Arthur L. Frothingham
Handbook of War Facts and Peace Problems

CHAPTER IX.

INTERNAL PROBLEMS OF PEACE FOR THE CITIZEN

The countries of Europe and Asia that have suffered colossal losses of property and life will call the next generation a period of reconstruction. For us it will rather be a period of rearrangement, of readjustment of our lives and activities in the light of what we have learned. What the Brotherhood of man really means we have learned by practical association with other peoples, by drawing closer together in our own land, by seeing in the Germans a horrible example of the nationalized hate of one race for all other races, and by seeing in Russia the still more horrible results of the hatred of one class for all other classes---both aiming at world tyranny.

We have taken account of stock of our country, on its good and its bad sides, and we have determined to get together and pull together to make it better and stronger.

America Self-Sustaining.---Another lesson we have learned is that we must make America as self-sustaining as possible so that we shall not again be caught unawares or be constantly paying unnecessary toll to other countries through indolence or ignorance.

It has taken us the whole period of the war, through efforts of our chemical geniuses with the help of German patents taken over in this country, to become even partly independent of German dyes and other chemical specialties and to free ourselves from German interference in our own land with our sources of supply of raw materials and manufactures. That is merely one instance of quite a general condition. England has had a similar experience, and has taken it to heart.

Educational Changes Imperative.---Over 500 of our universities and colleges were for a few months turned into incubating plants for army officers. When they were returned to their original condition, the question was often asked: Will these institutions make any big changes in their teaching on account of the lessons of the War? Must we not also reinforce the teaching body of our public school system?

These institutions are the guides to our people. The great force that made the German people love war, go to war, and practice frightfulness was the character of the education given from childhood. German education killed religion and morality. The splendid crusading spirit of our own soldiers was largely due to the democratic and ethical ideas at the basis of our own system of education.

At the same time, the statistics secured by the War Department by means of the draft examinations and reports of camp life, showed two alarming defects in our educational results: (a) a much larger percentage of illiteracy than we had supposed possible; (b) a great lack of Americanizing educational work among our foreign-born population. These facts stirred thinking elements of the country. To them it is now apparent that we have been falling behind during the past generation in our understanding of educational needs. In consequence, 200,000 of the first 2,000,000 men drafted into the National Army were illiterate in any language. Many thousands more could not understand the simplest order given in English, as they had not acquired our tongue. Schools had to be established in the cantonments to remedy these defects in so far as they interfered with preparations for war; and many of them had to teach the Primer and A, B, C to full grown American citizens. The first draft brought between 30,000 and 40,000 illiterates into our army.

Of American men of military age there are 700,000 who can neither read or write. There were 5,516,163 persons over 10 years of age in the United States, according to the Federal Census of 1910, illiterate in any language. Ten per cent. of our country folk cannot read the bulletins on agriculture, the food pledge cards, the liberty loan appeals, the newspapers, or the Constitution of the United States.

Americans are beginning now to realize that we are starving our teachers and in so doing are starving the soul of our Republic. Changes in their salaries have not corresponded to the increased cost of living. In New York State their increase has been only about 12% in the last 20 years, whereas the increase in wages of labor has been between 100 and 150% during this time.

By degrees the full meaning of our educational shortcomings was made known. One-fifth of our teachers, mostly those in rural districts, have no professional training and no educational training above the eighth grade. The average annual salary of public school teachers throughout the United States is only $543, and more than 100,000 of them are between 17 and 19 years of age.

Foreign Trade.---If we wish to occupy our rightful place in foreign trade, we should study the economic methods of expansion used by Germany during the thirty years before the war, because these methods were rapidly giving her the commercial mastery of the world. The political mastery for which this was the preparation has failed, but this failure is no excuse for not-learning what we properly can regarding the good side of technical German trade methods. These methods we should understand not only in order to get out of them what we can use but so that we can meet and defeat them in the struggle for trade existence that is about to begin. The best brief study of this subject is in "Germany's commercial grip on the world: Her business methods explained" by Henri Hauser, a French genius. He explains the monopolistic "kartel" system of Germany's international trade under government control.

Without placing our commerce under governmental direction, or losing the constructive elements of our individualism, we are beginning to acquire and practice "the spirit of association" not only through a closer union of manufacturers in each industry, but by close interrelation of those diverse factors that go to make up the whole sphere of commercial effort, especially the carriers, the banks, the producers of raw materials, aside from the two classes more directly concerned, the workers and the sellers. Nor must we forget the men of science and the inventors, whose co-operation is most essential. It was the German laboratories and their professors that made German business supreme even more than her great industrial magnates, banks and governmental support.

Emigration and Immigration.---What will be the natural trend in the movement of the floating population during the first years after the war? Will foreign labor rush in or will many of our foreign-born population return to their European homes? The ink was hardly dry on the armistice document when this question began to be a burning one both in the ranks of American labor and among foreign governments. The government of Italy was reported as asking our government not to place any obstacles in the way of an influx of Italians, for the reason that there would be a superabundance of man power in Italy, owing to her having called to the colors so many of her sons who were living abroad before the war. A bill was introduced in Congress prohibiting immigration to this country for four years.

American organized labor showed some nervousness at the prospect of an influx of foreign labor, lest it depress the high level of wages reached during war times. Is there any reason why American labor should be apprehensive on this score? There seems slight ground for any such fear. In fact we began to suffer at once from the opposite trouble, the return of our alien population to their native lands creating labor shortage. Moreover foreign labor has always fitted into our labor demands. Such necessary work as the expansion of our railroads and the improvement of our various means of communication and our harbors will, among other things, absolutely require foreign labor, because our own people do not care for this class of work.

What Are Our Dangers?---We have some problems to face that are dangerous, however---political, social, economic, and educational problems.

Of the political the most obvious are:

(1) The relation between the executive, the legislative, and the administrative powers. Are we going to reaffirm and clarify the supremacy of Congress? Are we going to escape the dangers of one-man power? Is the concentration of power merely a result of the war?

(2) The relation of the government to public utilities. What is to be the people's verdict as to the management and ownership of public utilities? Are we to have any form of state socialism? Is politics to be introduced into this big field? Is individual ambition to be curtailed by bureaucratic supremacy?

Of the social and economic dangers the most general are:

(1) The attitude of the country toward socialism and revolutionary bolshevism. Are we to drift into the social anarchy that is threatening Europe?

(2) The attitude of labor toward business. Is there to be an increasing good feeling and co-operation between organized labor and big business? Or are those croakers to be justified who are writing and speaking of the coming class war?

(3) The readjustment of occupations. Is the return of our soldiers to civil life producing any dislocation of industries? How about our women workers?

(4) What are we to do with our Merchant Marine, and how much of our war left-overs will be of permanent use?

Our Government.---Our people must study more than ever the practical workings of our government in order to decide intelligently the questions that must be faced in the political field so that they can influence their representatives in Congress. The autocratic powers that Congress gave to the President for the duration of the war gave him more actual power in every branch of the government than any ruler in Europe enjoys. He practically received a blank check. The result has been temporary state socialism. This must be studied in two quite distinct fields : in the relation of Congress to the administration and in the relation of the administration to the public utilities of the whole country.

Our government by the people, a representative government and not a primary democracy, is so planned as to make the various branches act as checks upon one another. During the war Congress practically gave up this checking power. It will naturally be part of the process of readjustment that it should resume this function, as otherwise our government will no longer be truly democratic.

The second question which has caused even a wider agitation is that of government control or ownership of the public utilities, especially the railroads, telegraph, telephone, cable and express companies, and also of the new merchant marine. The arguments urged in favor of it are: (1) greater unity of administration with elimination of duplication of offices, of material, etc.; (2) greater economy with elimination of waste; (3) greater attention to the public needs. The arguments against it are: (1) that it introduces politics into business and gives the administration a couple of million employees practically bound to vote for it; (2) that it would enshrine in our democracy a vicious bureaucracy that would kill ambition, individuality, and genius; (3) that government management or ownership instead of being more efficient and economical than private ownership is notoriously more extravagant and inefficient, as shown for example by the way our railroads have been run with a loss of about $1,000,000,000 in a year and a half of government management, notwithstanding the great increase in rates, both passenger and freight. The handling of the express, telegraph, and telephone companies has been equally unsatisfactory to the public, as well as to the companies.

Readjustment of Occupations.---The first question that was asked when the armistice had been signed was: How are we going to return three million men to private life without a social convulsion and great hardships and delay? This problem seemed bigger than it really was, for the business world was ready to absorb all comers. We hardly realize how many peace industries had suspended operation, the mere reopening of which would offer positions in large numbers. The difficulty was largely one of adjustment---of bridging a gap. Business is eager enough to act again on a big peace scale, with present high prices. There is only one new element to take into account: the body of women who entered into so many fields that had previously been reserved for men.

On the other hand there are at least three new fields that will call urgently to young men of ambition and ability; the new merchant marine, the field of foreign trade, and the development of a colossal farming industry on a new and gregarious and not isolated basis. Our government will help in organizing all this work as well as in that of the development of our farms.

Soldiers on the Farm.---Indeed Secretary Lane has already asked Congress for $100,000,000 to develop farming land and to help the returning soldiers to become expert farmers in the right environment, and he has elaborated a plan for helping returning soldiers to settle on farms. There is an inexhaustible quantity of land unused but available for cultivation. Congress has appropriated a fund for an examination of these resources. There are about 200,000,000 acres, state-owned or private-owned that are reclaimable by irrigation, by draining, or by clearing. The government itself owns land enough to keep every man busy. Water is available at once for between 15,000,000 and 20,000,000 acres of arid land. It is by no means only unbroken land in the West that is available or most inviting. Parts of old plantations in Maryland and Virginia can be bought for less. Between Washington and New Orleans are over 40,000,000 acres of unused land, and a great deal of abandoned land is in Eastern States, especially New York and Massachusetts.

It is planned to make it attractive for the returning soldiers to become farmers by giving them land, by giving them facilities for the necessary training that will enable them to become successful farmers, by planning farm settlements or communities that will do away with the old-fashioned isolated life of the farmer and establishing centres with most of the-advantages of small cities. Canada has already started on this work.

The government aims to effect a radical revolution in farming, by giving it a place among the profitable industries of the country that shall make it attractive for ambitious young men. The fact that our farmers, as a class, have hitherto been unfairly treated has finally been recognized by the government. No more patriotic work could be undertaken than fostering every move that will help our people to return from our overcrowded cities to the broad, fruitful, and health-giving fields.

Our Food Problem.---We are told that we shall be called upon to feed some part of the rest of the world for five years more. For two years at least we shall be obliged to practice as vigorous a food economy as in 1918, and therefore there must be constant propaganda against a return to our former wastefulness or even indulgence. We must especially fight profiteering, encourage community markets and community feeding. We must develop our fishing business for the benefit of the people and not of fish combines. Our young men will come back from France with many new ideas about food, attractive cooking, and economy. Families ought carefully to gather points for the improving of our national meagre and crude methods of cooking. What the war has taught us in community canning and dehydration, new recipes and new foods, must be developed for the sake of our health and our pocketbooks.

Mr. Hoover, after his wide experience as American Food Controller, was put at the head of the International Commission for feeding the world, and Congress, at the request of President Wilson, appropriated $100,000,000 for this purpose.

Our Peace Duties Toward Belgium and France.---We must not abandon Belgium with our work for her only half done. We must not only keep her population alive with our food, but we must furnish her with the machinery, the raw materials, and the live-stock that are necessary to the reconstruction of the country's industrial life. Germany, we must remember, stripped her bare: stole or destroyed everything. Belgian hands have now nothing to work with. Our bankers, our manufacturers, and our handlers of raw materials must show the greatest altruism in giving Belgium all she needs.

Northern France needs the same kind of help. There were 26,000 factories and industrial establishments in the part destroyed by the Germans and they furnished a third of the total industrial output of France. Buildings, tools, machinery, models, everything is now destroyed, and at present prices their restoration will cost about three times their original cost. It will be years before any adequate return for the outlay can be expected. Germany's idea of utter industrial annihilation was thoroughly carried out, and it will be our joyful duty to counteract from our splendid resources this diabolic plan.

We are also assuming the same obligations towards Serbia , Armenia, and Poland, and the government's gifts are being supplemented by large private funds, such as the Near East Fund, and the Relief Funds organized by the Methodist and other churches.

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ILLUSTRATIVE EXTRACTS.

How Congress Has Provided for Demobilization of War Agencies.

Congress has provided for the dissolution of the great American war machine with the coming of peace. The collateral agencies are limited as follows:

Appropriations and increased personnel for aircraft were limited to "the present emergency," and the authority of the President under the emergency shipping fund, created June 16, 1917, ends six months after the proclamation of peace.---(N. Y. Tribune, November 14, 1918.)

Illiteracy in the United States.

The war has brought facts to our attention that are almost unbelievable and that are in themselves accusatory. There are in the United States (or were when the census was taken in 1910) 5,516,163 persons over 10 years of age who were unable to read or write in any language. There are now nearly 700,000 men of draft age in the United States who are, I presume, registered who can not read or write in English or in any other language.

Over 4,600,000 of the illiterates in this country were 20 years of age or more. This figure equals the total population of the States of California, Oregon, Washington, Montana, Idaho, Wyoming, Colorado, Utah, Nevada, Arizona, New Mexico, and Delaware. The percentage of illiterates varies in the several States from 1.7% in Iowa to 29% in Louisiana. More than 10% of it was in 13 states. Half of the illiterates were between 20 and 45 year, of age . . . . . . Over 58% are white persons, and of these 1,500,000 are native-born whites.

I beg you to consider the economic loss arising out of this condition. If the productive labor value of an illiterate is less by only 50 cents a day than that of an educated man or woman, the country is losing $825,000,000 a year through illiteracy. This estimate is no doubt under rather than over the real loss. The Federal Government and the States spend millions of dollars in trying to give information to the people in rural districts about farming and home making. Yet 3,700,000, or 10% of our country folk can not read or write a word. They can not read a bulletin on agriculture, a farm paper, a food-pledge-card, a liberty-loan appeal, a newspaper, the Constitution of the United States, or their Bibles, nor can they keep personal or business accounts. . . . An uninformed democracy is not a democracy. . . . (Secretary Lane's Annual Report for the year 1918, p. 38.)

Community Organization Recommended by Council of National Defense.

To meet emergencies of the readjustment and demobilization period, the Council of National Defense, through the state and territorial councils and its woman's committee, has asked that legislation be instituted in the various states to provide for the development of wholesome community organization under a permanent state leadership on a non-partisan basis to succeed the present system. This announcement was made by. Grosvenor B. Clarkson, director of the United States Council of National Defense.

The council recommends that the proper functions be vested in commissions composed of such state departments as those dealing with education, agriculture, and labor, which are in most intimate contact with communities. By this means it is felt that the organized community and the state executive departments will reach the maximum of co-operation and mutual assistance.

"It is plain," Mr. Clarkson declared "that the great lesson of the war to America has been the inter-dependency of social effort. It is equally plain that permanent dividends for the future should be drawn from this wartime co-operation. The Council of 'National Defense believes that community organization will bring into our national life a much-needed element of co-operative endeavor and civic orderliness which will make for democratic and efficient public service.

"It will develop an intelligent community interest and sense of responsibility in the improvement of the buildings, grounds, streets, and parks of the community and in the community health, sanitation, and general welfare; and it will lead to action on behalf of the whole community upon these matters. It will provide a ready contact between the community and the forces of the state and nation so that the community may become articulate on state and national affairs and so that at any time the assistance of all members of the community can be quickly mobilized by the state or nation to meet new problems or emergencies."---(Newspapers of January 23-25, 1919.)

Labor and Wages.

Shortage of labor has been a chronic condition in this country. We have empires in our waste places awaiting reclamation: there are deserts to irrigate, swamps to drain, highways to build, railroads to extend.

There are huge private construction enterprises also awaiting an opportunity to get under way. It has been estimated that at least $500,000,000 worth of such undertakings can be started at once. Experts have declared that fully five years and as many billions of dollars will be required to catch up with our general building requirements. In brief there is more work to be dome in this country than we shall have labor to accomplish, if we take full advantage of our unequalled opportunities. . . .

There can be no arbitrary reduction of wages to the pre-war basis. Were such folly attempted, employers would suffer as much as employees, and capital as much as labor. That there will be a gradual readjustment is inevitable, but we should remember that for every loss there is some compensation. If wages are gradually lowered there will also be an accompanying reduction in prices; consequently, labor will lose none of the just advantages gained during the war, and of which no far-seeing employer would desire to deprive labor. But labor must accept its readjustment of dollar value like the rest of us.

Let us hope that Americans will be so busy from now on that peace production will be great enough to maintain wages at a high level. And let us hope also that employers and wage-earners will carry into the transition period, and into the future for all time the realization, awakened by patriotism during the war, of their joint responsibility, and that they will perceive the wisdom and the blessings of industrial peace. The spectacle afforded by Russia today ought to be a lesson of what any other course may develop.---("Mobilizing for Peace," address by Francis H. Sisson, November 26, 1918, at Newark, N. J.)

Importance of Merchant Ships.

No people living unto itself alone has ever been truly great. Commerce has been the world's greatest civilizing influence; and it has frequently happened that wealth and power and the opportunity to serve mankind have been intrusted to nations whose territorial dominions were inconsequent and whose people were numerically puny. . . .

A hundred years ago America gave promise of sharing honors with the parent nation (England). From 1793 to 1842 more than four-fifths of all the imports and exports of the United States were carried in American bottoms; from 1843 to 1862 the proportion declined to three-fourths. The next quarter century saw it diminish to one-fourth, and finally to only a little more than one-tenth, from 1887 to 1913.---("Ships for the Seven Seas," by R. A. Graves, in National Geographic Magazine, Sept. 1918.)

The American People Must Become Ship-Minded.

Looking back twelve months to the time when we faced the task of building 150 new shipyards for merchant tonnage, and when only two complete new ships had been delivered to the Shipping Board, I feel that we have not only made creditable progress against overwhelming difficulties, but that the thought of the nation has followed us and made even greater progress in the building of sound public opinion.

War has taught every class of American producer the vital importance of ships.---(Edward N. Hurley, Chairman, U. S. Shipping Board, in the National Geographic Magazine, September, 1916.)

Statement of What the Shipping Board at One Time Hoped To Do.

It will require $5,000,000,000 to finish our program for 1918, 1919, and 1920, but the expenditure of this enormous sum will give to the American people the greatest merchant fleet ever assembled in the history of the world---a fleet which I predict will serve all humanity loyally and unselfishly upon the same principles of liberty and justice which brought about the establishment of this free republic. The expenditure of this enormous sum will give America a merchant fleet aggregating 25,000,000 tons of shipping. . . .

If in 1919-20 we have the passenger and cargo tonnage we have planned, we will be in a position to establish a weekly passenger service between New York and Rio de Janeiro, Montevideo, Buenos Ayres, and Caracas on the east coast, and weekly service between Colombia, Ecuador, Peru, and Valparaiso, Chile, on the western coast. On the west coast we now have two fast passenger steamers plying between New York and Valparaiso. These are the first to carry the American flag on that route. They have cut the time between these two important cities from 27 to 18 days---a saving of 9 days.

Our Central American neighbors, Mexico, Guatemala, Nicaragua, Honduras, and Costa Rica must all have the very best passenger and cargo service, as must all of our South American neighbors. . . .

On the Pacific we must provide sufficient tonnage to meet Russia's requirements. China also has many commodities which we require.

What better use can we make of our merchant marine than to assure to these countries the best possible regular steamship service? . . . .

We have established a shipbuilding industry that will make us a great maritime nation. We have today under contract and construction 819 shipbuilding ways including wood, steel, and concrete, which is twice as many shipbuilding ways as there are in all the rest of the shipyards of the world combined. Our program for the future should appeal to the pride of all loyal and patriotic Americans.

It calls for the building of 1,856 passenger, cargo, refrigerator ships and tankers, ranging from 5,000 to 12,000 tons each, with an aggregate deadweight tonnage of 13,000,000. We are also contracting for 200 wooden barges, 50 concrete barges, 100 concrete oil carrying barges, and 150 steel, wood, and concrete tugs of 1,000 horsepower for ocean and harbor service, which aggregate a total deadweight tonnage of 850,000.

Exclusive of the above, we have 245 commandeered vessels, taken over from foreign and domestic owners, which are being completed by the Emergency Fleet Corporation. These will average 7,000 tons and aggregate a total deadweight tonnage of 1,715,000.

This makes a total of 2,101 vessels.

With these great expansions of our marine in view, great training stations for seamen are being developed. Uncle Sam must supply his ships with skilled men, to keep pace with the growth of his cargo carrying trade. . . . . For this purpose schools of seamanship will be distributed on the coasts, near ports, and under the control of the government. Seamanship will emerge into an American trade of skilled and properly paid proportions. Training service will be given upon ships in the service, and no seaman will be sent to sea until qualified(Stephen Marshall, in the Forum, October, 1918. Charles Piez, director of the Emergency Fleet Corporation, stated January 23, 1919, that the actual ship construction in the United States in 1918 totaled 5,054,055 tons.)

Program of the Food Administration.

The nation's obligation and opportunity to serve stricken humanity in war-torn Europe by helping to provide sustenance until the next harvest will demand further sacrifices by the American people. Conditions of famine exist in Europe, that will be beyond our power to remedy, even with the carrying out of the plan to ship from America 201,000,000 tons of foodstuffs during the next year. In Northern Russia alone there are 40,000,000 people who have but little chance of obtaining food this winter . . . . .

This being the new world situation, created by the collapse of the war, the prime changes in our policies on today's outlook can be summarized. That we may now advantageously abandon the use of substitutes in our wheat bread; that we will still require economy and elimination of waste in its consumption; that for the present we need conservation in butter and condensed milk; that ultimately we must extend this to all the fats. There is one policy which cannot change, and that is the vital necessity to simplify living, to economize in all consumption of commodities more or less substitutes for each other. We must realize that the spectre of famine abroad now haunts the abundance of our tables at home.

We have now to consider a new world situation in food. We have to frankly survey Europe, a Europe of which a large part is either in ruins or in conflagration; a Europe with degenerated soils and depleted herds; a Europe with the whole of its population on rations or varying degrees of starvation, and large numbers who have been under the German heel actually starving.

The matter of prime importance to us is how much of each commodity the exporting countries can furnish between now and next harvest and how much is necessary to the importing countries in which we have vital interest, in order to maintain health and public order in the world,

A computation on this basis shows this situation until the next harvest. A shortage of about 3,000,000,000 pounds in pork, and in dairy products of about 3,000,000 tons. Of beef, there are sufficient supplies to load all refrigerating ships' capacity, and there will be enough of other foodstuffs, provided the utmost economy is practised by the American public. Although the sugar that will be available is ample for normal consumption here if other nations retain their present short rations, any increase in Europe will create a world shortage. There is a surplus of coffee.

North America will have to furnish 60 per cent. of the world's supply of foodstuffs, and the United States and the West Indies will be able to export 20,000,000 tons, as against a pre-war normal of 6,000,000 tons.

The food policy of the United States has contributed to this ability to increase shipments and the nation should be particularly congratulated on two measures taken---a guaranteed price for wheat and maintenance of the price of hogs to the farmer through export control, thus stimulating production and lessening the world shortage of fats to some degree. There will be a shortage under the normal world supply of fats for two or three years, and pork production must be maintained. Of America's export possibilities in fats, the largest item will be pork products.---(Mr. Hoover's address to a Conference of Food Administrators in Washington, November 12, N. Y. Times, November 13, 1918.)

Feeding the World.

I am going to Europe to discuss the further food measures that must be organized as a result of the cessation of hostilities. The food problem in Europe today is one of extreme complexity. Of their 420,000,000 (people) practically only three areas---South Russia, Hungary, and Denmark---comprising say 40,000,000 have sufficient food supplies to last until next harvest without imports. Some must have immediate relief.

Arrangements have long since been completed by which the big Allies---that is France, England, and Italy---will be provisioned. This covers 125,000,000 people.

Our first and deepest concern now must be for the little Allies who were under the German yoke---they are the Belgians, Serbians, Rumanians, Greeks, Czechs, Jugoslavs, and others. There are some 75,000,000 people in these groups, and they must be systematically helped, and at once. We have already doubled the stream of food flowing toward Belgium.

Our next concern must be to relax blockade measures as far as possible in order that the neutral states in Europe, which are now all on short rations, should be able to take care of their people and prevent the growth of anarchy. This is another group of about 40,000,000.--- (From Mr. Hoover's statement, see N. Y. Times, November 17, 1918.)

Alien Property Custodian's Report

When the original trading with the enemy act was passed a full realization of the German industrial menace had not dawned upon the lawmaking body. The design of Germany in planting an industrial and commercial army upon American soil was only vaguely felt, and Congress followed the custom of other war-time legislation in making provision for the conservation and safekeeping of enemy-owned property in this country, without any attempt to employ the power of the government as a war weapon to destroy the German hold upon American industry and commerce.

The Alien Property Custodian was given the power of a common law trustee to manage and operate the property within his control, and to dispose of the same only, if, and when necessary to prevent waste and protect the property.

After a large bulk of this enemy property had come. under our hand, and we were able to piece together the picture of Germany's industrial aggression during the last forty years, there came not only a fuller realization of the hostile nature of Germany's industrial investment in America, but also of the powerful weapon against the foe which lay ready at our hands.

Shaking Off the German Thing.---The Congress then adopted the Americanization idea. On March 28, 1918, an amendment to the trading with the enemy act was passed, giving to the Alien Property Custodian the general power of sale, providing only that enemy property should be sold at public auction to American citizens, except in cases where the public interest would best be served by private sale, to be determined by the President.

Under this amendment it has been possible for the Alien Property Custodian to make a big start in the work of divorcing German capital from American industry. When I came to carrying out my selling program, however, I met with two very serious obstacles. I found that some of the most important of the German-owned industries in this country were operating under patents issued by the United States government to German subjects, which patents were being used and enjoyed by the American corporations owned by the enemy and which had never been formally assigned and were still the property of German subjects. I found further that Germany had taken out thousands of patents upon articles produced under similar patents in Germany, for the sole purpose of preventing the manufacture of the patented articles in this country, and thereby forcing the importation of the German product into the American markets.

In Chemical Lines.---No domestic encouragement of any sort can operate to build up an American business in the face of such conditions. This was particularly true in all chemical lines. We have to confess, I think, that Germany has been ahead of America in the commercial application of the science of chemistry. The great dyestuff, pharmaceutical, and chemical business which Germany built up gave her a practical monopoly of the American markets, either because she controlled subsidiary corporations here which were permitted to use some of her patents or because she effectually shut off American effort by preventing the development of chemistry and its uses in industry in this country by her patents of processes and products.

The trading with the enemy act did not permit me to demand and take over those enemy-owned patents. Consequently, I faced the possibility of being required to sell American corporations to American citizens divested of their chief assets, and, more than that, of subjecting the American purchasers to ruinous competition with the cartel-controlled industries of Germany in some lines where American markets had been closed to American producers by German patent monopoly here. Germany, by the way, early in the war appreciated the value of American patents held in Germany and took steps to place them effectively in German hands.

The other obstacle was the difficulty in making title to American purchasers of stock, because the certificates representing the enemy ownership were beyond our reach, being in the strong boxes of the owners in the enemy countries. By an amendment to the trading with the enemy act, approved November 4, 1918, both these obstacles have been removed. The Alien Property Custodian was thereby empowered to demand and take over enemy-owned patents, to require corporations to issue to him new certificates of stock in lieu of certificates which cannot be produced for transfer by reason of their being in the enemy country.

Auction Sales.---It thus became possible for the Alien Property Custodian . . . . to sell at public auction to American citizens all of the interest of enemy persons in American industrial and commercial businesses, where that interest was large enough to either influence or control the business.

No greater favor could have been shown to Germany than by carefully managing and conserving these enemy properties as against the time when, at the conclusion of the war, upon accounting for the properties in kind, the former German owners could take up the invasion of American industry and commerce on the very salient which they had driven in before the war . . . . . .

Never to Be Theirs Again.---It is safe to say that the business which the Germans built up in America will be forever lost to them.

No other course is compatible with the safety of American institutions. No other course will make the American field of industry and commerce "safe for democracy," for the German autocracy was quite as apparent in its economic exploitation of the world as in its governmental and military domination of Central Europe. . . . . (A. Mitchell Palmer, Alien Property Custodian, N. Y. Tribune, January 8, 1919. In his report published March 10, he states that 35,400 alien properties were taken, of a value exceeding $700,000,000.)

The Railroads' Own Plan

The sudden cessation of active warfare has brought about serious reconstruction questions, and none more important than the future relations and policy of the government to the railroads which are still under Federal control. . . . . The Senate Committee on Interstate Commerce has been sitting for months in Washington taking testimony bearing upon the important question of a future national railroad policy, before formulating that policy and deciding the legislation required to make it effective.

The railroad executives . . . . . . recommended a plan which in their judgment, could be made effective in the war reconstruction period, and would protect the interests of the public, the railroad owners, and employees. Before the railroads are released from Federal control suitable legislative action must be taken whereby all interests will be adequately protected, and the country assured of a progressive transportation system, and the railroad owners a fair return upon their investment. This is not only justifiable but necessary to keep the railroad corporations' credit in sound condition, and to attract additional capital essential to enable the companies to expand their lines and facilities to meet the requirements of a still rapidly growing country.

While these necessities have heretofore been measurably recognized, the railroad companies have been unable to secure adequate revenues to produce those results, and the existing Federal and State laws and conflicting regulations do not concentrate the responsibility upon any of the Federal or State regulatory authorities. Under restrictive national and State laws and regulations the companies have not been able to obtain, for the good of the country, the benefits that reasonably could have been secured from closer co-operation and unification of their service and facilities, the elimination of duplicate train service and facilities, and from other operating economies. It is hoped that these and other deficiencies in our regulatory system will be dealt with by both national and State legislation in such effective fashion as to stabilize railroad credit on a sound basis, and maintain the confidence of investors in railroad securities. The railroad stocks and bonds are owned by many millions of citizens, individually and through their savings, insurance, and other institutions, and, judged by past results on our railroads, compared with those of other countries, it ought to be the national policy to encourage such ownership, instead of government ownership, which inevitably means political operation, with all of its consequent civic dangers, increased costs, and lack of development to meet commercial demands.

This ownership and a sound national railroad policy it is believed can be secured under the plan submitted by the railroad executives without disturbance of business, or placing an additional financial burden upon the government, and in such a way as to preserve private initiative and operation of railroads, under which the country has had such remarkable development in the past. The main features recommended by the railroad executives are: a Federal statutory rule to insure rates that will produce a return sufficient to attract new capital into the railroad business and pay a reasonable return on the existing investment; the concentration of responsibility in the Federal government for the regulation of rates, wages, and security issues, relief from the restrictive Federal and State laws which prevent the further unification of existing railroads and co-operation between them as to the use of their terminals, equipment, ticket offices, and other transportation facilities and service. Under any policy of fair regulation and adequate rates, the railroads require no financial assistance from the government.--- (From President Rea's Annual Report of the Penn. R. R., N. Y. Times, March 4, 1919.)

Chapter Ten

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