FRIDAY, JANUARY 4, 1918 CONTENTS THE United States is a nation of un- The situation in regard to meats and fats The only fundamental food of which we The two great textiles of the world are 1 Address of Charles R. Van Hise as retiring president of the American Association for the Ad- vancement of Science, Pittsburgh, Pennsylvania, 2 For a much fuller presentation of the facts herein summarized see "Conservation and Regu- lation in the United States during the World put of the United States was more than twice that of the rest of the world; and wool was also produced in large quantities; but for this textile, we were both exporters and importers. Of the most essential mineral products. we were leaders of the world. More iron ore and its products, iron and steel, were produced in the United States than by our two chief competitors combinedGreat Britain and Germany. Similarly the production of copper was more than half that of the world. For lead and zinc we led the world. The petroleum production again was more than half that of the world. Fundamental to all industry is power; and power is mainly produced by coal and falling water. The coal production of the United States previous to the war was greater than that of Great Britain, Germany and France combined; and water power was developed on a more extensive scale than in any other country. Also the forests of the United States originally surpassed those of any other country; indeed wood was so abundant that except in the cities we are a nation of wooden houses. Finally the transportation system of the United States has developed far beyond that of any other country. The railroad mileage of the United States for 100,000,000 people is 40,000 miles greater than for Europe with 450,000,000 people; and, aside from Europe, is much greater than for the more than 1,000,000,000 people inhabiting all the rest of the world. Our transportational system furnished rapid movement of commodities at a lower rate than that of any other nation. It is not so many years ago that the American people thought that all of their natural resources would last forever. It was frequently said that the deposits of iron ore, copper and petroleum are inexhaustible. While, before the war, we had developed beyond this simple primitive faith in our bigness, at least so far as scientific men were concerned, we still took it as a matter of course that each year there would be enough of every essential commodity-food, clothing, metals, oil, fuel— to meet without limitation any demands that might be made. While there might be local want in the cities, this was not due to lack of an insufficient quantity of essentials in the country, but to our imperfect economic system. Famine was unknown. From childhood the great majority of our people regarded an abundance of essential commodities as the natural order of our planet; whereas, those who consider the globe as a whole know that a considerable fraction of the people of the world go to bed each night, if not absolutely hungry, at least insufficiently nourished. From time to time, since the dawn of history and doubtless millenniums before, famine has swept over the densely populated portions of the earth carrying away the people by hundreds of thousands or by millions. Control by Supply and Demand Under the conditions of abundance in this country, we depended upon the law of supply and demand and competition to control the prices and distribution of commodities. Indeed these doctrines were a faith with both the great political parties, and without being formulated have been unquestioningly accepted by the people for a hundred years. The Antitrust Laws.-When the period of concentration in industry came with modern transportation, and it become possible by combination and cooperation to control the market and thus unduly enhance prices, a remedy for the trusts was demanded by the people. Congress decided upon prohibition with penalties. The Sherman antitrust law was enacted, which forbids all combinations and contracts in restraint of trade and monopoly. Similar laws were enacted by the states. Notwithstanding these laws, combination and cooperation continued; and a long series of suits have been brought by the Attorney General of the United States to enforce the Sherman law and dissolve unlawful trusts. But still cooperation existed everywhere, not by definite contracts, but by mutual understanding, so that in any given community the price for each. standard commodity was the same. However, the representatives of the people did not surrender their faith that the remedy was to restore the freedom of trade; and in 1915 the Clayton antitrust act was passed, which attempted to bolster up the Sherman act by introducing the new restrictive principle that any combination which resulted in substantial lessening of competition was unlawful. Thus antecedent to the war, so far as the control of production and distribution of commodities were concerned, we were mainly dependent upon the law of supply and demand with competition and upon repressive laws which should prevent cooperation and allow a free flow of trade. Regulation Before the War Regulation, however, had begun. It had become recognized that the public utilities. occupied an exceptional position. The Public Utilities.—All business and industry are so dependent upon transportation, and the public convenience was so interested in having good service without discrimination that, for the railroads and other public utilities, regulation had been adopted as a national policy through the enactment of the Interstate Commerce law and the various state public utilities laws. It is difficult to recall the bitter opposition which the proposal to regulate the public utilities aroused when it was first made. The owners of the stocks and bonds said the railroads were private property, in the control of which the public should have no part. These ideas bring a smile now; but the older men among us remember the fierce contest running through years, before it was established that the public had such an interest in the utilities as to require their regulation. The Pure Food and Drug Acts.-At another point, it appeared that the laws of supply and demand and competition were not adequate to control commerce. It was the theory of those who held these doctrines in an extreme form that supply and demand and competition would result in securing quality, because poor goods or spurious goods could not compete with good materials. But, after the period of concentration came on, it was found as a matter of fact that food and drugs were extensively sold of inferior quality and even dangerous character under false names. After a prolonged contest, the pure food and drug laws were enacted by Congress and by the several states. The manufacturers of food and drugs denounced these regulatory measures as an interference with private business. It seems odd to us now that any one should consider it a right to sell a food or a drug under a false name. It seems even more strange that the right to sell diseased meats should be regarded as sacred. But this is so recent that probably all here remember the severe struggle to establish the principle that meat should be inspected and found wholesome before being placed upon the market. During the contest for public control, those who advocated the regulation of the public utilities and foods and drugs were often denounced as socialists and were held up for opprobrium as being in favor of the subversion of the fundamental principles of our government. The Administrative Commissions.-As a necessary concomitant of these regulatory movements, commissions or other public agents were created whose duty it was to enforce the public utilities and pure food laws. At first the commissions had small authority; but as necessity arose their powers were expanded. When the present powers of these commissions and agents were worked out, it was found that they were a combination of executive, legislative and judicial; and, thus, instead of keeping these functions separate, they were combined. Regulatory commissions have now become recognized as essential under modern conditions as the executives, legislatures or courts. The development of the administrative commissions is probably the most fundamental change which has taken place in our government since the adoption of the Constitution. Therefore it is not at all surprising that the development of these commissions has been looked upon with suspicion and doubt by the people, in consequence of which it is only slowly and, as proven necessary by irresistible facts, that they have increased in numbers and expanded in functions. The above is a wholly inadequate, because necessarily all too brief, summary of economic conditions which existed antecedent to the war. THE EFFECT OF THE WORLD WAR When the World War broke out in August, 1914, the immediate economic effect was to create almost a panic in this country. The stock exchanges in the chief commercial countries of the world were successively closed. Prices of many commodities fell. But it was not long before the permanent economic effect of the war began to appear. The Greatly Increased Demand for Commodities There were withdrawn from productive work by the allies alone 15,000,000 to 20,000,000 of men; and behind the lines as many more were ere long diverted to war manufactories. In consequence of the collosal transfer of the ranks of industry, there was a great decline in the agricultural and ordinary manufacturing production of Europe. Yet, the many millions of men in the field required more than the usual amounts of food and great quantities of clothing. The demand for ships, guns and munitions was insatiable. The result was an extraordinary call for essential commodities from the United States. Increase in Exports The amount of wheat which was exported in the fiscal year 1914-15 was more than double that of any previous year. The exportation of meats and fats rapidly increased until it became threefold. The exports of iron and steel gradually increased until they became fourfold. The exportation of copper increased twofold. Many other commodities were exported in proportion to those mentioned. Thus while, from the outbreak of the war, the central powers were in a great measure cut off as export markets for the United States, the needs of the allies were so greatly enhanced as to vastly more than counteract the partial loss of the export market for the central powers. Increase in Home Demands Finally in April, 1917, we entered the war; and in consequence there were at once great governmental demands for materials to build ships, for munitions, for food, and for textiles. To meet these needs it was necessary greatly to extend our manufacturing, transportational, mining and constructional facilities. Thus there arose a greatly increased home call for foods, for textiles, for metals, and for wood. Fundamental to all industry is energy. The energy derived from water can not be readily increased suddenly; and therefore the increased requirements must be met by coal. This particular demand came rather slowly; and it was not until the middle of the summer of 1916 that a shortage of coal appeared probable. From the middle of that year, the demand has exceeded the supply, and exerting every effort, for 191718, it is estimated that the supply will be 50,000,000 tons short of the needs, although the production has been largely increased. Mounting Prices It thus appears that, in consequence of the World War, we have an absolutely new situation in this country-one in which there is demanded more of every essential commodity than the country is able to supply. Because of this radically changed situation prices began to mount, rather slowly for most commodities until about July, 1915; but since that time for two years rapidly and at an accelerating rate. Prices at about the middle of 1917, as compared with those three years earlier, just before the outbreak of the war, for a number of the most important commodities, were roughly as follows: Meat animals and meats, 25 to 75 per cent. higher. Wheat and flour, two and one fourth times as much. Corn and cornmeal, an increase of 80 per cent. Potatoes, an increase of about 60 per cent. Wool and worsted, two and one third fold. Bituminous coal, from two to threefold. Copper, about two and one half fold. Pig lead, about threefold. Pig iron, about three and two thirds times as much. Steel billets, more than fivefold. Petroleum, an increase of about 75 per cent. The Causes of Mounting Prices.-The fundamental cause of the mounting prices is that which has already been explained, an unusual and extraordinary demand at first abroad and later at home for all essential commodities; but this has been only one factor in the process. When it was generally appreciated that there was likely to be a shortage of the essential commodities, the home purchasers, instead of buying ordinary amounts, purchased in advance of their needs. Thus the family, instead of buying flour by the sack, bought a number of barrels; or, in some instances, bought flour for years ahead. The same was true for sugar. Similarly during the spring and summer of 1917, when it was appreciated that there was a shortage in coal, many manufacturers tried to protect their business by accumulating reserves to carry them through the winter. Many of those who required coal for heat did likewise. The consequence of the unusual buying campaign was that the demands of purchasers were far beyond what would have been necessary to meet actual needs, had the ordinary procedure been followed. This frenzy of excessive buying greatly aggravated the situation. Another important cause of the rising prices was that a time when there is an extraordinary demand is especially advantageous for speculators to accumulate larger stores of goods of various kinds and hold them for advances in prices. This |