There were two schools of war economists in Central Europe, and they had
their following in each of the several governments that regulated
food--its production, distribution, and consumption. The two elements
opposed each other, naturally, and not a little confusion came of this
now and then.
The military formed one of these schools--the radical. These men wanted
to spread over the entire population the discipline of the barrack-yard.
For the time being they wanted the entire state to be run on military
principles. All production was to be for the state; all distribution was
to be done in the interest of the war, and all consumption, whether that
of the rich or the poor, was to be measured by the military value of the
individual. It was proposed that every person in the several states
should get just his share of the available food and not a crumb more.
The rich man was to eat exactly, to the fraction of an ounce, what the
poor man got. He was to have no greater a share of clothing, fuel, and
light.
That seemed very equitable to most people. It appealed even to the other
school, but it did not find the approval of those who were interested in
the perpetuation of the old system of social economy. What the military
proposed was more than the socialists had ever demanded. The enforcement
of that measure would have been the triumph absolute of the
Social-Democrats of Central Europe.
But for that the Central European politician and capitalist was not
ready. With the capitalist it was a question of: What good would it do
to win the war if socialism was thus to become supreme? It would be far
better to go down in military defeat and preserve the profit system.
The struggle was most interesting. I had occasion to discuss it with a
man whose name I cannot give, for the reason that it might go hard with
him--and I am not making war on individuals. At any rate, the man is now
a general in the German army. He was then a colonel and looked upon as
the ablest combination of politician, diplomatist, and soldier Germany
possessed, as he had indeed proved.
"You are a socialist," I said to him. "But you don't seem to know it."
"I am a socialist and do know it," said the colonel. "This war has made
me a socialist. When this affair is over, and I am spared, I will become
an active socialist."
"And the reason?" I asked.
That question the colonel did not answer. He could not. But I learned
indirectly what his reasons were. Little by little he unfolded them to
me. He was tired of the butchery, all the more tired since he could not
see how bloody strife of that sort added anything to the well-being of
man.
"When war reaches the proportions it has to-day it ceases to be a
military exercise," he said on one occasion. "The peoples of Europe are
at one another's throat to-day because one set of capitalists is afraid
that it is to lose a part of its dividends to another. The only way we
have of getting even with them is to turn socialist and put the curb on
our masters."
There would seem to be no direct connection between this sentiment and
the economic tendency of the military in food regulation. Yet there is.
The men in the trenches knew very well what they were fighting for. They
realized that, now the struggle was on, they had to continue with it,
but they had also made up their mind to be heard from later on.
The case I have quoted is not isolated. I found another in the general
headquarters of General von Stein, then commanding a sector on the
Somme.
In the camp of the military economists was also that governing element
which manages to drag out an existence of genteel shabbiness on the
smallest pay given an official of that class anywhere. This faction also
favored the most sweeping measures of war economy.
But it was in the end a simple matter of holding these extremists down.
Their opponents always had the very trenchant argument that it took
money to carry on the war, and that this money could not be had if the
old system was completely overthrown. There was little to be said after
that. To do anything that would make war loans impossible would be
treason, of course, and that was considered going too far.
Regulation thereafter resolved itself into an endeavor by the
anti-capitalists to trim their _bête noire_ as much as was possible and
safe, and the effort of the economic standpatters to come to the rescue
of their friends. Now the one, then the other, would carry off the
honors, and each time capital and public would either gain or lose. It
depended somewhat on the season. When war loans had to be made, the
anti-capitalist school would ease off a little, and when the loan had
been subscribed it would return to its old tactics, to meet, as before,
the very effective passive resistance of the standpatters.
I may mention here that much of what has been said of the efficient
organization of the German governments is buncombe--rot pure and simple.
In the case of the Austrian and Hungarian governments this claim has
never been made, could never have been made, and no remark of mine is
necessary. The thing that has been mistaken for efficient organization
is the absolute obedience to authority which has been bred into the
German for centuries. Nor is that obedience entirely barrack bred, as
some have asserted. It is more the high regard for municipal law and
love of orderliness than the fear of the drill-sergeant that finds
expression in this obedience. How to make good use of this quality
requires organizing ability, of course. But no matter how the efficient
organization of the Germans is viewed, the fact remains that the German
people, by virtue of its love of orderliness, is highly susceptible to
the impulses of the governing class. To that all German efficiency is
due.
There had been some modification of distribution early in 1915. That,
however, was entirely a military measure. The traffic on the German
state railroads was unusually heavy, and trackage, rolling-stock, and
motive power had to be husbanded if a breakdown of the long lines of
communication between the French and Russian fronts was to be avoided.
There was no thought of social economy. The thing aimed at was to keep
the railroads fit for military service.
But by August of 1915 the military economists had managed to get their
hands into economic affairs. It cannot be said that their efforts were
at first particularly fortunate. But the German general staff was and is
composed of men quick to learn. These men had then acquired at least one
sound notion, and this was that, with the railroads of the several
states under military control, they could "get after" the industrial and
commercial barons whom they hated so cordially.
"In the interest of the military establishment" a number of
socio-economic innovations were introduced. The first of them was the
distribution zone. There is no doubt that it was a clever idea. It was
so sound, at the same time, that the friends of the trade lords in the
government had to accept it.
The arrangement worked something like this. A wholesaler of flour in
western Hanover might have a good customer in the city of Magdeburg. Up
to now he had been permitted to ship to that customer as he desired.
That was to cease. He could now ship only to that point when he could
prove that the flour was not needed nearer to where it was stored. But
to prove that was not easy--was impossible, in fact.
Since the German state railroads had in the past provided much of the
revenue of the several governments, this was no small step to take. But
it was taken, and with most salutary effects. The trundling of freight
back and forth ceased, and the food shark was the loser.
Ostensibly, this had been done in order to conserve the railroads. Its
actual purpose was to check the trade lords by depriving them of one of
their arguments why the price of necessities should be high.
What was accomplished in this instance should interest any community,
and for that reason I will illustrate it with an example of "economic
waste" found in the United States.
You may have eaten a "Kansas City" steak in San Antonio, Texas, if not
at Corpus Christi or Brownsville. (I am an adopted "native" of that
region and inordinately proud of it.) If you had investigated the
history of that steak I think you would have been somewhat surprised.
The steer which produced that steak might have been raised in the valley
of the Rio Grande. After that the animal had taken a trip to Oklahoma,
where better pasture put more meat on its back. Still later a farmer in
Missouri had fattened the steer on the very cream of his soil, and after
that it had been taken to Kansas City or Chicago to be butchered and
"storaged."
It might then have dawned upon you that a great deal of wasted effort
was hidden in the price of that steak, though no more than in the
biscuit that was wheat in North Dakota, flour in Minneapolis, biscuit in
San Francisco, and a toothsome morsel to follow the steak. You would be
a dull person indeed if now some economic short cut had not occurred to
you. The steak might have been produced by Texas grass and North Texas
corn, and the like, and it need never have traveled farther than San
Antonio. The biscuit might have been given its form in Minneapolis.
It was so in Germany before the military social economists took a hand
in the scheme, though the waste was by no means as great as in the cases
I have cited, seeing that all of the empire is a little smaller than the
Lone Star State.
But the little trundling there was had to go.
In the winter of 1915-16 this budding economic idea was still in
chrysalis, however. The several governments still looked upon it
entirely as a measure for the conservation of their railroads. What is
more, they were afraid to give the principle too wide an application. In
the first place, the extension of the scheme into the socio-economic
structure seemed difficult technically. It was realized that the
reduction of traffic on the rails was one thing, and that the
simplifying of distribution was quite another. To effect the first the
Minister of Railroads had merely to get in touch with the chiefs of the
"direction," as the districts of railroading are called. The chiefs
would forward instruction to their division heads, and after that
everything was in order.
But distribution was another thing. In that case the several governments
did not deal with a machine attuned to obey the slightest impulse from
above, and which as readily transmitted impulses from the other end. Far
from it. Not to meddle with distribution, so long as this was not
absolutely necessary, was deemed the better course, especially since all
such meddling would have to be done along lines drawn a thousand times
by the Central European socialist.
But the food shark had to be checked somehow. The unrest due to his
sharp practices was on the increase. The minimum-maximum price decrees
which had been issued were all very well, but so long as there was a
chance to speculate and hoard they were to the masses a detriment rather
than a benefit.
Let me show you how the food shark operated. The case I quote is
Austrian, but I could name hundreds of similar instances in Germany. I
have selected this case because I knew the man by sight and attended
several sessions of his trial. First I will briefly outline what law he
had violated.
To lay low what was known as chain trade throughout Central Europe,
_Kettenhandel_, the governments had decreed that foodstuffs could be
distributed only in this manner: The producer could sell to a
commission-man, but the commission-man could sell only to the
wholesaler, and the wholesaler only to the retailer.
That appears rational enough. But neither commission-man nor wholesaler
liked to adhere to the scheme. Despite the law, they would pass the same
thing from one to another, and every temporary owner of the article
would add a profit, and no small one. To establish the needed control
the retailer was to demand from the wholesaler the bill of sale by which
the goods had passed into his hands, while the wholesaler could make the
commission-man produce documentary evidence showing how much he had paid
the producer. Under the scheme a mill, or other establishment where
commodities were collected, was a producer.
Mr. B. had bought of the Fiume Rice Mills Company a car-load of best
rice, the car-load in Central Europe being generally ten tons. He had
brought the rice to Vienna and there was an eager market for it, as may
be imagined. But he wanted to make a large profit, and that was
impossible if he went about the sale of the rice in the manner
prescribed by the government. The wholesaler or retailer to whom he sold
might wish to see the bill of sale, and then he was sure to report him
to the authorities if the profit were greater than the maximum which the
government had provided. To overcome all this he did what many others
were doing, and in that manner made on the single car of rice which he
sold to a hunger-ridden community the neat little profit of thirty-five
hundred crowns.
Something went wrong, however. Mr. B. was arrested and tried on the
charge of price-boosting by means of chain trade. When the rice got to
Vienna he had sold it to a dummy. The dummy sold it to another dummy,
and Mr. B. bought it again from the second dummy. In this manner he
secured the necessary figures on the bill of sale and imposed them on
the wholesaler. The court was lenient in his case. He was fined five
thousand crowns, was given six weeks in jail, and lost his license to
trade. _Preistreiberei_--to wit--price-boosting did not pay in this
instance.
After all, that sort of work was extremely crude when compared with some
other specimens, though the more refined varieties of piracy needed
usually the connivance of some public official, generally a man
connected with the railroad management. Many of these officials were
poorly paid when the war began and the government could not see its way
clear to paying them more. The keen desire of keeping up the shabby
gentility that goes with Central European officialdom, and very often
actual want, caused these men to fall by the roadside.
There was a little case that affected three hundred cars of wheat
flour. Though Hungary and Austria had then no wheat flour to spare for
export, the flour was actually exported through Switzerland into Italy,
though that country was then at war with the Dual Monarchy! Thirty-two
men were arrested, and two of them committed suicide before the law laid
hands on them. The odd part of it was that the flour had crossed the
Austro-Hungarian border at Marchegg, where the shipment had been
examined by the military border police. It had then gone across Austria
as a shipment of "cement in bags," had passed as such into Switzerland,
and there the agents of the food sharks in Budapest had turned it over
to an Italian buyer. Nobody would have been the wiser had it not been
that a shipment of some thirty cars was wrecked. Lo and behold, the
cement was flour!
They had some similar cases in Germany, though most of them involved
chain trading in textiles. The unmerciful application of the law did not
deter the profiteer at all, any more than capital punishment has ever
succeeded in totally eradicating murder. There was always somebody who
would take a chance, and it was the leakage rather than the general
scheme of distribution that did all the damage. Whatever necessity and
commodity had once passed out of the channel of legitimate business had
to stay out of it if those responsible for the deflection were not to
come in conflict with the law, and there were always those who were only
too glad to buy such stores. The wholesaler received more than the
maximum price he could have asked of the retailer, and the consumer was
glad to get the merchandise at almost any price so that he could
increase his hoard.
But the governments were loth to put the brake on too much of the
economic machinery. They depended on that machinery for money to carry
on the war, and large numbers of men would be needed to supervise a
system of distribution that thwarted the middleman's greed effectively.
These men were not available.
The minimum-maximum price scheme had shown itself defective, moreover.
In theory this was all very well, but in food regulation it is often a
question of: The government proposes and the individual disposes. The
minimum price was the limit which any would-be buyer could offer the
seller. In the case of the farmer it meant that for a kilogram (2.205
pounds) of potatoes he would get, let us say, five cents. Nobody could
offer him less. The maximum price was to protect the consumer, who for
the same potatoes was supposed to pay no more than six and one-half
cents. The middlemen were to fit into this scheme as best they could.
The one and one-half cents had to cover freight charges, operation cost,
and profit. The margin was ample in a farm-warehouse-store-kitchen
scheme of distribution. But it left nothing for the speculator, being
intended to stimulate production and ease the burden which the consumer
was bearing. Not the least purpose of the scheme was to keep the money
out of the hands of food-dealers, who would hoard their ill-gotten
gain. The government needed an active flow of currency.
All of which was well enough so long as the supply of food was not
really short. But when it grew short another factor entered the arena.
Everybody began to hoard. The quantities which the authorities released
for consumption were not intended to be stored, however. Storing food by
incompetents is most wasteful, as the massacre of the pigs had shown,
and hoarding, moreover, gave more food to the rich than to the poor; so
for the time being it could not be encouraged too openly, despite the
revenues that came from it.
But the hoarder is hard to defeat. The consumer knew and trusted the
retailer, the retailer was on the best of terms with the wholesaler, and
the rapacious commission-man knew where to get the goods.
He made the farmer a better offer than the minimum price he usually
received. He paid six cents for the kilogram of potatoes, or even seven.
Then he sold in a manner which brought the potatoes to the consumer for
eleven cents through the "food speak-easy." The middleman and retailer
had now cleared four cents on the kilogram, instead of one and one-half
cents; their outlay deducted, they would make a net profit running from
two and one-half cents to three and one-half cents per 2.205 American
pounds of potatoes. This sort of traffic ran into the tens of thousands
of tons. The food shark was making hay while the weather was good. The
entire range of human alimentation was at his mercy, and often the
government closed an eye because the food shark would subscribe
handsomely to the next war loan.
In the winter of 1915-16 I made several trips into the country to see
how things were getting along. On one occasion I was in Moravia. I had
heard rumors that here the food shark had found Paradise. It was a fact.
Near a freight-yard in Brünn a potato-dealer was installed. He bought
potatoes in any quantity, being in effect merely the agent of the Vienna
Bank Ring that was doing a food-commission business as a side line. I
don't know why the government permitted this, except that this
"concession" was a _quid pro quo_ for war-loan subscriptions.
A little old Czech farmer drove up. He had some thirty bags of potatoes
on his sleigh, all well protected by straw and blankets. The food shark
looked the load over and offered the minimum price for that grade, which
on that day was eighteen hellers the kilogram, about one and
three-fourths cents American per pound avoirdupois.
The farmer protested. "My daughter in Vienna tells me that she has to
pay thirty-six hellers a kilogram," he said.
"Not according to the maximum price set by the government, which is
twenty-one hellers just now," was the bland remark of the agent.
"That is all very well, sir!" returned the farmer. "But you know as well
as I do that when my daughter wants potatoes she must pay thirty-six
hellers or whatever the retailer wants. She writes me that when she
stands in the food-line she never gets anything. So she does business
with a man who always has potatoes."
The food shark had no time to lose. Other farmers came.
"Eighteen hellers or nothing," he said.
The farmer thought it over for a while and then sold.
The reader uninitiated in war-food conditions may ask: Why didn't that
farmer ship his daughter the potatoes she needed? He couldn't, of
course. The economic-zone arrangement prevented him. That zone was the
means which the government employed to regulate and restrict
distribution and consumption without giving money an opportunity to
tarnish in the hands of people who might not subscribe to war loans. The
zone "mobilized" the pennies by concentrating them in the banks and
making them available _en masse_ for the war.
Yet the fact was that the daughter of the farmer, buying potatoes
clandestinely, may have bought the very product of her father's land.
Who in that case got the eighteen hellers difference? The middlemen, of
course. That the poor woman, in order to feed her children, might have
been able to use to good advantage two kilograms at thirty-six hellers,
instead of one, is very likely, but this consideration did not bother
the food sharks known as the Vienna Bank Ring.
On one occasion the same group of food speculators permitted two
million eggs to spoil in a railroad yard at Vienna because the price was
not good enough. The Bank Ring was just then agitating for a better
price for eggs and hoped that the maximum would be raised. But the
government was a little slow on this occasion, and before the price went
up, "according to regulation," the eggs were an unpleasant memory to the
yard-hands. Naturally, nobody was prosecuted in this case. I understood
at the time that the Bank Ring presented to the Austrian government a
sort of ultimatum, which read: "No profits, no war loans." The
government surrendered.
The fact that many of these speculators were of the Jewish persuasion
caused a revival of a rather mild sort of anti-Semitism. Several of the
Christian newspapers made much of this, but the government censors soon
put an end to that. This was no time for the pot to call the kettle
black. The food shark came from all classes, and the Austrian nobility
was not poorly represented.
There was the case of the princely house of Schwarzenberg, for instance.
The family is not of German blood to any extent, as the name would seem
to imply. Nowadays it is distinctly Bohemian, and in Bohemia its vast
estates and properties are located. The managers of the Schwarzenbergs
had a corner on almost everything that was raised in the localities of
the family's domains. In the winter of 1915-16 they forced up, to
unheard-of heights, the price of prunes. The prune was a veritable
titbit then, and with most people in Central Europe it had come to be
the only fruit they could get in the winter. Its nutritive value is
great, and since every pfennig and heller had to buy a maximum in food
values the demand for prunes soon exceeded greatly the supply--so
everybody thought.
But the trouble was not a shortage. The crop had been good, in fact.
Orchards, so far as they had not been harmed by the paucity of copper
for the manufacture of vitriol and Bordeaux mixture for the
extermination of tree parasites, had not suffered by the war. The trees
bore as usual, and fruit crops were generally what they had been before.
Nor had there been an increase in operation expenses, aside from what
little extra pay there was given those who gathered the crop.
But the Schwarzenbergs and a few others made up their minds that they,
too, would get a little of the war profits. They also were heavy
investors in war loans.
So long as this corner was confined to prunes and other fruits the thing
presented no great problem--as problems went then. But the activity of
this particular ring did not stop there. Its members dealt in everything
the soil produced.
During the first months of the war there had been set aside by the
several military authorities certain agricultural districts from which
the armies were to be supplied with food, forage, and the like. The
idea was not a bad one. The armies were voracious consumers, and a
scheme which would concentrate over as small an area as possible the
supplies needed meant a great saving of time and effort when shipments
had to be made.
That would have been very well had the several governments bought all
supplies from the producer direct through the medium of a purchasing
branch of the commissary department. Such was not the case, however. The
government continued to buy through war purveyors, who had, indeed, been
curbed a little, but only in exchange for other privileges. Standing in
well with the military, these men were able to sell out of the
commissary-supply zones what the armies did not need--poultry, butter,
fats, and eggs, for instance. These little side lines paid very well. I
remember discovering on one trip that near Prague could be bought a
whole goose for what in Vienna two pounds would cost. Since the Bohemian
geese are never small birds, and weigh from nine to twelve pounds, this
was a case of five to one. When in the cities butter was almost a thing
unknown, I was able to buy in Bohemia any quantity at the very
reasonable price of twenty-seven cents American a pound. In Vienna it
cost one dollar and thirty cents a pound after the food shark had been
satisfied.
The military-supply-zone arrangement made exports from districts
affected to the large population centers impossible, except upon
special permit, which was not easy to get by the man who had no
"protection," as they put it in Austria. The food shark always
interfered. In doing that he had a sort of double objective. Scarcity
was forcing up the prices in the cities, and when the government had
been persuaded that the prevailing maximum price was not "fair to the
farmer" the shark had a reservoir to draw upon.
I found a similar state of affairs in Galicia. On the very outskirts of
Cracow I ran into a veritable land of plenty. The military zone had
completely isolated this district, and while elsewhere people had not
seen butter in weeks, it was used here for cooking, and lard served as
axle-grease. Finally the zone was opened to the civilian consumer. But
this concession benefitted only the food sharks. In the population
centers prices remained what they had been.
I found similar conditions in Germany, though the cause was not entirely
the same.
The Mecklenburg states still have a government and public administration
scheme that has come down to our day from the Middle Ages without much
modification. They have no constitution as yet, and they would have no
railroads, I suppose, were it not that their neighbors had to get access
to one another through these principalities. The two countries are
hard-boiled eggs indeed. And the Mecklenburgers are like their
government. I understand that some enlightened ruler once offered his
people constitutional government, but had a refusal for his pains.
Enough food had been hoarded in Mecklenburg to meet all Germany's
shortage three months. But nobody could get it out. The Imperial German
government had no say in the matter. The several German states are as
jealous of their vested rights as any American State could possibly be.
And the Mecklenburg government had little influence with its farmers.
The case was rather interesting. Here was an absolute government that
was more impotent in its dealings with its subjects than constitutional
Austria was. But the Mecklenburg farmers were of one mind, and that
quality is often stronger than a regularly established constitution--it
is stronger for the reason that it may be an unwritten constitution.
The cellars and granaries of Mecklenburg were full to overflowing. But
there the thing ended, until one day the screws were put on by the
Imperial German government. The Mecklenburgers had been good war-loan
buyers, however. Hard-headed farmers often prefer direct methods.
In Westphalia they had similar food islands, and from Osnabrück to the
North Sea victuals had generally to be pried loose with a crowbar. There
the farmer was the peasant of the good old type; he was generally a hard
person to deal with. It was shown that while he did not mind being
classed as low-caste--_Bauernstand_--he also had cultivated a castal
independence. He would doff his cap to the government official, and all
the time resolve the firmer not to let his crops get out of his hands
in a manner not agreeable to him.
Passive resistance is too much for any government, no matter how
absolute and strong it may be. It can be overcome only by cajolery.
The clandestine food-buyer had better luck, of course. He knew how to
impress and persuade the thickhead, and then made the dear general
public pay for this social accomplishment, which may be as it should be.
He also frustrated the plan of the government. Pennies so mobilized did
not always go into war loans.
To the men in high places this was not unknown, of course. They realized
that something would have to be done soon or late to put this department
of war economics on a smooth track. Appeals not to hoard and not to
speculate in the interest of the nation were all very well, but they led
to nothing.
Still, it would not do to undertake the major operation on the vitals of
the socio-economic organism which alone could set matters right. More
doctoring was done during the summer of 1916. Those who did it were
being misled by the will-o'-the-wisp of a good crop prospect.
In August of that year I had an interview with Dr. Karl Helfferich, the
first German food-dictator. He was averse just then to more food
regulation. He had done wonders as it was. Everybody knew that, though
he was most modest about it. More regulation of the economic machine
seemed undesirable to him. He did not want to wholly unmake and remodel
the industrial and commercial organism of the state, and preliminary
crop reports were such that further interference seemed unnecessary at
that moment.
As it was, the rye crop of Germany met expectations. Wheat fell short,
however, Oats were good, but the potatoes made a poor showing, as did a
number of other crops that year.
Crop returns in Austria were disappointing on the whole. The spring had
been very wet and the summer unusually dry. When the harvesting season
came a long rainy spell ruined another 10 per cent. of the cereals.
Potatoes failed to give a good yield. In Hungary the outlook was equally
discouraging, and reports from the occupied territories in Poland,
Serbia, and Macedonia showed that what the "economic troops" and
occupation forces had raised would be needed by the armies.
To fill the cup of anxiety to the brim, Roumania declared war. The
several governments had made arrangements to give furlough to as many
farm-workers as possible, that the crops might be brought in properly.
The entry of Roumania into the war made that impossible. And the moment
for entry had been chosen well indeed. By reason of its warmer climate,
Roumania had been able to harvest a good three-quarters of her crops by
August, and the Indian corn could be left to the older men, women, and
children to gather. But in the Central states it was different. Much of
the wheat had been harvested, and some rye had also been brought in,
but the bulk of the field produce, upon which the populations depended
for their nourishment, was still in the fields.
I have never experienced so gloomy a time as this. There was a new
enemy, and this enemy was spreading all over Transylvania. The shortage
of labor was greater than ever before, with the weather more
unfavorable.
What the conditions in Austria and Hungary were at that time I was able
to ascertain on several trips to the Roumanian front. Cereals that
should have been under roof long ago were standing in the fields,
spilling their kernels when rain was not rotting them. Those who were
left to reap struggled heroically with the huge task on their hands, but
were not equal to it. If ever the specter of famine had stalked through
the Central states, those were the days.
All this left the food shark undisturbed. He laid hands on all he could
and was ready to squeeze hard when the time came.