Harper's Pictorial Library of the World War, Volume XII

Department of Political Economy, Yale University

In various ways, as this volume shows, the war has profoundly affected our economic and political life. War has ever been a disturber and innovator, always leaving after it a different world from that which existed previous to it. On account of our tremendously complex economic organization—the specialization of industry among nations, and the network of commerce—war today causes more profound changes than ever before. There can not be a human being in the world today whose life is not altered by the war through which we have just passed.

In trying, now that the war is over, to stop drifting, and to think our way out of the bent (or broken) remains of the ante bellum life, the world is confronted by a maze of problems and a still greater maze of proffered solutions.

Many of these proposals are, unfortunately, of the nature of treatment directed not at fundamental conditions, but merely at symptoms. We should be past the stage, in our social science, as we are in medicine, where we treat symptoms without a thorough diagnosis of the fundamental causes.

And yet it is just this thorough diagnosis that we lack.

What, then, are the changes brought about by the war which most deeply affect "the body politic," and by meeting which the most far reaching improvements can be made?

I can not take up, or even touch on, all of them; but to one of them I wish to call especial attention—the High Cost of Living or, more generally, the high level of prices, which is the most striking economic effect of the war throughout the world. It is, as I see it, hard to over-emphasize the need for attacking this problem of the price level as a preliminary to attacking the other economic problems which the war has left us.

We need only glance at a newspaper today, or step into a corner grocery, or fall into conversation with our neighbor in the train to have this topic come out as foremost in interest. It is, I believe, responsible for much more of our present uncertainty and confusion than is usually realized. In its ramifications it is chiefly this phase of the war's effects which, as I suggested above, touches every one of us at every point of our lives. A member of the Federal Reserve Board has called the price level problem the central economic problem of reconstruction.

Professor William Graham Sumner, who has inspired so many to the scientific study of social conditions, used to say: "In taking up the study of any social situation, divide your study into four questions—(1) What is it? (2) Why is it? (3) What of it? (4) What are you going to do about it?"

Let us follow this outline, and look first at the facts of the case; secondly at their causes; thirdly at the evils involved; and lastly at the remedies.

We now possess a device for measuring the average change in prices. This is what is known as an "index number."

Thus, if one commodity has risen 4 per cent. since last month and another, 10 per cent., the average rise of the two is midway between the sum of 4 per cent., and 10 per cent., or 7 per cent. It is

4 + 10          
————  =  7
2    

If we call the price level of the two articles last month 100 per cent., then 107 per cent. is the "index number" for the prices of the two articles this month. The same principle, of course, applies to any number of commodities.

[Pg viii]

The index number of the United States Bureau of Labor Statistics, the best index number we have, shows an average price level in 1918 of 196 for wholesale prices and 168 for retail prices of food on the basis of 100 per cent. for 1913, the year before the war; showing that wholesale prices, on the average, almost exactly doubled. The latest index number for wholesale prices (May, 1919) is 206, and for retail (July, 1919), 190.

A look at the history of prices shows the interesting fact that, while prices have sometimes fallen, they have generally risen. The high cost of living has been for centuries a source of complaint. In the 16th century, people objected to the price of wheat, which was three to ten times what it cost during the preceding 300 years.

Where, through ignorance of monetary science, irredeemable paper money was used, prices have sometimes gone up quite "out of sight." This was the case with the famous assignats of the French Revolution, and the "Continental" paper money of our own Revolution. After the Revolution a barber in Philadelphia is said to have covered the walls of his shop with continental paper money, calling it the cheapest wallpaper he could get! Jokes were also heard of a housewife taking a market-basket full of this "money" to the butcher's shop and bringing home the meat in her purse! This money became a hissing and a byword; and, even to this day, one of the favorite expressions for worthlessness is "not worth a Continental." We see the same situation repeated again today with Russian paper money.

But our first scientific measurement of price movements began with 1782, the beginning of Jevons' index number of wholesale prices in England.

Figure 1 shows the course of prices in England from that date, and also, for comparison, that in the U.S.

The conspicuous feature of these curves is their great irregularity. Practically never are they for any length of time at all horizontal. Sometimes, even in time of peace, a variation of over 10 per cent. is shown in one year. The curve for the U. S. shows, at the time of the Civil War, a very considerable rise (especially as measured in terms of paper), followed by a decline beginning in 1873 and continuing to 1896. The fall in the first part of this period was accentuated by the return from a paper to a gold standard. From an index number of 100 in 1873, the index number dropped to 51 in 1896. This decline resulted politically in the famous Bryan "Free Silver" campaign.

[Pg ix]

[Pg x]

Since that time, however, the course of prices has been steadily upward. Between 1896 and the outbreak of the war, the index number of the U. S. rose about 50 per cent. Substantially the same increase took place in Canada, while in the United Kingdom there was a rise of 35 per cent. This rise before the war amounted, in the United States, to about one-fifth of one per cent. per month. During the war, however, the rise amounted in this country to 1½ per cent. per month, and abroad to much more—in Germany and Austria to 3 per cent. per month, and in Russia, apparently, to 4 or 5 per cent. per month. In the light of the excitement caused up to 1914 by the comparatively moderate increase in this country, we can better understand the Russian economic unrest when a far steeper ascent of prices got under way.

The total effect can be summed up as follows: between 1914, before the war, and November, 1918, the price level in this country (as indicated by the United States Bureau of Labor Statistics retail food index number) rose 79 per cent.; that in England (according to the Statist index number), 133 per cent.; that in France, approximately 140 per cent.; that in western Europe probably at least three-fold; and in Russia perhaps ten or twenty-fold.

The price level of the United States today is over three-fold that of 1896. Expressing the same fact in terms of the purchasing power of money, our dollar of today is worth only 30 cents of the money in 1896, so that as contrasted with the dollar of 1896 our dollar literally "looks like thirty cents."

Now it is a common belief, and one which seems to be borne out by the present situation, that war raises prices whereas peace lowers them. The matter is, however, not so simple. Each case must be considered on its own merits. Figure 2 shows price curves for the various wars.

In general prices have risen during wars. But there has not been any such uniformity of movement after wars. Moreover in most cases the price disturbances both during and after the wars had scarcely anything to do with the coming and going of the war. In only four of the cases on the chart is the rise of prices during the war really and clearly due to the war. In the Napoleonic Wars, the war of 1812, the Civil War, and the World War the rise of prices during the war was largely due to war inflation.

As to the after effects on prices there are likewise only four clear cases. The fall of paper prices relatively to gold after the Napoleonic Wars, and the Civil War was, in each case, clearly due to resumption of specie payments. The fall of prices in the United States after the War of 1812 was doubtless due in large measure to the resumption of foreign trade. In one case there was a rise of prices as an aftermath; the war of 1871, which gave Germany a billion dollars of indemnity, created inflation in Germany and prices rose there between 1871 and 1873 faster than in any other country. This doubtless accentuated the crash in the crisis of 1873.

In the other cases in the diagram the many instances of rise of prices after the wars were due primarily at least, to other causes, although the cessation of war and the undue optimism and spirit of speculation which often follow may, in several instances, have contributed to the boom period and the crisis which so often came a few years later, viz., that of 1857 after the Crimean War, that of 1866 after the Civil War, as well as that of 1873 just mentioned.

The only safe generalizations seem to be the following two: The first is that in so far as a war has been costly, i. e., has strained the economic resources of the belligerents, there has been recourse to inflation in some form and prices have risen. Besides the examples in the chart are those of the French Revolution, the American Colonial wars, the American Revolution and many others. The second generalization is that after a costly war the price level is affected up or down by the fiscal policy of the governments concerned.

Most cherish the belief that high war prices today represent war scarcity. In the case of some countries like Belgium and some commodities like paper this is true and in such cases scarcity serves as a partial explanation of high prices. But in the case of most countries and most commodities there has been no general scarcity. The almost universal rise of prices cannot be ascribed to scarcity. Prices have risen of many goods not affected by the war or in countries remotest from the war.

As Mr. O. P. Austin, statistician of the National City Bank, has said:

"Raw silk, for example, for which the war made no special demand and which was produced on the side of the globe opposite that in which the hostilities were occurring, advanced from $3.00 per pound in the country of production in 1913 to $4.50 per pound in 1917, and over $6.00 per pound in the closing months of the war. Manila hemp, also produced on the opposite side of the globe and not a war requirement, advanced in the country of production from $180 per ton in 1915 to $437 per ton in 1918. Goat skins, from China, India, Mexico and South America, advanced from 25 cents per pound in 1914 to over 50 cents per pound in 1918; and yet goat skins were in no sense a special requirement of the war. Sisal grass produced in Yucatan advanced from $100 per ton in 1914 at the place of production to nearly $400 per ton in 1918; and Egyptian cotton, a high-priced product and thus not used for war purposes, jumped from 14 cents per pound in Egypt in 1914 to 35 cents per pound in 1918. Even the product of the diamond mines of South Africa advanced from 60 to 100 per cent. in price per karat when compared with prices existing in the opening months of the war.

"The prices are in all cases those in the markets of the country in which the articles were produced and in most cases at points on the globe far distant from that in which the war was being waged. They are the product of countries having plentiful supply of cheap labor and upon which there has been no demand for men for service in the war. The advance in the prices quoted is in no sense due to the high cost of ocean transportation since they are those demanded and obtained in the markets of the country of production.

"Why is it that the product of the labor of women and children who care for silk worms in China and Japan, of the Filipino laborer who produces the Manila hemp, the Egyptian fellah who grows the high grade cotton, the native workman in the diamond mines of South Africa, the Mexican peon in the sisal field of Yucatan, the Chinese coolie in the tin mines of Malay, or the goatherd on the plains of China, India, Mexico or South America has doubled in price during the war period?"

Mr. Austin goes on to show that the scarcity or "increased demand" for war goods has been greatly exaggerated. It is true that some 40 million men were at one time fighting in the war. But this is less than 2½ per cent. of the world's population and it must not be forgotten that these 40 million were also consumers before the war. Their withdrawal from industry did not really create a vacuum of even 1 per cent. of the world's productive power; as women, boys and old men took their places and others worked harder than in peace time.

In addition to the 40 million soldiers, some 150 million people have been required to work on "war work" at home but they have simply been "switched" from other forms of production which have been correspondingly reduced. War supplies were demanded but these also largely "switched" the demand from former and industrial uses. Lord D'Abernon found that in England those objects of luxury "which would seem to be influenced not at all or only very remotely and to a very small degree by increased cost of labor and materials," such as old books, prints and coins, had, nevertheless, advanced, roughly speaking 50 per cent., during the war. Thus "scarcity" and especial "war demands" do not go far toward explaining the high price level even in Europe and not at all, I believe, in this country.

[Pg xii]

In the United States while certain things have become scarce, including certain foods, the general mass of goods has been actually increased as a consequence of war.

The raw materials used in the United States in 1918 were 16 per cent. more than in 1913 and 2 per cent. more than in 1917. The physical volume of trade is estimated variously to be in 1918 from 22 per cent. to 41 per cent. above that in 1913 and 8 per cent. above that in 1917.

President Wilson, in his address to Congress, August 8, 1919, on the high cost of living, gave other impressive examples as to foods, especially eggs, frozen fowls, creamery butter, salt beef, and canned corn, showing that scarcity is not the cause of high prices.

The truth is that the chief causes of the rise of prices in war time are monetary causes.

It is almost invariably true that the great price movements of history are chiefly monetary. This is shown, in the first place by the fact that countries of like monetary standards have like price movements. Thus—to consider gold-standard countries—there has usually been a remarkable family resemblance between the curves representing the rise and fall of the index numbers of the United States, Canada, England, France, Belgium, Holland, Scandinavia, Germany, Austria and Italy. Again, the price movements in silver countries show a strong likeness, as in India and China between 1873 and 1893.

On the other hand, we find a great contrast between gold and silver countries or between any countries which have different monetary standards. In the World War the data are still too meager to enable us to express all the relations in exact figures, but we may arrange the different countries in the approximate order in which their prices have risen. The order of the nations corresponds, in general, with the order in which the currency in those nations has been inflated by paper as well as with the order in which their monetary units have depreciated in the foreign exchange markets.

This order—of ascending prices and of inflated currency—is as follows, beginning with the least rise and inflation: India, Australia, New Zealand, United States, Canada, Japan, Sweden, Switzerland, Denmark, Italy, Holland, England, Norway, France, Germany, Austria and Russia.

The ups and downs of prices correspond with the ups and downs of the money supply. Throughout all history this has been so. For this general statement there is sufficient evidence even where we lack the index numbers by which to make accurate measurements. Whenever there have been new discoveries of gold and rapid outpourings from mines, prices have gone up with corresponding rapidity. This was observed in the 16th century, after great quantities of the precious metals had been brought to Europe from the Americas; and again in the 19th century, after the Californian and Australian gold finds of the fifties; and still again, in the same century after the South African, Alaskan and Cripple Creek mining of the nineties.

Likewise when other causes than mining, such as paper money issues, produce violent changes in the quantity or quality of money, violent changes in the price level usually follow.

The World War furnishes important examples of this. In the United States the curve for the quantity of money in circulation and the curve for the index number of prices run continuously parallel, the price curve following the money curve after a lag of one to three months. It was in August, 1915, that the quantity of money in the United States began its rapid increase. One month later prices began to shoot upward, keeping almost exact pace with the quantity of money. In February, 1916, money suddenly stopped increasing, and two or three months later prices stopped likewise. As figure 3 shows, similar striking correspondences have continued to occur with an average lag between the money cause and the price effect of apparently about one and three-quarters months.

On the whole, the money in circulation in the United States rose from three and one-third billions in 1913 to five and a half billions in 1918, and bank deposits from thirteen to twenty-five billions, both approximately corresponding to the rise in prices.

Taking a world-wide view, the money in circulation in the world outside of Russia has increased during the war from fifteen billions to forty-five billions and the bank deposits in fifteen principal countries from twenty-seven billions to seventy-five billions. That is both money and deposits have trebled; and prices, on the average have perhaps trebled also.

The Bolsheviki are a law unto themselves. They have issued eighty billion dollars of paper money, or more than in all the rest of the world put together. Consequently prices in Russia have doubtless reached the sky, though no exact measure of them, since the Bolshevist régime, is at hand.

The increase of over thirty billions in the money of the world (outside of Russia) is as Austin says "more, in its face value, than all the gold and all the silver turned out by all the mines of all the world in 427 years since the discovery of America."

The conclusion toward which the foregoing and other arguments lead is that, in this war as in general in the past, the great outstanding disturber of the price level has always been money. If this is the case, how fruitless, except as treatments of symptoms, are price-fixing, or campaigns aimed at profiteers! The cry of profiteering may hinder a real solution of the difficulty by diverting attention from the real issue and fanning and giving up an object to the spirit of revolt. Money is so much an accepted convenience in practice that it has become a great stumbling block in theory. Since we talk always in terms of money and live in a money atmosphere, as it were, we become as unconscious of it as we do of the air we breathe.

We have now considered the cost of living situation under the two questions "What is it?" and "Why is it?"

The third question, "What of it?"—i. e., what are the evils connected with it—is more easily answered today, when it comes home to all of us, that it might have been 10 years ago.

If, for each one of us, the rise of income were to keep up exactly with the rise in cost of living, then the high cost of living would have no terrors; it would be merely on paper. But no such perfect adjustment ever occurs or can occur. Outstanding contracts and understandings in terms of money make this out of the question. The salaried men and the wage earners suffer—that is, the cost is borne by those with relatively "fixed" incomes.

The truth is, the war was largely paid for, not by taxes or loans but by the High Cost of Living. The result is that the effort to avoid discontent of tax payers has created or rather aggravated the discontent over high prices. Every rise in the cost of living brings new recruits to the labor malcontents who feel victimized by society and have come to hate society. They cite, in their indictment, the high price of necessities and the high profits of certain great corporations both of which they attribute, not to the aberrations of our monetary yardstick but to deliberate plundering by "profiteers" or a social system of "exploitation." They grow continually more suspicious and nurse an imaginary grudge against the world. We are being threatened by more quack remedies—revolutionary socialism, syndicalism, and Bolshevism. Radicalism rides on the wave of high prices.

As a matter of fact, the real wages in 1918, that is, their purchasing power, were only 80 per cent. of the real wages of 1913. That is, while the retail prices of food advanced 68 per cent., wages in money advanced only 30 per cent. The real wages of 1913 were in turn less than in earlier years.

Lord D'Abernon, in a recent speech in the House of Lords said: "I am convinced and cannot state too strongly my belief that 80 per cent. of our present industrial troubles and our Bolshevism which is so great a menace to Europe are due to this enormous displacement in the value of money." In fact, before the war, rising costs of living were manufacturing socialists all over the world, including Germany, and the German Government may have weighed, as one of the expected dynastic advantages of war, the suppression of the growing internal class struggle which this high cost of living was bringing on apace.

We are now ready for the question, "What can be done about it?" So far as the past is concerned, comparatively little. Bygones must largely be bygones. So far as wages and salaries are concerned, the remedy must be to raise them rather than to lower the high cost of living. While some kinds of work have had excessive wages during the war, this has not been true in general, public opinion to the contrary notwithstanding. I quite agree with Mr. Gompers that the wage level should not be lowered even if it could be. On the contrary it should be raised to catch up with prices, just as was done after the Civil War. But in regard to contracts little relief for past injuries can be expected. We would best use the past as a lesson for the future. That is what I understand by "reconstruction."

Many impracticable plans have been proposed. Secretary Redfield undertook to stabilize prices by arbitrarily fixing them. He failed, necessarily. We might as well try to fix the sea level by pressing on the ocean. The same, as I stated above, is true of a campaign against profiteers though proposed by so high an authority as President Wilson.

The plan I shall here outline has received the approval of a large number of leading economists, business men, and organizations, including President Hadley of Yale; a committee of economists appointed to consider the purchasing power of money in relation to the war; Frank A. Vanderlip, president of the National City Bank of New York; George Foster Peabody, Federal Reserve banker of New York; John Perrin, Federal Reserve Agent of San Francisco; Henry L. Higginson, the veteran banker of Boston; Roger W. Babson, statistician; John Hays Hammond, mining engineer; John V. Farwell, of Chicago; Leo S. Rowe, Assistant Secretary of the Treasury: United States Senator, Robert L. Owen, one of the authors of the Federal Reserve Act; Ex-Senator Shafroth; the late Senator Newlands; Sir David Barbour, one of the originators of the Indian gold exchange standard; the Society of Polish Engineers; the New England Purchasing Agents' Association; and a few Chambers of Commerce.

Our dollar is now simply a fixed weight of gold—a unit of weight, masquerading as a unit of value. It is almost as absurd to define a unit of value, or general purchasing power, in terms of weight as to define a unit of length in terms of weight. What good does it do us to be assured that our dollar weighs just as much as ever? We want a dollar which will always buy the same aggregate quantity of bread, butter, beef, bacon, beans, sugar, clothing, fuel, and the other essential things that we spend it for. What is needed is to stabilize or standardize the dollar just as we have already standardized the yardstick, the pound weight, the bushel basket, the pint cup, the horsepower, the volt, and, indeed, all the units of commerce except the dollar.

Money today has two great functions. It is a medium of exchange and it is a standard of value. Gold was chosen because it was a good medium, not because it was a good standard. And so, because our ancestors found a good medium of exchange, we now find ourselves saddled with a bad standard of value!

The problem before us is to retain gold as a good medium and yet to make it into a good standard; not to abandon the gold standard but to rectify it; not to rid ourselves of the gold dollar but to make it conform in purchasing power to the composite or goods-dollar. The method of rectifying the gold standard consists in suitably varying the weight of the gold dollar. The gold dollar is now fixed in weight and therefore variable in purchasing power. What we need is a gold dollar fixed in purchasing power and therefore variable in weight. I do not think that any sane man, whether or not he accepts the theory of money which I accept, will deny that the weight of gold in a dollar has a great deal to do with its purchasing power. More gold will buy more goods. Therefore more gold than 25.8 grains will, barring counteracting causes, buy more goods than 25.8 grains itself will buy. If today the dollar, instead of being 25.8 grains or about one-twentieth of an ounce of gold, were an ounce or a pound or a ton of gold it would surely buy more than it does now, which is the same thing as saying that the price level would be lower than it is now.

A Mexican gold dollar weighs about half as much as ours and has less purchasing power. If Mexico should adopt the same dollar that we have and that Canada has, no one could doubt that its purchasing power would rise—that is, the price level in Mexico would fall. Since, then, the heavier or the lighter the gold dollar is the more or the less is its purchasing power, it follows that, if we add new grains of gold to the dollar just fast enough to compensate for the loss in the purchasing power of each grain, or vice versa take away gold to compensate for a gain, we shall have a fully "compensated dollar," a stationary instead of fluctuating dollar, when judged by its purchasing power.

But how, it will be asked, is it possible, in practice, to change the weight of the gold dollar? The feat is certainly not impossible, for it has often been accomplished. We ourselves have changed the weight of our gold dollar twice—once in 1834, when the gold in the dollar was reduced 7 per cent., and again in 1837, when it was increased one-tenth of 1 per cent. If we can change it once or twice a century, we can change it once or twice a month!

In actual fact, gold now circulates almost entirely through "yellowbacks," or gold certificates. The gold itself, often not in the form of coins at all but of "bar gold," lies in the government vaults. The abolition of gold coin would make no material change in the present situation.

If gold thus circulated only in the form of paper representatives it would evidently be possible to vary at will the weight of the gold dollar without any such annoyance or complication as would arise from the existence of coins. The government would simply vary the quantity of gold bullion which it would exchange for a paper dollar—the quantity it would give or take at a given time. As readily as a grocer can vary the amount of sugar he will give for a dollar, the government could vary the amount of gold it would give for a dollar.

But, it will now be asked, what criterion is to guide the government in making these changes in the dollar's weight? Am I proposing that some government official should be authorized to mark the dollar up or down according to his own caprice? Most certainly not. A definite and simple criterion for the required adjustments is at hand—the now familiar "index number" of prices.

If, for instance, the index number is found to be 1 per cent. above the ideal par, this fact will indicate that the purchasing power of the dollar has gone down; and this fact will be the signal and authorization for an increase of 1 per cent. in the weight of the gold dollar. What is thereby added to the purchasing power of the gold dollar will be automatically registered in the purchasing power of its circulating certificate. If the correction is not enough, or if it is too much, the index number next month will tell the story.

Absolutely perfect correction is impossible, but any imperfection will continue to reappear and so cannot escape ultimate correction. Suppose, for instance, that next month the index number is found to remain unchanged at 101. Then the dollar is at once loaded an additional 1 per cent. And if, next month, the index number is, let us say, 100½ (that is, one half of 1 per cent above par) this one-half of 1 per cent. will call for a third addition to the dollar's weight, this time of one-half of one per cent. And so, as long as the index number persists in staying even a little above par, the dollar will continue to be loaded each month, until, if necessary, it weighs an ounce—or a ton, for that matter. But, of course, long before it can become so heavy, the additional weight will become sufficient; so that the index number will be pushed back to par—that is, the circulating certificate will have its purchasing power restored. Or suppose the index number falls below par, say 1 per cent. below. This fact will indicate that the purchasing power of the dollar has gone up. Accordingly, the gold dollar will be reduced in weight 1 per cent., and each month that the index number remains below par the now too heavy dollar will be unloaded and the purchasing power of the certificate brought down to par.

Thus by ballast thrown overboard or taken on, our dollar is kept from drifting far from the proper level. The result is that the price level would oscillate only slightly. Instead of there being any great price convulsions, such as we find throughout history, the index number would run, say 101, 100½, 101, 100, 102, 101½, 100, 98, 99, 99, 99½, 100, etc., seldom getting off the line more than 1 or 2 per cent.

With the question now before us, it is evident that the problem of our monetary standards has much more than theoretical significance. It is a practical problem, and, I submit, the most pressing which the war has left us. I do not offer the solution described above as the only answer to the problem. It is, however, a working basis, a starting point, from which we may be able to work out a better plan. Some scientifically sound plan is essential, or we shall be the victims of quack remedies.

Finally, now is the time to take up the matter. Public interest is now focused on the cost of living and is very largely educated to the fact that the high prices have a monetary basis. Furthermore, the world is looking to us, as never before, for leadership. It is our golden opportunity to set world standards. If we adopt a stable standard of value, it seems certain that other nations, as fast as they can straighten out their affairs, resume specie payments, and secure again stable pars of exchange, will follow our example.

Let us, then, who realize the situation, act upon our knowledge; and secure a boon for all future generations, a true standard for contracts, a stabilized dollar.

[Pg xviii]

[Pg 1]

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The paramount position of War Finance was brought vividly and continuously before the whole people of the United States by the Liberty Loan campaigns. This lesson was an old one though it was enforced by all the improved methods of modern publicity. To Napoleon Bonaparte is attributed the statement that three things are necessary to wage a successful war: money, more money, and still more money.

It has been well said that:

"Perhaps the greatest surprise of the war to most people, even to those who had studied political economy, has been the enormous expenditure of money which a nation can incur, and the length of time which it can go on fighting without complete exhaustion. This should not have been in reality a surprise to anyone who had studied past history, for all experience shows that lack of money itself has never prevented a nation from continuing to fight, if it were determined to fight. The financial condition of Revolutionary France at the commencement of Napoleon's career was wretched in the extreme, yet France went on fighting for nearly twenty years after that. The Balkan States can hardly be said ever to have had great financial resources, and yet they fought, one after the other, two severe wars, and are now fighting a third still more severe and prolonged. The Boers in South Africa found no difficulty in fighting the British Empire for three years with practically no financial resources. The Mexicans recently managed to fight one another for a good many years in the same way. Lastly, the Southern states in our own Civil War fought for years a desperate and losing fight and were ultimately beaten to the ground, not so much by a lack of money, as by an actual lack of things to live on and fight with. In fact, all history proves, and this war proves over again, that if what the Germans call 'the will to fight' exists lack of money will never stop a nation's fighting, provided it possesses or can obtain its absolutely minimum requirements of food, clothing, and munitions of war. It was Bismarck who said: 'If you will give me a printing press, I will find you the money.' In finding the money required for an exhausting war a nation is driven to all sorts of desperate financial expedients which may very seriously affect its economic life, but if a nation wants to continue fighting and can produce, or be induced to produce, the things that are absolutely necessary for life and warfare, the government will get hold of those things somehow. If it cannot get them in any other way, ultimately it will take them."

When the war opened England was in the strongest position of any of the Allies. She was the greatest creditor nation in the world. That is, she was able to purchase goods from foreign countries on easier terms than her associates. Russia and Italy were debtor nations and had to borrow even before the war in order to balance their foreign accounts. So these members of the Entente had to be assisted in making purchases abroad. England was able for a long time to keep up her exchange rate in New York. This was done by the shipment of gold and by inducing the holders of American securities in England to sell or lend such securities to their government.

England was forced to act as the agent of other Powers who were fighting with her. Until the United States came in, it was the greatest industrial arsenal among the Allies. Large imports were naturally a feature of this policy. The United States soon began to feel the result of the changes in international credit. Exports almost doubled between 1912 and 1917, the figures being in millions, $2,399,000,000 and $6,231,000,000, respectively.

Another side of the United States trade account to the world is indicated by the following classified list of loans to January, 1917:

"Between August 1, 1914, and December 31, 1916, the loans raised in the United States by foreign countries were estimated to reach $2,325,900,000, of which $175,000,000 had been repaid. The net indebtedness on January 1, 1917, was therefore $2,150,900,000. The loans may be classified geographically as follows:

Great Britain	$908,400,000
France	695,000,000
Russia	160,000,000
Germany	45,000,000	[1]
Canada	270,500,000
	————————
Total	$2,078,900,000	[2]

A new pace in war finance was set by the United States when it became a belligerent. It had to provide for an increase of taxation ascending from the point of $3,000,000,000 in 1917 to over $8,000,000,000 in 1918. The largest source of estimated revenue was from taxes on excess profits, including war profits of $3,100,000,000, and the next was from taxes on incomes, $1,482,186,000 from individuals, and $828,000,000 from corporations. The New York Journal of Commerce shows by the following table the difference between the old and the new system of taxation. Exemptions under the new law were the same as under the old: $1,000 for single persons and $2,000 for married, $200 additional allowed for each dependent child under eighteen years of age:

The following estimated yield from other sources is given by the same authority:

According to a calculation published in the New York World the war revenue bill imposed a war tax of $80 on every man, woman and child in the United States, or approximately $400 for each family. The amount expected to be derived from each item is given in the following table:

With the operation of this tax the people of the United States found it no longer possible to speak in terms of opprobrium of the tax-ridden people of Europe. The American income tax has a higher rate on large incomes than that provided for under the English system. A man in the United States with an income of $5,000,000 is taxed nearly 50 percent., more than in England. The New York Tribune published tables printed below comparing the income tax rates of the United States with those existing in France and in Great Britain.

A compilation made for the Wall Street Journal shows that the United States income tax even with the increases made in 1918 was still far lower than the English income tax:

"The great bulk, numerically, of incomes taxed in 1917 was in the field reached by the lowering of the exemption in the 1917 law.... It is a fact, however, that no one of these new taxpayers was called on to contribute more than $40 to the government, as the rate was only 2 percent., while all other incomes paid a basic normal tax of 4 percent. The lowest rate for normal tax in Great Britain is 2 shillings and 3 pence on the pound, or 11¼ percent., and the exemption is only $600. The basic normal tax under the new English law is 6 shillings on the pound, or 30 percent., on all incomes over $25,000.

[Pg 5]

Income	U.S. Tax	Per Cent.	British Tax	Per Cent.
$1,500	$60.00	4.00	$101.25	6.75
3,000	240.00	8.00	375.00	12.50
5,000	480.00	9.60	750.00	15.00
7,500	789.40	10.52	1,406.25	18.75
10,000	1,430.20	14.30	2,250.00	22.50
15,000	2,534.80	16.90	4,812.50	32.08
20,000	3,709.60	18.55	6,812.50	34.06
30,000	6,336.00	21.12	11,187.50	37.29
40,000	8,956.00	22.39	15,937.50	39.84
50,000	11,855.20	23.71	20,937.50	40.18
75,000	18,605.20	24.81	34,062.50	45.42
100,000	26,855.20	26.80	47,187.50	47.19
150,000	46,355.20	30.90	73,437.50	48.96
250,000	92,355.20	36.94	125,937.50	50.37
500,000	235,355.20	47.07	257,187.50	51.44
700,000	359,355.20	51.33	362,187.50	51.74
750,000	390,355.20	52.05	388,437.50	51.79
1,000,000	557,855.20	55.78	519,687.50	51.97
3,000,000	2,042,855.20	68.09	1,569,687.50	52.32
10,000,000	7,292,855.20	72.93	5,244,687.50	52.45

The passing of the war tax bill was not altogether easy sailing; there was plenty of criticism from the press throughout the country. Republican editors and congressmen wondered why the bill did not contain a tax on cotton, and one Pennsylvania congressman thought that the tax levy should be at the rate of three dollars a bale. Senator Smoot of Utah attacked the bill as a bunglesome measure.

The New York Jourial Journal of Commerce called attention to the discrimination between those whose income is in the form of services or property and those who get it in cash:

And the Democratic New York World agreed that the farmer "is not carrying his share of the load of war taxation," and observes:

There was some demand for extending the income tax downwards to cover smaller incomes, for example, we find the Council Bluffs' Nonpareil contending:

The attitude of the New York press is indicated by the Evening Sun and the Times. The New York Evening Sun (Rep.) said the committee "left so many rough edges upon their work." In the opinion of this newspaper, Mr. Kitchin "has given us a measure of class-taxation highly accentuated, and yet has failed to suit the McAdoo group, the most clear-minded adherents of the conscription-of-wealth idea. He has produced a confused series of taxes beyond the practical power of the ordinary busy citizen to master or comprehend, but has not combined these into a harmonious system." The morning Sun even went so far as to remark that "nothing that the Senate could do could make the Kitchin measure worse than it is." Yet it by no means criticized all the features of the bill. It objected to the proposed taxes on oil producers as discouraging the production of oil, and styled the plan to tax distributed corporation earnings at twelve percent. and undistributed earnings at eighteen percent. "simply a fool tax," which "will help to lock the wheels of every great industry in this country."

The foundation mistake of the bill, in the opinion of the New York Times (Ind. Dem.) was the "attempt to assess taxes upon the smallest possible number of persons and businesses, leaving a great majority of the people free from a levy direct or indirect." The Times thought that this policy was dictated by the desire "to leave the mass of voters free from grounds of complaint against the party in power." It insisted that there should be a consumption tax levying "upon the breakfast table and upon the purchases of a great mass of people." Such necessities as tea, coffee, cocoa, sugar, should bear a tax, in the opinion of this and other newspapers. The number of those taxed was also kept comparatively small by the retention of the old income exemption limits, namely, $1,000 for bachelors and $2,000 for married men, with the normal tax rate placed at only six percent. on incomes up to $5,000.

An outline of what was expected from the people of the country as a financial contribution was given by Mr. Wilson in his May (1918) address to Congress, when he decided to ask its members to remain in Washington and prepare a new revenue bill. Mr. Wilson's call for immediate action in behalf of both the public and the Treasury Department was a summons to a universal duty in language which, it is remarked, "was never before used in a tax speech." He said in part:

Mr. Wilson's appeal for the practice of personal economy met with widespread approval in England, as it did in the United States. The Economist considered that his manifesto to the American people on this subject was among the greatest documents that the war has produced. National self-sacrifice had gone far, but not far enough. To attain Mr. Wilson's standard of individual patriotism much was still needed, the Economist says:

When it came to a question of taxing luxuries, the difficulty was to decide what was a luxury. The situation perplexed Congress, for we find one congressman in Pennsylvania who held that collar buttons and cuff buttons were a necessity, while a representative from Texas asserted that Texas could get along without either collar buttons and cuff buttons and still be patriotic. A congressman from Oklahoma thought that all kinds of buttons could be done away with, adding, "Before I came to Congress I could use nails for my suspenders." Congressman from agricultural states considered that automobiles and gasoline were not luxuries but were really necessities, especially for farmers.

Many newspapers opposed anything like a luxury tax. We find the New York Times advising the imposition of taxes on tea, sugar, coffee and cocoa. These are good revenue producers but few politicians care to interfere with the free breakfast table. The Wall Street Journal approved of luxury taxes because they would be a means of enforcing thrift. The Treasury's plan for imposing these taxes may be gathered from the following condensed summary:

Heavy taxes on luxuries were anticipated but until these taxes were considered it was hardly realized how much of the consumption in America was concerned with articles that could be considered luxuries; for example, the country imported $6,000,000 worth of foreign cigarette papers. Pictures, statuary and other works of art were brought into the country to the extent of $17,000,000. Over $2,000,000 worth of ivory was imported every year; over $2,000,000 worth of mother-of-pearl and more than $2,500,000 worth of bulbs and roots. Higher taxes were urged by the financial experts, so we see a writer in Financial America emphasizing the connection between the importation of luxuries and the need of shipping:

In spite of the enormous cost of war operations, roseate views were taken of the ability of the country to surmount the unusual difficulties. Unprecedented taxes were being paid, heavy subscriptions to the Liberty Loans were being collected and yet the business of the country seemed to show a high degree of prosperity. This optimistic outlook marks the following comment found in a circular published by the First National Bank in Boston, after it had called attention to the small number of failures reported throughout the country for August, 1918. No such low record had been reached since July, 1901:

It was prophesied that in spite of the enormous financial obligations assumed by the United States normal conditions would soon be restored. History shows, the circular goes on to say, that financial recovery from devastation has been prompt and complete. Even the railway conditions at this time were viewed optimistically. Such a competent authority as the Wall Street Journal did not anticipate the financial troubles that soon overtook railway administration under government control. It thought that, by the end of the year, the existing debits on current operations would probably be wiped out:

Although called by other names, the United States has had issues of Liberty Bonds on several occasions during a period of one hundred and twenty-nine years, notably in the first years of the Republic and in the Civil War. The first was floated in 1789, the year when the Federal Government was established. Alexander Hamilton was Secretary of the Treasury and on him devolved the duty of raising funds for the government.

America's financial reputation stood at a fairly high level after the close of the Civil War. An era of unexampled production ensued for more than five decades, yet there were many timorous souls who were frightened at the thought of the United States being called upon to bear the burden of the colossal loans. The surprising feature of the Liberty Loans was the elasticity of the subscriptions. The subscribers for the first three loans numbered respectively 4,500,000, 10,020,000, 17,000,000; in every case the records show over subscription. A graphic statement of the nation's riches was presented by S. L. Frazier in the Northwestern Banker, Des Moines, October, 1918:

The New York Tribune remarked, "If any learned professor of economics had predicted that on top of ten billions of government loans in one year a fourth Liberty Loan would reach nearly seven billions we know what we all would have thought."

An official in the National City Bank of New York, Mr. G. E. Roberts, is quoted by the New York Times as saying that the wealth-producing equipment of the country had become greater than ever during the war. He did not believe either that there would be any difficulty of the United States being paid back for the money it had loaned foreign governments.

While the great sums subscribed for the Fourth Loan by banks, corporations, and individuals had a spectacular interest, observed the New York World, it was the plain people who made the loan a conspicuous success, and the twenty-one million subscribers mean in effect the purchase of a new Liberty Bond by "every American family."

There were very good reasons on the part of the government for selecting the definite periods at which the Liberty Loans were to be issued. There were also very good reasons derived from experience by which the government was guided in preparing for the loans. Prior to the fourth loan Secretary McAdoo believed that it could be made to reach fully one-fourth of the population of the country. Preparation for it was made through publicity on a scale hitherto unprecedented. The Washington correspondent of the New York Journal of Commerce, writing on July 31, 1918, said:

He added interesting data as to outstanding treasury certificates and war expenses. The time chosen for the loan was probably as good, it thought, as could have been selected, inasmuch as it would fall just after the bulk of the crops had been harvested and when much of them had been sold at good figures.

Included in the Third Loan subscription total is $17,917,750 subscribed by the United States Treasury. War Savings Stamps subscriptions totalled $879,330,000 up to November 20, 1918.

THE LIBERTY LOANS—BY FEDERAL RESERVE DISTRICTS
	FIRST LOAN (June, 1917— 3½ Per Cent.)	SECOND LOAN (Oct., 1917— 4 Per Cent.)	THIRD LOAN (1918— 4¼ Per Cent.)	FOURTH LOAN (1918— 4¼ Per Cent.)
Boston	$332,447,600	$476,950,050	$354,537,250	$632,221,850
New York	1,186,788,400	1,550,453,450	1,115,243,650	2,044,778,000
Philadelphia	232,309,250	380,350,250	361,963,500	598,763,650
Cleveland	286,148,700	486,106,800	405,051,150	702,059,800
Richmond	109,737,100	201,212,500	186,259,050	352,688,200
Atlanta	57,878,550	90,695,750	137,649,450	213,885,200
Chicago	357,195,950	585,853,350	608,878,600	969,209,000
St. Louis	86,134,700	184,280,750	199,835,900	296,388,550
Minneapolis	70,255,500	140,932,650	180,892,100	241,028,300
Kansas City	91,758,850	150,125,750	204,092,800	294,646,450
Dallas	48,948,350	77,899,850	116,220,650	145,944,450
San Francisco	175,623,900	292,671,150	287,975,000	459,000,000
Total subscriptions	$3,035,226,850	$4,617,532,300	$4,176,516,850	$6,989,047,000
Total quotas	$2,000,000,000	$3,000,000,000	$3,000,000,000	$6,000,000,000
Total allotments	2,000,000,000	3,808,766,150	4,176,516,850	6,989,047,000
Total number of subscribers	4,500,000	10,020,000	17,000,000	21,000,000
NEW YORK CITY SUBSCRIPTIONS
Manhattan	$960,417,050	$1,095,189,000	$702,577,750	$1,353,449,550
Bronx	404,700	1,015,500	5,112,350	5,751,800
Brooklyn	30,312,000	44,424,200	52,427,600	100,469,650
Queens	2,202,600	4,136,150	10,137,350	17,331,900
Richmond	679,600	1,373,700	3,386,800	5,075,750
Total city subscriptions	$994,015,950	$1,146,139,150	$773,641,859	$1,482,078,650

[Pg 13]

Some curious facts were brought out in the effort of the Liberty Campaign propaganda to reach the individual investor. In the large cities the organization was remarkably successful. In the smaller communities it was a greater difficulty. In a suburb or a small town everybody knows everybody else and the Liberty Loan Committee had hard work in getting subscribers. Mr. A. W. Atwood of Princeton thinks that the occupational and vocational classification of possible investors was not tried. Widows and maiden ladies who had inherited $50,000 or $75,000 were not reached. Some of them who were patriotic came forward of their own accord. The little town of Kircunkson in New York State exceeded its quota many times and there was an item in the papers about it. The success of the Liberty Loan in that town was due to the fact that it contained a large sanitarium patronized by millionaires. Yet there were no banks in the town and if their banking resources were used as a basis their quota would have been very small indeed.

As to the assignment of quotas Mr. Atwood makes the point that it was sometimes based on population, sometimes based on the amount of bank resources. He thought that in small places it would be better to post up a list of those who had subscribed and he even thought that if the country made the effort it could ultimately raise a loan of $100,000,000,000, his reason being the following:

One of the best methods of testing the influence of Liberty Loan activities on the thrift of the country is used by Bradstreet's in its examination of the annual report of the United States League of Building and Loan Associations. These Associations, be it remembered, are not patronized by capitalists but almost wholly by wage earners. During the past fifteen years the membership of building and loan associations has increased 150 percent. and since the war broke in 1914, the number of members has extended 52 percent. The latest report shows a gain in assets of 30 percent. over the amount indicated in 1914. The following tables taken from Bradstreet's give detailed items of the financial situation of these important organizations:

The following table gives membership and total assets of building and loan associations for a fifteen-year period:

	Membership	Assets
1902—03	1,530,707	$577,228,014
1903—04	1,566,700	579,556,112
1904—05	1,631,046	600,342,586
1905—06	1,642,127	629,344,257
1906—07	1,699,714	673,129,198
1907—08	1,839,119	731,508,446
1908—09	1,920,257	784,175,753
1909—10	2,016,651	856,332,719
1910—11	2,169,893	931,867,175
1911—12	2,332,829	1,030,687,031
1912—13	2,518,442	1,136,949,465
1914—15	3,103,935	1,357,707,900
1915—16	3,334,899	1,484,205,875
1916—17	3,568,342	1,696,707,041
1917—18	3,838,612	1,769,142,175

The following table shows total membership and total assets for States in which accurate statistics are compiled by state supervisors. The data for other States are consolidated under the heading, "Other States," and the figures given are estimated:

[Pg 14]

[Pg 15]

Such was the success of the Liberty Loan campaign in appealing to all classes of private investors, that it became an interesting speculation whether the popular thrift habit would survive war conditions. It was the general belief in finanical financial centers that the habit of saving had been promoted. Perhaps no better illustration of the thrift habit could be presented than returns made by the savings banks of Boston in October, 1918. At that date these banks had $321,000,000 against $319,000,000 at the same date in 1917, the previous banner total for the end of a banking year. It was estimated by Mr. Ingalls Kimball, the New York Times annalist, that twenty million separate individuals were saving by the method of subscribing to the Liberty Loans, and, as more than $800,000,000 worth of War Saving stamps had been sold, it was probable that nearly half the population of the country was saving money in one of these new ways. As to the method of continuing to encourage thrift, Mr. Kimball pointed out the value of the experience derived from the Liberty Bond Campaign:

Mr. Kimball questioned whether or not we are to lose the benefit of the great lesson of thrift and whether some plan could be devised to make us keep on saving. No problem of reconstruction seemed to him more important than this, "yet in no one of the announced conferences on reconstruction do I find mention of it." He then goes on to say:

For a period of twenty-five months, from April, 1917, through April, 1919, the United States spent for war purposes more than $1,000,000 an hour. All sorts of comparisons are used to make this figure seizable by the imagination. For example, the whole sum, nearly $22,000,000,000, was twenty times the whole of the pre-war debt. Indeed, it was nearly large enough to pay the entire cost of our Government from 1791 up to the outbreak of the European War. In addition to the actual war cost of our own Government Congress paid to various associated governments the sum of $8,850,000,000. As to how this enormous sum of money was spent, two-thirds of the amount practically was spent upon the Army, and the rate of expenditure for the Army was constantly advancing period by period. Even after the termination of hostilities there was a very high daily average owing to the building of ships for the Emergency Fleet Corporation, the construction and operation of naval vessels, food, clothing, pay and transportation of the Army. The Quartermaster's Department had the largest proportion of expenditure.

The amount spent about equals the value of all the gold produced in the whole world from the discovery of America up to the outbreak of the European War. The pay for the Army during the period of warfare was larger than the combined salaries of all of the public school principals and teachers in the United States for five years, from 1912 to 1916. Some of the money spent represents permanent assets. At the end of the war there were large stocks of clothing on hand and large supplies of standardized trucks. There were thousands of Liberty motors and service planes that were available for other uses. Engineer, signal and medical equipment still continued to have a value, but if the race for militarism is maintained it is hard to see how the quantities of war munitions can fail to escape the scrap heap in a few years' time.

Comparing the individual estimates of war expenditure, it is noteworthy that the Austro-Hungarian Empire spent almost as much as the United States. Of all the powers Germany spent the largest sum, $39,000,000,000—one billion more than England.

The following is quoted from the Annalist for December, 1918:

First Loan	$2,000,000,000
Second Loan	3,808,766,000
Third Loan	4,170,019,650
Fourth Loan	6,989,047,000
	————————
	$16,967,832,650

"The totals of each of the above loans have changed substantially since allotment, through conversions with a correspondingly increasing charge on the service. However, the gross amount is substantially unchanged. Of the old loans the Treasury statement of March 31 showed the following totals:

Consol. 2's of 1930	$599,724,050
4's of 1925	118,489,900
Panama Canal 2's, 1906	48,954,180
Panama Canal 2's, 1908	5,947,400
Panama Canal 3's, 1911	50,000,000
Conversion 3's, 1946—7	28,894,500
Postal Savings 2½'s, 1931—7	10,758,560
Postal Savings 2½'s, 1938	302,140,000
	———————
	$1,184,908,590

"The short-term loans in the shape of certificates of indebtedness and War Savings Stamps at the present writing are as follows:

4½% certificates, Series E	$639,493,000
4½% certificates, Series 4F	625,216,500
4½% certificates, Series 4G	614,069,000
	———————
	$1,878,778,500

[Pg 18]

Great Britain	$3,745,000,000
France	2,445,000,000
Italy	1,160,000,000
Russia	325,000,000
Belgium	183,520,000
Greece	15,790,000
Cuba	15,000,000
Serbia	12,000,000
Rumania	6,666,666
Liberia	5,000,000
Czechoslovak Republic	7,000,000
	———————
	[5]$7,919,976,666

One year before the war England's position in regard to the balance of trade was most favorable. Her imports were valued at $3,210,000,000 and her exports at $2,560,000,000. But it was usually estimated that foreign countries owed England about $1,610,000,000 annually for interest on capital lent for shipping freights and for banking insurance and other commissions. The total amount owed her, therefore was $4,170,000,000 as against $3,210,000,000 which she owed for her imports. She had therefore a favorable balance of about $960,000,000 which was lent abroad. The war brought an enormous decrease in tonnage, and the excess of imports over exports attained the figure of $1,950,000,000 a year.

Exceptional measures had to be taken to maintain the exchange rates with the United States from whom the chief purchases were made. Large amounts of gold were exported, but by June, 1915, there was a collapse in American exchange. Drastic measures were used to induce the holders of American securities in England to sell or lend those securities to the Government. In this way exchange was kept up practically to the gold point. This question of exchange and the position of England as the director of the financial campaign of the Allies is illustrated from an address given by Mr. R. H. Brand to the American Bankers Association, in September, 1917:

The extent of the withdrawal of productive power can only be judged by figures. Of the 7,500,000 men serving in the British Army, 4,530,000 were contributed by Great Britain, 900,000 by the British dominions and colonies; and the remaining 1,000,000 by India and the various British African dependencies. Production went on to a remarkable degree, but this production was largely for war purposes. It was secured by recruiting female labor to an unheard of extent in the munition factories. According to the London Economist, the financial side of the British administration was anything but satisfactory. It speaks of waste and faulty methods:

A thorny problem of all war finance is how to equalize as far as possible the amount of money furnished by taxation with the amounts borrowed. The proportion indicated in the last English war budget of 1918 was that between £842,000,000 raised by taxes and 2,000,000,000 sterling by fresh borrowing. Besides, war experience shows that the parliamentary estimates in each year were always far below the amount spent. In 1917 in Great Britain the shortage was upwards of £400,000,000. According to the London Economist, no effective steps were taken to stop the profligate extravagance by which public money was poured out through the sieves of the war spending departments into the pockets of innumerable manufacturers, middlemen and traders, not to mention the ever growing sums allocated to the privy purses of countless new bodies of officials. Each year, it says, there is a new debt charge of some £120,000,000 and each year there is a constant rise of prices in wages that enhances the cost of governmental goods and services.

The amount raised by taxation, £842,000,000, seems enormously large, but as the London Nation states:

There is much evidence to show that long before the war began financial preparations were made in Germany for the great struggle. For a considerable period prior to 1914, Germany and Russia had been engaged in a contest to accumulate a gold supply. Russia, it is known, had begun to withdraw the large balances which she kept in German, French and English banks. In Germany the story was circulated that in 1913 the Kaiser inquired of the governor of the Imperial Bank if the German banks were equipped for war. Being told that they were not ready he is said to have replied: "When I ask that question again I want a different answer." The Imperial Bank of Germany became an active bidder at the London gold auctions for the gold which arrived weekly from South Africa, and its activity along these lines was shown by the increasing of the German gold reserve in the bank vaults from $184,000,000 on December 31, 1912, to $336,000,000, the amount it stood at a month before the war began. In addition, the Imperial Bank collected for the Government a sum of about thirty million dollars to be added to the same amount said to be stored in the vaults of the Julius Thurm at Spandau, and to be used as a war chest. Other European countries were increasing their gold supplies, so it was not surprising that the New York markets were called upon to export eighty-four million dollars of gold for six months before the outbreak of the war. The entire gold production of the world during the eighteen months ending on June 30, 1914, was approximately $705,000,000. Of this amount, about two million dollars was required for the arts, and one hundred and fifty million dollars went to British India. This left about $350,000,000 to be applied to monetary uses and the whole of this amount was absorbed by the four great central banks of Germany, France, Russia and Austria-Hungary.

In order to resist raids on the German gold reserve a policy of note issuing was adopted. The situation, as forecast by Mr. C. A. Conant in September, 1914, in the New York Times, can be gathered from the following extract:

Among all the belligerent powers Germany occupied the unique position of using the war as an excuse for not publishing national accounts. The sole guide to her expenditure must be looked for in the credit votes passed by the Reichstag. Using this method, it is estimated that Germany spent about $30,000,000 a day. To cover this expenditure there was a regular plan of national loan—in March and September. This was the method followed in all the four years of the war. During the intervening six months there was an issue of Treasury bills. The German people were, apparently, schooled to these regular demands with commendable promptness, but the Imperial Government adopted a policy of inflation in the hope that a speedy victory would bring fruits in the shape of an indemnity, and so the German people would avoid being called upon to bear war burdens. Taxation was introduced only reluctantly and at a later period, and merely for the purpose of meeting so-called normal civil expenditure and interest on war debt. The plan followed was to spare the middle classes as far as possible from additional taxation charges.

The war loans have been, on paper, most successful. For example, the seventh loan of September, 1917, yielded $3,000,000,000; the eighth loan nearly $4,000,000,000. There was a large amount of ready money in the country and besides this all stocks of raw material have been realized. Large as the loans have been they have not been able to keep pace with the increase of expenditure. Out of the total amount of $30,000,000,000 about $20,000,000,000 have been covered by long-term loans. Of course, owing to the peculiar situation of Germany in relation to her allies, which were dependent upon her financial support, these loans have been raised by the German people themselves. The German Loan Bureaus were criticized at the beginning of the war, and German figures show that only about ten percent. of the national loans were involved in the Loan Bureau scheme. These Loan Bureaus, it was announced, would continue after the declaration of peace. According to the London Economist, Germany followed an easy and sure policy of war finance, although the same authority does not hesitate to use the terms "complete financial ruin" in connection with German post-war finance.

The whole subject of German inflation is difficult to analyze. The Economist works out a post-war expenditure of $5,000,000,000 a year against a revenue of a billion and a half. Its estimate of German inflation is contained in the following passage:

In this connection it is interesting to give a summary of Germany's war expenses as reported in the London Economist:

An extraordinary list of the gigantic war profits collected by Germany was drawn up by A. Cheraband, the well known French critic. He estimated that in three years Germany had spent $322.50 per head, France $444.00, Great Britain $559.75. He presents a list of war profits made by Germany. The "booty" he divided into movable and immovable property. In the former category he includes the 212,000 square miles of territory that had fallen into German clutches, and this he values at $32,000,000,000, which, he says, is a conservative estimate. Turning to the movable booty, he classifies it as follows:

1. "Capture of 'Human Material.'—This consists of the 46,000,000 Allied subjects from whom the Germans obtain free labor.
2. "Capture of War Material.—Guns, rifles, munitions, vehicles, locomotives, railway trucks, and thousands of miles of railway. The Belgian railway system alone is worth nearly $600,000,000.
3. "Capture of Foodstuffs.—Everywhere the Germans have stolen horses, cattle, corn, potatoes, sugar, alcohol, foodstuffs of every kind, and crops grown by the forced labor drawn from the 46,000,000 Allied subjects whom they have enslaved.
4. "Theft of Raw Materials.—Throughout the occupied territories the Germans have appropriated coal, petroleum, iron, copper, bronze, zinc, lead, etc., either in the mines or from private individuals; textile materials, such as woolen and cotton. In the towns of northern France alone the Germans stole $110,000,000 worth of wool.
5. "Theft of Industrial Plant.—On a methodical plan throughout the occupied territories, the motors, engines, machine-tools, steam and electric hammers, steel-rolling mills, looms, models, and industrial plant of all kinds have been carried off to Germany.
6. "Thefts of Furniture.—The way in which furniture and household goods were stolen and carried off is confessed by implication in the following advertisement published in the Kölnische Zeitung at the beginning of April, 1917:
   "'Furniture moved from the zones of military operations in all directions by Rettenmayer at Wiesbaden.'
   "It is impossible to estimate the money value of the goods thus removed.
   "Seizure of Works of Art.—The works of art collected for centuries in museums, churches, and by private individuals in Poland, Italy, Belgium, and France have been carried off by the Germans.
7. "War Levies.—Scores of millions in money have been secured by the Germans in the form of requisitions, fines, war levies, war taxes, and forced loans.
8. "Thefts of Coin, Jewels, and Securities.—In the occupied regions, and especially wherever they have been obliged to evacuate those regions, as, for instance, at Noyon, the Germans have emptied, by order, the safes and strong boxes of private persons and of banks and have carried off securities, jewels, and silver. In September and October, 1917, they seized at one stroke the deposits of Allied subjects in the Belgian banks amounting to $120,000,000.
   "In view of the high prices of foodstuffs, coal, metals, petroleum, war materials and machines, it is clear that the booty thus secured by the Germans during the last three years in the occupied territories is certainly worth several billion dollars."

It became commonplace after Germany's defeat was evident that her war cost must include the cost of the destruction she had caused her enemies. To estimate this was no easy matter. The attitude of the Germans on the subject was indicated by their constantly expressed hope that trade would recommence as usual and that they would be able to start economic relations in a favorable position. So we find the Cologne Chamber of Commerce beginning to prepare for peace by adopting a resolution expressing the hope that the destruction of French and Belgian industries would allow the rapid recovery of German power.

The Wall Street Journal used this statement as a guide to the Allied Powers for measuring the kind of indemnity that would be imposed upon Germany.

The soft plan of dealing with Germany's war cost was championed by Secretary Daniels. The Springfield Republican and the New Republic seemed to agree with the Manchester Guardian that Germany ought to to to be helped rather than punished, that the main thing was to set her on her feet again.

It is interesting also to note an attempt made by one of the expert statiticians statisticians attached to the Guaranty Trust Company of New York to estimate the total cost of the war at the close of the four-year period. The five main Allies possessed, before the war, $406,000,000,000 for national work, a sum nearly four times as great as the national wealth of the two Central Powers. In four years the seven leading belligerents had spent $134,000,000,000. The only way to grasp the meaning of this enormous sum is to contrast the cost of the World War with all former wars. The total cost of wars that had taken place since the American Revolution was $23,000,000,000; the World War costs therefore, are six times greater. In these figures, staggering as they are, it was comparatively easy to figure out the costs, debts and interests of actual war expenditures. Much more complicated is the problem of estimating the property value destroyed through military operations on land and sea:

The same expert goes on to figure out the economic value of the loss of human life:

The Carnegie Endowment for International Peace made public in November, 1919, an elaborate report on the cost of the World War in human life and in property and the consequent economic losses. The chief conclusions derived from this intensive study of all the conditions may be summarized as follows:

All of the great wars in European history have been followed by periods of increased production and economic expansion. Experts are convinced that the World War will prove no exception to the world's previous experience. Wars have been the principal influence that have determined the course of commodities and prices. In the Napoleonic Wars the index number rose seventy-two points in twenty years, but during the four years between 1914 and 1918 there was a rise of one hundred and eight points in four and a half years, a movement which Edgar Crammond, widely known British expert in economic and financial affairs, declared to be a movement to which there was no precedent in point of rapidity or magnitude. In an address outlined in the New York Journal of Commerce this authority estimated the direct cost of the war to the Allies as being roughly $145,000,000,000. The Central Powers had spent about $60,000,000,000. The total cost in dollars he estimated at $260,000,000,000. The upheaval caused by the war was manifested, according to the same authority, in the rise of the cost of living and in the universal increase of wages. Other economic consequences will be more gradually unfolded. Prospects of fall in the price of commodities and wages as the result of peace, he thinks, will be arrested for two reasons: First, the vast increase in the amount of paper money; second, the huge amount of public debts to the belligerents. He saw an additional psychological cause in the attitude of the laboring classes to maintain wages at a higher level than before the war and to improve the standard of living.

Reduced production is sufficient to account for all the economic disturbances that were produced during the war, according to the London Statist, which says:

The enormous advance of prices in England was synchronous with the issue of currency notes to an excess of £700,000,000 beyond the gold reserve. High officials in British administration ascribed this rise to the increased consuming capacity. According to the British Board of Trade a sovereign could purchase no more during the war time than eleven shillings would just before the war started. A writer in the Fortnightly Review, Mr. W. F. Ford, quotes Jevons' remark in his classical book on money in explanation of the phenomenon. "A number of bankers all trying to issue additional notes resemble a number of merchants offering to sell corn for future delivery, and the value of gold will be affected as the price of corn certainly is. We are too much inclined to look upon the value of gold as a fixed datum line in commerce, but in reality it is a very variable thing." Substitute today the word Government for bankers and one can see the reason for the upward rise in prices. This rise would take place apart from any questions of war waste, profiteering, difficulties of transport by sea or land or shortage of labor. All the countries involved have followed the same policy of inflation. The operation is depicted in the following passage:

In Great Britain £200,000,000 worth of new paper currency was placed in circulation and there was a considerable expansion in the use of banknotes, silver and copper coinage. Proposals were made that the famous English Bank Act should be repealed and that excess issues of banknotes should be made legal on the payment of a tax. But apart from these theories of involving the banking system there was a good deal of adverse criticism.

Protests against war inflation were not confined to British specialists in finance. What is inflation? As used by the more careful writers on the subject today, it is taken to signify the increase of bank credits not represented by any immediate addition to current wealth. For example, if the Government borrows by an issue of bonds, such bonds taken by the banks, and payment for them made in the form of bank credit which is at once transferred to individuals who have furnished labor or supplies, it is evident that there has been a net addition to the purchasing power of the community not represented by any corresponding addition to wealth whether of a saleable or available form. Mr. Delano, a member of the Federal Reserve Board, said that the war had produced a world inflation the like of which had never occurred before—"The usual symptoms of such methods of inflation are the disappearance of metallic money and the general advance in the prices of commodities." He gives the following illustration of what has taken place in this process of inflation:

The United States had large experience with inflation during the Civil War. Some $500,000,000 were in this way added to the cost of the war which might have been avoided. A plain statement of the real incidents of inflation is given by Mr. A. C. Miller of the Federal Reserve Board in his Financial Mobilization for War, in the following passage:

One of the ways in which inflation was caused in the United States during the war period was the plan adopted by the banks of financing the loan directly by means of bank credits to the buyers. According to Mr. Carl Snyder the banking officials roughly agree that on the first Liberty Loan for $2,000,000,000 the banks may have loaned somewhere near half the total and on the second loan even more. Of course, this means a heavy expansion of bank credit. Economists are generally agreed that the flooding of the country with paper money brings about an enormous rise in prices. They differ chiefly in regard to the degree of inflation. The most accepted statement of inflation is that prices vary directly as the volume of the actual currency employed and its rate of turn over or velocity, and inversely with the volume of trade. The effect of bank credits is exactly that of an excessive issue of notes; that is, if they are expanded more rapidly than the actual volume of business there is a rise in prices, that is to say there is inflation.

The situation of the country during the war in regard to business was put plainly by Mr. Snyder in the following words: "Railroads cannot haul any more goods. The government is already stepping in to shut down on shipments on certain lines of industry. We can not get any more coal unless labor is drafted from other industries, and as a whole we cannot get any more labor as is evident from the fantastic wages that are now being paid. In a word, production and therefore the actual volume of exchange is practically at the limit and has been for a year or more. No expansion of bank credits can put this production any higher. It follows, therefore, as a practical fact that any expansion of bank loans now means inflation—to all practical intents dollar for dollar." Because of the introduction of a billion dollars worth of gold into the country, prices have risen nearly one hundred percent. The expansion of bank credits increases the cost of living and the cost of the war will be doubled.

Some bankers estimated that if the war lasted the expansion of bank loans might reach $50,000,000,000. The progress of these loans was encouraged by the cutting of the required metallic reserve under the new Federal Reserve system and the system of book credits with the Federal Reserve banks allowed to the banks that are members of the system. The following is Mr. Snyder's description of the way the inflation was encouraged.

He then went on to speak of the possibilities of this inflation and uttered a warning of the danger, because the only obstacle in the way was the good sense and conservatism of the American banks. Some authorities hold that a war cannot be fought without inflation. Mr. Snyder thought that the United States with large ante-war income could and should have tried the experiment. People want easy money and flush times. If credit were contracted there would be tight money and a high interest rate. Mr. McAdoo and the Administration at Washington feel highly elated when they roll up five billion of statistics, half of which are merely bank rolls. It seems not to matter that all this may add two or three billion to the already swollen credit currency and that the millions of poor people, small investors and life insurance holders who cannot expand their income in any adequate way must pay the piper. These are the millions who rarely have any voice in national affairs, and all the more so because they are for the most part ignorant. It seems an idle consequence that we may spend perhaps ten long weary years of hard times, of falling prices, declining business and sharp distress, paying for the orgy of inflated prices, waste and extravagance in which we are now indulging.

The wide expansion of credit can be studied by making a comparison of the gold holdings of the leading nations. For example, in 1914 just before the outbreak of the war, the amount of cash held by all the banks of the United States was estimated at about $1,639,000,000. Of this amount about $913,000,000 was in the form of gold or gold certificates. Upon this basis there rested a structure of credit amounting to $21,351,000,000. In other words the gold basis of the country's deposit credits amounted to 4.27 percent.

In 1916 the cash held was $1,911,000,000; about $1,140,000,000 was in gold; and on this basis there rested a credit structure of $28,250,000,000.

One of the financial effects of the war was the transformation of the United States from a debtor to a creditor nation. The reconstruction period in finance is certain to bring about a situation described by a writer in the Wall Street Journal as one of the most interesting developments known in financial history. Financial waste in emergency measures was a superficial side of America's part in the World War. But this writer considers that what happened during the war was not altogether financial waste:

After the United States took an active part in the war large credits and loans were made in behalf of other countries as the following excerpt shows:

Country	Loans and Credits	Loans	Balances Under
	Agreed Upon	Made	Established Credits
Great Britain	$2,045,000,000	$1,985,000,000	$311,070,250 60,000,000
France	1,285,000,000	1,225,000,000	50,000,000 60,000,000
Italy	500,000,000	450,000,000	50,000,000
Russia	325,000,000	187,729,750	137,270,250
Belgium	77,400,000	75,400,000	2,000,000
Serbia	6,000,000	4,200,000	1,800,000
Totals	$4,238,400,000	$3,927,329,750	$311,070,250

During the war gold almost ceased to be currency in all the Allied countries. The Central Powers at the end of the struggle had comparatively little. Of the total gold production the United States produced about twenty-five percent., while the British Empire produced nearly sixty-four. A writer in the Edinburgh Review proposed to take the opportunity of creating a standard price for gold. For example, if the standard price of gold were reduced to half, the prices of all commodities would come down in sympathy. We must take advantage of the fact that we are working with a paper currency, and all authorities agree that financial stability is only secured by the backing of as much gold as possible against paper securities and emergencies.

The plan involved an increase of the standard price. The success of the scheme depends upon the concordant will of the United States and Great Britain to adopt it as the following article suggests:

Along with all other commodities, that cinderella of finance—silver—had a share in the general rise in prices. One of the reasons is the enormous falling off of silver production in Mexico, where one-third of the total world supply is produced; another is the great demand for silver. Prior to the war, the use of silver plate by the wealthy classes had largely fallen off; but the war, because of the rise in wages, brought about a largely increased demand for silver to be used in ornaments:

The use of silver in coinage, too, was notably increased. Gold disappeared in countries where gold coins were used; paper money and silver token money took its place. Another reason for the advance in silver is connected with the demand for the metal in eastern countries. According to the London Statist:

The accompanying diagram showing how military operations in Europe affected the average prices of fifty stocks, half industrial and half railway, was published in the New York Times Annalist:

A further indication of how military operations reacted on Stock Exchange quotations was shown in the decided improvement that took place since the end of July, 1918, after the Germans were pushed back in their drive towards Paris. The most direct way of measuring this influence is to take the quotations for the bonds and notes of the Allied Governments dealt in at the New York Stock Exchange since 1915:

		/——1917——\		/——1918——\		Aug.
		High	Low	High	Low	22
Am. For. Sec. 5s.	1919	977/8	90	98	94½	97½
Anglo-French 5s.	1920	95	817/8	95	88¼	94¾
Canada 5s.	1926	100	89	95	907/8	92
Canada 5s.	1931	100¼	87½	94	887/8	923/8
Fr. Republic 5½s.	1919	101	91½	99	94	987/8
U. Kingdom 5s.	1918	985/8	95½	100	97	997/8
U. Kingdom 5½s.	1919	987/8	93¼	99¼	95¼	98¾
U. King. 5½s, new	1919	1019/16	95¼	100	9¾	995/8
U. Kingdom 5½s.	1921	98½	84½	95¾	915/8	953/8
French Cities
Paris 6s.	1921	967/8	73½	921/8	815/8	917/8
Bordeaux 6s.	1919	967/8	74	95½	84	947/8
Lyons 6s.	1919	967/8	74	95½	84	94¾
Marseilles 6s.	1919	967/8	74	95½	84	94¾
Russian Govern.[6]
External 6½%		98¾	45	64½	33	61
External 5½%	1921	985/8	36	60½	34½	57

Until the United States entered the war with Germany it had never been realized that an enormous share of the economic wealth of the country was under German control. Attorney-General Palmer, in an address at Detroit, estimated this share to be about two billion dollars in money value, with an economic and political value far greater:

---

Europe was financially plunged into anarchy in August, 1914. All the exchanges were demoralized, checks were not cashed, the five-pound note became a worthless scrap of paper. The only thing that counted was gold and goods. Prices advanced to prohibited levels. England, in danger of a food famine, set up a Food Control Committee. Then the discovery was made that the country was short of sugar. This shortage was due to the fact that the war broke out when supplies from Cuba and elsewhere were stopping and when the German imports had not begun. Sugar was bought to the value of $86,000,000 from every country which had it to sell. When the sugar merchants began to put the price up, purchasing was stopped for the time. Later the Government managed to secure the quantity required, because it became the only sugar importer. It also supplied the French Government with sugar at cost price. Any further difficulties with the sugar supply were due to freight shortage. By this system sugar was cheaper in England than in any other belligerent country and the Exchequer took in $34,000,000 in the way of taxes, after raising the rate from 45¢ per hundred weight to $3.36 per hundred weight.

In its control of the meat situation, the Government put itself in a dominating position by seizing all steamers that had refrigerating space. Enormous quantities of canned meats were imported from the United States from the American packing firms, but the Government practically created a state monopoly in frozen meat. This product was distributed by it to all the other belligerents, except Russia. The purchase of wheat was entrusted to a large importing house, which acted as an agent of the Government. For supplying the fish market, a service of fishing boats was maintained and a deal with Norway was made by which the whole Norwegian fish supply was secured:

No policy of laissez-faire for handling the food situation was possible. The need of direction was paramount and required administrative talent of a high order. Fortunately the United States met this demand.

The work of Herbert M. Hoover was one of the main factors in securing the Allied victory. This was recognized by as conservative an organ of public opinion as the London Economist, which speaks of him as an unimpeachable authority and as the organizer of the Allied victory. His experience is a tribute to the wonderful readiness and self-sacrifice shown by the Americans in the matter of food consumption and to the untiring and increasing success of our fleet in combating the submarine.

How much success in the war depended upon food supplies may be gauged from the panicky feeling prevailing in Government quarters in England when it was reported in the winter of 1917—18, that the American wheat surplus had been used up. Lord Rhonda, the British Food Controller, cabled to Mr. Hoover—"We are beaten, the war is over." Then began the era in the United States of wheatless days and war bread. The result of this period of national abstinence enabled the exportation to Europe of about 150,000,000 bushels of wheat. A British member of the Allied Food Commission said it was very remarkable to see a whole nation denying itself of all wheat products, "not because it was short but because it wanted to assist." This rationing was accomplished with very little exercise of authority, and the peril of the defeat of the Allies by famine was averted.

Mr. Hoover in a letter to President Wilson stated that the total value of American food shipments to Allied countries for their armies, for the civilian population, Belgium relief and Red Cross, amounted to about $1,400,000,000 for the fiscal year, 1918:

	Pounds.
Fiscal year, 1916—17	2,166,500,000
Fiscal year, 1917—18	3,011,100,000
Increase	844,600,000

	Bushels.
Fiscal year, 1916—17	259,900,000
Fiscal year, 1917—18	340,800,000
Increase	80,900,000

The significance of the strides made in agricultural productivity by which Mr. Hoover's food campaign was made possible and successful is brought out in the report of the Secretary of Agriculture for 1918:

ACREAGE OF CROPS IN THE UNITED STATES.
[Figures refer to planted acreage.]
Crop	1918, subject to revision	1917, subject to revision	1916	1914	Annual average 1910—1914.
CEREALS
Corn	113,835,000	119,755,000	105,296,000	103,435,000	105,240,000
Wheat	64,659,000	59,045,000	56,810,000	54,661,000	52,452,000
Oats	44,475,000	43,572,000	41,527,000	38,442,000	38,014,000
Barley	9,108,000	8,835,000	7,757,000	7,565,000	7,593,000
Rye	6,119,000	4,480,000	3,474,000	2,733,000	2,562,000
Buckwheat	1,045,000	1,006,000	828,000	792,000	826,000
Rice	1,120,400	964,000	869,000	694,000	733,000
Kafirs	5,114,000	5,153,000	3,944,000
Total	245,475,400	242,810,000	220,505,000	[7]208,322,000	[7]207,420,000
VEGETABLES
Potatoes	4,113,000	4,390,000	3,565,000	3,711,000	3,686,000
Sweet Potatoes	959,000	953,000	774,000	603,000	611,000
Total	5,072,000	5,343,000	4,339,000	4,314,000	4,297,000
Tobacco	1,452,900	1,447,000	1,413,000	1,224,000	1,209,000
Cotton	37,073,000	33,841,000	34,985,000	36,832,000	35,330,000
Grand Total.	289,073,300	283,441,000	261,242,000	[7]250,692,000	[7]248,256,000
[7]Excluding kafirs.

Statistics have not yet been published as to the comparative food production before the war and during the war years. Statistics of this kind would go a long way towards settling the question whether high prices were due to currency inflation or due to a scarcity of food. It must be remembered that the arguments on both sides are expressed very dogmatically. Take, for example, the following passage from an address by Mr. Moulton: "The food problem," he says, "goes much deeper than conserving the use of an existing stock of foodstuffs. The real food problem is how to secure a supply of food large enough to meet the continuous requirements of this nation and our Allies. This is more a question of production than of consumption. That is to say, conservation in consumption is less important than large production. There is no possible escape from a substantial shortage of the necessities of life."

[Pg 39]

PRODUCTION IN THE UNITED STATES
[Figures are in round thousands; i. e., 000 omitted.]
Crops		1918 (unrevised estimate November 1918).	1917, Subject to revision.	1916	1914	Annual average 1910—1914
CEREALS
Corn	bush	2,749,198	3,159,494	2,566,927	2,672,804	2,732,457
Wheat	do	918,920	650,828	636,318	891,017	728,225
Oats	do	1,535,297	1,587,286	1,251,837	1,141,060	1,157,961
Barley	do	236,505	208,975	182,309	194,953	186,208
Rye	do	76,687	60,145	8,862	42,779	37,568
Buckwheat	do	18,370	17,460	11,662	16,881	17,022
Rice	do	41,918	36,278	40,861	23,649	24,378
Kafirs	do	61,182	75,866	53,858
Total	do	5,638,077	5,796,332	4,792,634	4,983,143	4,883,819
VEGETABLES
Potatoes	bush	390,101	442,536	286,953	409,921	360,772
Sweet potatoes	do	88,114	87,141	70,955	56,574	57,117
Beans(commercial)	do	17,802	14,967	10,715	11,585
Onions, fall commercial crop	do	13,438	12,309	7,833	[8]
Cabbage (commercial)	tons	565	475	252	[8]
FRUITS
Peaches	bush	40,185	45,066	37,505	54,109	43,752
Pears	do	10,342	13,281	11,874	12,086	11,184
Apples	do	197,360	174,608	204,582	253,200	197,898
Cranberries, 3 States	bbls	374	255	471	644
MISCELLANEOUS
Flaxseed	bush	14,646	8,473	14,296	13,749	18,353
Sugar beets	tons	6,549	5,980	6,228	5,585	5,391
Tobacco	lbs	1,266,686	1,196,451	1,153,278	1,034,679	991,958
All hay	tons	86,254	94,930	110,992	88,686	81,640
Cotton	bales	11,818	11,302	11,450	16,135	14,259
Sorghum sirup	galls.	29,757	34,175	13,668
Peanuts	bush	52,617	56,104	35,324
Broom corn, 5 States	tons	52	52	39
Clover seed	bush	1,248	1,439	1,706
[8]no estimate

The same point of view is expressed in the following extract:

In a war of attrition, physical deterioration of the masses of society in consequence of inadequate nourishment was certain to result in a serious decline in national morale, and this was a decided factor in the final outcome of the struggle. Food and other physical necessities would win the war. Mr. F. A. Vanderlip used the same argument for economies:

Under the long régime of free trade Great Britain depended upon other countries for its food supply. To offset the submarine campaign earnest appeals were made to make England self-supporting in this respect. The appeals were answered and were given enthusiastic popular support. What strides were made in England's agriculture since the war began can be seen from a paragraph in the London New Statesman:

One of the by-products of the food situation in England was the suffering occasioned by the scanty food supply on the canine population of the island. The London Times of June, 1918, contained the following pathetic paragraph:

But while English dogs were threatened with starvation, dogs of Germany were having a still worse time. Numerous cable paragraphs were published giving the price of dog flesh in various German cities.

Indeed, from all over Germany, at the closing period of the war, the hope of drawing upon Russian food supplies was seen to be illusory. There was much talk of getting food from the Ukraine, but this was probably used to keep up popular morale. The situation in the Ukraine did not encourage German hopes. This was frankly admitted by the Frankfort Zeitung:

It is interesting to study the effect of the war on the food situation of the neutral powers. In Scandinavia, there was at first a panicky feeling of a world-wide catastrophe; then there came the realization of an unparalleled chance for making profit. The international shortage of tonnage made freight rates soar. Shipping shares became attractive. Then came the submarine sinkings, and the refusal of the Allies to allow goods to be imported into Scandinavia for the sole purpose of selling them to the Central Powers. Imports fell off rapidly. Everything which could be sold had been sold in the beginning of the war. The next step was the placing of an embargo on exports by the Scandinavian governments:

A preliminary accounting was rendered on December 1, 1919, by Herbert C. Hoover, covering the $100,000,000 fund appropriated by Congress for the relief of starving Europeans. From Mr. Hoover's report it appears that in payment for relief supplied to eight European countries Mr. Hoover decided to accept their notes bearing 5% interest. Mr. Hoover's report stated:

It is impossible in words to show what the food conditions were in Europe after the armistice was signed. The United States Food Administration issued a statement that there were 420,000,000 people in Europe with food supplies sufficient to last only until next harvest for a small proportion of them. Some countries had to be supplied at once; others, it was believed, could help themselves temporarily, provided they could be given guarantees of food for the future. Many countries were devastated, undernourished and stripped bare of food and agricultural equipment because of enemy occupation. A graphic picture of the situation was presented by the Food Administration in the Hunger Map of Europe.

An official survey of how cessation of active fighting introduced new factors in the food situation is presented in a publication of the Agricultural Department, July, 1919.

Note.—Estimates of European crop and live-stock production, consumption, and stocks on hand, surplus or deficiency, are based on incomplete data, which are subject to change as more complete data become available.

Import Requirements	Wheat	Rye	Barley	Oats	Corn	Rice, Hulled
EUROPE						Million pounds
Allies	525	25	50	150	220	1,945
Neutrals	124	40	30	38	78	302
	649	65	80	188	298	2,247
Germany	68		149	3	32	438
Austria-Hungary	11			2	15	183
Total Europe	728	65	22	193	345	2,868
Other countries						7,411
Grand total						10,279
Surplus (estimated):
Canada	100		50	75
Argentina	185				90
Australia	210
India						18,000
Other countries (pre-war)						7,400
Total, except United States	495		50	75	90	25,400
Net deficit	233	65	179	118	255
UNITED STATES, 1918
Production	917	89	250	1,538	2,583	1,123
Consumption	640	32	130	1,254	2,730	816
Surplus	277	57	120	284		307
Deficit					147
WORLD
Surplus	44			166		14,428
Deficit		8	59		402

Note.—The figures are based on pre-war averages, 1909—1913, which may be considerably changed by post-war conditions.

MISCELLANEOUS CROP REQUIREMENTS, 1919.
Import requirements of—	Cotton (50 pounds bales).	Tobacco (million pounds).	Flaxseed (million bushels).
EUROPE
Allies, including Japan	8,058,000	340	21.6
Neutrals	720,000	150	7.9
Germany and Austria-Hungary (pre-war boundaries)	2,932,000	355	15.7
Other countries	1,200,00	17
Total requirements	13,010,000	1,022	45.2
SURPLUS (ESTIMATED)
Countries, except United States, recently reported (1918)	2,680,000		40
Average, 1900—1913, for other surplus countries	500,00	650	[9]5.7
Total, except United States	3,180,000	650	40
UNITED STATES
Production, 1918	11,700,00	1,340	14.7
Consumption	6,600,000	720	26.7
Surplus	5,100,000	620
Deficit			12
WORLD
Surplus		148
Deficit	4,730,000		17.2
[9]Russia

News from Europe showed everywhere acute suffering from lack of food; even in France the country districts were badly off. A member of the Federal Food Administration reported that bread was practically the only food that anyone could afford. President Wilson referred to this subject in the address with which he accompanied his announcement of the terms signed by Germany. He definitely took a stand in favor of provisioning the country, explaining that by use of the idle tonnage of the Central Empires it ought presently to be possible to lift the fear of utter misery,

Both in England and in France there was official recognition of the need of preventing famine conditions in Germany. It was believed that large imports of wheat could be brought from Australia and India. The Times (London) said:

Among the multiform activities of the American Food Administration, the distribution of sugar was most difficult. America had to supply sugar to the Allies and retain enough for the use of its own people. The matter of the feeling of personal self-sacrifice was difficult enough but there was the further question of how to organize and allocate distribution. The government had to decide the amount to be distributed to sugar-using industries. These industries had to be classified. For the manufacture of soft drinks it was decided to allow only one-half of the sugar used in normal times. Bakers were given a 70 percent. allotment and hotels were permitted three pounds of sugar to every ninety meals served, including cooking.

The sugar resources of the country, both cane and beet-root, were regulated by the so-called Sugar Equalization Board. The operation of this body was explained officially in the Literary Digest:

What might happen without this Sugar Equalization Board is illustrated by the Civil War, when sugar, because of speculation, went as high as thirty-five cents a pound. And at that time there was no world shortage of sugar. If there were no sort of sugar control today, it may readily be believed that the consumer might have to pay sugar prices soaring far above those Civil War levels.

In order to remedy the generally inadequate food supply, it became necessary to treat such a standard food as the potato according to newly devised methods by which it could be stored for permanent use and widely distributed. In a lecture in Economics given to a class of the National City Bank, it was stated that, since the war began, it was found practicable so to preserve the potato by grinding and drying as to transform it from a local and perishable commodity to one which could be produced in almost unlimited quantities and distributed to any part of the world:

The coal industry was the one basic war industry. Food and munitions were dependent upon the coal supply. It is not necessary to elaborate this argument; it is patent to every one. The following table gives a view of the coal production of the most important countries:

COAL PRODUCTION IN THE LEADING COAL-PRODUCING COUNTRIES OF THE WORLD
Country	1913	1914	1915	1916	1917
United States	570,048,125	513,525,477	531,619,487	585,372,568	621,409,629
Great Britain	287,698,617	265,664,393	253,206,081	256,348,351	248,473,119
Germany	278,627,497	245,482,135	235,082,000
Austria-Hungary	59,647,957		30,896,388	28,558,719
France	40,843,618	29,786,505	19,908,000	21,477,000	28,960,000
Russia	35,500,674		27,820,632	13,622,400	13,266,760
Belgium	22,847,000		15,930,000
Japan	21,315,962	21,293,419	20,490,747	22,901,580
India	18,163,856		17,103,932	17,254,309
China	15,432,200		18,000,000
Canada	15,012,178	13,637,529	13,267,023	14,483,395	14,015,588
Spain	4,731,647	4,424,439	4,686,753	5,588,594
Holland	2,064,608		2,333,000	2,656,000

A rapid advance in coal prices was inevitable under war conditions of unceasing demand and diminishing supply. Says Mr. William Notz in an article in the Journal of Political Economy, June, 1918:

American Fuel Control had to grapple drastically with a situation of shortage so dangerous that a catastrophe might have been precipitated at any moment. Fuel Administrator Garfield issued orders for coal conservation of a most startling and unusual character. Factories east of the Mississippi were ordered shut down for five days beginning January 18, 1918. Monday, furthermore,

From Fuel Administrator Garfield's explanation of the necessity of the order the following passage is taken:

After the trying experiences of the winter of 1918, the Fuel Administration began to prepare in the following summer for another prospective shortage in coal supply. Fortunately the following winter was remarkably mild throughout the country. But the plans outlined by the Fuel Administration are more than useful as a matter of record. They may be used as a model under other conditions of fuel shortage. The following passage from the Fuel Administration Bulletin illustrates the plan of campaign:

Some conception of the difficulties involved in the work of fuel control was set forth officially in a paper published by the Fuel Administration called Fuel Problems in War Time. The production of coal, it pointed out, stands on a different basis from that of any other major industry of the country. The differences are illustrated in the following paragraphs:

Economizing coal involved all kinds of unexpected side issues. As an illustration of the far extended reach of the Fuel Administration there was the example of the skip-stop plan in street railway traffic enforced by the Federal administration. A writer in the Chicago Engineering and Contracting Journal suggested, September 4, 1918, that the Government should adopt and extend the policy of compelling individuals and corporations to use economic methods and machines:

Coal mining was always one of the most significant elements in British trade. Before the war 270,000,000 tons of coal were produced in the mines of Great Britain. Parliamentary legislation of a most radical character dealing with the ownership and operation of coal mines was passed. The main provision of this legislation was described in the following passage from the London Morning Post:

The War Industries Board worked out a program for clothing conservation that showed a positive genius for detail. The most technical directions were issued regarding clothing. Double breasted coats, for example, were eliminated and the Board urged the wearing of sack suits only. Even the complicated subject of handling women's attire had no terrors for the experts employed by the Board. The characteristic features of its order can be judged by the following extract from the directions published on this subject:

Germany was not the only country prepared to employ substitutes. When the National Army in the United States was organized the Wall Street Journal predicted that on account of the large consumption of leather for military purposes, the civilian population would be obliged to have thinner soles and probably to use leather substitutes:

One of the plans to prevent the discontent arising from food speculation promoted by retailers and profiteers, was the preparation of fair price lists to protect the consumer. Every week new price lists were prepared so as to cover new fluctuation of cost to the retailer. These lists were given to the newspapers so that the consumer might be steadily informed and advised as to what he ought to pay the retailers in his city or town. It was shown how the patriotic retailer gained by the protection that this list offorded afforded him against the danger of unpatriotic profiteering. The United States Food Administration explained in a public statement the significance of the fair price lists. "They were nothing more," it said, "than bulletins to inform the public of the prices the retailer has to pay for certain foods, and the price he has to sell them to the consumer.

The natural and inevitable results of war on living conditions with food shortage and high prices were an unfamiliar factor in American experience for two generations. The artificial product of war time industry, "profiteering," was hard to be evoluted and caused resentment against those responsible for the practice. To deal with profiteers was no easy matter. How can profiteering be discriminated from legitimate profit-taking? How, too, can its existence be proved, for high fixed prices are not always an evidence of profiteering methods. The complexities of the various trade practices lumped together under the term profiteering are illustrated in the pamphlet on Profiteering, issued by W. B. Colver, Chairman of the Federal Trade Commission, in the form of a letter submitted on request to the U.S. Senate:

Some further details on the methods of securing huge profits in the meat packing industry are given in the following:

Mr. Colver gives information supported by trustworthy data on other devious and subtle types of profiteering practices:

A complete synopsis of the cost of living situation in the United States, during the four pears' years' period July, 1914, to June, 1918, was issued by the National Industrial Conference Board after a country-wide survey. The basis taken was that of family budgets divided under five heads: food, shelter, clothing, fuel and light, and sundries. The average increase for the period was shown to be between 50 and 55 per cent. The most marked advance was in clothing, 77 per cent. But the food advance of 62 per cent. was really more important because food represented 43 per cent. of the average expenditure, while clothing represented only 13 per cent. Wholesale prices, the report pointed out, are not to be relied upon in estimating the cost of living, because many articles enter only indirectly into the family budget. Often, too, wholesale prices are not reflected in retail prices until months later. The estimates given by the Board were based upon the expenditures of eleven thousand families:

Budget Item	Per Cent. Distribution of Family Expenditure	Per Cent. Inc. in Cost Dur'g War Period to June, 1918	Per Cent. Increase as Related to Total Budget
All items.	100.0	..	52.3
Food	43.1	62	26.7
Rent	17.7	15	2.7
Clothing	13.2	77	10.2
Fuel and light	5.6	45	2.5
Sundries	20.4	50	10.2

	Per Cent.
For families with incomes up to $600	43
For families with incomes from $600 to $1,000	41
For families with incomes from $1,000 to $2,000	40

Year and Month	Relative Wholesale Price of		Relative Retail Price of Food
	Farm Products	Food, Etc.
1913
Average for year	100	100	100
January	97	99	98
April	97	96	98
July	101	101	100
October	103	102	104
1914
Average for year	103	103	102
January	101	102	104
April	103	95	97
July	104	103	102
October	103	107	105
1915
Average for year	105	104	101
January	102	106	103
April	107	105	99
July	108	104	100
October	105	104	103
1916
Average for year	122	126	114
January	108	114	107
April	114	117	109
July	118	121	111
October	136	140	121
1917
Average for year	188	177	146
January	147	150	128
April	180	182	145
July	198	180	146
October	207	183	157
1918
January	208	188	160
April	217	179	154

The Civil War years of the United States were always remembered as the era of high prices. Yet it is interesting to know that the increase in living cost after the United States had been in war one year was greater than the increases in the fourth year of the Civil War. During the Civil War prices rose from 100 to 117 per cent., but necessities were relatively cheaper than at present because the currency was depreciated. In January, 1864, gold was at a premium of 52 per cent.

Emerson David Fite, assistant professor of history in Yale University, describes "Social and Industrial Conditions During the Civil War" as follows:

The rapid rise in the cost of living was much more severely felt by the classes of the population dependent upon small or less rigid incomes. In many industries wages increased faster than everage average living expenses. Figures published by the New York Labor Bureau show that the sum distributed in wages to industrial workers was substantially doubled in the four years of warfare. Investigation conducted by the National Industrial Board of Boston showed that there had been an increase of 50 to 55 per cent. in the budget of the average wage earner from July, 1914, to June, 1918.

Food	62%
Rent	15%
Clothing	77%
Fuel and light	45%
Sundries	50%
Average increase (depending on apportionment of these respective items in the family budget)	50% to 55%

In explanation of these figures the report goes on to say:

All articles of food, we are told, show a considerable increase in price since 1914, exceptional advances being recorded in the case of flour, lard, and cornmeal. The item of rent, says the report, "showed such wide variation that no general average applicable to all sections of the country could be reached," but the 15 per cent. estimate "is apparently ample to cover the increase in wage-earners' rents in New York, Chicago, Philadelphia, Boston, and St. Louis, which alone include several millions of the country's industrial population." Of the increase in clothing prices we read:

In spite of the contention that war-time conditions led to an increased standard of luxurious living, statistics of imports indicated a rapid fall in articles of luxury brought into the country. In the fiscal year, 1918, there was a material decline compared with the preceding year and a marked decline when compared with the year before the war:

It became accepted on all sides that price control was the one method to correct the inequalities of war conditions. It was necessary to prevent the poorer classes in the population from having an inadequate consumption of wealth. There was the political side, too. Price control had an effect on the morale of large strata of the population. It acted as a bulwark against the rising tide of discontent and internal dissension incident to warfare on a democratic scale. Mr. Sydney Webb, a well known English student of labor problems, conceded that the British government had by its system of price control been fairly successful in staving off any general fall in the standard of life in its people. How the system worked is summarized by him in the following passage:

The important effort, as seen by the Economist, was to back up the armies at the front by a policy of self-sacrifce sacrifice at home, and it spoke in drastice drastic terms of the constant evidence of profiteering among certain classes in England. The contrast in the attitudes of those at the front and those active in business life is set forth in the following words:

Although price control is a measure disapproved of by economists, experience has shown that for certain products, such as wheat and flour, it produced good results. In the case of bituminous coal, Professor Anderson of Harvard said that it had probably done much harm and little good, because the cut in price was too drastic. One good feature of the price control system was the ability to apply it to draft labor from non-essential industries to the production of munitions and necessities of life. It was possible to do this by refusing coal, copper, steel and freight cars to the non-essential industries. How the Food Administration came to be a general price fixing body is explained in the following article by a member of the Food Administration:

With the close of military operations there was noted a slight decline in commodity prices; how far the downward tendency would reach was considered a moot point. The apparent zenith point in prices was attained in July, 1918, but Bradstreet's prudently thought it unwise to indulge in any prophecies regarding low prices. The increased demand for food products among the stricken peoples of Europe would, it was believed, prevent any considerable fall in prices. There was not much to encourage consumers in the study of the index numbers of food commodities. The writer in Bradstreet's shows a wide range of price movements in the following table, in which are given the index numbers based on the prices per pound of ninety-six articles:

	1912	1913	1914	1915	1916	1917	1918
January	8.9493	9.4935	8.8857	9.1431	10.9163	13.7277	17.9636
February	8.9578	9.4592	8.8619	9.6621	11.1415	13.9427	18.0776
March	8.9019	9.4052	8.8320	9.6197	11.3760	14.1360	18.0732
April	9.0978	9.2976	8.7562	9.7753	11.7598	14.5769	18.4656
May	9.2696	9.1394	8.6224	9.7978	11.7485	15.1208	18.9133
June	9.1017	9.0721	8.6220	9.7428	11.6887	15.4680	19.0091
July	9.1119	8.9522	8.6566	9.8698	11.5294	16.0680	19.1849
August	9.1595	9.0115	8.7087	9.8213	11.4414	16.3985	19.1162
August 15			9.8495
September	9.2157	9.1006	9.7572	9.8034	11.7803	16.6441	19.0485
October	9.4515	9.1526	9.2416	9.9774	12.0699	16.9135	19.0167
November	9.4781	9.2252	8.8620	10.3768	12.7992	17.0701	18.9110
December	9.5462	9.2290	9.0354	10.6473	13.6628	17.5966

The groups that make up the index number are as follows:

	Nov. 1, 1917	Sept. 1, 1918	Oct. 1, 1918	Nov. 1, 1918
Breadstuffs	$0.2105	$0.2077	$0.2026	$0.1999
Live stock	.6785	.7400	.7100	.6960
Provisions	4.0285	4.3264	4.5359	4.5889
Fruits	.4288	.3725	.3725	.3725
Hides and leather	2.3900	2.2150	2.2150	2.2050
Textiles	5.1179	5.8742	5.7554	5.7029
Metals	1.1477	1.4233	1.3662	1.3062
Coal and coke	.0101	.0119	.0120	.0120
Oils	.9084	1.3185	1.3121	1.2734
Naval stores	.0956	.1295	.1255	.1348
Building materials	.1448	.2047	.2047	.2046
Chemicals and drugs	1.4261	1.5153	1.5253	1.5278
Miscellaneous	.4832	.7095	.6795	.6870
Total	$17.0701	$19.0485	$19.0167	$18.9110

A clear summary of the food situation and price conditions in the half-year succeeding the armistice is to be found in the Federal Commission's Memorandum on food stocks and wholesale prices, June, 1919:

COMMODITIES INCREASING IN STOCKS AND IN PRICE (Wholesale Prices)
Commodity	Unit of quantity	Quantity			Unit of Price	Price
		June, 1919	June, 1918	Per cent increase 1919 over 1918		June 1919	June 1918
Wheat	Bushel	41,955,167	15,286,331	174.5	Dollars per bu.	2.51	2.20
						2.46	2.17
Wheat flour	Barrel	3,942,205	3,236,671	21.8	Dollars per bbl.	12 - 12.20	9.80
						11.50 - 11.80	9.95
Canned salmon	Pound	99,203,544	82,616,582	20.1	Dollars per doz. No. 2 cans	2.70 - 2.75	2.70
Canned corn	Pound	81,233,023	42,352,994	91.8	Dollars per doz. No. 2 cans		1.70
						1.75-(Mch)	1.75
Fresh eggs	Case	5,975,817	5,441,560	9.8	Cents per doz.	40 - 40½	29
							30¾
Butter (creamery)	Pound	29,190,222	12,749,055	129.0	Cents per lb.	53	41
Salt Beef	Pound	25,701,138	24,962,881	3.0	Dollars per bbl.	35.00	32.00
						36.00	34.00
Frozen fowls	Pound	10,962,670	2,749,077	298.8	Cents per lb.	37½	34½

COMMODITIES INCREASING IN STOCKS AND DECREASING IN PRICE. (Wholesale Prices.)
Commodity	Unit of quantity	Quantity			Unit of Price	Price
		June, 1919	June, 1918	Percent increase		June 1919	June 1918
Barley	Bushel	16,399,396	7,916,073	107.2	Dollars per bu.	1.19 - 1.27	1.21 - 1.26
Rye	Bushel	11,613,127	3,355,349	246.1	Dollars per bu.	1.53½	1.73
Buckwheat Flour	Pound	18,053,230	5,523,850	226.8	Dollars per cwt	5.00(Apr)	5.75 6.25(Apr)
Canned Tomatoes	Pound	179,101,286	88,531,024	102.3	Dollars per doz. No. 3 cans	2.05 (Dec'18)	2.30

COMMODITIES DECREASING IN STOCKS AND IN PRICE. (Wholesale Prices)
Commodity	Unit of quantity	Quantity			Unit of Price	Price
		June, 1919	June, 1918	Percent increase		June 1919	June 1918
Oats	Bushel	37,827,343	41,763,555	9.4	Cents per bu.	69	73½
Corn Meal	Pound	34,231,066	117,674,918	70.9	Dollars per cwt	3.90	4.25
Beans	Bushel	4,252,451	4,408,686	3.5	Dollars per cwt	7.75 - 8.00	12.25 - 12.50
Rice (Blue Rose) (Honduras)	Pound	75,134,920	80,727,516	6.9	Cents per lb.	6 - 77/8	8.5 - 8.9
						91/8 [10] [11]	8½ - 95/8

COMMODITIES DECREASING IN STOCKS AND INCREASING IN PRICE. (Wholesale Prices)
Commodity	Unit of quantity	Quantity			Unit of Price	Price
		June, 1919	June, 1918	Percent increase		June 1919	June 1918
Corn	Bushel	13,260,910	27,883,361	52.4	Dollars per bu.	1.76 - 1.77	1.50 - 1.55
Sugar	Pound	207,622,237	217,632,365	4.6	Cents per lb.	8.82	7.30
Cheese (American)	Pound	10,174,502	15,875,236	35.9	Cents per lb.	31	21½
Dry Salt Pork	Pound	395,940,437	488,344,838	18.9	Dollars per bbl.	58.00 - 58.50	48-50
Lard	Pound	81,275,392	106,649,588	23.8	Cents per lb.	33.80 - 34.30	24.15 - 24.25

The following data, taken from the Monthly Labor Review of July 1919, give a survey of the retail prices of food in the United States:

AVERAGE RETAIL PRICES AND PER CENT OF INCREASE OR DECREASE IN THE UNITED STATES MAY 15 OF EACH SPECIFIED YEAR COMPARED WITH MAY 15, 1913
Article	Unit	Average retail prices, May 15—							Per cent of increase (+) or decrease (-) May 15 of each specified year compared with May 15, 1913.
		1913	1914	1915	1916	1917	1918	1919	1914	1915	1916	1917	1918	1919
		Cts.	Cts.	Cts.	Cts.	Cts.	Cts.	Cts.
Sirloin steak	Pound	25.7	25.9	25.7	27.8	32.2	40.0	44.4	+1	[16]	+8	+25	+56	+73
Round steak	do	22.3	23.3	23.0	25.0	29.6	38.0	41.6	+4	+3	+12	+33	+70	+87
Rib roast	do	19.9	20.1	19.9	21.6	25.7	31.8	35.2	+1	[16]	+9	+29	+60	+77
Chuck roast	do	16.1	17.0	16.3	17.5	21.8	27.8	29.7	+6	+1	+9	+35	+73	+84
Plate beef	do	12.1	12.5	12.3	13.1	16.6	21.9	22.5	+3	+2	+8	+37	+81	+86
Pork chops	do	20.9	22.2	20.9	22.9	30.6	36.7	43.0	+6	[16]	+10	+46	+76	+106
Bacon	do	27.0	26.7	26.4	28.4	41.6	50.5	56.7	-1	-2	+5	+54	+ 87	+110
Ham	do	26.8	26.8	25.6	31.8	38.8	45.6	54.6	[16]	-5	+19	+45	+ 70	+104
Lamb	do	19.4	19.8	21.7	23.2	29.7	36.8	39.6	+2	+12	+20	+53	+ 90	+104
Hens	do	22.2	22.7	21.5	24.1	29.3	37.9	43.5	+2	-3	+9	+32	+71	+96
Salmon, canned	do			19.8	20.0	25.7	29.6	31.9
Milk, fresh	quart	8.8	8.9	8.7	8.8	10.5	13.2	14.9	+1	-1	[16]	+19	50	+69
Milk, evaporated (unsweetened)	[12]							15.1
Butter	Pound	35.9	32.7	34.7	37.0	46.5	51.0	67.9	9	3	+3	+30	+42	+89
Oleomargarine	do							40.4
Nut margarine	do							35.3
Cheese	do			23.5	24.8	33.8	33.4	42.2
Lard	do	15.8	15.6	15.1	20.1	27.8	32.9	38.8	-1	4	+27	+76	+108	+146
Crisco	do							33.9
Eggs, strictly fresh	Dozen	26.3	26.6	26.3	28.1	39.8	42.4	53.1	+1	[16]	+7	+51	+61	+102
Bread	Pound [13]	5.6	6.2	7.2	7.0	9.6	9.8	9.8	+11	+29	+25	+71	+75	+75
Flour	Pound	3.3	3.3	4.5	3.9	8.7	6.6	7.5	[16]	+36	+18	+164	+100	+127
Corn meal	do	3.0	3.1	3.3	3.3	5.4	7.0	6.2	+3	+10	+10	+ 80	+133	+107
Rolled oats	Pound							8.4
Corn flakes	[14]	-						14.1
Cream of wheat	[15]							25.1
Rice	Pound			9.1	9.1	10.5	12.3	13.4
Macaroni	do							19.0
Beans, navy	do			7.6	9.4	19.1	17.8	12.0
Potatoes	do	1.6	1.9	1.6	2.5	6.1	2.2	3.3	+19	[16]	+56	+281	+38	+106
Onions	do			4.3	5.1	8.6	5.6	10.7
Cabbage	do							9.6
Beans, baked	No. 2 can.							17.5
Corn, canned	do							19.1
Peas, canned	do							19.0
Tomatoes, canned	do							15.8
Sugar, granulated	Pound	5.4	5.0	6.8	8.5	10.0	9.1	10.6	-7	+26	+57	+85	+69	+96
Tea	do			54.6	54.6	55.7	63.8	69.8
Coffee	do			27.9	29.9	30.2	30.1	40.5
Prunes	do			13.7	13.3	15.3	16.5	23.2
Raisins	do			12.5	12.6	14.4	15.1	16.3
Bananas	Dozen							38.8
Oranges	do							54.1
All articles combined									+1	+3	+13	+56	+64	+91

June 1, 1919	7,875,280,040
June 1, 1918	6,336,763,505

June 1, 1919	1,671,777,990
June 1, 1918	1,669,826,166

June 1, 1919	9,547,058,030 pounds
June 1, 1918	8,006,589,671 pounds

---

The issue of the great world conflict between autocracy and democracy rested largely in the hands of the laboring classes behind the lines. Mr. William B. Wilson, Secretary of Labor, placed vividly before the public in one of his official statements the views of American labor at the outbreak of the war:

From the moment of the declaration of war the general loyalty of the laboring classes throughout the United States was apparent. This attitude of loyalty found a ready response in the immediately declared intention of the Government to safeguard the interests of the workingmen. Congress announced its attitude toward standards of legal protection for workers. It was printed verbatim in Labor Laws in War Time, 201, p. 1, as follows:

Supplying the man power for industrial action during the war was a really more complicated task than drafting men for military service. In the earlier period of American participation labor was distributed more or less according to the law of supply and demand. The unequal distribution of workers became a grave problem. To meet this the United States Employment Service of the Department of Labor took over the supply of war industries with common labor, and all independent recruiting of labor by manufacturers having a pay roll of more than a hundred men was discontinued.

In the United States under war conditions labor unrest did not reach the intense form manifested in England. Nevertheless a great many strikes were reported. Surprise was expressed that the labor adjustment machinery of the War Department and of the Navy Department was not appealed to. Besides there was the National War Labor Board to take up mediation. Investigations in Bridgeport, Connecticut, showed an increase of earnings of 81 per cent. against an increase of living prices of 61 per cent. Yet at one time the Press reported strikes in over 350 machine shops in New Jersey—nearly all engaged in necessary war work—as well as trouble in many shipyards. Of course there was the explanation of foreign propaganda or a tendency toward industrial Bolshevism. Such explanations failed to account for the fact that American workmen as a whole were patriotic.

Attention was called, on the other hand, to the warm tribute given by the Federal Fuel Administrator to the bituminous coal miners who had brought production past the 13 million ton mark in the second week in July, 1917, and the exceptional efforts of diligent and patriotic workers in the shipyard. A portion of the press emphasized the unreasonableness of striking while the laboring people enjoyed, during war time, immunity from service and immunity from the pressure of competition for wages. The Springfield Republican protested against applying to the workingmen exaggerated standards of economic rectitude.

Mr. H. E. Coffin, Chairman of the Committee on Industrial Preparedness, described the European War in its last analysis as a war of munitions, a war of factories, of producing powers, of sweating men and women workers. When the United States entered the war there were four main things required of its government and its people, viz., ships, munitions and materials of war, food and soldiers. It can be seen that three out of these four factors are matters that belong to the economic history of the war. Fortunately for our Government, it had the experience of foreign countries to learn from, and learning was an essential part of war preparation in spite of the resources in hand in the United States; as Mr. Coffin said:

In certain respects the position of the United States was unique, not only because of its resources but because it was to a certain extent self-dependent as a belligerent. England was able for some time to import large quantities of munitions and supplies from other countries. In the case of the United States when it entered the war, munition and food supplies had to come from its own resources. Practically all of the war materials had to be ultimately produced in the United States. Many observers were optimistic because they had a sanguine opinion of the efficiency presented by American industrial democracy. But efficiency alone could not win the war. There were certain limitations to the sphere of efficiency. This was pointed out by Mr. H. G. Moulton in an address on "Industrial Conscription," delivered before the Western Economic Society, at Chicago, in 1917:

It is estimated that about 35,000,000 men, women and children in the United States do the country's work: dig its coal, raise its crops, run its trains, build its roads, make its powder, turn out its munitions. There was an increase each year of a million man-power through immigration. The result of the war was that this source of supply was cut off. What was the economic significance of this cutting off of immigration? The immigrant was almost the only source of what we call day labor—the men who do the building and repairing of railroads, the mending of streets and roads, mining, and the rough work of steel mills and other factories. Along with the cessation of immigration came the withdrawal from labor power of two million men who were drawn into the Army. These men, incidentally, became large consumers of goods rather than normal producers of wealth. Some estimates were made that the United States Government was using for war purposes about one-half of the entire productive capacity of the country. These figures enable one to gauge the industrial dislocation caused by the war. In matters affecting the members of what might be called the labor army, which still kept up the work of production, the Government laid great emphasis on the need of securing industrial peace.

A Mediation Commission was appointed by the President to deal with conditions of labor unrest. This Commission made a report early in 1918, in which it spoke of the lack of knowledge on the part of Capital as to Labor's feelings and needs and on the part of Labor as to problems of management. The program outlined by the Commission was as follows:

1. "Modern large scale industry has effectually destroyed the personal relation between employer and employee—the knowledge and coöperation that come from personal contact. It is therefore no longer possible to conduct industry by dealing with employees as individuals. Some form of collective relationship between management and men is indispensable. The recognition of this principle by the government should form an accepted part of the labor policy of the nation.
2. "Law, in business as elsewhere, depends for its vitality upon steady employment. Instead of waiting for adjustment after grievances come to the surface there is needed the establishment of continuous administrative machinery for the orderly disposition of industrial issues and the avoidance of an atmosphere of contention and the waste of disturbances.
3. "The eight-hour day is an established policy of the country; experience has proved justification of the principle also in war times. Provision must of course be made for longer hours in case of emergencies. Labor will readily meet this requirement if its misuse is guarded against by appropriate overtime payments.
4. "Unified direction of the labor administration of the United States for the period of the war should be established. At present there is an unrelated number of separate committees, boards, agencies, and departments having fragmentary and conflicting jurisdiction over the labor problems raised by the war. A single-headed administration is needed, with full power to determine and establish the necessary administrative structure.
5. "When assured of sound labor conditions and effective means for the just redress of grievances that may arise, Labor in its turn should surrender all practices which tend to restrict maximum efficiency.
6. "Uncorrected evils are the great provocative to extremist propaganda, and their correction would be in itself the best counter-propaganda. But there is need for more affirmative education. There has been too little publicity of an educative sort in regard to Labor's relation to the war. The purposes of the government and the methods by which it is pursuing them should be brought home to the fuller understanding of Labor. Labor has most at stake in this war, and it will eagerly devote its all if only it be treated with confidence and understanding, subject neither to indulgence nor neglect, but dealt with as a part of the citizenship of the state."

In order to prevent lack of coördination in the government's handling of the labor situation an advisory council was created to help the Secretary of Labor to organize the new war work. The field of this advisory council is indicated in a series of memoranda presented to him in January, 1917.

1. "An Adjustment Service which will have to do with the adjustment of industrial disputes according to policies and principles arrived at through the deliberations of the War Labor Conference Board.
2. "A Condition of Labor Service which will have charge of the administration of conditions of labor within business plants.
3. "An Information and Education Service which will devote itself to the establishment of sound sentiment among both employers and employees and to the establishment in individual plants of the local machinery (e.g., employment management) and policies necessary for the successful operation of a National Labor Program.
4. "A Woman in Industry Service which will meet the problems connected with the more rapid introduction of women into industry as a result of war conditions.
5. "A Training and Dilution Service which will administer such training and dilution policies as may be agreed upon.
6. "A Housing and Transportation of Workers Service whose duty it will be to provide the housing facilities to meet the nation's needs.
7. "A Personnel Service whose duties it shall be to assemble and classify information concerning appropriate candidates for positions in the war-labor administration and make recommendations for appointment.
8. "A Division for the Investigation of Special Problems which would be a part of the Secretary's office force and would conduct investigations in the placing of contracts, in priority of labor demand, in powers of the Department, in problems of reconstruction, and would assist in formulating the national labor policy.
9. "An Investigation and Inspection Service to provide the field force of examiners and inspectors required by the other services."

After various stages of experience the War Industries Board secured something more than an advisory position. This was done only after a year of warfare. The final situation was explained by Mr. C. M. Hitchcock in the Journal of Political Economy, June, 1918:

Military men were as keen as business men in realizing the industrial factor as a powerful contributory cause in winning the war. General Crowder's famous "work or fight" alternative was a sufficient witness of this fact. He said:

Industrial preparation for war was guided by the principle of priority. This is an old principle, but it began to be applied in unheard-of ways. When an army is to be moved all means of transport in sight are commandeered. When an army is to be fed, civilians protest in vain against the seizure of stores. These practices were always features in the history of warfare.

A novel factor in priority as applied during the present war was the breadth of its scope.

The United States, following the experience of other belligerents, adopted the policy of decentralization in the production of war supplies. A plan was worked out under which the small and large manufacturer were given equal opportunity to obtain war business:

Such regional divisions were but one factor in industrial administration. Government needs and labor shortage made imperative the regulation of manufactures by the priority system.

The actual working of the priority system is shown in the following general classification of industry for the purpose of priority treatment:

• Ships—Including destroyers and submarine chasers.
• Aircraft.
• Munitions, Military and Naval Supplies and Operations—Including building construction for government needs and equipment for same.
• Fuel—For domestic consumption, and for manufacturing necessities named herein.
• Food and Collateral Industries—
  1. Foodstuffs for human consumption, and plants handling same.
  2. Feeding stuffs for domestic fowls and animals, and plants handling same.
  3. All tools, utensils, implements, machinery, and equipment required for production, harvesting and distribution, milling, preparing, canning and refining foods and feeds such as seeds of foods, and feeds, binder twine, etc.
  4. Products of collateral industries, such as fertilizer, fertilizer ingredients, insecticides and fungicides, containers for foods and feeds, collateral products.
  5. Materials and equipment for preservation of foods, and feeds, such as ammonia and other refrigeration supplies, including ice.
• Clothing—For civilian population.
• Railroad—Or other necessary transportation equipment, including water transportation.
• Public Utilities—Serving war industries, Army, Navy, and civilian population."

But the perplexity of applying this system to such a question as fuel administration is shown in the following list taken from one of the trade publications of the Administration for April, 1918:

• Aircraft—Plants engaged exclusivevly exclusively in manufacturing aircraft or supplies and equipment therefor.
• Ammunition—Plants engaged in the manufacture of ammunition for the United States Government and the Allies.
• Arms (small)—Plants engaged in manufacturing small arms for the United States Government and the Allies.
• Army and Navy cantonments and camps.
• Chemicals—Plants engaged exclusively in manufacturing chemicals.
• Coke plants.
• Domestic consumers.
• Electrical equipment—Plants manufacturing same.
• Electrodes—Plants producing electrodes.
• Explosives—Plants manufacturing explosives.
• Farm implements—Manufacturers exclusively of agricultural implements and farm-operating Equipment.
• Feed—Plants producing feed.
• Ferro-alloys—Plants producing same.
• Fertilizers—Manufacturers of fertilizers.
• Fire brick—Plants producing same exclusively.
• Food—Plants manufacturing, milling, preparing, refining, preserving, and wholesaling food for human consumption.
• Food containers—Manufacturers of tin and glass containers and manufacturers exclusively of other food containers.
• Gas—Gas-producing plants.
• Guns (large)—Plants manufacturing same.
• Hemp, jute, and cotton bags—Plants manufacturing exclusively hemp, jute, and cotton bags.
• Insecticides—Manufacturers exclusively of insecticides and fungicides.
• Iron and steel—Blast furnaces and foundries.
• Laundries.
• Machine tools—Plants manufacturing machine tools.
• Mines.
• Mines—Plants engaged exclusively in manufacturing mining tools and equipment.
• Newspapers and periodicals—Plants printing and publishing exclusively newspapers and periodicals.
• Oil—Refineries of both mineral and vegetable oils.
• Oil production—Plants manufacturing exclusively oil-well equipment.
• Public institutions and buildings.
• Public utilities.
• Railways—Plants manufacturing locomotives, freight cars and rails, and other plants engaged exclusively in manufacture of railway supplies.
• Refrigeration—Refrigeration for food and exclusive ice-producing plants.
• Seeds—Producers or wholesalers of seeds (except flower seeds).
• Ships (bunker coal)—Not including pleasure craft.
• Ships—Plants engaged exclusively in building ships (not including pleasure craft) or in manufacturing exclusively supplies and equipment therefor.
• Soap—Manufacturers of soap.
• Steel—Steel plants and rolling mills.
• Tanners—Tanning plants, save for patent leather.
• Tanning extracts—Plants manufacturing tanning extracts.
• Tin plate—Manufacturers of tin plate.
• Twine (binder) and rope—Plants producing exclusively binder twine and rope.

During the war period labor was much better off than during the Civil War epoch. The New York World presented the following table from the Merchants' Magazine of December, 1864, showing the rise of prices during the Civil War era:

	1862	1864
Copper, 100 lbs	$22.00 @ $25.00	$41.00 @ $42.00
Coal, ton	4.50 @ 5.00	9.00 @ 10.00
Iron, pig	21.00 @ 25.00	48.00 @ 49.00
Lead, 100 lbs	6.50 @ 6.75	11.75 @ 12.00
Nails, 100 lbs	3.25 @ 3.75	6.00 @ 6.25
Ashes, pot bbl	5.50 @ 5.75	8.75 @ 8.87
Dry cod, cwt	3.37 @ 4.25	6.50 @ 7.00
Flour, bbl	4.50 @ 5.60	7.30 @ 7.35
Corn, 100 bush	58.50 @ 60.00	131.00 @ 134.00
Hay, 100 lbs	.80 @ .85	1.35 @ 1.40
Wheat, bush	1.30 @ 1.45	1.63 @ 1.65
Hemp, cwt	10.00 @ 11.25	14.00 @ 16.12
Barley, bush	.85 @ 1.00	1.35 @ 1.50
Oats, bush	.37 @ .39	.90 @ .91
Hops, 100 lbs	14.00 @ 20.00	26.00 @ 33.00
Clover seed, 100 lbs	7.50 @ 7.75	12.50 @ 13.50
Lime, bbl	.60 @ .65	1.25 @ 1.35
Oil, whale, gal	.25 @ .35	.58 @ .60
Oil, coal, gal	.48 @ .57	1.10 @ 1.12
Pork, bbl	13.25 @ 13.75	21.75 @ 23.50
Beef, bbl	5.50 @ 8.00	10.00 @ 15.00
Lard, 100 lbs	7.50 @ 8.25	13.59 @ 14.00
Whisky, 100 gals	25.00 @ 25.50	89.00 @ 91.00
Tallow, 100 lbs	8.75 @ 9.00	12.62 @ 12.75
Whalebone, 100 lbs	68.00 @ 70.00	150.00 @ 155.00
Wool, fleece, 100 lbs	52.00 @ 53.00	78.00 @ 82.00
Wool, pl'd, 100 lbs	44.00 @ 45.00	70.00 @ 75.00
Butter, 100 lbs	16.00 @ 21.00	36.00 @ 37.00
Cheese, 100 lbs	5.00 @ 7.00	15.00 @ 18.00

[Pg 77]

To appreciate what industrial mobilization meant in England the best method is to start with the figures on national production taken from the British census of 1907, the last accesible accessible for the peace period:

In 1907 the British people are estimated to have produced goods to the total amount of, roughly	$10,000,000,000
The nation consumed during that year in personal consumption	7,050,000,000
It spent on capital purposes at home:
(a) On betterment of its national plant	950,000,000
(b) On maintenance of its national plant	900,000,000
It used up goods to the value of (in keeping up and probably increasing its stocks of material on hand)	325,000,000
It exported goods in the form of loans to foreign countries of about	500,000,000

By 1914 the British Empire had probably advanced its income to at least $12,500,000,000; and the surplus of goods which it had to export as loans to foreign countries seems to have increased from about $500,000,000 to $1,000,000,000. What happened in war-time? First of all there was an unprecedented manufacture of munitions and war supplies. This production was needed not only for Great Britain, but also for her Allies. Seven-tenths of what was produced in Great Britain in the year 1907 was immediately used up in the form of personal consumption by its population; accordingly war industrial activities meant either that British production must be increased or British comsumpton consumption reduced, or that more goods must be bought from foreign countries through the sale of British liquid capital assets.

First of all, consumption was cut down; in detail, this was accomplished in the following ways: 1. By cutting down all normal additions to England's national plant, i. e., by building no more houses, factories, railways, roads, etc., except for purely war purposes. This expenditure in 1907 amounted to about $950,000,000. 2. By cutting down and ceasing as far as possible to spend money on the maintenance of this national plant, except the minimum required to keep it running. This expenditure in 1907 amounted to $900,000,000. 3. Most important of all, by cutting down civil personal expenditure. This was so far the largest item of consumption that it was here that the most important savings were made.

In England the total number of "occupied males" between the ages of 18 and 44, i. e., roughly, the conscription age was, in 1911, 7,200,000. The number of men from the United Kingdom in the Army and Navy amounted to over 5,000,000; therefore, out of every seven of these men, on the average five were soldiers or sailors. These men were lost from the productive capacity of the nation. It is obvious that if English production remained the same, or increased, it must have been the result of extraordinary efforts on the part of the small percentage of occupied males of fighting age left, on the part of all the other males occupied or formerly occupied, and on the part of all females.

Mr. R. H. Brand, in discussing the situation in 1918, said:

Mr. R. H. Brand, who is responsible for these statements and used them in an address to the American Bankers' Association, showed how these regulations had resulted in a decline of British imports from peace conditions of 55,000,000 tons annually to war conditions of 20,000,000 tons. The imports were nearly all foodstuffs. England exported large amounts of munitions and supplies to her Allies. In the year 1916 alone we supplied them with 9,000,000 pairs of boots, 100,000,000 sand bags, 40,000,000 yards of jute, millions of socks and blankets, and in addition several thousand tons of leather; also cloth, foodstuffs of every kind, portable houses, tools, hospital equipment and so on.

Mr. Lloyd George became the man naturally selected to be Prime Minister because of his success in directing one of the chief war industries—the work of munitions. In May, 1915, when he was made head of the newly created Department of Munitions, the problem before him was no easy one. The Central Empires were able to turn out 250,000 shells a day, while the British rate of production was 2,500 high-explosive shells a day, and 13,000 shrapnel shells. Lloyd George selected a large technical staff; the work was decentralized as much as possible, and special committees were formed for the purpose of organizing the work in each district. The question of raw materials had to be handled and this was not always easy because there were unscrupulous suppliers trying to make a corner in their goods. New machinery had to be made for the manufacture of large shells; all the big machine works were taken under direct control by the Government. Old factories had to be equipped and altered and twenty-six large plants had to be created. To provide the labor power, workmen were recruited by voluntary methods. A hundred thousand were in this way got together by July, 1915, most of whom were experts in machinery and ship-building. The result is pictured in the following extract by a French expert, Jules Destrée:

When war was declared in 1914, the result in France was a complete disorganization. It must be remembered that workingmen from the age of 19 to 45 were called to the colors. This meant that the labor supply was reduced by about three-fourths. The revival of trade was very slow until the beginning of 1915. When it began to be realized that the war would be a long one, and when the consumption of ammunition and war materials was beyond all previous records, the Government was forced to prepare a program for industrial warfare. It was a hard task because much of industrial France was under enemy occupation. Munition work had to be undertaken in neighborhoods largely agricultural. Everything was lacking: labor, coal, raw material and transportation. As it became evident that the stoppage of industrial work was a serious mistake, an attempt was made to revive industries not connected with munitions, such as paper manufacture, glove and silk making. The operations undertaken by the Government are described in the following passage from M. R. Blanchard's article in the North American Review (1917):

Germany's industrial mobilization was picturesquely described by the head of the General Electric Co., Dr. Walter Rathenau, who was appointed at the beginning of the war to superintend the supplying of the German War Office with raw materials. He told the officials at the War Office that Germany was provided with more war materials only for a limited number of months. Accurate statistics were prepared in a short time on the power of production in various German industries. Then all the raw material was put where it could be commandeered. The flow of products was restricted, so that the raw material and also half manufactured products could be automatically diverted to articles needed by the Army. New methods were discovered and developed. Where former technical means were insufficient substitutes had to be found. Where it was prescribed that this or that article was to be made out of copper or aluminum, it was permitted to make it out of something else. All the laboring power of the country, including men from 16 to 60, were enrolled and controlled from the central organization called the War Office, described by General Gröner as follows:

Sixteen months after this war organization was effected, General Ludendorff said that when the great spring offensive of 1918 opened the Germans were superior to the Allies in every form of war supplies. There was a speeding up all round; the output of shells and cannon was double. This meant the doubling of the coal and iron production, and could be done only by increasing the workers necessary to double the output of basic war materials. Adequate food had to be supplied to the workers; there was what is known as the Hindenburg "Fat Fund" to which contributions were sent in from German peasantry and agriculturists. General Gröner, the head of the German War Office, outlined optimistically the future of German war industrial production as quoted in the New York Times of December 14, 1916:

In Russia industrial mobilization was badly managed. Cattle were taken to the front in herds. Often driven on foot, they were slaughtered on the spot where the meat was needed for the soldiers. The hides were thrown aside to rot. As a result of this wasting of hides, the supply of leather for military uses and for shoes for both the Army and the civilian population was soon utterly inadequate. Horses were requisitioned in the most unintelligent way, the result being that agricultural production decreased and with the lack of transportation facilities the Army horses could not be supplied with food. They died by the tens of thousands.

Gross mismanagement marked the war handling of the Russian railway system. The rolling stock was allowed to deteriorate. Locomotives and cars were put aside permanently when they needed slight repairs. They could not be repaired because the railway machine shops had been converted into munition factories. There was an appalling shortage of manufactured goods for the civilian population, because the entire output of many manufacturing concerns was taken over for the Army. It was almost impossible to get clothing, boots and articles of wearing apparel. So great was the dearth of cloth at the end of the third year of the war that one was struck by the contrast beween between the lines in front of the bakeries formed in the early morning hours and the groups of women gathered at eight in the evening before the shops which sold cloth to stand all through the night in line for the opening of the shop in the morning.

A bright spot in Russian war administration was the work of the Municipal and Provincial Councils. The members of these bodies did valiant service in preventing the growing disorganization of the economic life of their country. Their activities are described by Prof. Harper of Chicago University, an actual eye witness of Russian conditions during the war, in the following passage:

But it was not only foreign observers who were able to detect the prevailing rottenness in Russia's economic status. The following passage from an address made by A. I. Konovalov, a member of the Moscow Stock Exchange, shows that Russian business men were keenly alive to the dangers of the situation as early as April, 1917:

All kinds of economic theories and all varieties of economic experiences have been overturned by the abnormal industrialism of the war. The world really passed into a terra incognita. Even the firmest foundations of trade unionism have been shaken. There was no more firmly established fact before the war than the inability of women to secure a level of wages equal to that of the male wage earner. Such theories have passed to the limbo of forgotten things. Prejudice and tradition have given away before the actual test of facts. Women have taken the place of men called away to war service in practically all the fields of industrial activity. Apart from theory, biological and otherwise, it is now seen that the old exclusion of women from skilled industry was largely the result of trade union regulation. But the woman war-worker was found in fields untouched by trade unionism. There was the woman bank clerk as well as the woman engineer.

There was much discussion, mostly pessimistic, as to what would happen if the woman labor supply should permanently take the place of man labor after the war was over. The best solution was thought to be the placing of the woman worker under a régime of trade unionism. How far such prognostications went is illustrated in the following quotation from Miss Mary Stocks in the London Athenaeum.

As a result of the labor dislocation due to the operation of the American Draft Law, a large number of women were employed in railway work. The experience of the United States Railroad Administration in the matter of women employes was summarized in a paper read by Miss Pauline Goldmark, manager of the women's service section of the Railroad Administration, at a conference at the Academy of Political Science, in 1918:

The man in the fighting line was only one factor in the prosecution of warlike operations. The success of strategy and tactics was dependent upon the organization of the man in the labor line not only at home but also in the territory behind the miles of trenches in France. For this purpose Chinese labor was drafted by both the British and the French Government. Large numbers of British ships sailed with crews practically consisting of Chinese sailors. The sentiment in favor of Chinese exclusion had to give way before imperative needs for labor power. There were tens of thousands of Chinamen in the service of the Allies. In the Sunset Magazine, Mr. G. C. Hodges calls attention to the fact that the break between the Chinese Republic and Germany was precipitated largely by the Allied drafting of China's manpower. Even in its beginnings he says, the French and British mobilization of Chinese labor caused a diplomatic battle royal. The significance of Chinese labor behind the battle front is described in the following words:

Permanent economic improvements were one result of the presence in France of the American Expeditionary Force. An industrial movement was created that will probably continue long after the war is over. In various French seaports, docks had to be constructed to handle the enormous tonnage of supplies needed for the American troops. A letter in the New York Journal of Commerce gives a picture of the transformation in the transport system in France made in order to handle with speed and certainty the various supplies on which the American Army depended:

A realistic picture of the industrial exhaustion of France at the close of the war was given by M. Tardieu, General Commissioner for Franco-American war affairs. The war expenses of 120,000,000,000 francs was only a fractional part of the whole loss. Another 50,000,000,000 would have to be raised to secure raw material destroyed during the war. M. Tardieu presented in detail the various items indicating to what extent France had suffered economic disability and paralysis:

---

On April 5, 1917, the day before war was declared, Franklin K. Lane, Secretary of the Interior, introduced and had passed by the Council of National Defense the following resolution:

Acting in accordance with this resolution, the principal railroad executives of the country met in Washington on April 11, 1917, and resolved that during the war they would 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. The direction of the continental railway system thus organized was placed by the railroads in the hands of the executive committee of the Special Committee on National Defense of the American Railway Association. This executive committee was also known as the Railroads' War Board.

Under this resolution the railroads of the United States continued to be operated under private ownership and private management until December 28, 1917.

On that date President Wilson, exercising his war-time prerogative, took control of the railways of the country and appointed W. G. McAdoo Director General.

2. Congress in January passed a railroad-control bill.

3. On April 11, 1918, President Wilson issued a proclamation taking over for the Government the property of coastwise shipping lines.

4. On May 24th, Director General McAdoo placed in charge of each railroad property a federal manager whose duty it was to report to the regional director.

5. On June 29th, the Railroad Administration relinquished from federal control nearly 2,000 short-line railroads whose control by the Administration was regarded as not "needful or desirable."

During the first six months after the United States entered the war statistics showed that the railways not only handled far more traffic than in any earlier six months of their history but also as much as in any entire year prior to 1907. It will be remembered that the years 1906 and 1907 marked the climax of a long period of rapid increase of railroad business which resulted in the longest and most acute congestion of traffic and shortage that had ever been known prior to the war period. The grounds offered by the Government for taking over the railway systems during the war might be explained as the resultant of the findings of the Interstate Commerce Commission on December 5th, in which it was stated that the claim of the roads for higher rates could not be granted.

1. "The avoidance of obstructions to transportation due to the routing and division of freight, intended to give a fair share to each line in a given territory.
2. "The abolition of preferences to given shippers and kinds of freight, and the centralization of control over priority in shipment.
3. "The practical termination of rate controversies and labor discussions as between private individuals and the placing of the roads on a semi-military basis.

"The railroads themselves have received the announcement of the President's action with much greater equanimity than could have been expected. They undoubtedly see in the step the following advantages:

1. "Assurance of a moderate if not generous income in a period of great uncertainty and difficulty, during which they have been caught between the upper and nether millstones of fixed rates and advancing costs and wages.
2. "Termination of the danger that threatened them from the continually maturing obligations which ordinarily they would have little trouble in refinancing, but which, under existing conditions, can scarcely be provided for on any basis.
3. "Provision of means for betterment and improvement at a time when such provision can be had practically only through government orders designed to place such requirements ahead of those of private concerns."

This experiment in government control was discussed and explained by the Director General after six months' experience in the following statement issued by him on June 15, 1918:

The defects of the Government administration of the railways have been the subject of both criticism and apology. A diagnosis published by the Engineering News Record of New York states that the whole difficulty is ascribed to the employment of bankers in high places of railway management. Railroads, it was asserted, cannot be run by men of the banking type of mind. The article continues:

Like American railways the railway system of Great Britain was under private control prior to the war, but the experiment of Government direction began to be applied as soon as the war was declared. Government control did not mean Government ownership. The lines remained the property of the companies. They retained the management of their own concerns subject to the instructions of an executive committee appointed by the Government and the whole machinery of administration went on as before. At the beginning the sole purpose was to facilitate the movement of troops, but as the war developed the scope of the railway executive committee became greatly extended. Working in coöperation with the acting chairman were twelve general managers of leading British lines. Under the central body were groups of committees, each made up of railway experts. The War Office and the Director General of Transport were in touch with the Central Committee. A writer in the Railway Age Gazette for December, 1917, explains the arrangements as follows:

A definite proposal to nationalize the railway systems of the Dominion of Canada was made during the war. Canada has nearly one-sixth of the railway mileage of the United States, although it has less than one-fourteenth of the population. Canada has three trans-continental systems. There is sufficient trade in the Dominion for two good systems. A royal commission appointed to inquire into the subject reported that the net returns of the railways were so low as to prove that more railways had been built than could be justified on commercial grounds. Large subsidies had been granted by the Government. In the case of the Grand Trunk Pacific this public subsidy amounted to nearly two-thirds of the total investment; in the case of the Canadian Northern to nearly three-quarters. The Canadian Pacific was reported as the strongest railway in Canada, economically built and well managed. The other companies, such as the Canadian Northern and the Grand Trunk Pacific, were facing heavy annual deficits.

The commissioners recommended heroic measures. They did not consider that operation by a Minister directly responsible to Parliament would be in the public interest. It would not secure better service nor lower rates. What the commissioners did recommend was to transfer the three companies to a new body, a board of trustees to be incorporated as the Dominion Railway Company and that the Canadian Northern, the Canadian Pacific and the Grand Trunk Pacific be transferred to this body. The Government-owned Intercolonial and Transcontinental Railways stretching from Halifax to Winnipeg were to be transferred to the Dominion Company. Under the scheme worked out by the commission, the Government would assume responsibility to the Dominion Railway Company for the interest on existing securities of the transferred companies. As to the composition of the board of trustees, the commissioner recommended that they be five; three railway members, one member selected on the ground of business and financial experience and one as especially possessing the confidence of the railway employees. The commissioners laid stress on the importance of the board being non-political, permanent and self-perpetuating, and in this connection pointed to the experience of the Australian state railways.

The great strain on a country's railway system caused by war was illustrated by the French mobilization. Four thousand seven hundred and fifty trains were required. After mobilization was over the Army still had a permanent need of railways for two purposes: for its communications in the rear, and for its movements from place to place. To bring supplies to one Army corps trainloads aggregating 200 tons a day were required.

Mr. G. Blanchon in New Warfare explained the situation as follows:

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.

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:

				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

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:

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:

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:

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.

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.

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]

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.

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.

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:

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:

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:

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:

A true picture of the situation is given in the following passage from the Vienna Arbeiter Zeitung:

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:

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:

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:

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:

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:

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:

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:

Shipping Firm	Stock Capital, Florins	Net Profits, Florins	Reserve and Emergency Funds, 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

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 official leaders of the Allied Governments soon found that the scheme to start an economic war after peace had been negotiatd 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:

In explaining England's position as to war aims the Premier, Lloyd George, made the following observations:

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.

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.

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:

---

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.

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.

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.

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 into war	To
Great Britain	August 4, 1914	March 31, 1919	£ 8,601	$41,887
Australia	August 4, 1914	March 31, 1919	£ 291	1,461
Canada (inc. Newfoundland)	August 4, 1914	August 31, 1919		1,545
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-Hungary	July 28, 1914	October 31, 1919	kr 119,504	24,858
Turkey	November 3, 1914	October .., 1919		1,802
Bulgaria	October 4, 1915	October .., 1919		732
				———
Central Powers				$76,008
Total			(In Millions)	$232,058

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 public debt and of postal expenditures	Monthly War Expenditures [19]	Average Daily War Expenditures
	Million $	Million $	Million $
April 6—30, 1917	279	219	8.0
May, 1917	527	467	15.0
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

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.

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.

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.

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
Year ending June 30	1918	Per Cent.	1919	Per 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	....

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.

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.

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 Cash in Treasury	Annual Interest 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 the war		After the war		War debt
Great Britain	Aug. 4, 1914	£650 = $3,165	Mar. 31, 1919	£7,643[21]= $37,221	$34,056
Australia	Aug. 4, 1914	97 = 472	Jan. 31, 1919	[22]336 = 1,634	1,162
Canada.	Aug. 4, 1914	332	Mar. 31, 1919	1,584	1,250
New Zealand	Aug. 4, 1914	100 = 487	Mar. 31, 1919	170 = 828	341
South Africa	Aug. 4, 1914	126 = 614	Mar. 31, 1919	175 = 846	332
British Empire		$5,070		$42,213	$37,143
France	July Empire	fr. 32,594 = $6,291	Dec. 31, 1918	fr. 167,459 = 32,322	26,031
Russia	July 1914	ru. 8,800 = 4,623	Jan. 1, 1918	ru. 49,288 = 25,383	20,760
Italy	May 1915	li. 13,636 = 2,621	Oct. 31, 1918	li. 77,763 = 15,009	12,388
Belgium	Aug. 2, 1914	fr. 3,743 = 722	Apr. 30, 1919	fr. 9,787 = 1,888	1,166
Rumania	Aug. 1916	292	Oct. 31, 1918	1,020	728
Serbia	July 1914	271	Oct. 31, 1918	730	459
Japan	July 1914	yen 2,494 = 1,190	July 31, 1918	yen 2,530 = 1,265	18
United States	Apr. 5, 1917	1,190	June 30, 1919	24,232	23,042
Entente Powers		$22,327		144,062	121,735
Germany	Aug. 1, 1914	mk. 4,732 = $1,126	Dec. 31, 1918	mk. 204,000 = $48,352	47,426
Austria-Hungary	Aug. 1, 1914	3,726	Oct. 31, 1918	kr. 137,858 = 25,584	24,858[23]
Turkey	Nov. 1914	LT 112 = 485	Oct. 31, 1918	LT 455 = 2,002	1,517
Bulgaria	Oct. 4, 1915	219	Oct. 31, 1918	974	755
Central Powers		$5,556		$80,112	743,556 74,556
Total		In Millions $27,883		In Millions $224,174	196,291

---

By GROSVENOR B. CLARKSON

Director of the U. S. Council of National Defense and of Its Advisory Commission

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.

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:
   1. 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.
   2. The coördination of military, industrial, and commercial purposes in the location of extensive highways and branch lines of railroads.
   3. The utilization of waterways.
   4. The mobilization of military and naval resources for defense.
   5. 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.
   6. The development of sea-going transportation.
   7. Data as to amounts, location, methods and means of production and availability of military supplies.
   8. 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.

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:

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.

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:

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:

The Council duly approved these nominations.

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 should be said, of course, that no member of this Council organization ever sold commodities to himself. But that is another story.

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:

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.

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.

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:

The first of July, 1917, found the Council and Advisory Commission directing the operation of the following boards and committees:

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:

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.

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.

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 16²/₃¢. 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 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.

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:

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.

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:

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.

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 oversea 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.

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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.

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.

Up to the end of the Fourth Loan, which coincided with the negotiations for the Armistice, $16,971,909,050 had been paid in and this helped to save life to an extent that we can only imagine. It was the confident expectation when the Americans halted the German onslaught at Château-Thierry that the end of the war would come in the following spring. None dared to hope that it would come before Christmas. When the crash came in November, even the Allied commanders were bewildered by its suddenness. Had the war been prolonged to the spring of 1919, it is certain that we would have paid a large toll in lives. Some have estimated that 100,000 more of our young men would have been sacrificed. That the war did not drag along for six months more may be ascribed in part to the effect that the demonstrated loyalty of the Liberty Loan Army had upon German morale. We know that the Germans fed lies to their own troops and dropped pamphlets with these same falsehoods into our own trenches. They tried to convince their own and our men that the Loans had no support.

When at 11 o'clock on November 11, 1918, peace dawned upon a war-sick world we had 2,000,000 men in Europe, and as many more on this side putting themselves in readiness to go across. On the seas we had close to 300,000 men. This tremendous force was welded into form in the nineteen months we were in the war. Yet within a few months after our entrance into the war there were more than this total in the Liberty Loan Army. The list of subscribers to the First Liberty Loan which closed two months after our entry had 4,500,000 names.

And this number remained for the duration of the war, giving every penny they could spare, mortgaging their property, committing themselves to personal privations. When the Second Loan books were totalled in November the number had increased to 9,500,000, and it leaped to 17,000,000 in the Third. In the Fourth—the last loan of war-time—it had grown to 22,777,680 and in the Fifth which closed six months after the armistice, it finished with 12,000,000 names.

As in the Army, where organization is half the battle, it was through organization of the enthusiasm and the deep fervor of the American people that success came in this big venture. We had to create a state of mind, we had to educate the American public in finance—which in itself appeared an insuperable task—we had to marshal resources on a scale such as never before had been attempted, and we had to map out a sales campaign that would comprehend millions of persons. There were no precedents to go by; the example set in Europe could not have application in the United States because of temperamental and financial differences; the flotation of the loans in the Civil War afforded no practicable working basis. It was pioneering, and this fact was made clear in the first conference held in Washington when Secretary of the Treasury William G. McAdoo called together the financial leaders of the country.

Only three weeks were allowed to prepare for the First Loan Drive. As soon as we had decided to get into the war, this decision carried with it the determination to go in to the limit of our resources. The Secretary of the Treasury informed the bankers that the first issue would be for $2,000,000,000 and this would be merely the forerunner of a succession of loans in larger amounts. The bonds were to be put on the market at three and a half percent. and the campaigns were to be conducted according to the territories of the Federal Reserve districts, twelve in all.

The men whom he addressed were all recognized as organizers, all had been identified with big business. However, few of them had had the general contact with the public so essential to popularizing the loan. They knew how to sell, but not in small denominations or to millions of purchasers. In an abstract sense they realized the value of advertising and newspaper publicity, but not one of them had the remotest idea of how the ideal of Secretary McAdoo could be realized.

It was at this point that their resourcefulness came into play. Their first move was the right one; they engaged specialists to undertake the tasks of which they knew little. They addressed themselves to the public through men skilled in establishing such contacts as are given through advertising, publicity, and canvassing. In the brief time allotted to them, they barely had time to surround themselves with this trained talent.

Verily, it was shooting in the dark, a process of hit and miss. Some one said that the campaign in the First Loan was planned as we went along, and that is literally true. The patriotism was there—that was an unquestionable fact; the problem was to make it manifest itself in sacrifice of savings and earnings. The work of the whole three weeks was experimental and the country was the laboratory. Let it be said that the alchemy of patriotism transmuted the hearts and minds of the public into pure gold. Once the people were informed of their duty toward the United States they rallied instantly.

Newspapers turned over their columns, advertisers offered their precious space—and it was precious in those days of paper shortage; stores and banks opened booths for sales, public speakers cancelled every other engagement that they might participate, factories strove to enlist every person in their employment as purchasers, clubs responded in whole memberships, women's committees were formed for the acceleration of interest, churches consecrated themselves to the project, trade unions abandoned all differences with employers and allied themselves unselfishly, writers pleaded for a chance to exercise their influence, foreign language groups demanded opportunity to prove their Americanism, actors, singers, and lecturers begged for a place in the campaign.

Wholeheartedly and with utter disregard of personal sacrifice this vast aggregation committed itself to the task. The initial momentum gave the drive the force of an avalanche that swept everything else aside. There came times during this first drive when the issue seemed in doubt, but this was due more to an excess of enthusiasm than to a lack of support. When the totals were in, it was realized that these misgivings were due to the physical inability of the tabulators to keep abreast of the tide of subscriptions. The subscriptions went to $3,035,226,850.

It had been said that the first campaign in its directive agencies was largely hit and miss. When it was over the strikes were recorded and the misses eliminated for the preliminary work of the Second Loan which was to follow in October. Out of the mass was evolved a system of methods that served as the groundwork of the real organization. The results afforded a working basis that would have carried a dozen loans through, granting that the people remained faithful to their patriotism.

Let it be admitted that in the first loan there was no defined appeal. We were in the war and in to win, that was sufficient. It was foreseen that the psychology of the public must have a central theme for the next loan to which it must respond. The Second campaign began on October 1, 1917, after the embarkation of the nucleus of the vast army that eventually was to overwhelm the foe. None of them yet had been called into action. The keynote of this drive was the education of the people on the meaning of a German victory. We had before us the ghastly stories of what the Germans had done in Belgium and in France; we had to throw ourselves into the conflict to keep our own homes safe.

The eyes of all Europe, our Allies and our enemies, were upon us. It was clear that by the results at home we would be judged, as we had not yet had the opportunity to show ourselves in the field. For four weeks and a day the campaign went on, this time for $3,000,000,000. The appeal which touched the heartstrings of all persons served a double purpose. Not only did it carry the message of the Loan, but it knit closer the sentiment of the whole American people to the purposes of the war. Through its constant reiteration it had the effect of a prayer and like a prayer gained added meaning with deeper thought.

Thought was compelled through its manifold repetitions. All the functions of life were linked with it, all the recreations, all the relaxations embodied it in part. It formed the backbone of conversation, it became a part of every daily activity. It assailed the eye at every turn, it smote the ear constantly, it crashed into consciousnesses in every conceivable form. Through a strange paradox it linked a fear and a hope. It embraced the whole gamut of emotions.

Again there was a resounding response. In the First Loan the subscriptions were limited to the actual amount of the issue, but in the Second all subscriptions were accepted. The number of those who took bonds was increased more than 100 percent.—it reached 9,500,000, to be exact, and the $3,000,000,000 issue went to $3,808,766,150.

So it was in the Third, which was put before the public on the anniversary of our entrance into the war. At this time our men had gone into the trenches which in itself made the war our own in its most serious meaning. This was intensified throughout the land by the operation of the Selective Service Act. The draft had entered almost every home; many of those who had qualified in the first call were at that time in France. Casualty lists were beginning to appear in the newspapers.

It needed only this fact—the fact in itself was its own appeal—to bring out the finest in our people. All previous sentiment faded ito into insignificance compared with the solemnity of the actual participation. The resources that we had been led to believe had been plumbed to their depths were now revealed to us as inexhaustible. Giving seemed to be the poorest means of showing how the country was touched; the people gave as if in despair because this was all they might do.

The campaign had been for $3,000,000,000 and it brought in returns of $4,170,069,650 from 17,000,000 men, women and children in the United States; men, who regretted that this was all they might give to their country's need; women, who offered with each dollar a passionate prayer that it might help the men now matching themselves against the foe, and children, who realized with joy that they were becoming part of the world's greatest war.

Before the Fourth Loan the Rolls of Honor in the daily newspapers were carrying a lengthening list of those who had paid the supreme sacrifice. In the training camps more and more hundreds of thousands of drafted men were preparing themselves to take their places on the line; the sea lanes were crowded with troopships, each bearing the best of our country away. There had been a depressing period when Ludendorff's men seemed to carry everything before them, when the coast ports of France seemed menaced, but before the bugle called the non-combatants at home to attention again our boys had turned the tide at Château-Thierry and now were in full cry after the fugitive enemy.

On September 27, 1918, the call for the Fourth Loan came and it seemed at the time as if it had been postponed too long because the foe was crumbling. President Wilson sounded the tocsin in the Metropolitan Opera House in New York City. This time the appeal was to drive home the finishing blows, to demonstrate to the crumbling empire of the Hohenzollerns that here was a people undivided and unafraid.

The campaign was carried through in a veritable ecstacy ecstasy of delight. Where before there had been the spirit to give in order to wage the war to any length, here was the spirit to bring the end swiftly and splendidly, to crown the triumphs of our arms abroad with another triumph at home. In truth, the prospect of impending triumph at first almost defeated the need of a campaign. The enthusiasm during the period of the drive transcended everything ever seen in this country before. The result reflected it: In an issue of $6,000,000,000 there was an oversubscription of $933,073,250 and the total number was the 22,777,680 which will stand as the high mark of Americanism for many generations to come.

It has been set forth here that all appeals were based on arousing the emotions of the people. This was necessary because, had the offerings gone before the public solely on their practical value as investments, the results would have been considered abroad as another demonstration of our sordidness. Had the people of the United States been sordid, it is certain that they might have obtained better investment values. That they were not touched by selfish instincts is further proved by the fact that all through the drives the bonds of the previous issues had been quoted below par, due to the machinations of a group that never could be lifted above self-interest. The public, in full realization of this apparent depreciation, fought it out and showed their utter contempt for the manipulators by subscribing in greater force and for greater amounts to each subsequent issue.

It has been said before that the feeling of the public toward the war was made clear in the First Loan. It became the problem of the Second and the succeeding drives to organize enthusiasm so that through contagion the more resistant types might be affected. This compelled an organization of psychology. Back of each demonstration there were stage managers. These managers of psychology worked upon the public through the newspapers, through advertising, through "stunts," and generated a force of example which affected the whole community in which they were expressed.

For instance, a parade always has the effect of stirring people; feelings deep-hidden cannot be well concealed when, in war-time, marching men stride past. Unconsciously there comes to the mind of people the question: "What will become of these fine boys when they reach France?" There is the wish to help them, and the means to help them has been before their eyes for days in the Liberty Loan publicity. That is what is meant by stage management.

Through all the Loans it was necessary to manipulate the emotions first, to bring to the consciousness of the people in the news reports the facts and purposes of the loans; secondly, to carry the "urge" to them through the advertising; and thirdly to work upon their feelings through spectacles, meetings, aeroplane flights, sham battles, motion pictures of actual warfare, and like accelerants. It was necessary to infect them in the mass so that as individuals they might infect others with the fever to buy bonds.

All this work had to be carried through and was carried through with brilliant success in the four war-time loans. The Army, the Navy, the stage women's committees, police organizations, Boy Scouts, foreign language groups, all played a part. When the call came for the Fifth Loan, practically everything that had been done before had to be scrapped. It was all part of the war equipment and would help little in getting over another loan when people were striving with every fiber to get away from the thought and the sacrifices of the war.

We had to deal, then, with a people who were beginning to adjust themselves to peace, who were consoling themselves with the thought that they had done their part and should not be called upon again. It looked like a hopeless prospect from the vista presented at the close of the Fourth campaign to expect the same response for a peace campaign. The one optimistic fact that stood out was that the people had proved their patriotism, and such patriotism never dies. The Fifth Loan based its appeal solely upon patriotism's one expression in peace, duty.

"Finish the Job" was the slogan of the Fifth Loan. The country was told that the war was not ended until its debts were paid, that we should feel gratitude in the lives spared by its sudden end. The Liberty Loan workers had to create a new state of mind, to begin a new education—for this time the issue was in Victory notes instead of bonds—and to arouse the people to new emotions through spectacles, parades and other features. It may be mentioned here that the greatest parade of the entire war was held in New York in this Fifth Loan, when the different branches of the army showed in procession the men and weapons they had employed to win victory.

The call was for $4,500,000,000 and the answer was subscribed in notes by 12,000,000 persons, who paid in $5,249,908,300.

In between the drives there was a lesser drive constantly carried on among people who were not able to participate in bond buying. This was the War Savings campaign which was a part of the Government Loan enterprise. Newsboys, bootblacks, shop-girls, clerks and others who had been unable to participate in the Loan drives or who wanted to prove again their devotion to their country answered this appeal. In these savings there was collected for the country up to the date of the armistice $932,339,000 and the number of persons hoarding in small sums was far beyond a million.

LIBERTY LOAN FIGURES
Entire Country
	Quota	Am't Subscribed	Allotted	No. of Subscribers
First Loan	$2,000,000,000	$3,035,226,850	$2,000,000,000	4,500,000
Second Loan	3,000,000,000	4,617,532,300	3,808,766,150	9,500,000
Third Loan	3,000,000,000	4,170,069,650	4,170,069,650	17,000,000
Fourth Loan	6,000,000,000	6,993,073,250	6,993,073,250	22,777,680
Fifth Loan	4,500,000,000	5,249,908,300	4,500,000,000	12,000,000
	——————	——————	——————	—————
Totals	18,500,000,000	$24,065,810,350	$21,471,909,050	65,777,680
Federal Reserve District of New York
First Loan	$600,000,000	$1,191,992,100	$617,831,650	978,959
Second Loan	900,000,000	1,550,453,500	1,164,366,950	2,259,151
Third Loan	900,000,000	1,115,243,650	1,115,243,650	3,046,929
Fourth Loan	1,800,000,000	2,044,901,750	2,044,901,750	3,604,101
Fifth Loan	1,350,000,000	1,762,684,900	1,318,098,450	2,484,532
	——————	——————	——————	—————
Totals	$5,550,000,000	$7,665,275,900	$6,260,442,450	12,373,672

The benefits derived from the Loan campaigns were many. Prominent among them was the growth of thrift among the American people. The growth of this habit will be an important factor in the future greatness of this country.

A lasting monument to the war spirit of those who had to stay at home is the fact that more than a million persons, men, women and children, were engaged actively in the promotion of the five loans. In other words, one person in every hundred in the United States was a part of the organization, and each induced twenty other persons in that hundred to buy bonds. This colossal force did not work in haphazard fashion nor scatter its energy but acted under a definite plan of campaign in which each had an assigned part and in which each worked according to a method that would avoid duplication or extra expense.

The five campaigns which united such an aggregation of workers and which produced such remarkable results were carried forward with a minimum of expense. Never before in the history of finance had such widespread exploitation been accomplished at so low a cost. Of the million workers all but a small nucleus were volunteers; the resources of the country were thrown open to the organizers with unexampled prodigality, mediums of flotation in a veritable flood being contributed without cost to the officers in the Liberty Loan Army.

A single purpose animated the whole nation. Party lines, race prejudice, creed distinctions, social barriers, all were wiped out in these loan drives. The whole country formed itself into an All-American team that rushed onward irresistibly. The closest approximation to a common brotherhood had been achieved. War, with its terrible losses, with its impairment of lusty young men, with its heartbreaks and agonies, surely had not been waged in vain when it brought about such a unity.

The United States in waging the war for democracy had won that democracy for herself at home.

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By VERNON KELLOGG

Member of the Commission for the Relief of Belgium

America was made familiar with a slogan during 1917 and 1918 which declared that "Food Will Win the War." The European Allies became familiar from the very beginning of the war with the fact that without much more food than they could count on from their own resources they could not hope to win the war. And it became equally obvious to Germany and her associates that if their normal food resources were materially impaired they also could not hope to win the war.

So there arose almost from the beginning of the great military struggle an equally great struggle to get food and to keep food from being got. The Allies, devoting their manpower to fighting and munitions-making, saw their farms doomed to neglect and their food reduction doomed to lessen. And they began their call on America for food in such quantities as America had never dreamed of exporting before. In the last years before the war we had been sending about five million tons of foodstuffs a year to Europe. In 1918 we sent over fourteen million tons. Also the Allies began trying, by their blockade, to prevent the Central Empires from adding to their own inevitably lessened native production by importations from without.

On the other hand, Germany and her associates began to husband carefully their internal food supplies by instituting a rigid, or would-be rigid, control of internal marketing and consumption, and to collect from any outside sources still accessible to them, such as the contiguous neutral lands, whatever food was possible. Also they had strong hopes of preventing, by their submarine warfare, the provisioning of the Allies from America and other overseas sources.

Thus, from the beginning of the war, and all through its long course, food supply and food control were of the most vital importance. If our epigrammatic slogan, "Food Will Win the War," was, like most epigrams, not literally true, it was, nevertheless, literally true that there was always possible to either side the loss of the war through lack of food, and it is literally true that the food victory of the Allies was a great element in the final war victory. Germany's military defeat was partly due to food defeat, and if a military decision had not been reached in the fall of 1918, Germany would have lost the war in the spring of 1919 anyway from lack of food and raw materials.

The great struggle for food supply and food control involved so many and such complex undertakings that it is hopeless to attempt a detailed account of it in any space short of a huge volume. Yet the very limitations of the present discussion may have its advantages in compelling us to concentrate our attention on the most important aspects of the struggle and to try to sum up the most important results of it. Some of these at least should not be forgotten, for they have a bearing on the peace-time food problem as well as the war-time one. Fortunately the war-time food situation has developed in us a national and an individual food consciousness that will certainly not disappear in this generation at least.

The first important lesson that has been learned is that it is of great value to a nation to be able to provide in its own land its own necessary food supply. For although in times of peace and usual harvests international food exchanges enable a country, such as England or Belgium, highly industrialized and of large population in proportion to area, to make up without much difficulty its deficit as between production and consumption, the moment the great emergency arrives there is the utmost danger for its people. The history of the "relief of Belgium" during the war will illustrate this.

This little country, famous through all past history as a battleground and now famous for all future time for its heroic and pathetic rôle in the World War, found itself at the very beginning of the war faced with a food problem that seemed at first insoluble, and which, if not solved, meant starvation for its people. It is a country highly industrialized, and with an agriculture which, though more highly developed as to method than that of almost any other country, was yet capable of providing but little more than a third of the food necessary to its people. It depended for its very life on a steady inflow of food from outside sources. But with its invasion and occupation by the Germans this inflow was immediately and completely shut off. Belgium was enclosed in a ring of steel. What food it possessed inside this ring disappeared rapidly.

The terrible situation was met in a way of which Americans may be proud. For the Commission for the Relief of Belgium, which was the agency that solved Belgium's great problem, was an American organization with a staff composed chiefly of young Americans, most of them from American colleges and universities, headed by an American, Herbert Hoover, of great organizing and diplomatic genius, and with the large heart of a world philanthropist. In the four and a half years from November 1, 1914, to May 1, 1919, which was the period of activity of the Commission, Belgium depended upon it for the supplying of three-fourths of the food of its people, over seven million in number. This amounted to about one million tons a year. In addition, the Commission supplied the food through practically all this period for the maintenance of the nearly two million unfortunate people in the German-occupied area of France. This amounted to a total of about one million tons. The total value of the food supplied to Belgium and occupied France was about six hundred million dollars, which was provided by the Governments of Belgium, France, England, and America, and the private charity of the world.

For another impressive war-time food problem—which did not have the same solution as Belgium's—let us take that of Germany. In peace times the Germans produce about 80 percent. of the total food annually consumed by them. But their tremendous military effort necessarily entailed some reduction in their capacity for food production, although they also made a tremendous effort to stimulate and direct into most effective channels the native production of food.

Although it is true, as already stated, that Germany normally produces about 80 percent. of her food needs, making it seem possible for the nation to meet the blockade emergency by repressing consumption by 10 per cent. and increasing production by 10 per cent. this does not mean that they normally produce 80 per cent. of each kind of food consumed by them. As a matter of fact, they produce more than their total needs of certain kinds of food, as sugar, for example, and less than 80 per cent. of certain other kinds. And while there is a possibility of substituting, within certain limits, one kind of food for another, so that a shortage of wheat might be made up by an abundance of rye, or a shortage of bread-grains in general be made up, in some degree, by increasing the ration of potatoes, if they are available, this substitution cannot go to the extent of substituting pure carbo-hydrate or starchy foods like potatoes, which simply produce heat or energy for the body, for the protein foods like meat, fish, eggs and dairy products which produce not only energy but new tissues. A child must have protein food in order to grow; an adult must have it in order to replace the tissues worn out by daily work. Also, there are certain peculiar and so far little understood elements, called vitamines, found only in certain kinds of food, notably fats, milk and the green vegetables, which are essential to the proper metabolism of the body.

Now in the light of these needs for proper feeding, and in the light of the special conditions produced by the war, what was Germany's food problem through the war? It was that of attempting to increase production when the men and work animals had been sent to the fighting lines, of repressing consumption when both men in the army and the men in the war factories had to be well fed in order to fight well and work well, of attempting to get in food from outside the country when a blockade was steadily closing the borders ever and ever more tightly, and finally, of trying to get the people to modify their food habits in the way of accepting substitutes and using strange new semi-artificial foods in place of the familiar staples.

In 1916 the potato crop of Germany was a failure—but the turnip crop was enormous. So turnips were substituted largely for potatoes, and for many other kinds of food as well. Even marmalade and coffee substitutes were made from them, and turnip meal was mixed in the already too coarse and too much mixed flour. The Germans will never forget that terrible kohl-rüben zeit, or turnip time, of late 1916 and early 1917. And it was just after this time that the effects of Germany's great food difficulties began to show in a really serious way; they began to undermine the strength and health of the people. Those diseases like tuberculosis, which can rest in incipient or suppressed form for years without becoming serious as long as the body is well nourished, began to develop rapidly and dangerously. The birth rate decreased and the death rate increased. The physical and mental and moral tone of the whole nation dropped.

Belgium and Germany illustrate a special food situation created by the war, namely, one in which a country, which relied on outside sources for a greater or lesser part of its food needs, had access to these sources suddenly and almost completely shut off. But grave food problems also confronted the countries which were not blockaded in so specific a way. England and France, with full access to all the great food-producing lands overseas (except to the extent that the submarines reduced this freedom of access), nevertheless had food problems hardly less serious than those of the more strictly blockaded countries. Their difficulties arose primarily from the fact that there was only so much shipping in the world and that the war conditions created suddenly a need for much more shipping than existed. The transference of large numbers of troops with their necessary equipment and munitions from the distant colonies to the European seat of fighting, and of other numbers from the mother countries to extra-European battlegrounds, made great demands on the shipping available to these nations. At the same time, the reduction of their native production increased largely their needs of food importations.

Take, for example, the case of the sugar supply for England and France. England is accustomed to use about 2,000,000 tons of sugar a year but she does not produce, at home, a single ton. She had relied before the war chiefly on importations from Germany and Austria with some little from Belgium and France. But with the outbreak of the war, she could get none from the Central Empires, and none from Belgium, while France, instead of being able to export sugar, suddenly found herself with her principal sugar-producing region invaded by the Germans and able to produce hardly a third of her former output. In fact, France herself was suddenly placed in the position of needing to import nearly two-thirds of the supply needed for her own consumption. So England and France had to turn to Cuba, the nearest great sugar-producing country, and ask for large quantities of her output. But the United States has always depended on Cuba for a large part of its own needs. Consequently there was a sugar problem for our own country as well as for England and France long before we entered the war.

The situation was serious; the demands on Cuba were much larger than she could meet, although she was able under this stimulation of demand to increase materially her sugar crop in the years following the first of the war. One way of meeting this problem, which was promptly resorted to, was to cut down the consumption of sugar in the countries involved. In England and France sugar was strictly rationed; and in America the people were called on to limit their use of sugar by voluntary agreement. England cut her sugar allowance per capita from about seven and a half pounds a month to two, and France from nearly four to one. In America we reduced our per capita consumption by legally restricting the making of soft drinks and candy and by the voluntary restriction of the home use of sugar by about one-half. All this lessened the demand on Cuba, and also the demand on shipping.

In this discussion of the war-time sugar problem one may be struck by the fact, as noted, that the people of France were normally accustomed to eat much less sugar than the people of England, indeed only about one-half as much. This introduces a subject of importance in any general discussion of the world food problem. It is that of the varying food habits of different peoples, even peoples living under very similar climatic and general physical conditions. For example, the people of Germany are accustomed to eat twice as many potatoes as the people of England, who in turn use more than three times as many as the people of Italy. On the other hand, England uses twice as much sugar as Germany, although she produces no sugar and Germany produces much sugar. The Italians eat only a third as much meat as the English and the French only half as much. But the English eat only two-thirds as much bread as the French.

These differences in food use, established by long custom, have to be taken into account in all considerations of the world's food supply. They are differences which cannot be easily or quickly changed, even under circumstances which such great emergencies as war may produce. For example, we in America are accustomed to eat corn as food in the form of green corn, corn meal, corn flakes, etc. And in Italy one of the great national dishes is polenta (corn meal cooked in a certain way). But when the Commission for the Relief of Belgium tried to introduce corn as human food in Belgium, because of the large amount that could be obtained from America when wheat and rye were scarce, it met with great opposition and but little success. To the Belgians, corn is food for animals.

An important point brought out by the war-time food problem is that of the "scientific" make-up of the personal ration. Not only are the national food habits of a people often difficult to understand from a point of view of taste, but they are often of such a character as to lead to a most uneconomical use of food. The exigencies of a world food shortage and a shortage of shipping for food transport have made it necessary for food ministries and relief organizations to give careful consideration to the most economical selection of foods for import and distribution, both from the point of view of economy of space and weight and lack of deterioration during shipping and storage, and from that of concentrated nutritional values and proper balancing of the ration.

Food provides energy for bodily work and maintenance. It is the fuel for the human machine. Scientific students of nutrition measure the amount of energy thus provided, or the amount needed by the body, in units termed calories. Physiologists have determined by experiment the different amounts of calories produced by different kinds of foods and the varying amounts needed by men at rest, at light work, at hard work, by women and by children. By analyzing the make-up of a given population as to proportions of men, women and children, and of work done by them, it is possible to express the total food needs of the population in calories and to arrange for the most economical provision of the total calories necessary.

But the simple provision of the total sum of calories may by no means satisfy the real food needs of the population. For example, all the calories might be provided by potatoes alone, or grains alone, or meat or fats alone. But the population would starve under such circumstances. Food provides not merely the energy for the body, but the substances from which the body adds new tissue to itself during growth and reproduces its constantly breaking down tissues during all of life. Now while all kinds of food produce energy in greater or less quantity, only certain kinds are the source of new tissues. Hence there must be in the personal or national ration a sufficient proportion of the tissue-producing foods, the protein carriers, as well as a sufficient amount of the more strictly energy-producing foods, such as the fats and carbohydrates. And there is necessary, too, in any ration capable of maintaining the body in properly healthy condition, the presence in it, in very small quantities, of certain food substances called vitamines which have an important regulatory effect on the functioning of the body. These substances occur only in certain kinds of food.

All these things had to be taken into account in the war-time handling of food. So important was a proper knowledge of scientific food use and application of this knowledge, in connection with the efforts of the various countries to feed themselves most economically and to best effect in the light of their possibilities in the way of food supply, that every country concerned called on its scientific men to advise and help control the obtaining and distribution of its national food supply. For example, America and the Allies (England, France, Belgium and Italy) established an Inter-Allied Scientific Food Commission composed of experts who met at various times at London, Paris, and Rome, and on whose advice the determination, both as to kind and quantity, of the necessary importations of food from overseas to England, France, Belgium and Italy was largely made. Thus the war has done more to popularize the scientific knowledge of food, and to put into practice a scientific control of food-use than all the efforts of colleges and scientific societies and food reform apostles for years and years before. Calories, proteins, carbohydrates, fats and vitamines have been taken out of the dictionary and put into the kitchen.

America's special relation to the world's war food problem was primarily that of a provider of the Allies, but in order to insure that this provision should be sufficient to keep the Allied soldiers and war workers up to full fighting and working strength and their families in full health, it was necessary for America to stimulate its own production, repress considerably its consumption and cut out all possible waste in food handling. To do this there was needed some form of governmental food control and a nation-wide voluntary effort of the people. Each of the Allied countries had established governmental food control early in the war under the direction of a "food controller" either attached to an already existing government department of agriculture or commerce, or acting as an independent food minister.

On the actual entrance of America into the war in 1917, governmental food control was vested in a "United States Food Administration" with powers given it by Congress to control all exports of food and all food-handling by millers, manufacturers, jobbers, wholesalers, and large retail dealers. But no retail dealer doing a business of less than $100,000 a year, nor any farmer or farmers' coöperative association came under the Food Administration's control. Thus the American food administration differed from that of most European countries in that it had no authority to fix the prices at which the actual producers should sell their products or the small retailers should charge the consumers.

But, indirectly, it was able to do, and did, a good deal in this direction. By its direct control of exports, and of the millers, manufacturers and large dealers, it was able to cut out a great part of the middleman profits, and reduce wholesale prices for most staple foodstuffs, especially that most important one, flour. By publicity of prices and by indirect pressure through the wholesaler it was also able to restrain the further sky-rocketing of retail prices.

But if the Food Administration was limited in what it could effect by legal authority, there was no limit to what it could do by calling on the voluntary action of the people of the country, except by the possible refusal of the people to help. So there was set in movement a nation-wide propaganda for food-production and food-saving which resulted in the voluntary acceptance of wheatless and meatless days, voluntarily modified hotel and restaurant and dining-car meals, and the adoption of household pledges, taken by more than 12,000,000 American homes, to follow the Food Administration's suggestions for food-saving. All this, and the many other things which the Food Administration asked the people to do, and which the people did, resulted in accomplishing a very necessary thing. It enabled America not only to meet all those ever-increasing absolutely imperative calls of the Allies for food for their armies and people through 1917 and 1918, but to supply its own army and people sufficiently well to carry on the war effectively. The more food sunk by submarines, or prevented from coming to Europe from distant food sources, as Australia and Argentine and India, the more we provided by saving and increasing our production.

A few figures will illustrate the actual results of the call for food conservation. We entered the crop year of 1917 (July 1, 1917, to July 1, 1918), with a wheat supply which gave us only about 20,000,000 bushels available for export. By December 1, 1917, our surplus had gone overseas and an additional 36,000,000 bushels had been shipped to the Allies. In January we learned of the further imperative need of the Allies of 75,000,000 bushels. We responded by sending 85,000,000 bushels between the first of the year and the advent of the new crop. When the crop year ended we had sent in all about 136,000,000 bushels of wheat to Europe. We were assisted in these operations by the importation of 28,000,000 bushels of wheat from Australia and the Argentine to supplement our domestic supply, but the outstanding fact was the saving in our domestic consumption, most of which was accomplished in the six-months' period from January 1 to July 1, 1918.

But the cessation of the war did not produce food for the war-ravaged countries of Europe. The newly liberated peoples of Central and Eastern Europe found themselves, at the time of the Armistice, facing a period of starvation until their 1918 harvest could come in. Something to save these peoples had to be done quickly and on a large scale. The situation was met by the establishment of a new American governmental organization called the American Relief Administration which, with Mr. Hoover as director-general, worked in connection with the Inter-Allied Supreme Economic Council. Representatives of the A. R. A. were sent at once into all the countries crying for help to find out the exact food situation, and to arrange with the respective governments for the immediate beginning of the importation and distribution of staple foodstuffs. Programs for a food supply sufficient to last until the 1919 harvest were determined on a basis of minimum necessity, and provision for sufficient shipping and rail transportation was arranged by international agreement.

Modern war has thrown the spotlight on food. It has partly realized that famous prophecy of the Polish economist, Jean Bloch, who wrote, twenty years ago: "That is the future of war, not fighting, but famine." In the World War of 1914—18 there was fighting on a scale never before reached, but there was also famine, as never before dreamed of.

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By THE DIRECTOR OF THE COUNCIL OF NATIONAL DEFENSE

On August 9, 1919, Grosvenor B. Clarkson, Director of the Council of National defense, submitted to the Secretary of War, a report entitled "An Analysis of the High Cost of Living Problem." This report was the result of much careful study and investigation. It is non-academic in form and by omitting details presents a "panoramic view of the problem." It laid chief stress upon conditions since the armistice.

In the report the problem of the high cost of living is viewed as a permanent one. It was, in other words, not peculiar to past war conditions. Careful investigation by the Council has resulted in the following analysis of the problem.

In corroboration of the preceding analysis, the report cites statistical data gathered from various sources. The relation of currency and credit to prices is admirably epitomized in the following extract:

The inflation process is described as follows:

Despite the fact that we sent large shipments of food to our Allies, our supply at the close of the war was not seriously diminished. The 1919 crop, while not expected to be large, was amply sufficient to prevent a real shortage. This is supported by the following extract from Mr. Clarkson's report:

The meat situation is described as follows:

In view of the apparent abundance of food it is interesting to know the reason for the high price of foodstuffs. The Council of National Defense is of the opinion that the probability that the production of garden products in war gardens had fallen far below that of 1918, when, it is estimated, to have reached the value of $525,000,000, would not account for the high prices. Exportation and storage had not depleted our stock sufficiently to affect prices abnormally. In regard to the question of exports the report gives the following illuminating figures:

Concerning storage the same report states that:

The explanation of the post-war high prices of food is given as follows:

The price of commodities other than foodstuffs was influenced in 1919 by the inadequacy of supply and the curtailment of production. This was especially true of woolens, as stated by the Council:

The production of cotton and cotton goods also was far below normal. To quote again from the report:

The boot and show shoe industry showed a marked decline after the signing of the armistice. This, too, was borne out by the investigations of the Council.

What has been said of the production of cotton and woolen goods applied equally to the mining of coal and to the output of iron and steel. During the war we increased our coal production. In 1918 it amounted to "685,000,000 short tons, almost 50 per cent. of the world's estimated output for that year. Production for 1913 was 571,000,000 short tons." The coal situation since the armistice is stated as follows:

The production of iron and steel which was greatly stimulated by the war was allowed to decline as soon as the concentrated effort of the nation to win the war was abandoned. The resulting condition is succinctly described by the Council:

The Council summarized its findings and recommends remedial measures as follows:

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