The Weapon of Food
By Herbert Hoover
[The National Geographic Magazine, September 1917]
Food has gradually, since the war began, assumed a larger place in the economics, the statesmanship, and the strategy of the war until it is my belief that food will win this war— starvation, or sufficiency will in the end determine the victor.
The Allies are blockading the food from Germany; and the surrounding neutrals are under pressure to export their surplus both ways and to reduce their imports. The Germans are endeavoring to starve the Allies by sinking the food ships. Short production and limitation of markets cumulate to under-supply, and all governments are faced with reduction of consumption, stimulation of production, control of prices and readjustment of wages. The winning of the war is largely a problem of who can organize this weapon—food.
THE ZONE OF SUPPLY GRADUALLY NARROWING
As to our more intimate problems, to effect this end, it must be obvious that the diversion of millions of men to war reduces the productive labor of the Allies, and in consequence the food production. Also the destruction of food at sea, and of still more importance, the continuous destruction of shipping, has necessitated the gradual retreat in area from which overseas food supplies can be obtained to any given country.
Thus there has grown not only a limitation of supplies, but an accumulation in inaccessible markets. The result of these cumulative forces is that North America is called upon, by both Allies and neutrals, for quantities of food far beyond its normal export ability.
What this tax upon our resources amounts to is evident enough from the fact that during the past fiscal year we have increased our grain exports from 120,000,000 bushels—the three-year, prewar average—to 405,000,000 bushels. This year the Allied production is reduced by 300,000,000 bushels over last year, and we must therefore meet a much larger demand. Our exports of meat and fat products have increased from prewar average of 500,000 000 pounds to 1,500,000,000 pounds for the last fiscal year. And owing to the decrease in their animal herds, the Allies will require still more next year.
PRODUCTION MUST BE QUICKENED AS WELL AS CONSUMPTION CUT DOWN
If the extremely high prices thundering at every door were not a sufficient demonstration, it is possible, by actual figures, to prove that we have been exporting many commodities actually beyond our capacity to produce. Taking the three-year pre-war period as 100, we find in pork, for instance, the number of animals on hand on the 30th of June this year is variously estimated at from 92 to 98. The slaughter of animals during the year was at the rate of 179; the exports were at the rate of 215, and the natural consequence is that the price is at 250.
During the past year we have exported every last ounce of which the country during this period was capable of producing, and our national stock of cereals and animal products, proportionate to our population, was at the beginning of this harvest the lowest in our history, and many of us have been under the keenest anxiety lest we would face absolute shortage. This anxious period is now happily passed.
The demand in many commodities during the coming year is beyond our capacity to furnish if we consume our normal amounts. The necessity of maintenance of the Allies as our first line of defense and our duty to humanity in feeding the neutrals demand of us that we reduce our every unnecessary consumption and every waste to the last degree—and even then the world dependent on us, must face privation.
Owing to the limitation of shipping, we must confine our exports to the most concentrated foodstuffs—grain, beef, pork, dairy products, and sugar.
We must control exports in such a manner as to protect the supplies of our own people. Happily we have an excess of some other commodities which cannot be shipped, particularly corn and perishables, and we can do much to increase our various exports if we can secure substitutions of these in the diet of our people; but above all we must eliminate our waste.
Our first duty lies to our Allies, and if they are to sacrifice a share of our food to neutrals, and if this is also the result of our own savings and our own productive labor, these neutrals should expect to furnish equivalent service in other directions to the common pool against Germany.
Populations short of food hesitate at no price, and, in those commodities where there is demand beyond supply, whether food or otherwise, the old law of price-fixing by "supply and demand'' is broken.
SPECULATION BY OVER-DEMAND
Such an over-demand gives opportunity for vicious speculation and presents an instability to trade which necessitates widening margins in distributing profits and great damage to the consumer. It results in marking up the prices of millions of articles upon the shelves and engages the whole of the distributing trades in inherent speculation.
It is upon this question of price that I wish to dwell for a moment.
We have all listened to the specious arguments of the siren of high prices; it is heralded as the mark of prosperity and to possess economic advantages; it is advocated as a conservation measure. It is true, high prices reduce consumption, but they reduce it through the method's of famine, for the burden is thrown on to the class of the most limited means, and thus the class least able to bear it!
There is no national conservation in robbing our working classes of the ability to buy food. High prices are conservation by reducing the standard of living of the majority. It works no hardship on the rich and discriminates against the poor.
Real conservation lies in the equitable distribution of the least necessary amount, and in this country we can only hope to obtain it as a voluntary service, voluntary self-denial, and voluntary reduction of waste by each and every man, woman, and child according to his own abilities; not alone a contribution of food to our Allies, but a contribution to lower prices. We have and will retain sufficient food for all our people. There is no economic reason why there should be exorbitant prices. We are not in famine. It is obvious that our people must have quantities of food and must have them at prices which they can pay from their wages.
HIGH PRICES LEAD TO STRIKES, DISORDERS, RIOTS, AND UNDERMINE NATIONAL EFFICIENCY
If we are to have ascending prices, we must have ascending wages. But as the wage level rises with inequality, it is the door leading to strikes, disorder, riots, and defeat of our national efficiency. We are thus between two fires—to control prices or to readjust the income of the whole community. The verdict of the whole of the world's experience is in favor of price control as the lesser evil.
There are few who will dispute the advantage of such regulation as will eliminate speculation and extortionate profits. This is difficult to disassociate from fixing of prices, yet a great deal may be done by simple regulation and the organization of trades to police themselves under government patronage—to put regulations into force as will protect the legitimate and patriotic trader—for no one will deny that speculation against the consumer is a vicious crime in our present state.
The large question of the hour is price-fixing, because the suspension of the law of demand and supply as an equitable economic law is forcing our hand in every direction.
The total experience of Europe has demonstrated that many methods of price control, such as maximums and minimums, are a fallacy, and in themselves stimulate evasions and generate economic currents, which, while they may be a temporary palliative to a situation, ultimately wash away the very foundations of production and distribution.
Of European experience in price-fixing practically but one formula has remained, and that is the fixed specified price for every stage of a given commodity, from its raw to its finished delivered state, based as nearly as may be on the cost of production and reasonable return on capital.
We will find, as we go on with the war and its increasing economic disruption, that first one commodity after another will need to be taken into control. We will, however, profit by experience if we lay down no hard and fast rules, but if we deal with every situation on its merits.
So long as demand and supply have free play in a commodity, we had best leave it alone. Our repairs to the break in normal economic control in other commodities must be designed to repair the break, not with a view to setting up new economic systems or theories.
PRICE-FIXING AND PRODUCTION
It appears to me we can divide our commodities roughly into four classes:
First. Those commodities of which we produce our own supply and for which there is no export or import business of such consequence as to influence the whole, such as corn, potatoes, onions, apples, and many others. Here the law of demand and supply still reigns, and we can well leave them alone, provided no person or persons attempt to upset the normal flow of barter, and then we can best deal with the person.
Second. Those commodities the export demand for which dominates the price. Here it is possible as a first step to regulate the export price. In such a class I may mention wheat and flour. Nor have we much choice as to the matter of these commodities, for under the agreements between our government and the Allies our government must purchase or direct the purchase of Allied supplies in this country, and as these purchases in many commodities dominate the price, we are face to face with price determination whether we will or not.
Third. Commodities where internal demand exceeds the supply and where direct exports alone do not sufficiently influence the price; and here we are driven to price-fixing at once, to which coal has already fallen.
Fourth. Commodities, where our imports control the price. We can in some instances control the volume and price of imports so as to regulate price, and it is obviously in our interest to export as little of our money as we can,
In all control of price, there is one dominant factor. The very need of price control is proof of insufficient production, and in war the necessity itself transcends the cost. Therefore, the constant dominant thought in price must be the stimulation of production.
There is, however, a point at which stimulation is attained. To get ninety per cent of volume of production costs one price, and the need of the commodity to secure each advancing unit of production towards one hundred per cent becomes a problem of balance in the necessity for the commodity against the burden of the consumer.
We have in the Food Administration put into action a form of price control through purchase of the exports of wheat and flour. The government must buy or contract the buying of wheat for export and the export volume controls the price. We were immediately confronted with price determination.
FOR THE FIRST TIME IN HISTORY THE FARMER HAS A VOICE IN PRICE-FIXING
To determine it we called in the farmer himself, and gave him the majority of the commission, to determine a fair price,
We gave him the national balance and prayed him to weigh carefully and justly. For the first time in history he had a voice in fixing price, and unanimously determined $2.20 per bushel, with certain differentials on locality and grade.
We then created a voluntary engine of our best commercial men to carry this decision into effect, and to eliminate all speculation, and to reduce the cost of distribution, in hopes of finding relief to the consumer. We can now measure the results. The farmer will receive about 60 cents per bushel more for his wheat than his average last year. Sixty cents per bushel is equal to about $3 per barrel in flour. The price of wholesale flour is today $3 per barrel less than the last four months' average.
So here is the measure of reduced speculation and distribution charges—$3 per barrel increase to the farmer and $3 decrease to the consumer.
The Food Administration has no powers to fix prices except through the export buying, the power to buy and sell certain commodities, and the further power to enter voluntary agreements with producers. A case of the latter lies in sugar, where we agree with 95 per cent of the beet producers that they shall fix the price at a certain figure, and we propose to reinforce this by the control of imports, and if necessary to enforce other measures against the five per cent if they fail to fall in with the majority.
Each and every commodity has its own situation; each must be handled on the merits and with least interference by government that will effect purely war ends, and each by coöperation with the industry itself.
LITTLE POWER OVER PRODUCER AND RETAILER
One illusion in the mind of the public I am anxious to dispel: The Food Administration, through its own authority and the coöperation of other government agencies, can accomplish a great deal, but it is limited absolutely to that area of commerce between the producer and the retailer. We are stopped in law within this area; we can only use influence on both the retailer and producer, and depend upon their patriotism. In this area we can only regulate the flow of trade and hold it to moderate profits and excise speculation. This is an economic step short of price control—except where we can accomplish price control by the indirect means I have quoted above.
In the Food Administration we intend, to confine ourselves to ten or twelve fundamental staples—those food commodities that make up the basis of life—we take no interest in the luxuries or even semi-luxuries. We have laid down certain principles of coöperation with the business community, and if we are to succeed on these lines we must have their support.
We are asking the various trades in these particular staples to coöperate with us in organization of the trades to the end that all transactions shall be direct in the normal flow of distribution; that speculation shall be excised; that goods shall be sold both by producer and distributor at least at a reasonable and normal charge over cost, or even without profit.
PROFITEER A MODERN JUDAS
It appears to us that no right-minded man in this community wants extra profit from the war. If he does he should be branded with the brand of Judas for selling the blood of our sons for profit.
The Food Administration today is directed by a body of 250 volunteer representative business men, producers, and experts, and up to date it has held over 200 conferences with representatives of trades and producers. We have asked them to help in formulating plans to conserve, to stimulate production, and, above all, to regulate distribution. Most have been helpful, and in instances where organization has been completed the devotion of the business men has been above all praise, and in some cases we have so far failed to secure this coöperation in a discouraging way; but I am not, in view of the success in some lines, prepared to say that the experiment is either a success or a failure.
But let no one be under the illusion that selfishness or greed has disappeared from this great republic. There passes over my desk daily a sickening mass of evidence of individual, sectional, and class avarice and self-interest, backed by demand and threat, that is illuminated by rarer instances of real support in the gigantic task of government in this crisis.
We wish for coöperation in service from our commercial community. We wish to stamp our commercial community with the stamp of service in public interest. Compared with the sacrifice of our sons and brothers, it is but little to ask. And it is a service which, if given now, will not be without interest returns for the future. This interest in a thousandfold will come in two directions.
THE LOOMING SHADOWS 0F SOCIALISM
If we receive this support, we will have demonstrated the falsity of radical claims as to the necessity of socializing our industries. If we fail we will have given impulse to these demands and ground for their complaints.
One looming shadow of this war is its drift toward socialism, for with the gigantic sacrifice of life the world is demanding a sacrifice of property, and we will surely drift to that rocky coast unless we can prove the economic soundness and willingness to public service of our commercial institutions.
It is worth while examining the developments in Russia from this point of view. Here no practical or effective form of commercial regulation or distribution was undertaken. In consequence of speculation, profiteering, and the failure in commerce to serve public interest, the condition of the industrial classes became so intolerable as to steam the hotbed of revolution.
Justifiable as this revolution may have been and as great a cause of liberty as may result, no one can deny that the whole trend of this revolution has been socialistic, and the latest phase is a development into practical socialism. This strain in the revolution, I am convinced from much experience in Russia, was the reaction from failure of the government and the commercial classes to meet their public duty.
THE UGLY ALTERNATIVE IS A GOVERNMENT OF THE GERMAN TYPE
The other end to be attained is of profound importance. The alternative to failure of our commercial system to maintain its place and at the same time serve public interest is rigid autocratic governmental organization of industry of the German type. Such organization is autocracy itself; it breeds bureaucracy and stifles initiative, and thus democracy, at its birth.
We must organize—we must mobilize—our every national energy if we are to win this war against the organization perfected by autocracy. Either we must organize from the top down or from the bottom up. One is autocracy itself; the other, democracy. If democracy cannot organize to accomplish its economic, as well as its military defense, it is a false faith and should be abandoned.
The Food Administration has appealed to the commercial community to march with it to an organization democratic in its inspiration and vital to our defense.
If we succeed, we shall have assisted our commercial institutions to their own stability, in after years, and beyond this they will have proved that democracy is a faith worthy of defense.
© J. Fred MacDonald, 2013
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THE HEADLONG FURY
A Novel of World War One
By J. Fred MacDonald