which ought to be adopted as the boundary of East Prussia in this region.

In this recommendation, regard will be paid to the wishes of the inhabitants as shown by the vote, and to the geographical and economic conditions of the locality. The principal Allied and Associated Powers will then fix the frontier between East Prussia and Poland in this region. If the line fixed by the principal Allied and Associated Powers is such as to exclude from East Prussia any part of the territory defined in Article 94, the renunciation of its rights by Germany in favor of Poland, as provided in Article 87, above, will extend to the territories so excluded. As soon as the line has been fixed by the principal Allied and Associated Powers, the authorities administering East Prussia will be notified by the International Commission that they are free to take over the administration of the territory to the north of the line so fixed, which they shall proceed to do within one month of such notification and in the manner prescribed by the commission. Within the same period, and as prescribed by the commission, the Polish Government must proceed to take over the administration of the territory to the south of the line. When the administration of the territory by the East Prussian and Polish authorities, respectively, has been provided for, the powers of the commission will terminate.

Expenditure by the commission, whether in the discharge of its own functions or in the administration of the territory, will be borne by the local revenues. East Prussia will be required to bear such proportion of any deficit as may be fixed by the principal Allied and Associated Powers.

ARTICLE 96.—In the area comprising the Kreise of Stuhm and Rosenberg, and the portion of the Kreise of Marienburg which is situated east of the Nogat, and that of Marienwerder east of the Vistula, the inhabitants will be called upon to indicate by a vote, to be taken in each commune, (Gemeinde,) whether they desire the various communes situated in this territory to belong to Poland or to East Prussia.

ARTICLE 97.—The German troops and authorities will be withdrawn from the area defined in Article 96 within a period not exceeding fifteen days after the coming into force of the present treaty. Until the evacuation is completed they will abstain from all requisitions in money or in kind and from all measures injurious to the economic interests of the country. On the expiration of the above-mentioned period the said area will be placed under the authority of an International Commission of five members appointed by the principal Allied and Associated Powers. This commission, supported, if occasion arises, by the necessary forces, will have general powers of administration, and, in particular, will be charged with the duty of arranging for the vote and of taking such measures as it may deem necessary to insure its freedom, fairness, and secrecy. The commission will conform as far as possible to the provisions of the present treaty relating to the plebiscite in the Allenstein area. Its decision will be taken by a majority. Expenditure by the commission, whether in the discharge of its own functions or in the administration of the territory, will be borne by the local revenues.

On the conclusion of the voting, the number of votes cast in each commune will be communicated by the commission to the principal Allied and Associated Powers, with a full report as to the taking of the vote and a recommendation as to the line which ought to be adopted as the boundary of East Prussia in this region. In this recommendation regard will be paid to the wishes of the inhabitants as shown by the vote and to the geographical and economic conditions of the locality. The principal Allied and Associated Powers will then fix the frontier between East Prussia and Poland in this region, leaving in any case to Poland for the whole of the section bordering on the Vistula full and complete control of the river, including the east bank as far east of the river as may be necessary for its regulation and improvement. Germany agrees that in any portion of the said territory which remains German no fortifications shall at any time be erected.

The principal Allied and Associated Powers will at the same time draw up regulations for assuring to the population of East Prussia to the fullest extent, and under equitable conditions, access to the Vistula, and the use of it for themselves, their commerce, and their boats. The determination of the frontier and the foregoing regulations shall be binding upon all the parties concerned. When the administration of the territory has been taken over by the East Prussian and Polish authorities, respectively, the powers of the commission will terminate.

ARTICLE 98.—Germany and Poland undertake, within one year of the coming into force of this treaty, to enter into conventions of which the terms, in case of difference, shall be settled by the Council of the League of Nations, with the object of securing on the one hand to Germany full and adequate railroad, telegraphic, and telephonic facilities for communication between the rest of Germany and East Prussia over the intervening Polish territory, and [Pg 202] the other hand to Poland full and adequate railroad, telegraphic, and telephonic facilities for communication between Poland and the free city of Danzig over any German territory that may, on the right bank of the Vistula, intervene between Poland and the free city of Danzig.

Sir Eric Drummond

Copyright Harris and Ewing

Sir Eric Drummond

The first Secretary of the League of Nations. Sir Eric joined the British Foreign Office in 1900, and later served as confidential secretary to Sir Edward (Viscount) Grey, Herbert H. Asquith, and Arthur J. Balfour. In 1917 he accompanied Mr. Balfour to the United States as a member of the British High Commission.

Click for a larger image.

[Pg 203]

SECTION X.—Memel

ARTICLE 99.—Germany renounces in favor of the principal Allied and Associated Powers all rights and title over the territories included between the Baltic, the northeastern frontier of East Prussia as defined in Article 28 of Part II. (frontiers of Germany) of the present treaty and the former frontier between Germany and Russia.

Germany undertakes to accept the settlement made by the principal Allied and Associated Powers in regard to these territories, particularly in so far as concerns the nationality of the inhabitants.

SECTION XI.—Free City of Danzig

ARTICLE 100.—Germany renounces in favor of the principal Allied and Associated Powers all rights and title over the territory comprised within the following limits:

From the Baltic Sea southward to the point where the principal channels of navigation of the Nogat and Vistula (Weichsel) meet;

The boundary of East Prussia as described in Article 28 of Part II. (boundaries of Germany) of the peace treaty;

Thence the principal channel of navigation of the Vistula downstream to a point about 6½ kilometers north of the bridge of Dirschau;

Thence northwest to point 5, 1½ kilometers southeast of the Church of Güttland, a line to be fixed on the ground;

Thence in a general westerly direction to the salient of the Kreise of Berent, 8½ kilometers northeast of Schöneck;

A line to be fixed on the ground passing between Mühlbanz on the south and Rambeltsch on the north;

Thence the boundary of the Kreise of Berent, westward to the re-entrant which it forms 6 kilometers north-northwest of Schöneck;

Thence to a point on the median line of Lonkener See; a line to be fixed on the ground passing north of Neu Fietz and Schatarpi and south of Barenhütte and Lonken; thence the median line of the Lonkener See to its northernmost point; thence to the southern end of Pollenziner See; a line to be fixed on the ground;

Thence the median line of Pollenziner See to its northernmost point;

Thence in a northeasterly direction to a point about one kilometer south of Koliebken Church, where the Danzig-Neustadt Railway crosses a stream;

A line to be fixed on the ground passing southeast of Kamehlen, Krissau, Fidlin, Sulmin, (Richthof,) Mattern, Schaferei, and to the northwest of Neuendorf, Marschau, Czapielken, Hoch and Klein Kelpin, Pulvermühl, Renneberg, and the towns of Oliva and Zoppot;

Thence the course of this stream to the Baltic Sea.

The boundaries described above are drawn on a German map scale 1-100,000, attached to the present treaty, (Map No. 4.)

ARTICLE 101.—A commission composed of three members appointed by the principal Allied and Associated Powers, including a High Commissioner as President, one member appointed by Germany, and one member appointed by Poland, shall be constituted within fifteen days of the coming into force of the present treaty for the purpose of delimiting on the spot the frontier of the territory as described above, taking into account as far as possible the existing communal boundaries.

ARTICLE 102.—The principal Allied and Associated Powers undertake to establish the town of Danzig, together with the rest of the territory described in Article 100, as a free city. It will be placed under the protection of the League of Nations.

ARTICLE 103.—A constitution for the free city of Danzig shall be drawn up by the duly appointed representatives of the free city in agreement with a High Commissioner to be appointed by the League of Nations. The constitution shall be placed under the guarantee of the League of Nations.

The High Commissioner will also be intrusted with the duty of dealing in the first instance with all differences arising between Poland and the free city of Danzig in regard to this treaty or any arrangements or agreements made thereunder.

The High Commissioner shall reside at Danzig.

ARTICLE 104.—The principal Allied and Associated Powers undertake to negotiate a treaty between the Polish Government and the free city of Danzig which shall come into force at the sa