SELLING THE SURPLUS
In our earlier chapters, frequent and more or less extended references
have been made to the disposition of surplus property acquired by the
various branches of the Army during the World War. In so far as these
references have been to surpluses with the American Expeditionary
Forces, we have aimed to make the statements complete; but the
references to sales of the surplus military property accumulated
within the United States have been only incidental, inserted merely
to make plain to the reader the extent of the tasks of the various
production bureaus after the armistice. This may have seemed haphazard
and confusing treatment of what was one of the most interesting
and important phases of the demobilization of war industry. We are
therefore taking occasion in this chapter to consider this phase--the
disposal of the domestic surpluses of war materials--as a whole and in
such detail as may be expedient.
That same tendency toward centralization which succeeded in placing
under one direction the procurement of all war supplies and, after the
armistice, the liquidation of the Government’s business engagements,
also brought about a unified control of the sale of the surplus
materials. Shortly after the armistice there was set up in the Division
of Purchase, Storage, and Traffic a Sales Branch under an officer
called the Director of Sales. Just as, after the formation of the
“overhead” business organization known as the Division of Purchase,
Storage, and Traffic, the various production bureaus still continued
to procure most of their own supplies, but now under the control and
authority of the Director of Purchase, Storage, and Traffic, so after
the armistice these same bureaus sold and otherwise disposed of the
surpluses they had acquired, but under the supervision of the Director
of Sales. With the exception of a few sales made directly with various
foreign governments and companies (property valued at $63,450,000 going
in these transactions), the Sales Branch itself engaged in no selling,
but merely directed the selling activities of the operating bureaus.
It is impossible here even to give an estimate of the value of the
surplus materials left on the hands of the War Department after the
termination of the war industry, for the reason that the War Department
itself has never been able to arrive at an estimate. The subject has
been so vast, so intricate, and so complicated by the changing of
_personnel_ and the evolution of organization, that it has seemed to be
a hopeless task to attempt an inventory of the surplus property sold
and for sale. We can, however, gain some idea of the quantities of
it. It is estimated that the armistice found the Army with a surplus
of war supplies on hand of a value of $2,000,000,000. This investment
represented goods actually produced by American industry up to November
11, 1918, in the maintenance of a force of 4,000,000 men and in
anticipation of a force of nearly 5,000,000 in 1919. But this, mind
you, was surplus within the United States. On the same date--the day
of the armistice--the A. E. F., through importations from the United
States and through its own foreign purchases, had built up a surplus
of supplies worth $1,330,000,000 over and above what it would return
to the war reserves at home and outside of what it would consume while
resting on European soil during demobilization. Thus we have the figure
$3,330,000,000 as representing the value of the surplus supplies,
munitions, on hand when the active fighting ceased.
But this is only the beginning of the complete inventory; this was
merely the surplus existing on November 11, 1918. War industry, under
the policy of terminating it by graduating a declining production,
still had weeks and months to go on producing goods, for most of which
there was no war use. This dwindling manufacture by thousands of
factories with millions of employees added to the surpluses materials
worth many hundreds of millions. And still the tale is not told. War
industry had been fostered by huge federal investments in buildings and
machinery. These facilities, too, existed as surplus when the industry
ended. This great accumulation was largely augmented by the machinery
and other manufacturing facilities taken over by the Government in
the settlement with the war contractors. The Government had purchased
heavily of raw materials of various sorts, quantities of which remained
as surplus after the armistice. In liquidating the war industry it
added further to its stores of raw materials and took over, besides,
a great mass of semi-finished materials in all stages of completion.
When upon this heap we pile a great part of all the war building
construction, and on that the additional surpluses automatically
created when polity in Congress and in the executive offices made cut
after cut in the size of the permanent Army, then we are approximating
the total of the surplus.
This was all wealth, the true substance of the nation, its resources
fabricated by its labor for the special purposes of war; and, with the
war over, with little or no demand or use for these special materials,
they could be disposed of only at a shocking sacrifice. Again, we
cannot estimate the extent of the shrinkage, but we can indicate
it. Up to March 1, 1920, the War Department had disposed of surplus
property which had cost it $2,600,000,000. For this it had received
$1,633,000,000. The recovery, therefore, was 64 per cent of the cost;
the loss, 36 per cent. The shrinkage in values is one of the wastes
which any nation must contemplate and accept when it sets forth to wage
war on the modern scale. The nation can get value received for the cost
of its munitions only by using them in war.
The largest of American companies, the United States Steel Corporation,
in 1918, its busiest year, did a gross business of $1,745,000,000. The
value of the surplus munitions produced before the armistice was nearly
twice as great as that. The Steel Corporation, however, produced only
a few dozen or few score sorts of products. The sorts of goods and
materials to be disposed of by the Sales Branch were in number about
250,000, and this range embraced goods known in many branches of trade.
The Steel Corporation and other great companies usually sell to a
relatively small group of customers, who take the products in wholesale
quantities. The market which the Sales Branch entered consisted of the
entire United States, with 110,000,000 possible buyers; for part of
the problem was to dispose of surplus materials by retail sale to the
public. All in all, this may be regarded as the greatest merchandizing
enterprise ever undertaken in America.
The 250,000 catalogue items in the sales list were divided roughly into
seven commodity groups, as follows: (1) railway and building materials
and contractors’ equipment; (2) manufacturing plants and plant sites;
(3) machine tools; (4) vehicles and airplanes, including spare engines
and parts; (5) quartermaster stores; (6) ordnance and technical
equipment, including office equipment; and (7) raw materials, scrap
metal, and waste materials.
It was recognized at the outset that to throw on the market vast
quantities of supplies and materials in all these seven categories was
to court disaster to the industrial situation. Business and industry
immediately after the armistice were in a ticklish position. They faced
the complete transition from the war to the peace basis, an uncharted
region through which it seemed likely that they could go safely only
under the wisest of guidance. If, in addition to its inevitable
troubles of reconstruction, industry were to have to face cutthroat
competition with the surpluses of the very goods its own mills had
created during the war, it was evident that the difficulties of the
transition might be doubled.
To safeguard business as much as possible and still dispose of
the surplus materials, the War Department adopted certain general
principles or policies. The first of these was that the general
Government, through its several departments and in the public work
which the departments were doing, should utilize all the surplus war
materials they could absorb. The second and more important was to
sell all general commodities to the public through the medium of the
industries which had produced these commodities and thus to avoid
disastrous breaks in market prices--even, sometimes, to sustain prices.
There was widespread disapproval of this latter policy. The public
for months had been stung and irritated by prices which many regarded
as the exactions of profiteers; and now at last, with huge stocks of
supplies on hand which had to be sold or lost, the people anticipated a
dumping which would smash down prices and bring about the discomfiture
of those who had seemingly victimized them. But this was not to be. The
Government adopted the view that it was better to have the high (but
normally declining) prices and to keep the wheels of industry turning
than to risk a collapse of prices that might bring with it general
unemployment and business stagnation.
Later on, when it had become evident that business was making a safe
passage through the reconstruction period, large stocks of clothing and
food supplies were sold directly to consumers at prices considerably
below the market averages.
Particularly in raw materials the policy of sale through, or in
coöperation with, the industry affected by the sale worked as the
Government had expected it to work. The War Department found itself
after the armistice with a surplus of 125,000,000 board feet of soft
lumber over and above what it would need in completing the various
unterminated construction projects. This was lumber enough to build
5,000 houses. To have dumped this on the market would have paralyzed a
large part of the lumbering industry until the market had absorbed the
army lumber. Accordingly the War Department entered into a contract
with the authorized representatives of the lumber industry whereby it
was agreed that the lumber should be marketed gradually and at prices
fixed by agreement between the Government and the industry. Under
this arrangement the surplus was all sold without disturbance to the
industry and at prices which brought a good return to the Government.
In the spring of 1919 the Government had on hand a surplus of something
more than 100,000,000 pounds of copper. The copper industry was in a
serious plight. The producers had on hand a surplus of 1,000,000,000
pounds, but still they were keeping the mines, smelters, and refineries
running to prevent unemployment and in the expectation that the
resumption of normal business would soon create a demand for copper.
Any dumping of the war department surplus most certainly would have
closed the mines. Instead of that, the Government sold the entire
surplus back to the producers. The industry continued in operation, and
the Government received an average of seventeen cents a pound for its
copper, a fair recovery.
The War Department’s surplus of 161,000,000 pounds of sulphur was
sold through the industry. At the armistice the Government had on
hand some 600,000 tons of nitrate of soda imported from Chile for the
powder factories. About half of this was retained as a war reserve.
The Department of Agriculture disposed of 125,000 tons of it to
farmers for use as fertilizer. About 142,000 tons was sold for the War
Department at market prices by the nitrate importers who had supplied
the commodity to the Government in the first place. A stock of 59,000
tons of nitrate in Chile, the property of the American Government,
was brought to the United States and sold by the importers on the
same terms. Approximately 730,000 bales of cotton linters in the war
department surplus are being used by the commercial powder industry on
such terms as will return to the Government from one-third to one-half
the original cost of the linters. A surplus of 66,000,000 pounds of
ammonium nitrate was sold at prices which reimbursed the War Department
to the extent of about one-third its war-time cost.
It should be borne in mind that all these sales were actually
consummated by the production bureaus in whose hands the supplies
remained as surplus after the armistice, the Sales Branch merely
coördinating the sales and approving the terms. It will be
impracticable here to go into the details of the salvage and sales
activities of all the bureaus, but enough can be told to illustrate
the ingenuity and business enterprise employed in disposing of the
great war surpluses. As the occasion demanded, the government salesmen
had to be merchants, barterers, auctioneers, and even partners with
commercial organizations.
The production bureaus were organized for their salvage operations
precisely as they had been for manufacturing the supplies and, later,
for liquidating the business arrangements with the contractors. Those
which had created manufacturing districts before the armistice,
afterwards established district salvage boards to take over and
dispose of the surpluses accumulated by the district claims boards
in their settlements with the contractors. These district salvage
boards, in turn, were subsidiary to the main bureau salvage boards,
which, in turn, reported to the Sales Branch of the Division of
Purchase, Storage, and Traffic. The surpluses of ordnance materials,
for instance, were handled by the Ordnance Salvage Board through its
district salvage boards, and the same system obtained in the Air
Service and under the Director of Purchase. The other bureaus disposed
of their surpluses through central salvage boards in Washington.
Perhaps the chief challenge to the ingenuity of the government salesman
was that offered by the ordnance surpluses, for these were probably
the most highly specialized of all military supplies; yet it was
often the task of the Ordnance Salvage Board to find civilian needs
to which these supplies could be adapted. Great commercial successes
have sometimes been scored by those able to develop new uses, and
therefore new markets, for the goods they manufactured. In like fashion
the ordnance salvers, by taking thought, could sometimes convert what
had been regarded as junk into merchandise for which there was a brisk
demand at good prices.
These activities took the salesmen far afield. They disposed of lumber
to the Panama Canal operators, sold nitrate to the Government of
Holland, converted the great ammonium nitrate plant at Perryville into
a hospital operated by the Public Health Service for the benefit of
disabled ex-service men, transferred tin to the Navy Department, and
demonstrated to the Department of Agriculture that the containers in
which it had been intended to ship trench mortar shell could serve
equally well as containers of dehydrated vegetables. They disposed of
rope to the Department of Agriculture. They sold a thousand revolvers
to the police force of Washington. To the federal road-builders they
turned over trucks and smokeless powder and trinitrotoluol to be used
as blasting explosive.
One of the largest single undertakings in ordnance salvage was the
disposal of manufacturing plants either built outright or equipped
with machinery by the Government. There were some 300 of these, and
the Government’s investment in them was practically $525,000,000. The
array included cannon and gun-carriage plants, shell-loading plants,
powder works, chemical and acid plants, toluol plants, small-arms
factories, ammunition factories, nitrate-fixation plants, and numerous
shell-making plants. In the liquidation of the ordnance industry large
additional quantities of ordnance production machinery, both new and
used, fell into the hands of the Government. All of it, beyond the
selections retained in the military reserves, had to be sold. During
the first year after the armistice the sales of ordnance plants and
machinery brought in a return of over $70,000,000. (Manufacturing
facilities worth double that amount had either been stored or installed
at the various arsenals, or else had been turned over to other
departments of the Government.) In the spring of 1920 half the vast
accumulation of ordnance plants and machinery had been disposed of.
The most spectacular sale accomplished in this branch of ordnance
salvage was that of the smokeless powder plant at Nitro, West Virginia.
This plant was a self-contained town, with three square miles of
land in its site, with houses for 20,000 people, theatres, schools,
churches, stores, electric lights, paved streets, gas, a telephone
system, water, and other modern improvements. The Director of Sales
himself conducted the negotiations whereby the entire establishment
was sold _en bloc_ to a development corporation, which planned to
resell the establishment piecemeal to manufacturers and thus create a
permanent industrial city at Nitro. The corporation paid a flat price
to the Government for the Nitro plant and in addition admitted the
Government as a partner in the profits. Several companies have already
occupied factory buildings there. The Ordnance Salvage Board maintained
representatives at Nitro to approve the resales as they were made.
The Ordnance Department took over from the producers after the
armistice large quantities of steel in process of being made into
artillery shell. A great deal of this steel consisted of finished
and semi-finished parts for shell. No matter how much labor had been
expended on these shell parts, their only value commercially was as
melting stock. The users of steel evidently expected to be able to pick
up the Government’s surplus stock of it after the armistice for a song:
the highest bids for the first offerings of it on the market were only
about $12 a ton. The ordnance salvers cannily decided not to sell at
such prices and, except for some trifling, but advantageous, sales, did
nothing about it until the summer of 1919. By that time the commercial
revival began to make itself felt in the demand for steel, the prices
of which were further enhanced by an impending strike in the steel
industry. Then it was that the wisdom of holding on to the steel stocks
became evident. The sale of shell steel was handled directly by the
Ordnance Salvage Board, which, after the prices rose, dealt only with
heavy purchasers. The average price paid to the Government for this
steel was about $30 a ton. The Salvage Board handled about 1,000,000
tons of it.
There were also large surpluses of nonferrous metals,--copper, zinc,
lead, tin, antimony, and nickel,--the stocks including nearly 20,000
ounces of platinum, which sold, it may be noted, for an average price
of $105 an ounce--just about what it had cost. The copper, as we have
seen, went back to the producers at a fair price. The Board sold
65,000,000 pounds of zinc at an average of eight cents a pound. The
surplus of brass amounted to 135,000,000 pounds, and this has been
selling at good prices. During the year following the armistice the
salvers disposed of nonferrous metals worth $40,000,000.
The salvers had to use their ingenuity in order to dispose of the
surplus cupro-nickel advantageously. Cupro-nickel is an alloy of
copper and nickel which is used in making jackets for small-arms
bullets, but the metal has no commercial use. The Government was
able to secure not a single bid for any of its large surplus of
cupro-nickel. The alloy is too tough for ordinary metal-working
machinery. The ordnance salvers first proposed that this metal be
used at the Mint in making five-cent pieces, but the surplus of it
was so large that it would have taken many years to consume it all in
this use. The experimenters then took hold and found that, by melting
cupro-nickel and further alloying it with zinc, they could produce
German silver, a commodity for which there is extensive industrial use.
This fact was demonstrated to the market, and the first result was a
bid for 5,000,000 pounds of cupro-nickel at a favorable price.
An even more conspicuous example of resourcefulness on the part of the
ordnance salvage forces was the sale of the so-called cartridge cloth.
The Ordnance Department was an extensive war consumer of textiles of
many kinds. Silk, cotton, wool, felt, and linen are used in numerous
forms in the production of ordnance supplies. The quantities acquired
during the war may be estimated from the fact that the surpluses
left after the armistice brought on sale close to $25,000,000. In
the surplus of textile goods was a considerable yardage of what was
called cartridge cloth; and it must be said that at the outset none of
the excess ordnance supplies seemed to be so hopeless as a salvaging
proposition, so certain to account for a large loss of investment, as
this stock of cartridge cloth.
The cartridge cloth was used during the war to make bags to be filled
with the smokeless powder used as the propelling charges for guns of
the larger calibers. The cloth was made of silk, for the reason that
silk alone among fabrics burns perfectly and leaves no ash to smut the
barrel of a gun. Cotton, in contrast, or any other fabric, is likely
to leave charred pieces of itself smouldering in the breech of a gun
after a shot; and these smouldering pieces may touch off the new powder
charge prematurely and kill or maim the men serving the gun. Moreover,
silk alone does not cause a flash at the muzzle of the gun when the
shot is fired. Such flashes at night betray the gun’s position to the
enemy.
But though cartridge cloth was made of pure silk, what a silk it was!
Naturally, to keep down its cost, it was woven of the cheapest silk
materials possible to obtain. It was made of what were practically
the by-products of silk-weaving--noils and waste silk. Noils are cut
cocoons, immature cocoons, and combings from the outsides of cocoons.
The woof of cartridge cloth was made from silk noils and the warp
from waste silk. All raw silk is filled with a natural gum, which in
commercial processes is boiled out before the silk is woven. Since
this gum did not impair the fabric for use in guns (the gum gave
perfect combustion and left no ash), it was left in the raw material
in order to keep down the cost of the fabric. In order to facilitate
the manufacture of cloth from noils, the noils were carded, combed, and
spun in oil, oil not being objectionable in the cloth. The result was a
greasy, dark colored, rough cloth, looking like oily gunny sacking, a
fabric about as unalluring as any that could be imagined. And it cost
the Government on the average seventy-two cents a yard. At the time
of the armistice the Ordnance Department had on hand about 22,000,000
yards of it. Most of this quantity was set aside as a war reserve.
The rest was offered for sale. The best offer for it was twelve and
one-half cents a yard. The Government, therefore, faced a considerable
loss.
The ordnance salvers were not content to swallow this loss. The Salvage
Board obtained $20,000 with which to experiment with the silk. An
expert silk maker in the Sales Branch then tried boiling out the gum
and oil and otherwise processing the fabric, after which he bleached,
dyed, printed, and napped it. The result was a beautiful fabric,
suitable for outer garments for both men and women, and for millinery,
drapery, and upholstery. Beautiful color effects were obtained with it
by certain silk-finishing companies. With this demonstration before the
trade, the Salvage Board again asked for bids, and this time received
a number of them, offering prices ranging from thirty-one cents a yard
to forty. This still was not enough for the salvage salesmen, who went
out and negotiated a contract with two companies--the Bush Terminal
Company of New York and the McLane Silk Company of Turners Falls,
Massachusetts--which netted the Government eighty-five and a half cents
a yard, plus half the profits received from the sale of the fabric. A
considerable quantity of the silk was sold under this arrangement.
The expenses of the Ordnance Salvage Board were less than 6 per cent of
the money received from sales and transfers. This sales cost compares
favorably with similar costs in the mercantile world.
The fact that a large part of the money spent by the Air Service during
the war was represented after the armistice by finished airplanes and
airplane engines precluded any considerable recoupment of the war
expenditures from sales of surplus materials afterwards, since, at
present, planes and engines have small commercial utility. Aviation
engines are too light and too powerful for ordinary tasks, and no
real market for airplanes has yet existed in the United States.
Consequently, the sales of air service surplus were virtually limited
to commodities having commercial use, such as tires, photographic
equipment, linen fabric, fur used in making aviators’ clothing, and the
like. Some of these surplus commodities, however, went at good prices.
One New York concern bought 372,500 Chinese dogskins for approximately
$700,000. Nearly 5,000,000 board feet of surplus mahogany, used in
making propellers, sold for $150 a thousand feet. Great quantities of
small tools from the airplane factories, millions of yards of cotton
fabric, and nearly 4,000,000 pounds of long-staple cotton sold at good
prices. The Government realized $700,000 from the sale of 20,000,000
feet of spruce, fir, and other soft woods used in the manufacture of
airplanes. One large sale of airplanes and engines was recorded. For
$380,000 the Nebraska Aircraft Corporation of Lincoln, Nebraska, bought
280 Standard J-1 training planes without engines and 280 Hispano-Suiza
engines to drive them.
To sell its surplus in the United States the Air Service set up field
disposal agencies at Boston, New York, Buffalo, Chicago, Detroit, and
Dayton. The property declared surplus was valued at approximately
$115,000,000. Up to the present (July, 1921) goods to the value of
$97,000,000 have been sold from this surplus, and there is an unsold
residue valued at $18,000,000. The average recovery has been 62 per
cent of the cost.
The disposition of the property acquired by the United States Spruce
Production Corporation in the forests of the Pacific Northwest was
delayed by the congressional investigation of the affairs of that
official organization. The cost value of all salvageable property
was calculated at approximately $19,000,000, of which $7,000,000
represented the cost of three railroads for hauling logs. The rest of
the investment was represented by sawmills, roads, hotels and barracks
for woodsmen, hoisting engines, drying kilns, and nearly 100,000 other
items, among which were 22,000,000 feet of lumber produced and on hand.
The lumber of commercial grades was promptly sold, and the Air Service
arranged to take over the 3,088,000 feet of airplane lumber stock, for
a consideration of approximately $1,000,000. The sale of the remaining
property has gone on slowly, and the recovery has been low in ratio to
the original cost.
The sale of surplus engineering materials brought to the Government
the unusually high average recoupment of 87 per cent of the cost
of manufacturing the supplies. The reason is that the largest and
most valuable part of the surplus consisted of railroad construction
materials and rolling stock. The railroads of the world, and
particularly those of Europe, had been neglected during the war, and
their rejuvenation had become a necessity even paramount to that of
reconstructing general industry. Such governments as those of France
and Poland were glad of the chance to secure American locomotives,
cars, and cranes at the cost of their manufacture. The largest single
sale of engineer supplies was made to the French Government, which paid
approximately $63,000,000 for 485 freight locomotives and nearly 20,000
freight cars. By the spring of 1920 surplus engineering supplies which
had cost $128,000,000 had been sold for about $110,000,000. Large
quantities of excavating machinery and other contractors’ equipment
were transferred to the Bureau of Public Roads.
Surplus chemical warfare materials, on the other hand, proved to have
low salvage value. After the armistice the Chemical Warfare Service
found itself with some 1,000 carloads of surplus materials on its
hands. These materials had cost $11,000,000. Of the surplus, obsolete
gas masks and other accumulations valuable to no one and therefore
unsalable, accounted for $2,000,000. The rest consisted principally of
raw materials and machinery. Certain of its raw chemicals the Service
was able to dispose of to the artificial dye industry at a profit. The
outside gas-making plants attached to the Edgewood Arsenal were sold by
auction to manufacturers of chemicals.
Though the sales of surplus factories, machinery, raw materials, and
scrap and junk were of intense interest and concern to industry and
business generally, the great masses of people in this country knew
little or nothing about them. The wage earners, the millions drawing
salaries of moderate range, were not beneficiaries--not immediate
beneficiaries, at any rate--of the bargains the Government was
offering. The trade journals were filled with advertising and reading
matter about the sales of the war surpluses, but the newspapers seldom
had anything to say about them. No doubt there were hundreds of
thousands of Americans who, immediately after the armistice, reading
about the excess stores which were overflowing the Government’s
enormous warehouses, expected to benefit personally and at once by
the situation. It was the opportunity of a lifetime to pick up a new
stock of kitchen utensils for a song, or a lawn mower, or a new Dodge
car at a knock-down price, or, at least, new supplies of underclothing
and other garments, or of food at figures which would make the corner
grocer squirm. But as the weeks and months went by and none of these
opportunities ever presented themselves, it became obvious to any
thinking person that the Government itself must be in league with
the profiteers and must be holding out its stocks in order to let the
gouging go on without hindrance.
Those who jumped to such a conclusion were not aware of the
restrictions which their own representatives, the men in Congress,
had thrown about the sale of government property. Just as the law
forbade (with certain exceptions and qualifications already noted in
this volume) the government executives to buy supplies except from
the best bidder in a competition for the business, so it forbade them
to sell supplies except to the best bidder. The buyers therefore had
to compete with each other for the surplus stocks, either in auction
sales or by sealed bids submitted after goods had been duly described
and advertised. And since the Government had its own sales expenses to
consider and therefore could not hold auctions to dispose of single
cans of tomatoes or advertise for bids for individual hams, the
ultimate consumer, unless he were prepared to purchase by the carload,
was as much out of it as if the supplies were stored on the moon.
Not until July 29, 1919, did Congress come to the relief of the
ultimate consumer by passing an act authorizing the War Department to
sell food, clothing, and household supplies at retail. Within ten days
the Surplus Property Division (of the Division of Purchase, Storage,
and Traffic, which had charge of all food, clothing, and general
supplies) inaugurated a plan of direct selling by parcel post. Price
lists and order blanks were sent to the 58,000 post offices of the
United States, and the postmasters were instructed to receive orders
and cash and send consolidated requisitions and payments to the Surplus
Property Division. This plan was not a success, thanks principally to
the postmasters’ unfamiliarity with such work; and a few weeks later it
was abandoned altogether in favor of the army retail stores. Through
these stores the masses of consumers at last came into direct touch
with the surplus war supplies.
The store system was established on September 25, 1919. At the stores
a consumer might buy food and other supplies over the counter in such
quantities as he chose; or, if he lived too far away to visit the
store, he might order from it goods to be delivered by parcel post,
postage prepaid and goods insured at government expense. At first
the Army established twenty-five stores, and these did so well that
additional stores and branches were added, until by the late winter
of 1919–1920 there were seventy-seven places where consumers might go
and buy, at reduced prices, the goods which their tax payments and
bond purchases had enabled the Government to procure. The stores were
operated under the supervision of the fourteen zone supply officers.
In selling directly to the consumer, the War Department adopted the
policy of pricing goods at four-fifths of the prevalent retail market
prices. Since the cost of living had begun to decline in late 1919 and
the early part of 1920, this policy meant a loss to the Government,
which had paid war prices for the supplies; but it was not a large
loss. On the average, the retail sales brought back nearly 80 per cent
of the original cost of the goods sold. The sales expenses came to
about 10 per cent of the money received.
The War Department did everything in its power to make the stores
attractive to the public. It stocked them with a wide range of articles
and advertised them heavily. A press bureau was established in
Washington, and the newspapers devoted acres of space to the publicity.
In spite of the propaganda, however, the response of the public was
not so unrestrained as the outcry against the costs of necessaries
might have led one to expect. (To be sure, the Government, naturally,
could not set up its stores in the high-rent districts--the districts
most convenient to the retail customers.) The army retail stores did
business at the rate of approximately $5,000,000 a month--not much
for 110,000,000 potential customers. As the sales went on it became
evident that, although the protest against high prices was practically
universal, only the thrifty minority was willing to step across the
line of convenience and custom in order to secure lower ones. The rest
preferred to grumble and follow their lines of least resistance.
Yet it is probably true that the retail stores benefited all, since
the continued sale of great quantities of surplus military supplies
at reduced prices doubtless had an effect in bringing down commercial
prices. Although only some 350 items in the Army’s supply list were
applicable to retail selling, this range, after all, was considerable.
In the subsistence list it ran from Apples, Evaporated, to Vinegar, and
in general supplies from Arctics, Cloth Top, to Whips, Artillery. The
Surplus Property Division even sold a few motorcycles at the stores.
Far overshadowing the retail sales in quantities of goods moved were
the sales to jobbers, dealers, and speculators, by informal bids on
advertised lists of supplies. The sales headquarters in Washington and
the zone offices became busy markets for months after the armistice
as the War Department got rid of the surplus supplies procured by
the Director of Purchase. As stated, there were regular commodity
days--textiles were sold on Mondays, raw materials on Tuesdays, and so
on. At the Monday sales the Surplus Property Division had taken in, by
February 20, 1920, nearly $66,000,000 paid for clothing and equipage
alone. These sales benefited the general public in that they usually
resulted in the goods being sold at retail by salvage companies or by
regular mercantile houses at reduced prices.
The fluctuations of markets sometimes made it possible for the
Government to sell surplus to bidders at a profit. For instance, a ton
or more of camphor, acquired originally for the Medical Department,
brought a profit of 84 per cent, due to a post-armistice increase in
the price of camphor. Medical supplies generally, although they were
sold principally to public institutions, brought a 99-per-cent recovery
of their war cost. General supplies--including hardware, kitchen
utensils, brushes and brooms, rope, paper, office furniture, musical
instruments, and athletic goods--sold at prices which brought back to
the Government more than 72 per cent of their war cost.
Apparently useless supplies--useless to civilians, that is--were
purchased by bidders who had found unique uses for them. The
nonbreakable eyepieces of gas masks were found to manufacture well
into motorists’ goggles. The anti-dim paste used to keep the gas-mask
eyepieces from fogging from the wearers’ breath had a practical use
upon the windshields of automobiles during rainstorms. Trench fans were
bought and used as aprons for cannery workers.
Surplus leather was sold in auctions held in Philadelphia, Chicago, San
Francisco, Boston, and elsewhere; and the cash recoveries generally
were large, ranging from 71 per cent to 100 per cent of the war cost,
and even, in instances, returning a profit. Harness did not sell well,
because much of it was made of russet leather, which does not attract
the commercial buyer, or else because the harnesses were of special
designs not used by teamsters.
The demands of other departments of the Government for surplus army
motor trucks were so great that only a few were sold as surplus, and
those few were neither new nor in good condition. Automobile tires,
however, were placed on sale in the retail stores.
The total sale of surplus materials acquired by the Division of
Purchase, Storage, and Traffic amounted to $357,000,000 between the
date of the armistice and January 31, 1920. The recovery was 77.57 per
cent of the original cost.