Part 8

Every community that reached or exceeded its quota to the loan was entitled to raise a flag of honor specially designed for the purpose. At least 32,000 communities gained the honor and raised the flag.

To strengthen the financial basis of the nation's war industries and use monetary resources to the best advantage the War Finance Corporation bill was passed by Congress and approved by President Wilson on April 5, 1918. The two main purposes of the act are to provide credits for industries and enterprises necessary or contributory to the prosecution of the war and to supervise new issues of capital. The act creates the War Finance Corporation, consisting of the Secretary and four additional persons, with $500,000,000 capital stock, all subscribed by the United States. Banks and trust companies financing war industries or enterprises may receive advances from the corporation.

Former War Loans of the United States

A Historical Retrospect

_The United States Government asked for $2,000,000,000 on the First Liberty Loan in the Spring of 1917, and $3,034,000,000 was subscribed by over 4,000,000 subscribers. For the Second Loan, near the end of 1917, $3,000,000,000 was sought, and $4,617,532,300 was subscribed by 9,420,000 subscribers._

_The Guaranty Trust Company of New York in a recent brochure reviewed the history of the various war loans of the United States, beginning with the Revolutionary loans, as follows:_

When the patriots at Lexington "fired the shot heard 'round the world," the thirteen Colonies found themselves suddenly in the midst of war, but with practically no funds in their Treasuries. The Continental Congress was without power to raise money by taxation, and had to depend upon credit bills and requisitions drawn against the several Colonies. France was the first foreign country to come to the aid of struggling America, the King of France himself advancing us our first loan. All told, France's loan was $6,352,500; Holland loaned us $1,304,000; and Spain assisted us with $174,017. Our loan from France was repaid between 1791 and 1795 to the Revolutionary Government of France; the Holland loan during the same period in five annual installments, and the Spanish loan in 1792-3.

Our first domestic war loan of £6,000 was made in 1775, and the loan was taken at par. A year and a half later found Congress laboring under unusual difficulties. Boston and New York were held by the enemy, the patriot forces were retreating, and the people were as little inclined to submit to domestic taxation as they had formerly been to "taxation without representation." To raise funds even a lottery was attempted. In October, 1776, Congress authorized a second loan for $5,000,000. It was not a pronounced success, only $3,787,000 being raised in twelve months. In 1778 fourteen issues of paper money were authorized as the only way to meet the expenses of the army. By the end of the year 1779 Congress had issued $200,000,000 in paper money, while a like amount had been issued by the several States. In 1781, as a result of this financing and of the general situation, Continental bills of credit had fallen 99 per cent.

Then came Robert Morris, that genius of finance, who found ways to raise the money which assured the triumph of the American cause. By straining his personal credit, which was higher than that of the Government, he borrowed upon his own individual security on every hand. On one occasion he borrowed from the commander of the French fleet, securing the latter with his personal obligation. If Morris and other patriotic citizens had not rendered such assistance to the Government, some of the most important campaigns of the Revolutionary War would have been impossible. Following came the Bank of Pennsylvania, which issued its notes--in effect, loans--to provide rations and equipment for Washington's army at Valley Forge. These notes were secured by bills of exchange drawn against our envoys abroad, but it was never seriously intended that they should be presented for payment. The bank was a tremendous success in securing the money necessary to carry out its patriotic purposes, and was practically the first bank of issue in this country.

With the actual establishment of the United States and the adoption of the Constitution, Alexander Hamilton came forward with a funding scheme by which the various debts owed to foreign countries, to private creditors, and to the several States were combined. In 1791, on a specie basis, our total debt was $75,000,000. The paper dollar was practically valueless and the people were forced to give the Government adequate powers to raise money and to impose taxes. Between that date and 1812 thirteen tariff bills were passed to raise money to meet public expenditures and pay off the national debt.

THE WAR OF 1812.

For some time previous to the actual outbreak of the War of 1812 hostilities had been predicted. In a measure, this enabled Congress to prepare for it. And although the war did not begin until June of 1812, as early as March of that year a loan of $11,000,000, bearing 6 per cent. at par, to be paid off within 12 years from the beginning of 1813, was authorized. Of this, however, only $2,150,000 was issued, and all was redeemed by 1817. The next year a loan of $16,000,000 was authorized and subscribed. This was followed, in August, by a loan of $7,500,000 which sold at 88-1/4 per cent.

At the end of the war the total loans negotiated by the Government aggregated $88,000,000. The nation's public debt, as a result of this war, was increased to $127,334,933 in 1816. By 1835, either by redemptions or maturity, it was all paid.

MEXICAN WAR LOANS

The Mexican War net debt incurred by the United States was approximately $49,000,000 and was financed by loans in the form of Treasury notes and Government stock. The Treasury notes, under the act of 1846, totaled $7,687,800 and the stock $4,999,149. The latter paid 6 per cent. interest. By act of 1847 Treasury notes to the amount of $26,122,100 were issued, bearing interest in the discretion of the Secretary of the Treasury, reimbursable one and two years after date, and convertible into United States stock at 6 per cent. They were redeemable after Dec. 31, 1867. Economic developments following this war led to a period of extraordinary industrial prosperity which lasted for several years. A change in the fiscal policy of the Government, with overexpansion of industry, however, resulted in a panic in 1857 and a Treasury deficit in 1858. The debt contracted in consequence of the Mexican War was redeemed in full by 1874.

The situation had not improved to any great extent when Lincoln took office on March 4, 1861, and by mid-November of that year a panic was in full swing. The outbreak of the civil war found the Treasury empty and the financial machinery of the Government seriously disorganized. Public credit was low, the public mind was disturbed, and raising money was difficult. In 1862 the Legal Tender act was passed, authorizing an issue of $150,000,000 of legal-tender notes, and an issue of bonds in the amount of $500,000,000 was authorized.

This proved to be a most popular loan. The bonds were subject to redemption after five years and were payable in twenty years. They bore interest at 6 per cent., payable semi-annually, and were issued in denominations of $50, $100, $500, and $1,000. Through one agent, Jay Cooke, a genius at distribution, who employed 2,850 sub-agents and advertised extensively, this loan was placed directly with the people at par in currency. Altogether the aggregate of this loan was $514,771,600. Later in that year Congress authorized a second issue of Treasury notes in the amount of $150,000,000 at par, with interest at 6 per cent.; in January, 1863, a third issue of $100,000,000 was authorized, which was increased in March to $150,000,000, at 5 per cent. interest. These issues were referred to as the "one and two year issues of 1863."

DEFICIT IN 1862

In December, 1862, Congress had to face a deficit of $277,000,000 and unpaid requisitions amounting to $47,000,000. By the close of 1863 nearly $400,000,000 had been raised by bond sales. A further loan act, passed March 3, 1864, provided for an issue of $200,000,000 of 5 per cent. bonds known as "ten-fortys," but of this total only $73,337,000 was disposed of. Subsequently, on June 30, 1864, a great public loan of $200,000,000 was authorized. This was an issue of Treasury notes, payable at any time not exceeding three years, and bearing interest at 7-3/10 per cent. Notes amounting to $828,800,000 were sold. The aggregate of Government loans during the civil war footed up a total of $2,600,700,000; and on Sept. 1, 1865, the public debt closely approached $3,000,000,000, less than one-half of which was funded.

Civil war loans, with one exception, which sold at 89-3/10, were all placed at par in currency, subject to commissions ranging from an eighth to one per cent. to distributing bankers. The average interest nominally paid by the Government on its bonds during the war was slightly under 6 per cent. Owing to payment being made in currency, however, the rate was, in reality, much higher. With the conclusion of the war, the reduction of the public debt was undertaken, and it has continued with but two interruptions to date.

Heavy tax receipts for several years after the close of the war potentially enabled the Government to reduce its debt. Indeed, from 1866 to 1891, each year's ordinary receipts exceeded disbursements, and enabled the Government to lighten its financial burdens. In 1866 the decrease in the net debt was $120,395,408; in 1867, $127,884,952; in 1868, $27,297,798; in 1869, $48,081,540; in 1870, $101,601,917; in 1871, $84,175,888; in 1872, $97,213,538, and in 1873, $44,318,470.

Through refunding operations--in addition to bonds and short-time obligations redeemed with surplus revenues--the Government paid off, up to 1879, $535,000,000 bonds bearing interest at from 5 to 6 per cent. In this year the credit of the Government was on a 4 per cent. basis, and a year later on a 3-1/4 per cent. basis, against a maximum basis of 15-1/2 per cent. in 1864.

Between 1881 and 1887 the Governzment paid off, either with surplus revenues or by conversion, $618,000,000 of interest-bearing debt. In 1891 all bonds then redeemable were retired, and on July 1, 1893, the public debt amounted to less than one-third of the maximum outstanding in 1865. In 1900 the Government converted $445,900,000 bonds out of an aggregate of $839,000,000 convertible under the refunding act passed by Congress in that year. And further conversions in 1903, 1905, and 1907 brought the grand total up to $647,250,150--a result which earned for the Government a net annual saving in interest account of $16,551,037.

SPANISH WAR LOANS

The United States is a debt-paying nation. Hence, America's credit, despite occasional fluctuations, has steadily risen, and our national debt has sold on a lower income basis than that of any other nation in the world.

Following the sinking of the Maine in Havana Harbor, in 1898, Congress authorized an issue of $200,000,000 3 per cent. ten-twenty-year bonds. Of this aggregate $198,792,660 were sold by the Government at par. So popular was this loan, it was oversubscribed seven times. During the year 1898, following the allotment to the public, this issue sold at a premium, the price going to 107-3/4, and, during the next year, to 110-3/4. After the war ended, the Government, in accordance with its unvarying custom, began to pay off this debt; but, despite the Secretary of the Treasury's offer to buy these bonds, he succeeded in purchasing only about $20,000,000 of them.

American Labor Mission in Europe

War Aims of Organized Workers Conveyed to English and French Labor Unions

An American Labor Mission visited England and France in April, 1918, to present the views of American workingmen regarding the war. The delegation numbered eighteen, headed by James Wilson, President of the Patternmakers' League of North America. In his first address at London, April 28, before the British and Foreign Press Association, Mr. Wilson said:

We recognize as a fundamental truth that there can be no democracy with the triumph of the Imperial German Government. The principle of democracy or the principle of Prussian military autocracy will prevail as a result of the world war. There can be no middle course nor compromise. The contest must be carried on to its finality.

The Central Powers have staked everything on the result of this struggle. Their defeat means the destruction of a machine which has been built with remarkable efficiency and embodies the very life of the German race.

On the other hand, every free man instinctively appreciates that if we are to maintain the standard of civilization as worked out by the free men of the world, and if posterity is to be guaranteed political and industrial freedom, the war must be won by the allied countries. Peace now would be the fulfillment of the Prussian dream, for they have within their grasp the very heart of Continental Europe and resources which would make sure further conquest upon the other nations of the world.

The American labor movement, in whose behalf my colleagues and myself have been authorized to speak, declare most emphatically that they will not agree to a peace conference with the enemies of civilization, irrespective of what cloak they wear, until Prussian militarism has withdrawn within its own boundaries, and then not until the Germans have, through proper representatives, proved to our satisfaction that they recognize the right of peoples and civilized nations to determine for themselves what shall be their standard.

Unless reconstruction shall soon come from the German workers within that country, it is now plain that the opportunity to uproot the agencies of force will only come when democracy has defeated autocracy in the military field and wins the right to reconstruct the relations between nations and men.

German freedom is ultimately the problem of the German people, but the defeat of Prussian autocracy in the field will bring the opportunity for German liberty at home.

BRITISH SEAMEN'S ATTITUDE

J. Havelock Wilson, President of the British Seamen's Union, conferred with the American Mission at London, April 30, and informed it of the decision of his union to transport no pacifists to any peace conference. He made the following statement:

On Sept. 21, 1917, we formed what we called a Merchant Seamen's League, and declared that if German terrorism on the sea continued we would enforce a boycott against Germany for two years after the war, and that for every new crime from that time on we would add one month to the length of the boycott. The length of the boycott now stands at five years seven months. We have reliable information that this action is making a very profound impression on German manufacturers and shippers.

The British seamen got their first intimation of German treachery when the international transport strike was first proposed by German delegates ostensibly to pledge support. But the British learned later that the German delegates had in their pockets as they talked contracts signed with employers.

After that we watched the German Social Democrats in the Socialists' international. But we never could get the Germans to face the issue. Always they had excuses and evasions. We never had confidence in them. When war came we felt it our duty to take care of the men on our ships who could no longer sail, and also to set a good example.

Here were Germans on our ships who had been in England so long that they had forgotten their language. On Aug. 20, 1914--you see we acted quickly--we bought an estate of thirty-nine acres and built the model internment camp of Great Britain. We asked the Government to give us charge of all interned German sailors, and, let it be known to the credit of Great Britain, that was done. The Government allowed us all 10s. per week per man for upkeep. The camp became a great success. There were 1,000 German sailors interned in it.

Until May, 1915, all went well. On May 1 the interned men celebrated May Day, their international revolutionary holiday. They had their banners, "Workers of the World, Unite," "World Brotherhood," and so on. We had planned a great fête to be held later and I had secured the consent of several well-known persons to attend and help make it a success. On May 7 the Lusitania was sunk. I called the Germans in camp together and told them the terrible thing that had happened. I told them they were not to blame, but that the celebration could not be held. And they made no protest to me.

Now here were 1,000 Germans not under control of the Kaiser. Some of them had been among us twenty or thirty years. As soon as I had got out of the place they sang and cheered and rejoiced over the Lusitania disaster. They kept this up for four hours. They made me conclude that the camp must be handed over to the military as soon as possible, and this was done. Six months after that came the U-boat campaign, and, what made that worse, the fact that the U-boats always turned their guns on open boats.

I have got hundreds of cases of boys whose arms and legs have been blown off by U-boat guns while trying to get away from sinking ships in open boats. I wrote the Secretary of the International Transport Workers' Union protesting against these crimes. His reply attempted to justify every crime. That showed us that not only was the Kaiser responsible, but that the organized trade union movement of Germany was also responsible.

On June 1, 1917, a Socialist congress was convened at Leeds. It was advertised as the greatest conference ever held. We sent two men there to tell our story. Our men found that small bodies of only a handful of members had been delegated, who got the floor easily for the pacifist cause. Our men could not secure anything like a fair chance.

In this conference MacDonald, Fairchild, and Jowett were elected delegates to Stockholm. We at once resolved that no delegates should leave this country. And none did.

That is the history of the seamen's determination to bottle up such British pacifists as may desire to go abroad spreading their doctrine. Mingled with it is the grim, sad story of 12,000 members of the Seamen's Union who have lost their lives on merchant ships through Germany's criminal conduct on the seas.

And while there is here and there one in England who resembles a leader of labor who is a pacifist, the determination of the British seamen to go through with the war to the finish is scarcely more than a reflection of the rank-and-file spirit that is to be found throughout the whole of British labor.

NO PARLEYS WITH ENEMY LABOR

The American delegates met the representatives of labor in London and in Paris. In England they found the sentiment almost unanimous in approval of their decision to favor no conferences with German labor representatives until a victory had been achieved. In France, however, they encountered a group that favored contact with the German and Austrian Socialists. On May 6 there was a conference in Paris between the American labor delegates and the members of the Confederation Générale de Travail, the great French revolutionary labor organization. M. Jouhaux, General Secretary of the confederation, made the proposed international conference practically the sole note of his speech. France, he asserted, had no hatred for the German workers themselves, and he pointed out that if the conference took place it could have only one of two results. Either the workers in the enemy countries would refuse to join in the efforts of the workers of the allied countries for the liberation of the world's peoples, in which case the war must continue, or they would accept the allied view of what was right and would act with the allied peoples for the good of humanity.

The American reply was in these definite words:

"We don't hate the German workers any more than you do, but to give them our hand now would be looked upon by them only as a sign of weakness."

After reminding the congress of the hypocritical professions of the German Socialist Party before the war, the delegation declared itself in entire agreement with Samuel Gompers that American labor men would refuse to meet the German delegates under any circumstances so long as Germany was ruled by an Imperialistic Government. This declaration left Albert Thomas, former Cabinet officer and leader of the group, practically without a word to say. M. Thomas urged the same arguments as Jouhaux, but all the satisfaction the French labor men got was a promise from James Wilson, President of the American delegation, to report the matter to the American workers when he returned home.

Chairman Wilson reaffirmed at a luncheon given at the Foreign Office May 10 that American labor would not discuss the war with representatives of German labor until victory was won, because German labor, which was permitting the war, must do something itself in its own country toward ending the conflict justly before it could debate with labor representatives of the allied countries on what ought to be.

The luncheon was given by Stephen Pichon, Foreign Minister, on behalf of the French Government. With the exception of Premier Clemenceau, all the members of the Cabinet were present as well as other men notable in French public life. Ambassador Sharp was also in attendance.

The mission visited the fighting front and returned to London May 11 to hold mass meetings at English industrial centres. The members were received by the King and dined by the London Chamber of Commerce May 15.

Progress of the War

Recording Campaigns on All Fronts and Collateral Events From April 18, 1918, Up to and Including May 17, 1918

UNITED STATES

The campaign for the Third Liberty Loan of $3,000,000,000 ended on May 4. The total subscription was $4,170,019,650, as announced by the Treasury Department on May 17.

On April 20 President Wilson issued a proclamation extending to women enemy aliens the restrictions imposed on men.

The Overman bill, giving the President power to consolidate and co-ordinate executive bureaus and agencies as a war emergency measure, was passed by the Senate on April 28 and by the House on May 14.

The War Trade Board announced on May 3 that a general commercial agreement with Norway had been signed. On May 12 it announced that in order to conserve materials and labor and to add tonnage to the fleet carrying men and munitions to Europe, arrangements had been made to have Great Britain, France, Italy, and Belgium pass upon the advisability of releasing proposed exports before granting licenses to shippers. On May 14 an agreement was reached between the United States and the allied nations providing that all imports to the United States should be forbidden unless sanctioned by the War Trade Board.

A conference report on the Sedition bill, giving the Government broad new powers to punish disloyal acts and utterances, was adopted by the Senate on May 4, and by the House of Representatives on May 7, and sent to the President for his signature.