Taking the Profit
Out of War
A ————
By BERNARD M. BARUCH
Reprinted from The Atlantic Monthly.
The February issue of the Atlantic for 1925 carried a paper by Mr. Bisley
Hedin dealing with the general subject of “taking the profit out of war,”
which Mr. Huddleston called “An American Plan for Peace.”
The first-quoted
Phrase was put into the language by the War Industries Board toward the
close of the World War through its efforts to eliminate all war profits.
Mr.
y, ame to the attention of Mr. Bernard M. Baruch, chair-
BO Board and administrator of the non-profit plan,
and (as he writes us), since it seemed to indicate a growing interest in the
{dea, induced him to invoke practical means to bring about a full compre:
Rension of taking the profit out of war in the various great countries of the
world. To this end he responded to a suggestion of Mr. Owen D. Young, of
the Page School of International Relations at Johns Hopkins University, that
he estadlish a course of lectures there to expound the War Industries Board
plan in detail. Later he will proceed to make similar arrangements at leading
universities in Great Britain, France, Germany, Italy, and Japan. Agreeing
with Mr. Baruch thqt the subject calls for public knowledge and discussion,
11 was natural for the Atlantic to turn to him for the following paper. —THE
Ebprrors or THE ATLANTIC MONTHLY.)
1
War was once described as Pru
sia’s most profitable industry.
history to learn that other countrie
were open to the same indictment
The methods of the Robber Baron
did not pass with the end of feudal
ism. Annexation by conquest did no
cease. But when America entered th
World War President Wilson fatherei
& doctrine that shall always goven
us—that never a foot of territor;
would be added te our boundaries b)
force.
So, as America has taken
toward making impossible
profit through war, it too may I
America’s privilege to point the wa;
toward making impossible individua
profit through war. To take the profi
out of war is to take a long step to
ward creating an economic detesta
tion of war. The experience of thi
United States in the World War af
fords a basis for the belief that the
plan herein discussed is practical. Ir
fact, it 1s more than a beliet—it is 3
certainty, although not widely known
The world is such a busy place, an¢
the radius of human activity has beer
80 greatly enlarged because of modern
inventions, that it is not strange tha
there are but few people who are con
versant with what was quietly buf
effectively taking place in this coun
try in the mobilization and use of its
material resources in the World Wai
—a process that would have eventual
ly eliminated all improper profits.
Strength is given to the public ad
vocacy of industrial mobilization made
by both President Harding and Presi
dent Coolidge—Mr. Coolidge as re
cently as last October in his Omaha
speech to the American Legion—by
the fact that the plan they advocated
as a part of the regular national war
agencies had once been set up and
successfully operated under the War
Industries Board.
Preceding the President’s reeent
clear exposition of this subject, some
degree of public interest had been en-
gendered by an exchange of letters be
tween Owen D. Young (of Dawes plan
fame), in behalf of the Waller Hines
Page School of International Rela:
tions, and the writer. The corre
spondence resulted in the establish:
ment of lectures at the Page School
(of Johns Hopkins University) on this
theme. Previously the Atlantic Month.
ly printed an article by Sisley Huddle-
ston, who pointed out that Europe saw
great strides toward peace in the
American idea of “taking the profit
out of war” in a systematic way. His
basic reference was to the plan of the
War Industries Board.
The resources of a country might
be referred to as the five M's: (1)
man power; (2) money; (8) main-
tenance or food: (4) material re-
sources (including raw materials,
manufacturing facilities, transporta-
tion, fuel and power); and (5) morale.
The intelligence with which the first
four are directed and co-ordinated as
& whole will determine the fifth, the
morale of the community.
In the war emergency it early be-
eame evident to those who were
charged with the responsibility of
mobilizing the resources that there
was a just sentiment among the peo-
ple against profiteering. Profiteering
might be willful and profit making
might be involumtary; but, whatever
dts form, there was a just determina-
tion it should cease. So it became
necessary to fix prices where the sup-
ply was limited.
Wherever the government created a
shortage by its demands, prices were
fixed, not only for the Army, Navy and
the lea¢
nationa
the Alles, but for the civilian popula |
ition as well. And in addition to price
fixing on war essentials (such as steel,
wool, copper, and so forth), the bal- |
ance, after the war program had been
{fillled, was rationed or distributed ac- |
cording to the priority needs of the
(various civilian demands. In other
words, where the price of the product
jot an industry was fixed that industry
{had to deliver the part whieh the gov-
ernment did not need to the civilian
population, not in the way the indus- |
(try chose, but as the government di- |
rected.
It must be remembered that when |’
the war came there was no adequate
\preparation. Indeed, it is doubted by
the best authorities whether any ef-
Jetive form of preparation then
| own would have been of much avail
in view of the widespread and engulf-
|{ng results of the war and the lack of
wledge of the varions instruments
0t destruction which were being de-
(Yised and which it became necessary
to combat.
Our own Army had several divisions
eompeting one with another for mate-
|
rials, transportation, housing, and
forth. On top of that there prevailes
the demands of the Shipping Board
| with the slogan that ships would wi
It needs only a scant examination o
the war, and of the Food Administra
tion, with the slogan that food would
win the war. Further, there was th
Railroad Administration with its need
for material and labor, and finally
there was the feverish quest for labor
and supplies on the part of the muni
tion makers—all competing for labor,
money, materials, transportation, fuel,
power, and each insisting on the
greater importance of its activity. All
this while the labor supply was being
lessened by the flow of men into the
Army.
While an endeavor was being made
to bring order out of chaos, the great
undertaking had to go on. Men, ships,
munitions, food, material, had to be
provided. Old organizations, bureaus
and traditions had to be met and
changed, but not destroyed until the
hew was set up. The wonder of it all
is, not that there were so many mis.
takes, but that =o much was accom
plished.
At the time we entered the war
prices were at their peak, and tending
higher because of the war's insatiable
demands. The problem was not alone
to secure the materials and labor and
to stop the confusion, but to do it in
such a way that the morale of the peo-
ple would be maintained. The prices
of some things, like steel and copper,
were fixed far below prevailing rates,
and the wages of labor in those indus-
tries were standardized. The more
highly organized an industry, the
easier it was to arrange. Order did
not commence to appear until the
Army funneled its needs through one
man sitting with a section of the War
Industries Beard and-until the Navy,
Shipping Board, Allies and Railroad
Administration did likewise. Each de-
partment satisfied its requirements
through a central authoritative body.
This was called the War Industries
Board, controlling and directing all
materials and co-ordinating through
fts chairman the whole system of gov-
ernmental and civilian supply and de-
mand. It was created by executive
order in March of the year 1918.
Briefly, this board endeavored to
mobilize the industries of America so
that the fighting forces of the Allied
and associated nations could draw
from the United States—the last res-
ervoir of men, materials and money—
the things needed for the winning of
the war at the time the things were
needed and with the least dislocation
of industry and the least disturbance
of the civilian population.
II
The War Industries Board was or- | 1 :
FaRlsed Ko a on supervisory | would be placed a government diree
committee, with a chairman, vice
One of them provided that manufass
turers, jobbers and retailers of shoes
could make and sell shoes only of a
specified quality at a fixed price, ef-
fective July, 1919. No one who did
not have a card of the War Industries
Board in his window could sell shoes,
and only the standardized shoes could
be sold. No jobber or manufacturer
would sell shoes to anybody who did
not have this card. The shoes were
to be stamped Class A, B or C and had
to be of the quality prescribed and
sold at the price fixed. The country
was so organized in every district that
there could be immediately reported
to Washington the name of any shoe
retailer who did not carry out the reg-
ulations of the War Industries Board
as to price and quality. Through re-
strictions on his labor, money, raw
materigls and trausportation no man-
ufacturer would have been permitted
to sell to any dealer violating the reg-
ulations. The Armistice stopped the
execution of this plan.
Another plan of this nature: The
manufacturers of men’s and women’s
wearing apparel had in 1918 been call-
.ed to Washington, together with the
retailers of various goods, and notified
that regulations would have to be
‘made in regard to retail prices and
standardization of clothing.
The rulings by the board were made
known through the issuance of official
bulletins at {irregular intervals and
{were widely distributed by the press,
|which co-operated in this most neces-
sary. work with a whole-hearted pur-
{pose that gave to the orders of the
{War Industries Board the instant an?
‘broad circulation they required
Mr. Hoover already was doing much
ito perfect his control of food products
and prices. There was also talk of
fixing rents, and in some cities thir
was done.
If we were to start, in the event of
another war, at the place where we
were industrially when the World War
ended, the President, acting through
an agency similar to the War Indus-
tries Board, would have the right to
fix prices of all things as of a date
previous to the declaration of war
when there was a fair peace time rela-
tionship among the various activities
of the nation. It would be illegal to
buy, sell, serve or reat at any other
than these prices. Brakes would be
' applied to every agency of inflation
«chairman, members in: charge of va- |
rious activities, burean chiefs and sub-
ordinate workers. It surveyed and
sought to arrange the whole industrial
war fleld under the plenary powers
conferred by the President and the
Congress. How well it did this is a
story for others to tell. What it did
is the basis of the plan I am here
drawing.
It was comparatively easy to fix
‘#rices and to distribute materials, and
indeed to stabilise the wages of labor
In those industries in which prices
were fixed. The labor situation, how-
ever, became increasingly difficult,
particularly when General Crowder
found it necessary to withdraw men
for the proposed campaign of 1919
after 4,000,000 soldiers had already
been taken.
Much has been said about the profi
| veering of labor. It is an unjust accu-
, sation. It is only fair to say that this
; condition was primarily brought about
, through the inexperience of the organ-
{zation within our own governmental
| departments and by the furious bid-
| ding of munitions makers and ship
{ builders for services. That situation,
| together with the increased prices of
the things that labor bad to buy with
| the results of its work, made it inevi-
| table that labor must get higher
| wages.
| Bo it became evident that the price
| Axing program had to go even fur
| ther, and the War Industries Board,
when the Armistice came, was pro-
| ceeding with a campaign to fix the
| prices of all the basic things that la-
| ‘bor had to buy. Some had previously
' been fixed. I speak of labor in a much
‘broader sense than manual labor, for
the unorganized so-called “white col-
Jar” part of our community—clerks,
teachers, government employees, pro-
fessional men—were less able to mee
the situation tham labor in the nar
Trower sense. For the protection and
relief of such groups certain plans
were devised. To {llustrate—
before the hurtful process started. An
intelligent control of the flow of men,
money and materials would be im-
posed, instead of having the blind pan-
ic heretofore ensuing on the first ap-
pearance of the frantic demands o°
war. The Draft Board would have be-
fore it the rulings of the priority com-
mittee, together with the estimated
needs of every business and profes-
sion in its relationship to the conduct
of the war, and men would be select-
ed accordingly. The Draft Board
could more intelligently decide, with
the advice of the priority committee
many of the problems with which it
would be faced. There would be no
sending of men to the trenches who
were needed for expert industrial wa:
work and then bringing them back
again. Businesses not necessary to
the winning of the war would be cur
tailed. The Draft Board would hav-
that information before it.
The prices of all things being fixed.
the price fixing committee would make
any necessary adjustments, as was
done during the war. Under the sys-
tem used in 191% these prices were
made public and adjusted every three
months, so that any consumer or pro-
ducer had his day in court when he
considered prices unfair. Those who
complained that during the war prices
were too high had this ready recourss
‘0 hand.
In the meantime all the industries of
the country would have been mobilized
by the formation of committees repre-
sentative of each industry as was
done in the World War. Over them
tor or commeodity chief. The various
government departments would ap-
point committees representing their
requirements, so that on one -commit-
tee the resources of the nation would
be represented and on the other the
demands of the government. The gov-
ernment director would stand between
to decide, in conjunction with the pri.
ority committee, to what department
supplies should go.
Money would be controlled and di
rected like any other resource. “Tak.
ing the profit out of war” is not
synonymous with ‘“conseription of
wealth,” as it is sometimes regarded.
The latter is a theoretical project, pro-
hibited by our Constitution, contrary
to the spirit of our social and political
institutions, and impossible in prac.
tice. Taking the profit out of war is
an orderly and scientifie development
of the economics and eonduct of mod.
ern war, necessary to the effective
mobilization of national resources and
indispensadle to equalizing the bur.
dens of war among the armed and
civiian population. Born of expe-
rience and proved by practice, it re-
moves some of the most destructive
coneomitants of modern war—the eon.
fusion and waste Incident to war time
inflation.
This term “conscription of wealth,”
ased by so many, has created a hope
among those of socialistie tendencies,
and a fear among those who, like me,
believe in our system based upon per-
sonal initiative and reward, of a tak-
ing of money, without payment, for
the use of Stats. Neither the hope
nor the fear is justified by the recom.
mendation herein contained or by our
experience in the war. The use of
money should be controlled and di
rected in a national emergency. A
,man should no more be permitted to
use his money as he wishes than he
should be permitted to use the pro-
duction of his mine, mill or factory
except through the general supervis.
ing ‘agency. This was being’ done to-
ward the end of the war,
¢ During the final phase of the World
War no man or corporation or institu-
tion could raise money without the
approval of the Capital Issues Commit-
tee of the Treasury Department, which
committee in turn would not permit
the borrowing of money unless the
‘War Industries Board approved the
-use to which it was to be put. Thus
‘the City of New York was not permit-
ted to spend $8,000,000 for the build-
ing of schools. The City of Philadel-
phia was prevented from making im-
bProvements that in peace time would
have been necessary, but in war time
were not. Various states, counties
‘and cities, and a vast number of pri-
vate concerns, were denied the use
of money and materials for purposes
‘not necessary for the winning of the
war. Each part of the community had
to adjust its wants to the whole grea’
undertaking,
III
There have been a great many bills
introduced into Congress on the sub-
ject of industrial mobilization, some
sponsored by great organizations like
the American Legion, and others by
newspapers and publicists. But it is
surprising how little knowledge there
was on the part of those who drew up
the bills of the practicability and fea-
#ibility of so mobilizing our resources
that it would be impossible to make
a8 much profit in war as in time of
peace. Take into consideration the
fact that the following things were be
ing done in 1918: —
. General Crowder, who was in charge
of the draft, had asked the chairman
of the War Industries Board where he
could obtain additional men needed
for the Army in France with the least
possible dislecation of the war making
industrial civilian machinery, and we
were in the process of replacing male
labor with women. By a system of
priorities the Board was allocating to
our own Army and Navy, to the Allies
and to the essential war industries the
things they required. It was making
priority rulings as to transportation,
and they were being followed out by
the Railroad Administrator. The Fuel
Administrator distributed fuel only on
the rulings of the War Industries
Board. The Board was engaged in
disentangling and removing the many
conflicts and competitive efforts in-
volved in labor and buildings that had
previously occurred because of lack of
any co-ordinating agency. It was allo-
cating power and making regulations
for the hitching up of scattered units
of power. It was changing munitions
orders from congested to less congest-
ed districts. It had actually carried
into effect an order that no building
involving $2,500 or more could be un-
dertaken without the approval of the
War Industries Board. No steel, no
cement, no material of any kind could
be used for any purpose whatsoever
unless the War Industries Board per-
mitted it. No steel company could
sell over five tons of steel unless ap-
proved by the Director of Steel. The
‘Freasury would not permit the raising
of money for any industrial or finan-
cial operation unless it was approved
by the War Industries Board. The
President issued an order that no com-
mandeering should be done by the
Army, Navy, Shipping Board or Food
Administration without the approval
of the chairman of the War Industries
Board. Every raw material industry,
and indeed practically every industry
in the country, was organized through
appointment of committees, and none
of these industries would do any busi-
ness except under the rulings promul-
gated by the Board. Standardisation
in every industry was rapidly proceed-
ing. These rulings were made known
through the issuance of official bulle-
tins at irregular intervals and were
distributed by the press. We were
endeavoring to arrange it so that the
fighting forces were to receive those
things which they needed and no
more, so that whatever was not ac
tually required at the front was left
to civilian purposes. Industries were
curtailed, but never destroyed; skele-
tonised, but never killed. Indeed, the
use of men, money and materials was
rapidly being brought into exactly
that condition which I have previously
stated to be necessary in case of ap
other war.
If, in addition to this, the President
in the future has the authority to fix
prices and distribution of materials
and labor, remt, and the use of man
power, transportation, fuel and all the
things necessary for the conduct of
the war, any rise in prices will be pre-
(Continued on page 3, Col. 4.)
Caldwell & Son
Bellefonte, Pa.
Plumbing
and Heating
Vapor....Steam
-By Hot Water
Pipeless Furnaces
WINS USNS
Full Line of Pipe and Fit-
tings and Mill Supplies
All Sizes of Terra Cotta
Pipe and Fittings
ESTIMATES
Cheerfully ana Promptly Furnished
66-10-t¢
For all the
World to See
hen you walk forth in one of the
new Griffon productions, you’ll
walk with the pride of a man
who knows his attire is beyond re-
proach. Have you been in to see
the new Griffon Clothes yet ?
$25.00 to $35.00
Lyon & Company
April Reductions
Will Make Easy Buying
*4 Charming Styles in wide variety, radiant in their new-
Coats and Suits ness; stunning new Coats; Tailored Straight-Line Coats,
Sport Coats and Dress Coats in Tweeds, Fine Twill and Porietsheen. Colors
brilliant live shades, much navy and black. Tweed Suits in all colorings.
. All the brighter, lighter colors—Tan, Nude, Sandal,
Beautiful Dr esses Palmetto, Powder Blue, Cocoa, also Navy and Black—
displayed in the new flares and straight lines.
SILK HOSIERY—The famous Silver Star Brand Hosiery in all the new
‘Spring shades.
GLOVES—Silk Gloves in the new Grays and Tans, with the new Cuffs and
pretty colored stitching.
NEW SILK SCARFS—In plain colors, two-toned, and Figured Geor-
gettes and Crepe de Chenes.
: Our Rugs are all new designs in a combina-
Rugs and Floor Coverings tion of beautiful colorings, 9x12 Axminster
and Brussels. Hall Runners and smaller Rugs to match. Fibre and Wool Rugs.
9x12, specially priced $15.00. Linoleum and Oil Cloths at greatly reduced
prices.
Lyon& Company