THE NECESSITIES OF THE ALLIES MUST BE MET It is just as imperative that we furnish the allies with the necessary foods, munitions and railroad equipment, as it is that we supply our own armies. Their armies are doing precisely the work that the United States Army is doing, only on a vastly larger scale. The sacrifices of the British, French and Italians have been immeasurably greater than our own; therefore it is but a small thing to insure their securing the commodities that are essential to carry the war to a successful conclusion. ENORMOUS EXCESS PROFITS Under the conditions described above, it is inevitable that the profits of the great corporations dealing in the essential commodities should be excessive. There has been nothing comparable to the profits of the present war in the history of civilization. In the United States, the most exploitive profiteering of the days of the Civil War was trivial as compared with the enormous sums which have been obtained during the present war by the great corporations dealing in the essential commodities. By "excess profits" is meant the amount which the profits of the war times exceed those of normal times before the war. Cereals. There are no available figures showing the amount of the excess profits for those producing and handling the cereals for the war period as compared with the conditions before the war. To obtain accurate figures in this matter is exceedingly difficult because the profits are distributed among the producers of grain, dealers, millers, jobbers and retailers. Mr. Herbert Hoover in a statement before the Senate committee on agriculture, June 19, 1917, stated that "in the last five months on the item of flour alone $250,000,000 has been extracted from the American consumer in excess of the normal profits of manufacturers and distributers." If this statement is correct, the total excess profits made upon the grains during the last year must amount to more than a billion dollars and may have reached two billion dollars. Meats. According to figures presented by one of the treasury experts to the finance committee of the Senate, the profits of 1916, as compared with 1914 and the excess profits of four big packing companies of Chicago were as follows: It should be understood, however, that the excess profits of $28,633,978 are not exclusively from meats, for the reason that these packing companies are engaged in allied industries and an unknown portion of them are from other sources than meat. Metals. In regard to the excess profits in metals, Senator Simmons on August 10, 1917, presented to the Senate figures compiled by J. P. Morgan and Company showing the excess profits for 1916 as compared with 1914 of some of the larger metal manufacturies as follows: Petroleum. In regard to the excess profits of petroleum, these for 1916 are stated, on the same authority, to be for the Standard Oil Company of New York $20,425,000. Manufactured Commodities. The excess profits of manufactured products other than the metals have been similarly large. From the same authority the excess profits of the duPont Powder Company for 1916 are placed at $76,581,000; for the Corn Products Company at $3,798,000; and for the United States Rubber Company at $4,537,000. Forty-eight Corporations. It is also stated that the excess profits of forty-eight corporations which include the above mentioned with others for 1916 as compared with 1914 amounted to $659,858,490. Coal. No figures are available which will show the excess profits of the miners of coal for 1916 and 1917 as compared with *15 months. years antecedent to the war. However, the enhancement of prices from two to fourfold makes it certain that these profits for the entire United States in the fiscal year 1916-1917 amounted to hundreds of millions of dollars, possibly to a billion dollars or more. Transportation. The general increase in profits has also been shared by transportation. Senator Simmons in the report mentioned gives the excess profits of the Pennsylvania Railway Company for 1916 as compared with 1914 as $11,741,000, and for the "Big Four," $5,843,000. Wood. The foregoing statements have not included the wood industries but if they had been included, we should have had similar facts in regard to the enormous increase in production, increased exportation and greatly enhanced prices for the wood products; indeed the enhancement of prices has been so great in the case of paper and the situation so acute, that the Federal Trade Commission has stated that the production of paper, both for print and book, "is vested with a public interest." The Federal Trade Commission in a letter dated June 13, 1917 to the president of the Senate, recommended governmental control of the production of print and book paper. The letter stated if in 1917 the same tonnage is produced as in 1916 at the price prevailing in June, the 1917 output would cost $105,000,000 whereas the cost of this amount in 1916 was $70,000,000. It said further that at least 50 per cent of this increase of $35,000,000 would be excess profits over those of 1916, the prices for print and book paper being from 65 to 84 per cent higher than in 1915. The average profits of forty-one of the book making paper mills for 1916 were 100 per cent more than for the previous year. The situation was regarded as so serious that the commission recommended as a war emergency measure that all mills and agencies in the United States producing and distributing print paper and mechanical and chemical pulp be operated by the government through suitable agencies, and that the products be equitably distributed at fair prices. It was also recommended that because so much of the newspaper print paper comes from Canada to the United States that the government of Canada be asked to create agencies to act jointly with similar agencies from the United States for the protection of consumers; and that in case the Canadian government would not join in the enterprise that the exportation of paper and paper material into the United States should be made only on government account through the federal agency recommended by the commission. Other Industries. A full discussion of the industrial situation would show advances in prices and increased war profits in the production of scores of finished commodities other than those already considered, whether the material be foods, meats, metals or wood, or some combination of one or more of these. CONCLUSION REGARDING EXCESS PROFITS The foregoing facts show that war conditions have been taken advantage of by corporations generally throughout the United States to exact excessive profits. Indeed in many cases the demands for commodities have been so pressing and the enhanced prices so great as to make the exactions amount to extortion. When prices for essentials are increased two, three or fourfold and result in profits beyond the dreams of any imagination before the war, it cannot be said that the appeal of President Wilson to have men in business and industry on patriotic grounds not to practice profiteering has led to any substantial results. Nor can it reasonably be expected that such an appeal would have been successful. When all lines of business are following the same practice, it cannot be expected that one corporation or one business man shall depart from the practices of the others. FURTHER ATTEMPTS TO CONTROL BY INDICTMENT As before the war there have been attempts to prevent cooperation and thus control prices and profits through prosecution under the Sherman Act. Thus on May 24, 1917, by the federal grand jury at Boston eighty-eight dealers were indicted for violating the anti-trust law to control the entire crop of onions to enhance the prices of that product. On June 2 the federal grand jury at Chicago brought indictment against twenty-five individuals and firms acting on the Chicago Butter and Egg Board, who were charged with manipulating the markets to increase the price of eggs. In New York it was announced June 19, that fifty-one coal operators and one hundred and two corporations were put on trial before the United States district court for violating the Sherman Anti-trust Act by combining to increase and fix the price of certain coals. Other indictments have been made along the same line. Some of the prosecutions, notably that relating to coal, have been abandoned; others have been continued. However, whether the prosecutions are few or more, are abandoned or continued, they have been utterly futile to prevent general coöperation to control the market and thus enhance prices for all essential commodities. The failure in these respects has been just as complete as was failure along similar lines before the world war. The facts presented in the foregoing pages demonstrate beyond doubt that we cannot rely upon the laws of supply and demand and competition to meet the situation under war conditions. The only possible way in which prices and profits can be reduced to reasonable amounts is by governmental action. FOOD PRICES VS. WAGE INCREASES A STUDY AS TO THE TREND OF REAL WAGES IN BY RAYMOND T. BYE, A.M., Instructor in Economics, University of Pennsylvania AND CHARLES REITELL, PH.D., Professor of Commerce, Lawrence College. EDITOR'S NOTE Immediately after the food riots in the streets of Philadelphia last winter, Mayor Smith appointed a Food Inquiry Committee to investigate the situation. One of the many problems that presented itself to this committee was the determination of the trend in food prices as compared with the trend in wages to ascertain whether there were substantial reasons for discontent. Mr. Raymond T. Bye was asked to undertake a study of the trend of food prices and Dr. Charles Reitell a similar study of the trend in wages. With the consent of the city authorities the Editor has secured the results of these two investigations for publication in THE ANNALS. The two articles which follow thus constitute a joint investigation intended to determine the movement of real wages in Philadelphia over the period from January 1, 1916 to March 10, 1917. |