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Title: Harper's Pictorial Library of the World War, Volume XII - The Great Results of the War
Author: Various
Language: English
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 HARPER'S PICTORIAL LIBRARY
 OF THE WORLD WAR

 _In Twelve Volumes
 Profusely Illustrated_

 VOLUME XII

 THE GREAT RESULTS OF THE WAR

 Economics and Finance, The Peace
 Treaty, The League of Nations. Index


[Illustration: Painting by Frank Stick A Soldier of the Soil]


 =HARPER'S PICTORIAL LIBRARY
 OF THE WORLD WAR=

 _In Twelve Volumes
 Profusely Illustrated_

 FOREWORD BY CHARLES W. ELIOT, PhD.

 _President Emeritus, Harvard University_

 VOLUME XII

 The Great Results of the War

 _Economics and Finance, The Treaty of Versailles
 and League of Nations----Index_

 WITH INTRODUCTION BY PROFESSOR IRVING FISHER, YALE UNIVERSITY

 _Edited by_

 DR. W. L. BEVAN, KENYON COLLEGE
 _and_
 DR. HUGO C. M. WENDEL, NEW YORK UNIVERSITY

 GENERAL EDITORIAL BOARD

    PROF. ALBERT BUSHNELL HART
      Harvard University

    GEN. DOUGLAS MACARTHUR, U.S.A.
      Chief of Staff, 42nd Division

    ADMIRAL ALBERT GLEAVES
      U.S. Navy

    PROF. W. O. STEVENS
      U.S. Naval Academy, Annapolis

    GEN. ULYSSES G. MCALEXANDER
      U.S. Army

    JOHN GRIER HIBBEN
      President of Princeton University

    J. B. W. GARDINER
      Military Expert, _New York Times_

    COMMANDER C. C. GILL, U.S.N.
      Lecturer at Annapolis and aide
      to Admiral Gleaves

    HENRY NOBLE MACCRACKEN
      President of Vassar College

    PROF. E. R. A. SELIGMAN
      Columbia University

    DR. THEODORE F. JONES
      Professor of History, New York
      University

    CARL SNYDER

    PROF. JOHN SPENCER BASSETT
      Professor of History, Smith College

    MAJOR C. A. KING, JR.
      History Department, West Point

 HARPER & BROTHERS PUBLISHERS

 NEW YORK AND LONDON

 Established 1817

Copyright, 1920, by Harper & Brothers Printed in the United States of
America M-U



             CONTENTS OF VOLUME XII                            PAGE

  _Introduction_ Professor Irving Fisher                        vii

             PART I

  I. Economic Results of the War                                  1
  II. Wartime Food and Price Problems                            34
  III. Industry and Labor in Wartime                             65
  IV. Government Control                                         87
  V. The Money Cost of the War, Edwin R. A. Seligman            105
  VI. American Business in the War, Grosvenor B. Clarkson       115
  VII. The Liberty Loan Army, Guy Emerson                       126
  VIII. Food and the War, Vernon Kellogg                        135
  IX. The High Cost of Living, Director of the Council of       142
      National Defense

             PART II

  I. The Peace Conference at Work, Thomas W. Lamont             149
  II. Wilson's Fourteen Points                                  163
  III. How the Peace Treaty Was Signed                          165
  IV. The Peace Treaty--Its Meaning to America, George W.       170
      Wickersham

  THE TREATY OF VERSAILLES AND THE COVENANT OF THE LEAGUE OF NATIONS

  Preamble                                                      179
  Part I. The Covenant of the League of Nations                 182
  Part II. Boundaries of Germany                                186
  Part III. Political Clauses for Europe                        188
  Part IV. German Rights and Interests Outside Germany          206
  Part V. Military, Naval, and Aerial Clauses                   209
  Part VI. Prisoners of War and Graves                          216
  Part VII. Penalties                                           217
  Part VIII. Reparation                                         217
  Part IX. Financial Clauses                                    226
  Part X. Economic Clauses                                      229
  Part XI. Aerial Navigation                                    246
  Part XII. Ports, Waterways, and Railways                      247
  Part XIII. Labor                                              255
  Part XIV. Guarantees                                          261
  Part XV. Miscellaneous Provisions                             262

  Rejection of the Peace Treaty                                 264
  The Reservations Which Failed                                 269
  Peace by Congressional Enactment Fails                        271
  The Map of Europe Remade                                      279
  Our Part in Winning the War                                   280

  Index
  Text                                                          291
  Illustrations
  I. Portraits                                                  363
  II. General                                                   368
  Maps                                                          383

  ILLUSTRATION IN COLOR
  A Soldier of the Soil                               _Frontispiece_



Illustrations in this volume


  Price Movements of the United States and England from the Earliest
  Index Numbers Through the First Years of the World War

  Trend of Prices Before and After the Great Wars of History

  William McAdoo

  Money and the Price Level

  John Pierpont Morgan

  President Wilson and Rear Admiral Grayson Passing the Palace of the
  King in Brussels

  Women Munition Workers in the International Fuse and Arms Works

  Poster for Boy Scouts Who Worked for the Victory Loan

  Dropping the First Bomb

  A Poster Used During the Fourth Liberty Loan Campaign

  Detroit--City of Automobiles

  A Woman Doing Road Construction Work

  A Woman Operating a Multiple Spindle Drill in an English Shell
  Factory

  Launching the Quistconck at Hog Island

  Ship-building at Camden, N. J.

  Diagram Showing the Effect of the War on the Prices of Stocks

  Centres of Live Stock Production Throughout the World

  Members of "The Women's Land Army" in England

  A Map Issued by the Food Administration to Show Food Conditions in
  Europe After the Signing of the Armistice

  A Food Riot in Sweden

  Harry A. Garfield

  Drying Fruit and Vegetables to Save Tin and Glass

  "Back on the Farm"

  The Nations and Their Wheat Supply

  A Municipal Canning Station

  In the Heart of the Bethlehem Steel Plant

  Forging Armor Plate

  Building Howitzers

  Guns and Armaments for United States and Her Allies

  Plowing by Night

  A War Time Warning

  Women Workers in America

  Samuel P. Gompers

  Walker D. Hines

  Building a Steel Ship in Seattle, Washington

  Hog Island Ship-building Yards

  Launching the City of Portland on the Columbia River, near Portland,
  Oregon

  Examining Cargoes for Contraband

  An Antidote for the Submarine Pest

  The Awkward Squad

  The Economic Conference in Paris

  Lord Reading

  While the Men Fought, Those Left Behind Bought Bonds

  French School Children Waiting to Welcome General Pétain

  United States Council of National Defense and Its Advisory
  Commission

  Bernard M. Baruch

  Daniel Willard

  John D. Ryan

  A Poster Used During the Fourth Liberty Loan Campaign

  A Poster for the Third Liberty Loan Campaign

  Victory Way at Night

  The Battle Scene at Home

  A Community Conference on Food-Saving

  Will There Be Enough to Go Around?

  Women Doing Night Farming

  The Ore Market--Cleveland

  David Lloyd George

  President Poincaré With the Swiss President, M. Gustave Ador,
  Driving to the Peace Conference in Paris

  Where the Peace Treaty Was Signed

  Awaiting the Decision of the German Peace Delegates.

  The George Washington

  Paris Crowds Greeting President Wilson

  Henry White

  Count von Brockdorff-Rantzau

  Victoria Hall at Geneva

  William Howard Taft

  Woodrow Wilson, President of the United States

  President and Mrs. Wilson Waving Good Bye

  President Wilson's Welcome in Paris

  Sir Eric Drummond

  Lord Robert Cecil

  Berlin Demonstrations Against The Peace Treaty

  German Press Representatives in Versailles

  Dreadnoughts Welcoming President Wilson Home

  M. Stephen Pichon

  Henry Cabot Lodge

  America's Peace Capitol in Paris

  The White Flags That Meant Defeat for the German Cause and Marked
  the Beginning of the End of the War

  Paris in War Time

  Senator Philander C. Knox of Pennsylvania

  Male Population Registered and Not Registered

  Comparative Losses of Merchant Shipping During the War

  Production of Training Planes and Engines to the End of Each Month

  Number of Battle Aeroplanes in Each Army at the Date of the
  Armistice

  Secretary of War Baker Drawing Registration Numbers

  Our Flag in Alsace



INTRODUCTION

By PROFESSOR IRVING FISHER

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?


HIGH COST OF LIVING A VITAL QUESTION

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.


MEASURING CHANGES IN PRICES

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.

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.


WORTHLESS PAPER MONEY

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.


COMMENTS ON FIGURE 1

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

[Illustration: Figure 1

Price Movements of the United States and England from the Earliest Index
Numbers Through the First Years of the World War

Showing, in general, a close similarity. England was on a paper basis,
1801--1820; and the United States, 1862--78. The dotted lines for these
periods show the prices as translated back into gold.]

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.

[Illustration: Figure 2

Trend of Prices Before and After the Great Wars of History]

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."


COMMENTS ON FIGURE 2

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.


HIGH PRICES NOT DUE TO SCARCITY

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.

[Illustration: Copyright by Underwood & Underwood

William McAdoo

Secretary of the Treasury during the World War, and Director-General of
the Railroads.]

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.

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.


HIGH PRICES DUE TO MONETARY CAUSES

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.

[Illustration: Figure 3.

Money and the Price Level

Showing a correspondence between the quantity of money and the level of
prices. Since the middle of 1915, when the quantity of money in the
United States began to be greatly affected by the war, the
correspondence has been close, changes in the price level seeming
usually to follow changes in the quantity of money one to three months
later.]

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.


COMMENTS ON FIGURE 3

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.


ASSOCIATE EVILS OF HIGH PRICES

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.


MANY SUGGESTED REMEDIES INADEQUATE

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."

[Illustration: John Pierpont Morgan

The banking house of Morgan was closely identified with international
finance throughout the World War.]

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.


PROPOSED REMEDY

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.


WANTED--A STANDARDIZED DOLLAR

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!


HOW GOLD CIRCULATES

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.


CRITERION OF STANDARDIZATION

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.


A PROBLEM CALLING FOR URGENT ACTION

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.

[Illustration: Copyright by Underwood & Underwood

President Wilson and Rear Admiral Grayson Passing the Palace of the King
in Brussels]



The Great Results of the War



The Great Results of the War

_PART I_

I--ECONOMIC RESULTS OF THE WAR

Striking Changes Made by the European Conflict Upon the Economic Life of
the Great Nations


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.

FINDING THE MONEY FOR WAR

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."


STRONG POSITION OF UNITED STATES

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:

    Europe                      $1,893,400,000
    Canada                         270,500,000
    Latin America                  157,000,000
    China                            5,000,000
                                --------------
    Total foreign loans         $2,325,900,000
    Less amount paid, estimated    175,000,000
                                --------------
    Net foreign indebtedness    $2,150,900,000

     "The loans of the belligerent countries which were floated in
     the United States up to the close of 1916 are divided 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]

[1] Estimated.

[2] Nearly $1,900,000,000 of this constituted war loans.


NEW PACE IN WAR FINANCE

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:

      Incomes         Tax Under
                    Old       New
                    Law       Law
       $2,500       $10       $30
        3,000        20        60
        3,500        30        90
        4,000        40       120
        4,500        60       150
        5,000        80       180
        5,500       105       220
        6,000       130       260
        6,500       155       330
        7,000       180       400
        7,500       205       470
        8,000       235       545
        8,500       265       620
        9,000       295       695
        9,500       325       770
       10,000       355       845
       12,500       530     1,320
       15,000       730     1,795
       20,000     1,180     2,895
       25,000     1,780     4,240
       30,000     2,380     5,595
       35,000     2,980     7,195
       40,000     3,580     8,795
       45,000     4,380    10,645
       50,000     5,180    12,495
       55,000     5,980    14,695
       60,000     6,780    16,895
       70,000     8,880    21,895
       80,000    10,980    27,295
      100,000    16,180    39,095
      150,000    31,680    70,095
      200,000    49,180   101,095
      300,000    92,680   165,095
      500,000   192,680   207,095
    1,000,000   475,180   647,095
    5,000,000 3,140,180 3,527,095

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

     "Transportation--Freight, $75,000,000; express, $20,000,000;
     passenger fares, $60,000,000; seats and berths, $5,000,000; oil
     by pipe lines, $4,550,000.

     "Beverages (liquors and soft drinks), $1,137,600,000; stamp
     taxes, $32,000,000; tobacco cigars, $61,364,000; cigarettes,
     $165,240,000; tobacco, 104,000,000; snuff, $9,100,000; papers
     and tubes, $1,500,000.

     "Special Taxes.--Capital stock, $70,000,000; brokers,
     $1,765,000; theaters, etc., $2,143,000; mail order sales,
     $5,000,000; bowling alleys, billiard and pool tables,
     $2,200,000; shooting galleries, $400,000; riding academies,
     $50,000; business license tax, $10,000,000; manufacturers of
     tobacco, $69,000; manufacturers of cigars, $850,000;
     manufacturers of cigarettes, $240,000; use of automobiles and
     motor cycles, $72,920,000.

     "Telegraph and telephone messages, $15,000,000; insurance,
     $12,000,000; admissions (theaters, circuses, etc.),
     $100,000,000; club dues, $9,000,000.

     "Excise Taxes.--Automobiles, etc., $123,750,000; jewelry,
     sporting goods, etc., $80,000,000; other taxes on luxuries at
     10 percent., $88,760,000; other taxes on luxuries (apparel,
     etc., above certain prescribed prices), at 20 percent.,
     $181,095,000.

     "Gasoline, $40,000,000; yachts and pleasure boats, $1,000,000."

     "The income tax law levies on all citizens or residents of the
     United States a normal tax of 12 percent. upon the amount of
     income in excess of exemptions, except that on the first $4,000
     of the taxable amount the rate shall be 6 percent. The law also
     increases the surtaxes all along the line. The advances by
     grades compared with the percentage under the old law are:
     $5,000 to $7,500 incomes, increased from 1 to 2 percent.;
     $7,500 to $10,000, from 2 to 3 percent.; $10,000 to $12,500,
     from 3 to 7 percent.; $12,500 to $15,000, from 4 to 7 percent.;
     $15,000 to $20,000, from 5 to 10 percent.; $20,000 to $30,000,
     from 8 to 15 percent.; $30,000 to $40,000, from 8 to 20
     percent.; $40,000 to $50,000, from 12 to 25 percent.; $50,000
     to $60,000, from 12 to 32 percent.; $60,000 to $70,000, from 17
     to 38 percent.; $70,000 to $80,000, from 17 to 42 percent.;
     $80,000 to $90,000, from 22 to 46 percent.; $90,000 to
     $100,000, from 22 to 46 percent.; $100,000 to $150,000, from
     27 to 50 percent.; $150,000 to $200,000, from 31 to 50
     percent.; $200,000 to $250,000, from 37 to 52 percent.;
     $250,000 to $300,000, from 42 to 55 percent. The rate continues
     to increase, but on incomes of over $5,000,000 the increase is
     only from 63 percent., under former law to 65 percent."

[Illustration: Copyright by International Film Service

Women Munition Workers in the International Fuse and Arms Works

Before entering the war, the United States was the great arsenal of the
Allies. After our entry, production of munitions increased, while the
man power in the industry diminished through enlistments and the draft.
Women took up the work and showed surprising ability.]


MEANING OF NEW TAXATION

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:

    Individual income tax            $1,482,186,000
    Corporation income tax              894,000,000
    Excess and war profits            3,200,000,000
    Estate tax                          110,000,000
    Transportation                      164,550,000
    Telegraph and telephone              16,000,000
    Insurance                            12,000,000
    Admissions                          100,000,000
    Club dues                             9,000,000
    Excise, luxury, and semi-luxury     518,305,000
    Beverages                         1,137,600,000
    Stamp taxes--chiefly documentary     32,000,000
    Tobacco and products                341,204,000
    Special business and
    automobile-user's Taxes             165,607,000
                                     --------------
      Total                          $8,182,452,000

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.


INCOME TAX COMPARISON

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.

                     _United States
                   Old Law         New Law    United Kingdom  France
 Income             Rate             Rate      Rate     (%)    Rate
                Am't    (%)      Am't   (%)  Unearned  Earned  (%)_
 $   2,500       $10    .40       $30   1.20   11.25    8.44   1.25
     3,000        20    .67        60   2.00   14.84   11.87   1.67
     3,500        30    .86        90   2.57   16.24   12.96   2.07
     4,000        46   1.00       120   3.00   18.16   14.53   2.44
     4,500        60   1.33       150   3.33   18.75   15.00   2.86
     5,000        80   1.60       180   3.60   18.75   15.00   3.20
     5,500       105   1.91       220   4.00   22.50   18.75   3.48
     6,000       130   2.16       260   4.33   22.50   18.75   3.71
     6,500       155   2.38       330   5.08   22.50   18.75   3.90
     7,000       180   2.57       400   5.71   22.50   18.75   4.07
     7,500       205   2.73       470   6.27   22.50   18.75   4.21
     8,000       235   2.93       545   6.81   26.25   22.50   4.34
     8,500       265   3.12       620   7.29   26.25   22.50   4.53
     9,000       295   3.28       695   7.72   26.25   22.50   4.69
     9,500       325   3.42       770   8.11   26.25   22.50   4.84
    10,000       355   3.55       845   8.45   26.25   22.50   4.98
    12,500       530   4.24     1,320  10.56   30.00   26.25   5.53
    15,000       730   4.87     1,795  11.97   32.08   32.08   6.07
    20,000     1,180   5.90     2,895  14.48   34.06   34.06   6.99
    25,000     1,780   7.12     4,245  16.98   35.75   35.75   7.84
    30,000     2,380   7.93     5,595  18.65   37.29   37.29   8.41
    35,000     2,980   8.51     7,195  20.56   38.75   38.75   8.99
    40,000     3,580   8.95     8,795  21.99   39.84   39.84   9.43
    45,000     4,380   9.73    10,645  23.66   40.97   40.97   9.77
    50,000     5,180  10.36    12,495  24.99   41.88   41.88  10.05
    55,000     5,980  10.87    14,695  26.72   42.84   42.84  10.27
    60,000     6,780  11.30    16,895  28.16   43.65   43.65  10.45
    70,000     8,880  12.69    21,895  31.26   44.91   44.91  10.75
    80,000    10,980  13.72    27,295  34.12   45.86   45.86  10.96
   100,000    16,180  16.18    39,095  39.10   47.19   47.19  11.27
   150,000    31,680  21.12    70,095  46.73   48.96   48.96  11.68
   200,000    49,180  24.59   101,095  50.55   49.84   49.84  11.89
   300,000    92,680  30.89   165,095  55.03   50.73   50.73  12.09
   500,000   192,680  38.54   297,095  59.42   51.44   51.44  12.25
 1,000,000   475,180  47.52   647,095  64.71   51.97   51.97  12.38
 5,000,000 3,140,000  62.80 3,527,095  70.54   52.39   52.39  12.48

"Actual rate, allowing for deductions, normal tax, and surtaxes, based
on taxes on incomes of heads of families. Persons with no dependents pay
more; those with more than one pay less. $2,000 is exempted for heads of
families, $1,000 for bachelors. Below $4,000, 6 per cent. is the normal
tax; above, 12 per cent. Surtaxes begin at $5,000."

     "If the new normal tax in the United States were made uniformly
     12 percent.--wiping out the 2 percent. discrimination of the
     1917 law--a single man in this country with a salary of $1,500
     a year would be called on to pay $60 in income tax, as against
     an English tax of $101.25. Assuming that the normal tax were
     raised to 12 percent. and the surtax and excess tax were left
     as at present, an unmarried American with a salary of $10,000
     would pay $1,430.20, while the unmarried Englishman would pay
     $2,250. If the Englishman derived his $10,000 income from
     rentals, his tax would be increased to $2,625, while the
     American tax would be reduced to $1,165--an Irish dividend on
     effort.

     "According to a level where the British surtax becomes
     effective, take a salary of $20,000. The English normal tax on
     this would be $6,000 and the surtax $812.50 (figuring $5 to the
     pound), a total of $6,812.50. At the suggested rate of 12
     percent., the American's normal tax would be $2,145.60 (rate
     applying to $20,000, less $1,000 exemption and $1,120 excess
     tax); the surtax would be $444 and the excess tax $1,120; a
     total of $3,709.60. If the American cut non-tax-free coupons
     for his income instead of working for it, his tax would be
     reduced to $2,780, making it more than $600, less than one-half
     the English tax. This, be it remembered, is figuring the
     American normal tax at the supposititious rate of 12 percent.

     "Going abruptly to an income of $1,000,000, the American normal
     tax at 12 percent., would be $119,880, against an English normal
     tax of $300,000. The increase in the American normal tax would
     be $79,960 over present rates. The American surtax at present
     rates would be $435,300, as against a British surtax of
     $217,915; total American, $555,180, English, $519,687.50. No
     account is taken in this computation of any excess tax on the
     American income. With an income of $3,000,000. the American
     normal tax at 12 percent. would be $359,880, an increase of
     $239,960 over present rates. The surtax at present rates would
     be $1,680,300, a total of $2,040,180, or nearly 70 percent.,
     the rate on the last $1,000,000 being at 75 percent. The
     corresponding British tax is, normal, $900,000, and surtax
     $669,685; total, $1,569,685, or nearly 52 percent., the actual
     maximum rate being 52½ percent. on all excess over $50,000.

     "Expressed in tabular form, comparative results from a normal
     tax of 12 percent., combined with present surtax rates and
     assuming all income up to $50,000 to be earned income for a
     single man, would be as follows:

                    U.S.     Per       British    Per
    Income           Tax   Cent.           Tax  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

     "With additional exemption of $1,000 for heads of families and
     $200 each for dependent children, the United States figures in
     the table would be reduced by $120 for the $1,000 exemption and
     $24 for each child. There are similar deductions to be made in
     the English figures. Furthermore, for incomes above $50,000,
     deduction for the excess tax has not been figured exactly in
     order to avoid long computations. This would slightly reduce
     the figure on the large incomes. But for demonstrative
     purposes, the table gives a fairly accurate general comparison
     of the range of taxes under the proposed English law and a
     tentative 12 percent. normal rate under our law.

     "It will be noticed that the rates would come together just
     below $750,000. It is in the range between $5,000 and $500,000
     incomes that greatest divergence in rates occurs. The British
     tax takes its largest jump between $10,000 and $15,000, where
     the surtax begins to operate. The United States gradations are
     erratic and irregular, showing the haphazard manner in which
     the steps of the surtax were applied."

ATTITUDE TOWARD WAR TAX BILL

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 _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:

     "Take the case, for instance, of the salaried employee of a
     bank or factory who receives $5,000 a year, out of which he
     pays his house rent and his usual costs of living; contrast him
     with the case of a farmer who owns his land and obtains the
     bulk of what he needs, both in food, fuel, and other
     essentials, for himself and family in produce or in goods
     obtained by trade at the neighboring village; the situation
     becomes clear and shows why it is that the farming class pays
     only a microscopic proportion of the income tax at the present
     time."

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

     "An analysis of income tax returns for the fiscal year 1916,
     recently published, shows that, although farmers are the most
     numerous class of Americans engaged in gainful occupations,
     they were at the foot of the list proportionately among income
     tax payers. Outside of the notorious war profiteers, no element
     of our population has advantaged so greatly by war as
     agriculturists; yet in the year of which we speak only one
     farmer in four hundred paid a farthing's tax upon income. In
     this respect preachers and teachers showed a higher
     percentage."

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

     "The men of more moderate income should be required to pay at
     least a nominal income tax. This is a common country. It
     belongs to common people. And common people will esteem it a
     privilege to contribute their mites. One dollar per hundred on
     a thousand-dollar income would be both reasonable and just."


CRITICISM OF THE TAX

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.


WILSON'S TAX PROGRAM

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:

     "We can not in fairness wait until the end of the fiscal year
     is at hand to apprize our people of the taxes they must pay on
     their earnings of the present calendar year, whose accountings
     and expenditures will then be closed.

     "We can not get increased taxes unless the country knows what
     they are to be and practices the necessary economy to make them
     available. Definiteness, early definiteness, as to what its
     tasks are to be is absolutely necessary for the successful
     administration of the treasury....

     "The present tax laws are marred, moreover, by inequities which
     ought to be remedied....

     "Only fair, equitably distributed taxation of the widest
     incidence, drawing chiefly from the sources which would be
     likely to demoralize credit by their very abundance, can
     prevent inflation and keep our industrial system free of
     speculation and waste.

[Illustration: Poster for Boy Scouts Who Worked for the Victory Loan]

     "We shall naturally turn, therefore, I suppose, to war profits
     and incomes and luxuries for the additional taxes. But the war
     profits and incomes upon which the increased taxes will be
     levied will be the profits and incomes of the calendar year
     1918. It would be manifestly unfair to wait until the early
     months of 1919 to say what they are to be....

     "Moreover, taxes of that sort will not be paid until the June
     of next year, and the treasury must anticipate them....

     "In the autumn a much larger sale of long-time bonds must be
     effected than has yet been attempted....

     "And how are investors to approach the purchase of bonds with
     any sort of confidence or knowledge of their own affairs if
     they do not know what taxes they are to pay and what economies
     and adjustments of their business they must effect? I can not
     assure the country of a successful administration of the
     treasury in 1918 if the question of further taxation is to be
     left undecided until 1919."

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:

     "We still have a very long way to go before we can attain to
     President Wilson's standard of individual patriotism. From the
     outbreak of war to the end of last year the small investor in
     this country has lent £118,179,000 to the government. Moreover,
     in the first two months of 1917 as much as £40,000,000 was
     contributed to war loans in one form or another in the shape of
     small savings. That result represents a great deal of patriotic
     saving, and reflects the highest credit on the committee, as
     well as upon the Montagu committee, which devised so suitable a
     form of investment as the 15s 6d certificate. But far more is
     required. During the war loan campaign, war savings
     certificates brought in £3,000,000 in a single week. That
     effort was, perhaps, too great to be kept up; but it is hardly
     satisfactory that, in spite of the hard work of the committee,
     and an enormous growth in the number of active war savings
     associations all over the country, the weekly receipts from the
     15s 6d certificates have fallen back to the £800,000 to
     £900,000 level which was reached last December. This relapse
     may be partially accounted for by the late increase in the cost
     of living, but there can be no doubt that much more might yet
     be done by the masses of people of moderate means to whom the
     small certificates appeal. Nor is there any evidence that the
     wealthier classes, generally speaking, have done nearly as
     much, in the matter of war self denial, as they might have
     done."


LUXURY TAXES

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:

     "Fifty percent. on the retail price of jewelry, including
     watches and clocks, except those sold to army officers.

     "Twenty percent. on automobiles, trailers and truck units,
     motor cycles, bicycles automobile, motor cycle, and bicycle
     tires, and musical instruments.

     "A tax on all men's suits selling for more than $30, hats over
     $4, shirts over $2, pajamas over $2, hosiery over 35 cents,
     shoes over $5, gloves over $2, underwear over $3, and all
     neckwear and canes.

     "On women's suits over $40, coats over $30, ready-made dresses
     over $35, skirts over $15, hats over $10, shoes over $6,
     lingerie over $5, corsets over $5. Dress goods--silk over $1.50
     a square yard; cotton over 50 cents a square yard, and wool
     over $2 per square yard. All furs, boas and fans.

     "On children's clothing--on children's suits over $15, cotton
     dresses over $3, linen dresses over $5, silk and wool dresses
     over $8, hats $5, shoes $4, and gloves $2.

     "On house furnishings, all ornamental lamps and fixtures, all
     table linen, cutlery and silverware, china and cut glass; all
     furniture in sets for which $5 or more is paid for each piece;
     on curtains over $2 per yard, and on tapestries, rugs, and
     carpets over $5 per square yard.

     "On all purses, pocketbooks, handbags, brushes, combs and
     toilet articles, and all mirrors over $2.

     "Ten percent. on the collections from the sales of vending
     machines.

     "Ten percent. on all hotel bills amounting to more than $2.50
     per person per day. Also the present 10 percent. tax on cabaret
     bills is made to apply to the entire restaurant or café bill.


TAXES OF MANUFACTURER OR PRODUCER

     "Ten cents a gallon on all gasoline to be paid by the wholesale
     dealers.

     "Ten percent. tax on wire leases.

     "Graduated taxes on soft drinks. Mineral now taxed 1 cent a
     gallon to pay 16 cents. Chewing gum now taxed 2 percent. of
     the selling price, to pay 1 cent on each 5-cent package.

     "Motion-picture shows and films: abolish the foot tax of ¼ and
     ½-cent a foot and substitute a tax of 5 percent. on the rentals
     received by the producer, and double the tax rate on
     admissions.

     "Double the present taxes on alcoholic beverages, tobacco and
     cigarettes.

     "Automobiles--a license tax on passenger automobiles graduated
     according to horsepower.

     "Double club membership dues.

     "Household servants, made 25 percent. of the wages of one
     servant up to 100 percent. of the combined wages of four or
     more. Female servants, each family exempted from tax on one
     servant. All additional servants (female) from 10 to 100
     percent. on all over four."


LUXURIES IMPORTED

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:

     "America can not spare ships to bring costly garments and
     furnishings thousands of miles across the sea. For the war
     period these articles can be replaced at home with materials
     that cost less labor and less money. The money spent for
     domestic goods remains in America and maintains our working
     population and our business and banking resources.

     "We lack a sufficient market for our cotton crop, owing to the
     lack of ships. Americans should wear more cotton. The money
     spent upon it maintains the Southern planter and his family.
     Modern processes give it the appearance of silk. It serves very
     well as carpets, curtains, hangings, and furniture coverings.
     It should answer present needs for such fabrics. A heavier tax
     on imports of these goods is indicated as a means of revenue
     and war economy.

     "Imported wearing apparel of silk pays 60 percent. duty and of
     wool 44 cents a pound and 60 percent. _ad valorem_. There is a
     graduated rate on dress goods of these materials. Despite the
     tax, America spent more on imported manufactures of silk in
     1917 than ever, the total being nearly $40,000,000. The same
     was true of woolen goods, amounting to $23,000,000.

     "Our imports of woolen carpets and rugs, most of them brought
     half way round the world from oriental lands, were also larger.
     They cost us $3,740,000, though America is a large producer of
     carpets and rugs, fine as well as coarse. These imports paid
     ten cents a square foot and 40 percent. _ad valorem._
     Evidently, it was not enough.

     "We also spent $53,000,000 for imported cotton manufactures,
     including cloth, laces, curtains, handkerchiefs, veils, and
     wearing apparel, though America is the world's chief producer
     of cotton. A higher tariff is indicated as a tax on those who
     insist on the foreign product.


     TAXES ON TOBACCO

     "America has a large tobacco industry at home. We import
     tobacco in vast quantities from every producing land to satisfy
     the whimsical and varying tastes of connoisseurs. Our own
     tobacco is discouraged by those who smoke it under the name of
     Turkish, Egyptian, Cuban, Dutch, Spanish, and other foreign
     products, and pay a heavy price for the critical taste which
     their vanity causes them to imagine they possess. Last year
     these imports of leaf tobacco alone were valued at $26,000,000,
     or $10,000,000 more than in 1915. The war tax is five cents a
     pound added to eight cents paid under the internal revenue act,
     or thirteen cents altogether. There is also a duty of $1.85 to
     $2.50 a pound. To increase the tax would encourage the industry
     in Kentucky, Virginia, Pennsylvania, Connecticut, and other
     states, while saving our resources in ships and keeping our
     money at home.

     "In addition, America spent $7,000,000 for foreign-made cigars
     and cigarettes last year. These purchases support foreign
     factories, although our own factories use the same raw material
     which they import. They have jumped nearly $3,000,000 in two
     years. Until the war is ended, Americans should be satisfied
     with cigars 'made in America.' The present war tax ranges from
     one tenth of a cent to one cent on each cigar, according to
     value, in addition to a duty of $4.50 a pound and 25 percent.
     _ad valorem_. A higher tax would deprive the smoker of nothing
     but a craving for the foreign label on his cigar box, unless he
     chose to pay well for it. He can even get a Spanish name on his
     American-made cigar.


     DIAMONDS, LEATHER AND MILLINERY

     "America spent $41,000,000 in 1917 to import diamonds, pearls,
     and other precious stones and imitations, not set. They paid a
     war tax of only 3 percent. when made into jewelry. America
     could be content with beauty less adorned to keep this
     $40,000,000 at home, or those who insist on sending their money
     to African mine owners and Dutch cutters should pay a larger
     tax.

     "America last year had a tremendous bill for hides and skins of
     $209,000,000, nearly two and a half times that of 1915. Much of
     it was for the great necessities of the army. A good proportion
     of the rest was unnecessary. These imports of raw material are
     free of duty and there is no war tax on leather goods.
     Substitutes have been devised for many of them. These should be
     encouraged by a tax on the unnecessary use of leather in
     furnishings, decorations, toilet articles, hand bags, trunks,
     high shoes, belts, hatbands, and many small articles.
     Substitutes for these will be provided quickly enough if
     leather is lacking. A heavy tax would help the movement. The
     tremendous military and other legitimate demands for leather
     goods will keep the industry in thriving condition without so
     much waste.

     "For imported millinery materials America spent nearly
     $13,000,000 last year, and we also spent $3,000,000 for mere
     feathers, tributes to feminine vanity that filled up many ships
     needed for war use. The greater part of this stuff came 10,000
     miles from China and Japan. There are plenty of substitutes
     that a high war tax would encourage, including those provided
     by the American hen.

     "Our imported glassware, on which there is no war tax, cost
     nearly $2,000,000. It occupies large space aboard ship, owing
     to voluminous packing that is necessary. Imported china,
     porcelain, earthenware, and crockery cost America nearly
     $6,500,000."

BEARING THE BURDEN

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:

     "The steps that have been taken to curtail credits have
     resulted in greater conservatism, and have had a beneficent
     effect, which is likely to continue for some time after the
     present necessity disappears. The business foundation is
     extremely sound. Figures of resources of savings banks show
     that the subscriptions to the Liberty Loans have brought only
     a trifling decrease in savings deposits. Evidently subscribers
     are buying bonds with their current income rather than with
     their savings. In other words, the Liberty Loans represent
     additions to the savings of the country, and not merely
     transfers of investments."

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:

     "Aggregate railroad earnings and expenses for July of all the
     important roads in the country are in line with the individual
     statements of the different roads already published in showing
     large increases in both gross and net revenues. They also
     indicate, so far as one month's operating results may be used
     to generalize from, that the railroads are now on a
     self-supporting basis, if they are not actually returning a
     profit to the government on current operation.

     "Net operating income of these roads for the month of July
     (1918) was $137,845,425 as compared with $92,599,620 in the
     same month of 1917. In a recent statement from the
     Director-General's office the compensation payable to the
     railroad companies for the use of their property by the
     government was estimated at $650,000,000 for the first eight
     months of the year, or at the rate of $81,250,000 a month. The
     net operating income of the Class 1 roads as mentioned above
     exceeds this monthly rental figure by $56,595,000."


THE FIRST GOVERNMENT LOAN, 1789

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.

     "Conditions being pressing, Hamilton, in raising the necessary
     money, at first did not wait even for the approval of Congress,
     but went to the Bank of New York, which he had helped to found
     in 1784--the second bank in the United States and the first in
     New York City--to raise the first necessary money. At a meeting
     of the board of directors the new secretary of the treasury
     asked for a loan of $200,000. It was promptly and unanimously
     granted, the money to be advanced in five installments of
     $20,000 each and ten of $10,000 each, at 6 percent. On the
     following day Hamilton sent to the bank the first bond ever
     issued by the United States Treasury--a bond of $20,000--on
     receipt of which the money was paid over, so that the United
     States Treasury could show $20,000 cash on hand. In _The
     Investor's Magazine_, where these facts were recently brought
     to light, we are further told that the bond then issued is
     still carefully preserved by the bank which bought it. Quite
     unlike the now familiar Liberty Bonds of 1917 and 1918, it was
     executed with an ordinary quill pen, such as was in use in
     those times, and signed in ink by the secretary. With its seal
     somewhat yellow with age, the bond is still in an excellent
     state of preservation."

[Illustration: Richards in the Phila. _North American_

Dropping the First Bomb]


POPULARITY OF THE LIBERTY LOANS

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:

     "Our resources are well up toward $300,000,000,000, or about
     equal to the combined resources of France, England, and
     Germany. Our annual production is close to $50,000,000,00,
     amounts that stagger the imagination. Why it would take ten
     thousand years to count the dollars representing out country's
     resources counting one each second, and working day and night
     and Sundays."

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."


HOW EUROPE WILL PAY US BACK

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.

     "We are going to be peculiarly situated in our foreign
     relations after the war. We have paid off the greater part of
     what we owe abroad, and we have lent to foreign governments
     some $7,000,000,000 or $8,000,000,000. Including all loans by
     the time the war is over, probably there will be annual
     interest payments coming to us amounting to $400,000,000 or
     $500,000,000. How are we going to receive our pay? I am not
     questioning the ability of our debtors to raise this amount
     from their people. I have no doubt they can do it, but in what
     manner are they going to make payment to us? They can't pay it
     in gold; they haven't the gold to do it, and the total
     production of gold in the world outside of the United States
     wouldn't be enough to do it. We won't want them to pay it in
     goods, for that would interfere seriously with our home
     industries....

     "There is only one way out, and that is by extending more
     credit to them. We will have to capitalize the interest
     payments and reinvest them abroad. And if we want to sell goods
     to them we will have to take their bonds and stocks. In short,
     we will have to play the part that England has played in the
     past, of steadily increasing our foreign investments."

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."


THE LOAN PERIODS

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:

     "The country will be appealed to, with new and striking film
     arguments, with a great variety of poster slogans, and with a
     use of the press and the platform such as has never been
     witnessed before in this country.

     "There are to be nineteen days of actual campaign work. The
     great task of organization and preparation is now going on.
     Artists have been making posters, writers have been preparing
     arguments, and printing presses in all parts of the country
     have been turning out many millions of mottoes, cartoons, and
     slogans."

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.

     "War expenses for July were somewhat less than for June and
     May, amounting to about $1,482,000,000 as compared with
     $1,512,000,000, the record for June, and $1,508,000,000 for
     May, the Treasury Department announced. The outlay for July,
     however, was approximately the amount estimated in advance by
     the treasury, and expenses for August probably will be higher,
     it was said.

     "During July the government's daily outlay was about
     $48,000,000, an average of $38,000,000 daily was for ordinary
     expenses of the army, navy, shipping board, and other agencies,
     and $10,000,000 daily in loans to the Allies. Total ordinary
     expenditures for the month were about $1,157,000,000 and loans
     to the Allies $325,000,000.

     "Receipts from sale of War Savings Stamps July 3rd passed the
     half-billion dollar mark, of which $200,000,000 came in this
     month as a result of the campaign on Thrift Day, June 28th.

     "The government now is financing itself mainly through the sale
     of certificates of indebtedness, in anticipation of the Fourth
     Liberty Loan. More than $1,600,000,000 came in from this source
     in July. In addition, the government received $491,000,000 from
     belated income and excess profits taxes, and $97,000,000 from
     miscellaneous internal revenue. Customs duties yielded only
     $14,000,000.

     "Payments on the Third Liberty Loan now amount to
     $3,652,000,000, leaving $524,000,000 to come in from the next
     installment payment."

------------------------------------------------------------------------
             THE LIBERTY LOANS--BY FEDERAL RESERVE DISTRICTS
------------------------------------------------------------------------
                 FIRST LOAN    SECOND LOAN     THIRD LOAN    FOURTH LOAN
              (June, 1917--  (Oct., 1917--        (1918--        (1918--
                     3½             4              4¼             4¼
                 Per Cent.)     Per Cent.)     Per Cent.)     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        $3,035,226,850 $4,617,532,300 $4,176,516,850 $6,989,047,000
subscriptions
------------------------------------------------------------------------
Total quotas $2,000,000,000 $3,000,000,000 $3,000,000,000 $6,000,000,000
Total         2,000,000,000  3,808,766,150  4,176,516,850  6,989,047,000
allotments
Total number of   4,500,000     10,020,000     17,000,000     21,000,000
subscribers
------------------------------------------------------------------------

                     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     $994,015,950 $1,146,139,150   $773,641,859 $1,482,078,650
subscriptions
------------------------------------------------------------------------
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 INDIVIDUAL INVESTOR

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:

     "This country is approaching, as England has long ago, the
     position of being a possessor of great accumulated wealth. One
     broker after another is really nothing but a family investment
     agent. That is what it amounts to. There are railroad magnates,
     bankers, steel kings, copper kings and so on indefinitely.
     Hundreds of firms in the New York Stock Exchange are nothing
     but channels for the investment of accumulated wealth and I do
     not think we realize how much there is of that in this
     country."


LIBERTY LOANS AND THRIFT

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:

                    --------------1917--18---------------
                    Members        Assets       Increase
    Pennsylvania    677,911    $324,265,393   $25,438,326
    Ohio            767,100     321,741,529    51,188,940
    New Jersey      329,063     168,215,913    13,088,951
    Massachusetts   247,725     126,695,037    13,389,130
    Illinois        246,800     113,528,525     8,050,122
    New York        199,571      86,072,829     6,442,948
    Indiana         202,409      78,112,917     5,818,661
    Nebraska        101,929      54,545,630     6,627,783
    California       42,227      35,928,447     3,134,429
    Michigan         69,041      35,659,360     4,279,888
    Kentucky         62,846      27,085,282     1,272,372
    Missouri         56,116      26,770,144     3,226,311
    Kansas           66,442      26,000,167     2,446,058
    Louisiana        47,793      25,911,928     1,362,683
    Dist. Columbia   37,075      22,399,995       255,115
    Wisconsin        50,612      19,887,368     3,013,526
    North Carolina   37,400      17,608,000     1,703,230
    Washington       46,318      14,444,177     2,366,450
    Arkansas         21,053      10,583,447       409,439
    Iowa[3]          33,035       9,638,852      ........
    Minnesota        22,020       8,979,642       626,537
    West Virginia    21,500       8,119,131       369,564
    Colorado[3]      10,200       6,688,983      ........
    Maine            14,959       6,671,239       233,961
    Oklahoma         18,142       6,554,175     2,354,175
    Rhode Island     11,499       5,938,436       577,906
    Connecticut      14,900       4,869,748       610,423
    South Dakota      5,857       3,603,836        89,286
    N. Hampshire      8,554       3,336,072       322,812
    Tennessee         5,166       3,207,754    [4]112,865
    North Dakota      5,785       2,837,118        90,308
    Texas             7,156       2,314,927       372,489
    Montana           4,239       1,849,935       209,906
    New Mexico        3,545       1,469,276        72,660
    Vermont             749         287,791        52,079
    Other States    341,875     157,319,172    10,975,756
                  ---------  --------------  ------------
    Total         3,838,612  $1,769,142,175  $170,514,039

[3] Reports issued biennially; figures of 1916 used.

[4] Decrease.

[Illustration: A Poster Used During the Fourth Liberty Loan Campaign]


THE THRIFT HABIT

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 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:

     "The thrift machine set up by the Treasury was as follows: 1.
     small unit government bonds; 2. non-interest-bearing Thrift
     Stamps; 3. War Savings Stamps--a short-term obligation paying
     interest at maturity.

     "This was the mechanism. What was the power that actuated the
     machine to such wonderful effect? 1. salesmanship, including
     every modern device of advertising; 2. distribution: (a)
     through retail stores; (b) through employers, by partial
     payments (usually pay-roll deduction).

     "From these simple elements was built up a campaign that
     induced the people to save in a new and unaccustomed way at
     least twenty times as much as they had ever before saved in the
     same time. None of the elements was unimportant, but
     salesmanship, probably, contributed most. The selling campaigns
     of the Liberty Loans and War Savings Stamps were carried on by
     the largest and most effective selling organization ever put
     together, under the direction of the ablest men in the United
     States, and with an energy and devotion that were unimaginable.
     This selling force was irresistible. Everybody bought because
     everybody was asked, or begged, or told, to buy. Under the same
     stimulus almost anything would have sold.


     "SAVING AT THE SOURCE"

     "Next in importance to the direct selling effort came
     distribution. For the first time in the history of finance it
     has been made easy to save; for the first time the great retail
     channels of distribution have been thrown open to saving; for
     the first time millions of wage-earners have learned the value
     and ease of 'Saving at the Source' by pay-envelope deduction of
     a dollar or so a week toward a Liberty Bond."

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:

     "The greatest thrift lesson in the world is thrift, no matter
     what its motive. A great many hundred thousand persons in this
     country have found themselves this year possessed of $100 or
     more in one piece for the first time in their lives; often
     without realization of how they got it. Will that lesson last?
     Will the wage-earner, now that loan drives are over, keep on
     saving, going weekly to the bank to put in his dollar. The
     answer to these questions is, unfortunately, 'no.'

     "It would be perfectly possible to continue the issue of War
     Savings Stamps, and there are many advocates of this plan, but
     it is doubtful if distribution could be permanently maintained
     on anything like its present scale. Merchants and banks, with
     rare exceptions, would scarcely continue to handle them, for
     the cost is not inconsiderable, and there is no compensating
     commercial gain. In the postoffices alone their continued sale
     would set up competition with the present postal savings
     system, which would serve no good purpose and would be highly
     confusing.

     "Can the savings banks successfully undertake this great task?
     I believe they could. I believe a national savings bank,
     operating through commercial banks, stores, and employers all
     over the United States, making its investments through a small
     compact, very highly paid and very efficient and very
     stringently supervised board of executives in one city,
     supporting a vigorous, numerous, and far-flung selling
     organization, similar in many respects to the industrial life
     insurance organizations, could undertake this work and, were it
     possible to act quickly enough, could keep the thrift movement
     going without losing the amazing momentum which it has now
     acquired."


SPENDING THE MONEY

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.


MONEY LOANED TO ASSOCIATE NATIONS

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

     "Money owed to a government by the nations of the world, with
     whom it is in active commercial competition, is another line of
     fortifications in defense of the frontier. Let us, then
     consider our debts and our debtors, and how we both propose to
     pay. Our long-time loans may be scheduled as follows:

    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

     "In addition to the above a series of certificates of
     indebtedness, designated as TA, bearing interest at four per
     cent. and maturing July 15, 1919, was issued to a small amount
     in anticipation of next year's income taxes. The sale proved to
     be slow, and further issuance was discontinued and a new issue
     for the same purpose and of a similar maturity bearing interest
     at 4½% per cent. was substituted. The sale of these securities
     through the agency of the Federal Reserve Banks is in the
     nature of a continuous operation, and no totals so far have
     been announced.

[Illustration: Detroit--City of Automobiles

Many thousands of standardized trucks were made in Detroit during the
war rush, the automobile having proved to be indispensable to the
fighting forces overseas.]

     "The sale of War Savings Stamps and certificates has increased
     the national debt by $1,257,000,000, or within 400 million of
     the maximum under the first authorization. A second series,
     however, amounting to two billion dollars, has been authorized,
     so that the operation will probably continue into the coming
     year. The Treasury for the fiscal year 1917--18 estimated
     receipts of $663,200,000 from this source and about a billion
     for 1918--19. The first estimate was out of line, owing to the
     difficulty in getting the plan into smooth operation.
     Subsequent results have, however, justified the average of
     expectations.

     "The pre-war debt, in the light of recent figures, is almost
     negligible, and the outstanding certificates in anticipation of
     taxes and the Fourth Liberty Loan will be redeemed in due
     course by the flow of funds owing to the Government in taxes
     and subscription payments. The problem of how to deal with the
     eighteen-billion-dollar war debt is the vital question. How
     much of this sum represents a charge on the coming generation
     and how much an invaluable national asset?


     WHAT IS OWED THE AMERICAN PEOPLE.

     "We have loaned abroad the following items:

    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

    [5] Increased to $9,646,419,494 by October, 1919.

     "Here, then, are figures totaling nearly half of our war debts
     that are not only self-supporting but also a double-edged
     weapon in the international market. In the first place, they
     represent money spent at home on American goods, from which the
     American manufacturer has taken his toll of profit; and in the
     second place, they have put the world in our debt to an extent
     that will be difficult to pay in the exchange of goods.

     "Imports of foreign commodities or even gold will take a decade
     to halve the debt, for the gold can not be spared, nor do we
     wish it, and our creditors will find it difficult to increase
     their exports to a point capable of bringing about a balance in
     their favor. The imports from Europe are bound to be offset by
     our own exports, some able economists predicting a balance of a
     billion dollars in our favor for the next five years.
     Regardless of the demands to be made upon us from this source,
     it is probable that the peak-load of expenditure has been
     reached and the period of readjustment and redemption set in.

     "Charging off, then, our loans to the Allies as an asset, let
     us then consider how we may best meet the bill due the American
     people. Vague discussions of the creation of a huge sinking
     fund have been heard, although for some reason or other, in
     history these operations have not been entirely successful.
     Fortunately the bulk of our debt has an early callable date,
     and the Treasury has recently come in for much applause by
     advocating no more loans unless they be in the nature of a
     one-to five-year currency. Experience teaches that the full
     benefit and effect of war taxes are rarely felt until after the
     war. England, after the Napoleonic wars, came back with a
     rapidity that astonished the Exchequer itself. Taxes rolled up
     in such a volume and expenses dropped with demobilization to
     such an extent that the Government found itself anticipating
     the callable date in national debts by market purchases, and
     even then it was found convenient gradually to reduce the scale
     of taxation.

     "Our experience after the Civil War was very similar to
     England's, and the Treasury's surplus annually accumulated to a
     point that forced the Government to buy back at high premiums
     the bonds it was not privileged to call. This was true, though
     to a lesser degree, with the Spanish war loan.

     "It seems as though the two operations of liquidating our own
     debts and the debt of Europe to the United States dovetailed
     perfectly into one gradual and stupendous task. While Europe is
     paying her indebtedness to us without interfering with the
     development of international trade by the sale of foreign
     securities in our home market our buyers here must receive the
     tools to operate with through the redemption and repurchase of
     their Liberty Bonds. In this half of the deal safety, as usual,
     lies in the middle course. It is hoped that taxes will be
     maintained at a level that will infallibly provide funds for
     fixed redemptions with a sufficient surplus to get a flying
     start by purchase around the present low levels."


FINANCIAL STATUS OF ENGLAND IN 1914

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:

     "Of course no nation could permanently tolerate such
     unfavorable trade balances as those from which the Allies in
     Europe are now suffering. They can only do so now and keep
     their exchanges with the United States steady by borrowing
     immense sums here. But the war itself is not permanent, and the
     question is merely whether the present state of affairs can be
     continued long enough to enable all the enemies of the Central
     Powers to exert their full strength and win a final victory.

     "You will no doubt all have noticed that the credits granted
     Great Britain have been greater than those granted to any other
     Ally. The reasons are simple, though they are not, I think,
     generally understood. We have, in the first place, the largest
     war and munition program of any Ally; in the second place, as I
     have shown above, we are, with the exception of the United
     States, the greatest industrial arsenal among the Allies; that
     necessarily involves large imports. We send a great deal of
     steel from England to our Allies; we have to replace it by
     steel from here. We make rifles for Russia; we have to import
     the steel to make them. We send boots to Russia; we have to
     import the leather needed. These examples might be multiplied
     many times. Thirdly, we extend large credits in England to our
     Allies, some part of which they may use anywhere in the world,
     and this part may ultimately come back on the sterling exchange
     in New York. Lastly, it is well known that neutrals who are
     owed money by England unfortunately find it convenient to
     utilize the sterling exchange in New York in order to recoup
     themselves in dollars. But so also do neutrals who are owed
     money by the other Allies. So long as we maintain the sterling
     exchange this appears to be inevitable, and the burden of
     financing both our own and our Allies' trade tends to fall on
     that exchange. It is by our maintenance of this sterling
     exchange that the continuance of our Allies' trade is rendered
     possible. The maintenance of the sterling exchange means the
     maintenance of the allied exchanges. All these factors together
     exert an immense influence. If England had had only herself to
     finance since the beginning of the war, and indeed even if she
     had only herself to finance now, it is quite possible she would
     not have needed to borrow at all abroad."


LOSS IN PRODUCTIVE POWER

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:

     "On the financial side our record is by no means so
     satisfactory. We have, it is true, poured out money like water,
     but much of it has been raised by faulty methods, and the
     amount of it that has been wasted is appalling to consider. In
     the matter of borrowing, our methods have lately been greatly
     improved; and the recommendation of the Committee on National
     Expenditure, that the system of raising money by bank credits
     should be checked as far as possible, is being brought within
     the bounds of practical politics by the great success of the
     War Savings Committee's energetic and ingenious campaign for
     prompting the sale of National War Bonds. Perhaps also we may
     claim some small share in that success through the adoption of
     the principle so long advocated in these columns of a lower
     rate for money at home combined with special terms for money
     left here by foreigners. But successful borrowing, direct from
     the investor, instead of in the shape of money manufactured by
     banks, is a welcome, but not sufficient, improvement. We have
     to raise much more money by taxation. We have also to do much
     more than has yet been done to reduce the wicked waste of
     public money and support the efforts of the Committee on
     National Expenditure to husband the resources of the nation. A
     correspondent in a provincial town in which a Tank has lately
     been busy asks: 'Is it not pathetic to see widows and children
     scraping together their shillings and pennies to help the
     Government, while we have tens of thousands of pounds being
     squandered by a profligate Ministry of Munitions!'"

[Illustration: Copyright Underwood & Underwood

A Woman Doing Road Construction Work

Of the 7,500,000 men serving in the British Army, 4,530,000 were
contributed by Great Britain. Yet production was speeded up by
recruiting and training the labor of women.]


EQUALIZING LOANS AND TAXATION

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:

     "The enormous rise of prices only makes it represent half that
     amount in actual purchasing power. Before the war our
     expenditure was 200 millions. If money had kept the same value,
     the taxation and other public income for this year would only
     have been 420 millions, a little more than twice the pre-war
     level. Would that have seemed so heroic an effort for a
     patriotic nation? No. It can never be repeated too often that a
     really rigorous taxation, begun in 1914 and carried on till
     now, would have left us in a far sounder condition both for
     conducting the war and for facing the peace finance. The money
     and the goods are there. We get them. But we get them by
     crooked and expensive methods of borrowing which inflate
     prices, oppress the poorer purchasers, put huge war loot into
     the pockets of contractors and financiers, and fail to restrain
     expenditure in luxuries."


GERMANY'S ECONOMIC PREPARATION FOR WAR

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:

     "With the general suspension of gold payments at the central
     banks of Europe, except at the Bank of England, the banks are
     in a position to resist raids upon their gold and to lend their
     resources, as far as sound banking policy permits, to the
     struggle of their Governments to maintain national
     independence. In England, while the bank is still paying gold
     for notes, the policy of keeping gold in circulation has been
     abandoned, and the old limit of note issue, which was £5
     ($24.40), has been lowered to 10 shillings ($2.44) and £1
     ($4.88).

     "It is not the purpose of any of the European Powers, however,
     to carry on the war by issues of paper money. The suspension of
     gold payments at the banks and the issue of notes for small
     denominations, which are legal tender in domestic transactions,
     is for the purpose of husbanding the gold stock against
     needless runs and keeping it as a guaranty fund of national
     solvency. It is the course which was adopted by France at the
     time of the Franco-German War in 1870, but so prudently were
     the affairs of the Bank of France conducted that the paper
     never fell more than 2½ per cent. below its value in gold.

     "A similar policy of reserve will probably be pursued by the
     banks of France, Germany, and Russia in the present contest.
     The Government of France has raised the maximum limit of the
     note circulation of the bank by nearly $1,000,000,000, but the
     increase will not be used except as additional currency may be
     required, owing to the restriction in other forms of credit and
     the special demand for notes in the districts where the armies
     are gathered.

     "The suspension of specie payments does not convey to the
     banking community quite the same doleful warning of the
     unlimited issue of paper and its steady depreciation in gold
     which were conveyed by specie suspension in the United States
     in 1861 or by Austria-Hungary and Russia in the desperate
     contest of the Napoleonic wars. Monetary science is better
     understood at the present time than in those days."


GERMAN WAR FINANCE

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 LOAN BUREAU SCHEME

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:

     "To take note circulation alone is obviously misleading,
     particularly in view of the violent efforts that have been
     made, especially during the last year, to extend the use of the
     check, and in other ways to limit as far as possible the use
     of notes. For what these figures are worth, it may be said that
     the total note circulation of the country at the end of June
     (1918), including Reichsbank notes, State Bank notes, Treasury
     notes, and loan notes, stood at £1,030,000,000, as compared
     with £109,300,000 on July 23, 1914. Reichsbank deposits, again,
     stood on June 30, at £459,100,000, as compared with £47,600,000
     on July 23, 1914, while the deposits of the eight 'great'
     banks, even at the end of 1917, stood at £800,000,000, as
     compared with £250,000,000 at the end of 1914, £362,000,000 at
     the end of 1915, and £500,000,000 at the end of 1916."

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

     "In his comparison of German war finance with ours, the
     Chancellor, in his Budget speech, made the following points:
     First, that German war expenditure is now £6,250,000--almost
     the same as ours--though our expenditure includes items (such
     as separation allowances) which are not included in the German
     figures. Second, that the whole amount of the German Votes of
     Credit (£6,200 millions) has been added to their war debt,
     'because their taxation has not covered their peace expenditure
     in addition to their debt charge.' Third, the total amount of
     new taxation levied by them since the beginning of the war
     comes to £365 millions, against our £1,044 millions. Fourth, in
     a year's time they will have a deficit, comparing the revenue
     with the expenditure, of £385 millions at least. 'If that were
     our position,' the Chancellor added, 'I should certainly think
     that bankruptcy was not far from the British Government.'
     Fifth, with the exception of the war increment tax, 'scarcely
     any of the additional revenue has been obtained from the
     wealthier classes in Germany'."


GERMAN WAR PROFITS

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:

     "_(a) Capture of 'Human Material.'_--This consists of the
     46,000,000 Allied subjects from whom the Germans obtain free
     labor.

     "_(b) 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.

     "_(c) 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.

     "_(d) 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.

     "_(e) 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.

     "_(f) 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.

     "_(g) 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.

     "_(h) 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.

     "_(i) 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."

[Illustration: A Woman Operating a Multiple Spindle Drill in an English
Shell Factory

Photo by James M. Beck

"Since the war broke out," said M. Barriol, a French celebrated actuary,
"no less than 1,500,000 women have been added to the ranks of wage
earners in England, an increase of fully 25 per cent."]


GERMAN MONEY INDEMNITY

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.

     "One of the departments of the Government at Washington has in
     its files a report of a German commission on industry after the
     war. Reading this, one can understand the motive for what at
     one time looked like pure vandalism. Vandalism it was, by
     descendants of the Vandals, but it was a deliberate destruction
     of international competitors, killing the workmen--and
     workwomen--and destroying plants and machinery for the one
     purpose of removing competition. A physical injury to a child
     helped to weaken future competition in the world's trade; and
     it was upon the power gained thereby that Germany hoped to
     launch another war for world domination....

     "A peace that gives the cold-blooded perpetrators of these
     crimes an advantage over their victims would not be equitable.
     If any must suffer, let it be those who are guilty, but don't
     give them a start ahead of their victims.

     "In substance, that point should declare that Germany shall not
     profit through the wrecking of any Allied industry. Except to
     admit necessary foodstuffs, the blockade should not be lifted
     until every Allied country from England to Serbia has been
     industrially rebuilt. One object of the wholesale murder of
     civilians was to weaken industrially the enemy countries. The
     greater proportionate loss of man-power in the Allied countries
     should be met by restrictions on the entry of raw materials
     into Germany. Every piece of stolen machinery should be
     returned before her own industries are allowed to resume."

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
be helped rather than punished, that the main thing was to set her on
her feet again.

     "Representative papers like the New York _Times_, Syracuse
     _Post-Standard_, Buffalo _Express_, and Sacramento _Bee_ all
     insist that while we might or perhaps should claim no
     war-expenses from Germany, 'we must exact payment,' in the
     words of the Syracuse daily, 'to the last penny for losses
     suffered through illegal warfare.' Germany's submarine campaign
     cost us, according to this paper's figures, 375,000 tons of
     shipping and 775 civilian lives. If we take the burden of
     payment for this property and these lives from the guilty
     shoulders of Germany it would only be to 'pass it on to the
     innocent shoulders of the American taxpayer,' which, the New
     York _Times_ declares, would be 'rank injustice'."


FORECASTING THE TOTAL COST OF WAR

It is interesting also to note an attempt made by one of the expert
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:


LOSS FROM DESTRUCTION OF PROPERTY

     "The total area of the war zone is 174,000 square miles, of
     which the Western theater of the war, in France and Belgium,
     stretches over an area of 19,500 square miles, and it contains
     over 3,000 cities, villages, and hamlets, great manufacturing
     and agricultural districts, of which some have been totally
     annihilated and some heavily affected. The estimate by the
     National Foreign Trade Council of the war losses, which
     unfortunately does not go beyond 1916, is as follows:

     "'Destruction of buildings and industrial machinery in Belgium,
     $1,000,000,000, and in France $700,000,000. The destruction of
     agricultural buildings and implements, of raw materials, of
     crops and live stock, has been estimated at a sum of
     $780,000,000 in Belgium and $680,000,000 in France. Roads were
     destroyed frequently by the retreating troops and have been
     seriously damaged by heavy gun fire and excessive use. The
     losses from destruction of railway bridges, etc., have been
     estimated in Belgium at $275,000,000 and in France at
     $300,000,000.

     "'In the Eastern theater of the War Germany has been invaded
     only in eastern Prussia, where the agricultural population has
     been seriously impaired. Heavy damage was inflicted upon
     bridges, roads, and governmental property, including railroads.
     The direct cost to Germany through the loss of agricultural
     products, of manufacturing products, as well as in interest on
     investments abroad, of earnings from shipping and banking
     houses, and profits of insurance and mercantile houses engaged
     in business abroad has been enormous'."


ECONOMIC LOSS OF MAN-POWER

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

     "Mr. M. Barriol, the celebrated actuary, gives the following
     figures as the capital value of man: in the United States,
     $4,100; in Great Britain, $4,140; in Germany, $3,380; in
     France, $2,900; in Russia, $2,020; in Austria-Hungary, $2,020
     or an average capital value for the five foreign nations of
     $2,892.

     "The number of men already lost is 8,509,000 killed and
     7,175,000 permanently wounded, or a total of 15,684,000. Thus
     society has been impoverished through the death and permanent
     disability of a part of its productive man-power to the extent
     of $45,000,000,000.

     "The loss of men, measured in terms of the capital value of the
     workers withdrawn from industry, is offset in some degree by
     the enhancement of the capital value of the remaining
     producers.... This loss of man-power is also partly offset by
     the large contingents of women drawn into industries. In
     England, out of a female population of 23,000,000, about
     6,000,000 were engaged before the outbreak of the war in
     gainful occupations. Since the war broke out no less than
     1,500,000 women have been added to the ranks of wage-earners,
     an increase of fully 25 per cent. Moreover, about 400,000 women
     have shifted from non-essential occupations to men's work. In
     the United States, approximately 1,266,000 women are now
     engaged in industrial work, either directly or indirectly
     necessary to carry on the war.


EFFECTS ON POPULATION

     "The physical and moral effects of the war, the moral strain to
     which the nations have been subjected, the 'shell-shock' which
     has reacted upon the population at home as well as upon the
     soldiers on the battlefield, the undernourishment and
     starvation of children as well as adults, all have resulted in
     a lowered vitality, the ill effects of which, especially in the
     countries of the Central Powers, are already seen in an
     increase of the death rate, in a spread of epidemics and
     diseases that have taxed the medical resources of all
     countries.

     The lowered vitality of the race, which is still further
     aggravated by the millions of incapacitated soldiers and the
     premature and excessive employment of children and women in the
     industries, will eventually make for a lower standard of
     efficiency in all human activities, or a retardation of human
     progress. Authoritative statements are to the effect that in
     Belgium in the earlier period of the war, the deaths of women
     and children far outnumbered those of men. Annual deaths among
     the German civilian population have increased by a million
     above the normal.

     "Besides the loss in actual population there is a loss of
     potential population. Carefully compiled figures show that by
     1919 the population of Germany will be 7,500,000 less than it
     would have been under ordinary circumstances. The people in
     Austria in 1919 will be 8 per cent. less in numbers than in the
     year before the war. Hungary will be still worse off; it will
     have a population of 9 per cent. lower than in pre-war days."


CARNEGIE ENDOWMENT'S ESTIMATES

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 the wars of the nineteenth century from the Napoleonic down
     to the Balkan wars of 1912--1913, show a loss of life of
     4,449,300, according to the report, while the known and
     presumed dead of the World War reached 9,998,771. (See Vol.
     III, pp. 403-5.) The monetary value of the individuals lost to
     each country is estimated, the highest value on human life
     being given to the United States, where each individual's
     economic worth is placed at $4,720, with England next at
     $4,140; Germany third, at $3,380; France and Belgium, each
     $2,900; Austria-Hungary at $2,720, and Russia, Italy, Serbia,
     Greece, and the other countries at $2,020.

     With a loss of more than 4,000,000 the estimate puts Russia in
     the lead in human economic loss, the total being more than
     $8,000,000,000; Germany is next with $6,750,000,000; France,
     $4,800,000,000; England, $3,500,000,000; Austria-Hungary,
     $3,000,000,000; Italy, $2,384,000,000; Serbia, $1,500,000,000;
     Turkey, almost $1,000,000,000; Rumania, $800,000,000; Belgium,
     almost $800,000,000; the United States slightly more than
     $500,000,000; Bulgaria, a little more than $200,000,000;
     Greece, $75,000,000; Portugal, $8,300,000, and Japan, $600,000.
     On this basis the total in human life lost cost the world
     $33,551,276,280, and the loss to the world in civilian
     population is placed at an equal figure.

     The attempt to determine property losses is the least
     satisfactory, as it is the most difficult. The destruction and
     devastation in the invaded areas of Belgium, France, Russian
     Poland, Serbia, Italy and parts of Austria are probably
     incapable of exact determination, and it may well be doubted if
     the exact losses will ever be known.

     The total property loss on land is put at $29,960,000,000,
     one-third of which was suffered by France alone, its loss being
     given as $10,000,000,000, with Belgium next at $7,000,000,000,
     and the other countries following as follows:

     Italy, $2,710,000,000; Serbia, Albania, and Montenegro,
     $2,000,000,000; The British Empire and Germany, each,
     $1,750,000,000; Poland, $1,500,000,000; Russia, $1,250,000,000;
     Rumania, $1,000,000,000, and East Prussia, Austria, and Ukraine
     together, the same amount.

[Illustration: Copyright by Central News Service

Launching the Quistconck at Hog Island

According to the report of the Carnegie Endowment the cargo loss at sea
was $3,800,000,000, the total tonnage and cargo loss being
$6,800,000,000. To offset the Allied loss in shipping, ship-building in
the United States was rushed at topmost speed.]

     In the property losses on sea, that is, to shipping and cargo,
     the report estimates that "the construction cost of the tonnage
     loss can scarcely be estimated at less than $200 a ton, and the
     monetary loss involved in the sinking of this 15,398,392 gross
     tons may, therefore, be placed at about $3,000,000,000." To
     this is added loss of cargo, which is estimated at $250 a ton,
     giving a cargo loss of $3,800,000,000, and a total tonnage and
     cargo loss of $6,800,000,000.

     Among the indirect costs of the war, loss of production is
     placed at $45,000,000,000. In arriving at this figure an
     average of 20,000,000 men are counted as having been withdrawn
     from production during the whole period of the war, and their
     average yearly productive capacity is placed at $500. War
     relief is another indirect cost which totalled up to
     $1,000,000,000; and the loss to the neutral nations is given as
     $1,750,000,000.

     With the total direct costs of the war amounting to
     $186,336,637,097 and the indirect costs to $151,612,542,560,
     the stupendous total of $337,946,179,657 is reached. Finally,
     the report says:

     "The figures presented in this summary are both
     incomprehensible and appalling, yet even these do not take into
     account the effect of the war on life, human vitality,
     economic well-being, ethics, morality, or other phases of human
     relationships and activities which have been disorganized and
     injured. It is evident from the present disturbances in Europe
     that the real costs of the war cannot be measured by the direct
     money outlays of the belligerents during the five years of its
     duration, but that the very breakdown of modern economic
     society might be the price exacted."


THE WAR AS A PRODUCT OF HIGH PRICES

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:

     "It is enough to say that production is reduced almost to a
     minimum, while consumption is going on at a most extravagant
     rate. Those who wish to pose as economists without competent
     knowledge are telling the public that all the evil is due to
     this, that, and the other thing--such, for example, as
     inflation, the rise in prices, the enormous loans raised, and
     several other fads. It is pure moonshine. The world is
     impoverished, firstly, because so much of the world's manhood
     is withdrawn from production to consumption; and, secondly,
     because reduction in production is so serious that very little
     has been saved either by the belligerents or the neutral
     countries of Europe, at all events. International trade is
     really carried on by barter. It is true that money is
     frequently paid. At the present time money has in some markets
     to be paid because credit has been injured, and those who
     possess wealth are not as willing as they used to be to trust
     to mere credit."


QUESTIONS OF INFLATION

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:

     "The inevitable result of extensive note issues by a number of
     Governments was that prices were irresistibly impelled upwards
     in all belligerent countries--apart from any questions of war
     waste, profiteering, difficulties of transport by sea or land,
     or shortage of labor. Belligerent countries became
     extraordinarily good markets in which to sell goods; and a
     golden harvest was temptingly displayed to neutral nations, in
     whose favor enormous trade balances rapidly grew up. In large
     part these balances were met by payment in gold.... But just as
     gold substitutes in the shape of paper money swelled the
     currencies and increased prices in the belligerent countries,
     so also the large quantities of gold coin sent to neutral
     States in payment for goods supplied to the warring nations
     swelled the currencies and increased prices in the neutral
     states themselves. The withdrawal of gold set up a natural
     tendency for prices to fall in the countries from which it had
     been exported; but not only was this tendency overcome, but the
     upward movement of prices was continued by the action of the
     several Governments in placing still further issues of
     inconvertible paper money on their respective markets. The net
     results have been that currencies have been inflated and prices
     forced up all over the world, that inconvertible paper money is
     tending more and more to drive out gold from the currencies of
     the states that issue it, and that the gold so driven out is
     being absorbed into the currencies of the neutral nations.
     Between August, 1914, and the date of her own declaration of
     war, America increased the amount of her gold currency by
     approximately £200,000,000 sterling. No real benefit has
     accrued.

     "The currencies of the whole world have been artificially
     inflated to the extent that, under the most favorable
     circumstances existing in any part of the world, £5 are now
     needed to do the work in circulation that before the war was
     accomplished by £3. The loss to people with fixed incomes, the
     disturbance of trade, the potential labor difficulties are
     stupendous. And as a result of purchasing war material at
     excessively high prices, the dead weight of debt incurred by
     all the countries at war is very much greater than it need have
     been had currencies been kept within reasonable bounds."


CURRENCY EXPANSION IN GREAT BRITAIN

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.

     "Mr. Herbert Samuel made a masterly attack upon the vicious
     system of War Finance, by which no less a sum than £196,170,000
     is added to the expenditure by bonuses and increases of wages,
     which, in their turn, only force prices still higher and raise
     the cost of living. Lives have been conscripted; incomes have
     been conscripted; the only thing which has not been conscripted
     is labor. If the Government had at an early stage of the war
     had the courage to fix wages, instead of prices, the cost of
     living would then have been regulated by supply and demand. By
     fixing prices of commodities, after they had risen to almost
     famine figures, we have the maximum of loss and inconvenience,
     high wages, dear food, and a war bill that increases day by
     day. Despite Mr. Bonar Law's assurance that the bill of the
     year would not be so high as he expected, we have the fact that
     we are spending over seven millions a day. The satire of 'the
     cheap loaf' consists in its cost to the nation at large of
     £45,000,000 a year. Bonuses to munition workers amount to
     £40,000,000, bonuses to miners come to £20,000,000, to railway
     workers £10,000,000, to potato growers £5,000,000. Is this
     anything else but a system of gigantic corruption? In order
     that artisans and agriculturists may be kept in good humor with
     the war, they are bribed with bonuses and allowed to buy food
     at prices which are partially paid by the rest of the
     community. If ever there was a case of robbing Peter to pay
     Paul it is here."


AMERICA'S EXPERIENCE WITH INFLATION

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:

     "Prior to our entry into the war, when the European nations
     were buying heavily in the United States, they paid largely in
     gold for what they bought, and as a result about a billion
     dollars in gold coin came to this country in the period of two
     and one-half years. The reason the European nations were able
     to send us their gold was that they printed paper money for
     their own use, releasing gold for us. But that gold inflation
     in this country is one explanation of the general advance in
     prices of all commodities, although undoubtedly it is not the
     only explanation; for it must be freely admitted that prices
     have been affected, first, by scarcity, occasioned by increased
     demand from Europe for many articles produced by us; second, by
     reason of the fact that increases in taxes and wages of labor
     have entered into the cost of production and sale of all
     articles and account for a share of the increased prices of
     commodities."


CIVIL WAR 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:

     "For let it not for a moment be overlooked that inflation, in
     its effects, amounts to conscriptive taxation of the masses. It
     is, indeed, one of the worst and the most unequal forms of
     taxation, because it taxes men, not upon what they have or
     earn, but upon what they need or consume. The only difference
     for the masses between this kind of disguised and concealed
     taxation and taxes which are levied and collected openly is
     that in the case of the latter the government gets the revenue,
     while in the former case it borrows it, and those to whom it is
     eventually repaid are not those, for the most part, who have
     been mulcted for it. Inflation therefore produces a situation
     akin to double taxation in that the great mass of the consuming
     public is hard hit by the rise of prices induced by the
     degenerated borrowing policy and later has to be taxed in order
     to produce the revenue requisite to sustain the interest charge
     on the debt contracted and to repay the principal. The active
     business and speculative classes can usually take care of
     themselves in the midst of the confusion produced by inflation
     and recoup themselves for their increasing outlays. Indeed
     inflation frequently makes for an artificial condition of
     business prosperity. That is why war times are frequently
     spoken of in terms of enthusiasm by the class of business
     adventurers. But it is a prosperity that is dear-bought and at
     the expense of the great body of plain living people. It would
     be a monstrous wrong if in financing our present war we should
     pursue methods that would land us in a sea of inflation in
     which the great body of the American people, who are called
     upon to contribute the blood of their sons to the war, were
     made the victims of a careless or iniquitous financial policy."


INFLATION ILLUSTRATED.

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.

     "Every dollar of gold may become three dollars of Federal Bank
     credits and each dollar of this may in turn become the basis of
     eight dollars of credits for the Central Reserve cities, ten
     dollars for the smaller cities and fifteen dollars for the
     country banks, which works out to a practical average of ten
     dollars for all the banks in the Federal Reserve system."

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.

[Illustration: Photo by Paul Thompson

Ship-building at Camden, N. J.

One of the financial effects of the war was the transformation of the
United States from a debtor to a creditor nation. Immense private
fortunes were made. In no industry was there a greater boom than in
ship-building.]


CREDIT EXPANSION

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.


UNITED STATES A CREDITOR NATION

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:

     "A great upheaval took place in the world of finance. Credit
     resources were brought to the fore and nations established on a
     financial basis of far-reaching importance, but of a kind that
     had only a secondary place before.

     "The war has turned the United States from a debtor to a
     creditor nation. Formerly we owed abroad something like
     $4,000,000,000, about three-quarters of which sum we have
     bought back. Moreover, Europe now owes us about
     $9,000,000,000--on private account; about $2,000,000,000 in
     securities; in United States Government obligations over
     $7,000,000,000. The world is under obligations to us in
     interest alone of between $400,000,000 and $500,000,000 a
     year."

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:

     "A total appropriation of $7,000,000,000 has been made,
     $3,000,000,000 by the Act of April 24, 1917, and $4,000,000,000
     by the Act of September 24, 1917. Under these authorizations
     credits have been established in favor of the governments of
     Great Britain, France, Italy, Russia, Belgium, and Serbia.
     These loans, up to January 17, 1918, are given in the following
     table:

                  Loans and                           Balances
Country        Credits Agreed         Loans       Under-Established
                    Upon               Made            Credits

Great Britain   $2,045,000,000    $1,985,000,000     $60,000,000
France           1,285,000,000     1,225,000,000      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

     "On the basis of the requests being made on the Treasury, it is
     estimated that credits aggregating approximately $500,000,000
     per month will be required to meet the urgent war needs of the
     foreign governments receiving advances from the United States.
     At this rate approximately the entire appropriation authorized
     by Congress will be accredited to our Allies by the close of
     the present fiscal year (June 30, 1918).

     "A significant feature of the loans floated in this country in
     the last three and a half years has been the fact that many
     states and municipalities which formerly went to London to sell
     their securities have recently been financed through the United
     States. About $150,000,000 of the Canadian loans went to
     provinces and municipalities, and many of the South American
     obligations were contracted for municipal improvements. The
     neutral nations of Europe have also sought accommodation in the
     American money market. Loans have been made to the city of
     Dublin, Ireland, the London Water Board, and the French cities
     of Paris, Bordeaux, Lyons, and Marseilles."


DISAPPEARANCE OF GOLD CURRENCY

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:

     "Obviously if Great Britain or any other country _alone_
     attempted to alter the standard price of gold, and therefore
     the value of the present sovereign (or its equivalent), the
     currency would be debased, instead of being enhanced. It would
     also in effect amount to a partial repudiation of national
     debt. A standard ceases to be a standard if _one_ nation can
     arbitrarily alter it, but surely there can be no argument
     against the creation of a new standard sanctioned by the whole
     civilized world for their mutual advantage. If Great Britain
     and the United States were to proclaim their desire to adopt my
     scheme it is hardly likely that any country other than the
     Central Powers would fail to welcome it. Spain, for instance,
     has increased her gold reserve to about £80,000,000 and greatly
     enhanced the value of her currency thereby. Would she fail to
     grasp the happy chance of making this £120,000,000, and would
     any country continue to part with its gold at £4 per ounce when
     it could get £6 or £8?"


WAR'S EFFECT ON SILVER

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 war has brought into the market a vast number of new
     buyers for ornaments, whose demand in the aggregate is
     estimated to more than compensate for the falling off in the
     purchases by the wealthy classes of silver plate. Wages
     everywhere, not merely in England, but practically all over the
     world, have advanced, and particularly in Western Europe;
     moreover, immense numbers of women, and even children, are
     being employed who were not employed before, and those who were
     employed before have a larger income, particularly amongst the
     wage earning classes, than has been the case in this country
     for many years past."

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_:

     " ... About half the annual production of silver throughout the
     world is absorbed by the East, meaning principally India and
     China. It has to be borne in mind that prices in the East have
     advanced as well as in Europe and the two Americas, and,
     consequently, more token money is required there as well as
     here. Silver is the standard of value, and not token money at
     all, in China; and in India, while gold is nominally the
     standard of value, the rupee is the actual coin in which the
     Indian natives, as distinct from mere government officials,
     reckon their wealth. Now, as one result of the war, nearly all
     the governments forbid the export of gold; consequently, India
     requires a steadily increasing supply of silver, not merely to
     do the work that silver did before the war, but, in addition,
     to supply the void created by the prohibition of the export of
     gold."


STOCK EXCHANGE WAR

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_:

     The wider black area shows the high and low average prices of
     the twenty-five industrials included in the fifty, and the
     white area the corresponding figures for the twenty-five rails.
     The lines begin at a time when Germany was suffering severely
     from her failure at Verdun and from losses in men and territory
     from the great Allied Somme offensive. The subsequent rapid
     decline (November to February) embraces the period of
     Bethmann-Hollweg's sensational peace offensive, followed a few
     weeks later by Germany's intensified submarine warfare. The
     lowest point of all (December, 1917) was reached after
     Germany's successful counter-thrust for Cambrai, her "peace
     offensive" with the Bolsheviki at Brest-Litovsk, and the taking
     over of our railroads by the government.--_Literary Digest_,
     October 19, 1918.

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:

     "The lowest quotations for these bond and note issues were
     reached in 1917, when the cause of the Allies assumed a gloomy
     appearance. The depression was aggravated by the general
     decline of the entire securities market in the later part of
     that year. Some recovery occurred by the end of last year, but
     the beginning of 1918 saw them still depressed. Last March,
     April, May and June, when the great German drives were in
     progress, they showed little disposition to break, but after
     the active participation of the American Army in the fighting
     began and news came that the counter-offensive had assumed a
     decided and successful phase, an assertion of strength took
     place in foreign government bonds, carrying quotations 'not
     only to the highest of the year, but in some instances to the
     best figures attained since they first made their appearance in
     the American market.' The following tabulation is presented by
     _Bradstreet's_ as giving the range of prices for the most
     prominent bonds and short-term notes of foreign countries
     during 1917 and 1918, with the quotations for them on August
     22nd:

                                  /---1917----\   /---1918----\     Aug.
                                  High      Low   High     Low      22
 Am. For. Sec. 5s.         1919  97-7/8  90       98      94½      97½
 Anglo-French 5s.          1920  95      81-7/8   95      88¼      94¾
 Canada 5s.                1926 100      89       95      90-7/8   92
 Canada 5s.                1931 100¼     87½      94      88-7/8   92-3/8
 Fr. Republic 5-1/2s.      1919 101      91½      99      94       98-7/8
 U. Kingdom 5s.            1918  98-5/8  95½     100      97       99-7/8
 U. Kingdom 5-1/2s.        1919  98-7/8  93¼      99¼     95¼      98¾
 U. King. 5-1/2s, new      1919 101-9/16 95¼     100      9¾       99-5/8
 U. Kingdom 5-1/2s.        1921  98½     84½      95¾     91-5/8   95-3/8
   _French Cities_
 Paris 6s.                 1921  96-7/8  73½      92-1/8  81-5/8   91-7/8
 Bordeaux 6s.              1919  96-7/8  74       95½     84       94-7/8
 Lyons 6s.                 1919  96-7/8  74       95½     84       94¾
 Marseilles 6s.            1919  96-7/8  74       95½     84       94¾
   _Russian Govern._[6]
 External 6½%                    98¾     45       64½     33       61
 External 5½%              1921  98-5/8  36       60½     34½      57

 [6] Curb market quotations.

[Illustration: Diagram Showing the Effect of the War on the Prices of
Stocks

(See explanation on page 32)]

     "British issues, as shown above, declined least of all, 'and
     consequently had less ground to regain in the rise,'
     _Bradstreet's_ adds:

     "The feeling of confidence in England's credit has all along
     been a factor in connection with its American obligations. This
     will doubtless be strengthened by the announcement made this
     week that the United Kingdom secured 5 per cent. notes, due
     September 1, 1918, will be paid at their maturity on that date.
     There were originally $250,000,000 of these notes, which were
     sold in our market in 1916; but the outstanding issue has been
     reduced to about $180,000,000 by purchases in the market for
     redemption. French obligations have been one of the chief
     features of the advance. As will be seen from the above table,
     the French Republic 5½ per cents., due 1919, have risen 6
     points from the low figures of the year. The 6 per cent. notes
     of the French cities, Paris, Lyons, Bordeaux, and Marseilles,
     with rises of about 10 points each, are conspicuous examples of
     the good effects following the checking of the German advance
     and the counter-offensive launched by the Allies and the
     American Army. No division of this part of the bond market has,
     however, shown such a marked improvement as the Russian
     external or dollar bonds, which though not listed at the Stock
     Exchange, are dealt in extensively on the New York Curb
     market'."


GERMAN PROPERTY IN AMERICA

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:

     "Furthermore, this structure was 'designed so to hold American
     industry as to frustrate the organization of our resources in
     case of war.' With two hundred American corporations controlled
     by the financial and military power in Germany, we had a
     situation that 'might easily have been fatal in America had it
     not been discovered in time.' When the war began in 1914 the
     structure 'had become so large and powerful and was so firmly
     entrenched in the industrial life of our country that its real
     commanders in Germany cherished the hope that it would prove
     the make-weight which would keep America out of the war, or,
     failing in that, constitute a powerful ally of the German cause
     in our very midst.'" Mr. Palmer added:

     "'During the last twenty-five or thirty years Germany had built
     up upon American soil a structure reaching into every part of
     the country and stretching its arms across the seas to fasten
     upon Porto Rico, the Virgin Islands, Hawaii, and the
     Philippines. Congress has declared that all these enemy
     properties shall be managed and administered by the Alien
     Property Custodian with all the powers of a common law trustee,
     the proceeds to be distributed after the war in such manner as
     the Congress may determine. This means that the final
     disposition of the properties or the funds realized from their
     sale will be a topic for discussion and a subject for
     settlement at the council table of the nations at which
     permanent peace shall be restored to the world.

     "'This being so, it seems to me to be an important part of our
     work to capture the army which Germany skilfully and craftily
     planted midst the busy wheels of American industry, and to
     break, never to be again repaired, the industrial and
     commercial chain which Germany has stretched across the
     American continent and our insular possessions. I would let
     Germany understand now that her plan has dismally failed. I
     would let her understand now that no matter how long she
     fights, or what sacrifice she makes, or what price she pays,
     however much territory she may occupy, or whatever worlds she
     may conquer, there is one place which she will never soil again
     with the tramp of the marching legions of her industrial army.
     That is the United States of America. I would divorce utterly
     and forever all German capital from American industry'."



II--WARTIME FOOD AND PRICE PROBLEMS

Intricacies of a Perplexing and Critical Situation Which Taxed the
Ingenuity of Statesmen of All the Belligerents

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:

     "The British Government went into the beef business in order to
     supply the troops at home and overseas with chilled meat. It
     did so at an average cost of 12 cents per pound. It also
     supplied all meat of this kind required by the French Army, the
     Italian Army, the Belgians, and the Serbians. The amount of
     meat required for the British and French armies was over 50,000
     tons per month; for the Italian Army about 10,000 tons per
     month. These quantities increased proportionately with the
     additions to the forces. Having created a state monopoly in the
     importation and control of chilled meat, the Government had to
     make provisions for domestic supplies outside the Army. The
     Board of Trade arranged to sell to British firms the surplus
     meat at market prices. They obtained a small commission, lower
     than it hitherto received from traders. Sales to speculators
     were prohibited.

     "Wheat was quite as important as sugar and beef, although there
     was less risk of a world-corner. Wheat was purchased for
     Government account on somewhat similar lines as beef. One of
     the largest importing houses was commissioned to do all the
     purchasing, while the other houses held off, and it was four
     months before the corn trade, on the selling side, discovered
     that purchases were made for the state. Naturally the
     commission which the state paid on such transactions was
     nominal. The British Government organization bought and shipped
     wheat, oats, fodder, etc., for Italy. The French Government
     bought their civil _ravitaillement_ wheat through the Hudson
     Bay Company. Large purchases were made in Canada on behalf of
     the Italian Government."


     UNITED STATES AS FOOD PRODUCER

     "It is hard to realize that the United States was in 1917 much
     less favorably situated for producing a huge food surplus than
     it was thirty years before. In the interim industrialism had
     made huge strides in the land, and a great urban population has
     risen to eat up a large part of the surplus of food produced by
     the farms. This change is indicated by a growth of the urban
     population in the twenty years from 1890 to 1910 from
     22,720,223 to 42,625,383, or more than 80 per cent., while
     rural population during the same period increased from
     40,227,491 to 49,348,883, or less than 25 per cent. If the same
     ratios have been maintained since 1910 urban population has now
     become one-half of the whole. In terms of food production
     decidedly more than one-half of our population now produces a
     very insignificant part of the food which it consumes, for the
     rural population includes all who live in towns of less than
     2,500. The significance of the change is indicated by the
     following figures of the production, export, and consumption
     of typical food products. The comparison is between the average
     of the five-year period ending in 1895 and that ending in 1914.
     The average production of wheat per year for the former period
     was 476,678,000 bushels; for the latter 697,459,000 bushels, an
     increase of 46 per cent. Between these periods domestic
     consumption increased from 310,107,000 to 588,592,000 bushels,
     or about 90 per cent., while exports decreased from 166,571,000
     to 104,945,000 bushels, or 37 per cent. The average production
     of corn for the former period was 1,602,171,000 bushels; for
     the latter 2,752,372,000 bushels, or an increase of 72 per
     cent. Consumption increased from 1,552,003,000 to 2,790,962,000
     bushels, or 79 per cent., while exports decreased from
     50,168,000 to 41,509,000 bushels, or 17 per cent. The figures
     upon sugar, beef, pork, and other staples lead to similar
     conclusions. The growth of industrial centers has given us an
     increasingly urban population which has been consuming a larger
     and larger part of the food surplus."


THE FOOD CONTROLLER

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.

[Illustration: Centres of Live Stock Production Throughout the World]


AMERICA'S CONTRIBUTION IN FOOD TO THE ALLIES

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:

     "Shipments of meats, fats, and dairy products were as follows,

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

     "'Our slaughterable animals at the beginning of the last fiscal
     year were not appreciably larger in number than the year
     before, and particularly in hogs; they were probably less';
     so, as Mr. Hoover points out, 'the increase in shipments is due
     to conservation and the extra weight of animals added by our
     farmers.' Our shipments of cereal and cereal products have
     been,

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

     "The total shipment of wheat from our last harvest was about
     141,000,000 bushels, with 13,900,000 of rye, a total of
     154,900,000 bushels, of prime breadstuffs. Mr. Hoover notes a
     remarkable achievement in connection with the wheat shipments:

     "'Since the urgent request of the Allied Food Controllers early
     in the year for a further shipment of 75,000,000 bushels from
     our 1917 wheat than originally planned, we shall have shipped
     to Europe, or have _en route_, nearly 85,000,000 bushels. At
     the time of this request our surplus was already more than
     exhausted.

     "'This accomplishment of our people in this matter stands out
     even more clearly if we bear in mind that we had available in
     the fiscal year 1916--17 from net carry over and a surplus over
     our normal consumption about 200,000,000 bushels of wheat,
     which we were able to export that year without trenching on our
     home loaf. This last year, however, owing to the large failure
     of the 1917 wheat crop we had available from net carry over and
     production and imports only just about our normal consumption.
     Therefore, our wheat shipments to Allied destinations represent
     approximately savings from our own wheat bread.'

     "The effort and sacrifice made by our people to do this are
     more fully appreciated when we consider that last year's wheat
     crop was a small one and that the corn failed to mature
     properly. Mr. Hoover concludes his letter with these words of
     warm appreciation of the people who have made up the army of
     which he has been the commanding general:

     "'I am sure that all the millions of our people, agricultural
     as well as urban, who have contributed to these results should
     feel a very definite satisfaction that, in a year of universal
     food shortages in the northern hemisphere, all of these people,
     joined together against Germany, have come through into sight
     of the coming harvest, not only with health and strength fully
     maintained, but with only temporary periods of hardship. The
     European Allies have been compelled to sacrifice more than our
     own people, but we have not failed to load every steamer since
     the delays of the storm months of last winter.

     "'Our contributions to this end could not have been
     accomplished without effort and sacrifice, and it is a matter
     for further satisfaction that it has been accomplished
     voluntarily and individually. It is difficult to distinguish
     between various sections of our people--the homes, public
     eating places, food trades, urban or agricultural
     populations--in assessing credit for these results, but no one
     will deny the dominant part of the American women'."


AGRICULTURE AND THE WAR

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:

     "The efforts put forth by the farmers and the agricultural
     organizations to secure increased production can perhaps best
     be concretely indicated in terms of planting operations. The
     size of the harvest may not be the measure of the labors of the
     farmers. Adverse weather conditions and unusual ravages of
     insects or plant diseases may partly overcome and neutralize
     the most exceptional exertions."


ACREAGE UNDER CULTIVATION

     "The first year of our participation in the war, 1917,
     witnessed the Nation's record for acreage planted--283,000,000
     of the leading cereals, potatoes, tobacco, and cotton, as
     against 261,000,000 for the preceding year, 251,000,000 for the
     year prior to the outbreak of the European war, and 248,000,000
     for the five-year average, 1910--14. This is a gain of
     22,000,000 over the year preceding our entry into the war and
     of 35,000,000 over the five-year average indicated. Even this
     record was exceeded the second year of the war. There was
     planted in 1918 for the same crops 289,000,000 acres, an
     increase over the preceding record year of 5,600,000. It is
     especially noteworthy that, while the acreage planted in wheat
     in 1917 was slightly less than that for the record year of
     1915, it exceeded the five-year average (1910--14) by 7,000,000;
     that the acreage planted in 1918 exceeded the previous record
     by 3,500,000; and that the indications are that the acreage
     planted during the current fall season will considerably exceed
     that of any preceding fall planting."


YIELDS OF PRINCIPLE CEREALS

     "In each of the last two years climatic conditions over
     considerable sections of the Union were adverse--in 1917
     especially for wheat and in 1918 for corn. Notwithstanding this
     fact, the aggregate yield of the leading cereals in each of
     these years exceeded that of any preceding year in the Nation's
     history except 1915. The estimated total for 1917 was
     5,796,000,000 bushels and for 1918, 5,638,000,000 bushels, a
     decrease of approximately 160,000,000 bushels. But the
     conclusion would be unwarranted that the available supplies for
     human food or the aggregate nutritive value will be less in
     1918 than in 1917. Fortunately, the wheat production for the
     current year--918,920,000 bushels--is greatly in excess of that
     for each of the preceding two years, 650,828,000 in 1917 and
     636,318,000 in 1916, and is next to the record wheat crop of
     the Nation. The estimated corn crop, 2,749,000,000 bushels,
     exceeds the five-year pre-war average by 17,000,000 bushels, is
     3.4 per cent. above the average in quality, and greatly
     superior to that of 1917. It has been estimated that of the
     large crop of last year, approximately 900,000,000 bushels were
     soft. This, of course, was valuable as feed for animals, but
     less so than corn of normal quality. It should be remembered,
     in thinking in terms of food nutritional value, that, on the
     average, only about 12 per cent. of the corn crop is annually
     consumed by human beings and that not more than 26 per cent.
     ever leaves the farm. It should be borne in mind also that the
     stocks of corn on the farms November 1, 1918, were 118,400,000
     bushels, as against less than 35,000,000 bushels last year, and
     93,340,000 bushels, the average for the preceding five years.
     It is noteworthy that the quality of each of the four great
     cereals--barley, wheat, corn, and oats--ranges from 3 to 5.4
     per cent., above the average.

     "The tables printed below may facilitate the examination of
     these essential facts:


NEED OF FOOD CONSERVATION

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."

 =========================================================================
                   ACREAGE OF CROPS IN THE UNITED STATES.
                     [Figures refer to planted acreage.]
 -------------------------------------------------------------------------
         |   1918,   |   1917,   |           |              |    Annual
   Crop  |subject to |subject to |    1916   |     1914     |    average
         |  revision |  revision |           |              |  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   |    959,000|    953,000|    774,000|       603,000|      611,000
 Potatoes|           |           |           |              |
 --------+-----------+-----------+-----------+--------------+-------------
  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   |289,073,300|283,441,000|261,242,000|[7]250,692,000[7]248,256,000
   Total.|           |           |           |              |
 --------+-----------+-----------+-----------+--------------+-------------

[7] Excluding kafirs.

                    PRODUCTION IN THE UNITED STATES
         [Figures are in round thousands; i. e., 000 omitted.]

 ======================================================================
        Crops       |   1918   |  1917,  |   1916  |   1914  |  Annual
                    |(unrevised| Subject |         |         | average
                    | estimate |    to   |         |         |1910--1914
                    | November |revision.|         |         |
                    |  1918).  |         |         |         |
 -------------------+----------+---------+---------+---------+---------
       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        |   do|    88,114|   87,141|   70,955|   56,574|   57,117
      potatoes|     |          |         |         |         |
 Beans        |   do|    17,802|   14,967|   10,715|   11,585|
  (commercial)|     |          |         |         |         |
 Onions, fall |   do|    13,438|   12,309|    7,833|    [8]  |
    commercial|     |          |         |         |         |
          crop|     |          |         |         |         |
 Cabbage      | tons|       565|      475|      252|    [8]  |
  (commercial)|     |          |         |         |         |
        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, | bbls|       374|      255|      471|      644|
      3 States|     |          |         |         |         |
    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| tons|        52|       52|       39|         |
        States|     |          |         |         |         |
 Clover seed  | bush|     1,248|    1,439|    1,706|         |
 ----------------------------------------------------------------------

[8] no estimate


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

     "It is not usually understood that the chief cause of the
     enormously high prices of the necessities of life at the
     present time is their relative scarcity. The supply of
     necessities in this country has not materially increased, but
     the demand for them, owing to the requirements of our Allies,
     has enormously increased. We can prevent a still further
     soaring of prices only by increased production of
     necessities--increased production to be accomplished, let it be
     repeated through a diversion of productive power from the
     non-essential lines.

     "The wealthy have often been urged since the war started to
     spend lavishly on luxuries and to economize on necessities in
     order that the necessities will remain for consumption by the
     poor. This is sheer shortsightedness; for the energy devoted to
     the production of luxuries for consumption by the wealthy
     would, if diverted to the production of essentials, give us a
     sufficient supply of the necessities of life that all might
     have them in relative abundance. The result of a policy of
     spending lavishly on luxuries is an inadequate production of
     necessities and hence prices so high as to cause real privation
     among the masses. Those engaged in producing luxuries obviously
     cannot at the same time be engaged in producing necessities."

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:

     "Thus the diversion of productive resources to public ends
     requires of each of us a voluntary or compulsory rearrangement
     of individual and household budgets and radical changes in the
     habits of our lives. We must encourage direct diversion by
     reducing to a minimum our consumption of articles which can be
     used by our soldiers. But it is even more important that we
     give up the consumption of non-essential things in order that
     the productive energy which they embody be devoted to the
     accomplishment of the purpose in hand. The amount which we are
     forced to give up or voluntarily surrender constitutes a
     surplus over private consumption that measures the extent of
     our ability to wage war. We are fighting a nation which
     continues to be willing to reduce private consumption to the
     barest subsistence minimum. Unless a large surplus is produced
     we can gain no active participation in war and cannot hope for
     a victorious peace. The larger the surplus the shorter the war
     will be, and the nearer we are to victory."


GREAT BRITAIN'S FOOD DANGER

Under the long rgime 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_:

     "In 1918, as against 1916, the acreage (England and Wales)
     under oats is up by 35 per cent.; that under wheat by 38 per
     cent.; that under barley by 11 per cent.; that under other
     grain by 69 per cent.; that under potatoes by 50 per cent. The
     number of allotments (1,300,000) has increased by 140 per cent.
     The Report of the Food-Production Department ... is as
     satisfactory as we could wish; the number of acres under
     cultivation in the United Kingdom has gone up by over four
     millions in two years, all records being broken.

     "This figure ignores the great increase in gardens and
     allotments, and it is estimated that, on the present scale of
     consumption, this year's home harvest will be sufficient to
     feed the population for forty weeks. The supply before the war
     was only enough to meet a ten weeks' consumption. Breadstuffs
     are not everything; and even of them one-fifth still has to be
     provided. But granted that we can keep this rate of production
     up, and--in spite of the drains of the Army upon our
     labor--can, with the help of women and prisoners, save what we
     produce, the wolf has now been driven a considerable distance
     from the door. With sinkings diminishing and ship-building on
     the increase, we can, we think, congratulate ourselves on the
     final failure of the German attempt to starve us out."


ACREAGE INCREASE DUE TO WOMEN'S LABOR

     "Much of the increased cultivation has been done by women, we
     are told, and Mr. Prothero, the British Minister of
     Agriculture, had a cheerful picture to paint when appealing for
     recruits for 'the Women's Land Army.' As reported by the London
     _Morning Post_ his speech ran:

     "'Today (1918) the acreage under wheat, barley, and oats is the
     highest ever recorded in the history of our agriculture. That
     is one of the finest achievements of the war. In the same
     period the number of allotments has been increased by 800,000,
     which means something like 800,000 tons of produce raised
     additionally a big saving in transport, and an improvement
     socially and morally. This advance has been effected in spite
     of the fact that there are 500,000 fewer laborers on the land.
     It is because of that decrease of labor that the appeal is
     being made for more women. I do not believe that any assembly
     of British farmers will hold back men who can possibly be
     spared when the alternative is our troops being driven back by
     overwhelming numbers and butchered on the beach by German guns.
     The promise of the harvest is not yet fulfilled, and there is
     much to be done. Women's work on the land is a vital necessity.
     I know the work they are asked to do is hard, bringing with it
     discomforts, and, comparatively speaking, is poorly paid. Life
     on the land is not luxurious, but it brings health with it, and
     the women have the conviction that they are doing something in
     one of the most important fields to make victory sure.'"


EVIDENCES OF FOOD SHORTAGE

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:

     "Considerable alarm has been caused among dog owners by the
     intimation that stocks of biscuits are practically exhausted.
     Not only is this the case, but the prospects of more flour
     being released for their manufacture are also remote unless
     some action is taken by the government to insure further
     importations of low-grade flours suitable for the purpose.

     "The state of things is undoubtedly acute. Until the food
     economy campaign set in early last year most households
     provided enough waste to feed a dog, and where more than one
     was kept butchers' offals could be had for a few pence. These
     sources of supply having now vanished, much ingenuity will have
     to be exercised in order to preserve the family friend and
     guard from extinction. Blood, steamed until it is of a solid
     consistency, fish heads, and the heads of poultry offer some
     alternatives. Rice, oatmeal, and other cereal products may not
     be used.

     "The whole question of dogs is engaging the closest attention
     of the authorities. Admittedly the problem of reducing the
     numbers is beset with difficulties, and, whatever is done, it
     is extremely unlikely the one-dog owner will be disturbed, the
     government recognizing the sentimental forces involved, to say
     nothing of the utility value of many breeds."

[Illustration: Members of "The Women's Land Army" in England

Girls weeding frames in which cauliflower plants were set out to be
ready for market in the early spring.

Copyright by Underwood & Underwood]

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_:

     "The stores and warehouses in the Ukraine are almost emptied.
     The peasants' stocks are depleted, while the best seed corn has
     been used to feed cattle or to supply a secret still, which
     nearly every household possesses.

     "The outlook for next harvest is most unpromising. The peasants
     have plundered the estates, destroyed farm buildings and
     machinery, and have stolen or slaughtered most of the cattle.
     No labor is available for cultivation, and there are no
     facilities for harvesting the next crop, while the sugar
     industry is confronted with ruin, owing to the decrease of beet
     cultivation."


FOOD CONTROL FOR NEUTRALS

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:

     "The index of the Swedish official list of laws, dated October
     31, 1916, forbidding exports, mentioned more than 1,100
     articles, and even that was expressly called only a help to
     find the commodity looked for and did not pretend to be a
     complete index. The result was, of course, that trade, compared
     to former volumes, decreased very considerably, and the energy
     as well as the wealth actually earned was turned towards
     speculation on the local exchange.

     "To supply all the people of Scandinavia with the necessities
     of life was a problem. Law upon law, one governmental decree
     after the other, tried to regulate the distribution of
     commodities as well as their prices. The majority of the people
     were in actual need. Prices soared, and it really did not
     matter to the ordinary man whether the cause of this rise in
     the cost of living was a too big circulation of paper currency
     or a limited supply of goods. What confronted him was the fact
     itself, not theories, and he realized all too well that he
     could not make 'both ends meet.' There was, generally speaking,
     no doubt that under normal circumstances the laws of supply and
     demand will work satisfactorily to the community and that
     artificial interference was only harmful. The supply being
     short, consequently the demand and the consumption must be
     controlled to secure a fair distribution. Sugar cards, which
     had been used in Sweden for months, and which were decreed in
     Denmark to go into force January 1, 1917, were an example of
     the means employed to control the distribution and to prevent
     waste to supplies.

     "While on the one hand one saw new millionaires permit
     themselves to indulge in the most senseless luxuries, which
     incidentally added considerably to the high cost of living
     under circumstances like these, the less well-to-do actually
     were without many things formerly considered necessities.
     Collections of money and foodstuffs were made all over
     Scandinavia to help the less fortunate through the winter. The
     poorer population of the cities was especially considered. It
     was even difficult to get a roof over one's head. Proposals and
     counter proposals to remedy the evil were forthcoming, but no
     real remedy seemed to be in sight."


FEEDING EUROPE'S STARVING MILLIONS

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:

     "About 88 per cent. of the relief supplies furnished were sold
     under contract to the various Governments in the relief areas.
     For all such sales these Governments gave their special
     treasury notes in a form approved by the United States
     Treasury, bearing 5 per cent. interest, due June 30, 1921, to
     June 30, 1924. It was impossible to obtain reimbursement in
     cash because the currency in the countries to which these
     supplies were sent was impossible to convert into foreign
     exchange, except in comparatively insignificant amounts.


POLAND THE BIGGEST DEBTOR

     "I give herewith approximate list of the notes of each
     Government, which we expect to turn over to the United States
     Treasury.

    Poland                   $57,000,000
    Czechoslovakia             6,750,000
    Armenia                   10,000,000
    Russia.                    5,000,000
    Esthonia                   2,300,000
    Latvia                     3,000,000
    Lithuania                    700,000
    Finland                    4,000,000

    Total                    $88,750,000

     "The remaining 12 per cent. of the supplies was donated in
     assistance to private organizations set up in each country
     under direction of the American Relief Administration for the
     purpose of furnishing food on a charitable basis to
     undernourished children. For such supplies it was, of course,
     impossible to obtain reimbursement. This service has
     contributed greatly to stabilizing the situation in those
     countries, aside from the physical benefits to more than
     3,000,000 undernourished children, to whom the war threatened
     serious and permanent injury. Certainly this service is one for
     which the name of America will always be held in deepest
     gratitude."


FOOD CONDITIONS AFTER THE ARMISTICE

[Illustration: A Map Issued by the Food Administration to Show Food
Conditions in Europe After the Signing of the Armistice.]

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.


NEW FACTORS AFTER NOVEMBER, 1918

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.

     "With the signing of the armistice and the cessation of active
     fighting, new factors were introduced which affect the food
     situation. One of these was the step taken to release shipping
     as rapidly as possible, with the probable result that the
     agricultural products of the more distant producing countries
     will again largely appear on the markets of Europe. The
     channels of trade are being reëstablished and food supplies
     will be sought wherever they can be secured most cheaply.

     "A provision of the armistice required the immediate evacuation
     by the Germans of a large area in Belgium, France,
     Alsace-Lorraine, Luxemburg, and other territory. As a result
     many millions of people have been added to those that must be
     aided and fed by the Allies, and a material increase in the
     amount of foodstuffs to be imported has been made necessary. It
     may be found, too, that Turkey, Austria, and even Germany will
     have to draw on outside supplies to meet their needs.

     "The demobilization of the European armies will permit men to
     return to the farms, and it may be expected that under the
     stimulus of an urgent demand for food an attempt will be made
     this year to increase food production in all the affected
     European countries. The devastated regions will be slow in
     recovering. Much time and labor will be required to construct
     necessary homes and farm buildings, level the ground, remove
     obstructions, and in other ways prepare for a resumption of
     regular agricultural activities. But it must be remembered that
     as compared with the whole of the countries concerned these
     areas are small and should not affect the results in any large
     way.

     "In many sections of Europe there is a shortage of horses and
     other work stock, farm machinery, seeds, and fertilizers. In
     these localities a normal production should not be expected,
     but it is evident that under favorable conditions a material
     increase over the past year will be secured.


     CEREAL REQUIREMENTS FOR 1919

     "The following table presents estimates of the cereal
     requirements for 1919 and shows the world balance as deficit or
     surplus. Figures for the cereals, except rice, represent
     millions of bushels.

    ==========================================================
    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     |     |    |      |     |     |  7,400
    (pre-war)           |     |    |      |     |     |
                        |-----+----+------+-----+-----+-------
    Total, except United|  495|    |    50|   75|   90| 25,400
    States              |     |    |      |     |     |
                        |=====================================
    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.--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.

     "The figures on import requirements of the Allies and neutrals
     are those estimated for 1917--18, while the estimated
     requirements of Germany and Austria are pre-war net imports.

     "The rice surplus might be required in the Orient for countries
     whose crops may have failed.

              MISCELLANEOUS CROP REQUIREMENTS, 1919.

 =================================================================
 Import requirements of--    |   Cotton (500|   Tobacco|  Flaxseed
                             |pounds bales).|  (million|  (million
                             |              |  pounds).| bushels).
 ----------------------------+--------------+----------+----------
            EUROPE           |              |          |
 Allies, including Japan     |     8,058,000|       340|      21.6
 Neutrals                    |       720,000|       150|       7.9
 Germany and Austria-Hungary |     2,932,000|       355|      15.7
 (pre-war boundaries)        |              |          |
 Other countries             |      1,200,00|        17|
 ----------------------------+--------------+----------+----------
      Total requirements     |    13,010,000|     1,022|      45.2
                             |====================================
 SURPLUS (ESTIMATED)         |              |          |
 Countries, except United    |     2,680,000|          |        40
 States, recently reported   |              |          |
 (1918)                      |              |          |
 Average, 1900--1913, for    |        500,00|       650|    [9]5.7
 other surplus countries     |              |          |
                             |--------------+----------+----------
 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

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

     "The cotton table is based upon normal industrial conditions in
     all the consuming countries and upon the restoration of the
     spinning industry in the devastated regions. If conditions do
     not reach normal, and if the industry is not restored, the
     consumption of cotton will be substantially less. With
     practically complete restoration, cotton consumption may well
     be expected to equal the normal or pre-war times on account of
     the present shortage of cotton goods in various countries. The
     economies which the peoples of Europe must practice for some
     years to come must be considered."


CENTRAL EUROPE IN DIRE WANT

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,

     "'from their oppressed populations and set their minds and
     energies free for the great and hazardous tasks of political
     reconstruction which now face them on every hand. Hunger does
     not breed reform; it breeds madness and all the ugly distempers
     that make an ordered life impossible.

     "'For with the fall of the ancient governments which rested
     like an incubus on the peoples of the Central Empires has come
     political change not merely, but revolution.'

     "Putting this danger into a nutshell, the _Wall Street Journal_
     asks whether Central Europe shall have 'bread or Bolshevism?'
     This strong exponent of a firm social order is of the opinion
     that 'we must recognize the fact that hunger breeds anarchy,
     and that the most effective weapon against Bolshevism is a loaf
     of bread.' Victory has made the Allied peoples, 'through their
     governments, responsible for world conditions,' in the opinion
     of this paper as well as of the Montreal _Star_ quoted above,
     and Food Administrator Hoover declares that 'the specter of
     famine abroad now haunts the abundance of our tables at home.'"


TO PREVENT FAMINE IN GERMANY

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:

     "Mr. Hoover expects that enough wheat will be brought from
     those countries to permit reduction of the percentage of
     substitutes now required in bread, and thus release fodder
     grain for dairy use. The change, it is said, may take place
     within three months. But it will not reduce the total of
     foodstuffs which we must supply. He predicts that 'our load
     will be increased,' and that there will be a greater demand for
     economy.

     "The available quantities of grain are sufficient. From our
     great crop of wheat we can spare more than 300,000,000 bushels.
     Canada, with a yield almost equal to last year's, has a
     surplus. While our crop of corn shows a decline of 441,000,000
     bushels from that of a year ago, it is very near to recent
     averages and of very good quality. The output of home gardens,
     increased by one half, is not included in official reports,
     although its value exceeds $500,000,000. Australia has on hand
     the surplus of three wheat crops, India is said to have
     120,000,000 bushels for shipment, and much can be taken from
     Argentina. As a rule, our war partners in Europe increased
     their crops this year. England gains 30,000,000 bushels of
     wheat, Italy 24,000,000, and France 35,000,000. But other crops
     in France are short, and the nutritive value of the entire
     yield is less than that of last year's harvest. It is well
     known that the Central Powers have very little food; and no
     help can come to them from the East. Before the war Russia
     exported a large surplus of wheat. Many of her people are now
     starving. So far as can be learned, she has no grain to sell.
     Bulgaria and Rumania have the smallest crops in fifty years.
     Germany and Austria can get no grain from the northern
     neutrals; we are sending wheat to them. There is food enough to
     supply the wants of our European friends and foes until the
     next harvest if it can be carefully distributed. But if the
     plans for helping those who have fought against us, as well as
     our partners in the war, are carried out, the American people
     must practice economy and submit to restrictions for some time
     to come."

[Illustration: Copyright Underwood & Underwood

A Food Riot in Sweden

News from Europe immediately following the armistice showed everywhere
acute suffering from lack of food. A member of the Federal Food
Administration reported that bread was practically the only food that
anyone could afford.]


SUGAR DISTRIBUTION

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_:

     "This board is a part of the Food Administration and approved
     by the President. Its purpose is to equalize the cost of
     various sugars and to secure better distribution. It can also
     coöperate with the Allies in the procurement of sugar for them
     and in the adjustment of overseas freight rates. Through
     capital supplied by the President through his special funds, it
     is enabled, when desirable, to buy up all available sugars at
     different prices and resell them at one fixed and even rate.

     "In other words, it provides a sort of vast storehouse of
     sugar, which may be doled out where it is most needed, at a
     price secure from the fluctuations otherwise inevitable in war
     time."


KEEPING DOWN THE PRICE

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.

     "It costs more to produce and market some sugars (such as
     domestic beet sugar and Louisiana cane) than it does others,
     such as Cuban cane sugar. But that is no reason why the sugar
     manufacturer, whose production costs are high, should suffer,
     even to the extent of being forced out of the market. Nor can
     the country afford to have this happen under present war time
     shortage of nearby supplies. Consequently, when it becomes
     necessary, the Sugar Equalization Board through its purchasing
     powers can insure fair profits to the manufacturers. Then the
     Board may resell this sugar, so that it reaches the public at a
     price lower than what the maximum would otherwise be."


POTATO ECONOMY

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 potato can be grown in almost any temperate zone area, but
     theretofore nine-tenths of the world's crop of 6,000,000,000
     bushels is grown in a half-dozen countries, and almost
     exclusively in Europe and North America. Germany, Russia,
     Austria-Hungary, France, Great Britain, and the United States
     have produced in favorable years about 5,000,000,000 bushels,
     while the remainder of the world produced only 1,000,000,000.
     These six countries that produced five-tenths of the world's
     potato crop have only 450,000,000 peoples, while the potatoless
     world has a population of over 1,200,000,000, from which it
     appears that 'fully two-thirds of the population of the world
     live outside of the area.'

     "Germany is by far the largest potato grower of the world,
     producing about 2,000,000,000 out of a world crop of
     6,000,000,000 bushels, using them as a food for man and animals
     and the production of alcohol for use in her industries, and
     for the production of heat and power when necessary. Next in
     line is European Russia, with an annual crop of about
     1,000,000,000 bushels; Austria-Hungary, 600,000,000; France,
     500,000,000; United States, 450,000,000, and Great Britain,
     300,000,000 bushels.

     "This new system of turning the potato into a condition in
     which it can be readily distributed has, quite naturally,
     developed in the country which has the largest potato
     production of the world, Germany. Factories for the crushing
     and drying of the potato and turning the product into flour for
     man, flakes and cubes for animals, or alcohol for the chemical
     industry and also as a substitute for petrol, have grown from
     about a dozen a few years ago to over 400 in 1914 and 840 in
     1916, with a capacity to turn into this condensed form more
     than 1,000,000,000 bushels of potatoes a year. The reduction in
     weight is about 60 per cent., while the product can be
     preserved almost indefinitely.

     "The value of our own potato crop in the United States last
     year was approximately $540,000,000 at the place of production,
     and yet the amount entering international trade was only
     $4,000,000. Our potato crop averages about 90 bushels per acre,
     that of European Russia 100 bushels; France 135 bushels;
     Austria 150 bushels; United Kingdom 124 bushels, and Germany
     200 bushels and upward per acre, her large flavorless potato,
     grown chiefly for alcohol, having reached and sometimes
     exceeded 500 bushels per acre."


FUEL CONTROL

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-Hungary59,647,957|           |           | 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|
 =========================================================================


THE COAL SHORTAGE

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:

     "The question of war-time coal prices offers many angles of
     interest. Everywhere prices have increased far above pre-war
     levels. Voluntary agreements on the part of producers and
     dealers to limit prices and profits have failed without
     exception. In all the leading coal-consuming countries of the
     world maximum prices had to be fixed sooner or later by
     government action. In every case the maximum mine prices are
     considerably above the average scale of prices obtaining in the
     years immediately prior to the war. In every country where
     maximum sales prices at the mines were fixed, liberal
     allowances were made for wage increases to mine workers. In
     Great Britain present maximum mine prices approximate 6s. 6d.
     above the average mine price which obtained during the year
     ending June 30, 1914. In the United States special mine prices
     have been fixed for each state, and in many cases also for
     certain coal fields within a state. The f.o.b. price for
     bituminous coal in Pennsylvania was in 1913 $1.11 and in 1918,
     $2.60. Anthracite increased to $4.00 ($4.55 for white ash
     broken).

     "In Germany the total increase in mine prices of the
     Rhenish-Westphalian Coal Syndicate from the beginning of the
     war to January, 1917, approximated $1.25 per ton.

     "While a certain degree of uniformity is noticeable in the rise
     in price levels for coal at the mines in the countries where
     maximum prices have been fixed, an entirely different picture
     presents itself if we compare the maximum retail coal prices
     obtaining under government regulations in different sections of
     the same country. In most countries the national coal
     controller has established a uniform maximum margin of profit
     for all retail coal dealers, while local authorities have fixed
     maximum retail coal prices for their communities. By reason of
     the fact that in establishing maximum retail consumers' prices
     allowances had to be made for increased handling expenses,
     freight rates, middlemen's profits, war taxes, etc., retail
     coal prices at the present time universally show a very heavy
     increase over pre-war prices."


FUEL CONSERVATION MEASURES

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,

     "was decreed a holiday for ten weeks on which offices,
     factories, and stores, except drug and food stores, must use
     only such fuel as is necessary to prevent damage. The order
     under which these restrictions were made, according to the Fuel
     Administration's statement to the press, was 'designed to
     distribute with absolute impartiality the burden,' and it added
     that the Fuel Administration 'counts upon the complete
     patriotic coöperation of every individual, firm, and
     corporation affected by the order in its enforcement.' We read
     further that the government aims to carry out its plan without
     'undue interference with the ordinary course of business' and
     earnestly desires to 'prevent entirely any dislocation of
     industry or labor.'


SHUT-DOWN OF INDUSTRY TO SAVE COAL

     "Fuel Administrator Garfield hoped to save 30,000,000 tons of
     coal and to give the railroads a chance to straighten out the
     transportation tangle in the eastern states, according to a
     Washington correspondent of the New York _Tribune_, who notes
     that the measures were taken by the President and the
     government heads 'as a desperate remedy.' The closing down of
     the greater part of the nation's industries, trades, and
     business, says the New York _Sun_, is the 'fruit of the insane,
     criminal starvation of the railroads by the government for a
     generation'; yet regardless of what it may cost any individual
     or group of individuals, the order is to be 'greeted without
     protest.' A surgeon was more welcome than an undertaker, in the
     view of this daily, and a disaster of the second degree and a
     temporary one is better than a disaster of the first degree and
     a permanent one. If the five-day term clears the railroads and
     the Monday holidays set the trains running with their former
     clocklike regularity, the _Sun_ added, we can resume being the
     'busiest nation on earth, instead of being an industrial
     paralytic.' While recognizing that the order struck Utica and
     all cities in the designated territory 'a staggering blow,' the
     _Utica Press_ holds that there is really nothing a patriotic
     city could do about it save to accept the situation with as
     good grace as possible, and if the result hasten the end all
     will agree that it was a good investment. The Chicago _Herald_
     considered the order 'a tremendous decision' carrying with it a
     'tremendous responsibility,' and while the chief industries of
     the principal part of a nation can not be stopped even for a
     day without disorganization and loss, still the country is
     willing to pay the price 'if it is the necessary cost of
     preventing the suffering of hundreds and thousands, perhaps
     millions, of individuals and of keeping certain indispensable
     war and public functions going at their accustomed speed.'"

[Illustration: Copyright by Underwood & Underwood

=Harry A. Garfield=

As Fuel Administrator during the war he issued orders for coal
conservation of a most startling character. Factories east of the
Mississippi were ordered shut down for five days beginning January 18,
1918. Monday was decreed a holiday for ten weeks "on which offices,
factories and stores must use only such fuel as is necessary to prevent
damage."]


THE GOVERNMENT'S EXPLANATION

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

     "The most urgent thing to be done is to send to the American
     forces abroad and to the Allies the food and war supplies
     which they vitally need. War munitions, food, manufactured
     articles of every description, lie at our Atlantic ports in
     tens of thousands of tons, while literally hundreds of ships,
     waiting, loaded with war goods for our men and the Allies, can
     not take the seas because their bunkers are empty of coal. The
     coal to send them on their way is waiting behind the congested
     freight that has jammed all the terminals.

     "It is worse than useless to bend our energies to more
     manufacturing when what we have already manufactured lies at
     tidewater, congesting terminal facilities, jamming the railroad
     yards and side tracks for a long distance back into the
     country. No power on earth can move this freight into the war
     zone, where it is needed, until we supply the ships with fuel.

     "Once the docks are cleared of the valuable freight for which
     our men and associates in the war now wait in vain, then again
     our energies and power may be turned to manufacturing, more
     efficient than ever; so that a steady and uninterrupted stream
     of vital supplies may be this nation's answer to the Allies'
     cry for help....

     "This is war. Whatever the cost, we must pay it, so that in the
     face of the enemy there can never be the reproach that we held
     back from doing our full share. Those ships, laden with our
     supplies of food for men and food for guns, must have coal and
     put to sea."


GARFIELD'S PLAN FOR FUEL ECONOMY, 1918--19

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:

     "Fuel economy is being given intensive study in connection with
     steam plants and industrial uses. An organization is already in
     existence, provided with engineers and inspectors who will
     visit every one of the two hundred and fifty thousand
     steam-producing plants in the country with a view to the
     improvement both of equipment and firing practice. This is
     expected to save twenty million tons of coal.

     "The economical use of power in factories will be in the hands
     of organized shop committees. The power loads of the public
     utilities throughout the country are being studied with a view
     to readjustments which will result in large saving.

     "In many cities the isolated power plants which use an extravagant
     amount of coal in proportion to the power produced will be urged to
     obtain more economical power from large producing stations.

     "The introduction of 'skip-stop' schedules on all the street
     railways is expected to save a million tons of coal. The
     consolidation of ice plants will yield a still larger tonnage.
     Unnecessary outdoor lighting, including advertising signs and
     display illumination, will be reduced. Hotels, office
     buildings, apartment houses, and public buildings are being
     asked to join in rigid economy of light and heat.

     "Every American citizen will be asked to clean his furnace,
     keep it in repair, and study economical firing. Instructions
     prepared by the highest authority will be furnished by the Fuel
     Administration.

     "If every one joins in this movement, from the owner of an
     industrial plant to the householder with his furnace and cook
     stove, if indoor and outdoor lighting is reduced to the amount
     absolutely needed, if houses are not overheated, the furnace
     dampers properly adjusted, and the ashes sifted, it will be
     possible to save from fifty to seventy-five million tons of
     coal without serious inconvenience to the American people."


DIFFICULTIES OF FUEL CONTROL

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:

     "As an illustration, consider the cotton crop with its millions
     of bales. Every bale of cotton raised in the country last year
     amounted to no more than the coal moved in one and one-third
     days. Or take the wheat crop for comparison. We hear of the
     immense preparations made during the fall months for moving the
     wheat crop; yet the weight of America's enormous wheat crop of
     1917 is equaled by the coal mined and transported every eight
     days.

     "Every year the miners go into the ground and dig out coal and
     the railroads ship it for hundreds of miles, dragging back the
     empty cars, until the amount mined equals two and one-fourth
     times the earth and rock removed in digging the Panama Canal.
     _It took sixteen years to dig the Panama Canal. Our miners will
     dig two and one-half Panama Canals this year._

     "In the mining of coal we are dealing with a task so gigantic
     that the wonder is not why we have not increased production to
     meet the demand, whatever that might be, but how, with the men
     and equipment overtaxed by the multiplicity of the demands of
     the war, we were able to increase the output fifty million tons
     in 1917, and will be able to add a probable fifty million tons
     to that high record the present year.

     "The wonder is increased when we note that every other
     coal-producing country now in the war found it impossible to
     maintain the pre-war production of coal. In every case the
     output is less now than before the war. In England seven and
     one-half per cent. less coal was produced the first year of the
     war than in the previous year and five per cent. less than this
     reduced output in the following year. America alone has been
     able to increase its production of coal in addition to meeting
     the thousands of other increases demanded by war preparation.


COAL AND THE STEEL SUPPLY

     "As every one knows, coal mining is very largely a matter of
     coal transportation. The most difficult task involved in an
     increase must fall upon the railroads. The wonderful work these
     railroads are doing is brought into bold relief when we
     remember that in 1914, when the great war started, the output
     of bituminous coal in the United States was 423,000,000 tons,
     and that in 1918 it promises to be nearly 200,000,000 tons
     greater.

     "Apparently, this country today can furnish the steel required
     if only it can get the necessary coal. The work of the Fuel
     Administration during many months has been directed toward
     increasing coal production. These efforts have borne much
     fruit, miners are approaching one hundred per cent. service,
     while the railroads are outdoing themselves expediting the
     movement of coal cars from the mine to the consumer and back
     again.

     "But war's demands mount so rapidly that even with full speed
     ahead production can not make the pace. _A fuel deficit can be
     averted only by the most intensive conservation._ Conservation,
     economy, savings, sacrifice must fill the gap between the
     possible increase of production and the greater increase of
     demand. If every user of coal will join the army of fuel
     conservationists, realizing that the need for steel to carry on
     this war is practically unlimited and that every ton saved
     means an additional five hundred pounds of steel, there is
     prospect--the figures show it--that the work of the miners will
     not be in vain. Our increased production, plus conservation,
     the Fuel Administration believes, can furnish the coal, and
     hence the steel needed for the war, and still leave none of our
     people cold."


SIDE ISSUES OF FUEL CONTROL

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:

     "Conceive, if you can, what could be accomplished in America in
     the way of increased productivity and economy if our Federal
     Government had the authority to make every individual and every
     company adopt any method or device that had been proved to be
     economic. No engineer acquainted with the application of the
     principles of the science of management can doubt that if the
     universal adoption of those principles could be forced upon
     producers in general, this nation could increase its
     productivity fully 25 per cent. That would alone add more than
     twelve million dollars annually to the national income. But
     that is not all. The application of the principles of the
     science of management is only a fraction of the total enginery
     at our disposal. We have literally countless labor and
     material-saving machines and appliances that are scarcely used,
     although many of them are generations old. Does this sound
     incredible? Certainly not to any engineer who has a wide
     acquaintance with the literature of engineering.

     "Take so simple a thing as the heat insulator for steam pipes
     and boilers. It has been known to engineers for nearly a
     century that by encasing boilers and pipes with magnesia or
     other suitable insulators, practically all heat radiation and
     conduction losses could be stopped. Furthermore, it has been
     known to engineers that the saving in fuel thus effected would
     pay an annual interest of 20 per cent. on the cost of the heat
     insulator. But go into the basements of steam-heated residences
     if you want to get a conception of how rarely this knowledge is
     applied. The landlord may know that heat insulators would earn
     a big return on their cost, but since they would earn it for
     the tenant and not for himself, he does not cover the boiler
     and pipes adequately, if at all. The tenant, even if he knows
     the economics of heat insulating, will not spend the money for
     insulators whose use he may not enjoy for more than a year or
     two before he moves out. For similar reasons very few houses
     have double windows, although double windows will save fully 15
     per cent. of the fuel required to heat the average house. On
     these matters the Fuel Administration has power to act, and it
     should act."


FUEL CONTROL IN GREAT BRITAIN

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_:

     "Briefly, the main provisions of the bill are the following:
     Under the present Finance Act the state takes 80 per cent. of
     the profits in excess of those made in the two best of the last
     three pre-war years, or above 9 per cent. of the capital
     employed. The new scheme deprives owners of these statutory
     rights. It does away altogether with the percentage standard.
     Output is made the chief determining factor in the regulation
     of the profits to be retained by the coal owner. The production
     of a colliery working under normal conditions during the two
     pre-war years, which has already been adopted under the Finance
     Act for the purposes of the Excess Profits Duty, is adopted as
     the standard output. If that output is maintained in any
     accounting period under the new bill, the colliery owner will
     be guaranteed a profit equal to the average profit made in the
     standard period, whether he makes it or not. If his trading
     profits in the accounting period are greater than those in the
     standard period, the treasury will take its 80 per cent. of the
     difference under the authority of the Finance Act, the
     Controller will retain 15 per cent. of it in order to create a
     fund for the compensation of the less fortunate collieries and
     the administration of his department, and the coal owner will
     be allowed to retain 5 per cent. of the excess. Thus a colliery
     company with a profits standard of £50,000 will, if it maintain
     its standard output, continue to receive £50,000; if such
     company make, say, £70,000, it will be permitted, generally
     speaking, to retain only 5 per cent. of the extra £20,000, that
     is to say, £1,000, plus the statutory £200, or £51,200 in all;
     but in no case shall the retainable profits exceed five-sixths
     of the profits standard. In that illustration the scheme is to
     be seen at its best, and, under the conditions, it is not
     unreasonable."

[Illustration: Photo by P. Thompson

Drying Fruit and Vegetables to Save Tin and Glass

Conservation became a great watchword during the World War. Mr. F. P.
Lund of the U. S. Department of Agriculture showed women how tin and
glass could be saved by drying fruit instead of canning it.]


OTHER FORMS OF CONSERVATION

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:

     "All shoes, both leather and fabric, shall be restricted to
     black, white, and two colors of tan (the two colors of tan to
     be dark brown or tan and a medium brown or tan).

     "Patent leather shall be black only. These color regulations do
     not apply to baby shoes made of fabrics.

     "Shoe-manufacturers shall not, for the next six months,
     introduce, purchase, or use any new style lasts. They may
     replenish to cover wastage or to meet requirements on present
     lasts now in use in the manufacture of shoes. This is to be
     effective at once. By new style lasts is meant any lasts which
     have not actually been used for the manufacture of shoes in the
     past season.

     "The use of leather as a quarter lining in oxfords and low
     shoes is permitted only when used in skeleton form with fabric.
     Leather linings will be permitted in evening slippers where
     uppers are made of fabrics. We advocate the use of full fabric
     linings for low shoes wherever possible.

     "The maximum height of women's shoes, both leather and fabric,
     shall not exceed eight inches (measured from breast of heel at
     side to center of top at side of finished shoes), size 4B to be
     the base measure.

     "The maximum height of misses' shoes, size 1½, shall not exceed
     6½ inches (measured as above).

     "The maximum height of children's shoes, sizes 8½-11, shall not
     exceed six inches.

     "The maximum height of boys' and youths' shoes shall not exceed
     5½ inches.

     "The maximum height of infants' shoes, sizes 4-8, shall not
     exceed 5½ inches.

     "The maximum height of button shoes for women shall not exceed
     6½ inches.

     "The maximum height of all women's overgaiters shall not exceed
     eight inches, measured from breast of heel at side to center of
     top at side.

     "The maximum height of misses' overgaiters shall not exceed 6½
     inches (measured as above)."


LEATHER CONSERVATION

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:

     "Price fixing on leather is still 'in the air.' It is not an
     easy proposition, in view of the complexity of grades and the
     variations in quality. The most practicable arrangement would
     be a series of general price standards, with allowance for
     deviations. Unlike other commodities, leather trading is a very
     flexible affair. The trade is confident of fair price maxima in
     relation to recently fixed hide quotations; possibly, in view
     of higher labor and other costs, of somewhat more liberal rates
     than hide prices, which have just been modified upward
     somewhat.

     "Leather prices have been tending upward all round. Heavy sole
     leather, which did not recede nearly as much as lighter grades
     in the slump of last winter, are now nearly back to the high
     point of early last fall. Union sole has advanced four cents
     since May 1, and for some varieties of leather above No. 9 iron
     the market is around eighty cents, against sixty-five cents
     earlier this spring.

     "In leather it is a case of all-round conservation, plus
     intensive effort for maximum output with government aid. Export
     license-restrictions have just been tightened, and most of what
     is shipped now goes to England. Neutrals must wait. In nine
     months to April 1st we exported but 20,342,101 pounds of sole
     leather, against 84,267,573 a year before. In March we shipped
     only 490,000 pounds to other countries than England, against
     1,945,000 a year earlier. Hardly any is now moving save on
     British government order.

     "Men's shoes of higher quality and price will be affected
     chiefly by the requirement to carry soles as light as women's
     wear. This will involve either more frequent buying or more
     resort to tapping. Cheapest grades of shoes will be least
     affected, being almost wholly outside the military scope. In
     fact, some manufacturers of low-priced shoes have lately been
     enabled to use better material than usual, thanks to army
     'leavings.' It is the urgent advice of the Government and
     tanners that shoe manufacturers promptly conform to the new
     program and that consumers cheerfully accept it. Meanwhile,
     experiments are continuing under government direction as to
     further extension of the use of composition or even of wooden
     soles to help meet the increased demand and short supply
     equation in leather."


FAIR PRICE LISTS

[Illustration: Photo by P. Thompson

"Back on the Farm"

The number of slaughterable animals decreased in the United States and
in Europe during the war. The shortage of fats was helped by the
production of more animals, increasing the weight of those slaughtered,
and by changed methods of cooking, including the substitution of
vegetable oils for butter.]

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 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.

     "Such a bulletin at one stroke does away with all the obscurity
     which too often veils the price increase which takes place at
     the hands of the retailer.

     "To give an example, it shows at just what price a retailer is
     able to buy oatmeal and at just what price he is entitled to
     sell it. If any retailer decides to set upon the food he has
     for sale a higher price than that which brings him a fair
     profit, he is labeling himself 'Profiteer.' And thereafter it
     depends upon the public's own choice whether they shall trade
     with him or not.

     "In accordance with the plans of the Food Administration such a
     system of fair price lists is now in operation throughout the
     country. Every week new price lists are prepared so as to cover
     new fluctuations of cost to the retailer. And these
     up-to-the-minute fair price lists are given to the newspapers
     to print so that the consumer may be steadily informed and
     advised as to what he ought to pay the retailers in his city or
     town."


HOW FAIR PRICE LISTS ARE MADE UP

     "In theory the plan is the simplest imaginable. But it is
     complicated by the size of this country and by the variety of
     local food conditions which are bound to affect the price at
     which the retailer can buy and sell his foodstuffs. It would be
     utterly impossible to set forth one fair price list which would
     _be_ fair for every spot in this country at any one time. A
     grocer in Calais, Maine, may be able to buy potatoes at a lower
     rate than a grocer in Snohomish, Washington. And the grocers of
     Red Oak, Iowa, may have to pay a different price from either.
     Obviously, each locality must determine its own fair price
     list.

     "This is done by establishing in every community or county
     where fair price lists are to be put out a Price Interpreting
     Board, consisting of representatives of wholesale grocers,
     retailers, and consumers. The County Food Administration or his
     representative should act as chairman of this board. Such
     boards include representatives of both 'Cash and Carry' stores
     and 'Credit and Delivery' stores. These boards secure from
     wholesale representatives the prices charged to the retailer
     for various staple foods. With this as a basis, plus their
     knowledge of local conditions, and guided by a schedule of
     maximum margins submitted to them by the Food Administration at
     Washington, they determine what is a reasonable profit at which
     the retailer may sell to the consumer. Thus the retailer does
     not have a scale of selling prices arbitrarily thrust upon him;
     he helps determine them himself."


PROFITEERING

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:

     "Survey of the petroleum field shows that the market, when
     under the control of dominating factors, such as Standard Oil,
     can be one of huge profits without the device of the high fixed
     price. No price for the public has been fixed upon petroleum
     and its products by the government. Unlike the situation in
     steel, flour, and coal, there has been as yet no government
     interference with the law of supply and demand except in the
     instances of government purchases. Under that law large profits
     may eventuate through the bidding up of prices by anxious
     buyers. And, moreover, even in the absence of this element,
     prices may be forced up by spreading false and misleading
     information concerning the condition of supply and demand.
     Reports, for instance, have been circulated that the supply of
     gasoline was endangered for the purpose of maintaining the high
     price of that product and the heavy profits from it. At
     different stages of the oil industry different products of
     petroleum have yielded the heavy profits. Kerosene was once the
     chief profit producer. Gasoline followed and superseded it as
     the chief producer of profits. Enormous profits are now being
     made in fuel oil, with the advantage to the refiner that the
     high price of that product meets no popular challenge. Gasoline
     is maintained at its present high price and produces heavy
     profits for the low cost refiners."


PROFITEERING IN THE MEAT INDUSTRY

     "Similarly, the power of dominant factors in a given industry
     in maintaining high prices and harvesting unprecedented profits
     is shown in a survey of the meat packing situation. Five meat
     packers, Armour, Swift, Morris, Wilson, and Cudahy, and their
     subsidiary and affiliated companies, have monopolistic control
     of the meat industry and are reaching for like domination in
     other products. Their manipulations of the market embrace every
     device that is useful to them, without regard to law. Their
     reward, expressed in terms of profit, reveals that four of
     these concerns have pocketed in 1915, 1916, and 1917,
     $140,000,000. Comparisons between their present profits and
     those of the pre-war period are given below. However delicate a
     definition is framed for 'profiteering,' these packers have
     preyed upon the people unconscionably. They are soon to come
     under further governmental regulation approved by Executive
     order."


PROFITEERING IN THE MEAT INDUSTRY

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

     "An exposition of the excess profits of four of the big meat
     packers (Armour, Swift, Morris, Cudahy, omitting Wilson as not
     comparable) is given in the fact that their aggregate average
     pre-war profit (1912, 1913, and 1914) was $19,000,000; that in
     1915 they earned $17,000,000 excess profits over the pre-war
     period; in 1916, $36,000,000 more profit than in the pre-war
     period; and in 1917, $68,000,000 more profit than in the
     pre-war period. In the three war years from 1915 to 1917 there
     their total profits have reached the astounding figure of
     $140,000,000, of which $121,000,000 represents excess over
     their pre-war profits.

     "These great increases in profits are not due solely to
     increased volume of business. The sales of these companies in
     this period increased 150 per cent., much of this increase
     being due to higher prices rather than to increased volume by
     weight, but the return of profit increased 400 per cent., or
     two and one-half times as much as the sales.

     "The profit taken by Morris & Co. for the fiscal year ended
     November 1, 1917, is equal to a rate of 18.6 per cent. on the
     net worth of the company (capital and surplus) and 263.7 per
     cent. on the three millions of capital stock outstanding. In
     the case of the other four companies the earned rate on common
     capital stock is much lower--from 27 per cent. to 47 per
     cent.--but the reason for this is that these companies have
     from time to time declared stock dividends and in other ways
     capitalized their growing surpluses. Thus Armour in 1916 raised
     its capital stock from twenty millions to one hundred millions
     without receiving a dollar more of cash. If Swift, Wilson,
     Cudahy, and Armour had followed the practice of Morris in not
     capitalizing their surpluses (accumulated from excessive
     profits), they too would now show an enormous rate of profit on
     their original capital."


JUGGLING OF ACCOUNTS--HUGE SALARIES

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

     "In cases where the government fixes a definite margin on
     profit above costs, as in the case of flour, there is a
     considerable incentive to a fictitious enhancement of costs
     through account juggling. This has added to the volume of
     unusual profits. Increase of cost showing on the producers'
     books can be accomplished in various ways. The item of
     depreciation can be padded. Officers' salaries can be
     increased. Interest on investment can be included in cost. New
     construction can be recorded as repairs. Fictitious valuations
     on raw material can be added, and inventories can be
     manipulated.

     "The Federal Trade Commission has been vigilant and untiring in
     its exclusion of these practices. An instance of this practice
     was afforded by the Ismert-Hincke Milling Co., of Kansas City,
     Mo. This company padded its costs by heavily increasing all its
     officers' salaries and by manipulating the inventory value of
     flour bags on hand. As evidence of the length to which padding
     can be carried, it may be added that this company even included
     in its costs the gift of an automobile which it charged to
     advertising expenses. This case was heard of by the commission
     for the Food Administration. The commission recommended
     revocation of license and the recommendation was followed.

     "Payment of extraordinary salaries and in some instances
     bonuses to executives of corporations have been found by the
     commission during its investigations."


WAR COST OF LIVING

A complete synopsis of the cost of living situation in the United
States, during the four 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:

     "In reaching 52.3 per cent. as the amount of increase in the
     cost of living for the four years' period, the expenditures of
     11,000 families were considered. Following is a table in which
     besides the 52.3 per cent. for all items entering into the
     family budget, the percentage for rent, clothing, fuel, and
     light, and sundries are given:

                                        Per Cent.           Per Cent.
                        Per Cent.     Inc. in Cost           Increase
                      Distribution      Dur'g War           as Related
  Budget               of Family        Period to            to Total
   Item               Expenditure      June, 1918              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

     The figures examined prove that there was a fair similarity of
     increase in the different sections of the country. The advance
     in rent in the dwelling places of the average wage earner was
     put down at 15 per cent.

     "A general summary is given of changes in the cost of living
     among industrial workers as presented by the Railroad Wage
     Commission for the period between December, 1915, and the end
     of April, 1918, as follows:

                                                     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

     "By the Brotherhood of Locomotive Firemen and Enginemen the
     advance in living costs between 1914 and 1917 was placed at 43
     per cent. Conditions among ship-building workers on the Pacific
     coast, as arrived at by the United States Shipping Board,
     indicated that between June, 1916, and February, 1918, living
     costs had gone up 46 per cent. A table is given which shows
     relative increase in the cost of food as measured by wholesale
     and retail prices for the past six years."

                                     Relative       Relative
       Year and Month    Wholesale   Price of        Retail
                           Farm        Food,        Price of
         1913            Products       Etc.          Food
    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


CIVIL WAR COST OF LIVING

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 situation in New York City at the end of the year 1863 is
     typical of the period. Eggs had then reached 25 cents per
     dozen, from 15 cents in 1861; cheese, 18 cents from 8 cents;
     potatoes, $2.25 from $1.50 per bushel, and for all the
     necessities of life there was an advance ranging from 60 to 75
     and in some cases even 100 per cent. Wages, on the other hand,
     lagged behind; the blacksmith's increase was only from $1.75 to
     $2 per day, that of common laborers from $1 to $1.25, that of
     bricklayers from $1.25 to $2, and the average increase in all
     the trades was about 25 per cent., or less than one-half the
     increase of prices. The winter of 1863--64 and the ensuing
     months were accordingly a time of unusual industrial unrest,
     which increased in severity as the discrepancy between wages
     and prices continued. The dollar was slowly but surely
     diminishing in value, and labor engaged in a determined
     struggle to force wages up, capital to keep them down. The
     advantage lay with the employing classes, but labor in 1864
     recovered much of the ground that had been lost in the two
     previous years, and the war closed with wages much nearer
     prices than a year earlier. It was generally agreed at the time
     that prices during the entire war period advanced approximately
     100 per cent. and wages from 50 to 60 per cent."


WHERE THE COST OF LIVES WEIGHED THE MOST

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 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.

     "The increases for the different items are given as follows:

    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:

     "'In combining the percentages of increase for the respective
     items, in order to determine the average increase for the
     budget as a whole, food was taken as constituting 43 per cent.
     of the total family expenditure, rent 18 per cent., clothing 13
     per cent., fuel and light 6 per cent., and sundries 20 per
     cent. Applying the Board's percentages of increase for the
     respective items to this distribution of the budget, the
     average increase is 52 per cent. The distribution of budget
     items just given is an average based on cost of living studies
     made by several United States Government bureaus and other
     agencies, covering in all 12,000 families.

     "The proportions of these major items of expenditure can be
     varied within narrow limits, but no reasonable arrangement
     would cause a wide change in the increase in the total cost of
     living as given above. For instance, if, instead of this
     average distribution of the budget, food be allocated as much
     as 45 per cent., rent and clothing 15 per cent. each, fuel and
     light 5 per cent., and sundries 20 per cent., the indicated
     increase in the total cost of living, using the Board's
     percentages of increase for the respective items, would be 54
     per cent."

     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:


INCREASED COST FOR WEARING APPAREL

     "Information secured from retail stores in cities well
     distributed throughout the country indicates increases in
     prices of the most common articles of wearing apparel, ranging
     from 50.5 per cent. for women's dollar blouses up to 161 per
     cent. for men's overalls. Striking increases occurred in the
     prices of certain yard goods, where advances in cost over 1914
     prices amounted, in a number of cases, to more than 100 per
     cent.

     "Men's hosiery, selling for 15 cents in 1914, cost in June,
     1918, usually not less than 25 cents, and women's hosiery,
     selling for 25 cents four years ago, brought 45 cents in June
     of this year. Knit underwear, the report finds, had increased
     nearly 100 per cent. Women's shoes of a standard grade
     increased 88.5 per cent.; men's 69 per cent. Women's kid gloves
     which in 1914 cost $1 averaged more than $2 in June, 1918.

     "The report places the average rise in the total clothing
     budget since 1914 at 77 per cent. This increase compares with
     an increase of 51.33 per cent. between 1914 and 1917 for
     families in the ship building districts of Philadelphia and an
     increase of 54.21 per cent. among similar families in the ship
     building district of New York, as reported by the United States
     Bureau of Labor Statistics. The difference between these
     increases and the Board's figure of 77 per cent. is largely
     explained by the difference in the period of time covered;
     clothing prices have continued to advance since 1917. Further
     increases in the fall of 1918 were, moreover, clearly indicated
     by the statements of retail dealers."


WAR PRICES AND LUXURY IMPORTS

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:

     "A recent compilation by the National City Bank shows this in
     practically all imports usually classed as luxuries. That the
     imports should be less than before the war was quite natural by
     reason of the fact that many articles of this character
     originated in European countries, some in countries with which
     we are now at war, and some with our Allies who are otherwise
     too busily employed.

     "In art works, for example, the value of the imports of 1918
     was only about $11,000,000 against $23,000,000 in 1917, and
     $35,000,000 in the fiscal year 1914. In automobiles the value
     in 1918 was about $50,000 against nearly $2,000,000 in 1913,
     and more than $2,000,000 in 1912, while the average value per
     machine imported in 1918 was less than one-half what it was
     before the war. Decorated china imported in 1918 was about
     $3,500,000 in value against practically $8,000,000 in 1914. Of
     cotton laces imported in 1918 the value was about $10,000,000
     against $16,500,000 in 1917, and nearly $34,000,000 in 1914. Of
     silk laces the 1918 imports were valued at little more than
     one-half those of 1914. Of cotton plushes and velvets the
     quantity in 1918 was less than 1,000,000 yards against more
     than 3,000,000 in 1917, and practically 5,000,000 in 1914. Of
     ostrich feathers, in 1918 the imports were valued at nearly
     $1,000,000 against nearly $4,000,000 in 1914 and over
     $6,000,000 in 1913. In precious stones the total for 1918 was
     only about $32,000,000 against $47,000,000 in 1917 and
     $50,000,000 in 1913; while of pearls alone the value in 1918
     was less than $2,000,000 against over $8,000,000 in 1917, and
     more than $10,000,000 in 1916.

     "In articles of food usually classed as luxuries there was also
     a marked fall. Cheese imported in 1918 amounted to about
     9,000,000 pounds against 15,000,000 in 1917, and 64,000,000 in
     1914. Of currants the imports of 1918 were over 5,000,000
     pounds against 25,000,000 in 1916 and 32,000,000 in 1914, and
     of dates only 6,000,000 pounds in 1918 against 34,000,000 in
     1914; while olives and olive oil showed totals in 1918 of about
     one-half those of the year before the war."

[Illustration: The Nations and Their Wheat Supply

Under the Lever Bill, which became the Food Control Law after the United
States declared war, the President was authorized to fix a reasonable
guaranteed price for wheat.]


GOOD EFFECTS OF PRICE CONTROL

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:

     "What has been successful in Great Britain in economizing
     supplies has been a widespread appeal to the whole nation to
     limit its consumption of wheaten bread (4 pounds per week),
     meat (2½ pounds per week), and sugar (¾ of a pound per week) to
     a prescribed maximum per person in the household; and to make
     up the necessary subsistence by the use of substitutes, such as
     fish, other cereals than wheat, and other vegetables than
     potatoes, of which the crop throughout all Europe has largely
     failed. More efficacious still has been the absolute government
     monopoly of sugar, secured at the very beginning of the war,
     and the drastic restriction of the total quantity allowed to be
     issued from store, the aggregate reduction being thus
     infallibly secured, and the retailers being left to share what
     sugar they obtained among their customers. It has been found
     useful, too, to make the wheaten flour go farther by compelling
     all the millers to include both an increased proportion of bran
     and a certain proportion of other cereals. More drastic
     measures are near at hand."


STAY-AT-HOMES WHO MADE MONEY

The important effort, as seen by the _Economist_, was to back up the
armies at the front by a policy of self-sacrifice at home, and it spoke
in 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:

     "One of the most curious and interesting psychological facts of
     the war is the manner in which one man goes to the front and
     becomes a hero and a _preux chevalier_, while another, just
     like him in training and blood and outlook, stays at home and
     works for spoils, whether in wages or profits, resenting
     taxation, grumbling about his food, and seeming to think that
     this war for justice was invented to increase his wealth and
     comfort."


PRICE CONTROL IN UNITED STATES

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:


WHEAT AT $2.20 A BUSHEL

     "There are many evidences that price fixing has come to lodge
     itself as an unwelcome factor in the program of the Food
     Administration. Price fixing came to be a fact even while
     avoided as a theory, and eventually it has become necessary to
     face it, if not to accept it, even as a theory. What are the
     evidences that price fixing is essentially involved in the
     program of the Food Administration? One piece of evidence lies
     in the fact that when once you have fixed the price of one
     commodity the condition is bound to be reflected in other
     commodities. In fixing the price of wheat Congress fixed as
     well, though not so explicitly, the price of corn, and hogs,
     and sugar beets. The determining and administering of these
     prices it left to the Food Administration.

     "A further evidence that the Food Administration could not
     avoid the onus of price fixing lies in the reasons for which
     the Administration was brought into existence and the services
     it was created to perform. The Food Administration is a war
     agency. Its chief purpose is the feeding of warring nations,
     our own nation and the Allies. All its other activities, its
     conservation, its stabilization of trade processes, its
     encouragement of production, are tributary to the one purpose
     of segregating stocks of food for the effective prosecution of
     the war. This latter purpose, in fact, takes the Food
     Administration directly or indirectly into the market.... By
     Section 14 of the Lever Bill, which became the Food Control
     Law, the President is authorized from time to time to determine
     and fix a reasonable guaranteed price for wheat and this
     section itself fixed the price for the crop of 1918 at not less
     than $2 per bushel at the principal interior primary markets.
     Pursuant to this section the President has, by two separate
     decrees, set the price of 1917 wheat and of the 1918 crop at
     $2.20 per bushel. Section 11 of the law authorizes the
     President to purchase and store and sell wheat and flour,
     meal, beans, and potatoes. Manifestly any purchase so made by
     the government would in effect fix the price. Aside from these
     delegations of power no authority is given by the Food Control
     Law to fix prices. And yet a study of the operations of these
     provisions as well as a regard for the implications of other
     functions of the Food Administration carry the conviction that
     price fixing is a necessary and inescapable corollary of the
     effective prosecution of the Food Administration program."


PRICE LEVEL, NOVEMBER, 1918

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
    January             $8.9493
    February             8.9578
    March                8.9019
    April                9.0978
    May                  9.2696
    June                 9.1017
    July                 9.1119
    August               9.1595
    September            9.2157
    October              9.4515
    November             9.4781
    December             9.5462

            1913
    January              9.4935
    February             9.4592
    March                9.4052
    April                9.2976
    May                  9.1394
    June                 9.0721
    July                 8.9522
    August               9.0115
    September            9.1006
    October              9.1526
    November             9.2252
    December             9.2290

            1914
    January              8.8857
    February             8.8619
    March                8.8320
    April                8.7562
    May                  8.6224
    June                 8.6220
    July                 8.6566
    August               8.7087
    August 15            9.8495
    September            9.7572
    October              9.2416
    November             8.8620
    December             9.0354

            1915
    January             $9.1431
    February             9.6621
    March                9.6197
    April                9.7753
    May                  9.7978
    June                 9.7428
    July                 9.8698
    August               9.8213
    September            9.8034
    October              9.9774
    November            10.3768
    December            10.6473

            1916
    January             10.9163
    February            11.1415
    March               11.3760
    April               11.7598
    May                 11.7485
    June                11.6887
    July                11.5294
    August              11.4414
    September           11.7803
    October             12.0699
    November            12.7992
    December            13.6628

            1917
    January             13.7277
    February            13.9427
    March               14.1360
    April               14.5769
    May                 15.1208
    June                15.4680
    July                16.0680
    August              16.3985
    September           16.6441
    October             16.9135
    November            17.0701
    December            17.5966
    1918
    January            $17.9636
    February            18.0776
    March               18.0732
    April               18.4656
    May                 18.9133
    June                19.0091
    July                19.1849
    August              19.1162
    September           19.0485
    October             19.0167
    November            18.9110

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

                            Nov. 1, Sept. 1,  Oct. 1,  Nov. 1,
                             1917     1918     1918     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

[Illustration: Photo by P. Thompson

A Municipal Canning Station

In city establishments like the one shown above, food that would
otherwise go to waste in the markets was saved, and women were
instructed in the best methods of putting up fruits and vegetables for
winter use.]


FOOD CONDITIONS AND PRICE LEVEL, 1919

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:

     "The comparative amounts of food stocks on hand June 1, 1919,
     as against June 1, 1918, in the case of many important foods,
     show that the stocks are considerably larger.

     "On June 1, 1918, the United States stocks were in demand for
     feeding the armies of the Allies as well as the civilian
     population. The fact that stocks of many important foods were
     much larger on June 1, 1919, while prices were as high or
     higher, apparently, means that they are being withheld
     speculatively for a world demand which is not now here but
     which is expected when hunger-impelled strikes secure higher
     wages with which higher food prices can be paid.

     "The statistics of stocks are from the latest and last issue of
     the Bureau of Markets 'Food Surveys,' June 27, 1919. We use the
     quantities reported by identical firms for 1918 and 1919.
     (Stocks held June 1, 1919, by other firms not reporting for
     June 1, 1918, increase the actual stocks from 5 or 10 per cent.
     up to 20 or 25 per cent. over the comparable stocks). The
     stocks are those in warehouses and cold storage houses and in
     hands of wholesale dealers. Retail stocks are not reported. The
     prices are wholesale prices, furnished by the Bureau of Labor
     Statistics, for the first Tuesday in June.

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

         COMMODITIES INCREASING IN STOCKS AND DECREASING IN PRICE.
                           (Wholesale Prices.)

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

     COMMODITIES DECREASING IN STOCKS AND IN PRICE. (Wholesale Prices)

 =======================================================================
          |        |            Quantity           |       |    Price
          |        |----------+-----------+--------+       |------+-----
 Commodity|Unit of |June, 1919| June, 1918|Per cent|Unit of| June | June
          |quantity|          |           |decrease| Price | 1919 | 1918
          |        |          |           |  1919- |       |      |
          |        |          |           |  1918  |       |      |
 ---------+--------+----------+-----------+--------+-------+------+-----
 Oats     | Bushel |37,827,343| 41,763,555|     9.4| Cents |    69|73½
          |        |          |           |        |per bu.|      |
 ---------+--------+----------+-----------+--------+-------+------+-----
 Corn Meal|  Pound |34,231,066|117,674,918|    70.9|Dollars|  3.90| 4.25
          |        |          |           |        |per cwt|      |
 ---------+--------+----------+-----------+--------+-------+------+-----
 Beans    | Bushel | 4,252,451|  4,408,686|     3.5|Dollars| 7.75-|12.25
          |        |          |           |        |per cwt|  8.00|12.50
 ---------+--------+----------+-----------+--------+-------+------+-----
 Rice     | Pound  |75,134,920| 80,727,516|     6.9| Cents | 6    |  8.5
 (Blue    |        |          |           |        |per lb.| 7-7/8|  8.9
 Rose-    |        |          |           |        |       |      |
 Honduras)|        |          |           |        |       | 9-1/8|  8½
          |        |          |           |        |       [10][11]  9-5/8
 =======================================================================

[10] First week JUNE.

[11] Increase in price.

         COMMODITIES DECREASING IN STOCKS AND INCREASING IN PRICE.
                             (Wholesale Prices)

 =========================================================================
           |        |            Quantity            |       |   Price
           |        |                                |       |
           |        |-----------+-----------+--------+       +-----+------
           |        |           |           |        |       |     |
 Commodity |Unit of |June, 1919 |June, 1918 |Percent |Unit of|June | June
           |quantity|           |           |decrease| Price |1919 | 1918
           |        |           |           | 1919-  |       |     |
           |        |           |           | 1918   |       |     |
 ----------+--------+-----------+-----------+--------+-------+-----+------
 Corn      | Bushel | 13,260,910| 27,883,361|    52.4|Dollars| 1.76| 1.50
           |        |           |           |        |per bu.| 1.77| 1.55
 ----------+--------+-----------+-----------+--------+-------+-----+------
 Sugar     | Pound  |207,622,237|217,632,365|     4.6| Cents | 8.82|  7.30
           |        |           |           |        |per lb.|     |
 ----------+--------+-----------+-----------+--------+-------+-----+------
 Cheese    | Pound  | 10,174,502| 15,875,236|    35.9| Cents |   31|21½
 (American)|        |           |           |        |per lb.|     |
 ----------+--------+-----------+-----------+--------+-------+-----+------
 Dry Salt  | Pound  |395,940,437|488,344,838|    18.9|Dollars|58.00| 48-50
 Pork      |        |           |           |        |  per  |58.50|
           |        |           |           |        | bbl.  |     |
 ----------+--------+-----------+-----------+--------+-------+-----+------
 Lard      | Pound  | 81,275,392|106,649,588|    23.8| Cents |33.80|24.15
           |        |           |           |        |per lb.|34.30|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
 ========================================================================+
                        |        |                                       |
                        |        |                                       |
                        |        |                                       |
                        |        | Average retail prices, May 15--       |
                        |        +---------------------------------------+
    Article             | Unit   |                                       |
                        |        |     1913|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|
 Round steak            |  do    |     22.3|23.3|23.0|25.0|29.6|38.0|41.6|
 Rib roast              |  do    |     19.9|20.1|19.9|21.6|25.7|31.8|35.2|
 Chuck roast            |  do    |     16.1|17.0|16.3|17.5|21.8|27.8|29.7|
 Plate beef             |  do    |     12.1|12.5|12.3|13.1|16.6|21.9|22.5|
                        |        |         |    |    |    |    |    |    |
 Pork chops             |  do    |     20.9|22.2|20.9|22.9|30.6|36.7|43.0|
 Bacon                  |  do    |     27.0|26.7|26.4|28.4|41.6|50.5|56.7|
 Ham                    |  do    |     26.8|26.8|25.6|31.8|38.8|45.6|54.6|
 Lamb                   |  do    |     19.4|19.8|21.7|23.2|29.7|36.8|39.6|
 Hens                   |  do    |     22.2|22.7|21.5|24.1|29.3|37.9|43.5|
                        |        |         |    |    |    |    |    |    |
 Salmon, canned         |  do    |         |    |19.8|20.0|25.7|29.6|31.9|
 Milk, fresh            |        |         |    |    |    |    |    |    |
 Milk, evaporated       |        |         |    |    |    |    |    |    |
 (unsweetened)          |  [12]  |         |    |    |    |    |15.1|    |
 Butter                 | Pound  |     35.9|32.7|34.7|37.0|46.5|51.0|67.9|
 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|
 Crisco                 |  do    |         |    |    |    |    |    |33.9|
 Eggs, strictly fresh   | Dozen  |     26.3|26.6|26.3|28.1|39.8|42.4|53.1|
                        |        |         |    |    |    |    |    |    |
 Bread                  |Pound[13]      5.6| 6.2| 7.2| 7.0| 9.6| 9.8| 9.8|
 Flour                  | Pound  |      3.3| 3.3| 4.5| 3.9| 8.7| 6.6| 7.5|
 Corn meal              |   do   |      3.0| 3.1| 3.3| 3.3| 5.4| 7.0| 6.2|
 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|
                        |        |         |    |    |    |    |    |    |
 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|
                        |        |         |    |    |    |    |    |    |
 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  |        |         |    |    |    |    |    |    |
 -----------------------+--------+---------+----+----+----+----+----+----+
 =========================================================================
                        |        |         |Per cent of increase (+) or  |
                        |        |         |decrease (-) May 15 of each  |
                        |        |         |specified year compared with |
                        |        |         |May 15, 1913.                |
                        |        |---------------------------------------+
    Article             | Unit   |                                       |
                        |        |         |1914|1915|1916|1917|1918|1919|
 -----------------------+--------+---------+----+----+----+----+----+----|
                        |        |         |    |    |    |    |    |    |
 Sirloin steak          | Pound  |         |  +1|[16]|  +8| +25| +56| +73|
 Round steak            |  do    |         |  +4|  +3| +12| +33| +70| +87|
 Rib roast              |  do    |         |  +1|[16]|  +9| +29| +60| +77|
 Chuck roast            |  do    |         |  +6|  +1|  +9| +35| +73| +84|
 Plate beef             |  do    |         |  +3|  +2|  +8| +37| +81| +86|
                        |        |         |    |    |    |    |    |    |
 Pork chops             |  do    |         |  +6|[16]| +10| +46|+ 76|+106|
 Bacon                  |  do    |         |  -1|  -2|  +5| +54|+ 87|+110|
 Ham                    |  do    |         |[16]|  -5| +19| +45|+ 70|+104|
 Lamb                   |  do    |         |  +2| +12| +20| +53|+ 90|+104|
 Hens                   |  do    |         |  +2|  -3|  +9| +32|+ 71|+ 96|
                        |        |         |    |    |    |    |    |    |
 Salmon, canned         |  do    |         |    |    |    |    |    |    |
 Milk, fresh            |        |         |    |    |    |    |    |    |
 Milk, evaporated       |        |         |    |    |    |    |    |    |
 (unsweetened)          |  [12]  |         |    |    |    |    |    |    |
 Butter                 | Pound  |         |  9 |   3|  +3| +30| +42| +89|
 Oleomargarine          |  do    |         |    |    |    |    |    |    |
                        |        |         |    |    |    |    |    |    |
 Nut margarine          |  do    |         |    |    |    |    |    |    |
 Cheese                 |  do    |         |    |    |    |    |    |    |
 Lard                   |  do    |         |  -1|   4| +27| +76|+108|+146|
 Crisco                 |  do    |         |    |    |    |    |    |    |
 Eggs, strictly fresh   | Dozen  |         |  +1||  +7| +51| +61|+102|
                        |        |         |    |    |    |    |    |    |
 Bread                  |Pound[13]         | +11| +29| +25| +71| +75|+ 75|
 Flour                  | Pound  |         |[16]| +36| +18|+164|+100|+127|
 Corn meal              |   do   |         |  +3| +10| +10|+ 80|+133|+107|
 Rolled oats            | Pound  |         |    |    |    |    |    |    |
 Corn flakes            |  [14]  |         |    |    |    |    |    |    |
                        |        |         |    |    |    |    |    |    |
 Cream of wheat         |  [15]  |         |    |    |    |    |    |    |
 Rice                   | Pound  |         |    |    |    |    |    |    |
 Macaroni               |  do    |         |    |    |    |    |    |    |
 Beans, navy            |  do    |         |    |    |    |    |    |    |
 Potatoes               |  do    |         |+ 19|[16]|+ 56|+281|+ 38|+106|
                        |        |         |    |    |    |    |    |    |
 Onions                 |  do    |         |    |    |    |    |    |    |
 Cabbage                |  do    |         |    |    |    |    |    |    |
 Beans, baked           |        |No. 2 can.    |    |    |    |    |    |
 Corn, canned           |  do    |         |    |    |    |    |    |    |
 Peas, canned           |  do    |         |    |    |    |    |    |    |
                        |        |         |    |    |    |    |    |    |
 Tomatoes, canned       |  do    |         |    |    |    |    |    |    |
 Sugar, granulated      | Pound  |         |-  7|+ 26|+ 57|+ 85|+ 69|+ 96|
                        |        |         |    |    |    |    |    |    |
 Tea                    |  do    |         |    |    |    |    |    |    |
 Coffee                 |  do    |         |    |    |    |    |    |    |
                        |        |         |    |    |    |    |    |    |
 Prunes                 |  do    |         |    |    |    |    |    |    |
 Raisins                |  do    |         |    |    |    |    |    |    |
 Bananas                |  Dozen |         |    |    |    |    |    |    |
 Oranges                |  do    |         |    |    |    |    |    |    |
                        |        |         |    |    |    |    |    |    |
 All articles combined  |        |         |+  1|+  3|+ 13|+ 56|+ 64|+ 91|
 -----------------------+--------+---------+----+----+----+----+----+----|

[12] 15-16 ounce can.

[13] Baked weight.

[14] 8-ounce package.

[15] 28-ounce package.

[16] No change in price.

     "The total of dry storage stocks, including those that
     increased and those that decreased is as follows, all items
     being reduced to pounds:

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

     "That is the total dry storage stocks reported on June 1, 1919,
     were 124 per cent. of those on June 1, 1918.

     "The total of cold storage items reported in pounds in June,
     1919, and June, 1918 (omitting apples in barrels but covering
     eggs; frozen eggs; butter; cheese, frozen and cured beef;
     frozen lamb and mutton; frozen, dry salt and pickled pork;
     lard; and frozen poultry), was as follows:

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

     "That is, cold storage stocks this June are 100.1 per cent. of
     those last June.

     "None of the above figures include army stores nor the army
     excess supply which is to be distributed by the War Department
     under resolution of the House of Representatives.

     "The sum of dry storage and cold storage (except apples) for
     the two periods (combining the figures already given) was as
     follows:

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

     "That is the total stocks reported on June 1, 1919, were 119
     per cent. of those on June 1, 1918.

     "This as noted does not include Army supplies.

     "Grouping the commodities in four classes:

     "(1) Those increasing in stocks and increasing in price.

     "(2) Those increasing in stocks and decreasing in price.

     "(3) Those decreasing in stocks and increasing in price.

     "(4) Those decreasing in stocks and decreasing in price; we
     have the accompanying significant tables, which indicate that
     the 'law of supply and demand' is not working.



III--INDUSTRY AND LABOR IN WARTIME

Unprecedented Conditions and Developments Due to the World War
and How They Were Met


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:

     "During the past decade the sentiment of American labor has
     crystallized against resort to arms as a means of settlement of
     disputes between nations. War had come to be considered
     wasteful economically, socially, and morally. Labor felt that
     no national advantage gained through force of arms could offset
     the human life sacrificed, the burden of taxation levied upon
     successive generations to pay the cost of war, the standards of
     life set back or destroyed, which had to be rebuilt slowly and
     with infinite sacrifice. In short, war had come to be looked
     upon as morally wrong, entirely unnecessary, a calamity that
     could be avoided and must be avoided if the race was to
     progress. This feeling was shared to a greater or lesser extent
     by the workers of all civilized nations, and there was a
     universal feeling in world labor ranks prior to the outbreak of
     the European war that this sentiment, shared by many thoughtful
     people outside the ranks of the wage workers in all civilized
     nations, was strong enough to prevent any armed conflict which
     would involve any number of peoples. This sentiment was
     undoubtedly responsible for the lack of military preparedness,
     in the sense that Germany prepared, among the other major
     powers now engaged in the world conflict.

     "When the war clouds broke in Europe, American labor was
     stunned. All its preconceived notions as to the inability of
     any great nation to wage war upon another nation because the
     working people would refuse either to fight or produce
     munitions and supplies of war were shattered when nation after
     nation quickly mobilized its armies and the organized labor
     movements of each country, without exception, quickly pledged
     their men and their resources to the support of their
     respective governments. But the fact that America itself might
     be drawn into the world conflict was still foreign to the mind
     of the American workman. While American labor grieved over the
     fate which had befallen its kind in Europe no sense of danger
     to this country was apparent. From the beginning of this
     Republic it had been our national policy to hold aloof from the
     quarrels of the Old World. The splendid isolation of thousands
     of miles of ocean protected us. We had no quarrel with Europe
     and we asked but to be let alone. We stood upon our rights to
     protect the people of continental America from invasion or
     aggression as enunciated by the Monroe Doctrine, and further
     than that we could not see that the European conflict embroiled
     us as a nation. Let Europe settle her own family quarrel. We
     were to remain the one great neutral nation of the earth. When
     the time came America, untrammeled by participation in the
     conflict, with no desire for American aggrandizement or
     territorial expansion, would be the natural messenger of peace
     to war-worried Europe."


SAFEGUARDS FOR WORKINGMEN

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:

     "WHEREAS, The entrance of the United States into the World War
     appears imminent; and

     "WHEREAS, Other countries upon engaging in the conflict
     permitted a serious breakdown of protective labor regulations
     with the result, as shown by recent official investigations, of
     early and unmistakable loss of health, output, and national
     effectiveness; and

     "WHEREAS, Our own experience has already demonstrated that
     accidents increase with speeding up and the employment of new
     workers unaccustomed to their tasks, that over fatigue defeats
     the object aimed at in lengthening working hours, and that new
     occupational poisoning has accompanied the recent development
     of munition manufacture; and

     "WHEREAS, The full strength of our nation is needed as never
     before and we cannot afford to suffer loss of labor power
     through accidents, disease, industrial poisoning, and
     overfatigue; now, therefore, be it.

     "_Resolved_, That the American Association for Labor
     Legislation, at this critical time, in order to promote the
     success of our country in war as well as in peace, would sound
     a warning against the shortsightedness and laxness at first
     exemplified abroad in these matters, and would urge all
     public-spirited citizens to coöperate in maintaining, for the
     protection of those who serve in this time of stress the
     industries of the nation (who as experience abroad has shown
     are quite as important to military success as the fighting
     forces), the following essential minimum requirements:


     I. SAFETY

     "1. Maintenance of all existing standards of safeguarding
     machinery and industrial processes for the prevention of
     accidents.


     II. SANITATION

     "1. Maintenance of all existing measures for the prevention of
     occupational diseases.

     "2. Immediate agreement upon practicable methods for the
     prevention of special occupational poisonings incident to
     making and handling explosives.


     III. HOURS

     "1. Three-shift system in continuous industries.

     "2. In non-continuous industries, maintenance of existing
     standard working day as basic.

     "3. One day's rest in seven for all workers.


     IV. WAGES

     "1. Equal pay for equal work, without discrimination as to sex.

     "2. Maintenance of existing wage rates for basic working day.

     "3. Time and one-half for all hours beyond basic working day.

     "4. Wage rates to be periodically revised to correspond with
     variations in the cost of living.


     V. CHILD LABOR

     "1. Maintenance of all existing special regulations regarding
     child labor, including minimum wages, maximum hours,
     prohibition of night work, prohibited employment, and
     employment certificates.

     "2. Determination of specially hazardous employments to be
     forbidden to children under sixteen.


     VI. WOMAN'S WORK

     "1. Maintenance of existing special regulations regarding
     woman's work, including maximum hours, prohibition of night
     work, prohibited hazardous employments, and prohibited
     employment immediately before and after childbirth.


     VII. SOCIAL INSURANCE

     "1. Maintenance of existing standards of workmen's compensation
     for industrial accidents and diseases.

     "2. Extension of workmen's compensation laws to embrace
     occupational diseases, especially those particularly incident
     to the manufacture and handling of explosives.

     "3. Immediate investigation of the sickness problem among the
     workers to ascertain the advisability of establishing universal
     workmen's health insurance.


     VIII. LABOR MARKET

     "1. Extension of existing systems of public employment bureaus
     to aid in the intelligent distribution of labor throughout the
     country.

     IX. ADMINISTRATION OF LABOR LAWS

     "1. Increased appropriations for enlarged staffs of inspectors
     to enforce labor legislation.

     "2. Representation of employees, employers, and the public on
     joint councils for coöperating elsewhere with the labor
     departments in drafting and enforcing necessary regulations to
     put the foregoing principles into full effect."


ORGANIZING LABOR FOR WAR WORK

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.

[Illustration: In the Heart of the Bethlehem Steel Plant

H. E. Coffin, Chairman on Industrial Preparedness of the Council of
National Defence, described the conflict as a war of munitions, of
factories, of producing powers, of sweating men and women workers. In
the plant sketched above, 26,000 men toiled and sweated during the war
to make munitions for our troops overseas.]

     "On this Board were representatives of the War, Navy, and
     Agriculture Departments, the Shipping Board and the Emergency
     Fleet Corporation, the War Industries Board, and the Food,
     Fuel, and Railroad Administrations. Assistant Director Nathan
     A. Smyth, of the United States Employment Service, was quoted
     in the New York _Globe_ as saying in part:

     "'Today the war industries of the country are short about
     500,000 unskilled workers, and the coming requirements of war
     production necessitate finding between 2,000,000 and 3,000,000
     more.

     "'Similarly the demand for skilled workers in war industries is
     greater than the immediately available supply. Before long we
     will have to take every tool maker and die-sinker in non-war
     work and put him in war production.'

     "The country was divided into thirteen Federal districts, by
     the regulation of labor for war industries, and each was in
     charge of a superintendent of the United States Employment
     Service, while the States within the several districts were in
     charge of a State director. The labor problem this measure was
     designed to remedy and control was pictured by Secretary of
     Labor Wilson, who was quoted in the New York _Sun_ as saying in
     part:

     "'The Government found itself in need of men, and on going out
     to get them found itself in competition with private industry,
     which was equally hard pressed. Men who had never drawn more
     than a common laborer's wages found themselves at a premium in
     the market, and began to ask and receive extortionate prices,
     and to rove from place to place seeking still higher prices.

     "'Everywhere industry was hampered by what is known as the
     turnover, or the constant shifting of itinerant labor, in some
     cases the loss in efficiency running as high as 100 per cent.
     This is what is perhaps best described as the evil of the
     individualistic strike--the strike by the man, thousands of
     him, in different yards and factories all over the country, who
     is forever throwing down his tools and wandering away on the
     slightest rumor of higher wages elsewhere, who by his habit of
     roving never masters the details of any trade, and who in the
     mass accounts for a greater loss than all the organized strikes
     and walkouts in the land.'"


INFLUENCE OF WAR CONDITIONS

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.

     "It is easy to be harsh in one's judgment even in the case of
     the strikes that occur. Why do they strike at all while the war
     continues? Have they no capacity for self-sacrifice for the
     country? These questions will be asked by many people whenever
     war work anywhere is checked in the least degree by workmen
     dropping their tools.

     "On the other hand, let us not be unjust to labor, for in the
     American Army in France labor is represented by multitudes of
     youth upon whose gallantry and steadiness all our hopes of
     victory depend. No class here at home gives 100 per cent.
     efficiency or commits itself to 100 per cent. of sacrifice in
     the winning of the war. Why demand it of the wage earners or
     the labor unions?

     "Simply because of its organization and its machinery of
     leadership, however, labor enjoys an exceptional opportunity to
     contribute to the winning of the war. This is the first great
     war in history in which labor has been organized into an
     economic unit, and that is the reason for some special war
     problems today which were never encountered by governments in
     previous wars. But there can be gains even more than losses to
     the national strength by reason of this organization, if the
     opportunity be accepted to promote labor's contribution. This
     is a task especially for the leadership of organized labor. It
     is certainly no exaggeration to say that in no way can labor be
     advantaged after the war so much as by the wholehearted
     acceptance of its opportunity for loyal service to the nation
     during the war. Let labor splendidly do its part in bringing
     victory and its future influence will expand beyond the dreams
     of its prophets....

     "Labor and victory are inseparable; nay more, the one may
     command the other, and thus it may control the fate of the
     world."


INDUSTRIAL MEANING OF WAR

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:

     "A close observation of the experience in foreign countries has
     shown us the vital necessity for a peace time prearrangement
     for conversion in all industries. Wars, as now waged, involve
     every human and material resource of a belligerent nation.
     Every factory and every man, woman, and child are affected.
     Every sinew of industry, of transportation, and of finance must
     be harnessed in the country's service. In England two years and
     a half ago there were three government arsenals. Today
     thousands of England's industrial plants are being operated as
     government factories for the production of war materials, and
     many other thousands of plants, still under private control,
     are centering their energies in this same direction.

     "We have here in the United States vast resources in
     manufacturing and producing equipment, but they are unorganized
     and uneducated for the national service. Our observations of
     the European War have taught us that it is upon organized
     industry that we must base every plan of military defense. In
     the event of trouble with any one of the several first-class
     powers, between 80 and 90 per cent. of our industrial activity
     would of necessity be centered upon the making of supplies for
     the government. We have learned also that from one to two years
     of time and of conscientious effort are needed to permit any
     large manufacturing establishment to change over from its usual
     peace-time commercial line to the quantity production of war
     materials for which it has had no previous training."

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:

     "At this point it should be emphasized that the position of the
     United States is unique, so far as the allied nations are
     concerned. England, for instance, at the outbreak of the
     conflict could import vast quantities of munitions and supplies
     from other countries. England, therefore, had a fourth
     alternative, one denied to us because the struggle is now
     world-wide. All of the materials of war that we furnish must
     come from the current energy of our own people. We must
     ourselves produce these ships, munitions, food supplies, and
     stocks in the coming months. There is no one else to do it for
     us. In this connection I should like to emphasize with all the
     power at my command the argument that we cannot by bond issues
     shift the burdens of this war to future generations. The mere
     fact that all of us--as represented by the government--borrow
     from some of us--as represented by bond purchasers--does not
     change the other essential fact that we, the people within this
     country, must actually produce practically all the war
     materials we are to have for use in the war.

     "There is also much current discussion of the wonderful gains
     that may be made through increasing efficiency. It is argued
     that we should make our patriotic impulses the occasion for the
     universal introduction of scientific management. It of course
     goes without saying that we should do all that we possibly can
     to further the improvement of industrial methods; and doubtless
     something may be accomplished."

[Illustration: Forging Armor Plate

"Every man, in the draft age at least, must work or fight," said General
Crowder. And the workers were just as important a factor in winning the
war as the fighters. In the gigantic machine sketched above, ingots of
sixty and seventy tons were pressed into plates of any size and
thickness for use on our super dreadnoughts.]


LABOR DISLOCATION

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."


ADVISORY LABOR COUNCIL

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:

     "When on March 4th of the present year the President appointed
     Bernard M. Baruch Chairman of the War Industries Board and
     defined his duties he did not, as certain press reports have
     implied, create an industrial dictator. His action did clear
     the way for Mr. Baruch's assumption of the duties of a director
     of industrial war strategy, of an industrial Chief of
     Staff--for the present position of the War Industries Board in
     the American Government is comparable in its relation to
     national industrial policy to nothing so much as the functions
     of the General Staff of the Army in its jurisdiction over
     military strategy. After a year of war the direction of
     industrial policy is placed in single hands, and a central
     planning board is established for dealing not only with the
     problems of production and purchase but with the whole attitude
     of the government toward the mobilization of business resources
     for the prosecution of the war. Leadership has been focused and
     an administrative channel opened for the inauguration of a
     studied and inferentially constructive industrial policy.

     "From the present trend of events the War Industries Board
     promises to become the sole directing agency between the
     government and industry. Backed by the power of the President
     to commandeer, to withhold fuel, and in other ways to force the
     halting into line, it can mold the country's industrial system
     almost as it will--whether in organizing the nation for war or
     in directing the lines along which it shall return to normal
     conditions when peace comes. In a system of government such as
     ours, where the responsibility for directing the war rests
     almost exclusively in the hands of the President, and where his
     power ultimately becomes almost absolute, the Board has been
     shaped into a very potent instrument.

     "Yet powerful as it may become, subject only to the
     jurisdiction of the President, it is well to remember that in a
     comprehensive national war plan it cannot stand alone. Its
     policies must be subject to the administration's general
     strategy in the war--for instance, to the amount of munitions
     in comparison with the number of men or the amount of food that
     it wishes to send abroad at any given time. The munitions
     program and the conversion of industry to war purposes must be
     governed by the ultimate end in view. In addition, one of the
     great factors in production--the labor factor--is being
     administered by another government agency, and it is obvious
     that priority in the labor supply must go hand in hand with
     priority in materials."


WORK OR FIGHT

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:

     "Every man, in the draft age at least, must work or fight.

     "This is not alone a war of military maneuvers. It is a deadly
     contest of industries and mechanics. Germany must not be
     thought of as merely possessing an army; we must think of her
     as _being_ an army--an army in which every factory and loom in
     the Empire is a recognized part in a complete machine running
     night and day at terrific speed. We must make ourselves the
     same sort of effective machine.

     "We must make vast withdrawals for the Army and immediately
     close up the ranks of industry behind the gap with an
     accelerating production of every useful thing in necessary
     measure. How is this to be done? The answer is plain. The first
     step toward the solution of the difficulty is to prohibit
     engagement by able-bodied men in the field of hurtful
     employment, idleness, or ineffectual employment, and thus
     induce and persuade the vast wasted excess into useful fields.

     "One of the unanswerable criticisms of the draft has been that
     it takes men from the farms and from all useful employments and
     marches them past crowds of idlers and loafers away to the
     Army. The remedy is simple--to couple the industrial basis with
     other grounds for exemption and to require that any man
     pleading exemption on any ground shall show that he is
     contributing effectively to the industrial welfare of the
     nation."

[Illustration: Building Howitzers

A nine-mile howitzer nearly ready for transportation. Beyond are seen
heavy armorplate turrets in the making. The small and large
manufacturers were given equal opportunity to obtain war business.]

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.

     "When the whole industry of a nation is mobilized behind the
     fighting line, it is not merely finished munitions that must be
     given priority in transportation, but also the materials and
     fuel for further munitions production. The food supply of the
     industrial population, as well as that of the army, has a claim
     to priority. So also have clothing supplies, lumber for
     housing, and whatever else is essential to working efficiency.
     In production it would be impossible to fix definite limits
     upon the application of the priority principle. We can not much
     longer permit the free flotation of the securities of foreign
     enterprises, nor even of the less essential domestic
     enterprises, so long as national loans or issues designed to
     finance railways or industrial enterprises of prime necessity
     are to be floated. Modern warfare, in involving the whole
     national life, has made inevitable a control of business
     practically coextensive with the economic system.

     "The application of the priority principle to transportation
     and production is quite in accord with plain common sense. It
     is none the less revolutionary in its social economic
     implications. What it means is that necessities shall have
     right of way. If we have excess productive capacity, the
     unessentials and luxuries may be provided, but not otherwise.
     And necessities are definable in terms that take account only
     of physical requirements. There is no room in the definition
     for class distinction. A new country house may seem a matter of
     necessity to the man of fortune, but he will persuade no
     priority board to permit shipment of building materials while
     cars are needed for coal or wheat. Nor will he persuade them to
     let him have lumber that could be used for ships or
     workingmen's camps, or labor that could be employed to
     advantage in production for more clearly national and
     democratic needs."


WAR SUPPLIES

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:

     "Under the plan that has been worked out for bringing the
     manufacturing resources of the country into more effective
     coöperation with the government, the country is to be divided
     into twenty industrial regions, with the following cities as
     centers: Boston, Bridgeport, New York, Philadelphia,
     Pittsburgh, Rochester, Cleveland, Detroit, Chicago, Cincinnati,
     Baltimore, Atlanta, Birmingham, Kansas City, St. Louis, Dallas,
     Milwaukee, St. Paul, Seattle, San Francisco. The following plan
     for effecting the organization is suggested by the officials in
     charge:

     "1. Organize through Chambers of Commerce and other business
     associations Industrial Committees with the principal
     industrial center as headquarters and such subdivisions as are
     recommended by the business association of each district.

     "2. Develop such organization in various classes of industry as
     well as in area for greatest convenience, to get information of
     all classes of products in and between regions.

     "3. Having established such region and sub-region, through the
     coöperation of the best business men in each district have a
     survey of the industries recorded in the hands of the section
     in Washington of the War Industries Board for information to
     the various procurement sections of the government.

     "4. Each region may have in Washington a representative who
     through the Resources and Conversion Section of the War
     Industries Board may keep in direct contact with his region and
     be available to the governmental procurement divisions or the
     War Industries Board for prompt action in giving data from his
     region.

     "The detailed form of organization suggested for each region
     (subject, of course, to modifications as desired to meet the
     needs of any region) is known as the Cleveland Plan, which has
     been for some time in operation. Under this plan each region is
     divided into eight sub-regions, an important industrial city in
     each sub-region being designated as a center. Each sub-region
     has a local War Industries Commission which coördinates all
     industry within its territory. Within each sub-region
     manufacturing is divided into the following classes: castings,
     forgings and stampings; machinery and machine products; rubber
     products; clay products, chemicals, oils, and paints; textiles
     and clothing, wood and leather; engineering; automotive. Other
     classifications may of course be added in important lines of
     industry."

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.

[Illustration: Guns and Armaments for United States and Her Allies

Interior of one of the Bethlehem Steel Company's mills--among the
largest plants in the world for the production of munitions during the
War.]


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--(_a_) Foodstuffs for human
     consumption, and plants handling same.

     (_b_) Feeding stuffs for domestic fowls and animals, and plants
     handling same.

     (_c_) 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.

     (_d_) Products of collateral industries, such as fertilizer,
     fertilizer ingredients, insecticides and fungicides, containers
     for foods and feeds, collateral products.

     (_e_) 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:

     "The Fuel Administration has therefore arranged the following
     list of preferred industries:

    Aircraft--Plants engaged 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.


CIVIL WAR CONDITIONS

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

     "Wheat flour, one of the prime necessities, 'was at no time
     during the Civil War above $7.35 per barrel, which is somewhat
     less than four cents per pound,' while at the present time it
     is seven cents per pound, 'or close to 100 per cent. higher
     than the top notch of the '60s.' Lard has already advanced
     about 100 per cent., while its greatest advance during the
     Civil War was 75 per cent.

     "'The present-day advance in the price of clothing in general
     has not been proportionate with the advance of foodstuffs,
     though it has been considerable, especially as to the cheaper
     grades. Cotton shirts that sold for 48 cents in 1913 are now
     bringing 90 cents to $1. Cheap hosiery has also about doubled
     in value. Suits that formerly sold for $15 are now bringing
     $17, which is about 10 per cent. advance. Cotton goods during
     the Civil War were exceptionally high, owing to the difficulty
     of procuring the staple. After the stocks on hand at the
     beginning of the war were exhausted, New England mills shut
     down because of inability to get supplies. In 1864 raw cotton
     ruled at 72 cents per pound, while at one time it touched
     $1.90. Cotton goods of all kinds were therefore extraordinarily
     high.'

[Illustration: Plowing by Night

The number of men drawn from Great Britain into the army and navy during
the war was about 5,000,000. This meant extraordinary efforts of
production were necessary on the part of those who were left behind. By
means of a motor tractor and an acetylene gas generator, the owner of
the farm shown above was able to run day and night shifts.

Copyright Underwood & Underwood]

     "The public spirit manifested at present is much more admirable
     than that displayed in the '60s, as shown by the following
     first-hand description of life in those days, as compared with
     what we see on every hand today. Said the New York
     _Independent_ of June 25, 1864:

     "'Who at the North would ever think of war if he had not a
     friend in the army or did not read the newspapers? Go into
     Broadway and we will show you what is meant by the word
     "extravagance." Ask Stewart about the demand for camel's-hair
     shawls and he will say "monstrous." Ask Tiffany what kind of
     diamonds and pearls are called for. He will answer "the
     prodigious, as near hen's-egg size as possible, price no
     object." What kind of carpetings are now wanted? None but
     "extra." Brussels and velvets are now used from basement to
     garret. Ingrains and three-plys won't do at all.

     "'Call a moment at a carriage repository. In reply to your
     first question you will be told, "Never such a demand before,
     sir." And as for horses, the medium-priced $500 kind are all
     out of the market. A good pair of fast ones, "all right," will
     go for $1,000 sooner than a basket of strawberries will sell
     for four cents. Those a "little extra" will bring $1,500 to
     $2,000, while the "superb" 2.40 sort will bring any price among
     the high numbers.'"


GREAT BRITAIN'S PRODUCTIVE POWER

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 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 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.


A WHOLE POPULATION AT WORK

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:

     "Notwithstanding the great difficulties, I think it is probable
     that our production is quite as great as before. Measured in
     money, and owing to the rise of prices, it would probably be
     much greater. This is due to the fact that the whole
     population, practically speaking, has been working, and working
     intensely. Millions of women who have not worked before are
     working now. No one is idle. Every acre of land or garden that
     can be used is being used. Methods of production have been
     speeded up, labor-saving machinery in industry and agriculture
     multiplied. In every direction the wheels have been turning
     faster.

     "But, perhaps more important still, the _character_ of our
     production has entirely changed--almost our entire industry is
     producing for war purposes. Ordinary civil needs are no longer
     considered. We have of course to produce what is essential for
     life, but beyond that all our energies are directed to war
     production. The government has of necessity compelled the whole
     of British industry to produce for war and to produce what it
     is told to produce, because in no other way could our own
     armies and our Allies have been supplied. No man is free to do
     what he likes with his labor and capital, with his ships, or
     with his steel. He has to do what he is told to do. By this
     means production for war purposes has enormously increased, and
     civil consumption has enormously decreased, because the goods
     for the civil population were no longer produced and one cannot
     buy what isn't there. Instead of gramophones, the gramophone
     company makes fuses; instead of cloth for ordinary clothes, the
     woolen factory makes khaki; instead of motor cars, the
     motor-car maker makes shells.


     BRITISH INDUSTRY ON WAR BASIS.

     "Apart from selling our liquid capital assets in return for
     foreign goods, and apart from borrowing from foreign countries
     for the same purpose, our power to provide our own army and
     navy with all they want and have any surplus over for our
     Allies has indeed depended entirely on our extraordinary
     efforts in production--not in normal production, but in war
     production--and also on the extent to which we have been able
     to reduce our civil consumption of all kinds. I put production
     first because, while economy in consumption is exceedingly
     important, increased productive capacity devoted to war
     material, in my opinion, is still more important. Our increased
     productivity has, as I say, been devoted entirely to war
     requirements. We have had to turn over our whole industry from
     a peace to a war basis. We have both voluntarily and
     compulsorily cut off the production of goods which are
     unnecessary for war purposes. Many trades have been actually
     shut down and the labor taken from them and handed over to war
     industries. Labor itself has been subjected to restrictions
     which would have been wholly impossible before the war. Labor
     may not leave its employment without government leave; salaries
     and wages may not be increased without government approval.
     Measures for the control of industry which were unheard of and,
     in fact, absolutely impossible before the war have been imposed
     upon all industry.

     "Fixed prices had been placed on the most important materials;
     the government now has the absolute control of the use of
     steel, copper, lead, wool, leather, and other materials for
     which the war demand is insatiable, and also of all materials
     manufactured therefrom. No use may be made of most of these
     materials for any purpose whatever without a certificate being
     first obtained, no buildings of any kind may be erected without
     leave of the Ministry of Munitions. The whole of industry may
     now be said to be directed according to the requirements of the
     government, its regulation is an enormous task. In the head
     office of the Ministry of Munitions alone there are more than
     10,000 people.

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.


LABOR POWER IN ENGLAND

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:

     "On the 20th of December, 1915, Mr. Lloyd George, in a speech
     delivered in the House of Commons, summarized the results of
     the first six months of his tenure of office. We will take a
     few points.

     "Orders placed before the formation of the department were
     delivered with an increase of 16 per cent. on previous
     deliveries. The number of new orders placed increased by 80 per
     cent.

     "The state regulation of the metal market resulted in a saving
     of from 15 to 20 million pounds sterling.

     "The present output of shells for a single week is three times
     as great as the entire output for May, 1915, which means that
     the rate of production is twelve times as great.

     "The enormous quantity of shells consumed during the offensive
     of September, 1915, was made good in a month. The time will
     soon come when a week will suffice.

     "The output of machine guns is five times as great; that of
     hand grenades is increased forty fold.

     "The production of heavy artillery has been accelerated, and
     the heaviest guns of the early days of the war are now among
     the lightest.

     "An explosive factory in the south of England, which on October
     15, 1915, started to fill bombs at the rate of 500 a week with
     a staff of 60, was in March, 1916, turning out 15,000 a week
     with a staff of 250.

     "An entirely new factory which started work at the end of
     October, 1915, with one filling shed and six girl fillers and
     an output of 270 a week, was in March, 1916, employing 175
     girls and handling 15,000 bombs a week.

     "The Ministry of Munitions has built, or is building, housing
     accommodation for 60,000 workers, and canteens and mess rooms
     in munition works now give accommodation for 500,000 workers a
     day.

     "All the workmen were assigned either to the works already in
     existence--which in many cases were short of hands and unable
     for this reason to fulfill their contracts--or else they were
     allotted to the new factories.

     "But in view of influence wielded by the labor unions, various
     provisions were inserted in the Munitions Act. They related to
     the settlement of labor disputes and to the prohibition of
     strikes and lockouts the grounds for which had not been
     submitted to the Board of Trade.

     "To obviate such disputes, which were generally called forth by
     the excessive profits accruing to the employers and the demands
     of the wage-earners, the system of 'controlled establishments'
     was instituted. Every establishment engaged on munition work
     was placed, so far as the regulation of profits and salaries
     was concerned, under direct government control. Any
     modification in the rate of wages had to be submitted to the
     Ministry of Munitions, which had power to refer the question to
     an arbitration board specially set up by the act.

     "To complete this rapid survey it must be added that a
     department was created by the Ministry of Munitions, under the
     control of an undersecretary, whose special business it was to
     examine war inventions."


INDUSTRIAL DISLOCATION IN FRANCE

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):

     "The first was to take men out of the army and send them to
     industrial work. This was done with great caution during the
     winter of 1914--15. The proportion of the men thus taken
     increased more and more during the year 1915 and reached its
     fullest extent in 1916. The specialists in steel work were the
     first to be taken out of the trenches; these were far from
     being sufficient, and common workmen were added to them. Then
     chemists and workmen trained in the manufacture of explosives
     were recalled; electric engineers were sent back to the
     hydro-electric plants; miners above thirty-five years of age
     who belonged to the territorial regiments were sent to the
     mines; paper-makers and cardboard-makers who could be employed
     in the preparation of explosives were put to work;
     cabinet-makers were put to manufacturing rifle stocks;
     wood-cutters were brought back from the front in order to see
     that there was no waste in providing the enormous amount of
     wood needed in the army. All this recalling of mobilized men
     was effected at first according to the need, and without
     method. By degrees it became clear that the output would be
     greater if these soldier-workmen were assigned to the plants or
     factories where they were working before the war. As it would
     have been unwise to take too large a number of men out of the
     fighting units, hundreds of thousands were taken from the
     auxiliary troops of the interior, men who through lack of
     physical ability to fight were employed in sedentary tasks.
     Thus in 1915 and 1916 auxiliaries were swept away to become
     workmen, foremen, secretaries, bookkeepers, accountants, etc.
     Finally the administration decided to draw from the oldest
     classes of men still under the military law. These were called
     in 1915 and sent to the factories--men born in 1868, either
     bachelors or married men without children.

     "Another draft was made on the civil population. To make up for
     the absence of male help, women were called upon for a great
     number of occupations. Along with the women the refugees were
     to do their part. After a rather long period of unsettled life
     these refugees took again to regular occupations, some working
     in the fields as agricultural hands, others in factories. Today
     it is difficult to find unemployed people among them.

     "The alien population for France is also large, considerable
     numbers of Italians, Spaniards, and Portuguese being employed
     in the southeastern region. A newer element was provided by
     natives from French colonies, namely, Morocco and Algeria.
     Since the war started large numbers of Greeks and Armenians had
     been imported into France; and during the last two years
     something like 200,000 Chinamen had been brought to France for
     unskilled work. The last resource was the enemy itself. There
     were in France more than 250,000 German prisoners engaged in
     various work and receiving a salary for it."

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:

     "The new War Office represents Germany as a colossal firm which
     includes all production of every kind and is indifferent to the
     kind of coat, civil or military, which its employes wear. The
     new measures are intended to mobilize all effective labor,
     whereas up to the present we have only mobilized the army and
     industry. The whole war is becoming more and more a question of
     labor, and in order to give the army a firm basis for its
     operations the domestic army must also be mobilized. All the
     labor, women's as well as men's, must be extracted from the
     population, so far as possible voluntarily. But if voluntary
     enlistment does not suffice we shall not be able to avoid the
     introduction of compulsion."


THE GERMAN NATION IN ARMS

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:

[Illustration: Photo by P. Thompson

A War Time Warning

Dairy production among the Allies decreased 30 per cent. during the war.
The lard supply was also decreased. Kitchen economy in fats was never
more important. Fats were so scarce in Germany during the latter part of
1917 that a "Hindenburg Fat Fund" was organized to which contributions
were sent in from German peasantry and agriculturists.]

     "German locomotives are running to the Taurus in Asia Minor; we
     are operating practically all the Serbian railways with German
     rolling stock; we have thousands of cars in Transylvania and
     Rumania, to say nothing of other occupied territories. After
     the transportation problem, we are taking measures to double
     the production of the auxiliary raw materials and semi-finished
     products. As one example, we are doubling our efforts for the
     manufacture of nitres from the nitrogen of the air. Not only of
     the basic raw materials, coal and iron, but of auxiliary raw
     materials we have no lack.

     "The brains of our chemists and technicians are supplying the
     missing imports, and will continue to do so. Only when we have
     accomplished all this will we proceed to the last step of
     doubling the production of shells and cannon. Such a war is not
     to be won by looking ahead from month to month, but only by
     thinking of the distant future. After we have doubled the
     pyramid, we shall proceed to treble it.

     "By spring we shall be going full steam ahead. After that our
     production will increase from month to month; and we have the
     labor and raw materials for keeping up the pace indefinitely.

     "The male working forces available between the ages of
     seventeen and sixty, as provided by the Auxiliary Service Law,
     will cover our requirements into the distant future, but
     ultimately, aside from the children, aged and sick, every man
     and woman will be enlisted for home defense, if necessary. The
     home army will be the whole nation.

     "What we are engaging on is not alone the progressive
     mobilization of all the nation's physical strength and material
     resources, but the mobilization of the nation's brains. An army
     corps of professors, scientists, chemists, engineers,
     technicians, and other specialists is already working with the
     Kriegstaat. Our idea is to be eminently scientific and
     practical--no theorizing. We are working to show results.

     "We are coöperating closely with the war industries of Turkey,
     Bulgaria, and Austria. It means doubling and trebling their
     ammunition supply, too.

     "The military successes achieved in Rumania, which synchronize
     with the birth of patriotic auxiliary service, are an advantage
     that cannot be overestimated. The Danube means everything to
     us. Last year we had to beg Rumania for her oil and grain and
     pay our good money for it too. Now we don't need to beg costly
     favors of Rumania.

     "Lloyd George does not scare us. We have, however, not time for
     busying ourselves with politics; we have more important things
     to do--supplying Hindenburg with the means of victory."


RUSSIA'S INDUSTRIAL MOBILIZATION

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 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:

     "So these organizations entered upon a campaign of 'saving' and
     'production.' They saved the hides that were being thrown away,
     collected the discarded boots at the front and repaired them,
     and took over the task of supplying the underwear for the whole
     army--mobilizing the village coöperative societies to fill the
     large orders. And they did much to organize the refugees from
     the invaded districts for productive work. In a word, these men
     saw that the war was going to extend into years, and they
     realized that only foresight and organization of productive
     resources would make it possible for Russia to withstand
     economically the burdens of a protracted struggle.

     "The attitude of the governmental authorities (the bureaucratic
     departments) toward the work of these non-bureaucratic, but
     public, institutions (the Unions of the Municipal and
     Provincial Councils) was one of suspicion and antagonism, and
     difficulties were put in their way with the deliberate intent
     to block their activities. The institutions were suspected of
     pursuing political aims. Only when it became clear that the
     ruling group in the bureaucracy was consciously allowing the
     country to drift into a state of anarchy in order to bring
     Russia out of the war did these leaders venture to risk
     revolutionary methods of action.

     "The president of the All-Russian Union of Provincial Councils,
     the Zemstvo, was Prince Lvoff, the first Prime Minister of the
     new Russia after the revolution of March, 1917. In the monthly
     reports of the work of the All-Russian Union of Zemstva, Prince
     Lvoff, repeatedly issued warnings of the impending economic
     collapse of the country. But neither he nor Kerensky was able
     to liquidate the heritage received from the old régime in time
     to stave off the series of economic and financial crises of
     which the Bolsheviki availed themselves."


FOREBODINGS OF RUSSIA'S COLLAPSE

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:

     "The old régime has seemingly done everything deliberately to
     destroy and demoralize the trade-industrial apparatus it took
     years to build up. As a result the usual course of the
     country's economic life was stopped, and at the same time,
     through the peculiarly enforced system of regulations, a wide
     field for all sorts of abuses and speculations was opened. We
     must frankly acknowledge that from these abuses and
     speculations a system of oppression grew up which has called
     forth fully merited reproach, distrust, and hostile feelings
     towards the representatives of the trade-industrial class.

     "At the same time there can be no doubt but that under present
     circumstances, lacking most of the necessaries of existence,
     with the factories and mills forced to cut down their
     production due to lack of raw material and fuel, with the
     demoralization of the transportation system, and being
     compelled, despite all these obstacles, to meet the numerous
     requirements at the front--there is no other way out but
     government control of private industrial and mercantile
     enterprises, and the coöperation of the democratic masses of
     the population in the matter of regulating the trade-industrial
     life of the country. In addition to fair distribution it should
     be the task of all the committees, which are to become parts of
     the Ministry, also to regulate the prices.

     "Closely connected with this question there is another one
     which I personally consider of tremendous importance. I have in
     mind the question of limiting the profits of all mercantile and
     industrial establishments. Undoubtedly a properly worked-out
     solution of this question would have the tendency to check the
     unwarranted growth of prices that would appease the masses. The
     normal effect of a decree limiting profits is of tremendous
     importance, not only in that it would soften the feeling of
     ill-will towards the trade-industrial class, but also because
     it would afford the government a new, convincing proof that the
     commercial and industrial class is ready to make all possible
     sacrifices for the common good, a proof which would paralyze
     the voicing of any new demands on the part of the masses.

     "Now, these are the main ideas, the fundamental points of view
     which the trade-industrial class should consider as a starting
     point in its efforts to win the confidence of the population
     and to safeguard that important position which it ought to
     occupy in the life of the country.

     "The situation is becoming all the more difficult because of
     the ever-increasing famine due to the shortage of means of
     production as well as of all the necessaries of life; this
     famine will be felt very acutely, not only on account of the
     lack of these goods, but also because of the overabundance of
     paper money."


LABOR TRADITIONS UPSET

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_.

     "It has been presupposed that the war will end decisively
     before the armies engaged are reduced to inappreciable numbers
     of able-bodied men. It has been presupposed that the return of
     peace will find British industry based upon the old system of
     private ownership of capital and haphazard production in
     response to the effective demand of individuals. It presupposes
     no change of heart on the part of employers, government or
     trade unions. But, in view of possible, if not probable
     dangers, the most urgent stress should be laid upon what is an
     undoubted palliative, if not a fundamental cure for such
     prospective economic ills; that is, the strenuous promotion and
     public encouragement of trade unionism among women. What women,
     by reason of underlying social and economic causes, are not
     able to do for themselves, the moral and financial support of
     the public must do for them, and such support should be
     regarded not merely as an interference in the old struggle
     between capital and labor, but as an attempt to ward off a
     national danger.

     "The root of the evil is the old incompatibility between male
     and female labor in the skilled and semi-skilled grades of
     industry. That incompatibility has arisen partly from
     fallacious theorizing of the 'wages-fund' type, but largely
     from the fact that the industrial woman, in spite of the uphill
     and often successful trade union work which has been
     accomplished, mainly from above, during the past forty years,
     is regarded by her male colleague as nature's blackleg. And in
     spite of the short-sighted policy of hostility to women members
     displayed by a few trade unions, it is fairly clear that it is
     not the woman trade unionist that the man is afraid of, but the
     woman blackleg; not the well-paid woman, but the sweated woman.
     Now there are three ways of dealing with a blackleg: he may be
     elbowed out of the industrial world altogether; he may be
     penned up, as women have been penned up, in the lowest and most
     undesirable grades; or he may be turned into a trade unionist.
     As far as women are concerned, the first two are closed by
     national expediency, humanity and justice. The third lies open;
     and in view of the peculiar economic rocks which loom vaguely
     ahead of us, it may be said without exaggeration that one woman
     trade-union leader is worth a hundred welfare workers."

[Illustration: Copyright Underwood & Underwood

Women Workers in America

A field of winter lettuce, with the cloches, or glass bells, which made
it possible during the war to raise plants in cold weather.]


WOMEN WORKERS IN AMERICA

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 number of women employed on the railroads of the United
     States had been 60,000 at the beginning of the year, and
     reached approximately 100,000 by October 1st. The greatest
     number are in the clerical and semi-clerical occupations. Of
     the 81,000 employed July 1st, 61,000 were working as clerks of
     all kinds, stenographers, accountants, comptometer operators,
     etc. In this class appear women ticket sellers and bureau of
     information clerks, who served the public for the first time;
     they were found well fitted for this type of work, and special
     instruction agencies were opened by the government in various
     states to train them in the intricacies of tariffs and routes.

     "The next largest group of 4,000, it is not surprising to
     learn, appears in women's time-honored occupation of cleaning.
     Women have long been cleaning stations, offices, etc., but now
     they are employed in the yards to clean coaches and Pullmans,
     both inside and outside; and in the roundhouses, doing the
     heavier work of wiping locomotives; 800 were so employed. In
     personal service, including work in dining rooms and kitchens,
     as matrons and janitresses, 2,000 were found. In the railroad
     shops, women entered the greatest variety of new occupations.
     Three thousand were employed, ranging at one end of the scale
     from common laborers, at the other end of the scale of skilled
     mechanics earning the machinists' or carmen's rate of pay.

     "Many women were employed a year and a half ago, before the
     railroads were put under Federal control, because they could be
     obtained for less pay than men. They were, for instance,
     engaged as common laborers at 20¢ to 22¢ an hour, at a time
     when men were receiving 28¢ to 30¢ for the same class of
     labor. With rare exceptions where adjustments are still
     necessary, the wage orders have absolutely stopped this
     undercutting of men's wages by women.


WORK UNSUITABLE FOR WOMEN

     "Soon after women began to be largely employed it became
     apparent that some of their work was neither profitable nor
     appropriate. The use of women as section laborers, for
     instance, in a gang of men working along the tracks at a
     distance from any house or station was judged to be unsuitable.
     This was also found to be the case where women were employed as
     truckers in depots and warehouses on account of the
     extraordinary physical exertion required of them. In view of
     the wages now paid it was believed possible to secure men and
     to transfer the women to some class of work suitable to their
     strength and with proper regard to their health. The railroads
     were accordingly asked to discontinue their employment in both
     these positions.

     "Comparisons with other industries can probably best be made in
     respect to the women employed in the shops. They are operating
     a number of machines such as bolt-threaders, nut-tappers, drill
     presses, for which no great skill or experience is needed, and
     which is classed as 'helpers' work,' and rated at the specified
     pay of 45¢ an hour. They are also employed for highly skilled
     work. A number have succeeded as electric welders and
     oxy-acetylene-burners. They have been found well adapted for
     work on the air-brake equipment and are cleaning, testing, and
     making minor repairs on triple valves. In some places they are
     now working in a separate group on the lighter-weight valves,
     weighing not more than forty pounds. After a period of
     training they are giving satisfaction without the help of any
     man operator.

     "A remarkably fine type of woman is now to be seen in many of
     the shops, who enjoys the greater freedom of her work as
     compared with factory routine, although in many cases the
     discomfort, the dirt, and exposure are far greater. It remains
     to be seen whether the women will remain in these jobs to any
     great extent. The railroads will, of course, recognize the
     seniority rights of all their employees returning from military
     service, but as far as the new employees are concerned, women
     will have the same privileges as other new employees in
     retaining their positions or being assigned to other jobs.
     There can be no doubt that in the clerical and semi-clerical
     positions they have proved their worth, and will to a great
     extent be retained."


ALIEN LABOR FOR WAR PURPOSES

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:

     "They are a war factor. His Britannic Majesty's Chinese Labor
     Corps now behind the battle line in France is almost as large
     as the total Chinese population in the United States. The
     French Republic has recruited a force of similar dimensions,
     bringing Chinese manpower overseas for non-combatant and
     industrial work. Even teeming Russia, before its tragic
     collapse, had drawn upon thousands of Chinese for work as far
     west as the Ural mines. In 1914 there were but 7,000 in this
     rich country, but a fourfold increase brought the total to
     30,000. All told, 200,000 Chinese are 'carrying on' in the war
     zone, laboring behind the lines, in munition works and
     factories, manning ships.

     "Though the pages of no White Book say it, the break between
     the Chinese Republic and Germany was precipitated largely by
     the Allied drafting of China's manpower. Even in its
     beginnings, the French and British mobilization of Chinese
     labor caused a diplomatic battle royal."


ECONOMIC VALUE OF AMERICAN ARMY TO FRENCH INDUSTRY

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:

     "Our project comprises nearly 1,000 miles of railroad
     construction, but not continuous. France already controls on
     her lines such facilities that she has been able to support her
     great military burden and not break. Their local development in
     the way of sidings and so forth is chiefly in the big towns,
     and small engines and cars are used. To meet our larger needs,
     it is necessary to establish terminals outside the towns for
     the change of engines and for our great storage warehouses. Our
     great railway construction in France, apart from a few cut-off
     lines, is in the way of storage yards. We have practically the
     use of two trunk-line tracks. The French run over them, too,
     for there is a tremendous civil population to be supported. The
     French are necessarily supreme, and we simply have the right to
     run over their railroads subject to their rules.

     "The French have an arrangement with their railroads by which a
     piece of track that is put in for military purposes is paid for
     by the French Government. If the civil requirements of the
     railroad grow up to the use of that particular piece of track,
     then the government is reimbursed by the railroad. We are in
     the same position toward these railroads as the French
     Government. At the end of the war the improvements which we
     make will be surveyed. If they are useful to the railroads our
     expenditures will be reimbursed. If not, we are at liberty to
     take up the stuff and clear the ground. Two days ago a
     semi-official statement was made to the Paris press, reading:

     "'Americans, in full agreement with the French authorities,
     are making every effort to carry out, by their own means, the
     debarkation of their troops in ports, their provisioning as
     well as their transportation over our railroads. Sidings, large
     stations, and establishments of every kind are being
     constructed by the most modern and expeditious processes. One
     of the warehouses has an area of about 4,000 acres, and it has
     a cold-storage plant capable of holding several thousand tons
     of meat. Aviation training camps and repair shops, considerable
     in size and with the most improved machinery, are being erected
     on every side.'"


FRENCH INDUSTRIAL EXHAUSTION

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:

     "The territories which have been under German occupation for
     four years were the wealthiest part of France. Their area did
     not exceed six per cent. of the whole country. They paid,
     however, 25 per cent. of the sum total of our taxes. These
     territories are now in a state of ruin even worse than we had
     anticipated. Of cities and villages nothing remains but ruins;
     350,000 homes have been destroyed. To build them up again--I am
     referring to the building proper, without the furnishings--600
     million days of work will be necessary, involving, together
     with building material, an outlay of 10,000,000,000 francs. As
     regards personal property of every description either destroyed
     by battle or stolen by the Germans, there stands an additional
     loss of at least 4,000,000,000 francs. This valuation of lost
     personal property does not include--as definite figures are
     lacking as yet--the countless war contributions and fines by
     the enemy, amounting also to billions. I need hardly say that,
     in those wealthy lands, no agricultural resources are left. The
     losses in horses and in cattle, bovine and ovine species, hogs,
     goats, amount to 1,510,000 head--in agricultural equipment to
     454,000 machines or carts--the two items worth together
     6,000,000,000 francs.

     "As regards industries, the disaster is even more complete. Those
     districts occupied by the Germans, and whose machinery has been
     methodically destroyed or taken away by the enemy, were,
     industrially speaking, the very heart of France, the very backbone
     of our production, as shown in the following startling figures: In
     1913 the wool output of our invaded regions amounted to 94 per
     cent. of the total. French production and corresponding figures
     were: For flax from the spinning mills, 90 per cent.; iron ore, 90
     per cent.; pig iron, 83 per cent.; steel, 70 per cent.; sugar, 70
     per cent.; cotton, 60 per cent.; coal, 55 per cent.; electric
     power, 45 per cent. Of all that--plants, machinery, mines--nothing
     is left. Everything has been carried away or destroyed by the
     enemy. So complete is the destruction that, in the case of our
     great coal mines in the north, two years of work will be needed
     before a single ton of coal can be extracted and ten years before
     the output is brought back to the figures of 1913.

[Illustration: Samuel P. Gompers

President of the American Federation of Labor.

Copyright Underwood & Underwood]


THE WORK OF REBUILDING

     "All that must be rebuilt, and to carry out that kind of
     reconstruction only, there will be a need of over 2,000,000
     tons of pig iron, nearly 4,000,000 tons of steel--not to
     mention the replenishing of stocks and of raw materials which
     must of necessity be supplied to the plants during the first
     year of resumed activity. If we take into account these
     different items, we reach as regards industrial needs a total
     of 25,000,000,000 francs. To resurrect these regions, to
     reconstruct these factories, raw materials are not now
     sufficient; we need means of transportation. The enemy has
     destroyed our railroad tracks, our railroad equipment, and our
     rolling stock, which, in the first month of the war, in 1914,
     reduced by 50,000 cars, has undergone the wear and tear of
     fifty months of war.

     "Our merchant fleet, on the other hand, has lost more than a
     million tons through submarine warfare. Our shipyards during
     the last four years have not built any ships. For they have
     produced for us and for our Allies cannon, ammunition, and
     tanks. Here, again, for this item alone of means of
     transportation we must figure on an expense of 2,500,000,000
     francs. This makes, if I sum up these different items, a need
     of raw material which represents in cost, at the present rate
     of prices in France, not less than 50,000,000,000 francs."



IV--GOVERNMENT CONTROL

Wartime Nationalization of Railways and Shipping--Ship-building at
High Speed--Trade Licensing, Etc.


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:

     _Resolved_, That Commissioner Willard be requested to call upon
     the railroads to organize their business so as to lead to the
     greatest expedition in the movement of freight.

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.

     "From the standpoint of the Government three principal reasons
     are seen for the taking over of the lines:

     "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."


OBJECTS OF GOVERNMENT CONTROL

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 policy of the United States Railroad Administration has
     been informed and shaped by a desire to accomplish the
     following purposes, which are named in what I conceive to be
     the order of their importance:

     "_First_, the winning of the war, which includes the prompt
     movement of the men and the material that the Government
     requires. To this everything else must be subordinated.

     "_Second_, the service of the public, which is the purpose for
     which the railways were built and given the privileges accorded
     them. This implies the maintenance and improvement of the
     railroad properties so that adequate transportation facilities
     will be provided at the lowest cost, the object of the
     Government being to furnish service rather than to make money.

     "_Third_, the promotion of a spirit of sympathy and a better
     understanding between the administration of the railways and
     their two million employees, as well as their one hundred
     million patrons, which latter class includes every individual
     in the nation, since transportation has become a prime and
     universal necessity of civilized existence.

     "_Fourth_, the application of sound economies, including:

     (_a_) The elimination of superfluous expenditures.

     (_b_) The payment of a fair and living wage for services
     rendered and a just and prompt compensation for injuries
     received.

     (_c_) The purchase of material and equipment at the lowest
     prices consistent with a reasonable, but not an excessive,
     profit to the producer.

     (_d_) The adoption of standardized equipment and the
     introduction of approved devices that will save life and labor.

     (_e_) The routing of freight and passenger traffic with due
     regard to the fact that a straight line is the shortest
     distance between two points.

     (_f_) The intensive employment of all equipment and a careful
     record and scientific study of the results obtained, with a
     view to determining the comparative efficiency secured.

     "The development of this policy will, of course, require time.
     The task to which the Railroad Administration has addressed
     itself is an immense one. It is as yet too early to judge of
     the results obtained, but I believe that great progress has
     been made toward the goal of our ideals."


GOVERNMENT CONTROL CRITICISED

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:

     "Here was, and is, an agency with daily influence on the life
     of every member of the community, performing a service
     essential to the nation's life. Yet it has few friends among
     the people at large; more now than formerly, however, due to
     the number of those whose pity has been excited at the
     railroads' plight. The first of the railroads' plagues was the
     type of management--manipulation, it would better be
     called--which regarded the properties not as carriers but as
     media for stock-jobbing operations. Consolidations with the
     addition of water, and reconsolidations, with still more water,
     were the order of the day; while those operating the properties
     danced riotously over their territories waving insolently the
     flag of 'The Public Be Damned.' Rebates, car-withholding
     tyrannies, all manner of schemes were worked to aid the
     favored few, while the purchasing methods honeycombed the
     organization with rottenness.

     "Then came the day for the people to have their say, and one
     national and forty-eight State commissions began to bedevil the
     carriers. What the stock-jobbers and the grafters had failed to
     do the people in their vengeance helped to complete. The public
     at large, which under intelligent management of the properties
     would have been the railroads' best friend, had been alienated.
     As a result we have had the drift into bankruptcy which has
     been railroad history during the past decade. Instances need
     not be cited. Each one can supply them from his own
     neighborhood. Probably the mention of the New Haven will
     furnish sufficient nausea to carry the right impression.

     "And that _débâcle_ we attribute to the banking type of mind,
     that type of mind that places personal profit ahead of all
     other considerations. The engineering type of mind, we hold,
     would have analyzed the purpose of the railroads--would have
     seen that service to the public at large, and not to any
     private interest, was the prime object, would have erected that
     as the railroads' ideal and builded a machine for its
     attainment."


BRITISH RAILWAY MANAGEMENT

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:

     "Under the terms on which the railways were taken over for the
     period of the war the Government guaranteed to the proprietors
     of the railways that their net revenue should be the same as in
     1913, except when the net receipts for the first half of 1914
     were less than the first half of 1913; in that case the sum
     payable was to be reduced in the same proportion. The entire
     Government traffic--men and freight--was to be carried without
     any direct charge being made for it or any accounts rendered.
     This plan was considered satisfactory by both sides. In the
     majority of cases there had been a reduction of earnings in the
     first half of 1914 over the previous half-year, and companies
     were contemplating a still further reduction. The interests of
     their shareholders being assured, they were able to devote
     themselves to the work of economical and efficient
     distribution, quite apart from the usual financial problems.
     The one weak side of this agreement was that it made no
     allowance to cover increased interest payments on account of
     new investments and new capital expenditure since the war
     began. This point was afterward met by an arrangement that the
     government should pay interest at 4 per cent. on all new
     capital invested by the railways since August 4, 1914, on new
     lines, branches, terminals, equipment, or other facilities put
     into use since January 1, 1913.

     "The conclusion of the financial agreement between the
     Government and the companies automatically brought about a
     great economy in the system of railway accounts. The reports of
     the companies were cut down to a bare minimum, and in many
     cases even these reduced reports were not sent to the
     shareholders unless they specially asked for them."


RAILWAY NATIONALIZATION IN CANADA

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.

[Illustration: Walker D. Hines

He succeeded William McAdoo as Director-General of Railroads after the
signing of the armistice.

Copyright Underwood & Underwood]

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.


FRENCH RAILWAYS IN WARTIME

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 preparation of railways for war uses is not confined to
     the planning of the system itself. It extends to the provision
     and adaptation of stations, to the duplication of the lines, to
     the defence of bridges and other structures, to the provision
     of rolling-stock. Considerable extension may be looked for in
     all these directions. However important the motor-car and the
     aeroplane may be in military transport, it is probable that the
     railways will always be the most satisfactory means of
     conveying heavy material.

     "The railway carriage itself can be adapted for military uses.
     We have tank cars, cold-storage cars, hospital trains; above
     all, we have armored trains and truck gun-carriages.

     "Railways will perhaps render more effective service than ever
     in the matter of bringing to the required spot huge guns too
     heavy to be transported in any other way. These will be fired
     without leaving the rails. The truck gun-carriage is so
     arranged as to withstand the recoil; this result is obtained by
     placing on the ground, once the carriage is stationary,
     supports which take the load off the wheels. The recoil is
     transferred to the ground so that the rails do not suffer.

     "Whether the object is to organize a supply line, to transfer
     reinforcements, or to carry heavy material to its destination,
     it may be of service to provide for the absence of normal lines
     by laying down rails along the road. Both the Germans and
     ourselves have done this very frequently. A narrow gauge of
     sixty centimeters is generally used. A team of skilled sappers
     takes about three hours to lay down about one kilometer of
     railway."


AMERICA'S SHIPPING PREPARATION

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.


WAR'S EFFECT ON SHIPPING

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:


    THE WAR AND WORLD SHIPPING

                                                   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

[17] To October, 1917.

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:

     "The world's shipping suffered a net loss of 2,632,279 tons
     from the beginning of the war to April 1, 1918, the greater
     part of this having occurred since the beginning of the
     unrestricted submarine warfare which brought America into the
     war. This loss is partly due to England's having increased her
     naval building at the expense of merchant tonnage. While naval
     construction must not be neglected, some building capacity can
     be turned back to merchant ship-building in case of extreme
     need. However, in April, 1918, Great Britain and the United
     States built 40,000 tons more shipping than was lost, and
     American construction is still rapidly increasing."


AMERICA'S SHIP-BUILDING PROGRAM

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_:

     "British shipping, still in magnitude far beyond that of any of
     the Allies, is declining; it is still being sunk faster than it
     is being replaced. American shipping, on the other hand, is
     rapidly expanding, and has already turned the scale against the
     U-boats. The American Army in France as it is reinforced must
     become more and more dependent upon American ships for
     transport and supply. Up to the end of July the net loss in
     British shipping due to enemy action and marine risks since
     August, 1914, had been 3,851,537 gross tons. During the current
     year to July 31 we have lost 583,600 gross tons more than we
     have built. British sea power, the power to use the sea as
     measured in merchant shipping, is wasting. On the other hand,
     the net gain since August, 1914, in Allied and neutral
     shipping--to which the United States have largely
     contributed--was nearly 1,100,000 tons at the end of June this
     year, and was showing a very remarkable rate of expansion.
     Thanks chiefly to the United States, the Allied and neutral
     monthly gain now more than offsets the British loss. The
     critical corner has been turned. To those whose eyes look
     beyond the war, and who already anticipate a great American
     mercantile marine in competition with depleted British lines,
     we would point out that after all its losses British merchant
     shipping still amounts to over 14,000,000 tons gross, and that
     America's ocean-going tonnage built and completing--exclusive
     of captures--is as yet little more than 4,000,000. What the
     relative positions will be a year hence--or two years hence,
     should the war last so long--we do not venture to predict."


THE FOURTH OF JULY SPLASH

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:

[Illustration: Copyright by Charles Phillip Norton

Building a Steel Ship in Seattle, Washington

American ship-building during the war was planned on a gigantic scale to
make good the losses by submarines and to provide transportation for
American troops to Europe. The _West Lianga_, shown above, an 8,800-ton
cargo carrier was launched within 55 working days and delivered, ready
for cargo, in 67 days.]

     AMERICAN LOSSES--NEW TONNAGE BUILT

     "At San Francisco on July 4th, Mr. Charles M. Schwab,
     Director-General of the Emergency Fleet Corporation, said to
     the shipworkers: 'If you stand up to your job, we'll make the
     Kaiser take his medicine lying down.' Mr. Schwab also ventured
     the statement that this Fourth of July shows the greatest
     record of launchings for a single day in the world's history,
     and added:

     "'Every time we launch a cargo or troopship or tanker we add to
     the certainty that German submarines can not win this war.
     Already we have the U-boats on the run, and if we keep up the
     pace we will have them beaten by next year. And when we achieve
     this victory it will be you who will deserve the credit.

     "'In 1915 all the shipyards in America turned out 215,602
     dead-weight tons of shipping. The next year our output jumped
     to 520,847 tons. In 1917 the hot pace continued until we very
     nearly doubled the output of the previous year, completing a
     total of 901,223. I am confident now that if we pull together
     and every man stays on the job, we will produce more than
     3,000,000 dead-weight tons in 1918--the greatest output of any
     nation in the world in a single year.'

     "Premier Lloyd George sent a cable to President Wilson on the
     launching of the ships, in which he extended 'heartfelt
     congratulations on this magnificent performance,' and in an
     Independence-day speech Secretary of the Navy Josephus Daniels
     said in part:

     "'We are launching this day far more tonnage than that of all
     the American vessels sunk by submarines since the war began. We
     are launching today more than the Germans sank of the ships of
     all nations in the last month for which we have the official
     figures. The recent enemy submarine activities off our coast
     resulted in the loss of 25,411 dead-weight tons of American
     shipping. During this same time 130,000 gross tons of shipping
     were built.

     "'To give some idea of the tonnage situation with reference to
     American shipping, it may be of interest to know that the total
     tonnage of American vessels lost prior to the entry of the
     United States into the war was 67,815. The total American
     tonnage sunk since the entry of the United States into the war
     is 284,408, or a total of 352,223 tons sunk during the whole
     period of the European War. As against this loss, the gross
     tonnage of merchant ships built in the United States since the
     commencement of the European War is 2,722,563 tons, 1,736,664
     gross tons of which have been built since the entry of the
     United States into the war. In addition to the tonnage thus
     built 650,000 tons of German shipping have been taken over.
     This does not include the tonnage acquired of Dutch, Japanese,
     and other vessels. It will be of further interest to know that
     today there will be launched in the great shipyards of this
     country over 400,000 dead-weight tons. These figures are in
     addition to those previously given.'"


A SHIP-BUILDING CAPACITY OF OVER 1,500,000 TONS A YEAR

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.


TRANSPORTING THE AMERICAN ARMY

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.

[Illustration: Hog Island Ship-building Yards

The expenditure of millions of dollars and the labor of thousands of
workmen transformed in a short time a tract of marsh lands near
Philadelphia into one of the greatest ship yards in the world.]

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]

[18] For complete official figures of the troop movement overseas, see
Volume IV.

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.


ACCELERATED SHIPPING

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.


BRITISH SHIP-BUILDING

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:

     "On top of foreign subsidized competition our people are to be
     subjected to Government competition at home, and their whole
     position and prospects rendered uncertain, if not impossible.
     This new government undertaking can have nothing but a
     chilling, blighting effect upon our splendid ship-building and
     engineering trades, and it will not give us one additional ton
     of shipping. The government policy--or lack of policy--is such
     that no one knows what to expect next. There is no certainty.
     There is no continuity of policy. There is no encouragement.
     There is no common justice for British enterprise. Whilst
     Germany, France, Italy and other nations are preparing large
     subsidization schemes for their shipping and ship-building
     trades, our government excessively penalizes our industries and
     enterprises, and gives no hint of any fair dealing in the
     future. Before the war German subsidized liners were permitted
     to come into our harbors and take on board British passengers
     at 'blackleg' rates, and without paying even a due share for
     the upkeep of our ports and lights. Now our government, whilst
     paying neutral shipowners--our future rivals--freights up to as
     much as 500 per cent. above the Bluebook rates paid to our own
     vessels, is taxing our shipping people up to the eyes--doing
     all that it can to render it difficult, if not impossible, for
     our companies to increase their fleets and maintain British
     supremacy after the war."

[Illustration: Copyright by Underwood & Underwood

Launching the City of Portland on the Columbia River, near Portland,
Oregon

Most of the cargo ships that carried supplies to our troops after we
entered the war were American owned, and carried thousands of articles
of the most varied sort. The _City of Portland_, shown above, was a
three hundred foot wooden motor vessel.]

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:

     "In addition to this, the Shipping Controller has taken steps
     for the quickening of ship-building. The tonnage built in this
     country during peace times is, I think, on an average
     something a little under 2,000,000. In 1915 the ship-building
     came to 688,000 tons. In 1916 it was 538,000 tons. In this year
     a little over a million tons, nearly 1,100,000 tons, will be
     built in this country and 330,000 tons will be acquired abroad,
     so that this year the tonnage which we shall acquire will be
     1,900,000. This is purely mercantile marine. Bear in mind the
     condition under which the tonnage is built. It is the fourth
     year of the war. There is a difficulty in labor and great
     difficulty in material. You require steel for guns and shells
     for the Navy, because the ship-building program of the Navy has
     gone up considerably in the course of the present year. In
     spite of that fact the ship-building of the country in this
     year will not be very far from what it was in the days of
     peace.

     "Even now we have not got enough tonnage for all essential
     purposes. We have got to provide tonnage for France, Italy and
     Russia, as well as for ourselves, and we need more ships
     instead of fewer ships. And I am not going to pretend that
     there will not be at best a rate of diminution of our shipping
     which will embarrass us in the struggle, and therefore it is
     essential, not merely that this country should build, but that
     the only other countries which have a great ship-building
     capacity should also build. If the United States of America
     puts forth the whole of her capacity, and I have no doubt, from
     what I hear, that she is preparing to do it in her own thorough
     and enterprising way, I have no doubt at all that we shall have
     sufficient tonnage not merely for this year but for the whole
     of 1918 and, if necessary, for 1919 as well, because America
     can expand very considerably her ship-building capacity if the
     real need ever arises for her to do so."


BRITISH BUREAUCRATIC METHODS

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:

     "From every quarter members with first-hand knowledge of
     ship-building got up to tell the same story of
     over-centralization, fussy control, conflicting orders, leading
     all to the same result--discouragement of masters and men. Mr.
     Mackinder, speaking for a Glasgow constituency, and Sir Walter
     Runciman, speaking as a ship-owner--two men whose views on
     economics are the poles apart--were in agreement here. The
     fault, they declared, lay, not in the want of patriotism or the
     inherent vice of the British workman, or even in the lethargy
     of the British employer, but in the third and predominant
     member of the ship-building partnership, the British
     Government. Keeping the direction in its own hands, the
     Government started with a preconceived theory of the standard
     ship--a theory that might be of great value to a builder of
     revolutionary ideas laying the foundations of a prosperity to
     be enjoyed twenty years hence, but is of considerably less
     value to a nation that is losing steamers at the rate of
     fifteen or twenty a week, and wants new steamers now. When the
     standard ship was first proposed, builders pointed out that in
     practice each had a standard ship of his own, and they could
     build most quickly by confining themselves to their own
     familiar types. Mr. Macnamara told them that they were
     Solomons, wise after the event, but that is less than fair.
     They were wise from the beginning, and their predictions have
     come true."


TRADE POLICY AS A WAR WEAPON

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:

     "If the final peace does not return to us what our enemies have
     taken and destroyed in the outside world, if it does not
     restore to us freedom in our work and our spirit of enterprise
     in the world, then the German people is crippled for an
     immeasurable period. We demand restoration for all violation of
     the law and for all acts of destruction. We demand
     indemnification for all damages done, and we meet the plan of
     differentiation with the demand for the most-favored-nation
     treatment and equal rights; the plan of exclusion with the
     demand for the open door and free seas; and the threat of a
     blockade of raw materials with the demand for the delivery of
     raw materials."

A true picture of the situation is given in the following passage from
the Vienna _Arbeiter Zeitung_:

     "Even if Hindenburg's genius and German bravery won a complete
     victory on land, even if the English Army fell into our hands
     to the last man, and France was disarmed and had to submit to
     Germany's terms, even then England and America could not be
     compelled to the capitulation that the Pan-German word-heroes
     prophesy daily. Even then they would blockade our coasts and
     the war would continue at sea. And even if they could not or
     would not do that, even if peace was concluded and all the
     battles ended, they would still have a terrible weapon to use
     against us. Our domestic economy can not exist permanently
     without the wheat, the copper, and the cotton from America, the
     nickel from Canada, the cotton from Egypt and India, the
     phosphates from the North African coasts, the rubber from the
     English tropical colonies, Indian jute, and the oilplants of
     the South Sea Islands.

     "There will be a scarcity of all these things after the war and
     there will be great competition for them. If England and
     America do not deliver to us these raw materials after the war,
     then we as conquerors are conquered."


GERMANY'S POTASH BOYCOTT

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:

     "There is potash in plenty in the great Republic, especially in
     the alkali lakes of Nebraska and Southern California. Potash is
     now obtained from the Great Salt Lake in Utah, and from the
     vast kelp beds of the Pacific coast. American chemists are also
     extracting potash (by the Cottrell process) from the dust of
     cement-kilns and blast-furnaces. So the German monopoly will
     pass, and many others with it. America will produce her own
     dyes and optical instruments, though I may not linger on the
     details of this supplanting.

     "American genius has long been busy with these things; another
     year or two will see her wholly independent of German supplies.
     The potash monopoly--from the mines of Stassfurt in Saxony--was
     undeniably a problem; there are still richer sources in Alsace,
     as we all know Germany's resolve to hold that province through
     thick and thin. America needs 500,000 tons of potash every
     year, for the sandy soils of the Atlantic seaboard, and also
     for the citrus fruits of Florida, the tobacco of Georgia and
     the Carolinas, the potatoes and garden produce of Maryland."


SHUTTING OFF GERMAN TRADE

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:

     "Neutral exports of foodstuffs to the Central Powers have
     declined from last year's corresponding exports in amounts
     estimated at from 65 to 85 per cent., depending on the neutral,
     and there has been a decrease in the export of many other
     important commodities.

     "In November, 1917, we became party to Great Britain's
     tentative agreement with Norway, as a result of which action on
     our part 1,400,000 tons dead-weight of Norwegian shipping were
     chartered into the service of the United States and Great
     Britain for the period of the war. Shortly following, temporary
     agreements were concluded with Holland and with Sweden. That
     with Holland gives us the use, for periods up to 90 days, of
     450,000 tons dead-weight of her shipping which had heretofore,
     for a long period, lain idle. The agreement with Sweden gives
     us the use for three months of tonnage estimated at 250,000
     tons dead-weight which had not theretofore been employed in
     services useful to us.

     "Specific accomplishments of this character are, however, far
     from constituting a full measure of the results achieved by the
     War Trade Board. The elimination of enemy advantage from our
     trade and, to a considerable extent, from that of the world,
     the securing and conserving of commodities essential to
     ourselves and those associated with us in the war, the bringing
     of shipping generally into the services most useful to
     us--these results can not be accurately stated or appraised at
     the present time, nor have they been accomplished by any single
     act or agreement."

[Illustration: Examining Cargoes for Contraband

An inspector is using the X-ray on a bale of cotton, it having been
found that smuggling of every conceivable sort was being carried by
German agents.]


THE TRADE LICENSE SYSTEM

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_:

     "To accomplish these results the War Trade Board, through its
     Bureau of Imports, has adopted certain regulations in
     connection with the importation of many of these raw materials,
     to which it is the duty of every patriotic American citizen to
     give complete and wholehearted support.

     "Organizations have been voluntarily created in many of the
     trades, such as rubber, wool, jute, tin, etc., to act as
     consignees when required and to perform other duties in
     connection with importations, under and by direction of the War
     Trade Board.

     "Every effort will be made to administer these regulations with
     the slightest possible detriment to legitimate business
     interests, but when it is considered that the transmittal of a
     few pounds of rubber or copper to Germany may cost the lives of
     scores of our men at the front, and that each day's supply of
     wool, or food, or money to the enemy means another day's war,
     with its accompanying toll of lives, the very thought of
     hesitancy or weakness is inconceivable. The policy will be
     'safety first' for our soldiers, regardless of every other
     consideration. Persons and firms in this country, as well as
     abroad, who before our entrance into the war had little
     sympathy with the war-time commercial safeguards of the Allies
     must be taught that these are now matters of the first
     importance to this country, and violators of present
     restrictions need expect no favors, regardless of how important
     such individuals or firms may be in the business world. The
     time has come when all must realize that the war is not limited
     to combating the enemy on the battle fields of France, but must
     be carried into our every-day transactions of life, and that
     our business practices must be remolded, where necessary, to
     meet existing conditions.

     "It is unnecessary to mention other desirable results which may
     be obtained by this import control, such as the gathering of
     trade information or the conservation of tonnage by elimination
     of non-essentials.

     "No anxiety need be felt by importers that there will be any
     serious restrictions of the importation of necessary articles
     if the transaction does not involve dealing with an enemy or
     ally of an enemy, or otherwise giving him aid or comfort."


THE ANTI-GERMAN TOY EPISODE

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:

     "It is none too soon to begin the campaign against the
     importation of German-made goods. Imagine for one moment any
     American mother giving to her baby toys made by Germany while
     she thinks of tens of thousands of babies murdered by Germany
     in this war. Every toy made in Germany and every other piece of
     goods of every kind will for generations bear a bloody stain
     which all the waters of all the oceans can never wash out."

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:

     "America has fed starving Belgium. We fed and clothed and cared
     for her suffering people long before we became her proud ally
     on the battlefields. Thousands of orphaned Belgian and French
     children have been adopted into American homes. In the days to
     come are we going to force these children to play with
     German-made toys? God forbid! American toy manufacturers have
     stripped us of the last vestige of an excuse for the purchase
     of toys from the Huns. Our factories are making more toys than
     we ever imported, and they are not the flimsy jim-cracks we
     formerly bought from abroad. They are largely exercise toys
     which develop a child's body, or mechanical or structural toys
     which train the mind. Before the war we imported eight million
     dollars' worth of toys from the Central Powers. Who will make
     our kiddies' toys in the days to come? Once more, Mr. Buyer,
     it's up to you."


SMUGGLING FROM NEUTRAL COUNTRIES

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_:

     "To direct and indirect re-exportation must be added, finally,
     smuggling, which has always been a factor in the evasion of
     blockades. In Switzerland a member of the Commerce Department
     of the government was recently convicted of this offense and is
     serving a prison sentence.

     "That this aid was precious to the Central Powers and enabled
     them to stave off starvation and consequent submission can be
     corroborated in various ways. First, in spite of the enormous
     volume of imports from the neutrals Germany was on the verge of
     starvation during the last winter, the economic crisis reaching
     its critical stage coincidentally with the political crisis in
     the Reichstag at the beginning of July. The most potent cause
     of this political upheaval was the economic destitution which
     cast its melancholy shadow over the whole nation and increased
     the desperation of people and Reichstag till it exploded in a
     violent outburst of wrath against the government. Secondly, the
     general impression of press and people in Germany and
     Switzerland is that the most sensational part of the speech of
     Erzberger, which brought the crisis into being, consisted of an
     exposé proving the futility of the submarine policy and
     impugning the judgment of the officials responsible for its
     inauguration, inasmuch as the entrance of the United States
     into the list of Germany's enemies, which resulted therefrom,
     was likely to result in a curtailment of the imports obtained
     through the neutrals, and without a continuance of these
     imports Germany could not hold out long."


SURPRISING INCREASE OF NEUTRAL SHIPPING

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_:

     "Of great importance for an estimate of the future of our
     shipping combines is the progress which the two largest Danish
     lines--the Forenede, which sails to North America; and the
     Estasiatisk Kompagni, which, as the name suggests, runs lines
     to East Asia--have made during the war. The Forenede, for
     instance, made in 1916, with a stock capital of 30,000,000
     crowns, a net profit of no less than 40,000,000 crowns, of
     which a good 10,500,000 crowns was allotted to the reserve and
     emergency funds. The collective reserves of this company
     amounted to more than 26,000,000 crowns at the end of 1916: and
     its bank credits totaled 44,000,000 crowns.

     "The large Dutch shipping firms have likewise made enormous
     profits. The following table presents their results for 1916
     (the Dutch florin, or guilder, is worth $0.402 United States
     currency at normal exchange):

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

     "The example of the Holland-America Line shows best what
     enormous progress took place in the inner consolidation of the
     Dutch firms. The reserve of this company, which in 1913
     amounted to 6,600,000 florins, grew to 24,800,000 by the end of
     1916--in other words, the previous stock capital (which in the
     meantime had been increased by 15,000,000 florins) by more than
     double. In addition, the company has available funds amounting
     in all to 21,700,000 florins. The reserves in the Nederland
     Company, which have increased in the same period from 6,700,000
     to 23,000,000 florins, exceed the capital by 4,000,000 florins.
     The available funds of the Rotterdamsche Lloyd amounted at the
     end of 1916 to about 25,000,000 florins, with a share capital
     of 15,000,000 florins and a ready reserve of 16,000,000
     florins.

     "But the business successes of the neutral European shipping
     firms are far surpassed by the earnings of the Japanese
     overseas lines. Thus the largest Japanese shipping firm, Nippon
     Yusen Kaisha, that sails from East Asia to all the important
     shipping markets, had a net profit in the summer half-year 1916
     of 19,780,000 yen (the Japanese yen is equivalent to $0.498
     United States currency); in the winter half-year 1916--17
     actually 22,150,000; in a single fiscal year it earned,
     therefore, about 42,000,000 yen. The company's capital stock
     amounted at the end of the fiscal year 1916--17, after a
     previous increase through the distribution of free shares, to
     27,500,000 yen, the net profits of this single company being
     thus about 15,000,000 yen more than the amount of the capital.

     "The company's fleet has grown considerably. The total
     available reserves amount to nearly 63,000,000 yen. Of ready
     money the company had at its disposal at the end of March,
     1917, 55,300,000 yen."


GERMANS AT WORK IN SPAIN

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 German propagandists have carried on a campaign on the
     proposition of the Kaiser. It has been the finest selling
     campaign that I have ever seen. They have organized it. Each
     man had his territory, his selling territory; each man has his
     line of samples, and that line of samples was the finest lot of
     German gold and German 'hot air' that any propaganda has ever
     produced.

     "The Germans have sold Spain on the proposition of German trade
     and German good-will, because they are giving the Spaniard, as
     they did in business before the war, what the Spaniard had in
     mind.

     "Germany went into Spain to fill the Spaniard with 'hot air'
     and to tell him he was the finest aristocrat in the world. And
     he got it over. And if you had gone, as I have, from one end of
     Spain to the other and looked into these great warehouses you
     would have found hundreds of them jammed and packed with copper
     and oil and cotton, and all the material with which to
     re-establish a great industry. And today, whenever there is a
     water-right for sale, whenever there is stock for sale, or
     whenever anything can be leased, or a factory can be bought,
     who buys it? =The Germans.=

     "They have got the finest industrial secret service in Spain that I
     have seen in my life. And to what end? All to the great end that
     when the war is over, in Spain as in Holland and in Switzerland,
     the wheels of German output will be going.... Germany will put on
     the goods, as I have seen with my own eyes, 'Made in Spain,' 'Made
     in Switzerland,' and 'Made in Holland.' Your own goods, machine
     tools, are going out in the markets of the world now and
     forevermore in competition with German-made stuff, made by German
     hands, made by German capital, part with stuff that is marked
     offensive, in competition with stuff that is marked as I have said
     it would be marked."

[Illustration: Photo by Paul Thompson

An Antidote for the Submarine Pest

Quantity production of eighty-foot motor boats in a shipyard at Bayonne,
N. J., for use as scouts and submarine hunters.]


NO ECONOMIC BOYCOTT AFTER THE WAR

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

     "We had heard of war after the war, and it had been suggested
     that whatever the terms of peace might be we in England should
     have no dealings with Germany, that we should boycott them
     commercially, allow none of our raw materials to go to Germany,
     that we should form a combination with our Allies, and that
     together we should cut her off altogether and treat her as
     though she were a leper. He did not believe in this idea. He
     was out for peace, and when he said he wanted peace he meant a
     lasting peace. He wanted peace founded on sound conditions,
     which would stand wear and tear and last forever, if
     possible--at all events, for many, many years, it might be
     centuries; but a boycott of Germany would not be the way to
     attain a peace of that kind. That would be a way of carrying on
     the war, and although it would not be with the weapons we were
     now using, there would be the same hatred and struggle between
     one combination of nations and another, and it would leave the
     world divided and engender seeds of hatred and dissent. In many
     respects it would be almost as bad as the war at the present
     time. He did not, therefore, accept that condition of things."

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

     "Germany has occupied a great position in the world. It is not
     our wish or intention to question or destroy that position for
     the future, but rather to turn her aside from hopes and schemes
     of military domination and to see her devote all her strength
     to the great beneficent tasks of the world.... The economic
     conditions at the end of the war will be in the highest degree
     difficult. Owing to the diversion of human effort to warlike
     pursuits, there must follow a world shortage of raw materials,
     which will increase the longer the war lasts; and it is
     inevitable that those countries which have control of the raw
     materials will desire to help themselves and their friends
     first."


AN IMPOSSIBLE PROGRAM

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.

     "Even if Belgium, France, and Italy alone took that course, the
     whole policy of an economic boycott, or partial boycott, to
     prevent German expansion or to punish German crimes would fall
     to the ground. We cannot imprison Germany in an economic strait
     jacket if her territorial neighbors are willing to trade with
     her. As a matter of fact before the war the most important and
     the most expansive portion of German export trade was with the
     continent of Europe."


COMMERCIAL AVIATION

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_.

     "The type of aeroplane for commercial work requires careful
     consideration and design. In estimating the value of a
     transport vehicle account must be taken of the respective
     proportions of the load that are and are not remunerative. A
     steam motor wagon that was only just able to transport the coke
     for its own consumption would be useless for transport work.
     The large quantity of fuel the aeroplane must carry makes this
     point an important one regarding it. It affects very largely
     the _type_ of aeroplane that must be chosen for each duty.

     "The total lift of a large bombing aeroplane of medium speed is
     about 20 lbs., while that of a small high-speed scout may not
     be more than about 8 to 10 lbs. per horse-power. From these
     lifts have to be deducted the weight per horse-power of the
     aeroplane structure and engines. These leave a margin of about
     11 pounds per horse-power in the case of the large machine and
     of only about two to four pounds per horse-power in the case of
     the smaller and higher speed machine. From these margins have
     to be deducted the weight _per horse-power_ of the pilot and of
     the fuel to be carried."

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:

     "There must be no possible chance of the wildcat schemes of the
     early railway days recurring, nor must aircraft or their pilots
     be below a specified standard. The State must see that projects
     doomed to failure owing to lack of financial or technical
     backing are prevented from being placed before the public.

     "Regulations must be drawn up which will insure that the
     machines cannot be used for the public service until they have
     received a certificate similar to that now issued by Lloyd's
     for ships. Pilots must not be allowed to fly machines conveying
     the public or mails, unless they have received a certificate
     equivalent to that issued to the master of a ship by the Board
     of Trade before he can take charge.

     "The aeroplane will not compete with the telegraph system,
     cable, or wireless, but will be a useful adjunct conveying
     written signed statements, important documents, long reports,
     and descriptive letters in the time of a week-end cable and at
     a fraction of the cost.

     "It will enable the business man to visit his overseas agencies
     and friends, to discuss matters with them on the spot and
     examine the requirements of their districts, at the cost of a
     few _days_ instead of months of travel."

[Illustration: The Awkward Squad

"Left, right--one, two, three, four," was the slogan heard throughout
the National Army cantonments, such as this at Camp Dodge, Des Moines,
Ia., during the first days in teaching the recruits one of the first
lessons of the soldier; how to keep step.

Copyright International Film Service]



V--THE MONEY COST OF THE WAR

Over $210,000,000,000 Spent by the Belligerents--How This Stupendous
Sum Was Raised--What the War Cost Uncle Sam

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.


THE COST OF THE WAR DAY BY DAY

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.


OUR WAR EXPENSES MONTH BY MONTH

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.

[Illustration: The Economic Conference in Paris

Mr. Bonar Law talking with M. Clementel (Minister of Commerce) and M.
Doumergue (Colonies) in the garden of the foreign ministry.]

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


HOW MONEY FOR WAR WAS RAISED

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    |   Monthly   |  Average
                             | public debt |     War     |   Daily
                             |and of postal|Expenditures |Expenditures
                             |expenditures |     [19]    |
 ----------------------------+-------------+-------------+------------
                             |  Million $  |  Million $  |  Million $
 April 6--30, 1917           |      279    |      219    |     8.
 May, 1917                   |      527    |      467    |    15.
 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    |
 ----------------------------+-------------+-------------+------------

[19] Obtained by deducting 11/12 of the annual (peace) expenditures for
1915--1916 exclusive of postal expenditures, i. e. 11/12 of $1,008--287
millions--60 millions. Secretary Glass in his letter of July 9, 1919 to
the Chairman of the Committee of Ways and Means excludes postal
expenditures in the first column, but fails to exclude them when making
the deduction for peace expenditures. He consequently arrives at the
figure of 30,177 billions as the cost of the war; making allowance for
this fact, and using the final corrected figures, we reach the figure of
$32,261,000,000 as the cost of the war to June 30, 1919.


WAR TAXATION IN OTHER COUNTRIES

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.


OUR WAR TAXES COMPARED WITH WAR EXPENDITURES

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.

[Illustration: Copyright Underwood & Underwood

=Lord Reading=

President of the Anglo-French loan mission to the United States in 1915,
and special envoy of the British Government to the United States in
1917.]

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.


CHARACTER OF WAR TAXATION

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

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

    [20] As the new taxes are payable in instalments, about 2 millions
    of the 1919 tax will not be received until the fiscal year 1920.
    Making allowance for this the proportion of taxes on wealth
    really ascribable to the year 1919 rises to 80.6 per cent.

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.

[Illustration: While the Men Fought, Those Left Behind Bought Bonds

Not all brave hearts beat under khaki during the war. More than
$20,000,000,000 was raised by the four Liberty Loans and the Fifth
Victory Loan. Among those who bought bonds were hundreds of thousands of
wives and children of the men at the front.

Courtesy McClure's Magazine]

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.


TOTAL WAR DEBT, UNITED STATES

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

[21] Counting on repayments of one half of the loans to the Allies (£816
millions).

[22] Not including the debts of the separate states.

[23] Obtained by considering the debt of the new Austria as representing
70 per cent of the debt of all the states which constituted the old
empire.

[Illustration: French School Children Waiting to Welcome General
Pétain]



VI--AMERICAN BUSINESS IN THE WAR

Voluntary Coöperation of Experts and Loyal Support of Labor Put Our
Industries on a War Basis

By GROSVENOR B. CLARKSON

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


     Modern wars are not won by mere numbers. They are not won by
     mere enthusiasm. They are not won by mere national spirit. They
     are won by the scientific conduct of war, the scientific
     application of irresistible force.

    --WOODROW WILSON.


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.


COUNCIL OF NATIONAL DEFENSE

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:

     (_a_) 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.

     (_b_) The coördination of military, industrial, and commercial
     purposes in the location of extensive highways and branch lines
     of railroads.

     (_c_) The utilization of waterways.

     (_d_) The mobilization of military and naval resources for
     defense.

     (_e_) 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.

     (_f_) The development of sea-going transportation.

     (_g_) Data as to amounts, location, methods and means of
     production and availability of military supplies.

     (_h_) 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.


PERSONNEL OF THE COUNCIL

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:

    Secretary of War              Newton D. Baker, Chairman.
    Secretary of the Navy         Josephus Daniels.
    Secretary of the Interior     Franklin K. Lane.
    Secretary of Agriculture      David F. Houston.
    Secretary of Commerce         William C. Redfield.
    Secretary of Labor            William B. Wilson.

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.

[Illustration: Copyright by Harris & Ewing

=United States Council of National Defense and Its Advisory Commission=

Seated, left to right: David F. Houston, Secretary of Agriculture;
Josephus Daniels, Secretary of the Navy; Newton D. Baker, Secretary of
War; Franklin K. Lane, Secretary of the Interior; William B. Wilson,
Secretary of Labor. Standing, left to right: Grosvenor B. Clarkson,
Secretary, later Director, of both Council and Advisory Commission;
Julius Rosenwald, Bernard M. Baruch, Daniel Willard, Chairman of the
Advisory Commission; Dr. Franklin Martin, Dr. Hollis Godfrey, Howard E.
Coffin and Walter S. Gifford, Director of the Council and Advisory
Commission.]


PROPOSALS OF THE ADVISORY COMMITTEE

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:

     To begin immediately a study to determine the most effective
     flexible organization and mechanism for the securing of all
     necessary information and for the clarifying, recording, and
     classifying of such information when secured.

     To begin immediately a study as to what media now exist which
     can aid in the carrying out of the purposes of the council.
     This study to be made in three divisions--governmental media
     in the departments, governmental media outside the departments,
     and civil media. As this study progresses it is believed that
     the council can aid materially in the development of such
     media, and can from time to time define (_i. e._, delimit and
     delineate) spheres of activity in which existing organizations
     may operate intensively without duplication.

     To assist in the advance of the physical well being of the
     people of the nation.

     To begin immediately a study of the possibility of the
     coördination of transportation, communication and surveys.

     To continue the work done on the inventory of manufactures, of
     medical equipment and officers, of supplies, and of resources.

     To assist in the development of the "Personal Index" already
     begun.

     To set a fixed date (a date three months after the beginning of
     action is suggested) on which an inspection may be made of the
     work accomplished to that date. This inspection to be made
     through the submitting to the commission of an actual problem
     by the Departments of War and Navy, with the intent to
     determine at that time what needed information is or is not
     available.

     To form a temporary organization to put the above proposals or
     any part of them or additional proposals into effect at the
     earliest possible date, with the intention of changing from a
     temporary organization to a permanent organization as the
     progress of the work makes this possible.

     To begin a study of the best methods of expression of the work
     of the council to the people of the nation.

     To scrutinize all legislative action touching national defense.

     To do any other thing or take any other action necessary to
     give effect to the law under which the council and commission
     are organized.


PRE-WAR ACTIVITIES

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:

     W. H. Vandervoort, builders of special machine tools, and
     President of the Moline Automobile Co.

     E. A. Deeds, formerly General Manager for the National Cash
     Register Co., President of the Dayton Engineering Laboratories
     Co., and interested in many industrial activities.

     Frank A. Scott, Warner & Swasey Co., Cleveland, manufacturers
     of automatic machinery and optical instruments.

     Frank Pratt, General Electric Co., Schenectady.

     Samuel Vauclain, Baldwin Locomotive Works, Remington and
     Westinghouse Cos.

     John E. Otterson, Vice-President, Winchester Arms Co.

The Council duly approved these nominations.

[Illustration: Copyright Underwood & Underwood

Bernard M. Baruch

Known as the "Eye of Industry," because his task was to see that the raw
materials were brought to the factories and the finished products
shipped overseas.]


MEN OF VISION

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 appears from the minutes of the advisory commission and the
     council, which were kept separately, that practically all of
     the measures which were afterwards considered as war measures,
     were initiated by this advisory commission, adopted by the
     council, and afterwards acted upon by Congress. In many cases,
     a considerable period before the actual declaration of war with
     Germany this advisory commission was discussing matters which
     were thought to be new legislation, conceived by reason of the
     necessities of war. For instance, on March 3rd, over a month
     before the War declaration, the advisory commission indorsed to
     the Council of National Defense a daylight-saving scheme, and
     recommended a Federal censorship of the press. The question of
     Federal censorship of the press was further discussed on March
     24th, two weeks before the declaration of war.

     On February 15th, about two months before the declaration of
     war, Commissioners Coffin and Gompers made a report as to the
     exclusion of labor from military service, and the draft was
     discussed; the draft was also discussed on other occasions
     before anyone in this country, except this advisory commission
     and those who were closely affiliated with the administration,
     knew that a declaration of war was to be made later. At a
     meeting, on February 15th, this same commission of seven men
     (none of whom had any official authority except as advisors),
     recommended that Herbert Hoover be employed by the Government
     in connection with food control. It was generally understood,
     as appears from the minutes, that Mr. Hoover was to be in
     control of this matter, although war was two months in the
     future.

     The advisory commission first met on December 6, 1916. Almost
     the first thing the commission did was to take up the matter of
     arranging an easy method of communication between the
     manufacturers and the Government. On February 12th, for
     example, Secretary Lane offered a resolution to the advisory
     commission suggesting to them to call a series of conferences
     of the leading men in various industries, so the industries
     might organize and be able to do business with the council
     through one man. In several meetings, long before the war was
     declared, this advisory commission of seven men met with the
     representatives of the manufacturing industries and formed an
     organization of them for selling supplies to the Government,
     which organization was well perfected before the war was
     declared. This method consisted of having the representatives
     of the various businesses, producing goods which the Government
     would have to buy, form themselves into committees so that they
     might be able to sell to the Government the goods direct, which
     their industries produced. In almost every meeting that this
     advisory commission had before the declaration of war, they
     discussed and recommended to the council (which consisted of
     six Cabinet members) these plans for fixing prices and selling
     to the Government. When war was declared on April 6th, this
     machinery began to move, headed by the advisory commission of
     these minutes, the active Government of the seven men, who
     were, in effect, as shown by United States, so far as the
     purchase of supplies was concerned. So far as I can observe,
     there was not an act of the so-called war legislation afterward
     enacted that had not before the actual declaration of war been
     discussed and settled upon by this advisory commission.

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


MEN OF EXPERIENCE

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:

     In pursuance of the authority given me and in order to be
     prepared to meet the requests made of the advisory commission,
     I have appointed the following committees. As the necessity
     arises and the advisability becomes apparent, I shall add from
     time to time other members to these committees, always bearing
     in mind keeping them down to such a size that they will be
     workable. It has been my endeavor to appoint on these
     committees men of proved ability and undoubted integrity.

     LEATHER.--Walter C. Garritt, U. S. Leather Co., Boston, Mass.;
     George F. Johnson, Endicott, N. Y.; Theodore P. Haight,
     American Hide & Leather Co., New York City.

     RUBBER.--A. Marks, Diamond Rubber Co., Akron, Ohio; Fred Hood,
     Hood Rubber Co., Watertown, Mass.; Stuart Hotchkiss, General
     Rubber Co., New York City.

     STEEL.--E. H. Gary, President, American Iron & Steel Institute,
     New York.

     WOOL.--J. F. Brown, Boston, Mass.; Sigmund Silberson, Chicago,
     Ill.; Joseph R. Grundy, Bristol, Pa.; F. J. Hagenbarth,
     President, National Association of Wool Growers, Salt Lake
     City, Utah.

     NICKEL.--Ambrose Monell, President, International Nickel Co.,
     New York.

     OIL.--I have asked Mr. A. C. Bedford, president of the Standard
     Oil Co., to serve on the committee, but I shall probably add
     another from the Middle West, whose name I have not yet
     determined upon, and Mr. Ed. L. Doheny, of Los Angeles, Calif.

     ZINC.--I have in the process of formation a committee
     representing the zinc trade. There are certain difficulties in
     the way of trade jealousies which we have to smooth away. The
     same thing is occurring in other lines, but it will be
     adjusted, and I shall report on them from time to time.

     COAL.--I have been in consultation with the producers of coal,
     both bituminous and anthracite, and am now studying that
     situation as to the best method of covering coal.

     SPRUCE WOOD.--I have also under consideration, but have come to
     no conclusion, the employment through a committee of those best
     fitted for obtaining the manufacture of aeroplanes for the
     Government the proper amount of spruce wood which seems to be
     needed.


LABOR PLEDGES SUPPORT

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.

[24] I took Mr. Gompers' words verbatim.

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.


MERGING THE RAILROADS

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:

     RESOLVED, That the railroads of the United States, acting
     through their chief executive officers here and now assembled
     and stirred by a high sense of their opportunity to be of the
     greatest service to their country in the present national
     crisis, do hereby pledge themselves, with the Government of the
     United States, with the governments of the several States, and
     one with another, that during the present war they will
     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. To this end they hereby
     agree to create an organization which shall have general
     authority to formulate in detail and from time to time a policy
     of operation of all or any of the railways, which policy, when
     and as announced by such temporary organization, shall be
     accepted and earnestly made effective by the several
     managements of the individual railroad companies here
     represented.


COÖPERATING COMMITTEES

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

     Aircraft Production Board.

     Committee on Coal Production.

     Commercial Economy Board.

     Woman's Committee.

     General Munitions Board with its sub-committees on Army
     Vehicles, Armored Cars, Emergency Construction and Contracts,
     Optical Glass, Storage Facilities, Machine Guns, Priority, and
     Accounting.

     Munitions Standards Board with its sub-committees on Gauges and
     Dies, Army and Navy Artillery, Fuses and Detonators, Small Arms
     and Munitions, Optical Instruments, and Army and Navy
     Projectiles.

     Section on Coöperation with States.

     Committee on Inland Waterways.

     Committee on Telegraphs and Telephones.

     Committee on Railroad Transportation, with which acted an
     executive committee made up of leading railroad presidents and
     six departmental committees composed likewise of railroad
     executives and paralleling the military departments over the
     country, and sub-committees on Express, Car Service, Military
     Equipment Standards, Military Transportation Accounting,
     Military Passenger Tariffs, Military Freight Tariffs, and
     Materials and Supplies.

     Committees on Cars and Locomotives, with their personnel made
     up of the high executives of such concerns as the Baldwin
     Locomotive Works, the Pullman Company, and the American
     Locomotive Company.

     Committee on Electric Railroad Transportation, composed of
     electric railway presidents.

     Committee on Gas and Electric Service.

     Committee on Automotive Transport.

     Committee on Supplies, with its sub-committees on Cotton Goods,
     Woolen Manufacturers, Shoe and Leather Industries, Knit Goods,
     Leather Equipment, Mattresses and Pillows, and Canned Goods.

     Committee on Raw Materials, with its sub-committees, popularly
     known at the time as the "A to Z" committees, on Alcohol,
     Aluminum, Asbestos, Magnesia and Roofing, Brass, Cement,
     Chemicals, Acids, Alkalis, Electrochemicals, Fertilizers,
     Miscellaneous Chemicals, Coal-Tar Products, Pyrites, Sulphur.

     Sub-Committees on Copper, Lead, Lumber, Mica, Nickel, Steel
     Products, with sub-committees on Alloys, Sheet Steel, Pig Tin,
     Steel Distribution, Scrap Iron, Pig Iron, Iron Ore, and Lake
     Transportation, Tubular Products, Tin Plate, Wire Rope, Wire
     Products, and Cold Rolled and Cold Drawn Steel.

     Sub-Committee on Oil, Rubber, Wool, and Zinc.

     Committee on Engineering and Education, with its sub-committees
     on General Engineering, Production Engineering, Universities
     and Colleges, Secondary and Normal Schools, and Construction
     Engineering.

     Committee on Labor, with its sub-committees on Mediation and
     Conciliation, Wages and Hours, Women in Industry, Welfare Work,
     Sanitation with twelve subdivisions, Vocational Education with
     nine subdivisions, Information and Statistics, Cost of Living
     and Domestic Economy.

     General Medical Board, with a long and active list of
     sub-committees.

[Illustration: Copyright by Underwood & Underwood

Daniel Willard

President of the Baltimore and Ohio Railroad.

He was chairman of transportation and communication in the Council of
National Defense.]


SERVICE OF EXPERTS

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:

     Rear Admiral David W. Taylor, one of the world's leading naval
     constructors.

     F. S. Peabody, the great coal operator.

     James J. Storrow, of Lee, Higginson & Co., of Boston.

     A. W. Shaw, publisher of the _System_ magazine, who, as
     Chairman of the Commercial Economy Board, preached with
     remarkable success the gospel of conservation in business.

     Dr. Anna Howard Shaw, who for her labors as Chairman of the
     Woman's Committee received the Distinguished Service Medal.

     Frank A. Scott, on whom was bestowed the same distinction for
     his leadership of the General Munitions Board.

     W. A. Starrett, constructing architect of New York, to whom in
     great measure is due the credit for the building of the
     cantonments in an incredibly short space of time.

     Samuel Vauclain, President of the Baldwin Locomotive Works,
     whose contribution in the matter of Army and Navy artillery was
     monumental.

     Theodore Vail, President of the American Telephone & Telegraph
     Company, who brought the wire communication men of the country
     to a common center in the national interest.

     Charles Clifton, President of the National Automobile Chamber
     of Commerce.

     Gen. George H. Harries, the famous electric railway operator.

     Samuel Insull, President of the Commonwealth Edison Co., of
     Chicago.

     Charles Eisenman, who, as active head of the Council's
     Committee on Supplies, procured for the Government $800,000,000
     of supplies in 200 days at an overhead cost of but $20,000,
     involving the handling of 45,000 contracts, and who justly
     received the Distinguished Service Medal.

     A. F. Bemis, President of the National Association of Cotton
     Manufacturers.

     John P. Woods, the eminent woolen manufacturer.

     J. F. McElwain, of the McElwain Shoe Company.

     Lincoln Cromwell, of Wm. Iselin & Co., New York.

     Arthur V. Davis, President of the Aluminum Co. of America.

     Thomas F. Manville, President of H. W. Johns-Manville Co.

     Charles F. Brooker, President of the American Brass Company.

     John E. Morron, President of the Atlas Portland Cement Company.

     John D. Ryan, President of the Anaconda Copper Company.

     R. L. Agassiz, President of the Calumet & Hecla Mining
     Company.

     W. A. Clark, President of the United Verde Copper Company.

     Murry M. Guggenheim.

     R. H. Downman, President of the National Lumber Manufacturers'
     Association.

     Ambrose Monell, President of the International Nickel Company.

     Gary, Farrell, Burden, Dinkey, King, Grace, Schwab, Topping,
     Dalton, and Clarke, the great steel executives.

     Bedford, Davison, Doheney, Lufkin, Markham, Sinclair, Van Dyke,
     Muir, James, and Guffy, in whose hands lay almost the entire
     oil output of America.

     Stuart Hotchkiss, President of the General Rubber Company.

     F. J. Hagenbarth, President of the National Association of Wool
     Growers.

     The Presidents of the leading zinc companies.

Then when we come to Engineering and Education:

     Dr. Henry E. Crampton, of Columbia University.

     Charles A. Stone, of Stone and Webster.

     The heads of the great engineering societies.

     The presidents of Harvard, Johns Hopkins, and other famous
     universities and colleges.

Among labor leaders such persons as:

     Warren S. Stone, Grand Chief of the Brotherhood of Locomotive
     Engineers.

     James W. Sullivan, Matthew Woll and Frank Morrison, all high in
     the American Federation of Labor.

Such well-known men as:

     V. Everit Macy, Benjamin Ide Wheeler, John H. Finley, August
     Belmont, E. T. Stotesbury and Charles G. Dawes, afterwards a
     brilliant figure as a General in France.

Such nationally and internationally known physicians as:

     General Gorgas; Dr. William H. Welch, of Johns Hopkins; the
     Mayos; Dr., afterwards Brigadier-General, Finney; Dr. George E.
     Brewer; Dr. George W. Crile; Dr. Simon Flexner; and Dr.
     Theodore Janeway.

     Dr. George E. Hale, Chairman of the National Research Council,
     which was and is the Council's Department of Science and
     Research.

     Thomas A. Edison, President of the Naval Consulting Board,
     which was and is the Council's Board of Inventions.

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.


NON-PARTISAN REPRESENTATION

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.


SOME RESULTS OF COÖPERATION

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 16-2/3¢ 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 FIELD DIVISION

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.


WAR INDUSTRIES BOARD

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:

     Robert S. Brookings.

     Brigadier-General Hugh S. Johnson.

     Rear Admiral F. F. Fletcher.

     Hugh Frayne, of the American Federation of Labor.

     George N. Peek, a prominent Middle Western manufacturer.

     J. L. Replogle, who became the very efficient Director of Steel
     Supply.

     L. L. Summers, an expert on explosives.

     Alexander Legge, General Manager of the International Harvester
     Company.

     And Judge Edwin B. Parker.

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.


CANTONMENT CONSTRUCTION

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:

[Illustration: Copyright Underwood & Underwood

=John D. Ryan=

President of the Anaconda Copper Company. He was made chairman of the
Aircraft Production Board after we entered the war.]

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.


MEN LITTLE KNOWN

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 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.



VII--THE LIBERTY LOAN ARMY

Mobilizing Americans at Home to Pay for the War--A National Effort
Which Yielded $24,065,810,350

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.


THE SPIRIT BEHIND THE DOLLAR

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.


MOBILIZING THE LIBERTY LOAN ARMY

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.

[Illustration: A Poster Used During the Fourth Liberty Loan Campaign]

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.

     "It is quite likely," said the Secretary of the Treasury, "that
     we could induce a group of men to take up this loan but that
     would compromise the country before the world. We must sell to
     the public in such numbers that there shall exist no doubt
     among our enemies that our people are back of the Government as
     a unit in this war."

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.


ORGANIZING THE FIRST DRIVE

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.


THE APPEAL

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.


GROWING RESPONSE

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 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.


FOURTH LIBERTY LOAN

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.

[Illustration: A Poster for the Third Liberty Loan Campaign]

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 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.


AROUSING THE HALF-HEARTED

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.


"FINISH THE JOB"

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.

[Illustration: Victory Way at Night

During the Victory Loan Drive, Park Avenue, just above the Grand Central
Station, was shut off and devoted to propaganda for the drive. The
photograph shows a pyramid of captured German helmets.]

"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.


WAR SAVINGS CAMPAIGN

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
                            |               |               |  No. of
                  Quota     |Am't Subscribed|    Allotted   |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

BENEFITS DERIVED FROM LOAN CAMPAIGNS

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.



VIII--FOOD AND THE WAR

How Scientific Control and Voluntary Food-Saving Kept Belgium from
Starving and Enabled the Allies to Avert Famine

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.


ECONOMIC SELF-SUFFICIENCY

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.


$600,000,000 WORTH OF FOOD SUPPLIED

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.


THE FOOD PRODUCTION OF GERMANY

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.

[Illustration: Photo by P. Thompson

The Battle Scene at Home

During the war the Allies called on the United States for food in far
greater quantities than we had ever dreamed of exporting. For example,
in the last years before the war we had been sending yearly to Europe
about five million tons of food. In 1918 alone we shipped more than
fourteen million tons of foodstuffs overseas.]


GERMANY'S FOOD PROBLEM

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.


THE SUGAR SHORTAGE

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.


NATIONAL TASTES IN FOOD

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.


SCIENTIFIC CONTROL OF FOOD

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.

[Illustration: Photo by P. Thompson

A Community Conference on Food-Saving

The importance of work of this kind increased after the signing of the
armistice, because the Poles, the Belgians, and other peoples whom we
could not reach during the war needed every pound of food we could
spare.]


GOVERNMENT REGULATIONS

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.


NATION-WIDE FOOD SAVING

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.


AMERICAN RELIEF ADMINISTRATION

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.



IX THE HIGH COST OF LIVING

A Study of the Extraordinary Conditions Subsequent to the Armistice

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.

     THE ESSENCE OF THE HIGH COST OF LIVING SITUATION

     "1. The only complaints of the high cost of living which have
     justification are those which are based upon inability of the
     present income to maintain previous or reasonable standards of
     living at present prices--such well-founded complaints mean
     that increase of income has not kept pace with increased cost
     of living, and therefore imply enforced reduction in standards
     of living.


     AMERICA'S PRODUCTIVE CAPACITY

     "2. America's industrial and economic achievements during the
     war, notwithstanding depleted man power and diversion of
     productive effort to war purposes, demonstrate the ample
     ability of the Nation to sustain its population according to a
     standard of living equal to or above standards of living which
     obtained previous to or during the war.

     "3. The fundamental basis for the maintenance of national
     standards of living is adequate production, economical
     distribution, and fair apportionment among the various economic
     groups which constitute our society. With the exception of
     agricultural activity, production since the armistice has shown
     evidence of curtailment, and has in general been abnormally
     low. Normal consumption can not continue unless an adequate
     rate of production is maintained.


     FOOD SITUATION AND READJUSTMENT

     "4. Food production and the facilities for food production were
     improved rather than injured during the war. Moreover, the
     program with respect to food production since the signing of
     the armistice has been one of vigorous expansion of the means
     of providing raw food products. The actual consumption of
     wheat, as shown by the Grain Corporation's report of May 25,
     1919, had for the previous ten months averaged 37,700,000
     bushels per month, as against 39,000,000 bushels for the
     previous twelve months. This does not necessarily imply reduced
     consumption of cereals.

     "The number of cattle slaughtered in the period January to May,
     1919, was 3,803,000, as against 4,204,000 for the corresponding
     period of 1918, though the national reserve of cattle on farms
     had increased during the war. The swine slaughtered January to
     May increased from 18,260,000 in 1918 to 20,500,000 in 1919.


     CLOTHING SITUATION

     "5. The production of civilian cloths and clothing suffered
     some reduction during the war, and has suffered heavy
     curtailment for many months since the signing of the armistice.

     "Boot and shoe production for civilian use was unfavorably
     affected by the war and has likewise undergone extreme
     curtailment since the signing of the armistice.


     HOUSING PROBLEM

     "6. Housing facilities developed acute shortage through
     curtailment of building during the war and, due to curtailment,
     for many months following the armistice, of the production of
     building material and of building construction, housing is
     still far below normal. Rents continue to rise.


     PROVISION OF NEW CAPITAL

     "7. The first half of 1919 shows diminished production of raw
     materials and subnormal construction of new capital, and thus
     indicates failure to utilize an adequate proportion of our
     productive forces in the preliminary processes of provision to
     meet future requirements. In fact, due to business uncertainty
     and hesitation and tendencies to disagreement between
     productive groups, retailers, wholesalers, manufacturers,
     labor, etc., there ensued after the armistice a disuse of a
     large proportion of America's productive capacity. Unless this
     slump in production is atoned for by consistent future
     activity, and unless production is constantly maintained on an
     adequate scale, reduced standards of living will become
     inescapable, regardless of prices, whether they rise or fall.

     "8. The very fact that prices of finished commodities,
     consumption goods, so called, have risen to an extent out of
     proportion to the rise in prices of raw materials and perhaps
     out of proportion to the rise in general wages, indicates that
     production and distribution carried on under these conditions
     is, in general, yielding profits abnormally high."

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:


CURRENCY AND CREDIT

     "The manner in which the volume of circulating credit and
     currency is related to the war-time rise in prices is about as
     follows:

     "The outbreak of the war brought to America urgent government
     orders for munitions and supplies. Inasmuch as the belligerent
     governments could not brook delay they were obliged to pay the
     increased prices which American producers found it possible to
     demand, and thus the wave of war prices was started in America.
     When America entered the war it required, in order to perform
     its part, almost boundless quantities of equipment and man
     power. Producers naturally took advantage of the extremely
     urgent character of these demands in order to increase their
     prices, and, as a natural sequence, wages began to advance.
     These increased prices and wages of course necessitated larger
     expenditures by the government.

     "Increased prices also necessitate the employment of larger
     funds in the conduct of a business. A larger volume of credit
     is required at higher prices to take care of bills for raw
     materials, and more money is necessary to meet increased
     payrolls. As a consequence, therefore, of increased prices,
     business men required increased credit if they were to avoid
     curtailment of operations and reduced production. Due to higher
     prices, therefore, the banks were under the necessity of
     meeting the business demand for expansion of credit."


INFLATION

The inflation process is described as follows:

     "In pre-war times every dollar finding its way to the market
     was supposedly the counterpart of some commodity or part of a
     commodity also appearing in the market. Funds expended for the
     purchase of food, clothing, and for the payment of rentals
     were assumed to have been earned by some productive
     contribution to the general supply of commodities. With the
     outbreak of war there began to appear in the market, funds
     derived from wages, profits, etc., which had been paid out in
     connection with nonproductive activities of war, and which
     therefore implied no corresponding contribution to the market
     supply of commodities. The producers of, and the dealers in,
     the decreased quantity of commodities brought to market
     increased the prices of these commodities to the point where
     they might absorb all the purchase money that became available.
     These increased prices and wages have required increased
     circulating medium. This requirement has been met primarily by
     increased credit and the increased use of bank checks as an
     instrument of payment. As to the currency situation, the total
     money in the United States in 1900 amounted to $2,340,000,000.
     According to a statement issued by Governor W. P. G. Harding,
     of the Federal Reserve Board, the amount of money in
     circulation has varied during the last five years as follows:

    July 1, 1914, $3,419,108,368, or $34.53 per capita.
    April 1, 1917, $4,100,976,000, or $37.88 per capita.
    December 1, 1918, $5,129,985,000, or $48.13 per capita.
    August 1, 1919, $4,796,890,000, or $45.16 per capita.

     "This shows an increase during our war period of $7.28 per
     capita. The amount of money in the Treasury and in Federal
     Reserve Banks is not in circulation, and is, therefore not
     included in the figures quoted from Governor Harding's
     statement.

     "In regard to the part played by national credit in meeting the
     situation growing out of the extraordinary requirements of the
     government and the rise in prices which the urgency of demands
     made possible, it is to be noted that government bonds had to
     be sold to pay for a large proportion of the goods which war
     activities were consuming. In consequence the national debt up
     to August 1, 1919, had been increased by $24,518,000,000, or
     approximately $230 per capita. Of course, government bonds are
     always good security for bank credit."


FOOD SUPPLY--WHEAT, CORN AND SUGAR

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 wheat crop for 1918 amounted to 917,000,000 bushels, as
     compared to an average for 1910--14 of 728,000,000 bushels; and
     the probable harvest in 1919 is 1,236,000,000 bushels. Our
     supply of wheat in elevators, mills, etc., on May 9, 1919, was
     96,000,000 bushels, as against 34,000,000 bushels the year
     before. Our flour mills, whose capacity is estimated at
     something like double their usual output, were milling week by
     week during 1919 considerably more flour than the year before.
     They produced for the week ending May 9, 1919, for example,
     2,553,000 barrels as against 1,569,000 barrels for the
     corresponding week of 1918. Notwithstanding large exports, our
     wheat supply is obviously adequate. In 1918, a record year, we
     exported 21,000,000 barrels of flour. In 1915 our wheat exports
     reached their maximum--206,000,000 bushels.

[Illustration: McCutcheon in the Chicago Tribune

Will There Be Enough to Go Around?]

     "The corn crop of 1918 was likewise sufficient. The supply of
     corn on hand on May 1, 1919, was 23,000,000 bushels, as
     compared with 16,000,000 bushels May 1, 1918, and 7,000,000
     bushels on May 1 of both 1917 and 1913. Though the 1919 corn
     crop is not expected to be unusually large, there is no
     prospect of real shortage. And the situation with respect to
     the other cereals is generally very good.

     "The sugar industry of the United States passed through the
     period of the war with a tendency to increased production,
     notwithstanding shipping difficulties. Though present stocks
     are somewhat low in the United States, our exports during 1919
     have been unusually large. The future is normally provided
     for."


THE MEAT SUPPLY

The meat situation is described as follows:

     "America emerged from the war producing meat at a rate far
     above pre-war figures, and yet possessing in reserve a larger
     number of animals on the farms than we had before the heavy war
     drafts upon our supplies began. The number of cattle
     slaughtered in 1918 was 11,000,000, as compared with 6,978,000
     in 1913. Swine slaughtered were 41,214,000 in 1918 and
     34,163,000 in 1913. The cattle slaughtered in 1919,
     January--May, were 3,803,000, as against 4,204,000, January--May,
     1918. The swine slaughtered January--May, 1919, made an increase
     over the 1918 record, the figures being 20,500,000 for the
     present year, as against 18,260,000 for the corresponding
     interval last year. Although exports of hams and shoulders for
     1918 approximately doubled previous records, amounting to
     518,000,000 pounds, as against 172,000,000 pounds for 1913, and
     exports have continued large during 1919, there is no doubt
     that our productive capacity is vastly more than ample to meet
     our requirements."


HIGH PRICE OF FOOD

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:

     "Present food prices are not to be accounted for largely on the
     basis of heavy exports. Exports of beef, canned, fresh, and
     pickled, for example, have been less for 1919 than in the
     previous year, the quantity amounting to 23,499,000 pounds in
     May, 1919, as compared with 82,787,000 pounds in May, 1918. The
     May figures for exports of hog products show 125,937,000 pounds
     in 1919, as against 201,279,000 pounds in May, 1918. The
     monthly exports of beef and pork show a declining tendency
     during the first five months of 1919, contrary to the tendency
     in 1918, the total amounting to 1,090,000,000 pounds in 1919,
     as against 1,122,000,000 pounds for the corresponding period of
     1918--less than the amount of all meats in cold storage on July
     1, 1919, which was 1,336,000,000 pounds."

Concerning storage the same report states that:

     "Even the fact that the report of goods in cold storage shows
     an increase of over 9 per cent. in the quantity of all meats
     held on July 1, 1919 (1,336,000,000 pounds), as compared with
     the figures for July 1, 1918, is, though very important, not a
     matter of significance for any considerable period of time.
     Storage poultry July 1, 1919, was 48,895,704 pounds, or 181 per
     cent. above last year; cheese, about 25 per cent.; butter,
     about 75 per cent.; and eggs, about 25 per cent. above July 1
     last year. There was a decrease of frozen fish of about 13 per
     cent. from last year. Taken in connection with the evidence of
     relatively abundant reserves of live animals and large crops
     for the current year, it would seem that some relief from high
     prices of food should be possible."


WHY FOOD PRICES WERE HIGH

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

     "It is true that food is, by comparison, plentiful. But it is
     also true that money or other circulating medium is
     unprecedently plentiful. The fact that food prices are
     relatively high and that the prices of chemicals, metals,
     lumber, etc., are relatively low, though their supply is
     relatively small, may be due to a concentration of purchasing
     power upon food, and the general direction of the flow of
     currency toward the purchase of immediate consumables. Some
     relatively minor luxuries such as jewelry (and perhaps
     automobiles should also be included here as the semi-luxury of
     greater magnitude) find favor with purchasers, but the main
     trend of purchase seems to bear toward demand for the
     necessities of life now in a finished state or nearly so, with
     a relatively weaker tendency toward demand of capital goods. If
     the supply, and also the production, of raw materials has been
     relatively small, and if the prices at which they have
     exchanged have also been relatively low, it seems obvious that
     the proportionate amount of currency and credit engaged in
     their purchase must be abnormally small, thus accounting for
     the ability of the producers and purveyors of food to demand
     abnormally high prices regardless of the relative plentifulness
     of their goods."


CONDITIONS FAVORABLE TO PROFITEERING

     "The conditions just described are highly favorable to both
     speculative profiteering and wasteful distribution, through the
     intervention of supernumerary middlemen and caterers. In fact,
     the statistics published by the New York Industrial Relations
     Commission seem to indicate an unusually large increase of
     persons engaging in certain kinds of salesmanship after the
     armistice. It should, however, be remembered that even though
     it may smack of profiteering to produce a very large crop and
     sell it at abnormally high prices, this is a kind of
     profiteering which deserves unstinted praise as compared with
     that other species of profiteering which deliberately reduces
     output in the expectation that the extortionate prices which
     the reduced product will command may more than make up to the
     producer or speculator for the portion of production withheld
     or the percentage of hoarded goods condemned to spoil and be
     lost to the nation."


OTHER COMMODITIES

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 most obvious explanation of the high prices of woolens is
     the glaring fact of the extreme reduction in output which
     ensued after the signing of the armistice and the completion of
     Army orders, which practically ended in January, 1919.

     "The war came to an end with the supply of civilian woolens
     unprecedentedly low. The total quantity of wool available for
     civilian fabrics between April and November, 1918, was probably
     somewhere in the neighborhood of 75,000,000 pounds, an amount
     perhaps a little more than sufficient to meet the demands of
     normal manufacture for civilian consumption for one and
     one-half months.

       *       *       *       *       *

     "In consequence of the general situation the total consumption
     of wool in manufacture during first five months of the year
     1919 amounted to but little more than one-half the amount
     consumed during the corresponding months of the previous year.
     The proportion of looms, 50-inch reed space and over, idle
     increased from 21 per cent. in November, 1918, to 52 per cent.
     idle in February, 1919, and these looms were still 39 per cent.
     idle in May, 1919. Of worsted spindles, 27 per cent. were
     reported idle in December, 1918, and 52 per cent. idle in
     March, 1919, and 26 per cent. were still idle in May. In the
     meantime an extraordinary number of textile workers were
     condemned to idleness, their productive capacity perishing day
     by day and week by week, while the deficiency in the supply of
     clothing was developing to such a point that it became possible
     for the wholesale index number of the prices of cloths and
     clothing to rise to 250 in June."

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

     "When the war ended the world's cotton supply was understood to
     be below normal. The supplies of cotton goods were also
     reported low. The acreage planted to cotton was in 1919
     approximately 9 per cent. less than for 1918. The present
     prospects are that the cotton crop will be small, and published
     articles are appearing expressing gratification over the
     prospectively large commercial returns which the cotton
     producers may be able to command because of the high prices
     which may be had for the reduced cotton output. The forecast of
     the cotton crop for 1919 is 10,900,000 bales--about 10 per
     cent. below that of recent years and but little over two-thirds
     as large as the record crop of 1914."


     "OUTPUT AND MORE OUTPUT" ABANDONED

     "In regard to cotton manufacture, it may be recorded that the
     situation is less unsatisfactory than as regards wool
     manufacture. In this industry, as in most of our industries,
     the economic watchword of war-time, which was 'Output, and more
     output' (the necessary condition of full prosperity in peace,
     as well as of success during war), was not heard after the
     armistice. There soon developed, on the contrary, groundless
     doubts about future demand, and hints of unhealthy fears of
     'overproduction.'

     "Notwithstanding the release of labor, if it were needed, by
     demobilization, and notwithstanding adequate supplies of raw
     cotton to meet the season's requirements and the lack of any
     important difficulties in the way of reconversion to peace-time
     products, and with low supplies of finished goods in stock, the
     cotton industry kept more spindles idle during the first five
     months of 1919 than were idle during the corresponding period
     for 1918. The amount of cotton consumed in the United States
     during the nine months ending with April, 1919, was
     approximately 12 per cent. less than for the corresponding nine
     months of 1918. The prices of cloths and clothing, as above
     mentioned, show in June, 1919, an increase of 150 per cent.
     over 1913 prices."

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

     "The production of boots and shoes for the first quarter of
     1919 was reported as about 60 per cent. below the production
     for the last quarter of 1918. Plants were partially closed and
     in some cases it is reported that machinery was returned to the
     Shoe Machinery Co. All in all, there were 75,000,000 less pairs
     of shoes produced in the first quarter of 1919 than in the last
     quarter of 1918.

     "The census report shows a reduction of more than 25 per cent.
     in the output of civilian men's shoes in the quarter ending
     with March, 1919, as compared with production in the quarter
     ending with December, 1918, and nearly 25 per cent. reduction
     as compared with the quarter ending with September, 1918. The
     reduction in output of women's shoes amounted to approximately
     30 and 25 per cent., respectively, in comprising corresponding
     periods. The reduction in the output of shoes for youths, boys
     and misses was even more marked."


COAL AND IRON

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:

     "Coal, the source of a vast proportion of our industrial power
     as well as our chief source of heat and light, is a commodity
     the production of which is itself an index of our economic
     life. Coal output since the armistice has been greatly reduced,
     the weekly production of anthracite for the first half of 1919
     being from 1,200,000 to 1,800,000 net tons, as against
     1,800,000 net tons to 3,000,000 net tons for the corresponding
     period of 1918. Bituminous production was 9,147,000 net tons
     for a typical week in 1919, as against 12,491,000 net tons for
     the corresponding week in 1918. Coke production for the week
     ending June 28, 1919, amounted to only 287,000 net tons, as
     compared with 627,000 net tons for the week ending June 29,
     1918. The total amount of coal produced up to July 5, 1919, was
     261,000,000 long tons, as compared with 364,000,000 long tons
     for the corresponding period of 1918."

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 record of our after-war steel and iron output furnishes us
     with another warning that we have been neglecting to keep pace
     with the established American rate of industrial improvement
     and expansion and foresighted preparation for future
     requirements and progress.

     "The iron and steel business was considerably stimulated by
     war-time requirements. There was a governmental agency whose
     business it was to for see the war needs and to place orders so
     that those productive forces which are wrapped up in the steel
     industry might be utilized to capacity. The steel industry's
     activity has, however, since the armistice greatly declined.
     Pig-iron production for April, 1919, was 82,607 tons per day,
     as against 109,607 tons in April, 1918. Birmingham properties
     are reported to have been working in April, 1919, at about 50
     per cent. of the 1918 production. For the period January to
     May, 1919, pig-iron production was only 2,114,000 tons, as
     against 3,446,000 tons during the same period in 1918.
     Steel-ingot production fell in the spring of 1919 to lower
     figures than had been reached in more than two years. In fact,
     a regular decline in production was in evidence after December,
     1918.

     "The figures representing the unfilled orders of the United
     States Steel Corporation at the end of May, 1919, were smaller
     than they had been since 1915."

[Illustration: Copyright Underwood & Underwood

Women Doing Night Farming

Girls running a tractor plow and harrow at Farmingdale, Long Island.]


RECOMMENDATIONS

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

     "The findings of the Reconstruction Research Division Council
     of National Defense, indicate that the high cost of living is
     primarily due to curtailment in the production of nearly all
     commodities except raw food products, to hoarding of storage
     food products, to profiteering, conscious and unconscious, and
     to inflation of circulating credit. The findings indicate that
     the situation may be most advantageously met by:

     "1. Stimulated production.

     "2. Some readjustment of incomes to the basis of higher price
     levels.

     "3. The repression of hoarding and profiteering.

     "4. Improvement and standardization of methods and facilities
     for distributing and marketing goods.

     "5. The perfecting of means of keeping the nation frequently,
     promptly, and adequately informed regarding probable national
     requirements and of current production and stocks of the more
     important commodities.

     "The findings emphasize the fact that high standards of living
     can not be maintained upon a basis of reduced production,
     regardless of whether price levels be high or low."

[Illustration: The Ore Market--Cleveland]



_PART II_

I--THE PEACE CONFERENCE AT WORK

A Vivid Account from the Inside of the Machinery Which Produced the
Peace Treaty. How the Crises with Japan, Italy and Belgium Were Averted

By THOMAS W. LAMONT

Financial and Economic Adviser at Paris to the American Commission to
Negotiate Peace


When we finally gain an historic perspective of the work of the Peace
Conference we shall realize that, instead of being unduly delayed, it
was accomplished in an astonishingly brief period. The Treaty of Vienna,
back in 1815, took eleven months, and the factors to be dealt with were
nothing like so numerous nor so complex. The Paris Conference occupied
only about six months, and the earlier weeks were largely given over to
questions relating to the renewal of the Armistice, rather than to the
actual framing of the Peace Treaty. The Treaty text itself--aside from
the League of Nations Covenant--was whipped through in a little over
three months; for the active work of the Commissions which were to draft
the various chapters did not get under way until February 1st; and the
Treaty was presented to the German delegates at Versailles on May 7th.


COVENANTS "OPENLY ARRIVED AT"

No adequate history of the Peace Conference can be written until years
have elapsed--until it is possible, as it is not now possible, to make
public a multitude of intimate details. Hundreds of important documents
were woven into the completed text of the Treaty. Such documents must
eventually be made available to the chroniclers of history, who must
finally have access to the official records, so that in course of time
they can acquaint the world with the details of those momentous
conferences which were held among the Chiefs of State, where the
ultimate decisions settling every important question were made. There
have been complaints that the covenants of the Treaty were not as
President Wilson had promised, "openly arrived at." In point of fact, as
far as lay within the bounds of possibility, the covenants of the Treaty
_were_ "openly arrived at," inasmuch as their essence was made public
just as soon as an understanding upon them had been reached, and in many
cases, long before the final agreement. Nothing was held back which the
public had any legitimate interest in knowing. It would, of course, have
been quite out of the question for the Chiefs of State to discuss in
public all the highly delicate and complex situations which were bound
to, and which did, arise at Paris. Every man of strong character and
powerful conviction has a view of his own upon any given subject, and
naturally maintains that view with vigor and tenacity--even at times, if
he be bitterly opposed--with acrimony.

To take a familiar instance, it is an open secret that M. Clemenceau's
first solution of the question of the Saar Basin did not at all suit
President Wilson. Not unnaturally, M. Clemenceau simply wanted in effect
to annex the Saar Basin, on the grounds that the Germans had destroyed
the coal mines of Northern France. Mr. Wilson was in entire accord--to
this extent, that France should, until her coal mines had been repaired,
enjoy the entire output of the Saar coal fields; but to have France
permanently annex the Basin was contrary to his profoundest convictions,
as expressed in the well-known Fourteen Points.

In the course of the discussion between M. Clemenceau and Mr. Wilson,
their ideas at the start being so divergent, vigorous views were
undoubtedly expressed; quite possibly tart language was used, at any
rate by the French Premier, who was feeling all the distress of German
frightfulness and war weariness. But to what possible good end could the
detail of such intimate conversations have been made public? I allude to
the possible conversations on the Saar Basin not as an historical fact,
but as an example of what might have taken place, and very likely did
take place; and if such temporary disagreements existed on that
question, undoubtedly, among so many Chiefs of State as were gathered
together at Paris, they existed on others. But in all cases amicable and
cordial agreements were finally reached.

Whenever agreements were even in sight, the press was informed; so that,
when the Treaty of Peace and the summary of it finally came out, there
were no surprises for the public. Every covenant, every clause, had been
already foreshadowed and accurately pictured.


THE "BIG THREE"

Naturally, the question is often asked: Who were the peacemakers at
Paris? Were they two or three powerful Chiefs of State? The answer is
both "Yes" and "No." The final decision on every important matter lay in
the hands of the so-called Big Four, and after Premier Orlando's
defection and return to Italy, it narrowed down to the Big Triumvirate,
Messrs. Wilson, Lloyd George, and Clemenceau. Yet while they made the
final decisions, these were almost invariably based upon reports and
opinions expressed to this trio, or to the quartet, by their advisers
and experts. The actual text of the Treaty was, of course, written by
the technicians, and there is hardly a phrase in the whole of it that
can claim as its original author any one of the Chiefs of State. In
every true sense, then, the Treaty of Peace has been the product, not of
three men, not even of three-score, nor of three hundred, but of
thousands; for quite aside from the official delegations at Paris, which
comprised several hundred persons, we must remember that the data and
the various suggested solutions on most of the questions had been
canvassed at home for each delegation by large groups of office and
technical experts.

Of course it sounds well to say that the Treaty was written by three
men: the picture of those few Chiefs of State sitting in conference day
after day is dramatic in the extreme. That is, I must confess, the
picture which comes back oftenest to my mind. I see them today, as I saw
them for months at Paris, sitting in that large but cosy salon in the
house allotted to President Wilson on the Place des États Unis; for, by
common consent, it was there that the Supreme Council finally held all
its meetings. It is in that theatre, with the three or four Chiefs of
State taking the leading rôles, that we saw the other characters in the
great drama moving slowly on the stage, playing their parts, and then
disappearing into the wings. Today it might be Paderewski, pleading with
all his earnestness and sincerity, to have Danzig allotted to the
sovereignty of Poland. To-morrow it might be Hymans, the Belgian
Secretary for Foreign Affairs, begging that there should be a prompt
realization of those pledges to Belgium, which Belgium felt had been
made by all the Allies; or it might even be word brought by special
aeroplane from the King of the Belgians at Brussels, with fresh and
important instructions to his delegation in the matter of Reparation. Or
it might be a group of the representatives of those newer nationalities,
Czechoslovakia, Rumania, Jugoslavia, arguing some burning question of
boundary rights. Or it might be the British shipping experts,
maintaining that the captured German ships should be restored to the
various Allies upon a basis dividing the ships _pro rata_ to the losses
sustained by submarines, and contending against the American claim that
the United States should have all the German ships finding lodgment in
American harbors. Or it might be Herbert Hoover, that brilliant
American, come to describe to the Big Four starvation conditions in
Vienna, and to emphasize his belief that, enemy or no enemy, those
conditions must be relieved or Bolshevism would march into Austria and
directly on west until it reached France--and beyond.


THE PLACE OF MEETING

The stage for this world drama was originally set at the Ministry of
War, behind the Chamber of Deputies and across the Seine; and here
Premier Clemenceau--who, it will be remembered, was Minister of War as
well as President of the Council of French Ministers--was the presiding
genius. But eventually, as the result of an interesting trend of
circumstances, the all important conferences took place at President
Wilson's house.

[Illustration: Copyright Walter Adams & Sons

=David Lloyd George=

Ray Standard Baker, who attended the Peace Conference, wrote in his
book, "What Wilson Did at Paris": "Lloyd George personally was one of
the most charming and amiable figures at Paris, full of Celtic
quicksilver, a torrential talker in the conference, but no one was ever
quite sure, having heard him express an unalterable determination on one
day, that he would not be unalterably determined some other way the day
following."]

The original theatre of operations at the War Ministry had been so
large, and there was such an enormous chorus brought into play, that
progress was interminably slow. There were usually present all five of
the plenipotentiaries of each of the five great powers, including Japan,
and very frequently Marshal Foch as well. His presence automatically
commanded the attendance of the chief military experts of the other
delegates. With the innumerable secretaries who had to attend the
plenipotentiaries, with the interpreters and whatnot, the Supreme
Council came to look like a legislative chamber, in the midst of which
sat Clemenceau, presiding with his usual incisiveness. At such meetings
progress could be made only upon rather formal matters which had been
threshed out beforehand. When it came to a point of great delicacy,
where the discussions could be only on a most intimate basis, it became
quite impossible to "carry on." Nobody would feel like speaking out in
meeting and calling the other fellow names--as was necessary at times in
order to clear the atmosphere--if there were half a hundred other people
around, to hear those names, and promptly to babble them to an expectant
throng outside.

So finally the Supreme Council was boiled down to the four Chiefs of
State, including Japan's representative on any questions not strictly
confined to Western Europe; and the small Council began to meet
alternately at Clemenceau's office in the War Ministry, at Mr. Lloyd
George's house, and at Mr. Wilson's, which was just around the corner
from the British Premier's. Then in March, shortly after President
Wilson's second coming from the United States, he fell ill with the
grippe. After a rather severe attack he was able to get on his feet
again and to do business, but was warned by his vigilant friend and
physician, Admiral Grayson, to keep within doors for a time. Mr. Lloyd
George, M. Clemenceau, and Signor Orlando were glad to accommodate
themselves to Mr. Wilson's necessities, and formed the habit of meeting
regularly at his house. His large salon was much better adapted for
these conferences than the room at Mr. Lloyd George's. So there it was
they met during all the final weeks of the Conference, leading up to the
very end.


A DESCRIPTION OF THE COUNCIL CHAMBER

In the middle of the salon, facing the row of windows looking out upon
the Place, was a large yet most inviting fireplace. On the left of this,
a little removed from it, President Wilson usually ensconced himself on
a small sofa, where he made room for some one member of his delegation,
whom, for the particular subject under discussion, he desired to have
most available. On the other side of the fireplace sat Mr. Lloyd George
in a rather high, old-fashioned chair of carved Italian maple, and at
his left sat his experts. Opposite the fireplace, to the right of it,
and about half-way across the room, sat M. Clemenceau, with such of his
Ministers as he needed, and then between him and President Wilson was
Signor Orlando with the Italians. This made a semi-circle around the
fireplace, and whenever Viscount Chinda of the Japanese delegation was
present, the circle was usually enlarged so as to give him a seat in the
middle of it. Behind this first semi-circle was a second one, made up of
secretaries and various technical experts, but the conference was always
a limited one, and was not allowed to grow so large as to become
unwieldy.

Directly in front of the fireplace, almost scorching his coat-tails, sat
Professor Mantou, the official interpreter for the Big Four. Mantou is a
Frenchman, Professor of French in the University of London, so he had a
perfect mastery of both French and English, with a good working
knowledge of Italian. Mantou was quite an extraordinary character, and
the most vivid interpreter I have ever heard, or rather seen; for at
times he entered into the spirit of the discussions more vigorously than
the original actors. M. Clemenceau, for instance, might make a quiet,
moderate statement, in French, of course; and when it became Mantou's
time to interpret it into English, he would enliven and embellish it
with his own unique gestures.

The Secretary of the Council was Sir Maurice Hankey, a British Army
officer of great skill and tact, who had a marvelous aptitude for
keeping everything straight, for taking perfectly adequate, and yet not
too voluminous minutes, for seeing that no topic was left in the air
without further reference, and in the last analysis, for holding the
Chiefs of State with their noses to the grindstone. He knew French and
Italian well, and was a distinct asset to the Council. I note that, in
the honors and money-grants disbursed by Parliament to Marshal Haig,
Admiral Beatty and others, Hankey received £25,000. Everybody who worked
with him at Paris will be glad of this just recognition. I have
described this Council Chamber in the President's house rather minutely
because, as I have said, it formed the stage for all of the momentous
decisions which went to make up the final peace settlement. At these
conferences there was no formal presiding officer, but to President
Wilson was usually accorded the courtesy of acting as moderator.


HOW THE TREATY WAS COMPOUNDED

What, then, is the Treaty? The answer is that it is a human document, a
compound of all the qualities possessed by human beings at their
best--and at their worst. People might expect a Treaty of Peace to be a
formal, legal, mechanical sort of document; and undoubtedly an effort
was made by some of the drafting lawyers, who bound all the different
clauses together, to throw the Treaty into the mold of formality. But
all the same, it is a compound quivering with human passion--virtue,
entreaty, fear, sometimes rage, and above all, I believe, justice.

The reason fear enters into the Treaty must be manifest. Take, for
instance, the case of France. France had lived under the German menace
for half a century. Finally the sword of Damocles had fallen, and almost
one-sixth of beautiful France had been laid waste. Her farms, her
factories, her villages, had been destroyed; her women ravished and led
captive; her children made homeless; her men folk killed. Do we realize
that almost 60 per cent. of all the French soldiers under thirty-one
years of age were killed in the war? Is it any wonder France could not
believe that the German menace was gone forever, and that the world
would never again allow German autocracy to overwhelm her? She could not
believe it, and for that reason she felt it essential that the terms of
the Treaty should be so severe as to leave Germany stripped for
generations of any power to wage aggression against beautiful France. If
her Allies pointed out that to cripple Germany economically was to make
it impossible for Germany to repair the frightful damage she had wrought
in France, France would in effect reply that this might be so, but never
again could she endure such a menace as had threatened her eastern
border for the previous half century. If certain of the Treaty clauses
appear to some minds as unduly severe, it must be remembered that the
Allies, little more than France, could bear the thought of letting
Germany off so easily that within a few years she might again prepare
for war.

There was fear, too, on the part of those new nations, which had been
largely split off from the effete and outworn Austro-Hungarian Empire,
that in some way their ancient oppressors would once more gain sway over
them. And, every nation, great and small, was overshadowed with the
constant terror of Bolshevism,--that dread specter which seemed to be
stalking, with long strides, from eastern Europe west towards the
Atlantic. Unless peace were hastened that evil might overtake all the
Allies. Such apprehensions as these, far more than imperial ambition or
greed, were factors in the Treaty decisions. Judgments that might take
many months in the ripening could not with safety be awaited.


THE PROTECTION DEMANDED BY FRANCE

France, I say, was thoroughly shocked at the frightful fate which had
come upon so great a portion of her land and population. She seemed to
have real fear that out of the ground, or from the sky, or from the
waters of the earth, at the waving of the devil's wand, there would
spring into being a fresh German army, ready to overwhelm her. It was
this fear that led France to ask for a special Treaty by which England
and America would pledge themselves to come to her aid in case of
Germany's unprovoked attack against her. Those Americans who object to
this have no conception of the real terror in France which led her to
entreat her two most powerful Allies to make such a special treaty with
her. France maintained, and with some reason, that during the formative
period of the League of Nations, before it might become an effective
instrument, if she did not have the psychological and practical
protection of England and America, she must look to her own defense, and
the only real defense she could conceive was to make the Rhine her
eastern boundary. This suggestion of Marshal Foch, based upon sound
military concept, was rejected by President Wilson and Mr. Lloyd George
on the theory that it would mean the annexation of German territory,
would change Germany's ancient boundary line of the Rhine, and
inevitably lead to future trouble.

[Illustration: Copyright Underwood & Underwood

President Poincaré With the Swiss President, M. Gustave Ador, Driving to
the Peace Conference in Paris.]

"Very well," in effect answered M. Clemenceau, "we see your point, but
if you will not allow us to fix this natural boundary for defense, then
we must beg you to guarantee us by treaty your coöperation against
German aggression. That coöperation you will never be called upon to
render with military force, because if Germany knows you are pledged to
come to our defense, that very fact will act as a complete deterrent to
any aggression."

This was the sound reasoning which led President Wilson and Mr. Lloyd
George to agree to submit respectively to Congress and Parliament this
special French Treaty; this is the reasoning which ought to lead
Congress, as it has led Parliament, to ratify the French Treaty
promptly. My belief is that after five years, this special Treaty will
be abrogated by mutual consent, because by that time the League of
Nations will be built up into such an effective instrument for the
prevention of future wars, any special treaties will be deemed
unnecessary.


THE LEAGUE OF NATIONS COVENANT

If, in the foregoing paragraphs, I have given some idea as to how the
Treaty of Peace was compounded, how it was made up of a mixture of
virtue, selfishness, fear and justice, then perhaps I can proceed to
describe briefly how the document was actually evolved. First, then, we
deal with the drafting of the League of Nations Covenant:

The world has come to regard President Wilson as the special promoter
and sponsor for the League of Nations. It is perfectly true that Mr.
Wilson went to Paris with a fixed determination, above all else, to
bring about some definite arrangement which would tend to prevent future
wars. It is also true, however, that English statesmen had, for an even
longer time than President Wilson, been giving this same subject earnest
thought and study. Some of the more enlightened French statesmen, like
Leon Bourgeois, had also been sketching out plans for a League of Free
Nations. In England Viscount Grey of Falloden, England's really great
Minister of Foreign Affairs for almost a decade prior to the war, the
man who did everything that human intelligence and wisdom could devise
to prevent the war, and now happily named as British Ambassador to the
United States, had long worked for a League of Nations. Lord Robert
Cecil, a worthy son of a noble father, was another British statesman who
had given his mind to the same subject. General Smuts of South Africa,
recently made Premier in succession to the late General Botha, was
another. So that President Wilson, Colonel House, and the other
delegates, upon their arrival in Paris, found themselves in a not
uncongenial atmosphere. To be sure, on the part of Clemenceau and of
course of the militarists, there was great scepticism. Nevertheless the
French joined in, and early in January the Covenant for the League of
Nations began to evolve. It was built up step by step, President Wilson
taking a most active part in the work.

Finally the Covenant was adopted in a preliminary way and made public
late in February. It was subject to amendment, and those who drafted the
document welcomed amendments and urged that they be offered. An especial
effort was made to secure suggestions from various Republican
statesmen. No amendments, so far as I have been able to learn, were
offered by any of the Republican Senators, but ex-President Taft
suggested certain changes, some of which were adopted. President Lowell
of Harvard contributed one or two which were taken over almost verbatim.
Ex-Senator Elihu Root also made valuable suggestions, some of which were
utilized in the final drafting of the Covenant, made public early in
April.


ESSENCE AND SPIRIT OF THE LEAGUE

Roughly, as the situation developed, the purpose of the League of
Nations became two-fold. The initial purpose, of course, was to set up
the machinery for a body, representative of the nations, keeping in such
close contact and guided by such general principles as would tend to
make it impossible for one nation to begin war upon another. Elsewhere
in this volume ex-Attorney General Wickersham has described in detail
the clauses of the Covenant; but even in this brief allusion it is
proper to set down the essence and spirit of the League. It is this: No
two peoples, if they come to know each other and each other's motives
sufficiently well, and if by certain machinery they are maintained in
close personal and ideal contact, can conceivably fly at each other's
throats. Now no machinery can be devised that will absolutely prevent
war, but a carrying out of the spirit and principles set forth in the
present Covenant ought to make war well-nigh impossible. The machinery
that was thus set up at Paris was deemed at the time to be of course
imperfect and subject to constant improvement.

The second purpose of the League was to act as the binder, and in a way,
the administrative force of the present existing Treaty. That is to say,
we found as time went on there were many situations so complex that
human wisdom could not devise an immediate formula for their solution.
Hence, it became necessary for the Peace Conference to establish certain
machinery which, if necessary, should function over a series of years,
and thus work out permanently the problems involved. Therefore, as it
fell out, there were established under the Treaty, almost a score of
Commissions, most of them to act under the general supervision of a
League of Nations. Here, then, is another great function that the League
of Nations is immediately called upon to fulfil.


WORK OF THE COMMISSIONS

With the Covenant of the League of Nations more or less complete, the
next business of the Conference was the setting up of the Treaty proper.
The method for this work was roughly as follows: About the first of
February there was appointed a large number of special Commissions, made
up of members of the various delegations. These Commissions, which were
each to treat of separate topics, having arrived at a solution of the
special subject, were then to draft their reports in such language that
they could readily be embodied in the final Treaty of Peace itself.
Thus, for instance, there was appointed a Commission on Reparations, a
Commission on Economic Phases of the Treaty, a Commission on Finance, a
Commission on Boundaries, a Commission on Military and Naval Armament, a
Commission on German Colonies, a Commission on the Saar Basin Coal
Fields, a Commission on Inland Waterways, and so on to the number of
perhaps twenty. These Commissions immediately organized, and if the
subject were particularly complex and many-sided, resolved themselves
into sub-commissions. These sub-commissions in turn organized, each with
its chairman and vice-chairman, its secretariat, and its interpreters,
together with experts called into attendance.


DELAYS TO THE TREATY

The sittings of all these Commissions began, as I say, about February
1st, and at that time the plan was that the work of the Commissions
should be concluded in the form of a report to the Supreme Council six
weeks later, or about March 15th. The plan, further, was for the Supreme
Council to pass upon these various reports, amend them if need be, and
then have them drafted in such form as together would go to make up the
Treaty, which, under this scheme, would be presented to the Germans on
or about April 1st. The Germans would presumably sign within a
fortnight, and we should all be going home about April 15th. As a matter
of fact, the Germans signed the Treaty at Versailles at three o'clock on
the afternoon of June 28th, two and one-half months later than the time
originally planned.

This delay was, however, not at all unreasonable, if one stops to
consider the number of questions involved, their magnitude, and the
difficulty of dealing with them promptly. In the first place, each
Commission was supposed to present the Supreme Council a unanimous
report. The Council had ruled that the Commissions should not report by
majority vote, for if in any given instance the majority overruled the
minority, the minority might have such bitter complaint that there would
be left in the situation the seed for future trouble. Therefore the
Council determined that in the case of divergence of opinion in the same
Commission, the two or more groups in the Commission should make
separate reports to the Council, each having its own day in court. The
Council would act as judges of the last resort, and no delegation would
go away feeling that it had not had ample opportunity to present its
case. Inevitable and sharp differences of opinion did arise, so that at
least half the reports, I should say, as presented to the Big Four had
to be thrashed out there in considerable detail.

The second handicap to rapid progress, of course, lay in the composition
of the various Commissions. Each of the large five powers had to be
represented on each Commission, and in most instances smaller powers
also demanded representation. On some of the important Commissions the
larger powers had two or more delegates sitting. Owing to the fact that
Paris was full of influenza, each delegate had to have his alternate so
as to keep the ball rolling. When they first met these delegates were
not well acquainted with each other. They did not know how to get along
together. It took weeks for them to shake down, so as to understand
each other's methods and points of view; so as to be prepared to make
the necessary give and take, certain meetings of views which are always
essential where people are gathered from the four corners of the earth
with a single aim, but with vastly different ideas for attaining it.

[Illustration: Copyright by Underwood & Underwood

Where the Peace Treaty Was Signed

This was the table and chair at which the delegates sat and signed the
peace document.]


POLITICS AT THE CONFERENCE

Still another difficulty was the question of politics which could not be
eliminated. It is easy enough to say, "cut out politics," but in any
international gathering it is never possible to do it. I must say right
here, however, that--as it seemed to me--the American delegation
well-nigh attained that ideal, and be it to President Wilson's credit, I
never once saw him throughout the length of the conference, "play"
politics. But some of the other delegations naturally felt that at home
there was a "list'ning senate" to applaud or to condemn, and many of
these delegates, being members of their respective parliaments or
ministries, naturally had their ear to the ground for the effect that
their course at Paris was producing. Then if, at the sittings of a
Commission, one delegate made a particularly eloquent speech, his fellow
delegate might feel it incumbent upon him to make another equally long.
Some of the delegates deemed it their duty to make an extended speech
every day and seemed to feel that they were lacking in patriotism if
they failed each morning to cover several pages of the record with their
views.


THE DIFFICULTY OF LANGUAGE

Then the final difficulty, uniting with the other troubles to prevent
rapid progress, was that of language. The Paris Conference was, of
course, a regular Tower of Babel. There were two official
languages--French and English. Each delegation used the language with
which its delegates were most familiar, and every word uttered by those
delegates had to be translated into the vernacular of the others. Not
only did this interpretation consume a vast amount of time, but of
course it frequently proved most unsatisfactory. Both the English and
French languages are so idiomatic that the finer shades of meaning can
never be well transmuted from one to the other. Hence, frequent and
sometimes serious mistakes arose. For instance, a Serbian delegate who
knew not a word of English would misunderstand something said by the
British delegate, poorly translated into French. As the Serbian
delegate's knowledge of French was also very limited he could not
readily understand. So he would fly into a towering rage, and for an
hour a heated argument would volley back and forth. Perhaps, at the end
of that time, some cool-headed delegate (frequently an American), would
point out that neither of the honorable delegates had any conception of
what the other had said, and at bottom their views were precisely
similar. Each of the competitors would then listen to reason, the
situation would clear up, and things move on more happily.

I use here as an example a Serbian delegate, not that the Serbian
delegates were more prone to passion than anybody else. We were all
fighting like mad to make peace. We realized that though fundamentally
we all had the same aim, yet as to methods our views were so divergent,
that when we entered into conference at ten o'clock in the morning we
should probably have one continuous struggle, with interludes for
luncheon and dinner, until perhaps late in the evening. These struggles
never ceased altogether, but as we got to know one another better, they
of course let up materially, and we got on amicably and effectively.


THE COMMISSION ON REPARATIONS

No sketch of the Peace Conference, even one as cursory and superficial
as this, could give any idea of the picture without a more detailed
reference to the workings of some particular Commission that played an
important part in the building up of the Peace Treaty. Hence I may be
permitted to mention the Commission on Reparations. All things
considered, this was perhaps the most important Commission at work.

The original Commission on Reparations was divided into three
sub-commissions. Commission Number One was to determine upon what
principles reparation should be demanded from Germany, that is to say,
what items of damage should be included. In addition to physical damage
inflicted by Germany upon the Allies, by reason of her aggression on
land or sea, and from the air, should the cost of pensions for dead
French soldiers be claimed? Was the entire cost of the war as waged by
England, for instance, to be included as a charge against Germany? In
other words, just what categories should be adopted in order to define
Germany's liability?

This Commission Number One sat for weeks, and it was only towards the
very end that it succeeded in establishing the categories. At the start
there was a sharp divergence of opinion among the various delegations.
The American delegation pointed out that under President Wilson's
Fourteen Points costs of war would have to be excluded. The British
delegation maintained otherwise. The French thought the costs of war
ought to be included, but deemed the matter academic, inasmuch as
Germany could never pay the total war costs. And so the argument ran.

Sub-commission Number Two on reparations had for its object to determine
what Germany's capacity to pay was, and what the proper method of
payment should be. Sub-commission Number Three was to devise sanctions
or guarantees by which the Allies should be assured of receiving the
payments finally determined upon.

For weeks I was active upon Sub-commission Number Two, and in fact was
charged with the duty of drawing up the initial report covering the
question of Germany's capacity to pay. Early in the deliberations of
this Sub-commission it became apparent that its work was of momentous
import, for whatever the Sub-commission determined as Germany's capacity
to pay, undoubtedly that sum would be fixed as what Germany should be
obligated to pay. Theoretically, as the French had pointed out, it did
not make a great difference what categories of damage were included,
because Germany would probably be unable to pay even the extent of
material damage she had wrought. It was equally evident that she would
be compelled by the Allies to pay to the utmost extent of her capacity.
Therefore Sub-commission Number Two was in effect, naming the amount of
the German "indemnity."


AN ESTIMATE OF GERMANY'S CAPACITY TO PAY

This knowledge rendered the work of the delegates on Sub-commission
Number Two considerably more difficult. To estimate Germany's capacity
to pay over a series of years was by no means a purely scientific
matter. No banker, or economist, or financier, whatever his experience,
could look far enough into the future to be able to say what Germany
could or could not pay, in ten, twenty, or thirty years. The initial
estimate made by one of the delegations, as representing Germany's
capacity to pay, was one thousand million of francs. Another estimate
was twenty-four billion sterling, about one hundred twenty billion of
dollars. Now Germany's entire wealth was estimated at not over eighty
billion dollars, so it was inconceivable how it could be possible, even
over a series of years, for Germany to pick up her entire commonwealth
and transfer it to the Allies. Most of Germany's property consists of
the soil, railroads, factories, dwellings, and none of those things can
be transported, none can be made available for the payment of
reparation. Hence the question arose as to how much liquid wealth
Germany could export year after year and still maintain her own economic
life. This was the estimate upon which the British, French and American
delegations wrangled pleasantly for weeks. Whenever we reached too tense
a point, tea and toast was served, with jam to sweeten the atmosphere a
bit, and then we would start afresh.

As a matter of fact, as we encouraged newspaper reporters to surmise, we
had nearly arrived upon a basis of agreement for demanding a fixed sum
from Germany. That sum would not have exceeded forty or forty-five
billion dollars, with interest added. The American delegation believed
it to be far sounder economically to name a fixed sum and thus limit
Germany's liability, so that all nations could address themselves to a
definite end and arrange their fiscal and taxation policies accordingly.
But both Mr. Lloyd George and M. Clemenceau urged that public opinion in
both their countries would not acquiesce in any sum that fell far below
previous expectations; that, therefore, inasmuch as it was difficult
anyway to arrive at once upon the exact amount of damage caused, it
would be wiser to leave the amount of reparation open, to be determined
by a commission which should examine into the damage sustained, and fix
the total amount within two years. America's material interest in the
question was so limited that President Wilson finally did not oppose Mr.
Lloyd George's and M. Clemenceau's judgment. This, in brief, is the
history of the Reparation clauses in the Treaty. As I have already said,
if we realize that in almost every one of the other chapters similar
complex courses of procedure had to be followed, we shall not be
surprised at the time which the Treaty took for drafting.


THE ITALIAN CRISIS

The world is already familiar with the several crises which arose during
the course of the Peace Conference. The so-called Fiume crisis, when the
Italian delegation walked out and returned to Rome, was regarded as the
most serious. I am not sure it was, although it was generally so
considered. I believe most of Italy's warmest friends maintain that her
action in going home was a mistake. The question of putting Fiume under
Italian sovereignty was not covered nor even touched upon in the Treaty
of London. In face, the question of Fiume arose long after the Peace
Conference was under way. Signor Orlando, the Italian Premier, was
accused of fostering Italian feeling on Fiume and of fanning it into
flame. I believe there is no truth in this. At any rate, if the Italians
had been wise, they would have prevented the matter of Fiume from
becoming such a _cause celèbre_. I think that by judicious work they
could have prevented it. Then, too, probably the difficulty would have
been lessened if President Wilson's statement to the Italian people had
previously met Signor Orlando's approval. Mr. Wilson made his statement
with the best will in the world, with the intent to allay and not
inflame Italian public opinion. It should have been possible to
coördinate his idealism with Signor Orlando's position.

Later on the Italian delegation returned to Paris, realizing that the
question of Fiume, which was formerly an Austrian port, did not bear one
way or another upon the Treaty with Germany. But the Italians had lost a
certain tactical position which was important to them, and in my
judgment the move cost Italy much more than the whole question of Fiume
amounted to.

[Illustration: Copyright Underwood & Underwood

Awaiting the Decision of the German Peace Delegates.

President Clemenceau is shown standing. Next to him from right to left
are: President Wilson, Secretary of State Robert Lansing, Commissioner
Henry White, Colonel House, Gen. Tasker H. Bliss, Stephen Pichon, French
Minister of Foreign Affairs; Louis Klotz, French Minister of Finance,
and André Tardieu, French High Commissioner. From Clemenceau, left to
right: Premier Lloyd George, Bonar Law and A. J. Balfour.]


THE QUESTION OF SHANTUNG

The Shantung crisis was another serious one. It was so realized at the
time by the conferees at Paris. The Japanese delegation considered that
it had already suffered one or two rebuffs. Their clause to embody race
equality in the League of Nations Covenant had not been accepted. They,
as the leading Far Eastern Power, were being urged to take an active
part in the organization and development of the League of Nations, yet
they could see nothing for Japan in the idea except a chance to help the
other fellow. It was at this time that the Treaty clause was being
drafted covering the disposition of German rights in the Far East,
including those on the Shantung Peninsula. It will be remembered that at
the outbreak of the war Germany, by reason of treaty rights with China,
had possession of Kiauchau, upon the neck of the Shantung Peninsula.
Back in 1916, at a time when the war was going badly, after Japan had
driven the Germans out of the Far East and had prevented German
submarines from getting a base there to prey upon British troop ships
from Australia, Japan had demanded from England and France that she
become the inheritor of whatever rights Germany had in Shantung. England
and France readily granted this request, as America probably would have
done if she had been in the war at the time. Later on, according to the
record, China confirmed Japan in these rights.

President Wilson's idea, however, was "China for Chinamen"; therefore
Shantung should be turned over to China. This was a proper point of
view. It was a great pity that it could not be made to prevail. The
difficulty, however, was two-fold: first, the agreement which I have
just cited between England and France on one hand, and Japan on the
other; second, Japan's statement to President Wilson that if he began
his League of Nations by forcing England and France to break a solemn
agreement with Japan, then Japan would have no use for such a faithless
confederation and would promptly withdraw. At the same time, however,
Japan reiterated that her inheritance of Shantung was largely a formal
matter, and that if the Allies gave her that recognition, she would feel
in honor bound to withdraw from Shantung in the near future. This
statement, made repeatedly by the Japanese delegates to President
Wilson, finally led him to refrain from forcing Great Britain and France
to break their agreement, as he might perhaps otherwise have done. The
climax, of course, came when Japan gave her ultimatum and said that
unless she had her rights she would retire from the Conference.


DEMANDS OF BELGIUM

Then came the third and last crisis--the Belgians threatened to withdraw
and go home. They had, as they claimed, been promised by their Allies,
as well as by their enemies, including specifically Germany, that their
country, trampled over and devastated in order to defend France and
England from attack, was to be fully restored and reimbursed for its
expenditures. Early in the Conference Colonel House projected a plan to
Mr. Balfour of the British delegation and Mr. Klotz of the French
delegation, granting Belgium a priority of $500,000,000 on the German
reparation, this sum being sufficient to set Belgium well on her way to
recovery. There was, however, great delay in getting the final assent to
this priority. The American delegation worked hard to bring it about and
to push the plan on every occasion, but it still hung fire.

The Belgian delegation, finally becoming alarmed, insisted on formally
taking up the question with the Council of Four. The Belgian delegation,
under the leadership of Mr. Hymans, Minister of Foreign Affairs, made
two chief demands, one for the priority already mentioned, and one for
reimbursement for what the war had cost her. To this latter item there
was vigorous objection on the ground that it was inadmissible to provide
for Belgium's "costs of war" and not for those of England, France, Italy
and the other Allies. As a compromise to meet the situation, a formula
was finally proposed in a phrase to the effect that Germany was to be
obligated especially "to reimburse Belgium for all the sums borrowed by
Belgium from the Allies as a necessary consequence of the violation of
the Treaty of 1839." Inasmuch as all such sums borrowed by Belgium were
used for the prosecution of the war, this phrase was simply a euphemism
for granting to Belgium the war costs which she had demanded. But it was
finally agreed to on all hands, and the crisis was averted.

[Illustration: Copyright by Press Illustrating Service

The George Washington

It was on this ship that President and Mrs. Wilson made their two trips
across the Atlantic and back during the Peace Conference.]


THE TREATY PRESENTED TO THE GERMANS AT VERSAILLES

The Treaty in its final form was presented to the Germans at Versailles
May 7th. The Germans were hoping they would be permitted to discuss
certain phases of the Treaty in person with the Allied delegates, and in
fact repeatedly requested the opportunity. Some of us believed such
conversations might be advantageous if they were held; not between the
chiefs of the Allied states and the heads of the German delegation, but
between technical experts on both sides. Mr. Wilson favored this view,
as tending to enlighten the Germans on certain phases of the Treaty,
which from their written communications it was evident they did not
understand. We thought that some weeks of delay might possibly be
averted by sitting around the table with the Germans, distasteful as
that task might be, and holding a kind of miniature peace conference.
This suggestion, however, was strongly opposed by M. Clemenceau,
although it was favored by some of his ministers. In fact, some of the
latter, as well as many of the British, were for a time convinced that
the terms of the Treaty were such that Germany would never sign them.
Again and again Clemenceau was urged to give way on this point, but he
sturdily opposed the view and declared positively that he knew the
German character; that the only way to secure a German signature to the
Treaty was to insist upon purely formal and written communications.
Clemenceau had his way, and then began the laying of a good many wagers
as to whether the Germans would sign. This was after the original German
delegation, or at least the chiefs of it, had returned to Berlin and
declared that they would not come back again to Versailles. My own
opinion was, that after making as great a kick as possible the Germans
would undoubtedly sign. The logic of the situation was all for their
signing, the reasoning being this: If the Treaty were a just Treaty,
then they ought to sign any way; if it were an unjust Treaty, then, even
if signed, it would eventually fall of its own weight, and the Germans
would run no risk in signing it. I felt that the German psychology of
the situation would be acute enough to see these points and to lead to a
signature.


GERMANY SIGNS THE TREATY

This proved to be the case, and on Saturday, the 21st of June, after
questionings and misgivings, we finally got the word that the Germans
were to sign. I shall never forget the moment that the news came. Some
of us were in session with the Council of Four at the President's house.
Mr. Wilson sat on the right of the fireplace, Mr. Lloyd George on the
left, and M. Clemenceau in the middle. Mr. Orlando was in Italy but his
foreign minister, Baron Sonnino, was there in his place. The afternoon
was a tense one, for the time was growing short and the Germans had, as
I say, not yet signified their intention of signing the treaty. In the
mind of every one of us there lurked the question as to the terrible
steps that would have to be taken in the event the Germans refused to
sign. Late in the afternoon an orderly slipped into the room and
whispered into M. Clemenceau's ear. He struggled to his feet, marched up
to President Wilson and Mr. Lloyd George, and, drawing himself up, said
in solemn tones, "I have the honor to announce to you that the Germans
will sign the treaty."

And then a moment later the cannon boomed forth to the expectant
populace the news that the Germans would sign, and M. Clemenceau,
turning to me, breathed: "Ah, that is the sound that I have been waiting
to hear for forty-eight years."



II--WILSON'S FOURTEEN POINTS

An Attempt to Raise International Morality to the Level of
Private Morality


On January 8, 1918, President Wilson outlined the fourteen points on the
basis of which the Allies should make peace. This program was the
startling climax of a whole series of peace proposals which had kept
coming from both camps of belligerents, from neutrals, Socialists, and
the Pope. It is without doubt one of the greatest and most inspiring
State documents in the history of the world. It struck a vital and
telling blow at the basic causes of modern wars. For that reason it
electrified into complete unity the masses of the Allied countries.
Liberal, radical and pacifist opponents of the war rallied around it as
the last great hope of civilization. Its most important effect was to
give a democratic basis to the weary and disillusioned masses of the
Central Powers who were longing for peace. It was on the basis of the
fourteen points that the enemy surrendered.


THE WILSON PROGRAM

     We entered this war because violations of right had occurred
     which touched us to the quick and made the life of our own
     people impossible unless they were corrected and the world
     secured once for all against their recurrence. What we demand
     in this war, therefore, is nothing peculiar to ourselves. It is
     that the world be made fit and safe to live in; and
     particularly that it be made safe for every peace-loving nation
     which, like our own, wishes to live its own life, determine its
     own institutions, be assured of justice and fair dealings by
     the other peoples of the world, as against force and selfish
     aggression. All the peoples of the world are in effect partners
     in this interest and for our own part we see very clearly that
     unless justice be done to others it will not be done to us. The
     programme of the world's peace, therefore, is our programme,
     and that programme, the only possible programme, as we see it,
     is this:

     I. Open covenants of peace, openly arrived at, after which
     there shall be no private international understandings of any
     kind, but diplomacy shall proceed always frankly and in the
     public view.

     II. Absolute freedom of navigation upon the seas, outside
     territorial waters, alike in peace and in war, except as the
     seas may be closed in whole or in part by international action
     for the enforcement of international covenants.

     III. The removal, as far as possible, of all economic barriers
     and the establishment of an equality of trade conditions among
     all the nations consenting to the peace and associating
     themselves for its maintenance.

     IV. Adequate guarantees given and taken that national armaments
     will be reduced to the lowest point consistent with domestic
     safety.

     V. A free, open minded, and absolutely impartial adjustment of
     all colonial claims, based upon a strict observance of the
     principle that in determining all such questions of sovereignty
     the interests of the populations concerned must have equal
     weight with the equitable claims of the government whose title
     is to be determined.

[Illustration: Copyright by Underwood & Underwood

Paris Crowds Greeting President Wilson

A general holiday was declared to welcome the President of the United
States. This photograph was taken in the Place dé la Concorde.]

     VI. The evacuation of Russian territory and such a settlement
     of all questions affecting Russia as will secure the best and
     freest coöperation of the other nations of the world in
     obtaining for her an unhampered and unembarrassed opportunity
     for the independent determination of her own political
     development and national policy and assure her of a sincere
     welcome into the society of free nations under institutions of
     her own choosing; and, more than a welcome, assistance also of
     every kind that she may need and may herself desire. The
     treatment accorded Russia by her sister nations in the months
     to come will be the acid test of their good will, of their
     comprehension of her needs as distinguished from their own
     interests, and of their intelligent and unselfish sympathy.

     VII. Belgium, the whole world will agree, must be evacuated and
     restored, without any attempt to limit the sovereignty which
     she enjoys in common with all other free nations. No other
     single act will serve as this will serve to restore confidence
     among the nations in the laws which they have themselves set
     and demanded for the government of their relations with one
     another. Without this healing act the whole structure and
     validity of international law is forever impaired.

     VIII. All French territory should be freed and the invaded
     portions restored, and the wrong done France by Prussia in 1871
     in the matter of Alsace-Lorraine, which has unsettled the peace
     of the world for nearly fifty years, should be righted, in
     order that peace may once more be made secure in the interest
     of all.

     IX. A readjustment of the frontiers of Italy should be effected
     along clearly recognizable lines of nationality.

     X. The peoples of Austria-Hungary, whose place among the
     nations we wish to see safeguarded and assured, should be
     accorded the freest opportunity of autonomous development.

     XI. Rumania, Serbia and Montenegro should be evacuated;
     occupied territories restored; Serbia accorded free and secure
     access to the sea, and the relations of the several Balkan
     States to one another determined by friendly counsel along
     historically established lines of allegiance and nationality,
     and international guarantees of the political and economic
     independence and territorial integrity of the several Balkan
     States should be entered into.

     XII. The Turkish portions of the present Ottoman Empire should
     be assured a secure sovereignty, but the other nationalities
     which are now under Turkish rule should be assured an undoubted
     security of life and an absolutely unmolested opportunity of
     autonomous development, and the Dardanelles should be
     permanently opened as a free passage to the ships and commerce
     of all nations under international guarantees.

     XIII. An independent Polish State should be erected which
     should include the territories inhabited by indisputably Polish
     population, which should be assured a free and secure access to
     the sea and whose political and economic independence and
     territorial integrity should be guaranteed by international
     covenant.

     XIV. A general association of nations must be formed under
     specific covenants for the purpose of affording mutual
     guarantees of political independence and territorial integrity
     to great and small States alike.



III--HOW THE PEACE TREATY WAS SIGNED

A Description of the Historic Ceremony in the Hall of Mirrors at the
Palace of Versailles, June 8, 1919

(Reprinted from the New York _Times_.)


No nobler and more eloquent setting could have been found for this
greatest of all modern events, the signing of the Peace of Versailles,
after five years of terrific struggle on whose outcome the fate of the
whole world had hung, than the palace of the greatest of French Kings on
the hillcrest of the Paris suburb that gave its name to the treaty. To
reach it, says the correspondent of _The New York Times_, the
plenipotentiaries and distinguished guests from all parts of the world
motored to Versailles that day, and drove down the magnificent
tree-lined Avenue du Château, then across the huge square--the famous
Place d'Armes of Versailles--and up through the gates and over the
cobblestones of the Court of Honor to the entrance, where officers of
the Republican Guard, whose creation dates back to the French
Revolution, in picturesque uniform, were drawn up to receive them.

All day the crowd had been gathering. It was a cloudy day; not till noon
did the sky clear. By noon eleven regiments of French cavalry and
infantry had taken position along the approaches to the palace, while
within the court on either side solid lines of infantry in horizon blue
were drawn up at attention.

Hours before the time set for the ceremony an endless stream of
automobiles began moving out of Paris up the cannon-lined hill of the
Champs Elysées, past the massive Arc de Triomphe, bulking somberly
against the leaden sky, and out through the Bois de Boulogne. This whole
thoroughfare was kept clear by pickets, dragoons, and mounted gendarmes.
In the meantime thousands of Parisians were packing regular and special
trains on all the lines leading to Versailles, and contending with
residents of the town for places in the vast park where the famous
fountains would rise in white fleur-de-lis to mark the end of the
ceremony.


A MEMORABLE SCENE

Past the line of gendarmes thrown across the approaches to the square
reserved for ticket holders, the crowd surged in a compact and
irresistible wave, while hundreds of the more fortunate ones took up
positions in the high windows of every wing of the palace. Up the broad
boulevard of the Avenue de Paris the endless chain of motor cars rolled
between rows of French soldiers; and a guard of honor at the end of the
big court presented arms to the plenipotentiaries and delegates as they
drove through to the entrance, which for the Allied delegates only was
by the marble stairway to the "Queen's Apartments" and the Hall of
Peace, giving access to the Hall of Mirrors. A separate route of entry
was prescribed for the Germans, an arrangement which angered and
disconcerted them when they discovered it, through the park and up the
marble stairway through the ground floor.

The delegates and plenipotentiaries began to arrive shortly after 2 p.
m., their automobiles rolling between double lines of infantry with
bayonets fixed--it was estimated that there were 20,000 soldiers
altogether guarding the route--that held back the cheering throngs. The
scene from the Court of Honor was impressive. The Place d'Armes was a
lake of white faces, dappled everywhere by the bright colors of flags
and fringed with the horizon blue of troops whose bayonets flamed
silverly as the sun emerged for a moment from behind heavy clouds. At
least a dozen airplanes wheeled and curvetted above.

Up that triumphal passage, leading for a full quarter of a mile from the
wings of the palace to the entrance to the Hall of Mirrors,
representatives of the victorious nations passed in flag-decked
limousines--hundreds, one after another, without intermission, for fifty
minutes. Just inside the golden gates, which were flung wide, they
passed the big bronze statue of Louis XIV., the "Sun-King," on
horseback, flanked by statues of the Princes and Governors, Admirals and
Generals who had made Louis the Grand Monarque of France. And on the
façade of the twin, temple-like structures on either side of the great
statue they could read as they passed an inscription symbolic of the
historic ceremony just about to occur: "To All the Glories of France."


NOTABILITIES ARRIVE

One of the earliest to arrive was Marshal Foch, amid a torrent of
cheering, which burst out even louder a few moments later when the
massive head of Premier Clemenceau was seen through the windows of a
French military car. To these and other leaders, including President
Wilson, General Pershing, and Premier Lloyd George, the troops drawn up
all around the courtyard presented arms. After Clemenceau the unique
procession continued, diplomats, soldiers, Princes of India in gorgeous
turbans and swarthy faces, dapper Japanese in immaculate Western dress,
Admirals, aviators, Arabs; one caught a glimpse of the bright colors of
French, British, and Colonial uniforms. British Tommies and American
doughboys also dashed up on crowded camions, representing the blood and
sweat of the hard-fought victory; they got an enthusiastic reception. It
was 2:45 when Mr. Balfour, bowing and smiling, heralded the arrival of
the British delegates. Mr. Lloyd George was just behind him, for once
wearing the conventional high hat instead of his usual felt. At 2:50
came President Wilson in a black limousine with his flag, a white eagle
on a dark blue ground; he received a hearty welcome.

By 3 o'clock the last contingent had arrived, and the broad ribbon road
stretched empty between the lines of troops from the gates of the palace
courtyard. The Germans had already entered; to avoid any unpleasant
incident they had been quietly conveyed from their lodgings at the Hotel
des Reservoirs Annex through the park.


THE SCENE INSIDE

The final scene in the great drama was enacted in the magnificent Hall
of Mirrors. Versailles contains no more splendid chamber than this royal
hall, whose three hundred mirrors gleam from every wall, whose vaulted
and frescoed ceiling looms dark and high, in whose vastness the
footfalls of the passer re-echo over marble floors and die away
reverberatingly. It was no mere matter of convenience or accident that
the Germans were brought to sign the Peace Treaty in this hall. For this
same hall, which saw the German peace delegates of 1919, representing a
beaten and prostrate Germany, affix their signatures to the Allied terms
of peace, had witnessed in the year 1871 a very different ceremony. It
was in the Hall of Mirrors that the German Empire was born. Forty-nine
years ago, on a January morning, while the forts of beleaguered Paris
were firing their last defiant shots, in that mirror-gleaming hall was
inaugurated the reign of that German Empire the virtual end of which, so
far as the concept held by its originators is concerned, was signalized
in Versailles in the same spot on Saturday, June 28. And in 1871
President Thiers had signed there the crushing terms of defeat imposed
by a victorious and ruthless Germany.

In anticipation of the present ceremony carpets had been laid and the
ornamental table, with its eighteenth century gilt and bronze
decorations, had been placed in position on the daïs where the
plenipotentiaries were seated. Fronting the chair of M. Clemenceau was
placed a small table, on which the diplomatic instruments were laid. It
was to this table that each representative was called, in alphabetical
order by countries, to sign his name to the treaty and affix to it his
Governmental seal. The four hundred or more invited guests were given
places in the left wing of the Hall of Mirrors, while the right wing was
occupied by about the same number of press representatives. Sixty seats
were allotted to the French press alone. Besides the military guards
outside the palace, the grand stairway up which the delegates came to
enter the hall was controlled by the Republican Guards in their most
brilliant gala uniform.


THE PEACE TABLE

The peace table--a huge hollow rectangle with its open side facing the
windows in the hall--was spread with tawny yellow coverings blending
with the rich browns, blues, and yellows of the antique hangings and
rugs; these, and the mellow tints of the historical paintings, depicting
scenes from France's ancient wars, in the arched roof of the long hall,
lent bright dashes of color to an otherwise austere scene. Against the
sombre background also stood out the brilliant uniforms of a few French
guards, in red plumed silver helmets and red, white, and blue uniforms,
and a group of Allied Generals, including General Pershing, who wore the
scarlet sash of the Legion of Honor.

But all the diplomats and members of the parties who attended the
ceremony of signing wore conventional civilian clothes. All gold lace
and pageantry was eschewed, the fanciful garb of the Middle Ages was
completely absent as representative of traditions and practices sternly
condemned in the great bound treaty-volume of Japanese paper, covered
with seals and printed in French and English, which was signed by
twenty-seven nations that afternoon.

As a contrast with the Franco-German peace session of 1871, held in the
same hall, there were present some grizzled French veterans of the
Franco-Prussian war. They took the place of the Prussian guardsmen of
the previous ceremony, and gazed with a species of grim satisfaction at
the disciples of Bismarck, who sat this time in the seats of the lowly,
while the white marble statue of Minerva looked stonily on.


ENTRANCE OF CHIEF ACTORS

The ceremony of signing was marked only by three minor incidents: a
protest by the German delegation at the eleventh hour over the
provision of separate entrance, the filing of a document of protest by
General Jan Smuts of the South African delegation, and the deliberate
absence of the Chinese delegates from the ceremony, due to
dissatisfaction over the concessions granted to Japan in Shantung.

[Illustration: Copyright Underwood & Underwood

Henry White

Former Ambassador to France and Italy and one of the United States
delegates to the Peace Conference.]

The treaty was deposited on the table at 2:10 p.m. by William Martin of
the French Foreign Office; it was inclosed in a stamped leather case,
and bulked large. Because of the size of the volume and the fragile
seals it bore, the plan to present it for signing to Premier Clemenceau,
President Wilson, and Premier Lloyd George had been given up. A box of
old-fashioned goose quills, sharpened by the expert pen pointer of the
French Foreign Office, was placed on each of the three tables for the
use of plenipotentiaries who desired to observe the conventional
formalities.

Secretary Lansing, meanwhile, had been the first of the American
delegation to arrive in the palace--at 1:45 p.m. Premier Clemenceau
entered at 2:20. Three detachments each consisting of fifteen private
soldiers--from the American, British, and French forces--just before 3
o'clock and took their places in the embrasures of the windows
overlooking the château park, a few feet from Marshal Foch, who was
seated with the French delegation at the peace table. Marshal Foch was
present only as a spectator, and did not participate in the signing.
These forty-five soldiers of the three main belligerent nations were
present as the real "artisans of peace" and stood within the inclosure
reserved for plenipotentiaries and high officials of the conference as a
visible sign of their rôle in bringing into being a new Europe. These
men had been selected from those who bore honorable wounds. Premier
Clemenceau stepped up to the poilus of the French detachment and shook
the hand of each, expressing his pleasure at seeing them, and his
regrets for the suffering they had endured for France.


PRESIDENT WILSON ENTERS

Delegates of the minor powers made their way with difficulty through the
crowd to their places at the table. Officers and civilians lined the
walls and filled the aisles. President Wilson entered the Hall of
Mirrors at 2:50. All the Allied delegates were then seated, except the
Chinese representatives, who were conspicuous by their absence. The
difficulty of seeing well militated against demonstrations on the
arrival of prominent statesmen. The crowd refused to be seated and
thronged toward the center of the hall, which is so long that a good
view was impossible from any distance, even with the aid of opera
glasses. German correspondents were ushered into the hall just before 3
o'clock and took standing room in a window at the rear of the
correspondents' section.

At 3 o'clock a hush fell over the hall. There were a few moments of
disorder while the officials and the crowd took their places. At 3:07
the German delegates, Dr. Hermann Müller, German Secretary for Foreign
Affairs, and Dr. Johannes Bell, Colonial Secretary, were shown into the
hall; with heads held high they took their seats. The other delegates
remained seated, according to a prearranged plan reminiscent of the
discourtesy displayed by von Brockdorff-Rantzau, who at the ceremony of
delivery of the peace treaty on May 7th, had refused to rise to read his
address to the Allied delegates. The seats of the German delegates
touched elbows with the Japanese on the right and the Brazilians on the
left. They were thus on the side nearest the entrance, and the program
required them to depart by a separate exit before the other delegates at
the close of the ceremony. Delegates from Ecuador, Peru, and Liberia
faced them across the narrow table.


THE GERMANS SIGN

M. Clemenceau, as President of the Peace Conference, opened the
ceremony. Rising, he made the following brief address, amid dead
silence:

     "The session is open. The allied and associated powers on one
     side and the German Reich on the other side have come to an
     agreement on the conditions of peace. The text has been
     completed, drafted, and the President of the Conference has
     stated in writing that the text that is about to be signed now
     is identical with the 200 copies that have been delivered to
     the German delegation. The signatures will be given now, and
     they amount to a solemn undertaking faithfully and loyally to
     execute the conditions embodied by this treaty of peace. I now
     invite the delegates of the German Reich to sign the treaty.'

There was a tense pause for a moment. Then in response to M.
Clemenceau's bidding the German delegates rose without a word, and,
escorted by William Martin, master of ceremonies, moved to the signatory
table, where they placed upon the treaty the sign-manuals which German
Government leaders had declared over and over again, with emphasis and
anger, would never be appended to this treaty. They also signed a
protocol covering changes in the documents, and the Polish undertaking.
All three documents were similarly signed by the Allied delegates who
followed.


WILSON SIGNS NEXT

When the German delegates regained their seats after signing, President
Wilson immediately rose and, followed by the other American
plenipotentiaries, moved around the sides of the horseshoe to the
signature tables. It was thus President Wilson, and not M. Clemenceau,
who was first of the Allied delegates to sign. This, however, was purely
what may be called an alphabetical honor, in accordance with which the
nations were named in the prologue to the treaty. Premier Lloyd George,
with the British delegation, came next. The British dominions followed.
M. Clemenceau with the French delegates, was next in line; then came
Baron Saionji and the other Japanese delegates, and they in turn were
followed by the representatives of the smaller powers.

[Illustration: Copyright Underwood & Underwood

Count von Brockdorff-Rantzau

Foreign Minister of Germany and President of the German Peace
delegates.]

During the attaching of the signatures of the great powers and the
Germans a battery of moving picture cameras clicked away so audibly that
they could be heard above the general noise and disorder of the throng.
The close of the ceremony came so quickly and quietly that it was
scarcely noticed until it was all over. M. Clemenceau arose almost
unremarked, and in a voice half lost amid the confusion and the hum of
conversation which had sprung up while the minor powers were signing
declared the conference closed, and asked the Allied and associated
delegates to remain in their seats for a few moments--this to permit the
German plenipotentiaries to leave the building before the general
exodus.


THE GERMANS DEPART

None arose as the Germans filed out, accompanied by their suite of
secretaries and interpreters, just as all the plenipotentiaries had kept
their seats when Dr. Müller and Dr. Bell entered. The Germans went forth
evidently suffering strong emotion. Outside an unsympathetic crowd
jammed close to the cars which took them away. There was no aggression,
but the sentiment of the throng was unmistakable.

Meanwhile the great guns that announced the closing of the ceremony were
booming, and their concussion shook the old palace of Versailles to its
foundations. Amid confusion the assembly dispersed, and the most
momentous ceremony of the epoch was at an end.

The great war which for five long years had shaken Europe and the world
was formally ended at last. It was a war which had cost the belligerents
over $200,000,000,000; which had caused the deaths of 8,000,000 human
beings, and which had left the world a post-war burden of debt amounting
to $135,000,000,000. It was a war which had changed the whole face of
Europe, which had brought many new nations into existence, which had
revolutionized the organization of all national and international life.
It was a war which had brought the world the consciousness of its common
obligation to unite against all war. The booming of the great guns of
Versailles seemed to proclaim a new epoch.



IV--THE PEACE TREATY--ITS MEANING
TO AMERICA

America's "Place in the Sun" Due to Her Efforts to Secure a Just Peace

By GEORGE W. WICKERSHAM

Formerly Attorney-General of the United States.


"The cause of our entrance into the great war," declares Dr. David Jayne
Hill in a recent essay, "being the violation by the German Imperial
Government of our legal rights as a nation, our object in the war was to
make our rights respected. The one clear duty of the treaty-making power
in concluding peace with Germany, therefore, is to secure this
result."[25]

[25] "Americanizing the Treaty."--_North American Review_, August, 1919.

In these words, one of the most distinguished and accomplished of the
opponents of the treaty of Paris reveals the profound abyss which
separates those who oppose from those who are urging the approval of the
Treaty of Versailles. Dr. Hill, perhaps unconsciously, gives expression
to a sordid, narrow, selfish view of the issues of the war, which would
transmute into the most elemental act of self-defense one of the
greatest crusades of high idealism ever conducted by any people in the
history of nations. If, in fact, the cause of our participation in the
war was merely to repel attacks upon our legal rights as a nation, then
indeed, that end being attained, and the aggressor reduced to impotence
for the future, we may return within our own borders, withdraw unto
ourselves, disclaim all responsibility for the condition of the world
elsewhere and plunge into the selfish exploitation of our national
resources, "the world forgetting, by the world forgot." It is a strange
perversion of the facts of recent history that leads to such a
conception of America's responsibility for the future of civilization.

There were undoubtedly, as Mr. Wilson said, "violations of right which
touched us to the quick." Was it merely violations of our own national
rights that roused this peace-loving nation to array itself for battle;
that sent two million of our young men across three thousand miles of
ocean to take their places beside the heroes of Verdun and the Marne,
the veterans of Cambrai and Arras, Ypres and the Somme; infused the
weary defenders of civilization with new courage; converted their
defense into an irresistible offensive which shattered the greatest
military machine of history, overthrew the Kaiser and his government,
and brought the German nation to its knees? No! It was not the German
attacks upon our rights as a nation; it was the German challenge of the
whole basis of modern Christian civilization. It was her cynical
disclaimer of the binding character of treaties; her inhuman method of
warfare; her brutal cruelties of non-combatant men, women and children;
her ruthless destruction of monuments of art--the possessions of not
merely one nation, but of the entire world of men and women in every
land who love beauty and revere art. It was the growing conviction that
a government which ordered the sinking of the _Lusitania_ and the
_Sussex_; that destroyed the priceless literary treasures of Louvain;
that separated families in Belgium and France, and deported great
companies of men to work in German munition factories; that ruthlessly
cut up by the roots the fruit trees and shrubs of the occupied regions
of France; that sought to destroy not merely the men, but the souls of
nations, so that its own horrid philosophy of Force might reign over
them--that such a government must no longer exist; that its pestilential
influence was more noxious than tuberculosis or the bubonic plague.


THE BASIS OF PEACE

Therefore, the Youth of America joyously leaped to arms and crowded
overseas in the greatest of all crusades, insuring victory and promising
the opening of a new and better epoch of human history. It was the
recognition of human kinship; the perception of human brotherhood, that
inspired them to the great endeavor. Our proud sense of American
nationality took on a deeper and holier significance as we joined
forces with the older peoples in defense of the great principles of
human right which had been formulated by our fathers and upon which was
reared the American State. We were no less Americans that we had
accepted a common responsibility with Great Britain, France and Italy
for the preservation of the ideals of human freedom for which Washington
fought and Lincoln died. Nay! better Americans, as we realized that the
war was being fought in defense of those principles upon which our own
institutions were founded and by which we had become the great, strong,
free nation we are.

And as the hideous carnage went on, and we saw a whole generation of the
youth of the free nations of Europe butchered because the German people
had become so obsessed with their own sense of superiority that they
were determined to rule the world and impose upon all other peoples
subservience to their Moloch-like gospel of efficiency, another feeling
began to struggle for expression in Europe and America alike--a
determination that all wars of aggression must cease; that disputes
between nations must be settled like those between individuals, by
peaceful arbitration or conciliation; that the causes of war must be
examined and, so far as possible, removed, and that no such war as this
ever again should desolate the earth. This was the meaning of the phrase
one came to hear on many lips, that it was "a war against war." How
could such a result be attained? Obviously, only by the continued
association in peace of those powers whose close coöperation in war was
compelling the overthrow of German militarism, and the widening of that
association to include all the other nations who should accept its
program and give an earnest of adherence to its ideals. There was also
the hope that some time--when they should have offered up that ancient
sacrifice, "an humble and a contrite heart"--even the German people,
enfranchised and regenerated, might be admitted into the society of Free
Peoples and with new significance become entitled to be called a
civilized nation.

These were the principles that underlay Mr. Wilson's program of
peace--the fourteen points of January 8, 1918, and subsequent addresses;
the only definite formulation of the basis of peace which was laid
before the world, a program concerning which the American Congress
expressed no definite criticism and for which it offered no substitute;
a program which was accepted by Allies and opponents alike, and which
constituted the Chart by which the Conference of Paris was required to
endeavor to formulate the terms of the Treaty of Peace.

The work of that Conference now has been submitted to the judgment of
mankind. It was accepted by the new government of Germany with a wry
face, as the judgment of the victors naturally would be taken by the
vanquished. It has been ratified by the Parliament of Great Britain, by
Italy, by France and by Japan. It has been for weeks under debate in the
Senate of the United States. Daily efforts have been made to create a
partisan political issue over it, and to visit upon it party resentment
against the past actions of the President.[26]

[26] This article by Mr. Wickersham was prepared prior to the Senate
deadlock and the rejection of the Treaty with the Lodge reservations.

Dr. Hill again sums up the case against the treaty--the final basis
which the confused gropings after some means of making it unpopular with
the people finally have evolved--in these words:

     "The League of Nations, as proposed, includes not only
     obligations not related to the reasons for engaging in the war,
     but also obligations opposed to the traditions, the
     time-honored policies, and even the constitutional provisions
     of the United States. It commits the whole future policy of
     this country to the decisions of an international body in which
     it would have only a single voice; it permits that body to
     intrude its judgments, and thereby its policies into a sphere
     hitherto regarded as exclusively American, and, in addition, it
     demands that the territories held by each of the members of the
     League under this treaty shall receive the permanent protection
     of the United States as integral parts of the Nations that now
     claim them."

Is it true? What is the real meaning of the Peace Treaty and its effect
upon the people of the United States? The answer to these questions, and
indeed to most of the criticism of the Covenant, is conclusively met by
a reading of the treaty. But first let us turn for a moment to the
fourteen points of Mr. Wilson's address of January 8, 1918. The basis of
the territorial readjustment of Europe which he then proposed, was the
giving of national expression to racial aspiration. Alien imperial rule
such as that of Austria over Hungary and Bohemia, and that of Germany,
Austria or Russia over Poland, was to end, and the Poles, the Croats,
Serbs, Hungarians, Bohemians, and the Czechoslavs and Jugoslavs each
were to be allowed national existence, with the right of
self-determination. Whatever may now be thought of the wisdom of this
theory, it was accepted by all of the Allies, who thereby were committed
to a responsibility for the protection, certainly in the early years of
their existence, of the new nations they united to call into being.
Recognizing this fact, the fourteenth of the Wilson points provided for
the creation of an Association of the Allied Nations to protect the work
of their arms. Aside from that practical purpose, the League of Nations
was recognized by many in every land as furnishing the only practicable
machinery for the removal of causes of war and the prevention of new
assaults upon civilization, such as that which Germany had launched in
August, 1914.

[Illustration: Copyright Underwood & Underwood

=Victoria Hall at Geneva=

Selected by the Council of the Powers as the meeting place of the League
of Nations.]

The first Chapter of the Peace Treaty, therefore, is a Covenant or
Compact forming a League of Nations, whose purpose, as expressed in the
Preamble, is "to promote international coöperation and to achieve
international peace and security." Worthy objects, these: how are they
to be attained? The Preamble answers,

     "by the acceptance of obligations not to resort to war, by the
     prescription of open, just and honorable relations between
     nations, by the firm establishment of the understandings of
     international law as to actual rule of conduct among
     governments, and by the maintenance of justice and a scrupulous
     respect for all treaty obligations in the dealings of organized
     peoples with one another."

Are not these methods such as America has made her own? Have we not in
many treaties accepted obligations not to make war until all peaceful
methods of settling disputes shall have been exhausted; have we not
striven to make the principles of international law rules for the
government of nations; and was not one of the main points in the
indictment of Germany on which we prosecuted the war against her that
she had flouted the sanctity of treaties and made them mere scraps of
paper?

The objects of the League therefore, as set forth in the Covenant, are
expressive only of policies and principles to which the United States
has given a consistent and unbroken adherence from the days of the Jay
Treaty to the present hour. How are these objects proposed to be
attained in the text of the Covenant? What is there in its provisions to
justify the frantic abuse that has been heaped upon it by its opponents
and to sustain the final accusation that it is "un-American?"


MACHINERY OF THE LEAGUE

First, as to the Machinery of the League. There is an Assembly of its
members to which each Sovereign State may send delegates. There is an
Assembly of its members to which each nation necessarily has one vote.
In the United States Senate, Rhode Island and New York have equal
representation, despite disparity in wealth and population. The
principle of sovereignty requires this recognition of equality. But the
powers of the Assembly are restricted to voting upon the admission of
new members to the League, the addition of members to the Council, the
disposition of international disputes which may be referred to it by the
Council under Article XV, and the general consideration at its meetings
of "any matter within the sphere of action of the League or affecting
the peace of the world." This general authority only can embrace the
right of discussion, save in very exceptional cases, as by Article V,
"decisions at any meeting of the Assembly or of the Council shall
require the agreement of all the members of the League represented at
the meeting."

The actual governing body of the League is the Council, which is to
consist of representatives of the five greater powers,--the United
States, Great Britain, France, Italy and Japan, together with
representatives of four other members of the League selected by the
Assembly from time to time. These numbers may be increased, but only by
the unanimous vote of the Council, approved by a majority of the
Assembly.

As noted above, save in the very few expressly expected cases, the
Council can reach decisions only by unanimous vote. What are to be its
functions? They need not be enumerated in detail here. Briefly, they
deal with the reduction of armaments, the control by governments of the
private manufacture of munitions and implements of war, the
consideration of any war or threat of war--"of any circumstance whatever
affecting international relations which threatens to disturb either the
peace or the good understanding between nations upon which peace
depends." They require the formulation and submission to the members of
the League for adoption of plans for the establishment of a permanent
Court of International Justice. They empower the Council to endeavor to
effect a settlement of any international dispute which shall not be
submitted to arbitration by the parties; to investigate, consider and
report upon any such dispute, and to publish its conclusions.

The parties to the League solemnly covenant and agree that if any
dispute shall arise between them likely to lead to a rupture they will
submit it either to arbitration or inquiry by the Council, and that in
no case will they resort to war until three months after the award by
the arbitrators or the report by the Council. They agree also to carry
out in good faith any award that may be rendered, and not to make war
against any member of the League that complies therewith. If a report by
the Council is unanimously agreed to by its members, other than the
representatives of the disputants, the members agree not to go to war
with any party to the dispute which complies with the recommendations of
the report.


OBJECTIONS TO THE PLAN

It is objected by some that the decision of questions between nations by
these provisions is left to a body of delegates composing the Council
who are not bound to decide according to rules of international law, but
may reach conclusions merely as political expediency. This seems a
strained interpretation. The members of the League agree to submit
either (1) to arbitration or (2) to investigation by the Council, every
dispute which may arise between them likely to lead to a rupture and in
no case to resort to war until three months after the award by
arbitrators or the report by the Council. They declare (by Article XIII)

     "Disputes as to the interpretation of a treaty, as to any
     question of international law, as to the existence of any fact
     which, if established, would constitute a breach of any
     international obligation, or as to the extent and nature of the
     reparation to be made for any such breach," to be among those
     which are generally suitable for submission to arbitration.
     Disputes of the character thus enumerated are what are known as
     justiciable, _i. e._, subject to be decided by a Court by the
     application of the recognized principles of international law.

Mr. Root recommended that such disputes should be required to be
arbitrated. The Conference at Paris, like those at the two Hague
Conferences, would not agree to that. But in view of the declaration
just quoted, any power which should bring before the Council a dispute
of the character mentioned, but which it was unwilling to submit to
arbitration, would have the burden of showing convincing reason for such
attitude.

When the first draft of the Covenant was before the country, American
critics objected that it would compel the United States to submit to
arbitration on inquiry by the Council purely domestic questions such as
tariff, immigration and coastwise traffic. To meet this objection, there
was inserted in Art. XV the following paragraph:

     "If the dispute between the parties is claimed by one of them,
     and is found by the Council to arise out of a matter which by
     international law is solely within the domestic jurisdiction of
     that party, the Council shall so report, and shall make no
     recommendation as to its settlement."

To this it is objected that the determination of the question whether or
not a matter of dispute is by the rules of international law solely with
the domestic jurisdiction of a member is left to the Council and not to
the member. Surely, it requires no explanation to demonstrate, that if a
member State may oust the Council of jurisdiction to inquire into a
given dispute which threatens the peace of the world merely by itself
asserting that it arises out of a matter within its exclusive domestic
jurisdiction, a very imperfect means of averting war will have been
provided, and the League Covenant will hardly have more efficacy than
the second Hague Convention. Remember too, that the reports of the
Council must be unanimous, and the unreasonableness of the objection to
the provisions cited will appear.


MEANS TO PREVENT WAR

Articles XI to XVI constitute the heart of the Covenant, the most
effective means ever formulated to prevent war. The agreements of the
nations not to resort to war until the processes of arbitration or
inquiry are exhausted, are buttressed by the provision that should any
member violate these agreements it shall _ipso facto_ be deemed to have
committed an act of war against all the other members of the League,
entailing as a consequence commercial boycott, expulsion and the
application of armed force, if the members shall so determine. The
employment of force in this case, as in every other contemplated by the
Covenant, is not left to the decision of Council or Assembly. They can
only recommend. The member States agree _not to go_ to war. There is
nowhere in the document any provision compelling them _to go_ to war.
Even where one State in violation of its Covenant threatens the peace of
the world, the utmost the Council can do is

     "To recommend to the several governments concerned what
     effective military or naval forces the members of the League
     shall severally contribute to the armaments of forces to be
     used to protect the covenants of the League."

Much heated objection has been directed against Article X, which reads
as follows:

     "The members of the League undertake to respect and preserve as
     against external aggression the territorial integrity and
     existing political independence of all members of the League.
     In case of any such aggression or in case of any threat or
     danger of such aggression, the Council shall advise upon the
     means by which this obligation shall be fulfilled.'

Again, it is left to the determination of each State what force it shall
employ to enforce this provision. As a matter of fact, this article adds
little, if anything, to the provisions of Article XI, which declares
that "Any war or threat of war ... is hereby declared a matter of
concern to the whole League, and the League shall take any action that
may be deemed wise and effectual to safeguard the peace of nations." Any
external aggression against the territorial integrity or political
independence of a member of the League would amount to a war or threat
of war, and would invoke action under Article XI, if not under Article
X. But the guaranty of Article X is very necessary as affording a moral
protection to the new nations brought into being through the peace
Conference. The United States of America, whose President formulated the
principles of peace to which these Nations owe their existence, can not
afford to shirk responsibility for their protection. The Covenant
abolishes the evil of secret treaties between the nations composing the
League, while preserving the effectiveness of existing treaties of
arbitration.

[Illustration: Copyright Harris & Ewing

=William Howard Taft=

An earnest supporter of the President and his administration throughout
the war, though of the opposite party.]


THE MONROE DOCTRINE

To meet the objection that the Covenant would deprive us of the Monroe
Doctrine--a national policy adopted by the United States as its own and
maintained for its own protection--Article XXI of the amended Covenant
provides that--

     "Nothing in this Covenant shall be deemed to affect the
     validity of international engagements such as treaties of
     arbitration or regional understandings like the Monroe Doctrine
     for securing the maintenance of peace."

The phrase "regional understanding," as applied to the Monroe Doctrine,
is not a happy one. But the article certainly excludes the Monroe
Doctrine from modification or effect by the treaty. It secures from
every one of the thirty-two original members and the thirteen other
states which shall be invited to join the League, a recognition of the
existence of the Monroe Doctrine and an agreement that it is not to be
affected by anything contained in the Covenant. Certainly _that_ is not
an un-American result to accomplish, and when one reads Dr. Hill's
statement that the Covenant "does not embody our traditional American
ideals," one wonders in what museum of forgotten lore the learned doctor
has found those "traditional ideals" preserved. Dr. Hill's so-called
ideals conflict with the expression in this great treaty of the
peculiarly American ideal of averting war by providing peaceful methods
of settling disputes among nations, with the express recognition by all
the other nations of the doctrine that "was proclaimed in 1823 to
prevent America from becoming a theater for the intrigues of European
absolutism," and with the official commentary of the Delegates of Great
Britain which says that--

     "At first a principle of American foreign _policy_, it (Monroe
     Doctrine) has become an international _understanding_, and it
     is not illegitimate for the people of the United States to ask
     that the Covenant should recognize this fact."


GERMAN COLONIES

One of the most difficult problems presented to the Peace Conference was
the disposition of the former colonies of Germany in Asia, Africa and
Australasia, and of the communities formerly belonging to the Turkish
Empire. It was recognized that the victors in the war shared a common
responsibility for the just and wise treatment of these peoples, who
were utterly unable to stand alone. The method adopted declared all of
them to be wards of the League of Nations and provided that they should
be governed by Mandatory Powers willing to undertake the task and
appointed by the League under charters framed by the Council. These
Powers would be answerable to the League for the right exercise of their
powers, and subject to inspection and report. A great deal of
impassioned rhetoric has been expended over these provisions, upon the
false assumption that thereby the United States was committed to a
responsibility for the government of remote regions of the earth. The
Covenant commits us to nothing. Our participation in the war has
entailed upon us a common responsibility with our Allies for the
protection and wise government of these communities. We no more can
escape that responsibility with honor than we could after the Spanish
War escape responsibility for the Philippine Islands.

But it is for the American Congress to determine the extent of
recognition of our duty and the means by which we shall discharge it.

In the case of the Philippine Islands, the United States set for the
world a great moral example in the government of colonies, not in its
own interest, but for the benefit and exclusively in the interest of the
inhabitants of possessions which fell into our hands as a consequence of
the war with Spain. The principle thus proclaimed and practiced has been
followed in the case of the colonies and territories which the World War
has left at the disposition of the Allied and Associated Nations. This
principle, in the words of the Covenant, is "that the well-being and
development of such peoples form a sacred trust of civilization." The
best method yet devised for giving practicable effect to this principle
undoubtedly is,

     "That the tutelage of such peoples be intrusted to advanced
     nations who, by reason of their resources, their experience or
     their geographical position, can best undertake this
     responsibility, and who are willing to accept it, and that this
     tutelage should be exercised by them as mandatories on behalf
     of the League."

This is the American attitude toward undeveloped peoples. To remove
these provisions from the Peace Treaty would be to _de_-Americanize the
Treaty.


MISCELLANEOUS PROVISIONS

The Covenant brings within the cognizance of the League the regulation
of international relations affecting (1) efforts to secure and maintain
fair and humane conditions of labor for men, women and children--a
subject elaborated and provided for in great detail in Part XIII of the
Peace Treaty; (2) the execution of international agreements with regard
to traffic in women and children, and in opium and other dangerous
drugs; (3) the trade in arms and ammunition with the countries in which
the control of this traffic is necessary in the common interest; (4) the
prevention and control of disease.

The members of the League further agree (1)

     "To make provision to secure and maintain freedom of
     communication and of transit and _equitable_ treatment for the
     commerce of all members of the League,"

and (2)

     "to encourage and promote the establishment and coöperation of
     duly authorized voluntary national Red Cross organizations
     having as purposes improvement of health, the prevention of
     disease and the mitigation of suffering throughout the world."

All these are subjects customarily dealt with in international
agreements. These provisions are designed to bring into coördination
with the League and make more effective all provisions concerning such
matters.

The framers of this great program recognized that it was, necessarily,
an experiment, and that experience doubtless would develop defects and
suggest needed changes. Provision is therefor made for amendments which
should take effect when ratified by the members of the League whose
representatives compose the Council, and by a majority of the members
whose representatives compose the Assembly. But, preserving the theory
that the League is to be an alliance of Sovereign Powers, it also is
provided that no member shall be bound against his will by any such
amendment. It may dissent, and thereby cease to be a member of the
League.

Finally, any member may, at will, after two years' notice, withdraw from
the League,

     "provided that all its international obligations and all its
     obligations under this Covenant shall have been fulfilled at
     the time of its withdrawal."

No jurisdiction is vested in any organ of the League to determine
whether or not in any instance this condition has been complied with. It
is conceivable that pending some arbitration or inquiry by the Council,
the application of a commercial boycott or other disciplinary process
for violation of a provision of the Covenant, the offending power should
seek to escape the jurisdiction of the League, by exercising the right
of withdrawal. The period of notice probably is too long to allow of
this, and yet the slow process of international procedure might require
more than two years to reach a conclusion. Does it not seem fair that
before a nation should withdraw from this great association it should be
required to fulfil its obligations under the treaty?


PROBABILITY OF WAR MINIMIZED

The treaty of peace with Germany deals with many questions of vital
import to European nations, but with which America has but little direct
concern. Part I, the Covenant, is the section which touches us most
nearly. It is the part which embodies the idealism of our people, and
through which we are enabled to discharge the responsibilities we
assumed by formulating for friend and foe the conditions of peace. Human
nature changes but little from century to century, but the highest and
purest aspirations of the human heart find expression from age to age
with greater force and with wider acceptance. Doubtless, in the future,
the passions of man will again flare up in bloody wars, but the
creation of an adequate machinery for discussion and cooling reflection,
must tend to minimize the probabilities of war. The spirits of millions
of slaughtered youth who sleep in the fields of France and Flanders call
out to us, for whom they died, to consecrate their sacrifice by a new
and greater endeavor to safeguard the future peace of the world.

The conferees of Paris have formulated a measure for this purpose. It is
not perfect. Experience may develop even greater imperfections than
study has revealed. But it contains much of hope and promise. It is
practical; it is subject to amendment. It commits no one irrevocably to
its provisions. It is instinct with American idealism. It is in accord
with the best American traditions. Washington, Lincoln, McKinley, and
Roosevelt--each has contributed to the establishment of some of its main
provisions. No partisan, no provincial prejudice should be permitted to
influence or control the judgment of our people concerning it.

       *       *       *       *       *


=When Peace Came to Verdun=

It was 10:45 on the morning of November 11th in Verdun. The Germans had
thrown a barrage over the little French city, now immortal; and shells
were falling, plowing up the earth that had been turned over and over,
ground to powder by four years of artillery fire. Would the Germans stop
at 11 o'clock? Reason said "yes." Everyone in Verdun knew that at that
hour the armistice would go into effect.

It was 10:50. The guns continued bellowing. A feeling deeper than reason
came over those in the city that the Germans would not stop. Verdun had
lived through four years of fire, smoke, thunder, blood, and ruin.
Sometimes for days there would be a lull, but the guns were never quiet
long. The Germans never forgave the "they-shall-not-pass" spirit that
had hurled them back just as the prize--this military key to the West
front--seemed within their grasp.

It was 10:55. Men were crouching between buildings. They kept
coming--doughboys, Morrocans, English soldiers, more doughboys. Even the
general and his aids began to look anxious.

"Then," says B. C. Edworthy in _Association Men_, "as suddenly as though
God himself had dropped a wet blanket over the crackling flames of hell
and at one blow had extinguished them all, the firing ceased. There was
an instant's pause, in which it seemed as though the world had come to
an end. Then from the forty bells, high in the still untouched towers of
that old cathedral at Verdun, which had witnessed the most heroic
sacrifice of life and love save that on Calvary alone, pealed forth as
did the voices over the Bethlehem hills those silver tones that once
again were saying, 'Peace on Earth.' The men were joyously and
deliriously leaping about, yelling and shouting and singing and kissing
one another. Slowly those heavy cathedral doors opened and in rushed
about six hundred of the Allied soldiers."

There were Mohammedans, Catholics, Jews, and Protestants. They pressed
forward into the choir space, the roofs above them open to heaven. A
simple impromptu service of thanksgiving followed. An English soldier
led the Doxology, and all who knew the hymn joined in. Six hundred
worshipers knelt, each soldier praying according to his faith.
Mohammedans bowed to the stones, Catholics crossed themselves, Jews and
Protestants with moving lips bent their heads or lifted their faces to
heaven. Dr. Oscar E. Maurer, of New Haven, Conn., led the _Lord's
Prayer_. As the strange congregation rose, the Americans began "My
Country 'tis of Thee," the English joining in with "God Save the King."

There could be only one closing hymn in that battered shell of Verdun
Cathedral. Now, as though it had been arranged, the French pushed
forward and began the "Marseillaise." It was the singing of the soul of
a nation, a soul redeemed:

    _Allons, enfants de la patrie
    Le jour de gloire est arrivé_

Peace had come to Verdun, deliverance to France, safety to the world.
With the last words of the national hymn of France, the service was
finished, and the worshipers turned and reverently left the building.



THE TREATY OF VERSAILLES AND THE COVENANT OF THE LEAGUE OF NATIONS

(Signed June 28, 1919, Rejected by the United States, November 19, 1919
and Again Rejected, with the Lodge Reservations, March 19, 1920)


The preamble contains the names of the plenipotentiaries that took part
in the negotiations and signed the treaty, with a few exceptions: Dr.
Hermann Müller and Dr. Johannes Bell were substituted for
Brockdorff-Rantzau and his associates, China's delegates refused to sign
on account of the Shantung concessions to Japan, and Italy was
represented by a new commission headed by Signor Tittoni, the new
Foreign Minister.

The text here reproduced is the revised edition of the treaty
distributed in French and English among the delegates at the time of the
signing. The copy actually signed is deposited in the archives of the
Republic of France in Paris.



PREAMBLE


     The United States of America, the British Empire, France,
     Italy, and Japan, these powers being described in the present
     treaty as the principal Allied and Associated Powers; Belgium,
     Bolivia, Brazil, China, Cuba, Ecuador, Greece, Guatemala,
     Haiti, the Hedjaz, Honduras, Liberia, Nicaragua, Panama, Peru,
     Poland, Portugal, Rumania, the Serb-Croat-Slovene State; Siam,
     Czechoslovakia, and Uruguay, these powers constituting with the
     principal powers mentioned above the Allied and Associated
     Powers of the one part; and Germany, of the other part: Bearing
     in mind that on the request of the Imperial German Government
     an armistice was granted on Nov. 11, 1918, to Germany by the
     principal Allied and Associated Powers in order that a treaty
     of peace might be concluded with her, and the Allied and
     Associated Powers being equally desirous that the war in which
     they were successively involved directly or indirectly, and
     which originated in the declaration of war by Austria-Hungary
     on July 28, 1914, against Serbia; the declaration of war by
     Germany against Russia on Aug. 1, 1914, and against France on
     Aug. 3, 1914, and in the invasion of Belgium, should be
     replaced by a firm, just, and durable peace;

     For this purpose the high contracting parties represented as
     follows:

     THE PRESIDENT OF THE UNITED STATES OF AMERICA, by:

     The Honorable Woodrow Wilson, President of the United States,
     acting in his own name and by his own proper authority;

     The Honorable Robert Lansing, Secretary of State;

     The Honorable Henry White, formerly Ambassador Extraordinary
     and Plenipotentiary of the United States at Rome and Paris;

     The Honorable Edward M. House;

     General Tasker H. Bliss, Military Representative of the United
     States on the Supreme War Council;

     HIS MAJESTY THE KING OF THE UNITED KINGDOM OF GREAT BRITAIN AND
     IRELAND AND OF THE BRITISH DOMINIONS BEYOND THE SEAS, EMPEROR
     OF INDIA, by:

     The Right Honorable David Lloyd George, M. P., First Lord of
     his Treasury and Prime Minister;

     The Right Honorable Andrew Bonar Law, M. P., his Lord Privy
     Seal;

     The Right Honorable Viscount Milner, G. C. B., G. C. M. G., his
     Secretary of State for the Colonies;

     The Right Honorable Arthur James Balfour, O. M., M. P., his
     Secretary of State for Foreign Affairs;

     The Right Honorable George Nicoll Barnes, M. P., Minister
     without portfolio; and

     FOR THE DOMINION OF CANADA, by:

     The Right Honorable Sir George Eulas Foster, G. C. M. G.,
     Minister of Trade and Commerce;

     The Right Honorable Charles Joseph Doherty, Minister of
     Justice;

     FOR THE COMMONWEALTH OF AUSTRALIA, by:

     The Right Honorable William Morris Hughes, Attorney General and
     Prime Minister;

     The Right Honorable Sir Joseph Cook, G. C. M. G., Minister for
     the Navy;

     FOR THE DOMINION OF SOUTH AFRICA, by:

     General the Right Honorable Louis Botha, Prime Minister;

     Lieut. General the Right Honorable Jan Christiaan Smuts, K. C.,
     Minister of Defense;

     FOR THE DOMINION OF NEW ZEALAND, by:

     The Right Honorable William Ferguson Massey, Minister of Labor
     and Prime Minister;

     FOR INDIA, by:

     The Right Honorable Edwin Samuel Montagu, M. P., his Secretary
     of State for India;

     Major General his Highness Maharaja Sir Ganga Singh Bahadur,
     Maharaja of Bikanir, G. C. S. I., G. C. I. E., G. C. V. O., K.
     C. B., A. D. C.;

     THE PRESIDENT OF THE FRENCH REPUBLIC, by:

     Mr. Georges Clemenceau, President of the Council, Minister of
     War;

     Mr. Pichon, Minister of Foreign Affairs;

     Mr. L. L. Klotz, Minister of Finance;

     Mr. André Tardieu, Commissary General for Franco-American
     Military Affairs;

     Mr. Jules Cambon, Ambassador of France;

     HIS MAJESTY THE KING OF ITALY,[27] by:

     Mr. V. E. Orlando, President of the Council of Ministers;

[27] On account of the overthrow of the Orlando Ministry and the
formation of the Nitti Ministry, the treaty was signed by a delegation
headed by Signor Tittoni, the New Foreign Minister.

     Baron S. Sonnino, Minister of Foreign Affairs;

     Mr. S. Crespi, Deputy, Minister of Supplies;

     Marquis G. Imperiali, Senator of the Kingdom, Ambassador of his
     Majesty the King of Italy at London;

     Mr. S. Barzilai, Deputy, formerly Minister;

     HIS MAJESTY THE EMPEROR OF JAPAN, by:

     Marquis Saionji, formerly President of the Council of
     Ministers;

     Baron Makino, formerly Minister of Foreign Affairs, member of
     the Diplomatic Council;

     Viscount Chinda, Ambassador Extraordinary and Plenipotentiary
     of H. M. the Emperor of Japan at London;

     Mr. K. Matsui, Ambassador Extraordinary and Plenipotentiary of
     H. M. the Emperor of Japan at Paris;

     Mr. H. Ijuin, Ambassador Extraordinary and Plenipotentiary of
     H. M. the Emperor of Japan at Rome;

     HIS MAJESTY THE KING OF THE BELGIANS, by:

     Mr. Hymans, Minister of Foreign Affairs, Minister of State;

     Mr. Van Den Heuvel, Envoy Extraordinary and Minister
     Plenipotentiary of H. M. the King of the Belgians, Minister of
     State;

     Mr. Vandervelde, Minister of Justice, Minister of State;

     THE PRESIDENT OF THE REPUBLIC OF BOLIVIA, by:

     Mr. Ismael Montes, Envoy Extraordinary and Minister
     Plenipotentiary of Bolivia at Paris;

     THE PRESIDENT OF THE REPUBLIC OF BRAZIL, by:

     Mr. Epitacio Pessoa, formerly Minister of State, formerly
     member of the Supreme Court of Justice, Federal Senator;

     Mr. Pandiá Calogeras, Deputy, formerly Minister of Finance;

     Mr. Raul Ferdnandes;

     THE PRESIDENT OF THE CHINESE REPUBLIC,[28] by;

     Mr. Lou Tseng-Tsiang, Minister of Foreign Affairs;

     Mr. Chengting Thomas Wang, formerly Minister of Agriculture and
     Commerce;

     [28] Refused to sign on account of Shantung concessions to Japan.

     THE PRESIDENT OF THE CUBAN REPUBLIC, by:

     Mr. Antonio Sanchez de Bustamante, Dean of The Faculty of Law
     in the University of Havana, President of the Cuban Society of
     International Law;

     THE PRESIDENT OF THE REPUBLIC OF ECUADOR, by:

     Mr. Enrique Dorn y de Alsua, Envoy Extraordinary and Minister
     Plenipotentiary of Ecuador at Paris;

     HIS MAJESTY THE KING OF THE HELLENES, by:

     Mr. Eleftherios Venizelos, President of the Council of
     Ministers;

     Mr. Nicolas Politis, Minister of Foreign Affairs;

     THE PRESIDENT OF THE REPUBLIC OF GUATEMALA, by:

     Mr. Joaquin Mendez, formerly Minister of State for Public Works
     and Public Instruction, Envoy Extraordinary and Minister
     Plenipotentiary of Guatemala at Washington, Envoy Extraordinary
     and Minister Plenipotentiary on Special Mission at Paris;

     THE PRESIDENT OF THE REPUBLIC OF HAITI, by:

     Mr. Tertullien Guilbaud, Envoy Extraordinary and Minister
     Plenipotentiary of Haiti at Paris;

     HIS MAJESTY THE KING OF THE HEDJAZ, by:

     Mr. Rustem Haidar;

     Mr. Abdul Hadi Aouni;

     THE PRESIDENT OF THE REPUBLIC OF HONDURAS, by:

     Dr. Policarpe Bonilla, on special mission to Washington,
     formerly President of the Republic of Honduras, Envoy
     Extraordinary and Minister Plenipotentiary;

     THE PRESIDENT OF THE REPUBLIC OF LIBERIA, by:

     The Honorable C. D. B. King, Secretary of State;

     THE PRESIDENT OF THE REPUBLIC OF NICARAGUA, by:

     Mr. Salvador Chamorro, President of the Chamber of Deputies;

     THE PRESIDENT OF THE REPUBLIC OF PANAMA, by:

     Mr. Antonio Burgos, Envoy Extraordinary and Minister
     Plenipotentiary of Panama at Madrid;

     THE PRESIDENT OF THE REPUBLIC OF PERU, by:

     Mr. Carlos G. Candamo, Envoy Extraordinary and Minister
     Plenipotentiary of Peru at Paris;

     THE PRESIDENT OF THE POLISH REPUBLIC, by:

     Mr. Roman Dmowski, President of the Polish National Committee;

     Mr. Ignace Paderewski, President of the Council of Ministers,
     Minister of Foreign Affairs;

     THE PRESIDENT OF THE PORTUGESE REPUBLIC, by:

     Dr. Affonso Costa, formerly President of the Council of
     Ministers;

     Mr. Augusto Soares, formerly Minister of Foreign Affairs;

     HIS MAJESTY THE KING OF RUMANIA, by:

     Mr. Jean J. C. Bratiano, President of the Council of Ministers,
     Minister of Foreign Affairs;

     General Constantin Coanda, Corps Commander, A. D. C. to the
     King, formerly President of the Council of Ministers;

     HIS MAJESTY THE KING OF THE SERBS, THE CROATS, AND THE
     SLOVENES, by:

     Mr. N. P. Pachitch, formerly President of the Council of
     Ministers;

     Mr. Ante Trumbic, Minister of Foreign Affairs; Mr. Milenko R.
     Vesnitch, Envoy Extraordinary and Minister Plenipotentiary of
     H. M. the King of the Serbs, the Croats, and the Slovenes at
     Paris;

     HIS MAJESTY THE KING OF SIAM, by:

     Prince Charoon, Envoy Extraordinary and Minister
     Plenipotentiary of H. M. the King of Siam at Paris;

     Prince Traidos Prabandhu, Under Secretary of State for Foreign
     Affairs;

     THE PRESIDENT OF THE CZECHO-SLOVAK REPUBLIC, by:

     Mr. Charles Kramar, President of the Council of Ministers;

     Mr. Edouard Benes, Minister of Foreign Affairs;

     THE PRESIDENT OF THE REPUBLIC OF URUGUAY, by:

     Mr. Juan Antonio Buero, Minister of Industry, formerly Minister
     of Foreign Affairs;

[Illustration: Woodrow Wilson, President of the United States

On January 8, 1918, President Wilson outlined the fourteen points on the
basis of which the Allies should make peace.]

     GERMANY,[29] by;

     Count Brockdorff-Rantzau, Minister for Foreign Affairs of the
     Empire;

[29] Treaty Signed by Dr. Hermann Müller, Minister for Foreign Affairs
of the Empire, and Dr. Johannes Bell, Minister of the Empire.

     Dr. Landsberg, Minister of Justice of the Empire;

     Mr. Giesberts, Minister of Posts of the Empire;

     Oberbürgermeister Leinert, President of the Prussian National
     Assembly;

     Dr. Schücking;

     Dr. Karl Melchior; Acting in the name of the German Empire and
     of each and every component State.

WHO having communicated their full powers found in good and due form
HAVE AGREED AS FOLLOWS:

From the coming into force of the present treaty the state of war will
terminate. From that moment and subject to the provisions of this treaty
official relations with Germany and with any of the German States will
be resumed by the Allied and Associated Powers.



PART I

The Covenant of the League of Nations


The high contracting parties, in order to promote international
coöperation and to achieve international peace and security by the
acceptance of obligations not to resort to war, by the prescription of
open, just, and honorable relations between nations, by the firm
establishment of the understandings of international law as the actual
rule of conduct among Governments, and by the maintenance of justice and
a scrupulous respect for all treaty obligations in the dealings of
organized peoples with one another, agree to this covenant of the League
of Nations.

=ARTICLE 1.=--The original members of the League of Nations shall be
those of the signatories which are named in the annex to this covenant
and also such of those other States named in the annex as shall accede
without reservation to this covenant. Such accession shall be effected
by a declaration deposited with the secretariat within two months of the
coming into force of the covenant. Notice thereof shall be sent to all
other members of the League.

Any fully self-governing State, dominion, or colony not named in the
annex may become a member of the League if its admission is agreed to by
two-thirds of the assembly, provided that it shall give effective
guarantees of its sincere intention to observe its international
obligations, and shall accept such regulations as may be prescribed by
the League in regard to its military, naval and air forces and
armaments.

Any member of the League may, after two years' notice of its intention
so to do, withdraw from the League, provided that all its international
obligations and all its obligations under this covenant shall have been
fulfilled at the time of its withdrawal.

=ARTICLE 2.=--The action of the League under this covenant shall be
effected through the instrumentality of an assembly and of a council,
with a permanent secretariat.

=ARTICLE 3.=--The assembly shall consist of representatives of the
members of the League.

The assembly shall meet at stated intervals and from time to time as
occasion may require at the seat of the League or at such other place as
may be decided upon.

The assembly may deal at its meetings with any matter within the sphere
of action of the League or affecting the peace of the world.

At meetings of the assembly each member of the League shall have one
vote, and may have not more than three representatives.

=ARTICLE 4.=--The council shall consist of representatives of the
principal Allied and Associated Powers, together with representatives of
four other members of the League. These four members of the League shall
be selected by the assembly from time to time in its discretion. Until
the appointment of the representatives of the four members of the League
first selected by the assembly, representatives of Belgium, Brazil,
Spain, and Greece shall be members of the council.

With the approval of the majority of the assembly, the council may name
additional members of the League whose representatives shall always be
members of the council; the council with like approval may increase the
number of members of the League to be selected by the assembly for
representation on the council.

The council shall meet from time to time as occasion may require, and at
least once a year, at the seat of the League, or at such other place as
may be decided upon.

The council may deal at its meetings with any matter within the sphere
of action of the League or affecting the peace of the world.

Any member of the League not represented on the council shall be invited
to send a representative to sit as a member at any meeting of the
council during the consideration of matters specially affecting the
interests of that member of the League.

At meetings of the council, each member of the League represented on the
council shall have one vote, and may have not more than one
representative.

=ARTICLE 5.=--Except where otherwise expressly provided in this covenant
or by the terms of the present treaty, decisions at any meeting of the
assembly or of the council shall require the agreement of all the
members of the League represented at the meeting.

All matters of procedure at meetings of the assembly or of the council,
including the appointment of committees to investigate particular
matters, shall be regulated by the assembly or by the council and may be
decided by a majority of the members of the League represented at the
meeting.

The first meeting of the assembly and the first meeting of the council
shall be summoned by the President of the United States of America.

=ARTICLE 6.=--The permanent secretariat shall be established at the seat
of the League. The secretariat shall comprise a Secretary General and
such secretaries and staff as may be required.

The first Secretary General shall be the person named in the annex;
thereafter the Secretary General shall be appointed by the council with
the approval of the majority of the assembly.

The secretaries and staff of the secretariat shall be appointed by the
Secretary General with the approval of the council.

The Secretary General shall act in that capacity at all meetings of the
assembly and of the council.

The expenses of the secretariat shall be borne by the members of the
League in accordance with the apportionment of the expenses of the
International Bureau of the Universal Postal Union.

=ARTICLE 7.=--The seat of the League is established at Geneva.

The council may at any time decide that the seat of the League shall be
established elsewhere.

All positions under or in connection with the League, including the
secretariat, shall be open equally to men and women.

Representatives of the members of the League and officials of the League
when engaged on the business of the League shall enjoy diplomatic
privileges and immunities.

The buildings and other property occupied by the League or its officials
or by representatives attending its meetings shall be inviolable.

=ARTICLE 8.=--The members of the League recognize that the maintenance
of peace requires the reduction of national armaments to the lowest
point consistent with national safety and the enforcement by common
action of international obligations.

The council, taking account of the geographical situation and
circumstances of each State, shall formulate plans for such reduction
for the consideration and action of several Governments.

Such plans shall be subject to reconsideration and revision at least
every ten years.

After these plans shall have been adopted by the several Governments,
the limits of armaments therein fixed shall not be exceeded without the
concurrence of the council.

The members of the League agree that the manufacture by private
enterprise of munitions and implements of war is open to grave
objections. The council shall advise how the evil effects attendant upon
such manufacture can be prevented, due regard being had to the
necessities of those members of the League which are not able to
manufacture the munitions and implements of war necessary for their
safety.

The members of the League undertake to interchange full and frank
information as to the scale of their armaments, their military and naval
programs and the condition of such of their industries as are adaptable
to warlike purposes.

=ARTICLE 9.=--A permanent commission shall be constituted to advise the
council on the execution of the provisions of Articles 1 and 8 and on
military and naval questions generally.

=ARTICLE 10.=--The members of the League undertake to respect and
preserve as against external aggression the territorial integrity and
existing political independence of all members of the League. In case of
any such aggression or in case of any threat or danger of such
aggression the council shall advise upon the means by which this
obligation shall be fulfilled.

=ARTICLE 11.=--Any war or threat of war, whether immediately affecting
any of the members of the League or not, is hereby declared a matter of
concern to the whole League, and the League shall take any action that
may be deemed wise and effectual to safeguard the peace of nations. In
case any such emergency should arise the Secretary General shall on the
request of any member of the League forthwith summon a meeting of the
council.

It is also declared to be the friendly right of each member of the
League to bring to the attention of the assembly or of the council any
circumstance whatever affecting international relations which threatens
to disturb international peace or the good understanding between nations
upon which peace depends.

=ARTICLE 12.=--The members of the League agree that if there should
arise between them any dispute likely to lead to a rupture, they will
submit the matter either to arbitration or to inquiry by the council,
and they agree in no case to resort to war until three months after the
award by the arbitrators or the report by the council.

In any case under this article the award of the arbitrators shall be
made within a reasonable time, and the report of the council shall be
made within six months after the submission of the dispute.

=ARTICLE 13.=--The members of the League agree that whenever any dispute
shall arise between them which they recognize to be suitable for
submission to arbitration and which cannot be satisfactorily settled by
diplomacy, they will submit the whole subject-matter to arbitration.

Disputes as to the interpretation of a treaty, as to any question of
international law, as to the existence of any fact which if established
would constitute a breach of any international obligation, or as to the
extent and nature of the reparation to be made for any such breach, are
declared to be among those which are generally suitable for submission
to arbitration.

For the consideration of any such dispute the Court of Arbitration to
which the case is referred shall be the court agreed on by the parties
to the dispute or stipulated in any convention existing between them.

The members of the League agree that they will carry out in full good
faith any award that may be rendered, and that they will not resort to
war against a member of the League which complies therewith. In the
event of any failure to carry out such an award, the council shall
propose what steps should be taken to give effect thereto.

=ARTICLE 14.=--The council shall formulate and submit to the members of
the League for adoption plans for the establishment of a Permanent Court
of International Justice.

The court shall be competent to hear and determine any dispute of an
international character which the parties thereto submit to it. The
court may also give an advisory opinion upon any dispute or question
referred to it by the council or by the assembly.

=ARTICLE 15.=--If there should arise between members of the League any
dispute likely to lead to a rupture, which is not submitted to
arbitration in accordance with Article 13, the members of the League
agree that they will submit the matter to the council. Any party to the
dispute may effect such submission by giving notice of the existence of
the dispute to the Secretary General, who will make all necessary
arrangements for a full investigation and consideration thereof.

For this purpose the parties to the dispute will communicate to the
Secretary General, as promptly as possible, statements of their case
with all the relevant facts and papers, and the council may forthwith
direct the publication thereof.

The council shall endeavor to effect a settlement of the dispute, and if
such efforts are successful, a statement shall be made public giving
such facts and explanations regarding the dispute and the terms of
settlement thereof as the council may deem appropriate.

If the dispute is not thus settled, the council either unanimously or by
a majority vote shall make and publish a report containing a statement
of the facts of the dispute and the recommendations which are deemed
just and proper in regard thereto.

Any member of the League represented on the council may make public a
statement of the facts of the dispute and of its conclusions regarding
the same.

If a report by the council is unanimously agreed to by the members
thereof other than the representatives of one or more of the parties to
the dispute, the members of the League agree that they will not go to
war with any party to the dispute which complies with the
recommendations of the report.

If the council fails to reach a report which is unanimously agreed to by
the members thereof, other than the representatives of one or more of
the parties to the dispute, the members of the League reserve to
themselves the right to take such action as they shall consider
necessary for the maintenance of right and justice.

If the dispute between the parties is claimed by one of them, and is
found by the council to arise out of a matter which by international law
is solely within the domestic jurisdiction of that party, the council
shall so report, and shall make no recommendation as to its settlement.

The council may in any case under this article refer the dispute to the
assembly. The dispute shall be so referred at the request of either
party to the dispute, provided that such request be made within fourteen
days after the submission of the dispute to the council.

In any case referred to the assembly all the provisions of this article
and of Article 12 relating to the action and powers of the council shall
apply to the action and powers of the assembly, provided that a report
made by the assembly, if concurred in by the representatives of those
members of the League represented on the council and of a majority of
the other members of the League, exclusive in each case of the
representatives of the parties to the dispute, shall have the same force
as a report by the council concurred in by all the members thereof other
than the representatives of one or more of the parties to the dispute.

=ARTICLE 16.=--Should any member of the League resort to war in
disregard of its covenants under Articles 12, 13, or 15, it shall =ipso
facto= be deemed to have committed an act of war against all other
members of the League, which hereby undertake immediately to subject it
to the severance of all trade or financial relations, the prohibition of
all intercourse between their nationals and the nationals of the
covenant-breaking State and the prevention of all financial, commercial,
or personal intercourse between the nationals of the covenant-breaking
State and the nationals of any other State, whether a member of the
League or not.

It shall be the duty of the council in such case to recommend to the
several Governments concerned what effective military, naval or air
force the members of the League shall severally contribute to the armed
forces to be used to protect the covenants of the League.

The members of the League agree, further, that they will mutually
support one another in the financial and economic measures which are
taken under this article, in order to minimize the loss and
inconvenience resulting from the above measures, and that they will
mutually support one another in resisting any special measures aimed at
one of their number by the covenant-breaking State, and that they will
take the necessary steps to afford passage through their territory to
the forces of any of the members of the League which are coöperating to
protect the covenants of the League.

Any member of the League which has violated any covenant of the League
may be declared to be no longer a member of the League by a vote of the
council concurred in by the representatives of all the other members of
the League represented thereon.

=ARTICLE 17.=--In the event of a dispute between a member of the League
and a State which is not a member of the League, or between States not
members of the League, the State or States not members of the League
shall be invited to accept the obligations of membership in the League
for the purposes of such dispute, upon such conditions as the council
may deem just. If such invitation is accepted, the provisions of
Articles 12 to 16 inclusive shall be applied with such modifications as
may be deemed necessary by the council.

Upon such invitation being given the council shall immediately institute
an inquiry into the circumstances of the dispute and recommend such
action as may seem best and most effectual in the circumstances.

If a State so invited shall refuse to accept the obligations of
membership in the League for the purposes of such dispute, and shall
resort to war against a member of the League, the provisions of Article
16 shall be applicable as against the State taking such action.

If both parties to the dispute when so invited refuse to accept the
obligations of membership in the League for the purposes of such
dispute, the council may take such measures and make such
recommendations as will prevent hostilities and will result in the
settlement of the dispute.

=ARTICLE 18.=--Every treaty or international engagement entered into
hereafter by any member of the League shall be forthwith registered with
the secretariat and shall as soon as possible be published by it. No
such treaty or international engagement shall be binding until so
registered.

=ARTICLE 19.=--The assembly may from time to time advise the
reconsideration by members of the League of treaties which have become
inapplicable and the consideration of international conditions whose
continuance might endanger the peace of the world.

=ARTICLE 20.=--The members of the League severally agree that this
covenant is accepted as abrogating all obligations or understandings
inter se which are inconsistent with the terms thereof, and solemnly
undertake that they will not hereafter enter into any engagements
inconsistent with the terms thereof.

In case any member of the League shall, before becoming a member of the
League, have undertaken any obligations inconsistent with the terms of
this covenant, it shall be the duty of such member to take immediate
steps to procure its release from such obligations.

=ARTICLE 21.=--Nothing in this covenant shall be deemed to affect the
validity of international engagements, such as treaties of arbitration
or regional understandings like the Monroe Doctrine, for securing the
maintenance of peace.

=ARTICLE 22.=--To those colonies and territories which as a consequence
of the late war have ceased to be under the sovereignty of the States
which formerly governed them and which are inhabited by peoples not yet
able to stand by themselves under the strenuous conditions of the modern
world, there should be applied the principle that the well-being and
development of such peoples form a sacred trust of civilization and that
securities for the performance of this trust should be embodied in this
covenant.

The best method of giving practical effect to this principle is that the
tutelage of such peoples should be intrusted to advanced nations who by
reason of their resources, their experience or their geographical
position can best undertake this responsibility, and who are willing to
accept it, and that this tutelage should be exercised by them as
mandatories on behalf of the League.

The character of the mandate must differ according to the stage of
development of the people, the geographical situation of the territory,
its economic conditions and other similar circumstances.

Certain communities formerly belonging to the Turkish Empire have
reached a stage of development where their existence as independent
nations can be provisionally recognized subject to rendering of
administrative advice and assistance by a mandatory until such time as
they are able to stand alone. The wishes of these communities must be a
principal consideration in the selection of the mandatory.

Other peoples, especially those of Central Africa, are at such a stage
that the mandatory must be responsible for the administration of the
territory under conditions which will guarantee freedom of conscience
and religion, subject only to the maintenance of public order and
morals, the prohibition of abuses such as the slave trade, the arms
traffic and the liquor traffic, and the prevention of the establishment
of fortifications or military and naval bases and of military training
of the natives for other than police purposes and the defense of
territory, and will also secure equal opportunities for the trade and
commerce of other members of the League.

There are territories such as Southwest Africa and certain of the South
Pacific Islands, which, owing to the sparseness of their population or
their small size, or their remoteness from the centers of civilization;
or their geographical contiguity to the territory of the mandatory, and
other circumstances, can be best administered under the laws of the
mandatory as integral portions of its territory, subject to the
safeguards above mentioned in the interests of the indigenous
population.

In every case of mandate the mandatory shall render to the council an
annual report in reference to the territory committed to its charge.

The degree of authority, control, or administration to be exercised by
the mandatory shall, if not previously agreed upon by the members of the
League, be explicitly defined in each case by the council.

A permanent commission shall be constituted to receive and examine the
annual reports of the mandatories and to advise the council on all
matters relating to the observance of the mandates.

=ARTICLES 23.=--Subject to and in accordance with the provisions of
international conventions existing or hereafter to be agreed upon, the
members of the League:

     (a) will endeavor to secure and maintain fair and humane
     conditions of labor for men, women and children, both in their
     own countries and in all countries to which their commercial
     and industrial relations extend, and for that purpose will
     establish and maintain the necessary international
     organizations;

     (b) undertake to secure just treatment of the native
     inhabitants of territories under their control;

     (c) will intrust the League with the general supervision over
     the execution of agreements with regard to the traffic in women
     and children and the traffic in opium and other dangerous
     drugs;

     (d) will intrust the League with the general supervision of the
     trade in arms and ammunition with the countries in which the
     control of this traffic is necessary in the common interest;

     (e) will make provision to secure and maintain freedom of
     communications and of transit and equitable treatment for the
     commerce of all members of the League. In this connection the
     special necessities of the regions devastated during the war of
     1914--1918 shall be borne in mind;

     (f) will endeavor to take steps in matters of international
     concern for the prevention and control of disease.

=ARTICLE 24.=--There shall be placed under the direction of the League
all international bureaus already established by general treaties if the
parties to such treaties consent. All such international bureaus and all
commissions for the regulation of matters of international interest
hereafter constituted shall be placed under the direction of the League.

In all matters of international interest which are regulated by general
conventions but which are not placed under the control of international
bureaus or commissions, the secretariat of the League shall, subject to
the consent of the council and if desired by the parties, collect and
distribute all relevant information and shall render any other
assistance which may be necessary or desirable.

The council may include as part of the expenses of the secretariat the
expenses of any bureau or commission which is placed under the direction
of the League.

=ARTICLE 25.=--The members of the League agree to encourage and promote
the establishment and co-operation of duly authorized voluntary national
Red Cross organizations having as purposes the improvement of health,
the prevention of disease, and the mitigation of suffering throughout
the world.

=ARTICLE 26.=--Amendments to this covenant will take effect when
ratified by the members of the League whose representatives compose the
council and by a majority of the members of the League whose
representatives compose the assembly.

No such amendment shall bind any member of the League which signifies
its dissent therefrom, but in that case it shall cease to be a member of
the League.

ANNEX

I. Original members of the League of Nations signatories of the treaty
of peace.

    United States of America.
    Belgium.
    Bolivia.
    Brazil.
    British Empire.
     Canada.
      Australia.
      South Africa.
      New Zealand.
      India
    China.[30]
    Cuba.
    Ecuador.
    France.
    Greece.
    Guatemala.
    Uruguay.
    Haiti.
    Hedjaz.
    Honduras.
    Italy.
    Japan.
    Liberia.
    Nicaragua.
    Panama.
    Peru.
    Poland.
    Portugal.
    Rumania.
    Serb-Croat-Slovene State.
    Siam.
    Czecho-Slovakia.

States invited to accede to the covenant.

    Argentine Republic
    Chile.
    Colombia.
    Denmark.
    Netherlands.
    Norway.
    Paraguay
    Persia.
    Salvador.
    Spain.
    Sweden.
    Switzerland.
    Venezuela.

[30] Refused to sign.

II. First Secretary General of the League of Nations. The Honorable Sir
James Eric Drummond, K. C. M. G., C. B.



PART II.

Boundaries of Germany


=ARTICLE 27.=--The boundaries of Germany will be determined as follows:

1. With Belgium: From the point common to the three frontiers of
Belgium, Holland, and Germany, and in a southerly direction; the
northeastern boundary of the former territory of neutral Moresnet, then
the eastern boundary of the Kreis of Eupen, then the frontier between
Belgium and the Kreis of Montjoie, then the northeastern and eastern
boundary of the Kreis of Malmédy to its junction with the frontier of
Luxemburg.

2. With Luxemburg: The frontier of the 3d August, 1914, to its junction
with the frontier of France of the 18th July, 1870.

3. With France: The frontier of the 18th July, 1870, from Luxemburg to
Switzerland, with the reservations made in Article 48 of Section 4
(Sarre Basin) of Part III.

4. With Switzerland: The present frontier.

5. With Austria: The frontier of the 3d August, 1914, from Switzerland
to Czechoslovakia is hereinafter defined.

6. With Czechoslovakia: The frontier of the 3d August, 1914, between
Germany and Austria from its junction with the old administrative
boundary separating Bohemia and the Province of Upper Austria to the
point north of the salient of the old Province of Austrian Silesia
situated at about eight kilometers east of Neustadt.

7. With Poland: From the point defined above to a point to be fixed on
the ground about 2 kilometers east of Lorzendorf: the frontier as it
will be fixed in accordance with Article 88 of the present treaty;
thence in a northerly direction to the point where the administrative
boundary of Posnania crosses the river Bartsch; a line to be fixed on
the ground leaving the following places in Poland: Skorischau,
Reichthal, Trembatschau, Kunzendorf, Schleise, Gross Kosel,
Schreibersdorf, Rippin, Fürstlich-Niefken, Pawelau, Tscheschen,
Konradau, Johannisdorf, Modzenowe, Bogdaj, and in Germany: Lorzendorf,
Kaulwitz, Glausche, Dalbersdorf, Reesewitz, Stradam, Gross Wartenberg
Kraschen, Neu Mittelwalde, Domaslawitz, Wodelsdorf, Tscheschen Hammer;
thence the boundary of Posnania northwestward to the point where it cuts
the Rawitsch-Herrnstadt railway; thence to the point where the
administrative boundary of Posnania cuts the Reisen-Tschirnau road: a
line to be fixed on the ground passing west of Triebusch and Gabel and
east of Saborwitz; thence the administrative boundary of Posnania to its
junction with the eastern boundary of the Kreis of Fraustadt;

Thence in a northwesterly direction to a point to be chosen on the road
between the villages of Unruhstadt and Kophitz: a line to be fixed on
the ground passing west of Geyersdorf, Brenno, Fehlen, Altkloster,
Klebel, and east of Ulbersdorf, Buchwald, Ilgen, Weine, Lupitze,
Schwenten; thence in a northerly direction to the northernmost point of
Lake Chlop: a line to be fixed on the ground following the median line
of the lakes; the town and the station of Bentschen, however, (including
the junction of the lines Schwiebus-Bentschen and Züllichau-Bentschen,)
remaining in Polish territory;

Thence in a northeasterly direction to the point of junction of the
boundaries of the Kreise of Schwerin, Birnbaum, and Meseritz: a line to
be fixed on the ground passing east of Betsche; thence in a northerly
direction the boundary separating the Kreise of Schwerin and Birnbaum,
then in an easterly direction the northern boundary of Posnania and to
the point where it cuts the river Netze; thence upstream to its
confluence with the Küddow: the course of the Netze; thence upstream to
a point to be chosen about 6 kilometers southeast of Schneidemühl; the
course of the Küddow;

Thence northeastward to the most southern point of the re-entrant of the
northern boundary of Posnania about 5 kilometers west of Stahren: a line
to be fixed on the ground leaving the Schneidemühl-Konitz railway in
this area entirely in German territory; thence the boundary of Posnania
northeastward to the point of the salient it makes about 15 kilometers
east of Flatow; thence northeastward to the point where the river
Kamionka meets the southern boundary of the Kreis of Konitz about 3
kilometers northeast of Grunau: a line to be fixed on the ground leaving
the following places to Poland: Jasdrowo, Gr. Lutau, Kl. Lutau and
Wittkau, and to Germany: Gr. Butzig, Cziskowo, Battow, Böch, and Grunau;

Thence in a northerly direction the boundary between the Kreise of
Konitz and Schlochau to the point where this boundary cuts the river
Brahe; thence to a point on the boundary of Pomerania 15 kilometers east
of Rummelsburg: a line to be fixed on the ground leaving the following
localities in Poland: Konarzin, Kelpin, Adl. Briesen, and in Germany:
Sampohl, Neuguth, Steinfort, and Gr. Peterkau; then the boundary of
Pomerania in an easterly direction to its junction with the boundary
between the Kreis of Konitz and Schlochau;

[Illustration: Copyright Press Illustrating Service

President and Mrs. Wilson Waving Good Bye

This picture was taken as they were starting out for their first trip to
the Peace Conference.]

Thence northward the boundary between Pomerania and West Prussia to the
point on the river Rheda about 3 kilometers northwest of Gohra, where
that river is joined by a tributary from the northwest; thence to a
point to be selected in the bend of the Piasnitz River about 1½
kilometers northwest of Warschkau: a line to be fixed on the ground;
thence this river downstream, then the median line of Lake Zarnowitz,
then the old boundary of West Prussia to the Baltic Sea.

8. With Denmark: The frontier as it will be fixed in accordance with
Articles 109 and 110 of Part III., Section XII., (Schleswig.)

=ARTICLE 28.=--The boundaries of East Prussia, with the reservations
made in Section IX. (East Prussia) of Part III. will be determined as
follows:

From a point on the coast of the Baltic Sea about 1½ kilometers north of
Pröbbernau Church in a direction of about 159 degrees east from true
north: A line to be fixed on the ground for about 2 kilometers, thence
in a straight line to the light at the bend of the Elbinger Channel in
approximately latitude 54.19½ north, longitude 19.26 east of Greenwich;

Thence to the easternmost mouth of the Nogat River at a bearing of
approximately 209 degrees east from true north;

Thence up the course of the Nogat River to the point where the latter
leaves the Vistula, (Weichsel;)

Thence up the principal channel of navigation of the Vistula, then the
southern boundary of the Kreis of Marienwerder, then that of the Kreis
of Rosenberg, eastward to the point where it meets the old boundary of
East Prussia;

Thence the old boundary between East and West Prussia, then the boundary
between the Kreise of Osterode and Neidenburg, then the course of the
River Skoppau down stream, then the course of the Neide up stream to a
point situated about 5 kilometers west of Bialutten, being the nearest
point to the old frontier of Russia, thence in an easterly direction to
a point immediately south of the intersection of the road
Neidenburg-Mlava with the old frontier of Russia;

A line to be fixed on the ground passing north of Bialutten;

Thence the old frontier of Russia to a point east of Schmalleningken,
then the principal channel of navigation of the Niemen (Memel) down
stream, then the Skierwieth arm of the delta to the Kurisches Haff;

Thence a straight line to the point where the eastern shore of the
Kurische Nehrung meets the administrative boundary about 4 kilometers
southwest of Nidden;

Thence this administrative boundary to the western shore of the Kurische
Nehrung.

=ARTICLE 29.=--The boundaries as described above are drawn in red on a
one-in-a-million map which is annexed to the present treaty. (Map No.
1.)

In the case of any discrepancies between the text of the treaty and this
map or any other map which may be annexed, the text will be final.

=ARTICLE 30.=--In the case of boundaries which are defined by a
waterway, the terms "course" and "channel" used in the present treaty
signify: in the case of non-navigable rivers, the median line of the
waterway or of its principal arm, and in the case of navigable rivers
the median line of the principal channel of navigation. It will rest
with the boundary commissions provided by the present treaty to specify
in each case whether the frontier line shall follow any changes of the
course or channel which may take place or whether it shall be definitely
fixed by the position of the course or channel at the time when the
present treaty comes into force.



PART III

Political Clauses for Europe


SECTION I.--_Belgium_

=ARTICLE 31.=--Germany, recognizing that the treaties of April 19, 1839,
which established the status of Belgium before the war, no longer
conform to the requirements of the situation, consents to the abrogation
of the said treaties and undertakes immediately to recognize and to
observe whatever conventions may be entered into by the principal allied
and associated powers, or by any of them in concert with the Governments
of Belgium and of the Netherlands, to replace the said treaties of 1839.
If her formal adhesion should be required to such conventions or to any
of their stipulations, Germany undertakes immediately to give it.

=ARTICLE 32.=--Germany recognizes the full sovereignty of Belgium over
the whole of the contested territory of Moresnet, (called Moresnet
Neutre.)

=ARTICLE 33.=--Germany renounces in favor of Belgium all rights and
title over the territory of Prussian Moresnet situated on the west of
the road from Liége to Aix-la-Chapelle: the road will belong to Belgium
where it bounds this territory.

=ARTICLE 34.=--Germany renounces in favor of Belgium all rights and
title over the territory comprising the whole of the Kreise of Eupen and
of Malmédy.

During the six months after the coming into force of this treaty,
registers will be opened by the Belgian authorities at Eupen and Malmédy
in which the inhabitants of the above territory will be entitled to
record in writing a desire to see the whole or part of it remain under
German sovereignty.

The results of this public expression of opinion will be communicated by
the Belgian Government to the League of Nations, and Belgium undertakes
to accept the decision of the League.

=ARTICLE 35.=--A commission of seven persons, five of whom will be
appointed by the principal allied and associated powers, one by Germany
and one by Belgium, will be set up fifteen days after the coming into
force of the present treaty to settle on the spot the new frontier line
between Belgium and Germany, taking into account the economic factors
and the means of communication.

Decisions will be taken by a majority and will be binding on the parties
concerned.

=ARTICLE 36.=--When the transfer of the sovereignty over the territories
referred to above has become definitive, German nationals habitually
resident in the territories will definitively acquire Belgian
nationality ipso facto, and will lose their German nationality.

Nevertheless German nationals who become resident in the territories
after the 1st August, 1914, shall not obtain Belgian nationality without
a permit from the Belgian Government.

=ARTICLE 37.=--Within the two years following the definitive transfer of
the sovereignty over the territories assigned to Belgium under the
present treaty, German nationals over 18 years of age habitually
resident in those territories will be entitled to opt for German
nationality.

Option by a husband will cover his wife, and option by parents will
cover their children under 18 years of age.

Persons who have exercised the above right to opt must within the
ensuing twelve months transfer their place of residence to Germany.

They will be entitled to retain their immovable property in the
territories acquired by Belgium. They may carry with them their movable
property of every description. No export or import duties may be imposed
upon them in connection with the removal of such property.

=ARTICLE 38.=--The German Government will hand over without delay to the
Belgian Government the archives, registers, plans, title deeds and
documents of every kind concerning the civil, military, financial,
judicial or other administrations in the territory transferred to
Belgian sovereignty.

The German Government will likewise restore to the Belgian Government
the archives and documents of every kind carried off during the war by
the German authorities from the Belgian public administrations, in
particular from the Ministry of Foreign Affairs at Brussels.

=ARTICLE 39.=--The proportion and nature of the financial liabilities of
Germany and of Prussia which Belgium will have to bear on account of the
territories ceded to her shall be fixed in conformity with Articles 254
and 256 of Part IX. (financial clauses) of the present treaty.


SECTION II.--_Luxemburg_

=ARTICLE 40.=--With regard to the Grand Duchy of Luxemburg, Germany
renounces the benefit of all the provisions inserted in her favor in the
treaties of Feb. 8, 1842; April 2, 1847; Oct. 20--25, 1865; Aug. 18,
1866; Feb. 21 and May 11, 1867; May 10, 1871; June 11, 1872, and Nov.
11, 1902, and in all conventions consequent upon such treaties.

Germany recognizes that the Grand Duchy of Luxemburg ceased to form part
of the German Zollverein as from January 1, 1919; renounces all right to
the exploitation of the railways, adheres to the termination of the
régime of neutrality of the Grand Duchy, and accepts in advance all
international arrangements which may be concluded by the Allied and
Associated Powers relating to the Grand Duchy.

=ARTICLE 41.=--Germany undertakes to grant to the Grand Duchy of
Luxemburg, when a demand to that effect is made to her by the principal
Allied and Associated Powers, the rights and advantages stipulated in
favor of such powers or their nationals in the present treaty, with
regard to economic questions, to questions relative to transport and to
aerial navigation.


SECTION III.--_Left Bank of the Rhine_

=ARTICLE 42.=--Germany is forbidden to maintain or construct any
fortifications either on the left bank of the Rhine or on the right bank
to the west of a line drawn fifty kilometers to the east of the Rhine.

=ARTICLE 43.=--In the area defined above the maintenance and the
assembly of armed forces either permanently or temporarily, and military
maneuvers of any kind, as well as the upkeep of all permanent works for
mobilization, are in the same way forbidden.

=ARTICLE 44.=--In case Germany violates in any manner the provisions of
Article 42 and 43 she shall be regarded as committing a hostile act
against the powers signatory of the present treaty and as calculated to
disturb the peace of the world.


SECTION IV.--_Sarre Basin_

=ARTICLE 45.=--As compensation for the destruction of the coal mines in
the North of France and as part payment toward the total reparation due
from Germany for the damage resulting from the war, Germany cedes to
France in full and absolute possession, with exclusive rights of
exploitation, unincumbered and free from all debts and charges of any
kind, the coal mines situated in the Sarre Basin as defined in Article
48.

=ARTICLE 46.=--In order to assure the rights and welfare of the
population and to guarantee to France complete freedom in working the
mines, Germany agrees to the provisions of Chapters 1 and 2 of the annex
hereto.

=ARTICLE 47.=--In order to make in due time permanent provision for the
government of the Sarre Basin in accordance with the wishes of the
population, France and Germany agree to the provisions of Chapter 3 of
the annex hereto.

=ARTICLE 48.=--The boundaries of the territory of the Sarre Basin, as
dealt with in the present stipulations, will be fixed as follows:

On the south and southwest: By the frontier of France as fixed by the
present treaty.

On the northwest and north: By a line following the northern
administrative boundary of the Kreise of Merzig from the point where it
leaves the French frontier to the point where it meets the
administrative boundary, separating the commune of Saarhölzbach from the
commune of Britten; following this communal boundary southward and
reaching the administrative boundary of the Canton of Merzig so as to
include in the territory of the Sarre Basin the Canton of Mettlach, with
the exception of the commune of Britten: following successively the
northern administrative limits of the Cantons of Merzig and Haustadt,
which are incorporated in the aforesaid Sarre Basin, then successively
the administrative boundaries separating the Kreise of Saare Louis,
Ottweiler, and Saint-wendel from the Kreise of Merzig, Treves, (Trier.)
and the principality of Birkenfeld as far as a point situated about 500
meters north of the village of Furschweiler, (viz.: The highest point of
the Metzelberg.)

On the northeast and east: From the last point defined above to a point
about 3½ kilometers east-northeast of Saint Wendel:

A line to be fixed on the ground passing east of Furschweiler, west of
Roschberg, east of points 418, 329, (south of Roschberg,) west of
Leitersweiler, northeast of point 46'4, and following the line of the
crest southward to its junction with the administrative boundary of the
Kreis of Kusel;

Thence in a southerly direction the boundary of the Kreis of Kusel, then
the boundary of the Kreis of Homburg toward the south-southeast to a
point situated about 1,000 meters west of Dunzweiler;

Thence to a point about one kilometer south of Hornbach: a line to be
fixed on the ground passing through point 424, (about 1,000 meters
southeast of Dunzweiler,) point 363, (Fuchsberg,) point 322, (southwest
of Waldmohr,) then east of Jagersburg and Erbach, then encircling
Homburg, passing through the points 361, (about 2½ kilometers northeast
by east of that town,) 342, (about 2 kilometers southeast of that town,)
347, (Schreinersberg,) 356, 350, (about 1½ kilometers southeast of
Schwarzenbach,) then passing east of Einöd, southeast of points 322 and
333, about 2 kilometers east of Webenheim, about 2 kilometers east of
Mimbach, passing east of the plateau which is traversed by the road from
Mimbach to Böckweiler, (so as to include this road in the territory of
the Sarre Basin,) passing immediately north of the junction of the roads
from Böckweiler and Altheim, situated about 2 kilometers north of
Altheim, then passing south of Ringweilderhof and north of point 322,
rejoining the frontier of France at the angle which it makes about 1
kilometer south of Hornbach, (see Map No. 2, scale 1-100,000, annexed to
the present treaty.)

A commission composed of five members, one appointed by France, one by
Germany, and three by the Council of the League of Nations, which will
select nationals of other powers, will be constituted within fifteen
days from the coming into force of the present treaty, to trace on the
spot the frontier line described above. In those parts of the preceding
line which do not coincide with administration boundaries, the
commission will endeavor to keep to the line indicated, while taking
into consideration, so far as is possible local economic interests and
existing communal boundaries.

The decisions of this commission will be taken by a majority and will be
binding on the parties concerned.

=ARTICLE 49.=--Germany renounces in favor of the League of Nations, in
the capacity of trustee, the government of the territory defined above.

At the end of fifteen years from the coming into force of the present
treaty the inhabitants of the said territory shall be called upon to
indicate the sovereignty under which they desire to be placed.

=ARTICLE 50.=--The stipulations under which the cession of the mines in
the Sarre Basin shall be carried out, together with the measures
intended to guarantee the rights and the well-being of the inhabitants
and the government of the territory, as well as the conditions in
accordance with which the plebiscite hereinbefore provided for is to be
made, are laid down in the annex hereto. This annex shall be considered
as an integral part of the present treaty, and Germany declares her
adherence to it.


ANNEX

In accordance with the provisions of Articles 45 to 50 of the present
treaty, the stipulations under which the cession by Germany to France of
the mines of the Sarre Basin will be effected, as well as the measures
intended to insure respect for the rights and well-being of the
population and the government of the territory, and the conditions in
which the inhabitants will be called upon to indicate the sovereignty
under which they may wish to be placed, have been laid down as follows:


CHAPTER 1.--CESSION AND EXPLOITATION OF MINING PROPERTY

1. From the date of the coming into force of the present treaty, all the
deposits of coal situated within the Sarre Basin, as defined in Article
48 of the said treaty, become the complete and absolute property of the
French State.

The French State will have the right of working or not working the said
mines or of transferring to a third party the right of working them,
without having to obtain any previous authorization or to fulfill any
formalities.

The French State may always require that the German mining laws and
regulations referred to below shall be applied in order to insure the
determination of its rights.

2. The right of ownership of the French State will apply not only to the
deposits which are free, and for which concessions have not yet been
granted, but also to the deposits for which concessions have already
been granted, whoever may be the present proprietors, irrespective of
whether they belong to the Prussian State, to the Bavarian State, to
other States or bodies, to companies or to individuals, whether they
have been worked or not, or whether a right of exploitation distinct
from the right of the owners of the surface of the soil has or has not
been recognized.

3. As far as concerns the mines which are being worked, the transfer of
the ownership to the French State will apply to all the accessories and
subsidiaries of the said mines, in particular to their plant and
equipment both on and below the surface, to their extracting machinery,
their plants for transforming coal into electric power, coke and
by-products, their workshops, means of communication, electric lines,
plant for catching and distributing water, land, buildings, such as
offices, managers', employes', and workmen's dwellings, schools,
hospitals, and dispensaries, their stocks and supplies of every
description, their archives and plans, and in general everything which
those who own or exploit the mines possess or enjoy for the purpose of
exploiting the mines and their accessories and subsidiaries.

The transfer will apply also to the debts owing for products delivered
before the entry into possession by the French State, and after the
signature of the present treaty, and to deposits of money made by
customers, whose rights will be guaranteed by the French State.

4. The French State will acquire the property free and clear of all
debts and charges. Nevertheless the rights acquired, or in course of
being acquired, by the employes of the mines and their accessories and
subsidiaries at the date of the coming into force of the present treaty,
in connection with pensions for old age or disability, will not be
affected. In return, Germany must pay over to the French State a sum
representing the actuarial amounts to which the said employes are
entitled.

5. The value of the property thus ceded to the French State will be
determined by the Reparation Commission referred to in Article 233 of
Part VIII. (Reparations) of the present treaty.

This value shall be credited to Germany in part payment of the amount
due for reparation.

It will be for Germany to indemnify the proprietors or parties
concerned, whoever they may be.

6. No tariff shall be established on the German railways and canals
which may directly or indirectly discriminate to the prejudice of the
transport of the personnel or products of the mines and their
accessories or subsidiaries, or of the material necessary to their
exploitation. Such transport shall enjoy all the rights and privileges
which any international railway conventions may guarantee to similar
products of French origin.

7. The equipment and personnel necessary to insure the dispatch and
transport of the products of the mines and their accessories and
subsidiaries, as well as the carriage of workmen and employes, will be
provided by the local railway administration of the basin.

8. No obstacle shall be placed in the way of such improvements of
railways or waterways as the French State may judge necessary to assure
the dispatch and transport of the products of the mines and their
accessories and subsidiaries, such as double trackage, enlargement of
stations, and construction of yards and appurtenances.

The distribution of expenses will, in the event of disagreement, be
submitted to arbitration.

The French State may also establish any new means of communication, such
as roads, electric lines, and telephone connections, which it may
consider necessary for the exploitation of the mines.

It may exploit freely and without any restrictions the means of
communication of which it may become the owner, particularly those
connecting the mines and their accessories and subsidiaries with the
means of communication situated in French territory.

9. The French State shall always be entitled to demand the application
of the German mining laws and regulations in force on the 11th of
November, 1918, excepting provisions adopted exclusively in view of the
state of war, with a view to the acquisition of such land as it may
judge necessary for the exploitation of the mines and their accessories
and subsidiaries.

The payment for damage caused to immovable property by the working of
the said mines and their accessories and subsidiaries shall be made in
accordance with the German mining laws and regulations above referred
to.

10. Every person whom the French State may substitute for itself as
regards the whole or part of its rights to the exploitation of the mines
and their accessories and subsidiaries shall enjoy the benefit of the
privileges provided in this annex.

11. The mines and other immovable property which become the property of
the French State may never be made the subject of measures of
forfeiture, forced sale, expropriation or requisition, nor of any other
measure affecting the right of property.

The personnel and the plant connected with the exploitation of these
mines or their accessories and subsidiaries, as well as the product
extracted from the mines or manufactured in their accessories and
subsidiaries, may not at any time be made the subject of any measures of
requisition.

12. The exploitation of the mines and their accessories and
subsidiaries, which become the property of the French State, will
continue, subject to the provisions of Paragraph 23 below, to be subject
to the régime established by the German laws and regulations in force on
the 11th November, 1918, excepting provisions adopted exclusively in
view of the state of war.

The rights of the workmen shall be similarly maintained, subject to the
provisions of the said Paragraph 23, as established on the 11th
November, 1918, by the German laws and regulations above referred to. No
impediment shall be placed in the way of the introduction or employment
in the mines and their accessories and subsidiaries of workmen from
without the basin.

The employes and workmen of French nationality shall have the right to
belong to French labor unions.

13. The amount contributed by the mines and their accessories and
subsidiaries, either to the local budget of the territory of the Sarre
Basin or to the communal funds, shall be fixed with due regard to the
ratio of the value of the mines to the total taxable wealth of the
basin.

14. The French State shall always have the right of establishing and
maintaining, as incidental to the mines, primary or technical schools
for its employes and their children, and of causing instruction therein
to be given in the French language, in accordance with such curriculum
and by such teachers as it may select.

It shall also have the right to establish and maintain hospitals,
dispensaries, workmen's houses and gardens, and other charitable and
social institutions.

15. The French State shall enjoy complete liberty with respect to the
distribution, dispatch and sale prices of the products of the mines and
their accessories and subsidiaries.

Nevertheless, whatever may be the total product of the mines, the French
Government undertakes that the requirements of local consumption for
industrial and domestic purposes shall always be satisfied in the
proportion existing in 1913 between the amount consumed locally and the
total output of the Sarre Basin.


CHAPTER II.--GOVERNMENT OF THE TERRITORY OF THE SARRE BASIN

16. The government of the territory of the Sarre Basin shall be
intrusted to a commission representing the League of Nations. This
commission shall sit in the territory of the Sarre Basin.

17. The Governing Commission provided for by Paragraph 16 shall consist
of five members chosen by the Council of the League of Nations, and will
include one citizen of France, one native inhabitant of the Sarre Basin
not a citizen of France, and three members belonging to three countries
other than France or Germany.

The members of the Governing Commission shall be appointed for one year
and may be reappointed. They can be removed by the Council of the League
of Nations, which will provide for their replacement. The members of the
Governing Commission will be entitled to a salary which will be fixed by
the Council of the League of Nations, and charged on the local revenues.

18. The Chairman of the Governing Commission shall be appointed for one
year from among the members of the commission by the Council of the
League of Nations and may be reappointed. The Chairman will act as the
executive of the commission.

19. Within the territory of the Sarre Basin the Governing Commission
shall have all the powers of government hitherto belonging to the German
Empire, Prussia or Bavaria, including the appointment and dismissal of
officials, and the creation of such administrative and representative
bodies as it may deem necessary. It shall have full powers to administer
and operate the railways, canals, and the different public services.

Its decisions shall be taken by a majority.

20. Germany will place at the disposal of the Governing Commission all
official documents and archives under the control of Germany, of any
German State, or of any local authority, which relate to the territory
of the Sarre Basin or to the rights of the inhabitants thereof.

21. It will be the duty of the Governing Commission to insure, by such
means and under such conditions as it may deem suitable, the protection
abroad of the interests of the inhabitants of the territory of the Sarre
Basin.

22. The Governing Commission shall have the full right of user of all
property, other than mines belonging, both in public and in private
domain, to the Imperial German Government, or the Government of any
German State, in the territory of the Sarre Basin.

As regards the railways, an equitable apportionment of rolling stock
shall be made by a mixed commission on which the government of the
territory of the Sarre Basin and the German railways will be
represented.

Persons, goods, vessels, carriages, wagons, and mails, coming from or
going to the Sarre Basin, shall enjoy all the rights and privileges
relating to transit and transport which are specified in the provisions
of Part XII. (ports, waterways, railways) of the present treaty.

23. The laws and regulations in force n Nov. 11, 1918, in the territory
of the Sarre Basin, (except those enacted in consequence of the state of
war,) shall continue to apply. If, for general reasons or to bring
these laws and regulations into accord with the provisions of the
present treaty, it is necessary to introduce modifications, these shall
be decided on, and put into effect by the Governing Commission, after
consultation with the elected representatives of the inhabitants in such
a manner as the commission may determine. No modification may be made in
the legal régime for the exploitation of the mines, provided for in
Paragraph 12, without the French State being previously consulted,
unless such modification results from a general regulation respecting
labor adopted by the League of Nations.

In fixing the conditions and hours of labor for men, women, and
children, the Governing Commission is to take into consideration the
wishes expressed by the local labor organizations, as well as the
principles adopted by the League of Nations.

24. Subject to the provisions of Paragraph 4, no rights of the
inhabitants of the Sarre Basin acquired or in process of acquisition at
the date of the coming into force of this treaty, in respect of any
insurance system of Germany, or in respect of any pension of any kind,
are affected by any of the provisions of the present treaty.

Germany and the Government of the territory of the Saare Basin will
preserve and continue all the aforesaid rights.

25. The civil and criminal courts existing in the territory of the Sarre
Basin shall continue.

A civil and criminal court will be established by the Governing
Commission to hear appeals from the decisions of the said courts, and to
decide matters for which these courts are not competent.

The Governing Commission will be responsible for settling the
organization and jurisdiction of the said court.

Justice will be rendered in the name of the Governing Commission.

26. The Governing Commission will alone have the power of levying taxes
and dues in the territory of the Sarre Basin.

These taxes and dues will be exclusively applied to the needs of the
territory.

The fiscal system existing on Nov. 11, 1918, will be maintained as far
as possible, and no new tax except customs duties may be imposed without
previously consulting the elected representatives of the inhabitants.

27. The present stipulations will not affect the existing nationality of
the inhabitants of the territory of the Sarre Basin. No hindrance shall
be placed in the way of those who wish to acquire a different
nationality, but in such case the acquisition of the new nationality
will involve the loss of any other.

28. Under the control of the Governing Commission the inhabitants will
retain their local assemblies, their religious liberties, their schools,
and their language. The right of voting will not be exercised for any
assemblies other than the local assemblies, and will belong to every
inhabitant over the age of 20 years without distinction of sex.

29. Any of the inhabitants of the Sarre Basin who may desire to leave
the territory will have full liberty to retain in it their immovable
property or to sell it at fair prices and to remove their movable
property free of any charge.

30. There will be no military service, whether compulsory or voluntary,
in the territory of the Sarre Basin, and the construction of
fortifications therein is forbidden. Only a local gendarmerie for the
maintenance of order may be established. It will be the duty of the
Governing Commission to provide in all cases for the protection of
persons and property in the Sarre Basin.

31. The territory of the Sarre Basin as defined by Article 48 of the
present treaty shall be subjected to the French customs régime. The
receipts from the customs duties on goods intended for local consumption
shall be included in the budget of the said territory after deduction of
all costs of collection. No export tax shall be imposed upon
metallurgical products or coal exported from the said territory to
Germany, nor upon German exports for the use of the industries of the
territory of the Sarre Basin. Natural or manufactured products
originating in the basin in transit over German territory and similarly
German products in transit over the territory of the basin shall be free
of all customs duties.

Products which both originate in and pass from the basin into Germany
shall be free of import duties for a period of five years from the date
of the coming into force of the present treaty, and during the same
period articles imported from Germany into the territory of the basin
for local consumption shall likewise be free of import duties.

During these five years the French Government reserves to itself the
right of limiting to the annual average of the quantities imported into
Alsace-Lorraine and France in the years 1911 to 1913 the quantities
which may be sent into France of all articles coming from the basin,
which include raw materials and semi-manufactured goods imported duty
free from Germany. Such average shall be determined after reference to
all available official information and statistics.

32. No prohibition or restriction shall be imposed upon the circulation
of French money in the territory of the Sarre Basin. The French State
shall have the right to use French money in all purchases, payments, and
contracts connected with the exploitation of the mines or their
accessories and subsidiaries.

33. The Governing Commission shall have power to decide all questions
arising from the interpretation of the preceding provisions. France and
Germany agree that any dispute involving a difference of opinion as to
the interpretation of the said provisions shall in the same way be
submitted to the Governing Commission, and the decision of a majority of
the commission shall be binding on both countries.


CHAPTER III.--PLEBISCITE

34. At the termination of a period of fifteen years from the coming into
force of the present treaty, the population of the territory of the
Sarre Basin will be called upon to indicate their desires in the
following manner:

A vote will take place, by communes or districts, on the three following
alternatives: (a) Maintenance of the régime established by the present
treaty and by this annex; (b) union with France; (c) union with Germany.

All persons without distinction of sex, more than 20 years old at the
date of the voting, resident in the territory at the date of the
signature of the present treaty, will have the right to vote.

The other conditions, methods, and the date of the voting shall be fixed
by the Council of the League of Nations in such a way as to secure the
liberty, secrecy, and trustworthiness of the voting.

35. The League of Nations shall decide on the sovereignty under which
the territory is to be placed, taking into account the wishes of the
inhabitants as expressed by the voting.

(a) If, for the whole or part of the territory, the League of Nations
decides in favor of the maintenance of the régime established by the
present treaty and this annex, Germany hereby agrees to make such
renunciation of her sovereignty in favor of the League of Nations as the
latter shall deem necessary. It will be the duty of the League of
Nations to take appropriate steps to adapt the régime definitely adopted
to the permanent welfare of the territory and the general interests.

(b) If for the whole or part of the territory the League of Nations
decides in favor of union with France, Germany hereby agrees to cede to
France in accordance with the decision of the League of Nations all
rights and title over the territory specified by the League.

(c) If for the whole or part of the territory the League of Nations
decides in favor of union with Germany, it will be the duty of the
League of Nations to cause the German Government to be re-established in
the government of the territory specified by the League.

[Illustration: Copyright Underwood & Underwood

=President Wilson's Welcome in Paris=

A general view of the Place de l'Etoile, showing the President's
carriage, passing the triumphant arch on its way to the Murat Castle,
where President Wilson established his home during his stay in the
French Capitol.]

36. If the League of Nations decides in favor of the union of the whole
or part of the territory of the Sarre Basin with Germany, France's
rights of ownership in the mines situated in such part of the territory
will be repurchased by Germany in their entirety at a price payable in
gold. The price to be paid will be fixed by three experts, one nominated
by Germany, one by France, and one, who shall be neither a Frenchman nor
a German, by the Council of the League of Nations. The decision of the
experts will be given by a majority.

The obligation of Germany to make such payment shall be taken into
account by the Reparation Commission, and for the purpose of this
payment Germany may create a prior charge upon her assets or revenues
upon such detailed terms as shall be agreed to by the Reparation
Commission.

If, nevertheless, Germany after a period of one year from the date on
which the payment becomes due shall not have effected the said payment,
the Reparation Commission shall do so in accordance with such
instructions as may be given by the League of Nations, and, if
necessary, by liquidating that part of the mines which is in question.

37. If, in consequence of the repurchase provided for in Paragraph 36,
the ownership of the mines or any part of them is transferred to
Germany, the French State and French nationals shall have the right to
purchase such amount of coal of the Sarre Basin as their industrial and
domestic needs are found at that time to require. An equitable
arrangement regarding amounts of coal, duration of contract, and prices
will be fixed in due time by the Council of the League of Nations.

38. It is understood that France and Germany may, by special agreements
concluded before the time fixed for the payment of the price for the
repurchase of the mines, modify the provisions of Paragraphs 36 and 37.

39. The Council of the League of Nations shall make such provisions as
may be necessary for the establishment of the régime which is to take
effect after the decisions of the League of Nations mentioned in
Paragraph 35 have become operative, including an equitable apportionment
of any obligations of the Government of the territory of the Sarre Basin
arising from loans raised by the commission or from other causes.

From the coming into force of the new régime, the powers of the
Governing Commission will terminate, except in the case provided for in
Paragraph 35. (a)

40. In all matters dealt with in the present annex, the decisions of the
Council of the League of Nations will be taken by a majority.


SECTION V.--_Alsace-Lorraine_

The high contracting powers, recognizing the moral obligation to redress
the wrong done by Germany in 1871, both to the rights of France and to
the wishes of the population of Alsace and Lorraine, which were
separated from their country in spite of solemn protests of their
representatives of the Assembly of Bordeaux, agree upon the following
articles:

=ARTICLE 51.=--The territories which were ceded to Germany in accordance
with the preliminaries of peace signed at Versailles on the 26th
February, 1871, and the treaty of Frankfort on the 10th May, 1871, are
restored to French sovereignty as from the date of the armistice of the
11th November, 1918.

The provisions of the treaties establishing the delimination of the
frontiers before 1871 shall be restored.

=ARTICLE 52.=--The German Government shall hand over without delay to
the French Government all archives, registers, plans, titles, and
documents of every kind concerning the civil, military, financial,
judicial, or other administrations of the territories restored to French
sovereignty. If any of these documents, archives, registers, titles, or
plans have been misplaced, they will be restored by the German
Government on the demand of the French Government.

=ARTICLE 53.=--Separate agreements shall be made between France and
Germany dealing with the interests of the inhabitants of the territories
referred to in Article 51, particularly as regards their civil rights,
their business and the exercise of their professions, it being
understood that Germany undertakes as from the present date to recognize
and accept the regulations laid down in the annex hereto regarding the
nationality of the inhabitants or natives of the said territories, not
to claim at any time or in any place whatsoever as German nationals
those who shall have been declared on any ground to be French, to
receive all others in her territory, and to conform, as regards the
property of German nationals in the territories indicated in Article 51,
with the provisions of Article 297, and the Annex to Section 4 of Part
X. (economic clauses) of the present treaty.

Those German nationals who without acquiring French nationality shall
receive permission from the French Government to reside in the said
territories shall not be subjected to the provisions of the said
article.

=ARTICLE 54=.--Those persons who have regained French nationality in
virtue of Paragraph 1 of the annex hereto, will be held to be
Alsace-Lorrainers for the purposes of the present section.

The persons referred to in Paragraph 2 of the said annex will, from the
day on which they have claimed French nationality, be held to be
Alsace-Lorrainers with retroactive effect as from the 11th November,
1918. From those whose application is rejected, the privilege will
terminate at the date of the refusal.

Such juridical persons will also have the status of Alsace-Lorrainers as
have been recognized as possessing this quality, whether by the French
administrative authorities or by a judicial decision.

=ARTICLE 55.=--The territories referred to in Article 51 shall return to
France, free and quit of all public debts under the conditions laid down
in Article 255 of Part IX. (financial clauses) of the present treaty.

=ARTICLE 56.=--In conformity with the provisions of Article 256 of Part
IX. (financial clauses) of the present treaty, France shall enter into
possession of all property and estate within the territories referred to
in Article 51, which belong to the German Empire or German States,
without any payment or credit on this account to any of the States
ceding the territories.

This provision applies to all movable or immovable property of public or
private domain, together with all rights whatsoever belonging to the
German Empire or the German States or to their administrative areas.

Crown property and the property of the former Emperor or other German
sovereigns shall be assimilated to property of the public domain.

=ARTICLE 57.=--Germany shall not take any action, either by means of
stamping or by any other legal or administrative measures not applying
equally to the rest of her territory, which may be to the detriment of
the legal value or redeemability of German monetary instruments or
moneys which at the date of the signature of the present treaty are
legally current, and at that date are in the possession of the French
Government.

=ARTICLE 58.=--A special convention will determine the conditions for
repayment in marks of the exceptional war expenditure advanced during
the course of the war by Alsace-Lorraine or by public bodies in
Alsace-Lorraine on account of the empire in accordance with German law,
such as payment to the families of persons mobilized, requisitions,
billeting of troops, and assistance to persons who have been expelled.
In fixing the amount of these sums Germany shall be credited with that
portion which Alsace-Lorraine would have contributed to the empire to
meet the expenses resulting from these payments, this contribution being
calculated according to the proportion of the imperial revenue derived
from Alsace-Lorraine in 1913.

=ARTICLE 59.=--The French Government will collect for its own account
the imperial taxes, duties, and dues of every kind leviable in the
territories referred to in Article 51 and not collected at the time of
the armistice of the 11th November, 1918.

=ARTICLE 60.=--The German Government shall without delay restore to
Alsace-Lorrainers, (individuals, juridical persons, and public
institutions,) all property, rights, and interests belonging to them on
the 11th November, 1918, in so far as these are situated in German
territory.

=ARTICLE 61.=--The German Government undertakes to continue and complete
without delay the execution of the financial clauses regarding
Alsace-Lorraine contained in the armistice conventions.

=ARTICLE 62.=--The German Government undertakes to bear the expense of
all civil and military pensions which had been earned in Alsace-Lorraine
on the date of the 11th November, 1918, and the maintenance of which was
a charge on the budget of the German Empire.

The German Government shall furnish each year the funds necessary for
the payment in francs, at the average rate of exchange for that year, of
the sums in marks to which persons resident in Alsace-Lorraine would
have been entitled if Alsace-Lorraine had remained under German
jurisdiction.

=ARTICLE 63.=--For the purposes of the obligation assumed by Germany in
Part VIII. (reparations) of the present treaty to give compensation for
damages caused to the civil populations of the Allied and Associated
countries in the form of lines, the inhabitants of the territories
referred to in Article 51 shall be assimilated to the above mentioned
populations.

=ARTICLE 64.=--The regulations concerning the control of the Rhine and
of the Moselle are laid down in Part XII. (ports, waterways, and
railways) of the present treaty.

=ARTICLE 65.=--Within a period of three weeks after the coming into
force of the present treaty the Port of Strasbourg and the Port of Kehl
shall be constituted, for a period of seven years, a single unit from
the point of view of exploitation.

The administration of this single unit will be carried on by a manager
named by the Central Rhine Commission, which shall also have power to
remove him. He shall be of French nationality. He will reside in
Strasbourg and will be subject to the supervision of the Central Rhine
Commission.

There will be established in the two ports free zones in conformity with
Part XII. (ports, waterways, and railways) of the present treaty.

A special convention between France and Germany, which shall be
submitted to the approval of the Central Rhine Commission, will fix the
details of this organization, particularly as regards finance.

It is understood that for the purpose of the present article the Port of
Kehl includes the whole of the area necessary for the movements of the
port and the trains which serve it, including the harbor, quays and
railroads, platforms, cranes, sheds and warehouses, silos, elevators and
hydro-electric plants, which make up the equipment of the port.

The German Government undertakes to carry out all measures which shall
be required of it in order to assure that all the making up and
switching of trains arriving at or departing from Kehl, whether for the
right bank or the left bank of the Rhine, shall be carried on in the
best conditions possible.

All property rights shall be safeguarded. In particular, the
administration of the ports shall not prejudice any property rights of
the French or Baden railroads.

Equality of treatment as respects traffic shall be assured in both ports
to the nationals, vessels, and goods of every country.

In case at the end of the sixth year France shall consider that the
progress made in the improvement of the Port of Strasbourg still
requires a prolongation of this temporary régime, she may ask for such
prolongation from the Central Rhine Commission, which may grant an
extension for a period not exceeding three years.

Throughout the whole period of any such extension the free zones above
provided for shall be maintained.

Pending appointment of the first manager by the Central Rhine
Commission, a provisional manager, who shall be of French nationality,
may be appointed by the principal Allied and Associated Powers, subject
to the foregoing provisions.

For all purposes of the present article the Central Rhine Commission
will decide by a majority of votes.

=ARTICLE 66.=--The railway and other bridges across the Rhine now
existing within the limits of Alsace-Lorraine shall, as to all their
parts and their whole length, be the property of the French State, which
shall insure their upkeep.

=ARTICLE 67.=--The French Government is substituted in all the rights of
the German Empire over all the railways which were administered by the
Imperial Railway Administration, and which are actually working or under
construction.

The same shall apply to the rights of the empire with regard to railway
and tramway concessions within the territories referred to in Article
51.

This substitution shall not entail any payment on the part of the French
State.

The frontier railway stations shall be established by a subsequent
agreement, it being stipulated in advance that on the Rhine frontier
they shall be situated on the right bank.

=ARTICLE 68.=--In accordance with the provisions of Article 268 of
Chapter 1. of Section I. of Part X. (economic clause) of the present
treaty, for a period of five years from the coming into force of the
present treaty, natural or manufactured products originating in and
coming from the territories referred to in Article 51 shall, on
importation into German customs territory, be exempt from all customs
duty. The French Government shall fix each year, by decree communicated
to the German Government, the nature and amount of the products which
shall enjoy this exemption.

The amount of each product which may be thus sent annually into Germany
shall not exceed the average of the amounts sent annually in the years
1911--1913.

Further, during the period of five years above mentioned, the German
Government shall allow the free export from Germany and the free
reimportation into Germany, exempt from all customs duties and other
charges (including internal charges), of yarns, tissues, and other
textile materials or textile products of any kind, and in any condition,
sent from Germany into the territories referred to in Article 51, to be
subjected there to any finishing process, such as bleaching, dyeing,
printing, mercerization, gassing, twisting, or dressing.

=ARTICLE 69.=--During a period of ten years from the coming into force
of the present treaty, central electric supply works situated in German
territory, and formerly furnishing electric power to the territories
referred to in Article 51, or to any establishment the working of which
passes permanently or temporarily from Germany to France, shall be
required to continue such supply up to the amount of consumption
corresponding to the undertakings and contracts current on the 11th
November, 1918.

Such supply shall be furnished according to the contracts in force and
at a rate which shall not be higher than that paid to the said works by
German nationals.

=ARTICLE 70.=--It is understood that the French Government preserves its
right to prohibit in the future in the territories referred to in
Article 51 all new German participation:

1. In the management or exploitation of the public domain and of public
services, such as railways, navigable waterways, water works, gas works,
electric power, &c.

2. In the ownership of mines and quarries of every kind and in
enterprises connected therewith;

3. In metallurgical establishments, even though their working may not be
connected with that of any mine.

=ARTICLE 71.=--As regards the territories referred to in Article 51,
Germany renounces on behalf of herself and her nationals as from the
11th November, 1918, all rights under the law of the 25th May, 1910,
regarding the trade in potash salts and generally under any stipulations
for the intervention of German organizations in the working of the
potash mines. Similarly she renounces on behalf of herself and her
nationals all rights under any agreements, stipulations or laws, which
may exist to her benefit with regard to other products of the aforesaid
territories.

=ARTICLE 72.=--The settlement of the questions relating to debts
contracted before the 11th November, 1918, between the German Empire and
the German States or their nationals residing in Germany on the one
part, and Alsace-Lorrainers residing in Alsace-Lorraine on the other
part, shall be effected in accordance with the provisions of Section
III. of Part X. (economic clauses) of the present treaty, the expression
"before the war" therein being replaced by the expression "before the
11th November, 1918." The rate of exchange applicable in the case of
such settlement shall be the average rate quoted on the Geneva Exchange
during the month preceding the 11th November, 1918. There may be
established in the territories referred to in Article 51, for the
settlement of the aforesaid debts under the conditions laid down in
Section III. of Part X (economic clauses) of the present treaty, a
special clearing office, it being understood that this office shall be
regarded as a "central office" under the provisions of Paragraph 1 of
the annex to the said section.

=ARTICLE 73.=--The private property rights and interests of
Alsace-Lorrainers in Germany will be regulated by the stipulations of
Section IV. of Part X. (economic clauses) of the present treaty.

=ARTICLE 74.=--The French Government reserves the right to retain and
liquidate all the property, rights and interests which German nationals
or societies controlled by Germany possessed in the territories referred
to in Article 51 on Nov. 11, 1918, subject to the conditions laid down
in the last paragraph of Article 53 above.

Germany will directly compensate its nationals who may have been
dispossessed by the aforesaid liquidations.

The product of these liquidations shall be applied in accordance with
the stipulations of Sections III. and IV. of Part X. (economic clauses)
of the present treaty.

=ARTICLE 75.=--Notwithstanding the stipulations of Section V. of Part X.
(economic clauses) of the present treaty, all contracts made before the
date of the promulgation in Alsace-Lorraine of the French decree of 30th
November, 1918, between Alsace-Lorrainers (whether individuals or
juridical persons) or others resident in Alsace-Lorraine on the one
part, and the German Empire or German States and their nationals
resident in Germany on the other part, the execution of which has been
suspended by the armistice or by subsequent French legislation, shall be
maintained.

Nevertheless, any contract of which the French Government shall notify
the cancellation to Germany in the general interest within a period of
six months from the date of the coming into force of the present treaty
shall be annulled except in respect of any debt or other pecuniary
obligation arising out of any act done or money paid thereunder before
the 11th November, 1918. If this dissolution would cause one of the
parties substantial prejudice, equitable compensation, calculated solely
on the capital employed without taking account of loss of profits, shall
be accorded to the prejudiced party.

With regard to prescriptions, limitations, and forfeitures in
Alsace-Lorraine, the provisions of Articles 300 and 301 of Section V.,
Part X. (economic clauses) shall be applied, with the substitution for
the expression "outbreak of war" of the expression "11th November,
1918," and for the expression "duration of the war" of the expression
"period from the 11th November, 1918, to date of the coming into force
of the present treaty."

=ARTICLE 76.=--Questions concerning rights in industrial, literary, or
artistic property of Alsace-Lorrainers shall be regulated in accordance
with the general stipulations of Section VII. of Part X. (economic
clauses) of the present treaty, it being understood that
Alsace-Lorrainers holding rights of this nature under German legislation
will preserve full and entire enjoyment of those rights on German
territory.

=ARTICLE 77.=--The German Government undertakes to pay over to the
French Government such proportion of all reserves accumulated by the
empire or by public or private bodies dependent upon it, for the
purposes of disability and old age insurance, as would fall to the
disability and old age insurance fund at Strasbourg.

The same shall apply in respect of the capital and reserves accumulated
in Germany falling legitimately to other serial insurance funds, to
miners' superannuation funds, to the fund of the railways of
Alsace-Lorraine, to other superannuation organizations established for
the benefit of the personnel of public administrations and institutions
operating in Alsace-Lorraine, and also in respect of the capital and
reserves due by the insurance fund of private employes at Berlin by
reason of engagements entered into for the benefit of insured persons of
that category resident in Alsace-Lorraine.

A special convention shall determine the conditions and procedure of
these transfers.

=ARTICLE 78.=--With regard to the execution of judgments, orders and
prosecutions, the following rules shall be applied:

1. All civil and commercial judgments which shall have been given since
Aug. 3, 1914, by the courts of Alsace-Lorraine between
Alsace-Lorrainers, or between Alsace-Lorrainers and foreigners, or
between foreigners, and which shall not have been appealed from before
the 11th November, 1918, shall be regarded as final and capable of being
fully executed.

When the judgment has been given between Alsace-Lorrainers and Germans,
or between Alsace-Lorrainers and subjects of the allies of Germany, it
shall only be capable of execution after the issue of an exequatur by
the corresponding new tribunal in the restored territory referred to in
Article 51.

2. All judgments given by German courts since the 3d August, 1914,
against Alsace-Lorrainers for political crimes or misdemeanors shall be
regarded as null and void.

3. All sentences passed since the 11th November, 1918, by the Imperial
Court of Leipzig on Appeals against the decisions of the courts of
Alsace-Lorraine shall be regarded as null and void and shall be so
pronounced. The papers in regard to the cases in which such sentences
have been given shall be returned to the courts of Alsace-Lorraine
concerned.

All appeals to the Imperial Court against decisions of the courts of
Alsace-Lorraine shall be suspended. In the cases referred to above, the
papers shall be returned under the aforesaid conditions for transfer
without delay to the French Cour de Cassation which shall be competent
to decide them.

4. All prosecutions of Alsace-Lorraine for offenses committed during the
period between the 11th November, 1918, and the coming into force of the
present treaty will be conducted under German law except in so far as
this has been modified by decrees duly published on the spot by the
French authorities.

All other questions as to competence, procedure or administration of
justice, shall be determined by a special convention between France and
Germany.

=ARTICLE 79.=--The stipulations as to nationality contained in the annex
hereto shall be considered as of equal force with the provisions of the
present section.

All other questions concerning Alsace-Lorraine which are not regulated
by the present section and the annex thereto, or by the general
provisions of the present treaty, will form the subject of further
conventions between France and Germany.


ANNEX

1. As from the 11th November, 1918, the following persons are ipso facto
reinstated in French nationality:

First--Persons who lost French nationality by the application of the
Franco-German treaty of the 10th May, 1871, and who have not since that
date acquired any nationality other than German;

Second--The legitimate or natural descendants of the persons referred to
the immediately preceding paragraph, with the exception of those whose
ascendants in the paternal line include a German who migrated into
Alsace-Lorraine after the 15th July, 1870;

Third--All persons born in Alsace-Lorraine of unknown parents or whose
nationality is unknown.

2. Within the period of one year from the coming into force of the
present treaty, persons included in any of the following categories may
claim French nationality:

First--All persons not restored to French nationality under Paragraph 1,
above, whose ascendants include a Frenchman or French woman who lost
French nationality under the conditions referred to in the said
paragraph;

Second--All foreigners not nationals of a German State who acquired the
status of a citizen of Alsace-Lorraine before the 3d August, 1914;

Third--All Germans domiciled in Alsace-Lorraine, if they have been so
domiciled since a date previous to 15th July, 1870, or if one of their
ascendants was at that date domiciled in Alsace-Lorraine;

Fourth--All Germans born or domiciled in Alsace-Lorraine who have served
in the allied or associated armies during the present war and their
descendants;

Fifth--All persons born in Alsace-Lorraine before 10th May, 1871, of
foreign parents, and the descendants of such persons;

Sixth--The husband or wife of any person whose French nationality may
have been restored under Paragraph 1 or who may have claimed and
obtained French nationality in accordance with the preceding previsions.

The legal representatives of a minor may exercise on behalf of that
minor the right to claim French nationality; and if that right has not
been exercised, the minor may claim French nationality within the year
following his majority.

Except in the case provided in No. 6 of the present paragraph, the
French authorities reserve to themselves the right in individual cases
to reject the claim to French nationality.

3. Subject to the provisions of Paragraph 2, Germans born or domiciled
in Alsace-Lorraine shall not acquire French nationality by reason of the
restoration of Alsace-Lorraine to France, even though they may have the
status of citizens of Alsace-Lorraine.

They may acquire French nationality only by naturalization, on condition
of having been domiciled in Alsace-Lorraine from a date previous to the
3d August, 1914, and of submitting proof of unbroken residence within
the restored territory for a period of three years from the 11th
November, 1918.

France will be solely responsible for their diplomatic and consular
protection from the date of their application for French naturalization.

4. The French Government shall determine the procedure by which
reinstatement in French nationality as of right shall be effected, and
the conditions under which decisions shall be given upon claims to such
nationality and applications for naturalization, as provided by the
present annex.


SECTION VI.--_Austria_

=ARTICLE 80.=--Germany acknowledges and will respect strictly the
independence of Austria. Within the frontiers which may be fixed by a
treaty between that State and the principal Allied and Associated Powers
she agrees that this independence shall be inalienable, except with the
consent of the Council of the League of Nations.


SECTION VII.--_Czechoslovak State_

=ARTICLE 81.=--Germany, in conformity with the action already taken by
the Allied and Associated Powers, recognizes the complete independence
of the Czechoslovak State, which will include the autonomous territory
of the Ruthenians to the south of the Carpathians. Germany hereby
recognizes the frontier of this State as determined by the principal
Allied and Associated Powers and the other interested States.

=ARTICLE 82.=--The old frontier as it existed on Aug. 3, 1914, between
Austria-Hungary and the German Empire will constitute the frontier
between Germany and the Czechoslovak State.

=ARTICLE 83.=--Germany renounces in favor of the Czechoslovak State all
rights and title over the portion of Silesian territory defined as
follows:

Starting from a point about 2 kilometers southeast of Katscher, on the
boundary between the Circles (Kreise) of Loebschütz and Ratibor: the
boundary between the two Kreise; then, the former boundary between
Germany and Austria-Hungary up to a point on the Oder immediately to the
south of the Ratibor-Oderberg railway; thence, toward the northwest and
up to a point about 2 kilometers to the southeast of Katscher: a line to
be fixed on the spot passing to the west of Kranowitz.

A commission composed of seven members, five nominated by the Principal
Allied and Associated Powers, one by Poland, and one by the Czechoslovak
State, will be appointed fifteen days after the coming into force of the
present treaty to trace on the spot the frontier line between Poland and
the Czechoslovak State.

The decisions of this commission will be taken by a majority and shall
be binding on the parties concerned.

Germany hereby agrees to renounce in favor of the Czechoslovak State all
rights and title over the part of the Kreise of Loebschütz comprised
within the following boundaries in case after the determination of the
frontier between Germany and Poland the said part of that circle should
become isolated from Germany: from the southeastern extremity of the
salient of the former Austrian frontier at about 5 kilometers to the
west of Loebschütz southward and up to a point of junction with the
boundary between the Kreise of Loebschütz and Ratibor: the former
frontier between Germany and Austria-Hungary; then, northward, the
administrative boundary between the Kreise of Loebschütz and Ratibor up
to a point situated about 2 kilometers to the southeast of Katscher;
thence, northwestward and up to the starting point of this definition: a
line to be fixed on the spot passing to the east of Katscher.

=ARTICLE 84.=--German nationals habitually resident in any of the
territories recognized as forming part of the Czechoslovak State will
obtain Czechoslovak nationality ipso facto and lose their German
nationality.

=ARTICLE 85.=--Within a period of two years from the coming into force
of the present treaty German nationals over 18 years of age habitually
resident in any of the territories recognized as forming part of the
Czechoslovak State will be entitled to opt for German nationality.
Czechoslovaks who are habitually resident in Germany will have a similar
right to opt for Czechoslovak nationality.

Option by a husband will cover his wife, and option by parents will
cover their children under 18 years of age. Persons who have exercised
the above right to opt must within the succeeding twelve months transfer
their place of residence to the State for which they have opted. They
will be entitled to retain their landed property in the territory of the
other State where they had place of residence before exercising the
right to opt. They may carry with them their movable property of every
description. No export or import duties may be imposed upon them in
connection with the removal of such property. Within the same period
Czechoslovaks who are German nationals and are in a foreign country will
be entitled, in the absence of any provisions to the contrary in the
foreign law, and if they have not acquired the foreign nationality, to
obtain Czechoslovak nationality and lose their German nationality by
complying with the requirements laid down by the Czechoslovak State.

=ARTICLE 86.=--The Czechoslovak State accepts and agrees to embody in a
treaty with the principal Allied and Associated Powers such provisions
as may be deemed necessary by the said powers to protect the interests
of inhabitants of that State who differ from the majority of the
population in race, language or religion.

The Czechoslovak State further accepts and agrees to embody in a treaty
with the said powers such provisions as they may deem necessary to
protect freedom of transit and equitable treatment of the commerce of
other nations.

The proportion and nature of the financial obligations of Germany and
Prussia, which the Czechoslovak State will have to assume on account of
the Silesian territory placed under its sovereignty will be determined
in accordance with Article 254 of Part IX. (financial clauses) of the
present treaty.

Subsequent agreements will decide all questions not decided by the
present treaty which may arise in consequence of the cession of the said
territory.


SECTION VIII.--_Poland_

=ARTICLE 87.=--Germany, in conformity with the action already taken by
the Allied and Associated Powers, recognizes the complete independence
of Poland and renounces in her favor all rights and title over the
territory bounded by the Baltic Sea; the eastern frontier of Germany as
laid down in Article 27 of Part II. (boundaries of Germany) of the
present treaty, up to a point situated about two kilometers to the east
of the Lorzendorf, then a line to the acute angle which the northern
boundary of Upper Silesia makes about three kilometers northwest of
Simmenau, then to where the boundary of Upper Silesia has its meeting
point with the old frontier between Germany and Russia, then this
frontier to the point where it crosses the course of the Niemen, and
then the northern frontier of East Prussia, as laid down in Article 28,
Part II. aforesaid.

The terms of this article do not, however, apply to the territories of
East Prussia and the free city of Danzig, as defined in Article 28, of
Part II. (boundaries of Germany,) and in Article 100 of Section XI.
(Danzig) of this part.

The boundaries of Poland not laid down in the present treaty will be
subsequently determined by the principal Allied and Associated Powers. A
commission consisting of seven members, five of whom shall be nominated
by the principal Allied and Associated Powers, one by Germany, and one
by Poland, shall be constituted fifteen days after the coming into force
of the present treaty to delimit on the spot the frontier line between
Poland and Germany. The decision of the commission will be taken by a
majority of votes and shall be binding upon the parties concerned.

=ARTICLE 88.=--In the portion of Upper Silesia included within the
boundaries described below the inhabitants will be called upon to
indicate by a vote whether they wish to be attached to Germany or to
Poland:

Starting from the northern point of the salient of the old province of
Austrian Silesia, situated about eight kilometers east of Neustadt, the
former frontier between Germany and Austria, to its junction with the
boundary between the Kreise of Loebschütz and Ratibor; thence in a
northerly direction to a point about two kilometers southeast of
Katscher; the boundary between the Kreise of Loebschütz and Ratibor;
thence in a southeasterly direction to a point on the course of the Oder
immediately south of the Ratibor-Oderberg railway: a line to be fixed on
the ground passing south of Karanowitz;

Thence the old boundary between Germany and Austria, thence the old
boundary between Germany and Russia to its junction with the
administrative boundary between Posnania and Upper Silesia; thence this
administrative boundary to its junction with the administrative boundary
between Upper and Middle Silesia; thence westward to the point where the
administrative boundary turns in an acute angle to the southwest about
three kilometers northwest of Simmenau;

The boundary between Upper and Middle Silesia; thence in a westerly
direction to a point to be fixed on the ground about two kilometers east
of Orzendorf: a line to be fixed on the ground passing north of Kein
Hennersdorf; thence southward to the point where the boundary between
Upper and Middle Silesia cuts the Stadtel-Karlsruhe road: a line to be
fixed on the ground passing west of Hennersdorf, Polkowitz, Noldau,
Steamersdorf and Dammer, and east of Strehlitz, Nassadel, Eckersdorf,
Schwirz, and Stadtel; thence the boundary between Upper and Middle
Silesia to its junction with the eastern boundary of the Kreise of
Falkenberg; thence the eastern boundary of the Kreis of Falkenberg to
the point of the salient which is three kilometers east of Puschine;
thence to the northern point of the salient of the old province of
Austrian Silesia, situated about eight kilometers east of Neustadt: a
line to be fixed on the ground, passing east of Zulls.

The régime under which this plebiscite will be taken and given effect to
is laid down in the annex hereto.

The Polish and German Governments hereby respectively bind themselves to
conduct no prosecutions on any part of their territory and to take no
exceptional proceedings for any political action performed in Upper
Silesia during the period of the régime laid down in the annex hereto,
and up to the settlement of the final status of the country Germany
hereby renounces in favor of Poland all rights and title over the
portion of Upper Silesia lying beyond the frontier line fixed by the
principal Allied and Associated Powers as this result of the plebiscite.


ANNEX

1. Within fifteen days from the coming into force of the present treaty
the German troops and such officials as may be designated by the
commission set up under the provisions of Paragraph 2 shall evacuate the
plebiscite area. Up to the moment of the completion of the evacuation
they shall refrain from any form of requisitioning in money or in kind
and from all acts likely to prejudice the material interest of the
country.

Within the same period the workmen's and soldiers' councils which have
been constituted in this area shall be dissolved. Members of such
councils who are natives of another region and are exercising their
functions at the date of the coming into force of the present treaty, or
who have gone out of office since the 1st March, 1919, shall be
evacuated.

All military and semi-military unions formed in the said area by the
inhabitants of the district shall be immediately disbanded. All members
of such military organizations who are not domiciled in the said area
shall be required to leave it.

2. The plebiscite area shall be immediately placed under the authority
of an international commission of four members to be designated by the
following powers: The United States of America, France, the British
Empire, and Italy. It shall be occupied by troops belonging to the
Allied and Associated Powers, and the German Government undertakes to
give facilities for the transference of troops to Upper Silesia.

3. The commission shall enjoy all the powers exercised by the German or
by the Prussian Government; except those of legislation or taxation. It
shall also be substituted for the Government of the Province and the
Regierungsbezirk.

It shall be within the competence of the commission to interpret the
powers hereby conferred upon it, and to determine to what extent it
shall exercise them and to what extent they shall be left in the hands
of the existing authorities.

Changes in the existing laws and the existing taxation shall only be
brought into force with the consent of the commission.

The commission will maintain order with the help of the troops which
will be at its disposal and to the extent which it may deem necessary by
means of gendarmerie recruited among the inhabitants of the country. The
commission shall provide immediately for the replacement of the
evacuated German officials, and, if occasion arises, shall itself order
the evacuation of such authorities and proceed to the replacement of
such local authorities as may be required. It shall take all steps which
it thinks proper to insure the freedom, fairness, and secrecy of the
vote. In particular, it shall have the right to order the expulsion of
any person who may in any way have attempted to distort the result of
the plebiscite by methods of corruption or intimidation.

The commission shall have full power to settle all questions arising
from the execution of the present clauses. It shall be assisted by
technical advisers, chosen by it from among the local populations. The
decision of the commission shall be taken by a majority vote.

4. The vote shall take place at such date as may be determined by the
principal Allied and Associated Powers, but not sooner than six months
or later than eighteen months after the establishment of the commission
in the area.

The right to vote shall be given to all persons, without distinction of
sex, who:

(a) Have completed their twentieth year on the 1st of January of the
year in which the plebiscite takes place;

(b) Were born in the plebiscite area or have been domiciled there since
a date to be determined by the commission, which shall not be subsequent
to January 1, 1919, or who have been expelled by the German authorities
and have not retained their domicile there.

Persons convicted of political offenses shall not exercise their right
of voting. Every person will vote in the commune where he is domiciled,
or in which he was born, if he has not retained his domicile in the
area.

The result of the vote will be determined by the communes according to
the majority of votes in each commune.

5. On the conclusion of the voting the number of votes cast in each
commune will be communicated by the commission to the principal Allied
and Associated Powers with a full report as to the taking of the vote
and a recommendation as to the line which ought to be adopted as the
frontier of Germany in Upper Silesia. In this recommendation regard will
be paid to the wishes of the inhabitants, as shown by the vote, and to
the geographical and economic conditions of the locality.

6. As soon as the frontier has been fixed by the principal Allied and
Associated Powers the German authorities will be notified by the
International Commission that they are free to take over the
administration of the territory which it is recognized should be German;
the said authorities must proceed to do so within one month of such
notification and in the manner prescribed by the commission. Within the
same period and in the manner prescribed by the commission, the Polish
Government must proceed to take over the administration of the
territory which it is recognized should be Polish.

When the administration of the territory has been provided for by the
German and Polish authorities respectively the powers of the commission
will terminate.

The cost of the Army of Occupation and expenditure by the commission,
whether in discharge of its own functions or in the administration of
the territory, will be a charge on the area.

=ARTICLE 89.=--Poland undertakes to accord freedom of transit to
persons, goods, vessels, carriages, wagons, and mails in transit between
East Prussia and the rest of Germany over Polish territory, including
territorial waters, and to treat them at least as favorably as the
persons, goods, vessels, carriages, wagons, and mails, respectively, of
Polish or of any other most-favored nationality, origin, importation
starting point, or ownership, as regards facilities, restrictions, and
all other matters.

Goods in transit shall be exempt from all customs or other similar
duties.

Freedom of transit will extend to telegraphic and telephonic services
under the conditions laid down by the conventions referred to in Article
98.

=ARTICLE 90.=--Poland undertakes to permit, for a period of fifteen
years, the exportation to Germany of the products of the mines in any
part of Poland in accordance with the present treaty. Such export shall
be subject to duties or other charges or restrictions on exportation.

Poland agrees to take such steps as may be necessary to secure that such
products shall be available for sale to purchasers in Germany on terms
as favorable as are applicable to like products sold under similar
conditions to purchasers in Poland or in any other country.

=ARTICLE 91.=--German nationals habitually resident in territories
recognized as forming part of Poland will acquire Polish nationality
ipso facto and will lose their German nationality. German nationals,
however, or their descendants who became resident in these territories
after January 1, 1908, will not acquire Polish nationality without a
special authorization from the Polish State.

Within a period of two years after the coming into force of the present
treaty, German nationals over 18 years of age, habitually resident in
any of the territories recognized as forming part of Poland, will be
entitled to opt for German nationality. Poles who are German nationals
over 18 years of age, and habitually resident in Germany, will have a
similar right to opt for Polish nationality. Option by a husband will
cover his wife and option by parents will cover their children under 18
years of age. Persons who have exercised the above right to opt must
within the succeeding twelve months transfer their place of residence to
the State for which they have opted. They will be entitled to retain
their immovable property in the territory of the other State, where they
had their place of residence before exercising the right to opt. They
may carry with them their movable property of every description. No
export or import duties or charges may be imposed upon them in
connection with the removal of such property.

Within the same period Poles who are German nationals and are in a
foreign country will be entitled, in the absence of any provisions to
the contrary in the foreign law, and if they have not acquired foreign
nationality, to obtain Polish nationality and to lose their German
nationality by complying with the requirements laid down by the Polish
State.

In this portion of Upper Silesia submitted to a plebiscite the
provisions of this article should only come into force as from the
definite attribution of the territory.

=ARTICLE 92.=--The proportion and the nature of the financial
liabilities of Germany and Prussia to be borne by Poland will be
determined in accordance with Article 254 of Part IX. (financial
clauses) of the present treaty. There shall be excluded from the share
of such financial liabilities assumed by Poland that portion of the debt
which, according to the finding of the Reparation Commission referred to
in the above mentioned article, arises from measures adopted by the
German and Prussian Governments with a view to German colonization in
Poland. In fixing under Article 256 of the present treaty the value of
the property and possessions belonging to the German Empire and to the
German states which pass to Poland, with the territory transferred
above, the Reparation Commission shall exclude from the valuation
buildings, forests, and other State property which belonged to the
former kingdom of Poland; Poland shall acquire these properties free of
all costs and charges.

In all the German territory transferred in accordance with the present
treaty and recognized as forming definitely a part of Poland, the
property rights and interests of German nationals shall not be
liquidated under Article 297 by the Polish Government except in
accordance with the following provisions:

1. The proceeds of the liquidation shall be paid direct to the owner;

2. If, on his application, the mixed arbitral tribunal provided for by
the Section 6 of Part X. (economic clauses) of the present treaty, or an
arbitrator appointed by that tribunal, is satisfied that the conditions
of the sale or measures taken by the Polish Government outside of its
general legislation were unfairly prejudicial to the price obtained,
they shall have discretion to award to the owner equitable compensation
to be paid by the Polish Government.

Further agreements will regulate all questions arising out of the
cession of the above territory, which are not regulated by the present
treaty.

=ARTICLE 93.=--Poland accepts and agrees to embody in a treaty with the
principal Allied and Associated Powers such provisions as may be deemed
necessary by the said powers to protect the interests of inhabitants of
Poland who differ from the majority of the population in race, language
or religion.

Poland further accepts and agrees to embody in a treaty with the said
powers such provisions as they may deem necessary to protect freedom of
transit and equitable treatment of the commerce of other nations.


SECTION IX.--_East Prussia._

=ARTICLE 94.=--In the area between the southern frontier of East
Prussia, as described in Article 28 of Part II. (frontiers of Germany)
of the present treaty, and the line described below, the inhabitants
will be called upon to indicate by a vote the State to which they wish
to belong:

The western and northern boundary of Regierungsbezirk Allenstein to its
junction with the boundary between the Kreise of Oletsko and Angerburg,
thence, the northern boundary of the Kreise of Oletsko to its junction
with the old frontier of East Prussia.

=ARTICLE 95.=--The German troops and authorities will be withdrawn from
the area defined above within a period not exceeding fifteen days after
the coming into force of the present treaty. Until the evacuation is
completed they will abstain from all requisitions in money or in kind
and from all measures injurious to the economic interests of the
country.

On the expiration of the above-mentioned period the said area will be
placed under the authority of an International Commission of five
members appointed by the principal Allied and Associated Powers. This
commission will have general powers of administration and, in
particular, will be charged with the duty of arranging for the vote, and
of taking such measures as it may deem necessary to insure its freedom,
fairness, and secrecy. The commission will have all necessary authority
to decide any questions to which the execution of these provisions may
give rise. The commission will make such arrangements as may be
necessary for assistance in the exercise of its functions by officials
chosen by itself from the local population; its decisions will be taken
by a majority.

Every person, irrespective of sex, will be entitled to vote who:

(a) Is 20 years of age at the date of the coming into force of the
present treaty, and

(b) Was born within the area where the vote will take place, or has been
habitually resident there from a date to be fixed by the commission.

Every person will vote in the commune where he is habitually resident
or, if not habitually resident in the area, in the commune where he was
born.

The result of the vote will be determined by commune, (Gemeinde,)
according to the majority of the votes in each commune.

On the conclusion of the voting the number of votes cast in each commune
will be communicated by the commission to the principal Allied and
Associated Powers with a full report as to the taking of the vote and a
recommendation as to the line which ought to be adopted as the boundary
of East Prussia in this region.

In this recommendation, regard will be paid to the wishes of the
inhabitants as shown by the vote, and to the geographical and economic
conditions of the locality. The principal Allied and Associated Powers
will then fix the frontier between East Prussia and Poland in this
region. If the line fixed by the principal Allied and Associated Powers
is such as to exclude from East Prussia any part of the territory
defined in Article 94, the renunciation of its rights by Germany in
favor of Poland, as provided in Article 87, above, will extend to the
territories so excluded. As soon as the line has been fixed by the
principal Allied and Associated Powers, the authorities administering
East Prussia will be notified by the International Commission that they
are free to take over the administration of the territory to the north
of the line so fixed, which they shall proceed to do within one month of
such notification and in the manner prescribed by the commission. Within
the same period, and as prescribed by the commission, the Polish
Government must proceed to take over the administration of the territory
to the south of the line. When the administration of the territory by
the East Prussian and Polish authorities, respectively, has been
provided for, the powers of the commission will terminate.

Expenditure by the commission, whether in the discharge of its own
functions or in the administration of the territory, will be borne by
the local revenues. East Prussia will be required to bear such
proportion of any deficit as may be fixed by the principal Allied and
Associated Powers.

=ARTICLE 96.=--In the area comprising the Kreise of Stuhm and Rosenberg,
and the portion of the Kreise of Marienburg which is situated east of
the Nogat, and that of Marienwerder east of the Vistula, the inhabitants
will be called upon to indicate by a vote, to be taken in each commune,
(Gemeinde,) whether they desire the various communes situated in this
territory to belong to Poland or to East Prussia.

=ARTICLE 97.=--The German troops and authorities will be withdrawn from
the area defined in Article 96 within a period not exceeding fifteen
days after the coming into force of the present treaty. Until the
evacuation is completed they will abstain from all requisitions in money
or in kind and from all measures injurious to the economic interests of
the country. On the expiration of the above-mentioned period the said
area will be placed under the authority of an International Commission
of five members appointed by the principal Allied and Associated Powers.
This commission, supported, if occasion arises, by the necessary forces,
will have general powers of administration, and, in particular, will be
charged with the duty of arranging for the vote and of taking such
measures as it may deem necessary to insure its freedom, fairness, and
secrecy. The commission will conform as far as possible to the
provisions of the present treaty relating to the plebiscite in the
Allenstein area. Its decision will be taken by a majority. Expenditure
by the commission, whether in the discharge of its own functions or in
the administration of the territory, will be borne by the local
revenues.

On the conclusion of the voting, the number of votes cast in each
commune will be communicated by the commission to the principal Allied
and Associated Powers, with a full report as to the taking of the vote
and a recommendation as to the line which ought to be adopted as the
boundary of East Prussia in this region. In this recommendation regard
will be paid to the wishes of the inhabitants as shown by the vote and
to the geographical and economic conditions of the locality. The
principal Allied and Associated Powers will then fix the frontier
between East Prussia and Poland in this region, leaving in any case to
Poland for the whole of the section bordering on the Vistula full and
complete control of the river, including the east bank as far east of
the river as may be necessary for its regulation and improvement.
Germany agrees that in any portion of the said territory which remains
German no fortifications shall at any time be erected.

The principal Allied and Associated Powers will at the same time draw up
regulations for assuring to the population of East Prussia to the
fullest extent, and under equitable conditions, access to the Vistula,
and the use of it for themselves, their commerce, and their boats. The
determination of the frontier and the foregoing regulations shall be
binding upon all the parties concerned. When the administration of the
territory has been taken over by the East Prussian and Polish
authorities, respectively, the powers of the commission will terminate.

=ARTICLE 98.=--Germany and Poland undertake, within one year of the
coming into force of this treaty, to enter into conventions of which the
terms, in case of difference, shall be settled by the Council of the
League of Nations, with the object of securing on the one hand to
Germany full and adequate railroad, telegraphic, and telephonic
facilities for communication between the rest of Germany and East
Prussia over the intervening Polish territory, and Anthe other hand to
Poland full and adequate railroad, telegraphic, and telephonic
facilities for communication between Poland and the free city of Danzig
over any German territory that may, on the right bank of the Vistula,
intervene between Poland and the free city of Danzig.

[Illustration: _Copyright Harris and Ewing_

Sir Eric Drummond

The first Secretary of the League of Nations. Sir Eric joined the
British Foreign Office in 1900, and later served as confidential
secretary to Sir Edward (Viscount) Grey, Herbert H. Asquith, and Arthur
J. Balfour. In 1917 he accompanied Mr. Balfour to the United States as a
member of the British High Commission.]


SECTION X.--_Memel_

=ARTICLE 99.=--Germany renounces in favor of the principal Allied and
Associated Powers all rights and title over the territories included
between the Baltic, the northeastern frontier of East Prussia as defined
in Article 28 of Part II. (frontiers of Germany) of the present treaty
and the former frontier between Germany and Russia.

Germany undertakes to accept the settlement made by the principal Allied
and Associated Powers in regard to these territories, particularly in so
far as concerns the nationality of the inhabitants.


SECTION XI.--_Free City of Danzig_

=ARTICLE 100.=--Germany renounces in favor of the principal Allied and
Associated Powers all rights and title over the territory comprised
within the following limits:

From the Baltic Sea southward to the point where the principal channels
of navigation of the Nogat and Vistula (Weichsel) meet;

The boundary of East Prussia as described in Article 28 of Part II.
(boundaries of Germany) of the peace treaty;

Thence the principal channel of navigation of the Vistula downstream to
a point about 6½ kilometers north of the bridge of Dirschau;

Thence northwest to point 5, 1½ kilometers southeast of the Church of
Güttland, a line to be fixed on the ground;

Thence in a general westerly direction to the salient of the Kreise of
Berent, 8½ kilometers northeast of Schöneck;

A line to be fixed on the ground passing between Mühlbanz on the south
and Rambeltsch on the north;

Thence the boundary of the Kreise of Berent, westward to the re-entrant
which it forms 6 kilometers north-northwest of Schöneck;

Thence to a point on the median line of Lonkener See; a line to be fixed
on the ground passing north of Neu Fietz and Schatarpi and south of
Barenhütte and Lonken; thence the median line of the Lonkener See to its
northernmost point; thence to the southern end of Pollenziner See; a
line to be fixed on the ground;

Thence the median line of Pollenziner See to its northernmost point;

Thence in a northeasterly direction to a point about one kilometer south
of Koliebken Church, where the Danzig-Neustadt Railway crosses a stream;

A line to be fixed on the ground passing southeast of Kamehlen, Krissau,
Fidlin, Sulmin, (Richthof,) Mattern, Schaferei, and to the northwest of
Neuendorf, Marschau, Czapielken, Hoch and Klein Kelpin, Pulvermühl,
Renneberg, and the towns of Oliva and Zoppot;

Thence the course of this stream to the Baltic Sea.

The boundaries described above are drawn on a German map scale
1-100,000, attached to the present treaty, (Map No. 4.)

=ARTICLE 101.=--A commission composed of three members appointed by the
principal Allied and Associated Powers, including a High Commissioner as
President, one member appointed by Germany, and one member appointed by
Poland, shall be constituted within fifteen days of the coming into
force of the present treaty for the purpose of delimiting on the spot
the frontier of the territory as described above, taking into account as
far as possible the existing communal boundaries.

=ARTICLE 102.=--The principal Allied and Associated Powers undertake to
establish the town of Danzig, together with the rest of the territory
described in Article 100, as a free city. It will be placed under the
protection of the League of Nations.

=ARTICLE 103.=--A constitution for the free city of Danzig shall be
drawn up by the duly appointed representatives of the free city in
agreement with a High Commissioner to be appointed by the League of
Nations. The constitution shall be placed under the guarantee of the
League of Nations.

The High Commissioner will also be intrusted with the duty of dealing in
the first instance with all differences arising between Poland and the
free city of Danzig in regard to this treaty or any arrangements or
agreements made thereunder.

The High Commissioner shall reside at Danzig.

=ARTICLE 104.=--The principal Allied and Associated Powers undertake to
negotiate a treaty between the Polish Government and the free city of
Danzig which shall come into force at the same time as the establishment
of said free city, with the following objects:

1. To effect the inclusion of the free city of Danzig within the Polish
customs frontiers and to establish a free area in the port.

2. To insure to Poland without any restriction the free use and service
of all waterways, docks, basins, wharves, and other works within the
territory of the free city necessary for Polish imports and exports.

3. To insure to Poland the control and administration of the Vistula and
of the whole railway system within the free city; except such street and
other railways as serve primarily the needs of the free city and of
postal, telegraphic, and telephonic communication between Poland and the
Port of Danzig.

4. To insure to Poland the right to develop and improve the waterways,
docks, basins, wharves, railways, and other works and means of
communication mentioned in this article, as well as to lease or purchase
through appropriate processes such land and other property as may be
necessary for these purposes.

5. To provide against any discrimination within the free city of Danzig
to the detriment of citizens of Poland and other persons of Polish
origin or speech.

6. To provide that the Polish Government shall undertake the conduct of
the foreign relations of the free city of Danzig as well as the
diplomatic protection of citizens of that city when abroad.

=ARTICLE 105.=--On the coming into force of the present treaty German
nationals ordinarily resident in the territory described in Article 100
will ipso facto lose their German nationality, in order to become
nationals of the free city of Danzig.

=ARTICLE 106.=--Within a period of two years from the coming into force
of the present treaty German nationals over 18 years of age ordinarily
resident in the territory described in Article 100 will have the right
to opt for German nationality.

Option by a husband will cover his wife and option by parents will cover
their children less than 18 years of age.

All persons who exercise the right of option referred to above must
during the ensuing twelve months transfer their place of residence to
Germany.

These persons will be entitled to preserve the immovable property
possessed by them in the territory of the free city of Danzig. They may
carry with them their movable property of every description. No export
or import duties shall be imposed upon them in this connection.

=ARTICLE 107.=--All property situated within the territory of the free
city of Danzig belonging to the German Empire or any German State shall
pass to the principal Allied and Associated Powers for transfer to the
free city of Danzig or to the Polish State as they may consider
equitable.

=ARTICLE 108.=--The proportion and nature of the financial liabilities
of Germany and of Prussia to be borne by the free city of Danzig shall
be fixed in accordance with Article 254 of Part IX. (financial clauses)
of the present treaty.

All other questions which may arise from the cession of the territory
referred to in Article 100 shall be settled by further agreements.


SECTION XII.--_Schleswig_

=ARTICLE 109.=--The frontier between Germany and Denmark shall be fixed
in conformity with the wishes of the population.

For this purpose the population inhabiting the territories of the former
German Empire situated to the north of a line from east to west, (shown
by a brown line on the Map No. 3 annexed to the present treaty;)

Leaving the Baltic coast about thirteen kilometers east-northeast of
Flensburg, running southwest so as to pass southeast of Sygum,
Ringsberg, Munkbrarup, Adelby, Tastrup, Jarplund, Oversee, and northwest
of Langballigholz, Langballig, Bönstrup, Rüllschau, Weseby,
Kleinwolstrup, Gross-Solt; thence westward passing south of Frörup and
north of Wanderup; thence in a southwesterly direction passing southeast
of Oxlund, Stieglund, and Ostenau and northwest of the villages on the
Wanderup-Kollund road; thence in a northwesterly direction passing
southwest of Löwenstedt, Joldelund, Goldelund and northeast of
Kalkerheide and Högel to the bend of the Soholmer Au, about one
kilometer east of Soholm, where it meets the southern boundary of the
Kreise of Tondern; thence following this boundary to the North Sea;
thence passing south of the islands of Fohr and Amrum and north of the
islands of Oland and Langeness shall be called upon to pronounce by a
vote which will be taken under the following conditions:

1. Within a period not exceeding ten days from the coming into force of
the present treaty, the German troops and authorities (including the
Oberprasidenten, Regierungs-Prasidenten, Landrathe, Amtsvorsteher,
Oberbürgermeister) shall evacuate the zone lying to the north of the
line above fixed.

Within the same period the Workmen's and Soldiers' Councils which have
been constituted in this zone shall be dissolved; members of such
councils who are natives of another region and are exercising their
functions at the date of the coming into force of the present treaty, or
who have gone out of office since the 1st March, 1919, shall also be
evacuated.

The said zone shall immediately be placed under the authority of an
international commission, composed of five members, of whom three will
be designated by the principal Allied and Associated Powers; the
Norwegian and Swedish Governments will each be requested to designate a
member. In the event of their failing to do so, these two members will
be chosen by the principal Allied and Associated Powers.

The commission, assisted in case of need by the necessary forces, shall
have general powers of administration. In particular, it shall at once
provide for filling the places of the evacuated German authorities, and,
if necessary, shall itself give orders for their evacuation and proceed
to fill the places of such local authorities as may be required. It
shall take all steps which it thinks proper to insure the freedom,
fairness, and secrecy of the vote. It shall be assisted by German and
Danish technical advisers chosen by it from among the local population.
Its decisions will be taken by a majority.

One-half of the expenses of the International Commission and of the
expenditure occasioned by the plebiscite shall be paid by Germany.

2. The right to vote shall be given all persons, without distinction of
sex, who:

(a) Have completed their twentieth year at the date of the coming into
force of the present treaty; and

(b) Were born in the zone in which the plebiscite is taken, or had been
domiciled there since a date before the 1st January, 1900, or had been
expelled by the German authorities without having retained their
domicile there.

Every person will vote in the commune (Gemeinde) where he is domiciled
or of which he is a native.

Military persons, officers, non-commissioned officers and soldiers of
the German Army, who are natives of the zone of Schleswig, in which the
plebiscite is taken, shall be given the opportunity to return to their
native place in order to take part in the voting there.

3. In the section of the evacuated zone lying to the north of a line
from east to west (shown by a red line on Map No. 3, which is annexed to
the present treaty):

Passing south of the Island of Alsen and following the median line of
Flensburg Fjord;

Thence leaving the fjord about six kilometers north of Flensburg, and
following the course of the stream flowing past Kupfermühle upstream to
a point north of Niehuus;

Thence passing north of Pattburg and Ellund and south of Fröslee to meet
the eastern boundary of the Kreise of Tondern at its junction with the
boundary between the old jurisdiction of Slogs and Kjaer, (Slogs Herred
and Kjaer Herred;)

Thence the latter boundary to where it meets the Scheidebek;

Thence the course of the Scheidebek, (Alte Au), Süder Au, and Wied Au
downstream successively to the point where the latter bends northward,
about 1,500 meters west of Ruttebüll;

Thence in a west-northwesterly direction to meet the North Sea north of
Sieltoft;

Thence passing north of the Island of Sylt.

The vote above provided for shall be taken within a period not exceeding
three weeks after the evacuation of the country by the German troops and
authorities.

The result will be determined by the majority of votes cast in the whole
of this section. This result will be immediately communicated by the
commission to the principal Allied and Associated Governments and
proclaimed.

If the vote results in favor of the reincorporation of this territory in
the Kingdom of Denmark, the Danish Government, in agreement with the
commission will be entitled to effect its occupation with their military
and administrative authorities immediately after the proclamation.

4. In the section of the evacuated zone situated to the south of the
preceding section and to the north of the line which starts from the
Baltic Sea thirteen kilometers from Flensburg and ends north of the
islands of Oland and Langeness, the vote will be taken within a period
not exceeding five weeks after the plebiscite shall have been held in
the first section.

The result will be determined by communes (Gemeinden) in accordance with
the majority of the votes cast in each commune, (Gemeinde.)

=ARTICLE 110.=--Pending a delimination on the spot, a frontier line will
be fixed by the principal Allied and Associated Powers according to a
line based on the result of the voting, and proposed by the
International Commission, and taking into account the particular
geographical and economic conditions of the localities in question.

From that time the Danish Government may effect the occupation of these
territories which the Danish civil and military authorities, and the
German Government may reinstate up to the said frontier line the German
civil and military authorities whom it has evacuated.

Germany hereby renounced definitively in favor of the principal Allied
and Associated Powers all rights of sovereignty over the territories
situated to the north of the frontier line fixed in accordance with the
above provisions. The principal Allied and Associated Powers will hand
over the said territories to Denmark.

=Article 111.=--A commission composed of seven members, five of whom
shall be nominated by the principal Allied and Associated Powers, one by
Denmark, and one by Germany, shall be constituted within fifteen days
from the date when the final result of the vote is known, to trace the
frontier line on the spot.

The decisions of the commission will be taken by a majority of votes,
and shall be binding on the parties concerned.

=ARTICLE 112.=--All the inhabitants of the territory which is returned
to Denmark will acquire Danish nationality ipso facto, and will lose
their German nationality. Persons, however, who had become habitually
resident in this territory after the 1st October, 1918, will not be able
to acquire Danish nationality without permission from the Danish
Government.

=ARTICLE 113.=--Within two years from the date on which the sovereignty
over the whole or part of the territory of Schleswig subjected to the
plebiscite is restored to Denmark:

Any person over 18 years of age, born in the territory restored to
Denmark, not habitually resident in this region and possessing German
nationality, will be entitled to opt for Denmark.

Any person over 18 years of age habitually resident in the territory
restored to Denmark will be entitled to opt for Germany.

Option by a husband will cover his wife and option by parents will cover
their children less than 18 years of age.

Persons who have exercised the above right to opt must within the
ensuing twelve months transfer their place of residence to the State in
favor of which they have opted.

They will be entitled to retain the immovable property which they own in
the territory of the other State in which they were habitually resident
before opting. They may carry with them their movable property of every
description. No export or import duties may be imposed upon them in
connection with the removal of such property.

=ARTICLE 114.=--The proportion and nature of the financial or other
obligations of Germany and Prussia which are to be assumed by Denmark
will be fixed in accordance with Article 254 of Part IX. (financial
clauses) of the present treaty.

Further stipulations will determine any other questions arising out of
the transfer to Denmark of the whole or part of the territory of which
she was deprived by the treaty of Oct. 30, 1864.


SECTION XIII.--_Heligoland_

=ARTICLE 115.=--The fortifications, military establishments, and harbors
of the islands of Heligoland and Dune shall be destroyed under the
supervision of the principal Allied Governments by German labor and at
the expense of Germany within a period to be determined by the said
Governments.

The term "harbors" shall include the Northeast Mole, the West Wall, the
outer and inner breakwaters and reclaimed land within them, and all
naval and military works, fortifications, and buildings, constructed or
under construction, between lines connecting the following positions
taken from the British Admiralty Chart No. 126 of 19 April, 1918:

(A) Lat. 54 degrees 10 minutes 49 seconds N.; long. 7 degrees 53 minutes
39 seconds E.;

(B) Lat. 54 degrees 10 minutes 35 seconds N.; long. 7 degrees 54 minutes
18 seconds E.;

(C) Lat. 54 degrees 10 minutes 14 seconds N.; long. 7 degrees 54 minutes
0 seconds E.;

(D) Lat. 54 degrees 10 minutes 17 seconds N.; long. 7 degrees 53 minutes
37 seconds E.;

(E) Lat. 54 degrees 10 minutes 44 seconds N.; long. 7 degrees 53 minutes
26 seconds E.

These fortifications, military establishments, and harbors shall not be
reconstructed nor shall any similar works be constructed in future.


SECTION XIV.--_Russia and Russian States_

=ARTICLE 116.=--Germany acknowledges and agrees to respect as permanent
and inalienable the independence of all the territories which were part
of the former Russian Empire on Aug. 1, 1914.

In accordance with the provisions of Article 259 of Part IX. (financial
clauses,) and Article 292 of Part X. (economic clauses,) Germany accepts
definitely the abrogation of the Brest-Litovsk Treaties and of all
treaties, conventions, and agreements entered into by her with the
Maximalist Government in Russia.

The Allied and Associated Powers formally reserve the rights of Russia
to obtain from Germany restitution and reparation based on the
principles of the present treaty.

=ARTICLE 117.=--Germany undertakes to recognize the full force of all
treaties or agreements which may be entered into by the Allied and
Associated Powers with States now existing or coming into existence in
future in the whole or part of the former Empire of Russia as it existed
on August 1, 1914, and to recognize the frontiers of any such States as
determined therein.



PART IV

German Rights and Interests Outside Germany


=ARTICLE 118.=--In territory outside her European frontiers as fixed by
the present treaty, Germany renounces all rights, titles, and privileges
whatever in or over territory which belonged to her or to her allies,
and all rights, titles, and privileges, whatever their origin, which she
held as against the Allied and Associated Powers.

Germany undertakes immediately to recognize and to conform to the
measures which may be taken now or in the future by the principal Allied
and Associated Powers, in agreement where necessary with third powers,
in order to carry the above stipulation into effect.

In particular, Germany declares her acceptance of the following articles
relating to certain special subjects:


SECTION I.--_German Colonies_

=ARTICLE 119.=--Germany renounces in favor of the principal Allied and
Associated Powers all her rights and titles over her overseas
possessions.

=ARTICLE 120.=--All movable and immovable property in such territories
belonging to the German Empire or to any German State shall pass to the
Government exercising authority over such territories on the terms laid
down in Article 257 of Part IX. (financial clauses) of the present
treaty. The decision of the local courts in any dispute as to the nature
of such property shall be final.

=ARTICLE 121.=--The provisions of Section I. (commercial relations) and
Section IV. (property, rights, and interests) of Part X. (economic
clauses) of the present treaty shall apply in the case of these
territories whatever be the form of government adopted for them.

=ARTICLE 122.=--The Government exercising authority over such
territories may make such provisions as it thinks fit with reference to
the repatriation from them of German nationals, and to the conditions
upon which German subjects of European origin shall, or shall not, be
allowed to reside, hold property, trade, or exercise a profession in
them.

=ARTICLE 123.=--The provisions of Article 260 of Part IX. (financial
clauses) of the present treaty shall apply in the case of all agreements
concluded with German nationals for the construction or exploitation of
public works in the German overseas possessions, as well as any
sub-concessions or contracts resulting therefrom which may have been
made to or with such nationals.

=ARTICLE 124.=--Germany hereby undertakes to pay in accordance with the
estimate to be presented by the French Government, and approved by the
Reparation Commission, reparation for damage suffered by French
nationals in the Cameroons or the frontier zone by reason of the acts of
the German civil and military authorities and of German private
individuals during the period from Jan. 1, 1900, to Aug. 1, 1914.

=ARTICLE 125.=--Germany renounces all rights under the conventions and
agreements with France of Nov. 4, 1911, and Sept. 28, 1912, relating to
equatorial Africa. She undertakes to pay to the French Government, in
accordance with the estimate to be presented by the Government and
approved by the Reparation Commission, all the deposits, credits,
advances, &c., effected by virtue of these instruments in favor of
Germany.

=ARTICLE 126.=--Germany undertakes to accept and observe the agreements
made or to be made by the Allied and Associated Powers or some of them
with any other power with regard to the trade in arms and spirits, and
to the matters dealt with in the general act of Berlin of Feb. 26, 1885,
the general act of Brussels of July 2, 1890, and the conventions
completing or modifying the same.

=ARTICLE 127.=--The native inhabitants of the former German overseas
possessions shall be entitled to the diplomatic protection of the
Governments exercising authority over those territories.


SECTION II.--_China_

=ARTICLE 128.=--Germany renounces in favor of China all benefits and
privileges resulting from the provisions of the final protocol signed at
Peking on Sept. 7, 1901, and from all annexes, notes, and documents
supplementary thereto. She likewise renounces in favor of China any
claim to indemnities accruing thereunder subsequent to March 14, 1917.

=ARTICLE 129.=--From the coming into force of the present treaty the
high contracting parties shall apply in so far as concerns them
respectively:

1. The arrangement of Aug. 29, 1902, regarding the new Chinese customs
tariff.

2. The arrangement of Sept. 27, 1905, regarding Whang-Poo, and the
provisional supplementary arrangement of April 4, 1912. China, however,
will no longer be bound to grant to Germany the advantages of privileges
which she allowed Germany under these arrangements.

=ARTICLE 130.=--Subject to the provisions of Section VIII. of this part,
Germany cedes to China all the buildings, wharves and pontoons,
barracks, forts, arms and munitions of war, vessels of all kinds,
wireless telegraphy installations and other public property belonging to
the German Government, which are situated or may be in the German
concessions at Tientsin and Hankow or elsewhere in Chinese territory.

It is understood, however, that premises used as diplomatic or consular
residences or offices are not included in the above cession, and,
furthermore, that no steps shall be taken by the Chinese Government to
dispose of the German public and private property situated within the
so-called legation quarter at Peking without the consent of the
diplomatic representatives of the powers which, on the coming into force
of the present treaty, remain parties to the final protocol of Sept. 7,
1901.

=ARTICLE 131.=--Germany undertakes to restore to China within twelve
months from the coming into force of the present treaty all the
astronomical instruments which her troops in 1900--1901 carried away from
China, and to defray all expenses which may be incurred in affecting
such restoration, including the expenses of dismounting, packing,
transporting, insurance, and installation in Peking.

[Illustration: From Around the World

_Copyright Paul Thompson_

Lord Robert Cecil

A son of Lord Salisbury and one of the most influential statesmen in
Great Britain during the war and an enthusiastic advocate of a League of
Nations.]

=ARTICLE 132.=--Germany agrees to the abrogation of the leases from the
Chinese Government under which the German concessions at Hankow and
Tientsin are now held.

China, restored to the full exercise of her sovereign rights in the
above areas, declares her intention of opening them to international
residence and trade. She further declares that the abrogation of the
leases under which these concessions are now held shall not affect the
property rights of nationals or Allied and Associated Powers who are
holders of lots in these concessions.

=ARTICLE 133.=--Germany waives all claims against the Chinese Government
or against any Allied or Associated Government arising out of the
internment of German nationals in China and their repatriation. She
equally renounces all claims arising out of the capture and condemnation
of German ships in China or the liquidation, sequestration or control of
German properties, rights, and interests in that country since Aug. 14,
1917. This provision, however, shall not affect the rights of the
parties interested in the proceeds of any such liquidation, which shall
be governed by the provisions of Part X. (economic clauses) of the
present treaty.

=ARTICLE 134.=--Germany renounces, in favor of the Government of his
Britannic Majesty, the German State property in the British concession
at Shameen at Canton. She renounces, in favor of the French and Chinese
Governments conjointly, the property of the German school situated in
the French concession at Shanghai.


SECTION III.--_Siam_

=ARTICLE 135.=--Germany recognizes that all treaties, conventions, and
agreements between her and Siam, and all rights, titles and privileges
derived therefrom, including all rights of extra territorial
jurisdiction, terminated as from July 22, 1917.

=ARTICLE 136.=--All goods and property in Siam belonging to the German
Empire or to any German State, with the exception of premises used as
diplomatic or consular residences or offices, pass ipso facto and
without compensation to the Siamese Government.

The goods, property, and private rights of German nationals in Siam
shall be dealt with in accordance with the provisions of Part X.
(economic clauses) of the present treaty.

=ARTICLE 137.=--Germany waives all claims against the Siamese Government
on behalf of herself or her nationals arising out of the seizure or
condemnation of German ships, the liquidation of German property, or the
internment of German nationals in Siam. This provision shall not affect
the rights of the parties interested in the proceeds of any such
liquidation, which shall be governed by the provisions of Part X.
(economic clauses) of the present treaty.


SECTION IV.--_Liberia_

=ARTICLE 138.=--Germany renounces all rights and privileges arising from
the arrangements of 1911 and 1912 regarding Liberia, and particularly
the right to nominate a German receiver of customs in Liberia. She
further renounces all claim to participate in any measures whatsoever
which may be adopted for the rehabilitation of Liberia.

=ARTICLE 139.=--Germany recognizes that all treaties and arrangements
between her and Liberia terminated as from Aug. 4, 1917.

=ARTICLE 140.=--The property, rights, and interests of Germans in
Liberia shall be dealt with in accordance with Part X. (economic
clauses) of the present treaty.


SECTION V.--_Morocco_

=ARTICLE 141.=--Germany renounces all rights, titles, and privileges
conferred on her by the general act of Algeciras of April 7, 1906, and
by the Franco-German agreements of Feb. 9, 1909, and Nov. 4, 1911. All
treaties, agreements, arrangements, and contracts concluded by her with
the Sherifian Empire are regarded as abrogated as from Aug. 3, 1914.

In no case can Germany take advantage of these instruments, and she
undertakes not to intervene in any way in negotiations relating to
Morocco which may take place between France and the other powers.

=ARTICLE 142.=--Germany having recognized the French Protectorate in
Morocco, hereby accepts all consequences of its establishment, and she
renounces the régime of the capitulations therein.

This renunciation shall take effect as from Aug. 3, 1914.

=ARTICLE 143.=--The Sherifian Government shall have complete liberty of
action in regulating the status of German nationals in Morocco and the
conditions in which they may establish themselves there.

German-protected persons, semsars, and "associés agricoles" shall be
considered as having ceased, as from Aug. 3, 1914, to enjoy the
privileges attached to their status and shall be subject to the ordinary
law.

=ARTICLE 144.=--All property and possessions in the Sherifian Empire of
the German Empire and the German States pass to the Maghzen without
payment.

For the purposes of this clause, the property and possessions of the
German Empire and States shall be deemed to include all the property of
the crown, the empire, or States, and the private property of the former
German Emperor and other royal personages.

All movable and immovable property in the Sherifian Empire belonging to
German nationals shall be dealt with in accordance with Sections III.
and IV. of Part X. (economic clauses) of the present treaty.

Mining rights which may be recognized as belonging to German nationals
by the Court of Arbitration set up under the Moroccan mining regulations
shall form the subject of a valuation, which the arbitrators shall be
requested to make, and these rights shall then be treated in the same
way as property in Morocco belonging to German nationals.

=ARTICLE 145.=--The German Government shall insure the transfer to a
person nominated by the French Government of the shares representing
Germany's portion of the capital of the State Bank of Morocco. The value
of these shares, as assessed by the Reparation Commission, shall be paid
to the Reparation Commission for the credit of Germany on account of the
sums due for reparation. The German Government shall be responsible for
indemnifying its nationals so dispossessed.

This transfer will take place without prejudice to the repayment of
debts which German nationals may have contracted toward the State Bank
of Morocco.

=ARTICLE 146.=--Moroccan goods entering Germany shall enjoy the
treatment accorded to French goods.


SECTION VI.--_Egypt_

=ARTICLE 147.=--Germany declares that she recognizes the protectorate
proclaimed over Egypt by Great Britain on Dec. 18, 1914, and that she
renounces the régime of the capitulations in Egypt. This renunciation
shall take effect as from Aug. 4, 1914.

=ARTICLE 148.=--All treaties, agreements, arrangements, and contracts
concluded by Germany with Egypt are regarded as abrogated as from Aug.
4, 1914.

In no case can Germany avail herself of these instruments, and she
undertakes not to intervene in any way in negotiations relating to Egypt
which may take place between Great Britain and the other powers.

=ARTICLE 149.=--Until an Egyptian law of judicial organization
establishing courts with universal jurisdiction comes into force,
provision shall be made, by means of decrees issued by his Highness the
Sultan for the exercise of jurisdiction over German nationals and
property by the British consular tribunals.

=ARTICLE 150.=--The Egyptian Government shall have complete liberty of
action in regulating the status of German nationals and the conditions
under which they may establish themselves in Egypt.

=ARTICLE 151.=--Germany consents to the abrogation of the decree issued
by his Highness the Khédive on Nov. 28, 1904, relating to the commission
of the Egyptian public debt, or to such changes as the Egyptian
Government may think it desirable to make therein.

=ARTICLE 152.=--Germany consents, in so far as she is concerned, to the
transfer to his Britannic Majesty's Government of the powers conferred
on his Imperial Majesty the Sultan, by the convention signed at
Constantinople on Oct. 29, 1888, relating to the free navigation of the
Suez Canal.

She renounces all participation in the Sanitary, Maritime, and
Quarantine Board of Egypt, and consents, in so far as she is concerned,
to the transfer to the Egyptian authorities of the powers of that board.

=ARTICLE 153.=--All property and possessions in Egypt of the German
Empire and the German States pass to the Egyptian Government without
payment.

For this purpose the property and possessions of the German Empire and
States shall be deemed to include all the property of the crown, the
empire, or the States, and the private property of the former German
Emperor and other royal personages.

All movable and immovable property in Egypt belonging to German
nationals shall be dealt with in accordance with Sections III. and IV.
of Part X. (economic clauses) of the present treaty.

=ARTICLE 154.=--Egyptian goods entering Germany shall enjoy the
treatment accorded to British goods.


SECTION VII.--_Turkey and Bulgaria_

=ARTICLE 155.=--Germany undertakes to recognize and accept all
arrangements which the Allied and Associated Powers may make with Turkey
and Bulgaria, with reference to any rights, interests, and privileges
whatever which might be claimed by Germany or her nationals in Turkey
and Bulgaria and which are not dealt with in the provisions of the
present treaty.


SECTION VIII.--_Shantung_

=ARTICLE 156.=--Germany renounces in favor of Japan, all her rights,
titles, and privileges--particularly those concerning the territory of
Kiao-Chau, railways, mines, and submarine cables--which she acquired in
virtue of the treaty concluded by her with China on 6th March, 1898, and
of all other arrangements relative to the Province of Shantung.

All German rights in the Tsing-tao-Tsinan-Fu railway, including its
branch lines, together with its subsidiary property of all kinds,
stations, shops, fixed and rolling stock, mines, plant, and material for
the exploitation of the mines are and remain acquired by Japan, together
with all rights and privileges attaching thereto.

The German State submarine cables from Tsing-tao to Shanghai and from
Tsing-tao to Che Foo, with all the rights, privileges, and properties
attaching thereto, are similarly acquired by Japan, free and clear of
all charges and incumbrances.

=ARTICLE 157.=--The movable and immovable property owned by the German
State in the territory of Kiao-Chau, as well as all the rights which
Germany might claim in consequence of the works or improvements made or
of the expenses incurred by her, directly or indirectly, in connection
with this territory, are and remain acquired by Japan, free and clear of
all charges and incumbrances.

=ARTICLE 158.=--Germany shall hand over to Japan within three months
from the coming into force of the present treaty the archives,
registers, plans, title deeds, and documents of every kind, wherever
they may be, relating to the administration, whether civil, military,
financial, judicial or other, of the territory of Kiao-Chau.

Within the same period Germany shall give particulars to Japan of all
treaties, arrangements or agreements relating to the rights, title or
privileges referred to in the two preceding articles.



PART V

Military, Naval, and Aerial Clauses


In order to render possible the initiation of a general limitation of
the armaments of all nations, Germany undertakes strictly to observe the
military, naval, and air clauses which follow:


SECTION I.--_Military Clauses_

CHAPTER I.--EFFECTIVES AND CADRES OF THE GERMAN ARMY

=ARTICLE 159=--The German military forces shall be demobilized and
reduced as prescribed hereinafter.

=ARTICLE 160=--1. By a date which must not be later than March 31, 1920,
the German Army must not comprise more than seven divisions of infantry
and three divisions of cavalry. After that date the total number of
effectives in the army of the States constituting Germany must not
exceed 100,000 men, including officers and establishments of depots. The
army shall be devoted exclusively to the maintenance of order within the
territory and to the control of the frontiers.

The total effective strength of officers, including the personnel of
staffs, whatever their composition, must not exceed 4,000.

2. Divisions and army corps headquarters staffs shall be organized in
accordance with Table No. 1 annexed to this section.

The number and strength of the units of infantry, artillery, engineers,
technical services, and troops laid down in the aforesaid table
constitute maxima which must not be exceeded.

The following units may each have their own depot:

An infantry regiment; a cavalry regiment; a regiment of field artillery;
a battalion of pioneers.

3. The divisions must not be grouped under more than two army corps
headquarters staff.

The maintenance or formation of forces differently grouped or of other
organizations for the command of troops or for preparation for war is
forbidden.

The Great German General Staff and all similar organizations shall be
dissolved and may not be reconstituted in any form.

The officers, or persons in the position of officers, in the Ministries
of War in the different States in Germany and in the administrations
attached to them, must not exceed three hundred in number and are
included in the maximum strength of four thousand laid down in the third
sub-paragraph of the first paragraph of this article.

=ARTICLE 161.=--Army administrative services consisting of civilian
personnel not included in the number of effectives prescribed by the
present treaty will have such personnel reduced in each class to
one-tenth of that laid down in the budget of 1913.

=ARTICLE 162.=--The number of employes or officials of the German
States, such as customs officers, forest guards, and coast guards shall
not exceed that of the employes or officials functioning in these
capacities in 1913.

The number of gendarmes and employes or officials of the local or
municipal police may only be increased to an extent corresponding to the
increase of population since 1913 in the districts or municipalities in
which they are employed.

These employes and officials may not be assembled for military training.

=ARTICLE 163.=--The reduction of the strength of the German military
forces as provided for in Article 160 may be effected gradually in the
following manner:

Within three months from the coming into force of the present treaty the
total number of effectives must be reduced to 200,000 and the number of
units must not exceed twice the number of those laid down in Article
160.

At the expiration of this period, and at the end of each subsequent
period of three months, a conference of military experts of the
principal Allied and Associated Powers will fix the reductions to be
made in the ensuing three months, so that by the 31st of March, 1920, at
the latest, the total number of German effectives does not exceed the
maximum number of 100,000 men laid down in Article 160. In these
successive reductions the same ratio between the number of officers and
of men, and between the various kinds of units shall be maintained as is
laid down in that article.


CHAPTER II.--ARMAMENT, MUNITIONS, AND MATERIAL

=ARTICLE 164.=--Up till the time at which Germany is admitted as a
member of the League of Nations the German Army must not possess an
armament greater than the amounts fixed in Table No. 2, annexed to this
section, with the exception of an optional increase not exceeding
one-twenty-fifth part for small arms and one-fiftieth part for guns,
which shall be exclusively used to provide for such eventual
replacements as may be necessary.

Germany agrees that after she has become a member of the League of
Nations the armaments fixed in the said table shall remain in force
until they are modified by the Council of the League. Furthermore she
hereby agrees strictly to observe the decisions of the Council of the
League on this subject.

=ARTICLE 165.=--The maximum number of guns, machine guns, trench
mortars, rifles, and the amount of ammunition and equipment which
Germany is allowed to maintain during the period between the coming into
force of the present treaty and the date of March 31, 1920, referred to
in Article 160, shall bear the same proportion to the amount authorized
in Table No. 3 annexed to this section as the strength of the German
Army as reduced from time to time in accordance with Article 163 bears
to the strength permitted under Article 160.

=ARTICLE 166.=--At the date of March 31, 1920, the stock of munitions
which the German Army may have at its disposal shall not exceed the
amounts fixed in Table No. 3 annexed to this section.

Within the same period the German Government will store these stocks at
points to be notified to the Governments of the principal Allied and
Associated Powers. The German Government is forbidden to establish any
other stocks, depots, or reserves of munitions.

=ARTICLE 167.=--The number and calibre of the guns constituting at the
date of the coming into force of the present treaty the armament of the
fortified works, fortresses, and any land or coast forts which Germany
is allowed to retain, must be notified immediately by the German
Government to the Governments of the principal Allied and Associated
Powers, and will constitute maximum amounts which may not be exceeded.

Within two months from the coming into force of the present treaty the
maximum stock of ammunition for these guns will be reduced to, and
maintained at, the following uniform rates: Fifteen hundred rounds per
piece for those the calibre of which is 10.5 cm. and under; 500 rounds
per piece for those of higher calibre.

=ARTICLE 168.=--The manufacture of arms, munitions, or any war material
shall only be carried out in factories or works the locations of which
shall be communicated to and approved by the Governments of the
principal Allied and Associated Powers, and the number of which they
retain the right to restrict.

Within three months from the coming into force of the present treaty all
other establishments for the manufacture, preparation, storage, or
design of arms, munitions, or any war material whatever shall be closed
down. The same applies to all arsenals except those used as depots for
the authorized stocks of munitions. Within the same period the personnel
of these arsenals will be dismissed.

=ARTICLE 169.=--Within two months from the coming into force of the
present treaty, German arms, munitions, and war materials, including
anti-aircraft material, existing in Germany in excess of the quantities
allowed must be surrendered to the Governments of the principal Allied
and Associated Powers, to be destroyed or rendered useless. This will
also apply to any special plant intended for the manufacture of military
material, except such as may be recognized as necessary for equipping
the authorized strength of the German Army.

The surrender in question will be effected at such points in German
territory as may be selected by the said Governments.

Within the same period, arms, munitions, and war material, including
anti-aircraft material, of origin other than German, in whatever state
they may be, will be delivered to the said Governments, who will decide
as to their disposal.

Arms and munitions which on account of the successive reductions in the
strength of the German Army become in excess of the amounts authorized
by Tables 2 and 3 of the annex must be handed over in the manner laid
down above within such periods as may be decided by the conferences
referred to in Article 163.

=ARTICLE 170.=--Importation into Germany of arms, munitions, and war
material of every kind shall be strictly prohibited.

The same applies to the manufacture for and export to foreign countries
of arms, munitions, and war material of every kind.

=ARTICLE 171.=--The use of asphyxiating, poisonous or other gases and
all analogous liquids, materials or devices being prohibited, their
manufacture and importation are strictly forbidden in Germany.

The same applies to materials specially intended for the manufacture,
storage, and use of the said products or devices.

The manufacture and the importation into Germany of armored cars, tanks,
and all similar constructions suitable for use in war are also
prohibited.

=ARTICLE 172.=--Within a period of three months from the coming into
force of the present treaty the German Government will disclose to the
Governments of the principal Allied and Associated Powers the nature and
mode of manufacture of all explosives, toxic substances or other like
chemical preparations used by them in the war or prepared by them for
the purpose of being so used.


CHAPTER III.--RECRUITING AND MILITARY TRAINING

=ARTICLE 173.=--Universal compulsory military service shall be abolished
in Germany.

The German Army may only be constituted and recruited by means of
voluntary enlistment.

=ARTICLE 174.=--The period of enlistment for non-commissioned officers
and privates must be twelve consecutive years.

The number of men discharged for any reason before the expiration of
their term of enlistment must not exceed in any year 5 per cent. of the
total effectives as fixed by the second sub-paragraph of Paragraph 1 of
Article 160 of the present treaty.

=ARTICLE 175.=--The officers who are retained in the army must undertake
the obligation to serve in it up to the age of forty-five years, at
least.

Officers newly appointed must undertake to serve on the active list for
twenty-five consecutive years, at least.

Officers who have previously belonged to any formation whatever of the
army and who are not retained in the units allowed to be maintained must
not take part in any military exercise, whether theoretical or
practical, and will not be under any military obligations whatever.

The number of officers discharged for any reason before the expiration
of their term of service must not exceed in any year 5 per cent. of the
total effectives of officers provided for in the third sub-paragraph of
Paragraph 1 of Article 100 of the present treaty.

=ARTICLE 176.=--On the expiration of two months from the coming into
force of the present treaty there must only exist in Germany the number
of military schools which is absolutely indispensable for the
recruitment of the officers of the units allowed. These schools will be
exclusively intended for the recruitment of officers of each arm, in the
proportion of one school per arm.

The number of students admitted to attend the courses of the said
schools will be strictly in proportion to the vacancies to be filled in
the cadres of officers. The students and the cadres will be reckoned in
the effectives fixed by the second and third sub-paragraphs of Paragraph
1 of Article 160 of the present treaty.

Consequently, and during the period fixed above, all military academies
or similar institutions in Germany, as well as the different military
schools for officers, student officers (aspiranten), cadets
non-commissioned officers, or student non-commissioned officers
(aspiranten), other than the schools above provided for, will be
abolished.

=ARTICLE 177.=--Educational establishments, the universities, societies
of discharged soldiers, shooting or touring clubs, and, generally
speaking, associations of every description, whatever be the age of
their members, must not occupy themselves with any military matters. In
particular they will be forbidden to instruct or exercise their members,
or to allow them to be instructed or exercised, in the profession or use
of arms.

These societies, associations, educational establishments, and
universities must have no connection with the Ministries of War or any
other military authority.

=ARTICLE 178.=--All measures of mobilization or appertaining to
mobilization are forbidden.

In no case must formations, administrative services, or general staffs
include supplementary cadres.

=ARTICLE 179.=--Germany agrees, from the coming into force of the
present treaty, not to accredit nor to send to any foreign country any
military, naval, or air mission, nor to allow any such missions to leave
her territory, and Germany further agrees to take appropriate measures
to prevent German nationals from leaving her territory to become
enrolled in the army, navy, or air service of any foreign power, or to
be attached to such army, navy, or air service for the purpose of
assisting in the military, naval, or air training thereof, or otherwise
for the purpose of giving military, naval, or air instruction in any
foreign country.

The Allied and Associated Powers agree, so far as they are concerned,
from the coming into force of the present treaty, not to enroll in nor
to attach to their armies or naval or air forces any German national for
the purpose of assisting in the military training of such armies or
naval or air forces, or otherwise to employ any such German national as
military, naval, or aeronautic instructor.

The present provision, however, does not affect the right of France to
recruit for the Foreign Legion in accordance with French military laws
and regulations.


CHAPTER IV.--FORTIFICATIONS

=ARTICLE 180.=--All fortified works, fortresses, and field works
situated in German territory to the west of a line drawn fifty
kilometers to the east of the Rhine shall be disarmed and dismantled.

Within a period of two months from the coming into force of the present
treaty such of the above fortified works, fortresses, and field works as
are situated in territory not occupied by Allied and Associated troops
shall be disarmed and within a further period of four months they shall
be dismantled. Those which are situated in territory occupied by Allied
and Associated troops shall be disarmed and dismantled within such
periods as may be fixed by the Allied High Command.

The construction of any new fortification, whatever its nature and
importance, is forbidden in the zone referred to in the first paragraph
above.

The system of fortified works of the southern and eastern frontiers of
Germany shall be maintained in its existing state.


=TABLE NO. 1.=

=State and Establishment of Army Corps Headquarters Staffs and of
Infantry and Cavalry Divisions.=

These tabular statements do not form a fixed establishment to be imposed
on Germany, but the figures contained in them (number of units and
strengths) represent maximum figures, which should not in any case be
exceeded.

 +----------------------+----------+----------------------------+
 |Unit                  |   Maximum| Max. Strength of Each Unit |
 |                      |       No.|                            |
 |                      +----------+----------------------------+
 |                      |Authorized|      Officers.|    N.C.O.'s|
 |                      | Division.|               |        Men.|
 +----------------------+----------+---------------+------------+
 |Army corps hdq. staffs|         2|             30|         150|
 |Total for hdq. staffs |        ..|             60|         300|
 +----------------------+----------+---------------+------------+


2. ESTABLISHMENT OF AN INFANTRY DIVISION.

 +--------------------------+-----------------------------------------+
 |                          |Maximum No.|                             |
 |                          |  of Such  |                             |
 |                          |Units in a | Max. Strength of Each Unit  |
 |                          |  Single   +-----------+-----------------+
 |           Unit           |  Division |   Officers| N.C.O.'s and Men|
 +--------------------------+-----------+-----------+-----------------+
 |Hdqrs. of inf. div.       |          1|         25|               70|
 |                          |           |           |                 |
 |Hdqrs. of divisional inf. |          1|          4|               30|
 |                          |           |           |                 |
 |Hdqrs. of divisional art. |          1|          4|               30|
 |                          |           |           |                 |
 |Regiment of inf.          |          3|         70|            2,300|
 |                          |           |           |                 |
 |(Each regiment comprises 3|           |           |                 |
 |battalions of infantry.   |           |           |                 |
 |Each battalion comprises 3|           |           |                 |
 |companies of infantry and |           |           |                 |
 |1 machine-gun company.)   |           |           |                 |
 |                          |           |           |                 |
 |Trench mortar company     |          3|          6|              150|
 |                          |           |           |                 |
 |Divisional squadron       |          1|          6|              150|
 |                          |           |           |                 |
 |Field artillery regiment  |          1|         85|            1,300|
 |                          |           |           |                 |
 |(Each regiment comprises 3|           |           |                 |
 |groups of artillery. Each |           |           |                 |
 |group comprises 3         |           |           |                 |
 |batteries.)               |           |           |                 |
 |                          |           |           |                 |
 |Pioneer battalion         |          1|         12|              400|
 |                          |           |           |                 |
 |(This battalion comprises |           |           |                 |
 |2 companies of pioneers, 1|           |           |                 |
 |pontoon detachment, 1     |           |           |                 |
 |searchlight section.)     |           |           |                 |
 |                          |           |           |                 |
 |Signal detachment\        |          1|         12|              300|
 |                          |           |           |                 |
 |(This detachment comprises|           |           |                 |
 |1 telephone detachment, 1 |           |           |                 |
 |listening section, 1      |           |           |                 |
 |carrier pigeon section.)  |           |           |                 |
 |                          |           |           |                 |
 |Divisional Med. Service   |          1|         20|              400|
 |                          |           |           |                 |
 |Parks and convoys         |         ..|         14|              800|
 |                          |           |           |                 |
 |Total for infantry div.   |         ..|        410|           10,830|
 +--------------------------+-----------+-----------+-----------------+

3. ESTABLISHMENT OF A CAVALRY DIVISION.

 +------------------------------------+----------+--------+---------+
 |                                               | Maximum Strength |
 |                                               |   of Each Unit   |
 |                                    +----------+------------------+
 |                                    |[31]Units.|Officers.|N.C.O.'s|
 |                                    |          |         |and Men.|
 |                                    |          |         |        |
 |Headquarters of a cavalry division  |         1|       15|      50|
 |                                    |          |         |        |
 |Cavalry regiment                    |         6|       40|     800|
 |                                    |          |         |        |
 |(Each regiment comprises four       |          |         |        |
 |squadrons.)                         |          |         |        |
 |                                    |          |         |        |
 |Horse artillery group (three        |         1|       20|     400|
 |batteries)                          |          |         |        |
 |                                    |          |         |        |
 |Total for cavalry division          |        ..|      275|   5,250|
 +------------------------------------+----------+---------+--------+

[31] Maximum number of such units in single division.

=TABLE NO. 2.=

=Tabular statement of armament establishment for a maximum of seven
infantry divisions, three cavalry divisions, and two army corps
headquarters staffs.=

 +--------------------------+-------+-------+-------+------+-------+
 |Materials.                |  Inft.|  For 7|   Cav.| For 3|  Total|
 |                          |   Div.|  Inft.|   Div.|  Cav.|Columns|
 |                          |       |  Divs.|       | Divs.|  2 & 4|
 +--------------------------+-------+-------+-------+------+-------+
 |Rifles                    | 12,000| 84,000|    ...|   ...| 84,000|
 |                          |       |       |       |      |       |
 |Carbines                  |    ...|    ...|  6,000|18,000| 18,000|
 |                          |       |       |       |      |       |
 |Heavy machine guns        |    108|    756|     12|    36|    792|
 |                          |       |       |       |      |       |
 |Light machine guns        |    162|  1,134|    ...|   ...|  1,134|
 |                          |       |       |       |      |       |
 |Medium trench mortars     |      9|     63|    ...|   ...|     63|
 |                          |       |       |       |      |       |
 |Light trench mortars      |     27|    189|    ...|   ...|    189|
 |                          |       |       |       |      |       |
 |7.7 cm. guns              |     24|    168|     12|    36|    204|
 |                          |       |       |       |      |       |
 |10.5 cm. howitzers        |     12|     84|    ...|   ...|     84|
 +--------------------------+-------+-------+-------+------+-------+


Army corps headquarters staff establishment
must be drawn from the increased armaments of
the divisional infantry.

=TABLE NO. 3.=

=Maximum Stocks Authorized.=

 +----------------------+-----------+---------+-----------+
 |Material.             |  Maximum  | Estab-  |    Maximum|
 |                      | Number of |lishment |    Totals,|
 |                      |   Arms    |Per Unit,|    Rounds.|
 |                      |Authorized.| Rounds. |           |
 +----------------------+-----------+---------+-----------+
 |Rifles                |  84,000 } |     40  | 40,800,000|
 |                      |           |         |           |
 |Carbines              |  18,000 } |         |           |
 |                      |           |         |           |
 |Heavy machine guns    |     792 } |  8,000  | 15,408,000|
 |                      |           |         |           |
 |Light machine guns    |  1,134 }  |         |           |
 |                      |           |         |           |
 |Medium trench mortars |     63    |     40  |     25,200|
 |                      |           |         |           |
 |Light trench mort's   |    189    |    800  |    151,200|
 |                      |           |         |           |
 |Field artillery--     |           |         |           |
 |                      |           |         |           |
 |7.7 cm. guns          |    204    |  1,000  |    204,000|
 |                      |           |         |           |
 |10.5 cm. howitzers    |     84    |    800  |     67,200|
 +----------------------+-----------+---------+-----------+

SECTION II.--_Naval Clauses_

=ARTICLE 181.=--After the expiration of a period of two months from the
coming into force of the present treaty the German naval forces in
commission must not exceed: Six battleships of the Deutschland or
Lothringen type, six light cruisers, twelve destroyers, twelve torpedo
boats, or an equal number of ships constructed to replace them as
provided in Article 190.

No submarines are to be included. All other warships except where there
is provision to the contrary in the present treaty must be placed in
reserve or devoted to commercial purposes.

=ARTICLE 182.=--Until the completion of the minesweeping prescribed by
Article 193, Germany will keep in commission such number of minesweeping
vessels as may be fixed by the Governments of the principal Allied and
Associated Powers.

=ARTICLE 183.=--After the expiration of a period of two months from the
coming into force of the present treaty the total personnel of the
German Navy, including the manning of the fleet, coast defenses, signal
stations, administration, and other land services, must not exceed
15,000, including officers and men of all grades and corps. The total
strength of officers and warrant officers must not exceed 1,500. Within
two months from the coming into force of the present treaty the
personnel in excess of the above strength shall be demobilized. No naval
or military corps or reserve force in connection with the navy may be
organized in Germany without being included in the above strength.

=ARTICLE 184.=--From the date of the coming into force of the present
treaty all the German surface warships which are not in German ports
cease to belong to Germany, who renounces all rights over them. Vessels
which, in compliance with the armistice of Nov. 11, 1918, are now
interned in the ports of the Allied and Associated Powers, are declared
to be finally surrendered. Vessels which are now interned in neutral
ports will be there surrendered to the Governments of the principal
Allied and Associated Powers. The German Government must address a
notification to that effect to the neutral powers on the coming into
force of the present treaty.

=ARTICLE 185.=--Within a period of two months from the coming into force
of the present treaty the German surface warships enumerated below will
be surrendered to the Governments of the principal Allied and Associated
Powers in such allied ports as the said powers may direct. These
warships will have been disarmed as provided in Article 23 of the
armistice, dated Nov. 11, 1918. Nevertheless, they must have all their
guns on board.

Battleships--Oldenburg, Thuringen, Ostfriesland, Heligoland, Posen,
Westfalen, Rheinland, and Nassau.

Light Cruisers--Stettin, Danzig, München, Lübeck, Stralsund, Augsburg,
Kolberg, and Stuttgart.

And in addition forty-two modern destroyers and fifty modern torpedo
boats, as chosen by the Governments of the principal Allied and
Associated Powers.

=ARTICLE 186.=--On the coming into force of the present treaty the
German Government must undertake, under the supervision of the
Governments of the principal Allied and Associated Powers, the breaking
up of all the German surface warships now under construction.

=ARTICLE 187.=--The German auxiliary cruisers and fleet auxiliaries
enumerated below will be disarmed and treated as merchant ships.

Ships interned in neutral countries: Berlin, Santa Fé, Seydlitz, Yorck.

Ships interned in Germany: Ammon, Fürst Bülow, Answald, Gertrud, Bosnia,
Kigoma, Cordoba, Rugia, Cassel, Santa Elena, Dania, Schleswig, Rio
Negro, Möwe, Rio Pardo, Sierra Ventana, Santa Cruz, Chemnitz, Schwaben,
Emil Georg von Strauss, Solingen, Habsburg, Steigerwald, Meteor,
Franken, Waltraute, Gundomar, Scharnhorst.

=ARTICLE 188.=--On the expiration of one month from the coming into
force of the present treaty all German submarines, salvage vessels, and
docks for submarines, including the tubular dock, must have been handed
over to the Governments of the principal Allied and Associated Powers.
Such of these submarines, vessels, and docks as are considered by said
Governments to be fit to proceed under their own power or to be towed
shall be taken by the German Government into such allied ports as have
been indicated. The remainder, and also those in course of construction,
shall be broken up entirely by the German Government under the
supervision of the said Governments. The breaking up must be completed
within three months at the most after the coming into force of the
present treaty.

=ARTICLE 189.=--Articles, machinery, and material arising from the
breaking up of German warships of all kinds, whether surface vessels or
submarines, may not be used except for purely industrial or commercial
purposes. They may not be sold or disposed of to foreign countries.

=ARTICLE 190.=--Germany is forbidden to construct or acquire any
warships other than those intended to replace the units in commission
provided for in Article 181 of the present treaty. The warships intended
for replacement purposes as above shall not exceed the following
displacement: Armored ships, 10,000 tons; light cruisers, 6,000 tons;
destroyers, 800 tons; torpedo boats, 200 tons. Except where a ship has
been lost, units of the different classes shall only be replaced at the
end of a period of twenty years in the case of battleships and cruisers,
and fifteen years in the case of destroyers and torpedo boats, counting
from the launching of the ship.

=ARTICLE 191.=--The construction or acquisition of any submarine, even
for commercial purposes, shall be forbidden in Germany.

=ARTICLE 192.=--The warships in commission of the German fleet must only
have on board or in reserve the allowance of arms, munitions, and war
material fixed by the principal Allied and Associated Powers. Within a
month from the fixing of the quantities as above, arms, munitions and
war material of all kinds, including mines and torpedoes now in the
hands of the German Government and in excess of the said quantities,
shall be surrendered to the Governments of the said powers at places to
be indicated by them. Such arms, munitions and war material will be
destroyed or rendered useless. All other stocks, depots or reserves of
arms, munitions or naval war material of all kinds are forbidden. The
manufacture of these articles in German territory for, and their export
to, foreign countries shall be forbidden.

=ARTICLE 193.=--On the coming into force of the present treaty Germany
will forthwith sweep up the mines in the following areas in the North
Sea to the eastward of longitude 4 degrees 00 minutes east of Greenwich:
(1) Between parallels of latitude 53 degrees 00 minutes N. and 59
degrees 00 minutes N.; (2) to the northward of latitude 60 degrees 30
minutes N. Germany must keep these areas free from mines. Germany must
also sweep and keep free from mines such areas in the Baltic as may
ultimately be notified by the Governments of the principal Allied and
Associated Powers.

=ARTICLE 194.=--The personnel of the German Navy shall be recruited
entirely by voluntary engagements entered into for a minimum period of
twenty-five consecutive years for officers and warrant officers, and
twelve consecutive years for petty officers, and men. The number engaged
to replace those discharged for any reason before the expiration of
their term of service must not exceed 5 per cent. per annum of the
totals laid down in this section. (Article 183.)

The personnel discharged from the navy must not receive any kind of
naval or military training or undertake any further service in the navy
or army. Officers belonging to the German Navy and not demobilized must
engage to serve till the age of 45 unless discharged for sufficient
reasons. No officer or man of the German mercantile marine shall receive
any training in the navy.

=ARTICLE 195.=--In order to insure free passage into the Baltic to all
nations, Germany shall not erect any fortifications in the area
comprised between latitudes 55.27 north and 54.00 north and longitudes
9.00 east and 16.00 east of the meridian of Greenwich, nor install any
guns commanding the maritime routes between the North Sea and the
Baltic. The fortifications now existing in this area shall be demolished
and the guns removed under the supervision of the Allied Governments and
in periods to be fixed by them. The German Government shall place at the
disposal of the Governments of the principal Allied and Associated
Powers all hydrographical information now in its possession concerning
the channels and adjoining waters between the Baltic and the North Sea.

[Illustration: Copyright Underwood & Underwood

=Berlin Demonstrations Against The Peace Treaty=]

=ARTICLE 196.=--All fortified works and fortifications other than those
mentioned in Article 195 and in Part III. (political clauses for
Europe), Section XIII. (Heligoland), now established within fifty
kilometers of the German coast or on German islands off that coast,
shall be considered of a defensive nature and may remain in their
existing condition. No new fortifications shall be constructed within
these limits. The armament of these defenses shall not exceed, as
regards the number and calibre of guns, those in position at the date of
the coming into force of the present treaty. The German Government shall
communicate forthwith particulars thereof to all the European
Governments. On the expiration of a period of two months from the coming
into force of the present treaty the stocks of ammunition for these guns
shall be reduced to and maintained at a maximum figure of fifteen
hundred rounds per piece for calibres of 4.1-inch and under, and five
hundred rounds per piece for higher calibres.

=ARTICLE 197.=--During the three months following the coming into force
of the present treaty the German high-power wireless telegraphy stations
at Nauen, Hanover, and Berlin shall not be used for the transmission of
messages concerning naval, military, or political questions of interest
to Germany or any State which has been allied to Germany in the war,
without the assent of the Governments of the principal Allied and
Associated Powers. These stations may be used for commercial purposes,
but only under the supervision of the said Governments, who will decide
the wave length to be used. During the same period Germany shall not
build any more high-power wireless telegraphy stations in her own
territory or that of Austria, Hungary, Bulgaria, or Turkey.


SECTION III.--_Air Clauses_

=ARTICLE 198.=--The armed forces of Germany must not include any
military or naval air forces. Germany may, during a period not extending
beyond Oct. 1, 1919, maintain a maximum number of 100 seaplanes or
flying boats, which shall be exclusively employed in searching for
submarine mines, shall be furnished with the necessary equipment for
this purpose, and shall in no case carry arms, munitions, or bombs of
any nature whatever. In addition to the engines installed in the
seaplanes or flying boats above mentioned, one spare engine may be
provided for each engine of each of these craft. No dirigible shall be
kept.

=ARTICLE 199.=--Within two months from the coming into force of the
present treaty the personnel of the air forces on the rolls of the
German land and sea forces shall be demobilized. Up to the 1st October,
1919, however, Germany may keep and maintain a total number of 1,000
men, including officers, for the whole of the cadres and personnel,
flying and nonflying, of all formations and establishments.

=ARTICLE 200.=--Until the complete evacuation of German territory by the
Allied and Associated troops, the aircraft of the Allied and Associated
Powers shall enjoy in Germany freedom of passage through the air,
freedom of transit and of landing.

=ARTICLE 201.=--During the six months following the coming into force of
the present treaty the manufacture and importation of aircraft, parts of
aircraft, engines for aircraft, and parts of engines for aircraft shall
be forbidden in all German territory.

=ARTICLE 202.=--On the coming into force of the present treaty all
military and naval aeronautical material, except the machines mentioned
in the second and third paragraphs of Article 198, must be delivered to
the Governments of the principal Allied and Associated Powers. Delivery
must be effected at such places as the said Governments may select, and
must be completed within three months. In particular, this material will
include all items under the following heads, which are or have been in
use or were designed for warlike purposes:

Complete airplanes and seaplanes, as well as those being manufactured,
repaired, or assembled.

Dirigibles able to take the air being manufactured, repaired, or
assembled.

Plant for the manufacture of hydrogen.

Dirigible sheds and shelters of every kind for aircraft.

Pending their delivery, dirigibles will, at the expense of Germany, be
maintained inflated with hydrogen; the plant for the manufacture of
hydrogen, as well as the sheds for dirigibles, may, at the discretion of
said powers, be left to Germany until the time when the dirigibles are
handed over.

Engines for aircraft.

Nacelles and fuselages.

Armament (guns, machine guns, light machine guns, bomb-dropping
apparatus, torpedo-dropping apparatus, synchronization apparatus, aiming
apparatus).

Munitions (cartridges, shells, bombs, loaded or unloaded, stocks of
explosives or of material for their manufacture).

Instruments for use on aircraft.

Wireless apparatus and photographic or cinematograph apparatus for use
on aircraft.

Component parts of any of the items under the preceding heads.

The material referred to above shall not be removed without special
permission from the said Governments.


SECTION IV.--_Interallied Commissions of Control_

=ARTICLE 203.=--All the military, naval, and air clauses contained in
the present treaty, for the execution of which a time limit is
prescribed, shall be executed by Germany under the control of
interallied commissions specially appointed for this purpose by the
principal Allied and Associated Powers.

=ARTICLE 204.=--The Interallied Commissions of Control will be specially
charged with the duty of seeing to the complete execution of the
delivery, destruction, demolition, and rendering things useless to be
carried out at the expense of the German Government in accordance with
the present treaty. They will communicate to the German authorities the
decisions which the principal Allied and Associated Powers have reserved
the right to take, or which the execution of the military, naval, and
air clauses may necessitate.

=ARTICLE 205.=--The Interallied Commissions of Control may establish
their organizations at the seat of the Central German Government. They
shall be entitled as often as they think desirable to proceed to any
point whatever in German territory, or to send sub-commissions, or to
authorize one or more of their members to go, to any such point.

=ARTICLE 206.=--The German Government must give all necessary facilities
for the accomplishment of their missions to the Interallied Commissions
of Control and to their members. It shall attach a qualified
representative to each Interallied Commission of Control for the purpose
of receiving the communications which the commission may have to address
to the German Government, and of supplying or procuring for the
commission all information or documents which may be required. The
German Government must in all cases furnish at its own cost all labor
and material required to effect the deliveries and the work of
destruction, dismantling, demolition, and of rendering things useless,
provided for in the present treaty.

=ARTICLE 207.=--The upkeep and cost of the Commissions of Control and
the expenses involved by their work shall be borne by Germany.

=ARTICLE 208.=--The Military Interallied Commission of Control will
represent the Governments of the principal Allied and Associated Powers
in dealing with the German Government in all matters concerning the
execution of the military clauses. In particular it will be its duty to
receive from the German Government the notifications relating to the
location of the stocks and depots of munitions, the armament of the
fortified works, fortresses and forts which Germany is allowed to
retain, and the location of the works or factories for the production of
arms, munitions and war material and their operations. It will take
delivery of the arms, munitions, and war material, will select the
points where such delivery is to be effected, and will supervise the
works of destruction and demolition and of rendering things useless
which are to be carried out in accordance with the present treaty. The
German Government must furnish to the Military Interallied Commission of
Control all such information and documents as the latter may deem
necessary to insure the complete execution of the military clauses, and
in particular all legislative and administrative documents and
regulations.

=ARTICLE 209.=--The Naval Interallied Commission of Control will
represent the Governments of the principal Allied and Associated Powers
in dealing with the German Government in all matters concerning the
execution of the naval clauses. In particular it will be its duty to
proceed to the building yards and to supervise the breaking up of the
ships which are under construction there, to take delivery of all
surface ships or submarines, salvage ships, docks and the tubular dock,
and to supervise the destruction and breaking up provided for. The
German Government must furnish to the Naval Interallied Commission of
Control all such information and documents as the commission may deem
necessary to insure the complete execution of the naval clauses, in
particular the designs of the warships, the composition of their
armaments, the details and models of the guns, munitions, torpedoes,
mines, explosives, wireless telegraphic apparatus and in general
everything relating to naval war material, as well as all legislative or
administrative documents or regulations.

=ARTICLE 210.=--The Aeronautical Interallied Commission of Control will
represent the Governments of the principal Allied and Associated Powers
in dealing with the German Government in all matters concerning the
execution of the air clauses. In particular it will be its duty to make
an inventory of the aeronautical material existing in German territory,
to inspect airplane, balloon, and motor manufactories, and factories
producing arms, munitions, and explosives capable of being used by
aircraft, to visit all aerodromes, sheds, landing grounds, parks, and
depots, to authorize, where necessary, a removal of material, and to
take delivery of such material. The German Government must furnish to
the Aeronautical Interallied Commission of Control all such information
and legislative, administrative or other documents which the commission
may consider necessary to insure the complete execution of the air
clauses, and, in particular, a list of the personnel belonging to all
the German air services, and of the existing material as well as of that
in process of manufacture or on order, and a list of all establishments
working for aviation, of their positions, and of all sheds and landing
grounds.


SECTION V.--_General Articles_

=ARTICLE 211.=--After the expiration of a period of three months from
the coming into force of the present treaty the German laws must have
been modified and shall be maintained in conformity with this part of
the present treaty. Within the same period all the administrative or
other measures relating to the execution of this part of the treaty must
have been taken.

=ARTICLE 212.=--The following portions of the armistice of Nov. 11,
1918: Article VI., the first two and the sixth and seventh paragraphs of
Article VII, Article IX, Clauses I., II., and V. of Annex No. 2 and the
protocol, dated April 4, 1919, supplementing the armistice of Nov. 11,
1918, remain in force so far as they are not inconsistent with the above
stipulations.

=ARTICLE 213.=--So long as the present treaty remains in force, Germany
undertakes to give every facility for any investigation which the
Council of the League of Nations, acting if need be by a majority vote,
may consider necessary.



PART VI

Prisoners of War and Graves


SECTION I.--_Prisoners of War_


=ARTICLE 214.=--The repatriation of prisoners of war and interned
civilians shall take place as soon as possible after the coming into
force of the present treaty and shall be carried out with the greatest
rapidity.

=ARTICLE 215.=--The repatriation of German prisoners of war and interned
civilians shall, in accordance with Article 214, be carried out by a
commission composed of representatives of the Allied and Associated
Powers on the one part, and of the German Government on the other part.

For each of the Allied and Associated Powers a sub-commission composed
exclusively of representatives of the interested powers and of delegates
of the German Government shall regulate the details of carrying into
effect the repatriation of the prisoners of war.

=ARTICLE 216.=--From the time of their delivery into the hands of the
German authorities the prisoners of war and interned civilians are to be
returned without delay to their homes by the said authorities. Those
among them who before the war were habitually resident in territory
occupied by the troops of the Allied and Associated Powers are likewise
to be sent to their homes, subject to the consent and control of the
military authorities of the Allied and Associated Armies of Occupation.

=ARTICLE 217.=--The whole cost of repatriation from the moment of
starting shall be borne by the German Government, who shall also provide
the land and sea transport and staff considered necessary by the
commission referred to in Article 215.

=ARTICLE 218.=--Prisoners of war and interned civilians awaiting
disposal or undergoing sentences for offenses against discipline shall
be repatriated irrespective of the completion of their sentence or of
the proceedings pending against them.

This stipulation shall not apply to prisoners of war and interned
civilians punished for offenses committed subsequent to May 1, 1919.

During the period pending their repatriation all prisoners of war and
interned civilians shall remain subject to the existing regulations,
more especially as regards work and discipline.

=ARTICLE 219.=--Prisoners of war and interned civilians who are awaiting
disposal or undergoing sentence for offenses other than those against
discipline may be detained.

=ARTICLE 220.=--The German Government undertakes to admit to its
territory without distinction all persons liable to repatriation.

Prisoners of war or other German nationals who do not desire to be
repatriated may be excluded from repatriation; but the Allied and
Associated Governments reserve to themselves the right either to
repatriate them or to take them to a neutral country or to allow them to
reside in their own territories.

The German Government undertakes not to institute any exceptional
proceedings against these persons or their families nor to take any
repressive or vexatious measures of any kind whatsoever against them on
this account.

=ARTICLE 221.=--The Allied and Associated Governments reserve the right
to make the repatriation of German prisoners of war or German nationals
in their hands conditional upon the immediate notification and release
by the German Government of any prisoners of war who are nationals of
the Allied and Associated Powers and may still be in Germany.

=ARTICLE 222.=--Germany undertakes:

1. To give every facility to the commissions to inquire into the cases
of those who cannot be traced; to furnish such commissions with all
necessary means of transport; to allow them access to camps, prisons,
hospitals, and all other places; and to place at their disposal all
documents, whether public or private, which would facilitate their
inquiries.

2. To impose penalties upon any German officials or private persons who
have concealed the presence of any nationals of any of the Allied and
Associated Powers, or have neglected to reveal the presence of any such
after it had come to their knowledge.

=ARTICLE 223.=--Germany undertakes to restore without delay from the
date of the coming into force of the present treaty all articles, money,
securities, and documents which have belonged to nationals of the Allied
and Associated Powers and which have been retained by the German
authorities.

=ARTICLE 224.=--The high contracting parties waive reciprocally all
repayment of sums due for the maintenance of prisoners of war in their
respective territories.


SECTION II.--_Graves_

=ARTICLE 225.=--The Allied and Associated Governments and the German
Government will cause to be respected and maintained the graves of the
soldiers and sailors buried in their respective territories.

They agree to recognize any commission appointed by an Allied or
Associated Government for the purpose of identifying, registering,
caring for, or erecting suitable memorials over the said graves and to
facilitate the discharge of its duties.

Furthermore, they agree to afford, so far as the provisions of their
laws and the requirements of public health allow, every facility for
giving effect to requests that the bodies of their soldiers and sailors
may be transferred to their own countries.

=ARTICLE 226.=--The graves of prisoners of war and interned civilians
who are nationals of the different belligerent States and have died in
captivity shall be properly maintained in accordance with Article 225 of
the present treaty.

The Allied and Associated Governments on the one part, and the German
Government on the other part, reciprocally, undertake also to furnish to
each other:

1. A complete list of those who have died, together with all information
useful for identification.

2. All information as to the number and position of the graves of all
those who have been buried without identification.



PART VII

Penalties


=ARTICLE 227.=--The Allied and Associated Powers publicly arraign
William II. of Hohenzollern, formerly German Emperor, for a supreme
offense against international morality and the sanctity of treaties.

A special tribunal will be constituted to try the accused, thereby
assuring him the guarantees essential to the right of defense. It will
be composed of five judges, one appointed by each of the following
powers: The United States of America, Great Britain, France, Italy, and
Japan.

In its decision, the tribunal will be guided by the highest motives of
international policy with a view to vindicating the solemn obligations
of international undertakings and the validity of international
morality. It will be its duty to fix the punishment which it considers
should be imposed.

The Allied and Associated Powers will address a request to the
Government of the Netherlands for the surrender to them of the
ex-Emperor in order that he may be put on trial.

=ARTICLE 228.=--The German Government recognizes the right of the Allied
and Associated Powers to bring before military tribunals persons accused
of having committed acts in violation of the laws and customs of war.
Such persons shall, if found guilty, be sentenced to punishments laid
down by law. This provision will apply, notwithstanding any proceedings
or prosecution before a tribunal in Germany or in the territory of her
allies.

The German Government shall hand over to the Allied and Associated
Powers or to such one of them as shall so request, all persons accused
of having committed an act in violation of the laws and customs of war
who are specified either by name or by the rank, office, or employment
which they held under the German authorities.

=ARTICLE 229.=--Persons guilty of criminal acts against the nationals of
one of the Allied and Associated Powers will be brought before the
military tribunals of that power.

Persons guilty of criminal acts against the nationals of more than one
of the Allied and Associated Powers will be brought before military
tribunals composed of members of the military tribunals of the powers
concerned.

In every case the accused will be entitled to name his own counsel.

=ARTICLE 230.=--The German Government undertakes to furnish all
documents and information of every kind, the production of which may be
considered necessary to insure the full knowledge of the incriminating
acts, the discovery of offenders, and the just appreciation of
responsibility.



PART VIII

Reparation


SECTION I.--_General Provisions_


=ARTICLE 231.=--The Allied and Associated Governments affirm, and
Germany accepts, the responsibility of Germany and her allies for
causing all the loss and damage to which the Allied and Associated
Governments and their nationals have been subjected as a consequence of
the war imposed upon them by the aggression of Germany and her allies.

=ARTICLE 232.=--The Allied and Associated Governments recognize that the
resources of Germany are not adequate, after taking into account
permanent diminutions of such resources which will result from other
provisions of the present treaty, to make complete reparation for all
such loss and damage.

The Allied and Associated Governments, however, require, and Germany
undertakes, that she will make compensation for all damage done to the
civilian population of the Allied and Associated Powers and to their
property during the period of the belligerency of each as an Allied or
Associated Power against Germany by such aggression by land, by sea, and
from the air, and in general all damage as defined in Annex I. hereto.

In accordance with Germany's pledges, already given as to complete
restoration for Belgium, Germany undertakes, in addition to the
compensation for damage elsewhere in this chapter provided for, as a
consequence of the violation of the treaty of 1839, to make
reimbursement of all sums which Belgium has borrowed from the Allies and
Associated Governments up to Nov. 11, 1918, together with interest at
the rate of 5 per cent. per annum on such sums. This amount shall be
determined by the Reparation Commission, and the German Government
undertakes thereupon forthwith to make a special issue of bearer bonds
to an equivalent amount payable in marks gold, on May 1, 1926, or, at
the option of the German Government, on the 1st of May in any year up to
1926. Subject to the foregoing, the form of such bonds shall be
determined by the Reparation Commission. Such bonds shall be handed over
to the Reparation Commission, which has authority to take and
acknowledge receipt thereof on behalf of Belgium.

=ARTICLE 233.=--The amount of the above damage for which compensation is
to be made by Germany shall be determined by an interallied commission,
to be called the Reparation Commission, and constituted in the form and
with the power set forth hereunder and in Annexes II. to VII. inclusive
hereto.

This commission shall consider the claims and give to the German
Government a just opportunity to be heard.

The findings of the commission as to the amount of damage defined as
above shall be concluded and notified to the German Government on or
before the 1st May, 1921, as representing the extent of that
Government's obligations.

The commission shall concurrently draw up a schedule of payments
prescribing the time and manner for securing and discharging the entire
obligation within a period of thirty years from the 1st May, 1921. If,
however, within the period mentioned, Germany fails to discharge her
obligations, any balance remaining unpaid may, within the discretion of
the commission, be postponed for settlement in subsequent years, or may
be handled otherwise in such manner as the Allied and Associated
Governments, acting in accordance with the procedure laid down in this
part of the present treaty, shall determine.

=ARTICLE 234.=--The Reparation Commission shall after the 1st May, 1921,
from time to time, consider the resources and capacity of Germany and,
after giving her representatives a just opportunity to be heard, shall
have discretion to extend the date and to modify the form of payments,
such as are to be provided for in accordance with Article 233; but not
to cancel any part, except with the specific authority of the several
Governments represented upon the commission.

=ARTICLE 235.=--In order to enable the Allied and Associated Powers to
proceed at once to the restoration of their industrial and economic
life, pending the full determination of their claims, Germany shall pay
in such installments and in such manner (whether in gold, commodities,
ships, securities, or otherwise) as the Reparation Commission may fix,
during 1919, 1920, and the first four months of 1921, the equivalent of
20,000,000,000 gold marks.

Out of this sum the expenses of the armies of occupation subsequent to
the armistice of the 11th November, 1918, shall first be met, and such
supplies of food and raw materials as may be judged by the Governments
of the principal Allied and Associated Powers to be essential to enable
Germany to meet her obligations for reparation may also, with the
approval of the said Governments, be paid for out of the above sum. The
balance shall be reckoned toward liquidation of the amounts due for
reparation.

Germany shall further deposit bonds as prescribed in Paragraph 12 (c) of
Annex II. hereto.

=ARTICLE 236.=--Germany further agrees to the direct application of her
economic resources to reparation as specified in Annexes III., IV., V.,
and VI., relating respectively to merchant shipping, to physical
restoration, and to coal and derivatives of coal, and to dyestuffs and
other chemical products; provided always that the value of the property
transferred and any services rendered by her under these annexes,
assessed in the manner herein prescribed, shall be credited to her
toward liquidation of her obligations under the above articles.

=ARTICLE 237.=--The successive installments, including the above sum,
paid over by Germany in satisfaction of the above claims, will be
divided by the Allied and Associated Governments in proportions which
have been determined upon by them in advance on a basis of general
equity and of the rights of each.

For the purposes of this division the value of property transferred and
services rendered under Article 243 and under Annexes III., IV., VI.,
and VII. shall be reckoned in the same manner as cash payments effected
in that year.

=ARTICLE 238.=--In addition to the payments mentioned above, Germany
shall effect, in accordance with the procedure laid down by the
Reparation Commission, restitution in cash of cash taken away, seized,
or sequestrated, and also restitution of animals, objects of every
nature, and securities taken away, seized, or sequestrated, in the cases
in which it proves possible to identify them in territory belonging to
Germany or her allies.

Until this procedure is laid down restitution will continue in
accordance with the provisions of the armistice of 11th November, 1918,
and its renewals and the protocols thereto.

=ARTICLE 239.=--Germany undertakes to make forthwith the restitution
contemplated by Article 238 and to make the payments and deliveries
contemplated by Articles 233, 234, 235, and 236.

=ARTICLE 240.=--Germany recognizes the commission provided for by
Article 233 as the same may be constituted by the Allied and Associated
Governments in accordance with Annex II. and agrees irrevocably to the
possession and exercise by such commission of the power and authority
given to it under the present treaty. The German Government will supply
to the commission all the information which the commission may require
relative to the financial situation and operations and to the property,
productive capacity, and stocks and current production of raw materials
and manufactured articles of Germany and her nationals, and, further,
any information relative to military operations which in the judgment of
the commission may be necessary for the assessment of Germany's
liability for reparation as defined in Annex I.

The German Government will accord to the members of the commission and
its authorized agents the same rights and immunities as are enjoyed in
Germany by duly accredited diplomatic agents of friendly powers. Germany
further agrees to provide for the salaries and expenses of the
commission, and of such staff as it may employ.

=ARTICLE 241.=--Germany undertakes to pass, issue, and maintain in force
any legislation, orders, and decrees that may be necessary to give
complete effect to these provisions.

=ARTICLE 242.=--The provisions of this part of the present treaty do not
apply to the property, rights, and interests referred to in Sections
III. and IV. of Part X. (economic clauses) of the present treaty, nor to
the product of their liquidation, except so far as concerns any final
balance in favor of Germany under Article 243 (a).

=ARTICLE 243.=--The following shall be reckoned as credits to Germany in
respect of her reparation obligations:

(a) Any final balance in favor of Germany under Sections III. and IV. of
Part X. (economic clauses) and Section V. (Alsace-Lorraine) of Part III.
(political clauses for Europe).

(b) Amounts due to Germany in respect of transfers under Part IX.
(financial clauses), Part XII. (ports, waterways, and railways), and
Section IV. (Sarre Basin) of Part III. (political clauses for Europe).

(c) Amounts which in the judgment of the Reparation Commission should be
credited to Germany on account of any other transfers under the present
treaty of property, rights, concessions, or other interests.

In no case, however, shall credit be given for property restored in
accordance with Article 238.

=ARTICLE 244.=--The transfer of the German submarine cables which do not
form the subject of particular provisions of the present treaty as
regulated by Annex VII. hereto.


ANNEX I.

Compensation may be claimed from Germany under Article 232 above in
respect of the total damage under the following categories:

1. Damage to injured persons and to surviving dependents by personal
injury to or death of civilians caused by acts of war, including
bombardments or other attacks on land, on sea, or from the air, and all
the direct consequences thereof, and of all operations of war by the two
groups of belligerents wherever arising.

2. Damage caused by Germany or her allies to civilian victims of acts of
cruelty, violence, or maltreatment, (including injuries to life or
health as a consequence of imprisonment, deportation, internment, or
evacuation, of exposure at sea, or of being forced to labor by Germany
or her allies,) wherever arising, and to the surviving dependents of
such victims.

3. Damage caused by Germany or her allies in their own territory or in
occupied or invaded territory to civilian victims of all acts injurious
to health or capacity to work, or to honor, as well as to the surviving
dependents of such victims.

4. Damage caused by any kind of maltreatment of prisoners of war.

5. As damage caused to the peoples of the Allied and Associated Powers,
all pensions and compensations in the nature of pensions to naval and
military victims of war, (including members of the air forces,) whether
mutilated, wounded, sick or invalided, and to the dependents of such
victims, the amount due to the Allied and Associated Governments being
calculated for each of them as being the capitalized costs of such
pensions and compensations at the date of the coming into force of the
present treaty, on the basis of the scales in force in France at such
date.

6. The cost of assistance by the Governments of the Allied and
Associated Powers to prisoners of war and to their families and
dependents.

7. Allowances by the Governments of the Allied and Associated Powers to
the families and dependents of mobilized persons or persons serving with
the forces, the amount due to them for each calendar year in which
hostilities occurred being calculated for each Government on the basis
of the average scale for such payments in force in France during that
year.

8. Damage caused to civilians by being forced by Germany or her allies
to labor without just remuneration.

9. Damage in respect of all property, wherever situated, belonging to
any of the Allied or Associated States or their nationals, with the
exception of naval and military works or materials, which have been
carried off, seized, injured, or destroyed by the acts of Germany or her
allies on land, on sea, or from the air, or damage directly in
consequence of hostilities or of any operations of war.

10. Damage in the form of levies, fines and other similar exactions
imposed by Germany or her allies upon the civilian population.


ANNEX II.

1. The commission referred to in Article 233 shall be called "The
Reparation Commission," and is hereinafter referred to as "the
commission."

2. Delegates to the commission shall be nominated by the United States
of America, Great Britain, France, Italy, Japan, Belgium, and the
Serb-Croat-Slovene State. Each of these powers will appoint one delegate
and also one assistant delegate, who will take his place in case of
illness or necessary absence, but at other times will only have the
right to be present at proceedings without taking any part therein. On
no occasion shall the delegates of more than five of the above powers
have the right to take part in the proceedings of the commission and to
record their votes. The delegates of the United States, Great Britain,
France, and Italy shall have this right on all occasions. The delegates
of Belgium shall have this right on all occasions other than those
referred to below. The delegate of Japan shall have this right on
occasions when questions relating to damage at sea and questions arising
under Article 260 of Part IX. (financial clauses) in which Japanese
interests are concerned are under consideration. The delegate of the
Serb-Croat-Slovene State shall have this right when questions relating
to Austria, Hungary, or Bulgaria are under consideration.

Each Government represented on the commission shall have the right to
withdraw therefrom upon twelve months' notice, filed with the commission
and confirmed in the course of the sixth month after the date of the
original notice.

3. Such of the other Allied and Associated Powers as may be interested
shall have the right to appoint a delegate to be present and act as
assessor only while their respective claims and interests are under
examination or discussion, but without the right to vote.

4. In case of the death, resignation or recall of any delegate,
assistant delegate, or assessor, a successor to him shall be nominated
as soon as possible.

5. The commission will have its principal permanent bureau in Paris and
will hold its first meeting in Paris as soon as practicable after the
coming into force of the present treaty, and thereafter will meet in
such place or places and at such time as it may deem convenient and as
may be necessary for the most expeditious discharge of its duties.

6. At its first meeting the commission shall elect from among the
delegates referred to above a Chairman and a Vice Chairman, who shall
hold office for one year and shall be eligible for re-election. If a
vacancy in the Chairmanship or Vice Chairmanship should occur during the
annual period the commission shall proceed to a new election for the
remainder of the said period.

[Illustration: Copyright Underwood & Underwood

German Press Representatives in Versailles

These men who are shown in their work room in the Hotel Des Reservoirs,
Versailles, sent the news of the progress of the Peace Treaty throughout
Germany]

7. The commission is authorized to appoint all necessary officers,
agents, and employees who may be required for the execution of its
functions, and to fix their remuneration; to constitute committees,
whose members need not necessarily be members of the commission, and to
take all executive steps necessary for the purpose of discharging its
duties, and to delegate authority and discretion to officers, agents,
and committees.

8. All proceedings of the commission shall be private unless, on
particular occasions, the commission shall otherwise determine for
special reasons.

9. The commission shall be required, if the German Government so desire,
to hear, within a period which it will fix from time to time, evidence
and arguments on the part of Germany on any question connected with her
capacity to pay.

10. The commission shall consider the claims and give to the German
Government a just opportunity to be heard, but not to take any part
whatever in the decisions of the commission. The commission shall afford
a similar opportunity to the allies of Germany when it shall consider
that their interests are in question.

11. The commission shall not be bound by any particular code or rules of
law or by any particular rule of evidence or of procedure, but shall be
guided by justice, equity, and good faith. Its decisions must follow the
same principles and rules in all cases where they are applicable. It
will establish rules relating to methods of proof of claims. It may act
on any trustworthy modes of computation.

12. The commission shall have all the powers conferred upon it, and
shall exercise all the functions assigned to it by the present treaty.

The commission shall in general have wide latitude as to its control and
handling of the whole reparation problem as dealt with in this part of
the present treaty, and shall have authority to interpret its
provisions. Subject to the provisions of the present treaty, the
commission is constituted by the several Allied and Associated
Governments referred to in Paragraphs 2 and 3 above as the exclusive
agency of the said Governments respectively for receiving, selling,
holding, and distributing the reparation payments to be made by Germany
under this part of the present treaty. The commission must comply with
the following conditions and provisions:

(a) Whatever part of the full amount of the proved claims is not paid in
gold, or in ships, securities, and commodities or otherwise, Germany
shall be required, under such conditions as the commission may
determine, to cover by way of guarantee by an equivalent issue of bonds,
obligations, or otherwise, in order to constitute an acknowledgment of
the said part of the debt;

(b) In periodically estimating Germany's capacity to pay, the commission
shall examine the German system of taxation, first to the end that the
sums for reparation which Germany is required to pay shall become a
charge upon all her revenues prior to that for the service or discharge
of any domestic loan, and, secondly, so as to satisfy itself that, in
general, the German scheme of taxation is fully as heavy proportionately
as that of any of the powers represented on the commission.

(c) In order to facilitate and continue the immediate restoration of the
economic life of the Allied and Associated countries, the commission
will, as provided in Article 235, take from Germany by way of security
for and acknowledgment of her debt a first installment of gold bearer
bonds free of all taxes or charges of every description established or
to be established by the Government of the German Empire or of the
German States, or by any authority subject to them; these bonds will be
delivered on account and in three portions, the marks gold being payable
in conformity with Article 262 of Part IX. (financial clauses) of the
present treaty, as follows:

First. To be issued forthwith, 20,000,000,000 marks gold bearer bonds,
payable not later than May 1, 1921, without interest. There shall be
specially applied toward the amortization of these bonds the payments
which Germany is pledged to make in conformity with Article 235, after
deduction of the sums used for the reimbursement of expenses of the
armies of occupation and for payment of foodstuffs and raw materials.
Such bonds as have not been redeemed by May 1, 1921, shall then be
exchanged for new bonds of the same type as those provided for below,
(Paragraph 12, c. second.)

Second. To be issued forthwith, further 40,000,000,000 marks gold bearer
bonds, bearing interest at 2½ per cent. per annum between 1921 and 1926,
and thereafter at 5 per cent. per annum, with an additional 1 per cent
for amortization beginning in 1926 on the whole amount of the issue.

Third. To be delivered forthwith a covering undertaking in writing, to
issue when, but not until, the commission is satisfied that Germany can
meet such interest and sinking fund obligations, a further installment
of 40,000,000,000 marks gold 5 per cent. bearer bonds, the time and mode
of payment of principal and interest to be determined by the commission.

The dates for payment of interest, the manner of applying the
amortization fund, and all other questions relating to the issue,
management, and regulation of the bond issue shall be determined by the
commission from time to time.

Further issues by way of acknowledgment and security may be required as
the commission subsequently determines from time to time.

(d) In the event of bonds, obligations, or other evidence of
indebtedness issued by Germany by way of security for