others, the Secretary of Commerce called a conference on February 5, 1919, at Washington, of the former heads of the more important divisions of the War Industries Board, representatives of various Government services, and others to consider the action that should be taken to induce a prompt inauguration of peace enterprises, to the end that widespread unemployment might be prevented and industry might assume at the earliest possible date its normal course. This conference reached the conclusion that the factor chiefly responsible for the failure on the part of the industries of the country to resume work at full speed and especially to undertake new construction was the uncertainty in regard to future prices of basic raw and building materials. Persons were naturally unwilling to engage in constructive work under existing high prices for materials if there was danger that in a few weeks or months the value of such enterprises would be much less than the money put into them because of a severe drop in the prices of the materials used. The Conference therefore felt that the most important thing that could be done by the Government was to create a board that, acting in close cooperation with the producers of raw materials, would undertake to stabilize prices for a reasonable period. These conclusions were formulated by the Secretary of Commerce in a statement which he gave to the public on February 8, 1919, in the following paragraphs:

(a) It was felt that a large, latent buying power exists in the country which needs only a fair adjustment of prices to become active and effective.

(b) That there is no prospect of the restoration of pre-war prices and the prices of everything will remain higher than in pre-war days.

(c) That it is highly desirable to take steps to reduce the

prices of all commodities abnormally high to their proper level.

(d) That it is necessary in considering the readjustment of prices of materials to have due regard for the necessity of maintaining a proper and just war scale.

(e) That the fine spirit of voluntary coöperation in industry which proved such a valuable factor in the conduct of the war should be availed of to expedite the processes of industrial readjustment.

(f) That time is of the essence of handling the problem and the situation requires the utmost speed.

(g) It was, therefore, determined that it would be wise for the Secretary of Commerce to seek the approval of the President to the appointment of a board to deal with the situation,

On February 25 the Secretary of Commerce announced that, having secured the approval of the President, he had created an Industrial Board of the Department of Commerce whose duty it would be " to put into practical effect a programme for the readjustment of prices for basic materials in such a fashion as to create a firm foundation on which the consumer can base his future purchases." George N. Peek, formerly Vice-Chairman of the War Industries Board, who probably more than anyone else was responsible for the initiation of the project, was made Chairman of the Board. The other members were for the most part officials of large industrial enterprises who had been in charge of important sections of the War Industries Board.

This Board at once entered upon the performance of its duties and on March 22, 1919, was able to announce that, as a result of conferences held with Judge Elbert H. Gary of the United States Steel Corporation and other large producers of iron and steel, a schedule of prices for iron and steel products had been agreed upon which represented a reduction from existing prices and

was one to which iron and steel producers were willing to adhere. To the surprise of the public Walker D. Hines, the Director-General of Railroads, almost immediately announced that in making his purchases of steel rails and other iron and steel products he did not consider himself bound by the schedule of prices that had been agreed upon. In a statement given to the public on

April 10, 1919, he said:

After repeated consideration of the steel and iron prices proposed by the Industrial Board, I am still of the opinion that those prices are too high and therefore that the Railroad Administration cannot approve them as reasonable prices. It has been perfectly clear to me throughout the discussion of this matter, and I think it is now generally understood, that no power was conferred on the Industrial Board to impose any prices upon the Railroad Administration, but that it retained the power and also was under a duty to exercise its own judgment in respect to this important matter. Throughout the discussion in the Industrial Board itself, Mr. Powell, the representative of the Railroad Administration, indicated that the final approval of any prices so far as the Railroad Administration was concerned rested with the Director-General himself. Mr. Powell, during the discussion, objected that not only the prices on steel rails but the prices generally were unreasonably high, and before the Committee announced its action, he positively stated that the Railroad Administration would not agree to buy at the proposed prices. In view of these considerations I cannot do otherwise than announce definitely that I must decline to endorse these prices as being reasonable, either for the present or for the future To the extent that the Railroad Administration finds it necessary to make purchases, it will continue to make them on the best terms obtainable by fair and just methods, with full recognition of the principle that a Government agency with large purchasing power must be particularly careful not even to attempt action which could be regarded as oppressive.

This attitude on the part of the Railroad Administra

tion not only defeated the attempt of the Industrial Board to fix iron and steel prices, but discredited the entire effort to stabilize prices through a Government agency working in connection with the voluntary cooperation of producers. As a result the Secretary of Commerce a few days after the stand of the Railroad Administration was made known announced the dissolution of the Board and the abandonment of the undertaking. Immediately afterwards publicity was given to an opinion of the Attorney-General declaring that the attempted action of the Board was illegal as being in violation of the Sherman Act and statutes regulating the purchase of supplies by Government agencies.

A feature of this episode that attracted no little attention was the evidence that it afforded of a lack of unity of policy and programme on the part of the Administration. Although the President had, according to the announcement of the Secretary of Commerce, approved the constitution and purposes of the Industrial Board, one of his most important representatives refused to cooperate in the project. The whole incident was not a little like that of the attempt, hereafter described, the part of a committee of the Council of National Defense to fix the price of coal which was immediately repudiated by the Secretary of War.

on

CHAPTER VI

THE MOBILIZATION OF FOREIGN TRADE

Conditions demanding rigid control of foreign trade - Importation of necessary raw materials - Shortage of shipping Supplying the Allies and rationing the neutrals - Prevention of trading with the enemy - Legislation establishing Government control-Of exports under the Espionage Act-Of imports under the Trading-with-the-Enemy Act- Administration of exports control first vested in the Secretary of ComThe Exports Council Exports Administrative

and

merce Board Creation of the War Trade Board and War Trade Council Their powers and duties Organization activities of the War Trade Board-Control of exports Control of imports - Control of trading with the enemy Control of bunkerage - Negotiation of trade agreements with European neutrals Control of exports of money, of insurance, and of enemy patents and trade marks - Withdrawal of trade restrictions after the armistice The Russian Bureau Incorporated of the War Trade Board.

Closely analogous to the necessity for the mobilization of industry for war purposes was that of the mobilization, in the sense of the establishment of rigid control, of foreign trade. This was due to a number of circumstances. In the first place, many of our industries were directly dependent upon imports from abroad for their raw materials. If assurance was to be had that supplies of such materials would be forthcoming in sufficient quantity, it was essential that the Government should take steps to see that they were imported. In the second place, the amount of ocean tonnage available for the use of the United States was utterly inadequate to meet our needs. This arose partly from the increased demand for ships for the transportation of troops and supplies, and partly from the destruction of vessels resulting from the unrestricted use of submarines by the