strategic location, and the needs of the civilian population. Besides allowing for Navy requirements we maintain a judicious margin of safety for civilian necessities.

How can it be procured at the time and in the quantity desired? Here is our most difficult problem. How can we assure ourselves that deliveries in war will follow the schedule made in peace? We have found it necessary to break down requirements into three additional classifications in order to make more complete studies, namely: Class I items, presenting the greatest difficulties in procurement. Of the 1,162 problem items in this group, we have completed plans for 1,076 and with increased funds and personnel we should go even further next year. Class II items, presenting minor procurement problems and requiring only informal plans. It is estimated that between 3,000 and 4,000 items fall into this class. We have received assurances from the supply arms and services that informal plans for such items are available but no abstracts are furnished. Class III items, requiring no plans, being commercial in type, and consideration need only be given to that of matching requirements with national supply. Fortunately, this class covers most of the required items.

As an aid in solving this difficult problem, the War Department has three methods at its disposal, the effectiveness of which depends upon the funds available for carrying them out. These are, first, actual production orders; second, educational orders; third, purchase by the Government of procurement studies and factory plans. All of these methods are being utilized to the maximum extent permitted by appropriations.

Shortage of skilled labor.-Preliminary surveys indicate that one of the most serious problems that will arise in time of war is the supply of skilled labor in the mechanical trades. This problem is being given further intensive study. Other interested Federal agencies, the Navy Department, Labor Department, Civil Aeronautics, Interior Department, the Civilian Conservation Corps, and the National Youth Administration are cooperating in these studies with a view to the preparation of a program for the maximum use of vocational educational facilities of the country for the creation of a reserve of mechanically skilled manpower.

Economic mobilization for war.-The War and Navy Departments alone are charged with the preparation of plans for the economic mobilization for war. The Army and Navy Munitions Board is the agency established to carry out these functions and to arrange for their adequate consideration in wartime. This Board provides a common meeting ground for the Army and Navy to coordinate their respective procurement plans. By virtue of its position as senior agency of the Government involved in planning for industrial mobilization in war, the Board must insure that plans shall be prepared and that these plans shall be adequate and workable.

In carrying out the first function, that of coordinating Army and Navy procurement plans, the Board this year has acted upon the joint Army-Navy aeronautical specifications, approved joint allocations of major and minor aircraft manufacturing companies, and made progress on the plans for the procurement of machine tools. Through cooperation with the National Machine Tool Builders Association a survey has been made which produced data on the potential productive capacity of the Nation for machine tools by types and sizes.

In discharging the duties involved in the second function, the Board has established contacts with many leaders in business and industry and with other agencies of the Government to keep up to date the plans for emergency organizations proposed for creation by the President at the outbreak of war; engaged in an analytical survey of labor requirements; maintained and established contacts with transportation agencies for cooperation and advice in connection with the utilization of these organizations in time of emergency; studied the problem of formulating a plan for such control over prices as will avoid unnecessary cost of Government purchases and rises in the cost of living. At my request the Brookings Institution has been engaged for several months in the study of bases upon which price regulation can be inaugurated successfully and the legislation necessary to make such control effective. The Federal Trade Commission is cooperating in the work and has made preliminary studies at the request of my Planning Branch concerning the nature of price data which should be assembled in peacetime to assist in carrying out the general plan of price control now in preparation.

The 1939 revision of the current industrial mobilization plan has been completed, involving three changes from the 1936 plan: (1) It recognizes the changes in our Government structure during the past few years and proposes to use existing Government agencies to their fullest extent. (2) It recognizes fully the desirability of providing close coordination between the various agencies involved in the mobilization of economic resources for war. (3) In the interest of clarity, supporting annexes and appendices have been omitted in the 1939 revision. These annexes will hereafter be separate so that they may better be kept current. The 1939 revision, therefore, contains the same basic material as previous editions but has been condensed and prepared so as to appeal more to the civilian reader. It has been approved by the Assistant Secretary of War and the Assistant Secretary of the Navy as a study for the effective and equitable utilization of the industrial resources of the United States in time of war.

Army Industrial College.-First as a medium for close study of the interrelation of military activity and national economy and, second, as a common meeting ground for officers of the Army, Navy, and Marine Corps to study and correlate the factors of procurement and to study the relation of military activity to the national economy, the Army Industrial College has continued its excellent progress.

A total of 751 officers of the Army, Navy, and Marine Corps has been graduated from this college and forms a reservoir of trained officers for duty in various responsible positions related with procurement and the mobilization of industry.

Each succeeding year finds the scope of this college widening to encompass more detailed studies of the national and international developments in industrial mobilization. A student of economics may understand the recent trends in national economics in peace, but to apply this knowledge to a period of maladjustment in an emergency demands a knowledge of far wider scope. This college aims to ground officers of the services with a basic understanding of these problems. There is no attempt to train officers in the 1-year course to become industrial leaders or finished students of economics or business management. Graduation from this college is but the first step in an industrial education.

The course of instruction follows more generally the post-graduate and problem methods. The curriculum is so arranged that individuals must apply themselves to minute studies of our industrial problems. and engage in educational research. In this manner we inculcate in the graduate the necessity for study, analysis, and evaluation of all concepts of our national economy.

It is with pleasure that we welcome each year student officers from the Navy and the Marine Corps. The mutual exchange of opinions which these officers enjoy as much as do our own Army officers most assuredly is conducive to a better understanding of our joint problems.

NONSTATUTORY DUTIES

In reporting on the nonstatutory duties which have been delegated to me to perform, it may be said that the administration of these duties has been performed by the officers working thereon in the usual efficient manner. In the sale or disposal of surplus property; in the purchase of real estate; in the study of foreign and domestic claims; in matters relating to national cemeteries, national parks, and national monuments, the Government's interests have been carefully watched and every effort made to protect them.

National Matches.-The largest number of teams in its history125, together with 1,065 individual participants, attended the National Matches at Camp Perry, Ohio, last year. Personnel from the Army and from the Marine Corps operated these Matches. Each succeeding year brings further evidence of the excellent results from the War Department's contributions in encouraging this element of our national defense. The American rifleman has no peer in the world of rifle marksmanship. The effect of his aimed rifle fire cannot be matched either on the target range or on the field of battle. Competition at the National Matches each year perpetuates this spirit of rifle marksmanship and develops the innate ability of our young men to shoot accurately.

To illustrate the increased interest in rifle marksmanship in the United States, the number of junior rifle clubs has increased from 101 to 246, and membership in these clubs has increased from 5,685 to 9,898 since my last report. Affiliated with the National Rifle Association were 2,175 senior clubs, with a membership of 120,825, and 1,151 junior clubs, with a membership of 46,040.

Conclusion. To gain first-hand information about the activities of my office as they appear to industrial America, to observe, at first to question and second to learn of the problems affecting our allocated plants, Government arsenals, airfields, and airplane factories, I have traveled approximately 100,000 miles by air and 35,000 miles by rail. To familiarize our citizens with the aims, plans, and definite objectives of my office, I have delivered 102 formal and 22 impromptu speeches before industrial, patriotic, military, and social

groups.

I am convinced that our Nation, awakening to realities, is coming to a much clearer and certainly more definite understanding of the close association of military and economic factors. If the requests for information by industry upon my office may be taken as a criterion, then I am confident that national interest in our problems is avid, keen, and intelligent.

Considerable progress has been made toward the attainment of our objectives-current procurement of our peacetime requirements and the assurance of adequate provision for the prompt and effective mobilization of essential national resources in event of an emergency. LOUIS JOHNSON, The Assistant Secretary of War.

ANNUAL REPORT OF THE CHIEF OF STAFF

The Honorable, THE SECRETAry of War.

DEAR MR. SECRETARY: I submit the following report on the state of the Military Establishment at the close of the fiscal year 1939.

Since the date of this report coincides with the end of my active duty as Chief of Staff, it differs materially both in detail and general concept from the three previous yearly accountings of my tenure of office.

In general, it may be said that those prior reports dealt with the vigorous attempt by the Congress and the Administration to rectify the unsound and hazardous condition into which the Army was placed as a result of the so-called disarmament period following the World War. In order to justify itself as a minimum defensive force in fact as well as in theory, our organization, equipment, and ground installations had to be completely renovated. It was a costly and complicated task spread, of necessity, over a period of years and it was based on the essential priorities of M-day. During the last 3 years a gradual shift in objectives had been evolving, culminating in the past year in a complete reappraisal and a resulting definite determination to place the Military Establishment on a sound operating basis as a dependable instrument of national security. This report, therefore, will deal with the responsibilities of the rearmed Army, and its place in our national affairs.

The problem I encountered on my entry into office as your principal adviser that caused the greatest concern was the lack of realism in military war plans. Of necessity, due to grave inadequacies in men and particularly in equipment, these plans comprehended many paper units, conjectural supply, and a disregard of the time element which forms the main pillar of any planning structure. Military planning is one of the most serious responsibilities that can confront a people or a group of men. The plans deal with the Nation's future, with hundreds of thousands of lives, and untold wealth. They must be coldly and painstakingly considered in the light of intense realism as the basis of all future military strategy and tactics. What transpires on prospective battlefields is influenced vitally years before in the councils of the Staff and in the legislative halls of Congress. Later I shall refer again to time as the keystone of preparation, because it is the only thing that may be irrevocably lost and it is the thing first lost sight of in the seductive false security of peaceful times. It is because of this and because neither the rank and file of our citizenry nor their political representatives should shoulder the responsibilities of a continuous evaluation of the time factors of war plans, that there is here recommended a military plan that is in fact a "position in readiness."

In military language, when a commander in the field is faced with insufficient information as to the intentions of his enemy, when the hostile dispositions are not known, and when he has yet time to dispose