Herbert Hoover: The Man and His Work

APPENDICES

With the war effectually over we enter a new economic era, and its immediate effect on prices is difficult to anticipate. The maintenance of the embargo will prevent depletion of our stocks by hungry Europe to any point below our necessities, and anyone who contemplates speculation in food against the needs of these people can well be warned of the prompt action of the government. The prices of some food commodities may increase, but others will decrease, because with liberated shipping accumulated stocks in the Southern hemisphere and the Far East will be available. The demands upon the United States will change in character but not in volume.

The course of food prices in the United States during the last fifteen months is of interest. In general, for the first twelve months of the Food Administration the prices to the farmer increased, but decreased to the consumer by the elimination of profiteering and speculation. Due to increases in wages, transportation, etc., the prices have been increasing during the last four months.

The currents which affect food prices in the United States are much less controlled than in the other countries at war. The powers of the Food Administration in these matters extend:

First, to the control of profits by manufacturers, wholesalers and dealers, and the control of speculation in foodstuffs. They do not extend to the control of the great majority of retailers, to public eating places, or the farmer, except so far as this can be accomplished on a voluntary basis.

Second, the controlled buying for the Allied civil populations and armies, the neutrals and the American army and navy, dominates the market in certain commodities at all times, and in other commodities part of the time. In these cases it is possible to effect, in coöperation with producers and manufacturers, a certain amount of stability in price. I have never favored attempts to fix maximum prices by law; the universal history of these devices in Europe has been that they worked against the true interests of both producer and consumer.

The course of prices during the first year of the Food Administration, that is, practically the period ending July 1,1918, is clearly shown by the price indexes of the Department of Agriculture and the Department of Labor. Taking 1913 prices as the basis, the average prices of farm produce for the three months ending July 1, 1917, were, according to the Department of Agriculture's price index, 115 per cent more than the average of 1913 prices, and according to the Department of Labor index, it was 91 per cent over 1913 prices. The two departments use somewhat different bases of calculation. The average of farmers' prices one year later—that is, the three months ending July 1,1918, was, according to the Department of Agriculture indexes, 127 per cent over the 1913 basis and, according to the Department of Labor index, was 114 per cent over the 1913 average. Thus farm prices increased 12 per cent on the Department of Agriculture calculations and 23 per cent upon the Department of Labor basis.

An examination of wholesale prices, that is, of prepared foods, shows a different story:

The Department of Agriculture does not maintain an index of wholesale prices, but the Department of Labor does, and this index shows a decrease in wholesale prices from 87 per cent over 1913 basis to 79 per cent over the 1913 basis for the three months ending July 1, 1917, and July 1, 1918, respectively. The Food Administration price index of wholesale prices calculated upon still another basis shows a decrease of from 84 per cent to 80 per cent between these periods one year apart.

Thus all indexes show an increase in farmers' prices and a decrease in wholesale prices of food during the year ending July 1, 1918. In other words, a great reduction took place in middlemen's charges, amounting to between 15 per cent and 30 per cent depending upon the basis of calculation adopted. These decreases have come out of the elimination of speculation and profiteering.

The course of retail prices corroborates these results also. Since October, 1917, the Food Administration has had the services of 2,500 weekly, voluntary retail price reporters throughout the United States. These combined reports show that the combined prices per unit of 24 most important foodstuffs were $6.62 in October, 1917. The same quantities and commodities could be bought for $6.55 average for the spring quarter, 1918—that is, a small drop had taken place. During this same period of quarters ending July 1, 1917, to July 1, 1918, the prices of clothing rose from 74 per cent to 136 per cent over 1913, or a rise of about 62 per cent, according to the Department of Labor indexes.

Since the spring quarter, ending July 1, 1918, there has been a rise in prices, the Department of Agriculture index for September showing that farm price averages were 138 per cent over the 1913 basis, and the Department of Labor index showing 136 per cent, or a rise from the average of the spring quarter this year of 11 per cent and 22 per cent respectively to the farmer. The wholesale price index of the Department of Labor shows a rise from 79 per cent average of the spring quarter, 1918, to 99 per cent for September, or a rise of 20 per cent. The Food Administration wholesale index shows an increase from 80 per cent to 100 per cent, or 20 per cent for the same period.

In October, 1918, the Food Administration retail price reports show that the retail cost of the same quantity of the 24 principal foodstuffs was $7.58 against an average of $6.55 for the spring quarter 1918, or a rise of about 18 per cent.

It is obvious enough that prices have risen during the last three months both to the farmer and to the wholesaler and retailer. On the other hand, these rising prices have only kept pace with the farmers' prices.

Since the first of July this year, many economic forces have caused a situation adverse to the consumer. There has been a steady increase in wages, a steady increase in cost of the materials which go into food production and manufacture, and in containers and supplies of all kinds. There has been an increase of 25 per cent in freight rates. The rents of the country are increasing and therefore costs of manufacturing, distribution and transportation are steadily increasing and should inevitably affect prices. The public should distinguish between a rise in prices and profiteering, for with increasing prices to the farmer—who is himself paying higher wages and cost—and with higher wages and transport, prices simply must rise. An example of what this may come to can be shown in the matter of flour. The increased cost of transportation from the wheat-producing regions to New York City amounts to about forty cents per barrel. The increased cost of cotton bags during the last fourteen months amounts to thirty cents per barrel of flour. The increase in wholesalers' costs of drayage, rents, etc., amounts to ten cents, or a total of eighty cents without including the increased costs of the miller or retailer.

Such changes do not come under the category of profiteering. They are the necessary changes involved by the economic differences in the situation. We cannot "have our cake and eat it." In other words, we cannot raise wages, railway rates, expand our credits and currency, and hope to maintain the same level of prices of foods. All that the Food Administration can do is to see as far as is humanly possible that these alterations take place without speculation or profiteering, and that such readjustments are conducted in an orderly manner. Even though it were in the power of the Food Administration to repress prices, the effect of maintaining the same price level in the face of such increases in costs of manufacture, transportation and distribution, would be ultimately to curtail production itself. We are in a period of inflation and we cannot avoid the results.

We have had a large measure of voluntary coöperation both from producers, manufacturers and wholesalers, in suppression of profiteering and speculation. There are cases that have required stern measures, and some millions of dollars have been refunded in one way or another to the public. The number of firms penalized is proportionately not large to the total firms engaged.

In the matter of voluntary control of retailers we have had more difficulty, but in the publication from week to week in every town in the country of "fair prices" based upon wholesale costs and type of service, there has been a considerable check made upon overcharges. The Food Administration continues through the armistice until legal peace and there will be no relaxation of efforts to keep down profiteering and speculation to the last moment.

APPENDIX II

The profession of engineering in the United States comprises not alone scientific advisers on industry, but is in great majority composed of men in administrative positions. In such positions they stand midway between capital and labor. The character of your training and experience leads you to exact and quantitative thought. This basis of training in a great group of Americans furnished a wonderful recruiting ground for service in these last years of tribulation. Many thousands of engineers were called into the army, the navy, and civilian service for the Government. Thousands of high offices were discharged by them with credit to the profession and the nation.

We have in this country probably one hundred thousand professional engineers. The events of the past few years have greatly stirred their interest in national problems. This has taken practical form in the maintenance of joint committees for discussion of these problems and support to a free advisory bureau in Washington. The engineers want nothing for themselves from Congress. They want efficiency in government, and you contribute to the maintenance of this bureau out of sheer idealism. This organization for consideration of national problems has had many subjects before it and I propose to touch on some of them this evening.

Even more than ever before is there necessity for your continued interest in this vast complex of problems that must be met by our Government. We are faced with a new orientation of our country to world problems. We face a Europe still at war; still amid social revolutions; some of its peoples still slacking on production; millions starving; and therefore the safety of its civilization is still hanging by a slender thread. Every wind that blows carries to our shores an infection of social diseases from this great ferment; every convulsion there has an economic reaction upon our own people. If we needed further proof of the interdependence of the world, we have it today in the practical blockade of our export market. The world is asking us to ratify long delayed peace in the hope that such confidence will be restored as will enable her to reconstruct her economic life. We are today contemplating maintenance of an enlarged army and navy in preparedness for further upheavals in the world, and failing to provide even some insurance against war by a league to promote peace.

Out of the strain of war, weaknesses have become ever more evident in our administrative organization, in our legislative machinery. Our federal government is still overcentralized, for we have upon the hands of our government enormous industrial activities which have yet to be demobilized. We are swamped with debt and burdened with taxation. Credit is woefully inflated; speculation and waste are rampant. Our own productivity is decreasing. Our industrial population is crying for remedies for the increasing cost of living and aspiring to better conditions of life and labor. But beyond all this, great hopes and aspirations are abroad; great moral and social forces have been stimulated by the war and will not be quieted by the ratification of peace. These are but some of the problems with which we must deal. I have no fear that our people will not find solutions. But progress is sometimes like the old-fashioned rail fence—some rails are perhaps misshapen and all look to point the wrong way; but in the end, the fence progresses.

Your committees, jointly with those of other engineering societies, have had before them and expressed their views on many matters concerning the handling of the railways, shipping, the reorganization of the government engineering work, the national budget, and other practical items.

The war nationalization of railways and shipping are our two greatest problems in governmental control awaiting demobilization. There are many fundamental objections to continuation of these experiments in socialism necessitated by the war. They lie chiefly in their destruction of initiative in our people and the dangers of political domination that can grow from governmental operation. Beyond this, the engineers will hold that the successful conduct of great industries is to a transcendant degree dependent upon the personal abilities and character of their employees and staff. No scheme of political appointment has ever yet been devised that will replace competition in its selection of ability and character. Both shipping and railways have today the advantage of many skilled persons sifted out in the hard school of competition, and even then the government operation of these enterprises is not proving satisfactory. Therefore, the ultimate inefficiency that would arise from the deadening paralysis of bureaucracy has not yet had full opportunity for development. Already we can show that no government under pressure of ever-present political or sectional interests can properly conduct the risks of extension and improvement, or can be free from local pressure to conduct unwarranted services in industrial enterprise. On the other hand, our people have long since recognized that we cannot turn monopoly over to unrestrained operation for profit nor that the human rights of employees can ever be dominated by dividends.

Our business is handicapped on every side by the failure of our transportation facilities to grow with the country. It is useless to talk about increased production to meet an increased standard of living in an increasing population without a greatly increased transport equipment. Moreover, there are very great social problems underlying our transport system; today their contraction is forcing a congestion of our population around the great cities with all that these overswollen settlements import. Even such great disturbances as the coal strike have a minor root in our inadequate transportation facilities and their responsibility for intermittent operation of the mines.

We are all hoping that Congress will find a solution to this problem that will be an advanced step toward the combined stimulation of the initiative of the owners, the efficiency of operation, the enlistment of the good will of the employees, and the protection of the public. The problem is easy to state. Its solution is almost overwhelming in complexity. It must develop with experience, step by step, toward a real working partnership of its three elements.

The return of the railways to the owners places predominant private operation upon its final trial. If instant energy, courage and large vision in the owners should prove lacking in meeting the immediate situation we shall be faced with a reaction that will drive the country to some other form of control. Energetic enlargement of equipment, better service, coöperation with employees, and the least possible advance in rates, together with freedom from political interest, will be the scales upon which the public will weigh these results.

Important phases of our shipping problem that have come before you should receive wider discussion by the country. As the result of war pressure, we shall spend over $2,800,000,000 in the completion of a fleet of nineteen hundred ships of a total of 111,000,000 tons—nearly one quarter of the world's cargo shipping. We are proud of this great expansion of our marine, and we wish to retain it under the American flag. Our shipping problem has one large point of departure from the railway problem, for there is no element of natural monopoly. Anyone with a water-tight vehicle can enter upon the seas today, and our government is now engaged upon the conduct of a nationalized industry in competition with our own people and all the world besides. While in the railways government inefficiency could be passed on to the consumer, on the seas we will sooner or later find it translated to the national Treasury.

Until the present time, there has been a shortage in the world's shipping, but this is being rapidly overtaken and we shall soon be met with fierce competition of private industry. If the government continues in the shipping business, we shall be disappointed from the point of view of profits. For we shall be faced with the ability of private enterprise to make profits from the margins of higher cost of government operation alone. Aside from those losses inherent in bureaucracy and political pressure, there are others special to this case. The largest successfully managed cargo fleet in the world comprises about one hundred and twenty ships and yet we are attempting to manage nineteen hundred ships at the hands of a government bureau. In normal times the question of profit or loss in a ship is measured by a few hundred tons of coal wasted, by a little extravagance in repairs, or by four or five days on a round trip. Beyond this, private shipping has a free hand to set up such give-and-take relationships with merchants all over the world as will provide sufficient cargo for all legs of a voyage, and these arrangements of coöperation cannot be created by government employees without charge or danger of favoritism. Lest fault be found, our government officials are unable to enter upon the detailed higgling in fixing rates required by every cargo and charter. Therefore they must take refuge in rigid regulations and in fixed rates. In result, their competitors underbid by the smallest margins necessary to get the cargoes. The effect of our large fleet in the world's markets is thus to hold up rates, for so long as this great fleet in one hand holds a fixed rate others will only barely underbid. If we hold up rates an increasing number of our ships will be idle as the private fleet grows. On the other hand, if we reduce rates we shall be underbid until the government margin of larger operation cost causes us to lose money.

We shall yet be faced with the question of demobilizing a considerable part of this fleet into private hands, or frankly acknowledging that we operate it for other reasons than interest on our investment. In this whole problem there are the most difficult considerations requiring the best business thought in the country. In the first instance, our national progress requires that we retain a large fleet under our flag to protect our national commercial expansion overseas. Secondly, we may find it desirable to hold a considerable government fleet to build up trade routes in expansion of our trade, even at some loss in operation. Thirdly, in order to create this fleet, we have built up an enormous ship-building industry. Fifty per cent of the capacity of our ship yards will more than provide any necessary construction for American account. Therefore there is a need of obtaining foreign orders, or the reduction of capacity, or both. I believe, with most engineers, that, with our skill in repetition manufacture, we can compete with any ship builders in the world and maintain our American wage standards; but this repetition manufacture implies a constant flow of orders. It would seem highly desirable, in order to maintain the most efficient yards until they can establish themselves firmly in the world's industrial fabric, that the Government should continue to let some ship construction contracts to the lowest bidders, these contracts to supplement private building in such a way as to maintain the continuous operation of the most economical yards and the steady employment of our large number of skilled workers engaged therein.

When we consider giving orders for new ships, we must at the same time consider the sale of ships, as we cannot go on increasing this fleet. When we consider sale, we are confronted with the fact that our present ships were built under expensive conditions of war, costing from three to four times per ton the pre-war amount, and that already any merchant, subject to the long time of delivery, can build a ship for seventy-five per cent of their cost. It would at least seem good national policy to sell ships today for the price we can contract for delivery a year or two hence, thus making the government a reservoir for continuous construction.

We could thus stabilize building industry to some degree and also bring the American-owned fleet into better balance, if each time that the government sold three or four emergency constructed cargo vessels it gave an order for one ship of a better and faster type. This would make reduction in our ship-building steadier and would give the country the type of ships we need.

Our joint engineering committees have examined with a great deal of care into the organization of and our expenditure on public works and technical services. These committees have consistently and strongly urged the appalling inefficiency in the government organization of these matters. They report to you that the annual expenditure on such works and services now amounts to over $250,000,000 per annum, and that they are carried out today in nine different governmental departments. They report that there is a great waste by lack of national policy of coördination, in overlapping with different departments, in competition with each other in the purchase of supplies and materials, and in the support of many engineering staffs.

They recommend the solution that almost every civilized government has long since adopted, that is, the coördination of these measures into one department under which all such undertakings should be conducted and controlled. As a measure practical to our government, they have advocated that all such bureaus should be transferred to the Interior Department, and all the bureaus not relating to those matters should be transferred from the Interior to other departments. The Committee concludes that no properly organized and directed saving in public works can be made until such a re-grouping and consolidation is carried out, and that all of the cheeseparing that normally goes on in the honest effort of Congressional committees to control departmental expenditure is but a tithe of that which could be effected if there were some concentration of administration along the lines long since demonstrated as necessary to the success of private business.

Another matter of government organization to which our engineers have given adhesion is in the matter of the national budget. To minds charged with the primary necessity of advance planning, coördination, provision of synchronizing parts in organization, the whole notion of our hit-or-miss system is repugnant. A budget system is not the remedy for all administrative ills, but it provides a basis of organization that at least does not paralyze administrative efficiency as our system does today. Through it, the coördination of expenditure in government department, the prevention of waste and overlapping in government bureaus, the exposure of the "pork barrel," and the balancing of the relative importance of different national activities in the allocation of our national income can all be greatly promoted. Legislation would also be expedited. No budget that does not cover all government expenditure is worth enactment. Furthermore, without such reorganization as the grouping of construction departments, the proper formulation of a budget would be hopeless. The budget system in some form is so nearly universal in civilized governments and in completely conducted business enterprise, and has been adopted in thirty of our States, that its absence in our federal government is most extraordinary. It is, however, but a further testimony that it is always a far cry of our citizens from the efficiency in their business to interest in the efficiency of their government.

Another great national problem to which every engineer in the United States is giving earnest thought, and with which he comes in daily contact, is that of the relationship of employer and employee in industry. In this, as in many other national problems today, we are faced with a realization that the science of economics has altered from a science of wealth to a science of human relationships to wealth. We have gone on for many years throwing the greatest of our ingenuity and ability into the improvement of processes and tools of production. We have until recently greatly neglected the human factor that is so large an element in our very productivity. The development of vast repetition in the process of industry has deadened the sense of craftsmanship, and the great extension of industry has divorced the employer and his employee from that contact that carried responsibility for the human problem. This neglect of the human factor has accumulated much of the discontent and unrest throughout our great industrial population and has reacted in a decrease of production. Yet our very standards of living are dependent on a maximum productivity up to the total necessities of our population.

Another economic result is, or will be yet, a repercussion upon the fundamental industry of the United States, that is, agriculture. For the farmer will be unable to maintain his production in the face of a constant increase in the cost of his supplies and labor through shrinkage in production in other industries. The penalty of this disparity of effort comes mainly out of the farmer's own earnings.

I am daily impressed with the fact that there is but one way out, and that is again to reestablish through organized representation that personal coöperation between employer and employee in production that was a binding force when our industries were smaller of unit and of less specialization. Through this, the sense of craftsmanship and the interest in production can be re-created and the proper establishment of conditions of labor and its participation in a more skilled administration can be worked out. The attitude of refusal to participate in collective bargaining with representatives of the employees' own choosing is the negation of this bridge to better relationship. On the other hand, a complete sense of obligation to bargains entered upon is fundamental to the process itself. The interests of employee and employer are not necessarily antagonistic; they have a great common ground of mutuality and if we could secure emphasis upon these common interests we would greatly mitigate conflict. Our government can stimulate these forces, but the new relationship of employer and employee must be a matter of deliberate organization within industry itself. I am convinced that the vast majority of American labor fundamentally wishes to coöperate in production, and that this basis of goodwill can be organized and the vitality of production re-created.

Many of the questions of this industrial relationship involve large engineering problems, as an instance of which I know of no better example than the issue you plan for discussion tomorrow in connection with the soft coal industry. Broadly, here is an industry functioning badly from an engineering and consequently from an economic and human standpoint. Owing to the intermittency of production, seasonal and local, this industry has been equipped to a peak load of twenty-five or thirty per cent over the average load. It has been provided with a twenty-five or thirty per cent larger labor complement than it would require if continuous operation could be brought about. I hope your discussion will throw some light on the possibilities of remedy. There lies in this intermittency not only a long train of human misery through intermittent employment, but the economic loss to the community of over a hundred thousand workers who could be applied to other production, and the cost of coal could be decreased to the consumer. This intermittency lies at the root of the last strike in the attempt of the employees to secure an equal division among themselves of this partial employment at a wage that could meet their view of a living return on full employment.

These are but a few of the problems that confront us. But in the formulating of measures of solution, we need a constant adherence to national ideal and our own social philosophy.

In the discussion of these ideals and this social philosophy, we hear much of radicalism and of reaction. They are, in fact, not an academic state of mind but realize into real groups and real forces influencing the solution of economic problems in this community. In their present-day practical aspects, they represent, on one hand, roughly, various degrees of exponents of socialism, who would directly or indirectly undermine the principle of private property and personal initiative, and, on the other hand, those exponents who in varying degrees desire to dominate the community for profit and privilege. They both represent attempts to introduce or preserve class privilege, either a moneyed or a bureaucratic aristocracy. We have, however, in American democracy an ideal and a social philosophy that sympathizes neither with radicalism nor reaction as they are manifested today.

For generations the American people have been steadily developing a social philosophy as part of their own democracy, and in these ideals, it differs from all other democracies. This philosophy has stood this period of test in the fire of common sense; it is, in substance, that there should be an equality of opportunity, an equal chance, to every citizen. This view that every individual should, within his lifetime, not be handicapped in securing that particular niche in the community to which his abilities and character entitle him, is itself the negation of class. Human beings are not equal in these qualities. But a society that is based upon a constant flux of individuals in the community, upon the basis of ability and character, is a moving virile mass; it is not a stratification of classes. Its inspiration is individual initiative. Its stimulus is competition. Its safeguard is education. Its greatest mentor is free speech and voluntary organization for public good. Its expression in legislation is the common sense and common will of the majority. It is the essence of this democracy that progress of the mass must arise from progress of the individual. It does not permit the presence in the community of those who would not give full meed of their service.

Its conception of the State is one that, representative of all the citizens, will in the region of economic activities apply itself mainly to the stimulation of knowledge, the undertaking only of works beyond the initiative of the individual or group, the prevention of economic domination of the few over the many, and the least entrance into commerce that government functions necessitate.

The method and measures by which we solve this accumulation of great problems will depend upon which of these three conceptions will reach the ascendancy amongst our people.

If we cling to our national ideals it will mean the final isolation and the political abandonment of the minor groups who hope for domination of the government, either by "interests" or by radical social theories through the control of our political machinery. I sometimes feel that lawful radicalism in politics is less dangerous than reaction, for radicalism is blatant and displays itself in the open. Unlawful radicalism can be handled by the police. Reaction too often fools the people through subtle channels of obstruction and progressive platitudes. There is little danger of radicalism's ever controlling a country with so large a farmer population, except in one contingency. That contingency is from a reflex of continued attempt to control this country by the "interests" and other forms of our domestic reactionaries.

The mighty upheaval following the world war has created turmoil and confusion in our own country no less than in all other lands. If America is to contribute to the advance of civilization, it must first solve its own problems, must first secure and maintain its own strength. The kind of problems that present themselves are more predominantly economic—national as well as international—than at any period in our history. They require quantitative and prospective thinking and a sense of organization. This is the sort of problems that your profession deals with as its daily toil. You have an obligation to continue the fine service you have initiated and to give it your united skill.

APPENDIX III

As you are aware, a report has recently been issued by the Industrial Conference, of which I have been a member together with Governor McCall and Mr. Hooker of your State. The conference embraced among its members representatives from all shades of life including as great a trade unionist as Secretary Wilson. I propose to discuss a part of the problem considered by that commission. There is no more difficult or more urgent question confronting us than constructive solution of the employment relationship. It is not sufficient to dismiss the subject with generous and theoretic phrases, "justice to capital and labor," "the golden rule," "the paramount interest of the people," or a score of others, for there underlies this question the whole problem of the successful development of our democracy.

During last year there was a great deal of industrial unrest throughout the entire world. This has somewhat moderated during the last few months, but the underlying causes are only slumbering. Because the country is not today involved in any great industrial conflicts, we should not congratulate ourselves that the problem of industrial relations has been solved. Furthermore, the time for proper consideration of great problems does not lie in the midst of great public conflict but in sober consideration during times of tranquillity. There is little to be gained by discussion of the causes of industrial unrest. Every observer is aware of the category of disturbing factors and every one will place a different emphasis on the different factors involved.

There is, however, one outstanding matter that differentiates our present occasion from those that have gone before. It cannot be denied that unrest in our industrial community is characterized more than ever before by the purposes and desires that go beyond the demand for higher wages and shorter hours. The aspirations inherent in this form of restlessness are to a great extent psychological and intangible. They are not, for this reason, any less significant. There is perhaps in some local cases an infection of European patent medicines, and the desire to use labor for political purposes. Aside from this, however, they do reveal a desire on the part of the workers to exert a larger and more organic influence in the processes of industrial life. They want better assurance that they will receive a just proportion of their share of production. I do not believe those desires are to be discouraged. They should be turned into helpful and coöperative channels. There is no surer road to radicalism than repression.

One can only lead up to consideration of these problems by tracing some features of our industrial development even though they may be trite to most of you. One underlying cause of these discontents is that with the growth of large plants there has been a loss of personal contact between employers and employees. With the high specialization and intense repetition in labor in industrial processes, there has been a loss of creative interest. It is, however, the increased production that we have gained by this enlargement of industry that has enabled the standard of living to be steadily advanced. The old daily personal contact of employer and employee working together in small units carried with it a great mutuality of responsibility. There was a far greater understanding of the responsibilities toward employees and there was a better understanding by employees of the economic limitations imposed upon the employer. Nor can the direct personal contact in the old manner be restored.

With the growth of capital into larger units, there was an inequality of the bargaining power of the individual. Labor has therefore gradually developed its defense against the aggregation of capital by counter-organization. The organized uses of strike and lockout on either side and the entrance of their organization into the political arena have become the weapons for enforcement of demands. The large development of industrial units with possible cessation of production and service, through strikes and lockouts, penalizes the public. The public is not content to see these conflicts go on, for they do not alone represent loss in production, and thus lowering of the standard of living, but also they may, by suspension of public service, jeopardize the life of the community.

But the solution of the industrial problem is not solely the prevention of conflict and its losses by finding methods of just determination of wages and hours. Not only must solution of those things be found out but, if we are to secure increased production and increased standard of living, we must reawaken interest in creation, in craftsmanship and contribution of his intelligence to management. We must surround employment with assurance of just division of production. We must enlist the interest and confidence of the employees in the business and in business processes.

We have devoted ourselves for many years to the intense improvement of the machinery and processes of production. We have neglected the broader human development and satisfactions of life of the employee that leads to greater ability, creative interest, and coöperation in production. It is in stimulation of these values that we can lift our industry to its highest state of productivity, that we can place the human factor upon the plane of perfection reached by our mechanical processes. To do these things requires the coöperation of labor itself and to obtain coöperation we must have an intimate organized relationship between employer and the employee and that cannot be obtained by benevolence; that can only be obtained by calling the employee to a reciprocal service.

Therefore it has been the guiding thought of the conference that if these objects are to be obtained a definite and continuous organized relationship must be created between the employer and the employee and that by the organization of this relationship conflict in industry can be greatly mitigated, misunderstanding can be eliminated, and that spirit of coöperation can be established that will advance the conditions of labor and secure increased productivity.

It is idle to argue that there are at times no conflict of interest between the employee and the employer. But there are wide areas of activity in which their interests should coincide, and it is the part of statesmanship on both sides to organize this identity of interest in order to limit the area of conflict. If we are to go on with the present disintegrating forces, these conflicts become year by year more critical to the existence of the State. If we cannot secure a reduction in their destructive results by organization of mutual action in industry, then I fear that public resentment will generate a steadily larger intervention of the Government into these questions.

In consideration of a broad, comprehensive, national policy, the Conference had before it four possible alternative lines of action. First, the attempt to hew out a national policy in the development of the progressive forces at work for better understanding in industry under such conditions as would maintain self-government in industry itself; or, secondly, to adopt some of the current plans of industrial courts, involving summary decision with jail for refusal to accept, such as that initiated in the State of Kansas; or, thirdly, the nationalization at least of the services upon which the very life of the community depends; fourthly, to do nothing.

In a survey of the forces making for self-government in industry, the Conference considered that definite encouragement must be given to the principles of collective bargaining, of conciliation, of arbitration, but that such forces could not develop in an atmosphere of legal repression. There is but little conflict of view as to the principle of collective bargaining and its vital corollary, fidelity to the bargain made. There has been conflict over the methods of representation on both sides. The Conference, therefore, has proposed that the Government should intervene to assist in determination of the credentials of the representatives of both sides in case of disagreement, and that such pressure should be brought to bear as would induce voluntary entry into collective bargain. Furthermore, it was considered that the large development of conciliation and arbitration already current in connection with such bargaining should be encouraged and organized under a broad national plan that would give full liberty of action to all existing arrangements of this character and stimulate their further development.

The Conference has therefore proposed to set up a small amount of governmental machinery comprising Chairmen covering various regions in the United States, with a Central Board in Washington, as a definite organization for the promotion of these agencies. It has believed that this is a step consonant with the normal development of our institutions and the progressive forces already in motion, and that in such steps lie the greatest hope of success. No one is compelled to submit to the machinery established but where the employer and employee refuse to enter into, or fail in, bargaining, then through the use of this machinery the public stimulates them to come together under conditions of just determination of the credentials of their representatives. The plan is, therefore, a development of the principle of collective bargaining. It is not founded on the principle of arbitration or compulsion. It is designed to prevent the losses through cessation of production due to conflict but, beyond this, to build up such relationship between employer and employees as will not only mitigate such disaster but will ultimately extend further into the development of the great mutual ground of interest of increased production and under conditions of satisfaction to both sides. It is a part of the conception of the Conference that only in bargaining and mutual agreement can there be given that free play of economic forces necessary to adjust the complex conditions under which our industries must function.

Reduction of conflict in industry is the phase that not only looms large in the public mind, but conflict is the public exhibit of the greatest mark of failure in industrial relations. The imminence of conflict is evidence of failure to have discussion or to arrival at mutual agreement. Therefore, under the plan of the Conference that mutual agreement is the best basis for prevention of conflict, the second step in the Conference proposals is that there should be a penalty for failure to submit to such processes. That penalty is a public inquiry into the causes of the dispute and the proper ventilation to public opinion as to its rights and wrongs. The strength of the penalty is based upon the conviction that neither side can afford to lose public good will. Pressure to rectitude by government investigation is distinctly an American institution. It is not an intervention of public interest that is usually welcomed. In the plan of this Conference, this general repugnance to investigation is depended upon as a persuasive influence to the parties of the conflict to get together and settle their own quarrels. They are given the alternative of investigation or collective bargain under persuasive circumstances. In order to increase the moral pressures surrounding the investigation, either one of the parties to the conflict may become a member of the board of investigation, provided he will have entered on an a priori undertaking that he is prepared to submit his case to orderly and simple processes of adjustment. Thus his opponent will be put at more than usual disadvantage in the investigation. If both sides should agree to submit to normal processes of settlement, the board of investigation becomes at once the stage of a collective bargain and the investigation ceases.

I will not trouble you with the elaborate details of the plan, for they involved a great deal of consideration as to many difficult questions of selection of representatives, provision for action by umpires, for appeal to a board in certain contingencies, the character of questions to be considered, methods of enforcement, standards of labor, and so on. The point that I wish to make clear is that the Conference plan is fundamentally the promotion of collective bargaining under fair conditions of representation by both sides and the definite organization of public opinion only as a pressure on the parties at conflict to secure it. It is therefore basically not a plan of arbitration, nor is it an industrial court. It is stimulation to self-government in industry. The plan contains no essence of opposition to organized labor or organized employers. It involves no dispute of the right to strike or lock out, nor of the closed or open shop. It simply proposes a sequence of steps that should lead to collective bargain without imposing compulsions, courts, injunctions, fines, or jail. It is at least a new step and worth careful consideration before employees and employers subject themselves to the growth of public demands for the other alternatives of wider governmental interference.

The Conference has set out the critical necessity of the development within industry itself of a better basis of understanding as having the great values that all prevention has over cures. There have been hopeful developments in American industry during the past two or three years in this direction. The first unit of employment relationship is each industrial establishment, and if we would battle with misunderstanding and secure mutual action it must be at this stage. It takes its visible form in the organization in many establishments under various plans of shop councils, shop committees, shop conference, all of which are based on the democratic selection of representatives of employees who shall remain in continuous open and frank relation and conference with the employer in the interests of both. Where this development has had success it has had one essential foundation; that is, that it must be conceived in a spirit of coöperation for mutual benefit and it has invariably lost out where it has been conceived solely to bargain for wages and conditions of labor. It does not necessarily involve profit-sharing, but it does involve a human approach to the problems on both sides and a mutual effort at betterment.

It is the organization of such contact between employer and employees which distinguishes this advance from the previous drift in large industry. This type of organization has met with success not only in non-union shops but in unionized shops, and in the latter case it has imported the spirit of mutuality in addition to sheer negotiation of grievance as to conditions of labor. It cannot, in our view, succeed if it is to be conceived in a spirit of antagonism either to employer or to union organization.

The trade unions of the United States have conferred such essential services upon their membership and upon the community that their real values are not to be overlooked or destroyed. They can fairly claim great credit for the abolition of sweat shops, for recognition of fairer hours in industry, reduction of overstrain, employment under more healthful conditions, and many other reforms. These gains have been made through hard-fought collective bargains and part of the difficulties of the labor situation today is the bitterness with which these gains were accomplished. In my own experience in industry I have always found that a frank and friendly acceptance of the unions' agreements, while still maintaining the open shop, has led to constructive relationship and mutual interest.

In the early days trade unionism was dominated mainly by the economic theories of Adam Smith, and union labor at that time adopted as one of its tenets that a decrease of productive effort by workers below their physical necessities would result in more employment and better wage. During the past twenty-five or thirty years, this economic error has been steadily diminishing in American trade unions and while it may be adhered to by some isolated cases today it is not the economic conception of large parts of that body. The great majority have long since realized that an increased standard of living of the whole nation must depend upon a maximum production within the limits of proper conservation of the human machine. We find, during the past few years, many of the unions embracing the further principle of actual coöperation with the employer to increase production. I believe the development of this latter theme opens avenues for the usefulness and growth of trade unionism of greater promise than any hitherto tried. I am aware of the current criticism in some union quarters of the development of the shop council idea for this purpose, and there are perhaps isolated cases that give merit to this opposition. The strongest argument of union labor against the shop council system should lie in the fact that nation-wide organization of labor is essential in order to cope with the unfair employers, but I believe that if they embrace encouragement to shop council organization they open for themselves not only this prevention of unfairness but the whole new field of constructive coöperation and the further reduction of industrial conflict.

Attempts by governments to stop industrial war are not new. The public interest in continuous production and operation is so great that practically every civilized government has time and again ventured upon an attempt at its reduction. There is a great background of experience in this matter, for the world is strewn with failure of labor conferences, conciliation boards, arbitration boards, and industrial courts. This Conference, of course, had in front of it and in the experience of its members this background of the past score of years. I understand that recently you have had ably presented to you the industrial solution that has been enacted into legislation by the State of Kansas. I think some short discussion of this legislation may be of interest in illuminating the difference in point of view between the industrial conference and that legislation. The Kansas plan is, I believe, the first large attempt at judicial settlement of labor disputes in the United States. With the exception of one particular, it is practically identical with the industrial acts of Australasia of fifteen to twenty years ago. It comprises the erection of an industrial court, the legal repression of the right to strike and lockout under drastic penalties, the determination of minimum wage, and involves a consideration of a fair profit to the employer. The Kansas machinery goes one step further than any hitherto provided in this particular of placing more emphasis on fair profits and it also provides for the right of the State to take over and conduct the industry in last resort. Under the enumerated industries in the Kansas law, probably two thirds of Massachusetts industry would be involved. No man can say that this legislation may not succeed in Kansas or under American conditions. The experiment is valuable, and if it should prove a success to both employees and employers Kansas will have again taken the initiative in service to her sister states.

I will not be taken as a carping critic if I point out the difficulties in its progress on the basis of Australasian experience. It may, as did the Australasian acts, have a period of apparent success, and the workers benefit by an initial service in planing out the worst injustices. So far as I can see today, there is no reason why it will not run the same course as in Australia, where the amount of strikes and dislocation was ultimately as great under these laws as in countries without them. In periods of industrial prosperity, the advancing wage usually adjudicated by the industrial courts prevents strikes, but in times of industrial depression decisions against the work people give rise to the old form of resistance.

No one denies the right of the individual to cease work. The question involved in this form of legislation is the right to combination in common action by strike. Whatever the right may be, it is a certainty that the working community of the civilized world adheres to this right as an absolute fundamental to their protection. They believe that the aggregation of capital into large units under single control places them at an entire disadvantage if they cannot threaten to use their ultimate weapon of combined cessation of labor. While it may be argued that the State may intervene in such a manner as to substitute the protection of justice for the right of strike and lockout, the belief in the right to strike has become imbedded in the minds of the laboring community of the world to an extent that it will not receive with confidence any alternative in driving its own bargains.

There are other difficulties in compulsory adjudication of disputes. The workings of such law necessarily result in ultimate determination of minimum wage for all crafts and industries. Every different industrial unit will claim a different minimum based upon its local economic surroundings. Otherwise the competitive basis upon which industry is established will be undermined. No court has ever yet adequately solved these differentials and some dislocation of industry results. I would expect to see develop out of this type of minimum wage the same phenomenon that existed in some parts of Australia, where certificates of inability to earn the minimum, and therefore permission to undertake employment at less than this wage had to be issued in order that employment might be found for the aged and disabled. The employers will naturally in face of a minimum wage retain in employment that quality of worker that can give the maximum effort. Another difficulty is the tendency for wages of all workers, regardless of their ability, to fall to the minimum, for the employer naturally reduces the good to average with the poor worker. I would not want to be understood to necessarily oppose the possibilities of a minimum wage for women over large areas, as distinguished from craft minimums for men, because certain social questions enter that problem to an important degree.

There is another feature of the Kansas Act that should be given a great deal of consideration, and that is its essential provision that in the determination of wage disputes it shall be based on a fair profit to the employer. This must ultimately lead to a determination as to what a fair profit consists of, just as minimum wage will need be found for every craft and every establishment. I do not assume that any employer will contend for an unfair profit, but the termination of what may be a fair or unfair profit in respect to the hazards involved in the institution of a business, in its conduct over a long term of years, its necessary provisions for its replacement and future disasters, is a matter that has not yet been satisfactorily determined by either theoretic economics, legislation, or courts. In competitive industry the processes of business determine this matter every day, and owners will only claim such determination by the State when the competitive tide is against them. We have long since recognized the rights of the State to determine maximum profits in case of a monopoly, but the determination of minimum profits (for fair profit is a minimum as well as maximum) may deliver large burdens to the people. Moreover, I doubt whether labor will ultimately welcome such determination, for an unsuccessful plant, instead of abandoning its production to its competitors, will claim wage reductions from the courts, and the general level of wages can thus be driven down and the State, at least morally, becomes a guarantor of profits in overdeveloped industry. This plan in the long run substitutes government control of industry for competition.

As to whether such acts will not tend to crush out initiative, credit, and curtail the proper development of industry, can only be determined with time. Generally, it should be clearly understood that compulsory settlement of employment at best only assures continuity of production through just wages, hours and profits. It does not approach the problem from the point of view of upbuilding a relation in industry that will, if successful, not only eliminate strikes and lockouts, but make constructively for greater production and cheaper costs.

The economic repercussions from such regulation do not all lie in favor of either capital or labor. To curtail the activities in one is not necessarily a favor to the other.

I am sure you would, upon consideration, view the entry of the Government on a nation-wide scale into the determination of fair wage and fair profit in industry, even if it could be accomplished without force, with great apprehension. There are some things worse in the development of democracy than strikes and lockouts, and whether by legislative repression we do not set up economic and social repercussions of worse character is by no means determined. They have also the deficiency in that they undermine the real development of self-government in industry and that, to me, is part of the growth of democracy itself. Courts and litigation are necessary to the preservation of life and property, but they are less stimulus to improved relations among men than are discussion and disposal of their own differences.

The whole world is groping for solution to this problem. If we cannot solve it progressively, our civilization will go back to chaos. We cannot stand still with the economic and social forces that surround us. There has never been a complete panacea to all human relationships so far in this world. The best we can do is to take short steps forward, to align each step to the tried ideals that have carried us thus far. The Conference has endeavored to find a plan for systematic organization of the forces that are making for better relationships, to encourage the growing acceptance of collective bargaining by providing a method that should enable it to meet the objections of its critics and to aggregate around this the forces of conciliation and arbitration now in such wide use. It has sought to do this without legal repression but with the organized pressure of public opinion.

To me there is no question that we should try the experiment of the perhaps longer road proposed by the Industrial Conference for the development of mutuality of relationship between employer and employee, rather than to enter upon summary action of court decision that may both stifle the delicate adjustment of industrial processes and cause serious conflict over human rights. We must all agree that those deficiencies in our social, economic and political structure which find solution through education and voluntary action of our people themselves are the solutions that endure. To me, the upbuilding of the sense of responsibility and of intelligence in each individual unit in the United States with the intervention of government only to promote the development of these relations, the suppression of domination by any one group over another, is the basis upon which democracy must progress.

Upon the solution of industrial peace and good will does the gradual lift of the standard of life of our whole people rest by increase in the material and intellectual output and its proper distribution among all of us. To me the philosophic background of solution lies in rigorous application to economic life of our tried national ideal—the equality of opportunity and the preservation of industrial initiative; that is, the stimulation of every individual by his own effort to take that position in the community to which his abilities and character entitle him and the protection to him to attain that end. In the earlier days of our democracy, with its simpler economic life, we were concerned more with the application of this ideal in its social and political phases. It has been so long and firmly established there that it is no longer a matter of discussion. With the growth of greater complexity in our economic life, its practical application to the sharing in the material and intellectual output in proportion to effort, ability, and character, becomes more difficult. It must, nevertheless, be adhered to if the ideal of our democracy is not to be abandoned.

I do not believe we can attain this equality of opportunity or maintain initiative through crystallization of economic classes or groups arraigned against each other, exerting their interest by economic and political conflicts, nor can we attain it by transferring to governmental bureaucracies the distribution of material and intellectual products. I do believe that we can attain it by systematic prevention of domination of the few over the many and stimulation of individual effort in the whole mass.

It is well enough to hold a philosophic view, but the problems of day to day that arise under it are very practical problems that require concrete solution, and the employment relation is one of them.