The American Empire Part 17

6. _Business in Control_

After the declaration of war, the mobilization and direction of the economic war work of the government was placed in the hands of the Council of National Defense, an organized group of the leading business men. The Council consisted of six members of the President's Cabinet, a.s.sisted by an Advisory Commission and numerous sub-committees. The "Advisory Commission" of the Council (the real working body) contained four business men, an educator, a labor leader and a medical man. ("The Council of National Defense" a bulletin issued by the Council under date of June 28, 1917.)

Each member of the Advisory Commission had a group of persons cooperating with him. The make-up of these various committees was significant. Among 706 persons listed in the original schedule of sub-committees, 404 were business men, 200 were professional men, 59 were labor men, 23 were public officials and 20 were miscellaneous. It was only in Mr. Gompers' group that labor had any representation, and even there, out of 138 persons only 59 were workers or officials of unions, while 34 were business men and 33 professional men, so that among Mr. Gompers' a.s.sistants the business and professional men combined considerably outnumbered the labor men.

The make-up of some of the sub-committees revealed the forces behind the Defense Council. Thus Mr. Willard's sub-committee on "Express" consisted of four vice-presidents, one from the American, one from the Wells-Fargo, one from the Southern and one from the Adams Express Company. His committee on "Locomotives" consisted of the Vice-President of the Porter Locomotive Company, the President of the American Locomotive Company, and the Chairman of the Lima Locomotive Corporation.

Mr. Rosenwald's committee on "Shoe and Leather Industries" consisted of eight persons, all of them representing shoe or leather companies. His committee on "Woolen Manufactures" consisted of eight representatives of the woolen industry. The same business supremacy appeared in Mr.

Baruch's committees. His committee on "Cement" consisted of the presidents of four of the leading cement companies, the vice-president of a fifth cement company, and a representative of the Bureau of Standards of Washington. His committee on "Copper" had the names of the presidents of the Anaconda Copper Company, the Calumet & Hecla Mining Company, the United Verde Copper Company and the Utah Copper Company.

His committee on "Steel and Steel Products" consisted of Elbert H. Gary, Chairman of the United States Steel Corporation; Charles M. Schwab, of the Bethlehem Steel Company; A. C. d.i.n.key, Vice-President of the Midvale Steel Company; W. L. King, Vice-President of Jones & Loughlin Steel Company, and J. A. Burden, President of the Burden Steel Company. The four other members of the committee represented the Republic Iron and Steel Company, the Lackawanna Steel Company, the American Iron and Steel Inst.i.tute and the Picklands, Mather Co., of Cleveland. Perhaps the most astounding of all the committees was that on "Oil." The chairman was the President of the Standard Oil Company, and the secretary of the committee gives his address as "26 Broadway," the address of the Standard Oil Company. The other nine members of the committee were oil men from various parts of the country. What thinking American would have suggested, three years before, that the Standard Oil Company would be officially directing a part of the work of the Federal Government?

Comment is superfluous. Every great industrial enterprise of the United States had secured representation on the committees of business men that were responsible for the direction of the economic side of war making.

Then came the Liberty Loan campaigns and Red Cross drives, the direction of which also was given into the hands of experienced business men. In each community, the leaders in the business world were the leaders in these war-time activities. Since the center of business life was the bank, it followed that the directing power in all of the war-time campaigns rested with the bankers, and thus the whole nation was mobilized under the direction of its financiers.

The results of these experiences were far-reaching. During two generations, the people of the United States had been pa.s.sing anti-trust laws and anti-pooling laws, the aim of which was to prevent the business men of the country from getting together. The war crisis not only brought them together, but when they did a.s.semble, it placed the whole political and economic power of the nation in their hands.

The business men learned, by first hand experience, the benefits that arise from united effort. They joined forces across the continent, and they found that it paid. James S. Alexander, President of the National Bank of Commerce (New York), tells the story from the standpoint of a banker (_Manchester Guardian_, January 28, 1920. Signed Article.) In a discussion of "the experience in cooperative action which the war has given American banks" he says, "The responsibility of floating the five great loans issued by the government, together with the work of financing a production of materials speeded up to meet war necessities, enforced a unity of action and cooperation which otherwise could hardly have been obtained in many years."

7. _Economic Winnings_

The war gains of the plutocracy in the field of public control were important, as well as spectacular. Behind them, however, were economic gains--little heralded, but of the most vital consequence to the future of plutocratic power.

The war speeded production and added greatly to the national income, to investable surplus, to profits and thus to the economic power of the plutocrats.

The most tangible measure of the economic advantage gained by the plutocracy from the war is contained in a report on "Corporate Earnings and Government Revenues" (Senate Doc.u.ment 259. 65th Congress, Second Session). This report shows the profits made by the various industries during 1917--the first war year.

The report contains 388 large pages on which are listed the profits ("percent of net income to capital stock in 1917") made by various concerns. A typical food producing industry--"meat packing"--lists 122 firms (p. 95 and 365). Of these firms 31 reported profits for the year of less than 25 percent; 45 reported profits of 25 but under 50 percent; 24 reported profits of 50 but under 100 percent, and 22 reported profits of 100 percent or more. In this case, a third of the profits were more than 25, but less than 50 percent, and half were 50 percent or over.

Manufacturers of cotton yarns reported profits ranging slightly higher than those in the meat packing industry (pp. 167, 168, 379). Among the 153 firms reporting, 21 reported profits of less than 25 percent; 61 reported 25 but less than 50 per cent; 55 reported 50 but under 100 percent, and 16 reported 100 percent or more.

Profits in the garment manufacturing industry were lower than those in yarn manufacturing. Among the 299 firms reporting (pp. 171, 380) 74 gave their profits as less than 25 percent; 121 gave their profits as 25 but under 50 percent; 65 gave profits of 50 but less than 100 percent, and 39 gave their profits as 100 percent or over.

The profits of 49 Steel plants and Rolling Mills (pp. 100, 365) were considerably higher than profits in any of the industries heretofore discussed. Four firms reported profits of less than 25 percent; 13 reported profits of 25 but less than 50 percent; 17 reported profits of 50 but less than 100 percent, and 15 reported profits of more than 100 percent. In this instance two-thirds of the firms show profits of 50 percent or over.

Bituminous Coal producers in the Appalachian field (340 in number, pp.

130 and 372) report a range of profits far higher than those secured in the manufacturing industries. Among these 340 firms, 23 reported profits of less than 25 percent; 45 reported profits of 25 but under 50 percent; 79 reported profits of 50 but under 100 percent; 135 reported profits of 100 but under 500 percent; 21 reported profits of 500 but under 1,000 percent, and 14 reported profits of 1,000 percent and over. In the case of these coal mine operators only a fourth had profits of under 50 percent and half had profits of more than 100 percent.

The profits in these five industries--food, yarn, clothing, steel and coal--are quite typical of the figures for the tens of thousands of other firms listed in Senate Doc.u.ment 259. Profits of less than 25 percent are the exception. Profits of over 100 percent were reported by 8 percent of the yarn manufacturers, by 13 percent of the garment manufacturers, by 18 percent of the meat packers, by 31 percent of the steel plants, and by 50 percent of the bituminous coal mines. A considerable number of profits ranged above 500 percent, or a gain in one year of five times the entire capital stock.

When it is remembered that these figures were supplied by the firms involved; that they were submitted to a tremendously overworked department, lacking the facilities for effective checking-up; and that they were submitted for the purposes of heavy taxation, the showing is nothing less than astounding.

8. _Winnings in the Home Field_

What has the American plutocracy won at home as a result of the war? In two words it has gained social prestige and internal (economic) solidarity. Both are vital as the foundation for future a.s.sertions of power.

The plutocracy has unified its hold upon the country as a result of the war. Also, it has won an important battle in its struggle with labor.

The position held by the American plutocracy at the end of the Great War could hardly be stated more adequately than in a recent Confidential Information Service furnished by an important agency to American business men:

"SHALL VICTORS BE MAGNANIMOUS?

"There is no doubt about it--Labor is beaten. Mr. Gompers was at his zenith in 1918. Since then he has steadily lost power. He has lost power with his own people because he is no longer able to deliver the goods.

He can no longer deliver the goods for two reasons. For one thing, peace urgency has replaced war urgency and we are not willing to bid for peace labor as we were willing to bid for war labor. For another thing, the employing cla.s.s is immensely more powerful than it was in 1914.

"We have an organized labor force more numerous than ever before.

Relatively twice as many workers are organized as in 1916. But this same labor force has lost its hold on the public. Furthermore, it is divided in its own camp. It fears capital. It also fears its own factions. It threatens, but it does not dare.

"We said that the employing cla.s.s was immensely more powerful than in 1914. There is more money at its command. Eighteen thousand new millionaires are the war's legacy. This money capacity is more thoroughly unified than ever. In 1914 we had thirty-thousand banks, functioning to a great degree in independence of each other. Then came the Federal Reserve Act and gave us the machinery for consolidation and the emergency of five years war furnished the hammer blows to weld the structure into one.

"The war taught the employing cla.s.s the secret and the power of widespread propaganda. Imperial Europe had been aware of this power. It was new to the United States. Now, when we have anything to sell to the American people we know how to sell it. We have learned. We have the schools. We have the pulpit. The employing cla.s.s owns the press. There is practically no important paper in the United States but is theirs!"

9. _The Run of the World_

The war gains of the American plutocracy at home were immense. Even more significant, from an imperial standpoint, were the international advantages that came to America with the war. The events of the two years between 1916 and 1918 gave the United States the run of the world.

Destiny seemed to be bent upon hurling the American people into a position of world authority. First, there was the matter of credit. The Allies were reaching the end of their economic rope when the United States entered the war. They were not bankrupt, but their credit was strained, their industries were disorganized, their sources of income were narrowed, and they were looking anxiously for some source from which they might draw the immense volume of goods and credit that were necessary for the continuance of the struggle.[47]

The United States was that source of supply. During the years from 1915 to 1917, the industries of the United States were shifted gradually from a peace basis to a war basis. Quant.i.ties of material destined for use in the war were shipped to the Allies. The unusual profits made on much of this business were not curtailed by heavy war taxation. Thus for more than two years the basic industries of the United States reaped a harvest in profits which were actually free of taxation, at the same time that they placed themselves on a war basis for the supplying of Europe's war demand. When the United States did enter the war, she came with all of the economic advantages that had arisen from selling war material to the belligerents during two and a half years. Throughout those years, while the Allies were bleeding and borrowing and paying, the American plutocracy was growing rich.

When the United States entered the war, she entered it as an ally of powers that were economically winded. She herself was fresh. With the greatest estimated wealth of any of the warring countries, she had a public national debt of less than one half of one percent of her total wealth. She had larger quant.i.ties of liquid capital and a vast economic surplus. As a consequence, she held the purse strings and was able, during the next two years, to lend to the Allied nations nearly ten billion dollars without straining her resources to any appreciable degree.

The nations of Europe had been so deeply engrossed in war-making that they had been unable to provide themselves with the necessary food. All of the warring countries, with the exception of Russia, were importers of food in normal times. The disturbances incident to the war; the insatiable army demands, and the loss of shipping all had their effect in bringing the Allied countries to a point of critical food scarcity in the Winter of 1916-1917.

The United States was able to meet this food shortage as easily as it met the European credit shortage--and with no greater sacrifice on the part of the American people. Then, too, with the exception of small amounts of food donated through relief organizations, the food that went to Europe was sold at fancy prices. The United States was therefore in a position to lay down the basic law,--"Submit or starve."

With the purse strings and the larder under American control, the temporary supremacy of the United States was a.s.sured. She was the one important nation (beside j.a.pan) that had lost little and gained much during the war. She was the only great nation with a surplus of credit, of raw materials and of food.

The prosperity incident to this period is reflected in the record of American exports, which rose from an average of about two billions in the years immediately preceding the war to more than six billions in 1917. In the same year the imports were just under three billions, leaving a trade balance--that is, a debt owing by foreign countries to the United States--of more than three billions for that one year.

10. _Victory_

The war had been in progress for nearly three years before the United States took her stand on the side of the Allies. At that time the flower of Europe's manhood had faced, for three winters, a fearful pressure of hardship and exposure, while millions among the non-combatants had suffered, starved, sickened and died. The nerves of Europe were worn and the belly of Europe was empty when the American soldiers entered the trenches. They were never compelled to bear the brunt of the conflict.

They arrived when the Central Empires were sagging. Their mere presence was the token of victory.

For the first time in history the Americans were matched against the peoples of the old world on the home ground of the old world, and under circ.u.mstances that were enormously favorable to the Americans. European capitalism had weakened itself irreparably. The United States entered the war at a juncture that enabled her to take the palm after she had already taken billions of profit without risk or loss. The gain to the United States was immense, beyond the possibility of present estimate.

The rulers of the United States became, for the time being, at least, the economic dictators of the world.

The Great War brought noteworthy advantages to the American plutocracy.

At home its power was clinched. Among the nations, the United States was elevated by the war into a position of commanding importance. In a superficial sense, at least, the Great War "made" the plutocracy at home and "made" the United States among the nations.

FOOTNOTES:

[45] "The Navy League Unmasked," Speech of December 15, 1915, _Congressional Record_.