"Railways will perhaps render more effective service than ever

in the matter of bringing to the required spot huge guns too

heavy to be transported in any other way. These will be fired

without leaving the rails. The truck gun-carriage is so

arranged as to withstand the recoil; this result is obtained by

placing on the ground, once the carriage is stationary,

supports which take the load off the wheels. The recoil is

transferred to the ground so that the rails do not suffer.

"Whether the object is to organize a supply line, to transfer

reinforcements, or to carry heavy material to its destination,

it may be of service to provide for the absence of normal lines

by laying down rails along the road. Both the Germans and

ourselves have done this very frequently. A narrow gauge of

sixty centimeters is generally used. A team of skilled sappers

takes about three hours to lay down about one kilometer of

railway."

AMERICA'S SHIPPING PREPARATION

The two great means of transport--railways and ships--furnished in this

war the greatest examples of modified state socialism which America had

yet seen. As to the general way in which they were controlled these two

services show a fairly close family resemblance, though the forms of

organization were technically quite different. The larger railroads and

the larger ships were taken possession of by the Government and were

operated by the same people, in general, who operated them before, but

under orders of the Railroad Administration and the Shipping Board

respectively. New ships and new railroad equipment were built on plans

made under federal direction, and in both cases the output was being

largely standardized. The heads of the Shipping Board and the Emergency

Fleet Corporation were men drawn from private business, while the

regional directors of the railroad regions and the federal managers of

the separate roads were railroad men, usually managing their own roads,

under the government's direction. Thus in both cases private enterprise

furnished the traditions and training of the personnel that made this

experiment in socialism.

Besides the points of likeness there were differences between the two

services. In the case of ship-building, the industry was virtually

re-created, so great was the expansion and the revolution in methods. In

the case of railroads the emphasis was, as has been seen, on the task of

utilizing an existing and limited plant to its utmost capacity for war

purposes.

WAR'S EFFECT ON SHIPPING

The following table, taken from a pamphlet distributed by the Emergency

Fleet Corporation six months before the conclusion of the war, gives a

perspicuous view of the shipping situation at the opening of military

operations in the United States:

THE WAR AND WORLD SHIPPING

Gross Tons

World's shipping (except German and

Austrian) August 1, 1914 42,574,537

Additional ships built, August, 1914-

December 31, 1917 6,621,003

German and Austrian interned ships

available for use of Allies 875,000

----------

Total 50,070,540

Losses since 1914.

Due to ordinary causes. 1,600,000

Due to mines, raiders

and submarines:

Allies 8,900,119[17]

Norway 1,031,778

Other neutrals 400,000

Total 11,931,897

----------

Balance actual tonnage available 38,138,643

Net decrease since 1914 4,435,894

Add 2 tons constantly required to

maintain each man in France

(1,500,000 men × 2) 3,000,000

Shortage for merchant traffic, at least 7,435,894

[17] To October, 1917.

Another table gives a view of the rates between the building and sinking

of ships among the Allied, neutral, and British nations from the

beginning of the war to April, 1918:

"The world's shipping suffered a net loss of 2,632,279 tons

from the beginning of the war to April 1, 1918, the greater

part of this having occurred since the beginning of the

unrestricted submarine warfare which brought America into the

war. This loss is partly due to England's having increased her

naval building at the expense of merchant tonnage. While naval

construction must not be neglected, some building capacity can

be turned back to merchant ship-building in case of extreme

need. However, in April, 1918, Great Britain and the United

States built 40,000 tons more shipping than was lost, and

American construction is still rapidly increasing."

AMERICA'S SHIP-BUILDING PROGRAM

American ship-building was planned on grandiose lines, partly to make

good the losses by submarine, partly to provide transportation for

American troops to Europe, and partly for propaganda purposes in

friendly and in enemy countries. The American program was an ambitious

one. Inflated figures were offered for popular consumption and

undoubtedly they were consumed and had their influence in securing a

successful close to the struggle. While reports were coming from Great

Britain telling of constant labor troubles on the Clyde and other

ship-building localities, every item of news from Washington spoke of

the marvelous achievements of American ship-building. One message read

after eight months of the war had passed: "For the first time in history

America has outdistanced England in her ship-building output."

Foreign critics called attention to the fact that American figures of

ship-building (1918) had a different basis of valuation from those of

other countries. In one case there were vessels completed and entered

for service, and in another there were vessels launched. The situation

is presented by the London _Economist_:

"British shipping, still in magnitude far beyond that of any of

the Allies, is declining; it is still being sunk faster than it

is being replaced. American shipping, on the other hand, is

rapidly expanding, and has already turned the scale against the

U-boats. The American Army in France as it is reinforced must

become more and more dependent upon American ships for

transport and supply. Up to the end of July the net loss in

British shipping due to enemy action and marine risks since

August, 1914, had been 3,851,537 gross tons. During the current

year to July 31 we have lost 583,600 gross tons more than we

have built. British sea power, the power to use the sea as

measured in merchant shipping, is wasting. On the other hand,

the net gain since August, 1914, in Allied and neutral

shipping--to which the United States have largely

contributed--was nearly 1,100,000 tons at the end of June this

year, and was showing a very remarkable rate of expansion.

Thanks chiefly to the United States, the Allied and neutral

monthly gain now more than offsets the British loss. The

critical corner has been turned. To those whose eyes look

beyond the war, and who already anticipate a great American

mercantile marine in competition with depleted British lines,

we would point out that after all its losses British merchant

shipping still amounts to over 14,000,000 tons gross, and that

America's ocean-going tonnage built and completing--exclusive

of captures--is as yet little more than 4,000,000. What the

relative positions will be a year hence--or two years hence,

should the war last so long--we do not venture to predict."

THE FOURTH OF JULY SPLASH

Reports of the Shipping Board's activity led to expectations of an

unprecedented number of ships to be launched, fitted and ready for

transport and trade purposes within a very short interval. Much

enthusiasm was created by the Fourth of July splash, 1918, when,

according to the New York _Tribune_, in twelve hours steel and wooden

ships hit the water in clouds of smoke and spray, at the rate of one

every seven minutes. The era of Mr. Jefferson Brick had undoubtedly

returned, for the _Tribune_ went on to expatiate in poetical exuberance

that the shores of "Puget Sound, San Francisco Bay, Columbia river, the

Gulf of Mexico, the Delaware, Chesapeake Bay, New York Bay, and all the

coast of New England and the Great Lakes were laved by the backwash of

the great ships of the Liberty Fleet rushing to their proper element."

The Bureau of Navigation estimated that by the end of June, 1918, 1,622

ships of 1,430,793 gross tons would be launched--more than double the

output of German yards in times of peace. One article refers to the

actual event as follows:

[Illustration: Copyright by Charles Phillip Norton

Building a Steel Ship in Seattle, Washington

American ship-building during the war was planned on a gigantic scale to

make good the losses by submarines and to provide transportation for

American troops to Europe. The _West Lianga_, shown above, an 8,800-ton

cargo carrier was launched within 55 working days and delivered, ready

for cargo, in 67 days.]

AMERICAN LOSSES--NEW TONNAGE BUILT

"At San Francisco on July 4th, Mr. Charles M. Schwab,

Director-General of the Emergency Fleet Corporation, said to

the shipworkers: 'If you stand up to your job, we'll make the

Kaiser take his medicine lying down.' Mr. Schwab also ventured

the statement that this Fourth of July shows the greatest

record of launchings for a single day in the world's history,

and added:

"'Every time we launch a cargo or troopship or tanker we add to

the certainty that German submarines can not win this war.

Already we have the U-boats on the run, and if we keep up the

pace we will have them beaten by next year. And when we achieve

this victory it will be you who will deserve the credit.

"'In 1915 all the shipyards in America turned out 215,602

dead-weight tons of shipping. The next year our output jumped

to 520,847 tons. In 1917 the hot pace continued until we very

nearly doubled the output of the previous year, completing a

total of 901,223. I am confident now that if we pull together

and every man stays on the job, we will produce more than

3,000,000 dead-weight tons in 1918--the greatest output of any

nation in the world in a single year.'

"Premier Lloyd George sent a cable to President Wilson on the

launching of the ships, in which he extended 'heartfelt

congratulations on this magnificent performance,' and in an

Independence-day speech Secretary of the Navy Josephus Daniels

said in part:

"'We are launching this day far more tonnage than that of all

the American vessels sunk by submarines since the war began. We

are launching today more than the Germans sank of the ships of

all nations in the last month for which we have the official

figures. The recent enemy submarine activities off our coast

resulted in the loss of 25,411 dead-weight tons of American

shipping. During this same time 130,000 gross tons of shipping

were built.

"'To give some idea of the tonnage situation with reference to

American shipping, it may be of interest to know that the total

tonnage of American vessels lost prior to the entry of the

United States into the war was 67,815. The total American

tonnage sunk since the entry of the United States into the war

is 284,408, or a total of 352,223 tons sunk during the whole

period of the European War. As against this loss, the gross

tonnage of merchant ships built in the United States since the

commencement of the European War is 2,722,563 tons, 1,736,664

gross tons of which have been built since the entry of the

United States into the war. In addition to the tonnage thus

built 650,000 tons of German shipping have been taken over.

This does not include the tonnage acquired of Dutch, Japanese,

and other vessels. It will be of further interest to know that

today there will be launched in the great shipyards of this

country over 400,000 dead-weight tons. These figures are in

addition to those previously given.'"

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

The war program of the Shipping Board implied a multiplication by three

of existing outputs. This increased output signified the possibility of

labor difficulties, and in order to prevent these an agreement was

reached between representatives of the labor unions, the Navy

Department, the Shipping Board and the Emergency Fleet Corporation, to

the effect that all disputes concerning wages, hours or conditions in

shipyards in ship-building plants should be determined by a committee of

three, one representing the corporation, one nominated by the President

and the third selected by Mr. Samuel Gompers. When this agreement was

entered into the United States reported a ship-building capacity of over

one and one-half million gross tons a year. Two years previously the

ship-building capacity was only five hundred thousand tons, but

according to the London _Economist_, a rate of four million gross tons a

year would have to be supplied if the American Army was to have

sufficient means of transport.

When this forecast was made on both sides of the Atlantic, it was

realized that so far as the marine situation was concerned the war had

become simply a question of ship-building against the submarine.

Military operations intervened to prevent a full test of our

ship-building strength, but there was full confidence in the United

States that American ship-building would by increased production make

the German submarine program an inconsiderable factor in the question of

terminating the war.

TRANSPORTING THE AMERICAN ARMY

When there came a demand for an increase of man-power to be sent to the

battle front few appreciated what this effort meant in its effect on

increased shipping activities. Half a million American soldiers crossed

the Atlantic in the first thirteen months of the war, after our entrance

into the war, and a million and a half in the last six months of the

war. The shipment across the Atlantic was at first anything but rapid.

There were only a few American and British troop ships chartered

directly from their owners. Then the former German liners were brought

into service and with this addition embarkations greatly increased.

[Illustration: Hog Island Ship-building Yards

The expenditure of millions of dollars and the labor of thousands of

workmen transformed in a short time a tract of marsh lands near

Philadelphia into one of the greatest ship yards in the world.]

Early in 1918 increased shipping facilities were arranged for with the

British Government. The results of this arrangement became visible in

the growth of troop movements for March, 1918. Then there came the great

German drive; after this every ship that could be secured was pressed

into service. More British troop ships were used. Accordingly, in May,

1918, more than twice as many men were carried as in April. The June

record was greater than that of May and before the first of July one

million had been embarked. During the summer the number carried was more

than 10,000 men per day. This record has only been excelled by the

achievement in bringing back the same men to the shores of the United

States.[18]

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

Volume IV.

In addition to the transatlantic fleet there was an American

cross-channel fleet carrying men and cargo from England to France. This

fleet consisted of more than a third of a million tons by the end of

1918. One-fourth of these vessels were Swedish or Norwegian, while the

rest were American. This fleet comprised large numbers of small wood and

steel vessels built by the Emergency Fleet Corporation at the yards of

the Great Lakes and along the coast.

ACCELERATED SHIPPING

The Emergency Fleet Corporation turned over nearly a million tons of new

ships for military purposes, and besides Scandinavian and Japanese

tonnage was chartered. By doing this and by taking over lake steamers

the large tonnage figures were secured, but it must be remembered that

the Allies were largely concerned in the American troop movement. Of

every 100 men who went over, 49 went in British ships, 45 in American,

three in Italian, two in French and one in Russian shipping under

British control. Moreover, a way was found to increase the loading of

transports by as much as 50 per cent.

The duration of the voyage round trip was considerably decreased. In the

spring of 1917 the average turn around for troop ships was 52 days. Some

of the fast ships averaged under 30. The _Leviathan_, for example,

landed the equivalent of a German division in France each month. Most of

the cargo ships were American and these ships carried thousands of

articles of the most varied sort. Nearly one-half of all the cargoes

consisted of food and clothing. Then came the engineering and ordnance

supplies. A large number of locomotives were shipped, set up on their

own wheels so that they could be unloaded on the tracks in France and

run off in a few hours under their own steam. These locomotives were of

the hundred-ton type. Shipments of this type had never been made before.

When the armistice was signed the Army was prepared to ship these set-up

locomotives at the rate of 200 a month. The actual record shows that

1,791 were sent to France on transports.

Nearly 27,000 standard-gauge freight cars were shipped abroad, and motor

trucks to the number of 47,000; rails and fittings were sent to France

aggregating in all 423,000 tons. Moreover, the Army shipped nearly

70,000 horses and mules. The increase in the shipping of cargo from the

United States was consistently maintained from the start of the war, and

at its cessation it was undergoing marked acceleration.

BRITISH SHIP-BUILDING

Ship-building in England was taken over by the government early in the

war. This plan was described by many as an example of a blundering

surrender to Socialism and a concession to bureaucratic tendencies.

These critics pointed to the fact that in 1914 British shipping tonnage

had reached the figure of 19 million tons, an increase of over 10

millions in 15 years; and this was done in spite of subsidized

competition from abroad and lack of reasonable encouragement at home.

The policy of government interference was regarded as simply a method of

discouraging English initiative in this industry. A writer in the London

_Outlook_, Mr. E. T. Good, described the project in a most unfavorable

light:

"On top of foreign subsidized competition our people are to be

subjected to Government competition at home, and their whole

position and prospects rendered uncertain, if not impossible.

This new government undertaking can have nothing but a

chilling, blighting effect upon our splendid ship-building and

engineering trades, and it will not give us one additional ton

of shipping. The government policy--or lack of policy--is such

that no one knows what to expect next. There is no certainty.

There is no continuity of policy. There is no encouragement.

There is no common justice for British enterprise. Whilst

Germany, France, Italy and other nations are preparing large

subsidization schemes for their shipping and ship-building

trades, our government excessively penalizes our industries and

enterprises, and gives no hint of any fair dealing in the

future. Before the war German subsidized liners were permitted

to come into our harbors and take on board British passengers

at 'blackleg' rates, and without paying even a due share for

the upkeep of our ports and lights. Now our government, whilst

paying neutral shipowners--our future rivals--freights up to as

much as 500 per cent. above the Bluebook rates paid to our own

vessels, is taxing our shipping people up to the eyes--doing

all that it can to render it difficult, if not impossible, for

our companies to increase their fleets and maintain British

supremacy after the war."

[Illustration: Copyright by Underwood & Underwood

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

Oregon

Most of the cargo ships that carried supplies to our troops after we

entered the war were American owned, and carried thousands of articles

of the most varied sort. The _City of Portland_, shown above, was a

three hundred foot wooden motor vessel.]

It must be remembered that Great Britain's shipping problem was a matter

of extreme complexity. There were first of all the submarine sinkings.

There was the lack of labour for ship-building. There was, besides, the

fact that the tonnage available for ordinary imports was considerably

lessened by the commandeering of merchant ships for the carriage of

government material. The following statement of the problem was

presented by the British Premier himself in August, 1917:

"In addition to this, the Shipping Controller has taken steps

for the quickening of ship-building. The tonnage built in this

country during peace times is, I think, on an average

something a little under 2,000,000. In 1915 the ship-building

came to 688,000 tons. In 1916 it was 538,000 tons. In this year

a little over a million tons, nearly 1,100,000 tons, will be

built in this country and 330,000 tons will be acquired abroad,

so that this year the tonnage which we shall acquire will be

1,900,000. This is purely mercantile marine. Bear in mind the

condition under which the tonnage is built. It is the fourth

year of the war. There is a difficulty in labor and great

difficulty in material. You require steel for guns and shells

for the Navy, because the ship-building program of the Navy has

gone up considerably in the course of the present year. In

spite of that fact the ship-building of the country in this

year will not be very far from what it was in the days of

peace.

"Even now we have not got enough tonnage for all essential

purposes. We have got to provide tonnage for France, Italy and

Russia, as well as for ourselves, and we need more ships

instead of fewer ships. And I am not going to pretend that

there will not be at best a rate of diminution of our shipping

which will embarrass us in the struggle, and therefore it is

essential, not merely that this country should build, but that

the only other countries which have a great ship-building

capacity should also build. If the United States of America

puts forth the whole of her capacity, and I have no doubt, from

what I hear, that she is preparing to do it in her own thorough

and enterprising way, I have no doubt at all that we shall have

sufficient tonnage not merely for this year but for the whole

of 1918 and, if necessary, for 1919 as well, because America

can expand very considerably her ship-building capacity if the

real need ever arises for her to do so."

BRITISH BUREAUCRATIC METHODS

On the whole it must be allowed that after the results were published

there was a great disappointment, particularly as the government had put

forth roseate plans for ship-building on a large scale. At the beginning

of the war there were 16 million tons gross of steamers of more than 600

tons each. A large part of this total was used in the service of the

Navy; and the balance, available for the carriage of food, materials and

exports, was lost during the submarine campaign. The government seemed

to show no ability to replace it. Sometimes it is contended that the

responsibility was to be charged up to the labor organizations.

According to the _Economist_ the situation was due to bureaucratic

methods of control.

In a debate in Parliament the whole subject was ventilated:

"From every quarter members with first-hand knowledge of

ship-building got up to tell the same story of

over-centralization, fussy control, conflicting orders, leading

all to the same result--discouragement of masters and men. Mr.

Mackinder, speaking for a Glasgow constituency, and Sir Walter

Runciman, speaking as a ship-owner--two men whose views on

economics are the poles apart--were in agreement here. The

fault, they declared, lay, not in the want of patriotism or the

inherent vice of the British workman, or even in the lethargy

of the British employer, but in the third and predominant

member of the ship-building partnership, the British

Government. Keeping the direction in its own hands, the

Government started with a preconceived theory of the standard

ship--a theory that might be of great value to a builder of

revolutionary ideas laying the foundations of a prosperity to

be enjoyed twenty years hence, but is of considerably less

value to a nation that is losing steamers at the rate of

fifteen or twenty a week, and wants new steamers now. When the

standard ship was first proposed, builders pointed out that in

practice each had a standard ship of his own, and they could

build most quickly by confining themselves to their own

familiar types. Mr. Macnamara told them that they were

Solomons, wise after the event, but that is less than fair.

They were wise from the beginning, and their predictions have

come true."

TRADE POLICY AS A WAR WEAPON

The building of ships under Government supervision and control was only

one side of Allied war shipping administration. Seaborne trade was

rigidly directed as a potent arm in bringing Germany's war power to

ruin. The industrial and economic effect of the marine blockade was

fully conceded by a number of German and Austrian newspapers.

_The Frankfurter Zeitung_ said:

"If the final peace does not return to us what our enemies have

taken and destroyed in the outside world, if it does not

restore to us freedom in our work and our spirit of enterprise

in the world, then the German people is crippled for an

immeasurable period. We demand restoration for all violation of

the law and for all acts of destruction. We demand

indemnification for all damages done, and we meet the plan of

differentiation with the demand for the most-favored-nation

treatment and equal rights; the plan of exclusion with the

demand for the open door and free seas; and the threat of a

blockade of raw materials with the demand for the delivery of

raw materials."

A true picture of the situation is given in the following passage from

the Vienna _Arbeiter Zeitung_:

"Even if Hindenburg's genius and German bravery won a complete

victory on land, even if the English Army fell into our hands

to the last man, and France was disarmed and had to submit to

Germany's terms, even then England and America could not be

compelled to the capitulation that the Pan-German word-heroes

prophesy daily. Even then they would blockade our coasts and

the war would continue at sea. And even if they could not or

would not do that, even if peace was concluded and all the

battles ended, they would still have a terrible weapon to use

against us. Our domestic economy can not exist permanently

without the wheat, the copper, and the cotton from America, the

nickel from Canada, the cotton from Egypt and India, the

phosphates from the North African coasts, the rubber from the

English tropical colonies, Indian jute, and the oilplants of

the South Sea Islands.

"There will be a scarcity of all these things after the war and

there will be great competition for them. If England and

America do not deliver to us these raw materials after the war,

then we as conquerors are conquered."

GERMANY'S POTASH BOYCOTT

Before we entered the war Germany viewed with great concern the effect

of the economic weight of the United States if added to the side of her

antagonists. She felt that if this country remained neutral she could

depend on us for raw materials. To be sure, German ingenuity had

produced ten thousand substitutes, due to the skill of German chemists,

ranging from bacteria fats to synthetic rubber. But even the War Office

in Berlin was under no illusion on this point. "We need copper and no

stripping of palace roofs, no raiding of door knockers or kitchen pans

can make up for the deficiency." Even the vision of economic

self-sufficiency in Central Europe had rifts in it. Raw material was so

important that, in the boot and shoe industry 1,400 factories in the

German Empire were amalgamated into 300. In the silk industry the spools

were reduced from 45,000 to 2,500. Out of 1,700 spinning and weaving

mills, only 70 were running at high pressure.

The plan, as outlined by German experts, to force the United States to

supply raw material was to cut off potash exports and certain

manufactured goods. "If America will sell us no cotton," was the threat

of the Berlin _Deutsche-Zeitung_, "she shall get no potash--the

indispensable fertilizer in which we have a world monopoly. If she

withholds her oil and grain, then she shall get no _dyes_, no drugs, no

glassware or optical instruments." But as a writer in the London

_Outlook_ stated, this threat could not be made an effective instrument

of trade control:

"There is potash in plenty in the great Republic, especially in

the alkali lakes of Nebraska and Southern California. Potash is

now obtained from the Great Salt Lake in Utah, and from the

vast kelp beds of the Pacific coast. American chemists are also

extracting potash (by the Cottrell process) from the dust of

cement-kilns and blast-furnaces. So the German monopoly will

pass, and many others with it. America will produce her own

dyes and optical instruments, though I may not linger on the

details of this supplanting.

"American genius has long been busy with these things; another

year or two will see her wholly independent of German supplies.

The potash monopoly--from the mines of Stassfurt in Saxony--was

undeniably a problem; there are still richer sources in Alsace,

as we all know Germany's resolve to hold that province through

thick and thin. America needs 500,000 tons of potash every

year, for the sandy soils of the Atlantic seaboard, and also

for the citrus fruits of Florida, the tobacco of Georgia and

the Carolinas, the potatoes and garden produce of Maryland."

SHUTTING OFF GERMAN TRADE

Pessimistic anticipations of German statesmen regarding the curtailing

of German trade were realized when the War Trade Board in the United

States began to deal with the question of American exports to neutrals.

The report of the Board, published in 1918, contains the following

passage:

"Neutral exports of foodstuffs to the Central Powers have

declined from last year's corresponding exports in amounts

estimated at from 65 to 85 per cent., depending on the neutral,

and there has been a decrease in the export of many other

important commodities.

"In November, 1917, we became party to Great Britain's

tentative agreement with Norway, as a result of which action on

our part 1,400,000 tons dead-weight of Norwegian shipping were

chartered into the service of the United States and Great

Britain for the period of the war. Shortly following, temporary

agreements were concluded with Holland and with Sweden. That

with Holland gives us the use, for periods up to 90 days, of

450,000 tons dead-weight of her shipping which had heretofore,

for a long period, lain idle. The agreement with Sweden gives

us the use for three months of tonnage estimated at 250,000

tons dead-weight which had not theretofore been employed in

services useful to us.

"Specific accomplishments of this character are, however, far

from constituting a full measure of the results achieved by the

War Trade Board. The elimination of enemy advantage from our

trade and, to a considerable extent, from that of the world,

the securing and conserving of commodities essential to

ourselves and those associated with us in the war, the bringing

of shipping generally into the services most useful to

us--these results can not be accurately stated or appraised at

the present time, nor have they been accomplished by any single

act or agreement."

[Illustration: Examining Cargoes for Contraband

An inspector is using the X-ray on a bale of cotton, it having been

found that smuggling of every conceivable sort was being carried by

German agents.]

THE TRADE LICENSE SYSTEM

The United States trade license system was extremely effective in

cutting off the business of firms whose controlling motive was the

advancement of German commercial interests. It was largely directed

against preventing pro-German firms in neutral countries from engaging

in the re-exportation process, a familiar practice in the earlier part

of the war. The policy of the War Trade Board is indicated in the March

(1918) issue of the _War Trade Journal_:

"To accomplish these results the War Trade Board, through its

Bureau of Imports, has adopted certain regulations in

connection with the importation of many of these raw materials,

to which it is the duty of every patriotic American citizen to

give complete and wholehearted support.

"Organizations have been voluntarily created in many of the

trades, such as rubber, wool, jute, tin, etc., to act as

consignees when required and to perform other duties in

connection with importations, under and by direction of the War

Trade Board.

"Every effort will be made to administer these regulations with

the slightest possible detriment to legitimate business

interests, but when it is considered that the transmittal of a

few pounds of rubber or copper to Germany may cost the lives of

scores of our men at the front, and that each day's supply of

wool, or food, or money to the enemy means another day's war,

with its accompanying toll of lives, the very thought of

hesitancy or weakness is inconceivable. The policy will be

'safety first' for our soldiers, regardless of every other

consideration. Persons and firms in this country, as well as

abroad, who before our entrance into the war had little

sympathy with the war-time commercial safeguards of the Allies

must be taught that these are now matters of the first

importance to this country, and violators of present

restrictions need expect no favors, regardless of how important

such individuals or firms may be in the business world. The

time has come when all must realize that the war is not limited

to combating the enemy on the battle fields of France, but must

be carried into our every-day transactions of life, and that

our business practices must be remolded, where necessary, to

meet existing conditions.

"It is unnecessary to mention other desirable results which may

be obtained by this import control, such as the gathering of

trade information or the conservation of tonnage by elimination

of non-essentials.

"No anxiety need be felt by importers that there will be any

serious restrictions of the importation of necessary articles

if the transaction does not involve dealing with an enemy or

ally of an enemy, or otherwise giving him aid or comfort."

THE ANTI-GERMAN TOY EPISODE

An example of the intense popular indignation against encouraging trade

with Germany was furnished when a Dutch boat arrived in New York in

1918, laden with 400 cases of toys made in Germany. The ship that

carried them had been guaranteed against submarines by the German

Government. Its arrival in America brought about a storm of indignation

strong enough to remind many editors of the famous Boston Tea-Party. One

of the consignees of the cargo refused to accept delivery of his share;

the _Manufacturers Record_ of Baltimore offered him its congratulations:

"It is none too soon to begin the campaign against the

importation of German-made goods. Imagine for one moment any

American mother giving to her baby toys made by Germany while

she thinks of tens of thousands of babies murdered by Germany

in this war. Every toy made in Germany and every other piece of

goods of every kind will for generations bear a bloody stain

which all the waters of all the oceans can never wash out."

Patriotic organizations passed resolutions on the subject. American

feeling as to German merchandise was well shown through the publication

of an editorial in the _Hardware Age_ against American use of German

toys. The paper received 4,000 letters on the subject and over 250,000

reprints of the editorial were sent out, all on request. On the subject

of German toys, it said, among other things:

"America has fed starving Belgium. We fed and clothed and cared

for her suffering people long before we became her proud ally

on the battlefields. Thousands of orphaned Belgian and French

children have been adopted into American homes. In the days to

come are we going to force these children to play with

German-made toys? God forbid! American toy manufacturers have

stripped us of the last vestige of an excuse for the purchase

of toys from the Huns. Our factories are making more toys than

we ever imported, and they are not the flimsy jim-cracks we

formerly bought from abroad. They are largely exercise toys

which develop a child's body, or mechanical or structural toys

which train the mind. Before the war we imported eight million

dollars' worth of toys from the Central Powers. Who will make

our kiddies' toys in the days to come? Once more, Mr. Buyer,

it's up to you."

SMUGGLING FROM NEUTRAL COUNTRIES

Considerable aid was afforded to Germany by her trade with neutral

countries. First, there was a good deal of direct re-exportation of

materials imported from abroad. Then there was an exportation of

domestic products, and the filling up of this deficit by importation

from abroad, mainly from the United States. Mr. J. L. Moore of Harvard

University, thought that smuggling deserved to be added to the source of

German supply from the outside, and he mentioned the fact that a member

of the Commerce Department of the Swiss Government was convicted of this

offense and served a prison sentence. His exposition of how neutrals

aided Germany is given in the following passage from the New York

_Times_:

"To direct and indirect re-exportation must be added, finally,

smuggling, which has always been a factor in the evasion of

blockades. In Switzerland a member of the Commerce Department

of the government was recently convicted of this offense and is

serving a prison sentence.

"That this aid was precious to the Central Powers and enabled

them to stave off starvation and consequent submission can be

corroborated in various ways. First, in spite of the enormous

volume of imports from the neutrals Germany was on the verge of

starvation during the last winter, the economic crisis reaching

its critical stage coincidentally with the political crisis in

the Reichstag at the beginning of July. The most potent cause

of this political upheaval was the economic destitution which

cast its melancholy shadow over the whole nation and increased

the desperation of people and Reichstag till it exploded in a

violent outburst of wrath against the government. Secondly, the

general impression of press and people in Germany and

Switzerland is that the most sensational part of the speech of

Erzberger, which brought the crisis into being, consisted of an

exposé proving the futility of the submarine policy and

impugning the judgment of the officials responsible for its

inauguration, inasmuch as the entrance of the United States

into the list of Germany's enemies, which resulted therefrom,

was likely to result in a curtailment of the imports obtained

through the neutrals, and without a continuance of these

imports Germany could not hold out long."

SURPRISING INCREASE OF NEUTRAL SHIPPING

The shutting off of the German commercial fleet from trade and the

employment of Allied shipping under government contract offered an

exceptional opportunity to small neutral countries to advance their

shipping business. This opportunity was eagerly seized. Norway reported

the establishment in 1915 of no fewer than 488 shipping firms. This was

followed in 1916 by an increase of 459. Some of these Norwegian firms

paid dividends as high as 400 per cent. Statistics from Sweden also show

a significant expansion. Swedish firms of inconsiderable capitalization

before the war became important companies, able to undertake

transatlantic trade on a large scale. It seems likely that these Swedish

transatlantic lines will constitute a formidable competitor to the old

established German companies--now that the war is over.

Corroborative evidence on the shipping situation in neutral powers is

found in the following passage taken from the New York _Journal of

Commerce_:

"Of great importance for an estimate of the future of our

shipping combines is the progress which the two largest Danish

lines--the Forenede, which sails to North America; and the

Estasiatisk Kompagni, which, as the name suggests, runs lines

to East Asia--have made during the war. The Forenede, for

instance, made in 1916, with a stock capital of 30,000,000

crowns, a net profit of no less than 40,000,000 crowns, of

which a good 10,500,000 crowns was allotted to the reserve and

emergency funds. The collective reserves of this company

amounted to more than 26,000,000 crowns at the end of 1916: and

its bank credits totaled 44,000,000 crowns.

"The large Dutch shipping firms have likewise made enormous

profits. The following table presents their results for 1916

(the Dutch florin, or guilder, is worth $0.402 United States

currency at normal exchange):

Reserve and

Stock Net Emergency

Shipping Firm Capital, Profits, Funds,

Florins Florins Florins

Holland-Amer. Line 12,000,000 26,500,000 10,200,000

Stoomvaart Mij. Nederland 19,000,000 18,600,000 8,800,000

Kon. Nederl. Stoomboot Mij 15,050,000 19,000,000 7,800,000

Rotterdamsche Lloyd 15,000,000 15,100,000 12,600,000

Kon. Holland Lloyd 10,000,000 10,900,000 2,000,000

"The example of the Holland-America Line shows best what

enormous progress took place in the inner consolidation of the

Dutch firms. The reserve of this company, which in 1913

amounted to 6,600,000 florins, grew to 24,800,000 by the end of

1916--in other words, the previous stock capital (which in the

meantime had been increased by 15,000,000 florins) by more than

double. In addition, the company has available funds amounting

in all to 21,700,000 florins. The reserves in the Nederland

Company, which have increased in the same period from 6,700,000

to 23,000,000 florins, exceed the capital by 4,000,000 florins.

The available funds of the Rotterdamsche Lloyd amounted at the

end of 1916 to about 25,000,000 florins, with a share capital

of 15,000,000 florins and a ready reserve of 16,000,000

florins.

"But the business successes of the neutral European shipping

firms are far surpassed by the earnings of the Japanese

overseas lines. Thus the largest Japanese shipping firm, Nippon

Yusen Kaisha, that sails from East Asia to all the important

shipping markets, had a net profit in the summer half-year 1916

of 19,780,000 yen (the Japanese yen is equivalent to $0.498

United States currency); in the winter half-year 1916--17

actually 22,150,000; in a single fiscal year it earned,

therefore, about 42,000,000 yen. The company's capital stock

amounted at the end of the fiscal year 1916--17, after a

previous increase through the distribution of free shares, to

27,500,000 yen, the net profits of this single company being

thus about 15,000,000 yen more than the amount of the capital.

"The company's fleet has grown considerably. The total

available reserves amount to nearly 63,000,000 yen. Of ready

money the company had at its disposal at the end of March,

1917, 55,300,000 yen."

GERMANS AT WORK IN SPAIN

Germany's astuteness in dealing with neutral countries was especially

marked in Spain. The country was filled with German propaganda and there

were skeleton German trade organizations ready to begin functioning at a

moment's notice. The extent to which this propaganda was carried on was

described by a correspondent of the _Saturday Evening Post_, Mr. I. F.

Marcosson, in an address to the National Machine Tool Builders'

Association at Atlantic City:

"The German propagandists have carried on a campaign on the

proposition of the Kaiser. It has been the finest selling

campaign that I have ever seen. They have organized it. Each

man had his territory, his selling territory; each man has his

line of samples, and that line of samples was the finest lot of

German gold and German 'hot air' that any propaganda has ever

produced.

"The Germans have sold Spain on the proposition of German trade

and German good-will, because they are giving the Spaniard, as

they did in business before the war, what the Spaniard had in

mind.

"Germany went into Spain to fill the Spaniard with 'hot air'

and to tell him he was the finest aristocrat in the world. And

he got it over. And if you had gone, as I have, from one end of

Spain to the other and looked into these great warehouses you

would have found hundreds of them jammed and packed with copper

and oil and cotton, and all the material with which to

re-establish a great industry. And today, whenever there is a

water-right for sale, whenever there is stock for sale, or

whenever anything can be leased, or a factory can be bought,

who buys it? =The Germans.=

"They have got the finest industrial secret service in Spain that I

have seen in my life. And to what end? All to the great end that

when the war is over, in Spain as in Holland and in Switzerland,

the wheels of German output will be going.... Germany will put on

the goods, as I have seen with my own eyes, 'Made in Spain,' 'Made

in Switzerland,' and 'Made in Holland.' Your own goods, machine

tools, are going out in the markets of the world now and

forevermore in competition with German-made stuff, made by German

hands, made by German capital, part with stuff that is marked

offensive, in competition with stuff that is marked as I have said

it would be marked."

[Illustration: Photo by Paul Thompson

An Antidote for the Submarine Pest

Quantity production of eighty-foot motor boats in a shipyard at Bayonne,

N. J., for use as scouts and submarine hunters.]

NO ECONOMIC BOYCOTT AFTER THE WAR

The official leaders of the Allied Governments soon found that the

scheme to start an economic war after peace had been negotiated had no

very strong support. President Wilson took a hand in subjecting the

Paris resolutions advocating this economic war to unfavorable criticism.

The British Trades Union by a large majority showed their disapproval of

them. The London _Economist_ also disapproved of the program of a

vindictive trade policy after the war, though it thought that an

economic boycott might be used as a threat to force Germany to make

peace. Lord Robert Cecil took the ground that it would not be wise to

attempt an economic war. The labor point of view was that an economic

war was bound to produce another outbreak of militarism. The Speaker of

the British House of Commons, who always occupies a non-partisan

position, in an address at Carlisle on war aims, showed no sympathy with

the proposal:

"We had heard of war after the war, and it had been suggested

that whatever the terms of peace might be we in England should

have no dealings with Germany, that we should boycott them

commercially, allow none of our raw materials to go to Germany,

that we should form a combination with our Allies, and that

together we should cut her off altogether and treat her as

though she were a leper. He did not believe in this idea. He

was out for peace, and when he said he wanted peace he meant a

lasting peace. He wanted peace founded on sound conditions,

which would stand wear and tear and last forever, if

possible--at all events, for many, many years, it might be

centuries; but a boycott of Germany would not be the way to

attain a peace of that kind. That would be a way of carrying on

the war, and although it would not be with the weapons we were

now using, there would be the same hatred and struggle between

one combination of nations and another, and it would leave the

world divided and engender seeds of hatred and dissent. In many

respects it would be almost as bad as the war at the present

time. He did not, therefore, accept that condition of things."

In explaining England's position as to war aims the Premier, Lloyd

George, made the following observations:

"Germany has occupied a great position in the world. It is not

our wish or intention to question or destroy that position for

the future, but rather to turn her aside from hopes and schemes

of military domination and to see her devote all her strength

to the great beneficent tasks of the world.... The economic

conditions at the end of the war will be in the highest degree

difficult. Owing to the diversion of human effort to warlike

pursuits, there must follow a world shortage of raw materials,

which will increase the longer the war lasts; and it is

inevitable that those countries which have control of the raw

materials will desire to help themselves and their friends

first."

AN IMPOSSIBLE PROGRAM

In the emotional atmosphere of the war period some astonishing economic

propositions were accepted as if they were axiomatic truths. Notably was

this the case in the discussion of Germany's program of peaceful

penetration in the economic sphere. It was undoubtedly linked up with

schemes of military aggression. There was wide discussion of the methods

to be used to guard against Germany's commercial policy. Sometimes these

proposals indicated the desire that those who opposed Germany should

take a leaf from her dog-in-the-manger policy. Strange conceptions of

international trade that suggest the mercantilism of the seventeenth and

eighteenth centuries were revived in order to guard against any attempt

on the part of Germany to secure a privileged industrial position after

the war. As early as 1916 there was the famous proposal of an

anti-German economic league contemplated in the Paris resolutions of

that date. In Great Britain the supporters of this policy also actively

advocated a system of imperial preference by which special advantages

would be given to countries within the bounds of the British Empire. The

result of upholding any double-barreled policy of this type is described

by the Edinburgh _Review_ as impossible of realization.

"Even if Belgium, France, and Italy alone took that course, the

whole policy of an economic boycott, or partial boycott, to

prevent German expansion or to punish German crimes would fall

to the ground. We cannot imprison Germany in an economic strait

jacket if her territorial neighbors are willing to trade with

her. As a matter of fact before the war the most important and

the most expansive portion of German export trade was with the

continent of Europe."

COMMERCIAL AVIATION

A great advance in aeroplane development was one of the most spectacular

results of war activity. The military side of this development must be

discussed in another place, but the fact that aeroplanes had to be

constructed substantial enough to carry a large amount of explosives

naturally brought up the whole question of the commercial side of

aeroplane employment. Although the aeroplane has been developed to a

remarkable extent for war purposes, it must not be taken for granted

that every type of aeroplane has its use for peace. In the military

machine regard has been paid rather to gun positions, bomb carrying

capacity and performance than to economy in operation and large cargo

space, which are the essential peace requirements. This aspect of the

problem was discussed by F. Handley-Page in an article in the

_Fortnightly Review_.

"The type of aeroplane for commercial work requires careful

consideration and design. In estimating the value of a

transport vehicle account must be taken of the respective

proportions of the load that are and are not remunerative. A

steam motor wagon that was only just able to transport the coke

for its own consumption would be useless for transport work.

The large quantity of fuel the aeroplane must carry makes this

point an important one regarding it. It affects very largely

the _type_ of aeroplane that must be chosen for each duty.

"The total lift of a large bombing aeroplane of medium speed is

about 20 lbs., while that of a small high-speed scout may not

be more than about 8 to 10 lbs. per horse-power. From these

lifts have to be deducted the weight per horse-power of the

aeroplane structure and engines. These leave a margin of about

11 pounds per horse-power in the case of the large machine and

of only about two to four pounds per horse-power in the case of

the smaller and higher speed machine. From these margins have

to be deducted the weight _per horse-power_ of the pilot and of

the fuel to be carried."

According to this expert's opinion there is little probability of using

for commercial purposes the small high-powered aeroplane. But if large

machines are used with a speed limit of 100 miles an hour and fitted

with twin engines, Mr. Page thinks that such machines will have economic

possibilities. Countries now far distant from one another can be brought

close together. For example Australia will be within a week of London,

and he thinks that passengers can be carried at the rate of about six

cents a mile. If air transport is to be systematized he is in favor of

strict state regulation:

"There must be no possible chance of the wildcat schemes of the

early railway days recurring, nor must aircraft or their pilots

be below a specified standard. The State must see that projects

doomed to failure owing to lack of financial or technical

backing are prevented from being placed before the public.

"Regulations must be drawn up which will insure that the

machines cannot be used for the public service until they have

received a certificate similar to that now issued by Lloyd's

for ships. Pilots must not be allowed to fly machines conveying

the public or mails, unless they have received a certificate

equivalent to that issued to the master of a ship by the Board

of Trade before he can take charge.

"The aeroplane will not compete with the telegraph system,

cable, or wireless, but will be a useful adjunct conveying

written signed statements, important documents, long reports,

and descriptive letters in the time of a week-end cable and at

a fraction of the cost.

"It will enable the business man to visit his overseas agencies

and friends, to discuss matters with them on the spot and

examine the requirements of their districts, at the cost of a

few _days_ instead of months of travel."

[Illustration: The Awkward Squad

"Left, right--one, two, three, four," was the slogan heard throughout

the National Army cantonments, such as this at Camp Dodge, Des Moines,

Ia., during the first days in teaching the recruits one of the first

lessons of the soldier; how to keep step.

Copyright International Film Service]

V--THE MONEY COST OF THE WAR

Over $210,000,000,000 Spent by the Belligerents--How This Stupendous

Sum Was Raised--What the War Cost Uncle Sam

By EDWIN R. A. SELIGMAN

Professor of Political Economy and Finance in Columbia University

The cost of a war may mean several different things. It may mean, in the

first place, the actual money cost, or expenditure in dollars and cents,

directly involved in prosecuting the war. Or, secondly, it may mean the

war cost, both direct and indirect, from the economic point of view. The

real cost of a war from this latter point of view may mean either actual

loss of lives and property or the diminution of the annual social

production. The wealth of a country measured in its social income may be

reduced either by the actual loss of territory, as in Germany; by the

impairment of its natural resources like the coal mines and forests, as

in France; by the reduction of labor power, due to the wounded workmen

or the results of starvation or privation, as in many countries of

Europe; or by the loss of economic efficiency due to a reduction of the

standard of life or to a changed attitude toward habits of work. The

real costs of war, although often incalculable, are none the less of

profound significance.

The actual money costs or expenditures of government for war include not

only the actual outlays for military and naval purposes, but also the

whole range of expenditures incurred in industrial life to prepare the

wherewithal for the Army and Navy; and they also comprise the sums

devoted to the maintenance of the families of the soldiers. All these

items are far greater in modern times than they used to be. It is a far

cry from the meeting of two savage tribes armed only with bows and

arrows or javelins, to the modern 16-inch guns, the dreadnoughts, the

airplanes, the submarines, the poison gas and the innumerable technical

adjuncts of modern warfare. The consequence is that the money costs of

the World War have far transcended those of all previous conflicts.

The attempt to present in figures the costs of the war meets with

several difficulties. In the first place the question arises as to the

period at which we ought to stop. In one sense the war ceased when the

armistice was declared. In another sense the war did not actually stop

until the peace was declared--in this case a matter of many months

additional. But even when peace was declared the war expenses were by no

means over. The process of demobilization is a slow one: moreover it is

necessary to continue for some time the policing of the conquered

countries; and finally comes the question of the pensions to the wounded

soldiers or to the families of the dead. It will be seen, therefore, how

impossible it is to state with any accuracy at the present time the

costs of the war, when those are still being incurred. Furthermore, the

figures ordinarily given contain additional inaccuracies. The richer

countries make loans to the poorer countries and these expenditures are

consequently counted twice in the total,--a procedure legitimate only on

the assumption that the loans will not be repaid. Again, in a country

like the United States, which has substituted an insurance system for

the pension system, the nominal expenditures appear smaller than is

really the case, because of the receipt of vast insurance premiums which

will ultimately all be expended again. Finally the figures make no

allowances for the change in the price level or the alteration in the

value of money. In a great war like the present, prices have risen: in

some countries they have doubled, in some countries they have more than

tripled, for reasons which it is needless to discuss here. What appears,

therefore, to be a great and increasing outlay from year to year may be

in reality due in part, at least, to this cause.

After making all allowances for these difficulties we may proceed to

state some of the facts as to the actual outlays of various countries.

THE COST OF THE WAR DAY BY DAY

In all the belligerent countries it naturally took some time for them to

get into their stride. This is especially true of Great Britain. The

figures of the average daily expenditures, as given by the Chancellor of

the Exchequer, amounted to almost $10,000,000 in the opening months of

the war and reached a maximum of almost $36,000,000 by 1918. These

figures, however, are not exact because they include all of the

expenditures. The real war expenditures may be arrived at by deducting

in each case the amount of the expenditures in the last year of peace,

ending March 31, 1914. Making these corrections, it appears that the

average daily war expenditures in England rose from about $9,500,000

during the first eight months of the war to about $33,500,000 in 1918,

then slowly receding in 1919. In France the average daily expenditures

were naturally somewhat less, rising from about $8,500,000 during the

first three months of the war to over $21,000,000 during 1917, the last

full year of the war. In Germany the daily expenses were approximately

the same as in Great Britain, rising from about $13,000,000 in the first

nine months of the war to $34,500,000 during the last six months of

1918. In the case of both Germany and France, it is not known whether

the figures comprise the total expenditures or only the pure war

expenditures. In the former event the daily expenditures of Germany

would be a little less than those of Great Britain; in the latter, they

would be a little more. In Italy and Austria-Hungary the daily

expenditures were naturally smaller, amounting at the maximum to about

$10,500,000 and $20,000,000 respectively. In Russia the daily

expenditures rose in 1916 to about $20,000,000 and in 1917, just prior

to the October revolution, nominally to $47,000,000. But, owing to the

great depreciation of the ruble, the actual expenditures were much less.

OUR WAR EXPENSES MONTH BY MONTH

When the United States entered the war the scale of its operations

became so stupendous that its daily war expenditures soon far exceeded

those of any other belligerent. In the second month of the war the

average daily expenditures for pure war purposes were $15,000,000 and

little over a year later they had risen to almost $50,000,000. By the

end of 1918, the daily average war expenditures reached the staggering

figure of $64,500,000.

[Illustration: The Economic Conference in Paris

Mr. Bonar Law talking with M. Clementel (Minister of Commerce) and M.

Doumergue (Colonies) in the garden of the foreign ministry.]

If, now, we attempt to present the statistics of the total cost of the

war we must be mindful of the difficulties mentioned above. The figures

are not entirely accurate, and cannot be made entirely accurate for the

following reasons: In the first place, the last date in the official

return differs from country to country. They are, however, all

subsequent to the armistice, with the exception of Russia, where we

have no trustworthy figures after the advent of Bolshevism. In the

second place, we do not know, except in the case of the United States

and Great Britain, whether the figures comprise the total expenditures

or only the purely war expenditures. Even making allowance for these

differences it will be seen that the total war expenditures amount to

over $232,000,000,000. In Japan and some of the minor belligerents,

there were virtually no war expenses. Inasmuch, however, as most of the

countries will continue to have expenses attributable to the war for

some little time in the future, it is probable that the total war

expenditures will amount, by the end of 1920, to almost

$236,000,000,000. From this must, however, be deducted the sums counted

twice, because advanced to their allies by the United States, Great

Britain, France and Germany. Making allowance for this, it is safe to

say that the total net war expenditures will be about $210,000,000,000.

WAR EXPENDITURES OF ALL BELLIGERENTS

In Millions

====================================================================

| From entrance | To | |

| into war | | |

--------------+----------------+----------------+----------+--------

Great Britain | August 4, 1914 | March 31, 1919 | £ 8,601| $41,887

| | | |

Australia | August 4, 1914 | March 31, 1919 | £ 291| 1,461

| | | |

Canada (inc. | August 4, 1914 |August 31, 1919 | | 1,545

Newfoundland) | | | |

New Zealand | August 4, 1914 | March 31, 1919 | £ 76| 365

| | | |

South Africa | August 4, 1914 | March 31, 1919 | £ 33| 243

| | | |

India | August 4, 1914 | March 31, 1919 | £ 119| 584

| | | | -------

British Empire| | | | $46,083

| | | |

France | August 3, 1914 | March 31, 1919 |fr 169,000| $32,617

| | | |

Russia | August 1, 1914 |October 31, 1917| ru 51,500| 26,522

| | | |

Italy | May 23, 1915 |October 31, 1918| li 81,016| 15,636

| | | |

Belgium | August 2, 1914 |October 31, 1918| fr 5,900| 1,387

| | | |

Rumania |August 27, 1916 |October 31, 1918| | 907

| | | |

Serbia | July 28, 1914 |October 31, 1918| | 635

| | | |

United States | April 15, 1917 | June 30, 1919 | | 32,261

| | | |--------

Entente Powers| | | |$156,050

| | | |

Germany | August 1, 1914 |October 31, 1919|mk 204,268| 48,616

| | | |

Austria- | July 28, 1914 |October 31, 1919|kr 119,504| 24,858

Hungary | | | |

Turkey |November 3, 1914|October .., 1919| | 1,802

| | | |

Bulgaria |October 4, 1915 |October .., 1919| | 732

| | | | -------

Central Powers| | | | $76,008

| | | |

Total | | | In |$232,058

| | | Millions |

====================================================================

HOW MONEY FOR WAR WAS RAISED

The question now arises as to the steps taken by the various countries

to meet these stupendous outlays. Of the older expedients, such as war

treasures, or the sale of public property there was naturally no

question. In only one country, viz., Germany, was there a war treasure;

but this was so small as to be well-nigh negligible. The only two

available resources were accordingly taxation and borrowing.

When we compare these two expedients, we are struck not only by the

great difference in the theories of war finance followed by the various

countries, but also by the diversity in the economic conditions which

largely influenced the choice. In a general way, it may be said that all

countries were compelled to rely to an overwhelming extent on public

loans, but that Great Britain and the United States raised a far greater

share by taxation than did other countries. Italy was able to raise by

new taxation only just about enough to pay the interest on the new

loans; Germany accomplished this only in part; while France was not in a

position to defray any of her war expenditures from additional taxation.

The same is true of the other belligerents, with the exception of the

British colonies.

Proceeding now to take up this matter in detail, we shall first attempt

to set forth the facts as to war taxation.

UNITED STATES

----------------------------+-------------+-------------+------------

| Monthly | |

|Expenditures | |

|exclusive of | |

|the principal| |

| of the | Monthly | Average

| public debt | War | Daily

|and of postal|Expenditures |Expenditures

|expenditures | [19] |

----------------------------+-------------+-------------+------------

| Million $ | Million $ | Million $

April 6--30, 1917 | 279 | 219 | 8.

May, 1917 | 527 | 467 | 15.

June, 1917 | 410 | 350 | 11.7

| ------ | ------ |

Total April 6--June 30, 1917| 1,216 | 1,156 |

| | |

July 1917 | 662 | 602 | 19.4

August 1917 | 757 | 697 | 22.5

September 1917 | 746 | 686 | 22.9

October 1917 | 944 | 884 | 29.5

November 1917 | 986 | 926 | 30.9

December 1917 | 1,105 | 1,045 | 33.7

January 1918 | 1,090 | 1,030 | 33.2

February 1918 | 1,012 | 952 | 34.

March 1918 | 1,156 | 1,096 | 35.9

April 1918 | 1,215 | 1,155 | 38.5

May 1918 | 1,508 | 1,448 | 46.7

June 1918 | 1,512 | 1,452 | 48.4

| ------ | ------ |

Total for fiscal year, 1918 | 12,697 | 11,977 |

July 1918 | 1,608 | 1,548 | 49.9

August 1918 | 1,805 | 1,745 | 56.8

September 1918 | 1,557 | 1,497 | 49.9

October 1918 | 1,665 | 1,605 | 51.8

November 1918 | 1,935 | 1,875 | 62.5

December 1918 | 2,061 | 2,001 | 64.5

January 1919 | 1,962 | 1,902 | 61.4

February 1919 | 1,189 | 1,129 | 40.

March 1919 | 1,379 | 1,319 | 42.5

April 1919 | 1,429 | 1,369 | 45.6

May 1919 | 1,112 | 1,052 | 33.9

June 1919 | 809 | 749 | 24.9

| ------ | ------ |

Total for fiscal year 1919 | 18,505 | 17,785 |

| | |

Total April 6, 1914 to June | | |

30, 1919 | 32,428 | 30,918 |

----------------------------+-------------+-------------+------------

[19] Obtained by deducting 11/12 of the annual (peace) expenditures for

1915--1916 exclusive of postal expenditures, i. e. 11/12 of $1,008--287

millions--60 millions. Secretary Glass in his letter of July 9, 1919 to

the Chairman of the Committee of Ways and Means excludes postal

expenditures in the first column, but fails to exclude them when making

the deduction for peace expenditures. He consequently arrives at the

figure of 30,177 billions as the cost of the war; making allowance for

this fact, and using the final corrected figures, we reach the figure of

$32,261,000,000 as the cost of the war to June 30, 1919.

WAR TAXATION IN OTHER COUNTRIES

Great Britain, as the wealthiest country at the outbreak of the war,

endeavored to raise as much as possible from taxation. From year to

year, as the expenses mounted up, more and more demands were made upon

the taxpayer. But the expenditures for the war were so enormous that it

soon turned out to be impracticable, even with the best of will, to

secure more than a comparatively small proportion of the total cost from

taxation. The figures usually advanced by the various Chancellors of the

Exchequer and repeated parrot-like by most commentators take the

proportion that total taxes bear to total expenditures. This method of

calculation, as will be seen from the table, shows that almost a quarter

of the total expenditures, or to be more exact, 24.9 per cent., was

derived from taxes. These figures, however, err doubly. In the first

place the significant problem is to ascertain the war expenditures, not

simply the total expenditures. These can naturally be obtained only by

deducting from the annual total expenditures the sums equal to the peace

expenditures, _i. e._, the expenditures for the last full year of peace.

In the second place, what is significant is not the total taxes, but the

war taxes; that is, the proceeds of the additional taxes raised during

the war. These again can be obtained only by deducting from the total

tax revenue the proceeds of the taxes during the last full year of

peace. If then we endeavor to ascertain how much of the war expenditures

were met by war taxes--and this is really the important problem--we find

that, immense as were the burdens resting upon the British taxpayer, the

percentage of war expenditures raised by war taxes is much smaller than

is usually stated. As a matter of fact, in the first year of war only a

little over 7 per cent. of the total war expenditures were raised from

taxes. With every succeeding year the percentage increased until the

last year of war, 1918--19, a little over one-quarter of the war

expenditures were met from war taxes. For the entire five years the

proportion of war taxes to war expenditures was slightly over 17 per

cent.

In the other belligerent countries the showing was by no means so good.

France struggled under a double difficulty. In the first place France

was invaded at the very outset of the war, and the territory occupied,

although relatively small in extent, represented the richest and the

most industrially developed part of the country. This operated largely

to reduce the ordinary revenues. In the second place the resultant

economic confusion, as well as the general political situation, made it

very difficult to impose any new taxes at all. The consequence was that

for the first three years of the war, the tax revenues of France did not

even suffice to defray the ordinary peace expenditures.

After a little while, indeed, France found it possible to levy some war

taxes; but these were exceedingly slight compared with what had been

accomplished in Great Britain. The result is that the new war taxes of

France were only just about sufficient to make up the deficit on the

ordinary peace budget--a deficit caused chiefly by the devastation of

the occupied territory. In France, therefore, we may say that as a

result no part of the expenditures was met by war taxes.

In Italy the situation was a little better. Italy had not been invaded

and its financial situation was not so desperate as that of France.

Moreover, Italy entered the war somewhat later and did not have to

endure a strain for so long a time. Italy consequently proceeded as soon

as possible to levy new war taxes; but as Italy had always been

relatively overtaxed, as compared with Great Britain, it was not

feasible to do as much. As a result, the war taxes levied by Italy were

just about sufficient to pay the interest on the war loans. While Italy,

therefore, did better than France, she also was not able to defray any

of the war expenditures proper out of war taxation.

The condition of Russia soon became worse than that of France and Italy,

and even before the October revolution, Russia was able to put very

little reliance upon revenues from war taxation.

Among the Central Powers the situation was much the same, but for a

different reason. Germany at the outset of the war had so confidently

counted upon victory and upon huge indemnities that it resolved to

defray its war expenses entirely from loans. It must, however, be

observed that in Germany a not insignificant part of the war expenses

were met by the separate states; and in these various states a

considerable increase of taxation was provided for at once. As the war

proceeded and the hopes of a speedy and complete victory gradually faded

away, Germany began to change her policy and decided, especially from

1916 on, to impose more and more taxes. The result was that by the end

of the war Germany had done a little better than France.

OUR WAR TAXES COMPARED WITH WAR EXPENDITURES

We come finally to the experience of the United States. When the United

States entered the war it was confronted by two rival theories of

public finances. One was to the effect that the war expenses should be

defrayed entirely by war loans, as had been the case in the early years

of the Civil War and as was true of many of the belligerents during this

war. The other theory was that the war expenditures ought to be defrayed

entirely out of war taxes. This was equally extreme and perilous as the

former theory, and labored under the additional disadvantage of being

impossible of achievement. The President went so far as to adopt the

fifty-fifty theory, namely, that half of the war expenditures ought to

be defrayed from taxation.

The prodigious profits made during the beginning years of the European

war and the resulting prosperity throughout the country enabled Congress

to levy taxes far higher than had before been attempted in our history.

Even with an immense addition to taxation, however, the proportion of

war expenses derived from war taxes was relatively small. Here, again,

we must observe the same caution as in the case of the British figures.

We must not compare total expenditures with total taxes, but war

expenditures with war taxes. War expenditures are easily ascertained by

deducting for each year the amount of the expenditures for the last year

of peace, the year ending June 30, 1916. In the case of war taxes,

however, it is more exact to deduct from the total revenues the tax

revenues for the year ending June 30, 1915. For during the year 1915--16

a number of taxes were already levied in preparation for our possible

entrance into the war.

As a matter of fact, during the first quarter of war ending June 30,

1917, the proportion of war expenditures derived from war taxes was less

than one-third or 30 per cent. If we exclude loans to Allies on the

assumption that they will all be repaid some day, the showing is

somewhat better--as two-thirds of the expenditures of that period

consisted of such loans.

As soon, however, as we struck our full gait the situation was less

satisfactory. The proportion of war expenditures derived from war taxes

during the year 1917--18 was less than one-quarter or more exactly only

24.8 per cent. and if we again exclude loans to Allies, only 30 per

cent. In the last year of the war the showing was still less favorable.

If we take the expenditures for the entire period of our participation

in the war the figures are respectively 21.7 per cent. and 27 per cent.

For the entire period of our participation in the war, less than

one-fourth (or exactly 23.3 per cent.) of the war expenditures were paid

out of war taxes. And if the loans to Allies are again excluded the

proportion is still under one third, or more exactly 32.5 per cent.

[Illustration: Copyright Underwood & Underwood

=Lord Reading=

President of the Anglo-French loan mission to the United States in 1915,

and special envoy of the British Government to the United States in

1917.]

This compares favorably even with the British figures. But it

conclusively shows how impossible it is even with the best of will, to

raise more than a relatively small part of war expenses from war taxes;

especially during the early period of a war.

CHARACTER OF WAR TAXATION

The next point of interest is that of the character of the war taxes

imposed by the various countries. Here again we notice a very great

difference. In all of the European belligerents on the continent, at

least as much additional revenue was raised from direct, as from

indirect, taxation. In France about as much new revenue came from

indirect taxation or taxes on consumption as from direct taxation or

taxes on wealth.

The situation is still less satisfactory in the other continental

countries.

In England, on the other hand, a different path was pursued from the

beginning. While it is true that a considerable increase of revenue was

derived from indirect taxes like customs and excise, the chief reliance

was placed on the increase of the income tax, on a new war profits tax

and finally, although to a minor degree, on an increase in the

inheritance tax.

When we come, however, to the situation in the United States we find the

democratic movement so strong that the overwhelming proportion of the

new tax revenue was derived from direct taxation on wealth rather than

from indirect taxation on consumption. In the great Revenue Act of 1917

over 79 per cent. of the new tax revenue came from direct taxation,

principally the income tax and the excess profits tax. In the second

great Revenue Act of 1918, the proportions were still more favorable,

the amount ascribable to direct taxation in 1919 being almost 81 per

cent.

UNITED STATES

Internal Revenue Receipts

In millions of dollars

Per Per

Year ending June 30 1918 Cent. 1919 Cent.

Income and profits taxes 2,839 2,596[20]

Munition manufacturers tax 13 .....

Estate tax 47 82

Corporate capital stock tax 25 29

----- -----

Total taxes on wealth 2,924 79.1 2,707 70.5

Distilled spirits 318 365

Fermented liquors 126 118

Tobacco 158 206

Stamp taxes 19 37

Transportation 71 234

Insurance 6 15

Excise taxes 37 78

Soft drinks 2 7

Admissions 26 51

Miscellaneous 8 22

---- ----

Total taxes on consumption,

transactions and

commodities 771 20.9 1,133 29.5

Total 3,695 .... 3,840 ....

[20] As the new taxes are payable in instalments, about 2 millions

of the 1919 tax will not be received until the fiscal year 1920.

Making allowance for this the proportion of taxes on wealth

really ascribable to the year 1919 rises to 80.6 per cent.

With the impossibility of securing more than a comparatively small

proportion of the war expenditures from taxation, it accordingly became

necessary to resort to borrowing. This was consequently done by every

country on a gigantic scale; although here again the fiscal and economic

conditions in the various countries were so different that they employed

quite diverse expedients.

Great Britain provided at the outset of the war for immediate needs by

the selling of short time securities, principally Treasury Bills. Before

long these had amounted to such a sum that it became necessary to issue

long time bonds. Accordingly, subscriptions were invited to the first

war loan, which was issued on March 1, 1915, followed by the second war

loan on June 1, 1915. These bore interest at the rate of 3½ and 4½ per

cent. and the amount issued was $1,703,000,000 and $2,883,000,000

respectively. On February, 1916, a continuous issue of War Savings

Certificates was inaugurated. On April 15, 1917, the third war loan was

issued at 4 per cent., followed on June 1, by the issue of 5 per cent.

bonds. Of these $4,811,000,000 were issued.

Beginning on October 2, 1917, a continuous issue of 4 and 5 per cent.

National War Bonds was made, the difference in the rate of interest

being due to the tax exemption. The temporary and short time paper was

gradually funded into these bonds. In the meantime the Anglo-French loan

of $500,000,000, of which England had one-half, had been contracted in

the United States; and with the entrance of the United States into the

war on April 6, 1917, continually larger sums were borrowed from the

American Government. During the period of the war the British debt rose

from £650,000,000 to £7,643,000,000 or from $3,115,000,000 to

$37,221,000,000. It is expected that $250,000,000 will be borrowed

during the year 1919--20, so that in all probability the debt of Great

Britain at the end of 1920 will amount to almost £8,000,000,000, or

$38,500,000,000, meaning that the war debt probably will amount to about

£7,500,000,000, or $35,000,000,000.

France was in a far less favorable situation than England at the outset

of the war. The total debt of France at the close of 1913 amounted to

fr. 32,594,000,000, or $6,291,000,000, and the ordinary budget had

closed with a large deficit. So that it had been necessary to issue a

loan during the spring and summer of 1914. When the war suddenly broke

out, precipitating an economical and financial crash, it became

practically impossible to issue another loan. The government was

therefore compelled to rely upon advances from the Banque de France,

which was permitted correspondingly to increase its notes issue. It was

not until November, 1915, that France saw her way to issue her first war

loan of 5 per cent. bonds. This was followed on August 6, 1916, by the

second war loan, also of 5 per cent. bonds, on December 15, 1917, by the

third war loan of 4 per cent. bonds, and on Dec. 15, 1918, by the fourth

war loan, also at 4 per cent. The first war loan issued at 88 yielded

$1,894,000,000; the second, at 83.75, yielded $1,981,000,000; the third

at 68.60 yielded $2,914,000,000 and the fourth at 70.8 yielded

$5,382,000,000. Meanwhile National Defense Bonds were issued

continuously from February 25, 1915, and foreign loans had been

contracted in England, in the United States and in Japan. The result was

that at the close of the year 1918 the French debt amounted to fr.

167,469,000,000 or $32,322,000,000. This meant that the debt due to the

war amounted to fr. 134,875,000,000 or $26,031,000,000. It is expected,

however, that a considerable sum will still have to be borrowed during

the year 1919, thus bringing the total French debt to 27 or 28 billions

of dollars.

[Illustration: While the Men Fought, Those Left Behind Bought Bonds

Not all brave hearts beat under khaki during the war. More than

$20,000,000,000 was raised by the four Liberty Loans and the Fifth

Victory Loan. Among those who bought bonds were hundreds of thousands of

wives and children of the men at the front.

Courtesy McClure's Magazine]

Russia was the first of the Entente Powers to issue public loans. On

September 14, 1914, it issued a 5 per cent. loan at 94, yielding

$259,000,000. This was followed at regular intervals by six more loans

prior to the revolution of 1917. After the revolution there was

considerable confusion which, of course, was much accentuated by the

advent of Bolshevism. The consequence was that the public debt of

Russia, which amounted for July, 1914, to $4,623,000,000, increased by

the time of the October revolution in 1917 to 49,288 millions of rubles

or 25,383 millions of dollars. This would mean a war debt of almost

twenty-one billions of dollars. As a matter of fact of course it is very

uncertain whether the debt will ever be redeemed at these figures.

The debt of Italy before it entered the war amounted to lire

13,636,000,000 or $2,621,000,000. Italy started at once with a so-called

mobilization loan followed by its first war loan in July, 1915, and

successive war loans on the first of January of each of the following

years. The result was that on October 31, 1918, the total debt amounted

to lire 63,093,000,000 or $12,177,000,000. By the end of May, 1919, the

debt had grown to 77,763,000,000 lire or $15,009,000,000 leaving as the

war debt lire 64,127,000,000 or $12,388,000,000.

Of the Central Powers, Germany started at once on October 1, 1914, to

issue a war loan at 5 per cent., having from the outset decided to rely

upon comparatively long time bonds rather than upon temporary or short

time securities as was the case in England and in France. There followed

in regular succession eight war loans bearing 4½ and 5½ per cent.

interest. As a result, the debt of Germany, which before the war

amounted to Mk. 4,732,000,000 increased on October 31, 1919, to Mk.

204,000,000,000 or $48,552,000,000; the war debt proper in Germany would

therefore amount to $47,426,000,000.

TOTAL WAR DEBT, UNITED STATES

When the United States entered the war it depended, for the time being,

on temporary war certificates. But at the beginning of June, 1917,

Liberty Loans were issued in continually greater dimensions. In the

table below the details of the four Liberty Loans and the Fifth Victory

Loan are given, showing that over $20,000,000,000 were raised from bonds

alone. To these is to be added the unfunded loans. It appears that the

total net debt of the United States, which in April, 1917, was

$1,190,000,000, increased by June 30, 1919, to $24,232,000,000, making a

war debt of $23,042,000,000. Inasmuch, however, as somewhat over a

billion dollars from the Victory Loan will be paid in the course of the

year 1919--20, and as still more will have to be borrowed temporarily,

the total war debt of the United States by the end of 1920 will amount

to over $25,000,000,000, including the nine billions advanced to the

Allies.

UNITED STATES

In Millions

Debt Less Annual

Cash in Interest

Treasury Charge

April 5, 1917 $1,189 $23

June 30, 1917 1,909 84

June 30, 1918 10,924 466

June 30, 1919 24,233 619

DEBT ON JUNE 30, 1919

Bonds

Pre-war bonds 833

War loans

First Liberty Loan $1,985

Second Liberty Loan 3,566

Third Liberty Loan 3,959

Fourth Liberty Loan 6,795

Victory Loan (notes) 3,468 20,455

Treasury Certificates 3,634

Old debt on which interest increased 2

Non-interest bearing debt 236

------

Total gross debt 25,485

Cash on hand 1,252

-------

Net debt (In Millions) $24,233

The other belligerents need not be treated separately. The total pre-war

debt, including Japan, whose debt was increased only by the money raised

to loan to Great Britain and France, amounted to almost $28,000,000,000.

The debt at the close of the war amounted to over $224,000,000,000,

making the net war debt somewhat over $196,000,000,000. When we compare

this with the total cost of the war, which, as we have seen, will amount

to about $210,000,000,000, it appears that almost the entire cost of the

war will have been defrayed from loans, the difference of well-nigh

$15,000,000,000 derived from taxation being due almost entirely to the

efforts of Great Britain and the United States respectively.

PUBLIC DEBT OF THE BELLIGERENTS

000,000 omitted

==========================================================

|Before | | After | War debt |

|the war| |the war | |

---------+-------+----------+--------+-----------+

Great |Aug. 4,| £650 = |Mar. 31,|£7,643[21] | $34,056

Britain | 1914 | $3,165 | 1919 | = $37,221 |

| | | | |

Australia|Aug. 4,| 97 = 472 |Jan. 31,|[22] 336 = | 1,162

| 1914 | | 1919 | 1,634 |

| | | | |

Canada. |Aug. 4,| 332 |Mar. 31,| 1,584 | 1,250

| 1914 | | 1919 | |

| | | | |

New |Aug. 4,|100 = 487 |Mar. 31,| 170 = 828 | 341

Zealand | 1914 | | 1919 | |

| | | | |

South |Aug. 4,|126 = 614 |Mar. 31,| 175 = 846 | 332

Africa | 1914 | | 1919 | |

| | ------ | | ------- | -------

British | | $5,070 | | $42,213 | $37,143

Empire | | | | |

| | | | |

France | July |fr. 32,594|Dec. 31,|fr. 167,459| 26,031

| 1914 | = $6,291 | 1918 | = 32,322 |

| | | | |

Russia | July |ru. 8,800 |Jan. 1, |ru. 49,288 | 20,760

| 1914 | = 4,623 | 1918 | = 25,383 |

| | | | |

Italy | May |li. 13,636|Oct. 31,|li. 77,763 | 12,388

| 1915 | = 2,621 | 1918 | = 15,009 |

| | | | |

Belgium |Aug. 2,|fr. 3,743 |Apr. 30,|fr. 9,787 =| 1,166

| 1914 | = 722 | 1919 | 1,888 |

| | | | |

Rumania | Aug. | 292 |Oct. 31,| 1,020 | 728

| 1916 | | 1918 | |

| | | | |

Serbia | July | 271 |Oct. 31,| 730 | 459

| 1914 | | 1918 | |

| | | | |

Japan | July |yen 2,494 |July 31,|yen 2,530 =| 18

| 1914 | = 1,190 | 1918 | 1,265 |

| | | | |

United |Apr. 5,| 1,190 |June 30,| 24,232 | 23,042

States | 1917 | | 1919 | |

| | ------ | | ------- | -------

Entente | | $22,327 | | 144,062 | 121,735

Powers | | | | |

---------+-------+----------+--------+-----------+--------

Germany |Aug. 1,|mk. 4,732 |Dec. 31,|mk. 204,000| 47,426

| 1914 | = $1,126 | 1918 | = $48,352 |

| | | | |

Austria- |Aug. 1,| 3,726 |Oct. 31,|kr. 137,858| 24,858

Hungary | 1914 | | 1918 | = 25,584 | [23]

| | | | |

Turkey | Nov. | LT 112 = |Oct. 31,| LT 455 = | 1,517

| 1914 | 485 | 1918 | 2,002 |

| | | | |

Bulgaria |Oct. 4,| 219 |Oct. 31,| 974 | 755

| 1915 | | 1918 | |

| | ------ | | ------- | ------

Central | | $5,556 | | $80,112 | 74,556

Powers | | | | |

| | | | |

Total | | $27,883 | | $224,174 | 196,291

| |In Millions |In Millions|

==========================================================

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

millions).

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

[23] Obtained by considering the debt of the new Austria as representing

70 per cent of the debt of all the states which constituted the old

empire.

[Illustration: French School Children Waiting to Welcome General

Pétain]

VI--AMERICAN BUSINESS IN THE WAR

Voluntary Coöperation of Experts and Loyal Support of Labor Put Our

Industries on a War Basis

By GROSVENOR B. CLARKSON

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

Commission

Modern wars are not won by mere numbers. They are not won by

mere enthusiasm. They are not won by mere national spirit. They

are won by the scientific conduct of war, the scientific

application of irresistible force.

--WOODROW WILSON.

War today means that for every man on the fighting line there must be

approximately ten men--and women--behind him in the factories, mills,

and mines of the nation that enters the conflict. It is an enterprise to

which military men alone have ceased to be called, for it enlists the

specialists of every industry and every science from the fighting line

clear back to the last line of defense.

When the American Marines were thrown into the battle line at the Marne,

a French general officer rode up to headquarters.

"How deep is your front?" he asked.

"From here to San Francisco," was the reply; and in that statement lay

the story of America's industrial and economic mobilization for war.

For America the actual arena of the war was 3,000 miles oversea, and

into this arena the Government of the United States threw 2,000,000 of

the most superb troops that the drama of warfare has known; and, what is

more, got them there on time to make possible the final smashing blow.

The organization, transportation, and clocklike delivery at the eleventh

hour of these irresistible citizen armies of the great Republic of the

western world is an epic in itself.

But here at home there were armies too. They were created without

mandates; they were welded into cohesive form by suggestion rather than

by order; they were galvanized from beginning to end by the mighty force

of voluntary coöperation; and they went into the home stretch with a

power which nothing could have stopped. These were the armies of

production--production mainly, it is true, of guns and steel plates and

soldiers' shoes; but production as well of energy, of thought that made

the sword a flaming thing, of optimism to offset the stupid pessimism of

people who criticized but had nothing tangible to contribute, of the

immortal spirit of "carry on," of, above all, unification.

In all of this endeavor, in all of this uprooting of the static national

life of peace time, the business man of America reached his apotheosis

and surprised even himself in his ability to merge his heart and nerves

and brain into the national interest in the most emergent hour of the

country's history.

In effect, America went into the war unprepared. The will to war was a

dormant thing throughout the nation. The country was swollen with

material success almost to the point expressed in Lincoln's phrase: "A

fat hound won't hunt." The evolution of the Government of the United

States, enjoying profound peace for more than half a century, except for

the minor military operations of the Spanish-American conflict, into a

great war-making machine in mercilessly short time was a task to

challenge the ability of even the most resourceful nation of the earth.

There, broadly stated, was the national picture in the spring of 1917.

War came, and almost with every day grew the need for increased

participation on America's part.

COUNCIL OF NATIONAL DEFENSE

The only federal agency in existence on April 7, 1917, capable of the

elasticity to mobilize industry, labor, and science for the national

defense was the United States Council of National Defense. This body,

composed of the Secretaries of War, Navy, Interior, Agriculture,

Commerce, and Labor, had providentially been created by Congress eight

months before. It was charged by Congress with "the coördination of

industries and resources for the national security and welfare" and "the

creation of relations which will render possible in time of need the

immediate concentration and utilization of the resources of the nation."

With it was to act an advisory commission of seven men, each to have

expert knowledge of some special industry, public utility, or the

development of some natural resource.

The Council was further charged with the following particular duties:

1. To supervise and direct investigations and make

recommendations to the President and the heads of Executive

Departments as to:

(_a_) The location of railroads with reference to the frontier

of the United States, so as to render possible expeditious

concentration of troops and supplies to points of defense.

(_b_) The coördination of military, industrial, and commercial

purposes in the location of extensive highways and branch lines

of railroads.

(_c_) The utilization of waterways.

(_d_) The mobilization of military and naval resources for

defense.

(_e_) The increase of domestic production of articles and

materials essential to the support of the armies and of the

people during the interruption of foreign commerce.

(_f_) The development of sea-going transportation.

(_g_) Data as to amounts, location, methods and means of

production and availability of military supplies.

(_h_) The giving of information to producers and manufacturers

as to the class of supplies needed by the military and other

services of the Government, the requirements relating thereto,

and the creation of relations which will render possible in

time of need the immediate concentration and utilization of the

resources of the nation.

2. To report to the President or to the heads of Executive

Departments upon special inquiries or subjects appropriate

thereto.

3. To submit an annual report to Congress, through the

President, giving as full a statement of the activities of the

Council and the agencies subordinate to it as is consistent

with the public interest, including an itemized account of the

expenditures made by the Council or authorized by it, in as

full detail as the public interest will permit, providing,

however, that when deemed proper the President may authorize,

in amounts stipulated by him, unvouchered expenditures and

report the gross so authorized not itemized.

PERSONNEL OF THE COUNCIL

Save for preliminary meetings late in the winter of 1916, the Council

and Advisory Commission did not get under way to any appreciable degree

until February, 1917, when both bodies began to meet separately and

jointly with the primary purpose of taking the national balance, chiefly

with regard to industrial resources. The permanent organization of both

bodies was made on March 3, 1917.

The Council of National Defense was composed as follows:

Secretary of War Newton D. Baker, Chairman.

Secretary of the Navy Josephus Daniels.

Secretary of the Interior Franklin K. Lane.

Secretary of Agriculture David F. Houston.

Secretary of Commerce William C. Redfield.

Secretary of Labor William B. Wilson.

The members of the Advisory Commission were:

_Transportation and Communication_:

Daniel Willard, Chairman, President of the Baltimore and Ohio

Railroad.

_Munitions and Manufacturing, including Standardization and

Industrial Relations_:

Howard E. Coffin, Vice-President of the Hudson Motor Car

Company.

_Supplies, including Food and Clothing_:

Julius Rosenwald, President of Sears, Roebuck & Company.

_Raw Materials, Minerals and Metals_:

Bernard M. Baruch, financier.

_Engineering and Education_:

Doctor Hollis Godfrey, President of the Drexel Institute.

_Labor, including Conservation of Health and Welfare of

Workers_:

Samuel Gompers, President of the American Federation of Labor.

_Medicine and Surgery, including General Sanitation_:

Doctor Franklin Martin, Secretary-General of the American

College of Surgeons.

The Director of the Council and the Advisory Commission during the

greater part of the war was Walter S. Gifford, now Vice-President of the

American Telephone and Telegraph Company, a most capable organizer, who

with the writer had been closely associated with Howard Coffin in a

pioneer industrial preparedness movement inaugurated in the spring of

1916 to examine into the capacity of industrial plants for military

purposes. This was an entirely volunteer movement of business men and

industrial engineers under the Naval Consulting Board of the United

States, acting with the full approval of the President and the War and

Navy Departments. Mr. Coffin's Committee on Industrial Preparedness did

a remarkable job in a very short space of time, and the creation of the

Council of National Defense was the logical sequence of the Committee's

work, its records being turned over to the Council. The writer was the

Secretary of the Council and the Advisory Commission throughout until

the early summer of 1918, when he became Acting Director, succeeding Mr.

Gifford shortly after the signing of the armistice.

[Illustration: Copyright by Harris & Ewing

=United States Council of National Defense and Its Advisory Commission=

Seated, left to right: David F. Houston, Secretary of Agriculture;

Josephus Daniels, Secretary of the Navy; Newton D. Baker, Secretary of

War; Franklin K. Lane, Secretary of the Interior; William B. Wilson,

Secretary of Labor. Standing, left to right: Grosvenor B. Clarkson,

Secretary, later Director, of both Council and Advisory Commission;

Julius Rosenwald, Bernard M. Baruch, Daniel Willard, Chairman of the

Advisory Commission; Dr. Franklin Martin, Dr. Hollis Godfrey, Howard E.

Coffin and Walter S. Gifford, Director of the Council and Advisory

Commission.]

PROPOSALS OF THE ADVISORY COMMITTEE

Although the Council and Advisory Commission did not, as has been

stated, make permanent organization until March 3, 1917, the Advisory

Commission on December 7, 1916, determined on the following proposals of

action:

To begin immediately a study to determine the most effective

flexible organization and mechanism for the securing of all

necessary information and for the clarifying, recording, and

classifying of such information when secured.

To begin immediately a study as to what media now exist which

can aid in the carrying out of the purposes of the council.

This study to be made in three divisions--governmental media

in the departments, governmental media outside the departments,

and civil media. As this study progresses it is believed that

the council can aid materially in the development of such

media, and can from time to time define (_i. e._, delimit and

delineate) spheres of activity in which existing organizations

may operate intensively without duplication.

To assist in the advance of the physical well being of the

people of the nation.

To begin immediately a study of the possibility of the

coördination of transportation, communication and surveys.

To continue the work done on the inventory of manufactures, of

medical equipment and officers, of supplies, and of resources.

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

begun.

To set a fixed date (a date three months after the beginning of

action is suggested) on which an inspection may be made of the

work accomplished to that date. This inspection to be made

through the submitting to the commission of an actual problem

by the Departments of War and Navy, with the intent to

determine at that time what needed information is or is not

available.

To form a temporary organization to put the above proposals or

any part of them or additional proposals into effect at the

earliest possible date, with the intention of changing from a

temporary organization to a permanent organization as the

progress of the work makes this possible.

To begin a study of the best methods of expression of the work

of the council to the people of the nation.

To scrutinize all legislative action touching national defense.

To do any other thing or take any other action necessary to

give effect to the law under which the council and commission

are organized.

PRE-WAR ACTIVITIES

At this time there was consideration of plans to enroll labor in an

industrial reserve, and the question of mobilization of American

railroads for military purposes was seriously discussed against future

need. At the same time Commissioner Baruch stated that he had been

making a study of the steel and metal industries in connection with the

national defense, and wished for authority to consult further with the

leaders in those trades. The Director was asked to establish relations

in the interest of the national defense with civic organizations,

patriotic associations, and chambers of commerce.

At a meeting on February 12, 1917, plans were discussed to call a series

of conferences with the leading men in each industry fundamental to the

defense of the country in the event of war, and at the same meeting a

plan was laid down and afterwards agreed upon to split the Advisory

Commission up into seven separate committees as detailed above, the

Chairman of each committee to be given power to select the members of

his committee from either governmental or civil life, or both.

At a meeting on February 14, 1917, E. S. Stettinius, who, acting for J.

P. Morgan and Company, was the purchasing agent of the Allies at that

time, was called before the Council to confer with it on the manufacture

of munitions. In the same way during this early period men of the

authority and standing of Herbert Hoover, Admiral Peary, and General

Kuhn, who had closely studied the German armies, were called into

consultation by the Council, Mr. Hoover of course, discussing the

mobilization, distribution, and conservation of food supplies, and

Admiral Peary the development of the aeroplane and seaplane for modern

war.

On February 15th the Advisory Commission, further to progress its work

then already under way, requested detailed lists of materials, with

specifications and detailed dimensioned blueprints covering all

equipment needed for a force of 1,000,000 men and for the assumed force

of the Navy and Marine Corps with its numbers increased to emergency

strength. It also called for estimates of reasonable accuracy covering

the maintenance of a force of the size mentioned in the field during

each ninety days of active service. The information was desired in order

that approximations might be made as to the amounts of both manufactured

and raw material for which it would be necessary to draw upon the

resources of the country. The Advisory Commission later furnished

estimates of its own.

On March 3rd Chairman Willard of the Advisory Commission read to the

Council a list of men nominated by the Commission to compose a munitions

standards board. It is highly significant to detail the names of these

men with their occupations, for they were typical of the cream of

American industry which from that time on was enlisted in the

Government's interest:

W. H. Vandervoort, builders of special machine tools, and

President of the Moline Automobile Co.

E. A. Deeds, formerly General Manager for the National Cash

Register Co., President of the Dayton Engineering Laboratories

Co., and interested in many industrial activities.

Frank A. Scott, Warner & Swasey Co., Cleveland, manufacturers

of automatic machinery and optical instruments.

Frank Pratt, General Electric Co., Schenectady.

Samuel Vauclain, Baldwin Locomotive Works, Remington and

Westinghouse Cos.

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

The Council duly approved these nominations.

[Illustration: Copyright Underwood & Underwood

Bernard M. Baruch

Known as the "Eye of Industry," because his task was to see that the raw

materials were brought to the factories and the finished products

shipped overseas.]

MEN OF VISION

It is impossible here to give more than a few instances such as the

foregoing of the way in which the Council and Commission, with

remarkable vision and perhaps even more remarkable disregard of

precedent when precedent got in the way of the national welfare, made

history in these pre-war days. Fully to tell the story of this period

would pack a large volume. I quote from a recent partisan criticism

directed by an American Congressman, as chairman of a congressional

committee to investigate war expenditures, against the Advisory

Commission particularly, which he characterized as the "secret

government of the United States" during this vital space of time:

It appears from the minutes of the advisory commission and the

council, which were kept separately, that practically all of

the measures which were afterwards considered as war measures,

were initiated by this advisory commission, adopted by the

council, and afterwards acted upon by Congress. In many cases,

a considerable period before the actual declaration of war with

Germany this advisory commission was discussing matters which

were thought to be new legislation, conceived by reason of the

necessities of war. For instance, on March 3rd, over a month

before the War declaration, the advisory commission indorsed to

the Council of National Defense a daylight-saving scheme, and

recommended a Federal censorship of the press. The question of

Federal censorship of the press was further discussed on March

24th, two weeks before the declaration of war.

On February 15th, about two months before the declaration of

war, Commissioners Coffin and Gompers made a report as to the

exclusion of labor from military service, and the draft was

discussed; the draft was also discussed on other occasions

before anyone in this country, except this advisory commission

and those who were closely affiliated with the administration,

knew that a declaration of war was to be made later. At a

meeting, on February 15th, this same commission of seven men

(none of whom had any official authority except as advisors),

recommended that Herbert Hoover be employed by the Government

in connection with food control. It was generally understood,

as appears from the minutes, that Mr. Hoover was to be in

control of this matter, although war was two months in the

future.

The advisory commission first met on December 6, 1916. Almost

the first thing the commission did was to take up the matter of

arranging an easy method of communication between the

manufacturers and the Government. On February 12th, for

example, Secretary Lane offered a resolution to the advisory

commission suggesting to them to call a series of conferences

of the leading men in various industries, so the industries

might organize and be able to do business with the council

through one man. In several meetings, long before the war was

declared, this advisory commission of seven men met with the

representatives of the manufacturing industries and formed an

organization of them for selling supplies to the Government,

which organization was well perfected before the war was

declared. This method consisted of having the representatives

of the various businesses, producing goods which the Government

would have to buy, form themselves into committees so that they

might be able to sell to the Government the goods direct, which

their industries produced. In almost every meeting that this

advisory commission had before the declaration of war, they

discussed and recommended to the council (which consisted of

six Cabinet members) these plans for fixing prices and selling

to the Government. When war was declared on April 6th, this

machinery began to move, headed by the advisory commission of

these minutes, the active Government of the seven men, who

were, in effect, as shown by United States, so far as the

purchase of supplies was concerned. So far as I can observe,

there was not an act of the so-called war legislation afterward

enacted that had not before the actual declaration of war been

discussed and settled upon by this advisory commission.

It should be said, of course, that no member of this Council

organization ever sold commodities to himself. But that is another

story.

MEN OF EXPERIENCE

I could not complete even a skeleton outline of the period in question

without certain other references.

Further to emphasize the quality of the business men being called to

Washington by the Council and Advisory Commission, I quote part of a

letter to Chairman Willard of the Commission from Commissioner Baruch of

March 23, 1917:

Mr. Daniel Willard,

Chairman, Advisory Commission, Council of

National Defense, Washington, D. C.

Dear Sir:

In pursuance of the authority given me and in order to be

prepared to meet the requests made of the advisory commission,

I have appointed the following committees. As the necessity

arises and the advisability becomes apparent, I shall add from

time to time other members to these committees, always bearing

in mind keeping them down to such a size that they will be

workable. It has been my endeavor to appoint on these

committees men of proved ability and undoubted integrity.

LEATHER.--Walter C. Garritt, U. S. Leather Co., Boston, Mass.;

George F. Johnson, Endicott, N. Y.; Theodore P. Haight,

American Hide & Leather Co., New York City.

RUBBER.--A. Marks, Diamond Rubber Co., Akron, Ohio; Fred Hood,

Hood Rubber Co., Watertown, Mass.; Stuart Hotchkiss, General

Rubber Co., New York City.

STEEL.--E. H. Gary, President, American Iron & Steel Institute,

New York.

WOOL.--J. F. Brown, Boston, Mass.; Sigmund Silberson, Chicago,

Ill.; Joseph R. Grundy, Bristol, Pa.; F. J. Hagenbarth,

President, National Association of Wool Growers, Salt Lake

City, Utah.

NICKEL.--Ambrose Monell, President, International Nickel Co.,

New York.

OIL.--I have asked Mr. A. C. Bedford, president of the Standard

Oil Co., to serve on the committee, but I shall probably add

another from the Middle West, whose name I have not yet

determined upon, and Mr. Ed. L. Doheny, of Los Angeles, Calif.

ZINC.--I have in the process of formation a committee

representing the zinc trade. There are certain difficulties in

the way of trade jealousies which we have to smooth away. The

same thing is occurring in other lines, but it will be

adjusted, and I shall report on them from time to time.

COAL.--I have been in consultation with the producers of coal,

both bituminous and anthracite, and am now studying that

situation as to the best method of covering coal.

SPRUCE WOOD.--I have also under consideration, but have come to

no conclusion, the employment through a committee of those best

fitted for obtaining the manufacture of aeroplanes for the

Government the proper amount of spruce wood which seems to be

needed.

LABOR PLEDGES SUPPORT

It will be long before the writer forgets the dramatic meeting of the

Advisory Commission as early as March 3, 1917, when Commissioner Gompers

reported that he had called an executive council meeting of the American

Federation of Labor for March 9, 1917, for the purpose of considering

the attitude of labor toward the preparedness plans of the government.

The labor leader spoke with great emotion. He referred to England's

difficulty in the first year of the war in enlisting the services of the

working people. He went on to say that in England unity was then lacking

between government and labor and that the same situation, if not

properly handled before hand, could arise in this country in even more

acute form, largely because of the racial diversity of our working

classes. He concluded by stating that he was now bending his efforts to

mobilizing good will in this direction, saying: [24] "I want the

workingmen to do their part if war comes to America." He forecasted the

meeting in Washington on March 12, 1917, of the officers of the National

and International Trade Unions of America, and said: "I am expecting a

definite response of support from every trade union in America." There

is no doubt in the writer's mind that Samuel Gompers kept the faith

throughout.

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

On April 6, 1917, the Council and Advisory Commission approved a

declaration of the attitude of American labor toward the war presented

by Mr. Gompers' Committee on Labor of the Advisory Commission. This

action was directed toward the maintenance of existing standards of

employment, and provided, among other things, that the Council should

issue a statement to employers and employees in industrial plants and

transportation systems advising that neither employers nor employees

should endeavor to take advantage of the country's necessities to change

existing standards; and providing further that when economic or other

emergencies might arise requiring changes of standards, the same should

be made only after such proposed changes were investigated and approved

by the Council. It likewise provided that the Council urge upon the

legislatures of the States, as well as upon all administrative agencies

charged with the enforcement of labor and health laws, the great duty of

rigorously maintaining the existing safeguards as to the health and

welfare of workers, and that no departure from such standards in State

laws and State rulings affecting labor should be taken without a

declaration of the Council that such departure was essential for the

effective pursuit of the national defense.

MERGING THE RAILROADS

On April 7, 1917, the Council directed Chairman Willard of the Advisory

Commission to call upon the railroads so to organize their business as

to lead to the greatest expedition in the movement of freight and

troops. The response of the railroads was literally splendid. Their

executives came to Washington, conferred with Mr. Willard, and passed

the following resolution:

RESOLVED, That the railroads of the United States, acting

through their chief executive officers here and now assembled

and stirred by a high sense of their opportunity to be of the

greatest service to their country in the present national

crisis, do hereby pledge themselves, with the Government of the

United States, with the governments of the several States, and

one with another, that during the present war they will

coördinate their operations in a continental railway system,

merging during such period all their merely individual and

competitive activities in the effort to produce a maximum of

national transportation efficiency. To this end they hereby

agree to create an organization which shall have general

authority to formulate in detail and from time to time a policy

of operation of all or any of the railways, which policy, when

and as announced by such temporary organization, shall be

accepted and earnestly made effective by the several

managements of the individual railroad companies here

represented.

COÖPERATING COMMITTEES

The first of July, 1917, found the Council and Advisory Commission

directing the operation of the following boards and committees:

Aircraft Production Board.

Committee on Coal Production.

Commercial Economy Board.

Woman's Committee.

General Munitions Board with its sub-committees on Army

Vehicles, Armored Cars, Emergency Construction and Contracts,

Optical Glass, Storage Facilities, Machine Guns, Priority, and

Accounting.

Munitions Standards Board with its sub-committees on Gauges and

Dies, Army and Navy Artillery, Fuses and Detonators, Small Arms

and Munitions, Optical Instruments, and Army and Navy

Projectiles.

Section on Coöperation with States.

Committee on Inland Waterways.

Committee on Telegraphs and Telephones.

Committee on Railroad Transportation, with which acted an

executive committee made up of leading railroad presidents and

six departmental committees composed likewise of railroad

executives and paralleling the military departments over the

country, and sub-committees on Express, Car Service, Military

Equipment Standards, Military Transportation Accounting,

Military Passenger Tariffs, Military Freight Tariffs, and

Materials and Supplies.

Committees on Cars and Locomotives, with their personnel made

up of the high executives of such concerns as the Baldwin

Locomotive Works, the Pullman Company, and the American

Locomotive Company.

Committee on Electric Railroad Transportation, composed of

electric railway presidents.

Committee on Gas and Electric Service.

Committee on Automotive Transport.

Committee on Supplies, with its sub-committees on Cotton Goods,

Woolen Manufacturers, Shoe and Leather Industries, Knit Goods,

Leather Equipment, Mattresses and Pillows, and Canned Goods.

Committee on Raw Materials, with its sub-committees, popularly

known at the time as the "A to Z" committees, on Alcohol,

Aluminum, Asbestos, Magnesia and Roofing, Brass, Cement,

Chemicals, Acids, Alkalis, Electrochemicals, Fertilizers,

Miscellaneous Chemicals, Coal-Tar Products, Pyrites, Sulphur.

Sub-Committees on Copper, Lead, Lumber, Mica, Nickel, Steel

Products, with sub-committees on Alloys, Sheet Steel, Pig Tin,

Steel Distribution, Scrap Iron, Pig Iron, Iron Ore, and Lake

Transportation, Tubular Products, Tin Plate, Wire Rope, Wire

Products, and Cold Rolled and Cold Drawn Steel.

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

Committee on Engineering and Education, with its sub-committees

on General Engineering, Production Engineering, Universities

and Colleges, Secondary and Normal Schools, and Construction

Engineering.

Committee on Labor, with its sub-committees on Mediation and

Conciliation, Wages and Hours, Women in Industry, Welfare Work,

Sanitation with twelve subdivisions, Vocational Education with

nine subdivisions, Information and Statistics, Cost of Living

and Domestic Economy.

General Medical Board, with a long and active list of

sub-committees.

[Illustration: Copyright by Underwood & Underwood

Daniel Willard

President of the Baltimore and Ohio Railroad.

He was chairman of transportation and communication in the Council of

National Defense.]

SERVICE OF EXPERTS

On these boards and committees sat, almost without exception, the

American leaders of industry, science, and labor. Scattered through the

list one finds such names as:

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

constructors.

F. S. Peabody, the great coal operator.

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

A. W. Shaw, publisher of the _System_ magazine, who, as

Chairman of the Commercial Economy Board, preached with

remarkable success the gospel of conservation in business.

Dr. Anna Howard Shaw, who for her labors as Chairman of the

Woman's Committee received the Distinguished Service Medal.

Frank A. Scott, on whom was bestowed the same distinction for

his leadership of the General Munitions Board.

W. A. Starrett, constructing architect of New York, to whom in

great measure is due the credit for the building of the

cantonments in an incredibly short space of time.

Samuel Vauclain, President of the Baldwin Locomotive Works,

whose contribution in the matter of Army and Navy artillery was

monumental.

Theodore Vail, President of the American Telephone & Telegraph

Company, who brought the wire communication men of the country

to a common center in the national interest.

Charles Clifton, President of the National Automobile Chamber

of Commerce.

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

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

Chicago.

Charles Eisenman, who, as active head of the Council's

Committee on Supplies, procured for the Government $800,000,000

of supplies in 200 days at an overhead cost of but $20,000,

involving the handling of 45,000 contracts, and who justly

received the Distinguished Service Medal.

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

Manufacturers.

John P. Woods, the eminent woolen manufacturer.

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

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

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

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

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

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

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

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

Company.

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

Murry M. Guggenheim.

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

Association.

Ambrose Monell, President of the International Nickel Company.

Gary, Farrell, Burden, Dinkey, King, Grace, Schwab, Topping,

Dalton, and Clarke, the great steel executives.

Bedford, Davison, Doheney, Lufkin, Markham, Sinclair, Van Dyke,

Muir, James, and Guffy, in whose hands lay almost the entire

oil output of America.

Stuart Hotchkiss, President of the General Rubber Company.

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

Growers.

The Presidents of the leading zinc companies.

Then when we come to Engineering and Education:

Dr. Henry E. Crampton, of Columbia University.

Charles A. Stone, of Stone and Webster.

The heads of the great engineering societies.

The presidents of Harvard, Johns Hopkins, and other famous

universities and colleges.

Among labor leaders such persons as:

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

Engineers.

James W. Sullivan, Matthew Woll and Frank Morrison, all high in

the American Federation of Labor.

Such well-known men as:

V. Everit Macy, Benjamin Ide Wheeler, John H. Finley, August

Belmont, E. T. Stotesbury and Charles G. Dawes, afterwards a

brilliant figure as a General in France.

Such nationally and internationally known physicians as:

General Gorgas; Dr. William H. Welch, of Johns Hopkins; the

Mayos; Dr., afterwards Brigadier-General, Finney; Dr. George E.

Brewer; Dr. George W. Crile; Dr. Simon Flexner; and Dr.

Theodore Janeway.

Dr. George E. Hale, Chairman of the National Research Council,

which was and is the Council's Department of Science and

Research.

Thomas A. Edison, President of the Naval Consulting Board,

which was and is the Council's Board of Inventions.

The activities of these men and their hundreds of colleagues, nearly all

dollar-a-year workers and men whose time could not be bought, as a rule,

in days of peace, reached out and touched almost every town and village

in almost every part of the United States. They were moved and

stimulated by the philosophy of voluntary coöperation, which was first

and in a very daring way thrust into the consciousness of the nation by

the Council of National Defense. It was the policy that won the war. One

distinct benefit which the Government received from calling the

industrial intelligence of the country to its aid was the breadth of

view which industrial leaders possess. Their habit of mind to survey the

field as a whole, to take a bird's-eye view of the problem to be solved,

enabled the Government agencies to obtain a proper comprehension of the

task of building the war machine. The country will probably never know

the debt that it owes to these men and their like who came to Washington

and bent their backs throughout the hot Southern summer during a series

of endeavors in which absolutely no paths were charted.

NON-PARTISAN REPRESENTATION

It has been asked why a coalition government was not formed to wage the

war. That very thing was in effect done by the Council, though we were

all too busy to point it out at the time. A majority of the Advisory

Commission was made up of Republicans. Certainly Republicans were in the

huge preponderance in the Committee and Boards of the Council and

Advisory Commission. Speaking as one who was not affiliated with the

politics of the Administration of Woodrow Wilson, the writer never

perceived a trace of political flavor in the organization and operation

of the Council from first to last. Never did the six Democratic cabinet

officers forming the Council itself so much as inquire into the politics

of the hundreds of business men and experts nominated to them for

appointment. It was an amazing demonstration of non-partisanship in a

national crisis. The Council was an organization of specialists from

beginning to end, and the work was everywhere carried forward on the

most impersonal basis. The writer attributes this state of affairs to

the breadth of view, and the very genuine passion for national service,

of Secretary of War Baker, Chairman of the Council.

It should be plainly stated that, utilizing in the main dollar-a-year

experts, the Council made the preliminary mobilization of industry to

July 1, 1917, at the grotesquely small sum of $127,000. To May 1, 1919,

its total expenditures, including the operation of the war industries

for nearly a year, amounted to but $1,500,000, and this comprehended the

expenditure of $225,000 for the erection of a building. I doubt if there

is anything in governmental or commercial history to match those

figures, squared with results. The savings of the Council and Advisory

Commission to the Government and the people mounted literally into the

billions, as careful analysis of pre-war and war-time prices on certain

commodities will demonstrate. It was made possible by the Council's

course in commandeering to its side the business men of the United

States.

SOME RESULTS OF COÖPERATION

One of the practical results of voluntary coöperation was the agreement

made by Mr. Baruch and Mr. Ryan with the largest copper producers of the

country to furnish the Navy 20,000,000 pounds of copper and the Army

25,510,000 pounds at 16-2/3¢ a pound when the market price was 35¢ a

pound. This meant saving to the Government close to $10,000,000. The

copper men made this offer notwithstanding their increased cost for

labor, materials, etc., because, as they said: "We believe it to be our

duty to furnish the requirements of the Government in preparing the

nation for war with no more profit than we receive from our regular

production in normal times."

In the same way the steel makers of the country, represented in the

Steel Institute, agreed to furnish steel to the Government at the basic

price of 2.9¢ per pound as compared with the then market price of from

5¢ to 7¢ a pound. This represented an approximate saving to the

Government of $18,000,000.

THE FIELD DIVISION

The tremendous effort of the Council to mobilize and coalesce into a

fluid and powerful whole the industrial, economic and scientific forces,

was supplemented and to a great extent made possible by the Council's

Section on Coöperation with States, later known as the Field Division.

Through this subordinate body was created, guided and coördinated the

185,000 units of the state, county, community and municipal councils of

defense, which literally unified the citizenship of America for war. If

production was to win the war, it was elementary that the civilian

morale must be brought to the highest pitch of coöperation and

efficiency--and it was accomplished. In this vital task a noble part was

played by the Woman's Committee of the Council, which in the most

thorough-going and swift manner brought the services of the women of the

country to the Government. The director of this committee, Miss Hannah

J. Patterson, received the Distinguished Service Medal.

WAR INDUSTRIES BOARD

On August 1, 1917, the Council, with its fortunate power to create

subordinate bodies, brought into being the War Industries Board, of

which the first Chairman was Frank A. Scott, and of which some of the

other members up to the end of the war were:

Robert S. Brookings.

Brigadier-General Hugh S. Johnson.

Rear Admiral F. F. Fletcher.

Hugh Frayne, of the American Federation of Labor.

George N. Peek, a prominent Middle Western manufacturer.

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

Supply.

L. L. Summers, an expert on explosives.

Alexander Legge, General Manager of the International Harvester

Company.

And Judge Edwin B. Parker.

Mr. Brookings was later placed in charge of price fixing and Judge

Parker in charge of priorities. The War Industries Board undoubtedly

accomplished a much better centralization of effort than was possible in

the hurried organization of the early days, when the imperative need was

to increase the sources of supply and get production going until the

executive departments of the Government could get into their full

stride. Mr. Scott was succeeded as Chairman of the War Industries by

Daniel Willard, who in turn was succeeded by B. M. Baruch, who, in his

leadership of this vital and powerful agency, duplicated the success

that Mr. Willard had made as Chairman of the pioneer Advisory

Commission.

CANTONMENT CONSTRUCTION

In indicating even an outline statement of the American industrial and

economic effort in the war, the writer feels helpless to paint the

picture within the space of a few thousand words. It simply cannot be

done. But to visualize what the measure of the task was, let one thing

be cited:

[Illustration: Copyright Underwood & Underwood

=John D. Ryan=

President of the Anaconda Copper Company. He was made chairman of the

Aircraft Production Board after we entered the war.]

At our entrance into the war there were one colonel and four men to

build the cantonments. The job involved the expenditure of $150,000,000

in about three months. The largest year's work on the Panama Canal

amounted to but some $50,000,000. The situation was heart-breaking. On

hearing of it Frank Scott, then Chairman of the General Munitions Board,

called up the Secretary of War and said that something had to be done,

with which the Secretary instantly agreed. The result was that the

Colonel, afterwards Brigadier-General Littell, had a civilian

organization built around him by the Council of National Defense,

notably by W. A. Starrett, later himself a colonel in the Army, which

functioned until the Army was in shape to carry on the job alone. The

building of the cantonments was the greatest job of the ages.

Incidentally it should be stated that the average profit to the

contractors was less than three per cent.

MEN LITTLE KNOWN

The writer likewise feels great reluctance in mentioning, as he has

mentioned, only a few of the men who waged the industrial side of the

war. Many business men little known to the country gave up their

businesses and came to Washington and did superhuman things--did them in

an impersonal, selfless way that was nothing less than stirring. Many of

them remain unknown to this day, and their chief reward must lie in the

satisfaction that they drew to their own souls by what they did, which

is, of course, the greatest satisfaction of all in such situations as

war-time Washington exemplified.

It has not even been possible to touch on the work of business men in

such great war agencies as the Food and Fuel Administration, the War

Trade Board, the Shipping Board, the Aircraft Production Board, the

Office of the Alien Property Custodian, the War Finance Corporation, and

those divisions of the War Department which called highly qualified

civilians to their aid. It would seem better to emphasize the initial

effort, when the Council, through force of circumstances, became the

great administrative laboratory for the examination, organization, and,

at the proper time, allocation of totally new and untried phases of

Federal action related to the prosecution of the war. It was in effect a

fecund mother, which, it is not the slightest exaggeration to say, gave

birth to and propelled the war machine which in the closing days of the

conflict overseas was reaching to the peak of its load, and which in

fact dealt the death blow to the Imperial German Government. It made, in

truth, its fair share of mistakes, but some day its part in sending out

the trumpet call to the business and labor and scientific leaders of

America to join in the national defense will be fully told. Then there

will be perceived in clear and true light the extent to which

peace-loving American civilians offered all they had and all they were

to the Government of the United States so that decency might again be

paramount upon the face of the earth.

VII--THE LIBERTY LOAN ARMY

Mobilizing Americans at Home to Pay for the War--A National Effort

Which Yielded $24,065,810,350

By GUY EMERSON

Vice-President of the National Bank of Commerce, formerly Director of

Publicity, Government Loan Organization

Our Army was our first line in the war against Germany. Our second line

of offense and defense was the Navy, and behind both stood another line

without which neither the Army nor the Navy could have "carried on."

This third force was the greatest unit ever marshalled in the history of

this or any other country--the Liberty Loan Army. Before a man in the

United States uniform entered a trench, before the first depth bomb had

been dropped on a U-boat, this Army, which finally carried a roster of

22,777,680 names, had entered the war.

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

the war!

True, their contribution to the eventual triumph of our arms was

measured in dollars while that of the men at the front or on the seas

was in lives or limbs. Yet it is a fact that dollars were as powerful

relatively as men in bringing the Boche to bay.

Various causes have been given to account for the startlingly sudden

collapse of the Kaiser's army. Some say that the Allies' superior

military strategy brought it to its knees. Others contend that success

against the U-boats broke it down. Both are partly right, for each

helped to undermine the German morale. But however great the

contribution of both was, it is safe to say that the front presented by

the Liberty Loan Army was a vital factor. The belated German

consciousness that the United States as a whole was in the war, as

tangibly represented in the strength of the Liberty Loan Army, helped to

shatter the Germans' will to victory. As much as the men in khaki or in

blue, this gigantic unit bore in upon his mind as an unyielding

opponent. He understood the futility of trying to defeat a people that

enlisted against him to the number of 22,777,680 at home, 4,000,000 in

the field and 300,000 on the water.

THE SPIRIT BEHIND THE DOLLAR

There is another angle to this important element of morale. In inverse

ratio to the weakening of the spirit of the Germans against this

resistless body there came a daily strengthening of the morale of our

own men and those of the Allies through this manifestation at home.

Where there are two opposing wills to victory in the field, the one that

has the greater backing at home is certain to overwhelm the other.

It was not the dollar that won the war, it was the spirit behind the

dollar. Before Prince Max asked for the armistice he had learned that

$9,978,835,800 had been subscribed in this country toward his defeat. It

is natural to assume that this fact did not impress him so much as the

related fact that millions of persons had participated in the

subscription.

Harper's Pictorial Library of the World War, Volume XII · 第 18 / 30 章