existence as a result of the "automatic working" of "economic forces." The prevailing system of free enterprise seems natural only to those who look at all industrial organization through the glass of a very simplified picture of its institutions. It is composed of usages and habits, conventions, and practices, taboos upon action and ways of doing things. Its whole make-up consists of understandings and arrangements of a kind with the legal freedom of an individual to enter a trade, the exchange of goods by 'free contract," the system of profits as a way of getting things done, and the prohibition of "restraint of trade" by the Government. Each of these bears the confused reality of a long and chequered history.

No self-maintaining, self-regulating scheme of order has ever existed. A simon-pure competitive system, in which the interests of all are served by each acting for himself, does not operate unaided Its maintenance requ.res a code of rules to determine who is to have and to hold the instruments of production, an elaborate procedure for giving effect to contracts, a nice adjustment between the incentives to action of the parties, and a mechanism of checks and balances to hold personal activities with n social bounds. The effort to prevent restraint of trade and to preserve free competition by a resort to coercion is the best evidence of its mundane quality; for the order of nature does not have to appeal to the parliament of man of survival. The confusion in the courts over where competition ends and restraint begins bears testimony to the impossibility of separating the operation of economic laws from the behavior of the human actors in industry.

A compromised competitive system belongs to a Simian domain far removed from the unmities GF an order of nature. Its tangled scheme under which some matters are left to the market and rivalry of business concerns, others are regarded as within the province of government, and custom and collusion are not absent from the whole, bears evidence of its prolonged traffic with men. It is not characteristic of the free enterprise that operates in coal to settle the larger affairs of industry for the persons concerned through the beneficient action of economic laws. Instead the mark of its prevalence is the absence of an authority in large matters, which become mere incidents to the endless making of little decisions, and must get settled as best they may. The whole matter of fitting a scheme of control to the unique requirements of an industry belongs, not to the realm of the inevitables, but well within the domain of conscious choice.

The task of one who would set coal to rights, beset as it is with countless hazards and numerous choices, at least involves no sacrilege: for there is no way of passing the problem along to nature. There can be no choice between a natural and an artificial organization; between a control by the rules of men and the operation of economic laws. The only large choices are the retention of a very human competitive system which was never planned and works only as well as it works, its deliberate modification, or its conscious replacement by some other scheme of more conscious design but no less human origin.

An application of the art of organizaion to bituminous mining involves a critical and constructive inquiry into the arrangements which make up its scheme of control. It means doing for the industry as a whole what the resourceful and far-reaching executive is forever doing for his establishment; it means doing with the organization of the industry what the technicians are constantly doing with its technology.

The oil industry has been in similar throes of demoralization, due to overproduction and futile price cutting. The industry organized a petroleum institute to advertise new uses and stimulate demand as well as establish trade practices. States wherein great producing fields are located imposed restrictive production measures. Voluntary agreements covering production were reached. Great improvement has resulted, as attested by increased earnings during 1928, to which oil securities have responded by reaching higher levels. What has been accomplished by the oil industry is merely a beginning toward the attainment of a permanent, sound, economic basis. Oil men have at least expressed a willingness to cooperate, but the large number of units makes it imperative that some superstructure of control be established. This is recognized by oil leaders. Mr. W.

S. Farish, president of the Humble Oil Co., writing in the Chicago Journal of Commerce, has this to say on the need for greater control:

The American Petroleum Institute during its life has accomplished much for the good of the industry and these accomplishments have also been for the good of the public, as they have resulted mainly in better coordination and lessening of costs. The institute has failed to furnish the leadership necessary for a solution of our problems.

* * *

To the open-minded observer it is plainly evident that the future of the oil industry is headed straight for the folds of Government control.

The greater intelligence in oil as compared to coal is working to this end. Writing on the trend of the oil industry toward utility standing, Royal F. Munger, financial editor of the Chicago Daily News, points out:

Stabilization must mean combination of one sort or another, for otherwise there is no cure for the unrestricted competition that caused low prices. Combination without regulation seldom has been found desirable in the long run. The obvious outcome is that the great oil companies will enter, probably voluntarily, some form of public-utility regulation. After all they are public utilities, at least at the distributing end of the business. They come too closely into the life of the community to have either their control or their well-being left to chance.

That coal is a public utility is an accepted fact in many channels of public thought. By resort to Federal injunctions coal operators have established the coal business as a public utility engaged in interstate commerce. The United Mine Workers are, therefore, asking your committee to view the bituminous-coal industry as a utility engaged in producing a basic necessity and operating as an interstate commerce unit. In supporting this contention, I want to show that the president of the largest bituminous-coal company takes the same view of the utility status of coal.

In 1922 John D. Rockefeller became convinced that the management of the bituminous-coal industry was lacking in cooperation and efficiency, and holding large investments in the industry, particularly in the Consolidation Coal Co., he directed his personal counsel to make an investigation.

Mr. G. J. Anderson, now president of the Consolidation Coal Co., who was then associated with Curtis, Fosdick & Belknap as industrial relations counsel, made a survey of the industry. The following in part from Mr. Anderson's report plainly shows that back as far as 1922 Mr. Anderson regarded coal as a public utility. It will be recalled by the Senators that Mr. Anderson testified before your committee last spring. Quoting from Mr. Anderson's report:

THE PUBLIC INTEREST

Most official utterances, the majority of editorial comment, and all proposed legislation for control of the industry stress the truth that coal is not only a basic commodity but endowed with a public interest. The United States Supreme Court, adopting the language of a State supreme court, has also so defined it “an indispensable necessity of life." Efforts to refute or minimize this fact within the industry would seem ill-advised. Above all other industries save transportation, coal needs understanding and support from public opinion. Especially does it need them in the field of labor policy.

In considering the likelihood of this public interest taking active form through the medium of Federal legislation one fact stands out. For nearly

five years now the coal industry has actually been under some form of Government supervision; first, through the fuel administration; secondly, under its present scale contract, which issued from the Bituminous Coal Commission. This recent chapter, new as it is, nevertheless forms an important piece of background in the present situation. Precedent has already been established. Coal, moreover, in addition to being itself a public utility, is closely allied to other public utilities. Two of its three most important customers are the railroads and the public-utility companies. These enterprises are already subject to a high degree of public regulation. This, too, forms a precedent. It further provides an uncommon form of industrial pressure on the industry itself, for it is only natural that bodies which are subject to strict scrutiny of expenditures and rates will have a very vital concern in the cost of fuel. In connection with labor policy, this implies two important considerations for the coal industry: (1) It maintains even in times of rising prices and justifiable wage advance a form of consumer pressure which may obstruct right industrial relations; (2) resulting from this combination of public interest and consumer pressure a situation is created where mutual agreement between the parties in the coal industry is subject to criticism and suspicion, unless accompanied by some form-voluntary, at least-of public participation. Mr. Anderson spoke very plainly-no one need mistake what he intended to convey. He concludes:

1. That bituminous coal is a public utility.

2. That railroads and utilities operating under the protection of fixed revenues and consuming the bulk of all coal produced could easily use their purchasing power to batter down prices and thereby increase their own earnings. 3. That the labor relations in the coal industry could not be stabilized beyond the point permitted by consumer pressure of railroads and utilities.

Going into the matter of labor relations more fully, Mr. Anderson verified the oft-repeated statement made by representatives of the United Mine Workers that the maintenance of competitive wages by the union had constituted the only stabilizing force the industry had ever known.

The further analysis of labor relations by Mr. Anderson follows:

A COMPETITIVE INDUSTRY

Over and above at other elements, important as some of them are, from the viewpoint of the operator the dominating factor in determining labor policy must be the nature of the industry itself. When the facts are faced-viz, the existence of over 10,000 mines under more than half as many individual managements, and industry at all times with a surplus of at least 40 per cent, in equipment, labor, and investment-the range of possible labor policy is at once restricted.

What is economically possible in an industry of a comparatively few enterprises dominated by an overshadowing entity, such as steel, or in an industry where the cooperation of a small group can exert a high degree of stability, such as meat packing; or in industries where the labor item is relatively low in ratio to total cost of production, such as automobiles, it is not at all feasible in a highly irregular, seasonal, and overequipped industry composed of small units. Certainly it is not possible without a far higher degree of voluntary organization and discipline than the coal industry displays at the present time. The fluctuation of this industry, in response not merely to seasonal demand, but to economic cycles of depression and prosperity, makes a policy of cooperation indispensable. The high degree of competition makes it well-night impossible to leave labor, policy and particularly wage rates, to be determined by the most reckless element. Nor can employers of union labor who intend to operate under any condition of equity, expect to compete with the fluctuation of nonunion policy, either in the rise or in the fall of wages. On the contrary, with the opportunity to fix settlements of the largest single factor in operating costs, both over a wide area in the industry and for a definite period, the purely business value of scale contracts becomes a consideration of prime importance.

For a highly competitive and other wise seriously unstable industry, collective labor agreements can form the most important source of industry-wide

standards.

That public utility consumers of coal protected by Government and State regulation actually utilize the consumer pressure described by Mr. Anderson against the unprotected public utility of coal in depressing coal prices, looting the holders of coal securities and victimizing mine workers by destroying American wages through demoralization of labor relations, is admitted in the testimony of Samuel Brady, who has already testified before this committee. Mr. Brady's testimony in part follows:

The contract between the company and the miners' union expired by limitation on the 1st day of April, 1924, and the company had been advised by W. H. Warner & Co., its sales agent, through Whitney Warner, that it could secure a contract from the Jersey Central Railroad of 700 tons of coal per day at $1.60 per net ton f. o. b. mine, if it could begin shipping coal on the contract by the middle of May. W. H. Warner & Co. became a stockholder of the Brady-Warner Coal Corporation at the time of the execution of the mortgage in the amount of one-fourth of its capital stock, and the company's executive committee met for the purpose of reaching a decision upon two propositions: (1) Whether it would refuse to renew its agreement with the miners' union after the 1st of April, and (2) whether it could afford to take the Jersey Central contract and such other contracts as it might be able to obtain at the very low price of $1.60 per ton and attempt to operate its mines-open shopon a lower scale of wages.

At this meeting, after a thorough discussion of the company's affairs, the committee decided that it would not renew its agreement with the miners' union, and since it was the only business in sight and the condition of the market did not justify the presumption of a higher price, the company decided to accept the Jersey Central contract and attempt to operate its mines and to put into effect the 1917 scale of wages.

At this meeting we were advised by Mr. Charles A. Goodwin, of counsel for the company, that if we did not agree to renew our agreement with the union the courts would protect us in the operation of our mines on the open-shop basis and that under our contracts of lease with our employees under which they occupied our houses, we would give them the notice required by the lease and if they refused to vacate within a reasonable time, we had the right to evict them, and that this had been decided by the Supreme Court of West Virginia, and that if they attempted to interfere with our rights to operate our mines, with employees who would be willing to work for us, by such acts as intimidation or force, that we could restrain them by an injunction.

With this advice and driven by the necessities of our situation, we decided, as I have said, to adopt this policy, and the meeting adjourned with that understanding.

That such a business procedure as outlined by Mr. Brady was unusual and unsound in the opinion of some members of your committee is borne out by Senator Wheeler's questioning of Mr. Brady, which follows:

Senator WHEELER. Could you make money selling at that price?

Mr. BRADY. No, sir. But we figured we would break even and maintain our plant and pay our sinking fund and interest.

Senator WHEELER. The reason I asked you is that I have a telegram here from one of the coal operators, and perhaps you know him, sent from Charleston, W. Va., as follows:

Senator BURTON K. WHEELER,

Senate Building, Washington, D. C.:

CHARLESTON, W. Va., April 19, 1928.

New York, Ontario & Western and Delaware & Hudson purchasing agents are offering to close their contracts through jobbers, Morgantown district, mine-run coal, one thirty at mines, while both these roads enjoy high freight rates, being more or less associated with anthracite production, getting $8 or $10 per ton at the mine for domestic and household coal. Would like to see purchasing agents of these two railroads as well as Lehigh Valley subpoenaed and made be good by following some reasonable price not to exceed one fifty at mines, which is barely cost and much less than the Pennsylvania, Baltimore & Ohio,

and New York Central are now paying. No reply necessary, but please stick to the job until we all get some benefit from your untiring efforts. J. A. PAISLEY.

Who is one of the outstanding bituminous coal operators of this country.

In the testimony of Mr. Brady and the telegram of Mr. Paisley, you have a clear case of what Mr. Anderson meant when he reported the menacing evil of consumer pressure to Mr. Rockefeller.

COAL POSSIBILITIES

From time to time the public reads of the wonderful things that can be accomplished from the proper and thorough utilization of coal.

By-products by the hundreds are listed as obtainable from the coal supply. An endless fertile field is pictured ahead for the coal chemist and technician, but you never read about any American coal operator seizing the myriad opportunities offered. To illustrate the backwardness of the American coal operator, I quote a statement in part by President Baker, of the Carnegie Institute of Technology, during the recent second International fuel conference held in Pittsburgh:

The coal mine owner in Europe is coking his coal at the mouth of the mine and piping the gas to more or less distant cities. He is shipping his tar to a great central refinery, where it is distilled and made into a hundred different articles, ranging from explosives to perfumes and medicaments. He is creating a great new artificial fertilizer industry, which is changing the agricultural system in Europe and which may some day help to solve our perplexing farm problems. He is building plants for the manufacture of methanol or methyl alcohol from what we regard as waste products of the mine. He is just beginning to make use of scientific brains and scientific data in his business. American coal man will do well to emulate him.

The

Apparently President Baker is talking over the heads of the American coal operators, for despite the gloom that pervades the industry and the future dark outlook the National Coal Association at its recent convention, although the Baker statement was available, voted to oppose Government regulation, and adopted a resolution contending for freedom, a kind of freedom in the enjoyment of which it has already "sinned away its day of grace." The resolution follows:

The National Coal Association reaffirms its attitude toward proposed Federal legislation affecting the bituminous coal industry by saying that it opposes legislation which would seek to single out this industry for regulatory action. This particularly applies to such bills as S. 4490. At the same time it is recognized that there are other lines of legislation in which the industry may be interested: Therefore be it

Resolved, That it is recommended that the officers and directors of the National Coal Association keep in close touch with the national legislative situation and cooperate with representatives of other industries for such modification of existing laws and such new legislation as may be in the interest of industry generally and the welfare of the public.

While I accept the resolution as being the official action of the National Coal Association, I am frank to state that the resolution does not express the hopes and aspirations of a very large number of operators who are tired of aimless drifting down the bottomless pit of a disorganized industry. Operators of standing have frankly