Chapter 12

AMERICAN RELIEF ADMINISTRATION

With the coming of the armistice victorious America and the Allies found themselves face to face with a terrible situation in Eastern Europe. The liberated peoples of the Baltic states, Poland, Czecho-Slovakia, Jugo-Slavia, and the Near East, were in a dreadful state of starvation and economic wreckage. A great, responsibility and pressing duty devolved on America, Great Britain, France, and Italy to act promptly for the relief of these peoples who had become temporarily, by the hazards of war, their wards. But the Allies themselves were in no enviable position to relieve others. Their own troubles were many. It was on America that the major part of this relief work would fall.

No man knew this situation, as far as it could be known before the veil of blockade and military control was lifted from it, better than Hoover. And no man realized more clearly than he the direful consequences that it threatened not only to the peoples of the suffering countries themselves but to the peace and stability of the world, to restore which every effort had now to be exerted. Hoover was not only the man logically indicated to the President of the United States to undertake this saving relief on the part of America, but he was the man whom all of Europe recognized as the source of hope in this critical moment. He came to the gigantic endeavor as the man of the hour.

Hoover naturally made Paris his headquarters, for the Peace Conference was sitting here, and here also were the representatives of the Allies with whom he was to associate himself in the combined effort to save the peoples of Eastern Europe from starvation and help them make a beginning of self-government and economic rehabilitation.

His first steps were directed toward: First, securing coördination with the Allied Governments by setting up a council of the associated governments; second, finding the necessary financial support from the United States for making the American contribution to this relief; third, setting up a special organization for the administration of the American food and funds; and, fourth, urging the provision of funds and shipping by the Allied Governments.

The special American organization for assisting in this general European relief was quickly organized under the name of the American Relief Administration, of which Hoover was formally named by the President Director-General, and Congress on the recommendation of the President appropriated, on February 24, 1919, $100,000,000 as a working fund for the new organization. In addition to this the United States Treasury was already making monthly loans of several million dollars each to Roumania, Serbia, and Czecho-Slovakia. But while waiting for the Congressional appropriation the work had to be got going, and for this the President contributed $5,000,000 from his special funds available for extraordinary expenses.

Before actual relief work could be intelligently begun, however, it was necessary to find out by personal inspection just what the actual food situation in each of the Eastern European countries was, and for that purpose investigating missions were sent out in December, 1918, and January, 1919, to all of the suffering countries.

Hoover had quickly gathered about him, as nucleus of a staff, a number of men already experienced in relief work and food matters who had worked with him in the Belgian relief and the American Food Administration. Others were rapidly added, both civilians of business or technical experience and army officers, detached at his request, especially from the Quartermaster and Service of Supplies corps. From these men he was able to select small groups eager to begin with him the actual work. His own impatience and readiness to make a real start was like that of a race-horse at the starting gate or a runner with his toes on the line awaiting the pistol shot.

The atmosphere of Paris was an irritating one. The men in control were always saying "wait." There were a thousand considerations of old-time diplomacy, of present and future political and commercial considerations in their minds. They were conferring with each other and referring back to their governments for instructions and then conferring again. Common sense and necessity were being restrained by political sensitiveness and inertia. In Hoover's mind one thing was perfectly clear. Time was of the essence of his contract. Every day of delay meant more difficulty. The Eastern countries, struggling to find themselves in the chaos of disorganization, waiting for an official determination of their new borders, were already becoming entangled in frontier brawls and quarreling over the control of local sources of food and fuel. Their people were suffering terribly and were clamoring for help. Hoover was there to help; he wanted to begin helping. So he began.

Hoover had already taken the position that the day of hate was passed. With the end of mutual slaughter and destruction came immediately the time for help. It was like that pitiful period after the battle when the bloody field is taken over by the stretcher-bearers, the Red Cross nurses, and the tireless surgeons. So Hoover had already clearly in mind that the hand of charity was going to be extended to the sufferers in Hungary and Austria and Germany as well as to the people who were suffering because of the ravages of the armies of these nations. Dr. Alonzo Taylor and I, whom he had sent early in December to Switzerland to get into close touch with the situation in Eastern and Central Europe, listened, for him, in Berne to the pitiful pleas of the representatives of starving Vienna. By January Hoover's missions were installed and at work in Trieste, Belgrade, Vienna, Prague, Buda-Pest, and Warsaw. In February Dr. Taylor and I were reporting the German situation from Berlin.

The attitude of the people in these countries was one of pathetic dependence on American aid and confidence that it would be forthcoming. The name of Hoover was already known all over Europe because of his Belgian work, and the swiftly-spread news that he was in charge of the new relief work acted like magic in restoring hope to these despairing millions.

When the first food mission to Poland, making its way in the first week of January, 1919, with difficulty and discomfort because of the demoralized transportation conditions, had reached that part of its journey north of Vienna towards Cracow which brought it into Czecho-Slovakia, our train halted at a station gaily decorated with flags and bunting among which the American colors were conspicuous. A band was playing vigorously something that sounded like the Star-Spangled Banner, and a group of top-hatted and frock-coated gentlemen were the front figures in a great crowd that covered the station platform. I was somewhat dismayed by these evident preparations for a reception, for we were not coming to try to help Czecho-Slovakia, but Poland, between which two countries sharp feeling was already developing in connection with the dispute over the Teschen coal fields. I told my interpreter, therefore, to hurry off the train and explain the situation.

He returned with one of the gentlemen of high hat and long coat who said, in broken French: "Well, anyway, you are the food mission, aren't you?" I replied, "Yes, but we are going to Warsaw; we are only passing through your country; we can't do anything for you."

"But," he persisted, "you are the Americans, aren't you?"

"Yes, we are the Americans."

"Well, then, it's all right." And he waved an encouraging hand to the band, which responded with increased endeavor, while the crowd cheered and waved the home-made American flags. And we were received and addressed, and given curious things to drink and a little food--we gave them in return some Red Cross prisoner packages we carried along for our own maintenance--and then we were sent on with more cheers and hearty Godspeeds.

Delay so plainly meant sharper suffering and more deaths that even before the necessary financial and other arrangements were completed or even well under way, Hoover had made arrangements with the Secretary of War by which vessels carrying 135,000 tons of American food were diverted from French to Mediterranean ports, and with the Grain Corporation, under authority of the Treasury, by which 145,000 tons were started for northern European ports. Thus by the time arrangements had been made for financing the shipments and for internal transportation and safe control and fair distribution, the food cargoes were already arriving at the nearest available ports. Within a few weeks from the time the first mission arrived in Warsaw and had reported back to Hoover the terrible situation of the Polish people, the relief food was flowing into Poland through Dantzig, the German port for the use of which for this purpose a special article in the terms of the armistice had provided, but which was only most reluctantly and by dint of strong pressure made available to us.

Similarly from Trieste the food trains began moving north while there still remained countless details of arrangement to settle. I was in Vienna when the first train of American relief food came in from the South. The Italians were also attempting to send in some supplies, but so far all the trains which had started north had been blocked at some border point. The American train was in charge of two snappy doughboys, a corporal and a private. When it reached the point of blockade the corporal was told that he could go no farther. He asked why, but only got for answer a curt statement that trains were not moving just now. "But this one is," he replied, and called to his private: "Let me have my gun." With revolver in hand he instructed the engineer to pull out. And the train went on. When I asked him in Vienna if he had worried any at the border about the customs and military regulations of the governments concerned which he was disregarding, he answered with a cheerful smile: "Not a worry; Mr. Hoover's representative at Trieste told me to take the train through and it was up to me to take her, wasn't it? These wop kings and generals don't count with me. I'm working for Hoover."

But the whole situation in these southeastern countries because of their utter disorganization and their hopeless embroilment in conflict with each other, was too impossible. Whatever degree of peace the capitals of these countries recognized as the diplomatic status of the moment, the frontiers had no illusions. There were trenches out there and machine-guns and bayonets. Men were shooting at each other across the lines. Either the trains or cars of one country would be stopped at the border, or if they got across they did not get back. Some countries had enough cars and locomotives; some did not. If one country had some coal to spare but was starving for lack of the wheat which could be spared by its neighbor, which was freezing, there was no way of making the needed exchange. The money of each country became valueless in the others--and of less and less value in its own land. Everything was going to pieces, including the relief. It simply could not go on this way.

Finally, as a result of Hoover's insistence at Paris on the terrible danger of delay both to the lives of the people and the budding democracy of Europe, the Supreme Economic Council took the drastic measure of temporarily taking over the control of the whole transportation system of Southeastern Europe which was put into Hoover's hands, leaving him to arrange by agreement, as best he could, according to his own ideas and opportunities, the other matters of finance, coal, the interchange of native commodities between adjacent countries and the distribution of imported food.

Hoover became, in a word, general economic and life-saving manager for the Eastern European countries. It is from my personal knowledge of his achievements in this extraordinary position during the first eight months after the Armistice that I have declared my belief earlier in this account that it was owing more to Hoover and his work than to any other single influence that utter anarchy and chaos and complete Bolshevik domination in Eastern Europe (west of Russia) were averted. In other words, Hoover not only saved lives, but nations and civilizations by his superhuman efforts. The political results of his work were but incidental to his life-saving activities, but from an historical and international point of view they were even more important.

Before, however, referring to them more specifically, something of the scope and special character of the general European relief and supply work should be briefly explained.

Altogether, twenty countries received supplies of food and clothing under Hoover's control acting as Director-General of Relief for the Supreme Economic Council. The total amount of these supplies delivered from December 1, 1918, to June 1, 1919, was about three and a quarter million tons, comprising over six hundred shiploads, of a total approximate value of eight hundred million dollars. There were, in addition, on June 1, port stocks of over 100,000 tons ready for internal delivery, and other supplies came later.

The twenty countries sharing in the supplies included Belgium and Northern France (through the C. R. B.), the Baltic states of Finland, Esthonia, Latvia, and Lithuania, a small part of Russia, Poland, Czecho-Slovakia, Germany, German Austria, Hungary, Roumania, Bulgaria, Greater Servia, Turkey, Armenia, Italy, and the neutrals, Denmark and Holland. By the terms of the Congressional Act appropriating the hundred million dollars for the relief of Eastern Europe, no part of the money could be used for the relief of Germany, Austria, Hungary, Bulgaria, or Turkey. But Vienna needed help more quickly and imperatively than any other eastern capital. Hoover arranged that money should be advanced by England and France for food purchases in America for Austria and Hungary. This food was put into Hoover's hands, and to him was left the problem of getting it into the suffering countries. Germany was supplied under the approval of the Allies in accordance with the armistice agreement.

The "relief" of Eastern and Central Europe was, of course, not all charity in the usually accepted meaning of the term. The American hundred million dollars and the British sixty million dollars could not buy the needed eight hundred millions' worth of food and clothing. In fact, of that American hundred million all but about fifteen are now again in the U. S. Treasury in the form of promises to pay signed by various Eastern European Governments. About ten millions of it were given by Hoover outright, in the form of special food for child nutrition, to the under-nourished children from the Baltic to the Black Sea. By additions made to this charity by the Eastern European Governments themselves and by the nationals of these countries resident in America, and from other sources, two and a half million weak children are today still being given (May, 1920) a daily supplementary meal of special food.

Hoover's experience in Belgium and Northern France had taught him how necessary was the special care of the children. All the war-ravaged countries have lost a material part of their present generation. In some of them the drainage of human life and strength approaches that of Germany after the Thirty Years War and of France after the Napoleonic wars. If they are not to suffer a racial deterioration the coming generation must be nursed to strength. The children, then, who are the immediately coming generation and the producers of the ones to follow, must be particularly cared for. That is what Hoover gave special attention to from the beginning of his relief work and it is what he is now still giving most of his time and energy to.

For the general re-provisioning of the peoples of Eastern and Central Europe all of the various countries supplied were called on to pay for the food at cost, plus transportation, to the extent of their possibilities. Gold, if they had it--all of Germany's supply was paid for in gold--paper money at current exchange, government promissory notes, and commodities which could be sold to other countries, made up the payments. The charity was in making loans, providing the food, getting ships and barges and trains and coal for its transportation, selling it at cost, and giving the service of several hundred active, intelligent, and sympathetic Americans, mostly young and khaki-clothed, and a lesser group of Allied officers, all devoted to getting the food where it was needed and seeing that it was fairly distributed.

It is impossible to depict the utter bewilderment and helplessness of the governments of the liberated nations of Eastern Europe at the beginning of the armistice period. Nor is it possible to explain adequately the enormous difficulties they faced in any attempt at organizing, controlling, and caring for their peoples. With uncertain boundaries--for the demarcation of these they were waiting on a hardly less bewildered group of eminent gentlemen in Paris; with a financial and economic situation presenting such appalling features of demoralization that they could only be realized one at a time; with their people clamoring for the immediately necessary food, fuel and clothing, and demanding a swift realization of all the benefits that their new freedom was to bring them; and with an ever more menacing whistling wind of terror blowing over them from the East--with all this, how the responsible men of the governments which rapidly succeeded each other in these countries retained any persistent vestiges of sanity is beyond the comprehension of those of us who viewed the scene at close range.

For a single but sufficient illustration let us take the situation in the split apart fragments of the former great Austro-Hungarian Empire, which now constitute all or parts of German Austria, Hungary, Czecho-Slovakia, Jugo-Slavia and Roumania. For all these regions (except Roumania) Vienna had for years been the center of political authority and chief economic control. In Vienna were many of the land-owners, most of the heads of the great industries, and the directors of the transportation system. It was the financial and market center, the hub of a vast, intricate, and delicate orb-web of economic organization. But the people and the goods of the various separated regions, except German Austria, the smallest, weakest, and most afflicted one of them all, were cut off from it and all were cut off from each other. The final political boundaries were not yet fixed, to be sure, but actual military frontiers were already established with all their limitations on inter-communication and their disregard of personal needs. Shut up within their frontiers these regions found themselves varyingly with or without money--if they had any it was of ever-decreasing purchasing power--with or without food, fuel, and raw materials for industry; and with lesser or larger numbers of locomotives and railway cars, mostly lesser. But of everything the distribution bore no calculated relation to the needs of the industry and commerce or even to the actual necessities of the people for the preservation of health and life.

Vienna, itself, "_die lustige schöne Stadt Wien_" was, as it still is today and for long will be, the saddest great capital in Europe. Reduced from its position of being the governing, spending, and singing and dancing capital of an empire of fifty-five million people--it never was a producing capital--to be the capital of a small, helpless nation of scant seven million people concentrated in a region unable to meet even their needs of food and coal--Vienna represents the pathetic extreme of the cataclysmic results of War.

But if the situation was most complex and hopeless in the south, it was far from simple or hopeful in the north. Poland, the smaller Baltic states and Finland were all in desperate plight and their new governments were all aghast at the magnitude of the problem before them. To add to the difficulties of general disorganization of peoples, lack of the necessities of life, and helplessness of governments, there was ever continuing war. Armistice meant something real on the West and Austro-Italian fronts, but it meant little to Eastern Europe. There was a score of very lively little wars going on at once over there: Poland alone was fighting with four different adversaries, one at each corner of her land.

But the climax of the situation was reached in the realization by all immediately concerned that something saving had to be done at once, or the whole thing would become literal anarchy, with red and howling death rampant over all. Bolshevik Russia, just over the Eastern borders, was not only a vivid reality to these countries, but it was constantly threatening to come across the borders and engulf them.

Its agents were working continuously among their peoples; there were everywhere the sinister signs of the possibility of a swift removal of the frontiers of Bolshevism from their Eastern to their Western borders. In Paris the eminent statesmen and famous generals of the Peace Conference and the Supreme Council sat and debated. They sent out occasional ultimata ordering the cessation of fighting, the retirement from a far advanced frontier, and what not else. Inter-Allied Economic and Military Missions came and looked on and conferred and returned. But nobody stopped fighting, and the conferences settled nothing. The Allies were not in a position--this need be no secret now--to send adequate forces to enforce their ultimata. An Inter-Allied Military Mission of four generals of America, Great Britain, France and Italy started by special train from Cracow to Lemberg to convey personally an ultimatum to the Ruthenians and Poles ordering them to stop fighting. The train was shelled by the Ruthenians east of Przemsyl, and the generals came back. Eastern Europe expected the great powers to do something about this, but nothing happened, and the discount on ultimata became still more marked.

Somebody had to do something that counted. So Hoover did it. It was not only lives that had to be saved; it was nations. It was not only starvation that had to be fought; it was approaching anarchy, it was Bolshevism.

As already stated, Hoover's food ships had left America for Southern and Northern European ports before Hoover's men had even got into the countries to be fed. As a consequence, food deliveries closely followed food investigations. That counted with the people. One of Hoover's rules was that food could only go into regions where it could be safeguarded and controlled. That counted against Bolshevism. Shrewd Bela Kun was able to play a winning game in Hungary against the Peace Conference and Supreme Councils at Paris, but he was out-played by soft-voiced, square-jawed Captain "Tommy" Gregory, Hoover's general director for Southeast Europe, and it was this same California lawyer in khaki, turned food man, who, when the communist Kun had passed and the pendulum had swung as dangerously far in the other direction, allowing the audacious Hapsburg, Archduke Joseph, to slip into power, had done most to unseat him.

Gregory had been able to commandeer all the former military wires in the Austro-Hungarian countries for use in the relief work. So he was able to keep Hoover advised of all the news, not only promptly, but in good Americanese. His laconic but fully descriptive message to Paris announcing the Archduke's passing read: "August 24th, Archie went through the hoop at 8 P. M. today."

Relief in Eastern Europe was spelled by Hoover with a capital _R_ and several additional letters. It really spelled Rehabilitation. It meant, in addition to sending in food, straightening out transportation, getting coal mines going, and the starting up of direct exchange of commodities among the unevenly supplied countries. There was some surplus wheat in the Banat, some surplus coal in Czecho-Slovakia, some extra locomotives in Vienna. So under the arbitrage of himself and his lieutenants there was set up a wholesale international bartering, a curious reversion to the primitive ways of early human society.

This exchange of needed goods by barter solved in some degree the impossible financial situation, gave the people an incentive to work, and helped reduce political inflammation. It was practical statesmanship meeting things as they were and not as they might more desirably be, but were not. I say again, and many men in the governments of Eastern Europe, and even in the councils in Paris[1] have said, that Hoover saved Eastern Europe from anarchy, and held active Bolshevism to its original frontiers. That meant saving Western Europe, too.

Then Hoover came back to America to be an American private citizen again. That is what he is today. He is still carrying on two great charities in Eastern Europe: the daily feeding of millions of under-nourished children, and the making possible, through his American Relief Warehouses, for anyone in America to help any relatives or friends anywhere in Eastern Europe by direct food gifts. But he is doing it as private citizen. The story of Hoover--as far as I can write it today--is that of an American who saw a particular kind of service he could render his country and Europe and humanity in a great crisis. He rendered it, and thus most truly helped make the world safe for Democracy and human ideals. It would only be fair to add to his Belgian citation the larger one of American Citizen of the World and Friend of All the People. But he would only be embarrassed if anyone attempted to do it now. We can safely leave the matter to History.

[Footnote 1: The official representative of the Treasury of one of the Allied powers, who had no reason to be too friendly to the American director of relief, for Hoover had often to oppose the policies of this power in the Paris councils, has recently written of him: "Mr. Hoover was the only man who emerged from the ordeal of Paris with an enhanced reputation. This complex personality, with his habitual air of weary Titan (or, as others might put it, of exhausted prizefighter), his eyes steadily fixed on the true and essential facts of the European situation, imported into the Councils of Paris, when he took part in them, precisely that atmosphere of reality, knowledge, magnanimity, and disinterestedness, which, if they had been found in other quarters also, would have given us the Good Peace."]

APPENDICES

APPENDIX I

STATEMENT GIVEN TO THE PRESS BY U. S. FOOD ADMINISTRATOR HOOVER ON NOVEMBER 12, 1918 (THE DAY AFTER THE ARMISTICE BEGAN), CONCERNING THE RESULTS OF FIFTEEN MONTHS OF FOOD ADMINISTRATION

With the war effectually over we enter a new economic era, and its immediate effect on prices is difficult to anticipate. The maintenance of the embargo will prevent depletion of our stocks by hungry Europe to any point below our necessities, and anyone who contemplates speculation in food against the needs of these people can well be warned of the prompt action of the government. The prices of some food commodities may increase, but others will decrease, because with liberated shipping accumulated stocks in the Southern hemisphere and the Far East will be available. The demands upon the United States will change in character but not in volume.

The course of food prices in the United States during the last fifteen months is of interest. In general, for the first twelve months of the Food Administration the prices to the farmer increased, but decreased to the consumer by the elimination of profiteering and speculation. Due to increases in wages, transportation, etc., the prices have been increasing during the last four months.

The currents which affect food prices in the United States are much less controlled than in the other countries at war. The powers of the Food Administration in these matters extend:

First, to the control of profits by manufacturers, wholesalers and dealers, and the control of speculation in foodstuffs. They do not extend to the control of the great majority of retailers, to public eating places, or the farmer, except so far as this can be accomplished on a voluntary basis.

Second, the controlled buying for the Allied civil populations and armies, the neutrals and the American army and navy, dominates the market in certain commodities at all times, and in other commodities part of the time. In these cases it is possible to effect, in coöperation with producers and manufacturers, a certain amount of stability in price. I have never favored attempts to fix maximum prices by law; the universal history of these devices in Europe has been that they worked against the true interests of both producer and consumer.

The course of prices during the first year of the Food Administration, that is, practically the period ending July 1,1918, is clearly shown by the price indexes of the Department of Agriculture and the Department of Labor. Taking 1913 prices as the basis, the average prices of farm produce for the three months ending July 1, 1917, were, according to the Department of Agriculture's price index, 115 per cent more than the average of 1913 prices, and according to the Department of Labor index, it was 91 per cent over 1913 prices. The two departments use somewhat different bases of calculation. The average of farmers' prices one year later--that is, the three months ending July 1,1918, was, according to the Department of Agriculture indexes, 127 per cent over the 1913 basis and, according to the Department of Labor index, was 114 per cent over the 1913 average. Thus farm prices increased 12 per cent on the Department of Agriculture calculations and 23 per cent upon the Department of Labor basis.

An examination of wholesale prices, that is, of prepared foods, shows a different story:

The Department of Agriculture does not maintain an index of wholesale prices, but the Department of Labor does, and this index shows a decrease in wholesale prices from 87 per cent over 1913 basis to 79 per cent over the 1913 basis for the three months ending July 1, 1917, and July 1, 1918, respectively. The Food Administration price index of wholesale prices calculated upon still another basis shows a decrease of from 84 per cent to 80 per cent between these periods one year apart.

Thus all indexes show an increase in farmers' prices and a decrease in wholesale prices of food during the year ending July 1, 1918. In other words, a great reduction took place in middlemen's charges, amounting to between 15 per cent and 30 per cent depending upon the basis of calculation adopted. These decreases have come out of the elimination of speculation and profiteering.

The course of retail prices corroborates these results also. Since October, 1917, the Food Administration has had the services of 2,500 weekly, voluntary retail price reporters throughout the United States. These combined reports show that the combined prices per unit of 24 most important foodstuffs were $6.62 in October, 1917. The same quantities and commodities could be bought for $6.55 average for the spring quarter, 1918--that is, a small drop had taken place. During this same period of quarters ending July 1, 1917, to July 1, 1918, the prices of clothing rose from 74 per cent to 136 per cent over 1913, or a rise of about 62 per cent, according to the Department of Labor indexes.

Since the spring quarter, ending July 1, 1918, there has been a rise in prices, the Department of Agriculture index for September showing that farm price averages were 138 per cent over the 1913 basis, and the Department of Labor index showing 136 per cent, or a rise from the average of the spring quarter this year of 11 per cent and 22 per cent respectively to the farmer. The wholesale price index of the Department of Labor shows a rise from 79 per cent average of the spring quarter, 1918, to 99 per cent for September, or a rise of 20 per cent. The Food Administration wholesale index shows an increase from 80 per cent to 100 per cent, or 20 per cent for the same period.

In October, 1918, the Food Administration retail price reports show that the retail cost of the same quantity of the 24 principal foodstuffs was $7.58 against an average of $6.55 for the spring quarter 1918, or a rise of about 18 per cent.

It is obvious enough that prices have risen during the last three months both to the farmer and to the wholesaler and retailer. On the other hand, these rising prices have only kept pace with the farmers' prices.

Since the first of July this year, many economic forces have caused a situation adverse to the consumer. There has been a steady increase in wages, a steady increase in cost of the materials which go into food production and manufacture, and in containers and supplies of all kinds. There has been an increase of 25 per cent in freight rates. The rents of the country are increasing and therefore costs of manufacturing, distribution and transportation are steadily increasing and should inevitably affect prices. The public should distinguish between a rise in prices and profiteering, for with increasing prices to the farmer--who is himself paying higher wages and cost--and with higher wages and transport, prices simply must rise. An example of what this may come to can be shown in the matter of flour. The increased cost of transportation from the wheat-producing regions to New York City amounts to about forty cents per barrel. The increased cost of cotton bags during the last fourteen months amounts to thirty cents per barrel of flour. The increase in wholesalers' costs of drayage, rents, etc., amounts to ten cents, or a total of eighty cents without including the increased costs of the miller or retailer.

Such changes do not come under the category of profiteering. They are the necessary changes involved by the economic differences in the situation. We cannot "have our cake and eat it." In other words, we cannot raise wages, railway rates, expand our credits and currency, and hope to maintain the same level of prices of foods. All that the Food Administration can do is to see as far as is humanly possible that these alterations take place without speculation or profiteering, and that such readjustments are conducted in an orderly manner. Even though it were in the power of the Food Administration to repress prices, the effect of maintaining the same price level in the face of such increases in costs of manufacture, transportation and distribution, would be ultimately to curtail production itself. We are in a period of inflation and we cannot avoid the results.

We have had a large measure of voluntary coöperation both from producers, manufacturers and wholesalers, in suppression of profiteering and speculation. There are cases that have required stern measures, and some millions of dollars have been refunded in one way or another to the public. The number of firms penalized is proportionately not large to the total firms engaged.

In the matter of voluntary control of retailers we have had more difficulty, but in the publication from week to week in every town in the country of "fair prices" based upon wholesale costs and type of service, there has been a considerable check made upon overcharges. The Food Administration continues through the armistice until legal peace and there will be no relaxation of efforts to keep down profiteering and speculation to the last moment.

APPENDIX II

ADDRESS OF MR. HOOVER AT HIS INAUGURATION AS PRESIDENT OF THE AMERICAN INSTITUTE OF MINING ENGINEERS (NEW YORK CITY, FEBRUARY 17, 1920)

I have been greatly honored as your unanimous choice for President of this Institute with which I have been associated during my entire professional life. It is customary for your new President, on these occasions, to make some observation on matters of general interest from the engineer's standpoint.

The profession of engineering in the United States comprises not alone scientific advisers on industry, but is in great majority composed of men in administrative positions. In such positions they stand midway between capital and labor. The character of your training and experience leads you to exact and quantitative thought. This basis of training in a great group of Americans furnished a wonderful recruiting ground for service in these last years of tribulation. Many thousands of engineers were called into the army, the navy, and civilian service for the Government. Thousands of high offices were discharged by them with credit to the profession and the nation.

We have in this country probably one hundred thousand professional engineers. The events of the past few years have greatly stirred their interest in national problems. This has taken practical form in the maintenance of joint committees for discussion of these problems and support to a free advisory bureau in Washington. The engineers want nothing for themselves from Congress. They want efficiency in government, and you contribute to the maintenance of this bureau out of sheer idealism. This organization for consideration of national problems has had many subjects before it and I propose to touch on some of them this evening.

Even more than ever before is there necessity for your continued interest in this vast complex of problems that must be met by our Government. We are faced with a new orientation of our country to world problems. We face a Europe still at war; still amid social revolutions; some of its peoples still slacking on production; millions starving; and therefore the safety of its civilization is still hanging by a slender thread. Every wind that blows carries to our shores an infection of social diseases from this great ferment; every convulsion there has an economic reaction upon our own people. If we needed further proof of the interdependence of the world, we have it today in the practical blockade of our export market. The world is asking us to ratify long delayed peace in the hope that such confidence will be restored as will enable her to reconstruct her economic life. We are today contemplating maintenance of an enlarged army and navy in preparedness for further upheavals in the world, and failing to provide even some insurance against war by a league to promote peace.

Out of the strain of war, weaknesses have become ever more evident in our administrative organization, in our legislative machinery. Our federal government is still overcentralized, for we have upon the hands of our government enormous industrial activities which have yet to be demobilized. We are swamped with debt and burdened with taxation. Credit is woefully inflated; speculation and waste are rampant. Our own productivity is decreasing. Our industrial population is crying for remedies for the increasing cost of living and aspiring to better conditions of life and labor. But beyond all this, great hopes and aspirations are abroad; great moral and social forces have been stimulated by the war and will not be quieted by the ratification of peace. These are but some of the problems with which we must deal. I have no fear that our people will not find solutions. But progress is sometimes like the old-fashioned rail fence--some rails are perhaps misshapen and all look to point the wrong way; but in the end, the fence progresses.

Your committees, jointly with those of other engineering societies, have had before them and expressed their views on many matters concerning the handling of the railways, shipping, the reorganization of the government engineering work, the national budget, and other practical items.

The war nationalization of railways and shipping are our two greatest problems in governmental control awaiting demobilization. There are many fundamental objections to continuation of these experiments in socialism necessitated by the war. They lie chiefly in their destruction of initiative in our people and the dangers of political domination that can grow from governmental operation. Beyond this, the engineers will hold that the successful conduct of great industries is to a transcendant degree dependent upon the personal abilities and character of their employees and staff. No scheme of political appointment has ever yet been devised that will replace competition in its selection of ability and character. Both shipping and railways have today the advantage of many skilled persons sifted out in the hard school of competition, and even then the government operation of these enterprises is not proving satisfactory. Therefore, the ultimate inefficiency that would arise from the deadening paralysis of bureaucracy has not yet had full opportunity for development. Already we can show that no government under pressure of ever-present political or sectional interests can properly conduct the risks of extension and improvement, or can be free from local pressure to conduct unwarranted services in industrial enterprise. On the other hand, our people have long since recognized that we cannot turn monopoly over to unrestrained operation for profit nor that the human rights of employees can ever be dominated by dividends.

Our business is handicapped on every side by the failure of our transportation facilities to grow with the country. It is useless to talk about increased production to meet an increased standard of living in an increasing population without a greatly increased transport equipment. Moreover, there are very great social problems underlying our transport system; today their contraction is forcing a congestion of our population around the great cities with all that these overswollen settlements import. Even such great disturbances as the coal strike have a minor root in our inadequate transportation facilities and their responsibility for intermittent operation of the mines.

We are all hoping that Congress will find a solution to this problem that will be an advanced step toward the combined stimulation of the initiative of the owners, the efficiency of operation, the enlistment of the good will of the employees, and the protection of the public. The problem is easy to state. Its solution is almost overwhelming in complexity. It must develop with experience, step by step, toward a real working partnership of its three elements.

The return of the railways to the owners places predominant private operation upon its final trial. If instant energy, courage and large vision in the owners should prove lacking in meeting the immediate situation we shall be faced with a reaction that will drive the country to some other form of control. Energetic enlargement of equipment, better service, coöperation with employees, and the least possible advance in rates, together with freedom from political interest, will be the scales upon which the public will weigh these results.

Important phases of our shipping problem that have come before you should receive wider discussion by the country. As the result of war pressure, we shall spend over $2,800,000,000 in the completion of a fleet of nineteen hundred ships of a total of 111,000,000 tons--nearly one quarter of the world's cargo shipping. We are proud of this great expansion of our marine, and we wish to retain it under the American flag. Our shipping problem has one large point of departure from the railway problem, for there is no element of natural monopoly. Anyone with a water-tight vehicle can enter upon the seas today, and our government is now engaged upon the conduct of a nationalized industry in competition with our own people and all the world besides. While in the railways government inefficiency could be passed on to the consumer, on the seas we will sooner or later find it translated to the national Treasury.

Until the present time, there has been a shortage in the world's shipping, but this is being rapidly overtaken and we shall soon be met with fierce competition of private industry. If the government continues in the shipping business, we shall be disappointed from the point of view of profits. For we shall be faced with the ability of private enterprise to make profits from the margins of higher cost of government operation alone. Aside from those losses inherent in bureaucracy and political pressure, there are others special to this case. The largest successfully managed cargo fleet in the world comprises about one hundred and twenty ships and yet we are attempting to manage nineteen hundred ships at the hands of a government bureau. In normal times the question of profit or loss in a ship is measured by a few hundred tons of coal wasted, by a little extravagance in repairs, or by four or five days on a round trip. Beyond this, private shipping has a free hand to set up such give-and-take relationships with merchants all over the world as will provide sufficient cargo for all legs of a voyage, and these arrangements of coöperation cannot be created by government employees without charge or danger of favoritism. Lest fault be found, our government officials are unable to enter upon the detailed higgling in fixing rates required by every cargo and charter. Therefore they must take refuge in rigid regulations and in fixed rates. In result, their competitors underbid by the smallest margins necessary to get the cargoes. The effect of our large fleet in the world's markets is thus to hold up rates, for so long as this great fleet in one hand holds a fixed rate others will only barely underbid. If we hold up rates an increasing number of our ships will be idle as the private fleet grows. On the other hand, if we reduce rates we shall be underbid until the government margin of larger operation cost causes us to lose money.

We shall yet be faced with the question of demobilizing a considerable part of this fleet into private hands, or frankly acknowledging that we operate it for other reasons than interest on our investment. In this whole problem there are the most difficult considerations requiring the best business thought in the country. In the first instance, our national progress requires that we retain a large fleet under our flag to protect our national commercial expansion overseas. Secondly, we may find it desirable to hold a considerable government fleet to build up trade routes in expansion of our trade, even at some loss in operation. Thirdly, in order to create this fleet, we have built up an enormous ship-building industry. Fifty per cent of the capacity of our ship yards will more than provide any necessary construction for American account. Therefore there is a need of obtaining foreign orders, or the reduction of capacity, or both. I believe, with most engineers, that, with our skill in repetition manufacture, we can compete with any ship builders in the world and maintain our American wage standards; but this repetition manufacture implies a constant flow of orders. It would seem highly desirable, in order to maintain the most efficient yards until they can establish themselves firmly in the world's industrial fabric, that the Government should continue to let some ship construction contracts to the lowest bidders, these contracts to supplement private building in such a way as to maintain the continuous operation of the most economical yards and the steady employment of our large number of skilled workers engaged therein.

When we consider giving orders for new ships, we must at the same time consider the sale of ships, as we cannot go on increasing this fleet. When we consider sale, we are confronted with the fact that our present ships were built under expensive conditions of war, costing from three to four times per ton the pre-war amount, and that already any merchant, subject to the long time of delivery, can build a ship for seventy-five per cent of their cost. It would at least seem good national policy to sell ships today for the price we can contract for delivery a year or two hence, thus making the government a reservoir for continuous construction.

We could thus stabilize building industry to some degree and also bring the American-owned fleet into better balance, if each time that the government sold three or four emergency constructed cargo vessels it gave an order for one ship of a better and faster type. This would make reduction in our ship-building steadier and would give the country the type of ships we need.

Our joint engineering committees have examined with a great deal of care into the organization of and our expenditure on public works and technical services. These committees have consistently and strongly urged the appalling inefficiency in the government organization of these matters. They report to you that the annual expenditure on such works and services now amounts to over $250,000,000 per annum, and that they are carried out today in nine different governmental departments. They report that there is a great waste by lack of national policy of coördination, in overlapping with different departments, in competition with each other in the purchase of supplies and materials, and in the support of many engineering staffs.

They recommend the solution that almost every civilized government has long since adopted, that is, the coördination of these measures into one department under which all such undertakings should be conducted and controlled. As a measure practical to our government, they have advocated that all such bureaus should be transferred to the Interior Department, and all the bureaus not relating to those matters should be transferred from the Interior to other departments. The Committee concludes that no properly organized and directed saving in public works can be made until such a re-grouping and consolidation is carried out, and that all of the cheeseparing that normally goes on in the honest effort of Congressional committees to control departmental expenditure is but a tithe of that which could be effected if there were some concentration of administration along the lines long since demonstrated as necessary to the success of private business.

Another matter of government organization to which our engineers have given adhesion is in the matter of the national budget. To minds charged with the primary necessity of advance planning, coördination, provision of synchronizing parts in organization, the whole notion of our hit-or-miss system is repugnant. A budget system is not the remedy for all administrative ills, but it provides a basis of organization that at least does not paralyze administrative efficiency as our system does today. Through it, the coördination of expenditure in government department, the prevention of waste and overlapping in government bureaus, the exposure of the "pork barrel," and the balancing of the relative importance of different national activities in the allocation of our national income can all be greatly promoted. Legislation would also be expedited. No budget that does not cover all government expenditure is worth enactment. Furthermore, without such reorganization as the grouping of construction departments, the proper formulation of a budget would be hopeless. The budget system in some form is so nearly universal in civilized governments and in completely conducted business enterprise, and has been adopted in thirty of our States, that its absence in our federal government is most extraordinary. It is, however, but a further testimony that it is always a far cry of our citizens from the efficiency in their business to interest in the efficiency of their government.

Another great national problem to which every engineer in the United States is giving earnest thought, and with which he comes in daily contact, is that of the relationship of employer and employee in industry. In this, as in many other national problems today, we are faced with a realization that the science of economics has altered from a science of wealth to a science of human relationships to wealth. We have gone on for many years throwing the greatest of our ingenuity and ability into the improvement of processes and tools of production. We have until recently greatly neglected the human factor that is so large an element in our very productivity. The development of vast repetition in the process of industry has deadened the sense of craftsmanship, and the great extension of industry has divorced the employer and his employee from that contact that carried responsibility for the human problem. This neglect of the human factor has accumulated much of the discontent and unrest throughout our great industrial population and has reacted in a decrease of production. Yet our very standards of living are dependent on a maximum productivity up to the total necessities of our population.

Another economic result is, or will be yet, a repercussion upon the fundamental industry of the United States, that is, agriculture. For the farmer will be unable to maintain his production in the face of a constant increase in the cost of his supplies and labor through shrinkage in production in other industries. The penalty of this disparity of effort comes mainly out of the farmer's own earnings.

I am daily impressed with the fact that there is but one way out, and that is again to reestablish through organized representation that personal coöperation between employer and employee in production that was a binding force when our industries were smaller of unit and of less specialization. Through this, the sense of craftsmanship and the interest in production can be re-created and the proper establishment of conditions of labor and its participation in a more skilled administration can be worked out. The attitude of refusal to participate in collective bargaining with representatives of the employees' own choosing is the negation of this bridge to better relationship. On the other hand, a complete sense of obligation to bargains entered upon is fundamental to the process itself. The interests of employee and employer are not necessarily antagonistic; they have a great common ground of mutuality and if we could secure emphasis upon these common interests we would greatly mitigate conflict. Our government can stimulate these forces, but the new relationship of employer and employee must be a matter of deliberate organization within industry itself. I am convinced that the vast majority of American labor fundamentally wishes to coöperate in production, and that this basis of goodwill can be organized and the vitality of production re-created.

Many of the questions of this industrial relationship involve large engineering problems, as an instance of which I know of no better example than the issue you plan for discussion tomorrow in connection with the soft coal industry. Broadly, here is an industry functioning badly from an engineering and consequently from an economic and human standpoint. Owing to the intermittency of production, seasonal and local, this industry has been equipped to a peak load of twenty-five or thirty per cent over the average load. It has been provided with a twenty-five or thirty per cent larger labor complement than it would require if continuous operation could be brought about. I hope your discussion will throw some light on the possibilities of remedy. There lies in this intermittency not only a long train of human misery through intermittent employment, but the economic loss to the community of over a hundred thousand workers who could be applied to other production, and the cost of coal could be decreased to the consumer. This intermittency lies at the root of the last strike in the attempt of the employees to secure an equal division among themselves of this partial employment at a wage that could meet their view of a living return on full employment.

These are but a few of the problems that confront us. But in the formulating of measures of solution, we need a constant adherence to national ideal and our own social philosophy.

In the discussion of these ideals and this social philosophy, we hear much of radicalism and of reaction. They are, in fact, not an academic state of mind but realize into real groups and real forces influencing the solution of economic problems in this community. In their present-day practical aspects, they represent, on one hand, roughly, various degrees of exponents of socialism, who would directly or indirectly undermine the principle of private property and personal initiative, and, on the other hand, those exponents who in varying degrees desire to dominate the community for profit and privilege. They both represent attempts to introduce or preserve class privilege, either a moneyed or a bureaucratic aristocracy. We have, however, in American democracy an ideal and a social philosophy that sympathizes neither with radicalism nor reaction as they are manifested today.

For generations the American people have been steadily developing a social philosophy as part of their own democracy, and in these ideals, it differs from all other democracies. This philosophy has stood this period of test in the fire of common sense; it is, in substance, that there should be an equality of opportunity, an equal chance, to every citizen. This view that every individual should, within his lifetime, not be handicapped in securing that particular niche in the community to which his abilities and character entitle him, is itself the negation of class. Human beings are not equal in these qualities. But a society that is based upon a constant flux of individuals in the community, upon the basis of ability and character, is a moving virile mass; it is not a stratification of classes. Its inspiration is individual initiative. Its stimulus is competition. Its safeguard is education. Its greatest mentor is free speech and voluntary organization for public good. Its expression in legislation is the common sense and common will of the majority. It is the essence of this democracy that progress of the mass must arise from progress of the individual. It does not permit the presence in the community of those who would not give full meed of their service.

Its conception of the State is one that, representative of all the citizens, will in the region of economic activities apply itself mainly to the stimulation of knowledge, the undertaking only of works beyond the initiative of the individual or group, the prevention of economic domination of the few over the many, and the least entrance into commerce that government functions necessitate.

The method and measures by which we solve this accumulation of great problems will depend upon which of these three conceptions will reach the ascendancy amongst our people.

If we cling to our national ideals it will mean the final isolation and the political abandonment of the minor groups who hope for domination of the government, either by "interests" or by radical social theories through the control of our political machinery. I sometimes feel that lawful radicalism in politics is less dangerous than reaction, for radicalism is blatant and displays itself in the open. Unlawful radicalism can be handled by the police. Reaction too often fools the people through subtle channels of obstruction and progressive platitudes. There is little danger of radicalism's ever controlling a country with so large a farmer population, except in one contingency. That contingency is from a reflex of continued attempt to control this country by the "interests" and other forms of our domestic reactionaries.

The mighty upheaval following the world war has created turmoil and confusion in our own country no less than in all other lands. If America is to contribute to the advance of civilization, it must first solve its own problems, must first secure and maintain its own strength. The kind of problems that present themselves are more predominantly economic--national as well as international--than at any period in our history. They require quantitative and prospective thinking and a sense of organization. This is the sort of problems that your profession deals with as its daily toil. You have an obligation to continue the fine service you have initiated and to give it your united skill.

APPENDIX III

ADDRESS OF MR. HOOVER BEFORE THE BOSTON CHAMBER OF COMMERCE (MARCH 24, 1920)

As you are aware, a report has recently been issued by the Industrial Conference, of which I have been a member together with Governor McCall and Mr. Hooker of your State. The conference embraced among its members representatives from all shades of life including as great a trade unionist as Secretary Wilson. I propose to discuss a part of the problem considered by that commission. There is no more difficult or more urgent question confronting us than constructive solution of the employment relationship. It is not sufficient to dismiss the subject with generous and theoretic phrases, "justice to capital and labor," "the golden rule," "the paramount interest of the people," or a score of others, for there underlies this question the whole problem of the successful development of our democracy.

During last year there was a great deal of industrial unrest throughout the entire world. This has somewhat moderated during the last few months, but the underlying causes are only slumbering. Because the country is not today involved in any great industrial conflicts, we should not congratulate ourselves that the problem of industrial relations has been solved. Furthermore, the time for proper consideration of great problems does not lie in the midst of great public conflict but in sober consideration during times of tranquillity. There is little to be gained by discussion of the causes of industrial unrest. Every observer is aware of the category of disturbing factors and every one will place a different emphasis on the different factors involved.

There is, however, one outstanding matter that differentiates our present occasion from those that have gone before. It cannot be denied that unrest in our industrial community is characterized more than ever before by the purposes and desires that go beyond the demand for higher wages and shorter hours. The aspirations inherent in this form of restlessness are to a great extent psychological and intangible. They are not, for this reason, any less significant. There is perhaps in some local cases an infection of European patent medicines, and the desire to use labor for political purposes. Aside from this, however, they do reveal a desire on the part of the workers to exert a larger and more organic influence in the processes of industrial life. They want better assurance that they will receive a just proportion of their share of production. I do not believe those desires are to be discouraged. They should be turned into helpful and coöperative channels. There is no surer road to radicalism than repression.

One can only lead up to consideration of these problems by tracing some features of our industrial development even though they may be trite to most of you. One underlying cause of these discontents is that with the growth of large plants there has been a loss of personal contact between employers and employees. With the high specialization and intense repetition in labor in industrial processes, there has been a loss of creative interest. It is, however, the increased production that we have gained by this enlargement of industry that has enabled the standard of living to be steadily advanced. The old daily personal contact of employer and employee working together in small units carried with it a great mutuality of responsibility. There was a far greater understanding of the responsibilities toward employees and there was a better understanding by employees of the economic limitations imposed upon the employer. Nor can the direct personal contact in the old manner be restored.

With the growth of capital into larger units, there was an inequality of the bargaining power of the individual. Labor has therefore gradually developed its defense against the aggregation of capital by counter-organization. The organized uses of strike and lockout on either side and the entrance of their organization into the political arena have become the weapons for enforcement of demands. The large development of industrial units with possible cessation of production and service, through strikes and lockouts, penalizes the public. The public is not content to see these conflicts go on, for they do not alone represent loss in production, and thus lowering of the standard of living, but also they may, by suspension of public service, jeopardize the life of the community.

But the solution of the industrial problem is not solely the prevention of conflict and its losses by finding methods of just determination of wages and hours. Not only must solution of those things be found out but, if we are to secure increased production and increased standard of living, we must reawaken interest in creation, in craftsmanship and contribution of his intelligence to management. We must surround employment with assurance of just division of production. We must enlist the interest and confidence of the employees in the business and in business processes.

We have devoted ourselves for many years to the intense improvement of the machinery and processes of production. We have neglected the broader human development and satisfactions of life of the employee that leads to greater ability, creative interest, and coöperation in production. It is in stimulation of these values that we can lift our industry to its highest state of productivity, that we can place the human factor upon the plane of perfection reached by our mechanical processes. To do these things requires the coöperation of labor itself and to obtain coöperation we must have an intimate organized relationship between employer and the employee and that cannot be obtained by benevolence; that can only be obtained by calling the employee to a reciprocal service.

Therefore it has been the guiding thought of the conference that if these objects are to be obtained a definite and continuous organized relationship must be created between the employer and the employee and that by the organization of this relationship conflict in industry can be greatly mitigated, misunderstanding can be eliminated, and that spirit of coöperation can be established that will advance the conditions of labor and secure increased productivity.

It is idle to argue that there are at times no conflict of interest between the employee and the employer. But there are wide areas of activity in which their interests should coincide, and it is the part of statesmanship on both sides to organize this identity of interest in order to limit the area of conflict. If we are to go on with the present disintegrating forces, these conflicts become year by year more critical to the existence of the State. If we cannot secure a reduction in their destructive results by organization of mutual action in industry, then I fear that public resentment will generate a steadily larger intervention of the Government into these questions.

In consideration of a broad, comprehensive, national policy, the Conference had before it four possible alternative lines of action. First, the attempt to hew out a national policy in the development of the progressive forces at work for better understanding in industry under such conditions as would maintain self-government in industry itself; or, secondly, to adopt some of the current plans of industrial courts, involving summary decision with jail for refusal to accept, such as that initiated in the State of Kansas; or, thirdly, the nationalization at least of the services upon which the very life of the community depends; fourthly, to do nothing.

In a survey of the forces making for self-government in industry, the Conference considered that definite encouragement must be given to the principles of collective bargaining, of conciliation, of arbitration, but that such forces could not develop in an atmosphere of legal repression. There is but little conflict of view as to the principle of collective bargaining and its vital corollary, fidelity to the bargain made. There has been conflict over the methods of representation on both sides. The Conference, therefore, has proposed that the Government should intervene to assist in determination of the credentials of the representatives of both sides in case of disagreement, and that such pressure should be brought to bear as would induce voluntary entry into collective bargain. Furthermore, it was considered that the large development of conciliation and arbitration already current in connection with such bargaining should be encouraged and organized under a broad national plan that would give full liberty of action to all existing arrangements of this character and stimulate their further development.

The Conference has therefore proposed to set up a small amount of governmental machinery comprising Chairmen covering various regions in the United States, with a Central Board in Washington, as a definite organization for the promotion of these agencies. It has believed that this is a step consonant with the normal development of our institutions and the progressive forces already in motion, and that in such steps lie the greatest hope of success. No one is compelled to submit to the machinery established but where the employer and employee refuse to enter into, or fail in, bargaining, then through the use of this machinery the public stimulates them to come together under conditions of just determination of the credentials of their representatives. The plan is, therefore, a development of the principle of collective bargaining. It is not founded on the principle of arbitration or compulsion. It is designed to prevent the losses through cessation of production due to conflict but, beyond this, to build up such relationship between employer and employees as will not only mitigate such disaster but will ultimately extend further into the development of the great mutual ground of interest of increased production and under conditions of satisfaction to both sides. It is a part of the conception of the Conference that only in bargaining and mutual agreement can there be given that free play of economic forces necessary to adjust the complex conditions under which our industries must function.

Reduction of conflict in industry is the phase that not only looms large in the public mind, but conflict is the public exhibit of the greatest mark of failure in industrial relations. The imminence of conflict is evidence of failure to have discussion or to arrival at mutual agreement. Therefore, under the plan of the Conference that mutual agreement is the best basis for prevention of conflict, the second step in the Conference proposals is that there should be a penalty for failure to submit to such processes. That penalty is a public inquiry into the causes of the dispute and the proper ventilation to public opinion as to its rights and wrongs. The strength of the penalty is based upon the conviction that neither side can afford to lose public good will. Pressure to rectitude by government investigation is distinctly an American institution. It is not an intervention of public interest that is usually welcomed. In the plan of this Conference, this general repugnance to investigation is depended upon as a persuasive influence to the parties of the conflict to get together and settle their own quarrels. They are given the alternative of investigation or collective bargain under persuasive circumstances. In order to increase the moral pressures surrounding the investigation, either one of the parties to the conflict may become a member of the board of investigation, provided he will have entered on an _a priori_ undertaking that he is prepared to submit his case to orderly and simple processes of adjustment. Thus his opponent will be put at more than usual disadvantage in the investigation. If both sides should agree to submit to normal processes of settlement, the board of investigation becomes at once the stage of a collective bargain and the investigation ceases.

I will not trouble you with the elaborate details of the plan, for they involved a great deal of consideration as to many difficult questions of selection of representatives, provision for action by umpires, for appeal to a board in certain contingencies, the character of questions to be considered, methods of enforcement, standards of labor, and so on. The point that I wish to make clear is that the Conference plan is fundamentally the promotion of collective bargaining under fair conditions of representation by both sides and the definite organization of public opinion only as a pressure on the parties at conflict to secure it. It is therefore basically not a plan of arbitration, nor is it an industrial court. It is stimulation to self-government in industry. The plan contains no essence of opposition to organized labor or organized employers. It involves no dispute of the right to strike or lock out, nor of the closed or open shop. It simply proposes a sequence of steps that should lead to collective bargain without imposing compulsions, courts, injunctions, fines, or jail. It is at least a new step and worth careful consideration before employees and employers subject themselves to the growth of public demands for the other alternatives of wider governmental interference.

The Conference has set out the critical necessity of the development within industry itself of a better basis of understanding as having the great values that all prevention has over cures. There have been hopeful developments in American industry during the past two or three years in this direction. The first unit of employment relationship is each industrial establishment, and if we would battle with misunderstanding and secure mutual action it must be at this stage. It takes its visible form in the organization in many establishments under various plans of shop councils, shop committees, shop conference, all of which are based on the democratic selection of representatives of employees who shall remain in continuous open and frank relation and conference with the employer in the interests of both. Where this development has had success it has had one essential foundation; that is, that it must be conceived in a spirit of coöperation for mutual benefit and it has invariably lost out where it has been conceived solely to bargain for wages and conditions of labor. It does not necessarily involve profit-sharing, but it does involve a human approach to the problems on both sides and a mutual effort at betterment.

It is the organization of such contact between employer and employees which distinguishes this advance from the previous drift in large industry. This type of organization has met with success not only in non-union shops but in unionized shops, and in the latter case it has imported the spirit of mutuality in addition to sheer negotiation of grievance as to conditions of labor. It cannot, in our view, succeed if it is to be conceived in a spirit of antagonism either to employer or to union organization.

The trade unions of the United States have conferred such essential services upon their membership and upon the community that their real values are not to be overlooked or destroyed. They can fairly claim great credit for the abolition of sweat shops, for recognition of fairer hours in industry, reduction of overstrain, employment under more healthful conditions, and many other reforms. These gains have been made through hard-fought collective bargains and part of the difficulties of the labor situation today is the bitterness with which these gains were accomplished. In my own experience in industry I have always found that a frank and friendly acceptance of the unions' agreements, while still maintaining the open shop, has led to constructive relationship and mutual interest.

In the early days trade unionism was dominated mainly by the economic theories of Adam Smith, and union labor at that time adopted as one of its tenets that a decrease of productive effort by workers below their physical necessities would result in more employment and better wage. During the past twenty-five or thirty years, this economic error has been steadily diminishing in American trade unions and while it may be adhered to by some isolated cases today it is not the economic conception of large parts of that body. The great majority have long since realized that an increased standard of living of the whole nation must depend upon a maximum production within the limits of proper conservation of the human machine. We find, during the past few years, many of the unions embracing the further principle of actual coöperation with the employer to increase production. I believe the development of this latter theme opens avenues for the usefulness and growth of trade unionism of greater promise than any hitherto tried. I am aware of the current criticism in some union quarters of the development of the shop council idea for this purpose, and there are perhaps isolated cases that give merit to this opposition. The strongest argument of union labor against the shop council system should lie in the fact that nation-wide organization of labor is essential in order to cope with the unfair employers, but I believe that if they embrace encouragement to shop council organization they open for themselves not only this prevention of unfairness but the whole new field of constructive coöperation and the further reduction of industrial conflict.

Attempts by governments to stop industrial war are not new. The public interest in continuous production and operation is so great that practically every civilized government has time and again ventured upon an attempt at its reduction. There is a great background of experience in this matter, for the world is strewn with failure of labor conferences, conciliation boards, arbitration boards, and industrial courts. This Conference, of course, had in front of it and in the experience of its members this background of the past score of years. I understand that recently you have had ably presented to you the industrial solution that has been enacted into legislation by the State of Kansas. I think some short discussion of this legislation may be of interest in illuminating the difference in point of view between the industrial conference and that legislation. The Kansas plan is, I believe, the first large attempt at judicial settlement of labor disputes in the United States. With the exception of one particular, it is practically identical with the industrial acts of Australasia of fifteen to twenty years ago. It comprises the erection of an industrial court, the legal repression of the right to strike and lockout under drastic penalties, the determination of minimum wage, and involves a consideration of a fair profit to the employer. The Kansas machinery goes one step further than any hitherto provided in this particular of placing more emphasis on fair profits and it also provides for the right of the State to take over and conduct the industry in last resort. Under the enumerated industries in the Kansas law, probably two thirds of Massachusetts industry would be involved. No man can say that this legislation may not succeed in Kansas or under American conditions. The experiment is valuable, and if it should prove a success to both employees and employers Kansas will have again taken the initiative in service to her sister states.

I will not be taken as a carping critic if I point out the difficulties in its progress on the basis of Australasian experience. It may, as did the Australasian acts, have a period of apparent success, and the workers benefit by an initial service in planing out the worst injustices. So far as I can see today, there is no reason why it will not run the same course as in Australia, where the amount of strikes and dislocation was ultimately as great under these laws as in countries without them. In periods of industrial prosperity, the advancing wage usually adjudicated by the industrial courts prevents strikes, but in times of industrial depression decisions against the work people give rise to the old form of resistance.

No one denies the right of the individual to cease work. The question involved in this form of legislation is the right to combination in common action by strike. Whatever the right may be, it is a certainty that the working community of the civilized world adheres to this right as an absolute fundamental to their protection. They believe that the aggregation of capital into large units under single control places them at an entire disadvantage if they cannot threaten to use their ultimate weapon of combined cessation of labor. While it may be argued that the State may intervene in such a manner as to substitute the protection of justice for the right of strike and lockout, the belief in the right to strike has become imbedded in the minds of the laboring community of the world to an extent that it will not receive with confidence any alternative in driving its own bargains.

There are other difficulties in compulsory adjudication of disputes. The workings of such law necessarily result in ultimate determination of minimum wage for all crafts and industries. Every different industrial unit will claim a different minimum based upon its local economic surroundings. Otherwise the competitive basis upon which industry is established will be undermined. No court has ever yet adequately solved these differentials and some dislocation of industry results. I would expect to see develop out of this type of minimum wage the same phenomenon that existed in some parts of Australia, where certificates of inability to earn the minimum, and therefore permission to undertake employment at less than this wage had to be issued in order that employment might be found for the aged and disabled. The employers will naturally in face of a minimum wage retain in employment that quality of worker that can give the maximum effort. Another difficulty is the tendency for wages of all workers, regardless of their ability, to fall to the minimum, for the employer naturally reduces the good to average with the poor worker. I would not want to be understood to necessarily oppose the possibilities of a minimum wage for women over large areas, as distinguished from craft minimums for men, because certain social questions enter that problem to an important degree.

There is another feature of the Kansas Act that should be given a great deal of consideration, and that is its essential provision that in the determination of wage disputes it shall be based on a fair profit to the employer. This must ultimately lead to a determination as to what a fair profit consists of, just as minimum wage will need be found for every craft and every establishment. I do not assume that any employer will contend for an unfair profit, but the termination of what may be a fair or unfair profit in respect to the hazards involved in the institution of a business, in its conduct over a long term of years, its necessary provisions for its replacement and future disasters, is a matter that has not yet been satisfactorily determined by either theoretic economics, legislation, or courts. In competitive industry the processes of business determine this matter every day, and owners will only claim such determination by the State when the competitive tide is against them. We have long since recognized the rights of the State to determine maximum profits in case of a monopoly, but the determination of minimum profits (for fair profit is a minimum as well as maximum) may deliver large burdens to the people. Moreover, I doubt whether labor will ultimately welcome such determination, for an unsuccessful plant, instead of abandoning its production to its competitors, will claim wage reductions from the courts, and the general level of wages can thus be driven down and the State, at least morally, becomes a guarantor of profits in overdeveloped industry. This plan in the long run substitutes government control of industry for competition.

As to whether such acts will not tend to crush out initiative, credit, and curtail the proper development of industry, can only be determined with time. Generally, it should be clearly understood that compulsory settlement of employment at best only assures continuity of production through just wages, hours and profits. It does not approach the problem from the point of view of upbuilding a relation in industry that will, if successful, not only eliminate strikes and lockouts, but make constructively for greater production and cheaper costs.

The economic repercussions from such regulation do not all lie in favor of either capital or labor. To curtail the activities in one is not necessarily a favor to the other.

I am sure you would, upon consideration, view the entry of the Government on a nation-wide scale into the determination of fair wage and fair profit in industry, even if it could be accomplished without force, with great apprehension. There are some things worse in the development of democracy than strikes and lockouts, and whether by legislative repression we do not set up economic and social repercussions of worse character is by no means determined. They have also the deficiency in that they undermine the real development of self-government in industry and that, to me, is part of the growth of democracy itself. Courts and litigation are necessary to the preservation of life and property, but they are less stimulus to improved relations among men than are discussion and disposal of their own differences.

The whole world is groping for solution to this problem. If we cannot solve it progressively, our civilization will go back to chaos. We cannot stand still with the economic and social forces that surround us. There has never been a complete panacea to all human relationships so far in this world. The best we can do is to take short steps forward, to align each step to the tried ideals that have carried us thus far. The Conference has endeavored to find a plan for systematic organization of the forces that are making for better relationships, to encourage the growing acceptance of collective bargaining by providing a method that should enable it to meet the objections of its critics and to aggregate around this the forces of conciliation and arbitration now in such wide use. It has sought to do this without legal repression but with the organized pressure of public opinion.

To me there is no question that we should try the experiment of the perhaps longer road proposed by the Industrial Conference for the development of mutuality of relationship between employer and employee, rather than to enter upon summary action of court decision that may both stifle the delicate adjustment of industrial processes and cause serious conflict over human rights. We must all agree that those deficiencies in our social, economic and political structure which find solution through education and voluntary action of our people themselves are the solutions that endure. To me, the upbuilding of the sense of responsibility and of intelligence in each individual unit in the United States with the intervention of government only to promote the development of these relations, the suppression of domination by any one group over another, is the basis upon which democracy must progress.

Upon the solution of industrial peace and good will does the gradual lift of the standard of life of our whole people rest by increase in the material and intellectual output and its proper distribution among all of us. To me the philosophic background of solution lies in rigorous application to economic life of our tried national ideal--the equality of opportunity and the preservation of industrial initiative; that is, the stimulation of every individual by his own effort to take that position in the community to which his abilities and character entitle him and the protection to him to attain that end. In the earlier days of our democracy, with its simpler economic life, we were concerned more with the application of this ideal in its social and political phases. It has been so long and firmly established there that it is no longer a matter of discussion. With the growth of greater complexity in our economic life, its practical application to the sharing in the material and intellectual output in proportion to effort, ability, and character, becomes more difficult. It must, nevertheless, be adhered to if the ideal of our democracy is not to be abandoned.

I do not believe we can attain this equality of opportunity or maintain initiative through crystallization of economic classes or groups arraigned against each other, exerting their interest by economic and political conflicts, nor can we attain it by transferring to governmental bureaucracies the distribution of material and intellectual products. I do believe that we can attain it by systematic prevention of domination of the few over the many and stimulation of individual effort in the whole mass.

It is well enough to hold a philosophic view, but the problems of day to day that arise under it are very practical problems that require concrete solution, and the employment relation is one of them.

APPENDIX IV

SOME NOTES ON AGRICULTURAL READJUSTMENT AND THE HIGH COST OF LIVING[2]

BY HERBERT HOOVER

The high cost of living is a temporary economic problem, surrounded by high emotions. The agricultural industry is a permanent economic problem, surrounded by many dangers. We are now entering into our regular four-year period of large promises to sufferers of all kinds. Except to demagogues and to the fellows who farm the farmer, there are no easy formulas; nevertheless, there are constructive forces that can be put in motion--and these are good times to get them talked about.

As bearing upon some suggestion of constructive solution, I wish to establish and analyze certain propositions. Amongst other things they involve a clear understanding of the bearings of different segments of the total price of food between the different links in the chain of production and distribution. These propositions are:

First: That the high cost of living is due largely to inflation and shortage in world production; speculation is an incident of these forces, not the cause.

Second: That the farmer's prices are fixed by the impact of world wholesale prices; that such prices bear only a remote relation to his costs of production.

Third: That any increase or decrease in the cost of placing the farmer's products into the hands of the wholesaler is a deduction from or addition to the farmer's prices; that is, an expansion or contraction of the margin between the farm and wholesale prices makes an increase or decrease in the farmer's return.

Fourth: That increase or decrease in the cost of distributing food from the wholesaler to the door of the ultimate consumer is a deduction or addition predominantly to the consumer's cost; that is, the margin between the wholesaler and consumer in its increases or decreases is largely an addition or subtraction from the consumer's price.

Fifth: That these two margins in most of our commodities except grain were, before the war, the largest in the world; that they have grown abnormally during the war, except during the year of food control.

Sixth: That analysis of the character of the margin between the farmer and wholesaler will show that decreases in price find immediate reflection on the farmer, while immediate increases in price are absorbed by the trades between and the farmer gets but a lagging increase.

Seventh: That an analysis of these margins will show that they can be constructively diminished but that, regrettable as it is, the prosecution of profiteers will not do it.

Eighth: That the problem must be solved, if our agriculture is to be maintained and if the balance between agriculture and general industry is to be preserved so as to prevent our becoming dependent upon imports for food, with a train of industrial and national dangers.

PRESENT PRICES DUE TO INFLATION AND SHORTAGE IN WORLD PRODUCTION

Our war inflation does not lie so much in our increased gold and currency. Our currency per capita has increased by perhaps 25 or 30 per cent, but, compared to European practice of currency inflations of 200 to 800 per cent, our conduct has been provident indeed. This is not, however, the real area of inflation. It lies in the expansion of our bank credits. If we exclude the savings bank as not being credit institutions in the ordinary sense, and if we compile the commercial bank deposits, we still no doubt gather in some real savings, but nevertheless the figures show a considerable color of inflation somewhere. No one need think we have gotten so suddenly rich as the money complexion of these figures might indicate. At the outset it should be emphasized that all figures of this kind are subject to dispute and interpretation; but, after all such deductions, the indication of tendencies remains.

| | Per Cent | Bank Deposits | Change Year | Total | from 1913 -------------------------------------- 1913 | 11,390,918,596 | 100.0 1914 | 11,974,760,593 | 105.1 1915 | 12,282,097,638 | 107.8 1916 | 15,398,090,701 | 135.2 1917 | 18,444,103,496 | 161.9 1918 | 20,425,067,839 | 179.3 1919 | 24,971,784,000 | 219.2 --------------------------------------

It will be accepted at once that the volume of bank deposits must grow with increased commodity production and therefore we may roughly examine into this as well. If we combine the tonnage productivity of agriculture, metals, coal, salt, cement, lumber and the quarries, we shall cover the great bulk of our products. These figures also must be taken as merely indicating the tendencies of the times.

| | Per Cent | Production | Change Year | in Tons | from 1913 ------------------------------------- 1913 | 1,081,293,417 | 100.0 1914 | 1,019,018,207 | 94.2 1915 | 1,073,472,988 | 99.3 1916 | 1,162,489,530 | 107.5 1917 | 1,241,173,806 | 114.8 1918 | 1,247,787,883 | 115.4 1919 | 1,117,181,233 | 103.3 -------------------------------------

If we attach the index of prices during these periods and compare them with the per cent variation in commodity production and bank deposits, we have the following interesting parallels:

| | | Department | Per Cent | Per Cent | of Labor | Change in | Change in | Wholesale | Production | Bank Deposits | Index Year | from 1913 | from 1913 | of All | | | Commodities ------------------------------------------------------ 1913 | 100.0 | 100.0 | 100.0 1914 | 94.2 | 105.1 | 99.3 1915 | 99.3 | 107.8 | 100.5 1916 | 107.5 | 135.2 | 120.5 1917 | 114.8 | 161.9 | 175.9 1918 | 115.4 | 179.3 | 196.6 1919 | 103.3 | 219.2 | 214.5 ------------------------------------------------------

Two different extreme schools of economics will interpret these tables differently. One will hold that the increase in credit and money must influence prices in exact ratio. The other will hold the rise of prices as due to shortage in production, either at home or abroad, and that rise in price necessitates an increase in credits and money to carry on commerce. Both are probably right, for short production and inflation probably alternatively serve as cause and effect. The first school has some claims upon the large volume of gold we imported the first three years of the war and multiplied into credits--as the cause prior to our coming into the war. They can also point out that our Treasury and banks deliberately inflated bank credits in order to place war loans and that if this form of credits was removed our expansion would be nothing like its present volume. As necessary as it may have been to use this method in securing quick money at a low rate during the war, there are the strongest objections to it since the armistice was signed. If our post-war finance at least had been secured from savings by offering sufficiently attractive terms, the inflation would be less although the market price of Liberty Bonds might be lower.

That short world production has been one of the causes of rising prices cannot be denied. The warring powers of Europe took 60,000,000 men from production (nearly one third their productive man power) and put it to destruction. They have lived to a great degree by gain of commodities from the United States, and thus brought their shortage to our shores. They have not yet altogether recovered from the holidays of victory, the gloom of defeat, the persuasive "isms" that would find production without work, the destruction of their economic unity, transportation, credits, and other fundamentals necessary to maintain production. It will be some time before they do recover. In the meantime, they are perforce reducing their consumption--their standard of living--because they have largely exhausted their securities, commodities or credit to continue the borrowing of our commodities for their own short production, as during the war. The exchange barometer is today witness of the end of this procedure of living on borrowed money. In passing, it may be mentioned that exchange is no more a cause of their inability to buy from us than is the barometer the cause of blizzards. The storm is that they have mostly exhausted their credits and they have not recovered production so as to offer commodities to us in exchange for ours.

Our own industrial production, as distinguished from agricultural production, has fallen rapidly since the armistice. Some of the fall is due to war weariness, some to "isms" that have infected us from Europe, some to the natural abandonment of high cost production brought into play during the war, some to strikes and a host of other wastes. Our consumption has greatly increased since the restraints of war. Decrease had not penetrated our agricultural community up to 1919 harvest, nor will such decrease arise from these causes, but as I will set out later, forces are entering that will decrease our agricultural production. Our production in nearly all important food commodities except sugar is in surplus of our own need. It only becomes a shortage affecting prices under the drain of exports. Therefore, it is the world shortage that is affecting our price levels, and not, so far, a deficiency for our needs.

So far as relief from price influence by shortage in production is concerned, it may arise in two ways. First, slowly through gradual recuperation in world production. Second, by compulsory reduction of consumption in Europe through their inability to pay us by commodities, gold or credits. This latter has been very evident through the drop in exchange and engagements for export during the past few weeks.

THE THREE DIVISIONS OF THE PRICE

The cost of food to the consumer is divided among the farmers on one hand and storage, manufacture, jobbers, wholesalers, retailers and transportation on the other. I believe these charges between the farmer and consumer fall into two distinct groups--the charges comprising the margin between the farmer and wholesaler which mainly concern the farmer, and charges between the wholesaler and consumer, which mainly concern the consumer. To establish this division, it is necessary to analyze shortly the datum point by which price is determined.

The diet of the American people from a nutritional (not financial) standpoint comprises the following articles and proportion:

Wheat and Rye 29.5% Pork Products 15.7% Dairy Products 15.3% Beef Products 5.3% Corn Products 7.0% Sugar Products 13.2% Vegetable Oils 3.6% 89.6% All other, including potatoes 10.4%------ 100.0%

The wholesale price of about 90 per cent of our food in normal times is only remotely determined by the cost of production, but mostly by world conditions. We export a surplus of most commodities among the 90 per cent and the prices of exports are determined by competition with other world supplies in the European wholesale markets. Those items in this 90 per cent that we do not export are influenced by the same forces, because in normal times we import them on any considerable variation in price and the wholesaler naturally buys in the cheapest market. Even milk is to a considerable degree controlled by butter imports in normal times. When we import butter it releases more milk in competition. This cannot be said to such extent of most of the odd 10 per cent, because they are largely perishables that do not stand overseas transport and consequently rise and fall more nearly directly upon local supply and demand. Some economists will at once argue that if prices are unprofitable to the farmer the situation will correct itself by diminished production and, consequently, a general rise in the world level of prices. In the abstract, this is true, but as a matter of fact the surplus which our farmers contribute for export is only a small portion of their total production or of the world pool, yet the total of the world pool operating through this minor segment makes the prices for a large part of the farmers' commodities. Therefore, the effect in normal times of restriction in production in any one country does not affect price so much as theoretic argument would believe. The farmer must plant if he would live, and he must plant long in advance of his knowledge of prices or world production. He can make no contracts in advance of his planting, nor can he cease operations on the day prices fall too low. He is driven on, year after year, in hope and necessity, and will continue over long periods with a standard of return below rightful living because he has no other course--and always has hopes. He will vary fairly rapidly from one commodity to another--from wheat to other grains, for instance--but he mostly raises his maximum of something. In the long run of decreasing prices he would undoubtedly reach so low a standard as to cease production. Then comes a comparatively short period of higher prices in some commodity; production is again stimulated and followed by long intervals of low standards. As shown by the following table, on the whole, the farmer has not been underpaid during the war, but the currents again are turning against him.

It will be seen that the farmer enjoyed prices equivalent to or higher than the general level up to the last six months. He is now, however, falling behind in some important products. Unlike the industrial workers, he is unable to demand an adjustment of his income to the changed index of living.

| Index of Prices at the | Farm in Principal | Produce States ----------------------------- | A P | | | | | l r | | | W | C Department of Labor | l o | H | C | h | o Wholesale Index of | d | o | o | e | t All Commodities | F u | g | r | a | t | a c | s | n | t | o | r e | | | | n | m | | | | ------------------------------------------------------- Pre-war | 100 | 100 | 100 | 100 | 100 | 100 First Quarter 1918 | 187 | 200 | 213 | 224 | 254 | 246 Last Quarter 1918 | 206 | 204 | 223 | 220 | 258 | 246 First Quarter 1919 | 200 | 202 | 225 | 228 | 264 | 215 Last Quarter 1919 | 230 | 206 | 178 | 216 | 277 | 268 -------------------------------------------------------

For the moment, what I wish to establish is only that the farmer's prices are not based upon any conception of the cost of production, but upon forces in which he has no voice. He can never organize to put his industry in a "cost plus" basis as industrial producers do, and remedy must be found elsewhere.

THE TWO MARGINS

As stated, the margin between the farmer and consumer falls into two divisions--one of which predominantly affects the farmer and the other the consumer. It is really the wholesale prices that govern the farmer, rather than retail prices, for it is in wholesale prices that the farmer competes with the world. As the prices paid by the wholesaler are mostly fixed by overseas trade at the datum point on the Atlantic seaboard or in Europe, then if the margins between the wholesaler and the farmer are unduly large, or increase, it is mostly to the farmer's detriment. For instance, as the price of the farmer's wheat in normal times is made in Liverpool, any increase in handling comes out of the farmer's price. Likewise, as the wholesale price of butter is made by the import of Danish butter into New York, any increase in the numbers or charges between our farmer and the wholesale buyer comes, to a considerable degree, out of the farmer.

As the datum point of determining prices is at the wholesaler, the accretion by the charges for distribution from that point forward to the consumer's door will not affect the farmer, but will affect the consumer. When competition decreases through shortage the consumer pays the added profits of these trades.

Studies of the cost of our distribution system, made by the Food Administration during the war, established two prime conditions. The first is that the margins between our farmers and the wholesaler in commodities other than grain in some instances, are, even in normal times, the highest in any civilized state--fully 25 per cent higher than in most European countries. The expensiveness of our chain of distribution in most commodities in normal times, as compared to Continental countries, is due partly to the wide distances of the producing areas from the dominating consuming areas, but there are other contributing causes that can be remedied. In Europe, the great public markets in the cities bring farmer and consumer closely together in many commodities, but in the United States the bulk of products are too far afield for this. The farmer must market through a long chain of manufacturers, brokers, jobbers and wholesalers with or without their own distribution system, who must establish a clientele of direct retailers; and thus public markets, except in special locations and in comparatively few commodities, have not been successful. Another major factor in our cost of distribution is the increasing demand for expensive service by our consumers. There are many other factors that bear on the problem and the economic results of our system which are discussed, together with some suggestion of remedy, later on.

The second result of these studies was to show the great widening of this margin during the war. During the year of the Food Administration's active restraint on this margin, there was an advance of six points in the wholesale index while the farmer's index moved up 25 points. Both before and after that period the two indexes moved up together. The same can be said of the margins between the wholesaler and the consumer. Taking the period of the war as a whole, the margin between the farmer and consumer has widened to an extravagant degree.

A good instance of a movement in margins is shown in flour in 1917. The farmer's average return for wheat of the 1916 harvest, as shown by the Department of Agriculture, was about $1.42. As about four and one-half bushels of wheat are required to make a barrel of flour, the farmer's share of the receipts from this harvest was about $6.40 per barrel. In 1917, before the Food Administration came into being, flour rose to $17.50 per barrel to the consumer, or, at that time, a margin of $11.00 per barrel. During the Administration, the farmer received an average of about $2.00 for wheat at the farm, or about $9.00 out of a barrel of flour. The consumer paid $12.50, the margin being about $3.50 per barrel.

This increase in margins shows vividly in the higher priced foods, for instance, pork products. If we take hogs at the railway station over the great hog states contiguous to Chicago as a basis, we find:

| Price of Hogs | Price of | Margin Six | in Principal | Cured Products | Between Months | States | to Consumer | Farmer and | Per 100 Lbs. | 100 Lbs. Hogs | Consumer ------------------------------------------------------ 1914 | $7.45 | $18.97 | $11.52 1919 | 16.27 | 37.33 | 21.06 1920 | 15.37 | 37.71 | 22.34 ------------------------------------------------------

Thus, while the farmer has gained about $7.92 in his price, the margin has increased by $10.82 to the consumer and, incidentally, during the last year since food control restraints were removed, the consumer has paid $.30 more while the farmer got $.90 less. These instances could be greatly multiplied.

It is unfortunate that our national statistics do not permit a complete analysis of the distribution of margin between all the various groups in the chain between the farmer and consumer in different commodities. It would be helpful if we could take the farmers, railways, manufacturers, wholesalers and retailers, and determine what proportion each receives.

These margins between farmer and consumer are made up of a necessary chain of charges for transport, storage, manufacture and distribution. The great majority of citizens who are engaged in the processes that go to make up this portion of food costs are employed in an obviously essential economic function, and they do not approach it in a spirit of criminality, but as a very necessary, proper, and honorable function. They have, since the European War began, rather over-enjoyed the result of economic forces that were not of their own creation. That a considerable margin is necessary to cover the legitimate costs of, and profits on, distribution is obvious. The only direction of inquiry is how they can be legitimately minimized. These margins, starting from the unduly high expense of a faulty system, have increased not only legitimately, due to increased transportation, labor, rent, taxes, and increased interest upon the large capital required, but they have, except during the period of control, increased unduly beyond these necessities. There are two general characteristics of this margin that are of some interest. In the first instance, all of the transport, storage, manufacture and handling is conducted upon a basis of cost plus either fixed returns or, as is more usually the case, a percentage of profit upon the whole cost of operation. Any distributing agency ceases to operate when it does not secure costs and a profit. Consequently, all those links put up a resistance to a curtailment of the margin which the farmer is unable, except by absolute exhaustion, to put against reduction of his price levels. If rapid falls in food prices occur, the farmer, at least in the first instance, has to stand most of the fall because he cannot quit. The farmer's costs of production relate to a period long prior to the fall. Thus, if wages are due to fall as a result of a fall in food prices, the farmer is always selling on the old basis of his costs. The farmer has but one turn-over in the year. The middleman has several and can thus adjust himself quickly.

Second, the custom of many of these businesses is to operate upon a percentage of profit on the value of the commodities handled, even after deducting all their increased costs, interest or other charges. When we have rising prices, therefore, a doubling of prices, for instance, tends to double profits on the same volume of commodities handled. In a rising market, competitive pressures are much diminished and the dealer can assess his own profits to greater degree than usual. While the packers make a profit of, say, two cents on the dollar value of commodities, it represents double the profit per pound over pre-war, even after allowing such items as interest on the larger capital involved.

REDUCTIONS OF THE MARGINS

Aside from the necessary rise in the margin that has grown out of the rise in cost of labor, rent, etc., from inflation and world shortage, there are some causes which have accumulated to increase the margins between the farmer and the wholesaler and the wholesaler and consumer that could be greatly mitigated.

BETTER TAX DISTRIBUTION

During the war, in order to restrain wild greed and profiteering in the then existing unlimited demand, margins between purchase and sale in the different manufacturing and handling trades were fixed in all the great commodities--iron, steel, cement, lumber, coal and foodstuffs. The first task of the war was to secure production, and the margins were therefore fixed at such breadth as would allow the smaller high cost manufacturer and the smaller dealer to live. Otherwise, the smaller competitors would have been extinguished, production would have been lost, and, worse yet, the larger low-cost operator would have been left with much inflated monopoly. The excess profits tax was levied as a sequent corrective to this necessary first step, so as to take the undue profits of the large producer back to the public. It was a wise war measure, but the moment restraints on profits were taken off and there was a free and rising market ahead, then the tax was added to prices by all the participants and passed on to the consumer, or deducted from the farmer when world levels crowded his prices down. It should have been repealed at the time the controls were abandoned, but our legislatures have been busy with other things and, in the meanwhile, in food it not only increases the margin between the farmer and the consumer but tends, as stated above, to come out of the farmer to a large degree. It has other vicious results in that it also stimulates dealers and manufacturers to speculate their profits away in unsound business, rather than to pay it to the government. It does sound well to tax the great manufacturers, but to make them the agency to collect taxes from the population is not altogether sound government.

It is a very important tax to the Government, bringing as it does over a billion a year, and a place to put this load is not to be found easily. The income tax does not have so malign an effect, for it comes to a great extent from the individual and not from business. The present method of income tax, however, has some weaknesses. The same levy is made upon earned incomes as upon those that are unearned. The tax on earned incomes tends in certain cases to be passed on to the consumer or deducted from the farmer, and, besides, it is not just that a family living by giving productive service to the community should pay the same as a family that contributes nothing by way of effort. A stiff tax on these latter families might send them to work, and certainly would induce economy. Moreover, the earner of income must provide for old age and dependents while the unearned income taxpayer has this provision already. Altogether, it would seem the part of wisdom at least to increase the income tax on the larger unearned income and decrease it on the earners. It is argued that this drives great incomes to evasion by investment in tax-free securities, which is probably true. We need more comparative figures than the Treasury statistics yet show to answer this point. In any event, relief to the earner would free his savings to invest in taxable securities and we need above all things to stimulate the initiative of the saver. Income taxes, except when too high on earned incomes, do not destroy initiative, and every other government has, in taxing, recognized the essential difference between earned and unearned income. This distinction would generally relieve the range of smaller incomes, for they are mostly earned.

The inheritance tax has not been fully exploited as yet. It cannot be deducted from either farmer or consumer, it does not affect the cost of living, it does not destroy initiative in the individual if it leaves large and proper residues for dependents. It does redistribute overswollen fortunes. It does make for equality of opportunity by freeing the dead hand from control of our tools of production. It reduces extravagance in the next generation, and sends them to constructive service. It has a theoretic economic objection of being a dispersal of capital into income in the hands of the government, but so long as the government spends an equal amount on redemption of the debt or productive works, even this argument no longer stands.

We may need to come to some sort of increased consumption taxes in order to lift that part of excess profits and tax on earned incomes that cannot be very properly placed elsewhere. When it comes, it should lie on other commodities than food, except perhaps sugar, one half of which is a luxury consumption. The ideal would be for it to be levied wholly on non-essentials in order that it should be a burden on luxury and not on necessity. There is no doubt difficulty in classifying. Jewelry and furs are easy to class, but where necessity leaves off and luxury begins in trousers is more difficult to determine.

It requires no lengthy economic or moral argument as a platform for denunciation of all waste and useless expenditure. Some sane medium is needed between comfort and luxury. Failing definition, and objection to blue laws, the theme must be taken into the area of moral virtues and become a proper subject for the spiritual stimulations of the church. There is a psychology in luxury wherein we all buy high-priced things because they are high-priced, not because they add comfort--and this has contributed also to our high cost of living, for those who do it drive up prices on those who try to avoid it. From an economic point of view, the only recipes are taxation as a device to make it expensive.

More constructive than increasing taxes is to take a holiday on governmental expenditures and relieve the taxpayer generally. If we could stave off a lot of expensive suggestions for a few years and secure more efficiency in what we must spend, then our people could get ahead with the process of earning something to be taxed. This would at least be comforting to the great farming and business community.

BETTER TRANSPORTATION FACILITIES

There is a great weakness in our present railway situation bearing upon the farmer and consumer. Everyone knows of the annual shortage of cars during the crop-moving season. Few people, however, appreciate that this shortage of cars often amounts to a stricture in the free flow of commodities from the farmer to the consumer. The result is that the farmer, in order to sell his produce, often unknown to himself makes a sacrifice in price to local glut. The consumer is compelled at the other end to pay an increased price for foodstuffs due to the shortage in movement. The constant fluctuations in our grain exchanges locally or generally from this cause are matters of public record almost monthly. On one occasion a study was made under my administration into the effect of car shortage in the transportation of potatoes, and we could demonstrate by chart and figures that the margin between the farmer and the consumer broadened 100 per cent in periods of car shortage. Nor did the middleman make this whole margin of profit, because he was subjected to unusual losses and destruction, and took unusual risks in awaiting a market. The same phenomenon was proved in a large way at time of acute shortage of movement in corn and other grains.

The usual remedy for this situation is insistence that the railways shall provide ample rolling stock, trackage and terminals to take care of the annual peakload. We have fallen far behind in the provision of even normal railway equipment during the war and an additional 500,000 cars and locomotives are no doubt needed. Above a certain point, however, this imposes upon the railways a great investment in equipment for use during a comparatively short period of the year when many commodities synchronize to make the peak movement. The railways naturally wish to spread the movement over a longer period. The burden of equipment for short time use will probably prevent their ever being able to take entire care of the annual delays in transport and stricture in market, although it can be greatly minimized.

There is possible help in handling the peak load by improving the waterways from the Great Lakes to the Atlantic seaboard by way of the St. Lawrence River, so as to pass full seagoing cargoes. It has already been determined that the project is entirely feasible and of comparatively moderate cost. The result would be to place every port on the Great Lakes on the seas. Fifteen states contiguous to the Lakes could find an outlet for a portion of their annual surplus quickly and more cheaply to the overseas markets than through the congested eastern trunk rail lines. It would contribute materially to reduce this effectual stricture in the free flow of the farmer's commodities to the consumers. Of far greater importance, however, is the fact that the costs of transportation from the Lake ports to Europe would be greatly diminished and this diminished cost would go directly into the farmer's pockets. It is my belief that there is a possible saving here of five or six cents a bushel in the transportation of grain. Although a comparatively small proportion of our total grain production flows to Europe, I believe that the economic lift on this minor portion would raise the price of the whole grain production by the amount saved in transportation of this portion of it. The price of export wheat, rye, and barley--sometimes corn--usually hogs--in Chicago at normal times is the Liverpool price, less transportation and other charges, and if we decrease the transport in a free market the farmer should get the difference. Not only should there be great benefits to the agricultural population, but it should be a real benefit to our railways in getting them a better average load without the cost of maintaining the surplus equipment and personnel necessary to manage the peakload during the fall months. It has been computed that the capital saving in rolling stock alone would pay for the entire cost of this waterway improvement over a comparatively few years. The matter also becomes of national importance in finding employment for the great national mercantile fleet that we have created during these years of war.

Another factor in transportation bearing upon the problem of marketing is the control by food manufacturing and marketing concerns of refrigeration and other special types of cars. This special control has grown up largely because, owing to seasonal changes in regional occupation for these cars over different parts of the country, no one railway wished to provide sufficient special cars and service for use that may come its way only part of the year. The result has been to force the building up of a domination by certain concerns who control many of the cars and stifle free competition. Much the same results have been attained by special groups in control of stock yards and, in some cases, of elevators. Where such formal or informal monopolies grow up, they are public utilities, and if the farmer is to have a free market they must be replaced by constructive public service.

A FREE MARKET

Every impediment to free marketing in produce either gives special privileges or increases the risks which the farmer must pay for in diminished returns. We have some commodities where manufacture has grown into such units that these units exert such an influence that they consciously or unconsciously affect the price levels of the farmer's produce. When a few concerns have the duty of manufacturing and storing the seasonal reserves in a single commodity they naturally reduce prices during the heavy production season and increase them in the short season as a method of diminishing their risk and increasing profits. Moreover, their tendency is often to sell the minor portion of their product that goes for export at lower than the domestic price in order to dispose of it without depressing local prices. They do not need to conspire, for there can be perfectly coincident action to meet the same economic currents. Such coincidence has much greater possibilities of general influence with a few concerns in the field than if there were many.

The experience gained in the Food Administration on these problems during the war led to the feeling expressed at that time, that such business should be confined to one line of activity, just as we have had to confine our railways, banks and insurance companies. This is useful to prevent reliance being placed upon the profits of alternative products when engaged in stifling of competition, through selling below cost on some other item. Even this restriction may not prove to be sufficient protection to free market by free competition. I am not a believer in nationalization as the solution to this form of domination, but I am a believer in regulation, if it should prove necessary. If experience proves we have to go to regulation, it is my belief that it should be confined to overswollen units and that the point of departure should not be the amount of capital employed but the proportion of a given commodity that is controlled. The point of departure must depend upon the special commodity and its ratio to the whole. When such a concern obtains such dimensions that it can influence prices or dominate public affairs, either with deliberation or innocence, then it must be placed under regulation and restraint. Our people have long since realized the advantage of large business operation in improving and cheapening the costs of manufacture and distribution, but when these operations have become so enlarged that they are able to dominate the community, it becomes of social necessity that they shall be made responsible to the community. The test that should apply, therefore, is not the size of the institution or the volume of capital that it employs, but the proportion of the commodity that it controls in its operations. It is my belief that if this were made the datum point for regulation, and if regulation were made of a rigorous order, this pressure would result in such business keeping below the limit of regulation. Thus the automatic result would be the building up of a proper competition, because men in manufacturing would rather conduct a smaller business free of governmental regulation than enjoy large operations subject to governmental control. There are probably only a very few concerns in the United States that would fall into this category, and they should be glad of regulation in order to secure freedom from criticism.

SPECULATION AND PROFITEERING

There are three kinds of speculation and profiteering in the food trades. The first is of the inherent speculative character of foodstuffs due to their seasonal nature. The farmer, more by habit than necessity, usually markets the bulk of his grain in the fall. By necessity he must market his animals at certain seasons for they must be bred at certain seasonal periods, they must be fed at certain seasons, and thus they come to market in waves of production larger than the immediate demand. In perishables he must market fairly promptly as he cannot himself maintain necessary special types of storage. Thus, the dealer must speculate on carrying the commodities for distribution during the period of short production while the farmer markets in time of surplus production. While full competitive conditions might reduce the charges for this hazard, there is a possibility of reducing the hazard by better organization and, consequently, the charge for the hazard that is now debited to the farmer. It is worth an exhaustive national investigation to determine whether an extension of a system of central markets would not afford great help. I do not mean the extension of our so-called exchanges dealing in local produce, but the creation of great central exchange markets with responsibilities for service to the entire people. This help would arise in two ways. The first is the hourly determination of price at great centers that all may know, and thus the farmer protects himself against local variations and manipulation. The second is a system of forward contracts through such a market between farmer and consumer on standardized commodities. Such contracts in effect remove the necessity of a speculative middleman. This system exists in grain and in cotton and in its processes eliminates large part of the hazard and carries the commodity at the lower rate of interest. The present trouble with the system of future contracts is that it lends itself to manipulation, but I believe this could be eliminated.

Take the case of potatoes; here is an unstandardized, seasonal commodity, with no national market and therefore no established daily price as a datum point. A grower in Florida, Maine, or Wisconsin, through a local agent, or through local sale, consigns potatoes to Pittsburgh because a larger price is reported there than in Chicago. The grower can usually make no actual sale to an actual retailer or wholesaler at destination because the buyer has no assurance of quality. Coincident shipment from many points to a hopeful market almost daily produces a local glut at receiving points somewhere in the country. Often enough the shipper gets no return but a bill for freight and the perishables sometimes rot in the yards. If potatoes were standardized and sold on contract in national market, protected from manipulation, three things should result. First, there would be a daily national price known to growers. Second, by the sale of a contract for delivery the grower would be assured of this price. Third, the contract and directions for shipment would flow naturally to the distributor where the potatoes were needed, and thus the present fearfully wasteful system would be mitigated. Potatoes would be a most difficult case to handle; dried beans, peas, even butter and cheese would be easier. I am not advocating widespread dealing in futures, but short contracts giving time for delivery would probably greatly decrease the margin between farmer and local distributor by saving great wastes in transport, in spoilage and in manipulation.

The second class of speculation is one largely of the war as a period of rising prices growing out of inflation, and so forth. It lies in the marking up of goods on the shelf to the level of the rising daily market. This marking up has been one of the large factors in increasing the margin during the war. No better example exists than the rise of flour during the 1916-1917 harvest year, referred to elsewhere. We shall have a remedy for this the moment the tide of inflation turns. The farmer and consumer cannot, however, expect that they will get even during such a reverse period for their losses on the rise, because the trades have too great an individual power of resistance against selling goods at a loss. Anyway, the marking up of goods will cease when prices cease to rise--and there is a limit.

The third class of speculation is wholly vicious. That is the purchase of foodstuffs, in times of rising economic levels, sheerly for the rise in price or the deliberate manipulation of markets during normal times. These operations are against the common welfare; they can find no moral or economic justification. They are not to be reached by prosecution; they must be reached by prevention. Our great boards of trade in fine patriotic spirit proved their ability during the war to control deliberate manipulation of grain and other futures.

The two latter types of speculation are an impediment to free markets and they become an unnecessary charge on the margin.

CO-OPERATIVE MARKETING BY THE FARMER

There can be no question of the improvement in position of both farmer and consumer in cases where coöperative marketing can be organized. The high development of coöperative citrus fruit marketing has resulted in lower average prices to consumer, better quality, and better return to the grower. Here is a case of scientific distribution lamentably absent in many other commodities. There are other specialized products to which it could be well extended. To reach its best development it should have parallel coöperative development among consumers as have we discussed elsewhere.

SUNDRY ITEMS

There are many ways of assisting the agricultural industry not pertinent to this discussion on the cost of distribution. They do demand inquiry, and public illumination; most of them do not demand legislation so much as public education and consideration when legislating on other subjects. Our agricultural interests also need a foreign policy. For instance, during the last month there has been a consolidation of control of buying in world markets by the European Governments. How far it may be extended in its policies is not clear. Nevertheless, a combination of importers in all Europe under government control could determine the prices on every farm in the United States.

THE MARGIN BETWEEN THE WHOLESALER AND CONSUMER

As the datum point of price determination is the wholesaler's market, the accretions of charge for distribution from that point forward, the economy of extravagance in these costs, is of primary interest to the consumer. The same phenomena of marking up goods on the shelf, calculating profits not on commodities but on dollars handled, a minor amount of vicious speculation, and the passing on of excess profits tax, are present in those trades during the past years. A much more pertinent phenomenon in unduly increasing their margins is the increasing demands of the consumer as to service. Several deliveries daily, purchases on credit, the abandonment of the market basket in favor of the telephone, mean many costs. One of them much overlooked is that customers must always have "first" quality when they buy over the telephone, and the seconds and thirds of equal food value in many commodities go to waste and are added to the price of the firsts. That there are some people in the United States who want to buy sanely is evidenced by the 400 per cent increase in "cash and carry" shops. There are also too many people in the final stages of distribution. One city in the United States has one meat retailer for every 400 inhabitants; it would be equally well served with one dealer for every 1200. The result is high margin to the retailers and no out-of-the-way income to any of them. There is no very immediate remedy for this. One possibility is an extension of coöperative buying by consumers. It has proved a great success abroad. It is not socialism, for it arises from voluntary action and initiative among the people themselves.

ILL BALANCE OF AGRICULTURE AND GENERAL INDUSTRY

There is now a tendency to ill balance between the agricultural and general industry. For many years we were large exporters of food and importers of manufactured goods. We gradually imported mouths, manufactured our own goods and just as rapidly diminished our food exports. Up to the point where we consumed our own food and manufactured our own goods it has been a great national development. Our annual exports of food decreased during the past twenty-five years from some 15,000,000 tons to about 6,000,000 just before the European War. In the meantime we increased the import of such commodities as sugar, rice, vegetable oils, until our net exports were about 5,000,000 tons. Of the kinds of food exported this probably represents a decreased export of from twenty-five or thirty per cent of our production down to five per cent of it.

During the war we gave special stimulus to food production and produced greater economies in consumption so that these later years somewhat befog the real current, for our agricultural surplus in normal years is really very small. During the war and since, we have given great stimulus to our manufacturing industries. If we shall continue to build up our manufacturing industries and our export trade without corresponding encouragement to agriculture, we will soon have more mouths in our country than we can feed on our own produce. We shall, like the European States which have devoted themselves to industrial development, ultimately become dependent upon overseas food supplies. If we examine their situation we find the very life of their people is thus dependent upon maintaining open free access to overseas markets. From this necessity have grown the great naval armaments of the world, and the burden they imply on all sections of the population. Such nations, of necessity, have engaged in fierce competition for markets for their industrial products. Thus they built up the background of world conflicts. The titanic struggles that have resulted have endangered the very lives of their people by starvation. Their war tactics have, in large degree, been directed to strangle food supplies. One other result of this development is the terrible congestion of populations in manufacturing areas with all the social and human difficulties that this implies.

There is a jeopardy in industrial over-development which has received too little attention because the world has only experienced it during the past eighteen months. In times of industrial depression, or great increase in the cost of living, whether brought about by war or by the ebb and flow of world prosperity, these populations, oppressed with misery, turn to political remedies for matters that are beyond human control. They naturally resent the lowering of their standards of living, and they inevitably resort to industrial strife, to strikes and disorder. Theirs is the breeding ground of radicalism--for all such phenomena belong to the towns and not to the country.

By and large, our industries are now in a high state of prosperity. More favorable hours, more favorable wages, are today offered in industry than in agriculture. The industries are drawing the workers from our farms. If this balance in relative returns is to continue, we face a gradual decrease in our agricultural productivity. If we should develop our industrial side during the next five years as rapidly as we have during the past five years, we shall by that time be faced with the necessity to import foodstuffs to supplement our own food supplies. Some economists will argue, of course, that if we can manufacture goods cheaper than the rest of the world and exchange them for foodstuffs abroad, we should do so. But such arguments again ignore certain fundamental social and broad political questions. These dangers have become more emphasized by experience of the war. From dependence on overseas supplies for food, we will, by the very concern that will grow in public mind as to the safety of these supplies, soon find ourselves discussing the question of dominating the seas. Our international relations will have become infinitely more complex and more difficult. Unless the League of Nations serves its ideal, we will need to burden ourselves with more taxation, to maintain great naval and military forces. But of far more importance than this is that social stability of our country, the development of our national life, rests in the spirit of our farms and surrounds our villages. These are the sources that have always supplied our country with its true Americanism, its new and fresh minds, its physical and its moral strength. Industry's real market is with the farmer by the constant increase of his standard of living. We want our exports to grow in exchange for commodities we need from abroad, but we want them to grow in tune with our social and political interests, and to do so they must grow in step with our agriculture.

_In conclusion_ we are in a period of high inflation and shortage of world production, and consequent abnormal prices. The tide is likely to turn almost any time. Some of the outrageous margin between the farmer and consumer will be remedied by the turn in the tide itself, for it will eliminate the marking up of goods and the opportunity of vicious speculation. The dangers of the turn are twofold. First, unless we constructively remedy the unnecessary margin between the farmer and the wholesaler the farmer will receive the brunt of the fall long before the supplies he must buy and the labor he must employ will have fallen in step. It will bring to him the greatest suffering in the community.

The farmer's position can be remedied by better distribution of the tax load, by improvement in our transportation system, by getting our markets free of impediments to free flow of competition, and by constructive improvement in our whole distribution system. The consumer will get relief from deflation, improvement in world production, and by eliminating the same wastes and unnecessary costs in our distribution system.

The second danger is that deflation itself will take place without constructive consideration. Great wisdom will be required on the part of our government in its great control of credit that it shall take place progressively and with care, in order that there shall be no sudden breaks, with their resulting demoralization, unemployment and misery.

We require a careful balance of general industry to agriculture. We cannot afford to build this nation into an industrial state dependent upon other lands for its food supply. We want our industries to grow, but we want agriculture to grow in pace with them. Many of our farmers made great sacrifices in the war; they do not want to be coddled in peace; but they must have an equality of opportunity with all the other elements in the country.

[Footnote 2: _Saturday Evening Post_, Issue April 10, 1920.]

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